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SMEs in Europe

SMEs in Europe

Something that has raised its head time and time again in the run up to the General Election in May 2015 this year is whether or not the UK should stay part of the EU. While I know many people have concerns about immigration levels and the amount of regulations and restrictions that the UK is beholden to thanks to Brussels, I personally feel that leaving the EU would be disastrous for Wholesale Clearance UK and for all SMEs nationwide. I say we need to take a deep breath and consider not simply the emotive issues but think much more objectively about the bigger picture – not just the short term for us as a business.

I know I’m not alone in this. An IPSE poll from March 2015 found that out of 362 small business owners who took part, 49% agreed that leaving the EU would be bad for their business, and the reasoning is pretty simple. If we leave the EU we are effectively cutting ourselves off from millions of potential clients across the continent. Think about it – imagine you sell ice cream in a seaside town and someone effectively decides you can sell to locals but not to visitors. Your business would be decimated in days.

Well this analogy can serve you well. Many of our customers buy Wholesale Job Lots from us that they can then sell on eBay. Without the EU trade agreement they would be paying much, much more – in taxes, duty and postage – to send products across the Channel. Our customers would find that it was no longer competitive to sell in Europe and so they would lose millions of their customers.

OK – we’ll sell domestically instead.

Unfortunately that won’t work either. If the UK leaves the EU we’ll be storing up a warehouseload of grief for ourselves. Think of it – many businesses in marginal areas, are able to attract European funding. Leaving the EU would mean there would be decreased access to financial opportunities. How can this be a good thing?

Elsewhere, in research conducted by Vistage, 61 % of chief executives, managing directors and owners of small businesses have stated that they ‘would vote to stay in the EU’ while only six % would vote to leave. The reasons here are clear:

• 40% said leaving the EU would hurt their business
• 58 % said leaving the EU would slow the UK’s growth rate
• Only 2% thought their businesses would be better off

Staying in the EU is vital for the success of many SMEs

Staying in the EU is vital for the success of many SMEs

Whichever figures you look at, it is apparent that the majority of SMEs want to remain in the EU and do not see themselves as being throttled by “Brussels red tape”. The most up to date research from North East Chamber of Commerce (NECC) was released just last week and it reiterates the argument that in its survey of 4,000 businesses, a majority of 58% of businesses want to stay in the EU, while only 11% want to leave. A similar CBI survey actually found that 11% want to leave while 78% want to stay. So it’s unanimous then? Well not with everyone.

Reasons to leave

Eurosceptics believe that leaving the EU will enable EU businesses to untangle themselves from Brussels red tape and find new markets (although it’s not clear where these markets would be).

The main political parties’ stance on Europe

As we all know by now, UKIP’s core policy (possibly its only policy) is that the UK should leave the EU, but as Steve Gilroy, the chief executive of Vistage who ran the research above has stated, Farage “certainly has not made a persuasive case for leaving the EU to Britain’s SME businesses.” David Cameron will appease voters by offering to renegotiate the terms of Britain’s EU membership if he wins the General Election and he has promised to hold a referendum. However, Labour want to remain in the EU and so Ed Miliband has ruled out any EU referendum if he becomes Prime Minister. Most of the other parties – Plaid Cymru, SNP and the Green Party for example – all want to remain in the EU as they perceive many benefits.

Euro cash

Euro cash

What’s the alternative?

According to the BNE (Business for New Europe – who presumably have their own reasons to remain in Europe to be fair) – participants at a conference held in London in early April (2015) found that the best option for Britain would be to leave the EU and trade with it under the World Trade Organisation rules rather than under the EU trade rules. What does this mean? Well it would effectively mean that anyone exporting from the UK would have to pay the EU’s common external tariff.

The tariff we would pay on goods we sell varies but nothing would be cheaper. For example, on cars the EU common external tariff is 10%. Anyone making cars in the UK would have to cover the rise in cost of their cars. They could do this in a number of ways – force down wages, or put up the prices of their cars.

Does it bother you that big businesses would make less money? It should do – think about it.

Where to sell

Where to sell

Why would a foreign company continue to make cars in the UK? They wouldn’t, would they? Take Ford for example. It issued a warning in early 2014 that the UK would be “cutting off its nose to spite its face” if we quit the EU. They – and all the other car manufacturers based in the UK – would simply up sticks and move operations elsewhere in Europe. But when the big company goes, all the small companies that supply the big company would fold too.

There is a supply chain, and SMEs are a huge part of the machinery that keeps manufacturing, supply, retail and the sector service industry ticking over nicely in the UK.

There are large companies employing people all over the UK, in highly skilled and professional jobs. Chemicals, petrochemicals, pharmaceuticals, electronics and technology. If we pay European Union tariffs we’ll lose all of those jobs to Germany and elsewhere. That means raised levels of skilled unemployed, which leads to more pressure on lower paying jobs. People will have less money. They’ll spend less.

Marginal areas of the UK – Wales, Scotland, and the North-East – all receive foreign direct investment and benefit from the EU’s regional policy – but without access to the EU Single Market, many of these sorts of investments would become uneconomical. In the years between 2015 and 2021, the North-East will receive £1 billion from Brussels – in grants for infrastructure, small business support, digital and trade support. If we leave the EU, that pot of money will dry up and so will many SMEs.

Effectively the loss of large companies and investment from the UK and to other areas of Europe would lead to more bankruptcies, more SMEs folding, and higher levels of unemployment. Wages would remain static or fall.

We're better when we're together!

We’re better when we’re together!

We’re a tiny cog in a huge global wheel

Let’s face it the UK now accounts for less than 1 per cent of the world’s population and less than 3 per cent of global income (GDP). That means we’re one of the weediest kids in the playground. Standing alone, no-one will hear our voice. We’ll be very easy to marginalise, bully or ignore. Unless we have bigger and richer friends we could find ourselves with some serious problems. That’s why we need the EU.

With the EU we are a force. We have a voice. These days we are able to negotiate with America, China or Japan as part of the EU – the world’s largest trade bloc which means everyone else has to take us seriously. Can you imagine having a conversation with Washington, Beijing and Tokyo if we weren’t? The US economy is seven times as big as ours, the Chinese is five times as big, and Japan’s is twice our size. We would have no power for negotiation at all. Very tellingly, The Global Times, a Chinese government-controlled newspaper wrote that “The Cameron administration should acknowledge that the UK is not a big power in the eyes of the Chinese. It is just an old European country apt for travel and study”, when David Cameron visited the country in 2013. That’s pretty embarrassing when you consider that 150 years ago we were ‘the workshop of the world’ with an Empire that stretched far and wide.

The biggest advantage of being in the EU is the single market. This giant European supermarket allows British business to access and sell to the entire EU. There are a potential 500 million consumers over there. Why would we not want to sell to them? At the moment because we’re a part of the EU it’s free to access this market and doing so boosts the potential income of thousands and thousands of eBay businesses.

As part of the EU we get to negotiate and influence the EU’s product regulations. We have some say. If we leave the EU we would have to bear in mind that the EU economy would be SIX times our size.

We’d have no negotiating power at all. Is that what we want?

Over to you

What do you think? Should we stay or should we go? I’m interested to hear your thoughts and reasoning. Leave us a message below or join the conversation on Facebook 🙂

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