‘Brexit’ could kill business confidence, so we need answers!
Entrepreneur and business club owner Duncan Cheatle on the likely impact separation from the EU will cause for fast-growth companies
As David Cameron took the first step this week in his negotiations on Britain’s membership of the EU, he emerged buoyant, despite the ongoing debate on immigration and turmoil surrounding the Greek bailout sidelining his address to an eight minute slot.
We wait with baited breath. Back in the UK, although polling data has consistently showed that business on the whole wants to remain in the EU, we are starting to see two camps forming – those who see a Brexit as disastrous for UK plc (mostly growing and big business) and those who see our continued relationship untenable without drastic changes to the relationship.
Yet to see a compelling case for exit
On the whole, it’s agreed that we need to see clear reforms on the table. Personally, I don’t believe that we should leave the EU and I’m yet to see a compelling case to argue the benefits for business of an exit. What is clear is that we have a once in a generation chance to push for reform and iron out the problems caused by parts of EU legislation that simply doesn’t work for the UK.
The EU is a market of around half a billion people that accounts for half of all UK exports – something that benefits both big business and a growing number of smaller businesses. Similarly, the free movement of labour throughout the EU has been and still is hugely beneficial for business, despite ongoing tensions around immigration, opening up pools of skilled workers at a time where competition for talent is high.
Of course we are also tied up in to huge amounts of legislation, which disproportionately impacts small business. EU regulations associated with employment law and health and safety in particular are a huge burden. Specific pieces of law, for example uncapped tribunal fees for discrimination, corrupts behaviour in practice – in this case leading to vexatious claims which are both costly and time consuming.
It’s time for clarity
The debate is complex and as Cameron’s renegotiations formally begin there is only one hope that British business and the wider population can hope for, that we get some clarity about the deal itself.
Because in reality, there is one fundamental problem that could hold the biggest risk for business across the board and that is economic uncertainty.
Many of the touted benefits of exit are all based upon the assumption that we will be able to strike favourable trade deals with the 27 other member states of the EU and we shouldn’t take it for granted that we would have access to an open market if we pulled out.
It’s also unclear whether we would witness a jobs boom thanks to decreased employment regulation and red tape, or see thousands of jobs lost thanks to major employers taking their business to lower-cost EU countries.
Estimates about the impact on the economy also vary wildly, from best-case scenario, according to think tank Open Europe, that the UK would be better off by 1.6% of GDP a year by 2030 to the worst-case scenario, set out by the Centre for Economic Performance at the London School of Economics, which estimates between a 6.3% and 9.5% reduction in GDP.
What’s more, any negotiation will be a slow process, perhaps taking much longer than the two years we have until we need to vote ‘yes’ or ‘no’.
All of this poses huge problems for business confidence. Although for many small businesses, the debate is conceptual at the moment, two years will come around quickly and as we get closer to a referendum, we have to get some clarity and some factual information about the realities of what ‘in’ or ‘out’ might mean. Only then can we begin to have a sensible debate about the issue.
Duncan Cheatle is CEO and founder of the Prelude Group, home to The Supper Club, and Rise-To. He is also a co-founder of Startup Britain.