Tesla won’t be the last company to invest in Germany over Britain because of Brexit

It makes economic sense for the electric-car pioneer to build its new Gigafactory near Berlin, not Birmingham, writes Ben Chapman

‘Too risky’ was how Tesla’s enigmatic founder Elon Musk described the prospect of spending billions of pounds on a state-of-the-art battery factory here (Reuters)

Forget catastrophic Brexit scenarios of 30-mile-long lorry queues and piles of fresh fruit rotting at the border while Britons feed their children from stockpiled tins of corned beef.

The more sober, long-term reality facing the UK as it leaves the EU is likely to be a steady stream of decisions like the one announced on Tuesday by Tesla.

Elon Musk’s electric car company is to build its vast new “Gigafactory” in Berlin and not Britain.

“Too risky” was how Tesla’s enigmatic founder Elon Musk described the prospect of spending billions of pounds on a state-of-the-art battery factory in the UK.

What’s most concerning about Tesla’s move, though, is that it is far from unique. Even carmakers which are already heavily invested in this country have, reluctantly, begun beating a retreat: Nissan, Honda, Ford to name three.

Banks too have shifted hundreds of jobs and more than a trillion euros of assets from London to Frankfurt, Paris, Dublin and other EU financial hubs. Goldman Sachs last year went ahead with plans to build a new office in London but its former chief executive Lloyd Blankfein said things could have been different if it had known earlier that Britain would soon be outside the EU.

Large investments are often the culmination of years of planning, due diligence and legal negotiation. Even the famously impulsive Musk had talked about building a research and development facility in the UK as far back as 2014. That too will now be built in Germany.

Of course, in each decision, there are many other factors at play beyond Brexit, and the UK still has many qualities attractive to firms looking to invest – a well-educated workforce, decent infrastructure and strong regulatory system, for example.

But so do other EU economies. Companies therefore, particularly exporters, face a simple question: Why build a factory on this side of the channel and risk paying tariffs and facing administrative barriers to trade with the EU’s 500 million consumers when you could set up shop on the other side and have free access?

Brexit’s supporters point to the fact that some of the investment risks which Musk and others point to is down to uncertainty about the precise form Brexit will take, not the act of leaving the EU itself. Therefore, once Brexit is “done” a flood of spending will be unleashed, the argument goes.

But Brexit will not be done soon, no matter how many times Boris Johnson parrots that he has an “oven-ready” deal.

Experts who have actually been involved in trade negotiations agree that a comprehensive free trade agreement could take years to negotiate and our relationship with the EU will remain in flux after that. It’s not because of “dither and delay” by parliament, it is because rules and regulations governing the trade of millions of different products and services happen to be quite complicated.

So, if there is one thing we can be certain of in these extremely uncertain times it is that Elon Musk will not be the last chief executive to announce that they’ve chosen Germany over Britain.