NERVOUS car manufacturers have, with good reason, revved up their warnings about what a no-deal Brexit could mean for their British operations in a week in which key surveys have again flashed danger signals about UK economic growth having stalled.
Meanwhile, the Organisation for Economic Cooperation and Development has warned of UK recession in the event of a no-deal Brexit, while projecting very weak growth if a withdrawal agreement is sealed.
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However, as has been the case since mid-2016, this Conservative Government has still not got its listening ears on. Rather, it seems focused on dealing with its internal divisions, and on trying to work out how best to pander to the Democratic Unionist Party and to those Brexit-supporting Labour MPs it believes could help keep it in power. With only three weeks to go until the UK’s scheduled Brexit date of March 29, chaos reigns.
At the Geneva Motor Show this week, BMW signalled it might be forced to stop making the Mini at its plant at Cowley, near Oxford.
The Brexiters seem determined not only to wrap themselves in the Union Flag but also to hold up what they view as the great symbols of Britain. In the car industry, the Mini brand, regardless of its German ownership, is about as British as it gets.
Groupe PSA of France, which owns Vauxhall and is a major employer in the UK, was among other car-makers to sound warnings over Brexit. It was joined by Toyota and Bentley. Meanwhile, rumours swirled that Japanese car giant Nissan would cut production at its plant in Brexit-backing Sunderland.
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There has been plenty of bad news already from the car industry.
Honda last month unveiled plans to close its factory in (Brexit-voting) Swindon in 2021 with the loss of around 3,500 jobs. The Japanese car-maker, while not mentioning Brexit specifically in a diplomatically worded statement, said it would as a result of the “significant challenges of electrification…focus activity in regions where it expects to have high production volumes”. A post-Brexit UK is clearly not among these regions.
German giant Schaeffler, which makes bearings for the automotive industry, last November unveiled plans to close factories in Plymouth and at Llanelli in Wales, in a move affecting hundreds of jobs.
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Last month, Nissan confirmed it was abandoning plans to build a new model of its X-Trail sport-utility vehicle in Sunderland. Nissan cited “business reasons”, but warned: “The continued uncertainty around the UK’s future relationship with the EU is not helping companies like ours to plan for the future.”
Anyone in the UK Government hearing any of this? No?
The only thing we have been able to rely on the UK Government to deliver on the Brexit front is uncertainty. As Prime Minister Theresa May’s desired European Union exit date looms, Brexit-supporting international trade secretary Liam Fox cannot even tell us about tariffs in the event of a no-deal scenario. It is an incredible state of affairs, even taking into account the Tory track record.
There has been some bullish mood music from the Conservatives about the potential to get Mrs May’s draft withdrawal agreement approved in a vote in the Commons next Tuesday, and then signals they have made no progress in this aim.
It is important to remember that, on the UK Government’s own forecasts, Mrs May’s deal will be significantly worse for the economy than remaining in the EU.
Businesses do crave certainty, and many companies, especially the bigger ones, have spent a pretty penny on Brexit preparations.
But they should know better than anyone that such expenditure is a sunk cost. Having spent time and money preparing is not a reason to hope for Mrs May’s deal to go through. After all, there still looks to be some kind of chance that the UK might be saved from Brexit altogether.
Looking at the long-term impacts of Brexit under even the most-benign scenarios should surely persuade many businesses that the best outcome is remaining in the EU. Millions of households, and many businesses, will no doubt have fathomed this already.
It is easy to understand businesses’ exasperation over continued Brexit uncertainty, and its impact.
Surveys of UK manufacturing, services and construction, published in recent days by the Chartered Institute of Procurement & Supply, signal near-stagnation of the economy, even before we get to the Brexit date. CIPS makes no bones about Brexit being a key driving force in the weakness of these sectors.
The UK services sector cut its workforce at the fastest monthly pace since November 2011 in February as fears over the economic outlook and weak demand prompted firms to delay hiring amid Brexit uncertainty.
Meanwhile, the UK manufacturing sector cut staff in February at the fastest monthly pace in six years. And construction output fell in February for the first time in 11 months.
The Organisation for Economic Cooperation and Development this week almost halved its forecast of UK growth this year, reducing it from 1.4% to just 0.8%. The UK economy grew by only 1.4% last year – its weakest expansion since 2012. For 2020, the OECD forecasts UK growth of just 0.9%.
The OECD said: “Growth is projected to remain weak in the United Kingdom, at under 1% in both 2019 and 2020. The still-strong labour market continues to support household spending, but persisting uncertainty about Brexit and the ongoing growth slowdown in the euro area are weighing on business confidence, investment and export prospects.”
These albeit grim projections relate to a scenario in which a no-deal Brexit is avoided. The OECD warns of the danger of UK recession in the event of a no-deal Brexit, with “sizeable negative spillovers on growth in other countries”.
People who listen to the Brexit supporters and the spin of the Conservative Government could perhaps be forgiven for not realising the economy is stagnating or that a no-deal Brexit would likely trigger a very painful recession.
Then again, many Brexit voters beguiled by the Leave camp’s stories of great riches from a go-it-alone Mighty Blighty must surely have realised by now that they were hoodwinked.
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