Because business is worrying about the Windsor facility

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Good afternoon. Brexit is back on the front page with the history from carmaker Stellantis (that’s Vauxhall to you and me, Peugeot if you’re French) warning that if the EU-UK trade deal is not changed it could be forced to close its factory at Ellesmere Port in north-west England England.

The story, which refers to how so-called ‘rules of origin’ requirements for cars will see EU and UK carmakers face 10% tariffs on their exports starting next year, was entirely predictable.

In fact, it was being talked about when the trade and cooperation agreement was signed, but the industry didn’t want to sound rude, so it largely kept quiet.

This impacts both parties (since neither EU nor UK carmakers can achieve those ‘made locally’ targets given the state of the battery supply chain on both sides of the Channel) but when you look at the relative position of battery factories, it’s clearly much more existential for the UK.

You can read about the problems and whether the European Commission will eventually delay the deadlines Here. (There is, of course, a much bigger story, which is the competitiveness of the EU and UK in battery manufacturing relative to China.)

But I have two quick observations on the story of Stellantis and what it tells us about the new emerging Brexit narrative.

First, the fact that the Stellanti threat on its UK operations carried by the BBC’s 10am news this week (when that was an iceberg, which has been lying ahead for the industry, for three years now) shows that Brexit is once again becoming a “live” question. News editors who until recently groaned at the prospect of another pointless Brexit story are now apparently perking up at the prospect.

This ties directly into my second observation, which is that this is because the shape of Brexit really seems to be in question now that the Johnson-Truss era has passed and hardcore Brexiters are increasingly being ignored.

Interestingly, both Rishi Sunak (and Keir Starmer, was PM) made it clear that the TCA should be optimized for the benefit of both EU and UK car manufacturers.

This could be applied as a very narrow solution, but it could also be used (to the right kind of politician) to raise much broader questions about how ambitious the UK should be in the five-year review of the TCA in 2025, and with the reports from the EU more generally.

For now Starmer and Sunak are both still gripped by the same old cakeism – they will “fix” the deal without joining the EU’s single market and customs union – but as the history of cars will increasingly show, that’s a pretty superficial.

Sir Keir wants to halt the slow death of the car industry, but doesn’t want to join a customs union with the EU? Someone should ask him how compatible those positions really are, but it seems like they never are.

Anyway, the point is that the door is starting to open to a new discussion and yes, I wrote a book about how it could be. (And apologies, I won’t do this every week, but the Stellantis discussion is worryingly narrow and the book is designed to divert attention a bit.)

But all of this is the preamble to my main point this week which is, as today is local election day in Northern Ireland, the looming list of technical challenges relating to the implementation of the Windsor Framework Agreement.

Like my colleague Jude Webber reports here – this election is evidence of the Democratic Unionist party’s decision to continue to boycott the Stormont power-sharing executive because of Brexit, which the party says the Windsor Framework Agreement has not yet addressed.

The deal unlocked relations with Brussels (we’ll see about electric vehicles, but the memorandum of understanding on financial services and a possible deal on Horizon Europe are in sight) but the Windsor framework has yet to be delivered in practice.

When announcing the deal, Sunak said the new deal “takes away all meaning” of an Irish Sea border, which was obviously a careful choice of words. She still hasn’t convinced the DUP and business has started questioning what that actually means.

Broadly speaking, the trick of the Windsor framework was to shift the (lower) burden of the Irish Sea border onto business and away from the consumer, so that Northern Ireland residents feel as much a part of the UK internal market.

To this end, the Northern Ireland Business Brexit Working Group, which represents 14 industry bodies in the region, voiced its concerns this week in written tests to a House of Lords inquiry into the implementation of the agreement.

The business challenge

The paper is worth reading as it details the challenges businesses will still face.

For example, parcels sent by UK businesses to NI consumers will still need a six-digit commodity code to enter the light ‘green lane’ and give those customers the feeling that they are getting the same service as the rest of the UK.

Companies have many questions that new software may need to be brought in to run the system (expensive for small businesses) and are still awaiting details on how a new authorized courier scheme (Trusted Parcel Couriers) will work.

It needs this information sooner rather than later, along with other things including VAT, veterinary medicines and the application of “tariff quotas” for goods other than steel.

