BREXIT BETRAYS MARGARET THATCHER´S CARMAKING LEGACY / THE FINANCIAL TIMES OP EDITORIAL

Brexit betrays Margaret Thatcher’s carmaking legacy

Honda’s closure of its UK plant is part of a slow-motion tragedy for the industry

John Gapper



Leave means leave. It has taken a long time for Japanese carmakers in the UK to grab the attention of Theresa May’s government. Honda’s decision to close its vehicle and engine-making plant in Swindon and take production back to Japan has done so — although, sadly, too late.

Justin Tomlinson, the Brexit-backing local MP, kept his fingers firmly in his ears this week, insisting that Honda’s decision was based on “global trends and is not related to Brexit”. Margaret Thatcher, the former Conservative prime minister who lured Japanese companies to the UK in the 1980s by promising easy access to the EU single market, would have been less blasé.

Honda faced various difficulties in Europe, including a sales downturn exacerbated by the diesel crisis (although less than a tenth of its cars made in Swindon run on diesel). The plant operates below capacity and tariff cuts in the EU-Japan trade deal made it easier to bring production home.

But only a fool or a propagandist would deny the impact of Brexit and the threat to the pan-European integrated supply chains on which manufacturers such as Honda, Nissan and Toyota have relied. “We strongly request that the UK will consider this fact seriously,” the Japanese government wrote in September 2016, which is about as close to shouting a warning as it gets.

Honda is also closing a plant in Turkey and Takahiro Hachigo, chief executive, insisted tactfully on Tuesday that the Swindon decision was not related to Brexit, but the first cars rolled off the Swindon line just before the launch of the single market in 1993. Saying “sayonara” less than six weeks before the UK is due to leave the EU speaks volumes.

The unravelling of the UK’s achievement in reviving its car industry by welcoming foreign companies is a tragedy in slow motion. Nissan has reversed its 2016 promise to build the next X-Trail SUV in Sunderland and Toyota’s patience is being tested, despite having announced last year that it will build its new Auris hatchback in Derby.

Carmaking is highly competitive — Renault’s automobile operating margin last year was 4.3 per cent, for example — and even tiny disruptions and cost increases can render a viable plant unviable. This is what made Brexit dangerous for the UK industry, which not only exports 80 per cent of cars it produces, but relies on frictionless imports of parts to run just-in-time assembly lines.

The departure of Honda has a broader significance than simply the loss of 3,500 jobs around a former Spitfire plant in Swindon, both for UK carmaking and manufacturing in general. Japanese companies showed the UK not only how to produce high-quality cars, but how to run factories well and to inculcate harmonious relations between workers and managers.

It is easy to forget how dysfunctional the UK carmaking industry used to be — particularly after the 1975 nationalisation that brought brands including Rover and Jaguar under British Leyland. Cars were shoddily made and industrial relations with unions were terrible, leading to constant disputes. The UK industry’s output peaked at 2m cars in 1972, falling to 1m by 2009.

That was why Thatcher put so much effort both into forming the single market and courting the companies her party now attacks. Part one of her strategy for remaking the UK economy was eliminating the regulations and union obstructionism that had burdened many companies. Having (often brutally) cleared them away, part two was to implant an alternative.

The Japanese carmakers did her a huge favour by having faith that the UK would be a stable European base. They led the way for others, helping to reinvigorate an industry that was in deep trouble to remarkable effect. Before Brexit started to hurt, the industry had bounced back to making 1.7m cars and 2.7m engines in 2017, employing 850,000 people directly or indirectly.

Swindon was among the biggest beneficiaries of her strategy for economic restoration. Once a town of 100,000 that relied heavily for jobs on Isambard Kingdom Brunel’s former Great Western Railway works (which employed 17,000 at its peak but had fallen to 2,000 by the time it shut in 1986) it transformed into a cluster for high-value manufacturing and professional services.

“A home for Euro-strivers,” the FT wrote of Swindon in 1988, when this was taking hold and US companies were picking it as a location for UK and European headquarters. Its population is now 220,000, including many graduates in skilled jobs at its 8,600 companies.

But something in Swindon rejected the European implant, just as in Derby and Sunderland. Despite having thrived on the arterial route between Remain-voting London and Bristol, its citizens voted Leave in the 2016 referendum by 54.7 per cent to 45.3 per cent. Perhaps they believed the area’s economic transformation was so ingrained that Honda would never depart.

Now they know better. One Honda employee interviewed by Channel 4 News described the UK government’s Brexit prevarication as “idiocy of epic proportions”. The cruellest aspect is that Swindon’s citizens, and many others in the UK auto industry, were persuaded to risk themselves.