A Brexit could mean more regulation for small businesses, not less

Questions raised at a recent New Statesman roundtable challenge the ‘better off out’ argument.

‘Britain is shackled to the corpse of Europe’, wrote the MEP and polemicist Daniel Hannan last November. Often central to this argument is the notion that Brussels red tape is strangling the potential of small businesses, which could be a fundamental driver of our economic growth. If we left, we could dictate the terms of our trade with Europe. Recent tumult amongst the Conservative ranks would suggest that Hannan is not unique in this view. However, the idea is rooted in a fundamental misconception about our relationship with the EU- that exit would lead to less regulation for small businesses.

In a recent roundtable held by the New Statesman discussing the methods by which Britain might increase exports amongst small and medium enterprises (SMEs), Dr. Rebecca Harding, CEO of Delta Economics, suggested that exit from the EU will result in more regulation, not less. This is based on previous research conducted by Delta Economics in collaboration with UKTI, which shows that the amount of distance regulation would in fact increase. Non-UK companies outside of the EU but inside European Free Trade Association (EFTA), most notably Norwegian and Swiss companies, have complained of being treated as being both outside and inside of Europe, thereby increasing the amount of bureaucracy that they are forced to face. Further information about this research and the work of Delta can be found here.

Therefore, even if we accept the premise that our relationship with the EU is primarily about trade rather than the more utopian social democratic vision of Europe as a protector of rights and freedoms, it remains in our economic interest to stay in. This strikes at the heart of the economic pillar of the Eurosceptic ‘better off out’ argument. This also questions the oft-touted premise that Britain should, or even could, aspire to a ‘Norwegian-style’ relationship with the EU.

Instead, evidence suggests that small businesses stand to benefit from further economic integration. At the New Statesman round table, Helen Brand showed that even further removal of barriers to the achievement of the single market could provide invaluable trade opportunities for SME’s- potentially increasing trade by 45%. Findings from the progressive think-tank Institute for Public Policy Research (IPPR) further support this- suggesting that further integration of the single market could increase EU consumption by €37 billion, thereby providing ample opportunities for small business growth. Even the prime minister's newly appointed strategist Jo Johnson agrees, arguing in a recent essay that further integration would leave the average EU household £3,570 better off.

The more reasoned political voices on this issue remain oddly silent in the face of popular pressure, despite the fact that it marks a point of accord between the progressive Europhile and pro-trade business lobbies. As IPPR notes, neither the British government nor the EU itself have done enough to convince of its benefits, and myths have abounded. If the argument was centered around our small business economy becoming more competitive and the ceaseless ‘global race’, perhaps our discourse would be more measured.

Research suggests SME's could face more regulation if we left the EU. Photo: Getty Images
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Everyone's forgotten the one issue that united the Labour party

There was a time when Ed Miliband spoke at Momentum rallies.

To label the row over the EU at Thursday’s Labour leadership hustings "fireworks" would be to endow it with more beauty than it deserves. Owen Smith’s dogged condemnation of John McDonnell’s absence from a Remain rally – only for Corbyn to point out that his absence was for medical reasons – ought to go down as a cringing new low point in the campaign. 

Not so long ago, we were all friends. In the course of the EU referendum, almost all of the protagonists in the current debacle spoke alongside each other and praised one another’s efforts. At a local level, party activists of all stripes joined forces. Two days before polling day, Momentum activists helped organise an impromptu rally. Ed Miliband was the headline speaker, and was cheered on. 

If you take the simple version of the debate, Labour’s schism on the EU appears as an aberration of the usual dynamics of left and right in the party. Labour's left is supposedly cheering a position which avoids advocating what it believes in (Remain), because it would lose votes. Meanwhile, the right claims to be dying in a ditch for its principles - no matter what the consequences for Labour’s support in Leave-voting heartlands.

Smith wants to oppose Brexit, even after the vote, on the basis of using every available procedural mechanism. He would whip MPs against the invocation of Article 50, refuse to implement it in government, and run on a manifesto of staying in the EU. For the die-hard Europhiles on the left – and I count myself among these, having run the Another Europe is Possible campaign during the referendum – there ought to be no contest as to who to support. On a result that is so damaging to people’s lives and so rooted in prejudice, how could we ever accept that there is such a thing as a "final word"? 

And yet, on the basic principles that lie behind a progressive version of EU membership, such as freedom of movement, Smith seems to contradict himself. Right at the outset of the Labour leadership, Smith took to Newsnight to express his view – typical of many politicians moulded in the era of New Labour – that Labour needed to “listen” to the views Leave voters by simply adopting them, regardless of whether or not they were right. There were, he said, “too many” immigrants in some parts of the country. 

Unlike Smith, Corbyn has not made his post-Brexit policy a headline feature of the campaign, and it is less widely understood. But it is clear, via the five "red lines" outlined by John McDonnell at the end of June:

  1. full access to the single market
  2. membership of the European investment bank
  3. access to trading rights for financial services sector
  4. full residency rights for all EU nationals in the UK and all UK nationals in the EU, and
  5. the enshrinement of EU protections for workers. 

Without these five conditions being met, Labour would presumably not support the invocation of Article 50. So if, as seems likely, a Conservative government would never meet these five conditions, would there be any real difference in how a Corbyn leadership would handle the situation? 

The fight over the legacy of the referendum is theatrical at times. The mutual mistrust last week played out on the stage in front of a mass televised audience. Some Corbyn supporters jeered Smith as he made the case for another referendum. Smith accused Corbyn of not even voting for Remain, and wouldn’t let it go. But, deep down, the division is really about a difference of emphasis. 

It speaks to a deeper truth about the future of Britain in Europe. During the referendum, the establishment case for Remain floundered because it refused to make the case that unemployment and declining public services were the result of austerity, not immigrants. Being spearheaded by Conservatives, it couldn’t. It fell to the left to offer the ideological counter attack that was needed – and we failed to reach enough people. 

As a result, what we got was a popular mandate for petty racism and a potentially long-term shift to the right in British politics, endangering a whole raft of workplace and legal protections along the way. Now that it has happened, anyone who really hopes to overcome either Brexit, or the meaning of Brexit, has to address the core attitudes and debates at their root. Then as now, it is only clear left-wing ideas – free from any attempt to triangulate towards anti-migrant sentiment– that can have any hope of success. 

The real dividing lines in Labour are not about the EU. If they were, the Eurosceptic Frank Field would not be backing Smith. For all that it may be convenient to deny it, Europe was once, briefly, the issue that united the Labour Party. One day, the issues at stake in the referendum may do so again – but only if Labour consolidates itself around a strategy for convincing people of ideas, rather than simply reaching for procedural levers.