Why the European dream has gone sour for so many firms

WHEN it comes to the European Union, there is the good, the bad and the ugly. The free movement of goods, capital, services and people – the four freedoms – are a great, visionary, cosmopolitan and truly liberal idea in the classical, libertarian sense of the word; the only downside is that one of them, the free trade in services, has never fully been implemented.

Unfortunately, of the EU’s many competences and activities, that’s all that belongs to the first category. Everything else the European Union does is either bad (such as the job-destroying red tape or the thousands of pages of rules and regulations) or ugly (including the destruction of democracy, the creation of a new class of unaccountable Euro-elites, the lack of rigorous financial controls in its budgets and its protectionism towards poor countries).

Even the four freedoms have been corrupted: rather than simply allowing free trade, the EU regulates and harmonises it, believing that differences between countries need to be eliminated before commerce can happen. The result is that contrary to what some very large firms and a handful of senior business people would have us believe, most UK businesses have grown sceptical of the EU. Of course, they want to have the ability to trade with EU countries, and employ EU citizens, but they are angry about the costs that have been imposed on them by Brussels.

A poll of British Chambers of Commerce members yesterday reveals that just 26 per cent of (mostly small and medium sized) firms want to maintain the status quo – whereas 47 per cent want to negotiate a looser relationship while remaining part of the EU, and 12 per cent want to leave altogether (this latter chunk is “mad”, according to our always sensitive, sensible and knowledgeable prime minister). That means 59 per cent of firms want less Europe. Just 9 per cent want closer integration (and 6 per cent don’t know).

I’m with the 59 per cent who want the EU to have less power over the UK. Depressingly, it is the nine per cent who want it to have more who have been winning ever since anybody can remember, in practice if not in terms of rhetoric. Sadly, the 26 per cent who want to maintain the current balance of power are deluded: the EU doesn’t work that way. It’s always ever-closer union, ever more centralisation of powers and even more rules.

More than one-third (35 per cent) of the respondents to the BCC survey said the disadvantages caused by the red tape imposed by Brussels now outweigh the benefits of being part of the single market. This is an extremely important finding: increasingly, companies don’t even think that the single market – the specific legal framework that organises and regulates economic activity in the EU, and which is quite different to a traditional free trade agreement – is even worth it anymore. The old taboo – that the single market can never be criticised – has been smashed, and with good reason. Free trade and the free movement of people are great for companies, large and small – but the single market, with its awful regulatory superstructure, is deeply flawed.

The UK must regain as much power over its own affairs as possible while retaining access to European markets and maintaining the four freedoms. Other countries and the EU itself will have a huge incentive to pretend that such a major shift is impossible. They need to be told in no uncertain terms that the status quo is unacceptable. There needs to be change – and for that, the UK needs to start negotiating hard, and fast. It’s like everything else in life: if you don’t ask for something, you will never get it.

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

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