Coronavirus has brutally battered the British car industry. The reality denial of Brexit means carmakers teetering on the precipice will face a devastating second self-inflicted reckoning.
It’s official. After 47 years of membership, Britain departed the European Union on 31st Jan-uary 2020. The battle of Brexit had pushed the country into a civil war like no other. It consumed and broke Britain. It had become an existential psychodrama. But following a snap General Election, and a worldwide pandemic, Brexit has fallen off the radar of public discourse, altogether.
But rest assured, Brexit is going to become a topic of discussion again, very soon. First, some clarity and context. The Brexit debate has ended, it is over. This reality means I am not attempting to rerun the referendum debate here. But Brexit itself is far from done. This reality means I will instead look at the catastrophic consequences of Brexit that lies in wait for Britain, and, the British car industry.
As you can probably interpret, during the 2016 Referendum, I voted for Britain to remain a member of the European Union. But Remain lost. I lost. Yet I take comfort in that my personal conscience is clear from the chaos that’s about to unfold. I voted Remain on the hypothesis that I could not trust the figureheads fronting the Leave campaigns. What transpired in the aftermath of the referendum result has not only confirmed that premise, but has provided evidence that’s hardened my position.
After a probe was carried out by the Electoral Commission, it was revealed that the Vote Leave campaign had broken electoral law, by exceeding spending limits. That contravention calls into question both the credibility of the Leave vote, and the integrity of the referendum result. It was a level of corruption that conspired to manipulate the outcome of the European Union plebiscite.
Those responsible for the law-breaking Vote Leave campaign in 2016 are Boris Johnson and Domonic Cummings. Both now occupy the most powerful political positions in the country. And both specialise in very specific areas of expertise in the dark arts of politics. With Johnson, it’s charlatanism. With Cummings, it’s propaganda. Together, they are masters of mendacity and duplicity.
"Brexit became a contest between the fact and evidence of the Remain side, versus the emotions and feelings of the Leave side"
Brexit became a contest between the fact and evidence of the Remain side, backed by experts, versus the emotions and feelings of the Leave side, backed by nostalgic delusion. This can be proved by scrutinising just one slogan used by the Vote Leave campaign. These short soundbites are designed to sound convincing, but deflects the credulous electorate from comprehending the complexity of Brexit. The most bamboozling example is “Take back control”, which has a defiant resonance.
But when you examine its substance, it has no foundation. In the Brexit White Paper, it states: “Whilst Parliament has remained sovereign throughout our membership of the EU, it has not always felt like that.” So, contrary to what the slogan wants you to believe, Britain has always had control during EU membership in the form of parliamentary sovereignty. “Take back control” is an utterly nonsensical slogan fabricated in order to deflect from the truth.
This method of deception swindled a sufficient amount of gullible electorate for Britain to revoke membership of the European Union. If you have been hoodwinked, then don’t despair. This is the moment to acknowledge that you have been a victim of propaganda, and that it’s never too late to change your mind – it’s better late than never. It’s just too late to save the country from itself.
The construction of the referendum question itself has exposed factors that weren’t taken into consideration in the event of a Leave outcome. That absence of clarity and concrete certainty about what Britain’s subsequent political and economic arrangement with the EU would look like, created a vacuum of ambiguity around the complexity of Brexit. As a result, it brought equivocacy, and with that, wide-ranging ramifications.
This was always the defining aspect of Brexit Britain: what would the future relationship with itself, and the European Union be like? It brings to the fore fundamental political and economic questions about what Britain values most. To comprehensively answer them, you need to understand how the EU works. And that is the crux of the issue with Brexit Britain: vast swathes of the electorate simply do not understand what the EU is, and how it works.
Its early configuration was forged in the aftermath of World War Two. This economic union between European countries was formed to avoid conflict, and foster cooperation. The European Union has since developed into a political and economic club of 27 countries. In the simplest of terms, membership of the EU is like membership of a leisure centre. For a monthly fee, recipients get unlimited access to the facilities.
Contrast that to membership of the EU, and there are three types of payment. But the biggest contribution from a country is paid by membership fee. That size of the fee is determined by the size of each country’s economy, called Gross National Income (GNI). As Britain is also a Group of Seven (G7) member – an organisation made up of the seven largest advanced economies in the world – Britain paid in a bigger contribution to the EU.
That did grant Britain access to every political institution. EU agenda is set by the European Council; this comprises national heads of state or government that determine the political direction of members. There are three main institutions involved in the process of EU legislation: EU citizens elect the European Parliament to represent them; the European Council represents governments of member countries; and the European Commission represents interests of the Union as a whole.
