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Will a ‘No Deal’ Brexit Harm UK Manufacturing?

by John Brian Shannon

Certain pro-EU commentators paint a picture of either a catastrophic Brexit crash-out (Hard Brexit) or a ‘non-Brexit’ where the UK would retain few of the rights gained by a full Brexit but would still be chained to the responsibilities of EU membership (Soft Brexit) whether via the so-called ‘Norway’ model or the ‘Norway-plus’ model, or via any other model such as the ‘Canada’ model.

Those same commentators excitedly cite potential UK manufacturing job losses in the post-Brexit timeframe even though the UK is primarily a service based economy (80.2% in 2014 and rising) and they forget to factor-in the astonishing changes occurring every day in Britain’s manufacturing sector.


UK Manufacturing = Less Than 10% of GDP

Manufacturing in the UK accounts for less than 10% of GDP (2016) and provides jobs for 3.2 million workers (2016) but a recent PwC report says that by 2030 half of all UK manufacturing jobs could be automated. That’s less than 12-years from now. And it could happen much faster and on a much larger scale than that.

Repeat; Up to half of all UK manufacturing jobs will be lost within 12-years. It’s uncertain whether British workers are aware of these looming changes.

Economic impact of artificial intelligence on the UK economy

The economic impact of artificial intelligence on the UK economy. Image courtesy of PwC. Click on the image to view or download the PDF report.


What’s Great for UK Businesses Won’t be Great for Foreign Workers

In 2018, of the 3.1 million UK manufacturing workers (a stat that falls with each passing year as automation increases) we find that over half of manufacturing workers in the UK are citizens of other countries — primarily from eastern Europe, but also western Europe.

So, expect UK-based eastern European workers to be replaced by automation.

Increasing automation and Artificial Intelligence (AI) will cause UK companies to choose between UK-born workers and eastern European workers, and it’s likely that hundreds of thousands (perhaps millions) of eastern Europeans will be returning home with plenty of UK coin in their pocket. (And why not, they earned it)

I hope you didn’t expect the UK to lay-off its own British-born workers in order to protect the jobs of eastern European-born workers as automation proceeds, did you? Would EU companies show that level of courtesy to UK workers in the European Union, were the situation reversed?

Profits for UK manufacturing companies are projected to rise significantly as automation and AI become one with the system, while UK-born manufacturing workers should find themselves at 100% employment.

What’s not to like?


UK Manufacturing Job Losses Due to Automation – Not Brexit

If you’re one of the EU elites who fear that hundreds of thousands of eastern European workers in Britain will lose their UK manufacturing jobs due to Brexit you couldn’t be more wrong.

Let’s be perfectly clear; Half of all UK manufacturing jobs will be lost to automation by 2030 — and it won’t be on account of Brexit!


Summary

The narrative that says the UK economy will be severely damaged on account of manufacturing job losses due to a Hard Brexit is a complete and utter fantasy.

Every day from now until 2030, automation and AI will replace eastern European workers, Brexit or no Brexit. Meanwhile, British-born manufacturing workers will find themselves at full employment.

It’s all good!


Related Articles:

  • How will artificial intelligence affect the UK economy? (PwC)
  • The economic impact of artificial intelligence on the UK economy (PwC)
  • What would be the cost to the UK of regulation by a foreign power and major competitor? (BrexitCentral.com)

Time to Begin Planning for Life After Brexit

by John Brian Shannon

It looks like the so-called ‘Project Fear’ campaign has failed in its quest to force referendum after referendum until they got the answer they wanted (which to observers, seemed they wanted to stay in the European Union at any cost) and that Brexit will occur on March 30, 2019 as planned.

All that remains to be decided between the UK and the EU is whether future relations will be based on World Trade Organisation rules, or on a bilateral trade agreement that allows both sides to prosper while maintaining a reasonable level of protection for national sovereignty, for their respective economies, and is able to shelter startups or other businesses that may require some form of special treatment or protection.

Either UK and EU leaders are up to the task, or they’re not. We’ll soon know.

And if they aren’t up to the task, every one of them deserves to get the boot at the next election.


First on the Agenda for the UK

Of paramount importance for the UK are free trade agreements with its Commonwealth partners — agreements that automatically come into effect within 24 hours of the official Brexit date.

It’s important to begin with Commonwealth trading partners because if Commonwealth nations aren’t willing to sign bilateral trade agreements with the UK, why would other countries want trade deals with the UK?

(If I represented a non-Commonwealth country and the UK couldn’t get its act together enough to sign worthwhile free trade agreements with its own Commonwealth partners, I wouldn’t be interested in signing with the UK either)

Yesterday, Australia’s Prime Minister generously indicated his country will sign a bilateral trade agreement to automatically come into effect the day after Brexit, and New Zealand, Canada, India, and other Commonwealth nations have indicated they’re open to bilateral trade agreements with the UK too.

Therefore, it isn’t a reach to suggest that such agreements be ready for a signing ceremony the day after Brexit and that UK foreign direct investment (FDI) in those countries will thenceforth take an instant leap forward.

The time to get such negotiations done is NOW so that a simultaneous signing ceremony can be televised across each of the Commonwealth’s 53 capital cities at 00:01 (in the UK timezone) on March 30, 2019.

What a tribute to enduring relations between Commonwealth members. Such a historic moment!


