Yet there are many who remain intent on watering it down to the point where it hardly represents leaving the EU at all, Airbus and BMW among them. They are concerned that an exit without an agreement will wreak havoc with their just-in-time supply chains, and are lobbying hard to ensure business as usual, before the cabinet decides upon its final EU position at a Chequers summit next week.
One can understand industry’s perspective. Such is the complexity of global supply chains, developed over decades, that the simplest solution would seem to be to stick within the institutions that have delivered the so-called ‘frictionless’ trade that business has for so long enjoyed, namely the single market and customs union. Even many leave backers suggest that the no-deal World Trade Organization (WTO) option favoured by many prominent Brexiteers is unworkable in practice, given the need for regulatory alignment in a global rules-based system, and that an EU-lite model like EEA/EFTA should be considered.
And on the face of it, the concerns voiced by industry are more than the scaremongering some suggest it is. With car parts toing and froing across the Channel, complex customs rules threaten to add as much as nine days to shipping, as lorries sit idle in cross-border queues. The costs could be significant; Honda, whose UK plant assembles 250,000 cars a year, has said a mere 15-minute delay costs it £850,000. Such financial risks are already, it seems, leading to a retrenchment from the UK. The automotive industry has dramatically scaled back capital investment in new models since the referendum – according to the industry lobby the Society of Motor Manufacturers and Traders it’s fallen from £2.5bn in 2015 to £347m in the first half of 2018, halving in the last 12 months.
But we must not confuse correlation and causation. For one thing, the drop is more cyclical than structural, coming after years of heavy investment and coinciding with an unexpectedly rapidly phasing out of diesel after the emissions scandal and an industry not yet ready to ramp up production of electric vehicles. And Airbus’s suggestion that China could be an alternative destination for investment is, in fact, part of a long-term strategic shift. And therein lies the rub – that, as Mark Robinson explores on page 25, emerging markets are taking an increasing share of global trade, which both companies and countries need to embrace. And on that basis alone Brexit’s long-term gain may be worth the short-term pain – which in itself may be more muted than feared.
