Brexit will make foreign manufacturers in the UK take flight

Big firms will have to stay put for now, but future investment and research will go elsewhere

Airbus is committed to Broughton for the time being. Photograph: Jon Super for the Guardian

BMW is unlikely to shut its Mini factory in Oxford next year no matter how disastrously the government’s Brexit negotiations conclude.

Likewise, Nissan owner Renault won’t walk away from its base in the north-east – where it has built Britain’s single largest car factory – the day after the UK leaves the EU, even if departure means losing access to the frictionless trade area, otherwise known as the customs union and single market.

Both car companies have invested too much in these shores to close down or even mothball the UK offshoots of their sprawling empires. Airbus, which complained vociferously the other week about the potentially disastrous consequences for its British factories of a hard Brexit, is similarly over-committed.

The question is, will these firms still be researching and developing their products in the UK and employing tens of thousands of people to manufacture them in five or 10 years’ time?

Sadly, the betting must be that these foreign-owned businesses, which have little allegiance to Britain, will have demoted the angry island in their global supply chain by the time a transition period is exhausted in 2020. Investments in new models will go to continental firms instead.

If we focus on the car industry for a moment, it is clear that the Germans, the French, the Japanese and to a lesser extent the Indians and Chinese are the driving force of manufacturing in Europe. They are the owners and the decison-makers.

Countries like Britain, Italy, Slovakia and Turkey have become their parts suppliers and sometimes where the final assembly takes place.

It has served the political purposes of Volkswagen, Renault/Nissan, Peugeot Citroën, Tata-owned Jaguar Land Rover and BMW to spread the load of manufacturing around Europe. It pleases governments and some consumers to know their cars are made locally.

The outer limit for any location is the customs union border. There is little incentive to develop or manufacture new models in countries that lie outside. Tariffs applied by the EU are one obvious issue. More important are the non-tariff barriers that present outsiders with even more costly hurdles.

Winding down their UK operations is not the central plan. Mainly because Britain has built up a skilled and flexible workforce, top universities happy to link up with industry and and strong history of engineering and design.

That’s why major manufacturing firms are lobbying so hard to keep Britain on the inside. They want to minimise the level of aggravation in their supply chains while the industry goes through a major overhaul, possibly the biggest in its history.

It’s easy to forget that car companies, which employ almost 1 million people in the UK directly and indirectly, must convert everything they do in the next few years to accommodate the switch to electric and hybrid cars.

Jaguar Land Rover is tied to the diesel combustion engine in the same way Donald Trump is tied to Twitter – umbilically.

The company is developing its first electric car in Austria with a Canadian partner. Will it re-tool Wolverhampton’s vast diesel factory to make an electric car? With the industry suffering from an over-supply of vehicles in a period when global growth is slowing, the answer might be no.

Iain Duncan Smith has railed against business leaders as venal and wrong in the Daily Mail for misunderstanding the benefits of Brexit, while Boris Johnson has used expletives to illustrate their irrelevance to his EU exit plans. Yet both have a vision of a brighter future that involves all the UK’s highly integrated cross-border industries surviving intact. It doesn’t add up. Worse, it’s like playing roulette and thinking you can control the spinning ball.

Britain has long since handed over control of its most important manufacturing industries to foreign owners. Calling their bluff is a high-risk strategy that only wealthy Brexit campaigners, shouting their nationalistic slogans, can afford to pursue. Car workers should be worried.

Uber has finally been awarded a licence to operate in London.
Uber has finally been awarded a licence to operate in London. Photograph: Simon Dawson/Reuters

Uber hasn’t got one over on Transport for London

It is a measure, perhaps, of Britain’s lowered sense of its standing in the world that when London last year moved to block the ambitions of a multinational firm, it found itself cast as the mouse that roared. Or at least, when the capital refused to renew Uber’s operating licence, it was the dinosaur standing in the way of progress. The eventual award of a 15-month licence to Uber last week may have confirmed for cynics that the city’s transport department was always going to bow before the beasts of Silicon Valley and investors’ billions. As any London black-cab driver will ruefully note, Uber’s ability to fund a prolonged appeal meant its drivers never had to pause from working, and perhaps never will.

Uber has without doubt already reshaped transport habits, for good or ill, undercutting taxis and giving millennials a more affordable alternative, while contributing to a drop in public transport usage that has alarmed City Hall and could threaten services. Yet it has also popularised notions of car-pooling, and pushed others to raise their game – from local minicab firms now pinpointing arrival times, to big transport companies putting similar technology to good use with on-demand buses.

Such innovation was what made Transport for London welcome Uber initially, before deciding it was not a fit and proper licensee. But Uber has started to make amends, and remains on probation. Unions will justly fight for more rights for drivers, which Uber continues to resist.

But it would be wrong to see this licence award as any kind of defeat for London’s authorities. At a time when it can feel that too few are ever held to account, unheralded public employees have upheld norms and regulations from which Uber thought it could exempt itself. They have shone a light on the actions of a global tech firm, and helped effect change. Far may it ripple out.

Investors have made strong returns on Bordeaux wines in recent years.
Investors have made strong returns on Bordeaux wines in recent years. Photograph: Georges Gobet/AFP/Getty Images

Pass on the claret? That’s what wine buyers are doing

Sales are plummeting, customers are deserting, stock lies unsold. No, this is not another dispatch from Britain’s high streets but from the rather more refined banks of the Gironde – as the trade in en primeur Bordeaux wines nose-dives.

According to a report last week from wine data firm Liv-ex, sales of newly produced bordeaux wines have halved this year to £45m. Fine wine merchant Berry Bros & Rudd told Drinks Business magazine that its sales will be worth around £13m-£14m, half last year’s level, with volumes even lower.

The en primeur system is essentially a futures market in which collectors can buy Bordeaux’s finest wines up to a year before they are bottled and an official vintage released. About a third of the global trade usually goes through London.

But in a Brexit-style standoff, the dealers in Bordeaux are demanding terms London will not accept. The 2017 vintage is, say experts, not bad considering the devastating frosts, but not up to the quality of 2015 and 2016. Yet the chateaux, through their negociants, have been unwilling to cut prices to match. The result? The worst en primeur market for years.

The peak years of 2009 and 2010 saw unparalleled prices achieved as excellent vintages coincided with voracious demand from Chinese buyers. It helped turned vineyards such as Château Margaux into billion-dollar businesses. But those Chinese buyers who paid top dollar nearly a decade ago have seen little or no return on their investment. So the Asian buying frenzy has subsided, with the trade tilting back to the UK and US.

In the decade to 2017, wine investors averaged gains of 200%, with some labels, such as Château Lafitte, making far more. Wines from Bordeaux still make up nearly 70% of the wine investment market.

But the trouble with Bordeaux is that while buyers love it, they don’t love it at these prices. Investors are now looking further afield. The next wine billionaire is more likely to emerge in Burgundy than Bordeaux.

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