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Insight - For some British business owners, EU membership is losing its appeal
January 5, 2016 / 11:48 AM / 2 years ago

Insight - For some British business owners, EU membership is losing its appeal

Palletways CEO James Wilson poses for a photograph at their offices in Lichfield, central England December 1, 2015. REUTERS/Eddie Keogh

CLECKHEATON, England (Reuters) - Eric Simpson, the owner of a furniture recycling firm in northern England, once believed in the European Union. Now he’s unsure how to vote in a referendum on Britain’s future in the bloc, reflecting growing doubts among the business community.

Leaving the world’s biggest economic area, the market for almost half Britain’s exports, may sound like business folly. And yet small company bosses like 55-year-old Simpson - and even executives of some larger firms - are divided over the vote on EU membership that Prime Minister David Cameron has promised.

Four decades ago Britons voted decisively to stay in the European “common market”, the precursor of the modern EU which has become a major economic and political force as well as a trading bloc.

But sitting in the showroom of his Over2Hills business in the Yorkshire town of Cleckheaton, Simpson says Europe has changed for the worse since the last referendum in 1975.

“As a younger man, I thought the EU was good,” said Simpson, whose company collects office furniture and sells on refurbished pieces and raw materials.

“Some of the old views to help people trade and to help people work within Europe are good, but the EU’s got a long way from its original values,” he said. “I am completely undecided.”

Simpson was too young to vote in 1975 when business bosses mobilised a powerful campaign, casting membership as a way to save the country then known as “the sick man of Europe” by joining Germany and France, whose economies had overtaken Britain’s since World War Two.

Today economic growth in Britain is a percentage point faster than in France or Germany, and business is less united on the benefits of staying in the EU - important differences that could influence voters as they try to work out whether leaving would hurt their wallets.

Cameron, who is trying to negotiate more favourable EU membership terms for Britain, has promised to call the referendum before the end of 2017 but it could be held a soon as June this year.

Public opinion polls show the gap between the pro- and anti-membership camps is narrow, with a significant number of voters undecided.

BUSINESS DIVIDED

Chief executives of major British corporations believe “Brexit” - a British exit from the EU - is the biggest political threat to the economy. But other business owners are more sceptical, saying EU-imposed rules are burdensome and costly.

Support has dwindled even among bigger companies over the past six months, according to a quarterly survey conducted by business consultancy Deloitte.

The poll of chief financial officers at firms in the FTSE 350 stock index and other large privately-owned companies showed 62 percent backed Britain’s continued membership of the EU in the final quarter of last year.

This was sharply down from 74 percent in the second quarter of 2015, with a growing number of executives saying they wanted to see the results of Cameron’s renegotiation before deciding.

Outright opposition is much stronger among more modestly-sized firms. A survey conducted last year by the Federation of Small Businesses showed 41 percent of respondents backed leaving the EU, not far behind the 47 percent who wanted to stay, with regulations from Brussels one of the main gripes.

Surrounded by colourful refurbished tables and chairs ready for sale, Simpson said he had become ambivalent to the EU partly due to the ever-growing amount of “red tape”, believing the burden on his business would be lightened were Britain to leave the EU.

Palletways CEO James Wilson is seen at their offices in Lichfield, central England December 1, 2015. REUTERS/Eddie Keogh

“We’re asked to fill in questionnaire after questionnaire about how much we pay people, how much waste we produce and the questionnaires just get longer and longer and longer,” said Simpson, whose firm employs just 23 people.

He put the cost of adhering to rules and regulations at up to 30,000 pounds ($44,200) a year, equivalent to around 10 percent of the firm’s annual profit.

“INTO THE UNKNOWN”

Two of Simpson’s senior staff are surer of their views, but still reflect the divided business community.

Sales manager Jo Green is likely to back leaving the EU. “Britain was a leader and now we’re just a follower,” said 46-year-old Green, whose parents live in Norway - a country outside the EU but which has the sort of trade agreements with the bloc that supporters of Brexit say Britain could also negotiate.

“(Europe) holds us back in moving forward in our industries, having to comply with their rules and regulations,” she added.

A fork lift truck loads a lorry at Palletways in Lichfield, central England December 1, 2015. REUTERS/Eddie Keogh

But Logistics Manager Kirsty Wilson told Reuters that her “gut instinct” was to remain in the EU. “If it isn’t that broken, why do you go into the unknown?” she asked.

Avoiding uncertainty is, broadly, the chief argument of the main business lobby, the Confederation of British Industry, as well as of the boss of the pro-membership campaign.

“Leaving Europe is a leap in the dark and I don’t believe that is a risk that is worth us taking,” Stuart Rose, a former boss of retailer Marks & Spencer who chairs the “Britain Stronger in Europe” campaign, said in October.

But despite leaning in opposite directions, both of Simpson’s managers said the core EU freedom of movement of people, which Cameron is not attempting to change and has pushed net migration to record levels in Britain, was a problem.

“People who ... are trying to get work do find it annoying that people who have just come into the country get a job straight away because they are willing to be paid less,” Wilson said.

While Simpson’s business is largely domestic, others rely heavily on the single European market, which allows goods to be transported across the EU without customs checks at each national border.

About 100 miles (160 km) south of Cleckheaton, another business owner sees higher costs if Britain left.

James Wilson, the boss of distribution firm Palletways, said Brexit could mean British lorries are subjected to customs checks, lengthening journey times and taking drivers up to the maximum number of hours they are permitted to drive each day under safety rules.

“It will be less efficient, it’ll be more costly, I suspect, for customers to send their goods through Europe,” he told Reuters. “Let’s imagine (customs clearance) takes eight hours; you probably will add an extra day to the transit time, the driver runs out of hours so you need more drivers.”

British-based financiers who trade internationally also largely want to stay in the EU. But even in the City of London there is a small but significant group of Eurosceptics who believe the EU is dysfunctional and globally uncompetitive.

“We would rather not be a part of a chaotic European Union that looks like it is about to fall apart and which has fallen far behind its global peers,” said a British businessman with 40 years’ experience in the financial services industry who spoke on condition his name was not used.

“The clarity of an exit is now more appealing than staying with all this political and economic uncertainty of a rather tired EU bureaucracy,” he said.

Editing by Guy Faulconbridge and David Stamp

Our Standards:The Thomson Reuters Trust Principles.
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