Brexit and motorsport

974634E0-5234-4FD7-BB94-37CD214A5CAD.jpgThe only thing that made me laugh on Friday was the above cartoon. An aeroplane with a man standing in an open doorway, with a Union Jack, with a steward offering him a parachute. “Thanks,” he says. “The flag will do!”

For me, this summed up the whole Brexit story. I know this is a subject that excites huge passions, but passion without logic is not going to work.

Let’s face it, Britons are islanders and they have been, at best, truculent Europeans, not wanting to be involved in a European Union, but happy to enjoy the benefits and to grumble about the things they don’t like. Britain has always had its own deal with the EU, which was something that irritated other members. It was not so very different to France’s insistence on retaining the Common Agricultural Policy to protect its farmers.

Many Britons never really bothered to find out how the EU system worked. Only the party faithful voted in European elections and the activities in Brussels and Strasbourg did little but provide a home for politicians who didn’t quite make it at home and as something to complain about. It was taken for granted that British people and companies had free access to Europe. Younger people moved around much more than their parents and grandparents had done. They settled where they wanted to settle and built lives where they wanted to build lives. French entrepreneurs came to England to escape their government restrictions, British people moved to France to enjoy the cheap property prices and both groups provided economic value for the regions. Youngsters from Eastern Europe came to Britain to do jobs that no-one else wanted to do. It all helped to spread the wealth of Europe and the acceptance of other cultures across the continent.  Youngsters were able to travel for education and for them at least there was a sense of belonging to Europe. The EU poured huge sums of money into the countries in the east, long neglected under communist rule, aiming to create a union in which standards of living would gradually equalise, something that would then help to guarantee peace and stability.

There might be an uppity Russia to the east, but with a Europe united in its values, this could be held in check, with economic sanctions rather than tanks.

At the same time globalisation meant that companies chose the poorer EU countries for their new factories because the costs were lower and the workers keener to work, while unions in the west sometimes made their countries uncompetitive.

Despite this, opposition in the UK grew with some Conservatives and UKIP banging the anti-European drum, arguing that Britain should become independent and return to the days when it was “the workshop of the world”. It is these people, egged on by ambitious political egos, that have led Brexit. In part, I am sure, the vote was also because of the trend in many countries to reject the political classes of today, notably the US, where they may soon elect a star of reality TV with no political experience and some truly scary ideas. The message is that politicians are out of step with the common man and thus people have turned to more extreme solutions. The pro-Brexit British seem to have lumped all of these feelings together and voted, against all advice, to quit Europe, with the attitude that “we’ll sort it out, as we always do”.

That’s the background to Brexit, so what does it mean for Europe and, more specifically, for the motorsport industry? The simple answer is that we don’t have a clue. The country has jumped from the plane and is just beginning to realise that the Union Jack may not arrest the fall. It is an interesting fact that one of the biggest Google searches in the UK since the vote took place has been “What is the EU?”  Recriminations have already begun, with one conservative politician accusing Boris Johnson of sacrificing a million jobs in order to get the one he wanted. Let us hope that this is an exaggeration.

As things stand, however, everything is in play: finance, politics, immigration. It’s all up in the air. And because markets and businesses hate instability, things went into a tailspin yesterday. Some financiers made money, gambling, but the country woke up to a mess.

Many of the things that could now happen are things which the electorate were warned about: President Barack Obama said that the UK would go to the back of the queue in terms of trade if it decided to leave Europe. That was obvious, the EU is a far bigger trading bloc and will be the priority for the US and China. Across the Channel, the mayor of Calais, a city blighted by thousands of refugees, wants changes to the agreement that allows Britain to have immigration checks on the French mainland. Without hours of the vote, Natacha Bouchart said that the British must face the consequences of their choice. If that deal is cancelled, the refugees in Calais will be allowed to get as far as immigration in Folkestone, If that they can find a way across the Channel, and that will attract even more refugees. This is the absolute opposite of what the voters want.

