Lord Lawson's argument with business

Nigel Lawson

Naturally most coverage of Lord Lawson's euro-Damascene moment in the Times has focussed on who he is - one of the two most influential chancellors of modern times - rather than what he says.

So what about the content of his argument that the UK would now be better off outside of the European Union.

Perhaps his most interesting point is this one:

"Too much of British business and industry feels... secure in the warm embrace of the European single market and is failing to recognise that today's great export opportunities lie in the developing world, particularly in Asia."

In other words, he is not claiming that those who run our companies agree with him that exit from the EU is optimal for them or the economy.

As it happens, those who run our biggest companies would tend to be horrified at the idea of withdrawal from the EU.

Our multinationals, unlike those of Switzerland, increasingly think of themselves as global corporate citizens, as much as British citizens. And whether they started life as British or not, they have a mindset that they are in Britain because it is an attractive place to be located within the EU.

Bosses of big banks and financial institutions would have this European mindset in spades. And many of them would take serious issue with Lord Lawson's idea that they would be liberated to thrive again, outside of the supposedly deadening clutches of EU financial reform and its planned new tax on financial transactions.

Since the crash of 2008, they've felt - if anything - more bashed and battered by UK regulators and politicians than by EU ones. And Lord Lawson, with his partly successful campaign to reinforce barriers between retail and investment banking operations, would not be seen by them as a champion of City laissez faire.

Of course smaller companies, including smaller City ones, are more patriotic in a conventional sense. But right now and in recent years they have been less important to British economic performance than the giant companies - although the government is desperate for smaller business to increase its relative output and influence.

I am not sure whether it is a paradox or not, but smaller and medium-size companies in the UK, which tend to have more eurosceptic bosses than bigger companies, are less important to British prosperity than smaller companies in Italy or Germany, for example.

All that said, the consensus of those in charge of businesses large and tiny would be for changing the terms of EU membership, to reduce the regulatory burden on them (yes, I know you know this).

In other words, they are hoping that David Cameron succeeds in his ambition of scaling back aspects of EU rules and regulations that they see as undermining their competitiveness.

Start Quote

Lawson's claim [is] that ease of trading with the EU... prevents British businesses working hard enough to gain access to the faster growing markets of Asia and Latin America”

End Quote

Lord Lawson, never one to mince his opinions, thinks the prime minister will fail, and that - anyway - companies are wrong to place their faith in him.

But let's return to Lawson's claim, that ease of trading with the EU damages the UK because it somehow prevents British businesses working hard enough to gain access to the faster growing markets of Asia and Latin America.

If there is something in this, one important question is why it doesn't apply to Germany - whose exports to China, per capita, are more than four times the UK's.

However, it is important to note that ease of access to the EU market has not been an unalloyed boon for the UK.

For years, the UK has run a significant current account deficit with the rest of the EU. In other words, our business with the EU has contributed fairly significantly to the growing indebtedness of the UK, at a time when many would say the debt burden on the UK is unsustainably high (and, to remind you, I am talking here about the aggregate of household, business, financial sector and government debt - not public sector debt in isolation).

Of course there has been an enormous deficit in British trade with China. But the UK's consistent surplus with the US shows that Britain isn't doomed to be constantly in the red with economies regarded as formidable.

Margaret Thatcher and Nigel Lawson in 1989 Margaret Thatcher and Nigel Lawson in 1989

For decades, and pretty consistently since the UK joined the European Common Market, the EU's previous incarnation in 1973, the UK has been a deficit nation in its trading relationship with the rest of the world as a whole rather than a surplus nation.

Some would argue that the biggest problem currently faced by the UK is its failure since the great crash of 2008 to start generating a current account surplus, in spite of sharp falls in the value of sterling that should have made UK exports more competitive - because with the current account deficit bigger than at any time since 1989, it is impossible for the overall indebtedness of the UK economy to shrink.

The European Commission itself forecasts that the UK will continue to be a significant net borrower from the rest of the world for at least the next couple of years (at a rate of 2.5% of GDP in 2013 and 1.8% next year - compared with 3.5% in 2012).

So maybe Lord Lawson can be seen as kicking off an important debate, which is whether the UK will find it easier to start paying its way in the world on the inside - or the outside - of the EU.

Robert Peston Article written by Robert Peston Robert Peston Economics editor

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  • rate this

    Comment number 664.

    #657. Climate Change is not just related to car use. In light of all the evidence out there (I am a scientist myself - much like you I hope), what would it take for you to change your mind on this matter? A flood? A drought? Scientific evidence? I am sorry you are so angry and that climate change is so inconvenient. I hope you can see the risks of you and Mr Lawson being wrong

  • rate this

    Comment number 663.

    If the EU is such a negative force on the success of the UK economy Perhaps the anti EU brigade can explain the manufacturing success of Germany? could it be that they invest in their industries for the long term, do not run them based on a class system, fully involve, value and respect their workforce and resist the temptation to engage in a race to the bottom on price and wages.

  • rate this

    Comment number 662.

