UK business shies away from the EU: they invest elsewhere

The pro European Union minority are always telling us how much business likes the EU, and how it is a superior arrangement to our other trade, business and investment agreements with the rest of the world. Yet when it comes to where business puts its money, they shy away from the EU.

The figures for UK investment abroad by UK companies show that they have invested just £20bn in Germany over the years, only a shade more than in non EU Switzerland, a far smaller country. Meanwhile corporate UK has invested a mighty £210bn in the USA and £40 bn in Hong Kong and China. £36bn in Australia and £27bn in Canada compares to a total investment in Italy with a much larger population of just £11bn.

All this goes to show that the selective pro EU voices of UK business do not tell us the truth about the relationships. After more than 40 years in the EU we still have a much much larger business commitment to the Commonwealth and the USA than to the main EU countries. It is true the figures show large investments by the UK in Luxembourg and the Netherlands, but that is not a set of underlying investments in these countries. It represents a tax efficient means of investing elsewhere, usually outside the EU. The large £40bn invested in our own non EU offshore islands (Isle of Man and Channel islands) also reminds us of the power of lower taxes to attract business money.

Pro EU people always talk about trade in physical goods. They do not talk much about trade in services, where we do far more business outside the EU than in the EU, and always ignore the figures for overseas investment by UK companies.

Investing in a foreign country is a far greater commitment and far deeper and longer term relationship than buying manufactures from abroad. Judged by that standard, UK business thinks the US is the most important place by far to do business, followed by a range of Commonwealth countries. Tax rates, levels of regulation and the cost of government are amongst the features that put UK business off investing in the rest of the EU.

The lack of such investment flows should worry EU enthusiasts. It should lead the Brussels government to ask why is such long term commitment so unpopular? They could start by looking at the whole range of policies they pursue that are not business friendly.

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82 Comments

  1. Iain Gill
    Posted July 30, 2013 at 7:45 am | Permalink

    New Zealand is a much better friend than anyone in Europe

    • A.Sedgwick
      Posted July 30, 2013 at 9:28 am | Permalink

      It is also the destination for many of our young people, who visit in a gap year or for work experience, the latest we know, a young doctor, who completed her GP training out there and guess what she is not coming back. This is the reality of the spurious and misleading net migration figures.

      • uanime5
        Posted July 30, 2013 at 4:58 pm | Permalink

        Well the UK can’t expect to retain talented people if it keeps driving down salaries and living conditions.

        • Lifelogic
          Posted July 31, 2013 at 10:51 am | Permalink

          @unanime5

          Indeed but driving down wages is exactly what your and most of Cameron’s policies would do.

          • Bazman
            Posted July 31, 2013 at 7:56 pm | Permalink

            Like you belief that no workers rights, minimum wage and housing cost to be set by the worlds wealth elite hoarding money in London property, but not living there will improve rights, wages and housing?

    • Bazman
      Posted July 30, 2013 at 11:28 am | Permalink

      If you were to drill a hole through the earth you would come out just off the coast of New Zealand. If we were to leave Europe the money saved could be used to begin this tunnel with the trains powered by gravity alone.

      • alan jutson
        Posted July 30, 2013 at 11:43 am | Permalink

        Bazman

        So one way ticket cheap, no fuel needed, but return I guess very expensive ?

        A very big black hole to pour money into !

      • margaret brandreth-j
        Posted July 30, 2013 at 1:10 pm | Permalink

        And we could use the energy from the magma and earth’s core to drive transport forward.

      • Leslie Singleton
        Posted July 30, 2013 at 1:34 pm | Permalink

        Bazman–Train would not get all the way to New Zealand–It would stop just short due to friction and fall back and oscillate and eventually come to rest at the centre of the Earth, that’s assuming it were possible in the first place to drill a hole through the liquid molten centre. You have made worse comments though.

        • Jerry
          Posted July 31, 2013 at 9:27 am | Permalink

          @Leslie Singleton: Bazman’s joke made me laugh, your reply made me cry out in despair…

        • Lifelogic
          Posted July 31, 2013 at 3:40 pm | Permalink

          Do not suggest it as it is not that much dafter than HS2 and they may start to fund an initial study using tax payer money, starting with a fact finding trip there for some MPs and flunkies at Christmas I suspect.

      • Edward2
        Posted July 30, 2013 at 5:37 pm | Permalink

        The trains would only be able run twice each way in any 24 hour period as the Earth would only be at the correct angle twice a day for the gravity to work.
        It would also need excellent air conditioning to cope with the temperatures near the Earth’s centre.
        And good brakes when the trains exited the tunnel.

