The EU is a question that divides cities, towns and families throughout the UK.
As someone who was, until March, the director-general of the British Chambers of Commerce, I know that the business community is divided on this debate. As the chairman and chief executive of General Electric recently said: “It’s important the UK has good relationships around the world, but I don’t really think that its place in the EU makes that much difference.”
And you can understand why they wouldn’t be put off if we did decide to leave. After all, the UK is the EU’s largest export destination; our capital city is one of the three ‘command centres’ of the global economy; we have the lowest rate of corporation tax in the G7 and the City of London is the second largest financial sector in the world; our language is spoken by billions of people across the globe and last year, the UK grew faster than any other major advanced economy in the world.
And these are all qualities which, incidentally, ensured that despite calls to join the euro 15 years ago, the UK was able to grow and thrive outside of the eurozone.
So why leave?
Given that we are not in the eurozone, you might then wonder why we would want to leave the EU. Despite the inherent advantages that we enjoy, the UK has been outvoted by the European Council of Ministers 40 times since 2010. In other words, on 40 different occasions the UK has been forced to accept EU legislation regardless of whether this will advance the goals of British business.
And think about what this means for the City of London. With countries which use the single currency having a permanent voting majority, the UK financial sector is effectively being held hostage to the interests of eurozone countries and exposed to their economic fate.
But surely, as the question is often put, it is better to be in a larger bloc in order to trade with the rest of the world?
As well as being the only continent whose economy shrunk in 2015, the EU has been profoundly slow at striking trade deals with the rest of the world. Just look at how it has performed since its inception. Today there are just 37 free-trade deals that are in force between the EU and other nation states; Mexico and Turkey are the most prominent on that list. And where are the key, global economies that our membership of the EU is supposed to yield? After years of negotiation, deals with Brazil, Japan, the US, China, Russia and India all are still far from complete.
The waiting game
But that shouldn’t necessarily come as a surprise. By definition, the EU must negotiate on behalf of its 28 member states, all of whom have very different and competing interests. But what is unforeseen is that the UK must wait for 27 other nations before signing any trade deal, on terms that are unlikely to be ideal given the compromises that are made in any negotiation.
In contrast Australia, whose GDP is less than half the size of the UK according to the World Bank, recently signed separate bilateral trade deals with China, South Korea and Japan, all in little over a year.
Far from being a risky or radical departure from economic orthodoxy, leaving the EU makes economic sense for our country. It’s what our businesses want – about two-thirds of British businesses think that we should take back the power to make our own trade agreements.
And far from entering a dark and dangerous period of uncertainty, the UK would regain the confidence and ability to forge new, more intimate and more mutually beneficial partnerships, with the certainty of knowing that when we make our way in the world we do it with both hands on the steering wheel.
SME benefits
But it’s important to remember that it is not just big business that has much to gain from leaving the EU. Small and medium-sized enterprises (SMEs) account for 99% of all UK businesses and there are many ways in which our membership of the EU has greatly undermined their ability to grow and thrive.
Take the burden of regulation, which has been estimated by the independent think tank Open Europe to cost the UK economy more than £33bn ($48bn) every year. Again we can see the economic impact. In just four years the EU introduced more than 4700 regulations, many of which have served little or no practical purpose and make it harder for our industries to compete with the rest of the world and, more importantly, increase costs and reduce productivity in the domestic economy.
And small businesses themselves would agree that the terms of our membership have greatly impacted their ability to do business. As a study by Business for Britain in 2014 shows, SME leaders, by a majority of more than two to one, believe that the EU is hindering their businesses rather than helping.
Change from within?
But even if we accept that the EU has its problems, isn’t it at least better to stay and change the system from within rather than unilaterally withdrawing from it? Again, my conversations with senior EU officials and politicians cause me to seriously question whether or not the EU is even interested in meaningful reform, let alone open to changes that will benefit British business, and I would point to our own recent renegotiation as evidence of that.
Calls for greater competitiveness were rightly prioritised by the Prime Minister in his talks with other European leaders. And yet, despite British pressure, no specific regulations have been identified as possible barriers to growth. Nor have any pro-competitive measures been unveiled as part of a genuine effort to strengthen Europe’s economy. In fact, the final wording of the document refers merely to a commitment, “where feasible” to “burden reduction targets in key sectors”. And, crucially, the UK did not win the right to stop the eurozone imposing laws on it, with the agreement specifically ruling out a 'veto'. Nor did these negotiations do anything to progress the so-called single market towards a free-trade area in services. Again, it is clear from my conversations that there is no appetite in the EU for this, even though services make up the vast majority of the UK economy.
The EU has failed to address the concerns of British business. The path desired by those in Brussels is actually further integration. The EU project is a political project. And we don’t need to look very far before we spot some fairly ominous indications. Last June, the European Commission published a key report: ‘Completing Europe’s Economic and Monetary Union’. Dubbed the ‘Five Presidents’ Report’, this document commits the EU to the creation of a “genuine economic union”, a financial union, a fiscal union and a political union by 2025. Grim reading then, for anyone who seeks looser ties between the UK and the EU.
In response, the governor of the Bank of England, Mark Carney, issued a clear warning in 2015 over further eurozone integration and its impact on the UK economy. He noted that the Five Presidents’ Report states that there is “unfinished business” when it comes to further fiscal and financial integration in the euro area. The Bank of England's report cautioned that the "necessary deepening" of integration, coupled with the "weight of the members of the single currency" could impair the ability of the bank to "meet its financial stability objectives".
A vote to remain in the EU, in other words, is not a vote for the status quo. The eurozone is embarked on a journey and the eurozone will vote collectively to bring us along with it.
A quieter voice
Worse still, the document also proposes measures that would actually be regressive to British business such as abolishing the UK’s representation on key international bodies where global regulations and standards are increasingly set. Assertions that the EU must act “with one voice on the global stage” and the complaint that “in the international financial institutions, the EU and the euro area are still not represented as one” confirms that the UK's voice on the world stage would be further weakened were we to remain in the EU.
Over the next few weeks, the debate about the UK's membership of the EU will no doubt centre on the economic consequences of the decision we take. As part of that debate, we are often told that EU membership has greatly benefited the UK. But the EU today is not the one we joined in 1973: it has a common currency, a parliament, an anthem and a flag.
And far from reaping the benefits, over the past 40 years the UK's membership of the EU has led us further away from what we originally intended. The more we integrate within the EU, the more we will be expected to bear the economic crises that occur on the continent.
I would argue that the UK is great despite – rather than because of – the EU. Only by removing the barriers to prosperity that stand in our way can the UK be more successful: to meet the challenges that are on our doorstep, to be better prepared for those that are on the horizon, and to shape the direction of the 21st century. The UK can do better and that’s why on Thursday, June 23, I will Vote Leave.
John Longworth is the former director-general of the British Chambers of Commerce, and is currently campaigning for Vote Leave.
