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Saturday, June 23, 2018

Why the UK Government must take Airbus's assessment seriously

Yesterday was quite an extraordinary one in politics, and not just because of the warning issued by Airbus concerning its own future in a post-Brexit UK. Airbus have consistently argued over the last two years that the UK leaving the EU will damage their business and cause the loss of jobs. They said no different yesterday. It is just that the UK Government do not appear to be listening.

What was most remarkable about the last 24 hours though, was the reaction of Brexiteers to the announcement by Airbus and the subsequent row that blew up amongst the Welsh Tories as a result.

Suddenly, everybody in the Brexit camp was lining up to talk-down a company which directly employs 14,000 people on 25 sites in Britain and supports a further 110,000 UK jobs in its supply chain for parts and services.

Predictably, the former UKIP leader, Nigel Farage hit out at Airbus for "threatening" to leave Britain, saying in a tweet that its decision was heavily influenced by the £16.6 billion in aid it received from the EU. it seems that he is prepared for the rest of us to pay a very heavy price to finally secure his personal project of isolating the UK within the world, and making us economically and culturally poorer as a nation.

But it was the reaction of the mainstream politicians that took our breath away the most. As the Independent reports, Number 10 insisted Britain will get the “good deal” that would negate the need for the aircraft maker to relocate. Meanwhile, Boris Johnson, apparently oblivious to any downside, urged the prime minister to deliver a “full British Brexit”. His cabinet colleague Liam Fox added that the UK was not “bluffing” about being prepared to walk away from talks with Brussels. One begins to wonder if these people occupy the same reality as the rest of us.

At least some Tory politicians had woken up to the dangers, even if in Wales that person was not the Leader of the Welsh Conservatives (or is he?). As the BBC reports, an internal, but very public, row erupted within the Conservative party after its Welsh leader accused Airbus of exaggerating the risk of job losses if a no-deal Brexit happens.

Andrew RT Davies accused  the European plane-maker of making threats and "hyperbole" after it warned it could quit the UK. Guto Bebb, a UK defence minister, jumped in to say Davies' comments were "inflammatory". Mr. Bebb, who is the Conservative MP for Aberconwy, said Airbus have been "consistent in their concerns and the government shares their aspiration for an early and comprehensive deal."

The BBC added that Bebb disputed Mr Davies' title as leader of the Welsh Conservatives and said he does not speak in such a capacity:

He told BBC Wales: "He is the leader of the assembly group and whilst I am unaware of whether he consulted his colleagues before issuing his inflammatory statement he certainly did not consult with myself as an MP in North Wales.

"Shooting the messenger is an unworthy position for a politician to take not least when that politician aspires to lead a government in Wales. He should retract his comments."

And then the CBI jumped into the fray, they warned that Airbus could be the first of many firms to threaten to end its investment in Britain, putting tens of thousands of jobs at risk, if the government cannot provide urgent clarity on Brexit. Whilst the head of BMW UK also warned that the firm, which makes Minis and Rolls-Royces in Britain, needed clarity on future trading arrangements by the end of the summer.

If you are getting the impression that the UK Government's plans are starting to unravel then you would not be wrong. The problem of course is that if Ministers do have a plan, nobody knows what it is.  However, we should not fall for claims by Brexiteers that all of these 'noises-off' are political or part of the so-called 'Project Fear'.

These are hard-headed businesses whose duty and number one priority is the health and future of their business. It is not in their interests, nor those of their customers or shareholders to generate panic or concern unnecessarily.

Nils Pratley in the Guardian (no link) puts his finger on the real issue, that uncertainty on a whole range of issues which are subject to negotiation with Brussels is forcing Airbus's hand. He points out that the aircraft manufacturer didn't merely say that a 'no deal' outcome to Brexit talks "directly threatens Airbus's future in the UK". It also said an orderly Brexit, complete with a trade agreement and a transition period, would also be risky.

Effectively, the group have decided to freeze investment in Britain until it can judge how a new set-up would work and how many extra costs its British factories and research centres would bear. He also points out that Airbus's assessment barely mentioned tariffs. Instead, the worries are about the movement of employees between Britain and the EU, log-jams in the supply chain, and aircraft regulations.

The most critical issue on that list, he says, is probably UK membership of the  European Aviation Safety Agency (EASA), which certifies aircraft parts and runs safety checks:

'In theory, the Civil Aviation Authority could do the job in the UK, as it once did, but Airbus doubts the body could assemble the expertise in time to provide a smooth transition. Norway is a non-EU member of EASA and so Britain, if it is prepared to accept the European court of justice as the legal authority behind EASA's rulings, could also stay within. But a deal has not yet been struck, which is one of many reasons why Airbus is shouting that time is running short.'

Pratley concludes that the fear of "chaos at the borders" in 2020 is real. Downing Street talks about aiming to 'minimise' friction but is no longer able to reassure big business, who want technical details, not good intentions. And it seems to me that there is also a problem with Theresa May's red-lines, not least over the European Court of Justice, as evidenced above.

On the second anniversary of the referendum, on a day when thousands of people are gathering in London to demand that voters have the final say on whatever deal Theresa May is able to strike, we are getting a real feeling that Brexit, as many of us predicted, is going to hell in a handcart and that businesses, who employ thousands of people, are starting to make hard-headed economic assessments of specific economic risks that in time could see those jobs relocate to the other side of the English channel. This cannot continue.
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