EU regulation generates costs for businesses. He extra time that must be spent on paperwork, the training that needs to bee provided for employees and of course the dreaded health and safety all add to the amount of time and money a business must spend on things other than production. These costs can have one of two effects. Either the business chooses not to pass the costs onto their customers in which case their profits fall, or they do pass the costs on which makes then less competitive. Neither of these things is good for an economy trying to escape a recession.

To boost national economies we need to get capital circulating again. But if EU regulation is forcing prices up and profitability down this simply will not happen. In a recession customers are already nervous about parting with their money. The perception that prices are rising will not help this.

Now more than ever, the public needs reassurance that governing bodies like the EU are acting in their best financial interests. However, the perception will be that EU regulation is harmful to small businesses in particular, because of the increases in costs mentioned above. If the public believes that the EU is so out off touch that it is willing to harm the livelihoods of small business owners, how will they be trusted to lead us out of the recession?

Now if ever is the time for increased regulation of businesses. Because the motivating factor for businesses is their own profit, they are unable to look at the bigger financial picture. If something is profitable for a business but bad for the economy as a whole, for example cutting employees’ wages to increase profit margins, a business would have no reason not to do it. A body such as the EU however can take an unbiased view of the economy and weigh up the need for profitability against factors like the need for workers to have disposable income. This will lead to a more stable economy in the long term because the interests of all the involved parties have been considered.

Prior to the recession businesses seemed to be doing fairly well, so the government was willing to leave them alone. This success was predicated upon a healthy economy, and when this foundation was removed their unsound business models were revealed. If business regulation is halted it is possible that this will give businesses a short term boost. But because they will be desperately seeking short-term profitability this gives them a powerful incentive to use risky business models for a quick gain. But these models will not stand up to long-term scrutiny, so the cycle will begin again. EU regulation will create a system where high risk strategies are not profitable so will lead to business models which are more likely to be long-term sustainable.