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 697.

    Trust the people? You must be joking: people who don't know that Finland is in the EU? Who don't know that the ECHR has nothing to do with the EU? Who don't know that the EU Budget is only 1% of the EU GDP? Who don't know that only 6% of Uk legislation is affected by EU directives? Who have never been anywhere but Benidorm and/or Torremolinos? Trust this lot to vote? Time to short the pound...

  • rate this
    +3

    Comment number 696.

    The UK imports FAR more from the EU than it exports, so can one of the economic behemoths on this blog please explain why the EU would impose tariffs on the UK? Consider your answer framed against the Lisbon treaty , compelling the EU to seek FTAs with former members.

    A simple explanation please, but not from you Matthew, for you sir are clueless.

  • rate this
    +4

    Comment number 695.

    675.Matthew
    You do also realise that health insurance you receive abroard in the EU is still paid by the UK don't you? EU countries claim against cost of treatment back from the UK so its not free.The UK tax payer still picks up the tab,if this done away with it will mean if you go on holiday you will have to pay for medical insurance instead of the tax payer.Hardly a big issue and a lot fairer.

  • Comment number 694.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    0

    Comment number 693.

    667.RobinTheBoyWonder
    We are continually told by the Europhiles that the ECHR has nothing to do with the EU, so there is no link.
    //////
    Not the Europhiles tell you that, facts do.

  • rate this
    -6

    Comment number 692.

    @680.JasonEssex

    Significant amounts of our imports are food, we are a small country, with a large population, our farmers are good, but capable of feeding the nation, the grey pound has forced out the young from many parts of Spain, as our need for sun and sangria created the boom making it far too expensive for the young, if the UK is not in the EU, those young could demand the Greys get out

  • rate this
    +4

    Comment number 691.

    "676.Trout Mask Replica
    ....Read some history. I would recommend AJP Taylors "The Struggle for mastery in Europe 1848-1918". A dominant power in Europe was (and remains) against Britain's trading interests."

    Since the EU is currently the dominant power in Europe, are you now stating that the EU is against Britain's trading interests?

  • rate this
    -1

    Comment number 690.

    Our greatest statesman agreed that there should be a federal europe, but that Britain should not be part of that federation. The new breed of politicians are so wimpish they just follow the pied piper!!

  • rate this
    +3

    Comment number 689.

    @673.Trout Mask Replica

    Please don't invent untruths about my lifestyle to support your lack of cogent thought.

    I spend UP TO a maximum 6 months in (mainly) Portugal, and other countries in Europe and I have NOT been doing this for years.

    As I said in an earlier post it is none of your business so get stuffed.

  • rate this
    +3

    Comment number 688.

    679.Trout Mask Replica
    And I refer you (again) to comments at 529 and 461, which tell you I don't accept that known biased think tank, Open Europe, you promote. They have an agenda: stay in the EU, or else! Some may subscribe to their fear mongering, I don't.

    I noticed you (unsurprisingly) don't dispute my pointing out of your incorrectness on potential (French) tariffs :P

  • rate this
    0

    Comment number 687.

    I hope whether you are pre/anti EU, you can still go into the debate as a neutral person. Our politicians can twist facts and if you are one of those people who chose to hear what he believes, then we will be in trouble.
    Hopefully facts will start coming out soon, as this is a big decision for all brits.

  • rate this
    +3

    Comment number 686.

    We need clear understanding of the what we gain by being in the EU, and what we stand to gain or lose if we leave. But will we get it, and can we trust it?

  • rate this
    -2

    Comment number 685.

    Cameron's locked in a vice; a Conservative one...& it isn't very nice...& at the end of it all, he'll be the one paying the price. 2018 he'll grant a referendum if he wins the next election, but that won't happen, because the Conservatives have already lost the next election. He says Europe has won the peace, tell that to the French. Oh, & the real problems to face, Dave, are the present day ones!

  • rate this
    +3

    Comment number 684.

    Having read the speech I thought it gave a decent impression that it's better to work within the EU than outside. It accurately reflected what the UK feels and was still positive about working with our European neighbours. The problem is that the EU is in fact socialist in its concept. This allows no flexibility so although I think DC has got the balance right I can't see the EU agreeing with him.

  • rate this
    +1

    Comment number 683.

    "676. Trout Mask Replica
    Read some history. I would recommend AJP Taylors "The Struggle for mastery in Europe 1848-1918".

    Another of your "credible sources" no doubt?

  • rate this
    -2

    Comment number 682.

    Competition, Competition, Competition...

    Blind mantra competition often does more harm than good, logically the mantra ultimately dictates economic collapse as prices fall, in the end everything has no value, because customers have nothing to spend.

    Already the majority claim benefits to afford to work and can't take part in the economy.

    Why is government apparently so dumb?

  • rate this
    +1

    Comment number 681.

    @662.Trout Mask Replica
    [Pre-EU you] didn't have the unrestricted right to spend 6 months of the year there which you do and clearly don't even realise that this right is down to EU membership.
    ==
    Rubbish. It's not an unrestricted right now unless I adopt residency. They won't turn away people who spend their pensions in Portugal.

    If you're envious of my lifestyle just say so!

  • rate this
    +3

    Comment number 680.

    675.Matthew
    Not true, we import more from the EU than we export. Germany by 50% and France by 10-20%, why will they enforce import duties on cars/oil and gas when it will unduly damage their own economies and jobs. CAP by the way increases the cost of food. Do you honestly believe Spain will want to lose the grey pound and see the property market collapse even more? All are scaremongering.

  • rate this
    -2

    Comment number 679.

    "Bastiat
    Pure speculation that is rebutted by real life examples. 29+ countries enjoy FTAs with the EU (including France)."

    I refer you, once again, to this review of the various trading options that are available to us in and out of the EU http://www.openeurope.org.uk/Content/Documents/Pdfs/2012EUTrade.pdf Perhaps you can read it and try to understand it this time. Things like "rules of origin"

  • rate this
    -1

    Comment number 678.

    55% of the UK's trade is with the EU. Do you think that by pulling out this will change? Of course not. What will change, however, is the fact that the UK will have to conform to rules and regulations they have no chance of influencing, because they're not sitting at the negotiating table.

    France, Germany and the others are not going to give the UK preferential treatment if it quits the EU.

 

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