Britain and the European Union What SMEs think

Britain and the European Union What SMEs think Sponsored by

About Business for Britain Business for Britain exists to give a voice to the large, but often silent majority among Britain s business community who want to see fundamental changes made to the terms of our EU membership. We are independent and non-partisan, involving people from all parties and none. We reflect the views of thousands of business leaders, from FTSE 100 companies to SMEs and start-ups, who between them employ 1.1 million people in the UK. By pushing these voices into the mainstream debate, Business for Britain demonstrates to the public that many UK business leaders want a better deal for Britain from the EU renegotiation and are willing to fight to achieve that change. To arrange broadcast interviews or for more information, please contact: Robert Oxley, Campaign Director, Business for Britain robert.oxley@forbritain.org 07544 933 215 About the research figures, unless otherwise stated, are from Perspective Research Services. Total sample size was 601 business leaders. Fieldwork was undertaken in August 2015. The figures comprise of adults from a sample of owners of Small and Medium sized Enterprises (SMEs): sole traders (30%), employees (25%), employees (25%) and employees (20%). It should be noted that these weightings may favour the pro-eu argument. the data contained within this document is judged to be a wide enough cross-section of the target population and can therefore be considered statistically reliable unless otherwise stated. 2

Foreword A referendum on EU membership is due by the end of 2017. A key voice in this debate will be that of business leaders, as they are the people that the public will turn to for advice about the impact that either a vote to leave or a vote to remain could have on jobs and living standards. It is very important that the public knows what business thinks about Britain s membership of the EU. There have been lots of attempts by various organisations to speak for British business in this debate. There have been numerous polls and surveys although, sadly, they have often left out SMEs. Organisations like the CBI, which purport to be the voice of business, often relegate SMEs to the margins, if they include them at all in their surveys. The views of large businesses and multinationals often dominate such surveys. SMEs account for over 99% of British businesses and over 60% of all private sector employment in the UK. Any poll which doesn t give them a strong voice is, quite simply, not credible. This poll is an attempt to rectify this failure, by giving a voice to SMEs. It focuses solely on those who employ less than 250 people and gives similar weighting to those who are sole traders, those who employ between 1 and 9 people, those who employ between 10 and 49 people and those who employ between 50 and 250 people. The picture that this poll produces is one of an SME community that is very sceptical of the EU. SME leaders firmly believe that the EU hinders rather than helps their businesses. They reject the rationale for the single market, they want to see the burden of regulation reduced and also want to see fundamental changes made to Britain s membership. They also want to see the British Government back in charge of key policy areas, including employment law, working qualifications and health and safety regulation. I hope this document will serve as a useful guide for people looking to understand what the SME community thinks. It is clear that SMEs are very sceptical of the benefits of EU membership and want to see a lot more powers returned. The priority for the Government, as it conducts its renegotiation, should be to secure reforms that meet the expectations of those who keep Britain in work. I would like to express my gratitude to Shore Capital, whose generous sponsorship has made this work possible. The conclusions of the publication are ours alone, but we are grateful that they recognised the great appetite among voters for an informed assessment of this major turning point for the country. Matthew Elliott Chief Executive, Business for Britain 3

Contents page Executive Summary... 5 1. SME leaders say that the EU hinders their businesses... 6 2. SME leaders want the Government to regain control over key EU competences... 7 2.1 Employment Law... 8 2.2 Working qualifications... 8 2.3 Health and safety... 9 3. SMEs believe that cutting regulation would benefit their businesses... 9 3.1 SME leaders say that fewer regulations will allow them to improve their businesses... 9 3.2 SME leaders are concerned about health and safety regulations... 11 4. SME leaders believe that the UK should regain power over trade deals... 13 4.1 SME leaders believe the British Government will best protect our trading interests... 14 4.2 although most SMEs are not planning to export at all... 15 4.3 SMEs reject the rationale for the single market... 15 5. SME leaders want fundamental changes made to Britain s EU membership... 17 5.1 SME leaders believe that meaningful change requires Treaty change... 17 5.2 SME leaders would like to see a much less integrated EU... 18 6. SME leaders think that immigration from other EU countries to the UK has had a positive impact on their businesses... 19 7. The views of FSB members... 19 8. The views of SME leaders who are also members of their local Chambers of Commerce... 20 9. The views of IoD members... 21 10. The views of CBI members... 22 Conclusion... 23 Annex: Methodology... 24 Who we polled... 24 Fully representative of where UK SMEs are based... 24 A fair representation of SME sizes... 25 A proper cross-section of industry sectors... 25 4

