Andrew Wade, senior reporter
So, we finally have some clarity, and a hard Brexit looms. Theresa May’s speech yesterday outlined the key pillars of the UK’s exit strategy, including leaving the single market and the customs union. For many across industry, this is a worrying development. The prospect of tariffs and proof of origin requirements being reintroduced is difficult to countenance, and the prime minister’s assurances of as “frictionless” a trade deal with the EU as possible will do little to ease fears.
But accusations of ‘not having a plan’ can now no longer be levelled at the PM, and the solidification of the government’s position is welcome. Markets abhor uncertainty above all else, symbolised by the pound jumping in response to May’s definitive stance. However, stormy waters lie ahead. The PM delivered her speech with confidence, talking up the UK’s prospects outside the EU and even making some veiled threats to Brussels about Britain becoming a tax haven. But while a proportion of her support base will have enjoyed the rhetoric, threatening a bloc of 27 countries before anyone has sat down at the table is a questionable strategy.
Amidst all the talk of full immigration control and returning sovereignty to Westminster, May also said she wants to retain certain elements of the customs union, while leaving other aspects behind. She claims a free trade deal is in everyone’s interests, and warned that any ‘punitive’ deal would be a “calamitous act of self-harm” for the EU. But politicians across Europe have repeatedly warned that cherry-picking the favourable bits of EU membership is not going to happen. It has nothing to do with punishment. It is simply about the UK foregoing certain rights once it has left the club. If you are out, you are out, and you cannot expect the same privileges as if you are in.
Just as the UK is acting in its own interest, the remaining countries in the EU will now act in theirs. Many have claimed that it would be beneficial to the EU to agree a barrier-free trade deal. This is true, but only to a point. It is also hugely in the EU’s interest to ensure that being inside the club is more beneficial to being outside. To claim that the UK will be able to carry on trading with the EU as if nothing has happened is disingenuous. What exactly the deal looks like remains to be seen of course, but expecting Europe to roll over and acquiesce to the UK’s every demand is naïve, to say the least.
“While it is useful to have some clarity as to the future, we urgently need more details as to what our trading relationship with the EU might look like,” said James Selka, CEO of the Manufacturing Technologies Association. “We welcome the recognition that we need a comprehensive customs agreement and that trade should be as frictionless as possible. Advanced manufacturing, in the UK and Europe, depends on highly internationalised supply chains and leaving the single market raises many questions for our members.”
And what now for the UK’s automotive industry? What exactly was said to Nissan’s Carlos Ghosn to engender the company’s commitment to the Sunderland plant? Have JLR and other manufacturers been offered the same, and has the ground now shifted given that a hard Brexit is on? As alluded to above, the automotive and aerospace sectors – both major success stories for UK industry – rely on complex pan-European and international supply chains. The single market and the customs union have been key factors in enabling these two sectors to flourish, and the PM’s speech will have worried those involved.
“The recognition by the prime minister of the importance of single market arrangements for the automotive sector is critical,” said Mike Hawes, chief executive of the Society of Motor Manufacturers & Traders (SMMT). “We need government to deliver a deal which includes participation in the customs union to help safeguard EU trade, trade that is tariff-free and avoids the non-tariff and regulatory barriers that would jeopardise investment, growth and consumer choice. Achieving this will not be easy and we must, at all costs, avoid a cliff-edge and reversion to WTO tariffs, which would threaten the viability of the industry.”
But Theresa May stated yesterday that she was prepared to do exactly that, ending the two-year negotiation period with no deal rather a bad deal. It is perhaps a stance she had to take, declaring her willingness to revert to the nuclear option if agreement can’t be reached. As her impending counterpart in the US has said many times, one must always be willing to walk away from the table. But WTO rules would likely harm the UK more than the EU, perhaps with the exception of Ireland, whose trade reliance with the UK (along with the uncertainty over the border in the North) is a major cause for concern.