In terms of business, waving a Union Jack and feeling free is not going to pay the bills and Britain must be competitive – and it must now do so without European help. There are some optimistic entrepreneurs who believe that this is possible but there are problems over which they have no real control. The Leave campaigners made much about the amounts of money that Britain pays into Europe and said that the money would be used for other things. But is there enough to fund everything? Will agriculture, for example, get the same levels of funding as it has been receiving from the European Union?

Already UKIP leader Nigel Farage is weaseling his way out of a referendum promise to spend a huge sum of million on the NHS. This is a move so crass that it should wipe out what little credibility UKIP currently enjoys. Winning votes with false promises is not the way to win power.

Across the Channel, the EU is angry and has already began to hold meetings without the British being involved. The head of the European Commission Jean-Claude Juncker has made it very clear that he is not going to help the British more than he has to, if only to stop further erosion of the EU. The decision seems to have hardened the resolve of the big European nations to stay together, if only because the only other option is beyond disastrous.

For the British, however, other problems have now emerged: Scotland has a decent argument that there ought to be another independence referendum. This could impact not only on the status of the union but also the economy because the majority of the oil and gas in the North Sea would end up belonging to Scotland. Northern Ireland and Gibraltar are both in play as well, as both voted to stay in Europe. The Irish republicans are arguing that the north and south should finally be united (which could create violence) and the Spanish want joint control of Gibraltar.

One thing that I believe many British people failed to understand is that the UK has long been seen by the rest of the world, as the gateway to Europe. US Secretary of State Henry Kissinger’s famously remarked: “Who do I call if I want to speak to Europe?” The British played that role.

Global companies have little allegiance to anyone other than their shareholders. They want unencumbered access to complex markets, skilled staff (although less so with increasing robotic manufacturing) and, if possible, government financial aid.

The latest figures available show that Britain exports goods worth $472 billion and imports things worth $663 billion. The most important export industry is automobiles (worth $46 billion), gold ($37.4 billion) and oil ($21.3 billion). The largest imports are, wait for it, cars, worth $47.3 billion, and oil $34.1 billion.

The primary destination for British exports is the United States (which soaks up $51 billion), followed by Germany ($46.5 billion), the Netherlands $34.2 billion) and Switzerland ($33.6 billion). The primary provider of imports is Germany ($100 billion), followed by China ($62.7 billion), the Netherlands ($50.7 billion) and the United States ($44.4 billion). Now, it is true that Britons will still want to buy BMWs, Mercedes, Audis, Volkswagens and Porsches, and the Germans will still want to sell them, but if there are trade barriers what will happen? The British market is important to the EU but not at any price. particularly if they think that they can get jobs that the British have had to date.

The UK car industry builds 1.59 million cars a year and provides jobs for 800,000 people. It is the biggest industry in Britain. Brexit poses a huge threat to foreign investment in the UK. Companies such as Toyota, Nissan, Tata and Honda chose the UK but the country leaving the EU may create difficulties for these businesses which will lead to them moving. Even before the Brexit decision, Britain was not necessarily the first choice for Jaguar Land Rover, which decided to open a new manufacturing facility in Slovakia. The same concept is true in France where the system makes it undesirable for global car firms to have factories even the homegrown Renault and Peugeot have been opening new factories in places like Romania, Morocco, Iran and China.

Most of the car companies in the UK said before the vote that they would prefer the vote to keep Britain in the EU. They will now review their strategies and operations, now that the decisions have been made. It is the same in the financial industry and in service industries in general. Companies may move if they think Britain no longer gives them what they want.