        • Bazman
          Posted July 31, 2013 at 5:24 pm | Permalink

          Would the front or the rear come out first?

      • libertarian
        Posted July 30, 2013 at 5:56 pm | Permalink

        Why would you need to go to NZ Bazman? Did you not read the piece properly. JR talked of the value of service based exports. Where we live in the reality based 21st century we don’t need to move from our desks in order to sell service exports. Ram it .

        • Bazman
          Posted August 3, 2013 at 1:23 pm | Permalink

          Many company heads, middle managers and government officials would need to go on fact finding missions lasting a number of weeks to New Zealand’s volcanoes and substantiate this claim and the viability of The Earth Tunnel. These trips would ado have to be reciprocated in The Isle of Wight or some other island where the terminals would be located.

      • Anonymous
        Posted July 30, 2013 at 11:26 pm | Permalink

        Why use a train or build a tunnel ?

        We’re already well on the way in a handcart.

      • a
        Posted July 31, 2013 at 5:07 am | Permalink

        Would they need RMT drivers?

    • Deborah
      Posted July 30, 2013 at 1:36 pm | Permalink

      Yes, NZ is a much better friend.

      I started buying New Zealand butter back in the 80s when they helped us in the Falklands…whilst France was selling exocets to the Argies…

  2. James Reade
    Posted July 30, 2013 at 7:53 am | Permalink

    What would be imminently more sensible would be to analyse these numbers and find out the reasons driving them, before jumping to conclusions, as is your wont, on the EU.

    The EU may well be a driving force in this, but I’d much rather hear it from a proper analysis which looks at all other possible causes too.

    Reply: Why don’t you suggest an alternative hypothesis for causes? The facts are clear, and history is littered with examples of UK companies which have failed to invest or have given up, finding investing in some continental countries too difficult.

    • Lifelogic
      Posted July 30, 2013 at 9:10 am | Permalink

      The facts are indeed clear, business will go where it is welcomed and not strangled by government as it mainly is in the EU and UK. Indeed business has to or it will be out competed and just die, they have little choice.

      Such a shame Cameron and the EU seem unable to resist this strangling through tax, high energy costs and absurd regulations indeed they seem to love it in the name of equality. Witness his no retirement, his gender neutral insurance- as mad as a hatter.

      • Bazman
        Posted July 31, 2013 at 8:01 pm | Permalink

        They will also have a think about what infrastructure and education exist too. The Caymen Islands have a problem competing with Germany on this despite the absurd laws and regulation of Germany.

    • Richard1
      Posted July 30, 2013 at 6:21 pm | Permalink

      Its the statist, big govt, high tax policies which discourage investment rather than the EU as such. If the EU were to convert itself to being a free trade, small govt, light regulation, low tax area,investment would follow. It is interesting that is the political left which now jumps to the the defense of the EU – they perceive it as a way of bringing neo socialist policies to the UK. If this is still the line-up of the debate in 2017 the Outs will win.

    • Anonymous
      Posted July 30, 2013 at 11:44 pm | Permalink

      James Reade – I’m glad the Brussels Government doesn’t understand these things (nor you, it seems.)

      This is proving to be its undoing.

  3. Mike Stallard
    Posted July 30, 2013 at 7:58 am | Permalink

    Here in Australia, I am constantly struck by how very English it all is. The top end paper was delighted by the birth of the royal baby. The TV is constantly looking towards the BBC. Many people come over from UK. The names of the companies (Woolworths) are quite often very English too.
    None of this was true in Spain where, despite my very best efforts, I was always a foreigner.

  4. Jerry
    Posted July 30, 2013 at 8:37 am | Permalink

    Why would any UK business invest in another EU country when they can invest in the UK (more cheaply) and simply ship -tariff free- to that other EU country, UK companies invest in non EU countries to get a ‘presence’ (and thus tariff free trading) in the said country/market, just like Japan has invested in the UK to obtain a ‘presence’ here and by extension within the EU. It certainly shouldn’t worry the europhiles one bit, in fact it might be more worrying if UK companies were having to invest in (say) Germany just to be able to sell their products in that country without a tariff penalty, it would mean that the single market wasn’t working!

    John, I (think I) can see were you are attempting to go with your blog but you seem to have constructed a house of cards to get there – indeed the UK could survive every well outside of the EU….

