Small businesses have most to gain from staying in the EU

  • Small firms need stability and certainty to continue growing, not the economic damage and disruption that leaving the EU would bring.

  • BIRA Annual Conference
    Chateau Impney Hotel, Droitwich, Worcestershire

    Chuka Umunna MP

Check against delivery

Thank you so much for inviting me to speak to you this morning.

It’s a pleasure to be invited by BIRA which I was pleased to work with whilst Shadow Business Secretary, particularly when setting up Small Business Saturday UK in 2013.  Small Business Saturday has since become a successful annual event pushing hundreds of millions of pounds of trade to businesses like yours every year.

You may have noticed there is a certain referendum campaign in our midst – that little issue of our future membership of the European Referendum.

I was debating this topic with Nigel Farage a couple of weeks ago and was accused of being a Remainian since I am campaigning as a political champion of the Britain Stronger In Europe.  I’ve been called far worse by the extreme Left and Right on twitter and am a proud remainian!

I was asked to talk to you today about the referendum.  I know that most, though not all, BIRA members are small businesses so I want to make the small business case for Britain remaining in the EU.

Often it is claimed that micro, small and medium sized businesses are more in favour of leaving Europe than bigger businesses, who favour remaining.

But there is no evidence for this. Not only are the polls clear – a majority of small and medium sized businesses consistently support staying in Europe – so is the logic.

The Single Market

Britain’s home market is the EU’s ‘single market’. Small businesses benefit from the single market as it offers tariff-free trade, full access to the EU goods and service markets and the UK has regulatory influence so it can promote and defend your interests.

These are benefits that would otherwise be lost if we left the single market.

This is the central economic argument of this campaign. Outside, we could trade with the EU, but we would not be in the EU’s single market. And if we’re not in the single market we wouldn’t be able to trade as freely and we’d have no say over the rules of doing business, because the other 27 countries in the EU have made it clear they won’t give us a better deal than the one they have themselves.

The impact on retail would be stark.  Growth in the sector is already slow.  Losing the benefit of our current trading arrangement with the EU could harm growth further by pushing up prices.  At the moment 28% of produce on high street shelves comes from the EU.  Our biggest imports which fill your shelves are food and drink – for example £2.2bm worth of wine imports, £1.4bn worth of cheese and £1.1bn worth of chocolate.  If we left the EU, yes, we could keep these imports coming under World Trade Organisation rules but these products would face import tariffs and drive up the prices you have to charge customers.

So the choice is: trading with the EU with more barriers, no influence, and tariffs or trading in the single market, with free trade and a say over the rules.

A stable economy

But why is this so important for small businesses?

Small firms need stability and certainty to continue growing, not the economic damage and disruption that a leave vote would bring. The London School of Economics has warned that leaving the EU could make the UK economy 9.5% smaller – similar to the damage suffered during the 2008/9 global financial crisis. Any small business person considering how to vote will remember the pain that downturn caused.

Small businesses are also more globally-minded than ever before and Europe is their largest export market. Of all British small and medium-sized businesses that export, 88% do so to the EU. And UK start-up businesses that trade are also disproportionately reliant on the EU.

Now, the leave campaigns say this doesn’t matter – that only a small proportion of small businesses export direct to Europe, but they overlook that businesses aren’t islands.  They are interconnected and interdependent. Millions of small firms supply larger exporting companies, many of whom export to the EU. The knock-on effects of a vote to leave the EU would therefore hurt small businesses in those supply chains. And when exports are hit in one part of the country, a supplier, and their employees in another part suffers.

Future gains

And while small businesses benefit today, there are also opportunities around the corner as the single market develops across new sectors.

Independent research estimates show further deepening the single market could deliver £58.6bn to the UK economy by 2030 and an additional 791,000 jobs.

For example, eradicating inefficiencies in the EU’s transport and tourism sector will bring annual benefits of almost £1.9bn to the UK by 2030.

Outside of Europe we would lose this.

Of course, we know the EU is not perfect and we want to see reform. It must improve access to new markets, facilitate access to finance and promote competition and innovation. Still, the benefits of today and tomorrow far outweigh the risks. 

