How the EU helps businesses in the UK (and the rest of us)
The EU means a lot of things to different people. It means protection for workers and the environment, it means free trade, and it means a lot of bureaucracy. It does have its problems – an organisation the size of the EU always will – but overall, the benefits outweigh the costs. My own experience with the EU is with business: I have worked in business administration in the UK and Spain for over 15 years, both as owner-director and as an employee and manager. I’ve worked with large and small companies in various countries, and I believe that the EU is helpful for all of them. This is why.
First, free trade. We hear a lot about it. What it means is that on a day to day level, dealing with companies in other countries in the EU is more of less like dealing with companies in the UK. There are no customs restrictions, there is no import VAT (the VAT is handled in a slightly different way, but it’s fair and it’s not difficult).
You might think that it doesn’t matter much – customs duty is low and we are, after all, living in a society which is ever more global. But those small advantages can make a big difference. I work for an engineering company – in small-scale and specialised manufacturing. We can’t compete with China on cost, but we can and do compete on time. We can produce prototype parts and deliver them in days. Almost everything we do is urgent, and often, if we can’t do a job in a certain tight timescale, we lose the job.
Sometimes we have to buy in a component and can’t source it in the UK. If we buy it from Europe, it might result in a day’s delay due to the longer delivery time. But if we have to buy from outside the EU, the parts will be delivered to customs, the courier will send a card, I’ll phone up and pay the VAT (and the admin fee), and then the parts are delivered a day or two later. There is at least an additional day’s delay on top of the shipping, and that can make all the difference.
And of course, the delays, costs and paperwork involved with ordering from outside the EU also means that EU companies are more likely to order from us. It’s mutually beneficial.
Now I’m not an uncritical supporter of free trade - I’m a socialist after all. I am aware that it can create problems, and that we need various checks and balances in the system if we are to have both prosperity and fairness in our society. It’s not perfect, but we have a good system of checks and balances in place, in the form of the many and various EU regulations and directives on product quality, product safety, employment rights and environmental protection. The out campaigners tell us that these regulations are a “burden” and harm British business. Let’s have a look at that…
A couple of weeks ago, Boris Johnson claimed that there are 2,500 EU regulations a year and that they cost British businesses £600 million a week.
I’ll come back to the cost. But he’s just wrong about the number of regulations: there were 839 new ones last year (and 439 amendments to regulations). But the total number is meaningless, because most are very specific and won’t affect the vast majority of British businesses. These, for example are the most recent regulations passed. I haven’t cherry-picked these – at the time of writing, they were the most recent regulations as published on the EU law website at http://eur-lex.europa.eu. They were:
- A regulation allowing a new food additive
- A regulation which sets standard import prices for fruit and veg
- The refusal of a health claim for a specific ingredient
- The creation of a better mechanism to provide emergency support for member states
- A regulation approving a pesticide, with restrictions (as requested by the UK)
I think we can agree that these particular regulations don’t place much of a burden on UK businesses. Like a lot of what the EU does, they’re boring, but necessary. And I don’t know about you, but I think it’s a good thing that someone is checking new food additives, health claims for foods, pesticides, and all those things, and it makes sense to do it as part of a larger group of countries.
British businesses are, of course affected by some regulations. Some of them are integral to free trade – in particular the regulations relating to product quality and product safety. If we buy electronic components from, say, Italy, we want to know that it has been tested to the same safety and function standards as the components we buy from the UK. For manufacturers, that testing is complicated, and perhaps it is a bit of a burden. But it is necessary.
Other EU regulations which affect my company include employment and anti-discrimination regulations, and anti-pollution regulations like the waste electric and electronic equipment directive, which requires suppliers of electronic items to pay towards the cost of recycling them. And yes, there are a few that are a bit pointless, and a few which require a reasonable amount of paperwork, but on the whole, the regulations that affect us amount to enforced corporate social responsibility and they are a good thing. Our company – obviously – is environmentally responsible and fair to its employees anyway, but it is a good thing that other companies are forced to be socially responsible too, and we’re all better off.