    • sjb
      Posted July 30, 2013 at 9:49 am | Permalink

      Jerry wrote: […]Japan has invested in the UK to obtain a ‘presence’ here and by extension within the EU.

      Yes, and if the UK ceased to offer foreign companies operating here free access to the EU market how much of this foreign investment would find a home elsewhere?

    • alan jutson
      Posted July 30, 2013 at 10:43 am | Permalink

      Jerry

      You beat me to it, my thoughts as well.

      Pleased our foreign Secretary has had a word with the Spanish about their so called non co-operation with Gibralter entry and exit points to Spain, but a shame he needed to do this in order to restore “normality”

      Perhaps the Spanish were in practice mode for when we eventually leave the Club !

    • Leslie Singleton
      Posted July 30, 2013 at 10:56 am | Permalink

      Jerry–On that basis, if location of investment doesn’t matter, why the eternal clamour for investment in the North of England etc rather than London and the South East? They speak strange languages over there and eat frogs and horses; also apart from those at the top with their snouts in the trough the people do not like each other as much as you would undoubtedly like to pretend, rather the opposite. Let’s hear it for the English speaking world.

      • Jerry
        Posted July 30, 2013 at 2:54 pm | Permalink

        Leslie Singleton: Wow, slagging off both the UK north and the French in one rant, you must feel proud of yourself today. Oh and as I’ve said before, many in the world must think the British very uncouth, after all not only do we eat the sacred Cow but also the sacred Pig…

        Leslie, if that chip on your shoulder gets any wider people will start mistaking you for Cheddar Gorge – from space!

    • Bazman
      Posted July 30, 2013 at 11:34 am | Permalink

      You forget that many companies are foreign owned and leaving the EU would cause tariffs to be imposed. These companies would simply leave for cheaper EU countries such as Slovakia. Not good for employment. The New Zealand tunnel project might help, failing this, towing Britain to the Mediterranean and setting up a tax haven to rival Monaco.

      • Jerry
        Posted August 1, 2013 at 10:33 am | Permalink

        @Bazman: That all depends on were their market is, also you seem to forget that countries like Germany etc. will still want to sell their products to the UK, it would be in no ones interests to start a tariff war but if one did start the UK would be free to trade with who ever we like – and don’t for get that whilst BMW (for example) might be able to move the physical production line but they can’t move either the buildings nor the workers as easily…

        • Bazman
          Posted August 2, 2013 at 7:19 pm | Permalink

          Large numbers of companies have left and why is BMW here with our absurd regulations taxes infrastructure and education system? Right wing fantasists cannot have it both ways.

          • Jerry
            Posted August 3, 2013 at 8:45 pm | Permalink

            @Bazman: Nor can left wing fantasists, unless you care to explain why large numbers of companies have and still do invest in the UK (rather than the EU) even though they know that the UK might one day leave the EU – you seem to have not read, or more likely chosen not to read/understand, my comment about a tariff war being in no ones interest.

          • Bazman
            Posted August 5, 2013 at 5:40 pm | Permalink

            Britain is going to just leave the EU and not fa=ce any tariffs as it is not in anyone’s interests? You over estimate the importance of Britain Jerry. There would have to be some tariffs as Brain could not be a member without paying or following EU directives could they?

    • Acorn
      Posted July 30, 2013 at 3:58 pm | Permalink

      Spot on Jerry. The whole idea of the “single market act” is that you don’t have to move your factory to Spain or Germany, just the products of your factory / office. And; move them in a truck that is street legal in any EU state and can cross any internal border. The last bit is yet to be fully commissioned.

      Outside of the EU, I think the UK could survive. English is the current dominant lingua franca of international business, science, technology and aviation. UK investment money still likes to speak English wherever it lands. The UK is good at service industries, particular finance and banking, but they can be run from an I-Pad with Wi-Fi and 3G in any country that has learnt English now.

      In the UAE, you won’t find many graduate Arabs in business that don’t speak good English. Crikey, even budding French bureaucrats and all eurocrats are learning English at night school! Being British and speaking the Queen’s English, is no longer a de-facto winning hand for the UK.

      “EU ripe for single-market push” (Hugo Dixon at Reuters News), summed it up when he wrote:-
      “The original 1992 programme was pushed through by a British single market commissioner, Lord Cockfield, backed by a British prime minister, Margaret Thatcher. David Cameron should attempt to repeat the trick. He should aim to get another vigorous Briton in as single market commissioner when a new Commission is chosen next year. And he should secure agreement from fellow leaders to set a deadline – say, end-2019 – to complete the single market.”

