Does aerospace giant have a point or is it more Brexit hot air?

26 June 2018

LinkedIn ShareShare
More

The warning by Airbus that it could be forced to pull out of the UK in the event of a ‘no deal’ Brexit has, inevitably, descended into a partisan squabble about who should and shouldn’t shut up.

The aircraft manufacturer was rebuked over its statement by Health Secretary Jeremy Hunt and Tim Martin, the boss of Wetherspoons, among others, before Greg Clark, the Business Secretary spoke-up to defend the right of the company, which employs 14,000 people at 25 sites across the UK, to have its say.

Writers to the letters pages of broadsheet newspapers have been playing their usual game of statistical ping-pong with Professor Keith Hayward, a fellow of the Royal Aeronautical Society and the French Air and Space Academy, warning in the Guardian that “we could be watching the loss of over half a century’s massive public-private investment”.

 That was met with this pithy rejoinder in The Telegraph by Russell Montague of Sutton Courtenay, Oxfordshire: “Following the threats from Airbus, might it now be prudent to invite Boeing to take advantage of the highly skilled aerospace workforce and supply-chains that would become available when Airbus departs?”

As with most of the Brexit debate, it's become the latest ammunition deployed in the war of words over who has the most faith in Britain to make its own way in the world – Little England versus Project Fear.

Little, if any, of the hot air has been expended on the issue of whether Airbus has a valid point and, indeed whether the aerospace industry is particularly vulnerable to a trading environment where World Trade Organisation (WTO) rules apply.

We can assume the company has not spoken out flippantly or for partisan, political reasons. Corporate institutions don’t work like that. Their responsibility is not to one ideology or another, or to the political whim of the CEO.

In their decision making, they’re compelled legally to act in the best interests of their shareholders and that usually translates as the maximisation of profit. To that extent, Airbus is unlikely to have acted in a flagrantly self-destructive manner, simply to make a political point.

The aerospace industry and others that rely on the regular movement of goods and capital across borders, tend to employ large numbers of people (coincidentally in areas that featured the highest levels of Leave votes) and are critical to the UK economy.

Airbus, because of its size and influence, will have a greater say in the political process than most. With a strong and powerful lobbying arm, it's closer to the ears of government ministers and its statement is more likely to be part of an ongoing effort for it and the industry in which it operates to be treated as a special case in the Brexit negotiations

A study conducted earlier this year by a group of economists for the organisation The UK in a Changing Europe examined the extent to which British industries depend on trade with the EU.

In their analysis, an industry’s exposure to Brexit was defined by its dependence on products or services that cross a UK-EU border at least once.

‘Exposure’ to a hard or ‘no deal’ Brexit, in those terms, can be calculated as the extent to which an industry has to restructure its supply chains and employees to mitigate against the losses caused by reduced trade and movement with the EU.

Industries such as aerospace and motor car manufacturing, that require to source components from many different countries, are among those that will be hardest hit, it concluded.

Productivity figures suggest that most of the UK economy is not competitive enough to become, at current rates at least, self-sufficient in these industries.

Workers in industries that adjusted quickly to life outside the single market by buying components in the UK that are currently sourced from the EU are unlikely to be better off as increases in UK employment and GDP are estimated to be only a third of the losses sustained in a ‘no-deal’ scenario.

There’s another factor to consider, which is where, geographically, the impact of a ‘no deal’ Brexit will be felt most acutely. According to the research, the Midlands and the North of England are, by far, the most vulnerable regions because they’re more dependent on EU markets for trade than London, the South-East or Scotland.

Those areas also tend to be where companies like Airbus and Nissan base their UK plants, with easy access to transport links but also where operational and labour costs are lower.

Everyone, Airbus included, is entitled to have their say on Brexit, even if their message isn’t what we want to hear and, rather than shutting down the debate, perhaps we’d be wiser to explore the impact of what they have to say.

 

 

 

Comments

Currently there are no comments. Be the first to post one!

Post Comment

*
*
*