CABINET SPLITS ABOUT BREXIT

The papers are full of talk of a split in cabinet between those who want a hard Brexit and others, a majority apparently, led by Phillip Hammond who think that retaining tariff free access to the single market is a red line issue.  A meeting of the cabinet is taking place at Chequers today where the basic approach is being thrashed out.

The Telegraph on Sunday claimed that we will keep access to the single market for financial services and the car industry but we will be able to curb immigration (HERE).  This is exactly the kind of cherry picking that EU leaders have repeatedly warned against with the German Economics minister Sigmar Gabriel only this weekend (HERE) saying, “If we organise Brexit in the wrong way, then we’ll be in deep trouble, so now we need to make sure that we don’t allow Britain to keep the nice things, so to speak, related to Europe while taking no responsibility,” 

I would be amazed if the EU allow us access for financial services while giving us the right to exclude people we don't want.  An opinion piece in The guardian says the EU are going to make sure Brexit hurts (HERE).

The Independent (HERE) is reporting a major US hedge fund is investing in property in Germany, Ireland, France and Holland.  As usual it's the money that talks.

HOW PAUL MASON SEES IT

Paul Mason the former Newsnight economics editor and prominent left winger has written a thoughtful piece in The Guardian (HERE) about how the cabinet is split and also how the EU might "shaft" us as he puts it.

He says we should ask for EEA membership with some sort of time-limited control on immigration as the only concession demanded and make a statement in Parliament that rules out the UK leaving the single market. This would at least allow our car and financial services sector to continue producing the exports and tax revenues we need.  He says:

"May wants to serve a full term. But both logic and principle dictate that were she to give in to the “clean break” brigade within the cabinet, she would have to schedule an election and fight for a mandate to lead Britain into this particularly stupid form of economic suicide".

I think he may be right. If a majority of the cabinet think the loss of the single market access must be avoided at all costs, they may choose to resign and with a small majority an election may be the only answer and then - who knows what might happen?

CALAIS CAMP LOOKS INCREASINGLY PROBLEMATIC

Both candidates in next year's French presidential election have voiced concerns about the migrant camp in Calais and have proposed renegotiating the agreement. Nicholas Sarkozy has suggested the camp should be relocated to the UK (HERE) and (HERE).

Brexiteers seem to think this isn't going to happen but I would bet on it.  Why would France put themselves through the kind of thing that is happening around Calais when we have just snubbed the EU project that is so close to their heart?  I don't think we can expect much fraternity in future.

ANDREW SENTANCE SAYS STOP OBSESSING

Andrew Sentance the former member of the BoE monetary policy committee says we need to stop obsessing about short term economic effects (HERE).  The Brexit driven impacts on our economy will take a long time to feed through and it will take decades for the full effects to be seen.

This is I think probably the wisest intervention since June 23rd.

GOD SAYS BREXIT WILL TAKE YEARS AND YEARS AND MAY NEVER HAPPEN

Gus O'Donnel, also known as god says in the FT that Brexit will take years and years (HERE) to finally extricate ourselves from the EU and by the time it happens they may have arrived at a looser arrangement that the UK is happy with and we may decide not to leave anyway.

He suggests we will probably leave most EU based laws the same so joining would be relatively straightforward.

Another article that I read this week suggested it may not be until 2035 that we actually have a finished agreement and all the dust has settled so Mr O'Donnel may well be right.

The BBC has also run a piece (HERE) trying to explain how difficult Brexit is going to be and using as a basis for the story an article from the Centre for European Reform that this blog covered a couple of weeks ago (HERE).

FARAGE ATTENDS TRUMP RALLY

Nigel Farage has attended a Donald Trump rally in the US (HERE) and apparently told the audience that he wouldn't vote for Hilary Clinton if you paid him.  I don't think that should surprise us.

He also said Obama's intervention in the Brexit campaign didn't help David Cameron. Let us hope Farage's intervention on behalf of Trump has the same effect on Trump's campaign.

Him and Trump look like two cranks together on the same platform.

An article in the Guardian by Lucia Graves (HERE) says they are both playing the same game using bigotry and nationalism.  I think it also has more than a tinge of racism.  Someone said recently that the UK was becoming like Germany in the thirties with all of the nation's problems blamed on ethnic minorities or now the EU.  A UN report (HERE) blames UK politicians (Farage mainly I think) for a spike in hate crimes in the UK after the vote.

Farage is like Trump a demolisher, not a builder. It takes real intellectual strength to build something but just hate and anger to destroy it and that is all they have.

CAR PRODUCTION UP IN JULY

The British car industry (or the car industry based in Britain) had its twelfth month of consecutive growth with production up 7.6% in July compared with 2015.  Year to date production grew 12.3% to 1,023.723 according to the BBC (HERE).

However, Stuart Apperley of Lloyds Bank Commercial Banking says that consumer demand for cars is "cooling".  Until we have a clearer picture of what our relationship with Europe is going to be we have no idea what damage will be done to the UK car industry by Brexit.

INFRASTRUCTURE SPENDING FALLS 20%

The Independent say infrastructure spending fell 23% in July compared to June and to July 2015 (HERE). 

Michael Dall, lead economist at Barbour ABI, said that the economic uncertainty following UK’s vote to leave the EU could be discouraging investors from spending on infrastructure projects.

“In the first full month since the vote to leave the European Union, the value of construction projects reaching contract award stage declined in July. This is unsurprising given the uncertainty in the economy,” Dall said.

I am not sure one month's figures show anything at all and they may rebound or even increase if the government decides a fiscal stimulus is needed in the way of public contracts.  But cancelling Hinckley Point may have the opposite effect.

THE POUND RECOVERS SOME LOST GROUND

Bloomberg (HERE) are reporting the pound hit a 3-week high yesterday, recovering some of the post Brexit vote losses as it got to about $1.325.  This was on the back of data showing export orders had posted their highest for two years, attributed to the earlier fall in sterling.

However, Bloomberg point out that it is still 11% down and the worst performer of the major currencies.

I think we can expect this. The economic hits will take time to impact us but we will almost certainly see the results next year and thereafter.

TEBBIT WORRIED ABOUT ANTI-BREXIT FORCES

Norman Tebbit has written an article for The Telegraph (HERE) warning that the "vast" forces of  the anti-brexit elite are regrouping.  I assume he means as opposed to the pro-brexit elite of which he is a prominent member.

One half suspects that Mr Tebbit and many others who seem concerned that Brexit is not going to happen are worried that people will not be able to recognise the bright, prosperous sunlit uplands that Brexiteers have promised and perhaps mistake it for an economic calamity. Surely once the £350m per week is flooding into the NHS and our balance of payments deficit turns into an embarrassingly large surplus through the myriad trade deals we will soon be signing, everyone will see the benefits?  Or perhaps he is worried that the scales will drop from leavers eyes?

AFTER BREXIT WE COULD BE - SOUTH KOREA?

A writer in The Guardian thinks we should emulate South Korea after Brexit (HERE). He holds the south Asian country up as an example for us to follow. It has a 50 million population and a land area of 100, 000 sq km - close to our 65 million and 130,000 sq km apparently. Unfortunately, it has a GDP about half of ours and an income per capita about 60% of the UK's.

