Ford have announced
the closure of the Transit van factory in Southampton. The last 500 jobs will
be lost from a plant that has produced over two million vans since 1972.
This was not a
surprise. A Belgian Ford factory is also to close as the vehicle maker can produce
far more cheaply elsewhere.
The closure reflects
the continuing decline of Britain’s comparative advantage in basic
manufacturing. Turkey will benefit as all production is transferred there.
The move illustrates one
of the important effects of specialisation and exchange. We know that
specialising allows more goods and services to be produced overall and through
trade everyone can consume more and so be better off.
While overall welfare
rises somebody bears a cost during the 'adjustment period'. This must occur as an
industry grows in one trading partner through specialisation another, somewhere else, must
decline. Where an industry declines workers lose their jobs and must seek new
ones.
Those who lose their
jobs are structurally unemployed. They are in need of retraining and because so
many are losing their jobs at the same time it may be difficult to clear the local
labour market for some time. The costs will fall particularly heavily on the
over 40’s who will find it most difficult to find work.
A point to consider is
why BMW (the Mini) and Honda are growing in the UK. Is it because of their
product?
