An anti-capitalist European Parliament: The real threat to UK business

Allie Renison
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An anti-globalisation agenda is expected to dominate the next Parliament

NOT LONG ago, the government’s mantra was that the Eurozone crisis was having “a chilling effect” on the UK economy. Britain’s dependence on its trading links with the euro area, combined with the plunging fiscal and economic fortunes of certain member states, put in doubt the prospects for our own export-led recovery. Fast forward three years, and while Brussels has pronounced the euro’s “existential crisis” over, there is another looming threat to the UK’s competitiveness: today’s European elections.

Over the past five years, business across Europe has had to contend with a burgeoning new player in the regulatory landscape. The Lisbon Treaty significantly increased the European Parliament’s powers to decide on and amend EU legislation in a raft of new areas, and MEPs took up their boosted role with great relish.

A multinational treaty setting out a framework for the global protection of intellectual property rights was torpedoed by the European Parliament after being signed by nearly all national governments across the EU, including the UK. MEPs amended the Capital Requirements Directive (CRD) to push through restrictions on bankers’ remuneration, in defiance of its irrelevance to the Basel accords, which CRD IV was supposed to be implementing.

And it is not only big business which has been affected. SMEs often bear a disproportionate amount of EU regulation’s financial burden, but lack the resources of multinational companies to lobby Brussels and shape legislation. Too often, through no fault of their own, they only find out about proposals once they have been passed and transposed into UK law.

The documentation required by the proposed revision to the EU’s data protection regulation brings with it compliance costs that could be better invested elsewhere. In its original proposal, the European Commission (EC) exempted most SMEs from the obligation to appoint a data protection officer, a requirement that could easily keep smaller firms from hiring other, needed staff. The European Parliament’s Civil Liberties Committee promptly removed this exemption in its report on the regulation – changes which were subsequently backed by MEPs in plenary.

And in a resolution passed just last month, the European Parliament set out its opposition to suggestions, floated by the EC and David Cameron’s Business Taskforce, that micro-enterprises be exempted by default from new proposals. This obstinacy has come to characterise the Parliament. It has taken great delight in publicly boasting of its ability to hold both the EC, and more importantly the Council, to ransom.

But if the current crop of MEPs have given businesses cause for concern, the next wave will have enterprise and industry quaking in their boots. Populism and protectionism often seem to go hand in hand, and it is very likely that swathes of figures espousing such tendencies will be elected this week.

An anti-globalisation agenda is expected to dominate the next Parliament like never before. The think tank Open Europe has projected that the number of MEPs dedicated to free market policies could fall by nearly 40. It is this broader outlook which poses the bigger threat to British and European competitiveness, not simply the spike in EU-critical MEPs.

This election should be a catalyst for reform to refocus European legislators on fostering innovation, further liberalising the Single Market in services, and looking outwards to the EU’s place in the global race. But the worrying reality is that anti-capitalism will be in the ascendancy. Business is already concerned about the bloc’s future direction – according to a recent survey, just 11 per cent of our members thought the EU presented a viable socio-economic model. The recent spectacle of European Parliament group leaders attempting to outdo one another, by threatening to derail free trade talks with the US in their bid for Commission presidency, is alarming. Little wonder more staid national leaders are nervous about letting these elections determine the shape of the next Commission.

It is no coincidence that, as many lament the loss of British influence in Brussels, the prevailing sentiment in the UK is that the EU has lost its way. Regardless of his motivation, Cameron has sought to reverse this trend by embarking on an ambitious agenda for change, around which liberal, outward-looking member states can coalesce.

With the European Parliament looking likely to be one of the biggest threats to business-friendly reform, Britain’s emphasis must focus beyond Brussels on building political and, crucially, enterprise alliances across Europe. Our economic recovery and business’ continued support for the EU depend on it.

Allie Renison is head of Europe and trade policy at the Institute of Directors.

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