Cameron EU speech: Business leaders give mixed messages

 

PIMCO boss Mohamed El-Erian: UK faces an ‘uncertainty premium’

Some business leaders have warned that David Cameron's EU referendum proposal will hurt investment, but others have backed the prime minister's move.

The head of US-based investor Pimco, Mohamed El-Erian, said it would raise the UK's cost of borrowing in markets.

However, a group of 55 British business leaders have written an open letter to the Times throwing their weight behind Mr Cameron's strategy.

Mr Cameron is due to speak at the World Economic Forum in Davos later.

He will use his keynote address to set out the UK's priorities for its chairmanship of the G8 in 2013 and to call for international co-operation to make sure that global companies pay their fair share of tax.

He will make clear that he wants to focus on economic priorities - trade, tax and transparency - as measures that will enable countries to compete in the current market.

'New relationship'

But it was his speech on Wednesday that is likely to be of more interest to the Davos audience of business and world leaders.

Mr Cameron said the British people must "have their say" on Europe as he pledged an in/out referendum if the Conservatives win the election.

Start Quote

The only thing that's damaging to British business is the march of regulation, which weighs industry down”

End Quote Lord Wolfson Conservative peer and Next chief executive

The prime minister said he wanted to renegotiate the UK's relationship with the EU and then give people the "simple choice" between staying in under those new terms, or leaving the EU.

In their open letter, the group of top UK bosses endorsed his view.

"We need a new relationship with the EU, backed by democratic mandate," said the group, which includes the chief executives of B&Q owner Kingfisher, mining group Xstrata, electricals retailer Dixons, the London Stock Exchange and beverages maker Diageo, as well as the chairman of engineering firm Rolls Royce.

The executives complained about the red tape burden imposed by Brussels, and claimed it was the right moment "to push for a more competitive, flexible and prosperous European Union that would bring more jobs and growth for all member states".

The UK's biggest business organisation, the CBI, also expressed support for the mooted in-or-out referendum.

'Suffer the consequences'

Start Quote

David Cameron wants to use his keynote address here in Davos today to call for international co-operation to make sure that global companies pay their fair share of tax. But, the movers and shakers meeting here may be more interested in what he said yesterday about Britain's future in the European Union”

End Quote

However, other business leaders - including the British manufacturers' association, the EEF, and the UK head of the accountancy firm Deloitte - echoed the concerns raised by Mr El-Erian.

Speaking on the BBC's Hardtalk programme, Mr El-Erian - who heads the world's biggest investor in bonds, based in California - said the UK would "certainly suffer the consequences" if it exited the EU, including lower growth and lower investment.

But he said the uncertainty generated by the possibility of an EU exit years in the future would also be damaging.

"People like us start putting in an uncertainty premium," said the US-based fund manager.

"If we're going to make investment decisions, the uncertainty premium associated with that goes up when you're not sure what the relationship between Britain and Europe will be."

'Clarity needed'

If it goes ahead, the referendum is due to be held between 2015 and 2017.

David Sproul, the UK boss of Deloitte, said: "The Europe debate does not help to create certainty.

John Maguire asked the people of Bristol for their views on Europe

"When I talk to US clients who have not been immersed in the European debate as we have, they say that what they need is clarity. There is no question it will impact business - it will hit investment into the UK."

Sir Andrew Cahn, the former chief executive of UK Trade and Investment, went further, calling the next five years a period of "investment chill."

"If you don't know whether Britain is going to be a full positive member of the European Union in five years' time, you'll wonder if you want to make that additional investment," he said.

Other business leaders were supportive of the government. Lord Wolfson, the boss of the retail chain Next and a Conservative peer, described worries of uncertainty as "nonsense".

"The only thing that's damaging to British business is the march of regulation, which weighs industry down," he said.

Single market

In response to Mr Cameron's announcement on Wednesday morning, the French foreign minister Laurent Fabius said his country would "roll out the red carpet" for businesses who may be less keen to invest in the UK in the event of an exit.

But, during his speech, David Cameron repeatedly insisted that the European single market would be at the heart of any new treaty with Brussels, billed as the alternative to exiting the union.

"Continued access to the single market is vital for British businesses and British jobs," he said.

Cameron's proposals

  • He plans to renegotiate parts of the UK's relationship with Europe, arguing for fewer powers for Brussels
  • He will then put that changed membership package to the British people
  • The referendum will be a straight in-out question
  • He will campaign to stay inside the EU - provided the other 26 members have agreed to his changes

Since it began 20 years ago this month, the single market has established free movement of people, money, goods and services throughout the EU, a market that now includes 500 million consumers in 27 countries.

Working hours

Most business leaders agree with the prime minister that the UK needs to retain its place in that market, especially if it wants to continue to attract so much foreign investment.

"The vast majority of businesses across the UK want to stay in the single market, but on the basis of a revised relationship with Europe that promotes trade and competitiveness," said John Longworth of the British Chambers of Commerce.

The EU says the result of the single market has been a rise in quality, and a reduction in prices.

It claims that the cost of a mobile phone call has fallen by 70% since the single market came into operation, and the cost of a plane ticket has fallen by 40%.

One of the issues the government will examine is the issue of working hours. An EU directive, incorporated into UK law, limits the amount of time that most people work to 48 hours a week.

Should the government decide to repatriate that power, businesses might have greater freedom to ask their staff to work longer, a move that would be highly controversial.

"The working hours of British doctors should not be set in Brussels," said Mr Cameron.

 

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  • rate this
    -2

    Comment number 97.

