Layla Moran has been writing on Huffpost on the fallout from Airbus’s announcement that it will pull out of Britain (with the loss of thousands of jobs) if there is no transition deal on Brexit.
She writes:
The difficulty for those of us campaigning against an extreme Brexit ripping us out of the world’s largest market is that not enough people feel that the economy is nose-diving.
…
Take Airbus. It is looking for a breakthrough later this week at the European Council meeting, or else. It was a brave announcement, that if we don’t secure a decent trade deal, it is likely to move factories and jobs abroad – brave not for the act of leaving but for coming out and saying it.
…
So why did Airbus risk such an announcement? Because this wasn’t a threat. This was the first stage of its disinvestment from the UK; the risk of a no-deal Brexit is now simply too great, and too soon. Even a company the size of Airbus cannot afford to risk £1billion a week.
After laying out the dangers she sums up:
It breaks my heart to think of jobs lost and families devastated by potential Airbus job losses. But if there is any positive in this, perhaps even at this late hour, it is that as MPs start to receive letters from constituents worried about their jobs, pressure can still be brought.
This is much more than a row about deceitful slogans on buses. If Brexit is a plane crash, the pilot is out of the cockpit arguing with the cabin crew while ground control is screaming “mayday, mayday”. Credit at least to Airbus for refusing to follow the order over the tannoy – which is, terrifyingly, “brace, brace”.
You can read the full article here.
* Mary Reid is a contributing editor on Lib Dem Voice. She was a councillor in Kingston upon Thames, where she is still very active with the local party, and is the Hon President of Kingston Lib Dems.
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27 Comments
Didn’t we have the same arguments over the euro in the early 00’s? Then, UK industry wanted the the euro and tried to strong arm the government into doing what it wanted.
Well, we didn’t join the euro (does anyone still think we should have BTW?) and industry got used to having to use a calculator to convert between euros and pounds.
https://www.theguardian.com/business/2001/jan/15/emu.carindustry
I still believe we should join the Euro, and I expect after the fall out from Brexit we will in the next 10 or so years.
Most of the hatred towards the Euro was hard right nationalism, coupled with far left anti-finance propaganda, and naked populism from Gordon Brown trying to appeal to BNP voters. Hatred of the Euro is fundamentally a racist position.
If business is always wrong then it makes the rail unions, Corbyn and TUSC correct, and that is clearly not the case!
” Even a company the size of Airbus cannot afford to risk £1 billion a week” . So Airbus have a £52 billion a year business in the UK? Incredible. Maybe a better explanation of their statement is that Airbus is owned in large part by the German, French and Spanish governments? What else would Airbus say?
Johan Eliasch the CEO of Head sports group was clear when asked about this on Question Time last night. He said possibly a phone call from Macron to Airbus and Merkel to BMW and Siemans. Probably a tongue in cheek comment but said they were proud national companies and what else could they say. Was also pretty unimpressed with the negotiations to date.
Airbus has a problem, a big one.
Start with the Cabinet’s decisions on what sort of Brexit to go for. It is to leave both the Customs Union (CU) and Single Market (SM). Staying in the CU prevents new ‘Free Trade’ agreements being made while the SM would mean EU regulations remain. Both are No Nos for the ultras – the tail wagging the dog.
The EU has repeatedly asked what May & Co want to do. They’re still waiting for an answer because the Cabinet can’t agree among themselves. Every possibility runs into a red line and is worse than we have now.
Few Parliamentarians appear to have any idea of the SM’s importance. ‘Regulatory Union’ would be a better name since its job is to ensure that standards are harmonised and/or mutually recognised. For example, UK, France, Italy etc. all recognise each other’s’ driving licences as being equivalent. That saves everyone time and money.
Aerospace is where the rubber hits the road on this; every single component MUST be of guaranteed quality, traceable and so on. Ditto qualifications of everyone who makes or services them. A niece’s boyfriend recently completed a long series of Civil Aviation Authority (CAA) certified studies and in-work training that qualifies him to do specified maintenance work on certain types of aircraft. Those qualifications are recognised across the EU because we’re in the SM.
