LIKE all good clichés, there’s a lot of truth behind the claim that business is being strangled by EU red tape. There is plenty of top-quality research that has shown that regulations and bureaucracy emerging from Brussels are damaging British firms and holding many companies back as they strive to tap the fast-growing markets in places like South America and East Asia.
In November, the Prime Minister’s Business Task Force warned that EU red tape played a large role in stopping businesses growing, putting off would-be entrepreneurs from starting their own firms. And a poll by Business for Britain – the campaign for a better deal from the EU backed by over 800 business leaders – found that a majority of UK business leaders now think the costs of the Single Market outweigh the benefits.
We are told that EU rules and regulations are the price that we pay for access to the Single Market. In return for all businesses having to comply with rules on product regulation, social policies, employment laws and so on, we are able to export goods to a market of 500 million consumers. That benefit is big, and many British companies have taken full advantage. But this leads to a key question: why should companies that don’t sell anything in the Single Market be forced to comply with EU rules that fans and critics of the EU alike have recognised as overly burdensome?
Business for Britain has published a report this week that proposes a solution to this question. Our research found that only five per cent of British companies actually export to the EU (in fact the Government says that it may be as low as two per cent). Therefore, we have proposed that all companies that don’t export to the EU are exempt from the worst examples of EU red tape.
Under our proposal, which we’ve called ‘The British Option’, the Single Market would remain the bedrock of UK business law, but the UK Parliament would be allowed to draw up a list of EU regulations that British companies not exporting to the EU could opt out of. Our MPs would have the final say over which laws apply or don’t apply on the majority of British businesses, rather than the more unaccountable civil servants in the European Commission. Our idea would inject some much-needed democratic accountability into the EU law making process and lift a huge financial and time burden off our vital SMEs.
The company of which I am the chairman – Silver Cross – exports a lot of goods to south-east Asia, and I am happy to make sure that my goods meet those countries’ product standards. But it would be crazy to think that a small pram company in the UK should also meet those standards if they were only selling to Leeds. We only expect companies who export to Japan to comply with Tokyo’s regulatory requirements, so why do we expect every UK company to comply with Brussels’ rules?
The British Option would kick-start an important debate about what rules we want and those we don’t. Should the Working Time Directive, which layers costs onto small firms, apply to all British businesses? What about crazy new EU data protection rules that demand that certain firms hire a data protection officer? At the moment we have no choice but to accept these rules. This proposal would give Britain a choice again.
This is a simple idea that would be simple to deliver. The EU already has similar scheme regulating the trade of cars across Europe, making sure that parts from all over Europe and the World are manufactured under EU guidelines. We are simply suggesting that we should build on what the EU has done well. Firms that trade with the EU can carry on as they are today – they will stay in the Single Market while the companies that don’t want to export can free themselves from some of the most costly and cumbersome rules.
The British Option would also help British firms export more easily to the high-growth countries outside of Europe, freed from unnecessary bureaucracy that harms their competitiveness. The leading economist Jim O’Neill recently said that the MINT countries (Mexico, Indonesia, Nigeria and Turkey) were the new markets British businesses should be looking to enter and British business is ready to strike out in pursuit of new consumers.
Britain is finally starting to come out of the economic doldrums, but we cannot rest on our laurels. Now more than ever we need to encourage businesses to expand and for new businesses to set up. The British Option would lighten the load on our firms, encourage the creation of more businesses (and jobs) and would go a long way towards making sure that the UK’s financial recovery is secured.
* Alan Halsall, is co-chair of Business for Britain and chairman of Leeds-based Silver Cross.