Cameron Says Referendum Won’t Hurt U.K. Economy
Prime Minister David Cameron said the potential uncertainty surrounding a four-year debate over the U.K.’s membership of the European Union won’t undermine his economy’s appeal to global business.
“The arguments for investing in the U.K. are the same,” Cameron said in an interview with Bloomberg Television’s Francine Lacqua today at the World Economic Forum annual meeting in Davos, Switzerland. “Of course all paths that you take have risks. But the greatest risk of all is to sit back rather than engage with this and change Europe in a positive way.”
Cameron, 46, pledged yesterday to put the question of the U.K.’s role in the EU to a popular vote by the end of 2017, if re-elected in two years and once he negotiates a return of some powers to the U.K. He repeated today he wants his country to remain in the EU.
Business leaders meeting in Davos, including Peter Sands of Standard Chartered Plc and Prudential Plc (PRU)’s Tidjane Thiam, have urged the U.K. to remain within the 27-nation bloc for the good of its economy. More than half of British exports went to EU countries in 2011, the latest annual data available, and the government says more than 3 million U.K. jobs rely on trade with fellow members.
Describing the response to his strategy as “pretty good,” Cameron used the interview to highlight the U.K.’s economic strengths, betting they will be enough to keep luring foreign investment at a time when the economy is facing the threat of a triple-dip recession. Among them: Its membership of the EU’s single market, low tax rates and its own currency.
Official data tomorrow will probably show that gross domestic product dropped 0.1 percent in the final quarter of 2102 from the three months through September, according to the median of 38 estimates in a Bloomberg News survey.
The pound fell today to the weakest level in 11 months versus the euro and was down 0.9 percent to 84.79 pence per euro at 4:15 p.m. London time. The 10-year gilt yield rose two basis points to 2.01 percent. U.K. stocks climbed for a second day, extending the highest level for the FTSE 100 Index (UKX) since May 2008.
“What the business community wants is to know that there is a plan,” the prime minister said. “A plan to reform the European Union, to make it more open and flexible, and a plan to make sure that Britain remains a part of that. That’s the plan that we’ve set out.”
Cameron refused to say under what circumstances he would urge the British people to vote to leave the EU.
“I don’t want to say no, I want to say yes,” he said. “I go into a negotiation positive and optimistic that we can achieve not just what we want for Britain, but what we want for Europe. I don’t see this as a process of giving in or giving up. I see this as a process of positive engagement.”
On taxation, he said he’ll use his chairmanship of the Group of Eight leading industrial nations this year to push for international cooperation to stop “aggressive tax avoidance” by large companies.
“Britain is a low-tax country, I’m a low-tax Conservative,” Cameron said. “But we’ve got to make sure that when we have low taxes, people pay them. We do need to deal with tax evasion, but we also need to deal, not just as a country but as an international community, with very aggressive tax avoidance.”
Cameron’s decision to announce a referendum was attacked again earlier today by his Liberal Democrat coalition partners.
“Where, of course, David Cameron and I part company is I simply don’t understand the point of spending years and years and years tying yourself up in knots first, so-called renegotiating the terms of Britain’s membership in ways that at the moment at least are completely vague,” Deputy Prime Minister Nick Clegg said on his weekly phone-in show on London’s LBC radio. “I think that discourages investment and inhibits growth and jobs which has to remain our absolute priority.”
A letter to the Times newspaper signed by 55 leaders of industry and London’s financial district welcomed the referendum proposals as “good for business and good for jobs in Britain.”
The opposition Labour Party argued that Cameron’s position on the EU will make Britain less attractive to foreign investors.
“We have traditionally said, ‘come to Britain because it is a favorable climate and you will have access to his huge market,”’ a former Europe minister, Peter Hain, told BBC Radio 5 today. “Now we are on a road which could lead us out of Europe and out of that market and that is a decision which is going to affect investment.”
The premier’s fellow Conservatives were dismissive of objections.
“It’s a bit much to talk about political uncertainty introduced into the argument by Britain, when after all the euro zone itself has been the single major cause of uncertainty and instability in the global economy for the last few years,” London Mayor Boris Johnson told Bloomberg Television’s Ryan Chilcote in an interview in Davos today.
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