In not out, no shaking about: CBI makes case for UK in reformed EU

Posted on 4 Nov 2013

EU benefits each UK household by up to £3,000 a year, report claims

The UK must stay in a European Union that accepts key reforms, where EU membership is worth about 4%-5% of UK GDP every year, a landmark CBI report claims.

The changing balance of global power and the influence of world trade agreements the European Union can secure means the benefits of EU membership to the UK overwhelmingly outweigh the costs, the 184-page report concludes.

“We have looked beyond the political rhetoric to examine the pros and cons of EU membership and British business is unequivocal; the Single Market is fundamental to our future,” said CBI director-general John Cridland.

Our Global Future: the business vision for a reformed EU, pools research from more than 100 reports and articles to make a defiant case for Britain’s continued place in the EU. Membership of the EU is worth up to £3,000 a year to every household in terms of the wealth it creates for the UK, the report says.

The CBI says that the EU has helped open global markets on terms that support the UK’s global trade ambitions, citing 30 Free Trade Agreements – including the trade agreement with Canada signed last week – that give British companies access to markets worth $24 trillion.

It adds that if current negotiations with Japan and the US prove successful, that will grow to $47 trillion.

The report, the CBI’s biggest research project for several years, centres on the benefits the UK will receive from Europe, its biggest trade partner, by remaining a part of the EU – 50% of UK exports go to the EU and the European Free Trade Association, of Norway, Iceland and Lichtenstein. But the case is widened to show that Britain, as a member of the EU, will have a stronger trade negotiating position with the US, Japan and the BRIC bloc of Brazil, China, India and Russia too.

It emphasises that as the balance of world power shifts east, the UK must strengthen links to emerging markets to reflect the changing world. From 1999 to 2012, emerging and developing economies expanded by 118% while developed countries grew by just 26%.

While the 10-month research presents an emphatic list of EU benefits to business, it concedes the costs of membership. The lack of unilateral control over some regulations is a major drawback, where EU rules on the Working Time Directive and Temporary Agency Workers Directive have frustrated many British employers who operate a more flexible employment regime.

The amount of regulation that Brussels is prone to create was also highlighted, and the cost of EU membership – equivalent to about £116 per person each year, according to the CBI – was flagged, but it “dwarfed” by the strong of membership benefits.

John Cridland, director-general at the CBI
John Cridland, Director-General of the CBI

The report asks for a series of softening reforms that encouraging openness and competitiveness, urging the EU to be “outward looking, to sign trade deals with big established markets such as the US as well as high growth emerging markets.” A string of other reforms, such as putting legal safeguards in place for non-Eurozone countries, in the way that Banking Union negotiations have been achieved across Europe.

Manufacturing firms who are benefiting heavily from the EU pepper the report. Airbus, Bombardier Aerospace, Burberry, Diageo, Fujitsu UK, Jaguar Land Rover, Philips AVENT, Scotch Whisky, the entire motorsport industry and several SMEs were some of the beneficiaries of trading with Britain as part of the EU.

Portakabin, which through acquisition in Germany has become Europe’s second largest manufacturer of modular buildings, has been helped by the development of standardised regulations and product safety standards that allow it to exploit economies of scale to sell to 28 markets with one product. An exemplar of the need for reform, further alignment of European regulations is needed to give it a level playing field, despite strong demand for its products across the EU.

Group Rhodes CEO, Mark Ridgway

Machinery manufacturer Group Rhodes CEO, Mark Ridgway, said there was no doubt that the UK should be engaged within Europe and that the UK should be working towards eliminating non-tariff barriers.

“We sometimes forget however that the benefits that accrue from EU membership are not all related to how we view our own relationship with Europe, but rather how others view the same equation,” he said. “Foreign owned businesses looking to locate in the UK and strengthen our supply chain, often place as much importance on links with the EU as they do the economic benefits of locating and creating employment within our shores.”

Keith Cochrane, chief executive of oil & gas equipment supplier Weir Group and one of the report’s task group members, said his global company appreciated the importance of being able to trade effectively across borders. “In Africa the absence of a single African market means that our product is often stuck at country borders. Removing trade barriers is good for all,” he said. The EU is able to negotiate freer trade with Africa than Britain on her own, the report asserts.

The exhaustive study analysed the different alternatives to full EU status, and concluded “there is no credible alternative to EU membership”. It assesses each of the main alternatives for Britain in turn – going alone in the WTO, the Norway and Switzerland options, which suffer from a lack of influence and a series of weaker bilateral agreement, the weakest Turkey option, a special UK-EU trade deal and a customs union – and concludes that none provide the advantages of fully paid up EU membership.

Asked whether if Brussels declined to offer the reforms that the report sought, the CBI thought the UK should have a referendum on EU membership, Mr Cridland said “That is a country and political decision. We have deliberately focused on the economic and business case, which is ambitious but very persuasive. This is achievable,” he added.

The research found some regional differences in the support for EU membership, CBI chief policy adviser Katja Hall said. This was higher in the north east and West Midlands, which are more export centric than other parts of the country.