The supermarket chain Lidl has twice bet heavily that the United Kingdom would pay an economic price for reducing its integration with Europe. When the UK dropped out of the Exchange Rate Mechanism in 1992, the discount supermarket chain targeted British consumers, expecting that the following years would see incomes squeezed, creating a much larger market for Lidl than had existed beforehand. It located sites and the first British branches of Lidl opened in 1994: the first, it hoped, of many, many more.
Lidl was wrong: the UK’s exit out of the ERM helped pave the way for more than a decade of continuous expansion and low inflation. The chain’s 1994 stores were not followed by wave after wave of new openings, instead remaining confined to a handful of places on the British high street.
In 2016, it repeated the gamble, betting that the United Kingdom’s Brexit vote would create new opportunities for discount supermarkets. So far, that bet is paying off better than in 1992 – Lidl achieved its highest ever share of the British market last year and was the fastest-growing bricks and mortar store over the Christmas period. Uncertainty over Brexit and the downward pressure on the value of the pound squeezed incomes in real terms: the perfect economic conditions for a discount supermarket.
This illustrates why a company’s decision to invest or not invest in the United Kingdom isn’t, in of itself, a sign that Brexit is going well or badly. Lidl is investing in the United Kingdom, but it is betting against the UK’s overall economic prosperity. While no one will say so publicly, government ministers, particularly those in charge of spending departments, will hope that by the end of the decade, there are many more branches of Waitrose in the UK than there are Lidl – and that the discount chain’s bet against Brexit goes down as another ERM-style failure.
Leaked contingency plans by the car manufacturer Nissan, obtained by the FT, tell a similar story. Under one set of proposals made by the car giant, in the event of a Brexit deal that takes the UK out of the single market for goods, Nissan would close its factories within the EU and instead concentrate its operations within Europe solely on the British market, seeking to increase its share of the British market share from 5 per cent to a whopping 20 per cent. Nissan has denied that such plans exist, but they are worth discussing because they are both a) plausible and b) reveal an essential truth about the UK after Brexit.
This decision wouldn’t represent a vote of confidence in the overall British economy. As was the case with Lidl, Nissan would be investing in the British economy while also betting heavily against its overall performance. The reason Nissan thinks it might be able to achieve a fivefold increase in market share is that it thinks other British-based car manufacturers will go to the wall – and that the cost of buying a car manufactured outside of the UK will be beyond the means of most British consumers.
Because most big businesses, rightly or wrongly, think that the UK will become poorer as a result of Brexit, most of the companies that will announce or contemplate plans to invest in the UK will, when you look below the headlines, be making plans that envisage a poorer country than its immediate neighbours – or than the UK would have been had it stayed in the EU.
Are they right? Well, at this stage, it is honestly anyone’s guess. But it’s a neat illustration of the paradox of this stage of the Brexit process: that, for the most part, while the government and its media boosters will cheer every hint of further investment in the UK, a successful Brexit will be one in which most of the companies planning to invest big in post-Brexit Britain lose out.