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Lawyers In For Britain: The UK and the EU: Benefits, misconceptions and alternatives banner

The business reasons for remaining in the EU are compelling. EU membership has meant greater economic and financial openness in the UK. This in turn has supported a dynamic UK economy, raising economic growth and boosting living standards.[1]

  • Remaining in the EU guarantees the UK continued open access to the world’s largest market. The EU economy is worth about £11.3 trillion (24% of the global economy) – bigger than either the US (£10.5 trillion,  22%) or China (£6.74 trillion, 13%).[2]
  • The EU has 505 million consumers – one in fourteen of the world’s population.[3]
  • Some three to four million jobs in the UK are linked to exporting goods and services to the EU.[4]
  • Because of the EU, British business can sell goods to, and buy goods from, other EU countries without having to pay customs duties or other charges, irrespective of where the goods were produced – making those goods cheaper.[5]
  • Businesses in the UK also benefit if their production chain involves imports from other Member States, even if they do not export to the rest of the EU.
  • The administration and compliance processes for exporters are much simpler within the EU. For example, UK businesses do not have to declare goods when they ship them to the EU.[6]
  • UK businesses also benefit from pan-EU intellectual property regimes. These include pan-EU IP rights, like Community Trade Marks and Registered Community Designs, and central administration schemes, like the European Patent Office.[7] A new EU unitary patent system is due to be introduced in the next few years.[8]
  • The EU recognises the value of UK culture and protects UK artisans by prohibiting the sale of certain traditional products anywhere in the EU unless they are produced locally in the UK. Examples include Buxton blue cheese, Melton Mowbray pork pies, Stilton cheese, Jersey Royal potatoes, Cornish clotted cream, Welsh lamb, Scottish salmon, Armagh Bramley apples, Gloucester Old Spot pork, Cornish sardines, Yorkshire Forced Rhubarb and Yorkshire Wensleydale – an application for “Birmingham Balti” is pending.[9]
  • There is a wide range of European legislation aimed at removing non-tariff barriers to trade between Member States.[10]
  • The EU has removed the barriers to open public procurement within the internal market,[11] opening up other EU government’s contracts to UK businesses (and vice-versa).[12]
  • UK companies benefit from State Aid rules that prevent market distortions as a result of government support[13] – the rules support a level playing field between competing businesses.[14]
  • UK businesses further benefit from the EU’s common trade policy and its system of free trade agreements (FTAs). The FTA system includes over 50 states (e.g. Chile, Colombia, Egypt, Iceland, Israel, South Korea, Mexico, Morocco, Norway, Peru, South Africa, Switzerland, Turkey).[15]
  • UK businesses will also profit from expanded trade agreements that are being negotiated or ratified now, for example with the US (TTIP),[16] Canada (CETA) and Japan.[17]
  • the EU deploys trade protection measures to protect UK business and agriculture from unfairly dumped or subsidised products being sold in the EU’s single market such as aluminium foil (from Brazil), bicycles (from China), rainbow trout (from Turkey) and a range of steel products (from China).[18]

According to many economic studies,[19] the tangible benefits of membership are substantial. Not only are British incomes and standards of living higher,[20] but British jobs[21] are more secure and British quality of life is better.

Here are some examples:

  • Lower prices and broader choice: around 50% of UK trade is with the EU.[22] The goods the UK trades with the EU:
  • do not face any import tariffs.[23] If the UK was no longer able to benefit from the free movement of goods within the EU, over £40 billion of UK exports to the rest of the EU (90%) would be liable to import duties of between 4.5% and 15%.[24] These include goods in key UK export sectors such as motor vehicles, electronics, machinery, mechanical appliances, food and clothing.[25]
  • can move quickly and freely into and out of the UK because there are no customs or bureaucratic controls, formalities or national regulation. For example, British citizens benefit from lower prices for goods transported by road across Europe because of the cabotage rules. The “cabotage” rules mean that a haulier transporting goods from the UK to France by road need not return to the UK with an empty lorry, but may instead pick up goods for transportation back to the UK, so increasing the efficiency of operations.[26] If the UK leaves the EU, it is likely that the increased number of lorries required to maintain trade, and the customs checks which will be re-imposed at Calais, will result in delays. “Operation Stack” may well become a more frequent and intractable problem for drivers in the South East of England.
