Nissan is an early sign of the downturns and the divisions Brexit could bring

Will Hutton in The Guardian

One of the few advantages of Brexit is that the unfolding debacle may be the trigger for the deep economic, political and constitutional reform that Britain so badly needs. It will only be by living through the searing events ahead that people will become convinced that the indulgent Eurosceptic untruths they have been fed are not only economically disastrous but open the way to forms of racism that most Britons, Leave voters included, instinctively find repellent. Brexit will force home some brutal realities.

Leave voters in Sunderland – 61% in favour – will have woken up on Friday to the news that Renault Nissan, the largest car plant in Europe and a crucial pillar of the local economy, employing 7,000 people, has deferred all new investment until the details of Brexit are clear. The chief executive, Carlos Ghosn, explained that it was not because the company did not value its Sunderland plant, its most efficient. Rather, as a major exporter to the EU, its profitability depends on the prevailing tariff regime, which promises to change sharply for the worse. “Important investment decisions,” he said, “would not be made in the dark.”

It is hard to fault Ghosn’s reasoning. Gaining control of EU immigration is both a matter of personal conviction and a political necessity for Theresa May. But how can that be squared with ongoing membership of the customs union that defines the single market and which requires acceptance of free movement? Concessions can only be minimal without wrecking the EU’s core structures. Moreover, the Tory hard Brexiters, wedded to the notion of a clean break from an EU they detest, are in the political ascendancy.

One senior official tells me that a hard Brexit is inevitable: the best that can be hoped for is perhaps some agreement on the movement of skilled people, but beyond that the future is trading on the terms organised by the World Trade Organisation.

If so, Renault Nissan will face up to 10% tariffs on the cars it ships to the EU. Unless the UK government is prepared to compensate it, a bill that could top £350m a year, it cannot make new investments. The Sunderland economy will be devastated. The same is true for the entire UK car industry. Last Wednesday,Jaguar Land Rover made similar remarks: if the position had been more explicit and fairly reported rather than airily dismissed as Project Fear, the wafer-thin 3,800 majority for Leave in Birmingham might have switched their vote.

Every part of our economy involved in selling into Europe will be affected both by the rise in tariffs and by the new necessity to guarantee that our products and services meet EU regulatory standards, the so-called passport. This doesn’t only apply to the City where 5,500 UK registered firms turn out to hold the invaluable passport, but to tens of thousand of companies across the economy.

The Brexiters insist the losses will be more than compensated for by the wave of trade deals now open to be signed, but trade deals take many years to negotiate. More crucially, there is no free-trade world out there; rather, there is a series of painstakingly constructed, reciprocal entries to markets, the biggest of which we are now abandoning. Liam Fox is delusional, as former business minister, Anna Soubry, declares, to pretend otherwise.

Nor do hard Brexiters confront the fact that alongside China and the US, Britain has accumulated a stunning $1tn-plus stock of foreign direct investment. Nearly 500 multinationals have regional or global headquarters here, more than twice the rest of Europe combined. They are here to take advantage of our ultra pro-business environment – so much for the Eurosceptic babble about being stifled by Brussels – and trade freely with the EU. Britain was becoming a combination of New York and California, with a whole continental hinterland in which to trade. Hard Brexit kills all that stone dead and puts phantoms in its place.

The years ahead will be ones of economic dislocation and stagnation. But the impact goes well beyond the economic. Hard Brexit legitimises anti-foreigner and anti-immigrant sentiment. When Britain’s flag outside the EU institutions is brought down and Messrs Farage, Davis, Johnson, Redwood, Fox et al delightedly hail the sovereignty and supremacy of Britishness, it could signal a new round of street-baiting of anybody who does not look and sound British: expect more attacks on Poles and Czechs from Essex to Yorkshire.

Politicians of right and left are fighting shy of delivering the condemnation this deserves. Rachel Reeves’s remarks at the Labour fringe, warning of a social explosion if immigration were not immediately curbed, show how far the permissible discourse on immigration and race has changed. Britain has moved over the past 50 years from being one of the most equal countries in Europe to the most unequal. The result is rising social tension, with immigration the tinder for enmity and hate. The hard-working immigrants who add so much vitality and energy to our society are blamed for ills that have deeper roots. Brexit has made this harder to say.

This conjunction of the economically and socially noxious horrifies not only me but also many Tories. Scotland’s Ruth Davidson, a bevy of ex-ministers, some in the cabinet and a large number of backbenchers are keenly aware of the slippery racist, culturally regressive and economically calamitous course their Brexiter colleagues are set on and are ready to fight for the soul of their party. George Osborne is positioning himself as their leader. It is an impending civil war, mirroring parallel feelings in the country at large.

Beyond that, the referendum raised profound constitutional questions. In other democracies, treaty and constitutional changes require at least 60% majorities in either the legislature or in a referendum. Britain’s unwritten constitution offers no such rules: a parliamentary majority confers monarchial power so a referendum can be called without any such framing. Article 50 is to be invoked without a parliamentary vote: a change of government in effect without a general election.

In good times, the constitution interests only obsessives. Suddenly, Britain’s constitutional vacuity is part of a deep national crisis. The economic and political structures, along with the biased media, that delivered this are rotten. The question is whether the will – and political coalitions – can be built to reform them. If not, Britain is sliding towards nasty, sectarian decline.