NO, GERMAN INDUSTRY IS NOT ABOUT TO HELP US GET A GOOD DEAL POST BREXIT

Contrary to what we were told before the vote, German industry is not going to apply pressure on the EU to give us tariff free access and allow control on immigration (HERE). Markus Kerber, head of the BDI, dismissed claims that German companies would not tolerate trade tariffs after Britain leaves, and said Germany’s relations with the rest of the bloc were more important.

“I have read a lot of articles in the British press saying Germany would be a relatively soft negotiator because 7.5% of German exports go to Britain,” Kerber told BBC Radio 4’s today programme. “Well, 7.5% is a big number – but 92.5% goes somewhere else.”  And he said they don't want to upset other European markets by pleading for the UK to get something special.

Over to you David Davis.

CAR MANUFACTURERS BEGIN TO APPLY THE PRESSURE

Nissan has warned that new investment in their Sunderland plant is suspended until they have confirmation that the UK will have tariff free access to the single market or the government agrees to compensate the company for any tariffs that become payable (HERE) and (HERE).

On the same day Jaguar Land Rover (JLR) has said there are signs that European buyers are boycotting UK built cars because of Brexit (HERE).  If we had been subject to the kind of stuff that Farage and Johnson have directed at the EU, I would boycott European cars.

This all comes at a time when our current account gap has increased to 5.9% in the second quarter of the year (HERE).   Even the government can no longer claim to be unaware of the damage to the UK that will occur if we leave the single market.  We rely on foreign companies to boost our export performance. If they begin to wind down or leave we are in big trouble.

BREXIT NEGOTIATOR SEEMS EXASPERRATED

Guy Verhofstadt, the EU parliament's chief negotiator has expressed surprise and disbelief at recent comments from BoJo, Michael Fallon and Liam Fox (HERE).

Johnson has said the UK is prepared to help Turkey in any way it can - including presumably joining the EU. Verhofstadt, responding to BoJo's comments said:

“So Boris Johnson wants to help Turkey join the EU – after he just campaigned for the UK to leave the EU on the basis that Turkey would be joining the EU in the near future,” the former Belgian prime minister wrote on Facebook (see Tom Brake on it HERE)

He also took a pop at Michael Fallon for saying he would block any move to create an EU army and at Liam Fox who he said had “indicated the UK will leave the EU’s customs union because he thinks other markets are more important – while his prime minister tells us the EU27 ‘will sign’ an ambitious trade deal with the UK”.

The Europeans really must be wondering what's wrong with us.

CAR MAKERS WANT SINGLE MARKET MEMBERSHIP

The CEO of the Society of Motor Manufacturers and Traders (SMMT) says the UK car industry success has come from membership of the single market and that only continued membership can guarantee that success will continue (HERE).

As far as I can see the EU have all the cards.

COURT ORDERS GOVERNMENT TO REVEAL ARTICLE 50 ARGUMENTS

The judge in the case looking at the legal basis for triggering Article 50 has ordered the government to release the legal basis they are using to argue that the Royal prerogative is sufficient in law to allow the Prime Minister alone to make the decision (HERE).

He told both parties: “Against the background of the principle of open justice, it is difficult to see a justification for restricting publication of documents which are generally available under [court] rules.”

He has also allowed the People’s Challenge, a crowdfunded group, to publish its full claim without any sections of it being redacted or withheld. It argues that “only parliament can lawfully ‘decide’ to leave the EU for the purposes of article 50[of the treaty]; and that the [government] may only ‘notify’ such a decision to the European council under article 50(2) once [it] has been properly authorised to do so by an act of parliament”.

The solicitor acting for the People's Challenge said: “Those who were unsettled by the government’s insistence on its defence being kept secret will now be surprised by the contents, including submissions that Brexit has nothing constitutionally to do with the Scottish and Northern Ireland devolved governments, that parliament ‘clearly understood’ it was surrendering any role it might have in Brexit by passing the EU Referendum Act, that it has no control over making and withdrawal from treaties and that individuals can have fundamental rights conferred by acts of parliament stripped away if and when the executive withdraws from the treaties on which they are based".

