ANY QUOTES USED MUST BE ATTRIBUTED TO MURNAGHAN, SKY NEWS

DERMOT MURNAGHAN: Well the former bosses of some of Britain’s biggest supermarkets and retailers have been warning that leaving the EU would have a devastating effect on the economy.  Writing in the Mail on Sunday they say Brexit, leaving the European Union, would inevitably lead to price rises on the high street and would hit consumers the hardest.  Well Sir Terry Leahy is one of them, he is of course the former head of Britain’s biggest retailer, Tesco.  A very good morning to you, Sir Terry.  I put it to Dominic Raab that the public are getting a bit sick of this, they hear one dire warning from one side, one dire warning from the next and they scratch their heads and wonder if it really is true.  

SIR TERRY LEAHY: Well we’ve spoken about things that matter to the consumer.  The British economy is a consumer economy, 65% of it is made up of household spending so the consumers matter in this and it’s been a success story, in the last 10 or 20 years there has been an explosion of choice, improvement of quality in the goods and services people buy and that’s happened within the European Union.  If we left that would be put into peril.

DM: You know much more than I do and you were there when Tesco expanded into some other European countries and dipped your toes in the water, we’ve all been to supermarkets in other European countries and they seem [inaudible] and some of them are badly run, there is a feeling that Britain is way ahead when it comes to retailing and getting prices down for the consumer, why would that change on leaving the European Union?

SIR TERRY LEAHY: Britain is way ahead, London has become the world’s financial centre as part of the EU, Britain is a leading innovator in retail, it’s a leader now in the digital economy and in e-commerce within the EU but it benefits from being a part of that 500 million single market.  We attract investment into digital businesses, into retail, into the car industry which helps consumers here at home because it ups competition and investment and innovation but it is because we are part of that single market.  

DM: But why would prices go up?  This is about the famous shopping basket, the Margaret Thatcher shopping basket, why would that cost more if we leave the European Union?  You are effectively talking about tariffs and barriers.  

SIR TERRY LEAHY: For a number of reasons actually.  First of all for tariffs, as soon as we leave we come outside of the single market.  We would then go to WTO tariffs, so the costs of clothing and food and cars would go up but also, more importantly, in the last 10 or 20 years we have become part of an integrated supply chain which is based in Europe.  That inevitably would face huge disruption and that would increase prices. There are two further reasons: the pound would be hit hard, the shock to the system, the loss of confidence would drive sterling down and that would put up costs and …

DM: But is that the main driver behind the argument?  There may be other reasons involved, yes, the pound has been slipping down and even the Leave campaign admit there is a period of uncertainty, of course there is, but that would correct itself wouldn’t it, if Britain left and negotiated an orderly retreat from the European Union?

SIR TERRY LEAHY: I don't think so, no.  This would be a tremendous shock at a very delicate time.  The great recession of 2007 to 2012 hit families hard, they are gradually recovering their confidence, the whole economy depends on a confident consumer and that would be hit by the shock to the system. House prices would go down, food prices, clothing prices would go up, people would stop investing in the UK, that would cost jobs.  Now all of those things would hit consumer confidence, that would put the economy in …

DM: But food prices, why would they go up? People remember when we joined the Common Market as it then was, one of the big issues was the Common Agricultural Policy which artificially inflates prices, pays farmers more for some of the products they produce. If Britain is out of the European Union and wants to subsidise some of its own farmers to a similar level, it also then means it isn’t then paying into subsidising French, German, Spanish, Italian, the list goes on, farmers.  

SIR TERRY LEAHY: I’m not a great fan of the Common Agricultural Policy but the cost of that …

DM: So isn’t that a good reason to leave?

SIR TERRY LEAHY: The cost of that pales into insignificance against the cost for all household goods that would increase when we left the European Union because of increased tariffs, because of a collapse of the pound, because of a loss of investment here in the UK.  And you know, the EU is our natural trading partner, if you look at economics all over the world, countries trade with the countries next door.  If we go looking for trade in South America and Asia and Africa and so on, goods will cost more, they cost more the further afield you get them from so there are three or four very powerful reasons why if we leave the EU goods will cost more.  

DM: Have you thought carefully … I want to ask you, have your views been solicited, have you taken calls saying Sir Terry, it would be helpful given your former role, it would be helpful if you made these points, I’m sure you believe them sincerely but it would helpful if you and others got them out there to try and influence the campaign.

SIR TERRY LEAHY: No, I offered to help because I believe, I’m a great fan obviously of the UK, I think we’re a world class country but it’s important now that we stay in the EU.  We depend on the gradual recovery in consumer confidence that’s taking place.  The irony is that many of the things that the Leavers want we can achieve already.  What matters for people in Britain is can we build houses, can we improve our hospitals, we need better schools and more skills, we need better infrastructure – we can do that now within the EU and as part of the EU we can then export what we do well to a market next to us of 500 million people.  

DM: But you know what Leave campaigners say when you mention all those things, a lot of it comes back to immigration, the free movement of peoples within the European Union and we need a lot more housing, we need more schools, we need more medical facilities because the population of the UK is growing very rapidly indeed, partly through immigration and big bosses like it because it helps them keep wages down.

SIR TERRY LEAHY: Well first of all immigration is a good thing.  My parents were immigrants into the UK and there are many fine examples of people who have contributed a lot to the UK and were originally immigrants.  It needs to be better managed but of course there is more immigration from outside the EU, which we can manage, than there is from within the EU.  Another thing too, we want more British people in jobs so welfare traps people and keeps them out of the labour market.  If we can get more British people in there will be less need for immigration.  This thing about whether businesses enjoy low wages just doesn’t stand up.  The retail industry has got a tremendous track record of paying above the minimum wage, having profit shares and bonuses and pensions and training programmes all above that.  We want our people who work in the industry to do well.

DM: A last quick question, Sir Terry, with your retailing expertise, this huge issue of BHS, do you think it can continue as a viable concern or really is the brand dead in the water?

SIR TERRY LEAHY: It looks very difficult. One of the facts of all this innovation and all this improvement in retailing is not everybody can keep up and it looks like BHS hasn’t done enough to keep up.  The locations are good and I’m sure that in some form they will find another use.  

DM: Well great to see you, Sir Terry, thank you very much indeed for your time.  Sir Terry Leahy there.