      Might I suggest one Redwood, JR? 😉 It may be a better idea to fix it from the inside JR, cos, as I have opined before; the longer we remain in, the more assimilated we will become and unable to kick the habit.

      PS. Two years this week since I gave up the smokes. Cravings are down to a couple a day now.

      Reply I was the Single market Minister who helped the EU “complete” the single market in 1992. We duly launched the completed market then. It just amounted to a wide range of laws, many of them needless or undesirable. Any future revisit of a programme to “complete” the single market will mainly be additional laws we would be better off without.

      • Lindsay McDougall
        Posted August 7, 2013 at 7:21 pm | Permalink

        JR, I missed your reply first time round. I take it therefore that we would have been better off not accedeing to any of the Maastricht, Amsterdam, Nice and Lisbon Treaties.

        Reply That is my view. That is why I opposed Maastricht in Cabinet, pressing for the opt out from its main point, the Euro, and opposed and voted against the others in Parliament.

  5. Neil Craig
    Posted July 30, 2013 at 9:49 am | Permalink

    When the choice is between investing in places with wealth destroying regulation and a recession zone like the EU or with usually lower taxes and regulation and a 6% average growth rate its a no brainer.

    This does also suggest that if Britain ended all the eco-fascist regulations and cut corporation tax as well as quitting the recession zone we would have no problem attracting enough investment for all possible sensible investments.

    • Bazman
      Posted July 30, 2013 at 11:42 am | Permalink

      Which regulations will that be Neil? Employment laws, pollution control and and health and safety laws by any chance? This making us able to compete with the likes of China by the use of coal fired catapults allowing us to fling goods and people into space using the earths gravitational pull to transport them in minutes to anywhere on the planet? Who is stopping this you ask? Thats right The EU and Labour MP’s paid for by the unions. The BBC is covering all of this up too. Catapult technology like fracking is the way forward and is being held back by all of them.

      • Edward2
        Posted July 31, 2013 at 7:31 am | Permalink

        Are you ok Baz?
        We’ve just had a post from you talking about building a tunnel to New Zealand and now this one about a coal powered space catapult in China!

    • Max Dunbar
      Posted July 30, 2013 at 4:25 pm | Permalink

      There is absolutely no chance of ‘eco-fascist regulations’ being cut in Scotland where you live, whether there is a YES or NO vote in a years time. Better start packing your bags now and find a decent house somewhere in southern England.

      The attitude of (Scottish) government and local authorities to business in Scotland demonstrates clearly why most companies consider that geographical location and proximity to markets are not necessarily the most important considerations when choosing a base to operate from, manufacture or invest in. The ‘Scottish Government’ are determined to join the EU if separation from England is achieved. That position speaks for itself and it only remains to be seen how quickly business confidence haemorrhages from the Scottish area of the UK.

    • uanime5
      Posted July 30, 2013 at 5:53 pm | Permalink

      Care to explain why Canada, Australia, and the USA aren’t growing at 6% despite not being in the EU. It’s nothing but wishful thinking to believe that leaving the EU will result in growth increasing to 6%.

      Also many companies only invest in the UK because it has access to the EU, so leaving the EU will reduce investment, not increase it.

      • Neil Craig
        Posted July 31, 2013 at 9:46 am | Permalink

        Bazman: Ho ho ho, most amusing and such an original alternative to thoughtful discussion.

        Max, I share your dismay at the toytown socialists and Luddites running Scotland. I think most Scots do and will decide not to give them independence without the training wheels provided by Westminster.

        Uni I have pointed out to you previously that an AVERAGE world growth rate means that some will be below it and some (eg Singapore achieving 14% in one year) above. I suggest you look up the word.

        In any case I think you will find that all these countries are, to some extent, restrained by the catastrophic global warming fraud, which may explain them being under the AVERAGE.

        • Bazman
          Posted July 31, 2013 at 8:05 pm | Permalink

          How many of these countries have real democracy and are not suspects in human right abuses? Do get back to us on why we should emulate them?

          • Neil Craig
            Posted August 1, 2013 at 11:31 pm | Permalink

            Well most countries now have democratic systems and the vast majority of them have a system where the results are proportional to how people vote which makes them a damn sight more democratic than the UK.

            (lists a series of unspecific allegations about UK ed) If John decides these accusations though clearly true shouldn’t be published you can just take my word that there are very few countries with a human rights record as bad as ours.