Executive Summary Key findings By 41% to 20%, SME leaders believe that the EU is hindering their businesses rather than helping. SME leaders overwhelmingly want the UK to control employment law (84%), working qualifications (81%) and health and safety regulation (79%). 42% of SME leaders think that, if regulation was cut, they would be more likely to employ more staff. 45% of SME leaders think that it is more likely that they would increase the pay of good staff and 40% think that they would be more likely to keep staff during tough times. By 74% to 22%, British SME leaders believe that the British Government should handle international trade deals, not the EU. By 69% to 25%, SME leaders think that the UK can trade and cooperate with the EU without giving away powers. By 70% to 17%, British SME leaders believe that meaningful change requires Treaty change. 54% of SME leaders would either like the EU to be a less integrated free trade area or complete withdrawal from the EU. Just 25% would like greater EU integration. By 40% to 22%, SME leaders believe that immigration from other EU countries has had a positive impact on their businesses. By 48% to 28%, CBI members believe that the EU hinders their businesses rather than helps them. According to the poll, CBI members, FSB members and IoD members all support the UK taking over responsibility for making trade deals and reject the premise of the single market. Perspective Research Services polled 601 SME leaders on behalf of Business for Britain at the end of August 2015 to gauge their opinions of Britain s relationship with the EU and wider world. The poll was designed to give equal weight to the categories of sole traders; those who employ people, those who employ people and those who employ people. The poll was broadly representative of the locations and sectors in which the SME community is based. Overall, this poll of British SME leaders, the most comprehensive ever done on the EU issue, reveals that the SME community believes that the current terms of Britain s EU membership are harming their businesses. SMEs are keen to see fundamental changes in the terms of Britain s membership of the EU. This can only be secured via Treaty change. 5

1. SME leaders say that the EU hinders their businesses The EU produces a very large amount of regulation which hinders many SMEs. An Open Europe study produced in 2010 estimated that EU regulation introduced since 1998 will cost the UK 184bn between 2010 and 2020. 1 EU regulation is not only expensive, but also time consuming for many business owners. A Business for Britain study produced in 2014 found that, since David Cameron became Prime Minister in May 2010, the EU has introduced over 4,700 regulations that affected British businesses, amounting to over 19.8 million words. 2 The disadvantages that the EU s regulations have produced have been recognised by the Government. In the foreword of the report Cut EU Red Tape produced by the Government s Business Taskforce in 2013, a number of prominent business people, including Ian Cheshire (Kingfisher), Mark Bolland (M&S) and Paul Walsh (Diageo), asserted that businesses were Often encumbered by problematic, poorly-understood and burdensome European rules. The impact is clear: fewer inventions are patented, fewer sales are made, fewer goods are produced and fewer jobs are created. The burden also falls heaviest on small and medium sized firms who make up the vast majority of businesses. 3 Perhaps unsurprisingly, when we consider these facts, our poll showed that many SMEs are sceptical of the EU. Our poll shows that SMEs believe by 2:1 that the EU hinders their businesses. Overall, do you think each of the following levels of Government helps or hinders businesses like yours? - The European Union institutions Helps 20 17 18 19 27 Hinders 41 36 40 45 45 It depends / Don't know 39 47 42 36 28 This is in stark contrast to SME attitudes towards other levels of Government. The poll shows that the majority of SME leaders think that both local Government and National Government actually help their businesses: 1 Open Europe, Still out of Control? Measuring eleven years of EU regulation, June 2010, p.1, found at <http://www.openeurope.org.uk/content/documents/pdfs/stilloutofcontrol.pdf> 2 Business for Britain, Cutting red tape: is the EU listening?, found at <http://forbritain.org/euredtape14.pdf> 3 Cut EU red tape Report from the Business Taskforce, October 2013, p.5, found at <https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/249969/taskforce-report-15-october.pdf> 6

