· 6 min read · Features

The EU business case

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In, out, shake it all about? HR professionals and business leaders share their views on whether Britain should stay in Europe.

The small railway town of Eastleigh in Hampshire isn't used to seeing itself in the headlines. But this March, something happened that no one saw coming. The UK Independence Party (UKIP) came only 1,700 votes short of winning a crucial by-election, pushing the Conservatives and Labour into third and fourth place respectively. A win would have given UKIP its first seat in parliament.

Politicians on the left and right may not have noticed UKIP encroaching on their territories. But after this historic near-win, the anti-EU party is some way towards shaking off its 'BNP in blazers' image. UKIP leader Nigel Farage is even courting the growing number of Tory supporters who have become disillusioned with their party's feeble stance on Europe - promising to take the "tremor in Eastleigh" and turn it into "a national earthquake".

UKIP's growth could well be symptomatic of a wider issue: that we are turning into a nation of euro-sceptics. And if that is the case, it could have dramatic effects on UK business and on HR.

A YouGov poll published earlier this year reveals a decidedly frosty British attitude towards the EU. According to the survey, 40% of the public is still undecided about the best course for Britain's European future. Of those who have made a choice between remaining within the EU or opting for a viable alternative in the form of the European Free Trade Association (EFTA), just 38% are in favour of remaining within the EU. In contrast, support for EFTA and the European Economic Area (EEA) is substantially higher, at 62%.

Concrete policies might not appear to be UKIP's strong point (who could forget bendy banana-gate?), but that doesn't stop prime minister David Cameron acting worried. This January, he attempted to undercut anti-EU support by promising a referendum on UK membership of the EU in 2017. It's a big declaration - but just how likely is a referendum to happen?

Cameron last month set off on a month-long tour of the EU in an attempt to sell his vision for reform to other national leaders, with a charm offensive that takes in Madrid, Paris and Berlin. He's told leading European newspapers that support in the UK for EU membership has become "wafer thin" and the organisation must change.

However, the prime minister's plans have not been well received by the EU council and he has been given notice that no other EU leader is likely to support his campaign to rewrite the terms of British membership of the union. In fact, the president of the European Council, Herman Van Rompuy, has warned that although Britain was free to leave the EU, the exit "doesn't come for free". Van Rompuy commented: "It would be legally and politically a most complicated and unpractical affair. Just think of a divorce after 40 years of marriage."

But forget the politicians for a moment - what does business think? Just last month, a new lobby group called Business for Britain was formed by some 500 business chiefs. It aims to press the Government to renegotiate the UK's deal with the EU. In an open letter to newspapers, Business for Britain says: "As business leaders and entrepreneurs responsible for millions of British jobs, we believe that the Government is right to seek a new deal for the EU and for the UK's role in Europe. Far from being a threat to our economic interests, a flexible, competitive Europe - with more powers devolved from Brussels - is essential for growth, jobs and access to markets."

However, a recent survey by the British Chambers of Commerce (BCC) found that although many business leaders would like to renegotiate Britain's relationship with the EU, 60% regard a full withdrawal as a very bad idea. The most popular option for British business is to stay in the EU, but to renegotiate issues such as employment law (54% in favour), health and safety law (46%) and regional development policies (33%). Meanwhile, a recent survey of FTSE 100 chairmen by consultancy firm Korn/Ferry Whitehead Mann found 74% of respondents think leaving the EU would have a negative effect on British business. One chairman even suggests an exit would cause Britain to "lose all significant world influence [and ensure] shrinkage in the City of London would become permanent".

Exclusive research for HR magazine by the Irish International Business Network (IIBN), consulting 200 of its members, finds 88% believe a UK decision to leave the EU would have a negative effect on British-Irish trade relations.

Jonathan Grey, spokesperson for IIBN, says the UK's relationship with the EU is "extremely important" for the UK labour market. "The free movement of trade and people within the EU are the pillars of Britain's relationship with the EU," he says. "It is arguable that without these freedoms, and ease of access, Britain's global competitiveness would be severely diminished. You only have to look at the employment statistics of the UK's financial services sector to understand that the dynamism of the City is driven in large part by its EU, and indeed global, workforce."

Grey also warns that leaving the EU could present employers with a "large administrative burden", and could even lead to restrictions for UK citizens travelling or employed on business. "Would they be able to remain on the same terms?" he asks. "Would they be covered by personal and business insurances? Would a non-EU UK keep all the rules and provisions of EU employment legislation that are currently in place? These are the questions employers want to know."

Trade is the big issue for employers in manufacturing, with 45% of all UK exports heading to the EU. Carmaker Jaguar Land Rover, for example, supports continued EU membership. "We believe that free trade is an economic and social imperative, and the EU is the world's largest free trade zone," says a spokesman in its HR department. John Longworth, director general of the BCC, says: "From a business perspective, any renegotiation of Britain's relationship with the EU must focus on these areas which are not integral to the functioning of the Single Market in goods and services."

So it's clear that a departure would send shockwaves through British business. What would leaving mean for HR in particular?

For Jeannie Edwards, HR director of engineering firm MWH, it's a disquieting prospect. "There is so much invested emotionally and legally, I'm extremely worried what would happen if we left the EU," she says. "If the United States sends you a warning shot across your bows, you have to listen." (President Obama and other US officials have urged Britain to remain in).

Other HRDs contacted by HR magazine echoed Edwards' views. However, many wished to remain anonymous because of the sensitive political nature of the issues. As one put it: "At a time when we are seeing the economy dangerously close to recession, it's remarkable we are even having this discussion."

"We accept the need to try to modify and improve Europe," says Martin Flavell, HRD at defence engineering solutions firm Finmeccannia. "But to participate and be a major player is also important. From a labour market perspective, within HR there are major links and lots of international companies coming into the UK because they see it as a good platform to Europe and the rest of the world. If that's undermined it could potentially be problematic."

Business leaders have long griped about employment regulations coming over the Channel and tangling UK plc up in red tape, but Flavell thinks there is a bit of a perception issue here. He says: "People presume that if we were to leave the EU, quite a lot of the employment laws that are in place would be unpicked and changed. But I don't believe that's necessarily the case."

He also points out possible misconceptions about a full EU exit. "We certainly need to get Europe more focused around growth and less focused around aspects of the social agenda, which I think is beginning to happen," says Flavell. "That means that not being part of Europe wouldn't affect HR as much as many people [in HR] think it would. The reality is, in business we need to embrace the EU and modify and improve it before we can even think about leaving it."

However, Andrea Broughton, principal research fellow at the Institute of Employment Studies, disagrees. Departing from the EU, she says, could have a detrimental effect on the talent pipeline and cause problems for many HR departments.

"If we were to leave the EU and perceptions grew that Britain was becoming something of an economic backwater, then I think it would start to become harder to get the highly skilled, top talent employees," she says. "If you look at workers who are ambitious, they want to be at the centre of the action."

So, while politicians talk big, the overall view from business appears to see an exit as improbable. According to Dominic Schofield, a senior client partner at Korn/Ferry, business leaders "overwhelmingly believe a departure is unlikely". Nevertheless, with reforms being promoted from many sides, the UK's relationship with the EU is bound to change considerably over the next few years. If the result of a referendum would be to bow out, Broughton warns, it could be devastating. "We would lose a lot," she says. "You wouldn't necessarily notice it for a number of years, but the effect would be dramatic."