The Irish Times view: Chill wind of Brexit uncertainty

Spillovers to Ireland from hard exit are starkly posed, especially in the agri-food sector

The announcement that Honda is to close its Swindon plant raises much larger questions about how the British economy will weather the shocks of a hard or no-deal Brexit. Photograph: Andy Rain/EPA

The announcement that Honda is to close its Swindon plant raises much larger questions about how the British economy will weather the shocks of a hard or no-deal Brexit. Photograph: Andy Rain/EPA

 

The blow delivered to Swindon this week when the Japanese carmaker Honda announced it will close its factory there raises much larger questions about how the British economy will weather the shocks of a hard or no-deal Brexit. The British car industry is under substantial competitive pressure even without that political trauma; with it, this and other sectors of the UK economy face intense uncertainty. Notwithstanding the recent growth of employment and wages overall, economic prospects are bleak until the political uncertainty is eased.

Politics overrides economics in this crisis which is a familiar pattern in such periods of transition. Political polarisation puts people in siloed positions where they resist compelling evidence of economic setbacks flowing from decisions to break well-established connections between Britain and Europe. The British car industry was reinvented within the European single market by Margaret Thatcher from the 1980s, when she successfully attracted major Japanese companies to avail of its opportunities. The irony that this should begin to reverse just weeks before Brexit should not be lost on the ideologues supporting it who invoke her memory.

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Despite persistent pleading by Japanese managers and owners and ministerial undertakings to protect their interests, the British government has not been able to persuade them it has done so. That makes this decision really strategic, with consequences far down Honda’s supply chain and ripple effects into other small- and medium-sized engineering companies. The decision is also emblematic for other key British industries beset by uncertainty over their just-in-time supply chains. The transformation of industrial structures throughout Europe wrought by the single market, and the extended employment opportunities resulting, are put more at risk the more Brexit’s outcome distances itself from it and the customs union. That realisation animates the Labour Party’s policy and should underlie efforts to find a cross-party alliance against a hard exit.

Forecasts for the British economy if a hard or no-deal exit happens range from pessimistic to catastrophic. The latest ones focus on higher prices, growing unemployment and possible tariff wars to allow cheaper food in to compensate. Brexit ideologues say these forecasts are a strategy of fear or part of a necessary transition towards a freer trading system. Spillovers to Ireland are starkly posed, especially in the agri-food sector.

Britain’s international partners increasingly despair at its political prevarication in deciding which way to proceed and the incompetence of its governing class presented with such dangerous trends. The country’s reputation and influence abroad are suffering as a result just when it needs most help in making such a difficult transition.

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