I agree there are some thing about South Korea we could emulate - the industrial performance is excellent and they have many world class companies like Samsung and Hyundai  - chaebols or industrial conglomerates - that we might want to copy.  However, the writer doesn't explain why it's necessary to leave the EU to do it.

EU rules prevent state aid it's true but South Korea's success in the last half century or so is down to more than state aid alone.  There is no EU directive preventing us emulating Germany but we can't manage it.

As a follow up to this story, a letter in The Guardian (at the end of these letters HERE) by Troy Stangarone who is Senior Director at congressional affairs and trade, Korea Economic Institute, says South Korea is trying to emulate us, and if the writer (Christian Spurrier) "wants South Korea to be the model for the post-Brexit UK, perhaps he needs only to look to the pre-Brexit UK for the way forward".

EU SUMMIT OF BIG THREE - EXCLUDING UK

There is a summit this week in Ventotene, Italy where the first manifesto for a United Europe was drawn up at the end of the second world war by two Italian intellectuals (how I wish we still had some of them), Ernesto Rossi and Altiero Spinelli while imprisoned by the fascists.  The meeting is symbolic for two reasons, the location and the fact that there will only be three largest EU members Germany, France and Italy. We will be absent.

Buzzfeed report it HERE while the Guardian's take is HERE.

Buzzfeed say Europe is already moving on from Brexit and I think this sums it up for me.  They have given up on the UK and who can blame them.  

IDS URGES LEAVING AS SOON AS POSSIBLE

IDS is at it again (HERE). He wants the negotiations to start as soon as possible and by early next year at the latest.  I assume it all looks easy from the outside, especially if you believe, as he does, that we should leave the single market.  The moment of decision for Mrs May is coming soon.  Does she give in to the anti-Europeans like IDS and risk huge damage to our economy or allow The City and industry to continue in the single market as they would like. This might destroy the Conservative party.

LEAVING MORE EXPENSIVE THAN STAYING?

Christopher Booker at The Telegraph is suggesting that leaving could actually cost more than remaining in the EU (HERE), based on the net contribution at £12.9 Bn and the amount we have now confirmed we will continue to pay for farm subsidies, regional funding and research, plus £2 Bn we pay to 27 EU agencies that he says would cost us more to provide ourselves.

On top of this £11.2 Bn, he claims we owe the EU £5 Bn per year for spending commitments we are already signed up to until 2027.  So, overall we will be considerably worse off - at least until 2027 and this is without taking account of any economic hit.

BREXIT BOOM CLAIMS THE TELEGRAPH

The Telegraph has an article (HERE) based on five graphs which "show" we have "escaped an economic apocalypse".  This is two months after the vote and before we have even started the negotiation about what Brexit will actually mean.  I don't know what the writer was expecting on June 24th - a full scale economic meltdown with David Cameron declaring a state of emergency?

If all the engines of a Boeing 747 suddenly fail, it doesn't immediately plummet earthwards.  But if your fellow passenger tells you after a minute or two that all will be well, it doesn't mean he's right. Sooner or later you are going to hit the ground.

The same newspaper is joyfully reporting (HERE) the some economists are now forecasting a slight rosier outlook for 2016 and 2017 - but the increases are for 1.6% this year (up from 1.5%) and 0.7% next year (up from 0.5%).  The Brexit boom!!

BANKS STILL HOPE FOR FULL EU ACCESS AFTER BREXIT

According to Bloomberg (HERE), reports that banks in The City have given up hope of remaining in the single market are untrue and they still hope for a positive outcome.

"The banking sector unequivocally wants to maintain the current level of full access to the EU market, to ensure that businesses and customers across Europe can still be served by U.K.-based banks," British Bankers’ Association Chief Executive Officer Anthony Browne said in a statement.

Mr Browne makes the distinction between access and membership and seems to think we will remain in the EEA - but this means freedom of movement of people and for many leave voters this is a red line. Mrs May still has to square this circle.

WE MUST WAIT FOR ARMAGEDDON

The Guardian in the interests of balance presumably have given space for someone to claim that because what they call economic arnageddon hasn't happened (yet) everything is OK (HERE).  No one ever claimed armageddon would happen at all - just that we would be poorer than we otherwise would be.

The writer says it was project fear that has caused the problem or "put the wind up business" as he puts it resulting in a chilling of the economic outlook.  Now he says the government is engaged in project everything-is-ok to restore order.  He admits the UK has deep structural problems in or our of the EU but seems to think we should risk a big economic shock to cure them!

He claims Brexit has helped to make the government focus on these underlying problems but erecting barriers between yourself and the largest, richest market in the world does not seem a cure for anything. He voted leave because the EU is a failed project - but aren't all projects failures - until they succeed?

GIBRALTAR FACES EXISTENTIAL THREAT

The Independent are reporting the Chief Minister of Gibraltar saying it faces and existential threat if there is a hard Brexit (HERE) meaning if the UK negotiates a complete separation from the EU.

ARTICLE 50? NOT BEFORE END OF 2017 SAYS IAN MACSHANE

Dennis MacShane, the disgraced former Europe Minister has written an article for The Independent (HERE) suggesting Article 50 will not be triggered before the end of 2017 and quoting the new mayor of London Sadiq Khan that firing the starting gun at the beginning of next year when elections are due in Germany, France and The Netherlands is not a smart move.

President Hollande may not survive and the right wing challenger in France has already announced if elected he will move the border back to the UK - he will be popular in Calais.  Mrs Merkel has been German Chancellor for 12 years and may not want to continue.  Again, there is a rising right wing element in Germany that may influence who the next chancellor is.

So, it doesn't make sense to launch into the biggest post war negotiation we have ever been involved in when the partners with whom we are to negotiate may not even be in power within a few months.

BREXIT CENTRAL LAUNCHING IN SEPTEMBER

Fraser Nelson of The Spectator is clearly getting a bit unnerved by the action of various groups trying to upset the Brexit apple cart (HERE) and thinks it's time to defend Brexit from those he says are mounting an effective rearguard action.  He actually believes, "The vision of Brexit sold in the campaign was detailed, liberal, globally minded and massively popular. It’s time to start fighting for it once again". Detailed?  Really?  Mr Nelson would like to think he's clever but my mother would say he's as dim as a nightlight.

However, seemingly in response to Fraser Nelson's call. Jonathan Isaby of The Taxpayer's Alliance has announced (HERE) he is leaving to become editor of a website called Brexit Central, started by Matthew Elliot who was behind Leave's most egregious and misleading claims.  The objective is to “make the case for the clear, open version of Brexit that was described, and endorsed, at the referendum”

I think it shows that Leave never had any kind of post vote plan, not even to start a website to encourage the government to go through with Brexit.  It is only the response of remainers that has shown the war has not even started yet - the vote to leave was only the declaration and the first battles are months away yet.  I'll sign up to keep an eye on what they're doing.

IS THE ECONOMY DOING WELL OR NOT?

Matthew Lynn (see side bar) has written another piece for his Spectator blog (HERE) with the usual stuff about economists taking a battering rather then the economy.  This follows the first hard data out this week suggesting employment and retail sales held up post Brexit vote. He says the economy was doing fine before the vote (why did he urge us to leave then?) and there was no real reason to expect that to change.

