Tuesday, February 26, 2008

EU regulations to cost £66 billion

Just how much is the EU worth to Britain, in terms of trade? Well, in his June 2006 speech to Open Europe, William Hague quoted the following figures.
The other area where the European Union has had some conspicuous success is the Single Market. The success can be described in figures - it is widely accepted that the Single Market makes a contribution to the EU's GDP of 1.8 per cent a year, worth £20 billion annually to Britain and an average increase of wealth in a European household of £3,800.

Alas, Dear Billy gives no source for such figures, but we must assume that they are—or at least were—reasonably authoritative.

It is, however, difficult to tell since successive governments, both Tory and Labour, have utterly refused carry out any kind of official cost/benefit analysis (despite repeated requests from Lord Pearson of Rannoch, amongst others).

But, via EU Referendum and reported by Christopher Booker, we do have some idea of costs.
A shock-horror report in last week's Sunday Times, based on the latest annual "barometer" from the British Chambers of Commerce (BCC), showed that the cost of new regulations to UK businesses, according to Government figures, had soared last year by a record £10 billion.

Their total cost since 1998 is a staggering £66 billion. All this, according to the article, could be blamed on the Labour Government. Nowhere did it mention the EU.

But a look at the BCC's press release [PDF] shows that the origin of these regulations were clearly apportioned between the EU and our own Government. And by far the most costly examples, such as the regulations on working time (£16 billion), vehicle emissions (£9 billion) and data protection (£7 billion), all originated from Brussels.

Of the top 10, eight were based on EU directives and the remaining two both had a strong EU dimension. These 10 alone imposed a total cost of £43 billion.

In other words the suffocating cost of these laws can hardly be blamed just on Messrs Blair and Brown. They emanated from what is now in most respects the true government of our country. One can understand why politicians are so anxious to hide this.

Indeed we can. Because, if this is true, the benefit to this country of even the Single Market looks distinctly dubious.

When we EUsceptics point to these regulations and cite them as an additional and extremely damaging cost to our economy, EUphiles tend to argue that our businesses would still have to comply with these regulations, even were we to withdraw and maintain a free-trade agreement with the EU. "So what," they argue, "is the point?"

But one must remember that currently every single business in Britain must comply with all of these regulations even if they do not trade with the EU (or, indeed, abroad anywhere). In fact, the vast majority of our economy is internal.
The second misconception is that 60 per cent of our economy depends on the EU, whereas the true figure is more like ten per cent. Exports of goods and services only account for 21 per cent of ‘final demand’. If exports of goods and services to the EU account for 48 per cent of total exports, then ten per cent of GDP is currently the result of exports of goods and services to other EU members. In other words, about 79 per cent of our economy is the result of domestic activity, involving buying from and selling to each other, and exports of goods and services to the rest of the world account for another 11 per cent.

Even were we to say that this 11% of our economy directly relates to 11% of our companies (and this is highly unlikely: the figure is likely to be considerably lower because it will be the bigger companies that trade internationally), under the terms of our EU membership, 100% of our companies must comply with EU regulations whether they trade with other EU members or not.

In other words, were we not in the EU, only those companies that wished to trade with the EU need comply with their regulations. Of that £65,990,000,000 of regulation costs that the BCC identified, fully £46,892,000,000 is ascribed directly to the EU. But under a more flexible trade agreement, it should only have cost business 11% of that total: £5,158,120,000.

What this means is that being part of the EU has cost our businesses (and thus our economy) some £41,733,880,000 in unnecessary regulations. Let us translate that into something meaningful, shall we?

Let us say that the median wage, which is currently £24,000, has been constant over the last ten years; it would then cost £240,000 for a company to employ one person for ten years. If we divide £41.7 billion by £240,000, then we can determine that some 173,891 potential jobs (all running for a decade) have not been created.

These costs fall disproportionately on small businesses; if complying with a piece of EU legislation costs £10,000, that is going to hit a company turning over £50,000 a year far harder than one turning over £50 million. As such, these regulations damage small businesses and, since many of them do not trade overseas, this damage is often needless (and often fatal for the business).

These costs also give a massive competitive advantage to those bigger companies, already given a boost by their ability to pay large sums of money to lobby the EU as it is. As such, competition, diversity and innovation are being actively harmed—and a culture of corporatism fostered—by the costs associated with such senseless regulations.

In the name of all that's unholy, can we leave yet?


Serf said...

In other words, were we not in the EU, only those companies that wished to trade with the EU need comply with their regulations.

Even that overstates the impact of EU regulations on us were we to manage to escape.

The only regulations that the EU can demand of our companies would be in product specifications. Laws pertaining to how the goods or services were created, by whom and under what conditions, would be beyond their control.

As the most damaging EU regulations are without doubt those that control how things are made, even those companies wishing to sell into EU markets would still see the majority of their EU regulatory costs reduced.

Ed said...

Even if one was to admit to 1.8% "extra" that is less than one year's trend growth. I could handle a year's pay freeze if I could have my country back.

lettersfromatory said...

Shocking figures. If Britain were free to trade outside the EU on our own terms, our economy would receive an enormous boost.

I really hate the narrow perspective of Europhiles.

Mark Wadsworth said...

Gunter Verheugen, EU Trade Commissioner guesstimated cost of EU regulations across EU to be about £400 billion a year, divided by EU population 450 million = £900 per man woman and child. Or somewhere between 5% and 10% of EU's GDP.

Dundonald said...

All of these “rules by which we must continue to abide” outside of the EU constitutes another lie perpetrated by EU-whores, for the sake of argument when reason escapes them. The rules to which they refer are the rules of the Single Market (or European Economic Area) which are indeed set by the EU Commission. The ‘philes often cite Norway in this instance.

I assume that any future extra-EU Britain would give the EEA a body swerve for precisely this reason, and would instead join EFTA. Within EFTA, Britain would be free to negotiate a bilateral trade deal with the EU on our own terms. Even Mexico has a bilateral deal with the EU. Do the ‘philes think the Mexicans take cognisance of every bullshit directive on the Brussels legislative bog roll? Could they afford to?

Thus, our model should be Switzerland, not Norway.

anthonynorth said...

DK, that's almost an acceptance that I'm right about Big Biz. Embrace smaller companies as soon as possible. Get out of the EU. Renew our trading links with the Commonwealth.

John B said...

Take a look at the first few "EU" regulations as an example - they cover data protection, water pollution, employment protection, working time, fire regulations, employment consultation, part-time employment protection, and police surveillance.

Sure, you can argue these are things which should be decided at Westminster - but there's no way in hell that an independent government, even a very right-wing one, would repeal all (or even most) of these rules.

For a start, data protection, water pollution, H&S at work, and police surveillance are all areas where UK legislation that is substantially the same as the current EU legislation existed before the European directive was passed - and indeed, where the UK government was a major party lobbying the EU to implement it community-wide.