% Overall, do you think each of the following levels of Government helps or hinders businesses like yours? - Local Government e.g. Council Helps 36 32 32 41 41 Hinders 28 28 37 29 18 It depends / Don't know 35 40 30 30 42 Overall, do you think each of the following levels of Government helps or hinders businesses like yours - National Government in Westminster Helps 34 27 37 36 41 Hinders 33 37 31 36 28 It depends / Don't know 32 37 32 28 32 50 Overall, do you think each of the following levels of Government helps or hinders businesses like yours? 40 30 20 10 0 Local Government Westminster EU Helps Hinders It depends / Don't know 2. SME leaders want the Government to regain control over key EU competences Since the UK joined the then European Economic Community (EEC) in 1973, it has seen a steady transfer of powers from the British Parliament and courts to the EU s institutions. Successive Treaty changes have seen the EU gain control over more and more policy areas. This has resulted in a substantial increase in regulation: Business for Britain has calculated that 64.7% of all laws introduced in the UK between 1993 and 2014 came from the EU. 7

According to the UK Government, 50% of all UK legislation with a significant economic impact originates from EU legislation. 4 The poll shows that SME leaders want to see powers returned in four key areas: employment law, working qualifications and health and safety. 2.1 Employment Law The EU has considerable remit over employment law. The Treaty on the Functioning of the European Union grants the European Parliament and the Council of Ministers the power to make social policy which supersedes national law. The EU uses this power to set out minimum requirements for working and employment conditions as well as stating what information employers have to provide workers. The Working Time Directive 2003/88/EC is probably the most controversial example of EU employment law, setting out minimum daily rest periods and the maximum number of hours that can be worked in a week. At the moment, in the UK, individual workers can opt out. However, this freedom is under constant review by the European Commission. Parliament and Council Directive 2008/104/EC on temporary agency work is also cited as an example of legislation that imposes substantial costs on British businesses. Thinking about the UK Government and the EU, who do you think should be in control of each of the following? - Employment Law UK Government 84 83 87 86 80 European Union 13 11 12 10 20 Don't Know 3 6 1 4 0 2.2 Working qualifications The EU has the power to regulate working qualifications under articles 46 and 50 of the Treaty on the Functioning of the European Union. This imposes substantial costs on British businesses. For example, Parliament and Council Directive 2005/36/EC makes rules for the common recognition of professional qualifications throughout the EU including medicine, dentistry, pharmacy and architecture, while Council Directive 1977/249/EC makes similar provision in respect of lawyers. Thinking about the UK Government and the EU, who do you think should be in control of each of the following? - Working qualifications UK Government 81 82 79 84 78 European Union 15 13 17 13 19 Don't Know 4 6 4 3 3 4 Cited in House of Commons Library Research Paper 10/62, How much legislation comes from Europe?, 13 October 2010, p. 1, found at <www.parliament.uk/briefing-papers/rp10-62.pdf> 8

2.3 Health and safety Article 153 of the Treaty on the Function of the European Union gives the EU the power to support and complement the member states in the field of health and safety. This was infamously the legal basis on which the EU adopted the Working Time Directive over the British veto. Council Directive 1989/391/EC applies to all sectors of economic activity, placing employers under a duty to ensure employees health and safety at work, to undertake risk assessments, to keep a list of accidents, to draw up reports and engage in workplace consultation. It also requires certain employees to be designated by their employer to carry out certain activities to ensure health and safety. Examples of items that have been subject to specific European health and safety laws include: transportable pressure equipment, electrical equipment, machinery, lifts, personal protective equipment, welded unalloyed steel gas cylinders, pressure vessels and aerosol dispensers. Thinking about the UK Government and the EU, who do you think should be in control of each of the following? - Health and Safety UK Government 79 80 87 76 73 European Union 19 17 12 24 26 Don't Know 1 3 1 0 1 3. SMEs believe that cutting regulation would benefit their businesses SME leaders are very clear that, were the burden of regulation to be reduced there would be benefits for both their businesses and for their employees. The poll shows very clearly that, were regulation to be cut, SME leaders think that they would be more likely to employ more people, increase the pay of good staff, increase the amount of overtime available to staff, keep staff on during tough times and invest in their businesses. 3.1 SME leaders say that fewer regulations will allow them to improve their businesses If your business faced fewer regulations, would you be more or less likely to take each of the following actions? - Recruit more staff More likely 42 35 48 46 38 Less likely 7 6 11 8 6 No difference 48 54 38 46 53 Don t know 3 5 3-3 9