However, he adds the usual caveat in the article that most forecasters still predict a recession in 2017 and this, he concedes, may still happen.  It doesn't seem to have occurred to him that we aren't there yet so the reputation of economists - unlike his own - is quite safe for now.

The Guardian (HERE) gives a more analytical view of the data out this week showing a mix of good and bad news but overall, as the ONS have admitted, it is still far too early to tell.  The oil tanker has changed course but we don't yet know if it's heading for a reef or the open sea.

IS THE CITY REALLY LOOKING FOR A SWISS STYLE DEAL?

Bloomberg are quoting the FT and saying a task force set up by The City has given up hope of the UK retaining tariff free access to the single market and is close to recommending to Mrs May that we adopt some kind of Swiss deal but I am not sure the EU would ever contemplate such a deal.

The Swiss model is highly complex with about a hundred separate but linked bilateral deals on different sectors.  It has cause a lot of headaches and I'm not convinced the EU would ever want to repeat it and not for a country the size of the UK.

Update:  The BBC are now reporting the same thing (HERE) so I assume it has some credence. It claims The City, after testing the waters, thinks tariff free access is never going to happen.

And InFacts (HERE) has picked this up and carefully explain why a Swiss style deal won't help, not least because it involves the free movement of people.

It increasingly seems likely we will be forced to accept WTO rules and banks in The City will have to move large parts of their operation to the EU with all the loss of revenue that entails.

PRO BREXIT TELEGRAPH SEEMS TO BE BACK PEDALLING

The other day I read an article about how incoherent Brexiters are.  They say there are no problems with the economy and then blame remainers for causing them (the problems that don't exist).  As if on cue, Tim Wallace at The Telegraph has a piece about Trump being a bigger threat to the global economy than Brexit (HERE).  It is a prime example of cognitive dissonance.

Firstly, the headline implies that Brexit is a threat to the global economy even if the author thinks Trump is a bigger one. But more than this, he claims that the earliest indicators after Brexit point to "robust growth", using a single article by his colleague Alastair Heath to bolster it.  Then in the next paragraph he says, "The vote has implications for the rest of the EU and for world trade, with the outcomes far from certain. A slowdown seems likely.

He follows this with, "The outcome of trade talks with the EU are far from certain, though there are clear risks. Britain will lose out if exports are subject to EU tariffs, while EU customers will suffer if they pay the tax. The market for services is more significant for the UK, as the City of London needs EU customers, and they need the City".

And, "Economically speaking, migration is a big positive. Extra resources mean more growth, and allowing workers to move to the best-paying jobs means more value is created, benefiting workers, employers and customers".

This is from a newspaper that heavily backed Brexit, waving away any possible risks and accusing anyone suggesting there was risk as a scaremonger.  Now Mr Wallace at least says immigration is a good thing and admitting The City needs EU customers.  It remains to be seen how much the EU needs The City.

THE END OF THE CAP - THE SQUABBLING BEGINS

In addition to all of the super complex negotiations that the UK is going to have to undertake with the EU in the coming years, there is a reminder of another side to the work the government will be involved in.  The Telegraph covers (HERE) a story on what will replace the CAP. Already there are differences of opinion on what the subsidy regime should look like.

I can foresee years of argument while a new scheme is worked out.  There will be winners as well as losers presumably since the only other option is to keep it as it is, in which case what did Brexit achieve for the farming community who voted to leave?  My bet is that afterwards no one will be happy.

GERMAN DEPUTY FOREIGN MINISTER SAYS UK SHOULD GET TAILOR MADE DEAL BUT FREEDOM OF MOVEMENT NOT NEGOTIABLE

The German deputy foreign minister (HERE) has suggested the UK should get a deal tailor made for us so we won't have to adopt something along the lines of Norway or Iceland. However he confirmed once again that freedom of movement of people is fundamental to the EU and we won't be allowed to cherry pick.

Another German official, who asked not to be identified discussing government deliberations, expressed frustration with a lack of signals from London and said the U.K. government may be underestimating the complexity of the talks that lie ahead.

BRICKMAKER CUTS OUTPUT IN UK

An Austrian company described as the world's largest brickmaker (HERE) has announced it is cutting production at its UK sites as the construction sector enters a recession.  However, over in what the leavers describe as the sclerotic EU there was growth in the number of single and two family homes being built.

Prosper like never before.

EVERY MAJOR BANK EXPECTS RECESSION

The Independent is reporting details of an index published by The Treasury (HERE) showing almost every major bank in the UK is forecasting lower growth and a recession.  Meanwhile over at The Telegraph, they are quoting an economist at Moody's the ratings agency as saying we will probably avoid recession although growth will be reduced (HERE).

The Telegraph is of course reporting this as if it was some kind of victory.

PETER BONE MP RELAXED ABOUT BREXIT DELAY

According to PoliticsHome, Peter Bone MP, the prominent Brexiteer is "pretty relaxed" about a possible delay in achieving Brexit (HERE).

He has insisted a delay in Britain’s withdrawal was unlikely since Mrs May would not want the run-up to the next general election “still clouded by Brexit”.

"If David Davis says it’s right we delay triggering Article 50 - because that’s his department - so be it,” he told PoliticsHome.  “But I have seen no indication of that and no reason to believe that is going to happen.”

He added: “I have absolute confidence in the Prime Minister, David Davis and [International Trade Secretary] Liam Fox that they will deliver Brexit, they will deliver it properly and they will deliver it on time.”

Absolute confidence the Brexit - whatever it is - will be delivered.  We'll remember this in 2019.

THE ROLE OF THE STATE ACCORDING TO SIR KEITH BURNETT

Sir Keith Burnett, Vice Chancellor at Sheffield University has written a piece for The Guardian (HERE) about the role of the state in bringing products to market. Not surprisingly, he thinks it should be a big one.  But he makes the usual fundamental error:

"Firstly, a progressive industrial strategy promotes innovation in new products and processes. We are pretty good at this. Then you need a system to accumulate money and land to build the factories that make the products. We are not so good at that"

No, we are not "pretty good" at innovation in new products and processes. This is the problem.  If companies were as good as he thinks there would be no difficulty in raising finance and expertise to bring products to the market.  Government would do a terrible job and spend a fortune helping to develop and promote completely unsaleable products. Let us not forget at some point very intelligent and well paid people stood around things like the Sinclair C5, the Austin Allegro and lots of other junk and proclaimed them world beaters. UK manufacturers simply cannot recognise dogs. Unfortunately, the consumer can and that's why we buy German and Japanese in such quantities.

TELEGRAPH NOW SAYS BREXIT WILL BE DIFFICULT!

The Telegraph seems to be starting to hedge its bets.  An article by Ben Wright (HERE) rehashes an old story from a couple of weeks ago by someone at the Centre for European studies suggesting Brexit was going to be very hard indeed.

About Brexit he says, "But it will be a long and intensely choreographed dance along a cliff edge. 

The hope is that international companies based in the UK – like, for example, foreign banks – will hang around to see whether the UK can pirouette along the precipice without mishap. The worry is that they won’t".