The judgement when it comes will be interesting.

ARTICLE 50 LEGAL CHALLENGE SECRECY CLAIM

The group bringing a legal challenge against the government's proposed use of the royal prerogative to trigger article 50 have criticised the government for refusing to disclose to the public the arguments they are using to justify their position (HERE).

Submissions lodged with the court this week ready for the first hearing on 13th October are heavily redacted so that the groups lawyers are unable to see what explanation is behind the government's legal position.

This seems incredible to me. The claimants’ lawyers have now submitted an urgent challenge alleging that the government is over-exploiting a commitment to protect litigants from online abuse to prevent disclosure of the main points of its defence.

JOB LOSSES POSSIBLE IF EURO CLEARING MOVES TO EUROPE

The CEO of the London Stock Exchange says up to 100,000 jobs could be at risk if clearing was moved to the EU (HERE).  London cleared 320 Trillion Euros last year.

Listening to M Rolet's comments I think he is talking about the jobs involved in clearing all currencies but it is clear that a lot of jobs could be lost.

BoJo HUMILIATES US - AGAIN

Boris Johnson's remarks this week about there being no connection between single market access and freedom of movement (in fact he said it was "baloney" - see HERE) has provoked a humiliating response from the French and Germans (HERE).

Wolfgang Schauble says he can send Her Majesty's Foreign Minister a copy of the Lisbon Treaty where he can read there is a link. He even offered to come over and explain it to Mr Johnson in English!

Each time Boris opens his mouth he demonstrates how stupid he is and how he simply cannot be bothered to read the details.

On the same day Martin Schultz, President of the EU Parliament says "under no circumstances" can we have access to the single market without accepting freedom of movement (HERE).  How long are we going to keep up the pretence that we can?

LLOYDS OF FRANKFURT?

There are reports that Lloyds of London are beginning to think about creating an EU subsidiary as a contingency against the worst effects of Brexit (HERE) and (HERE).

Meanwhile we are being told that Frankfurt is poised to become London's "gateway" into Europe (HERE).

So, it seems one day we may well be hearing about the global insurance giant called Lloyds of Frankfurt.  Prosper like never before.

BORIS THINKS WE'LL GET A QUICKIE DIVORCE

The increasingly deluded BoJo has said he thinks we won't need two years to negotiate a withdrawal (HERE).

"You invoke Article 50 in the early part of next year. You have two years to pull it off. I don't actually think we will necessarily need to spend a full two years but let's see how we go." He is quoted as saying.

And he rejected the claims made by EU leaders that Britain cannot have access to the European single market unless it accepts free movement of migrants.  “Complete baloney, absolute baloney,” he said. “The two things have nothing to do with each other and we should go for a jumbo free trade deal and take back control of our immigration policy“.

In BoJo world you can opt to leave an organisation but still retain the right to tell them what to do. To EU leaders it must seem like they will be negotiation with the deaf and blind.

Some officials and politicians say that the unprecedented negotiations will take much longer than two years and I think they're right. He may be used to rattling off newspaper columns at the last minute but international treaties they are not.  

LOOKING FOR SIGNS?

There was apparently a meeting this week (HERE) of EU ambassadors held at the invitation of the Slovaks but allowing Oliver Robbins, the top civil servant in the British Department for Exiting the European Union, to brief UK-based diplomats from EU states on the status of Brexit preparations.

Those who attended say in the talks he asked for a signal from the EU about what kind of Brexit deal it is willing to accept before triggering divorce talks.

One person present said: "They do not seem to have made up their minds about anything."

Three months on and we still have no idea what Brexit is going to mean - apart from Brexit that is!

HANNAN AGAIN

Daniel Hannan (HERE) is now saying that leaving the EU was not an end in itself, only a means to an end and that we shouldn't have left if we "fail to press home the global opportunities that open up".

