A RM361b history lesson for the Brexit gang


Airbus SE has warned it will reconsider its British presence if the country crashes out of the European Union (EU) without a deal.

History is in danger of repeating itself here, with the UK once again failing to recognise where its best industrial interests lie. A British company once owned part of Airbus and sold out on the cheap. London is now threatening to double down on that calamitous bet.

The aircraft maker’s demand for clarity isn’t unreasonable. It has 14,000 workers in the UK and its suppliers employ several times that number. Those supply chains would grind to a halt if long customs checks were imposed at the British border. Its planes wouldn’t be able to leave the hangar unless suppliers were covered by the same safety and certification framework as the EU.

Yet, with nine months to go until Brexit becomes reality, the no-deal scenario remains an alarming possibility — a situation that was made clear this week by the failure of rebels in the ruling Conservative Party to secure a “meaningful vote” for law- makers on the eventual terms of Brexit.

Shockingly, some Brexiteer ministers appear perfectly happy to countenance no deal with Brussels, even though it would imperil the highly skilled manufacturing jobs they say they want to foster. While it would be expensive for Airbus to quit the UK, other countries are queuing up to prise away Britain’s aircraft wing work.

Brits are told their economic prospects will be brighter once they are freed from the shackles of an EU dominated by France and Germany, and the country is able to strike trade deals with the likes of the US and China. That’s always looked like wishful thinking; more so in view of who occupies the White House.

Indeed, Airbus itself offers a striking history lesson in why it’s foolish to ignore the riches on your doorstep (the EU accounts for about half of UK trade) in pursuit of unknown treasures further afield.

Until about a decade ago, Britain’s biggest defence manufacturer, BAE Systems plc, owned 20% of Airbus. In 2006, BAE elected to sell its holding for a modest £1.9 billion (RM10.1 billion) (then worth about US$2.8 billion [RM11.25 billion].) It argued that Airbus faced too many near-term challenges, including delays to the A380 superjumbo programme, which would place heavy demands on its cash.

Costly Mistake

Britain lost influence when BAE sold its Airbus stake. The plane business has flourished since.

BAE thought it could replace the income from Airbus with lucrative arms contracts in the US and else- where. Parts of the British establishment cheered on the move, characterising Airbus as a bloated European vanity project, riven by political interference from Berlin and Paris.

In fairness, they weren’t entirely wrong in that assessment. But shunning Airbus proved to be a big strategic and financial error — one that BAE later tried to correct via an unsuccessful attempt to merge with Airbus’ parent EADS in 2012.

A rush of international defence orders for BAE, not least in the US, soon fizzled out as military budgets were squeezed. Meanwhile, the Air- bus business amassed a trillion dollar orderbook, at list prices.

While Airbus still has its difficulties, not least a dearth of orders for the A380, its market value has swelled to some €77 billion (RM360.21 billion), three and half times bigger than that of BAE. France, Germany and Spain are still Airbus shareholders and so have a seat at the table when big investment decisions are made. Britain’s influence over Boeing Co’s one big rival has diminished.

The UK thumbed its nose at Airbus once and regretted it. Doing so twice would be pure folly. — Bloomberg

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