Immigration and the economy have taken center stage in the British E.U. referendum. The future economic performance of the U.K. in particular—its growth, job, and wealth creation prospects—depends on how business fares. This helps explain why business attitudes to the referendum have regularly been published in the run-up.
The Britain Stronger in Europe campaign relies on one such survey in its campaign literature. Conducted by the Council of British Chambers of Commerce in Europe (COBCOE), it found that 89 percent of member businesses were opposed to a U.K. exit from the E.U., while only 7 percent were in favor. The claim is regularly repeated by voices on the Remain side as evidence of the economic damage that a Brexit would cause. So is it accurate?
In fact, it turns out that the survey does not include any U.K. businesses. Instead, it reflects the views of the members of a total of 38 national chambers of commerce in countries ranging from Austria to Israel to Ukraine. This appears to make it quite a strange survey for Remain to be relying on.
When you look at other business surveys, several things stand out. They too tend to back Remain—if a little less decisively—and the balance of opinion is much tighter with smaller companies than larger ones. The CBI’s survey in March of nearly 800 U.K. companies found 84 percent backing Remain among large companies and 71 percent among smaller ones.
The British Chambers of Commerce survey of 2,200 members from May found 54 percent backed Remain compared to 37 percent against. Among companies with fewer than ten employees, however, a majority backed a Brexit.
A TNS survey in June of more than 500 small- and medium-sized companies found 38 percent backed Remain and 37 percent Leave. Yet a new academic survey of U.K. skippers and boat owners in the fishing industry found that 92 percent favor a Brexit. This all raises interesting questions about the differences between various businesses.
Scottish Echoes
During the Scottish independence referendum of 2014, I conducted extensive research into business attitudes. Despite close to 50 referendums on various issues across Europe since 2011 alone, there has been very little systematic research of this kind into business opinion.
I found business attitudes to an independence referendum are generally driven by a small number of variables: where the business is headquartered; the ownership structure; the jurisdiction where the balance of its trade takes place; and the most advantageous place for foreign direct investment by multinationals. Having applied the same framework to the E.U. referendum, it turns out the same variables apply.
Business leaders of U.K.-headquartered listed companies, or multinationals with subsidiary headquarters in the U.K. with significant trade in the E.U., have been the most perplexed by a vote to leave and most willing to relocate business investment elsewhere. That is why 36 heads of FTSE 100 companies signed an open letter arguing for a Remain vote, and 95 percent of members of the British American Business Association oppose a Brexit.
Heads of privately owned companies with comparable E.U. trading interests also oppose a Brexit, though without the same shareholder pressures they tend to be more willing to soldier on with U.K. investments if it comes to pass. Think about Sir Richard Branson and the Virgin group, for instance.
People who run private companies whose trade is more global are either ambivalent or in favor of leaving—if they can identify a specific benefit for their business. Lord Bamford, the chairman of building group JCB who came out in favor of Leave recently, is a prime example of the latter. Companies of this sort are a minority, however.
Business leaders most in favor of Leave are the ones who mainly trade at home and see a cost advantage or a greater ability to influence the political process after separation. Tim Martin of pub chain Wetherspoons fits into this category.
Verdict
It appears misleading for the Remain side to be using the COBCOE survey, though business surveys do generally lean towards the same point of view. Bigger businesses are pro-Remain—unless their sales are primarily either global or U.K.-focused—while small- and medium-sized businesses trading predominantly at home take a different view.
Sectors with a strong view one way or the other are driven by their own motivations—for instance U.K. fishermen tend to feel unfairly constrained by fishing quotas allocated by the European Common Fisheries Policy.
On the whole, however, the business case for Brexit doesn’t appear to add up.
Review
Michael Danson, professor of enterprise policy, Heriot-Watt University
This piece has identified that, as with many of the claims made by all sides in the EU referendum, Britain Stronger in Europe has been rather fast and loose with presenting COBCOE’s statistics. Nevertheless it is believable that firms successfully doing business internationally would support the status quo, while those struggling at home may have different concerns or else reflect the divisions within the country as a whole.
Some questions in business surveys are poorly posed or ambiguous—does “good for business” mean for my firm, for trade, or for the economy as a whole? Are these mutually compatible, or is what is good for a multinational contrary to the needs of smaller companies? As with the Scottish referendum, companies’ opinions seem dominated by self-interest, which never necessarily means in all our interests.
Apart from misleading us over business opinion with the COBCOE survey, Britain Stronger in Europe also promotes many campaign slides that play up the worst case scenario in the short-term forecasts of banks, treasuries, and international bodies—all of which undermine the objectivity of its message. These contrast different futures under the same free-market regime rather than presenting an alternative inclusive E.U. agenda that could lead to a different future for the continent.
Brad MacKay is a professor in strategic management at the University of St. Andrews in the U.K. This article was originally published on The Conversation.