Motorsport is a significant industry in the UK, but it is a minnow compared to others. The industry benefits from the presence of the big manufacturers, their design studios, their research and development centres and a number of small specialist car makers as well. There are also eight Formula 1 teams and, behind them, a large network of specialist suppliers, dependent on the automobile industry. The reason that there is a motorsport cluster is entirely due to a highly skilled workforce and flexible working practices, which were not held back by troublesome unionism.  It has suffered already. Britain has lost a virtual monopoly it once enjoyed on racing car manufacture, with firms such as March, Lola, Reynard and Van Diemen. Today the world markets are dominated by the Italians, notably Dallara. Britain remains the centre of a motorsport cluster, built around the F1 teams, but the cluster may erode further if the post-Brexit arrangements do not suit the big players.

The major impact on motorsport is likely to be in terms of paperwork: transporting goods and people, and securing work permits. It will all still happen, but it is unlikely to be as easy. Perhaps national championships will develop more and provide new opportunities, but the biggest fear is probably for the supplier networks. If a part can be manufactured to the same level in two places, the decision whether to buy that part will be based on price, ease of manufacture and delivery. It is hard to imagine F1 teams leaving the UK, but more than half the F1 engines come from abroad. If the flow of expertise is slower, they may become less competitive. Success also requires getting the best people and they are not all British. The country already struggles to fill engineering jobs with its own graduates and needs more youngsters from other countries.

If Brexit goes ahead, there will probably be restrictions and import duties on certain goods, services and people, which will make it less easy for UK firms to compete with rival European companies. Some argue that a weak Pound will help them sell more abroad, but then they will have to buy raw materials from abroad and that will erode the margins.

If you look at the patterns of voting in England, you can see that those in favour of staying in Europe were younger, better-educated and more cosmopolitan. You can read into this what you will, but I see it not as a victory for Little Englanders, as some would have us believe, but rather a protest against globalisation, led by some opportunistic politicians who would not have had any chance of power were it it not for David Cameron’s decision to throw himself on the bonfire of history. People could rapidly become disillusioned by the choice that has been made. A lot of people, it seems, did not vote because they thought Brexit would fail. Some voted without really understanding the implications.
Farage’s repudiation of his NHS promise is a sign that he is not a man to be trusted and that reality is going to be different to the promises made. Cameron is gone and Labour leader Jeremy Corbin may follow him down the political plug hole, leaving the field free for new people. But can Boris Johnson et al deliver an acceptable deal for Britain? Those who voted for Brexit on the basis that it would free Britain from European control may soon have to accept that they cannot have that and a trade deal. There are examples of Norway and Switzerland that are members of the single market without being in the EU, but they are not very comforting.
Norway, a country rich with oil money, is a party to the Schengen agreement and so has freedom of movement for workers and goods, although food and beverage is excluded from that deal because of the EU protection of its farmers. However, in order for this to happen, Norway has had to accept a large number of EU laws and directives and yet has no say at all in how these laws are formulated. Is that the best that Britain has to look forward to. Is it even acceptable? The problem is free movement or people and it is the price that countries have to pay for access to commercial freedom. And the Leave campaigners cannot easily agree to such a deal if they wish to deliver on their promise to restrict immigration and protect British jobs.
It is therefore quite possible that they will fail to deliver an agreement within two years. At that point Britain would be cut loose and would end up in the worst possible situation with no access and no trade deals. British politicians will realise long before that happens that if they go to the electorate with such a deal they will be blown out of the water and so they have little choice but to try to move the goalposts. Whoever the leaders are, they will probably have to end up asking for another referendum. And they may win because the voters may by then be more educated and more scared by the stark realities of being isolated. In such a situation one can imagine a more sensible discussion to allow Britain to stay in the EU with a new deal before Brexit is carried out. The Europeans would go for that because it helps keep the union strong. It might be a stretch to imagine that Boris Johnson could pull that off and grab victory from the jaws of defeat but that seems the most likely path ahead. It will produce a Europe that will have to accept reform and a Britain that will understand more about what Europe means.
None of this thinking is based anything other than logic. I may not be right but it is my honest opinion and if people wish to abuse me for it, then please at least read the blog rules before doing so, as it explains what happens to comments.