For industry, there is still uncertainty over the basic workings of the ‘red’ and ‘green’ lane system designed to ensure that more goods can flow from Britain to Northern Ireland with less paperwork.

But the uncertainty is such that Declan Gormley, the head of Brookvent, an NI manufacturer of energy-efficient ventilation systems, he told the Committee which calculated that many companies would only use the red lane for goods “at risk” of entering the EU.

“The idea of ​​trying to separate or create channels to move goods, some staying in Northern Ireland and some moving, will create another burden on the business,” he said. “Many companies will probably find that it’s just as easy to do it once and use the red lane solution and move it from there.”

This approach doesn’t work for big supermarkets, but they are clamoring for operational details, with the first controls (on fresh dairy products and meat products) due to come into effect in October this year.

“Not for the EU”

Like us reported earlier this monthall businesses will have to label products ‘Not for the EU’ for the whole UK market from October 2024, even if they don’t sell in Northern Ireland.

Retailers reluctantly accept that this is better than the alternative – full health certificates for export – but have expressed deep concerns that Whitehall (Defra, of course) is too slow to deliver details on how this will work.

As Andrew Opie, director of food and sustainability for the British Retail Consortium, told the Lords, the industry is not sure it can meet the requirements of the Windsor framework by the October 1 deadline. “We don’t have enough details. We don’t know how the processes will work,” he said.

I was also told by horticulture industry insiders that there still remain significant complexities in shipping GB plants to NI consumers, including seed potatoes and other areas that the initial deal headlines claimed to have resolved, at least for consumers.

Why bother with all this? Well, to be clear, the Windsor Framework Agreement is a step forward – as industry groups acknowledge in their evidence – but there is a real concern that (as we saw in 2021 when it all happened at the last minute, with disastrous effect) there will be too little information, too late for everything to run smoothly.

The risk is that without the required operational information, companies will unilaterally start delisting products because they can’t be sure of the rules for moving them.

As NI’s business groups put it: “Our members are therefore concerned about capacity levels within UK government, systems and business to implement meaningful change in such challenging times.”

Of course, it is very important indeed that the Windsor structure works and does not descend into the kind of acrimony that has already soured Northern Ireland politics so deeply. There will be those who will try to highlight the problems, not the solutions.

In the new spirit of EU-UK cooperation, the Windsor framework contains new mechanisms for jointly consulting businesses (rather than the UK and EU listening to businesses separately and interpreting things differently). These new forums need to be made to work.

And business wants it to work. But given Whitehall’s obvious struggles in implementing post-Brexit red tape – from farm subsidies to chemical regulations – there is perhaps an understandable trepidation in getting the deal done on the ground.

As Stuart Anderson, head of public affairs at the Northern Ireland Chamber of Commerce and Industry puts it: “We’re off to a good start, but government needs to be honest and upfront about where business needs to go.”

Brexit in numbers

In a recent edition I have written about how Brexit voter identities have proved very sticky since the 2016 referendum which intensified the political ‘reversal’ of recent years in which less educated and affluent voters – who had previously voted Labor – switched to conservatives.

However, this week’s chart by University of Manchester politics professor Rob Ford suggests voting patterns are changing yet again after Labor rebounded in the heart of Brexit in this month’s local elections.

“The electoral coalition that won an 80-seat majority in 2019 is crumbling,” Ford writes in a analyses of ward-level results on its Substack, The Swingometer.

Ford identifies what he calls a “Brexit unfolding” from the high point of “peak Brexit” in the May 2021 local elections, which saw a double-digit swing from Labor to the Conservatives in seats most prone to dismissal.

“The Conservatives have lost substantial support everywhere since 2021, but Con. medium[servative] the drop in the most heavily Leave wards is — at nearly 13 points — almost double the 7-point drop seen in the most Remain wards,” he writes.

The intriguing kicker is that when you compare these 2023 results to the pre-Brexit, pre-Corbyn era of 2015, it indicates that Brexit has a toxic legacy for the Tory party, deeply alienating those voters who would have voted Remain in 2016 .

According to Ford’s analysis, in the most Remain wards the Conservative share in 2023 was down 14 points compared to 2015, while in the strongest Leave areas it was only down by one point.

This indicates that Boris Johnson’s Brexit electoral coalition “is unraveling on both sides,” concludes Ford, as the Tory advance “in Leave areas is winding down, but its retreat in Remain areas is still taking hold”.