http://blogs.birminghampost.co.uk/business/

Europe: What happens next?

By Dr Steven McCabe on Nov 21, 12 11:59 PM in Economics

And once again the influence of Europe re-emerges as being crucial to our economy.

On Tuesday there was a meeting of the Eurozone finance ministers and today (Thursday) there is another critical meeting of Europe's leaders in Brussels to decide on the EU budget.

There is good reason to believe that some members of Government - particularly in the Conservative party - would dearly love to end our membership of the European Union.

This is something that is gaining popularity among votes.

A survey carried out by Opinium/Observer shows that 56% of people would 'probably' or 'definitely' vote leave if given the chance in a referendum.

Increasingly, it seems, there is a view that we would be better off outside the EU.

However, leaving would have consequences and any commitment to hold a referendum should be taken with extreme care as once voters have decided it will make the outcome irrevocable.

Whatever people may think, David Cameron and George Osborne are especially aware of the way in which events in European economies can have an impact on this country.
The fact that Europe still represents a major market for our exporters will not be lost on him.

Yesterday George Osborne received the public accounts for October which will tell have told him the extent of the deficit this country is currently running.

This information will have given him vital information in considering his Autumn statement which will be delivered on 5th December.

It's a good bet that whilst both Cameron and Osborne are fully aware of public opinion on continued membership of Europe but that they also know that a revival in the economies of member countries of the European Union will be good for the UK.

The fortunes of the EU and the UK are inextricable linked.

So, given the poor state of our economy, whatever decisions are taken on our continued role in Europe need to be carefully considered.

For the vast majority of us there has been five years of decline.

All data suggests that things are getting no better. Indeed quite the reverse as Governor of the Bank of England Sir Mervyn King made clear last week at his press conference concerning the quarterly inflation report.

It increasingly seems like the economy will behave like a sick patient in intensive care and slip in an out or growth. Sir Mervyn's suggestion that it will take until 2015 for GDP to return to its pre-financial crisis peak might be seen as a touch of optimistic flourish.

Another part of Sir Mervyn's speech concerned so called 'zombie companies' which due to continued low interest rates and the unwillingness to pull the plug on finance keeps them 'alive' though they are incapable of making any progress.

Anyone who walks down the average high street will see evidence both of those businesses that have already gone bankrupt and those that are just about hanging on; the proliferation of charity and so called 'pound shops'.

Sir Mervyn's view is these 'zombies' take up valuable financial resource that could be used to fund new ventures.

He appeared to suggest that it would be better to let them simply disappear a view that resonates with Abernathy and Clark's belief 'the winds of creative destruction' (1985).

Importantly, we are in a period of stagflation where inflation is going up - though not to the eye-watering levels seen in the 1970, 1980s and in the early part of the 1990s - whilst GDP remains, at best, lacklustre.

Indeed, most people are finding it hard to cope as their incomes effectively reduce through low or no pay rises whilst prices go up; especially fuel and food.

Our exporters are finding it increasingly difficult to cope with a global environment that shows no signs of settling down and events in the Middle East don't help in creating a mood of stability.

The recent news about Jaguar Land Rover is an exception in a mood of increasing pessimism.

So, our continued membership of Europe is a question that will continue to rumble into the next election.

However, even though David Cameron might not want to offer a referendum - he knows full well that there is every likelihood that the result will be a vote to leave Europe - he may be left with no choice as he tries to appease the Eurosceptics in the party.

Therefore, what would happen if a referendum led to a decision to leave Europe?

The Eurosceptics in the Cameron's party will undoubtedly proclaim that once we are freed to the regulations and interference of Europe we will become a nation island once again and that our economy will recover more quickly.

The trouble is, it's entirely possible that in the short-term the pound would increase in value which would make UK exports more expensive.

This would not be helpful.

There is a belief that many manufacturers - especially those that depend on Europe for sales - would relocate.

That would cause the loss of thousands of jobs in the sector that is regarded by everyone as being critical to this country's economic revival; manufacturing.

It is believed that the reason for the collapse of the defence deal between BAE Systems and EADS was the belief, particularly in Germany, that the UK will probably leave Europe.

So, it seems, our reluctance to become fully committed to Europe is already costing jobs.
For the supporters of Europe there is a fear that many of the employment rights that workers currently enjoy will be reversed and that we will become more of a 'sweatshop economy' than the model of social interaction and collaboration that is currently found in Germany.

