Many small German companies – the mittelstand – are as Eurosceptic as the UK counterparts, and the EU would be well advised to listen to their concerns, writes Brian Caplen.

Everyone expected that in the campaign for the UK to remain inside the EU, business would be largely united in wanting to stay. But as the days to the June 23 referendum tick by it is becoming clear that business is seriously divided and that this is not just a UK phenomenon – many continental businesses are also sceptical. 

If the EU wants to regain its credibility, listening more carefully to the concerns of SMEs – which account for 67% of employment, 58% of value added and 99% of the total number of companies across the EU – would be a good place to start. 

Predictably, international banks and multi-national companies are strongly in favour of the UK staying inside the EU. The loss of passporting rights allowing London-based banks, including those from outside the EU, to sell services directly into the single market would be a major setback for the City of London.  The likely loss of clearing and settlement of euro transactions would also be highly damaging to the UK ‘s financial services sector, its most successful export business, as we report in The Banker’s June cover story. Hardly surprising, then, that Goldman Sachs, JPMorgan and Morgan Stanley are prominent funders of the remain campaign. 

Multi-nationals using the UK as a base to export throughout the EU, or as part of an EU-wide operation, as is the case with Nissan, Siemens and Schneider Electric, which are also firmly in favour of the UK staying part of the EU. 

But companies that are exporting outside the EU, to emerging markets such as India and China – hedge funds and spread betting companies which could arguably operate from anywhere and generally dislike too many rules, and small and domestic companies – are more likely to support the leave campaign. 

This is not just the UK being awkward. There are plenty of German mittelstand that have their own reservations about the EU and the euro. As far back as 2013, and before the eurozone crisis was as bad as it is now, a survey of the mittelstand showed that they were more interested in expanding outside the EU than within it.

Prior to this in 2011, according to a report in Spiegel Online, German SMEs reacted strongly to an advertising campaign that featured the bosses of several large listed companies declaring “there is no serious alternative to the common euro”. The Munich-based Foundation for FamilyBusinesses in Germany and Europe responded that “exit and expulsion from the currency union must be possible”. 

European Commission president Jean-Claude Juncker – to some the chief exponent of European federalism – recently said that the EU was interfering and regulating too much. Rolling back the regulations imposed on SMEs might be a good place to start the reforms.  

Brian Caplen is the editor of The Banker.

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