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
    +1

    Comment number 713.

    No one under the age of 55 in the UK has been consulted by Parliament on membership of the EEC, let alone the EU!

    Time has come to ask the people if they want to continue surrendering sovereignty of our Parliament, which many fought to protect, or if we want to go to where the French & Germans seem to want to go: a United States of Europe.

    Let the people decide
    All aboard HMS Referendum :D

  • 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.

  • rate this
    -2

    Comment number 576.

    We should be an active member of the European family and positively engage with Europe. This does not mean we have to surrender soverignty or control. We should even adopt the Euro when the time is right for the sake of British businesses, how we maintain control then is a matter for discussion and will need to be carefully thought through.

  • rate this
    +7

    Comment number 265.

    2 things beggar belief to me (i) that America apparently wants us to stay in the EU & (ii) that some business people think it would be bad for the UK. to leave.
    (i) Whenever the USA has sought Britain's help, I can never recall them contacting Brussels rather than London & (ii) how can it be bad to conduct one's own business, make/uphold our own laws, and continue to trade with who we like?

  • rate this
    +25

    Comment number 123.

    What I'm hearing from many politicians is a disgrace. whether you believe in the euro or not to deny the people the right or choice of how their lives are run would be a disgrace. How dare people try and deny me my voice, my right to choose how I want to e governed.

    We should not be dictated to, it's what my grandfather and many others fought for to prevent this kind of imposition.

 

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