  • tend to be cheaper because the companies that make them can harness economies of scale which would not be available if the single market did not exist. The resulting innovation, scale and specialisation of business and the better matching of capital and labour, lowers prices and broadens choice. Many major companies, for example in the car industry, aerospace, banking or insurance offer goods and services made up of inputs from many different sources.[27] According to the AA and RAC, the EU results in “economies of scale [and] increased competition between manufacturers” which, in turn, has meant “falling [car] purchase prices in real terms”.[28]
  • Investing in the UK: EU membership has meant that foreign companies have invested in the UK and created more jobs. Ernst & Young’s 2015 “UK attractiveness survey” suggests that around 72% of investors[29] consider access to the single market as important to the UK’s attractiveness as a destination for foreign direct investment. This investment comes from:
    • EU companies – the largest source of foreign direct investment in the UK. Other EU Member States accounted for 46% of the stock of foreign direct investment in the UK in 2013 (£453 billion out of £975 billion);[30] and
    • non-EU companies investing in the UK because it gives them free access to the rest of the single market.
  • An example of the importance of foreign investment to the UK economy is the investment in the UK auto-industry. It employs 720,000 people[31] and is the UK’s largest exporter, generating £27 billion of revenue for the UK economy in 2011.[32] The UK exported over 1.2 million cars and commercial vehicles in 2012 of which 51% went to the EU.[33] The industry is largely owned by global corporations such as Ford (USA), Toyota (Japan), Honda (Japan), Nissan (Japan), Jaguar (India), BMW (Germany) and General Motors (USA). They have integrated their UK factories into the EU supply chain resulting in better quality and cheaper cars. Between 1995 and 2009, the UK transport equipment sector sourced around 90% of motor vehicle components from other EU countries.[34] If the UK left the EU, UK exports of cars would face tariffs of 10% without free access to the single market.[35]
  • Another example of the importance to the UK of the pan-EU supply chain is the aerospace industry. Thousands of UK design, manufacturing and engineering skills and jobs derive from the Airbus supply chain, including wing work.[36] The Rolls-Royce Trent engines, manufactured in Derby, are exported to France to be incorporated into Airbus aircraft, such as the A380[37] and the A350.[38] Paul Kahn, president of Airbus UK, has been quoted as saying that a British exit from the EU could cause Airbus to “reconsider future investment in the United Kingdom”.[39]

 

  1. Bank of England, EU membership and the Bank of England, October 2015 – http://www.bankofengland.co.uk/publications/Documents/speeches/2015/euboe211015.pdf.
  2. Bank of England, EU membership and the Bank of England, October 2015, page 8 – http://www.bankofengland.co.uk/publications/Documents/speeches/2015/euboe211015.pdf. All figures are for 2014.
  3. Bank of England, EU membership and the Bank of England, October 2015, page 9 – http://www.bankofengland.co.uk/publications/Documents/speeches/2015/euboe211015.pdf.
  4. See Benefits 1.
  5. Article 29 and Article 30 TFEU – http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A12012E%2FTXT.
  6. HM Revenue & Customs, Guidance: Dispatching your goods within the EU, updated 1 January 2015 – https://www.gov.uk/guidance/dispatching-your-goods-within-the-eu.
