Why big business is turning against the European Union

The business community has always been the EU's most steadfast champion, says Matthew Lynn. But now its support is wavering, the EU may struggle to survive.

The European Union has never been greatly loved by many of us. Most electorates have accepted it grudgingly at best. Its endless treaties and constitutions regularly get defeated when put to a vote. Through its half-century of existence in one form or another, there has only been one sector of society that has consistently supported it big business.

There was no great surprise about that. Industry, as much as any other group, votes with its wallet, and the EU for most of its existence was a resolutely pro-business organisation. It pushed for open markets, and the free movement of labour and capital policies that help companies.

Even the single currency was sold as a way of making the economy more efficient: it would end all that fiddly fussing about with exchange rates, and make pricing more transparent across the continent.

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True, there were minor irritations, like working hours directives, and endless harmonised directives that seemed to have been written by French bureaucrats determined to make actually selling anything at a profit as hard as possible. But on the whole, the EU was net positive for business.

However, something significant is now happening. Business is switching sides and edging closer to the anti-EU camp. If that continues, the European project will lose its most crucial group of supporters and in the long-term may struggle to survive.

That can be seen most clearly in the UK. This week saw the launch of Business for Britain, a new business grouping calling for David Cameron to renegotiate the UK's membership of the EU. It lined up plenty of senior figures such as Lord Woolfson of Next and Sir Stuart Rose, the former M&S chief executive now chairman of Ocado to argue that the UK needs a new deal with the EU.

The days when the FTSE could be solidly expected to line up in the pro-EU camp are now over. The same trend is evident elsewhere. Take Germany, for example. A poll by Commmerzbank this month found a majority of small- to medium- sized companies turning hostile to the euro. Hans-Olaf Henkel, the former head of the German equivalent of the Confederation of British Industry, a pro-business lobby group, is now helping the new anti-euro party.

In Austria, the new party set up by the billionaire Frank Stronach is scoring around 10% in the polls ahead of elections later this year and arguing for the dismantling of the single currency.

In Italy, it is the business community led by the former prime minister Silvo Berlusconi that is drifting into the anti-euro camp. There should not be any great surprise about that. Business is voting with its wallet once again. In reality, the EU no longer offers business very much.

The EU's entire energy is devoted to propping up a currency that keeps the continent locked in depression. The euro was sold to make business more efficient, and boosting Europe's growth rate. In some ways it does.

It is easier to sell products across an entire continent when you can price them in one currency rather than a dozen or more. The trouble is, there is no point in shaving one or two percentage points off your costs if it also means your sales are collapsing because economies are sinking into depression.

There can't be many people left who believe the euro has been good for their business yet the EU has turned itself largely into a vehicle struggling to keep the currency alive against terrible odds.

In every country it is exports to the emerging markets that are booming making the EU's open market less relevant every year. Again, take Germany as an example. A decade ago, 45% of its exports went to other EU members. Now that figure is down to 37%. Germany exports more than most EU countries, but the percentage figures will be the same elsewhere.

Partly that's because the eurozone is in crisis, but mostly it's because other parts of the world are growing so much faster and the European market is becoming less and less significant. When the EU was forcing open the Spanish or the Italian market for you, it was worth supporting. Now no one cares so much.

Besides, the work of opening up markets has largely passed to global bodies such as the World Trade Organisation. The EU was a pioneer. The creation of the single market in the 1980s was a genuine innovation. But other bodies have taken over its work. Our shops are full of things made in Korea or China. They seem to be able to get access to foreign markets without belonging to the EU.

The benefits are not really there any more. There are some plusses, of course. Most businesses welcome immigration, for example, because it provides them with lots of cheap and hard-working staff and they might have to raise wages if the Poles and Czechs stopped coming over here. But there is nothing to stop a country such as the UK opening its borders to immigrants anyway if it wants to.

Against that, costs are rising. The EU still churns out a tidal wave of regulations that business finds a burden. It is turning openly hostile to the City and may do in other industries as well.

In short, a simple cost-benefit analysis would no longer favour the EU. The trouble is, the business community was the EU's most natural constituency. If it loses faith, the EU will find it has very few supporters left.

Matthew Lynn

Matthew Lynn is a columnist for Bloomberg, and writes weekly commentary syndicated in papers such as the Daily Telegraph, Die Welt, the Sydney Morning Herald, the South China Morning Post and the Miami Herald. He is also an associate editor of Spectator Business, and a regular contributor to The Spectator. Before that, he worked for the business section of the Sunday Times for ten years. 

He has written books on finance and financial topics, including Bust: Greece, The Euro and The Sovereign Debt Crisis and The Long Depression: The Slump of 2008 to 2031. Matthew is also the author of the Death Force series of military thrillers and the founder of Lume Books, an independent publisher.