          • Bazman
            Posted August 2, 2013 at 6:35 pm | Permalink

            Most countries have democratic systems and few have human rights abuses as bad as ours? What planet are you on with your fantasy? You compare us the China for example? (personal abuse deleted ed)

  6. Vanessa
    Posted July 30, 2013 at 10:04 am | Permalink

    Why would any sensible business want to throw money at a declining market – EU GDP declining to 7% of world GDP by 2050 and an ageing population !! We need to look elsewhere.
    When the euro collapses (as it will) Cyprus will look like a picnic. Look out for your current accounts, the EU will be looking longingly at any account with more than, say, £10,000 in it ??!!
    Thank God for the Commonwealth and the rest of the world.

    • Peter van Leeuwen
      Posted July 30, 2013 at 12:55 pm | Permalink

      @Vanessa: has eurosceptic become synonym with “prophet”? 🙂
      In which case more practice will be needed, there have been a few blunders in these prophesies.

    • Jerry
      Posted July 30, 2013 at 3:01 pm | Permalink

      @Vanessa: Any currency can collapse, some of us are old enough to remember the UK economic ills of the late 1960s through the 1970s [1], inflation at 25+ % with a Pound Stirling worth less each week – a wise person doesn’t crow at the miss-fortune (or management) of others economies when out own is still very fragile, the only trick the UK has over the EZ countries is that we can unilaterally de-value.

      [1] more than a few people are still alive who remember (the effects of) the economic mess the USA -and then world- was in 80 and 90 years ago after the Wall Street crash.

    • uanime5
      Posted July 30, 2013 at 5:55 pm | Permalink

      Why would people living in countries that don’t use the euro need to worry if they have more than £10,000? This limit only applies when national banks go bankrupt and the Government can’t bail them out.

      • Jerry
        Posted July 31, 2013 at 9:48 am | Permalink

        @U5: I might be wrong but I took Vanessa’s comment to be a suggestion that the EU might try and raid individuals bank accounts like what happened in Greece. I doubt the EU would be that stupid, not twice…

        • Bazman
          Posted July 31, 2013 at 8:10 pm | Permalink

          How about the cutting of benefits to people who have paid for their houses and do not rent as they own assets that could be used to support themselves. Exclusions could be made for the right people such as the middle classes and rich individuals.

    • Lindsay McDougall
      Posted July 31, 2013 at 2:38 pm | Permalink

      It’s perfectly possible for the Euro to collapse slowly, and indeed that would be the least damaging solution. Heavily indebted countries would revert to a national currency and would simultaneously unilaterally convert their Euro debts to national currency. That would be a backdoor partial default because such currencies would be managed to depreciate relative to the Euro. Hopefully, each country would agree a rate of relative depreciation, 5% per annum tops.

      Consider the main alternatives:
      (1) Germany and the other fiscally continent nations make permanent transfer payments to the heavily indebted Member States. Unfortunately, they haven’t the resources to do this.
      (2) The ECB will do “whatever it takes” to save the Euro. If this takes the form of buying dodgy bonds from heavily indebted Member States, then eventually the ECB would have to print Euros to cover the ensuing defaults. The Euro would then become a soft currency.

  7. Anonymous
    Posted July 30, 2013 at 10:15 am | Permalink

    The Japanese warned us that their factories in the UK would be at risk if we pulled out of the EU.

    We want those jobs – but do we really want them at any cost ?

    And just how have the Japanese reached a position whereby they can help to dictate the end of Britain ?

    The counter-point to any federalist’s claim that ‘jobs are at risk if we pull out of Europe’ is that they were more than happy to give away fisheries and farming jobs (and to give away low skilled domestic work to EU citizens too) in furtherance of EU integration.

    • Jerry
      Posted July 30, 2013 at 3:06 pm | Permalink

      @Anonymous: “And just how have the Japanese reached a position whereby they can help to dictate the end of Britain ?

      The 1980s happened, the UK became an assembly plant (for others) rather than a manufacturing nation in our own right… 🙁

  8. Dan H.
    Posted July 30, 2013 at 10:24 am | Permalink

    There’s a simple reason for this, you know. The reason is that the people doing the investing are very, very pragmatic, extremely cold-blooded and almost 100% rational. The point of investing is to take X amount of money and turn it into X plus lots more money, and this not only depends on the businesses thriving but it also depends on the currency that the investment is denominated in also thriving, and finally it requires the target country to respect the rule of law.

