Brexiters’ BMW argument heads for crash

by Hugo Dixon | 12.01.2017

Remember how we were told German firms such as BMW would be so desperate to sell us cars that they’d force Berlin to give us easy access to the EU market? Well, that favourite Brexiter argument is heading for a crash.

It’s not just that the other EU countries – including Germany – have formed a united front to the effect that we can’t be members of the single market unless we continue with free movement of people. German companies are taking the same line.

Industry has bought into the German government’s line that the top priority is to keep EU together – a view also taken by the SPD, the junior member in the governing coalition. The boss of the German employers’ federation said this week that the EU’s four freedoms — including the freedom of movement — must not be “put into danger”.

Brexiters sometimes argue that it would be irrational for such political considerations to trump economics. But, viewed from the perspective of German industry, a fragmentation of the EU would be more damaging than Brexit. So the priority to keep the bloc together is hardly irrational.

What’s more, whoever said that political considerations don’t sometimes trump economics? Brexiters should understand that better than most.

Such big-picture calculations may not be the only consideration for German industry. A survey of 2,900 German companies found that a quarter expect to benefit as a result of business being diverted from the UK post-Brexit, whereas only one in ten firms are seriously concerned about the impact of Brexit on their activities.

Many firms invest in the UK to use it as a launchpad for serving the entire EU market with its 500 million people. If we lose full access to that market, other countries will be able to lure investors to their shores instead.

The argument that the EU needs the UK more than we need it was never strong. After all, our exports to the EU are 13% of our GDP, whereas their exports to us represent just 3% of its GDP.

But Brexiters still cling to the notion. Mark Carney unfortunately gave them succour yesterday when he told MPs that the risk from Brexit to EU financial stability was greater than to Britain. The Telegraph’s headline on this read: “The EU has more to lose from hard Brexit than the UK, Mark Carney says”. That’s not quite what the Bank of England governor was saying, given that financial stability, albeit hugely important, is not the only economic consideration – and is not the same as keeping trade open.

The sooner the UK gets real about what it can and cannot achieve in the coming Brexit talks, the better.

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    5 Responses to “Brexiters’ BMW argument heads for crash”

    • Sadly, our politicians are just not going to get real. They are obsessed with their own internal political battles. The economic future of the nation appear to be well down their list of priorities.

    • Can’t help feeling that the Germans too need to get real. When even The Pope refers to
      ‘prudent’ migration policies consistent with the ability of host countries to absorb newcomers in a cohesive way, then surely the EU should learn to listen to the call for fair freedom of movement. It isn’t limited to the UK. Almost half the population of Luxembourg is now made up of first or second generation migrants. The greatest danger to the fragmentation of the European Union will come not from greater flexibility, but its opposite – a bureaucratic rigidity that is out of touch with popular opinion.

      I say this as someone who believes that the best way out is in.

    • I don’t buy this argument that us UK consumers will all be happy to pay the extra tarrif which the UK Government might slap on German cars, French wine, Swedish furniture etc. I for one would be fairly bitter, as I have enjoyed buying all of the above, and I’m damned if my freedom to choose should be inhibited by some Little Englander fanatics, all for “the’greater good” of achieving their Hard Brexit.