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

    Comment number 157.

    #134. Howesyourview
    "Is there now way where we can negotiate with the EU to still have a common market but not to obide by the laws and regulations that they impose? If there isnt then i'm all up for leaving the EU."
    Outside the EU the UK would still have to abide by EU rules and regulations(over which we would have no input or influence) to trade into the EU as Norway & Switzerland have to.

  • rate this

    Comment number 156.

    Business hates uncertainty - and Cameron has now given them several years of it when our economy is already on its knees.

    He needed to clearly outline the parameters of his negotiations before spouting off like this - what can business count on him to fight to keep, what will he fight to change.

    Cameron is a mediocre leader.

  • rate this

    Comment number 155.

    So the 55 business leaders back Cameron because they want less red tape and more flexibility? When are people going to wake up the fact that what this really means is they want to do is repatriate powers so that they can rip up employment rights, drive wages down, have people work longer and have the ability to sack them at the drop of a hat?

  • rate this

    Comment number 154.

    And what about Scotland joining the EU as an independent state? Referendums are becoming the islanders' favourite fad, along with golf and grumbling.

  • rate this

    Comment number 153.

    The news of this referendum just before flying to Davos is ridiculous posturing to the Tory old guard and negates anybody at the WEF taking anything he says seriously. UK 0 RoW 1

  • rate this

    Comment number 152.

    Cameron may just have played a blinder on this one, he's going to have public support and maybe he might just get the leverage on the EU to do just what he said, bring reform and a better deal.

    Personally I'm not 100% sure an exit of the EU is in our interests or not but at least if the Tories stay in power we can hopefully have an informed debate that the People can then decide the outcome of.

  • rate this

    Comment number 151.

    What people forget is business just like the banks rely on our money to keep share holders happy and we will still be here spending money regardless of being in the EU or out.
    The professed line of the UK being abandoned should we leave is just another tool to keep the status quo. Our problems lie in the inability to tax cross border corporates in the same way our smaller businessess are treated.

  • rate this

    Comment number 150.

    So the PM Thinks the correct approach is to hold a gun to the UK's economies head and threaten to shoot if He doesn't get his own way.

    There are a minority of businesses who would be delighted to see any excuse for the removal of the workers rights so they can pay less for longer hours and sack if your face doesn't fit.

    The same people said minimum wage would cost a million jobs

  • rate this

    Comment number 149.

    This disgusts me and many British
    All the scare tactics by vested interests to force us into undemocratic federal state.
    Unless there is major change to the EU, which I cannot see the French even contemplating, we need to get out.
    We sacrifice our children's freedom if we do not win this battle.
    Scaremongering similar to Euro debate, which was fruitless
    Britains never, never, never shall be slaves

  • rate this

    Comment number 148.

    "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. "
    Good luck British people !!

  • rate this

    Comment number 147.

    Leave the EU, reduce corporation tax, income tax, business regulation and watch investment and jobs increase in the UK. 80% of everything we make is for UK consumption. Export figures for trade to the EU includes goods destined for the World passing through Rotterdam. The EU sells more goods to us than we to them. There are 2 billion consumers in the Commonwealth with most speaking English.

  • rate this

    Comment number 146.

    Being in Europe or out is not the problem now, it is the uncertainty thats the killer and it will certainly put of investment from European companies. Its a clear lack of leadership by DC and is being artificially drawn out for political scoring against Labour (as it will now be the major election issue which Labour will have no decent answer too). Show some leadership and make a choice DC!

  • rate this

    Comment number 145.

    I hope it woke the Labour supporters up because they are all for a dictatorship but you can't trust the tory's so vote UKIP for democracy.

  • rate this

    Comment number 144.

    I look forward to David Cameron explaining clearly the benefits of being in Europe, and making it clear to his Newspaper freinds that the ECHR is not and has never been part of the EU. After all, he has done this ever since he was in power.

  • rate this

    Comment number 143.

    121.Sue Doughcoup

    As you effectively say there is no perfect system - which is why I find the hyporcacy of the knee jerk, recationary Tory right wing so distatseful on Europe.....

    ....they point to mostly non existant flaws (over vastly over state the flaws that are there) whilst pretending UK democracy is perfect......

  • rate this

    Comment number 142.

    Let's remember that the attitude of a business depends on their markets, products and services. Large companies are attracted to protection and stability; they are often bureaucratic and controlling. Not known for agility and responsiveness. So guess what they'll want.
    Most of Britain's business is small and medium sized; competitive and responsive to opportunity; but shackled by bureaucracy..

  • rate this

    Comment number 141.

    No doubt the Tories would be delighted to do away with the 48 hour directive and take us back to the Victorian age and have us working slave labour hours for peanuts. If it wasn't for the EU I would still be working 6 days a week working all hours god sends. There is still something positive about the EU which no doubt the right whingers don't see. I for one will vote to stay in the EU.

  • rate this

    Comment number 140.

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

    Listing a mobile phone call & the price of an airline ticket are a low priority with most people. How about food & housing at an affordable cost?
    As for Dave's promise of an in/out vote if he gets re elected I think there is more likelihood of the Rev Ian Paisley becoming the next Pope.


  • rate this

    Comment number 139.

    Europhiles be warned:

    The following countries are happy, independent, sovereign nations and each enjoy a Free Trade Agreement with the EU:
    South Korea, Chile, Egypt, Mexico, South Africa, Turkey (and many more).

    We don't need the tyranny of career bureaucrats and politicians from Brussels.
    They need us :)

  • rate this

    Comment number 138.

    " Matthew Atkins
    but the 65.2 Bn a year we give them which could be much better spent"

    Where do you get such nonsense? The NET UK contribution to the EU is about one tenth of that amount.

    The rsst of your post is similarly founded in delusion and free of facts.


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