As supporters of the EU ague, the Eurozone is simply going through 'growing pains' and the measures currently being implemented will be eventually result in closer fiscal co-ordination and political collaboration that will bring about the cherished dream of a 'United States of Europe'.

What is certain is that if we left the EU, we'd be isolated and certainly enjoy none of the benefits resulting from this dream.

The Eurosceptics would no doubt assert that we could still sell our goods to Europe.

But I wouldn't want to bet on it.

Instead we'll be more likely to be seen as 'Little Englanders' and possibly shunned by Europe.

As I have written previously, in my childhood there was still a lingering resentment of those who were from outside the UK, especially Germans and the French.

As some of the older generation seemed to believe, why would we want to have anything to do with them?

I would suggest that the Eurosceptics are letting their petty-mindedness blind them to the benefits we have truly enjoyed from out closeness to Europe; most particularly in business relationships and trade.

What is interesting is that the veto that David Cameron may feel he has no choice to impose on the EU budget deal is to save a few hundred million pounds.
Not 'chicken-feed' I accept.

But compare that to the fact that we borrow a billion pounds every three days to service our debt.

If leaving Europe causes a flight of manufacturers and we lose both jobs and marketshare for our exports and causes us even greater indebtedness it will surely rank as a Pyrrhic victory of monumental proportions.

Whatever the Eurosceptics suggest, nobody will benefit.

Let's hope that sane counsel and some common-sense prevails.

Business authors

David Bailey

David Bailey - Professor of Industrial Strategy at the Aston Business School, Birmingham
My postings | David Bailey's RSS feed My feed

Stuart Pemble

Stuart Pemble - Construction Lawyer, Mills & Reeve
My postings | Stuart Pemble's RSS feed My feed

John Clancy

John Clancy - Birmingham City Councillor and director of mediafuturesalert.com and justliteracy.com
My postings | John Clancy's RSS feed My feed

John Samuels

John Samuels - Professor of Business Finance, Birmingham Business School
My postings | John Samuels's RSS feed My feed

Chris Tomlinson

Chris Tomlinson - Chris Tomlinson is the founder of social media and online PR agency Friend (frienddigital.com)
My postings | Chris Tomlinson's RSS feed My feed

Andrew Whitehead

Andrew Whitehead - Senior partner at law firm SGH Martineau, leading the firm's Energy & Climate Change practice.
My postings | Andrew Whitehead's RSS feed My feed

Keith Gabriel

Keith Gabriel - A Birmingham-based PR Account Manager
My postings | Keith Gabriel's RSS feed My feed

Beverley Nielsen

Beverley Nielsen - Lecturer, Design Management, at the Birmingham Institute of Art & Design, BCU
My postings  | Beverley Nielsen'a RSS feed My feed

Mike Loftus

Mike Loftus - Director of News from the Future Ltd. Writing on the trials of setting up your own business
My postings | Mike Loftus's RSS feed My feed

Richard Halstead

Richard Halstead - Midlands region director for EEF, the manufacturers organisation.
My postings | Richard Halstead's RSS feed My feed

Karl Edge

Karl Edge - partner at KPMG in Birmingham, specialising in automotive, manufacturing and house building sectors.
My postings | Karl Edge's RSS feed My feed

Peter Owen

Peter Owen - Managing director for construction firm Willmott Dixon Midlands.
My postings | Peter Owen's RSS feed My feed

Dr Steven McCabe

Dr Steven McCabe - director of research degrees for Birmingham City Business School.
My postings | Dr Steven McCabe's RSS feed My feed

Francis Greene

Francis Greene - Professor of Small Business and Entrepreneurship, at the University of Birmingham.
My postings

Alan Gilmour

Alan Gilmour - Director at Cogent Elliott, experienced in marketing, brand development and customer relationship management.
My postings

Paul Noon

Paul Noon - Paul Noon, OBE, West Midlands International Trade Director at UK Trade & Investment.
My postings

Latest Birmingham Post Lifestyle blog

Lifestyle Blog

Birmingham Post staff and guest bloggers from the midlands give you the lowdown on what's happening in your region and some musings on culture in the UK and beyond.

Keep up to date

Sponsored Links