    The EU has fluffed the latter one with the haircut imposed on Cyprus; they have clearly shown that they only obey their laws when it suits them. They also display no great clue when it comes to high finance and running a currency; in fact the general expression on the faces of EU officials during Euro crises closely resembles that on the face of a rabbit sitting staring at an oncoming HGV. Those running the Euro quite evidently havn’t got a clue how to fix the problems and are winging it all the damn time.

    Finally we have inductive logic; past performance is quite often a good indicator of future performance if nothing much has changed in the mean time. Most of the EU, especially the Eurozone, is on its arse economically and the politicians there don’t seem to know how to fix it. As long as these conditions prevail, these areas will continue to be moribund. Much of the EU’s ruling system seems dedicated to churning out truly staggering amounts of new law and regulation; this seems to be highly effective in surpressing economic activity (although there does seem to be a lively black market economy and a healthy sub-culture of carousel fraud).

    So, when you look at the Eurozone you see a collection of very dodgy characters whom you wouldn’t trust AT ALL even if you could keep tabs on them all the time, plus no real prospect of economic growth and plenty of things holding it back. Dodgy politicians can be tolerated (especially if they’re smart enough to stay bought once bribed) but only if there’s a profit to be made, and there simply isn’t in the EU. That’s why nobody’s touching it; lots of risk and no profit.

    • uanime5
      Posted July 30, 2013 at 6:03 pm | Permalink

      Actually Cyprus was an example of obeying EU rules. Specifically the rule that Governments only have to guarantee €10,000 per bank account if a bank goes bust because they’ve made too many bad investments.

      Given that the euro crisis had been largely resolved, mainly by bailing out eurozone countries in financial troubles, it seems the EU officials did know what they were doing.

      Most of the EU is recovering after the 2008 financial crisis, though the UK is one of the countries with a poor rate of recovery. By contrast Germany has already exceeded its 2008 GDP levels despite being bound by the same EU laws as the UK.

  9. Peter van Leeuwen
    Posted July 30, 2013 at 10:38 am | Permalink

    I doubt this is a UK phenomenon:
    All investment in the EU is down not just from the UK (see Eurostat)
    Dutch investments outside the EU have traditionally been far larger than those inside the EU. I don’t see this particularly strengthening the eurosceptic case. I bet that German investments abroad are also much larger outside than inside the EU. Germany is not a eurosceptic country.

    • Jerry
      Posted July 30, 2013 at 3:15 pm | Permalink

      @PvR: “see Eurostat

      Yeah, and you know what is said about statistics! At the best of times many are sceptical, put statistics and the EU together and most people trust the lady and her crystal ball more.

      • Peter van Leeuwen
        Posted July 31, 2013 at 9:03 pm | Permalink

        @Jerry: The crystal ball is used more often to look into the future, these statistics are pretty straight forward figures about last year collected in the same way across the EU

    • Neil Craig
      Posted July 30, 2013 at 10:49 pm | Permalink

      I think the German people are pretty Eurosceptic, just not their political class.
      Just like here.
      Just like everywhere they ever have a referendum on the subject.

      Despite theory financial decisions are individual and thus often a better measure of individual opinion than “democratic” ones.

      • Peter van Leeuwen
        Posted July 31, 2013 at 9:05 pm | Permalink

        @Neil Craig: there will be elections soon in Germany and there now is a clear and respectable eurosceptic party, so let us see how eurosceptic the German people will prove to be.

        Reply I doubt they will elect many AFD MPs.

  10. William Long
    Posted July 30, 2013 at 10:46 am | Permalink

    This is a prime illustration of the futility of the debate about our EU Membership over the years. The protagonists on both sides prefer emotion to reason and for the pro camp emotion seems absolute. Logic and numbers get very little place but when they do appear, as in this post, they are very telling indeed and can have only one conclusion: EU membership has very little relevance when it comes to where we perceive the best home for an investment, either direct or portfolio, to be.
    Incidentally I thought Helen Morrissey’s comments in the Telegraph over the weekend were very much to the point, but she comes from an investment background too!

  11. Mark B
    Posted July 30, 2013 at 11:15 am | Permalink

    The EU is a Customs Union. It charges tariffs on goods and services to non-EU/EEA* members making imports more expensive and thereby protecting businesses that would not be able to compete in the open world markets. The EU also creates vast amounts of legislation and bureaucracy which smaller companies struggle to implement and still remain competitive.

    Large Corporate business can arrange to have their tax affairs dealt with in another EU member state thereby obtaining a financial advantage that may not be open to a smaller competitor – think coffee.

    Large Corporate business has the resources to ‘influence’ national and supranational Government policy to better suit themselves.

