Its 72 days and counting until the UK decides whether we should remain a member of the European Union, or leave. EEF has produced a new report looking at what manufacturers think of the EU and the UK’s future relationship with it.
So, if you’re undecided and on the hunt for information about what the EU means to different parts of the economy – then read on.
But first off, amidst all the voices and opinions on the UK’s membership of the EU – why should you care what manufacturers think at all? Here’s a few reasons:
Manufacturing businesses and the 2.6 million people they employ making things in the UK directly contribute £1 in every £10 of output in our economy.
The UK economy needs stronger productivity growth, higher levels of investment and more exports – manufacturers punch above their weight on all of these.
Manufacturing is a global business – investment decisions, supply chains and customers are spread across the world, UK companies are connected globally and have strong links with the rest of the European Union – much more so than most other economic sectors.
Having established manufacturing’s credentials in this important debate, what do senior decision makers in industry think about the EU?
We’ve spoken to and surveyed hundreds of manufacturers about what the EU means to their businesses. We’ve heard lots of views – positive and negative, but mainly the former. Here’s a shortlist of reasons why manufacturers benefit from the UK being part of the EU.
It can make doing business that bit easier
The overwhelming majority of EEF members are already exporters – so they know what it’s like to get started. Over four-fifths (81%) of members’ surveyed agree that being part of the Single Market makes it easier for first time exporters to get started by selling to a market of half a billion customers.
Yes, there are lots of opportunities in markets outside the EU and UK manufacturers have made great progress in extending their reach into place like China and South America, but experience in lower risk European markets provided a good jumping off point – especially when there’s one set of rules across 27 other countries.
You may see some people commenting on the declining share of manufacturing in the UK economy and that this has come about because of our membership of the EU.
Clearly it is impossible to say how big the UK economy or the manufacturing sector might have been if we hadn’t joined the EU in 1973. But it is worth noting that manufacturing’s share of the UK economy, is about the same as the US and we’re still the 7th biggest manufacturing nation in the world (Source: UNIDO).
It adds to the UK’s attractiveness as a place to invest
The UK has a strong track record of anchoring foreign investment. Big industrial investors support dynamic supply chains, they can bring innovative practices that spillover into other businesses, driving up performance across the sector.
We don’t attribute all of this success to our membership of the EU – we have a competitive business tax base (mostly), well-functioning institutions (in the main) and are open to inflows of foreign capital. But 62% of EEF members believe our membership provides another big reason to choose the UK when investors are weighing up their international location options.
The option of recruiting from across Europe can help plug skills gaps
Nearly three-fifths (57%) of the companies we surveyed said the freedom to recruit from the rest of the EU was an advantage to their business. It is also important for businesses – especially those supplying services as well as products to their customers – to be able to respond to the increasing need to move employees to subsidiaries and projects in the rest of the EU.
What do manufacturers want less of?
Being part of the EU isn’t all upside. There are two main gripes from manufacturers – increased regulation and slower growth across the eurozone. Having been party to discussions about the EU over the last few years I am well versed in the frustrations surrounding REACH, the Working Time Directive and the Posting of Workers Directive. But I’ve also heard the same strength of feeling about policy changes that have nothing to do with the EU.
The weaker growth outlook for the eurozone is a somewhat trickier affair – this is a key concern for around half of EEF’s members. It’s our biggest market and there aren’t necessarily any easy substitutes for some exports in other parts of the world, but even on current forecasts the eurozone will still be the world’s third largest economy in a decade’s time and the emergence of a stronger recovery would have tangible benefits for three-quarters of manufacturers.
Manufacturers are in the front line of competing internationally. Any costs and compliance requirements that UK companies need to overcome to win in global markets, but competitors overseas don’t, can undermine export ambitions.
The EU Single Market does need a proper set of rules to function – sometimes these have been seen as too onerous, but claims that the EU produces 26,911 words of regulation on the sale of cabbages is just plain wrong. Indeed, some of the most contentious bits of legislation about to hit industry – such as the apprenticeship levy
– are born in the UK.
What could and should the EU be doing more of?
It’s almost inevitable that there will be a lot of attention paid to the stuff the EU does that we don’t like. It’s easy to take pot-shots at the lunacy of (mythical) cabbage regulations and the protracted decision making processes of EU institutions. But there are also areas where more Europe would be a good thing.
Trade deals, cracking on with the Digital Single Market, deepening the Single Market in Services, facilitating big collaborative innovation projects, helping small companies fund their innovation priorities, harmonisation of standards – to name a few.
Global manufacturing is entering a new era of digital technology – UK companies will be investing over the next five years in new internet-connected machinery; business models will be evolving and the lines between emerging and developed economies will become fuzzier. Any and all of the actions above will act as an important enabler for UK industry to get ahead.
Manufacturers are on board with anything that makes international trade easier. Trade deals aren’t a zero sum game and the EU (including the UK) and various trading partners have seen the benefits of expanding trade agreements. Possibly the biggest one on the stocks is TTIP – the Transatlantic Trade and Investment Partnership between the EU and the US.
It is clear that some people believe this trade agreement is reason alone to leave the EU, with arguments ranging from potential damage to the NHS to the dilution of employee rights. The UK government has set out some facts on the deal – still a work in progress – to dispel these concerns. Manufacturers say that a deal would support more investment in the UK and they believe that trade deals are more likely between large blocs rather than individual nations.
A vote to remain
Manufacturers are basing these views on what they see today. They can’t make a judgement on whether life and business would be better if the UK were outside the UK, because no one is so far painting a picture of what that would look like.
Going back to the issue of TTIP and free trade deals – some leave campaigners stand firmly against the deal, while others confidently claim that the UK, outside of the EU, will be securing its own FTA with the US. Who is right?
So the sum of all of this is that 61% of EEF members want the UK to remain in the EU, with 5% opting for Brexit; 70% believe the UK’s continued membership is important or critical to their business and 82% don’t see the sense in cutting ourselves off from our biggest market.
This is one view. A manufacturing view. Farmers, trade unionists, scientists, bankers all have their take on what referendum outcome they believe is in the best interests of the UK. And whatever those view may be, it is absolutely vital that they are heard and respected over the next ten weeks.