Brexit Deal or No Deal, having left it this late, our economy will be hit like a slow puncture

In an interview with the Guardian (full article below) I predicted that the UK economy now has no way of escaping a ‘slow puncture’. What I didn’t talk about is what the consequence for our future relationship with the EU will be; which I believe will see us negotiating for years with them, to slowly fix the puncture. This will only be possible by creating more alignment and not less as some key Brexit promotors are arguing for post Brexit. In fact, I hold the view that if the UK choses a path of divergence from EU standards, it will make the economic impact so bad, that it increases the chance of us returning to join the single market in full within a decade, as the only way for our economy to recover. I will return to this topic in a future Blog, but for now I make a copy of the Guardian article below and with the link here

Printed in the Guardian on 14th December 2020

Brexit will hit the British economy like a “slow puncture”, a leading industrialist has warned, with disruption to business to last at least six months even if a trade deal is reached.

Juergen Maier, the former chief executive of German electronics giant Siemens, warned that businesses were starting to shift parts of their operations to other countries in the EU while at the same time decrying the “nationalist” headlines over the weekend claiming Angela Merkel wanted the UK to “walk on broken glass” to secure a Brexit deal.

He said many people were under the illusion that a deal would be a panacea not realising that the mountain of red tape cross-border suppliers face will kick in whether there is a deal or not.

Hopes that cross-border supply chains will quickly recover from the pre-Christmas stockpiling that has resulted in gridlock in Dover and Calais are wide of the mark.

“It’s going to be a pretty tough for the first six months,” he said. “That is what I am hearing from the groups that I am on,” he said.

A member of government’s industrial strategy council and the Northern Powerhouse Partnership, Maier is a leading business commentator with the ear of the government, Whitehall and business.

He says Brexit will be felt deal or no deal but warns that “those who think a deal is going to miraculously resolve the situation” are wrong.

“It’s a slow puncture of the economy is how I describe it, because people will have made their contingency plans to lose bits of their production; to move parts of their research and development over to other places where it’s easier to do it from.

“They will just start acting on it slowly,” he said in relation to the flight of business caused by Brexit.

“You don’t suddenly just take all of your operations and shift them to the Netherlands or France, you move bits of it or you might also plan that the next generation of products you’ve developed might be for a European factory as opposed to a UK factory. So this will be a slow burn,” he said.

Born in Germany, but an Austrian-British national, Maier has spent years at the helm of pan-European companies and knows how sensitive they are to the Brexit rhetoric of the past four and a half years.

He said there were real consequences to the “irresponsible” and “xenophobic” headlines over the weekend quoting “government sources” claiming Merkel wanted “the UK to walk across broken glass” to get a Brexit deal.

“It is just rhetoric that is nationalist, and comes at exactly the wrong moment. The timing of it was particularly dreadful, with two blocs the UK and the European Union, trying their damnedest to solve something we all know is hugely difficult.

“The term ‘oven ready’ is just another piece of rhetoric and to irresponsibly add fuel to the fire with nationalist statements like that are just horrible,” he said.

“For German business, the UK was always seen as the most reliable partner in Europe. German businesspeople are feeling incredibly sad that their trusted reliable partner, at least for now, can no longer be trusted, because of things like the internal market bill and the language we saw at the weekend.

Looking ahead to the next few days and weeks, he has urged the government to provide what he calls an “adjustment period” to avoid the cliff-edge Brexit and allow businesses get accustomed the new customs and standards red tape that comes in on 1 January deal or no deal.

He also called for urgent publication of the rules of origin formula the EU is going to apply to imports.

Industry figures expect they will be able to continue to export if 55% of their products are made in the UK or the EU but this has not been confirmed.

Car companies using Japanese parts have already said their businesses could be unsustainable if the quota of British-made products is too high.