Different people
have reacted differently to the announcement by Honda
that it is to cease production and close its plant in Swindon, depending
largely on their views over Brexit. Opponents
of Brexit have been quick to claim that Brexit is clearly a factor, whilst Brexiteers
have, quite rightly, pointed out that Honda’s statement placed no blame on
Brexit; indeed, it specifically stated that it was not a Brexit-related issue. That statement may not be quite as definitive
as it sounds, though.
It’s certainly
true that there have been major changes in the industry, and that the move away
from diesel cars is happening faster than many would have predicted. And it would be surprising if Honda, like
other manufacturers, wasn’t looking more to a future which depended more on
electric vehicles. In that situation, ending
production of a vehicle whose life-span is nearing its end anyway is an
entirely normal, non-Brexit-related business decision.
More interesting,
though, is the question which is not being asked as a follow-up. As far as I can see, the company is not
planning to produce fewer cars in total, merely changing the emphasis away from
one type of vehicle to another. And
those new cars need to be produced somewhere – the company has decided to do
that in Japan. So, the question which
hasn’t been widely asked is this: given that you already have a factory capable
of producing vehicles with a trained and experienced workforce, why close that
and invest in new capacity elsewhere instead of repurposing the existing
facility?
The company’s own
statement gives us the answer to that when it says that it is due to the relative
size of the market in different locations.
Now we know that the original investment in the UK was part of a strategy
to target the EU market from the inside rather than across tariff barriers; and
we know that the new EU-Japan trade agreement facilitates trading with the EU
directly, without needing a base within the EU.
We also know that the terms of trade between the UK and EU post-Brexit
are a complete unknown at the moment, but there is no conceivable Brexit
scenario (other than cancelling it completely) which will not make trade
between the UK and the EU more difficult than it is at present – and potentially significantly more difficult than simply supplying the market directly from Japan.
So, in taking the
short-term decision to stop production of the current model, I can well believe
that Brexit was not a significant factor.
But in making the longer-term decision as to where to put future
investment, not only can I not believe that the changes which Brexit is leading
to are not a factor, but I also believe that if they weren’t, then the directors
of the company would be guilty of a grave dereliction of duty. And this matters; it matters a lot. We are going to see a lot of changes happening,
and in many cases it is going to be extremely difficult for anyone to say, with
absolute certainty, that this decision or that decision was a direct result of
Brexit.
At the level of
individual decisions, the Brexiteers will have a degree of what Nixon once
called “credible deniability”, and they will attempt to use that to deny any
causal link between their project and the economic damage which it does. But we shouldn’t lose sight of the fact that
whilst the changes resulting from Brexit may not be the direct cause in many
individual decisions, they will undoubtedly be part of the context considered
when those decisions are being made. The
influence of a deliberate decision to place the UK outside the world’s largest
free trade area will not always be direct and obvious, but it will be extremely
pervasive overall.