Our manufacturers can afford to wait for an EU decision, but not to crash out
One of Downing Street’s many arguments in favour of Theresa May’s Brexit deal is that further delay will persuade many of the UK’s biggest companies to stop procrastinating about their investment plans and move some or all of their activities abroad.
Bosses have spent long enough watching and waiting to see what kind of Brexit unfolds. Another six months, while parliament moves in the direction of a general election or a referendum on the current deal with the European Union, would break their resolve, say May’s supporters.
Businesses have certainly delayed investment decisions. The latest figures show that business investment fell by 1.1% to £47bn between the second and third quarters last year. Worse, this was the third consecutive quarter-on-quarter fall in business investment and the first time since the recession of 2008-09 that such a prolonged squeeze on investment has occurred.
Manufacturers are among the worst hit. They have not only squeezed investment: they have suffered a serious dent in output.
GDP figures last week covering November appeared at first glance to spread a little cheer. The monthly measure of Britain’s income and expenditure showed a small increase from 0.1% in October to 0.2%. However, a deeper dive into the data revealed that almost all that boost came from shopping on Black Friday and Cyber Monday, and that most of these gains are likely to be revised away once the Office for National Statistics applies its seasonal adjustment methods.
That leaves the glaring and declining trajectory of manufacturing output, which fell for a fifth straight month, something that has also not happened since the 200809 recession.
Across a broader swath of Britain’s industrial sector, which draws together energy production, water supply, and mining and quarrying alongside the manufacturing sector, there were declines in November across all four industries for the first time since 2012.
The car industry was especially badly affected, making a difficult period – following declines in demand for cars from China and the diesel emissions crisis – even worse. On just one day last week Jaguar Land Rover and Ford announced thousands of job cuts, while figures from China revealed the first drop in car sales for almost 30 years.
Nobody would want such a dire situation to drag on any longer than necessary. Everyone can see that the cost of negotiating an exit has proved to be high in lost investment and output.
All the studies, even those of the arch Brexiter Patrick Minford – the Cardiff academic whose Panglossian optimism meant he came bottom in a league of economic forecasters for 2018 – show the UK’s metal-bashers will be the most badly affected by leaving the EU’s customs union and single market.
It means that the north-west, the Midlands (east and west) and Wales, which have disproportionate numbers of well-paid residents working in manufacturing, have the most to lose. Manufacturing accounts for 10% of the economy and keeping it at that level in recent years has required considerable investment from companies such as Nissan, Jaguar Land Rover and Airbus.
So remaining inside the EU, or at the very least, getting the best possible Brexit deal, is hugely important to the areas in which these companies are based and the manufacturing industry more generally.
If a delay to article 50 is needed to decide on the best route forward, or even a general election – this newspaper’s preferred option is a referendum – then investment decisions can wait a little longer.
It will hurt, of that there is no doubt. But a bad Brexit will hurt much more.
Remaining inside the EU, or at the very least, getting the best possible deal, is hugely important to manufacturing
A flag-making firm in Chesterfield: UK manufacturers will be hit hard by leaving the EU.