At a business lunch last week at the World Economic Forum in Davos the CEO of car parts supplier Unipart John Neill said that if Britain were to leave the European Union without a deal the resulting disruption could cause a “cascade of failure” in the supply chain. As the prospect of a “no deal” Brexit inches closer, other automotive executives have voiced similar concerns, usually leading to cries of “Project Fear” by Brexit supporters. (Project Fear was the label given to pre-referendum warnings from industry and the U.K. government that Brexit would result in severe economic pain.)
During an interview with presenter Nick Ferrari on LBC radio, the former foreign secretary and Brexit leader Boris Johnson even suggested that he knew more about car manufacturing than Ralf Speth, the boss of Jaguar Land Rover.
“I would suggest [Ralf Speth] knows more about car manufacturing than you do,” pointed out Ferrari.
“I’m not certain he does,” replied Johnson, a journalist.
The U.K. automotive industry employs 856,000 people and accounts for 12% of U.K. exports.
Much of the blind faith that Brexit will not destroy manufacturing industries is based on the thinking of economist Patrick Minford. However, in 2012 he told a parliamentary committee that the U.K. leaving the European Union would result in the automotive sector suffering a “big transitional loss.” He claimed that there would be more “gainers than losers” because cheaper imported cars would flood into the U.K. He agreed this would all but destroy U.K. car manufacturing.
Minford is professor of economics at Cardiff Business School, a former advisor to Margaret Thatcher and supporter of the U.K. poll tax introduced in 1989 and which led to riots in 1990. He heads the pro-Brexit campaign group Economists for Free Trade (EFT), formerly known as Economists for Brexit. This group denies climate change, preferring neoliberal-style environmental deregulation, and has been pushing for a “no deal” Brexit scenario.
Giving evidence in a Foreign Affairs Committee session in 2012, Minford agreed that the U.K. automotive manufacturing industry would be destroyed. “You are going to have to run it down,” he said, nonchalantly.
“It will be in your interests to do it, just as in the same way we ran down the coal and steel industries,” added Minford.
Leading Brexiter Jacob Rees-Mogg is an admirer of Professor Minford’s work, arguing that he “deserves to be listened to because of his remarkable track record.”
The great majority of economists disagree with Minford’s views. Analysis from the Bank of England to the OECD to academia all conclude that Brexit would make the U.K economically worse off.
Brexiters have taken to ignoring such mainstream findings, and now default to economists working for the EFT. However, most Brexiter politicians still claim that the future for the U.K. leaving the E.U. is one of “sunny uplands.”
It is not mentioned that the economists most in favor of Brexit believe almost all manufacturing in the U.K. will come to an end.
According to Minford, writing for The Sun tabloid newspaper, in 2016, “if we left the EU, it seems likely that we would mostly eliminate manufacturing, leaving mainly industries such as design, marketing and hi-tech. But this shouldn’t scare us.”
It would most certainly scare workers in the manufacturing sector, many of whom nevertheless voted for Brexit.
However, according to Minford these “losers” would be “compensated” and prices for all consumers would fall:
The cost of a BMW or the price tag of an imported fridge would suddenly drop and our resources would shift from manufacturing to services — raising living standards for all of us.
“If we left the EU, we would immediately join the world market in cars,” Minford told MPs in 2012. Perhaps he had in mind Chinese or Indian car brands? (Professor Minford was contacted for this piece but did not answer.)
Of course, while cheaper cars would be welcomed by U.K. consumers it would lead to more cars on the road, increasing congestion and reducing the U.K.’s economic competitiveness.
Real-time traffic information provider INRIX worked with the Center for Economics and Business Research to estimate that traffic congestion will soon cost the U.K. economy £21.4 billion a year
“We now know that congestion will continue to have serious consequences for national and city economies, businesses and citizens in the years to come,” said Matt Simmons, European director, INRIX.
“If we think this problem is bad now, we are in for a terrible shock come 2030.”
