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By Lee Wild | Thu, 13th November 2014 - 09:15
The fear among many business leaders is that the vote promised by the Prime Minister is scaring off inward investment to Britain. These days Europe is the UK's largest trading partner. A significant chunk of whatever we make ends up on the other side of the English Channel.
Of course, the threat to business of ongoing referendum speculation is an accusation Mr Cameron is quick to dismiss. And it is one certainly not born out in the statistics.
A report published over the summer by UK Trade and Investment (UKTI) revealed that more than 66,000 jobs were created by international companies investing in the UK economy last year, up 12%. That's more than in any year since 2000/01. Foreign direct investment (FDI) projects in the UK were up 14%.
The Prime Minister is keen to put UK membership to the vote as early as 2017, if the Tories win the next election. "Simply standing here and saying, "I will stay in Europe, I will stick with whatever we have, come what may" is not a plan. It is not a strategy, it will not work," he told the CBI conference.
But while Cameron has backed CBI director-general John Cridland's reform strategy, the CBI chief is still concerned about the potential impact on business. And while he remains a fierce supporter of Britain's role in Europe, he's behind expansion into faster-growing markets further afield, like China, Brazil and India.
"Our exports to the Netherlands are higher than for all Bric (Brazil, Russia, India and China) countries combined. I don't consider the eurozone to be a foreign market. It's a home market. It is our back garden," he says.
"What the sceptics need to know is that our role is to be an advanced economy that services other advanced economies. We need to grow our exports to Europe as well as seizing opportunities in other markets." CBI president Sir Mike Rake is equally pro-Europe, urging opponents to "embrace openness.”
That's sensible, but there is a groundswell of domestic public opinion against Brussels, and it seems some kind of attempt to renegotiate an acceptable UK membership settlement with the EU is inevitable.
David Buik, a market commentator at Panmure Gordon and occasional contributor at Interactive Investor, made his views clear in a letter published in the Evening Standard this week. He wrote:
CBI director-general John Cridland strikes me as a great administrator and astute politician, having previously been number two at the organisation for a decade. He and his president Sir Mike Rake's obsession with Europe, regardless of 40% of our trade being with the EU, is unnerving, and their perceived ambivalence towards the renegotiation of terms for the UK to remain in the EU ahead of a referendum, disappointing.
I accept these august people speak for big business but they are clearly insensitive to the concerns of small businesses and much of the country at large. Apart from concern shown by Lord Wolfson, all the other FTSE 100 CEOs would vote to a man to stay in.
Clearly, the current situation is untenable. Public opinion, often anti-Europe, will need to be appeased by whoever wants to occupy Number 10 after the General Election on 7 May 2015. It's something acknowledged by Tom Elliott, International Investment Strategist at deVere Group.
"To many observers, Cameron's persistent outrage over European matters appears to be stage-managed, entirely for domestic political reasons, and his problem of his own making," he says. "After all, by offering the country a referendum on EU membership in 2017, hasn't he given succour to the anti-European lobby in UK politics?"
A compromise with European counterparts is the obvious solution. But business commentator Howard Wheeldon is pessimistic. "Angela Merkel has thrown in the towel and decided that Britain's stance on the issue of migration and free movement of workers in the EU is not only unacceptable but may well mark the point of its departure from the EU," he writes.
While not impossible, mending the country's relationship with Europe is difficult, and will require plenty of horse-trading in the aftermath of any Conservative victory. Clearly, there will be some unease among European investors between now and then, but the UK is too lucrative a market for foreign investors to ignore. Equally, the European mainland is too large a market for Westminster to dismiss. An extension of the uneasy truce is the inevitable outcome.
This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.