The business argument is with the EU

Even if the politics are a disaster zone.

Ever since the financial crisis, a previously buoyant eurozone has turned into a disaster zone. The single currency has lurched from crisis to catastrophe as the finances of member states have come under pressure. Bailouts that appear to be funded in large part from northern Europe are keeping several countries in southern Europe afloat. The next crisis is potentially lurking at the tail end of summer, with Cyprus due to get its next tranche of cash from the unofficial troika of the EU, ECB and IMF in early September. That is dependent on the country meeting stringent financial and budgetary targets and there is little evidence so far that they will be met.

With a German election by then just around the corner, it is unlikely that German chancellor Angela Merkel will be in the mood for leniency. The upshot could be that Cyprus is allowed to exit the single currency – the last six months having bought enough time to make it potentially a more orderly exit, and the economy is small enough for the ramifications to be less seismic than if a country such as Greece had fallen out.

Regardless of what happens in September (and it is as easy to paint a picture in which Cyprus gets the cash and everything carries on as it is), the eurozone’s troubles at least partly explain why the subject of the EU and the UK’s role within it is so high on the political agenda. As leader of the Conservative Party, David Cameron set out his stall clearly. He said he didn’t want the party to keep “banging on about Europe”. But the growth of anti-EU sentiment and the seemingly unstoppable rise of UKIP in particular has meant that, as prime minister, Cameron has had to bang on about it quite a lot.

UK politicians and the media are having to regularly discuss details (and not the possibility) of previously abstract ideas such as a referendum, renegotiation of the country’s relationship with the EU, or even complete withdrawal. The trouble is that all these discussions happen at a volume and intensity that rarely allow for sensible debate. Economic arguments are formed and numbers and statistics thrown around with little heed for anything other than scoring points and winning the argument.

It was somewhat sobering this month then to get a snapshot of what the UK’s exporters (clearly the key to UK economic recovery) think about Europe. The most often repeated story when it comes to discussions about where the UK recovery will come from is that exporters will have to seek out sales in high-growth emerging markets in far-flung corners of the world. So-called BRIC economies (Brazil, Russia, China and India) are cited above all as the key for our future success. Well, this didn’t chime with recent research conducted by economia. We asked the leaders of 500 businesses (a mix of those already exporting and those not currently doing so but with plans to do so in the next three to five years) to rate different markets around the world for their importance.

While it was no surprise to see Western Europe rated as important or very important this year by more respondents than any other market (71 per cent compared to the next most popular market, Asia at 55 per cent), what was less expected was the pattern when respondents were asked to rate the importance of markets in three to five years’ time. Here again Western Europe dominated by a similar margin. Even more unlikely was the rise of North America in the future (up by 5 per cent), knocking Asia back into third place.

Part of the explanation for the continued preference for Europe is the geography. Cost of exports was cited as a concern for and a factor in choosing markets by almost all respondents regardless of size or sector. And while the short distances help, some of the ease of doing business in Europe is driven by the standardisation of market rules and regulations and the lack of need to comply with different country guidelines or indeed to pay any import duties.

It appears from this that when asked about Europe on a purely business basis, without any of the political or emotive overlay, there is overwhelming support for the simplification benefits that arise from EU membership. More detailed analysis of the findings of this research needs to be conducted, but initial findings suggest there is also a worrying reluctance on the part of UK exporters to tap into the phenomenal growth of the emerging economies. In the mid-term at least, the ease of doing business in Europe appears to be winning over the potential returns from more long-term investments in places such as China, India, Russia or Brazil.

That would suggest that keeping close to Europe may be economically beneficial regardless of the politics.

This story first appeared on economia

Photograph: Getty Images

Richard Cree is the Editor of Economia.

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Keir Starmer: “I don’t think anybody should underestimate the risks of getting Brexit wrong”

The former director of public prosecutions is now heading up Labour’s response to Brexit. But can he succeed in holding the Tories’ feet to the fire?

Early in his new role as shadow Brexit secretary, Keir Starmer was accused of being a “second-rate lawyer”. The gibe, in a Commons debate, came from none other than Iain Duncan Smith. Starmer was director of public prosecutions for five years and later stood for parliament in 2015. No novice, then. Within a few days, Duncan Smith stood again in the House, this time to offer his apologies.

A fortnight later, I met Starmer at his quiet office in Westminster. He was sitting at a table piled with papers, in an office that, a discreet family photo aside, was unadorned. He had just got back from a whirlwind trip to Brussels, with many more such visits planned in the weeks ahead.

Starmer returned to the shadow cabinet after Jeremy Corbyn’s second leadership election victory last month. “The series of agreements we will have to reach in the next few years is probably the most important and complex we’ve had to reach since the Second World War,” he told me.

