Airbus has delivered a body blow to Brexit Britain. It won’t be the last.
S E E D E D C O N T E N T
Forget Brexiteer fantasies: where in the Commonwealth will Liam Fox find buyers for plane wings made in north Wales?
A few days ago, I wrote about how big businesses were no longer just frustrated with Theresa May and her Brexit bumblings. Instead, they were turning hostile . “Soon the headlines will be not just about a few hundred jobs moving out of the City – but of firms scrapping their expansion plans, or factories shifting to Poland, or thousands of jobs going at a stroke of a pen.”
Today’s announcement from Airbus is just the first of those body blows to the British economy. The aeroplane-making giant has said in public what it has been telling ministers and officials in private for months: if May’s government crashes out of the EU without a deal, it will be forced to “reconsider its footprint in the country, its investments in the UK and its dependency on the UK”. Even an “orderly” Brexit, with all ducks in a carefully negotiated row, will cost the multinational billions in red tape and slower operations.
“Until we know and understand the new [post-Brexit] relationship,” concludes the company’s internal risk assessment , “Airbus should carefully monitor any new investments in the UK and should refrain from extending its UK suppliers/partners base.” Make no mistake: a multinational is now showing Brexit Britain and its shambles of a government the red card. And it will not be the last.
The significance of this is hard to overstate. Airbus directly employs 14,000 people in Britain; its supply chain supports a further 110,000 jobs here. In a country beset by low pay and low productivity, this sector is the opposite: highly skilled, highly paid, and with productivity growth of around 4% a year (compared with only 1% in the wider economy).
At Broughton in north Wales, they’ve been making planes since world war two . Under Airbus, that plant teems with 6,000 staff , in an area that 40 years ago was pretty much stripped of its steel industry. If it loses that giant factory, the local economy will be back on the floor for decades.
Some will doubtless point out the irony of the leave voters of north Wales now paying for their votes with their jobs. That is to ignore how many Airbus workers will be commuting into Broughton from around Liverpool. The potential ripples of this will spread far and wide, and they will last.
After Margaret Thatcher delivered the mortal blow to British industry in the 1980s, she devastated those communities – and helped sow the seeds of the Brexit vote of 2016. We are once again back at the stage where decisions made in smart offices by company executives threaten economic and social collapse in areas that can still remember their last great economic disaster – and once again the political consequences are likely to remain with us for a long time to come.
Of course, the government knows all this, because it produced an analysis of Brexit’s impact on aerospace as one of its 39 secret reports. These were the ones that were only made public after weeks of wrangling and published just days before Christmas.
I went back this morning and looked at what clues the report contained for the fallout for Britain’s aviation industry. Aircraft, it solemnly declares, have “nose, fuselage, wings … and tail”. I looked up mention of Airbus. Like Boeing, the report says, Airbus has “the capability to design and manufacture large, civil passenger aircraft”. In other words, the aeroplane-maker makes planes. And so it rambles on for 19 pages. To call it a Wikipedia rip-off would be too kind, since the online encyclopedia costs the taxpayer nothing. Yet it’s what you might expect from a government that has always treated Brexit as more a matter of internal party discipline and less a real-world event with an actual hard deadline.
The Airbus factory in Broughton, north Wales.
David Levene for the Guardian
This is not purely a Brexit story. It is also a reflection of the weakness of Britain’s economic model.
What the Airbus story reveals again is that our political classes – from Holyrood to Westminster to Cardiff Bay – have made themselves supplicants for foreign investment. The result is that among all the 28 members of the EU, the UK comes second only to Ireland in its reliance on foreign-direct investment. Just like Dublin and its sweetheart deals for the likes of Apple, we have bribed our way into that position.
Even while George Osborne was hacking back benefits for the working poor, he also brought down corporation tax to among the lowest in the world. The rationale was that this would make Britain more “competitive” and boost investment. Yet that policy was described this morning by his former adviser Lord Jim O’Neill as a comprehensive failure: “Investment spending has been very weak absolutely and relatively to many other countries. Despite this remarkable drop in ongoing corporation tax and rising profitability … it’s not done the job it’s supposed to do.”
Not only that, we have handed billions to companies in order to get them to set up base here. Look at the Corporate Welfare Watch database , set up by Kevin Farnsworth at the University of York, and you can see that the Welsh government handed Airbus nearly £15m in direct grants between 2004 and 2007.
Like Mexico, we are effectively a branch-plant economy for the rest of the world: we import components from other countries, then ships off parts to the continent or China or the US for them to be made into whole products. Trade secretary Liam Fox can jaw on about striking new trade deals, but he’ll be waiting a long time to find a buyer in Wellington or Canberra for the plane wings made in Broughton. And Jeremy Corbyn’s Labour can fret over not hurting the feelings of its leave-voting constituents, but it would be better off developing an industrial strategy that privileged local businesses and the everyday economy.
Brexit Britain is a precarious business model coupled with throwback fantasies about buccaneering our way around the Commonwealth. It makes us easy prey for the likes of Airbus, which although profitable in this country has been exploring its options in Korea and elsewhere for a long time. Why would a European plane-maker cut jobs in France or Germany when it needs EU support against Donald Trump and Boeing? Far easier to cut back in Britain, with its cabinet at war, its economy drifting away from the European mainland, and its jar of corporate sweeties already heavily raided. In lots of other industries, lots of other companies will soon be arriving at the same conclusion.