  7. Directive 2008/95/EC of the European Parliament and of the Council of 22 October 2008 to approximate the laws of the Member States relating to trade-marks – http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX%3A32008L0095; Council Regulation (EC) No. 207/2009 of 26 February 2009 on the Community trade mark – http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:078:0001:0042:en:PDF; Commission Regulation (EC) No.2868/95 of 13 December 1995 implementing Council Regulation (EC) No.40/94 on the Community trade mark – https://oami.europa.eu/tunnel-web/secure/webdav/guest/document_library/contentPdfs/law_and_practice/ctm_legal_basis/2868_codified_en.pdf; European Patent Convention; Council Regulation (EC) No. 6/2002 of 12 December 2001 on Community Designs; Directive 98/71/EC of the European Parliament and of the Council of 13 October 1998 on the legal protection of designs – http://www.wipo.int/wipolex/en/details.jsp?id=1441.
  8. Regulation (EU) 1257/2012 of the European Parliament and of the Council of 17 December 2012 implementing enhanced cooperation in the area of the creation of unitary patent protection – http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2012:361:0001:0008:en:PDF; Regulation (EU) 1260/2012 of the Council of 17 December 2012 implementing enhanced cooperation in the area of the creation of unitary patent protection with regard to the applicable translations arrangements – http://www.wipo.int/wipolex/en/details.jsp?id=13316; The Agreement on a Unified Patent Court and the Statute of the Court – http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2013:175:0001:0040:EN:PDF.
  9. UK artisans are protected by: (i) Protected Design of Origin: this covers agricultural products and foodstuffs which are produced, processed and prepared in a given geographical area using recognised know-how; (ii) Protected Geographical Indication: this covers agricultural products and foodstuffs closely linked to the geographical area. At least one of the stages of production, processing or preparation takes place in the area; and (iii) Traditional Speciality Guaranteed: this highlights traditional character, either in the composition or means of production. The EU legislation behind these protection mechanisms can be viewed at: http://ec.europa.eu/agriculture/quality/schemes/legislation/index_en.htm.
  10. Including Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market (Services Directive) – http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32006L0123.
  11. Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC of the European Parliament and of the Council on the Coordination Procedures for the Award of Public Works Contracts, Public Supply Contracts and Public Service Contracts – http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.L_.2014.094.01.0065.01.ENG; Directive 2014/23/EU of the European Parliament and of the Council of 26 February 2014 on the award of concession contracts – http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32014L0023; Directive 2014/25/EU of the European Parliament and of the Council of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal services sectors and repealing Directive 2004/17/EC of the European Parliament and of the Council Coordinating the Procurement Procedures of Entities Operating in the Water, Energy, Transport and Postal Services Sectors – http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32014L0025.
  12. For example, in January 2013 a G4S consortium (G4S along with French consortium partners Thales and Onet) won a multi-million Euro contract from the French Ministry of Justice to provide cutting-edge monitoring equipment and software for the French national electronic monitoring programme – http://www.g4s.uk.com/en-GB/Media%20Centre/News/2013/01/25/Electronic%20Monitoring%20-%20France/. Between 2007 and 2009, UK firms won 17% of direct cross-border supply contracts in the EU and 13% of indirect supply contracts, the second strongest performance after Germany – European Commission, DG Internal Market and Services, Final Report: Cross-Border Procurement Above EU Thresholds, March 2011, page 46; and HM Government, Review of the Balance of Competences between the United Kingdom and the European Union – The Single Market: Free Movement of Services, Summer 2014, paragraph 3.38.
  13. HM Government, Review of the Balance of Competences between the United Kingdom and the European Union – Competition and Consumer Policy Report, Summer 2014, page 14 – https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/332779/Review_of_the_Balance_of_Competences_between_the_United_Kingdom_and_the_European_Union.pdf.
