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Cameron speech: Businesses fear EU 'uncertainty' Cameron speech: Business leaders give mixed messages
(about 1 hour later)
Business figures have warned that the planned referendum on UK membership of the EU will create uncertainty for businesses and investors. Some business leaders have warned that David Cameron's EU referendum proposal will hurt investment, but others have backed the prime minister's move.
The chief executive of the investment firm Pimco, Mohamed El-Erian, said investors may start placing an "uncertainty premium" on the UK. The chief executive of investment firm Pimco, Mohamed El-Erian, said investors may start placing an "uncertainty premium" on the UK.
Other business figures echoed those concerns. Other businessmen echoed his concerns.
But others have voiced their support for David Cameron's plans to renegotiate the UK's place in the EU. Meanwhile, a group of 55 British business leaders have written an open letter to the Times throwing their weight behind Mr Cameron.
The UK's biggest business organisation, the CBI, expressed support. "We need a new relationship with the EU, backed by democratic mandate," said the group of top executives, who include the chief executives of B&Q-owner Kingfisher, mining group Xstrata, electricals retailer Dixons, the London Stock Exchange and beverages maker Diageo, as well as the chairman of engineering firm Rolls Royce.
The executives complained about the red tape burden imposed by Brussels, and claimed it was the right moment "to push for a more competitive, flexible and prosperous European Union that would bring more jobs and growth for all member states".
'Suffer the consequences'
The UK's biggest business organisation, the CBI, also expressed support for the mooted in-or-out referendum.
"The prime minister rightly recognised the benefits of retaining membership of what must be a reformed European Union," said the business group's director general John Cridland."The prime minister rightly recognised the benefits of retaining membership of what must be a reformed European Union," said the business group's director general John Cridland.
Speaking on the BBC's Hardtalk programme, Mr EL-Erian said the UK would "certainly suffer the consequences" if it exited the EU, including lower growth and initial lower investment. However, other business leaders took a different view.
Speaking on the BBC's Hardtalk programme, Mr EL-Erian - a top executive at the biggest investor in bonds in the world - said the UK would "certainly suffer the consequences" if it exited the EU, including lower growth and lower investment.
But he said the uncertainty generated by the possibility of an EU exit years in the future would also be damaging.But he said the uncertainty generated by the possibility of an EU exit years in the future would also be damaging.
"People like us start putting in an uncertainty premium," he said. "People like us start putting in an uncertainty premium," said the US-based fund manager.
"If we're going to make investment decisions, the uncertainty premium associated with that goes up when you're not sure what the relationship between Britain and Europe will be.""If we're going to make investment decisions, the uncertainty premium associated with that goes up when you're not sure what the relationship between Britain and Europe will be."
'Clarity needed''Clarity needed'
If it goes ahead, the referendum is due to be held between 2015 and 2017.If it goes ahead, the referendum is due to be held between 2015 and 2017.
Mr El-Erian's concerns were echoed by a number of business figures including the UK manufacturers association the EEF.Mr El-Erian's concerns were echoed by a number of business figures including the UK manufacturers association the EEF.
David Sproul, the UK boss of accountancy firm Deloitte said: "The Europe debate does not help to create certainty.David Sproul, the UK boss of accountancy firm Deloitte said: "The Europe debate does not help to create certainty.
"When I talk to US clients who have not been immersed in the European debate as we have, they say that what they need is clarity. There is no question it will impact business - it will hit investment into the UK.""When I talk to US clients who have not been immersed in the European debate as we have, they say that what they need is clarity. There is no question it will impact business - it will hit investment into the UK."
Sir Andrew Cahn, the former chief executive of UK Trade and Investment, went further, calling the next five years a period of "investment chill."Sir Andrew Cahn, the former chief executive of UK Trade and Investment, went further, calling the next five years a period of "investment chill."
"If you don't know whether Britain is going to be a full positive member of the European Union in five years' time, you'll wonder if you want to make that additional investment," he said."If you don't know whether Britain is going to be a full positive member of the European Union in five years' time, you'll wonder if you want to make that additional investment," he said.
