The next independence referendum – should we stay in the EU?
Ignore warnings European firms will flee if Britain leaves the European Union, says Matthew Lynn – it’s happening already.
One referendum down, one to go. The Scots have now decided to stay within the UK. But the UK as a whole still needs to have a similar debate about whether it wants to remain in the European Union, or get out.
David Cameron has already promised a vote, following a renegotiation of the terms of membership. Ed Miliband has promised a vote if there is a major change in the treaties, and may come under pressure to do so even if there isn't.
When that debate gets underway, we will hear constantly that European businesses will pull out of Britain if we are not in the EU. But the interesting point is that they are already doing so.
The Office for National Statistics (ONS) released some figures this month on the numbers of foreign-owned companies in the UK. Not only are there far fewer from Europe than you might imagine, their numbers are also falling. The reality is, we might be pulling away from Europe but Europe is also pulling away from us.
The Scottish independence debate showed how important business can be in determining the way people vote. We don't know precisely why people eventually decided against independence.
But the warnings from banks and finance houses that they would move south if the Scots broke away was certainly influential. People are already feeling nervous about their standard of living. The thought of losing their job was probably more than enough to persuade many to cast their votes for the Union.
A referendum on membership of the EU is likely to follow a similar script. There have already been warnings from the big Japanese car manufacturers that they would invest less here if we were no longer part of the EU.
Once a campaign got underway, we could expect to hear a lot more dire predications about how businesses would be off to Berlin or Paris in the event of a Brexit'. There is a difference between Scotland and Europe, however.
Whilst the Scottish economy is very highly integrated into the rest of the UK, the UK is far less so into the rest of Europe.
Look at the figures from the ONS. Although we have been members of the EU for four decades now, there are far fewer European-owned businesses operating in the UK than you might think. In fact, only 1% of businesses registered in the UK are foreign-owned, although because many of them are very big, they account for 29% of output.
In the last five years, the total number has actually declined by 3%. A lot of the foreign-owned companies are from the US. The US alone accounts for 25% of the total, with Germany in second place on 8% and the Netherlands next after that on 6%.
What is interesting, however, is that between 2009 and 2012, the numbers from the EU actually fell. Indeed, there are now fewer French companies in the UK than there were four years ago 1,401 now, compared with 1,531 in 2009.
There are fewer German companies as well 1,825 now compared with 1,968 four years ago. Those are fairly marginal decreases, but in an economy that was becoming more integrated, as the EU is meant to be, you would expect those numbers to be going up rather than heading down.
Meanwhile, the big rises come from Asia and Oceania, as you might expect, whilst the numbers from the US were broadly stable. Korean and Japanese firms have been big players in the British economy for many years, but now they are being joined by Chinese, Indian, Thai and Malaysian companies and that trend is likely to continue for some time yet.
So why are the Europeans less keen on investing in the UK than they used to be? One reason, of course, might be because we are moving away from Europe. But, more plausibly, it is because few eurozone companies are expanding right now.
The eurozone is locked into what looks like a depression. European companies, whether big or small, have too many problems at home. There are not many French, Spanish or Italian businesses expanding in their own countries right now never mind setting up shop overseas. In fact, the growing industries are mostly based elsewhere.
You can argue for or against the EU for lots of different reasons. There are plenty of good arguments for remaining a member.
It guarantees the free movement of people and goods. It may well give the UK more influence in the world. It cements bonds between people.
And whether the UK is in or out, what happens in Europe matters so it makes sense to play a part in influencing its direction. But you might as well get the facts straight and the facts say investment from the EU counts for far less than it used to.
What businesses might decide to do mattered a lot in the Scottish referendum. No doubt there will be plenty of scare stories about companies quitting the UK when it comes to a referendum on the EU.
But the reality is the economics don't matter very much one way or the other and keeping EU companies on board will not be a conclusive argument for staying in. There are not enough of them, and there are fewer every year.