Before most of us were wiser about climate change and the effect of burning coal had on our environment, the homes of Britain were warmed by fireplaces burning fossil fuels, the trains of the nation were pulled by steam engines chuffing out smoke, and the machinery of industry was fired by coal-burning furnaces. Of course, Britain was not alone, and it was a habit that endured across Europe too.
With all this coal smoke hanging about, there was a lot of airborne pollution, and heavy fogs and smogs were commonplace. Indeed, in November 1939, the Times of London reported in a headline: ‘Fog in Channel, Continent cut off’. The irony of that headline still endures today nearly eight decades on, more so when it comes to the thinking of Brexiteers who are the belief that the 27 members of the European Union (EU) need the United Kingdom as much as it needs them. Don’t worry chaps, everything will be just fine come March 29, 2019 and Britain will indeed be splendid in its isolation.
Given that the end of the year is fast approaching, business and corporations are forward planning for the next couple of financial years — and they don’t like what they see.
Take Honda for example.
Earlier this month, its senior British company poohbahs appeared before the business select committee of the House of Commons at Westminster — and their testimony made for uncomfortable listening. Like most car manufacturers, the company relies of “just in time” supply chain logistics. Putting it simply, it means that auto makers keep as little spare parts on hand as they can. Tighter control of inventory means they don’t have to have large and expensive stocks of parts sitting around. It’s cheaper. The downside is that the companies depend on a constant supply of parts coming in to keep the assembly lines moving, and any delays mean lost productivity and lost money. And with customs checks at the UK borders come March 29, every 15-minute delay will basically cost €1 million (Dh4.4 million). Honda alone has 350 trucks a day coming from Europe with car parts, and it has just an hour’s parts on hand at any given time.
Putting it another way, about 240 of every 690 cars built every day in the company’s Swindon factory are shipped to Europe. If the UK leaves without a Brexit deal, World Trade Organisation rules would impose a 10 per cent tax on those cars, and a 4.5 per cent tax on all those auto parts coming into the UK. While 56 per cent of cars made in Britain are exported to the EU, just 8 per cent of the EU’s cars end up in the UK.
There are 4,000 workers at Swindon and that number is growing. As it stands now, 14 per cent of those highly skilled workers are from other EU countries, and they’re worried about what will happen after Brexit.
London is even more worried.
The financial services sector based there and known colloquially as “the City” accounts for 12 per cent of the UK’s economy and pays more tax than any other industry. It dominates financial clearing, stocks, bond markets, commodities and exchange rates, fund management and any other host of insurance, assurance, pension and investment services – all highly paid jobs that prop up any number of hotels, restaurants, dry cleaners, car hire companies, travel services, clothing and jewellers. For every job in the sector, there are ten more in services.
And things are not looking good.
Take Goldman Sachs for example.
The financial services company employs 6,000 people in the City and is in the middle of constructing a £350-million (Dh1.70 billion) headquarters. That was a project that was planned and underway before the Brexit referendum happened. The good news is that the building is an asset that can be sold on or leased down the road. That building is scheduled to open in March 2019, right as the UK leaves the EU. But the company has already decided that it is to move a significant number of its current employees to Paris and Frankfurt. Authorities in the German city, for example, are building extra capacity at international schools to accommodate the children of those moving there from the City post Brexit.
French President Emmanuel Macron has made no secret that he would love to take 10,000 financial sector jobs to Paris from London — and their income tax revenues and boost to restaurants, hotels and everything else would be very welcome too. As it stands now, about one-third of every piece of business transacted in the City involves at least one client from the EU27. The chill is already beginning to happen.
Take commercial real estate, for example.
Over the past year, office rates have fallen from £77.60 per square foot in September 2016 to £73.40 this September.
Or train trips on London Underground. Reuters has been keeping an eye on train journeys between the two busiest stations in the City, Bank and Monument stations. Over the first eight months of this year, compared to the same period last year, there has been a 2.7 per cent decline in passengers. These trends are indicative of a growing trend — the exodus from the City has already started.
And this week, there were two relocations that had to take place as a result of the Brexit vote. The City is home to two EU-wide agencies: The European Banking Agency (EBA); and the European Medicines Agency (EMA). The EBA has a staff of 167 people charged with being the regulator for EU banks. It was founded in 2011 in the wake of the financial crisis and ensures that there is enough liquidity in the system and stress-tests banks to ensure they are meeting European statutory requirements and regulate financial supervisors. On Monday, the EU27 voted to move the EBA to Paris, putting a smile on the face of Macron. That same day, the EU27 decided to relocate the EMA to Amsterdam. The agency ensures that EU standards are met and applied for all medical and pharmaceutical products sold across the EU. It employees 600 staff members, most of which will now switch to Amsterdam. So too will the 40,000 hotel nights that are associated with EMA meetings and conferences now in London.
Brexit indeed is hitting home with its death by a thousand cuts.
