The official mantra, heading into probably the most critical week of the Brexit process, remains “no deal is better than a bad deal”, but who in the UK still believes it (if anybody ever did) remains to be seen. Mrs May heads of to the latest EU summit mid-week with the mission to make a soufflé without breaking any eggs (an omelette with the same caveat would be too easy) whilst maintaining a fragile cabinet truce Should “the eggs” split from her cabinet before the summit, it is highly likely that the EU will conclude that she has no realistic chance of getting any “deal” through parliament and move to full-on no deal planning on their side. The latest car manufacturer to spell out the practical reality of such an event is Ford.
The American motor giant ceased making complete cars in the UK back in 2002, but it still produces gearboxes and engines in the UK. Plainly, these components need to leave the UK to be installed in completed cars built elsewhere in the EU’s single market (currently no big deal), but the activity must be incredibly vulnerable to any changes in the economic situation/political situation which would preclude “just in time” supply (such as delays at ports and inspections of shipments) or the imposition of tariffs in an already highly cost sensitive industry.
The European head of Ford, Steven Armstrong, is the latest car executive to sound warnings over a no deal Brexit. In comments to the BBC, he said that such a situation “would be pretty disastrous… force us to think about what our future investment strategy for the UK would be…” He also pointed out that the Canada style deal would not be optimum for the industry since although it : “would allow tariff-free trade, it would still involve border checks - and would upset the just-in-time delivery model used by the company in Europe" On the subject of falling back onto WTO trading rules, he had this to say: "That would put a significant amount of cost in our business. It would certainly make us think long and hard about our future investment strategy."
If the UK does leave the EU with no deal in place, it faces a cliff-edge break on 30/3/19 with no transitional period and an immediate default to WTO rules. Most serious economists describe this scenario as being catastrophic for the UK economy – but probably better than a bad deal, eh Mrs May?