Aditya Chakrabortty is a Guardian columnist
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Still driving forward! ... to where??
So what are your thoughts on this very important issue?
"If it ain't a Boeing, I'm not going!
I think that Brexit is insane. The referendum was absurd, and now, with ten months to go before "stuff happens", May's government still hasn't reached any accord with the EU.
Insane.
The problem isn't Brexit it's the EU that is refusing to make reasonable trade agreements. The EU isn't happy about Brexit and they're afraid other countries will follow suit if it works so they're trying to punish the UK and cause Brexit to fail as a warning to other countries and as a means to force the UK back into the EU. The EU is acting like the Mafia trying to muscle the UK into Capitulation which to me proves all the more the need for the UK to get out from under the EU's thumb and regain their sovereignty.
That may be true, but how is it different, but how is that any different than what the US is doing re: trade war?
That is the way governments work. They have protectionist policies and for ever push there is a pull.
It's different because of the reason it's being done. The EU has trade agreements with many countries that aren't EU members but they're attempting to Blackball the UK as revenge for pulling out of the EU (in what equates to economic sanctions) and to negatively effect their economy and force political change (force the UK voters to reverse their decision on Brexit). It makes Russia's interference with our politics look like child's play. This is the kind of thing you do to North Korea to force them to give up Weapons of Mass Destruction, it's not the type of thing you do to a country that helped save Europe in two World Wars just so you can maintain power over them and deter other member nations from attempting to leave. As far as Trump's Tariffs go he's just trying to do what should have been done all along but he's just doing a terrible job of it. For the last fifty years America's Trade agreements have been written by Multi-National Corporations for their benefit not the Citizens of the USA and pushed through by Politicians who were bought and paid for by those same Multi-National Corporations. Trump's main problem is his only tool is Tariffs because the majority of Politicians in both Parties are still beholden to the Multi-National Corporations so getting anything meaningful through Congress is impossible.
First of all, trade agreements are made under existing circumstances. When those change, then the the basis for the agreement change as well. You can say that it's payback ( it might be), but from an economic POV, it makes perfectly good sense. When England was part of the EU, the airbus agreement benefited all. Now that they are no longer part of the EU, it will probably go to France, which will benefit the EU.
Again, this is basic economics and protectionism and is no different than what we are doing.
Yes. That's politics.
No. Everything the EU is doing is legal.
Some of the May government's actions within the UK have been of dubious legality, infringing on the devolved rights of Scotland.
No. As a member of the EU, the UK's relationship was perfectly defined. (Not just economically! All areas.) The UK decided to leave... so it was the UK that chose to put an end to the existing relationship.
A new relationship must be negotiated.
The EU has no reason to give especially good conditions to the UK. None. The UK chose to leave. Did they imagine that they were making friends?
Now it's hardball.
The BREXIT thing also has Putin's fingerprints on it. His fingerprints are also here in America. And, Turkey.
Trump still stands.
In vaguely related news Harley Davidson just announced that Trump's idiotic trade war is causing them to open a manufacturing plant in the EU. No word yet on how many US jobs will be lost but it will be significant percentage of the company's current workforce.
Or maybe we will end up getting some of the work.
Airbus has been approached by at least seven governments looking to poach future wing production after the company raised concerns about Britain quitting the European Union, stirring fears at the planemaker’s U.K. unit that it may see an erosion of its leading role, according to people familiar with the matter. As Airbus assesses plans for its next A320 narrowbody, it has been courted by EU members France, Germany and Spain, as well as the U.S. and China, where it has assembly lines, and even Mexico and South Korea, according to the people, who asked not to be named as the approaches weren’t public.
Not to my knowledge.
The Brits just shot themselves in the foot. The pro-Brexit camp lied through their teeth, but most of their lies were debunked well before the referendum.
It was a stupid way to run a country. A momentous decision made by simple majority in a single vote. No attention given to the three non-English countries.
And the May government has continued to fumble and bumble ever since.
Harley is in trouble. The average age is... likely to die soon!
They need to find new customers. Maybe in Europe?
Airbus negotiates with national governments. That usually works pretty well... but with Trump, who knows?
That's already their 2nd largest market, they just can't afford to build bikes here for that market under a tariff regime. I suspect that factory will also supply their existing markets in the Asia-Pacific region too.
I didn't know that.
Harleys are expensive which is why they're probably not selling
Trump's new sanctions against Iran killed a $40 billion deal between Iran and Airbus & Boeing.......or at least it killed the Boeing part of the deal.
Well, that would be great for us.. not so much for England.
I haven't looked at motorcycle prices in a long time, but a few years ago, Harley had a fairly complete range of prices, beginning at this same level as a Japanese four-cylinder street bike. The big Electra-glide beasts were expensive, but no more than the equivalent Honda.
That said, the equipment level was systematically poorer than the Japanese.
Airbus, too.
As I noted, but it's not clear yet if Airbus will resubmit a proposal or if they'll ignore the US sanctions despite having one of their manufacturing facilities in the US. I know the French initially were urging the company to resubmit.
No. MI6 has found connections. Financial and political.
I follow Brexit fairly closely, but haven't seen this.
Do you have a link?
Do not know how to link. But google it. Has been discussed in the US Senate and The House of Lourdes. It is now under investigation in Britain by MI6. Serious investigation.
Done!