Launching the Labour Party’s business manifesto on the first day of the election campaign, Ed Miliband took the opportunity to contrast his approach to the EU with that adopted by David Cameron.

Miliband was clearly seeking to woo business leaders by targeting a Tory weakness. And he has a point. But whether his argument stacks up is open to question.

Speaking in London, Miliband declared the UK “must be a committed member of a reformed European Union”. For him, the road to such reform lies not via threats to leave but through exerting influence from the inside. David Cameron’s pledge to hold a referendum on Britain’s EU membership, Miliband concluded, represents a “clear and present danger” to business.

The attack focused on the opportunity costs that would arise if voters were promised a referendum on EU membership before the end of 2017. The uncertainty spawned by this, the Labour leader argued, would lead to a loss of investment. Companies could no longer plan for the future if there were doubts about whether the UK would remain a full part of the EU.

The Costs of Uncertainty

It is not hard to see why the Labour Party has chosen to stress the difference between its view of the EU and the plans put forward by the Conservatives.

The party’s relationship with business has been frayed, partly as a consequence of Ed Miliband’s reference to some firms as predators and his insistence that a Labour government would intervene directly in the banking and energy sectors.

Business leaders have expressed considerable anxiety about such policies but many are equally, if not more, concerned about the prospect of Brexit – a UK withdrawal from the EU. By appealing to concerns about the latter, Miliband is targeting the soft underbelly of Conservative relations with business.

On the surface, it is hard to dispute the Labour leader’s claim. The prospect of a referendum would cause significant uncertainty, and there is already anecdotal evidence that companies, particularly foreign firms, are considering holding back on investment decisions until after a popular vote.

There is also a lesson to be learnt from the Scottish referendum. Uncertainty about the result led to billions of pounds of investment being pulled from the UK in the weeks leading up to the vote. While it is far from certain that precisely the same thing would occur prior to an EU vote, it is certainly conceivable.

The long game

Yet the reality is somewhat less simple. The prime minister has, after all, promised a renegotiation of the terms of British membership, partly with a view to making the EU more business friendly. Should he succeed, any costs generated by a referendum would need to be weighed against the longer term benefits to British business of the new settlement.

This is, of course, a big if. There are good reasons to wonder just what can be achieved by any renegotiation. After all, the EU has already cut back dramatically on legislation and is engaged in a process of making EU regulation simpler and reducing its costs. It is hard to see what else could be accomplished.

As for the rest of the prime minister’s European agenda, business attitudes range from the disinterested to the hostile. Many Conservatives are keen to remove the words “ever closer union” from the EU treaty, but few businesses are particularly concerned about this rhetorical commitment. Large sections of the business community do however oppose the idea of restricting free movement if it makes it harder to recruit migrant workers.

While there are therefore reasons to be sceptical about what David Cameron can hope to achieve from his much-vaunted renegotiation, there is one other major reason to wonder whether Labour’s claims are credible.

Miliband has resisted pressure from his own MPs to promise a referendum on EU membership. Yet the nature of the debate in the UK implies that such a popular vote will have to be held at some point.

It is hard to imagine circumstances in which a future Conservative government could not hold one, while pressure from inside the party and its supporters might build even on the Labour leadership to such an extent that promising a popular vote might appear the lesser evil.

In or out?

The question then is, assuming (as most economists seem to) that membership is good for the British economy, under what circumstances is a referendum most likely to produce a vote in favour of continued British membership? Many pollsters would contend that the best way to ensure this outcome is for a referendum to be held under David Cameron in 2017.

Should he carry out his renegotiation effectively enough to be able to claim success (and what leader wants to carry out a highly public negotiation and then admit defeat?), he, along with the leaders of the other main parties, will campaign in favour of continued membership. If, on the other hand, Cameron loses the election, the Conservative Party will probably elect a far more eurosceptic leader. Under such circumstances, it is far more likely that an eventual popular vote would lead to exit.

So while Ed Miliband is undoubtedly right to question the short-term economic implications of Conservative plans for a referendum, the argument that businesses in favour of continued membership should automatically support Labour is more open to question.

That being said, there are, of course, other reasons to support membership than the narrow business case. And Europe, of course, is not the only issue in this election.

Anand Menon receives funding from the ESRC, for whom he heads the initiative on The UK in a Changing Europe. This article reflects the author's personal opinion and not those of the research councils.