Tesco chief pushes for EU enlargement

The proposed enlargement of the European Union to include 10 former Soviet Bloc countries is likely to be a momentous occasion by any standards, but for companies based in current EU countries and with operations in the aspirant member states, the economic benefits are likely to be significant.

Tesco, the UK's leading food retailer, is one such company, with 138 stores in the four Central European countries of the Czech Republic, Hungary, Poland and Slovakia, all of which are due to join the EU in 2004. It is not surprising, therefore, that the company's CEO, Sir Terry Leahy, has come out strongly in favour of expanding the Union into the east.

While strongly supporting enlargement, which he described as an "historic act"​, Sir Terry told an audience of politicians and businessmen in Vienna yesterday that "enlargement is, in itself, no guarantor of the EU's prosperity. We need to make Europe's economy as competitive, productive and flexible as possible. And that means fewer regulations"​.

Sir Terry described the benefits of enlargement as "the virtuous circle of wealth generation that investment creates"​. This, he said, should build on the "quiet revolution"​ that has "tiptoed"​ across Central Europe since Communism's collapse, in which retailers have delivered "a choice of quality goods at affordable prices; more jobs; new orders for suppliers"​.

But he warned the politicians across the continent that new investment must not be taken for granted.

"We invest where competition is encouraged, not hindered with regulations and protectionist laws. We invest in markets where we can deliver what consumers want, and are not bound by inflexible practices,"​ said Sir Terry. "Our willingness to invest wanes if politicians pass regulations and laws which increase costs, cut efficiency and reduce competition."​

Sir Terry stressed the importance that Europe's politicians do not lose sight of the benefits that enlargement should offer to millions of people. Enlargement, he said, was "not about arcane theories or the structure of institutions. It is about improving people's day-to-day lives. If we become absorbed by the minutiae of treaties, we risk failing to tell people about the everyday advantages of joining the European Union."​

This is clearly a seemingly altruistic spin on the process of enlargement, a process which will undoubtedly benefit the retailers as much (if not more) than the consumers which Sir Terry is so keen to help reach the high standards of the West. But there is also a great deal of sense in what he says about ensuring that the regulations and the red tape do not get in the way of development.

We only have to look at the arbitrary way that legislators in countries such as Poland or Russia have acted​ to try (and in some cases succeed) to take back brand names held legitimately by individual companies (such as SPI, which owns Stolichnaya, or Pernod Ricard, which owns Wyborowa), or recent protectionist measures introduced​ in Poland.

Sir Terry argues that Tesco's growth strategy has been built on forging partnerships with local producers and suppliers - in Poland alone it works with 1,600 Polish suppliers - and employing local staff, creating jobs and improving the standard of living.

But even in the west, the growth of supermarkets and hypermarkets has not been without fierce criticism - from producers complaining about reduced margins to local shopkeepers forced out of business by the massive buying power of the chains - and it is not unlikely that these same criticisms will be raised in the east.

So while the major chains will undoubtedly bring much to the new member states, including cheaper food and a far wider range of products, this should not be seen as a reason to give them carte blanche to open stores wherever they like. No matter what the rhetoric, the retail business has always been about profit margins, not improving the lot of the consumer.