But in case I was missing something, I looked up the report which Boris based his figures on. It’s from a think tank called Open Europe, and they’ve added up the costs of 100 EU regulations which cost businesses money. To do this, they’ve used the “cost” figure from the government’s cost-benefit analyses and ignored the benefits, which, to be fair, are often theoretical. But benefits are not always monetary. These are the “top 5” most costly regulations identified by the report. I’ll let you decide whether the benefits might outweigh the costs:
In reverse order, then:
5) The Temporary Agency Workers Directive – Recurring cost: £2.1bn a year
This is the regulation which gives agency workers the same rights as a company’s workers. So yes, if a company previously paid agency workers less than its permanent workers, then this regulation will have cost them money. Fairness sometimes comes at a cost. And of course, there are other British businesses who will benefit from those higher wages (especially the nearby pubs where the agency workers can spend their extra wages and moan about the thanklessness of their employers).
4) The EU Climate and Energy Package – Recurring cost: £3.4bn a year
Yes, investing in green technology and reducing carbon costs money. In the short term.
3) The Working Time Directive – Recurring cost: £4.2bn a year
This is the directive that gives us all the right not to work more than 48 hours a week, and the right to paid holiday. And yes, that does create a cost for companies who didn’t previously give all their staff paid holiday. Again, fairness often comes at a cost.
2) The Capital Requirements Directive IV package – Recurring cost: £4.6bn a year
This is the directive that forces the banks to hold a certain amount of capital so that we don’t have to bail them out again if they fail. Apparently that costs them money – presumably because it restricts their ability to speculate with our money.
And number 1…
1The UK Renewable Energy Strategy – Recurring cost: £4.7bn a year
Again, investing in green technology costs money. But it is an investment which is not only worthwhile, but imperative.
All five of these regulations have enormous benefits either to employees or to the environment. Talking about their cost without reference to the benefits is a nonsense. And according to the report, these 5 regulations cost the companies affected £19 billion a year, or 2 thirds of Boris’s overall "cost to British businesses". And the other regulations listed in the report are overwhelmingly to do with employee rights and environmental protection. They have enormous benefits to us as a society. They may be a “burden” to some, but they have benefits for us all.
You might suggest that we’d have all of those laws anyway without the EU. But, well we didn’t have clean beaches before the EU directive made us clean them up. And from a business point of view, it’s a really good idea to co-ordinate environmental laws, employment regulations and product regulations with our neighbours and biggest trading partners.
And sometimes, it’s only the EU that can regulate in the face of opposition from big corporations. Our government didn’t place restrictions on the banks (in fact they argued against some of the EU restrictions). Companies like Google and Microsoft have been subject to EU rulings concerning privacy and abuse of market position: those are much more effective when they affect the whole of the EU rather than one country.
Finally I want to talk about freedom of movement of labour. It’s controversial I know, but it doesn’t mean we have “no control over our borders” – we still have passport control, as anyone who has queued at an airport recently knows. But freedom of movement affects British businesses in a lot of ways. First, there are the obvious benefits to the tourist industry, and also to language schools and universities. But it helps companies in other ways too. One of our biggest customers is a large German owned manufacturing company, with lots of bases in the UK and Germany. Because we’re part of the EU, they can send British engineers to Germany and vice versa for extended periods whenever they want, without the need for visa or healthcare insurance. It’s enormously helpful for them and so, indirectly, it’s helpful to us. They restructure the company periodically – if we were to leave the EU, then that would add to the list of reasons for closing or downgrading their UK plants, and if they did close those plants, then we – and a lot of other UK small businesses – would lose a lot of work. It might not happen, and hopefully it won’t, but personally, I don’t want to give them any extra reasons to do that.
And of course, freedom of movement of labour goes both ways. Any British citizen can move to any EU country and get a job or set up a business, or go to university with the same rights as the citizens of that country. I worked as a self-employed worker in Spain for 7 years and briefly ran a company there. My children went to a Spanish school, they were born in Spanish hospitals, played on clean Spanish beaches and a Spanish surgeon saved my daughter’s life.
While I’m glad to be back here, I am really really grateful that we had that opportunity to live in another country, learn another language and share another culture (that is both a lot like ours, and quite different). Because, historically, sharing cultures and forming partnerships with other nations is what we British have always done well – from our language, which is a big, glorious mix of other languages – some of our most vital words came from the Vikings , to our food.
In the 21st century, we should be working to strengthen those partnerships – all of them – and we should be working together more. And to do that, we need to remain in the EU.