When we leave the SM all that stops working that exact minute as we will have chosen to make ourselves a third party outside the reach of the regulatory framework. The boyfriend will no longer be qualified to work on Airbus products.
The silly thing is that the EU regulations the ultras object to are just a localised version of international ones so after leaving the EU we will have to get the CAA internationally recognised instead of the ‘pass-through’ recognition that applies now via the EU.
But that will take time, many months, perhaps years given the epic incompetence of this government and the slowness of international bureaucracies. And I don’t think Airbus can wait that long with no wings and multiple other components.
So, my guess is that they will have to stitch up temporary fix while that production relocates to the EU27.
Goodbye UK aviation industry.
@ Stimpson,
“Hatred of the Euro is fundamentally a racist position…”
What nonsense!
If anyone pays me in €€ instead of ££ I love them all equally. Or maybe nearly equally. I do perhaps love my ££ by a factor of 1.13 times as much !
But just as it would be a big mistake for the UK to use the US$ as its currency, so it would be a big mistake for us to use the euro. It isn’t just about having to multiply by 1.13 Its about using someone else’s currency and so losing control of our own monetary and fiscal policy.
I do perhaps love my ££ by a factor of 1.13 times as much !
Are you buying or selling?
There was a time, not that long ago when factors greater than 1.4 was the everyday reality…
@ Roland,
1.4 is too high. It makes our exports uncompetitive. The UK couldn’t join the euro in the early 00’s because the pound was too high.
Hot money had been attracted into London by a combination of relatively high interest rates and a prolonged period of strong growth. The UK government feared that joining the euro at the wrong rate would penalise British manufacturers, while those already in the single currency were concerned that too cheap a rate for sterling entry would hand an added competitive advantage to the UK’s strong financial services sector.
The so-called 5 tests were a smokescreen devised by the Treasury. Industry wanted the euro because industrialists considered it would make costs cheaper. But it would have needed a big devaluation of sterling at the time and this wasn’t politically, or even economically, possible.
So the idea of joining the euro was simply shelved for pragmatic reasons! Politicians did the right thing but for the wrong reasons. Phew!! That was a close one!
@Peter Martin – I think you totally missed my point, I wasn’t referring to the UK joining the Euro and the excuses being made as to why the time wasn’t right. I was merely pointing out that in the past the rate has been higher and would have had the effect of reducing our (EU) import bill. Hence why I asked the question…
Although interestingly enough, looking back I did a significant amount of consulting work in the Eurozone during the period 1995~2005 (billed in GBP and got paid in EUR) when the rates were mostly above 1.4. So am well pleased that Euro investments I made then are being boosted by the falling GBP.
Mind you, given it looks as if we might be heading towards Liam Fox’s preferred style of Brexit (no deal) the GBP-EUR rate might be an irrelevance if the Eurozone effectively shuns UK goods and services…
an irrelevance if the Eurozone effectively shuns UK goods and services
Why should they? I think I’m correct in saying that tariff barriers in the Aviation industry are negligibly small. So consequently we have Airbus using , largely, US made engines and Rolls-Royce finding that US aircraft manufactures are better customers for their engines.
It’s all a lot of hot air from Airbus who perhaps should think about entering the balloon industry.
https://www.quora.com/Which-companies-make-the-engines-for-Airbus-and-Boeing
@ Roland,
“….the (exchange) rate has been higher and would have had the effect of reducing our (EU) import bill”
Our import bill is still higher in dollar or euro terms. The sum of the current account in trade and other day to day transactions and the capital account has to balance to zero. In other words if there is hot money net entering the economy as part of the capital account, a net inflow, there has to be a net outflow in the current account. Exports have to be less than imports.
If there is a tendency towards imbalance the pound shifts in value to make it balance. Or if a country manipulates its own currency value it can engineer a surplus in exports.
Without exception, all countries who run a larger net surplus in exports have a ‘policy on the exchange rate’. Which is possibly just a polite way of saying they manipulate it.
