Two significant – and linked – developments took place this week which will in all likelihood have major repercussions for the direction this country takes and the shape and health of the North East economy.
The pound fell to its lowest level since 1985, reaching $1.26 in early trading on Wednesday. Sterling has now lost 15 per cent of its value in the three months or so since the EU referendum result. That’s a bigger fall in the value of our currency than Harold Wilson’s 1967 devaluation and famous claim about the “pound in your pocket”. If you’re lucky enough to be about to go on holiday or pay for next year’s foreign trip, it’s probably going to get a lot more expensive.
The pound has fallen because the markets don’t much rate what the Prime Minister has said in the last couple of days about the terms of our exit from the European Union. There still remains enormous uncertainty and lack of clarity as to what the shape of the deal will be: will we have access to the single market? Unlikely, given the Prime Minister’s comments. That has meant that the markets have bet (and, let’s be honest, it is betting) that Britain will not be able to trade as well and therefore will not have the same economic strength, which is why they’re selling pounds.
Uncertainty about the single market is also behind the second major intervention, that from the boss of Nissan regarding pausing any further investment in the Sunderland plant until further clarity about Britain’s negotiating position and eventual deal are known.
This could have huge ramifications for the British car industry and the North East economy. The Sunderland plant is a great success story, making more cars than the whole of the Italian car industry put together. It employs people from Hartlepool and helps fuel prosperity in supply chain companies which also provides jobs for the town. But that success can’t be taken for granted, nor is it some sort of God-given right. Mo Farah is an enormous success, with two gold medals and winning the Great North Run this year. That doesn’t mean he stops training and investing in future success. So it is with industry.
The risk is that in a fiercely intense internal competition, with Sunderland competing with other Nissan factories in the likes of Spain, France and Russia to build the next model, the uncertainty about UK access to the single market just puts this country and our region at a disadvantage, especially if that uncertainty is being accompanied by an unwillingness to invest for a few years until this is resolved. That then makes it more difficult to win the next order, and the one after that, causing real concern in the British automotive industry and its supply chain.
Pointing all this out is not to request a second referendum. It’s not to dismiss the views of the majority of people in this country who voted to come out of the European Union. I think the Government has to ensure that the will of the people is provided without causing damage to the British economy. The words of the Prime Minister over the weekend suggest that she doesn’t have a plan, which is why the value of the pound has fallen off a cliff. The Chancellor of the Exchequer, Philip Hammond, suggested to the Conservative Party Conference in Birmingham this week that there will be “turbulence” in the British economy as this country moves to Brexit. It looks like it might be a bit more than that. The turbulence might be so severe that you’ll need your sick bag. Get ready for a bumpy few years.