What an amazing statement from a prominent leave campaigner. In other words this is akin to throwing someone in the deep end and telling them they could become an Olympic swimmer. The only problem is you don't know if they are a 12 year old strong swimmer or a fat, ageing asthmatic who cannot manage a stroke.

Mr Hannan won't know who he has thrown in until we're in the water.  What an extraordinary gamble.

TELEGRAPH CROWING EARLY

The Telegraph has an editorial today (HERE) crowing that the economy has not been plunged into economic darkness as the "experts" predicted.  They don't seem to realise nothing has actually happened yet. The experts were told by David Cameron that Article 50 would be triggered immediately after the vote and they predicted chaos on that basis.

Well, three months have gone by and Article 50 remains untriggered. Hence, nothing has happened to the economy. Let's wait and see what happens. Even the Telegraph is not totally confident:

"Of course, these are early days. The success of Brexit will be measured over years or decades, not months. But even on the evidence available so far, it is safe to conclude that Leave’s scepticism about the gloomy consensus of the experts was justified".

REASONS WHY THE EU WILL MAKE LIFE DIFFICULT FOR BREXIT

The Telegraph has a piece (HERE) setting out five reasons why they think the EU will make life difficult for us during and after the negotiations and then giving five more reasons why they (the EU) shouldn't.

It is an appeal for the EU to be rational and to consider that punishing us will damage the EU as well.

I think this may be a forlorn hope. This is why a lot of divorce cases end up in court with rancour and ill feeling. It isn't rational but where human beings are involved rationality often isn't.  You cannot spend thirty years slagging off your partners and looking for ways to opt out of things and then expect them to be sympathetic.  They will become competitors and will seek every possible advantage. This is not "punishing" us, it's called negotiating and exploiting your strengths. 

CZECHS SAY WE CANNOT HAVE CAKE AND EAT IT

The Czech Secretary of State for EU affairs (HERE) has spelt it out once again that there is zero chance of the UK negotiating a deal which includes separating the four basic freedoms.  He is saying we will not have a tariff free or preferential access to the single market unless we accept freedom of movement of people.

All of this points to a hard Brexit which is what Davis and Fox want anyway.  The impact on UK jobs and the economy will be serious but they seem to be completely cavalier about it all.

TYRIE WARNS ABOUT LOSS OF PASSPORTING RIGHTS

Andrew Tyrie, the chairman of the Treasury Select Committee has warned of a "significant risk" to financial services businesses if passporting rights into the EU are lost (HERE).  He produces figures on the committee website showing there are 5,476 firms in the UK with 336,421 passports.

This story also appeared elsewhere with someone suggesting loss of passporting would impact the EU more than the UK because 8,008 EU firms have passporting rights.  What this report didn't say was that this larger number of EU firms has only 25,532 passports in total.

DOUGLAS CARSWELL AND THE TIDES OF HISTORY

The UKIP MP Douglas Carswell has made a bit of a fool of himself in a twitter exchange with a scientist (HERE).  The scientist, a professor, had been explaining the "gravity" model of trade, something set out in the government documents released in the run up to the referendum.

The professor said we did more trade with Ireland then China, although China was bigger it was much further away and therefore affected trade less - liken it to the moon's effect on tides.  Carswell then tweeted that it was the sun and not the moon that affected tides!

If that had been me I would have taken up the life of a hermit on a remote island and never again appeared in public.  No doubt Mr Carswell will be pontificating again soon on things he knows nothing about. As you can see on the sidebar he once told us it was absurd to think Brexit would cause a downturn. 

CONSTRUCTION NEEDS EU WORKERS

A group representing the UK construction industry (HERE) has warned the government about limiting freedom of movement which results in a lack of skills needed for building work. 

The group representing Britain’s architects, surveyors, planers and builders said the free movement of labour within the EU has been “vital” to the growth and flexibility of the construction sector. “We are in the grip of our worst construction skills crisis in almost 20 years,” Amanda Clack, Royal Institute of Chartered Surveyors president, said.

