David Cameron has promised a referendum on the UK’s membership of the European Union
Britain’s banks have launched a strong intervention in the debate over the nation’s membership of the European Union, calling for closer ties with Brussels and urging the government to raise its game in order to make the single market work.
The British Bankers’ Association has sent a submission to a Treasury review that counters fears over the split of powers between London and Brussels, saying the current balance was “broadly appropriate”. It added there was an “overwhelming” case for more resources to be devoted to relations with Europe and warned that the UK was significantly underpresented in Brussels.
In a sign of the concern in the City over the outcome of David Cameron’s pledged referendum on EU membership, Citigroup has separately made an explicit warning to the Treasury about the costs for the UK economy if Britain were to leave Europe.
Citi said that if the UK were to disengage significantly or completely from the single market the implications could be “dramatic”. The UK population would face a drop in living standards as a result of lower wages or a weaker pound so that the same export performance could be maintained within the EU.
Jim Cowles, Citi’s chief executive for Europe, the Middle East and Africa, told the Financial Times of “mounting concern” among clients about their ability to continue using the UK as a regional hub if the country were to exit.
“It’s not that international companies will stop investing in Britain, but their investment just won’t be at the scale we have become accustomed to,” he said.
The Citi and BBA interventions were made in submissions on financial services to the government’s “balance of competences” review, which assesses the division of powers between Westminster and Brussels.
They come as City figures watch the growing rift within the Conservative party over how to recast the UK’s relations with Europe. A group of MPs wrote to the prime minister this month demanding a veto over EU legislation.
Some Conservative MPs – along with the UK Independence party – have been dismayed by the initial wave of reports from the “balance of competences” review published last July which concluded that the balance of powers was broadly correct in six policy areas. The report on financial services is expected to be published in the summer.
The BBA warned of a sharp decline in the number of Britons working in European institutions – a concern shared by George Osborne, chancellor. It added there was an “overwhelming” case for the UK to devote more resources to boosting Britain’s influence in Europe
“The single market for financial services is a significant factor in the success of the UK as a financial centre and therefore of considerable value to the UK economy,” the City trade body said.
The BBA paper, seen by the FT, details a number of concerns about EU processes, including over the possibility of diverging interests between countries inside the single currency’s Banking Union and non-euro members.
It also argues that, while the balance of powers between London and Brussels was broadly correct, tpowersers were “not always exercised consistently”. It added that action on retail financial services should only to be taken at an EU level where the benefits can be “clearly demonstrated”.
Mr Cowles said: “Jobs and the growth of Britain’s economy depend on maintaining and increasing exports to the EU, particularly as the European economy begins to recover. This will be a much more difficult task if businesses have to contend with a Britain that has decided to exit the EU. Existing trade arrangements will be at risk and Britain will have no influence in making the rules in the future.”
Mr Osborne has insisted on changes to voting rules to protect the interests of non-eurozone countries – for instance in the field of banking regulation – and has gone to the European Court of Justice to oppose policies which he says are discriminatory in favour of eurozone countries.
The chancellor agrees that the City is best served by British engagement in a reformed EU, but Britain’s future membership has been called into doubt by David Cameron’s pledge to hold an in-out referendum on Britain’s membership in 2017.
Mr Osborne is concerned about the dwindling number of senior British officials working at the European Commission: indeed many of them are nearing retirement age, having joined the EU bureaucracy after Britain joined the club in the 1970s.
The fact that more decisions are being made at a eurozone level – with Britain excluded – has made a career in the EU civil service less attractive to Britons, in spite of efforts by the Foreign Office to rectify the situation.
The BBA cites figures showing that the number of UK nationals on the staff of the European Commission has fallen 24 per cent in seven years and stands at 4.6 per cent of the total – against 9.7 per cent for France.