Terri Smith is a man I greatly admire. After all, his Fundsmith equity fund (LINK) has given me great returns over the past 2 years and it has been one of the best funds to invest your money in over the last 6 years. He is a man of high moral compass and his business acumen is second to none. So if there is anyone to listen to in this great Brexit debate, it is Terri Smith and not those insipid politicians.
At the recent Fundsmith annual general meeting, Terri has his say on the EU referendum and the consequences of Brexit. All in all, he had the following things to say:
- For so long, we have fought against being part of the European Trading block due to its disadvantages to Britain, so what has changed now?
- The EU is the worlds least competitive trading block due to regulations, subsidies, e.t.c.
- The trade numbers between UK and Europe are false. they are misrepresented due to the Rotterdam effect.
- Businesses will go on as usual.
- Politicians and News broadcasters alike stated that we were doomed because we did not adopt the Euro – Just look at what has happened since, we have not only survived but we have thrived as a result of not joining the Euro. The countries which adopted the Euro on the other hand have faltered.
Historic significance of joining the EU
I think that to support being in the EU is an interesting stance because it means that the thousands of years of history, roughly since 1066, English foreign policy successfully sided with the weaker powers of the continent against the major powers on the continent to prevent a coalition of power emerging on the continent of Europe.
So to know voluntarily join one is an interesting departure and one that you should definitely pause and think about. We sided against the Dutch when they were the leading maritime power, we obviously fought against Philip of Spain, then there was the Napoleonic wars and Germany twice in WW1 and WW2. And in many cases it was an overt attempt to ensure a emergence of a single power trading block and system on the continent of Europe which we saw to our disadvantage. So it would be keen to hear why people think that we should completely ignore that now.
The EU is the least competitive trading block
In terms of staying with the EU, it seems to me that we are agreeing to stay within and I think inevitably become increasingly wedded to the least competitive trading block in the world. One that certainly is endanger of remaining so indefinitely given its attitudes to regulation, size of government subsidies, e.t.c.
Trade between UK and EU – Statistical anomalies
Much is said on the balance of trade between UK and Europe. I don’t think that this is going to be a problem if the trade negations are handled forcefully because we are a net importer from Europe.
And the balance of trade which people site between us in terms of things like 45% of UK exports going to Europe should not be a problem. When these figures are compiled, they tend to ignore the so called Rotterdam effect – a very large part of our exports within that go to Continental Europe ports like Rotterdam before going on to the rest of the world. They are in fact therefore counted in the statistics as exports by us to the EU and then there are counted as exports by the EU to wherever they are going. Isn’t that great?!
This just shows that the statistics you are shown are misrepresented as they don’t give a true picture of our trade with Europe. Our exports to Europe are much less than the statistics would seem to suggest.
The effects on business of a Brexit
In simple and plain english, businesses are not going to face a big problem if Brexit were to happen. Just look at the what the CEO of cosmetics giant L’oreal had to say
“ Brexit is not a big issue for our company. I would find it on a person note to be a pity but honestly for our business I don’t think it would change anything’. (L’oreal CEO)
A Brexit vote won’t have a detrimental effect to the operations of companies which seems to be what most people are worried about.
So should we stay in the EU or vote to leave?
From the above arguments, Terri mentions that he is not optimistic about staying in Europe. Terri stood for parliament for the referendum party in 1997 alongside Jimmy Goldmsith and others with the aim of obtaining the referendum which we are now about to have.
Terri stated that when he looks at the debate on it, on of the things he feels is that an awful lot of the people who are pro Europe should probably use a disclaimer. The people that told us that if we didn’t join the Euro, the UK would founder, the city in particular would be damaged irreparably and this wonderful Eurozone project would take off and leave Britain behind. This as we have come to see has been proven comprehensively wrong so far. It hard to see but if we joined the Eurozone project, we could have had the some problems Italy, Spain, Greece or France have had as a result of this. France is the one that normally gets airbrushed out when it can be but it does have significant problems.
Terri states that he thinks that all the people who told us that was going to happen if we join the Euro should probably precede any remarks about why they are going to say exactly the same things about the EU with something like ‘I thought we should be in the Euro but I was comprehensively wrong. The reason you should listen to me this time is …’ This would basically be the BBC, Tony Blair, Financial Times, Peter Mandelson, Ken Clarke, Richard Branson, Martin Sorrel e.t.c. These people should all give us that disclosure before they opine on what there opinions are about where we should be in life.
One of the reasons politicians hate referendums is because my vote counts exactly the same as theirs, and it is not going to be decided on party political grounds unlike a general election. The people who might naturally be Labour supporters won’t necessarily be compelled to vote along party lines in this matter. This makes it much less predictable.
How should I vote in the EU referendum – deciding to vote Brexit or Stay.
If I were sitting here and wondering which way to jump, I would take my lead from the great saying that ‘you can judge a person from the company they keep’. So would you rather be on the side of :
- in the world of politics – For vote stay we have Tony Blair, Peter Mandelson and Chris Huhne or for Brexit we have Margret Thatcher, Boris Johnson and Nigel Lawson (the last chancellor of the exchequer who ran a surplus in this country).
- In the world of business – For stay we have 36 CEOs of the FTSE 100 who signed the letter drafted by the government for them saying that we should stay in or would you rather go with Antony Bamford who has taken JCB to being one of the largest private construction supply companies in the world and Peter Hargreaves, the entrepreneur behind Hargreaves Lansdown. It is interesting to note that Peter Hargreaves founded his business in his bedroom, has never borrowed any money, his business is in the FTSE100 and he is a multibillionaire who has stayed in the UK and paid his taxes here unlike a certain Mr Richard Branson who hardly pays tax in the UK.