The EU and trade

As I’ve mentioned before, the UK’s EU membership and open borders policy is crucial to trade. Restricting this, as UKIP and increasingly the Tories suggest, would have a disastrous impact on the UK economy.

This was hammered home to me last week when I was at a trade show in the NEC. As I walked around the stands, where much high tech stuff was on display, composites manufacturers, 3D printing of metal parts, Graphene, driverless vehicles, I couldn’t help but notice how much of this is dependent on three things – foreign labour (often the boffins behind such ideas aren’t British), foreign investment (ditto the cash paying for it all, you’d be surprised to learn how many firms in the UK these days are owned by foreign investors) and trade with the EU (about 75% of the cars made in Britain are built LHD for export, often using parts brought in from the EU, with many EU cars built with British made parts or designed by brits!).

Consequently if I was foolish enough to bring up the issue of the UK leaving the EU, the response would usually be either denial (:no: oh that would never happen, we’d be broke if it did) or a tirade. And not the usual tirade you’d get from Daily Mail readers of the “u see, the EU costs us 1 trillion pounds a day and wants to let 25 million Romanians claim benefits…”. No more along the lines of “are you mad or what? Do have any idea how many of our staff our European? How many of our customers are Europeans? Or our investors?” So think it was good Farage didn’t show up, unless he fancies being beaten to death by a load of angry engineer’s wielding British made 3-d printed composite crowbars. :))

Take for example an excellent presentation for Manchester University, at the conference on the topic of Graphene and its future applications. Well the lady giving the talk was French (possibly French Algerian or Moroccan I’d guess from her name). The two leading scientists from Manchester, who won the Nobel prize in 2010, neither of them are British. MU have just finished building a £60 million Graphene research centre, and have funding to the tune of a further £60 million. While some of this money is coming from the UK government, this is being matched with funds directly provided by the EU.

I didn’t torment the MU team about Brexit, but that was largely because, as a lecturer, I understand that I’d have been as well off asking them how they thought MU would continue functioning after nuclear war. A vast amount of the research funding that universities in the UK receive comes from the EU. Either directly (often to fund “blue sky” research) or indirectly through various schemes aimed at promoting business development via research. And a lot of our student finance is provided by foreign students (only 11% of students but about 30% of finance for teaching), either from the EU or beyond, which effectively helps subsidise the costs for UK students.

For example, a number of the research projects I’ve worked on have been funded under FP7. This grants money for collaborative research projects across the EU involving universities and businesses. Another research fund I’ve supported, provides direct research support to SME’s. Essentially the EU provides seed money which is matched by businesses and we lecturers provide our time to do the heavy lifting as far as lab work or research activities. It’s sort of a win, win for everybody.

And we are not talking small change here. The succession fund to FP7 for example, Horizon 2020 will dole out some 80 billion euro’s, mostly to academic institutions between now and 2020. Noting that UK universities have been one of the largest net receivers of FP7 cash.

Therefore, if the UK left the EU we would literally be going downstairs to the labs, locking the doors to many of them, and sacking most of our research staff and lab technicians. And keep in mind the universities that would take the biggest hit would be the elite research led universities, notably those in the Russell Group. While I suspect many would survive (most have a substantial endowment fund to rely on), some probably would be forced into radical reorganisation. Inevitably there will be mergers and even closures, with a knock on effect on the local area.

This of course would mean less university places and at higher rates of student fees. Already there is muttering (as a result of recent Tory antics against migrants, which has reduced foreign student numbers) that student fees will have to go up again. In short, the clock will go back 40 years and university education, crucial to getting a well-paid job in the UK, will once again become the preserve of the well off, educated in private schools.

And it won’t just be tens of thousands of unemployed researchers but this would have a knock on effect on the private sector too. As this conference I mentioned shows, the UK, like many EU states has been very successful in “reshoring” of high tech manufacturing technology over recent years. Indeed there seems to be a singularity forming between new manufacturing technologies (such as 3D printing) and topology optimisation with computer simulations, offering the possibility to design lightweight less resource intensive components.

However a lot of these companies are only here because they can access a well-educated labour market and to take advantage of research opportunities with the UK’s universities. Pull the EU rug from out underneath these companies and you’ll be burning an entire generation of innovators, entrepreneurs and engineers, who will avoid the UK like the plague from then on.

Indeed, there is history here. In my field of renewables you will often come across engineers from German or Chinese renewable companies, with North American accents. A little digging reveals they started out their career in the US or Canada, often on federally funded projects, only for the Bush and Harper administrations to pull the rug out from underneath them (for ideological rather than financial reasons). They subsequently left, got hired by a Chinese or German firm who are not profiting from these ideas, as the renewables business is now booming in many countries, even in the UK. So these German and Chinese profits are at the expense of research essentially paid for by the American and Canadian taxpayers!

This is why when the LSE suggests a 2.5 – 9.5% drop in UK GDP as the price paid for leaving the EU, I tend to believe the higher figure. The knock on effects, not all of which the LSE is probably capturing, will be significant. There will also be the fact that it’s sending out a message that the UK is not open for business. Can you see an Indian investor putting money into the UK if he gets the impression that the British are now so bigoted and xenophobic that they can’t get along with people twenty miles across the channel?

And of course the message from the Tories to many professionals (engineers, scientists, etc.) from the EU and beyond, will be that despite many years paying taxes in the UK, they will now not be entitled to benefits, or the NHS and will have to apply for a work permit to stay here. While some lazy BNP voting Chav, whose never worked a day in his life, will be entitled to such benefits? That is about as far removed from a traditional right wing ideology (or indeed any ideology that rewards hard work!) as you can possibly get.

About the only positive for the Tories is that many in the HEI and manufacturing sectors seem to be in denial. They cannot bring themselves to believe the Tories would be dumb enough to risk Brexit. But sooner or later the penny will drop, and the result is likely that many of the very people who traditionally vote Tory will realise that they cannot vote for them now.

Tory promises on tax cuts ain’t going to matter squat if you’re business folds as you won’t be earning anything to pay taxes with anyway! One can only hope the truth dawns on them before the next general election.

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4 thoughts on “The EU and trade

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