This week sees yet another supposedly critical meeting in the continuing saga of the UK’s attempt to leave the EU. Theresa May‘s meeting with Cabinet ministers at Chequers comes against the backdrop of several blood-curdling warnings from business leaders about the costs of leaving the EU without a deal. What attitude should we take to such pronouncements? To state the blindingly obvious, they should be listened to carefully and with respect. We must assume that the leaders of such businesses understand their own firms’ interests. And those interests should weigh significantly in the balance of pros and cons.
But it is vital that Cabinet ministers do not fall into the trap of believing that what some senior business leaders feel is in their interest is necessarily also in the national interest.
At this week’s Chequers meeting, doubtless some well-worn arguments about the business/economic interest will be rehearsed yet again.
Accordingly, I re-present here what I consider to be the 10 most significant arguments on this subject.
Brexit will produce some losers and some winners. Those business leaders who have been pontificating recently may be among the losers. But they do not represent all of British business.
It is noticeable that large numbers of businesspeople have not said anything in public at all. In particular, very few owners and/or managers of small businesses have spoken out.
They are predominantly potential winners from Brexit – especially from a full Brexit. They gain little or nothing from the single market but suffer from a welter of EU-driven legislation and regulation.
This factor should be considered against the shape of the British economy. Exports to the EU account for approximately 12pc of our GDP. This means that approximately 88pc of the UK’s GDP is not accounted for by exports to the EU. Yet the costs of EU regulation are felt throughout the whole economy. Those business leaders who are vociferous about EU membership tend to come, unsurprisingly, from the 12pc.
Businesspeople are natural mercantilists. That is to say, they believe that the ultimate point of economic activity is production. Yet the ultimate point of economic activity is consumption, as pointed out by every reputable economist.
The representatives of the consumer interest have been notably absent among the people who have traipsed into 10 Downing Street putting forward their views on Brexit. Yet a full Brexit would potentially bring serious benefits to consumers in the form of lower prices.
Businesspeople don’t like competition. And big established businesses often quite like the EU‘s extensive and expensive regulatory regime because it puts up barriers to entry against new competitors. A full Brexit would unleash a whirlwind of increased competition throughout the British economy – to the benefit of UK consumers.
When lobbying the Government, business leaders have a tendency to exaggerate. This is understandable. If they genuinely believe that a “hard Brexit” would cause them serious difficulties then it is in their interests to talk these up. But that doesn’t necessarily mean that we should believe them. When Britain stayed out of the euro, many companies said that this was going to be a devastatingly bad decision for their business and the UK. Some said that they would have to consider whether to pull out of this country. The same cast is still singing the same tune. Needless to say, on the euro they will be grateful that they did not heed their own warnings.
Businesspeople are predominantly short-termists. Understandably, they are focused on the interests of their firms as far as they can see – and as far as the stock market will allow them to look. This means that they overemphasise short-term difficulties that arise from the dislocation that may follow such a dramatic event as Brexit, and under-emphasise both the possibility of adapting, and the long-term benefits once things have settled down. But Brexit is a decision about Britain’s long-term future.
They don’t represent the future. The world is changing rapidly and the businesses that may be critical to our future in 10 or 20 years’ time may currently not even exist.
They don’t take account of how the EU is changing. They are judging what various forms of Brexit mean for their own businesses as things stand at the moment. But the eurozone will move towards fiscal and political union, or it will collapse. If it achieved full union and we were still members of the EU, or closely tied to it, this would put the UK in a subservient position. If the euro collapsed, we would be in a much better position to minimise the inevitable costs to us if we were outside the union cleanly and fully.
They don’t take account of how the cost of EU intrusions is likely to rise. Perhaps the greatest economic challenge of the next couple of decades is going to be the widespread use of robots and artificial intelligence. This is undoubtedly going to bring considerable disruption and involve the loss of many jobs.
Hopefully, it will lead to the creation of many new ones and greater prosperity overall. This will depend upon this new industrial revolution being allowed to sweep through the economy with the lightest regulatory restraint. Yet many European politicians have argued for tough taxation and regulatory restraint on robots and AI. This accords with the EU‘s economic philosophy and its past actions. The EU is likely to be a laggard in the AI revolution and, consequently, it is likely to fall further down the international pecking order.
Listening to senior businesspeople who speak out about their vested self-interest is the easy bit. More challenging for May is to give full weight to the interests of those who have not spoken out.
Perhaps the most difficult, but also the most important, thing is somehow to comprehend, and to heed, the unvoiced interests of the future.
To read Roger Bootle’s piece for the Daily Telegraph in full, click here.