Another curious Brexit side effect. Companies may get grants to move jobs out of the UK…

Nestlé has announced that they are to axe 300 UK jobs and move Blue Riband biscuit production to Poland. More than likely this is about cost saving and has nothing to do with Brexit but it does introduce some interesting questions.

Under EU rules member countries are not allowed to give subsidies that encourage companies to move jobs from one member state to another. So in the Nestlé example, Poland could not give grants to  Nestlé. You can only grant aid new jobs. Obviously, this is to discourage companies from moving jobs from Western Europe to Eastern Europe where costs are cheaper.

But what happens when the UK leaves the EU, and it is no longer a member state? Well, then it is open season on Eurozone members poaching jobs from the UK. Suddenly the Chech Republic will say to Nissan, why not move your factory to our country? We make very well built Skodas we will have no problem making lovely shiny Nissans. Not only are salaries cheaper, but we will grant aid you, and as we are part of the Eurozone there will be no import tariffs on your products.

You can see where this is going. Queue flood of companies leaving the UK to chase grant money and cheaper wages in the Eurozone. Remember all those companies Invest NI pumped millions into? But then they vanished when the grants ran out?

There is another factor in all this. Many factories in the UK are already highly staffed by migrant labour. It does not take a business genius to think hold on if 30% of our workforce is Polish why don’t we just move the entire factory to Poland and cut our production costs and have a ready supply of cheap labour? Maybe a future reduction in migrant labour into the UK will give factories no choice but to move to the Eurozone.

This is already happening. I know one company in Belfast based in a so-called economic blackspot that has a large Eastern European workforce because they could not get local workers. This company has recently opened a factory in Poland. Now in their case, the primary reason for the Polish factory was to be closer to markets but with improved transport links across Europe how long before they decide to move all production?

Now the UK government will say that after the UK is unleashed from its EU shackles, they will be an economic powerhouse, but what exactly does this mean? In simple terms to compete costs will need to come down. This means lower wages, longer hours and cuts in job benefits. What a bright new dawn awaits us ?