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Why JLR's China success is bad news for post-Brexit Britain

Even though it is now owned by Tata Motors from India, few brands are as recognisably British as Jaguar Land Rover (JLR). 
 
The fact that JLR increased its sales in China from £250 (€292) million in 2009-'10 to almost £8 (€9.3) billion in 2014-'15 therefore sounds exactly like the kind of success story that Britain needs right now. 
 
Here is one of the crown jewels of British industry, striking it rich in China – soon the biggest economy in the world. It is an example of how Britain not only will survive its break with the European Union, but will even prosper, post-Brexit, like never before. Who needs the stagnant EU single market if the fast-growing Chinese one is up for grabs?
 
But, as an investigation by Reuters shows, not only is that an overly optimistic presentation of the facts, the very case of JLR may point to a fundamental weakness of post-Brexit Britain.
 
As other British prime ministers before her, Theresa May likes to turn foreign visits into sales trips for British industry. With Brexit imminent, that instinct is even more urgent than before. But those high-profile deals often turn out to be less impressive than initially announced.
 
Since 2010, the total value of all deals to export British goods and services to China, often announced to coincide with prime-ministerial visits to Beijing, adds up to £36 (€42.2) billion. But, as Reuters has calculated, the total value of actual exports from those deals was less than £6 (€7) billion.
 
Offset against the bigger picture – Britain's growing trade deficit with China – and it becomes clear that isolated good-news trade agreements should be taken with a grain of salt. 
 
The same goes for individual company results like JLR's. The car manufacturer has indeed seen its Chinese operations grow and grow over the past few years. But the direct benefit of that growth to the British economy will be very small indeed. 
 
In fact, JLR's exports to China have dropped dramatically since late 2014, when it opened a manufacturing plant in the country. As Andy Goss, Global Sales Director at JLR told Reuters: "The authorities here want us to build cars in China. Like most governments around the world, they want employment in China and they want Chinese parts purchased for the cars".
 
As JLR's business in China is increasingly 'indigenised' – i.e. conducted with cars produced within China itself, this will have a serious impact on overall UK export figures to China. JLR's increased exports to China after 2008 alone generated 60% of the growth of UK exports to China. 
 
This almost certainly will impact overall UK export growth given the increase in JLRs exports generated 60% of the growth in UK goods exports to China since 2008.
 
As a result – and despite JLR's excellent results within China – the British trade deficit with China looks set to grow even larger than the £25 billion registered in 2015 (equivalent to more than 1% of Britain's GDP).
 
Image: Land Rover MENA, CC BY 2.0
08/02/2017  |  Frank Jacobs

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