Businesses offer cautious backing over PM’s handling of Eurozone crisis

PA 396/11

Small businesses and their advisors appear to have backed the Government’s stance over the Eurozone crisis, a survey has shown.

Respondents quizzed by the UK Business Barometer (UKBB) run by the University of Nottingham’s Institute for Enterprise and Innovation (UNIEI) seemed to indicate that they expect the Prime Minister’s veto on EU-wide treaty changes on Eurozone rules during recent crisis talks to have little impact on their day-to-day business.

More than two-thirds of small and medium-sized businesses (67 per cent) told the survey that they believed the situation in Europe would affect their business neither positively nor negatively.

However, they were slightly less optimistic about the effect that it may have on the UK economy as a whole with just over one-third (41 per cent) predicting it could have a negative impact.

While opinions seemed split on whether David Cameron’s move would isolate the UK, individual comments showed an appreciation of the difficult political backdrop against which the Prime Minister is making decisions on the UK’s future in Europe.

One business person commented: “I don’t think the UK had any other option. The UK is constantly being railroaded into decisions without any reference to democratic processes and into structures/policies that are often not working. At some point we had to have the courage to say ’no’ and significant issues of sovereignty were at stake. The treaty issue was one for those in the euro rather than outside it.”

Another added: “My concern is that the UK will now be blamed for all the European ills. I am also concerned that obstacles will be put in the way of UK exports. However, I do not see that David Cameron had much choice and that, in the short term, we may escape the worst of the crash when Greece defaults. Perhaps is it the least worst option.”

However, others voiced concerns over the Government’s policy on Europe, branding it as ‘short-sighted’ and demonstrating an outdated ‘little Englander’ mentality.

A view summed up by one respondent who said: “A position of ‘splendid isolation’ does not feel helpful, particularly as the government are also extending cuts in spending. Where is the drive for economic stimulation? It feels like business is being held back both at home and abroad now by a government that is only focussed on protecting banking.”

The views of business people were echoed by those of advisers responding to the sister survey the UK Business Adviser Barometer (UKBAB), with 70 per cent agreeing that the Government’s stance would affect their clients’ businesses neither positively nor negatively, while 44per cent said that it may have a negative impact on the UK economy more generally.

However, their comments do reflect worries about the future if the UK continues to move away from its European neighbours.

One adviser said: “I feel UK businesses will suffer as SMEs are not very good at exporting and with Europe being our nearest and largest market, a feeling of negativity towards us by European buyers will do us harm.”

Another said: “The bigger question, however, is what direction will the economy of Europe take in the next 1–2 years. My clients who sell into Europe are really worried about a recession or worse in Europe, not sure what happens to the City or changes to bank regulation.”

Another adviser voiced their concerns, adding: “There is a risk that in the long term those outside the EU will perceive the UK as being at the periphery of the single market and at risk of isolation by the other EU member states. This could adversely impact upon investment decisions.

“It is understandable that in the short term the government continues to focus attention on the City because fears around a further banking collapse. However, in the medium and long-term the government will have to focus its attention on rebalancing the economy away from financial services. It cannot do this without the UK being at the centre of Europe.”

The UK Business Barometer (UKBB) and the UK Business Adviser Barometer (UKBAB) provide a snapshot of how small and medium-sized businesses are coping with the current state of the economy and aim to uncover the key issues affecting the small business market. Operating over the web means that results can be rapidly generated and the surveys have unique software that enables results to be processed and posted on their respective websites immediately they arrive.