Accountants are well placed to understand implications of UK exit
MEMBERSHIP of the EU remains a critical topic of debate among UK politicians. But now and then, someone in Westminster says something that makes a lot of sense, and shifts the debate away from politics and into the economic arena. This is exactly what Nick Clegg did last week, when he said that leaving the EU would be “economic suicide.”
Clegg is right. In boardrooms across the UK, there is – or at least there should be – something resembling fear that, if Britain left the EU, our economy would take a hit. Accountants are trained to try and see into the future – into what prospects a business has. And as they gaze into their spreadsheets, they will see that a UK outside the EU would be bad for business on many levels.
VOICE OF BUSINESS
ACCA sees staying in Europe as a no-brainer, and we aren’t alone. Almost immediately after Clegg’s statement, Nissan’s chief operating officer Toshiyuki Shiga pointed out the major benefits for foreign investors in the UK being part of the EU, and expressed his hopes that the UK would stay in.
The UK would do well not to ignore Shiga. Nissan owns the biggest car factory in Sunderland, employing 6,100 people, and is supported by UK supply chains that employ even more. Further, in its contribution to the UK government’s balance of competences review, Japan’s government noted that 1,300 Japanese businesses are in Britain because it is part of the EU. The UK is seen as a bridge to EU trade. Do we really want to burn that bridge?
We’ve heard the counter-arguments that trade could still go on with the EU, whether the UK is in or out. But UK firms may need to pay EU export tariffs and would still have to meet EU production standards. In car manufacturing, those tariffs stand at 10 per cent for car exports from markets outside the EU and 20 per cent for vans. It would be an open invitation for major businesses to up sticks for another EU country, putting thousands of people out of work in the UK in the process.
The former Confederation of British Industry (CBI) president Sir Roger Carr has pointed out that “Europe is the bedrock of our international trade.” We can trade with other countries, of course. But with Europe such a large partner, it makes sense to continue that relationship while also trading elsewhere.
And this isn’t solely about overseas businesses setting up in the UK. Leaving the EU is bad for the smaller businesses further down the supply chain. In fact, there is an argument for saying that UK firms, especially SMEs, could benefit from greater integration in Europe.
This will send a shiver down the spines of politicians who have convinced themselves that the UK will do just fine without any foreign investment or overseas trade, or who believe that those key elements of our economy will still be there when we have pulled back from Europe. But as I told a recent New Statesman roundtable on SME exports, by completing the EU single market and lifting any remaining barriers, we could increase trade between the UK and EU by 45 per cent for SMEs.
Leaving the EU would also have a major impact on people. There is a misconception that floods of immigrants from the European mainland are pouring into the UK. That’s not entirely true, and it overlooks the fact that many UK residents move to EU countries for work.
From an accountancy point of view, chief finance officers tell us that overseas experience will be a vital skill for finance leaders in the future. And ACCA’s qualification is an exportable asset. You can study it in the UK and take the qualification to the Czech Republic or many other markets (and vice versa). In the EU, that mobility is made all the easier by the fact there are no barriers to the movement of people.
In addition, the UK benefits from being able to access talent from across Europe – employees who bring with them market knowledge and close links with clients, customers and other stakeholders. This cultural connection is vital in a business world that now operates on a global scale.
In theory, workforce mobility should mean that, if Nissan moved its Sunderland operation onto mainland Europe, all 6,100 workers could also move. But realistically an entire workforce isn’t going to relocate to another country. The local population will take those jobs, which is why the UK must keep luring foreign investment and business to its shores, with the benefit of access to Europe as a main attraction.
And there is another important benefit: the EU creates greater opportunity for social mobility. ACCA is perhaps guilty of “broken record syndrome” when it comes to social mobility. But since we began in 1904, it has been a central tenet of our qualification. Background is no bar to completing the ACCA qualification. If you can pass the exams and get the relevant work experience, you can become an accountant even if you haven’t been to university. That social mobility principle also applies in the EU.
Keeping to our accountancy remit, surely social mobility can include upwardly mobile progression across the EU in finance and beyond, as well as within the UK? Cutting that option off and confining social mobility to a UK fortress is limiting.
THE WEIGHT OF THE NUMBERS
To get a firmer understanding of why Clegg has flagged up the economic benefits of EU membership, you must look – as accountants do – at the figures.
The EU is the largest economy in world, worth £11 trillion, ahead of the US (£10.3 trillion), China (£5.4 trillion), and Japan (£2.7 trillion). Nearly 34 per cent of world trade originates in Europe, worth around $5.5 trillion (£3.5 trillion) annually. Twenty eight of Forbes’s top 100 companies are headquartered in the EU. The EU is also the top trading partner for 80 countries. By comparison, the US is the top trading partner for a little over 20 countries.
It carries on. More than 70 per cent of imports enter the single market at zero or reduced tariffs. The EU-US trade deal is expected to generate €80bn (£67.7bn) worth of benefits for the EU and create 2m jobs. The EU-South Korea Free Trade Agreement saves EU exporters £1.35bn annually in tariffs. UK companies alone benefit by £500m a year, while 50 per cent of foreign direct investment to the UK comes from other EU member states. Over 40 per cent of UK exports go to the EU and they are tariff-free. More than 300,000 UK companies operate in the EU.
Accountants use numbers to paint a convincing picture for the businesses they serve. And these figures paint a convincing masterpiece as to why leaving the EU would be economic suicide. Big business, overseas investors, small business and UK employment stand to lose if we drop out of the EU.
Somehow, what was once seen as an economic union has been turned into an emotional issue about Britishness and culture. But a non-EU Britain looks bleak, dead and buried – an economy left out in the cold.
These are issues that impact not only businesses, but the people they employ. Jobs will be lost if we leave the EU, and not just current jobs. Opportunities for Britain’s younger generation won’t be there if major employers have to leave the UK. The entrepreneurial spirit that the government is so keen to encourage will be limited to trading locally. Small businesses will struggle to grow from small, to medium, to large.
We’ve seen the CBI, TheCityUK and prominent business leaders like Sir Richard Branson warn of the risks of withdrawal from the EU to business and the economy. It’s time to take notice.
Helen Brand is chief executive of ACCA.