If your business faced fewer regulations, would you be more or less likely to take each of the following actions? Increase the pay of good staff More likely 45 40 50 52 38 Less likely 5 3 7 7 6 No difference 47 53 40 41 53 Don t know 3 4 3-3 If your business faced fewer regulations, would you be more or less likely to take each of the following actions? Increase the amount of overtime available to staff More likely 25 21 31 27 23 Less likely 8 4 11 9 8 No difference 64 71 55 64 65 Don t know 2 3 3-4 If your business faced fewer regulations, would you be more or less likely to take each of the following actions? Keep staff on during tough times More likely 40 31 46 46 40 Less likely 7 4 10 7 5 No difference 50 61 42 46 50 Don t know 3 4 2 1 5 If your business faced fewer regulations, would you be more or less likely to take each of the following actions? - Invest in your business to help it grow More likely 53 48 62 59 43 Less likely 5 6 6 4 3 No difference 39 42 30 35 51 Don t know 2 4 1 1 3 10

% 70 If your business faced fewer regulations, would you be more or less likely to take each of the following actions? 60 50 40 30 20 10 0 Recruit more staff Increase the pay of good staff Increase the amount of overtime available to staff Keep staff on during tough times Invest in your business to help it grow More likely Less likely No difference Don t know 3.2 SME leaders are concerned about health and safety regulations The poll also asked SME leaders to state which legal requirements were the hardest or most expensive for their businesses to comply with. Which regulations or legal requirements are the hardest, or most expensive, for your business to comply with? Please list up to three. employees employees Health and Safety 28 23 28 35 27 Employment/Employment 10 6 7 12 15 law Industry specific 9 7 7 15 9 regulations/legal requirements e.g. Membership of governing body, Care regulations, Gambling regulations, Cosmetic Directives, Licenses etc. Pensions / Autoenrolment etc. 8 4 11 11 8 11

Minimum wage / Wage 6 2 7 7 9 regulation / Living wage Insurance / Professional 5 9 5 4 1 indemnity / Public liability etc. Taxation / Taxation rules 5 7 2 7 3 Training 5 2 6 8 5 VAT / VAT returns 4 3 8 3 3 Maternity / Paternity 2 2 3 2 4 pay/leave Accounts / Accounting 2 2 3 1 2 Waste disposal / Waste 2 4 1 3 - management / Recycling / WEEE Mention of EU Meeting 2 2 3-5 EU standards/regulations Working hours 2 1 2 3 4 Business rates 2 2 3 3 - Environmental 2 1 3 2 3 Financial regulations / 2 4-1 2 FCA standards Employment of foreign 1 1 1 3 3 nationals Sick pay/leave 1 1 1 1 3 National Insurance 1-1 2 1 contribution Banks / Bank restrictions 1 1 1 1 2 Administration 1 2 1 1 - Transport 1 - - 3 1 PAYE 1-1 2 - Corporation Tax / 1 1-2 - Corporation tax returns Data Protection 1 1 1 1 - Equality / Discrimination 1 1 1-2 Red tape - 1 1-1 Energy - 1-1 1 Duty/Customs Duty - - 1 1 - Import/Export regulations - - 1 1 1 Immigration - - - - 3 Other tax - 1 1 - - Safeguarding / Checking - 1 1 - - everybody to make sure they are suitable to work with children Currency - - - 1 1 Risk assessment - - 1 1 - ISO - - 1 1 - Holiday pay/leave - - 1-1 Checking of criminal records - - 1-1 12

1958 1963 1968 1973 1978 1983 1988 1993 1998 2003 2008 2013 Disability access - 1 - - 1 Fire safety/regs - - - 1 - Other 10 9 8 11 13 Dk / None 33 43 30 25 33 4. SME leaders believe that the UK should regain power over trade deals For several years, the EU has declined in importance as a trading partner for the UK. More and more exports today go to countries outside of the EU, with our continental partners now accounting for less than 50% of total UK exports. 70% 60% 50% 40% 30% 20% 10% Destination of UK exports 1958-2013 0% EU North America Rest of the World Source: Change, or go While it would be useful, therefore, for the UK to have the freedom to strike trade deals with non-eu countries, this is currently impossible. Under the current terms of EU membership, the EU has sole control over the UK s trading relationship with non-eu countries. Advocates of EU membership claim that, by being part of a bloc, the UK has more clout in trading negotiations. This is simply not born out by the evidence. Countries outside the EU, such as Iceland and Switzerland, have had far more success in negotiating trade deals with countries outside the EU. Both, for example, have signed a free trade deal with China, something that the EU has failed to do. Our polls shows that SME leaders are unhappy with this status quo. 13