Other business leaders were supportive of the government. Lord Wolfson, the boss of the retail chain Next and a Conservative peer, described worries of uncertainty as "nonsense".Other business leaders were supportive of the government. Lord Wolfson, the boss of the retail chain Next and a Conservative peer, described worries of uncertainty as "nonsense".
"The only thing that's damaging to British business is the march of regulation, which weighs industry down," he said."The only thing that's damaging to British business is the march of regulation, which weighs industry down," he said.
Single MarketSingle Market
In response to Mr Cameron' announcement on Wednesday morning, the French foreign minister Laurent Fabius said his country would "roll out the red carpet" for businesses who may be less keen to invest in the UK in the event of an exit.In response to Mr Cameron' announcement on Wednesday morning, the French foreign minister Laurent Fabius said his country would "roll out the red carpet" for businesses who may be less keen to invest in the UK in the event of an exit.
But, during his speech, David Cameron repeatedly insisted that the European single market would be at the heart of any new treaty with Brussels, billed as the alternative to exiting the union.But, during his speech, David Cameron repeatedly insisted that the European single market would be at the heart of any new treaty with Brussels, billed as the alternative to exiting the union.
"Continued access to the single market is vital for British businesses and British jobs," he said."Continued access to the single market is vital for British businesses and British jobs," he said.
Since it began 20 years ago this month, the single market has established free movement of people, money, goods and services throughout the EU, a market that now includes 500 million consumers in 27 countries.Since it began 20 years ago this month, the single market has established free movement of people, money, goods and services throughout the EU, a market that now includes 500 million consumers in 27 countries.
Most business leaders agree with the prime minister that the UK needs to retain its place in that market, especially if it wants to continue to punch above its weight when attracting foreign investment.Most business leaders agree with the prime minister that the UK needs to retain its place in that market, especially if it wants to continue to punch above its weight when attracting foreign investment.
"The vast majority of businesses across the UK want to stay in the single market, but on the basis of a revised relationship with Europe that promotes trade and competitiveness," said John Longworth of the British Chambers of Commerce."The vast majority of businesses across the UK want to stay in the single market, but on the basis of a revised relationship with Europe that promotes trade and competitiveness," said John Longworth of the British Chambers of Commerce.
In theory, the single market means that inefficient companies will struggle, but efficient companies expand.In theory, the single market means that inefficient companies will struggle, but efficient companies expand.
The EU says the result has been a rise in quality, and a reduction in prices.The EU says the result has been a rise in quality, and a reduction in prices.
It claims that the cost of a mobile phone call has fallen by 70% since the single market came into operation, and the cost of a plane ticket has fallen by 40%.It claims that the cost of a mobile phone call has fallen by 70% since the single market came into operation, and the cost of a plane ticket has fallen by 40%.
Some will argue that such cost reductions are not down to the single market alone. Nevertheless, the EU says it is a "recipe for prosperity."Some will argue that such cost reductions are not down to the single market alone. Nevertheless, the EU says it is a "recipe for prosperity."
Working hoursWorking hours
One of the issues the government will examine is the issue of working hours. An EU directive, incorporated into UK law, limits the amount of time that most people work to 48 hours a week.One of the issues the government will examine is the issue of working hours. An EU directive, incorporated into UK law, limits the amount of time that most people work to 48 hours a week.
Should the government decide to repatriate that power, businesses might have greater freedom to ask their staff to work longer, a move that would be highly controversial.Should the government decide to repatriate that power, businesses might have greater freedom to ask their staff to work longer, a move that would be highly controversial.
"The working hours of British doctors should not be set in Brussels," said Mr Cameron."The working hours of British doctors should not be set in Brussels," said Mr Cameron.
Paul Walsh, the head of the drinks giant Diageo, suggested that businesses in the whole of the EU could benefit from an end to such regulations.Paul Walsh, the head of the drinks giant Diageo, suggested that businesses in the whole of the EU could benefit from an end to such regulations.
"The reformed EU must be more competitive, with highly flexible labour markets and fewer, less intrusive institutions," he said at the World Economic Forum in Davos."The reformed EU must be more competitive, with highly flexible labour markets and fewer, less intrusive institutions," he said at the World Economic Forum in Davos.
"It is important for industry to help articulate the case that the prime minister has outlined.""It is important for industry to help articulate the case that the prime minister has outlined."