The membership fee also granted Britain access to every economic institution. The single market is considered the economic engine room of the EU. It entitles people, goods, services and money to move about almost as seamlessly as in a single country. To construct this framework, lots of technical, legal and bureaucratic barriers between countries were discarded.
Another economic institution is the EU customs union. Its purpose is to protect consumers from goods that do not meet EU standards. In practice, 27 customs services enforce identical standards. Countries in the customs union apply the same tariffs to imports from the rest of the world. Once goods have cleared customs, they can circulate the EU customs territory, without internal tariffs.
"Reports indicate that Brexit will do more damage to the British economy over the next decade than the Coronavirus pandemic"
The contradistinction between the political and economic institutions of the EU defines the difference between a “Soft” and “Hard” Brexit. With it brings very different outcomes, with very different ramifications. A “Soft” Brexit withdraws Britain from the political institutions, but keeps the country integrated in the economic institutions. A “Hard” Brexit withdraws Britain from both.
It draws attention to the type of Brexit that is contained in the Withdrawal Agreement (WA) and the Political Declaration that Britain negotiated with the EU in October 2019. This procedure was first undertaken by Prime Minister Theresa May. But following a Conservative Party leadership election, the WA was reopened and changed under Prime Minister Boris Johnson. To compare and contrast the reasons why, a brief snapshot of the WA reveals the reasons of the revised version.
The WA process has pulled Britain out of the political institutions of the EU. That happened on January 31st 2020. With an eleven-month transition timeframe in place, the future relationship between the UK and EU must be completed. When this period ends on December 31st 2020, Britain will be pulled out of the economic institutions of the EU too. Hereafter, Britain would either revert to a Free Trade Agreement (FTA), or crash out of the EU with no-deal. Both are bleak.
In severing ties with the single market and customs union, a hard border will be created between the UK and EU. In turn, this will create bureaucratic protocols and red-tape checks that will have to be undertaken at this border to ensure that UK goods entering into the single market and customs union meet EU standards. This will happen regardless if an FTA is done with the EU or not.
And even if Britain does transfer to an FTA, the consequences will still deeply damage the economy. This will diminish the ability for the country to trade with its largest trading partner. Can you guess who that is? The EU. In 2019, the UK sent 43% of all exports to the EU, and received 51% of all imports from the EU. But in order to secure this inferior treaty, there are non-negotiable stipulations that the UK must agree to with the EU.
A prerequisite is that Britain must align with EU level playing field rules. This trade policy term is a set of common rules that enshrine labour conditions, environmental protections and consumer standards in law to stop businesses undercutting rivals in other countries. However, in the UK Withdrawal Agreement with the EU, the level playing field rules were removed and put into the Political Declaration.
That means they were stripped out of a legally binding commitment, and put into a document, as a pledge. The level playing field rules have gone from a legal guarantee, to a promise, based on trust. If the British government are promising to align with EU level playing field rules, why were they dropped as a legal obligation? Subsequently, this has proven to be an obstacle in negotiations, so far.
Furthermore, the EU has 72 Free Trade Agreements with partners around the world. In withdrawing from the single market and customs union, Brexit Britain will withdraw from every single one. As a result, reports indicate that Brexit will do more damage to the British economy over the next decade than the Coronavirus pandemic. Brexit is the definition of economic negligence and irresponsibility.
At the end of the transition period, if a no-deal outcome prevailed from failed negotiations with the EU, it would be the hardest “Hard” Brexit that Britain could opt for. As a result, the UK will revert to the default position of non-preferential World Trade Organisation (WTO) rules. This will make trade more expensive, and more difficult with the EU. A no-deal Brexit will have catastrophic consequences that criss-cross Britain.
But, how will Brexit impact the British car industry? To decipher this, it’s important to look at the technicalities of the Withdrawal Agreement to make sense of the aftermath. Its content means that Brexit will fundamentally impede manufacturing operations in Britain. The implications will likely decimate the capacity in the country to maintain it.
"Even with an FTA with the EU, it remains to be seen if Nissan in the UK can survive. Nissan is perched perilously on a cliff edge"
British car manufactures will have to comply with rules of origin (ROO) for goods to qualify as tariff-free exports to the EU single market and customs union. This determines whether the British car industry manufactures or assembles car parts and components. FTAs stipulate that 60% of goods must originate domestically to be exempt from tariffs and quotas. However just 44% of car value is produced in Britain. This is a big problem. It could prove to be an existential threat to what little car industry there is left in Britain.