    Britain has traditionally played an influential role in world, & especially European, affairs. It's one of Europe's biggest 4 economies, & has as much right to have a say, & be listened to, as anyone else. So the Government should be putting forward positive proposals for reform, especially among those member states outside the Eurozone. Not defeatism & threatening to leave if we don't get our way

  • rate this

    Comment number 661.

    Is this the Lawson who created the 'Lawson Boom' , with high inflation followed by massive bust? Are we to take him as any more of an authority on the economy than Noddy?

  • rate this

    Comment number 660.

    Quite remarkable there's now such a divergence between Cameron and a Tory grandee who's embraced the UKIP anti-EU line. How can a Government hope to persuade its partners in Europe that it is serious about a positive relationship with Europe when, as Lawson has shown, the tories can't even agree amongst themselves about the role and value of trading within the EU ?

  • rate this

    Comment number 659.

    #657 go check out the UK coal production figure for the 1800's UK produced 70% of world coal , then think start to use yr brain. Mass Car usage DID no happen in UK until after 1960.

    Alll the evidence is out there to show that MAN MADE CLIMATE change is a con

  • rate this

    Comment number 658.

    If small and medium size British companies seem to have trouble flourishing in the European Single Market, which is wide open and easily accessible to them. What on earth makes Lawson think they're capable of doing any better globally? Believe me, it'll require far more resources than they possess to flourish globally! The EU is a fantastic stepping stone for any globally ambitious small company.

  • rate this

    Comment number 657.

    Lord Lawson queries climate change with no evidence. When someone denounces science with no evidence - his opinion on other areas of science (i.e. business and finance) should not be trusted. Why this man is given a voice I do not understand. Why is his opinion important? Is the BBC courting controversy?

  • rate this

    Comment number 656.

    TheSalmonofDoubt @642
    "because it does not make"?

    Or rather because incentivised "to make ANYTHING that pays"?
    Not 'for all in equal partnership', for short-term personal advantage

    As happy - or obliged - to make ANYTHING. Candy-floss, addictions to whatever, loyalties to whatever, careers in politics, or just 'trouble' (beggary, petty crime, shock-jock, 'pure mercenary')

    EU needs reform. Ours.

  • rate this

    Comment number 655.

    Lawsons loyalties lie with the Oil producers (examine the history of the GWPF "educational charity" and its backers for evidence). I believe the motivation is to support Oil trade from outside the EU (there's hardly any in the EU anyway) and limit the influence of the EU on oil prices.

  • rate this

    Comment number 654.

    @571. So I will take it as read then that you would be happy with an average wage of USD1654 instead of the current 19,518.

    And that is one of the simplest comparisons one can use to explain Chinas industrial growth. Also consider that in the main the manufacturing responsible for the growth itself is not new, it has been transplanted (machine tools included) from Europe and the US.

  • rate this

    Comment number 653.

    #633 good parts, name 1.people on here supporting the EU... will you be supporting it when a rumanian or bulgarian take your job next year?
    Not going to happen. Got myself a good education and specialised myself from early on in my career. With the easy access to the great education system we have, everyone should have done this.

  • Comment number 652.

    All this user's posts have been removed.Why?

  • rate this

    Comment number 651.

    So your British Government wants to leave the EU? This will hurt the EU for sure in the medium term, but in the long term will hurt Britain even more. The days of 'Splendid Isolation' are long long gone. It will just be mere 'isolation' if GB does turn its back on the EU with the added pressure of the Scots pulling at the chain to leave the GB. The EU will survive, will GB?

  • rate this

    Comment number 650.

    people on here supporting the EU... will you be supporting it when a rumanian or bulgarian take your job next year? 

    Just as much as I can go to Romania, and get a job there if I like.

    That's the beauty of the EU.

    Don't blame others if someone takes your job, look at yourself and find another job, you've got the whole of Europe to find one.

  • rate this

    Comment number 649.

    @648 Never a truer word. Unfortunately it is human nature to blame someone else for your own failures

  • rate this

    Comment number 648.

    We could have been at the centre of the most powerful trading block in the world but successive governments have failed to do this, particularly starting with Thatcher and Lawson. It is not the EU holding us back. It is our own governments failing to have vision and move with the times.

  • rate this

    Comment number 647.

    "Where there is discord, may we bring harmony. Where there is error, may we bring truth. Where there is doubt, may we bring faith. And where there is despair, may we bring hope."

    What they really mean is:

    Where there is harmony, may we bring hate, where there is truth, may we bring lies, where there is faith, may we bring doubt, where there is despair, may we exploit resentment.

  • rate this

    Comment number 646.

    @645 It is very easy to say that the "whole thing is rigged against us". I saw a very interesting interview with the CEO of a bike company on Newsnight. He said that the government provided no help with exports. He lamented that there were more HQs of German companies in Sao Paulo than in Berlin! We can blame the EU, but they do not stop us getting off our backsides and selling our goods abroad.

  • rate this

    Comment number 645.

    549. Steve
    "I agree with Lawson's sentiments. Europe has never been a friendly market. The whole thing was rigged against us. The trade is imbalanced in their favour and their economies not growing. We should concentrate on working with the growing market places."

    And who is preventing Britain from succeding in the growing markets?
    Surely not the EU.


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