Lastly, the science community now faces significant difficulties. In her 12 point plan, Theresa May said she wanted to continue to work with European partners on major science, research and technology projects. But participation requires freedom of movement, and this is clearly not on the cards. Horizon 2020 funding – of which the UK has been a net benefiter to the tune of about £1bn per year – is likely to diminish over the next two years, and be cut off entirely once the UK has officially left the EU. The PM also said the UK would be willing to pay into certain European programmes but, again, there is no guarantee that the EU will play ball.
“The prime minister’s assertion that there ‘may be specific European programmes in which we might want to participate’ gives a glimmer of an indication that the UK may bid to continue to participate in the EU science programmes that have supported the UK so extensively to date,” said Dr Sarah Main, director of the Campaign for Science and Engineering (CaSE).
“This would be a popular move with the research community. But the EU position is that participation requires free movement – which is not on the table.”
Theresa May should be commended for finally facing up to reality and acknowledging that control over immigration and remaining within the single market are not compatible. Her decision is arguably one grounded in politics rather than logic or economics, but one which perhaps had to be made given the fallout since the referendum. After nearly 50 years inside the single market, the UK will now go it alone. For all the certainty to which we were treated in the PM’s speech, they are words that have set the UK on a very uncertain course.
Unscrambling the omelette is very easy for Ms. May. If she says that’s what she wants to do then she will find the best possible solution.
Hard times indeed… who knows how the EU will cope with the 15% reduction in their budget when we leave…. It probably won’t cross their bureaucratic self serving minds to reduce their own numbers, pay or perks.
Unfortunately the best possible solution might still be pretty awful compared with where the country would have been had we stayed “in” with our fellow Europeans.
Even if it is worse the the current status quo!
Another political monologue. The website is called “theengineer” not “thepolitician”.
If you scroll to the top of the page Mike, you’ll see the word ‘Comment’. That should give you some clue as to the piece’s content.
Thank you Mike, well said. I can get this crap from the Guardian.
Engineering doesn’t exist in a vacuum old chap – hard to see any issue that’s more pertinent to the trade at the moment.
Great Britain, not the UK, is stumbling to the cliff-edge and a ‘calamitous act of self-harm’. This at a time when we must work together in Europe to try to mitigate the far more serious issues of catastrophic climate change and an unsustainable global population.
Hear, Hear Will. When will politicians to brave enough to face the catastrophe of the every growing population and it’s impact on global resources, damage to the planet and it’s ecosystems and the immediate effect of Global warming.
Her points seem like a negotiating stance rather than a hard and fast inevitable outcome.
Compare what David Cameron went to Brussels to negotiate and what crumbs he was actually given.
It will be interesting to see how it plays out.
Meanwhile a lot of people are running scared. Including some of my customers,
As a relatively late Brexit convert, I believe that the threats are over-hyped while the benefits are harder to quantify at this time. The more data about our EU involvement that I see, the more I believe that we gained little from the years of EU membership. We have been a cash-cow to the EU while cutting-off a lot of world trade where the UK has still got a great reputation for quality and honesty.
Jack. Over-hyped I don’t thinks so. The Eurocrats of Brussels will not want to see Brexit succeed because if it does there is real risk that there will be a domino effect of other country’s like Greece, Spain and Italy might follow suite, so it is highly likely that they will not agree to many of our demands in fact make the negotiations as hard as possible.
Call me cynical, but what you are reporting on is a politician’s speach to the media, and as such has little or nothing to do with what will actually be said and take place at the negotiations.
Whatever the future holds for the UK one thing that still has credence throughout the world is ‘made in the UK’ Nobody knows what the future holds but those willing to be proactive and positive will reap whatever benefits are out there. We have always been a nation of inventors, engineers etc. leaving the EU does not change our ability to overcome obstacles and face adversity ,we are the United Kingdom (whoever fragile that alliance may be at times) and we should shout that to the world. In times of trouble, given a choice, I suspect the majority of peoples around the world would want us at their side. We once ruled the world, we once ruled the waves I would settle for ruling ourselves and our shores, enough said.