In FTA negotiations between the UK and EU, the European Commission rejected Britain's preposterous proposal that car parts and components made in Japan and Turkey – which are imported to Britain for assembly – can count as British made. To avoid export tariffs to the EU, carmakers need to prove that UK-exports are British made. It means that with or without an FTA, carmakers would need to identify the ultimate source of car parts and components in the supply chain.
This position is summarised by Ashwani Gupta, the Global Chief Operating Head at Nissan. The carmaker has the largest manufacturing plant in the UK in Sunderland. But the EU is the company’s biggest customer – 70% of UK-built Nissan cars are exported to the EU. It means that, with or without an FTA with the EU, UK-built Nissan models that do not contain the required number of British made components to reach ROO thresholds will be liable to import and export tariffs.
Ashwani Gupta has said: “You know we are the number one carmaker in the UK and we want to continue. We are committed. Having said that, if we are not getting the current tariffs, it's not our intention but the business will not be sustainable. That's what everybody has to understand.” This is gravely concerning. Even with an FTA with the EU, it remains to be seen if Nissan in the UK can survive. A no-deal Brexit will kill the Sunderland plant. Nissan is perched perilously on a cliff edge.
There will be no exceptions. The BMW Group manufacturing plants producing MINI and Rolls-Royce cars will be compromised. Just 40% of MINI components originate from Britain, 60% of MINI components are made in EU member countries. With a no-deal Brexit, MINI parts imported to the UK for assembly will incur tariffs, and then completed MINI models exported to the EU will incur tariffs. That means BMW will incur a double tariff whammy. BMW has contingency plans to shield supplies.
And it’s not just rules of origin checks that carmaker plants in Britain will have to contend with. The essential just-in-time (JIT) process will stop. This is another big problem. These integrated supply chains enable manufacturing plants to schedule components from EU suppliers, and are often sequenced so parts arrive for assembly just hours before. With the synchronicity of this system ending, production lines will be interrupted. This will create a fragmented production process that's inefficient.
The British car industry is the sector most dependant and reliant on the JIT process that the single market and the customs union provides. With Brexit Britain withdrawing from both, the additional red tape puts the British car industry into a straitjacket. It’s unlikely to survive this onslaught. The reality is that carmakers in Britain are likely to relocate manufacturing plants in the EU. That means much of the British car industry is likely to be sacrificed on the altar of Brexit.
But Brexit will not only damage the British car industry. EU car manufactures will be hit hard too. The German car industry exports more than 650,000 cars into Britain every year. Failure to secure an FTA would add tariffs to cars imported to the UK. The VW Group has warned that it will not absorb tariff costs. This extra cost will be added to models sold in the UK. And that means VW Group cars would get more expensive for British customers. It would add an additional average cost of £1500 per car.
The consequences of a “Hard Brexit” will be catastrophic for the British car industry. The underlying evidence is that carmakers have manufacturing plants in Britain for commercial purposes. Yet the infrastructure that supports it will be destroyed. Brexit has started a countdown time bomb of self-destruction. There’s nothing now that can be done to stop the disaster that’s about to transpire.
Furthermore, Brexit will paralyse commercial opportunity in Britain. And it already has. There is evidence affirming this. An example would be electric carmaker Tesla. Elon Musk pulled no punches in the reason Britain was discounted as a country to build the brands European factory, citing Brexit as the main deterrent. Musk said: “Brexit made it too risky to put a Gigafactory in the UK.” The rationale why is completely understandable.
“Brexit made it too risky to put a Gigafactory in the UK.” Elon Musk.
From the perspective of Tesla, Brexit Britain will be locked out of the EU single market and customs union. This would deprive Tesla of the strongest commercial ties with the EU. The advantages of the JIT process, frictionless and tariff-free trade cannot be harnessed by Tesla in this scenario. This would make it harder for Tesla to sell cars into the EU because of trade barriers, and it would make Tesla cars more expensive to buy in the EU because of red-tape costs.
Instead, Tesla will locate their European factory on the outskirts of Berlin, in Germany. Musk also said: “Some of the best cars in the world are made in Germany. Everyone knows that German engineering is outstanding, for sure, and that’s part of the reason why we are locating our Gigafactory Europe in Germany. We are also going to create an engineering and design centre in Berlin.” Brexit relegates Britain from the Premier League to League 2 in commercial terms.
How could it of come to this? The concept of Brexit was inflated by the fantasy of nostalgic delusion. Nationalism was dovetailed with the British Empire and two world wars that helped to propel this “belief” or “opinion” of a nation that’s inherently better than other countries. The perception that Britain is superior has created a form of British exceptionalism and entitlement that glosses over historical events with ignorance. This outlook is evidently misconceived, yet it still short-circuits the national psyche.
