The Brexit Column: Delivering your five a day? | KPMG | UK

The Brexit Column: Delivering your five a day

The Brexit Column: Delivering your five a day

Physical geography still matters, says KPMG in the UK Tax Partner - and geographer - Tim Sarson.

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Partner and Brexit Tax & Location Lead

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It’s fashionable to blame Brexit for all sorts of things, but even the most ardent Remainer would find it difficult to pin last month’s ‘Great Courgette Crisis’ on the EU referendum. Low stocks of fruit and veg in supermarkets had more to do with a cool spell over Southern Spain and Italy: a timely reminder that, even in today’s hyper-digital world, geography still plays a major role in meeting our basic needs.

The reason we can eat whatever we want, year-round, is because there are farmers in Murcia with the land, sunshine and polytunnels to grow them and an efficient motorway system to deliver them to the supermarket shelf. When the floods hit, we have few alternatives. Likewise, last month we choked under the same cloud of particulate pollution as our Belgian and Dutch neighbours.

Europe, like it or not, functions as a coherent geographical unit. It is blessed with estuaries and natural harbours, plains and protective mountain chains. In the maritime north west are fish, and hydrocarbons; in the south, olive oil, lettuces and holidays; along the Rhine delta, petrochemicals, and in the dead centre, precision engineering. There are cheap services in the east and expensive ones in London. Scattered liberally over the whole are cultural city breaks and stag and hen destinations, all within short haul range. 

Of course, global supply chains stretch further than the Continent. Britain imports textiles and prawns from South East Asia and sells everyone Scotch whisky and popular culture. But geography is a reality of value chains even in a globalised world. Just how sustainable is it to air-freight Peruvian asparagus into the UK, both financially and environmentally? If some supply chains end up disappearing, it’s likely to be the long haul ones. According to Google Maps, a delivery truck full of courgettes can make it from Murcia to London in the same time it takes just to get from Florida to New York. And let’s not forget the frequent geopolitical angle: witness those gas pipelines linking Europe to the vast Siberian reserves.

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Ties that bind

Two important conclusions arise from this. The first is hardly new: the near abroad matters. It’s a point referenced by Martin Wolf in a recent FT column, quoting the “iron law of trade models” that “trade between two countries approximately halves as distance between them doubles”. This doesn’t just apply to tangible goods: most financial investments in Jersey and Guernsey come from Britain and Northern Europe. The tech sector may seem borderless, but London’s fin-tech industry is there for a reason. 

British business cannot ever fully pivot away from its immediate neighbourhood. Recently, I have seen multinationals retreat slightly from completely global value chains towards regional models, with the UK often the European hub of choice. Time zone logic and air travel budgets usually demand it. We remain stuck fast to Europe, for better or worse.

The second point is less often made: Britain’s position in the temperate north west of Europe means we cannot be all things to all people. Ireland has long accepted this, but does the UK? Creating a trade border with the Continent brings things into sharp focus. There are certain sectors our climate, demographics and culture lend themselves to: pop music and costume dramas, service industries and commercial headquarters that rely on technology, skilled white collar labour and air connections. 

For other sectors, Britain is at the periphery. We will never be a European logistics hub, or olive oil exporter (climate change notwithstanding). The critical question for the government to address is how Britain can thrive as an industrial and engineering powerhouse, situated hundreds of kilometres and a sea away from Europe’s industrial heartland (stretching from Alsace in the west to Prague in the east). I don’t think anyone knows the answer, including Britain’s geographer prime minister. KPMG’s recent Rethink Manufacturing report explores some of the issues and opportunities.

It’s a challenge for government but also means companies considering their post-Brexit positioning should start by getting out an atlas. How and where they invest will depend at least partly on how far into the Atlantic our Brexit settlement pushes us.

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This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK. You can register for the email subscription list of this column and expert views from our Brexit leaders.

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