    Every national referenda seems to be worth less and less as powers diffuse to Brussels. How can we seriously lecture and promote democracy to other countries around the world while inside the behemoth EU? trade is going to happen anyway, europe is a stagnant duck with no resources or growth. we should be looking at other markets like Australia has done successfully they are still in boom

  • rate this
    +4

    Comment number 96.

    @John Petrie

    'It is the end for UKIP - why waste a vote protesting when a party with a chance of winning and election is offering the same option to leave the EU?'

    Only a fool would believe Cameron would stick to his pledge/promise. It's so couched in pre-conditions as to be worthless PLUS the malicious Brown has established in court that manifestos are not subject to legitimate expectation

  • rate this
    +66

    Comment number 95.

    The lack of understanding of the EU was shown today by Mr Grayling; the working time directive does not prevent doctors working more than 48hrs a week if they choose to, but it gives them a right to refuse to work that long, and they are exempt from WTD anyway. There is also no common EU legal system. If there is to be a referendum, there needs to be a balanced debate based on fact not fiction.

  • rate this
    +1

    Comment number 94.

    @85.. UKIP have seen a huge rise and its not just their EU policy that has captured people its a vast majority of other rules on such as Prison management, Power policies and Military budgets and spending that people also look for.. a party never stands for just one goal.. they stand for a wide variety of goals.. maybe you should read some.. as for the stance on UKIP are now over 18% on polls

  • rate this
    0

    Comment number 93.

    @75 Typical misrepresentation. Just because Chris Grayling says these decisions should be made in the UK parliament you immediately assume that means a detrimental change. You clearly have no faith in UK democracy and the electorate's right to choose who gets to make these decisions. You would rather hand it all over to an unelected cadre who's views just happen to match your own.

  • rate this
    +3

    Comment number 92.

    Is anyone really so gullible as to believe any of this will ever actually happen?
    More Smoke and Mirrors from a Government desperately trying to distract from the appalling mess they are making of the Country.
    It's going to take hundreds of years to put right the damage that these vandals are doing. If, indeed, it can ever be put right.

  • rate this
    -2

    Comment number 91.

    We initially joined EFTA as a founding member in 1960 which was and is a great idea, EFTA is still going strong.
    What we didn't need was to join the EU with Brussels and it's desire to politically rule Europe and overwhelm us with stupid rules and inept bureaucrats who cost us a fortune!

  • rate this
    0

    Comment number 90.

    I think Cameron is canny. For almost 40 years, since we were lied to about the Common Market just being a 'free trade' area, people have wanted to vote on our membership of this political union. A referendum will resolve this. Also by delaying the date he forces Labour & the Lib Dems to follow suit or be wiped out at the next election. And the EU can mull over losing the UK's contribution.

  • rate this
    -3

    Comment number 89.

    The EU is the Titanic of our time - the economic icebergs of Greece, Spain and Italy have already hit and Germany and France are playing the same old tunes on the deck . Time to go .

  • rate this
    +16

    Comment number 88.

    re 73: I see the same scaremongering is being spouted by the same people who said that we MUST join the Euro otherwise no global companies would even consider investing in the UK. Did that prediction come true? Methinks not.

  • rate this
    +4

    Comment number 87.

    Two cheers for democracy.

    Don't vote. It only encourages them.

  • rate this
    +39

    Comment number 86.

    I think we should invite other members to leave the EU and join the UK.

  • rate this
    -1

    Comment number 85.

    It is the end for UKIP - why waste a vote protesting when a party with a chance of winning and election is offering the same option to leave the EU?

  • rate this
    +9

    Comment number 84.

    As much as the EU gets a bad press these days, there are still some good aspects to it.

    The best case sceanario is this gives DC the leverage to renogiate the UK's position, and maybe even the direction the EU as a whole is taking.

    The worst case sceanario is DC returns from his negotiation without anything to convince us to stay, and we vote to pull out.

    Basically its a win win. :-)

  • rate this
    +2

    Comment number 83.

    Has anyone asked our Farmers whether they want to stay in Europe?

    Can't see them giving up all those lovely subsidies very easily.

  • rate this
    +1

    Comment number 82.

    I believe it is right for our country to review its position with the EU. Talk of a possible reduction in investment because of referendum smacks of alarmism by those with vested interests. It is good practice to review the fundamentals from time to time. We are not obliged to blindly follow our membership to the EU, neither to effect change. This is a democratic process. Well done Mr Cameron.

  • rate this
    +2

    Comment number 81.

    @35 "Other countries like Finland aren't in the EU " Errm Finland is in the EU. Maybe you are confusing it with the fact it is not in Nato? Switzerland and Norway are not in the EU and are doing ok but they are bound by a lot of the laws of the EU. In fact Norway has implemented more EU mandates than any EU country which is hilarious in itself. We need a different EU but we do need them.

  • rate this
    -1

    Comment number 80.

    We should have had a refferendum YEARS ago rather than our then prime ministers skulking about signing treaties they had absolutly no mandate to. If it's good enough for Scotland it's good enough for the UK as a whole. Grasp the nettle and give us the vote so we can start spending all our EU 'subs' on us!!

  • rate this
    +2

    Comment number 79.

    "Sue Doughcoup
    Such issues as capital punishment for certain types of crime, nationalising essential services (power, rail)"

    It really is amusing that many who wish to remove the "deadhand" of EU bureaucracy wish to reimpose the deadhand of state owned industry and even the right of the state to take the lives of its citizens. The idea the EU is a "socialist" instrument needs revising.

  • rate this
    +2

    Comment number 78.

    @23. My Pennies Worth 2
    Switzerland is not broke and up to it's neck in debt.

 

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