Prosper Spring

LGVs queue to enter the
docks at Dover. Trade with
the EU is worth £550bn,
dwarfing the figures for
other areas of the world
that of the US only projected to add 0.16%
to UK GDP over the long-term (15 years)
according to the UK Government’s own
analysis, which shows little benefit outside
that of niche sectors such as Scotch whisky.
In a similar fashion, the CPTPP would only
add about 0.1% to UK GDP, and current
trade with these countries only accounted
for 8% of UK exports in 2019 (less that that
sold to Germany).
While CPTPP membership may open up
some opportunities around digital and
services trade, and the UK Government still
holds out hope with India as a key emergent
economy, our main trade partner remains
the EU – which only serves to underlie how
trade flows are typically geographically
concentrated. In other words, that the
nature of supply chains – particularly for
manufacturing, on which much of our
region’s economy depends – warrant that
parts and components can be quickly and
easily moved around.
It is why key supply chains such as that of
the automotive industry tend to be
geographically concentrated in ‘world
regions’ such as Europe.
Toyota, for example, concentrates
production on a regional basis, and maintain
14 production companies in South East Asia
alone. No merchandise trade agreement
between the UK and the North Americas or
the Far East can hope to replicate this, given
the distances involved.
As such, the costs of Brexit to the UK
economy have been significant, with the
Government Office for Budget
Responsibility (OBR) estimating that Brexit
will result in a 4% drop in UK productivity
relative to having stayed in the EU (think of
all the resources now being squandered on
customs barriers/declarations and border
checks and you can see why), and in turn a
15% decline in exports and imports relative
to having stayed in the EU.
As can be seen in the Figure 1 below, the
UK’s trade performance has worsened in
recent years to date 1 .
Our own research has highlighted the
undue impact of Brexit on smaller firms in
the manufacturing supply chain in the Black
Country and wider Midlands, with many
respondents struggling to cope with
increased red tape and the additional cost
involved, and consequent lost business as
clients in the EU switch business to
elsewhere in the EU. In a similar fashion, our
research has highlighted the ongoing
exposure of firms in the region to a key
‘‘
As can be seen in
the chart left, the
UK’s trade
performance has
worsened in recent
years to date...
‘‘
number of anchor firms, such as Jaguar
Land Rover (JLR).
Moving forward then, there is a clear
need within the Black Country, and wider
Midlands region to which it is extrinsically
connected, to understand the nature of
supply chain dependency on key regional
anchor firms such as JLR.
As current news of JLRs purported
intention of wanting to construct a
Gigafactory for EV battery production in
Somerset (or Spain) attests, it spells bad
news for the West Midlands if a key
component of EV gross value-added is lost
to the region.
There is then a real risk that thousands of
jobs could disappear in the Midlands over
the coming decade if production is
re-routed elsewhere in the UK, or abroad.
1
Source: https://www.ons.gov.uk/economy/
nationalaccounts/balanceofpayments/
timeseries/ikbj/mret
PROSPER SPRING 2023 51