BUSINESS MONDAY, APRIL 28, 2014 EU exit could wreck London’s position All exit scenarios bad for business: Research LONDON: A British exit from the European Union a-day foreign exchange market, trading twice as could wreck London’s position as the only financial many dollars as the United States and more than centre to rival New York and isolate the country’s twice as many euros as the entire euro-zone, accord- economy, research ordered by a lobby group for ing to the lobby group. banks and money managers showed. Prime Minister A growing number of banks, including Goldman David Cameron has promised to renegotiate the Sachs, Citi and JPMorgan, have warned a “Brexit” terms of Britain’s EU membership and hold an “in-out” could hurt London’s position. Opponents of the EU referendum by the end of 2017 if re-elected in a 2015 say Britain would do better to trade with the world national election. from outside the bloc. Polls show voters split. But many of the most powerful banks, insurers Law firm Clifford Chance said its research showed and money managers in the City of London are that under five possible scenarios for Britain leaving increasingly concerned that Cameron’s gamble the European Union, the financial services sector - could allow the country’s $2.5 trillion economy, the which accounts for about a 10th of Brtain’s gross world’s sixth largest, to slip out of the EU. The lobby domestic product - would be harmed. group warned that a Britain outside the EU would be “The success of the UK financial services industry is shorn of influence, less attractive for investors and to a large extent built on EU Internal Market legisla- vulnerable to regulations over which London had no tion. To abandon this for some untried, unknown and influence. unpredictable alternative would carry very significant “Continued EU membership is essential to this risks,” said Malcolm Sweeting, a senior partner of country’s economic wellbeing,” said Gerry Grimstone, Clifford Chance. Chairman of TheCityUK group, whose members “The UK is a powerful player in the EU and should include asset managers, banks, insurance and retain the capacity to push for reform as a member,” accountancy firms. he said. Cameron has pledged to hold a referendum if “Our research clearly shows that leaving the EU he wins in 2015, while the opposition Labor Party has would seriously damage economic growth and jobs said any Labor government would be unlikely to hold in the UK,” he said. London dominates the $5-trillion- such a vote this decade. — Reuters Full speed ahead for some UK firms; risks for others Data expected to show economy close to pre-crisis size LONDON: From the shop floor of precision engi- help provide the extra profits needed to pay pay is unlikely, given how many people still have neering firm JJ Churchill, the return to health of higher wages and put the economy on a sound no job or work too few hours. Another boost Britain’s recession-damaged economy seems to footing. Yet it remains unclear how much longer could come from Britain’s recovering banks be fully on course. The firm invested heavily in Britain can carry on expanding at its current which are expected to once again prioritize advanced lathes and milling machines even as pace without stirring the kind of inflation pres- lending to more profitable firms over struggling orders plunged during the steep downturn, bet- sures that might force the BoE to raise interest ones, something that would boost productivity. SIEMENS: Flags of German engineering conglomerate Siemens AG flutter before the ting that when demand returned it would be rates sooner and possibly higher than it has Potentially most significantly, companies are annual shareholder meeting in Munich, southern Germany. — AP ready for it. Now, as Britain grows faster than the been signalling. starting to invest more to make their operations world’s other big rich economies, orders are The Bank is cautious about the chances of a more efficient. Business investment grew in each flooding in to the plant near Birmingham from long-awaited recovery in productivity which it of the four quarters of 2013, even if it remains Battle for France’s Alstom clients such as Rolls-Royce, which buys Churchill expects to grow only slowly over the next three almost 20 percent below its pre-crisis peak. blades for its jet engines, and Siemens, parts for years. A recent hiring surge, stronger even than Some economists are hopeful that productivity heats up with Siemens offer its power-generating gas turbines. growth in the overall economy, has underscored could pick up surprisingly quickly as demand “The amount of work we’re putting through how quickly the labor market is tightening. returns. Samuel Tombs, at Capital Economics, PARIS: German industrial giant Siemens said government wants to obtain guarantees on the equipment is increasing dramatically,” said Inflation is at a four-year low but house prices pointed to the transport and hospitality sectors, yesterday it wanted to discuss strategic “jobs, the location of activities and energy Andrew Churchill, the firm’s managing director have leapt by about 10 percent over the past saying train operators and restaurants, for exam- opportunities with France’s Alstom, raising independence”, according to President and grandson of its founder. “Machines that year. That could soon put to the test the BoE’s ple, could cope with more customers without the prospect of a takeover tussle with General Francois Hollande’s office. were used on one shift will move on two or even intention to use its new powers to control the having to invest more. Electric for the beleaguered firm. The offer three shifts.” The Bank of England hopes that housing market without resorting to higher Yet there are regular reminders of pressure came on the heels of reports that the US Better for French interests? many other British companies can respond in a interest rates. The International Monetary Fund growing in the labor market, something that giant wants to buy the French engineering GE has 305,000 employees around the similar way to stronger growth, without running warned this month that Britain’s recovery could eventually reverse the recent fall in British group, which manufactures the country’s world and its turnover totals $146 billion. into post-recession bottlenecks that could fuel remained too reliant on consumer spending and inflation. Employers are raising salaries they offer groundbreaking high-speed TGV trains. Press reports have said GE was ready to fork inflation. Data due tomorrow is likely to show pointed to risks from the country’s “surging” to new permanent staff at the fastest rate in Alstom is a politically-sensitive symbol of out 10 billion euros for the energy division, that, in the first three months of this year, house prices. And many firms are struggling to nearly seven years, a recent survey found. At engineering prowess in France and a key which does not comprise the unit that makes Britain’s economy came within a whisker of find staff. Recruitment difficulties among manu- Blue Hub Solutions, a small software firm in exporter, seen as one of the jewels of French the high-speed trains. recovering its size before the 2008-09 recession. facturers hit a record high in late 2013 before Britain’s Midlands region, recruitment is one of industry. GE chief Jeff Immelt was expected in But the stakes were raised yesterday when Many other rich countries passed that milestone easing a touch, the British Chambers of the biggest headaches as orders pick up for its Paris yesterday but a meeting with France’s Germany’s Siemens said it had “submitted a long ago. But to keep the recovery on track, it is Commerce says. online back-office systems used by manufactur- Economy Minister Arnaud Montebourg was letter to the board of Alstom to signal its will- vital that Britain’s poor productivity - a measure ing, engineering and freight firms. deferred by Montebourg’s office, which said ingness to discuss future strategic opportuni- of how much the economy produces compared Positive signs The company of seven spent months looking ties.” The Siemens statement did not to the number of people in work, or their hours For others, there are signs that things will go for a new programmer and had to increase its give any other details. When Alstom at work - picks up. smoothly. Exports are inching up, helped by an starting salary for new employees by 15 percent was on the brink of collapse in 2003- easing of Europe’s debt crisis. Consumer spend- over the past year. “We have to be quite compet- 2004, the French state strongly Bottlenecks ahead? ing, while still the key driver of the recovery, is itive in the first place now, I find, which is opposed a takeover by Siemens. Britain has had the worst productivity per- growing less quickly than before the crisis, tem- stretching us a wee bit,” said Matt Flanagan, one The group is once again facing a formance among the Group of Seven nations pering concerns about an unsustainable recov- of the firm’s directors. “But if they are good peo- financial crunch and its shares have since 2008 as firms held on to workers for when ery. Earnings are about to outpace inflation after ple, then their contribution back far outweighs dropped sharply in the last year. But demand eventually recovered. A rebound would six years of falling living standards but a surge in their salary in the end.” — Reuters Alstom chief Patrick Kron is said to remain strongly hostile to any tie-up with the German giant.