4.1 SME leaders believe the British Government will best protect our trading interests Article 3 of the Treaty on the Function of the European Union gives the EU exclusive power over the common commercial policy, namely international trade. The EU is a customs union, meaning that member states cannot sign their own free trade deals with third countries but are instead obliged to implement the EU s common external tariff, which is fixed by the Council of Ministers on a proposal from the Commission. Which one of the following statements do you think is more persuasive? The EU should handle negotiations on international trade agreements on behalf of all member 22 19 18 25 28 countries, because Britain gains by joining forces with Europe The British Government should handle negotiations on British trade agreements not 74 74 80 73 68 the EU because a British Government will best protect our interests. Neither 3 5 1 3 5 Don t know 1 2 1 1 2 14

Who should handle negotiations on international trade agreements? 3% 1% 22% 74% EU Neither British Government Don t know 4.2 although most SMEs are not planning to export at all It should be remembered that the majority of businesses do not export. Business for Britain found in 2013 that less than 5% of British businesses export to the EU. 5 This poll shows that while 50% of SMEs are ambitious to increase trade, only 33% are planning to target the EU. The bulk of SMEs are not planning to export at all. Thinking about the future, will your company prioritise increasing its trade with countries inside or outside of the EU? With countries 33 36 32 31 34 in the EU With countries 17 13 15 21 19 outside the EU Will not 47 48 50 47 43 prioritise either Don t know 2 3 2 1 3 Yet, despite this fact, all British businesses are expected to comply with the burden of the EU s single market regulations. 4.3 SMEs reject the rationale for the single market Historically, business polls have shown that businesses are unconvinced by the fundamental rationale for the single market. In 2004, an ICM poll for New Frontiers Foundation found that 74% of businesses thought that business regulation should be the responsibility of the British Parliament and only 22% thought that EU-wide rules were needed to create a level playing 5 Business for Britain, Setting out the British Option, M. Elliott and O. Lewis, found at <http://forbritain.org/britishoption.pdf> 15

% field. 6 This poll shows, once again, that most SMEs simply do not believe that there need to be common EU standards in order to facilitate trade across Europe. Which one of the following statements do you think is more persuasive? Common EU rules 25 19 23 29 28 make trade and business easier, and the single market is good for jobs and living standards. We can trade and 69 70 72 67 68 cooperate with Europe without giving away permanent control over the economy to politicians we can t vote out Neither 3 6 3 3 3 Don t know 3 5 3 1 2 Which one of the following statements do you think is more persuasive? 80 70 60 50 40 30 20 10 0 employees employees Common EU rules make trade and business easier, and the Single Market is good for jobs and living standards We can trade and cooperate with Europe without giving away permanent control over the economy to politicians we can t vote out Neither Don t know 6 ICM poll for New Frontiers Foundation, 2004 16

5. SME leaders want fundamental changes made to Britain s EU membership When he promised a referendum in his Bloomberg Speech of 2013, David Cameron made clear that the changes that he envisioned would require a change to the EU s Treaties: The European Treaty commits the Member States to lay the foundations of an ever closer union among the peoples of Europe. This has been consistently interpreted as applying not to the peoples but rather to the states and institutions compounded by a European Court of Justice that has consistently supported greater centralisation. We understand and respect the right of others to maintain their commitment to this goal. But for Britain - and perhaps for others - it is not the objective. And we would be much more comfortable if the Treaty specifically said so freeing those who want to go further, faster, to do so, without being held back by the others. 7 In subsequent interviews, the Prime Minister reaffirmed his commitment to Treaty change, telling the BBC the changes are that we need are changes that are good for Britain and good for Europe, they do involve treaty change and proper, full-on treaty change for that matter 8 Even very pro-eu business organisations like the CBI have acknowledged the need for Treaty change. In a report released in 2013, the CBI called for changes that should then be formalised in any new Treaty. 9 Business polling has consistently shown that the majority of business leaders want to see Treaty change. In 2013, a YouGov poll for Business for Britain found that 56% of businesses wanted to see Treaty change that brought powers back to the UK (only 23% of businesses opposed such a change). 10 5.1 SME leaders believe that meaningful change requires Treaty change This poll shows that the clear majority of SME leaders still want to see the EU s Treaties changed. Thinking about the Prime Minister s attempts to renegotiate the UK s membership of the EU, do you think the Prime Minister must agree a new Treaty with the EU to achieve meaningful change to the relationship between the UK and EU? Yes 70 68 68 76 69 No 17 14 20 16 21 Don t know 12 18 12 8 10 7 Found at <https://www.gov.uk/government/speeches/eu-speech-at-bloomberg> 8 Found at <http://news.bbc.co.uk/1/shared/bsp/hi/pdfs/09012015.pdf> 9 Found at <http://www.cbi.org.uk/media/2451423/our_global_future.pdf> 10 Business for Britain, What Business Thinks, found at <http://forbritain.org/what-business-thinks.pdf> 17