Whenever remainers raised this kind of stuff before June 23rd we were shouted down and called scaremongers. Has the penny finally dropped at The Telegraph?

INFLATION STARTS TO EDGE UPWARDS

The ONS released the latest inflation statistics yesterday and while CPI showed only a modest 0.1% increase in July up to 0.6% a Reuters article (HERE) concentrates on input prices to UK factories which rose to +4.3% in July after a 0.5% fall in June, the biggest rise in three years.

Import prices rose at the fastest rate since 2011.

Mike Prestwood, head of prices at the ONS said, "There was no obvious impact on today's consumer prices figures following the EU referendum results, though the Producer Prices Index suggests the fall in the exchange rate is beginning to push up import prices faced by manufacturers," 

PREDICTIONS AFTER SEVEN WEEKS TELEGRAPH

The Telegraph have an amazing article (HERE) where they examine how many of the Remain camp's warnings have actually come true after seven weeks and it seems to me they concede most of them have or are expected to.  But is there a word of regret?  No.

BANKS PLAN MOVE TO THE EU ALREADY

Bloomberg (HERE) say banks are privately already making plans to move jobs to Europe following discussions with government. They are said to be dismayed by the lack of any clear plan and are concerned that if they wait until our relationship with the EU becomes clear it will leave them at the back of the queue for discussions with regulators and other state authorities as well as problems securing the office space and infrastructure needed.

It looks like some are sceptical about what can be achieved:

"Bank executives are privately discouraged that seven weeks after the referendum, the ministers in charge of negotiating the best deal for the U.K. believe they can retain the benefits of being in the single market without accepting the free movement of EU citizens, the people said".

BREXIT WILL DAMAGE WAGES SAYS THINK TANK

Several sources are covering a report by The Resolution Foundation which details the potential effect of reducing net migration to tens of thousands. The Guardian (HERE) says that while wages of British workers might rise by 0.3-0.6% by 2018 this would be more than offset by the damage caused by Brexit with the report noting the BoE forecasting wages to fall by 2% in the same period.

The Huffington Post (HERE) says more or less the same thing, that Brexit will do more to damage wages than raise them.

Meanwhile The Daily Mail puts entirely the opposite spin on the headline (HERE) quoting the report as saying historically skilled workers wages have been reduced by 2.1% by mass immigration (which I assume is true) but only later in the article does it admit that Brexit will not help matters, saying, "However, [the report] said that while wages might rise by £150 if net migration was cut to the tens of thousands following Brexit, the extra earnings could be cancelled out by some of the other effects of leaving the European Union".

In other words the symptoms are not as bad as the cure The Daily Mail has been calling for!

BREXIT DELAYED?

Reuters are reporting comments by senior figures in The City (HERE) that Brexit might be delayed until late 2019 because they simply aren't in a position to trigger Article 50 before the end of 2017 and the situation in the departments charged with managing Brexit is "chaotic".

Government is of course denying this but it rings true given everything we know about the complexity of the task and the state of unpreparedness we were in on June 23rd.

SPECULATORS BETTING AGAINST THE POUND

Speculators are betting against sterling according to Bloomberg (HERE) as they wait for the first hard data on the economy, betting that the pound will go lower if the data on jobs and growth is poor.  This is always a bad sign.

FOX AND JOHNSON IN POLICY DIFFERENCES ALREADY

Liam Fox wants foreign trade policy to be separated out of the foreign office and given to his newly formed International Trade Department (HERE), a suggestion that Johnson has presumably leaked to The Telegraph where he was formerly employed.  This sort of empire building does not go down well with Theresa May apparently and is not likely to be implemented.

In the letter written by Fox he makes the same mistake that other ministers and economists make. 

DENMARK SPELLS IT OUT FOR BREXITEERS

The Danish foreign minister Kristian Jensen has told Bloomberg (HERE) that we shouldn't expect any favours in the forthcoming negotiations and that their objective is to do what is best for Denmark. I think this is an important point that I have made before, when we leave we will cease to be compatriots and will become competitors. Every country in the EU will be trying to help their businesses win orders in the UK as well as orders in our export markets and at the same time minimising the business we can access in their market.

And Denmark has usually been a close ally.

GOVERNMENT GUARANTEES EU FUNDING

Philip Hammond has promised to replace EU funding after we leave (HERE). This covers EU structural and investment fund projects that are signed before the Autumn Statement later this year and Horizon research funding granted before Brexit takes effect and farming subsidies will continue to be paid up until 2020.

What it doesn't say is what will happen after these guarantees end.

POUND UNDER PRESSURE AGAIN

Bloomberg report that the pound has regained the title of the world's worst performing currency in 2016 that it had temporarily lost to the Argentine peso recently (HERE).  Sterling's latest slump is attributed to the BoE's newly announced stimulus package.

Tonight the pound was trading at a new 52 week low of $1.29090 and €1.15680.

CONSTRUCTION SHRINKS IN JUNE

The ONS has suggested construction output fell by 0.7% in the second quarter to June as the BBC report (HERE).  The Guardian notes that construction also fell in the first quarter by 0.3% and is therefore in a technical recession (HERE).

Samuel Tombs from Pantheon Economics is quoted by the BBC as saying, "The downturn looks set to deepen in the third quarter. Meanwhile, Brexit negotiations will be protracted, so businesses will hold off committing to major capital expenditure for a long time to come,

"In addition, the public investment plans won't be reviewed until the Autumn Statement at the end of the year and few construction projects are genuinely 'shovel ready'. Accordingly, we continue to think that a slump in construction activity will play a key role in pushing the overall economy into recession over the coming quarters."

HOUSE PRICES DIP TO THREE YEAR LOW

According to the Royal Institute of Chartered Surveyors, the growth in house prices has fallen to a three year low (HERE) and a survey expects house prices over the next three months to fall. They say the amount of new buyers inquiries and the number of agreed sales continued to fall as the Brexit vote undermined UK consumers confidence and increased uncertainty about their finances and property values.

BREXIT PROBLEMS FOR THE MOD

The slump in the value of the pound may help some exporters but for the MOD it has been and will continue to be a disaster.  We spend apparently £10Bn a year with US defence companies and the bill will rise by about £700m per year simply because of the pounds weakness (HERE).

Lord West has said there wasn't enough money before the vote, now things will get even tighter. Prospering like never before.

THE PRU SAY THEY COULD MOVE M&G FUNDS TO THE EU

The Prudential have said they are considering moving their M&G fund management business to Ireland or Luxembourg following the referendum (HERE).

The chief executive of M&G, said the decision to move assets will depend on the outcome of UK’s negotiations with the EU. "What we are trying to do as a business is give ourselves options so we are in a position to react and adapt to whatever negotiations come through over the next year or so regarding Brexit," said Anne Richard.

THE BEGINNING OF INFLATIONARY PRESSURES

Some companies that import products into the UK are already starting to raise prices to counter the weaker pound.  According to Bloomberg (HERE) it includes Peugeot and Dell.  Others will follow and these numbers will find their way into the official inflation statistics and we will see a rise in the CPI.

