Titans of industry warn of Brexit exit from UK

Airbus has warned that it will reconsider investments if Britain crashes out of the EU

London (AFP) – Brexit was sold in large part as a historic opportunity for Britain to carve out new markets, free of the red tape of Europe’s trading regime. 

But now some of Europe’s most iconic manufacturers are warning that it could in fact mean their pulling investment out of Britain, imperilling tens of thousands of jobs and billions in exports.

With the clock ticking before Britain quits the European Union next March and negotiations stuck in the slow lane, companies such as BMW, Airbus and Siemens are speaking out more forcefully about the risk of a disorderly withdrawal.

Prominent supporters of Brexit accuse the companies of scaremongering. But observers caution that the threat is real, after new industry data on Tuesday showed that investment in Britain’s automotive sector collapsed by almost half in the first six months of 2018 owing to the political uncertainty.

“Businesses are beginning to speak up as we’re entering the critical point where decisive actions need to be made (for investment),” said Keith Pilbeam, professor of international economics at City, University of London.

“There’s no doubt they should be taken with the utmost seriousness. To take this in a trivial or cavalier way is reckless,” he told AFP.

Aviation giant Airbus, which directly employs nearly 15,000 people in Britain, warned last week that crashing out of the bloc would be “catastrophic” and force it to consider its investments.

– Out of time –

Interviewed for Tuesday’s Financial Times, BMW customs manager Stephan Freismuth said if after Brexit “the supply chain will have a stop at the border, then we cannot produce our products in the UK”.

More than most companies, auto manufacturers rely on intricate, “just in time” supply chains across Europe that would unravel if Britain fails to agree a new customs regime with the EU.

Profiting from the EU’s single market and customs union, foreign carmakers led by Japan’s Honda, Nissan and Toyota rescued Britain’s auto industry. Today, according to the Society of Motor Manufacturers and Traders, more than 1,100 trucks from the EU bring components to car and engine factories every day.

The Japanese companies and government have expressed their own misgivings, warning that profits would be wiped out and further investment imperilled if customs checks return at British ports for EU-sourced parts.

The auto industry directly employed 162,000 people in making vehicles in Britain in 2016 and contributed more than £15 billion ($20 billion, 17 billion euros) to the economy in 2017, or eight percent of all manufacturing output, according to the most recent government statistics.

Nearly a million jobs depend on the auto industry as a whole, including sub-contractors. And four-fifths of all engines and parts come from suppliers in other EU countries.

So the country’s car industry risks “becoming extinct” outside the EU’s customs union, Confederation of British Industry president Paul Dreschler said two weeks ago.

BMW, which directly employs about 8,000 people at its four British facilities, rowed back from Freismuth’s stark warning in a statement that said “we remain committed to our manufacturing operations in the UK”. 

Nevertheless, the statement said “the ongoing uncertainty surrounding the Brexit negotiations is not helpful when it comes to making long-term business decisions”, highlighting the lack of clarity on future customs arrangements. 

– ‘F— business’ –

Brexiteers, having promised a globetrotting Britain free to make its own trade deals, want a clean break with the EU including no more customs union.

They have assailed the companies for undermining Prime Minister Theresa May as her ministers try to negotiate a grand post-Brexit bargain with Brussels.

Health Secretary Jeremy Hunt said the threats were “completely inappropriate”. As relayed to the media by EU diplomats, Foreign Secretary Boris Johnson used a four-letter word to attack business during a reception last week.

In parliament on Tuesday, Johnson claimed to be attacking business lobbyists rather than the companies themselves.

Juergen Maier, the UK boss for Europe’s largest industrial conglomerate Siemens, said slogans vocalised by Johnson such as “full British Brexit” were “incredibly unhelpful”. 

On BBC radio last week, Maier called for “minimum friction” in future trading ties.

May herself Tuesday promised a respectful hearing to businesses, and said the government would release a “white paper” next month spelling out in detail what it wants in the future relationship with the EU.

But Pilbeam said that was too little, too late.

“The deadline is approaching and most people find the government’s lack of preparedness astonishing,” he said.