5. Statement by the Cabinet Secretary for Economy and Transport: The Recent Airbus Group Announcement

Part of the debate – in the Senedd at 3:25 pm on 26 June 2018.

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Photo of Ken Skates Ken Skates Labour 3:25, 26 June 2018

Diolch, Llywydd. I am grateful for the opportunity to make this statement today. Last week, Airbus Group published its own risk assessment outlining the urgent threats to its business arising from the UK exiting the European Union without a withdrawal agreement. The risk assessment is deeply concerning; it identifies that should the UK leave the EU next year without a deal, and without any transition period, it would lead to severe disruption and interruption of UK production and would force Airbus to reconsider its investments in the UK and its long-term footprint in the country. Even with a transition period, a hard Brexit that takes the UK out of the single market and customs union would make the company reassess its future plans.

As the First Minister said last week, this warning is of very serious concern to the Welsh economy. Companies such as Airbus are now actively making plans based on the worst-case scenario. What businesses have been saying in private for some time is now being said publicly, and it is clear that they are losing faith in the UK Government’s ability to negotiate a sensible outcome that works for our economy and that protects jobs. My message to the UK Government is a very simple and very clear one: the situation is now critical and it is time for them to recognise the fundamental threat their approach to Brexit poses for Wales, for our economy and for our communities. It is time to rule out a 'no deal' scenario and relaunch the negotiations on a basis that puts jobs and the economy first.

We share the significant concerns expressed by the chief operating officer of Airbus commercial aircraft, Tom Williams, last week. Airbus Group is the largest employer in Wales in the aerospace and defence sector with around 6,500 individuals employed at its site in Broughton and a further 500 or so in Newport. Across the UK, over 100,000 jobs rely on the Airbus presence on these shores. Since the referendum in 2016, the Welsh Government has been very clear that in leaving the European Union, the UK cannot take the huge risk of cutting our economy adrift from the single market and customs union arrangements. We have made the case, clearly and consistently, that any deal to leave the EU must see us stay in the single market and negotiate a new customs union with the EU.

This warning by Airbus, alongside others given by manufacturers such as BMW, make real the threat we face. Indeed, the concerns expressed by Airbus are certainly not confined to the aerospace industry. Just today, the Society of Motor Manufacturers and Traders, which is the voice of the automotive industry in the UK, has given the UK Government the starkest warning yet from a business sector, saying that it needs, as a minimum, to remain in the customs union and a deal that delivers single-market benefits. Their chief executive, Michael Hawes, has sent the simple but clear warning to the UK Government:

'There is no Brexit dividend for our industry'.

The stakes could not be higher. It is clear that the time for warm words and for meaningless platitudes is over. Clarity is now urgently required from the UK Government. The detail the UK Government needs to come forward with needs to address the three key issues raised in the Airbus risk assessment: the movement of parts within an integrated supply chain, the movement of people, and future regulatory environment. The possible disruption to the flow of materials caused by changes to the customs union and single market could have a negative impact running into many billions of pounds, leading to irrecoverable delays and many of our businesses in Wales losing their competitive edge. Restriction of the movement of people would cause major disruption to Airbus operations, with 1,300 Airbus-employed UK nationals working in EU members states—the majority being in France and Germany—and 600 Airbus-employed EU nationals working at Airbus operations in the UK. The third key issue relates to regulations and the European Aviation Safety Agency in particular. Without EASA approval, UK aerospace suppliers will no longer be part of the aircraft manufacturing supply chain. And supply chains cannot simply be switched on and off again like a light switch. They take years to build, and businesses have a right to expect more certainty from the UK Government two years on from the referendum.

The First Minister has pressed again for the UK Government’s White Paper to signal a change of direction to commit to staying inside the single market and a customs union with the EU. We all recognise the importance of the aerospace and defence sector to the Welsh economy. The sector in Wales adds £5 billion to our gross value added and employs over 20,000 people. We will continue to support Airbus at Broughton and Newport to mitigate the impact of the approach being taken by the UK Government. We've already shown our support for the sector through our financing of the Advanced Manufacturing Research Institute at Deeside, worth £20 million, in order to secure the prototypes of Airbus’s wing of tomorrow.

We urge the UK Government to respond and to provide clarity as soon as possible, and before this situation escalates even further. Prolonged uncertainty would do irrevocable damage to our manufacturing base in Wales and its extensive supply chain—employment that in Broughton, and across Wales, is the lifeblood of many communities. This is the most serious economic threat facing Wales in a generation. Airbus is a jewel in the crown of the Welsh economy, but it is also strategically vital to the United Kingdom. It's time for the Brexit parlour games to end. It's time for the UK Government to give business and our economy the certainty that it needs.