@Peter Martin – “If there is a tendency towards imbalance the pound shifts in value to make it balance. Or if a country manipulates its own currency value it can engineer a surplus in exports.”
So effectively what you are saying is that provided the currency is freely floating then it doesn’t really matter what the rate is and thus negates suggestions that 1.13, 1.4, 1.6 or even 0.8 are better, the market will adjust to make things balance. Hence the real deciding factor are the market conditions at the time of trade and peoples perceptions.
@Peter Martin
an irrelevance if the Eurozone effectively shuns UK goods and services
Why should they?
Your display of naive innocence is touching.
Clearly, over the past circa 30 years you’ve not been involved in getting UK goods and services into Europe and so the bias UK companies have experienced in bidding say for French government contracts has passed you by, or closer to home, how the UK government has consistently got things wrong and so have written ITT’s that have favoured state-supported companies from other EU members winning rather than companies employing UK nationals…
Brexit, is undoing much of the work done over the last 30+ years on creating the European single market and making it a level playing field. It isn’t perfect and is still work in progress. Post-Brexit there will be no requirement for EU businesses (and governments) to abide by the single market rules with respect to UK businesses, so effectively that will mean doors being closed to UK businesses ie. the shunning of UK goods and services. Naturally, being outside of the Single Market means that recourse to the European Courts won’t be available to UK businesses…
Looking through the analysis of the Tata Steel (India) agreement with Thyssenkrupp (Germany), it is clear they fully understand what Brexit means with respect to both access to the Single Market and how the rules will apply and thus the role of the UK.
@ Roland,
I don’t think I am saying that. If our currency genuinely floats and our economy strengthens the pound will rise as there will be a greater demand for our exports. That means we will be able to afford more imports which is the reason for exporting in the first place.
But if we look at the German economy we notice that they perpetually run a large export surplus. So I would question the point of that. They are swapping a greater value of goods and services for a lower value. Just as it wouldn’t make any sense for you and I to do that, neither does it make any sense for Germany.
They are accumulating the IOUs of others which they’ll probably never spend, and to such an extent, that others will have trouble honouring them if they ever did try to spend them.
@ Roland,
I think you’re saying that EU trade is all about politics. So why, then does Airbus mainly fit US built engines on its planes?
Peter, iirc, Airbus offers customers a choice of engines. So the buyer chooses the one it prefers. Airbus sells what it can, but the airlines decide what engines they want.
OK To get back to the original point of the post:
Layla Moran writes:
“The difficulty for those of us campaigning against an extreme Brexit ripping us out of the world’s largest market is that not enough people feel that the economy is nose-diving.”
Isn’t that a good thing? Economies do run on confidence and if that confidence is still there……..
I would expect that the problems of Brexit will be at their worst for the first two years as we reposition our economy to suit new circumstances. If there was a genuine feeling that our economy was “nose diving”, why would anyone want to lend us any money?
According to the link below, the interest paid out on two year bonds is 0.73%. This rises to 1.02%, 1.28% and 1.73% for 5, 10 and 30 year bonds.
There’s obviously no panic in the long term markets. Those with hard cash to lay down clearly don’t think that we are going to fall off the much warned about cliff-edge.
Forget to add this link:
https://www.bloomberg.com/markets/rates-bonds/government-bonds/uk
On top of sound logistical and regulatory reasons for UK-manufacturers to relocate to the single market (and the eurozone), UK politicians of both parties are excelling in creating a hostile environment for business. Apparently, major manufacturers are beyond the point at which they care about their relationship to this Government. Only blind Brexit lunatics can take this lightly. Their chances of prevailing diminish by the day.
@Arnold (and others),
This is a genuine question. If everyone is worried about future prospects why is there still a ready market for gilts?
Even I, who naturally am much more sanguine than most about Brexit, am surprised at how well sales of have held up. I would have expected that there would be a good deal of nervousness in the bond markets as we approach March 2019. Yes the pound could fall further and/or we have could see a rise in inflation. Even if only a few investors agreed with you, ie the ‘we are all doomed’ line, we should see some effect.
