We have hit a very important milestone – two years after the Brexit vote and I am sensing an increasing mood of unease and uncertainty among business about the lack of clarity on our future economic and trading arrangements with the EU after Brexit.
To be clear, whilst I am sad that the UK is leaving the EU, I do not think this decision can or should be reversed. Like other businesses, Siemens has tried to engage with those involved to find new trading arrangements that work and we are doing our internal preparation to prepare for the possible final outcomes. We have also worked with the government on its industrial strategy, to help develop post Brexit opportunities.
The shape of that final Brexit outcome however needs to be a practical one. One that allows us to trade with minimum friction. Just for Siemens this requires us to move thousands of parts across borders every day, and with that build and keep critical UK infrastructure working. At the whole economy scale the practicalities of this are enormous. As an example, if every truck passing Dover, would just take 2 minutes more to process, this would lead to a 17 mile tailback for every day that happens.
I used the opportunity today to argue that the time has come for more realism in the debate and for some honesty about the choices involved. In particular, I warned that business needs to see progress on the negotiations by October and that the Government must keep open the option of participation in a Customs Union with the EU in the absence of a better and workable solution by then.
The honesty needs to come from those who continue to argue that we can simply walk away without any consequences. This is deeply irresponsible. The UK’s economic, trading and legal system is inextricably intertwined with the EU. We see that every day at Siemens, with so much of our business operations, or those of our customers, undertaken seamlessly under the auspices of Single Market regulation and through participation in the Customs Union. You cannot just unpick this without consequences and two years (since the referendum) was never going to give enough time to prepare, even though promises were made to the contrary.
Of course 52% people voted to leave but we know that many of those were borderline in their decision. Many were neither hard Brexiteers or ardent Europhiles. And only last year we had an election which failed to give a definitive answer about the type of Brexit that people wanted. And whilst the outcome of the referendum was clear, it was not decisive or indication enough of the type of Brexit, hard, soft or whatever you want to call it. And I think with the increased knowledge we have now, the obvious and clear choice is to face Brexit realities and shoot for a sensible Brexit, not a hard one.
We know now that we have been sold a crock. None of this is as easy as promised. If you leave the single market, there will be non-tariff barriers to trade with our biggest market and, despite the Government’s very significant efforts for two years now to find alternative solutions, they are not in sight, and a Customs Union is still the most effective way of avoiding damaging customs costs and delays. In any case, the likelihood of a practical and agreed alternative being in place at the end of a transition period now appears very low and the UK should consider applying to remain in a Customs Union, until and unless an alternative solution can be agreed.
I understand some of the concerns about this in terms of making it harder to do FTAs with other countries (although as others have pointed out it doesn’t stop it completely). But all the evidence points to the benefits of those FTAs simply not outweighing the costs of leaving the Customs Union. And of course the promises of nations queuing up to do attractive trade deals with us, has been proven to be another broken promise. Moreover, there has never been anything stopping us trading much more with countries like the USA and China. Why does Germany trade 5 times more than we do with China, when they have exactly the same trading terms with them than us? The answer is simple, they have over decades innovated better, invested better and made more things to export.
So, that is where I recommend we place our focus. To help support Industry create a stronger global leadership position in this 4th Industrial Revolution, and through that innovate, create and make more things that we can trade with the world. And that is why I have placed my energy and focus into this, by leading the Industrial Strategy Made Smarter review, which you can read more about here. I am delighted that this work is receiving positive support from Business and Government alike and I think more effort and funding here combined with a sensible Brexit, gives us a tremendous opportunity to reek the economic benefits we so desperately need to pay for the every more thirsty public services.
It will be the prosperity created by business in this 4th Industrial revolution that will fund our NHS – not the famous £350m, which has turned out to be yet another broken Brexit promise.
I want to reiterate that I have no ambition of standing in the way of us leaving the EU, but it is time, two years on, to face the realities. A hard Brexit puts ideology over practicality and what is best for our country; just the thought of it is already harming the economy. Implementing it will harm it even more.
Now is the time for pragmatists, practical people, and, dare I say it, experts to sort this out and create a sensible Brexit. Otherwise our current circular debate will tear us apart internally and ruin our reputation as a pragmatic nation of innovators, traders and diplomats.