British Exit From the European Union Is Not Widely Embraced

Buoyed by the falling value of the pound and a work force with fewer of the labor restrictions found in many parts of Europe, Britain’s industrial exports, led by companies like BM and better-known names like Land Rover and Mini, could find growth markets in the dynamic economies of Asia and Latin America rather than continuing to rely on the rules-bound common market of Europe.

And yet the idea that Britain might be better off outside the 27-member European Union, a notion embraced with a near religious fervor by a small but influential faction of Mr. Cameron’s Conservative Party, is by no means widely accepted by the majority of voters here, according to opinion polls.

Nor is it the belief of top executives at BM Catalysts. They worry that Britain’s withdrawal from the bloc would make it harder to do business in Europe.

Britain, simply put, is already having enough trouble competing in the regional and global economy without making things more difficult by risking its open access to trade with the Continent, to which 58 percent of the country’s exports now go.

A British withdrawal from the European Union “would be a big problem for us,” said Mark Blinston, commercial director at BM. The company depends on the bloc for a third of its sales, which reached £22 million, or $34 million, last year.

In fact, BM, based in Mansfield in the north of England, has already started having trouble in Europe — not because of the Brussels bureaucracy but because of the harsh realities of competitive trade.

BM has been losing market share recently to a leading rival, AS, which is based in Spain, a nation that has one of Europe’s most troubled economies.

Because recession and high unemployment have driven down Spanish labor costs, AS has been able to undercut BM on price in the crucial German automotive market, as well as on BM’s home turf in Britain.

“We are worried,” Mr. Blinston said. “Economic changes in another market can really have an effect on you.”

On Jan. 23, Mr. Cameron called for a referendum on his country’s continued membership in the European Union if sufficient changes from Brussels were not forthcoming. In a poll after the speech, 40 percent of Britons said they would vote to opt out. But nearly as many, 38 percent, said they would oppose withdrawal.

Highlighting the stark trade reality this month was the incoming Bank of England governor, Mark J. Carney. In his first public remarks before Parliament, Mr. Carney pointed out that since 2000, Britain’s share of global exports have decreased about 50 percent — the steepest decline among the world’s 20 biggest economies.

That decline is all the more startling if one considers that it has happened during a time that the pound has lost up to a third of its value against other major currencies, one of the largest currency devaluations in the country’s history.

All other things being equal, a cheaper pound should make British assets, whether exports sent abroad or construction of factories at home, more of a bargain for foreign buyers and investors.

But a growing number of economists and policy experts say that a cheap currency alone is not enough to keep Britain competitive.

They make the case that the painful adjustments undertaken by government and industry in Spain, Ireland, Portugal and Greece have halted the decade-long loss of competitiveness that was at the root of Europe’s sovereign debt crisis.

Unable to devalue their currencies as Britain has, these euro zone nations have cut spending, raised taxes and laid off millions of employees. The resulting gains in competitiveness, painful and hard won as they have been, are now apparent. All of those countries are reporting smaller budget gaps and improved trade deficits that in some cases have swung to surpluses.

By these crucial yardsticks, Britain is emerging less as an economic dynamo poised to become a main trading partner with China than as the surprising economic sick man of a Europe committed to putting its financial house in order.

According to the European Commission, on the purest measure of how much more a government spends than it takes in through taxes, Britain’s primary deficit of 3.9 percent of gross domestic product will be the largest in the European Union this year.

And on the trade front, Austria and France are the only other European countries that, like Britain, have experienced a widening trade deficit since the onset of the financial crisis in 2007.

Through January of this year, new export orders by British industry have fallen for 13 consecutive months, according to official statistics.

Article source: http://www.nytimes.com/2013/02/13/business/global/britains-risk-filled-choice.html?partner=rss&emc=rss