Business for New Europe

Financial Times - UK business groups hedge their bets

3 July 2012

By Brian Groom and George Parker

Uncertainty over the UK’s future relationship with the EU threatens to damage the economy, pro-Europe business leaders warned on Monday as corporate Britain reacted nervously to David Cameron’s decision to float the prospect of a referendum.

None of the main business organisations would come off the fence over whether a referendum is desirable, in part because the prime minister has been vague about the timetable and the question.

There is also reluctance at this stage to reopen past splits over euro membership. Large, multinational businesses tend to be strongly supportive of the benefits of EU membership, while smaller companies can be more sceptical.

Sir Roger Carr, president of the CBI employers’ group, said: “We must never forget that the European market still accounts for more than half of UK exports and that our relationship needs to be not simply one of arm’s length trade but one of close involvement and real influence in the single market of 27.”

But the CBI is not taking a stance on a referendum. “It’s impossible to form a view without knowing the question,” said John Cridland, director-general.

The British Chambers of Commerce, which represents mainly small and medium-sized businesses, is currently polling its members on Britain’s relationship with Europe. John Longworth, director-general, said Mr Cameron was right to distinguish between “the parts of our European engagement we want and those we want to end”.

“Businesses are exasperated by the endless stream of new European legislation and by court rulings that raise their costs and lower their competitiveness,” he said. “But at the same time, they want free and unfettered access to other European markets.”

Pro-European campaigners have often expressed frustration at the low profile adopted by many business leaders on European issues, in contrast to the concerns they raise behind the scenes about the threat to Britain’s EU future.

Peter Sands, chief executive of Standard Chartered bank, was last week seen leaving Downing Street with a document which listed the threat of a British exit as being one of the biggest concerns in the City.

Business leaders complain that their reticence is driven partly by the failure of politicians to give them covering fire, especially as the pro-European cause is hardly popular with members of the public.

Malcolm Sweeting, managing partner of law firm Clifford Chance and a member of the advisory council of Business for New Europe, the pro-Europe lobby group, was among the few business people willing to spell out the pro-European position Monday.

“The possibility of a long period of uncertainty about the UK’s future relationship with the EU could have a damaging effect on the UK economy,” he said.

“International manufacturing and services businesses faced with investment decisions will look at Britain and wonder whether there is risk and uncertainty,” he added. “Companies already based here will wonder whether the UK is about to jeopardise its influence on the single market.”

Open Europe, a broadly eurosceptic think-tank, said an in-out referendum would raise as many questions as answers. However, it added: “Steps towards greater eurozone integration and an increasingly sceptical UK public mean that the UK will almost certainly have to change its relationship with Europe, including new membership terms, which may have to be put to a referendum sooner or later.”

Karen De Meza, financial director at JAM Recruitment, a Greater Manchester based agency, said the possibility of UK withdrawal from the EU or reduced influence within it could harm manufacturing and engineering exporters.

Jonathan Duck, chief executive of Amtico International, a Coventry-based maker of PVC floor tiles, said the big question was whether Brussels would impose tariff barriers if the UK left. But he added: “It’s unclear to me that being in the room all the time has done us any good. All we’ve got is a whole raft of EU legislation that companies have to deal with.”