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Build Stronger EU Relationships To Build Our Economy PDF Print E-mail
Tuesday, 21 June 2016
Amongst the skyscrapers of column inches detailing the whether we should ‘Leave’ or ‘Remain’, you may have come across the analogy of the nightclub? A chap called Iain Black, posted on Facebook that leaving the EU would be like leaving a club because you think there’s somewhere else better down the road, on finding nothing, you’re refused re-entry and end up in a kebab shop arguing with yourself whilst everyone else continues the party.

We’re now in the final hours of campaigning and the nation will soon make its decision whether to leave the club and head off into the night. Or, embrace the EU and help to shape its governance for the better and start to rebuild the damaged political relationships.

Rebuild relationships? Yes, because I’m making the assumption that a good handful of the other EU countries either think we’re arrogant or have never much liked us in the first place. If you take Black’s analogy a little further, the UK is probably the spoilt posh bloke in the club, slurring on about how we ‘used to rule the world.’ That was then. We live in the ‘now’ and our economy, skills and exports are very different to the days of the Empire.

Our relationship with the EU has generally been dislocated. It can be traced back to 1979 when choose not to join the ERM. Yup, we’ll join the Common Market, have some free trade, but reject the Euro, keep a veto up our handy – basically picking the best bits. Whilst keeping Sterling is a smart economic move, its time the UK actually embraced the EU and used it to our benefit. If we’re going to remain, let’s for the first time, roll up our sleeves and work to make things better. Isn’t that the epitome of Britishness?

Yes, the EU has its failings, lots of them. Fundamentally, northern and southern European countries are chalk and cheese. Regulation is slow can stifle businesses and the amount of waste that gushes from Brussels is cause for concern. But in our view, those issues are far out-weighed by the opportunity for UK business growth, for continued foreign investment and employment.

Since the single market began in 1993, Britain’s GDP has risen by 62%, compared by 42% in France and 35% in Germany. The ONS also reports growth of 69% during that period.

Looking at our performance in attracting Foreign Direct Investment (FDI), another key benefit of being part of the EU. In 2014, we saw a record number of 887 projects, up 11% on 2013; increased European market share; and a market-leading 31,198 jobs created.

Our success is broad-based. Despite a second year of decline in business services projects across Europe, the UK grew its software and financial services sector projects, captured 35% of all European headquarter (HQ) moves and led Europe on R&D projects. The UK achieved a leading market share of 29% of US projects in Europe and was the main destination for investment in Europe from France, Japan, Australia, Canada, India and Ireland.

2014 also saw significantly improved performance across the English regions, Northern Ireland and Wales. Yorkshire with a 145% increase in projects, the South East up 49% and the West Midlands with a 38% rise led the way. In total, the English regions secured 344 projects, the highest total since 1998.

Research earlier this year from Ernst & Young was startling. With 72% of investors citing access to the European single market as important to the UK’s attractiveness. And that 31% of investors will immediately freeze or reduce investment if we exit the EU.

Not only would it impact investment - whilst we spend months, if not years, whilst trying to shape new trade deals – banks would look to hold cash on their balance sheets. They may lose, or have to renegotiate their money-spinning EU passports which allow them to move money around Europe freely. Rates may well have to rise, hitting homeowners and we would likely see a 10-15% drop in the value of sterling. Ok, the latter has positives as well as negatives.

Banks, and other overseas multinationals will almost certainly start relocating staff. HSBC, Morgan Stanley and Goldman Sachs, along with leading French banks have confirmed this. Whilst the city is built on strong foundations, France, Luxembourg and Ireland will be looking to lure then away with attractive resettlement deals.

Looking at a range of polls taken from UK SME’s, the picture is slightly different. Back in March, the CBI noted that 71% would support staying in the EU. By May, that had dropped to 54%.

Smaller industry groups have been more bullish about Brexit. A BCC poll showed 42.1% of businesses that employ fewer than 10 people want to leave the EU. And, last month, the National Federation of Builders (NFB) said 47% of its members believed they would benefit more from being outside the EU, while 33% said that staying in would be more beneficial. This is a curious shift and one that smacks of naivety, topped up with foolhardiness.

