Aru Sivananthan: The European Union damages Britain's small businesses

I am often asked why I support Brexit. After all, I have lived on three continents, I have dear friends from all corners of the world including the European Union, and I worked for banks headquartered in the Eurozone.


I recognise that "immigration" and "loss of sovereignty" are important for many, however I do not recognise the latter in my day-to-day life. Perhaps the ebbing of sovereignty is a very slow process which you do not necessarily feel, but nevertheless it is not a motivating factor for me to support Brexit. 

Further, due to very bad policy errors made by the previous Labour government and not entirely corrected by succeeding Conservative government, we face an acute shortage of skilled professionals in the healthcare sector. This shortage is often filled by employing highly motivated, well-trained and dedicated professionals from Eastern Europe. Without them the UK healthcare system would grind to a halt, and we owe them our gratitude.

So, why do I support Brexit? As a shareholder of an SME (Small & Medium-sized Enterprise) I recognise that the European Union's rules and regulations are some of the most anti-business in the world.

The European working directive is a perverse instrument that has stifled service sector growth in the UK. It has increased labour costs in healthcare and similar service sectors by an additional 12%-17% over the past 8 years. This reduces the gross profit of these firms by 25%-35%, in turn depressing their equity value by 35%-48%. It has a staggering impact on their ability to invest, expand or create a buffer against adverse shocks. It stifles entrepreneurship, and has a punitive effect on risk taking and new job creation.

It also shifts income from those who make a permanent commitment to an employer to those who want casual or zero hours contracts. It transfers income from those who opt to work hard and take little or no holiday to those who take their full allocation of leave and other special holiday entitlements they may have. It also moves income from those who earn a fixed remuneration and are obliged to work until the job gets done, irrespective of how long it takes, to those who get paid on an hourly basis. The net effect is that it punishes strivers while rewarding those who want to just get by.

EU health and safety regulations and 'green' policies also have a negative effect on SMEs. In many service sector firms such policies have driven up costs by between 3% and 5%, but this could be more in other sectors. This not only drives up cost, but also negatively impairs gross profits and equity valuations, thus stifling their ability to grow.

Now to immigration. In my firm I also work with those needing a lesser skill set to perform their roles. Most work extremely hard and very long hours, and I admire their aspiration and determination. For example: some of them work as much as 100 hours a week in physically and mentally demanding roles in order to service a mortgage within the M25. And why do they have to work so hard? As the head of the Remain campaign, Lord Rose, has admitted to a parliamentary select committee, our membership of the European Union lowers wages. It is Britain's lowest-paid workers that have come under the most intense wage competition from the influx of cheap unskilled labour from the European Union. This uncontrolled unskilled migration has had a severe adverse impact on their living standards, and Brexit will increase their wages. 

Of course, we need skilled immigration to make up for the skills shortage in Britain - a shortage created by bad government policy. However, if we want to give our strivers a leg up, to help them fulfil their aspirations, and reward their tenacity, we must have a balanced immigration policy. Until we vote to leave the European Union, we must accept free movement, and we must accept the EU's regulations and directives which have had a particularly damaging impact on Britain's Small and Medium Sized Enterprises.


Dr Aru Sivananthan runs a medium-sized business in the healthcare sector, employing approximately 200 staff. Prior to that, he was a bond and credit derivative trader at Barclays Capital, where he was head of TMT, Utilities and Auto trading; and has also worked as head of high yield trading at Societe Generale. He the Chairman of the British Tamil Conservatives, a group which campaigned in several key marginal seats and helped the Conservative Party secure a majority government.

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