Apparently 12% of the 2.1 million construction workers are European.

So, we have the banks.the Japanese and the construction industry all calling (essentially) for freedom of movement.  It looks like the government has a clear choice, crash the economy or ignore the electorate.  What a problem.  Prosper like never before.

PASSPORTING RIGHTS UNDER THREAT

There are plenty of signs that Brexiteers want a hard Brexit and to leave the single market completely (HERE for example) so that we have total control over our borders. 

But a ECB policymaker Jens Weideman (and others) are warning we will lose passporting rights if we leave the EEA (HERE).

The stakes are huge.  Brexiteers are betting everything on the EU conceding London's leading position in finance and continuing to allow global banks to work across the EU while not being in the EU.  I think this might be a miscalculation and it may just be the beginning of London's decline. Frankfurt has wanted to overtake London for years and Brexit is a golden opportunity.

HONDA CONFIRMS UK AS GLOBAL HUB?

Brexit Central are linking to a report in The Daily Mail (HERE) about Honda confirming the UK as their "global hub" with the next generation Civic being built in Swindon for export to the US and Europe. I'm sure this is true although I don't see it reported elsewhere but the article carries pictures of the Civic and it talks of full production starting next February so I assume the decisions were made some time ago and everything was committed.

If so, this doesn't tell us anything about the future.  If there is no trade deal and exports to Europe carry a 10% tariff plus more tariffs on exports to territories where the EU had trade deals which we will now lose, the next generation of Civics might not look so certain. This is the problem.  Also, if Nissan  and Toyota move to Europe they will have a big advantage over Honda.

It isn't clear if  Honda were one of the businesses behind the letter sent to Mrs May a week or so ago but I would be surprised if they were not.  I think this is closer to their true sentiments than story in The Daily Mail.

BANKS BEGIN TO WORRY ABOUT BREXIT

Global banks are beginning to lobby the US and other governments to help them maintain London as the primary European financial centre (HERE). It seems they're concerned that Theresa May is putting the control of immigration above protecting The City. The BBC (HERE) are reporting the same thing with US bankers said to have stressed that "for the prosperity of the US and world economies" it was vital that uncertainly was "kept to a minimum" and that existing trade ties were "disrupted as little as possible."

It is also being reported that Phillip Hammond is preparing to ditch membership of the single market but is planning ways of allowing British based financials to continue to have access the Europeam markets (HERE).  This might preserve The City at the expense of manufacturing industry and other services.

The stakes are huge but the UK has everything to lose and the EU everything to gain. I cannot see the European parliament approving a deal which delivers a bonus to the UK by allowing major global banks to conduct business across the EU while being regulated from outside the bloc.  Why do it?  If they can agree an interim solution giving the banks more time to move operations into the EU they will gain in the medium term and London will lose. 

As soon as Article 50 is triggered and one or two banks start to get nervous about the outcome of negotiations there will be a rush to the exits. These are huge global businesses and they cannot afford to forego European trading.

NEGOTIATIONS ARE GETTING FRAUGHT EVEN BEFORE THEY START

There are a number of linked stories in today's news.  Bloomberg's editorial board (HERE) is urging the EU to adopt a flexible attitude and to give the UK a reasonable settlement with access to the single market for banks and financial institutions in particular. It thinks to do otherwise might damage the EU as much as the UK.

Then in The Guardian (HERE) there is a piece about Juncker's state of the union speech yesterday which the writer summarises as "You [the UK] are not as important as you think you are", essentially saying all will be well in the EU after Brexit.

In tomorrow's Telegraph (HERE) is an article about EU officials apparently working to make Brexit as tough as possible so that we change our mind about it.  But the really interesting part is this: 

In the European Parliament, which must ratify any Article 50 deal agreed by the EU 27, the mood against Britain was further soured this week by personal attacks on Mr Verhofstadt by former Ukip leader Nigel Farage and the Brexit Secretary, David Davis.

