Authi, BMW, Brexit, British businesses, British Leyland, Costas, economy, EU, Europe, Exports, Global trade, Jaguar Land Rover, laissez-faire, Manufacturing, Mini, Patrick Minford, Spain, Theresa May, UK
Britain’s long drawn out industrial decline has less to do with EU membership and more with the country’s inability to punch above its weight as an exporter, argues Richard Torné. Only by stepping up its game – and not by blaming Brussels’ red-tape – can the UK become a more successful trading nation.
By all means, let’s keep railing at the flawed EU, its bloated bureaucracy, penchant for waste and high-handed leaders.
But it’s all coming to a head. The country will on June 8 finally have its say on whether to rubber-stamp Theresa May’s vision for a post-EU Britain.
So far social care, pensions and terrorism have seen to it that the economy plays second fiddle in this election. But we can’t get away from the fact that Brexit is the single issue that will have the greatest impact on the lives of British people, and Britain’s ability to trade and export goods will be a deciding factor in whether the country becomes richer or poorer in the 21st century.
Brexiteers are painting a rose-tinted future for British firms. Free from the shackles of crippling regulation, the UK will be able to secure its own trade deals and flourish in the world’s markets.
Politicians such as Michael Gove and Boris Johnson have conveniently ignored the fact that Britain’s industrial decline began long before it joined the EU. The sobering truth is that under-investment, woeful management and the destructive force of unions crippled British industry in the past, not the EU.
One story, which curiously happened in Spain, illustrates this beautifully.
Turn the clock back to before 1973, when the UK wasn’t a member of the EU’s forerunner, the EEC. In order to circumvent highly protectionist trade rules (something Britain will still have to deal with when it wants to sell to China and Japan) British Leyland formed a partnership with a Spanish manufacturer to build the Mini and the Austin Victoria, an elegant Triumph Dolomite spin-off, under a newly formed conglomerate called Authi.
It all looked promising at the beginning. There wasn’t a single French or Italian-designed car in Spain at the time that could compete with these two models in terms of sophistication. The Mini was simply leagues ahead of its closest rival – the stumpy, rear-engine Seat 600.
Although the bubble-like Seat is rightly remembered as the car that brought cheap motoring to the Spanish masses, the truth is the 600 was a pig. It was under-powered compared to the Mini, it handled like a brick, and contrary to perceived wisdom it was not reliable – the only thing it had in common with the BL legend.
But it proved to be a false dawn. Authi folded in 1976 in the wake of BL’s all-too-familiar financial problems and poor management decisions – the same reasons that eventually caused the collapse of its successor Rover less than 30 years later.
Fast forward to today, and car manufacturing in the UK is now a relatively successful story, but that’s been largely thanks to foreign ownership and investment, not British business acumen.
Indian firm Tata came to the rescue of Jaguar Land Rover, which is now enjoying unheard of commercial success. BMW stepped in to save Rolls Royce and MINI, and Volkswagen took over Bentley. Even Aston Martin’s recent revival is linked to the financial clout of foreign equity firms – one of them Italian. What this shows is that while Britain may be good at inventing and packaging a product, its track record for running large manufacturing firms is pretty cruddy.
There are many other examples, too. High-street retailer Marks & Spencer inexplicably pulled out of the European market in the early noughties in favour of focusing on its ailing UK stores. It proved to be a hasty decision as the shops in Europe, unlike the ones in Britain, were largely operating at a profit. When M&S later returned to Spain, the company had gone off the boil. Just last week the board announced that annual profits had plunged by 63 per cent.
Closer to our Spanish home we have a plethora of small British businesses along the Costas whose success has often been a bit of a mixed bag. English-only signs, clearly just targeting expats and whose staff are often unable to speak Spanish are object lessons in how not to do business. It certainly didn’t help the chances of survival for many during the last recession.
You may argue that British bars in the Costas have little to do with the cut-and-thrust of international entrepreneurship, but there’s a correlation between failing to identify your potential client base and being an export-shy nation. Let’s not forget the UK lags behind even Italy and Holland when it comes to selling goods abroad.
The future could be even worse. Britain’s post-EU road map was laid out with relish by fervent Brexiteer and economist Patrick Minford before the EU referendum last year. And it made for disturbing reading.
He envisioned a laissez-faire dreamland; a bargain basement economy where nothing much would be made any more. He reckoned that the pulling down of all trade barriers and effectively saying to countries ‘you sell your goods to us at the price you want’ would somehow transform the UK into a new economic powerhouse.
In fact it would spell the end of what little remains of the UK’s manufacturing sector, which currently makes up about 13 per cent of the economy. To compete with other countries, UK companies would have to slash wages to even greater, third world levels, something Minford actually crows about. Mind you, some would say this process has already begun with wages struggling to keep up with the inflation rate – another unwelcome consequence of the decision to leave the EU.
It’ll take more than misplaced optimism and nostalgia to put things right. Let’s hope 10 years from now we won’t be looking back at Brexit as a remarkable confidence trick – as though sizing down from a modern, four-door saloon to a second-hand jalopy was actually what we really wanted all along.