Thread by @EmporersNewC

1. Lord Bamford sent this letter to the Telegraph last year suggesting that businesses will adapt to trading on WTO term.

It has left me with a single question.

2. First off, he says that he took over from his father in 1975.

At 30 years old, without experience in any other type of company, Lord Anthony Bamford became chairman and managing director of JCB.

3. In that time he has he has taken JCB from a one-factory operation to a global business with 22 plants around the world employing over 15,000 people making over 300 different products.

4. The opening of an axle factory in 1978 was the start of a strategy to have full technological control of the JCB product range.

5. Following Ford Tractors foray into Indian production in 1970, Anthony Bamford invested in an Indian factory in 1979. This was also very successful and prompted other moves.

6. Although, JCB didn’t start a business alone in India. National regulatory barriers meant JCB needed to invest with another local company. Consequently, they teamed up with Escorts Group to sell under the name: Escorts JCB.

7. It was 2002 before JCB was able to buy out Escorts Group. JCB’s early experience of WTO terms, therefore, was a lack of investment coverage, and this unquestionably led to a suboptimal solution.

8. Despite an early bad experience of WTO terms, in his letter, Lord Bamford still argued that there is nothing to fear from the WTO option. He qualified his position in the letter using sentiments very similar to a speech he delivered in the House of Lords in 2016.

9. He goes on to explain how his company exports all around the world, and that importing from Australia on WTO terms is as natural as trading with Austria in the Single Market.

10. JCB now exports about 75% of what they make in the UK. Exporting to North America, South America, the Middle East, Africa, Asia, and mainland Europe, while importing goods and services from around the world.

11. Although, having extolled how easy WTO rules are, Lord Bamford forgets to mention that part of their international investment strategy was driven by the cost of freight and duties.

12. Regardless of this fact, he argued in the House of Lords, that for companies that export, tariffs and duties are part of how they do business each day.

13. Actually, this “two-way trading” may be how JCB do business, but Lord Bamford is incorrect, HMRC figures suggest that around 145,000 companies only export to EU.

Tariffs are alien concepts to those companies.

14. Even if a company trades with countries covered by free trade agreement, the Rules of Origin are often too complicated or costly to accommodate, that the opportunities of tariff free trade are ignored.

15. In his Lords speech, Anthony Bamford went on to say that tariffs were part and parcel of doing business with Europe before we entered the common market, and currency fluctuations are more of an issue.

16. The first part is almost correct, people did trade on tariffs successfully, but equally a number of companies either established presence in the EEC, or just moved their whole business there.

17. The effect of currency fluctuations is, however, inarguably correct. To cope with this JCB has previously invested £120 million on global manufacturing over 3 years and increased their sourcing of components.

18. Lord Bamford then went on to suggest that the Single Market doesn’t create a ‘level playing field’ because they must meet national regulations.

19. This amounts to arguing that additional transaction costs are expensive. His company may not benefit from the Single Market which seeks to reduce these, but others do.

Unfortunately, the understanding within JCB of this fact seems to be incredibly limited.

20. He further qualified his overall position that WTO rules will be fine in the House of Lords by referring to a Civitas report suggesting that the UK loses out more than the EU.

21. The report in question suggested that Agriculture and Vehicles will be hit most.

Lord Bamford is making a political argument, rather than a business one.

22. Because, if agriculture is hit, then JCB’s customers are affected on both sides of the channel in one of JCBs largest markets.

Who is “most affected” is irrelevant as far as JCB should be concerned.

23. Equally, if vehicles are mostly hit, then that means that it will have a negative on JCB suppliers. Again, who is “most affected” is totally irrelevant in the context of his business.

24. We also learn from Lord Bamford’s House of Lords speech that JCB will be hit with 4% tariff on certain equipment.

Construction equipment tariffs are generally low around the world, (I'm told).

25. That is good news for JCB, but tariffs will be higher for other businesses if we refer to the same cited Civitas report.

26. Having previously acknowledged financial damage in the case of no deal in the House of Lords, Lord Bamford writes something similar in his letter, before going on to say that businesses will adapt.

27. This was consistent with his position in the House of Lords. British businesses will take tariffs in their stride, he argued.

28. Ignoring the fact tariffs may not be the biggest problem with trading on WTO terms, JCB’s solution for tariffs was commercial presence.

The way Lord Bamford took Indian tariffs ‘in his stride’ is simply not available to every company.

29. Also, while Lord Bamford’s arguments centre mainly on tariffs, he doesn’t address what happens to the architect whose credentials are no longer recognised, or the lawyer who can’t sell services on the basis of freedom of establishment.

30. Furthermore, Lord Bamford concludes his letter stating that ports will adapt, but, for example, additional delays at a port could result in a company being unable to fulfil their orders. This may see those companies going out of business before those ports have adapted.

31. It also doesn’t take into account that trade facilitation comes at a cost. Costs which could increase in no deal beyond that of the 4% tariff JCB will be facing.

32. JCB, however, has had decades to adapt to trading on WTO rules. Without the rug being pulled out from under it.

33. As we’ve seen, the company spent 40 years ensuring they had technical control and establishing vertical integration.

34. They spent 14 years in a less than suitable partnership to overcome technical barriers.

35. WTO Tariffs, duties and currency fluctuations, led them to invest in other countries. Which has also helped their logistical issues.

36. They have also invested in increasing their international sourcing of components.

37. And all of that was done to facilitate the trade of products in a category that doesn’t generally face prohibitive tariffs.

38. JCB is a company that, by virtue of its product category and long term strategy, is probably better equipped to cope with WTO terms than any other company.

Even when faced with a restrictive UK immigration policy.

39. And barriers to one of the biggest markets in the world aren’t going to be a long term problem for a company whose strategy is to access markets from “major centres”.

40. So, in response to Lord Bamford writing that British businesses will adapt, the one question I have for him is:

“On the basis that your business took 40 years to adapt, how long do you think that will take?”

/End