The majority of NMBS members think that the UK leaving the EU could have a negative effect on their businesses.
That’s according to a straw poll taken at the independent builders merchant buying group’s biennial conference in Lanzarote last weekend.
Sunday Times economics editor David Smith asked for a show of hands of who among the assembled delegates thought leaving the EU would be bad for their businesses. The vast majority said yes.
“Will we stay in the EU,” he asked, rhetorically? “David Cameron believed that he got quite a good deal when he renegotiated our terms of membership in February and that this would transform public opinion in favour of our continued membership. In Downing Street they were quite influenced by the answers to the question ‘ if David Cameron recommends continued membership of the EU on the basis f renegotiation, how would you vote, which had it looking as though 70% or so would be in favour of remaining and 25% in favour of leaving. However, that changed when Cameron came back from the renegotiation talks and the Euro-Sceptic tabloids ‘response was ‘Is that it Prime Minister’ and it didn’t work.”
Smith said that he felt that the deal that the Prime Minister struck wasn’t as bad as some commentators have since made out, rather that it hadn’t met the expectations that had been set out, in part by Downing Street itself.
“Downing Street has nailed its colours firmly to the Remain mast, so, if it goes the other way, I would think it would be impossible for both Cameron and George Osborne to remain as Prime Minister and Chancellor of the Exchequer. And while I can see an obvious candidate for the PM’s job, I can’t see an immediate candidate to replace Osborne.”
In hindsight, Smith said, the timing of the Referendum has not really been sensible, thanks to the migrant crisis and the EU’s handling of it which has been “terrible PR for the EU as a whole”.
“One thing that is positive for the Remain side is that consumer confidence is high. People feel quite good incomes are up, employment is up. In fact, this last year has been the best for consumer confidence for 40 years. Two or three years ago, if you had asked the question, people were feeling squeezed, the job market wasn’t so healthy and the EU could at that time have been see as the culprit.”
The downside of the raised consumer confidence to the Remain side, Smith added, is that people could be feeling a little too comfortable and therefore might be prepared to take a risk, and vote Leave.
Immigration is the strongest card the Leave side has), yet Smith points out that non EU migration – people coming in to the UK from countries outside the EU – has always been higher than EU migration and yet the two issues seem to have been translated into a general vote on immigration. “That has complicated the referendum issue and I don’t think the Remain side really expected it to to quite the extent that it has done.”
If Brexit does get voted through on Thursday, Smith said he believes that there would be a short-term shock, a political crisis, an economic crisis and a financial crisis. “Sterling is already down, although a) that might be exaggerated and b) it might be worth it in order to get back out country as people say. I think a Brexit would mean lower GDP & living standards in the long term, but again, some people might say that it would be worth it. Some estimates have it at 2% lower in the long term than it would be if we stayed, other estimates show that it would have a much bigger effect, between 6% and 8% lower GDP. And what that means is not that the economy would be 2%, 6% or 8% smaller than it is now, but rather that percentage smaller than what it would be had we remained in the EU.
“The polls in the last few days have shifted in favour of Leave, however, I think that Remain will still win, because of the ‘status quo bias’ – the closer to polling day we get, the more likely people are to vote to stick with hat they know. We saw that with Scottish Referendum”
If the UK does vote to leave, Smith said it would definitely hurt those businesses who are internally integrated across the EU, because even if everything else stays the same as negotiations begin, the decision itself would have an impact, with businesses who hate uncertainty postponing investment and the UK becoming a different proposition for international investors, especially in the financial sector.