Mark Carney has been a very successful Governor of the Bank of England. Since coming to office in June last year, the British economy has gone from strength to strength. Although Mr Carney can’t take all the credit, on his watch unemployment is falling rapidly and business confidence is at a record high. His appointment and policies have been met with general approval by the UK’s business leaders, which is to be welcomed.
So it is a shame that yesterday there were reports that the Governor thinks an EU referendum would be ‘bad for the economy’. The claim stems from the Governor’s comments on the Andrew Marr show on Sunday. In response to a question asking if the CBI was right to be worried about the ‘uncertainty’ that a referendum on EU membership might create, Mark Carney replied that ‘uncertainty is always bad for investment. It increases the value of waiting’. He also pointed out that:-
‘The uncertainties that we can influence at the Bank of England are not a European referendum or a Scottish referendum; what we can influence are uncertainties about the financial system.’
This is important: it’s not the Governor’s job to deal with the questions surrounding an EU referendum. What commentators should ask is – will a referendum actually create uncertainty (as some have claimed), and thus are businesses opposed to a vote on the EU?
The evidence overwhelmingly shows that they aren’t. Business for Britain’s definitive polling of British business leaders with YouGov showed last year that a majority of entrepreneurs support a referendum on our EU membership. Other surveys have come to a similar conclusion: Ernst and Young’s research has shown that leading investors have said that they find the idea of a UK with looser links with Europe appealing. The latest economic data backs up this positive view, with the ONS’s analysis of business investment in the UK showing no substantial change since the Prime Minister’s Bloomberg speech in January 2013:-
In fact the FTSE rose and industrial output increased after Cameron promised a referendum, while unemployment fell. These trends are, of course, down to a large number of factors, but taken together they show that there is precious little evidence to back up the view that the Prime Minister’s EU referendum pledge has compromised British business.
The value of having a set date for a future EU referendum is that it shows the EU that we are serious about getting a new deal. Ask most UK-based business people and they will say the great uncertainty in Britain’s EU relations comes from not knowing how the Eurozone, or indeed the European Commission, will respond to Europe’s flatlining growth. From tighter regulations, to financial transactions taxes, business people are growing increasingly concerned by Brussels’ response to the economic crisis. As the Governor himself admitted, there are big problems facing exporters, not least that ‘Europe remains weak’ and he thinks that weakness is going to remain a problem for many years.
We know some big corporations fear change and, while we must respect their need for stability, many of those who claim to be reconsidering investment in the UK as a result of the referendum pledge said the very same about Britain not signing up to the single currency – and you can imagine how grateful they are now that we didn’t.
The evidence is clear: Britain’s vital army of small and medium-sized companies want a new deal with the EU. They want the heavy burden of over-regulation lifted Getting a date set for a referendum makes it far more likely that we will get that deal, which is why over two-thirds of British business people support the Prime Minister’s referendum pledge.
Oliver Lewis is Research Director of Business for Britain