Mr Davis referred to his future interlocutor as “Satan” when addressing the Foreign Affairs select committee, while Mr Farage – long a thorn in the side of pro-EU MEPs – lambasted Mr Verhofstadt as a “fanatic”whose appointment amounted to “declaring war” in the coming talks.

“Perhaps there was a time when this could not have got nasty,” said one source close to Mr Verhofstadt, “but when the Brexit minister calls the chief negotiator ‘Satan’ what response, really, does Britain expect?”

Farage, Davis and Johnson plus most of the right wing press have spent the best part of thirty years attacking the EU over all sorts of perceived wrongs but we now expect them to behave as reasonable people and to forget all of the slights directed at them.  Some in the EU will no doubt see an opportunity for payback and will argue for the UK to come out as the clear loser. Otherwise what is the point of the EU?  The negotiations will be difficult.

As a backdrop to all of this Britain's trade gap (the difference between imports and exports) remained at near record levels in the six months up to March 2016 (see HERE). For 2015 as a whole, the deficit was revised up to 5.4 percent of GDP, the highest for a full year since annual records began in 1948. For us exports are crucial if we are to remedy the current account gap and upsetting your largest trading partner does not seem a wise strategy.

NO SUBSTANTIVE BREXIT TALKS FOR 12 MONTHS

Herman Von Rompuy, who it seems to me makes measured and intelligent interventions says real Brexit negotiations will not start until after the German elections next September (HERE).  I can see this is obvious since Germany is the largest economy and the biggest contributor to EU funds.

It is unrealistic to expect Mrs Merkel to negotiate substantive things that her successor (if she loses) does not accept so in practice everything of any value will wait until the end of next year. So much for a quick Brexir.

The utterly obnoxious Nigel Farage likened Mr Rompuy to a damp rag but he seems far wiser than Nigel.

BREXIT CENTRAL UP AND RUNNING

Brexit Central (HERE) is a website hurriedly put together to counter many websites set up by remain campaigners.  It is staffed by dedicated leavers (including support from Matthew Elliot I believe) and edited by a Jonathan Isaby.  I think they were worried that the country might lean back towards remaining in the EU and with some justification.

I signed up for their emails and note that 90% of the postings are references to articles from people saying we need to be optimistic and seize the opportunity Brexit presents. There is little of substance.

On the other hand when I look at the remain camp they mainly focus on the practicalities of what Brexit actually means. Will we have tariff free access to the single market?  Will our financial companies enjoy passporting right?  How will exiting the customs union affect us and in particular the border with Ireland?  On these substantive questions they offer no answers except to dismiss any risks to the economy.

In my opinion they are swimming against a tide. In the end we will have to rejoin. As older people pass away and younger ones come through the demographics of UK opinion will once again become much more pro-European.  The clock is ticking for leavers.  If things do not improve mightily in the next few years they will be in big trouble.  It will not be enough to remain as we are or even for there to be a modest improvement. We really must prosper like never before. Anything less will be seen as failure.

FRASER NELSON ON LIAM FOX

Fraser Nelson, a man who knows as much about industry as I know about astrophysics, has a piece on the Spectator Blog (HERE) about Liam Fox's description of many British exporters as fat and lazy. In the main he defends it but says trade deals alone won't solve the problem we have of exporting far too little.  We have the lowest ratio of exports to GDP in Europe (27%).

All of this is true but Brexit is like entering a very obese asthmatic for a marathon.  It might do them a lot of good and lead them to lose weight, slim down and begin to take up marathon running as a hobby.  Or it might not.

What Brexiteers like Mr Nelson have done is commit to a drastic solution without thinking through the impact.  We don't manufacture enough world class products. If we did customers would beat a path to our door - instead we ourselves choose imports because they are cheaper or better than our own stuff.  This is the truth and we haven't even got to the point of recognising the root of the problem yet let alone how to solve it.

