Automotive Industry: A Hard Brexit’s Gonna Fall

Originally written for the Q1 2017 edition of Professional Manager

Brexit automotive

Theresa May’s government, trapped between a rock and a hard place, seems likely to plump for a ‘hard’ Brexit, meaning Britain is likely to leave the single market in order to guarantee more controls over immigration. Conversely it’s the soft option, at least as far as a test of the government’s mettle is concerned. It knows that the single market is invaluable to the UK, but at the Tory Party conference in October the government signalled that it is not prepared to make the argument for staying in it.

Business is virtually united in opposing a hard Brexit, because they know it will make trading with Europe – far and away the largest economic partner GB has – much more costly and expensive. Unfortunately it’s a double-edged sword too. In making it harder for Europeans to live and work in Britain, the government seems set on depriving British businesses of both unskilled and highly-skilled workers alike. The vast sums in R&D funding that have flowed from the EU into Britain will also be lost. No wonder just 3% of SMMT members, the automotive industry’s UK trade body, were in favour of leaving the EU when surveyed in 2014.

The automotive industry has already signalled its intent. Jaguar Land Rover, Britain’s biggest exporter of any kind to China (our great saviour, according to Brexiteers) has made its feelings clear already: the tariffs that would hit British exports without single market access would directly ‘damage business and British jobs’ and be ‘frankly disastrous’. Nissan’s declaration that it will suspend investment in its massive and highly productive Sunderland plant is a similar warning shot warning shot. And no empty threat.

The automotive industry is hardly socialist, but it is internationalist. Without access to the single market and facing the prospect of more costly, time-consuming and inefficient factories and working processes, it will simply leave for the continent without huge public subsidies.

Quite how the Prime Minister would present the flow of billions to foreign-owned companies remains to be seen, but the alternative is a sector that accounts for 4% of GDP, 10% of the UK’s trade in goods, providing around £5bn in added value to the economy and supporting around 800,000 jobs simply leaving the UK.

As far as bewildered foreign car companies are concerned, the UK has voted to saw its own legs off. Much like the European Union itself, the automotive sector will drive a hard bargain with the government in exchange for a hard Brexit.

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