The BoE will then be in a dilemma. Do they raise interest rates to combat inflation or keep the low to boost the ailing economy?  The last time we had stagflation (a combination of stagnation and inflation) was ironically I think in the 1970s and this partly was what we joined the EU to control.

CAN A TRADE DEAL REALLY BE NEGOTIATED IN TWO YEARS?

A former EU ambassador to the WTO has suggested a trade deal could be negotiated between the EU and the UK in two years (HERE) but mainly on the basis that the EU will offer no concessions whatsoever on the freedom of movement and after that there will be a need to act quickly to avoid protracted negotiations that aren't in anybody's interest.  Others take a more pessimistic view and think five years at least.

BREXITEER LOOKS FOR BREXIT WARNING U TURNS

In an amazing piece of chutzpah, Tom Goodenough at The Spectator (HERE) has written an article about what he calls "rowing back on project fear warnings".  I think this is intended as a counterweight to remainers asking for Vote Leave to be held to account for their ridiculously exaggerated claims.

I am not sure even the examples he has been able to find amount to "rowing back" but he is also asking other Brexiteers to send examples where they feel warnings about leaving the EU were over egged and those making them are now resiling from what they said before the vote.

This is a bit like the captain of the Titanic, after the collision with the iceberg, asking passengers to send him examples of water rushing out of the ship.  It may distract them from worrying about their fate but it isn't going to prevent the ship sinking.  We'll keep an eye on Mr Goodenough to see how many examples he comes up with - as all the warnings come true.

GREENLAND'S CAUTIONARY TALE

Bloomberg have spoken to the Danish politicians (HERE) who negotiated Greenland's exit from the EEC as it was then in the early 1980s. Their negotiation took three years but they were just 56,000 people and had one main issue, fish. The EEC was notably smaller, less complicated and Greenland was only a colony of Denmark rather than a full member and they had only six or seven years of lawmaking to undo, having joined in 1973 along with the UK and others.

THE TELEGRAPH NO LONGER IN DENIAL ABOUT THE ECONOMY BUT BLAMES IT ON REMAIN

The Telegraph, for so long one of the great cheerleaders of Brexit, suggested during the campaign that any warnings about the economy were scaremongering or part of project fear,  After the vote they thought everything would be rosy and in one notable recent column (HERE) actually claimed that world growth was surging making "a mockery of Brexit panic".

NISSAN'S LOOMING PROBLEM

For the man who thinks Nissan will never, ever leave Sunderland (HERE) there is an interesting article on the BBC website (HERE) about a decision to be taken later in 2017 or 2018 about the site where the new Qashqi is to be built.  Nissan apparently ask their plants to "bid" for new models and Sunderland will need to do so for the next model to be ready for production in 2020.

However, the UK will almost certainly not have clarified its relationship with the EU by then and therefore no one will know what tariffs might be imposed.  The article suggests Sunderland may have to assume tariffs wlll be imposed and this will make their bid uncompetitive against other Renault/Nissan plants in France and Spain.  If this happens Sunderland's future will look very bleak.

Mrs Thatcher personally persuaded Nissan to build the plant in the UK to export cars to Europe by pushing the single market access.  Sunderland repaid her by voting Labour in ever increasing numbers and now by voting to leave the EU. Talk about shooting yourself in the foot.

NEW IFS REPORT SPELLS OUT COST OF BREXIT

A new report from the IFS suggests the cost of Brexit could be 4% of GDP if we fail to negotiate a free trade agreement. It emphasises the difference between having access to the single market and membership of it and says that in all scenarios short of full membership we will be worse off.  The BBC report it HERE but you can read the full report HERE.

The IFS are probably the most respected and impartial financial organisation in the UK and perhaps even the world but no doubt Brexiteers will point to it being partly EU funded and say it must be biased.

CAN WE ACTUALLY LEAVE THE EU?

A solicitor has written a piece for the Evening Standard (HERE) about how deeply intertwined the UK and EU are.  Mr Allen-Green thinks the process of withdrawing is like a surgical operation to separate conjoined twins.

There are so many policy areas and laws where we are connected that he says it will take years and years to untangle over the next few years and all of it will have to be done on top of what the Government will be doing anyway running the country, in a period of budget cuts and spending freezes, and with a civil service that is 20 per cent smaller than in 2010.  He thinks it may not even be possible to leave - "The referendum may have given irresistible political force to the Leave side but membership of the EU may prove an immovable object. There is a contradiction, and nobody can predict how this contradiction can be resolved".

STURGEON IN MORE TALKS WITH GERMANY

Scottish First Minister Nicola Sturgeon said she held “constructive” talks with the German government as she seeks ways of keeping Scotland in the European Union even after the U.K. as a whole voted to leave (HERE).  We are moving inexorably closer to the break up of the United Kingdom.

FAISAL ISLAM IN SUNDERLAND

The Channel 4 reporter Faisal Islam has visited Sunderland and his report (HERE) in The Guardian makes stunning reading.  One woman voted to leave because of the £350m per week going to the NHA and seems genuinely shocked to learn this is a fantasy, even talking about hiring a bus to go and see Boris Johnson.

A man says Nissan will never, ever leave Sunderland because of the workers there.  I wish I had his certainty - no doubt the shipyard workers in the fifties felt the same about their jobs.  Someone else thinks the shipyards and coal mines will reopen!  A woman is expecting cheaper food, gas and oil.

This is in a region that is more dependent on EU funding than anywhere else in England, relies on exports to the EU more per capita than anywhere else and has the smallest proportion of non British residents.  Actually, Sunderland has the fastest shrinking population of any UK city with the figure dropping by 8% since the 1980s so they need immigration more than anywhere else.  It's an amazing article and well worth reading.

NIESR SAY ECONOMY SHRANK IN JULY

The NIESR has released research suggesting the economy shrank in July (Reuters HERE) by 0.2%. They looked at the three months to the end of July and concluded the economy grew by 0.3% but since this was a reduction on the 0.6% growth to the three months to June, the conclusion is that we shrank by 0.2% in July.

You can read the NIESR figures directly HERE.

NORWAY MAY BLOCK UK JOINING EFTA

One of the suggestions for a "soft" Brexit has been membership of EFTA, an organisation we were a founder of in 1960.  At present it includes Norway, Liechtenstein and Iceland. But now it seems Norway may not want us to be a member (HERE) and who can blame them?  

Norway’s European affairs minister, Elisabeth Vik Aspaker, reflecting a growing debate in the country following the Brexit vote in the UK, told the Aftenposten newspaper: “It’s not certain that it would be a good idea to let a big country into this organisation. It would shift the balance, which is not necessarily in Norway’s interests.”

I don't think this would stop us becoming a member of the EEA but this would require the unanimous agreement of all the 27 EU countries.

MANUFACTURING UP IN Q2 BUT TRADE GAP WIDENS IN JUNE

The ONS have released figures (HERE) for industrial output in Q2 and this shows a healthy increase of 2.1% but masks a declining figure over the quarter because April's growth rate alone was actually 2.3% so May and June must be lower and some recent surveys indicate growth has slowed significantly.