Do you think the Prime Minister must agree a new Treaty with the EU to achieve meaningful change? 12% 17% 70% Yes No Don t know 5.2 SME leaders would like to see a much less integrated EU 54% of SME leaders would either like the EU to be a less integrated free trade area or complete withdrawal from the EU. Only 26% want greater European integration and only 17% support the status quo. People hold different views about how they would like to see the European Union develop. Which one of these statements comes closest to your own view? A fully integrated Europe 4 2 8 5 3 with all major decisions taken by a European government A more integrated 22 21 19 17 31 European Union than now, but not a common European government The situation more or less 17 17 14 19 18 as it is now A less integrated Europe 40 43 38 41 39 than now, more like a free trade area Complete British 14 15 18 15 8 withdrawal from the European Union Don t know 2 2 3 2 1 18

% 6. SME leaders think that immigration from other EU countries to the UK has had a positive impact on their businesses The poll shows that a plurality of SME leaders think that immigration from other EU countries has been good for their businesses. There is a clear and direct link between support for immigration and the size of their businesses, with support growing as the size of the company grows. Overall, would you say that immigration from other EU countries to the UK has a positive or negative impact on your business? Positive 40 28 38 43 57 Negative 22 28 24 21 31 Neither positive 37 43 37 36 28 or negative Don t know 1 1 1 1 2 60 50 40 30 20 10 0 Overall, would you say that immigration from other EU countries to the UK has a positive or negative impact on your business? employees employees Positive Negative Neither positive or negative Don t know What is important to note is that no type of SME considers immigration as being more negative than positive (sole traders are split on the matter). 7. The views of FSB members The FSB (Federation of Small Businesses) takes no position on the EU declaring that they remain neutral on the constitutional question of whether the UK should be in' or out'. 11 They have traditionally been hostile to the EU project in 2001 the FSB conference even voted 11 Found at <http://www.smallbusiness.co.uk/news/outlook/2144333/fsb-calls-on-government-for-increased-support-for-smallbusinesses.thtml> 19

to leave the EU. 12 The sample size in our poll is large enough for it to be indicative of views of members. 27% of the respondents to the poll were members of the FSB FSB members overwhelmingly believe that a meaningful change requires Treaty change. 73% of FSB members agree with this view, just 16% disagree. By 87% - 10% FSB members would like to see the UK Government rather than the EU in charge of employment law. By 80% - 16% FSB members would like to see the UK Government rather than the EU in charge of working qualifications. By 82% - 17% FSB members would like to see the UK Government rather than the EU in charge of health and safety. 19% of FSB members said that the EU helps their businesses, while 50% said it hinders them. FSB members are not convinced by the rationale of the single market. 74% of FSB members agreed with the statement We can trade and cooperate with Europe without giving away permanent control over the economy to politicians we can t vote out. Only 23% agreed with the statement Common EU rules make trade and business easier and the single market is good for jobs and living standards. FSB members believe that the UK, not the EU should be in charge of trade policy. When asked who should manage international trade negotiations, 81% said the British Government, just 17% said the EU. 8. The views of SME leaders who are also members of their local Chambers of Commerce Many SME leaders are members of their local Chambers of Commerce. The British Chambers of Commerce (BCC) has traditionally been somewhat sceptical of the EU, highlighting the cost of EU regulation to British businesses and supporting calls for both a renegotiation and a referendum. The Director General of the BCC, John Longworth, has made it clear that he is worried about the UK being outvoted by the Eurozone and would like to see the referendum 12 Found at <https://web.archive.org/web/20011120090133/http://www.fsb.org.uk/conference2001/results/results.asp> and <https://web.archive.org/web/20011107144641/http://www.fsb.org.uk/conference2001/results/motions_1_debate.asp?id=12> 20

