Why business should get behind Britain

Regardless of what action the European Union takes, British business should fight for free trade, says Matthew Lynn.


Stop the whingeing and fly the flag
(Image credit: Credit: Johnny Greig / Alamy Stock Photo)

In the nine months since the referendum on Britain's EU membership, we have been engaged in a phoney war with the EU. The government has stated its intention to leave, but nothing has actually happened yet. It is only once Article 50 is triggered, and the UK gives formal notice of its intention to quit, that the real negotiations will begin.

We will then discover what the exit bill will be, whether it will be possible to stay inside the single market, whether we will have some other form of trade agreement, and what kind of deal might be cut for the City to sell financial services into Europe. That process will, no doubt, be fraught, with lots of brinkmanship on both sides. But business, and big business in particular, can help the UK get the best possible deal.

First, drop the scaremongering. The referendum is over, and it isn't going to be re-run, so there is no need to keep on warning about all the terrible things that might happen when we leave. True, a company might be feeling nervous about this or that aspect of its business after Brexit. And it might hope that by voicing those fears it will get special treatment from the government, and strengthen the chances that it will get a better deal for its industry in the negotiations with the EU.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

The trouble is, that is a mistake. It weakens the UK's hand to have lots of companies arguing they will be in trouble outside the single market and it will simply encourage the EU to demand tougher terms. Just stay silent and the chances of a good deal will be higher.

Second, boost investment. If there are some plans in place for a new factory, call centre or building project, then take a deep breath and press the start button right away, even if the outlook is uncertain. In fact, for all the forecasts of an immediate recession after we voted to leave, the economy has done a lot better than even the most swivel-eyed Ukipper would have expected. The more investment grows in the UK over the next year, the stronger our hand in the negotiations will be.

Thirdly, trade more and work on building links on the continent. While the exit negotiations are under way, British companies should put more effort into building exports and strengthening customer bases right across the continent. Over the next year there will be lots of noise about how Britain is turning its back on Europe, how trade is about to freeze up, and about how barriers will come down once we leave the EU.

Most of it will be nonsense, but that doesn't mean some people won't believe it and that may make them more reluctant to buy things made in this country. Reassure business and trade partners that the UK is just as open as it always has been. That way, trade is more likely to continue to grow.

Finally, argue against tariffs. If it is a hardish Brexit, as looks likely, then we may end up with the right to impose modest tariffs on European goods, just as the EU will have the right to impose tariffs on our exports. Some companies will feel tempted to use that as an opportunity to argue for protection from European competition. After all, if that German or Italian rival suddenly faces a 3% or 4% import duty, that makes its easier to compete against them.

But that would be a mistake. In every market, even if the EU imposes tariffs on us, don't retaliate. Instead, companies should just ask for completely free trade. Sure, there might be some gains to protectionism, in the form of a slightly higher market share, or slightly higher profits. But it will only be very short-term. In the medium-term, it is best to compete in an open market because protectionism hurts the country that imposes it the most.

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.