More worrying is the trade balance or current account balance. In June the figure for goods widened from £11.5 bn in May to £12.4 bn in June.  Taking services into account reduces the deficit to £5.1 bn but this is up from £4.2 in May.  The pound slumped again when these numbers were announced and currently (at 13:53 GMT) is trading at $1.29750.

If we are to succeed outside the EU we need to get our imports and exports closer to balance - preferably by increasing exports - but these figures do not provide any confidence we can do this anytime soon.  On the BBC, HSBC today predicts the pound could fall to $1.20 by the end of the year and $1.10 by the end of 2017 when it also expects the pound to hit parity against the euro. "The UK has a very large current account deficit. This structural weakness will come under immense pressure because of the forthcoming major political and economic changes. We find that sterling will need to fall further, and remain weak for a long time, in order to create significant improvements to the UK's structural position."

Tom Goodenough in a Spectator Blog post (HERE) thinks the trade gap is a good bargaining chip to persuade the EU to give us a good deal but HSBC do not seem so sure.

CHINESE TRADE FALLS AGAIN

One of the big claims made by the leave campaign is that we will be able to sign trade deals with other fast growing countries once we are free of the EU.  China is often given as an example of economies that the EU does not have a trade deal with.  Yesterday the BBC reported figures showing that exports from China fell in July by 4.4%, the twelfth month out of the last thirteen where exports from China fell (HERE). 

If there was a single indicator of how global trade is suffering at the moment it is this.  And just as we are about to launch ourselves into a flurry of trade deals across the world.

The BBC also note Chinese imports fell by 12.5%.

EUROPEAN HOLIDAYS MORE EXPENSIVE

The Daily Mirror is pointing to research showing a family enjoying the same European holiday this year as 2015 will have to find an extra £408 (HERE) due to the fall in value of sterling.

This morning the BBC (HERE) are reporting more retail spending figures showing an increase in July. This will no doubt be seized upon by Brexiteers as evidence all is well.  But the BoE has already said they expect retail sales in 2016 to be the same as forecast earlier in the year at +2.5%.  Retail spending will be more affected in 2017.

CONSERVATIVE PARTY MEMBERS WANT A HARD BREXIT

Conservative Home did a survey of party members (HERE) and found 69% want a hard Brexit rather than an EEA version like Norway.  This would wreak havoc on our economy, damaging manufacturing, services and the financial sector as well as making the UK a far less attractive place for foreign direct investment.

What it tells us is how utterly reckless and uninformed conservative party members actually are. Let us hope Mrs May ignores them.

NESTLE SAY THEY'RE IN THE UK "FOREVER"

The Telegraph (HERE) are reporting the CEO of Nestle saying that Brexit doesn't change the fact that Nestle are in the UK forever.  But this rather misses the point.  No one is suggesting that Nestle would close any plants here in the UK - at least not while they remain profitable.  But were Britain to leave the single market and trade on WTO terms there would be a tariff of around 30% on chocolates and confectionery.

I assume that KitKats made in York are exported to the EU at the moment but if tariffs are imposed Nestle might think it is better to produce for the EU market inside the EU. This might mean a factory in Poland for example, is opened and KitKat production begins there.  The York factory would continue to produce mainly for the home market and we would lose some or perhaps all of the exports.  And this would continue until (perhaps) Poland could produce KitKats at a price where the tariffs on UK imports are not enough and then the York plant might look a little shaky.

The CEO also makes the same point that I have made previously, that the EU gets blamed for a lot that is not their fault. He says,

"Too often [the EU is] abused by politicians who say whenever things go wrong nationally it is always the responsibility of Brussels. So somewhere Europe has to be closer to the people, transparent, simple, and also when governments say something, they have to do it".

PENSIONS DEFICIT RISES TO NEAR £1TRILLION

The fall in government gilt yields to record lows following the Brexit vote came about after the BoE actions on interest rates and QE.  In turn, because many pension funds are invested in gilts, the deficit in final salary (defined benefit) schemes has risen to £945Billion - a record.  The report is HERE.

I wonder how may leavers thought their pensions may be at risk when they cast their votes?

CONFLICTING REPORTS ON POST BREXIT CONFIDENCE

There are conflicting reports this morning about confidence.  Bloomberg (HERE) suggest consumer confidence as expressed in spending at Visa has barely been affected and has risen a little if anything but add at the end that the BoE believed that consumer spending would remain unchanged this year at an extra 2.5%.

Meanwhile, in Northern Ireland a report in The Independent (HERE) shows drop in business confidence with the number of new orders falling in July for the first time since April 2015.

TELEGRAPH REPORT THE CITY REJECTS A NORWAY OPTION

The Telegraph on Saturday (HERE) claims The Treasury is looking at options to quit the single market saying discussions indicate a willingness by The City to scrap the so-called passporting system.  However, the article seems to show the reality is a bit different.

First of all, The City of London's Corporation policy chief, Mr Boleat said the Norway option wouldn't control immigration and is therefore politically unacceptable - so The City have rejected it because they realise it can't be delivered. What the BBA (British Bankers Association) wants is for the UK to leave the single market but retain unimpeded access to EU markets. Good luck with that one.

Also, apparently what The Treasury wants to know is how many jobs would be lost if passporting is scrapped. If it's 5% of jobs this may be OK but if it gets to 30% or more then the loss of tax revenues would make it very difficult.  I am not surprised financial companies might consider scrapping the passporting system because they wouldn't lose, they would simply move to Frankfurt or Paris.  It would be the British taxpayer that would suffer. The article says top banks have already warned of the potential cost to the UK’s financial sector if the UK loses these rights. Barclays has said it would set up “alternative arrangements” in other EU countries, while Carolyn Fairbairn, the CBI director general, is pushing its case to remain in the single market.

BREXITEERS WILL HAVE TO ADOPT COMMUNIST TACTICS IN FUTURE

Nigel Adams our local MP (see right) who campaigned to leave the EU, speaking to The Selby Times on June 30th said:

"This is a bright new future for our country and our part of North Yorkshire. We've got a really prosperous future ahead of us".

However, the problem for Mr Adams is that the horizon is full of ominous clouds. Withdrawal from membership of the biggest, richest and closest market to us will not help us to prosper and in a year or two, when things have not gone well - no extra billions for the NHS for example - the 52% will become increasingly impatient. To maintain support for leaving is going to be difficult (and let us hope impossible) he and the other prominent leavers are going to have to adopt tactics last used by the Russian communists. 

The mantra will be to blame it all on the EU for their intransigence and to exhort people to be patient and work harder as the economy stalls and unemployment grows.  Then inflation will begin to eat into the value of pay packets.  Through this the Brexiteers will have to keep saying be patient, jam will be delayed until next year and then the year after and so on.  The communists managed to do this for over 70 years - my guess is that the Brexiteers have until the 2020 elections at most.  We will make sure people know who to blame.

THE BILL FOR WITHDRAWAL

BuzzFeed has an item (HERE) that claims because large infrastructure and other EU spending is spread over several years, even after we formally leave we will have to pay around 25 billion Euros as our contribution to programmes that we signed up to before the 23rd June vote.

It puts the total spending commitments at 217 billion Euros at the end of last year (see HERE) and citing a report in the German newspaper Handelsblatt, it says our part of the bill is 25 billion Euros. Something else to occupy our negotiators in those long winter nights.