    To borrow a phrase from one of our hosts Cabinet colleagues;
    “Big business may be in ‘Europe’, but does not need to sell too ‘Europe’.”

    *28 EU members 3 EFTA members

  12. Denis Cooper
    Posted July 30, 2013 at 11:22 am | Permalink

    The basic question is whether overall we would experience any disadvantageous changes to these matters of trade and investment if we left the EU.

    And as our new treaty arrangements would have to be negotiated with the governments of the other EU member states, probably but not necessarily through the general procedures laid down in Article 50 TEU, the answer to that question would depend upon how stupid and malign some of those foreign governments would prove to be.

    Those who constantly say that “the EU would not allow … ” something which would be of mutual benefit, but actually somewhat more to the benefit of the other EU countries than to us, given that we are always running a trade deficit with them, should perhaps realise that they are in effect casting doubt on the intelligence and goodwill of the governments of other EU countries; and in that case why are they still so keen that those supposedly stupid and malign foreign governments shall have an increasing degree of control over the way our country is run?

    I think we need a straight answer from the eurofanatics who post here – they know who they are, there is no need to name them – do you support our EU membership because in your hearts you believe that the governments of other European countries are stupid and malign, or is it because you have faith in their intelligence and goodwill?

    • uanime5
      Posted July 30, 2013 at 6:10 pm | Permalink

      Your attempts to misrepresent what will happen if the UK leaves the EU is fooling no one. China, Japan, and the USA are outside the EU and as a result are subject to tariffs and quotas. The UK will not be treated any differently if we leave the EU. Thus the issue is inside the EU and free trade, or outside the EU and restricted trade; it has nothing to do with stupid and malign, or intelligence and goodwill.

      • Denis Cooper
        Posted July 31, 2013 at 9:45 am | Permalink

        How do you know with such certainty what would happen, that we would not be treated any differently to China by the governments of the other EU member states even though it would actually be in their interests to treat us differently, as a large scale net importer from their countries, and at present they are supposed to be our close friends and allies? So, yes, it does come down to what you think about those governments, and clearly you do not reckon much to their intelligence and goodwill.

        • Bazman
          Posted July 31, 2013 at 8:13 pm | Permalink

          We would end up competing with China on wages and conditions in your fantasy.

          • Edward2
            Posted August 1, 2013 at 9:12 am | Permalink

            Recent articles in the press were showing how the cost gap between China and the USA is narrowing rapidly
            Cheaper energy, higher productivity and reducing state taxes in the USA versus increasing wages, higher shipping costs and problems created by long supply chain at a time when just in time production is needed all means manufacturing is moving back home
            Its not all down to who has got the cheapest labour rate

          • Bazman
            Posted August 2, 2013 at 9:29 pm | Permalink

            This argument of increased costs can also be applied to China their cheaper energy and labour does come at a price of huge pollution and lack of human rights and state support for the population and we can never compete on that, but automation is cheaper then labour as history has proved.

  13. Martin
    Posted July 30, 2013 at 12:50 pm | Permalink

    I wonder how much of the USA/Canada figure is shale gas/oil investments.

    Not very popular in the Tory shires I note!

  14. David Price
    Posted July 30, 2013 at 3:28 pm | Permalink

    Many moons ago when I did a introduction to marketing workshop in a technology company one of the key rules of thumb was if you wanted x% of a market then you had to invest x% of all marketing expenditure in that market. This expenditure would be for R&D as well as sales and marketing.

    So it could be the lousy sales figures are due to the reduced investment rather than the other way round.

    However, direct experience from several sales campaigns in certain European countries suggests to me that it was very high degrees of nationalistic protectionism driving the low sales returns.

  15. Atlas
    Posted July 30, 2013 at 4:11 pm | Permalink

    The recently returned Australian PM, Rudd, made pro the UK staying in the EU noises recently. The sub-text was that without the UK the EU would morph into an even less pleasant place than it is now. I can understand exactly why UK companies invest elsewhere.

  16. uanime5
    Posted July 30, 2013 at 4:14 pm | Permalink

    The large £40bn invested in our own non EU offshore islands (Isle of Man and Channel islands) also reminds us of the power of lower taxes to attract business money.

    All these low taxes areas do is encourage companies to offshore as much of their profits as they can. It creates almost no jobs in these countries, nor is this “business money” invested in these countries.

    Pro EU people always talk about trade in physical goods. They do not talk much about trade in services, where we do far more business outside the EU than in the EU, and always ignore the figures for overseas investment by UK companies.

