7 February 2019
Beware: Steamroller Loose
Business and Brexit.
by J R Thomas
If you are one of those readers who look through Lens on the Week before grappling with the heavier stuff lurking further down, you might have noticed an odd passing remark in this week’s Business Section. Diageo, that behemoth of alcohol, still remembered by many as “Distillers”, or “Guinness”, has had a very successful half year last year and is awash with cash which it intends to get back to its shareholders. But the chief executive, in his report, passingly commentated that Brexit is not seen as a major issue by the company; indeed he barely mentioned the subject at all.
No doubt this extraordinary behaviour is even now under consideration by the Confederation of British Industry, and by the various senior businessmen whom the Chancellor of the Exchequer assured that Britain would not be “crashing” out of the EU, but could rely on the Conservative Party to protect their interests. Diageo will be for the high jump in the salons of large corporate UK for not grabbing the opportunity to further frighten Leave voters. Is that the distant sound of Tanqueray gin bottles being smashed, of quarts of Guinness flushing down drains?
In the Sunderland area, alarm and despondency broke out last week when Nissan, one of the largest employers in the north east of England, announced that the plans announced in 2016 to build its new X Trail vehicle there had now changed. The car will instead be built in Japan, where the company is domiciled. Nissan’s chief executive, Carlos Ghosn, had secured assurances and support from none other than Mrs May as to the position of the company post Brexit before it formalised its intent to build the X Trail in Sunderland. Alas, Mr Ghosn was arrested last year in Tokyo on vague charges concerning his remuneration and is in a cell awaiting hearing what he is to be formally charged with, so cannot comment. But that has not stopped Julie Elliot and Bridget Phillipson, Remainer Labour MPs respectively for Sunderland Central and Sunderland South, citing Brexit as causing job losses and dismay among Nissan workers. Those workers may not be dismayed for long if they read what the company has actually said; no jobs are likely to be lost in the Sunderland plant, and that the reasons for not building the car in Britain were mainly to do with declining sales in the car business, adverse currency movements affecting the yen, and the increasing tax burden on diesel engines (the X Trail is mainly diesel powered). They did say that uncertainty over Brexit did not help matters, but it is clear that it was a minor factor, and one that, given the unfortunate Mr Ghosn’s deal with Mrs May, was not likely to be significant.
But large corporate businesses in Britain are notably Remain. Britain must stay in the EU is their line, and a thousand curses upon referenda. That is not altogether surprising, of course. Large businesses like stability and certainty, they like pro-business governments who will listen to what business has to say, and they like access to senior ministers and civil servants so that helpful conversations may be had, threats warded off, and generous incentives to large-scale investment agreed. Large corporates do not tend to be entrepreneurial in the way small companies are; they do not duck and dive, welcome instability for its opportunities, and make policy changes overnight. A large business is much more focused on control and reporting – look what happens, even in the cake and bun business Patisserie Valerie, when those controls fall apart. A large business is extraordinary difficult to run, trying to maintain cost control, on-message branding, and quality across possibly a whole range of products and locations. The less external changes there are, the better, and the more notice the business gets that change might be afoot in the political arena, the better. And if the business is large enough and the politicians friendly enough, then there might be some talks early on to head off problems and to polish the agenda to help the corporate world prepare. Germany, and the EU, are noted for a business friendly approach – friendly, though, it should be said, to business domiciled within the EU. American businesses find a much more bristly welcome mat outside EU offices, and American technology firms in particular increasingly find Europe a difficult and expensive place to do business – those massive fines cause pain to the largest businesses in the world, even though they help Brussels pay the gas bill.
It is not just the Americans who find Europe not so keen on their activities and investments. Chinese telecoms giant Huawei has been welcomed in political salons across Europe, and has become a major investor across the continent, including pouring money into research at Oxford University. Huawei is increasingly a leader in the communications business and, even better, supplies reliable products at very attractive prices. Now, of course, it has belatedly occurred to some politicians, or their advisors, that Huawei has had so much input into how our communications networks function, that the company probably knows a lot more about us than we do. In particular, how to turn those systems off, should political relationships between China and Western countries break down. Nobody is yet suggesting that Huawei might be able to turn our defence systems off, because that would be a state secret. But, let’s face it, just turning off the mobile network would severely hamper us in times of trouble. If European politicians, major investors, and Oxford dons had thought a bit more strategically and a little more cynically about cosying up to a massive and very friendly and generous Chinese corporation and all that investment and research support, they might have seen this one coming.
The Americans did, much earlier. America, famously business friendly, also has a healthy cynicism about what business might be up to – maybe it’s just all those films about the Mafia, helped by some pretty fierce laws about lobbyists and influencing.
The idea of studying history, apart from the sheer pleasure of it, is that we should learn from it. Over the last hundred years or so we can learn that business and politics getting enmeshed can be a bad idea; and in the end can be very bad for business. In the 1930’s many large German companies decided that they could do business with the Nazi government and grew close to the party. In many ways this made sense; it enabled them to grow, to influence policy, to win contracts, to have beneficial links with decision makers. Many senior businessmen thought, absolutely innocently, that they could teach the new leaders moderation and stability. That did not work out as intended, of course; and it carries a lesson that what business wants is not always what is good for freedom and democracy, even though the motives of business leaders may be without reproach.
Many leaders of British business today want all the right things for their companies: certainty, stability, open markets in Europe, protection against cheap imports and over-aggressive competition. But what we keep getting glimpses of is a large corporate steam roller, driven with care and skill, trying to squash what the people seem to want. The danger is that the roller will roll on to collide with our democratic systems and alarm voters. That might just create an environment for business that becomes so hostile that even a no-deal Brexit might have been preferable for business Britain.