Referendum campaigning is underway as the UK renegotiates its position in Brussels
Since 2010, polls have indicated that the British public is divided on the question of EU membership. The largest ever poll - of 20,000 people, in March 2014 - by Lord Ashcroft showed the public evenly split on the issue, with 41% in favour of withdrawal, 41% in favour of membership and 18% undecided. This month (November 2015), a poll of 2,000 people by ORB for the Independent newspaper found that 52% wanted to see Britain leave, while 48% voted for it to stay in; the first time ORB's monthly survey has recorded a majority in favour of a British EU exit, or "Brexit".
EU reform and the "British question"
The UK's future in Europe is ultimately likely to be determined by the perceived success of Prime Minister David Cameron's attempts to secure changes to Britain’s relationship with Brussels before the referendum is held. The Prime Minister wrote to the President of the European Council on 10 November 2015 setting out the four objectives of Britain's EU reform plan. Of the four objectives, the one that is perhaps most likely to be relevant to British business is ensuring that any measures that Eurozone countries decide to take to secure the long-term future of their currency will "respect the integrity of the Single Market, and the legitimate interests of non-Euro members". The second objective relates to competitiveness and the burden of new regulations: "the UK would like to see a target to cut the total burden on business". The third objective is to exclude Britain from the obligation to work towards an "ever closer union". For referendum voters, however, perhaps the objective in relation to benefit restrictions will have the biggest impact: "that people coming to Britain from the EU must live here and contribute for four years before they qualify for in-work benefits or social housing".
The referendum must take place by December 2017. Although some have speculated that the government plans to hold the referendum as early as June 2016, the government's ability to do so may depend on whether David Cameron succeeds in his goal of securing a deal on EU reform by the end of 2015. In the meantime, campaigners' arguments for both in and out votes have gathered pace.
"In" and "Out" campaigns
The campaign for withdrawal, branded 'Vote Leave', draws together groups pushing for Brexit from within the Conservative Party government, the opposition Labour Party and the business community. Its main argument is to end the supremacy of EU law over UK law. 'Vote Leave' has so far jostled for attention with a rival group called Leave.EU, founded by Arron Banks, another businessman, and supported by Nigel Farage, leader of the United Kingdom Independence Party (UKIP). Leave.EU has now launched a bid to merge with its rival, although Vote Leave is apparently resisting this proposal.
Led by Stuart Rose, the official campaign to remain in Europe, 'Britain Stronger in Europe', argues that the UK economy would be "weaker outside Europe". Rose has the support not only of the three living former Prime Ministers, Sir John Major, Tony Blair and Gordon Brown, but also of a clutch of other pro-EU business figures, including Sir Richard Branson.
Those in favour of Brexit argue that the UK would be free to establish bi-lateral trade agreements with other countries, including fast-growing export markets. 'Vote Leave' advocates negotiating "a new UK-EU deal based on free trade and friendly cooperation". 'Britain Stronger in Europe', on the other hand, argues that the UK would have better negotiating power to secure beneficial trade deals as a member of the EU than as an individual player - "negotiation as part of a 500-million-strong economy also gives us clout we could never have on our own."
The UK's balance sheet is a key focus of the 'Vote Leave' campaign, the argument being that an exit would mean that the UK could "spend the £350 million we sent to Brussels every week on our priorities like the NHS, schools, and fundamental science research". Meanwhile 'Britain Stronger in Europe' makes the point that the membership fees associated with being part of the EU are outweighed by an average of £26.5 billion of investment into Britain per year from Europe and by the average person in Britain saving around £450 per year due to trading with Europe driving down the price of goods and services.
'Britain Stronger in Europe' highlights the fact that Confederation of British Industry estimates that three million jobs in Britain are linked to trade with the rest of Europe. Some have warned that an exit could result in millions of jobs being lost as global manufacturers move to lower-cost EU countries. Others have argued that with small and medium-sized firms freed from EU regulation, there could in fact be a jobs boom, particularly among the large proportion of the UK economy that is not involved in trade with Europe. 'Vote Leave' argues that exiting the EU will enable the UK to stop the current immigration system, which "means an open door to the EU while blocking people who could contribute to the UK coming from non-EU countries".
'Britain Stronger in Europe' points to strength in numbers when it comes to the UK's influence on the world stage, particularly with regard to its national security. 'Vote Leave' on the other hand says that "Britain would have a far greater 'influence' if it successfully pursued an alternative national policy".
(Legal) detail will be crucial
If the UK were to exit the EU, the impact on the UK, and UK business in particular, will depend on the detailed terms of the UK's exit and of any relationship it has with the EU (or individual countries within the EU) following its exit. Much UK law and regulation is based on EU law; how an exit would affect current law or its interpretation post-exit is not yet clear.
Looking beyond the immediate impact of an exit, there are various consultations underway for the future implementation of EU law at member state level. For example, a key focus of the European Commission is building a capital markets union in the EU, including consulting on a simplified prospectus regime for companies admitted to trading on SME growth markets. In the event of a UK exit, would the UK continue to follow Europe when updating its capital markets regulatory regime - to remain a competitive environment for SMEs - or would its regime begin to diverge from the EU's?
With no precedent for a country leaving the EU, neither side can really predict the impact of a UK exit. We will be monitoring new developments with interest as the debate continues.