DANIEL HANNAN AGAIN

Daniel Hannan has written a piece for The Spectator (HERE) claiming that after Brexit "Britain will be boss again".  He says the EU is different to every other international body in that "it presumes to legislate for its member states".

He talks as if Britain was under forced occupation by the EU.  To suggest it presumes to legislate for us is like saying Whitehall or the UK civil service presumes to legislate for us.  The EU commission (the civil service) acts under the direction of the European Council (Theresa May, Angela Merkel, etc) and laws are voted on the European Parliament (Mr Hannan among others).

PROFESSOR MINFORD SAYS WE SHOULD JUST WALK AWAY FROM THE EU - NOW

Professor Patrick Minford (HERE) is at it again. In the run up to the vote he suggested we should trade with the rest of the world without any tariffs at all although this, he admitted, "would mostly eliminate manufacturing" in the UK (HERE). He seems to think eliminating manufacturing is a "bump in the road" and he may be right but the millions of people employed in manufacturing may not be quite so gung ho about it.

Now he is again (HERE) advocating the same thing and says, "the main remaining task of Brexit policy is for the Ministry of Brexit under David Davis to withdraw us from the single market and take us to unilateral free trade, to reap these huge gains from eliminating EU protectionism and regulation".

He says, contrary to all the gloomy warnings, that everything is rosy, "The reality is that the situation of ordinary households today has never been better: real disposable incomes are rising at more than 3 per cent and employment levels are at a record. Credit is easily available; and the Bank of England yesterday made that easier still. The pound has dropped around 15 per cent, as it usually does when the UK hits a bump in the road".  So, there you have it.

SURVEY SHOWS BREXIT HAS STARTED TO HIT JOBS

In spite of earlier optimistic noises from one or two recruitment firms a new survey (HERE) involving 400 UK recruitment and employment agencies suggests the number of people securing a permanent position has fallen for two months in a row. The data suggests permanent placements in July fell at the sharpest rate since May 2009, with participants citing uncertainty caused by Brexit.

This is in marked contrast to Fraser Nelson (who accuses remainers of only picking bad economic news) in July quoting just one agency, Reed, as saying the jobs market is fluorishing (HERE).

NISSAN REASONABLY OPTIMISTIC OVER BREXIT

Nissan are said to be reasonably optimistic that the UK will be an important partner with the EU (HERE) and I think this is right. However, the headline on the BBC does not reveal the whole truth. Mr Ghosn, the CEO said that Nissan is not ready to make decisions on plans for its Sunderland plant, which employs 6,700 and investment there depends on the outcome of UK-EU talks on Brexit. 

He said: "The question is what will happen to customs, trade and circulation of products. That will determine how, and how much we will invest in the UK,"

The Independent has a slightly more pessimistic take (HERE) and claims that investment at Sunderland is on hold until our deal with the EU is clearer.

This only puts more pressure on the government to negotiate a Norway style agreement with the UK remaining in the EEA with freedom of movement and contributions to the EU budget.  Also, Norway is not in the customs union so is able to negotiate trade deals outside the EU but exports to the EU from Norway are subject to customs procedures and suppliers have to provide certificates of origin. Negotiating our own trade deals is a crucial element of Brexit so it's hard to see how Nissan will take to having to supply all this extra paperwork even if (and it's a big if) we manage to get tariff free access to the single market.

TRADE DEAL COULD TAKE TEN YEARS SAYS OPEN EUROPE

Bloomberg are reporting a piece by the Open Europe think tank (HERE) suggesting a trade deal would take up to ten years to negotiate and this is what we will have to have if freedom of movement is to come under UK control.

The EEA will not give Brexiteers what they want and will effectively relegate us to a satellite of Europe but, the report suggests it might be a suitable interim measure while we negotiated a trade deal with the EU and other countries. An EEA style relationship would allow us to do this.

BANK OF ENGLAND CUTS RATE AMID MORE GLOOM IN THE ECONOMY

In a further sign the authorities are becoming concerned about the state of the economy, the Bank of England today announced a cut in interest rate to 0.25%, the lowest on record (HERE) along with an increase of £60Bn in quantitative easing or printing money.  This is all in aid of avoiding the recession that the Brexiteers assures us we were not going to get.  It also cut next year's growth forecast by 1.5% - the biggest downgrade ever.

And Sean O'Grady (HERE) of The Independent has written another piece which is amazing in it's chutzpah (HERE).  He says he voted to leave and the record low interest rate is good for those with mortgages, which is true but only temporarily and when the cost of living rises and interest rates with it, they may not be quite as happy. But listen to this:

"I happen to think the Brexit campaigners were wrong not to fess up to the immediate harm a Leave vote would do to living standards and jobs".  And, "the Bank of England has downgraded its GDP growth forecast (but this was probably going to be downgraded in any case, ironically enough because of the continuing economic stresses in the Eurozone and slower growth globally)".

So the downgrade was going to happen anyway - nothing to do with Brexit! When remainers suggested that leaving would damage living standards and jobs they were shouted down and accused of being scaremongers. Now Mr O'Grady says Brexiteers should have been honest and admitted it was true.  It's a bit late for that.

AGRICULTURE COULD BE BADLY HIT BY BREXIT

I didn't realise until today just how much we relied on foreign workers to harvest fruit and vegetable crops.  The Guardian (HERE) has spoken to some large agricultural companies and they report that about 90% of British fruit and vegetables are picked and packed by about 60-70,000 migrant workers, mostly from eastern Europe.

These companies fear that it could mean the end of home grown fruit and vegetables unless some kind of permit scheme can be introduced.  Just one more complexity to be negotiated.

BRITAIN'S GLOBAL ROLE AFTER BREXIT - TWO VISIONS

Chatham House, the think tank, has an article (HERE) about two opposing views of Britain's global role after Brexit. One MP, Kwasi Kwarteng is cheerfully confident but Ian Bremmer a US political scientist is pessimistic. The author, while being even handed, also says negotiations with the EU are going to be very complicated, prolonged, and potentially fractious and could well bring most other strategic decision-making in London and Brussels to a standstill for years on end. 

The article says the Brexit vote has exposed a series of deep divisions in UK society – between young and old, rich and poor, and geographically: England and Wales voted Leave, while Scotland and Northern Ireland – as well as the ‘city state’ of London – voted very clearly for Remain. Brexit could well precipitate a new move to Scottish independence, followed by a surge in support for Irish unification.

SWISS WATCH

It will be interesting to keep an eye on Switzerland which has been in dispute with the EU since a 2014 referendum narrowly (50.3%) voted to curb immigration. Switzerland is not a member of the EU but has a series of bilateral agreements including one on the freedom of movement.  The EU are playing hardball and say if the Swiss want to opt out of one part, they must, through a guillotine clause, opt out of all the agreements and in effect resort to WTO rules.

This will have a massive impact on the Swiss economy. As InFacts says (HERE) The trade-off is clear: cutting immigration comes at the cost of access to the European single market. The economic price is too high to pay. But the political price for overturning the result could be higher still. Welcome to Switzerland – and possibly to Britain.