But we don’t seem to see anything at all! Why isn’t everyone selling up in sterling and moving to euros or dollars?
https://www.dmo.gov.uk/media/15456/pr240418.pdf
Peter,
as always you are off topic. Of course, the UK can refinance itself after a recession and further cuts. It is no banana-republic (just currently governed like one). But industry and many well paid jobs will disappear.
The markets are probably pricing in a soft or no Brexit. If it really looks otherwise, you will get your signals from the currency- and gilt-markets.
Peter Martin
“I think I’m correct in saying that tariff barriers in the Aviation industry are negligibly small.”
Tariffs may be low to zero but they can gum up the works as consignments will still have to be checked to ascertain their status and the Port of Dover has made it clear they can’t cope. Helpfully, [/sarc} the government has done nothing to start recruiting and training the thousands of extra customs officers their Brexit policy will require.
However, the real issue for Airbus (and aviation generally) is that while the media and politicians talk endlessly about tariffs (because I suspect because they’re easy to understand at some level), the big problem for them is the Single Market as I said in my earlier comment.
Anything to do with aviation – manufacture of parts, assembly of parts, maintenance, operations, air traffic control and the rest – is done subject to a complex web of international regulations including mutual recognition of others’ certifications and standards.
Of course, the UK used to do all this for itself and much is still done in the first instance by the likes of the CAA by arrangement with EU bodies such as EASA which, in turn, link that through to the International Civil Aviation Organisation (ICAO), a specialised UN agency. In practice the UK is hugely influential in EASA agenda so it’s not a case of those dastardly Europeans up to no good behind our backs.
On Brexit day the UK’s links into this complex international system are broken and, in direct and immediate consequence, international recognitions will stop forthwith. Of course, the UK could rearrange all the necessary links to European and international regulators but that will take time, probably quite a long time.
In the meantime, no international flights would be able to land at UK airports, use UK air traffic control or fly with UK-trained pilots. And of course, Airbus won’t be able to use any UK-made parts until a new system is up and running.
Don’t take my word for all this; check out the ‘Notice to Stakeholders’ on aviation safety published by the EC in April.
https://ec.europa.eu/transport/sites/transport/files/legislation/brexit-notice-to-stakeholders-aviation-safety.pdf
@ Arnold Kiel
If the UK is governed like a banana republic, as you claim, then why are so many people (presumably including yourself? ) wanting to come here from the EU? The weather is better there, the mountains are taller, the skiing is better, the seas are bluer, warmer and clearer. The wine is better and the beer is pretty good too. We can’t really blame the UK govt for that no matter how bad they are.
So why isn’t there a net migration the other way? The only group moving south are UK pensioners.
If the EU was so good, you’d surely want to be rid of your Northern neighbour then you could get on with building your ideal European Union without any interference from us awkward Brits. It should be a marvellous place. You’d have Germany plus 26 other smaller versions of Germany. They’d all be running budget surpluses, with the money to create those surpluses coming from export driven economies. They’d all be selling much more of what they produce to everyone else in the EU, than they buy from everyone else in the EU.
Who are we, in our failing banana republic, (or banana monarchy?) to point out any possible flaws in that vision? What would we know?
In the meantime, no international flights would be able to land at UK airports, use UK air traffic control or fly with UK-trained pilots
Now, this really is the most ridiculous idea that’s being bandied about, as if the UK could somehow be ‘cut out’ of the global air traffic system; as if, one day, UK airspace could be declared a ‘no-go’ area but the rest of the world’s air traffic could carry on as before.
Just Heathrow alone is one of the busiest hub airports in the world. If nothing could land or take off from Heathrow, that wouldn’t just affect people (and fright) travelling to and form the UK: it would have knock-on effects, with aircraft being in the wrong place, on every single route in the EU, and beyond.
Nobody is going to bring the entire world transport system to a screeching halt just out of spite the the UK population for voting the wrong way.
