Colin Borland: Small firms still waiting to hear solid arguments

Michael Gove and Boris Johnson on a business visit for Vote Leave this week. Many firms feel they are lacking solid facts on EU membership. Picture: Getty Images

With about 360,000 micro, small and medium-sized businesses in Scotland, who have an employment footprint of more than one million people, you can understand why both campaigns in the EU debate are keen to get them on side.

But, given the sheer scale and diversity of the sector, you can also understand why their views, concerns and motivations are so hard to pin down.

Anyone who tries to tell you that “business”, or even “small business”, has a single view on this is either deluded or trying to build their part up. The small business community won’t come as a block vote – and both the Leave and Remain campaigns need to recognise the myriad business interests, personal convictions and domestic concerns that will affect each business owner’s ultimate decision.

The fact that small businesses don’t seem overly impressed with the campaign so far, however, might suggest that neither side has managed to build this subtlety into their message.

In autumn 2015, the FSB published the largest ever research paper examining small firms’ views on Britain’s continued membership of the European Union. Based on feedback from 6,263 members – 571 of them in Scotland – the research looked at members’ voting intentions, alongside their views on EU reform.

The research showed that 60 per cent of Scottish members were likely to vote to remain in the EU, the highest proportion among the home nations. Across the UK as a whole, 47 per cent backed Remain, against 41 per cent who preferred Leave.

Owners of businesses that export to or import from the EU were, hardly surprisingly, much more likely to agree that membership of the EU is beneficial for the economy, their local area and their business. Firms which employ non-UK EU nationals were similarly positive about the EU’s impact. Perhaps less obviously, more female than male business owners saw the EU as beneficial to their local area and their business.

But the figures also revealed that more than a third of members (37 per cent) didn’t feel well informed on the arguments and that business owners felt there was nowhere to turn to for accessible, unbiased information.

Now, skip forward to February this year, when the Prime Minister, fresh from his marathon European negotiations, brought back the deal that fired the starting gun for the official campaign. When we asked members how they were feeling at that point, the proportion saying they didn’t feel informed had shot up to 53 per cent. All the debate, claim, counter-claim and unofficial campaign activity had actually made things worse.

In light of this, then, it’s perhaps unsurprising that the February data also suggested that 42 per cent of respondents were either undecided or open to persuasion. So, the good news for both campaigns is that, when it comes to the small business vote, it’s all to play for – but they need to up their game to win it.

What this means in practice is that the Leave side has to set out the impact on everyday business activities if Britain left the EU. What would you notice had changed? What regulations would disappear?

Their counterparts in Remain need to set out exactly what the practical effects of being in the EU are. Yes, the arguments about inward investment are important, but what are the practical, daily business benefits we enjoy? What barriers does it remove?

This is tougher ground for politicians, who like to talk in terms of multi-nationals, overseas inward investments, trading blocks and sovereignty. But these theoretical arguments need to be translated into solid answers to the question: “What does this mean for me?”

Does any of this sound familiar?

A lot of it reminds me of where we ended up in the Scottish independence referendum campaign. When business owners were researching how they should vote, they also often decried the lack of impartial sources of information.

The business community found the basic disagreements about key issues – such as whether or not Scotland could use sterling if it gained independence or, funnily enough, remain a member of the EU – difficult to say the least. Surely these should be matters of fact, not opinion?

But such is the inevitable consequence of the current political climate that, twice in two years, has taken us into uncharted waters. The gap left by the absence of solid, empirical evidence is enthusiastically filled by politicians, academics pundits and economists, with not just opposing views, but mutually exclusive premises. That makes it pretty hard for the lay person to arrive at a judgment. And, just as in the Indyref, it’s not good enough that each side attacks the bona fides and motives of the other’s experts, rather than countering their arguments.

So, given their volume and diversity, can we see any trends around what sort of questions small businesses are most keen for answers on? Well, broadly speaking, there will be a mix of issues of direct relevance to their business and wider economic or political considerations. Therefore, alongside things like business regulation and free movement of labour, there will be concerns over how the EU as a whole works.

Thus, when we asked members last autumn which factors would influence how they vote, EU governance, the free movement of people and the cost of membership topped the poll. The economic impact of staying or leaving was next, with the question of business regulation in fifth spot.

Incidentally, when you look at where business owners are getting their information on the EU from, television, radio and newspapers were highlighted as the biggest influencers on opinion, with digital media and government coming close behind. Trade bodies (such as FSB) were cited next, with the views of friends and family coming in a distant sixth. Little wonder, then, that the battle for the airwaves and rows over who is and who is not playing fair in their media comments is becoming so intense.

And while the FSB will be doing our best to get impartial, expert answers to our members’ questions, just as we did back in 2014, the fact is that small business owners will again end up relying on more than just the business or economic case when deciding how to cast their vote.

Indeed, work carried out by academics at the University of Edinburgh around the time of the independence referendum confirmed that, whereas large corporates arrive at their positions on big issues like this purely on business grounds, smaller businesses take all sorts of factors into account – from the impact on their community, to personal opinions, to family considerations. Perhaps this is to be expected when key decisions are taken with family around the dinner table, rather than directors around a boardroom table.

So what does all of this tell us? First, the idea that the business divide is between big business saying one thing and smaller firms saying another is an oversimplification. I have no inside knowledge on whether the chat in FTSE 100 boardrooms is of one mind, but there is probably as wide a range of views in the small business community as there is in the general population.

Second, smaller businesses will take a wider view than what is in their own direct business interests when deciding how to vote – looking at the wider economy and the community in which they’re based.

While organisations like the FSB have a role to play (do check out our podcast series where we put members’ questions to the campaign experts at www.fsb.org.uk), both Britain Stronger In Europe and Vote Leave have a busy few weeks ahead of them if they are to convince business owners and the self-employed that their path is the right one.

• Colin Borland is head of external affairs for FSB Scotland

FACT BOX

• There are 360,000 SMEs in Scotland, accounting for over a million jobs.

• 42 per cent of FSB members are either undecided on how to vote or may be open to persuasion (with 21 per cent indicating they do not yet know how they will vote and 21 per cent open to changing their voting intention).

• In September 2015, 37 per cent of small businesses said they don’t feel well informed on the arguments. By February this year, the figure had shot up to 53 per cent.

• With all to play for, campaigns must raise their game.

• For many small business owners, the decision will be taken around the kitchen table as much as the boardroom table.