British imperialism left a dark legacy that still lingers to this day in countries that came under colonial rule. For the descendants of those persecuted in these liberated countries, that does not reflect well on Britain. And in World War Two, Fourteen million allied forces were killed fighting against Axis powers. The glorified idea that Britain alone defeated fascism in Germany has an irony. Now that Britain has left the EU, Brexit has moved the country closer to the fringes of this extreme ideology.
Those who fail to learn from history are condemned to repeat it. The country has yet to get to grips with its colonial past. Brexit will inflict a brutal reckoning on Britain for acting on such hubristic delusions. Brexit was also fuelled by patriotic devotion to Britain. But this was based on a misunderstood interpretation in the context of Brexit. It was seized on by Leave campaigners to mask the sinister intentions of the Brexit political project.
For the record, there is nothing wrong with being patriotic. I’m patriotic. I love Britain. I voted for Britain to remain a member of the European Union because it is in the national interest. Because my patriotism in Britain is founded on wanting what is best for my country. That is the difference. The evidence and examples demonstrate that Brexit will make Britain worse. But Leave campaigners sugar-coated Brexit with slogans written from lies and disguised it as patriotism.
Brexit was sold on fake patriotism by proposing false promises that were simply untrue and undeliverable. But Britain still fell through the Brexit trap door. Leave campaigners decried and dismissed dire warnings by experts as project fear during the referendum campaign. But that was just nonsense. Experts were sounding alarms of project reality and project fact. Brexit will solve nothing. Period.
But Britain will have to confront and contend with a duo of looming problems. The aftermath of Brexit will be paired with the resurging Coronavirus pandemic. This lethal combination threatens to create the perfect storm of devastation for Brexit Britain. The Coronavirus response in Britain has been, and continues to be, an absolute disaster. The country has the highest death toll in Europe. The country has the hardest hit economy of G7 nations. The catastrophic consequences of Brexit will just compound these dark and difficult times.
With the failed Coronavirus response, and with Brexit reality now beginning to bite, there’s a sense of realisation coming to the fore about the terrible mistake that Britain has made. In response to the observable realities of Brexit, the electorate that voted to leave the EU in the referendum in 2016, and confirmed that by voting for the Conservative Party in the General Election in 2019, will start to disassociate and distance themselves from the unfolding consequences of the aftermath.
This contingent of “Brexiteers” and Conservative Party voters will wrestle with their own “beliefs” and “opinions” when confronted with the ramifications and fallout of Brexit. Most will not be prepared to admit that they have made a mistake, and most will not be prepared to accept that they were sold, and lived, the Brexit lie. For psychological reasons such as pride, excuses will become a defence mechanism. But as the teeth of reality bite deeper into Brexit Britain, guilt and shame will set in.
"The 'Brexiteer' perspective was – and still is – based on a farrago of falsehoods that culminate in bogus beliefs"
The “Brexiteer” perspective was – and still is – based on a farrago of falsehoods that culminate in bogus beliefs. Most “Brexiteers” don’t understand what the single market is, and what the customs union is. Or what they do. Or what they mean. But the liberties provided by both have been taken for granted, in particular by the gilded post-war generation. Ignorance is bliss, until the chickens come home to roost.
Another institution taken for granted in Brexit Britain is the NHS. As orthodoxy, Conservatism rejects the concept of the NHS. Historical evidence can prove this. The Conservative Party voted against the creation of the NHS in 1946. The Conservative Party have voted to underfund the NHS with an austerity programme of ideological cuts since 2010. It’s simple: if you underfund the NHS, it will be unable to cope with a pandemic. Period.
NHS founder Aneurin Bevan said this: “How can wealth persuade poverty to use its political power to keep wealth in power? Here lies the whole art of Conservative politics in the twentieth century.” This underlying scheme was applied during the EU referendum. Remember “We send the EU £350m a week, lets fund our NHS instead” on the side of the Vote Leave campaign bus? Another slogan, another lie. Britain will pay a terrible price for the Brexit bullshit.
Britain has embarked on a collision course with Brexit reality. Even if the UK reaches an FTA with the EU, it would still jeopardise manufacturing operations. The frictionless JIT supply chains will be broken. And the collateral damage will be carmaker plants. A no-deal Brexit will just torpedo the British car industry altogether. It remains to be seen just how much of the car industry in Brexit Britain can survive. My fear is that the writing is already on the wall.
Photos: ClaudioVentrella, Nissan, Toyota, MINI, Tesla
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