Brexit

Several readers are aware that your editor has been following the Brexit process for years. Hence, we have received several requests for a condensed report on Brexit as well as suggestions on how it will affect the bus industry. There already have been books written on Brexit so that trying to condense it into a thumbnail version will be difficult. In addition, since so much politics are involved, and there are so many sides to some of the issues, I have labeled this as “Editorial” since we are aware that there are many other opinions and views.

Geography

         A good place to start is with a little geography. The United Kingdom (UK) and Ireland are located on two islands west of Europe. Included in the United Kingdom are England, Scotland, Wales and Northern Ireland. The Island of Great Britain, located just west of the Netherlands, Belgium and France across the English channel has England on the south, Wales to the west and Scotland at the north. The neighboring Island of Ireland to the west is mainly the Republic of Ireland with Northern Ireland in the northeast corner. Up until 1922, both islands comprised the United Kingdom but Ireland broke away and became independent at that time.

Background

         The UK had as much difficulty getting into the European Union (EU) and Common Market as it has getting out. The UK applied to join the European Economic Community, the predecessor of the EU, in 1963 and in 1967 but were vetoed by France. After Charles de Gaulle was no longer the French president, the UK was finally able to join on January 1, 1973.

         To some extent the UK was somewhat of an uneasy member. On June 5, 1975, the UK voted on whether to remain in or leave the European Community and Common Market. This vote showed that 67 percent of the electorate wished to remain. In 1979, when the European Monetary System was created that led to developing the European Euro currency, the UK opted out. To this day the UK continues to use the Pound Sterling as its currency. It is the oldest currently in continuous use.

         In more recent years, there has been an increase in euroskepticism in the UK. Some people were unhappy with economic conditions and EU regulations. Under the EU, fishing boats from various EU member states were allowed to fish in UK waters. Several sources suggest that a major factor was EU immigrants that came to the UK because of its social programs and then did not assimilate.

         Things came to a head in 2016 when David Cameron and his conservatives won an overall majority in the 2015 UK election. They had made a commitment to hold a referendum on Britain’s involvement with the EU. Parliament complied by passing the necessary legislation for such a referendum. After several weeks of campaigning between the leavers and the remainers, voting took place on June 23, 2016. The result was that 52 percent of the electorate voted to leave the EU.

         In retrospect it might be suggested that the reason for this outcome was that neither the UK nor the EU had taken steps to appease the voters who were unhappy with the EU. Another influence undoubtedly was the nationalist movement spreading in several countries.

         For some, the result of the referendum was unexpected. Many of the UK elected officials had been on the remain side and were unhappy with the vote. There was talk of having another referendum in hope that the results would support remaining. But cooler heads eventually prevailed since a major decision like this could not brought up on a regular basis. However, things tended to move slowly in complying with the electorate and getting out of the EU.

         Eight months went by before Prime Minister Theresa May took action under Article 50 on March 29, 2017 to indicate the UK’s intention to leave the EU. This initially gave the UK and EU two years (until March 29, 2019) to come up with an exit deal. But, again, things seemed to be delayed.

         It was not until the early months of 2019 that Prime Minister Theresa May brought her suggested exit deal with the EU before Parliament. In spite of bending the law to bring it up three times, her deal with the EU was rejected by Parliament. As a result, the original deadline for Article 50 and departure were delayed twice.

         Having been unable to make any progress with Brexit, Theresa May decided to resign as Prime Minister in July of 2019. Boris Johnson, a leader in the Leave campaign, took over as Prime Minister and extended the deadline for leaving the EU to January 31, 2020. Johnson called for an early general election in December where Johnson and his conservative Tory party won a majority of 80 seats in what was obviously a landslide and a mandate to get Brexit done.

         I might interject that the flamboyant Boris Johnson had previously served as London’s mayor where he encouraged the traditional red double decker buses that began moving to hybrid and electric power. He also has a collection of model buses and an interest in transportation.

Two Major Problems

         The UK officially left the EU on January 31, 2020 with some people celebrating in the streets. For the next 11 months the UK would be in a transition period where it still followed EU rules but was negotiating for a following trade agreement with the EU. There seemed to be two major problem areas.

         The first of these problems is the only land border between the UK and other countries. This is the 310-mile border between Northern Ireland which is part of the UK, and Ireland, which is a member of the EU. In past years there have been conflicts in this area between the predominately Catholic residents of Ireland and the predominately Protestant residents of Northern Ireland. Various sources suggest that more than 3,000 died in what became known as “The Troubles.” While the hostilities ended with what became called the Good Friday agreement of 1998, there has been reluctance to reinstate a formal border here.

