EU largesse for UK firms must be matched by the Treasury
- Whitehall must prepare now to support those British sectors that stand to lose from ‘Brexit’
- Civitas study details fears of UK businesses reliant on EU support – and how they can be mitigated
The government should commit to ensuring any Brussels subsidies for British companies are matched from Whitehall in the event of the UK leaving the EU, a new report by the cross-party think tank Civitas urges.
The proposal is contained in a new analysis of the challenges facing those UK sectors that stand to lose if Britain votes to leave the EU in David Cameron’s promised 2017 referendum.
The report underlines the need for much greater planning by Whitehall ahead of a possible UK exit.
Jonathan Lindsell, the report’s author and a Civitas research fellow, writes: “The EU has tendrils that have infiltrated British life for 40 years, affecting our tax, our prices, our labour market and our export strength. Those in favour of ‘Brexit’ cannot simply trumpet the constitutional and economic benefits of leaving to drown out experts who foresee major impact in their particular fields.
“Even if you support exit in broad strokes, most accept that certain industries will be hit hard, depending on the nature of the exit agreement (or lack thereof). These individuals, sectors and regions cannot be ignored. It is important to take their fears seriously, so that the negative impact of ‘Brexit’ can be mitigated as far as possible.”
Lindsell warns that an abrupt loss of EU funds following “Brexit” could be devastating to the countryside and the economy if British farmers and fishermen, for example, are left to compete with still-subsidised Europeans.
However, the UK could raise “mirror funding” out of the money saved from terminating EU budget contributions. EU funds for British sectors vary from year to year but have averaged about £4.5 billion since 2007.
Research fellow Jonathan Lindsell writes: “Many British companies currently benefit from the EU’s largesse in the form of subsidies or research and development grants. These include farmers, engineers, automotive developers, fishermen and the Welsh regions. The loss of these funds could be devastating as it would leave Britons competing with still-subsidised Europeans.
“Political hostility to the idea of subsidies must acknowledge that, given the competition, an abrupt funding loss could irreparably change the countryside and the economy. Using the money saved from terminating EU budget contributions, the UK could raise ‘mirror funding’ with long-term commitments to establish stability.
“These commitments could be based on cross-party agreement or an inflation-linked system, limited treaties to stay part of specific EU initiatives, or memoranda of understanding.”
The UK will also have to be prepared to rapidly boost its diplomatic corps to fill the gaps left by the loss of EU diplomats. Their work will become especially important as a post-EU Britain has to quickly form new alliances and, vitally, establish trade deals.
“The Foreign Office will need a serious long-term boost in training, investment and recruitment (especially into languages) to make up for the absence of the various EU diplomatic bodies,” Lindsell writes.
“Britain will need to be proactive in winning new alliances as well as consolidating relationships with current trading partners. The basis of trade deals is mutual advantage, and improved access to a market of 60 million people will always be attractive.”
In Softening the Blow: Who gains from the EU and how they can survive Brexit, Lindsell interviews representatives from sectors that potentially have most to lose from leaving the EU and seeks to set out how the government can best address their fears.
Speaking especially to senior figures in agriculture, fisheries, small business, engineering and the Welsh government, Lindsell identifies eight particular categories of concern. Those categories include: losing access to the European market; uncertainty and discontinuity; loss of international clout; without UK influence, the EU will swing towards greater regulation; loss of skilled labour in technical sectors; loss of EU subsidies and funding; and the “platinum” plating of regulations by Whitehall.
Lindsell writes: “Such concerns are not universal: other businesses actively advocate a looser relationship or exit. Nevertheless, it is important that any government serious about leaving considers the nature of such concerns, and how they would mitigate the damage of ‘Brexit’ with domestic action and energetic new international agreements.”
The full report, Softening the Blow: Who gains from the EU and how they can survive Brexit, can be downloaded below.
Jonathan Lindsell joined Civitas in 2013 as EU research fellow after reading history at Trinity College, Oxford. His other reports include ‘Does the EU impede economic growth?’ and ‘Britain should opt out of the EU police and criminal justice measures’. He has written for The Independent, Conservative Home, the Index on Censorship and Open Democracy.
Softening the Blow: Who gains from the EU and how they can survive Brexit