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The economic impact of Brexit is just beginning to bite

 
Infinox Contributor
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The economic impact of Brexit is just beginning to bite (Source: Getty)

If you needed any further evidence that Brexit and the uncertainty caused by the continued ambiguity of Britain’s negotiating position is beginning to have an economic impact, look no further than Ellesmere Port.

The Vauxhall car factory that has been in operation since the 1960s faces possible closure after Brexit with the potential loss of up to 2,100 jobs.

Carlos Tavares, chief executive of PSA which owns Vauxhall, Peugeot and Citroen, told the BBC on Tuesday that clarity over the terms of the UK's departure was "a big concern".

Mr Tavares made it clear that PSA, which bought Opel and Vauxhall last year, “cannot invest in a world of uncertainty”.

You can see this as some form of French revenge for Brexit, ensuring that Britain truly suffers for its decision to leave the European Union (EU).

Risky business

But the reality is, it’s just business. It’s not personal.

The chances of Ellesmere Port’s Vauxhall plant remaining open beyond 2021 are now fairly slim, particularly given the job losses announced in the last few months.

And the situation is only likely to become more grim the closer Britain gets to Brexit.

As Mr Tavares himself said: "No one is going to make huge investments without knowing what will be the final competitiveness of the Brexit outcome."

In other words, expect Nissan to consider the future of its Sunderland plant, putting 7,000 jobs at risk. Expect Ford to take a hard look at the future of its Dagenham plant, putting around 4,000 jobs at risk. What might BMW do with its plants at Oxford, Swindon and Hams Hall in North Warwickshire?

It’s not just the immediate job losses caused by the potential closure of these manufacturing sites. There are thousands more jobs in the supply chain that could be affected.

This is the reality of Brexit unless the government offers greater clarity and, more importantly, greater detail on its negotiating position.

Theresa May’s speech on Friday may have offered a bit more clarity but there is scant detail about Britain’s negotiating position. For months businesses have been crying out for information from the government.

Without it they will not invest. A company like PSA needs to plan several years into the future.

Choices

If it cannot make plans in Britain because it has no idea what Britain’s relationship with the EU, the Single Market or Customs Union will be, PSA will simply make alternative plans that do not include Britain. This is for no other reason than that it has no choice.

Given the size of the car industry and its importance to the British economy, it cannot be ignored. According to the Society of Motor Manufacturers and Traders (SMMT), turnover in the industry was £77.5 billion last year.

And what happens if financial services firms begin to come to the same conclusion? It cannot be long now before City firms decide that enough is enough, that endlessly waiting for the government to tell them something is damaging the future prospects of their business.

There may be some very hard decisions for firms to take as we approach 29 March 2019. But the less information the government provides the easier those decisions become. Ultimately, businesses will simply not risk making investments on uncertain outcomes. So they will leave.

Better the devil you know.

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