Out-Law News 3 min. read
04 Apr 2016, 9:39 am
This is part of Out-Law's series of news and insights from Pinsent Masons lawyers and other experts on the impact of the UK's EU referendum. Sign up to receive our Brexit updates by email.
Andy Bagnall said that, broadly in line with all other major business groups, the CBI's membership backed staying in the EU, and that the majority of UK companies backed continuing membership.
He told an event analysing the impact of the referendum on business run by Pinsent Masons, the law firm behind Out-Law.com, that 80% of CBI members think that staying in a reformed EU would be best for business and that 77% think it would be best for the UK economy. The CBI membership accounts for a third of the private sector in the UK.
CBI members said that they want the EU to reform to become more open, more outward-looking and to have a better balance between countries that use the euro and those that have opted out.
Bagnall said that the changes negotiated by UK prime minister David Cameron came closer to achieving those aims that Cameron was given credit for in the press. "Cameron's concessions were a big jump towards the things the CBI has been campaigning for," he said. "The single market was at the top of the agenda, there is a specific target for the reduction of the regulatory burden, and a restatement of the level of ambition on the pipeline of trade deals, as well as a commitment that UK businesses won't face discrimination because they use the pound not the euro."
Bagnall said that individual businesses may want to leave the EU, but that for the CBI's membership as a whole the benefits outweighed the costs. This is because membership gives access to 500 million customers; a single set of rules for 28 different markets; access to skills through the free movement of people, and the bargaining strength to open up third country markets on good terms through trade deals, he said.
If the UK votes to leave then nobody knows what trade deal will be put in place. But Bagnall said that if none is in place by the end of the two year negotiating period then there will be an automatic default to the tariffs and trading rules set out by the World Trade Organisation (WTO). "That is deeply unattractive option for CBI members," he said. "The return of tariffs would apply to about 90% of UK exports by value; there would be a 10% tariff on cars, up to 50% on dairy."
Those backing a 'leave' vote have said that a directly negotiated post-exit trade deal would benefit the UK because EU countries would still want to do business with the UK in areas that they do currently.
Bagnall said that trade negotiations would be tough and that European countries' desire to continue trading with the UK would only go so far. Ultimately, he said, Europe is a more important market for the UK than the UK is for Europe, and this creates an imbalance in negotiations.
"50% of the UK's trade is with the EU and 11% of the EU's trade is with the UK. I know which hand I'd want in negotiations in terms of who needs the deal more, and it isn't the UK's," he said.
Speaking at the same event EU economics expert and Financial Times associate editor Wolfgang Münchau counselled against pessimism over post-exit trade talks, though. He said that France is the country likely to be the UK's toughest negotiating partner in trade talks, but that Germany would give the UK a "lenient, open deal" giving access to markets. "Anyone who is a trading partner would stand to lose business as well, so it is in everybody's interests."
While this is true, said Bagnall, it is also the case that tariffs on UK trade would provide opportunities for companies in EU countries to supply each other with goods and services previously supplied from the UK, increasing their revenue at the expense of UK companies.
Münchau said that increased trade tariffs would mean that some companies would move their business into the EU, but that tariffs would have to be lenient enough to allow continuing trade in other businesses. "You can't move Scotch whisky somewhere else, so there will have to be a deal," he said.
