If an international business such as Kingfisher was permitted one request of the EU, it would be for a single market fit for the 21st century.
We are at heart a European business – the continent’s largest home improvement retailer, employing more than 60,000 staff in six countries across the EU. Our success relies on the smooth functioning of the single market. In paint, our biggest-selling product, our own brand ranges are sourced from Germany by our UK and French businesses; the three best-selling tiles at B&Q are from France. Senior staff move seamlessly across our European businesses.
But the single market we have today urgently needs reform. Over the past quarter of a century, it has grown organically against a backdrop of successive EU enlargements. Born at a time of 12 member states with similar capabilities to process legislation and get the rules working, it now serves 27 diverse members.
Let me be clear. As an international retailer, Kingfisher wants Britain to remain in the EU – but a reformed EU. To hold a referendum in haste could leave the UK repenting at leisure. By all means have a vote, but let us make sure it is the right, reformed EU. Exiting an unreformed EU would be the worst-case scenario, creating potentially serious issues for our business in areas such as product sourcing, staff mobility, supplier relationships and prices. All these could well be higher if Britain hastens towards an early exit.
For example, Kingfisher has about £4bn of sales in the ÚK, of which the costs to us are about £2.4bn. Half of these products are sourced in Europe. If the UK left the EU and a customs duty of, say 5 per cent, was applied to goods entering a non-EU country, the net cost to us would be £60m a year. That is equivalent to a quarter of our UK profits and could potentially lead to price increases for customers.
Staff mobility is another crucial point. We have invested significant resources in developing an international mobile cadre of senior management. B&Q’s finance director is a Frenchman; the chief executive of our Castorama business in France previously worked at B&Q. We run an international graduate programme, recruiting French and British graduates to work in both countries. Such opportunities and mobility would be considerably more complicated outside of the EU.
Businesses need to make clear that there is no easy way for Britain to exit the EU and access the single market under the same terms as at present. Exit would mean facing up to new costs of access and reduced influence over future EU regulations, a considerable draw for foreign investors. Costs for businesses such as ours could mean custom duties such as trade tariffs of up to 6.5 per cent on products such as paints and varnishes, or 3.7 per cent on tools.
We enjoy the certainty of a single rule book across the EU but not at the cost of an ever increasing regulatory burden, which must be resisted. The government’s review of the EU’s competences is a welcome opportunity for business to present its case and give an evidence base from which to reform Europe.
In the meantime, there are opportunities to develop the single market further, particularly the digital single market – potentially a huge area. Addressing issues around common payment services, product merchandising and rules on domain names would boost competition and give consumers more choice.
Britain is not alone in wishing to reform the status quo and working with allies to push the reform agenda now is critical for the sake of all EU members, whether in the euro or not. Recent meetings with French officials made it clear that they too now recognise the case for reform. Germany and the Nordic countries are also supportive.
Just as business is having its say on Europe, so should the British public. The last referendum, in 1975, was before the single market was even created; a lot has changed since then. But only when reform is firmly on the EU table should the issue be put to a vote at home.
The writer is group chief executive of Kingfisher