Interview: Better Capital chief Jon Moulton talks Brexit


Veteran venture capitalist and outspoken EU critic Jon Moulton weighs in on why Branson is wrong and why British business would fare better out of Europe

Is Cameron for or against Brexit? Are British businesses keen to renegotiate a free trade agreement, or do they think that in the increasingly globalised climate, the UK needs the EU to survive?

Last week, in a letter published in the Financial Times, Sir Richard Branson, PR maestro Roland Rudd, BT chairman Sir Michael Rake, and CBI president Sir Roger Carr all called on Cameron to avoid a “wholesale renegotiation of our EU membership” fearing this would damage Britain’s “ability to attract new international companies to set up and employ people in the country.”

But today, famed venture capitalist Jon Moulton, who heads the leading London investment firm Better Capital, made headlines by weighing in on the debate. He joined a chorus of anti-EU businesspeople who want to see Britain out of the increasingly centralised EU, and who reject last week’s public outcry for caution by other more pro-EU business leaders.

LondonlovesBusiness.com talks to him to find out exactly why he believes Britain’s long-term interests would be best served by a new deal on Europe, and why Branson has got it wrong.

Why have you chosen this moment to come out publicly regarding your views on Europe?

I have not really decided that this was a moment to come out. It is just that the press seem to have picked up on this now, but I have been saying for quite a few years that being fully in Europe means that you are competitively disadvantaged to the rest of the world. You’re attached to a very low growth potential area and an area of relative decline – and that is before you move onto the more emotional things about sovereignty or the control of your investment.

So your statements are not linked to recent pro-EU comment by business leaders, including Sir Richard Branson?

Well it is quite easy for Sir Richard. He is headquartered in the Caribbean, so it is up to him whether he prefers to be in Europe or not. But I don’t quite know where he is coming from.

My personal position is not that we should have a free trade relationship as a rock bottom agreement. What we don’t need is a shooting match over every single possible kind of control over our sovereignty and behaviour, and walls and walls of regulations. We generate enough of these ourselves; we certainly don’t need any more.

London has benefitted from being Europe’s financial capital. Do you not fear that if it opts for a free-trade-style agreement, trading will be pulled from London and taken to Frankfurt or Paris?

That could well happen. That can’t be denied. But that could happen if we go into Europe too. We are already seeing European stock markets headquartered in Paris. There is no question that if we go into Europe we are just as likely to lose our financial services as being outside. It would be different mechanisms for losing [financial services], and possibly different timing. But it is perfectly possible that being outside Europe without the same regulation [as other European financial centres]would give the UK a stronger base, to become a base for Middle East, and Far East and emerging markets’ business.

The City is considered so successful, in part, because it attracts the best European talent. Do you not fear that moving to a free trade agreement would discourage them and make them move back?

It could actually work both favourably and unfavourably. It is very hard to judge. If Europe becomes a very dull, over-regulated place then brighter talent will go to places where there are opportunities to make money and operate more freely. That could well be London.

In the short term, if Europe decides to become vindictive and retaliatory – or just vindictive – then of course it could make London less attractive in the short term. But in the long term, I suspect, being a separate jurisdiction with a separate dynamic would give London a better position than being part of a very large, heavily regulated European financial centre.

Which industries in particular do you expect to benefit?

It is really hard to say. I think industry in general would benefit from regulation that enables the country to be internationally competitive. This way we could maintain trade, on good terms, with a lot of countries. Most industries would benefit from this, but there would be a small category of European law specialists in London who would cease to exist – although I don’t think there would be much missed.

At present around 45% of Britain’s exports go to the EU, which has some pretty tight regulations about the kinds of products it allows in. If Britain left the EU, would the divergence over product classification impact our trade capacity with Europe?

This depends on the regulations we have. In the simplest nature, we can simply agree that with Europe we have free trade – no duties on either side. You don’t need very much regulation beyond that. It may be that the Europeans will put in different regulations on drugs or things like electrical safety and make it difficult to trade, but again this represents as much opportunity as downside.

If the UK can manufacture to a cheaper and more cost effective specification than Europe, that would be a benefit, not a detriment. It is very hard to judge which way it will drop.

Britain continues to be in a difficult position economically. Surely reducing links with Europe will not be enough. What else does the UK have to do make itself more competitive and engage more effectively with emerging markets?

There are lots of things that Britain can do. These markets want us to be cheap and easy to deal with, those are the basic things. Our currency is gradually solving these cost problems at the moment, and its steady decline is helping. But we would also be easier to deal with if we were a less regulated economy.

The government’s policy on Europe has seemed ad-hoc. Do you think there needs to be more consistency or do you think that the government is doing okay?

The government sees this in political rather than policy terms. Rather than wondering what is good for the UK in the medium and long term, it is more about what will get us through the next few weeks. And this is not something that is limited to European policy. But this is the weakness of Cameron’s position – I have no idea where he will come out on the spectrum. There are some very bad outcomes here:

1)      Staying in Europe and becoming part of Europe – dreadful.

2)      Being thrown out of Europe in an aggressive and unpleasant way – definitely unpleasant, at least in the short term.

Those are two bad outcomes, but the right position is to end up somewhere in the direction of Switzerland or Norway. Free trade, but not necessarily inside. The Swiss economy has done remarkably well over recent years.

But Switzerland has the Schengen policy, which makes it much easier for other Europeans to work there. Should Britain adopt this too to prevent a foreign brain drain?

Something like that would be fine. But the words “free trade” don’t define everything. There have clearly got to be some other agreements on some things. Some form of relationship which enables trade to take place easily, without tax barriers, with the smallest possible number of non-trade barriers – that would be a very good position for Britain to end up in.  

The press is latching onto your views on Europe, but what are you going to do to make sure that your message is widely received? Will you lobby or try to unify business leaders?

I’m afraid I don’t have the time. I’m limiting my activities to talking to people like you. But I am su
pporting people who are anxiously trying to make sure that David Cameron delivers the promised referendum. This will force us into a position of having to deal with the issue rather than following the normal political habit nowadays of kicking it down past the next election.

Thank you Jon – we look forward to hearing more of your thoughts on Europe as the debate continues to heat up!