Tuesday 26 June 2018

The chasm is still growing

The reactions to the suggestion by Airbus that they will need to rethink their investments in the UK if the future trading relationship between the UK and the EU is not sufficiently smooth to support their manufacturing model did more to highlight the way in which existing perceptions colour people’s judgements than to shed light on the economic implications of Brexit. 
Airbus’ statement seemed to me to be little more than a statement of the blindingly obvious – a multi-national manufacturing operation depending on ‘just-in-time’ deliveries is going to be nervous about any changes which threaten delays in the supply chain; the company’s executives wouldn’t be doing their job if they did not highlight the problems likely to be caused.  Relocation isn’t the only answer, however; they could change their model to ensure that deliveries happened ahead of time so that materials and components are ‘in stock’ on site.  That was, after all, the way that most manufacturers worked in the distant past.  It has implications though; it ties up more capital, and requires more storage space, especially for larger components.  It’s an over-simplification I know, but ultimately, if the outcome is, as seems increasingly likely, a situation where the delivery of goods is prone to delay and disruption, then the management of companies like Airbus will need to decide which is the best investment to make: the space and facilities to allow a change in their production model, or to relocate.  The underlying point, at its simplest, is that existing locations owe a great deal to the fact that movement of goods within a single trading bloc is comparatively easy; had that not been the case, other locations would have been selected.
To the Brexiteers, the statement was just another part of Project Fear, a threat aimed at reversing the decision taken by referendum two years’ ago, and a decision which had nothing to do with the needs of the business.  Of course, for anyone who really believes (as the Brexiteers still seem to do) that it is possible to leave the Customs Union and the Single Market, negotiate different trade deals with other outside countries, and still maintain the same freedom of trade with the EU27, it’s easy to see how this will look like an idle threat, not to say an unwarranted interference by business in politics.  And because, from that perspective, the businesses are worrying unduly, they can be ignored (although whether it was wise to put that in such graphic terms as those apparently used by the Foreign Secretary is another matter).  Two years on, and nothing has convinced them that the UK is not so important, unique and special that it will be able to get whatever it wants, and that anything said by anyone else is just a ‘negotiating position’.
And that brings me to what I thought was the most worrying aspect of all in the story, the reaction of a spokesperson for the UK government, who said “We have made significant progress towards agreeing a deep and special partnership with the EU…”.  The spokesperson might just be spinning (or lying, as others might call it), but what if he or she (and the government) really believe that they have indeed made ‘significant progress’?  Airbus, BMW et al are getting jittery precisely because it’s obvious that not only is there not significant progress, but the UK government is still negotiating with itself about what it wants.  This ‘significant progress’ hasn’t only escaped their attention, it’s also escaped the attention of the EU27 and all the media reporting on events.  As a work colleague once said to the manager in the middle of a highly-fraught project, “If you can keep your head when everyone around you is losing theirs, you haven’t got a (expletive deleted) clue what’s going on”.  There is not so much a gap as a yawning chasm between the perspective of the Brexiteers and that of everyone else as to the current state of play, and despite two years of reality checks, the chasm seems to be growing, not shrinking.

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