• Mon
  • Jul 28, 2014
  • Updated: 2:48pm

UK economy

The coalition government led by David Cameron has been criticised for sticking to a strategy of austerity even though the country was expected to suffer a triple dip recession in early 2013. It was also stripped of its prized AAA credit rating in February 2013.

BusinessEconomy

British business chiefs urge Cameron to avoid EU isolation

PUBLISHED : Wednesday, 16 January, 2013, 2:26pm
UPDATED : Wednesday, 16 January, 2013, 2:26pm

Prime Minister David Cameron must not risk jeopardising Britain’s EU membership and damaging the weak economy, business chiefs warned ahead of the premier’s key Europe speech later this week.

The Conservative premier was due to address the nation’s strained relationship with the European Union on Friday, having already stated that he wanted to renegotiate the conditions of its membership with the 27-country bloc.

Cameron is expected to seek the repatriation of certain powers from the EU and to back a referendum after 2015 on the nation’s proposed new relationship with Brussels, but will not call for a so-called “in-out” referendum.

Top business chiefs are concerned that Cameron’s plans could damage their valuable links with Britain’s main trading partner, create uncertainty and hurt a economy which is expected to have shrunk once again in the fourth quarter of last year.

“We must tread very carefully,” said John Cridland, director-general of powerful employers’ grouping the Confederation of British Industry (CBI).

“The debate about our future in Europe this year must be based on an informed, hard-headed analysis of where our long-term economic and financial interests lie and business will need to make its voice heard.

“We need global trade deals to drive growth and create jobs, especially when the domestic economy is growing more slowly than required.

“Businesses do not want the baby thrown out with the bath water -- not with 50 per cent of our exports heading to Europe.”

Ten top business leaders -- including Virgin tycoon Richard Branson and WPP advertising agency boss Martin Sorrell -- have already called for “urgent” reform that did not require “wholesale renegotiation” of Britain’s position.

“To call for such a move in these circumstances would be to put our membership of the EU at risk and create damaging uncertainty for British business, which are the last things the prime minister would want to do,” they said.

“We need a strong reformed EU with Britain at the heart of it,” they added in an open letter in the Financial Times.

Economists have meanwhile cautioned that a referendum could have potentially “dangerous” consequences for Britain.

“It’s a very dangerous path,” said Professor Iain Begg at the London School of Economics.

“A referendum is such an unpredictable instrument.... It’s something that could go seriously wrong and risk pulling Britain out of the European Union and business leaders would find it a very worrying prospect,” he told AFP.

“The biggest risk for Britain is the foreign investment channel drying up and thereby causing a reduction in Britain’s capacity to export in what is our biggest market -- namely western Europe.”

For example, Japanese car manufacturers such as Honda and Nissan could decide to cut their production in English car factories that produce vehicles destined for the EU market -- and invest elsewhere.

Conservative veteran and former minister Michael Heseltine argued that a referendum would create uncertainty and dissuade investment.

“If I was responsible for inward investment into any of our European colleagues, it would give me the best argument I could dream of,” Heseltine noted.

“Why put your factory (in Britain) when you don’t know -- and they can’t tell you -- the terms upon which you will trade with us in future?”

Britain was a founding member of the EU single market, a tariff-free zone that is home to half a million people.

Cridland added that it was necessary to stay “at the table” to fight for Britain’s economic interests -- particularly on behalf of the City of London financial district.

“It’s essential we stay at the table to bang the drum for businesses and defend our national interest, particularly protecting our world-class financial services industry to maintain our competitiveness internationally.”

Share

Related topics

More on this story

For unlimited access to:

SCMP.com SCMP Tablet Edition SCMP Mobile Edition 10-year news archive
 
 

 

 
 
 
 
 

Login

SCMP.com Account

or