Different people have reacted differently to the announcement by Honda that it is to cease production and close its plant in Swindon, depending largely on their views over Brexit. Opponents of Brexit have been quick to claim that Brexit is clearly a factor, whilst Brexiteers have, quite rightly, pointed out that Honda’s statement placed no blame on Brexit; indeed, it specifically stated that it was not a Brexit-related issue. That statement may not be quite as definitive as it sounds, though.
It’s certainly true that there have been major changes in the industry, and that the move away from diesel cars is happening faster than many would have predicted. And it would be surprising if Honda, like other manufacturers, wasn’t looking more to a future which depended more on electric vehicles. In that situation, ending production of a vehicle whose life-span is nearing its end anyway is an entirely normal, non-Brexit-related business decision.
More interesting, though, is the question which is not being asked as a follow-up. As far as I can see, the company is not planning to produce fewer cars in total, merely changing the emphasis away from one type of vehicle to another. And those new cars need to be produced somewhere – the company has decided to do that in Japan. So, the question which hasn’t been widely asked is this: given that you already have a factory capable of producing vehicles with a trained and experienced workforce, why close that and invest in new capacity elsewhere instead of repurposing the existing facility?
The company’s own statement gives us the answer to that when it says that it is due to the relative size of the market in different locations. Now we know that the original investment in the UK was part of a strategy to target the EU market from the inside rather than across tariff barriers; and we know that the new EU-Japan trade agreement facilitates trading with the EU directly, without needing a base within the EU. We also know that the terms of trade between the UK and EU post-Brexit are a complete unknown at the moment, but there is no conceivable Brexit scenario (other than cancelling it completely) which will not make trade between the UK and the EU more difficult than it is at present – and potentially significantly more difficult than simply supplying the market directly from Japan.
So, in taking the short-term decision to stop production of the current model, I can well believe that Brexit was not a significant factor. But in making the longer-term decision as to where to put future investment, not only can I not believe that the changes which Brexit is leading to are not a factor, but I also believe that if they weren’t, then the directors of the company would be guilty of a grave dereliction of duty. And this matters; it matters a lot. We are going to see a lot of changes happening, and in many cases it is going to be extremely difficult for anyone to say, with absolute certainty, that this decision or that decision was a direct result of Brexit.
At the level of individual decisions, the Brexiteers will have a degree of what Nixon once called “credible deniability”, and they will attempt to use that to deny any causal link between their project and the economic damage which it does. But we shouldn’t lose sight of the fact that whilst the changes resulting from Brexit may not be the direct cause in many individual decisions, they will undoubtedly be part of the context considered when those decisions are being made. The influence of a deliberate decision to place the UK outside the world’s largest free trade area will not always be direct and obvious, but it will be extremely pervasive overall.