Well said!
Why has the Engineer gone political and following the BBCs gloom and doom reporting style – I would have expected better!
We are a democracy – a decision has been taken let’s pull together and get on with it – Made in Britain used to mean something special let’s make it so again!
This comment is correct in EVERY respect
Well said!
From the tone of this article I can only surmise that all trade outside of the EU is either a deal similar to the EU or it’s so difficult to sell our engineering to those countries that we don’t bother.
Clearly neither of those statements can be true, we sell our engineering all over the world, I presume a large proportion of that is under WTO rules? The car industry talks about the idea that all cars in Europe are made to a common standard so manufacturing is cheaper. Two points cars in the UK are normally RHD as opposed to LHD. In a modern car the complexity and cost of making both must be quite high as modern engine compartments are so tightly packed the differences must be large. Secondly when a friend of mine returned to the UK from Cyprus he imported his RHD car and then had to have quite a lot of modifications made to it before he could use it on UK roads.
May be it is easier with the single market and customs union but I think that the bigger picture may be that the price we pay for that as a nation may be more than it’s worth.
I am sure that the bureaucracy load on SMEs is ineveitably larger but the UK still has engineering to offer that is hard to find elsewhere in the world and that is our advantage. So let’s get out there and do it! As the globalisation of commerce increases, the paperwork will in the end decrease because everybody wants free trade, and I’ve never heard anyone say that the paperwork is really great and would feel lost without it!
An engineer is not worthy of the title unless unless she or he cannot face a challenge. Thats what we are here for, lets get on with it !
Does the Prime Minister ‘s assertions comply with the UK constitution?
I do not believe there is a mandate for it until the appeal verdict from the Supreme Court is issued.
This should quickly tidy up the current continual rhetoric.
Thank goodness there has been some intelligent and brave thought applied to our constitution in the past few hundred years.
This is a very gloomy and quite political article which seems to miss the point that the world order is changing. Unfortunately no one knows how that will end. So far we have seen the British people democratically deciding that the UK should withdraw from the EU and the American people democratically deciding that Donald Trump will be their President. Both of those events in isolation would have made large waves in the world order, but in combination the outcome is completely unknown.
If you add to the events that have already happened those that will happen or may happen – changes of government in France and Italy, elections in Germany, the very possible withdrawal of Italy from the Euro, the potential bankruptcy of Greece, the ongoing migrant crisis, etc., etc., – then it becomes impossible to say what the political and economic landscape in Europe will look like by the time the UK finally withdraws from the EU.
My point in all of this is that change is inevitable but worrying about change, whist understandable, is completely counterproductive. Plans to cope with change have to be made, our leaders in politics and business have to be flexible, and the nation has to do what it does best in times of adversity – get on with it.
Thank you for your concise and erudite comment. Mine are often blocked from here – for perhaps being to ‘earthy’. Let’s see what happens today.
May at least silenced those people who suggested that we would remain in the single market. I found their lack of realism very annoying. Now it’s all the people with unrealistic expectations about trade that are going to get their ideas corrected.
As a retired engineer/business consultant my major concern with Brexit is the impact on long term major capital investment. For certain industries (e.g. mass market cars, bulk chemicals) the UK market is too small to justify major investment in my experience, and the high global logistics costs mean they are dependent on local regional markets. These industries are important UK exporters and without EU free trade are likely to wither away over a number of years without EU free trade agreements.
EU cannot continue as it used to. Many changes will happen. After Great Britain, others will follow. Be patient. Remember Chrchill.
Yes, we will fight them on the beaches. That will make them buy our British goods and services!
It looks as if a vociferous minority of the Tory party have not only delegated their collective responsibility for the constructive parliamentary government of our country. They have also cost the UK a considerable amount of money and may subsequently be responsible for the break up of our “United” Kingdom.
Worse still, the opposition seem to have been implicit.