Regardless of the outcome of a referendum Britain and Europe must remain strong trading partners for the benefit of all the UK economy – EY comment
Mark Gregory, Chief Economist at EY commenting on today’s speech by the Prime Minister on the future of UK and EU relations, says:
- We have to accept that the European Union (EU) is changing, which needs to happen in order to solve the instability in the Eurozone. These changes are likely to affect the whole operation of the EU, and therefore Britain needs to assess how this might impact its interests now and in the future.
- Britain and Europe are strong trading partners. Europe is Britain’s largest export market and the EU runs a trade surplus with the UK. So it is in everyone's interests that a strong and mutually beneficial relationship is maintained.
- Even those who wish to see Britain leave the EU want a strong trading relationship to persist. The current debate is really about the terms on which the UK and EU relationship is best established.
- All of our research and conversations with clients highlight that the UK remains a good place to do business. Our country’s ability to win investment has been a crucial source of pride, job-creation and growth over many years – and this is now even more important. Any decisions taken on UK and EU relations should reflect that.
- It's also worth noting that 42% of all inward investment into the UK comes from the US, so the UK is arguably very exposed to US investment trend – another factor of any decisions taken on the UK in the EU.
- While the UK has consistently attracted the most foreign inward investment amongst the European economies, in 2011 the number of projects in the UK fell by 4%, with total projects in Europe rising by 7%. The gap between the UK and its peers, especially Germany, has also been narrowing year on year.
- Whatever the ultimate outcome of this process of renegotiation, there is a question about whether or not it could create uncertainty amongst investors into the UK, especially those looking to invest here for the first time e.g. Asian investors. EY will be putting this question to the 500+ global investors who respond to our annual European Inward Investment Monitor.
- In our 2012, of these 500 global investors in Europe, 21% told us that the most important factor in inward investment decisions is the ability to use a country as an export base. This response rate increased to 31% amongst Asian investors, who are the most concerned about the UK's relationship with the EU. This suggests that existing investors are less concerned than potential new investors and Asian investors about the UK's relationship with the EU when making investment decisions.