The hardening reality of Brexit

Nissan made the request just as it plans to make its latest investment – for manufacturing the next version of the Qashqai. It says it cannot wait for Brexit to happen before it decides where the cars will be assembled. The implication is that if the UK Government wants the Sunderland plant to get the work, it must agree to compensate Nissan if the company faces tariffs to export cars to the EU post-Brexit.

The LCP story is a snapshot of an in-depth white paper produced by the consultancy firm. Among the insights are that British retailer Next has said the weakness of the pound since Brexit is likely to increase sourcing costs and as a result, consumers may see price rises of up to 5%. In order to mitigate costs further, they are continuing to increase efficiency, improve capabilities and develop sources of supply in places such as Bangladesh, Cambodia, and Burma.

Low tax

It was also interesting to hear the opinions of Francis Maude, Baron of Horsham, who until earlier this year was Minister of State for Trade and Investment.

Maude spoke at the PPMA Total Show and outlined that Brexit gave the UK potential to 'create a great environment for businesses but also more scope to screw it up'.

He added: "A disadvantage of leaving is we won't have the clout of being part of a bigger club. But advantages include that we are in favour of freedom of trade, not so in some parts of the EU, which means we can go as fast as we like.

"There should be low business tax to support exports. I hope Government will reduce corporation tax, which is already competitive in G20 terms. The closer we get to Ireland's 12.5%, the more attractive to business we will be."

This is an interesting viewpoint and it went down well at the show. But it assumes that the UK lowering corporate tax would be a decisive move. This would not necessarily be so. Small and relatively insignificant economies such as Ireland can slip under the radar to some extent, but the UK is too big to ignore.

I would expect the EU to react to negate such a move, even if they didn't reciprocate by cutting their own tax rates. Perhaps they would do so by imposing greater costs on the UK for doing business with the EU.