  14. An effective State Aid regime is necessary to prevent subsidy races which would distort the market, particularly in areas where EU Member States are willing to offer greater subsidies to national champions. This is seen by the Law Society as having made a significant contribution to the ability of UK businesses to take advantage of the Single Market – HM Government, Review of the Balance of Competences between the United Kingdom and the European UnionCompetition and Consumer Policy Report, Summer 2014, page 49. In the period from 2000 to 2013, the Commission ordered the recovery of illegal State aid in 202 cases across all Member States. Of those, only four were UK measures compared to, for example, 20 in France, 50 in Germany and 41 in Italy. Thus the EU’s State Aid rules appear to operate primarily in the interests of the UK preventing its companies from losing out to subsidised European rivals – HM Government, Review of the Balance of Competences between the United Kingdom and the European UnionCompetition and Consumer Policy Report, Summer 2014, page 48 – https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/332779/Review_of_the_Balance_of_Competences_between_the_United_Kingdom_and_the_European_Union.pdf. The Commission is currently focusing on unlawful tax deals between Member States and multinational corporations that are said to be to the detriment of small and medium-sized businesses that do not gain the same tax advantages. For example, in 2015 the Commission ruled that the Netherlands and Luxembourg had agreed tax deals with Starbucks and Fiat Chrysler that constituted illegal State Aid. This type of State Aid legislation can only be managed at EU level as it requires enforcement against individual Member States that breach the rules – http://europa.eu/rapid/press-release_IP-15-5880_en.htm.
  15. Article 218 TFEU, read in conjunction with Article 207 TFEU – http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A12012E%2FTXT; “EU Trade relations world wide – a map”, see: http://trade.ec.europa.eu/doclib/docs/2012/june/tradoc_149622.jpg; and HM Government, Review of the Balance of Competences between the United Kingdom and the European Union – Trade and Investment, February 2014, Appendix D: Tariffs of Major UK Export Partners – https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/279322/bis_14_591_balance_of_competences_review_Trade_and_investment_government_response_to_the_call_for_evidence.pdf. See also Question 9.
  16. HM Government, Review of the Balance of Competences between the United Kingdom and the European Union – Trade and Investment, February 2014, ‘EU-US Transatlantic Trade and Investment Partnership (TTIP), page 66 – https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/279322/bis_14_591_balance_of_competences_review_Trade_and_investment_government_response_to_the_call_for_evidence.pdf. See also Question 9.
  17. HM Government, Review of the Balance of Competences between the United Kingdom and the European Union – Trade and Investment, February 2014, paragraph 2.27 and Appendix D: “Tariffs of Major UK Export Partners (export to which is no less than 1% of total UK exports)” – https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/279322/bis_14_591_balance_of_competences_review_Trade_and_investment_government_response_to_the_call_for_evidence.pdf.
  18. For a full list of anti-dumping, anti-subsidy and safeguard decisions and investigations see: European Commission, Report from the Commission to the Council and the European Parliament: 33rd Annual Report from the Commission to the Council and the European Parliament on the EU’s Anti-Dumping, Anti-Subsidy and Safeguard activities, 2014 SWD(2015) 149 final – http://www.europarl.europa.eu/meetdocs/2014_2019/documents/inta/dv/tdi_documenttravail_/tdi_documenttravail_en.pdf.
  19. Bank of England, EU membership and the Bank of England, October 2015 – http://www.bankofengland.co.uk/publications/Documents/speeches/2015/euboe211015.pdf.
  20. See Benefits 1.
  21. UK jobs linked to trade with the EU are estimated by the UK Government at 3.3 million – https://www.gov.uk/government/speeches/chief-secretarys-speech-to-the-centre-for-transatlantic-relations.
  22. October 2015, UK exports to the EU were 47% and UK imports from the EU were 52%. Over the 18 months to September 2015, the EU accounted for between 41-51% of UK exports and 49-55% of UK imports – HM Revenue & Customs: Overseas Trade Statistics – Non-EU and EU Trade, 8 January 2016, available at https://www.uktradeinfo.com/Statistics/OverseasTradeStatistics/Pages/EU_and_Non-EU_Data.aspx.
  23. The free movement of goods is an essential part of the EU internal market and finds its legal basis in Articles 26 and 28-37 TFEU. The right to free movement of goods originating in Member States, and of goods from third countries which are in free circulation in the Member States is a fundamental principle – Article 28 TFEU. The right is secured through the elimination of customs duties and quantitative restrictions (quotas), and the prohibition of measures having an equivalent effect to customs duties – http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A12012E%2FTXT.