UK HAS "HUGE" ADVANTAGE AFTER BREXIT THINKS CAR BOSS

The CEO of Pendragon the car dealer that owns Evans Halshaw and Stratstone says (HERE) we will have a "huge, huge advantage" after leaving the EU and finalising a trade deal with them because, "We have knowledge of the terms of every trade deal the EU has as we are still part of that".

I am not sure it is an advantage at all because I can easily see details of every US trade deal simply by looking on the US government website (HERE).  And how does he think companies trade with other companies overseas if they don't know the details of their trade deals?  I think the CEO, Mr Finn is wrong. Trade deals are not secret and knowing what they are does not give us any advantage at all.

PMI INDEX SHOWS BIGGEST EVER FALL

Andrea Leadsom, Digby Jones, Douglas Carswell and many other Brexiteers told us that Brexit would have either no effect at all or just a tiny one. These people are not very bright. Today Markit confirmed the July Purchasing Manager's Index figure for the UK fell from 52.3 in June to 47.4 in July - the largest fall in the index since records started in 1998.

See the BBC (HERE) and  Reuters (HERE). Even the Telegraph is now carrying a headline on their live business blog;  Brexit fall out, Bank rate cut foregone conclusion after UK business activity shows biggest fall ever.

It looks like the experts and the remain campaign have been vindicated.  Meanwhile to add insult to injury figures on the EU show business growth picked up (HERE) with Germany leading the way. They apparently are not worried about Brexit.  Soon, Boris will not be able to tell us that Antarctica is the only continent growing more slowly that Europe.

LONDONS LEADING STATUS AT RISK WARNS LOBBYING GROUP

A lobbying group for the City of London called TheCityUk (HERE) has warned that access to the single market is vital if London is to maintain its leading position in Europe. They say access to tap the EU’s single market “under broadly similar conditions” is “of utmost importance”.

It is clear the EU is in the stronger position. While we import a lot of their goods and the UK is an important market it is obvious we will be damaged by erecting tariff and non-tariff barriers much more than the EU.  Controlling immigration, which will probably be falling anyway as the economy slows down, may have a very big price tag for The City and for HM Treasury.

UK STILL SEEKING INVESTMENT FROM ABROAD

A spokesman for the government has said they are still seeking investment from overseas (HERE) and this is to reassure investors after the EDF/China nuclear power station at Hinckley point was put on hold.  Of course, no one can be surprised that we still need foreign direct investment, the question however is will we get as much as we would have done if Brexit had not happened?

The answer must be no.  Companies thinking about investing here as a platform to export to the EU must at the very least be waiting to see what happens while some may be making other plans because they cannot wait for the uncertain outcome of future negotiations with no timescale for completion. 

NEW FORECAST SHOWS ECONOMY SLOWING SHARPLY

The National Institute for Economic and Social Research (NIESR) has released their August report and gets a lot of coverage at the BBC (HERE), The Guardian (HERE) and Reuters (HERE).  It does not make happy reading and suggests the economy will shrink by 0.2% this quarter and be flat for the rest of the year.  We may avoid a technical recession but the chances of this are only 50:50.

Next year will see growth of just 1%. The report apparently says the Bank of England should use a sledgehammer to crack a nut - meaning I assume don't take any risks and use all available means to stimulate the economy.  Note the actual report is behind a pay wall so we can only see summaries.

Incredibly, The Telegraph don't cover it at all - amazing.

PENSIONS ISSUE FOR NEGOTIATION

Among the many hundreds of issues that will need to be discussed and agreed as part of the withdrawal negotiations is the responsibility to paying the pensions of about 1730 Britons who work for the EU (HERE). One might think this is a minor issue but it seems we are at loggerheads with the EU already with Brussels saying we are responsible and we saying they are.

It is not difficult to see the negotiations going on for years and years and years.

WORLD GROWTH IS SURGING CLAIMS TELEGRAPH

Mr Ambrose Evans-Pritchard, has written in The Telegraph (HERE) one of those whistling-in-the-dark pieces that claims world growth is "surging".  He must be reading a lot of quite different stuff to me. Everywhere I look there are reports of stimulus packages, profit warnings, low growth expectations and ongoing financial risks.

CORNWALL WANT TO KEEP OFFICE IN BRUSSELS

In a display not unlike Boris Johnson's policy on cake (pro having it and pro eating it) Cornwall Council (HERE) want to retain their office in Brussels even after we have formally left the EU.

The portfolio holder for economy and culture on the council, Mr Julian German, apparently said:

“There are still funding streams that are open to non-EU countries. In terms of trading and a wider fiduciary and cultural relationship, being in Brussels is beneficial,” 

My advice to him is not to hold his breath for any EU funding after we leave.

Update:  Birmingham and Bristol (HERE) also apparently plan to keep Brussels offices open after we leave!

BREXIT NEGOTIATIONS TO BE LONG AND DIFFICULT

Bloomberg (HERE) have a report on what they suggest will be the most tortured divorce proceedings in history as we try to disentangle ourselves from 43 years of integration into the EU. I don't believe anyone yet has any real idea of the huge scope of the negotiations to come.

UK BUSINESS LENDING TO FALL UNTIL 2019

The Ernst & Young Item club (Independent Treasury Economic Model) is forecasting that business lending in the UK (HERE) will fall in 2017 and 2018 taking the total stock of business loans to a level last seen in 2005.

Apparently, banks are willing to lend but customers are adopting a wait-and-see attitude until the meaning of Brexit is clearer. Mortgage lending is forecast to rise albeit at a lower rate than before the referendum result was announced.

MORE SURVEYS SHOW CONFIDENCE AT LOW EBB

The Institute of Chartered Accountants in England and Wales (ICAEW) said its business confidence index fell to -27.7 for the period June 24 to July 20, compared with -0.7 from April 27 through to the June 23 referendum (HERE).  The Markit Purchasing Manager's Index for July actually fell to 48.2 rather than the 49.0 initially reported, so worse than thought.

And the CBI (HERE) said the outlook was the weakest since December 2012 as the proportion of firms expecting lower output was now 3 percentage points higher than the share expecting growth. This marked a sharp turnaround from June, when there was a 16 percentage point margin in favour of those anticipating growth.

Meanwhile, swimming against the tide is this article (HERE) from The Daily Mail anticipating bad news this week and actually proclaiming everything is really good - unfortunately, most of the items on their list of "good new" are either backward looking or puts a positive slant on bad news.

NEGOTIATIONS, NEGOTIATIONS, NEGOTIATIONS

The Centre for European Reform has an opinion piece (HERE) setting out the problem faced by Theresa May's government.  For the foreseeable future they will be tied up in negotiating with many other countries and the piece suggests there are six interlocking sets of talks to:

• Exit the EU
• Set up a trade deal of some kind with the EU after exit
• An interim deal along the lines of the EEA while the trade deal is arranged
• Become a member of the WTO in our own right
• Replace the 53 trade deals we have at present that we will lose after we exit the EU plus new ones with the USA, China, India and others
• Set up new ties with the EU in security, foreign and judicial policy

Worryingly, the author says all 162 members of the WTO would have to agree with us rejoining and this includes Russia and Argentina, countries that are not necessarily friendly to us.