Three myths that require a rebuttal

 
Allister Heath
Myth number one: Tesco is becoming larger and larger. Fact: it is (very) gradually losing market share in the UK grocery market, according to Kantar.

Its share peaked at 31.2 per cent in December 2007 and is now back at 30.5 per cent, a market share last seen in 2006. When it comes to UK groceries, at least, it has been a case of five wasted years for Tesco, despite a huge push and many new stores. The company remains a formidable player and British success story – but this shows that market concentration is not a one-way bet. All the talk a few years back of a Tescopoly turned out to be nonsense. Size isn’t always self-reinforcing, especially after a certain point, apart from in network industries (and even then entire networks can be ditched in favour of new ones). Retail is more competitive than ever, and that can only be good for consumers.

Myth number two: the government has backed the City to the hilt and wants to save it from Brussels’ madness. Fact: the government spent its first 18 months attacking the City, and is now entirely schizophrenic in its attitude towards it.

Of course, a revolution was required in the City after the mad bubble. Many of the reforms since 2008 have been good, including getting banks to hold more capital, be more liquid and cut their leverage. Some have even been excellent. The move to introduce resolution schemes and living wills to allow even the biggest banks to fail in a controlled way – more advanced in the UK than elsewhere – will help banish bailouts for ever. But there have also been lots of job-destroying, stupid and unnecessary policies, punitive taxes and a relentless stirring up of anti-City sentiment. The British government has also tolerated or even embraced a tidal wave of EU rules, nearly of them flawed or disastrous. Hedge funds, private equity, insurers and now accountancy firms have all been hammered; new pan-EU regulators have been created. The coalition’s original aim was to shrink the City; then to shrink it as a share of GDP; now, with manufacturing in recession again, it has suddenly realised that it must find growth and jobs wherever they are created. Fine – but it shouldn’t pretend that it has always been the City’s best friend.

Myth number three: business uniformly backs the EU. Fact: opinions have shifted massively since the euro crisis.

Given the onslaught of regulations in recent years from the EU, and that the European market is set for at best permanent stagnation, it is patently clear that the appetite from real life business for ever-deeper EU integration has waned. Of course, they want free trade with the EU – but the old enthusiasm of yore has vanished, apart from at a few refusenik multinationals.

It is time to readjust. There are costs and benefits to EU membership – but the massive benefits promised in the 1980s and 1990s have not materialised, and the costs are now immense. Rather than spreading scare stories about the UK’s isolation or obsessing about the supposed wonders of the single market, business groups and trade lobbies need to understand that there is little the UK can do to influence the EU. With 26 other member states, Britain simply doesn’t have enough votes. It is time instead for a thorough rethink of our relationship with the EU – and for British business and its representatives to focus all of their energies on those parts of the world that are booming, rather than the bits that are facing permanent decline.

allister.heath@cityam.com
Follow me on Twitter: @allisterheath