Nigel Lawson, the Chair of Vote Leave, and Daniel Hannan, leading leave campaigner, have today conceded what for months the leave campaigns have sought to conceal: Britain outside the EU would lose access to Europe’s single market.
Writing in today’s Telegraph Nigel Lawson says that outside the EU Britain “would continue to trade with the EU, as the rest of the world does today, almost certainly assisted by a bilateral free trade agreement.”
We must be absolutely clear about what this means: Britain would not be part of the single market in goods and services, which is so critical to the UK economy, our businesses and families’ personal finances.
Daniel Hannan, speaking on Sky News, again said that the UK should seek a relationship with the EU similar to that of Switzerland, which does not have full access to the EU’s single market, in particular in services. Services make up 78% of the UK economy, so being cut out of the privileged trading terms currently on offer would have a huge impact on jobs, prices and the economic opportunities available to working people.
Why should we focus on the single market? Because the issue central to our country’s economic future, and indeed this ongoing debate about the UK and Europe, is not whether we would trade with the EU but the terms on which that trade would be conducted.
Currently, as a full member of the EU’s single market, covering both the goods and service sectors, Britain benefits from having no tariffs on our trade and having a seat at the table when trading regulations are set, so we can ensure they work in our industries’ interests.
This increases UK-EU trade since trade barriers are reduced, which enables British-based businesses to expand in their nearest market and increase employment. This increases competition, which drives innovation and lowers prices. And this harmonises regulations, which lowers the overall burden of regulation on businesses. There is simply no alternative trading model which delivers these benefits to the same extent. Such is the attraction of the single market that it is a primary reason for foreign investment in the UK.
This collaboration of course means we need protections, for example over our own currency, which is why the Prime Minister has rightly prioritised this as part of his renegotiation.
If we follow Nigel Lawson’s argument, we may get a trade agreement covering some goods, but we would likely pay tariffs on others, which would push up costs of imports for businesses and therefore consumers, and the costs of exports, which would hit demand for British goods. Given that in the UK 200,000 businesses trade goods with the EU, 75% of our businesses that do so internationally, this would undoubtedly have an impact on their capacity to expand and employ.
Critically, even if we had a free trade agreement with the EU, we would not be in the room when our competitors – whether Germany, France or other major European economies – were determining the terms of trade, for example the standards that products need to meet to enter the European market. Not only would that be bad for British business, as they would be adapting rules to suit the priorities of other European markets not our own, but it would hardly be a boost for British sovereignty: we would go from rule maker to rule taker.
And anyone arguing that they need us more than we need them should consider that half our goods exports go to the EU whereas on average just 5% of EU countries’ come to the UK.
The single market is particularly important for the service sector, where we have a trade surplus with the EU. Currently, within the single market, we have access to the ‘passport’, which allows financial services firms based in the UK to conduct business across the whole European Economic Area while still being regulated in the UK. This, combined with common regulatory standards, has reduced costs, increased expansion and has seen the UK become home to many overseas companies’ headquarters. Switzerland, Daniel Hannan’s favourite example of what the UK should become, does not have this and if we leave this will be lost, with clear implications for jobs at home.
We could of course join the single market having left the EU, as Norway does, paying in to the budget, accepting free movement and accepting EU regulations, but having zero influence. But surely leave campaigners don’t want to adopt a system where we pay but have no say.
We have long asked leave campaigners what ‘out’ looks like, and now we are beginning to find out. The EU is our largest trading partner – we sell six times more to the EU than we do to the BRICs – and the world’s largest free trade zone. As the single market develops it will create jobs and opportunities. If the UK stands outside looking in we will not only miss out, we will be paying to abide by rules signed off in Brussels without a voice of our own.
So now that we have some clarity from the leave campaigns the choice is clear: increased trade within Europe to support jobs and low prices for businesses and families, or the UK outside, with our financial security at risk.
Will Straw is Executive Director of Britain Stronger in Europe