BIG BUSINESS VOICING ITS BREXIT CONCERNS
This Article Appeared in The Irish Examiner 29th June 2018
Last weekend we passed the second anniversary of the monumental decision of the UK electorate to exit the EU and we are now less than nine months away from ‘B-Day’. The intervening period has seen the growth of a major industry around the subject. Every business in this country and indeed in the UK either has or should be considering the potential implications of the impending debacle; thousands of hours of management time have been devoted to it; thousands of reports have been prepared on the subject; the political system in the EU has been forced to hand over an inordinate amount of time to the topic; media here and the UK has been dominated by it; and it has exposed a most amazing level of political dysfunctionality in the UK. More than anything else relating to Brexit, it is the latter than has come as the biggest shock to me. The behaviour of politicians such as Boris Johnson, David Davis, Michael Gove, Jacob Rees-Mogg and Jeremy Corbyn has been quite simply astounding and pretty unbelievable.
It all makes one wonder what we would have been talking about over the past couple of years if the UK electorate had done the sensible thing and voted to stay in the EU? I have believed from the beginning, and I become even more convinced by the day, that the decision to walk away from such a huge market in return for very dubious benefits, makes no economic sense whatsoever. Indeed, the evidence of the damage that has been done to UK economy in the intervening period is becoming more palpable.
What is perhaps most disconcerting, is the fact that we are no clearer today about the eventual outcome than we were two years ago. It is still possible to make cogent arguments for any possible outcome. Uncertainty still reigns.
Based on what we know at the moment, the UK will formally leave the EU on March 29th next year and will then have a transition period that will end on December 31st 2020. During that transition period, the UK will have access to the single European market but will be subject to the rules and regulations of that market without having any influence over those rules and regulations.
Despite all of the confusion and uncertainty, the only really important question to be answered is the nature of the trading relationship that will exist between the UK and the EU from January 1st 2021 onwards. The answer is that nobody knows at this stage and anything is possible.
UK business did not play an adequate role in the run up to the referendum and never really highlighted its concerns ahead of the vote. However, it is interesting in recent days that some big names have started to make noise. Airbus has stated that a ‘no-deal’ scenario would threaten its investment in the UK for the very obvious reason that any border delays or trade tariffs would damage its business. Airbus employs 14,000 people directly in the UK. In a similar vein, BMW has called for clarity on future customs arrangements and has warned that it would shut UK plants if the supply chain is disrupted by Brexit. It employs 8,000 workers in the UK. The Society of Motor Manufacturers and Traders (SMMT) warned that investment in new cars and plants in the UK has weakened significantly and that 850,000 jobs directly and indirectly employed in the sector are at risk from a ‘hard Brexit’.
The issue for all of these businesses is that in the event of no deal and a hard Brexit, their supply chains would be damaged and this would damage profitability. If necessary, they will vote with their feet as they should do if they are to act in the best interests of their shareholders.
The reaction of the Health Secretary, Jeremy Hunt, was interesting and very telling. He basically described the warnings from Airbus as completely inappropriate and that the Government should ignore ‘siren voices’. We have also seen the re-emergence of the old chestnut about the extra funding that will be available for the NHS once it leaves the EU, but the reality is that the damage to growth from a hard Brexit would do so much damage to the UK economy that there would inevitably be less money available for the NHS and other public services. One could not make it up.
Shortly, the UK cabinet will meet in Chequers to agree on a white paper on the UK’s plans for a future relationship with the EU. The problem for the Prime Minister will be to bring both factions together. Her task is not to be envied, putting it mildly, but it is very clear that she still wants as soft a form of Brexit as possibly. Here in Ireland we should hope that she gets her way.