  24. Analysis by Business for New Europe, HM Government, Review of the Balance of Competences between the United Kingdom and the European Union – Single Market: Free Movement of Goods, February 2014, paragraph 3.6 – https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/288194/2901479_BoC_SingleMarket_acc5.pdf.
  25. Analysis by Business for New Europe, HM Government, Review of the Balance of Competences between the United Kingdom and the European Union – Single Market: Free Movement of Goods, February 2014, paragraph 3.6 – https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/288194/2901479_BoC_SingleMarket_acc5.pdf.
  26. Regulation (EC) 1072/2009 of the European Parliament and of the Council of 21 October 2009 on common rules for access to the international road haulage market, which took effect on 14 May 2010 – http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32009R1072. Article 8 gives a “haulier for hire or reward” who has a Community licence to carry out cabotage operations. Under Article 8(2), once the goods carried in the course of an incoming international carriage have been delivered, hauliers may carry out up to three cabotage operations from another Member State to the host Member State.
  27. HM Government, Review of the Balance of Competences between the United Kingdom and the European Union – The Single Market, July 2014, paragraph 3.8 – https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/227069/2901084_SingleMarket_acc.pdf.
  28. HM Government, Review of the Balance of Competences between the United Kingdom and the European Union – Transport, February 2014, paragraph 2.86 – https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/278966/boc-transport.pdf; taken from RAC Foundation, RAC and AA response to the Department for Transport, Review of the Balance of Competences between the United Kingdom and the European Union – Transport: Consultation Response, February 2014, page 400.
  29. EY’s attractiveness survey UK 2015, Another great year – but time to reflect on how the UK can stay ahead of the pack, page 7 – http://www.ey.com/UK/en/Issues/Business-environment/2015-UK-attractiveness-survey.
  30. ONS Statistical Bulletin, 20 January 2015 – http://www.ons.gov.uk/ons/rel/fdi/foreign-direct-investment/index.html.
  31. CBI, Full speed ahead: An industrial strategy for the UK automotive sector, Brief March 2013, page 1 – http://www.cbi.org.uk/media/2008476/cbi_full_speed_ahead.pdf; and The Society of Motor Manufacturers and Traders, Motor Industry Facts 2013, pages 9 and 12 – http://www.smmt.co.uk/wp-content/uploads/sites/2/SMMT-2013-Motor-Industry-Facts-guide.pdf.
  32. The Society of Motor Manufacturers and Traders, Motor Industry Facts 2013, page 8 – http://www.smmt.co.uk/wp-content/uploads/sites/2/SMMT-2013-Motor-Industry-Facts-guide.pdf.
  33. The Society of Motor Manufacturers and Traders, Motor Industry Facts 2013, page 16 – http://www.smmt.co.uk/wp-content/uploads/sites/2/SMMT-2013-Motor-Industry-Facts-guide.pdf.
  34. HM Government, Review of the Balance of Competences between the United Kingdom and the European Union –Single Market: Free Movement of Goods, February 2014, paragraph 3.37 – https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/288194/2901479_BoC_SingleMarket_acc5.pdf.
  35. HM Government, Review of the Balance of Competences between the United Kingdom and the European Union –Single Market: Free Movement of Goods, February 2014, paragraph 3.34 – https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/288194/2901479_BoC_SingleMarket_acc5.pdf.
  36. According to Airbus, around 100,000 jobs are generated in the UK by Airbus wing work, directly and indirectly in the supply chain. These jobs include 4,000 at Filton and more than 6,000 at Broughton in North Wales. See: http://www.airbus.com/company/worldwide-presence/airbus-in-uk/.
  37. http://www.rolls-royce.com/media/press-releases/yr-2010/100419-lufthansa-airbus-a380.aspx.
  38. http://www.rolls-royce.com/media/press-releases/yr-2015/pr-13-10-2015-rr-congratulates-airbus-and-singapore-airlines-on-new-ultra-long-range-A350-900.aspx.
  39. http://www.bbc.co.uk/news/business-32820717.