Unlike public, UK manufacturers favour EU membership

Unlike public, UK manufacturers favour EU membership

Anti-EU sentiment has been on the rise in most of the bloc’s 28 member states since the onset of the European sovereign debt crisis. However, few European countries have proven as skeptical about European integration as the United Kingdom, where a large number of voters (46 percent) admit to being in favour of leaving the European Union.

While euroscepticism appears to be pervasive among the British public, a recent report by the Manufacturers Organisation for UK Manufacturing (EEF) somewhat surprisingly found nearly universal support for the UK’s EU membership among representatives of the British manufacturing industry. The EEF report is based on interviews conducted with 398 manufacturing company executives, 85 percentage of whom expressed preference for the UK’s continued association with the EU. Moreover, 60 percent of the interviewees stated that the European market was crucial for their companies’ export strategies, and a third said that they were unlikely to increase investment in the UK if the country left the EU.

The extreme divergence of British manufacturers’ views from public opinion on the EU is largely attributable to the progressive internationalisation (or even Europeanisation) of the UK manufacturing sector in recent years. At present, about 90 percent of the British companies represented in EEF’s survey reportedly sell directly or indirectly to the EU. British manufacturers’ dependence on the EU market becomes even more clear in the structure of their international supply chains. For instance, 85 percent of the EEF survey’s respondents reported that most of their customer base is located in the EU, while 88 percent rely primarily on suppliers based in EU countries.

British manufacturers’ overwhelming support for the EU also reflects their long-term vision of the European market and common EU policies as stable foundations of the UK’s economic resurgence after over half a decade of crisis. In particular, EEF’s report stresses that completing the Single European Market, promoting interregional research and development cooperation, harmonising British and European product standards and developing the EU’s free trade partnerships with other world regions could result in a significant boost in Great Britain’s economic and industrial performance. In fact, the report estimates that together, these factors would contribute at least 7 percent of the UK’s total GDP growth within the next couple of years.

The report highlights a further crucial stimulus for the UK economy, derived directly from EU membership: European funding allocated to British small and medium enterprises (SMEs) under the EU Framework Programme for Research and Innovation Horizon 2020Horizon 2020‘s funding for British SMEs for the 2014-2020 period adds up to 9 billion euros. This amount is significant by any standard, and especially for a UK government that has identified SME entrepreneurship as an essential pillar of its strategy for a sustainable post-crisis economic recovery.

EEF’s survey comes at a crucial time and feeds into the broader debate on the future of the United Kingdom in the EU. Not very long ago, British Prime Minister Cameron pledged a referendum on EU membership by the end of 2017, should a Conservative government win the 2015 British general election. Although the Labour opposition has not yet formally expressed any intent to hold a referendum in the event of an electoral victory, this is not unlikely given strong public euroscepticism, and the pressure that these anti-EU attitudes would inevitably put on British policy-makers, irrespective of party affiliation.

At the same time, EEF’s report serves as a reminder that the swift recovery of the UK economy, deemed a policy priority by the British political elite and the electorate alike, would be considerably harder to achieve without open access to the EU internal market – especially in view of the increasingly outward orientation of the British manufacturing industry and other important economic sectors. Moreover, the report sheds light on the lack of cognizance regarding the potential large-scale costs of leaving the EU, which, at least in purely economic terms, considerably outweigh the “benefits” of repatriation of regulatory powers to the UK government and stronger national control over labour and capital markets. After all, if Great Britain did eventually leave the European Union, it would not only have to give up its privileged position as a member of the world’s biggest common market, but also forgo extensive EU support in various policy areas, ranging from external trade and product standardisation to innovation and SME development, among others.

Considering these facts, UK manufacturers could play a crucial role in helping reframe the policy debate on the UK’s EU membership, thereby allowing for a more balanced representation of views on the costs and benefits associated with a UK exit from the European Union.

Categories: Economics, Europe

About Author

Guest Post

This article was published as part of the GRI Guest Post Series. GRI guest posts come from leading experts in business, government, and academia. The series strives to bring a diverse range of perspectives on the critical issues of our time. The views expressed in this article are solely that of the author and do not necessarily represent the views or opinions of GRI.