date brought forward. 13 The sample size is large enough for it to be indicative of views of members. 21% of the respondents to the poll were members of their local Chambers of Commerce. Local Chambers of Commerce members overwhelmingly believe that a meaningful change requires Treaty change. 68% of members agree with this view, just 21% disagree. By 84% - 15%, SME leaders that are members of their local Chambers of Commerce would like to see the UK Government rather than the EU in charge of employment law. By 78% - 18%, SME leaders that are members of their local Chambers of Commerce would like to see the UK Government rather than the EU in charge of working qualifications. By 75% - 23%, SME leaders that are members of their local Chambers of Commerce would like to see the UK Government rather than the EU in charge of health and safety. 27% said that the EU helps their businesses, while 48% said it hinders them. 70% of these business leaders agreed with the statement We can trade and cooperate with Europe without giving away permanent control over the economy to politicians we can t vote out. Only 29% agreed with the statement Common EU rules make trade and business easier and the single market is good for jobs and living standards. These SME leaders also believe that the UK, not the EU should be in charge of trade policy. When asked who should manage international trade negotiations, 76% said the British Government, just 22% said the EU. 9. The views of IoD members The Institute of Directors (IoD) has traditionally been more guarded on the EU. In its membership surveys, members have tended to steer away from the argument that Britain should immediately leave the EU, however they have also been very clear that they believe that there needs to be fundamental changes made to Britain s EU membership. In 2014, a poll of members found that over 60% of IoD members said their support for continued EU membership was conditional on successful reform in key areas. 14 Our poll reflects this critical 13 Found at <http://www.thisismoney.co.uk/money/news/article-2946565/bcc-john-longworth-boss-calls-new-deal-eu.html> 14 IoD press release, 20 May 2014, found at <http://www.iod.com/influencing/press-office/press-releases/business-support-for-eumembership-conditional-on-fundamental-reform-finds-new-iod-survey> 21

attitude towards the EU (again, the sample size is large enough for it to be indicative of views of members): 11% of the respondents to the poll were members of the IoD. IoD members overwhelmingly believe that a meaningful change requires Treaty change. 75% of IoD members agree with this view, just 19% disagree. By 87% - 12% IoD members would like to see the UK Government rather than the EU in charge of employment law. By 84% - 13% IoD members would like to see the UK Government rather than the EU in charge of working qualifications. By 81% - 18% IoD members would like to see the UK Government rather than the EU in charge of health and safety. 21% of IoD members said that the EU helps their businesses, while 48% said it hinders them. IoD members are not convinced by the rationale of the single market. 70% of IoD members agreed with the statement We can trade and cooperate with Europe without giving away permanent control over the economy to politicians we can t vote out. Only 28% agreed with the statement Common EU rules make trade and business easier and the single market is good for jobs and living standards. IoD members believe that the UK, not the EU should be in charge of trade policy. When asked who should manage international trade negotiations, 79% said the British Government, just 18% said the EU. 10. The views of CBI members The Confederation of British Industry (CBI) has traditionally been seen as the business group with the highest number of large businesses, though there are serious questions about exactly how many businesses are actually members. The CBI has also been the most pro-eu of the major business groups noticeably campaigning for Britain to join the euro in the late 1990s and later supporting the Lisbon Treaty. The new President of the CBI, Paul Drechsler, has made it clear that he supports continued British EU membership. Please note that because of the sample size, these figures should only be seen as indicative. 5% of the respondents to the poll were members of the CBI. CBI members overwhelmingly believe that a meaningful change requires Treaty change. 62% of CBI members agree with this view, just 28% disagree. 22

By 79% - 17% CBI members would like to see the UK Government rather than the EU in charge of employment law. By 76% - 17% CBI members would like to see the UK Government rather than the EU in charge of working qualifications. By 86% - 10% CBI members would like to see the UK Government rather than the EU in charge of health and safety. By nearly 2:1, CBI members believe that the EU hinders their businesses rather than helps them. 28% said that the EU helps their businesses, while 48% said it hinders them. CBI members are not convinced by the rationale of the single market. 69% of CBI members agreed with the statement We can trade and cooperate with Europe without giving away permanent control over the economy to politicians we can t vote out. Only 28% agreed with the statement Common EU rules make trade and business easier and the single market is good for jobs and living standards. CBI members believe that the UK, not the EU should be in charge of trade policy. When asked who should manage international trade negotiations, 86% said the British Government, just 10% said the EU. Conclusion Any organisation that claims to speak for British business is liable to be contradicted. There are many voices and opinions within the British business community, especially on an issue as divisive and important as the question of EU membership. It is clear that SME leaders, who have been so often ignored when it comes to high level discussions of the pros and cons of EU membership, have a wide range of views, but that the majority are clearly sceptical of the current terms of EU membership. This poll one of the most comprehensive ever taken of SME opinion on the EU casts new light on the views of some of our most important business leaders. It should serve as yet further evidence that the business community is deeply dissatisfied with the current terms of EU membership and want to see radical changes made. SME leaders are clear that, for change to be seen as meaningful, it has to be enshrined in the EU s Treaties and are equally clear that they want to see Britain, not the EU, once again in charge of Britain s trading future. Crucially, this poll has also shown the burden that EU regulation places on many of our SMEs. The results provide convincing evidence that, were the burden of red tape reduced, we could expect to see more business leaders invest in their firms, employ more people and keep more 23

