Brexit Would Be a Small, Economy-Sapping Move for Great Britain
The people of the English region that was most supportive of Brexit during the 2016 referendum are turning against the move - especially following an announcement by Nissan that it will forego a planned expansion of a local plant. Maybe it indicates that a nation is stepping back from the brink.
The Japanese automaker announced earlier this month that it was cancelling planned production of its X Trail model in North East England. Building the new model, along with the Qashqai, would have created roughly 1,000 new jobs. Instead, Nissan joined a long list of auto companies that have reduced production in England. Car production there slumped by over 9 percent last year. Continued uncertainty over Brexit also prompted car companies to shrink projected new investment by about 50 percent last year.
Support for Brexit in the North East has already declined from 58 percent at the time of the vote to 50 percent by last summer, and most people said they would support a fresh referendum on Brexit than oppose holding a vote, according to the YouGov survey. The polling was commissioned by the Peoples Vote campaign, which is calling for a new referendum.
It is not surprising that North East England would turn against Brexit. The People’s Vote has also published a detailed impact study on how Brexit would affect the region. The study found that the North East would lose 10 percent of economic output over the next decade under a “no-deal” Brexit scenario - meaning every man, woman and child in the region would be about £3000 a year worse off.
The benefits of belonging to the EU are well known to those who engage in commerce. A leading organization of British businesses, the CBI, reports that 61 percent of its members say that U.K membership in the EU has had a positive impact in their businesses. A CBI review indicates that the net benefit of EU membership could be in the region of 4-5 percent of GDP - an amount far greater than the entire GDP of the North East.
It is not surprising that EU membership offers this level of benefits to the British economy. Access to the Single Market is actually far more than participation in a free trade agreement - eliminating tariff barriers and custom procedures and going a long way to removing non-tariff barriers.
Moreover, the Single Market underpins access to European supply chains. The vast majority of U.K exports to the rest of the EU are used as inputs, rather than final-use products. This is important even to sectors that are very much focused on the domestic economy. The health and social services sector, for example, uses over $20 billion of imported intermediate products, such as pharmaceuticals and other chemicals.
The benefits of EU membership certainly do not end with the free movement of goods and services. One of the biggest advantages of a wider trade area is the free movement of people. The vast majority of CBI members, 63 percent, say the opportunity to recruit and transfer staff across the continent has been good for their business, compared to a minuscule 1 percent who thought it was a negative factor. The benefits reside not just with companies, but also with individuals; at least three-quarters of a million Brits live and work in other EU countries.
As YouGov polling demonstrates, residents of economically challenged areas such as North East England are acutely threatened by reduced cross-trade market access. Even more than Londoners, they depend on the benefits that lower prices offer. And unlike the City’s investment bankers, they have fewer opportunities to just pick up and move to New York or Frankfurt should the going get tough.
The U.K has won the lottery. Only a narrow channel separates the Brits from one of the biggest and most robust markets in the world. It would be a shame if Little Britain ultimately prevails and the huge potential of EU membership is sacrificed.