Business leaders against EU exit

Wed, Jan 23, 2013, 00:00

British finance executives urged the UK to stay inside the European Union for the good of its economy after prime minister David Cameron paved the way for a referendum on continued membership.

At the World Economic Forum's annual meeting got under way in Davos, Switzerland, executives from companies such as Standard Chartered and Prudential said remaining in the 27-nation bloc was in the UK's economic interest.

That message was dovetailed with an acknowledgement that the crisis-stung euro area's own governance rethink justified British demands for a review of relations.

"The UK needs to remain very much part of the EU, but I can completely understand why prime minister Cameron thought it necessary to offer the people a referendum," Peter Sands, chief executive at Standard Chartered, told Bloomberg.

"Europe is changing and as the biggest country in Europe outside the euro zone its relationship is going to change."

With about half of UK exports heading to EU neighbours and London serving as the region's financial hub, companies have an interest in the UK sustaining ties with the rest of Europe.

Mr Cameron will have a chance to outline his strategy to the world's financial elite when he speaks in Davos tomorrow.

Describing British backing for the status quo as "wafer thin," Mr Cameron said today that voters will have their say by the end of 2017, if he's re-elected in two years.

He said that he wants his country to stay in the bloc.

"For the business sector in general, the long-term interest of Britain is in the EU," Tidjane Thiam, chief executive of Prudential, Britain's biggest insurer by market value, said in an interview.

"The EU needs to be reformed, there's a lot of frustration around, that debate needs to happen and long-term it's good for Britain to be in the EU."

The case for membership was made in a report last week from economists at Citigroup. They estimated 50 per cent of the UK's goods shipments and 38 per cent of services exports went to EU countries in the first three quarters of last year and that exports account for 15 per cent of UK gross domestic product.

By contrast, the EU relies on trade with the UK for just 2.5 per cent of GDP.

"An exit would be a bad thing and a lose-lose situation for the UK and EU," said Michel Petite, a lawyer at Clifford Chance and former head of legal services at the European Commission.

"A UK at the fringe of the EU would fare less well as an optimal investment site."

Quitting the EU could undermine the UK's status as the world's third-largest magnet for foreign direct investment given a chunk of the $1.2 trillion that entered in 2011 was likely sent there as EU membership guarantees access to the continent, Citigroup said.

To attract the same amount outside the EU, the population would likely have to suffer lower wages or a weaker pound to sustain the same amount of investment.

"The British economy is highly interdependent with the rest of Europe," John Nelson, chairman of Lloyd's of London, the world's oldest insurance market, said in an interview in Davos. "It's very important we're there. My guess and hope is common sense will break out and we'll stay."

Uncertainty caused by the prospect of a referendum on Europe might be detrimental to the City, said Mark Boleat, policy chairman at the City of London Corporation, the financial district's local government.

"London's position as Europe's leading international financial and business center is crucial to sustaining jobs and growth not just in the UK but across the continent," said Mr Boleat. "Uncertainty over this relationship with Europe risks making the UK less attractive as an international centre across many industries."