Leaving the European Union in favour of a looser arrangement with Brussels would have “serious downsides”, the Confederation of British Industry (CBI) has warned as it said the majority of firms wanted to remain inside the 28-member bloc.
The CBI acknowledged there were downsides to membership and the EU needed reform, but it said the problems were “significantly outweighed” by the benefits of staying in.
Business leaders made clear their view as Bank of England governor Mark Carney prepared to make his first formal intervention in the debate ahead of the in/out referendum promised by David Cameron by the end of 2017.
He is due to deliver a lecture at St Peter’s College, Oxford, as the Bank publishes its in-depth assess of the potential economic risks to Britain if the country votes to leave the EU.
The existence of the Bank’s project - codenamed Project Bookend - was supposed to remain confidential, but was accidentally revealed when details were sent to a journalist in an email blunder.
The work, led by deputy director for financial stability Sir Jon Cunliffe, has looked at “a range of economic and financial issues that arise in the context of the renegotiation and national referendum” and is reported to run to 100 pages.
Mr Carney has downplayed the significance of his speech but his words will be carefully scrutinised for hints of any opinion on the issue.
The CBI report said the Prime Minister’s promise of an in/out referendum by the end of 2017 meant it was essential for the business community to get involved in the debate.
The document said: “Whilst membership of the European Union has its downsides, the disadvantages are significantly outweighed by the benefits we get in return.
“And the Prime Minister’s push for reform gives a window of opportunity to maximise those benefits - before the public chooses the future course for the UK.
“With a referendum on Britain’s membership of the European Union now a question of ‘when’ not ‘if’, it is essential that the business community is part of the debate.”
The CBI report accepted that aspects of EU legislation “do get in the way of business” but while it was not a “uniform view” the “majority of firms believe that the pros of EU membership outweigh the cons”.
“Just as ‘more Europe’ isn’t the answer to every question, neither is ‘no Europe’,” the report said. “Being a member of the European Union helps British businesses to grow and create more jobs across the UK.
“The EU single market gives British business access to over 500 million customers - that’s eight times the number of customers in the UK alone.
“In many respects the EU makes it easier to sell to them, simplifying business rules on exporting. And the sheer size of the EU makes it a magnet for global investment as well as letting EU trade negotiators go ‘toe-to-toe’ with global giants like the US and China to open up their markets.
“And it’s a good deal for households too. Driving competition within Europe and helping open up trade with countries outside it means lower prices and more choice.
“Whilst it’s hard to quantify many of the benefits of EU membership, CBI research estimates that membership is worth about 4-5% of our national income - about £3,000 for the average household every year.”
Critics of the EU have suggested that the UK could have a relationship with the EU while being outside it, along the lines of Norway or Switzerland.
But the CBI said: “Alternative arrangements to full membership either have serious downsides or are surrounded by huge uncertainty. That’s why the majority of business want to remain in a reformed EU.”
CBI director general, John Cridland, said: “The CBI speaks for 190,000 firms of all sizes, in every sector and in every corner of the UK, and most of our companies want the UK to be in a reformed EU. For business the benefits of full membership outweigh the disadvantages, but the EU must work better.
“The single market has been the solid foundation of our economic success in recent decades, giving us direct access to eight times more consumers than in the UK alone and ensuring we can go toe-to-toe with larger economies on major trade deals, creating jobs and economic growth here in the UK.
“While there are many benefits to EU membership, we should not be blind to the downsides and recognise the EU, like any big institution has its faults and needs to do better.
“The burden of regulation on smaller firms in particular still needs tackling, even if some progress is being made. And the UK must push for reform to make the whole of the EU more competitive in the global economy and deliver a single market fit for the 21st century.”
Will Straw, executive director of the Britain Stronger in Europe campaign, said: “The CBI report blows a huge hole in the out campaign’s argument. Being part of Europe boosts the UK economy by increasing our trade and investment in turn supporting millions of jobs here at home.
“We already have the best of both worlds, trading within the EU and other countries. Why would we put that at risk?”
A study by NatCen Social Research found that younger, well-educated voters are more likely to want to remain in the European Union than older Britons and those without qualifications.