Second on the Agenda for the UK

No later than 24-hours after Brexit (which puts us at March 31, 2019) the UK should have free trade agreements automatically coming into effect with every economy in the world — agreements that work for each country just as well as they work for the UK.

‘Win-Lose’ thinking is no longer an option in the 21st century and anything less than ‘Win-Win’ isn’t worth spit. In fact, unless trade agreements are ‘Win-Win-Win’ these days, their value is questionable.

FOR EXAMPLE:

If the UK offers a ‘Win-Win’ trade agreement to China, but Japan offers a ‘Win-Win-Win’ trade agreement to China; Which of the two countries will be China’s most favoured trading partner?

Obviously, Japan’s offer would win, and the UK offer would simply gather dust as Japan’s relationship with China surged forward.

These negotiations must occur NOW and be led with a high level of urgency by Prime Minister Theresa May and Secretary of State for International Trade Dr. Liam Fox, so that by April 1, 2019 the UK will have bilateral trade deals with every country in the world — that automatically come into effect the day after the official Brexit date.

Anything less than that stellar achievement should be considered by UK voters to be a mediocre performance by the (then) ruling party in the UK House of Commons.


The world wants UK goods and services right now, and especially in the post Brexit era.

The world wants quality UK goods and services both now and in the post Brexit era.


Leaning toward ‘Soft Brexit’ Instead of Chaos?

by John Brian Shannon

Now that Brexit is beginning to sink-in for Britons and for UK politicians entrusted to carry out the will of ‘The People’ it seems that a so-called ‘Hard Brexit’ might be orders of magnitude more difficult than first imagined, while a so-called ‘Soft Brexit’ might be preferable to all parties, which appears to be an elegant solution at the point where the people’s interests intersect with the UK economy.

Because Philip Hammond’s economy is doing well considering everything that’s happened since 2008, PM Theresa May can relax about the economy and get on with her part of running the United Kingdom — namely, the political arrangements for a Soft Brexit now (let’s call that Brexit Stage I) and possibly a Hard Brexit later (let’s call that Brexit Stage II) if that part is approved by voters in the next UK election on May 7, 2020.

Soft Brexit vs. Hard Brexit. Image courtesy of J.P. Morgan Asset Management.

Soft Brexit vs. Hard Brexit. Image courtesy of J.P. Morgan Asset Management.

Soft Brexit probably equals mild uncertainty in the markets, while Hard Brexit might cause economic chaos

Since 1973 when Britain joined the European Community and it’s various and later governmental structures, the policies in all member nations have largely been set by common agreements forged with those organizations. There are literally hundreds of thousands of laws and regulations to replace in a post-Brexit UK. It will be a humongous task.

Even Greenland, with its total population of 56,196 took three years to exit the European Union. The UK with it’s $2.8 trillion (GDP) advanced economy has hundreds of thousands of EU laws, trade laws, tariff controls, manufacturing standards and immigration rules, that guide industry, the UK government, and Britons — all of which might take 5-10 years to replace with UK-centric legislation. Industry simply can’t function without proper regulations which leaves only one choice for many organizations; Leave Britain. That’s not in the best interests of Britons, the government, nor of UK industry itself.


A brilliant plan, is one that allows the UK to rejoin the EEA and the EFTA (as in the Norway or Swiss model) and it’s actually doable.

Have you seen Norwegian or Swiss economies? Let’s just say that on a per capita basis, they beat every European economy every year.

And, sure, some commenters will try to make things more complicated than they really are. But it isn’t complicated unless you desire it to be that.

With proper stewardship the UK economy can perform as well as any non-EU-member-nation noted in the links below. Check out their world-leading per capita income and low unemployment rates!

Norway Economic Outlook
Switzerland Economic Outlook

If Switzerland and Norway (for two examples) can have EEA and/or EFTA membership, and bilateral agreements with the EU, and booming economies — there’s no reason the UK can’t.

It’s not rocket science. Brexit does NOT mean the end of trade with the EU. That would cause long-term recession in the EU (likely leading to its dissolution) and a long-term case of the economic doldrums for the UK. The two blocs need each other whether some like it or not. So, get on with it!


UK Prime Minister Theresa May needs to stop everything(!) and get warm approval for EFTA membership accession from all four EFTA member nations.

Not to mention appointing a Minister for Scotland (a ‘Scot’) a Minister for Northern Ireland (a ‘Northern Irelander’) and a Minister for Wales (a Welsh resident) to shore-up relationships with the UK’s devolved regions, and also appoint a Minister for England.

And gain approval for Brexit among the remaining 27 EU member nations which must unanimously approve Britain’s exit from the European Union.

Accomplishing all of that would be five-years’ worth of dedicated work for any British Prime Minister! Even former Prime Minister extraordinaire Sir Winston Churchill, might’ve found a challenge in that.


UK Conservatives (with significant help from UKIP) have gained a mandate for Soft Brexit but I don’t think 52% is enough of a mandate for Hard Brexit. Which is why I support ‘Soft Brexit’ for now — and if approved by voters at the next election — ‘Hard Brexit’.

In the meantime, there’s an unimaginable amount of work left to secure a stable, fair, and expeditious Soft Brexit that solves some of the deficiencies of Britain’s EU membership, while leaving only free movement of labour and persons, and certain trade matters to negotiate, if it ever comes to Stage II Brexit.


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