         What came about was a very awkward solution known as the backstop arrangement. A hard border would be eliminated by leaving Northern Ireland partially in the EU. The actual border would be the Irish Sea located between Northern Ireland and the other UK members of Scotland, Wales and England. None of the reporting I have seen talks about whether this kind of arrangement exists somewhere else. Among other things, it treats Northern Ireland differently than the other member states of the UK. At one point the UK Parliament discussed the possibility of rescinding this arrangement.

         The second major problem was the differences between the UK and EU in trying to work out a trade agreement following the split. The UK was adamant that they were leaving and wanted to be independent. The EU wanted to continue control in some areas. One EU concern was that the UK could subsidize certain industries to complete with similar EU industries. The EU wanted control over what the UK could support and what it could not. The UK, in turn, was faced with past inequalities, dealing with the pandemic, and a commitment to be independent. Another major stumbling block was that the EU wanted to control fishing in UK waters for EU fishing boats while the UK wanted to be independent and sovereign.

         There were also suggestions from various sources that the EU was not going to give the UK a good deal on a trade agreement. Doing so could prompt other of the 27 EU member states to consider following the UK in departing. Italy has been unhappy over the EU’s treatment of their pandemic problem, Poland had concerns over their court system and other EU members may be thinking of leaving.

         Hence, negotiations on the trade agreement with the EU were going down to the wire, December 31, 2020, when the UK would officially split with the EU. Lack of a trade agreement would require the UK and EU to operation on World Trade Organization rules. The UK was moving ahead with trade agreements with other countries.

         In a scenario not unlike a cliffhanging action movie, the two sides reached an agreement on Christmas Eve, 2020, only a week prior to the actual split date. This prompted a mad scramble among the 27 EU states and the UK’s Parliament to take action to ease the split on December 31, 2020. The expected end result would be that commerce would continue across the English Chanel between the UK and EU with minimum fuss. And, the awkward position of Northern Ireland would be substantially improved. In addition, since the UK was now independent, it was expected that they would develop trade agreements with other countries.

The Bus Industry

         How will Brexit impact the bus industry? I think that the best place to start out is by saying that bus operations in the UK, in Western Continental Europe and in the United States and Canada are substantially different. While all three have municipal bus operations, their long distance and suburban operations are different.

         Western Europe had good public transportation with railroads and hence their long distance bus service has been geared primarily to tours. It has only been in recent years that there has been an increase in scheduled long distance buses. Distances are short (it is only 1,000 miles from London to Rome) so passenger amenities take presidence over vehicle longevity. Western Europe also has the advantage of numerous service locations at reasonable distances. With city transit, Europe is more prone to use railroad stations as hubs and terminals for city and suburban services.

         The UK has even shorter distances. One joke that has a lot of truth is that you cannot drive more than a day east or west without getting your feet wet. Because of short distances, England is more likely to use body-on-chassis buses than Europe or the United States. As in Europe, the body-on-chassis coaches are fairly good quality. While they have retained some of their rail service, it has been privatized and may have bus competition. In addition, much of the public transit services in the UK have also been privatized.

         Bus service in the United States and Canada grew up around scheduled service and residual value has been important. Hence, American buses traditionally are higher quality integral with substantial longevity. Our city transit operations do not put as much effort into railroad station connections and hubs as they do in Europe.

         Based on my past experience, the major imports from the EU to the UK have been higher quality body-on-chassis and integral coaches used primarily for tours and heavy scheduled service. Scania coaches with Irizar bodies were very popular in England in the past. Van Hool offers coaches with right hand drive for the British market. Some of the other European builders also offer modifications for the UK operators.

         Because of the last-minute trade agreement, it would be expected that trade between the EU and UK will continue much as previously. This means that higher quality body-on-chassis and integral coaches will be sold by EU builders into the UK.

         What will probably change is increased trade between the UK and other countries. The UK has already been making its own trade deals with several other countries. This will probably be positive for Alexander Dennis, the affiliate of New Flyer and MCI. Alexander Dennis is most likely already the leading British bus exporter and Brexit will increase trade arrangements with other countries will most likely give them additional locations to sell their buses.             I might add that Brexit will probably bring the UK and United States closer for trade. I would not be surprised to see more UK products being exported to the United States in the future.

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