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World’s Largest Plane-Maker Threatens To Leave UK

Aircraft

The process of the UK exiting the European Union is well underway, having kicked off in March 2017 and set to end in March 2019. Although Brexit is only about halfway done, Britain has already started counting its losses, with the Bank of England estimating the cost to the economy at £40 billion, or 2 percent of the economy--and still counting.

But that could merely be a harbinger of worse things to come.

Some of the country’s biggest multinationals are now threatening to leave the if the UK exits the regional body without first striking a transitional deal with the rest of the EU members.

One such company is Airbus, the world’s largest plane-maker, which has in recent years surpassed fierce rival Boeing in orders and deliveries.

(Click to enlarge)

Source: Statista

Airbus has said in no uncertain terms that a no-deal Brexit—in which the UK leaves both the single market and customs union without a deal--would lead to severe interruption of its UK production, which in turn would leave it with little choice than to “reconsider its investments in the country”.

Airbus has made it clear that it’s not bluffing or engaging in empty rhetoric; rather, its decision is informed by a dawning reality... Related: Trade War Fears Fail To Spook Legendary Investors

The aircraft maker has warned that the planned 2020 transition period is too short for it to complete a realignment of its supply chain and would therefore be forced to refrain from extending contracts for its 4,000 UK suppliers.

(Click to enlarge)

Source: BBC

An Airbus exit would certainly be a huge blow to the UK. The company makes wings for at least five passenger plane models across 25 sites in the UK where it employs 14,000 people. Not to mention the loss of an important source of national pride that the country would suffer.

Brexit Black Hole

Airbus’ move is by no means an isolated incident.

A UBS survey has shown that 12 percent of eurozone companies with operations in the UK plan to wholly pull out of the country post-Brexit, with 36 percent planning to move at least some of their operations from the country.

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Quantifying the full Brexit costs in real monetary terms reveals a very unsettling picture. The British economy is set to suffer a £252-billion hit (about $334 billion) over 15 years if prime minister Theresa May makes good her threat to leave the EU without striking any deals. That in turn means that the British economy’s output in 2033 would only be £2.36 trillion, about 12 percent smaller than it would otherwise be without the deleterious effects of Brexit.

That would be comparable to the 2008 financial crisis which robbed the country of a full decade of growth. The UK recently resigned itself to the fact that the economy will never fully recover from the ravages of that crisis.

Britain would still lose £131 billion even if it was able to secure a deal with the EU.

The scenario that presents the least damage is in the highly unlikely event that the UK government makes a U-turn and decides to leave the country in the EU single market and customs union, a deal that would “only” swipe £52 billion from the economy.

Conservative MPs (pro-Brexiteers) have already ruled out option #3 by threatening to block Theresa May’s plan for a custom partnership with the EU, saying such a move would severely limit the country’s ability to strike meaningful deals with other countries.

There’s no easy way at this point to undo the Brexit damage, and for a country that already runs a huge trade deficit with important trading partners like China, the world’s workshop, Airbus—for one—doesn’t see much hope. 

By David Craggen for Safehaven.com

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