We vote to leave. Credit lines dry up, less investment comes in, there is a recruitment freeze and people spend less. For how long could some of our SME’s hold out?

On Monday, the FTSE charged, up 3%, reversing recent losses, the Pound has gained more ground that day, than at any time in the last 12 years as the city senses ‘Remain’ has the require momentum to clinch victory on Thursday.

Despite all of this, why is the referendum still so close? There have been three major failures from the Remain camp.

Firstly, their strategy has been purely about trying to instil as much fear into the nation as possible. House prices will crash, taxes will go up, the £pound will plummet, airports will make us queue for days at immigration and we won’t be allowed to play football in Europe anymore. Anything that could go wrong would due to a Brexit.

Next, there’s been a total lack of cross-party cohesion. This a referendum about Britain and its position within the European and World stage - not Conservative versus Labour local party politics. Labour are a party divided. Their leader has been both anonymous and shown little conviction when reading from his hymn sheet. They are an opposition comprising of limited political experience and business understanding. Apparently, the Lib-Dems do still exist. Somewhere just off the A303.

Lastly, campaigning for Remain has fallen – largely – on the same two shoulders. Cameron and Osbourne…..occasionally the BoE’s Grim Reaper being wheeled out to sprinkle more doom. Voters from Wigan or Glasgow are poles apart from the Chipping Norton set. They have little in common. So desperate, that bundle of charisma, Gordon Brown was unleashed in a last ditch attempt to swing Scottish voters. Remain has barely sold a positive message to voters.

The Leave camp, in Boris and Farage are two ‘Carlsberg’ politicians. You could have a pint with Nige – several probably. They are able to reach a broader cross section of voters that the other politicians fail to reach. Instead of spouting negativity and fear, they have – asides the immigration card – have trumpeted ‘opportunity’ ‘taking back control’ and that we are brilliant enough to ‘trade with the world, not just the EU.’ People want to believe good news.

Voters for Leave are generally more passionate and vocal. They’ve allowed themselves to be engulfed by nostalgia and are happy to believe the nonsense that immigration means we cannot control our borders and we’ll all be jobless once hundreds of thousands of Turkish join the influx to our shores. The fact that the ONS reported another fall in unemployment in March 2016 – down to 1.68m, or 74.1% are employed, the highest since June 1971, has fallen on deaf ears.

EU migrants pay their way. Yes, there is a percentage who are abusing our generous welfare systems, but no more so than our own slobs who smugly pop out another child purely to increase their benefit allowances, moan their council house is too small and still chug through 20 Rothmans a day. Want your office cleaned, fruit picked or car washed? Don’t look to Wayne or Sharon on benefits street for days’ graft.

Migration also responds to economic conditions in Britain and compliments our flexible labour market. In 2008, when the crisis hit, net migration from the EU halved. It fell again in 2009 and is only got back to 2007 levels in 2014, a sign our economy was starting to motor again.

How about we attract skilled migrants? Integrate them into our innovative, industry leading businesses and harness their skills, insights and knowledge to build an even stronger economy. How many UK SME’s have ever thought about marketing their products to eastern Europeans living here? Very few, if any. It’s only been a couple of years since retailers thought having black, or lighter skinned mannequins showcasing latest fashions in shop windows.

So let’s embrace the European club. They have membership at the other global clubs and the drinks are cheaper. Just because we don’t always like the music DJ Junker plays, it doesn’t mean we should neck a few Sambuca’s and storm off, fuelled by misguided bravado, into the night, muttering drunkenly about Winston Churchill, Bobby Moore and bacon sandwiches.

It is a difficult, often personal decision. So, come Friday morning, whoever has lost, needs to dust themselves off and unite to build a stronger future for the UK. We’ve only just clawed our way out of the last recession, why would we want to risk another?

John Mulheron, Managing Director
CMF Capital

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