There’s a lot wrong with the European Union, that’s for sure. Particularly, the common currency of the eurozone and the unrelenting focus on austerity are doing some serious damage to the countries that need a bit of spending stimulus. We can see the result, as the whole zone is coming out of the recession more slowly than the UK and the USA, where we might have thought that a 19-member union should have pulled together and recovered more speedily.
But for all its faults, the EU has been a great boon for British business interests in creating a huge free market without barriers to goods, money or labour. And if Brexit should happen, we could be throwing away decades of free-market growth and the investment wealth that has come with it.
British businesses don’t only enjoy free access to the countries of the EU, but also trade agreements with around 60 other countries around the world too. They include Japan, India, and many more — and access to emerging markets is an increasingly valuable asset for British companies. We’d lose those deals on exit, and we’d have to try to set up new agreements from scratch, one by one.
And, of course, inwards investment would be put at great risk. One of the great attractions of investing in the UK is that it gives companies direct access to the whole of Europe — with that gone, the dollars, the yen, the yuan would see more attractive homes across the Channel.
The FTSE is revolting
We’ve now seen more than a third of the UK’s FTSE 100 companies coming out firmly against Brexit, after they signed a joint letter published in The Times saying that “Business needs unrestricted access to the European market of 500 million people in order to continue to grow, invest and create jobs. We believe that leaving the EU would deter investment and threaten jobs. It would put the economy at risk“.
Among the signatories are such companies as Vodafone, which is working on expanding its next-generation network across Europe; Marks & Spencer, which gets about 20% of its profit internationally; BAE Systems, which sees 60% of its turnover coming from outside the UK; easyJet, which enjoys the freedom to fly to so many European destinations; and BP and Royal Dutch Shell, two of the world’s greatest oil companies based in the UK.
The chief executives of Heathrow and Gatwick airports also signed the letter, with Heathrow boss John Holland-Kaye telling the BBC that the EU has “opened up the aviation market and reduced the cost of flying“.
Of those FTSE 100 companies who did not sign and have commented, their reasons for not doing so are really about avoiding politics — their absence does not indicate support for leaving the EU.
Knee-jerk
In my view, the EU has helped create the best business environment we could have hoped for, and it’s been a cornerstone of the free market that has helped generate all those profits that have poured into the pockets of investors by way of share price gains and dividends. I think it would be madness to throw that all away, and if we leave I can see a very long bear market ahead of us.
I just hope the people of the UK will be able to see the bigger long-term picture and keep away from a knee-jerk reaction to today’s short-term problems.