@Peter Martin – “I think you’re saying that EU trade is all about politics.”
Not ‘all about’ just that politics does come into international trade.
To successfully sell software into America, we (a UK-based company) had to appear American; to sell into Europe, I found being able to describe the UK company as part of a French group of companies opened doors and got business – yes subsequently having proved ourselves getting repeat business with these customers was much simpler.
Dav,
The consequences of breaking regulatory and mutual recognition links is a problem that could (in varying degree) affect many industries, but most of all aviation/aerospace because of the safety angle. In the ‘Notice to Stakeholders’ I linked earlier, the EC is listing where fallout might land in the worst-case scenario where no alternative arrangements are made in good time. As the title suggests, that’s mainly so those affected can plan accordingly.
As you say, the consequences not putting alternative arrangements in place are too awful to contemplate for all parties, so it makes no sense that this is done out of “spite” even if the EU was feeling spiteful for which there is no evidence. Think of it rather as a ‘to-do’ list for the negotiations and for the industry.
I imagine that, even if it’s done at the last minute, it will be possible to make arrangements to keep Heathrow working and traffic flowing. However, if the EU27 wanted to squeeze they could; for EU27 flights to detour around UK airspace is no big deal whereas for UK flights to detour around EU27 airspace would be catastrophic even if it only lasted for a day or two.
It means the claims that Brexit would be easy are totally unfounded and that Theresa May’s assertion that “No deal is better than a bad deal” is utter nonsense. She & the Cabinet ought to know as much; the EU27 side certainly does. Making threats in a negotiation (even veiled ones) that you can’t follow through on and/or which would harm yourself more than the other side is unspeakably dumb.
If problems do emerge, I feel they’re likely to be lower down the list in the complex web of certifications for quality control, maintenance etc. simply because I’m not seeing any sign of capacity to get to grips with detail in this government. Consider the disaster Grayling has made of trains or May’s total failure to limit immigration in line with manifesto commitments and the mess she made of Windrush children or Gove’s destruction of teacher morale and growing list of failed ‘free schools’. And then there’s Boris!
This is a bunch of incompetent ideologues that no sane person should back. There is a relatively good version of Brexit but we not heading towards that with this crew.
Dav,
The consequences of breaking regulatory and mutual recognition links is a problem that could (in varying degree) affect many industries, but most of all aviation/aerospace because of the safety angle. In the ‘Notice to Stakeholders’ I linked earlier, the EC is listing where fallout might land in the worst-case scenario where no alternative arrangements are made in good time. As the title suggests, that’s mainly so those affected can plan accordingly.
As you say, the consequences not putting alternative arrangements in place are too awful to contemplate for all parties, so it makes no sense that this is done out of “spite” even if the EU was feeling spiteful for which there is no evidence. Think of it rather as a heads up and ‘to-do’ list for the negotiations and for the industry.
I imagine that, even if it’s done at the last minute, it will be possible to make arrangements to keep Heathrow working and traffic flowing. However, if the EU27 wanted to squeeze they could; for EU27 flights to detour around UK airspace is no big deal whereas for UK flights to detour around EU27 airspace would be catastrophic even if it only lasted for a day or two.
It means the claims that Brexit would be ‘easy’ are totally unfounded and that Theresa May’s assertion that “No deal is better than a bad deal” is utter nonsense. She & the Cabinet ought to know as much; the EU27 side certainly does. Making threats in a negotiation (even veiled ones) that you can’t follow through on and/or which would harm yourself more than the other side is unspeakably dumb.
If problems do emerge, I feel they’re likely to be lower down the list in the complex web of certifications for quality control, maintenance etc. simply because I’m not seeing any sign of capacity to get to grips with detail in this government. Consider the disaster Grayling has made of trains or May’s total failure to limit immigration in line with manifesto commitments and the mess she made of Windrush children or Gove’s destruction of teacher morale and growing list of failed ‘free schools’. And then there’s Boris!
This is a bunch of incompetent ideologues that no sane person should back. There is a relatively good version of Brexit but we not heading towards that with this crew.