staff on. The respondents to this poll are clear; when it comes to employment law, working qualifications and health and safety, it should be the British Parliament that is in charge, not the EU. The message from this poll is explicit. For the Government to realise the expectations of the SME community, it will need to pursue a thorough renegotiation which brings about fundamental changes in the way the EU works. The power to strike trade deals should return to Westminster and the Treaties need to be reopened. Also, EU rules such as Parliament and Council Directive 2005/36/EC on medicines, Council Directive 1977/249/EC on lawyer s services and Council Directive 1989/391/EC on health and safety need to be reviewed to see whether the burden that they place on British businesses can be reduced. This poll has shown the level of ambition that the SME community has for the Government s renegotiation. We hope that the final result of these negotiations will measure up to these hopes. Annex: Methodology Who we polled Most pieces of research purporting to represent the views of business are usually membership surveys of trade associations, or are polls of an organisation s supporters. They do not necessarily cover all company sizes, sectors and locations. As a representative poll of 601 SME leaders based in the United Kingdom, this piece of research is a comprehensive analysis of what SMEs think about Britain s membership of the EU. Fully representative of where UK SMEs are based Respondents locations were largely similar to the actual spread of businesses Share of SMEs as classified by BIS) % in our poll % according to BIS North East 2 3 North West 8 10 Yorkshire and the Humber 8 7 East Midlands 6 6 West Midlands 8 8 East of England 9 10 London 16 18 South East 17 16 South West 10 10 Wales 3 4 Scotland 8 6 Northern Ireland 3 2 Source: BIS 15 15 BIS figures found at <https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/378063/bpe_2014_detailed_tables.xls> 24

A fair representation of SME sizes Rather than seeking to reflect the distribution of SME sizes, each of the size categories of SMEs was given close to equal weighting in our poll. Slightly greater weight was given to sole traders and slightly lower weight was given to larger employers. This provided the best overview of what business opinion was across the whole range of different SME sizes. In general, large businesses tend to be more pro-eu, reflecting their greater propensity to export and their ability to lobby the EU institutions. Small businesses, by contrast, are generally more Eurosceptic because they are less likely to trade but they are still subject to EU regulation from the single market. Share of SMEs in the UK private sector by size (as % business in our poll % according to BIS classified by BIS) Sole trader 30 74 employees 25 20 employees 25 4 employees 20 0.6 Source: BIS 16 A proper cross-section of industry sectors There is a slight discrepancy in the sampling of different business sectors in our poll due to the difficulties in targeting business leaders in specific sectors. However, it should be noted that Information and Communication (traditionally more pro-eu) is overrepresented, while Construction (traditionally much more Eurosceptic) is underrepresented. Share of SMEs in the UK private sector by industry (as classified by BIS) % in our poll % according to BIS Agriculture, Forestry and 2 3 Fishing Manufacturing 9 5 Construction 8 18 Wholesale and Retail Trade 16 10 Transportation and Storage 3 5 Accommodation and Food 8 3 Service Activities Information and 7 6 Communication Financial and Insurance and Real Estate Activities 5 4 Professional, Scientific and 12 15 Technical Activities Administrative and Support 7 8 Service Activities Education 3 5 Human Health and Social Work Activities 5 6 16 BIS, Business Population Estimates for the UK and regions 2014, found at <https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/377934/bpe_2014_statistical_release.pdf> 25

Arts, Entertainment and 4 4 Recreation Other Service Activities 7 6 Other 2 - Source: BIS 17 17 BIS, Business Population Estimates for the UK and regions 2014, found at <https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/377934/bpe_2014_statistical_release.pdf> 26