Starmer, who is 54, took his time entering politics. Born in 1962, he grew up in a Labour-supporting household in Surrey – his father was a toolmaker and his mother a nurse – and was named after Keir Hardie. After studying law at Leeds University, he practised as a human rights barrister and became a QC in 2002. In 2008, after varied legal work that included defending environmental campaigners in the McLibel case, he became the head of the Crown Prosecution Service for England and Wales as well as director of public prosecutions, positions he held until 2013.

When in 2015 Starmer ran for a seat in parliament to represent Holborn and St Pancras in London, it was assumed he would soon be putting his expertise to use in government. Instead, after Labour’s election defeat under Ed Miliband, he served as one of Corbyn’s junior shadow ministers, but resigned after the EU referendum in June.

Now, he is back on the opposition front bench and his forensic scrutiny of government policy is already unsettling the Conservatives. Philippe Sands, the law professor who worked with him on Croatia’s genocide lawsuit against Serbia, says he couldn’t think of anyone better to take on the Brexiteers in parliament. “It’s apparent that the government is rather scared of him,” Sands said. This is because Starmer is much more capable of teasing out the legal consequences of Brexit than the average Brexit-supporting Tory MP. Sands added: “It would be fun to watch if the stakes weren’t so very high.”

Starmer is a serious man and refused to be drawn on the character of his opponents. Instead, speaking slowly, as if weighing every word, he spelled out to me the damage they could cause. “The worst scenario is the government being unable to reach any meaningful agreement with the EU and [the UK] crashing out in March 2019 on no terms, with no transitional arrangement.” The result could be an economic downturn and job losses: “I don’t think anybody should underestimate the risks of getting this wrong.”

If Starmer seems pessimistic, it is because he believes time is short and progress has been slow. Since the referendum, disgruntled MPs have focused their attention on the final Brexit settlement. Yet if, as he argues, the starting position for our negotiations with the EU is wrong, the damage will have been done. MPs faced with a bad deal must either approve it or “risk the UK exiting the EU without a deal at all”.

It is this conviction that is driving his frantic schedule now. Starmer’s first month in the job is packed with meetings - with the representatives of the devolved nations, business leaders and his European counterparts.

He has also become a familiar face at the dispatch box. Having secured a commitment from David Davis, the minister for Brexit, that there will be transparent debate – “the words matter” – he is now demanding that plans to be published in January 2017 at the earliest, and that MPs will have a vote at this stage.

In his eyes, it will be hard for the Prime Minister, Theresa May, to resist, because devolved parliaments and the European parliament will almost certainly be having a say: “The idea there will be a vote in the devolved administrations but not in Westminster only needs to be stated to see it’s unacceptable.”

In Europe, Starmer said, the view is already that Britain is heading for the cliff edge. It was May’s pledge, that after Brexit the UK would not “return to the jurisdiction of the European Court of Justice”, which raised alarm. And among voters, there is “increasing anxiety” about the direction in which the UK is moving, he said. Even Tory voters are writing to him.

In the Labour Party, which is putting itself back together again after the summer’s failed coup, immigration remains the most vexed issue. Starmer told me that Labour had “earned a reputation for not listening” on the issue. Speaking on The Andrew Marr Show shortly after becoming shadow Brexit secretary, he said immigration was too high and ought to be reduced. But later that same day, Diane Abbott, a shadow cabinet colleague, contradicted him, publicly criticising immigration targets.

Starmer believes there is a bigger picture to consider when it comes to Britain’s Brexit negotiations. Take national security, where he warns that there are “significant risks” if communications break down between the UK and the EU. “Part of the negotiations must be ensuring we have the same level of co-operation on criminal justice, counterterrorism, data-sharing,” he said.

Crucially, in a Labour Party where many experienced politicians are backbench dissenters, he wants to reach out to MPs outside the shadow cabinet. “We have to work as Team Labour,” he stressed.

It’s a convincing rallying cry. But for some MPs, he represents more than that: a lone moderate in what can be seen as a far-left leadership cabal. Does he have any ambitions to lead Labour? “Having had two leadership elections in the space of 12 months, the last thing we need at the moment is discussion of the leadership of the Labour Party.” He has agreed to serve in the shadow cabinet, and is determined to stay there.

Starmer has found his purpose in opposition. “If we think things aren’t going right, we’ve got to call it out early and loudly. The worst situation is that we arrive at March 2019 with the wrong outcome. By then, it will be too late.”

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines. 

This article first appeared in the 27 October 2016 issue of the New Statesman, American Rage