Common EU rules

But it is not just the benefits of being in that disproportionately benefit small businesses. The risks of leaving are disproportionately threatening.

The sectors which are most exposed to the dangers of Britain leaving Europe have a huge number of small businesses in their supply chain. 80% of the Society of Motor Manufacturers and Traders’ membership is made up of them, for example.

Small firms benefit from a simple set of rules like those in the Single Market, which give easy access to a market of 500 million people. The benefits of harmonisation and not having multiple production lines due to differing product standards disproportionately benefit those with the smallest balance sheets and least able to absorb increased production costs.

Indeed, it could become a disincentive to export to the EU if different regulatory systems had to be adapted to each time a new market opportunity opened up.

What’s more, funding for small firms could be at risk in case of Brexit. Firstly, small firms would be cut off from the myriad of EU schemes that support small firms. But more importantly, the Bank of England has warned that Brexit could lead to a rise in interest rates, which would hurt funding for small firms.

Lastly, being outside the EU with no formal channels for influence would be particularly harmful to smaller firms who, unlike the larger companies, are less able to influence decision-makers domestically or in Brussels.

Growing small business support to stay in

So it is perhaps no surprise, therefore, that poll after poll shows that small businesses support remaining in Europe.

The Leave campaigns like to claim business opinion is split down the middle on the EU but this is deliberate misinformation. If they were retailers, Leave campaigners would be reported to Trading Standards.  Their dodgy goods, sold with the complicity of some of our print media, need more scrutiny than they’re currently receiving.

Polls from business organisations including Tech UK, the EEF and, just this week, the Institute of Directors, have all shown overwhelming support amongst businesses for being in Europe.  Even after the row following the exit of their former Director-General to join Vote Leave, a clear majority of those surveyed by the British Chambers support Britain remaining in the EU.

So, no matter which way Leave campaigners try to spin it, British business overwhelmingly wants us to stay in.

Myth debunking

Let’s look at some of the other claims that are made.

They claim we have no influence within Europe and lose sovereignty. The fact is this: in the last Parliament just four Acts of Parliament, of a total of 121, were to exclusively implement EU law.

“To enter into commercial obligations and treaties is an exercise of sovereignty, not derogation from it.” These words were said by Margaret Thatcher in 1962 whom so many of the Brexiters worship.  You will not hear me say this often, but she was right then and she is right now on that.

National power and influence are directly proportionate to the strength of our international partnerships. Does signing the UN Convention against Torture, joining the UN or adhering to NATO’s Article 5 undermine our ability to control our own destiny? If you take the Leave campaigns’ argument to its logical conclusion, the most sovereign nation in the world is North Korea.

Next, they claim that leaving is risk-free and that we would get a free trade deal with the EU, but they have put forward the fantasy that we can have all of the benefits and none of the costs.

Everything we sell, 44% goes to the EU, whereas 8% of EU exports come to us. Given this balance, is it really in EU nations’ interests to give Britain a better deal than they have, once we have walked away?

They claim the UK can end free movement, end budget contributions and end regulations, while still having access to Europe’s market for free.  When Germany and France want to protect their domestic industries and also stave off their own extreme Eurosceptic movements, can you see them handing us the keys to the single market for free?

And then they point to the economies of our EU partners, particularly those in the Eurozone and claim they are all basket cases – stay in the EU and we will all go the way of Greece, or end up with Spanish levels of unemployment.  Greece and Spain are in the Euro, we are not.

Far better to make comparisons with the third of EU countries not in the Eurozone like us.  What about Sweden which invests more than double the UK in R&D at present or Denmark which, whilst we have had a record trade deficit, has enjoyed a trade surplus for more than 15 years. I’m proud of our country and our achievements but let’s not pretend we can’t learn from others and don’t have economic imbalances that need addressing.


In conclusion, I want to say something about your role in this referendum. As businesses I would encourage you to play a full role in this referendum debate and let your employees and customers get your thoughts on  how it will affect your business.  This does not mean instructing them how to vote but it does mean providing them with your take on what it means for their job or their local shop to inform how they decide to vote on June 23rd.