    According to the ONS between in May 2013 the UK’s worldwide exports in services were worth £16.2 billion and total imports were £10.2 billion, so the UK made a surplus of £6.1 billion. By contrast in May 2013 the UK exported £12.9 billion of goods to the EU and imported £17.3 billion of goods (deficit £4.4 billion). The UK also exported £12.7 billion of goods to the rest of the world and imported £16.8 billion worth of goods (deficit £4.1 billion). This means the UK has had worldwide goods deficit of £8.5 billion in May 2013.

    Oddly ONS provides figures explaining how many goods are sold inside and outside the EU but not for how many services are provided inside and outside the EU. So it’s difficult to determine how much the UK makes in services inside and outside the EU.

    How exactly does the UK profit from overseas investment? Wouldn’t all the tax revenues made overseas go to the overseas country, rather than the UK?

    http://www.ons.gov.uk/ons/rel/uktrade/uk-trade/may-2013/stb-uk-trade-may-2013.html#tab-May-2013

    Tax rates, levels of regulation and the cost of government are amongst the features that put UK business off investing in the rest of the EU.

    Or it could be that UK companies either want to locate somewhere where people speak English or the local population will work for the lowest possible wage.

    They could start by looking at the whole range of policies they pursue that are not business friendly.

    Surely if their policies weren’t business friendly then wouldn’t this cause businesses to leave the EU for non-EU countries. Something that other members of the EU might notice.

    • Denis Cooper
      Posted July 31, 2013 at 9:58 am | Permalink

      “Oddly ONS provides figures explaining how many goods are sold inside and outside the EU but not for how many services are provided inside and outside the EU.”

      Of course they do, go back and look more carefully.

      This is from September 2012:

      http://www.globalbritain.org/BNN/BN80PinkBook12pdf.pdf

      and uses data from the July 2012 Pink Book.

  17. Mike Wilson
    Posted July 30, 2013 at 6:21 pm | Permalink

    If, for some absurd reason, after Brexit, the Japanese stopped investing in car production in the UK and, gradually, over 20 years or so, moved production to mainland Europe … surely it is not beyond the wit of Britain to create our own cars again.

    It’s not the 1960s or 1970s any more.

  18. zorro
    Posted July 30, 2013 at 7:00 pm | Permalink

    John, I shouldn’t worry about the investment environment. I saw on the BBC News at 6 that there is a Director for Measuring National Wellbeing and we can afford that job apparently….

    zorro

  19. Edward.
    Posted July 30, 2013 at 11:04 pm | Permalink

    I was talking to my cousin, he is very concerned about certain EU nations leaving the zero – if they do so, he worries about remuneration/ payment for his goods being made – if and when the inevitable devaluation occurs.

    He is halting exporting to most EZ countries in the club Med and elsewhere and concentrating on seeking new markets for his goods.

    He, as a businessman is not alone.

  20. Alte Fritz
    Posted July 31, 2013 at 5:09 am | Permalink

    Oh, those pesky facts again! I hope you will beat the drum long and loud on this. One can see the EU propaganda machine at work again. Who can forget “Jobs for the boys” in 1975?

  21. Martin
    Posted July 31, 2013 at 11:13 am | Permalink

    Another explanation for all your figures might be that the Dollar is under valued against the Pound/Euro. (The Dollar are contains other currencies which are pegged to it.)

  22. Normandee
    Posted August 1, 2013 at 11:55 am | Permalink

    Your comments section when discussing the EU have become a comedy special, is that because of the uselessness of asking you what, apart from say no in un-winnable votes, you are going to do about it ? “Having the courage of your convictions”, “putting your money where your mouth is ” you will not achieve anything within the conservative party, give up on that dream. Have you written to the 1922 Committee yet? no I thought not .

  23. Lindsay McDougall
    Posted August 1, 2013 at 2:01 pm | Permalink

    People invest in countries and companies where they anticipate an increase in demand and need to increase supply. The Euro zone hardly fits the bill, does it?

    • sjb
      Posted August 3, 2013 at 2:36 pm | Permalink

      Hmm. A few days ago an Cambridge University economist wrote:

      “[…] output has more than recovered to pre-crisis level in many eurozone countries, including France and Germany, while UK output is still 3.3% less than what it was at the beginning of 2008.

      It gets worse. During the past five years, the UK’s population has grown by 3%. This means that, on a per capita basis, the country’s income is 6.3%, not just 3.3%, less today than it was five years go. “

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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