John McGrane shares the real-world outlook for enterprise businesses if the UK leaves the EU.
This week people will vote in the UK Referendum on EU Membership to decide whether to Leave or Remain in the EU. And, unlike in Ireland, they won’t have a second Referendum – if they go, they go.
If they go, we should be concerned. The world won’t stop turning, but less business will be done, and fewer jobs will be sustained. Jobs are made by entrepreneurs who risk investing in their business to sell their goods and services at competitive prices and competitive costs. Brexit, if the UK votes for it, will raise costs and reduce sales. The freedom of EU citizens to work in any of the 28 member states allows employers to get the optimum mix of skills and labour costs. Putting tariffs and duties or regulatory differences in the way of sales reduces sales.
The EU sells only 3% of its GDP into the UK, but the UK sells 50% of its exports to the EU. The UK needs the EU more. It will be rational for the EU members to say: “If you go, you can’t access our 440 million customers without paying into our EU budget, complying with our rules and allowing free movement of our people into your country.” The reasons why the Leavers in the UK want to leave!
Ireland won’t be able to do a deal with Britain to keep business as usual. Any local bilateral deal needs the unanimous agreement of all the other 26 Member States. Most of those have no interest in Ireland’s trade with Britain and Northern Ireland.
If people vote to Leave, the UK Prime Minister (whoever he or she is when the dust settles) will first have to tell the EU exactly what the UK wants as it Leaves. Politicians, media and voters will soon realise a two-year clock is ticking to conclude an acceptable deal for Britons. As the two years pass, 60 global trade agreements that the UK enjoys through its EU membership, will fall away. The UK doesn’t have enough experienced negotiators to put them back together in less than ten years.
So the UK could end up pleading to trade into Europe on worse terms than it has today. In the meantime, Britain and Northern Ireland will have lost billions in a flight of capital. The Pound will have collapsed causing inflation, recession and unemployment. The City will have lost its primacy to Dublin and Frankfurt. UK residents abroad will have been sent home. Yet, the UK will have the same United Nations obligations to admit refugees from non-EU war-torn countries.
And Dublin? In the beginning, Dublin will enjoy some London finance businesses shifting to our English-speaking, EU welcoming base.
But make no mistake: that won’t compensate for the problems caused to the rest of Irish business. The UK is Ireland’s largest trading partner, with over €1.2 billion of goods and services traded between us every week that support 400,000 jobs across the two islands.
There’s a reason why the Dublin-London air corridor is the second busiest route in the world after the Hong Kong-Taipei. Every year 4.5 million people and firms use it to do business in both city regions as if they were one. Tech companies and startups see Dublin and London as an integrated cluster of talent, funding, operations and sales. FinTech businesses thrive in Dublin and sell in London. The development agencies in both countries love them equally. What’s bad for London is bad for Dublin in technology and many other sectors. Restrictions on moving talented people, as well as levies on services and intellectual property, will offset the good work done in both countries to stimulate and reward enterprise.
Ireland will lobby hard – in Brussels and London – for the right to maintain as much as possible of what we do today with the UK. But the EU will have other fish to fry: elections in Spain, France, Holland and Germany, plus immigration and the crisis in Ukraine. There may be little sympathy for our cause.
We still don’t even know what kind of Leave the UK will want. Most of the Leave campaigners agree that the UK will still want to have access to the Single European Market if it leaves the European Union. But they all want different versions of it, from Norway, to Switzerland, to Canada and more. However, the fact from each is that there is no such thing as free trade agreements with any other EU country outside of a full EU membership. There are Conditional Trade Agreements that still require free movement of people, payment into the EU budget, tariffs on vital trades like food and financial services, and agreement to EU regulations. Which is exactly what the Leavers say the UK should Leave to get away from!
In the real world, trade grows jobs, and Free Trade grows the most jobs and wellbeing. British and Irish employers owe much of their success over the last quarter of a century to the creation of a single European market of half a billion consumers. The collective weight of the European Union has helped to open up markets and drive standards in areas as the environment and social protection.
Freedom needs rules to avoid abuses and inequality. Leavers aim to escape from Europe’s rules. But which rules exactly? The rules that allow people to travel freely to 28 countries? The ones that give people fair workers’ rights such as paid holidays and maternity leave? Or assure health and safety at work? The ones that lower the costs for energy and mortgages? Or the ones that reduce rates for phoning home and transferring money to UK students who can study in any EU college and use their qualifications in any EU country? The Leave campaigners acknowledge that the UK would still need to make similar rules to all these at home and follow them when travelling or trading abroad.
The UK has already won its battles to get the form of EU membership that its people want. It enjoys all the benefits with less of the drawbacks. Since 2011, Britain has a Referendum Lock that prevents the transfer of further powers to Brussels without the consent of the people. Since earlier this year, the UK has the right to keep full free access to the Single Market.
The situation is clear: without any benefit whatsoever, the real-world costs of a potential EU exit to every man, woman and child in the UK are showing. Economic activity, job creation and inward business investment are already reduced. There is a growing collapse of the Sterling Pound. Those who claim the other 27 member states will reverse all that through some new deal, after Britons turn their backs on Europe, have no experience with either negotiation or supplication. UK people won’t get it. Almost half the UK population, including most in Scotland, Wales, Northern Ireland and London, will have reasonable cause to question in whose name is all this done?
It’s difficult to argue with the emotional slogan that characterises the Leave campaign. Especially with those who “do not like” the EU. But it’s worth making the effort.
The EU is such a good idea that if we didn’t have one, we’d have to make one. For peace, security, fairness and achieving the ambitions of our parents, ourselves and our children. The European Union needs to be reformed. It needs to adapt and improve continuously to become the locally effective and globally competitive consensus between likeminded peoples that it can be. Only this way can it deliver real and acknowledged benefits for every one of its citizens now and in the future. The United Kingdom of Great Britain and Northern Ireland has a part to play as it has before. It is strong and self-believing enough not to Leave, and should instead Lead the vital work to realise those benefits for all.
If you or someone you know can vote on June 23, do it. Every vote counts, make sure it’s used well.
John McGrane is Director General of the British Irish Chamber of Commerce and a Council Member of Dublin Chamber of Commerce. He works extensively with businesses of all sizes in the UK and Ireland and with State agencies in support of business and employment growth.