REBOUND MAY BE A MIRAGE SAY S & P

Reuters (HERE) report S&P saying that the UK's better figures in August which some are suggesting there has been a "rebound" may in fact be a mirage. "While the news is encouraging, we believe it has no bearing on the cloudy longer-term outlook for the UK economy," Sophie Tahiri, an economist at S&P Global Ratings, said in a report.

Meanwhile, the British Chambers of Commerce says (HERE) say Britain’s economy will grind to a near standstill over the coming months as post-referendum uncertainty triggers a slump in business investment, as it slashed its growth forecasts.

In its first set of forecasts since the vote to leave the EU, the British Chambers of Commerce (BCC) on Monday more than halved its GDP growth prediction for next year from 2.3% to 1.0%. That would mark the worst economic performance since 2009, when the UK was emerging from a deep recession sparked by the global financial crisis. Because others (the BoE and the IM) said we might face a technical recession some see this as good news!!

IRISH PM SAYS NO MARKET ACCESS WITHOUT FREEDOM OF MOVEMENT

Reuters (HERE) are quoting the Irish PM Enda Kenny saying the Britain cannot have tariff free access to the single market without allowing freedom of movement.

"Let me tell you that around the European Council table, that is an issue that will not be given in on," Kenny said in an interview with Ireland's Newstalk radio station.  The Irish have a particular vested interest in making sure our relationship is as close as possible. They are the friend who is speaking honestly to us and yet the UK government continues to insist it is working to avoid damaging the economy while controlling (reducing?) immigration. 

The objective might be laudable but it continues to look impossible.  Sooner or later some very hard choices will have to be made.

DAVID DAVIS BEFORE A LORDS SELECT COMMITTEE

David Davis appeared in front of the Lords Select Committee on Europe yesterday and I watched it on Parliament TV.  It was a performance full of arrogance and bluster. The minister in charge of Brexit does not have a clue.

He told the committee that his objective was not to damage the British economy but it is impossible to see how this can be achieved. The uncertainty alone is already causing damage and once article 50 is triggered we will see what an earthquake Brexit really is.  He said the negotiation would be the "most complex in modern times" if not ever!  I am pleased he is at last beginning to see the enormity of the task ahead.  It's a start.

The also admitted the customs union was "very complicated" and in consulting industry and others he is asking them to "quantify" the effects of Brexit including those of tariff and non-tariff barriers.  I am amazed that not one member of the committee asked him why he hadn't considered these point before he advocated Brexit.

Speaking to Bloomberg, the CEO of a large Nordic bank says Brexit may to take up to 5 years (HERE) and the article quotes Czech state secretary for EU affairs who last week went as far as to call the U.K.’s current proposals (for access to the market without freedom of movement) "completely unrealistic".  It all looks like a disaster unfolding before our eyes.

METRICATION & VACUUM CLEANERS

The Sun has a piece by Bill Cash (HERE) blaming (if that's the word) the EU for metrification athough as InFacts point out we adopted a lot of metric measurements in 1965 well before we joined the EU because it made sense.  I assume Mr Cash would like us to return to feet and inches or even cubits - for good measure!  

The Sun then rails against efficient vacuum cleaners because the EU has banned those that use too much energy. Soon they will be calling for models in cast iron and mahogany with giant motors that cause the lights to dim when switched on.  They won't suck up more dirt but The Sun isn't bothered about that.  

These people were in the vanguard of calling for us to leave the EU and this is what they were worried about - amazing.

VISA MAY BE NEEDED TO VISIT EUROPE AFTER BREXIT

The Guardian are claiming that the EU are considering introducing a visa requirement similar to the US system where visitors have to apply on-line and pay a fee for the privilege (HERE). The scheme would cover all visitors to the passport-free 26-nation Schengen zone – of which Britain is not a member – from countries that do not need a visa to enter, EU sources confirmed.

BRUSSELS THINKS WE WILL BEG FOR A DEAL

The Telegraph (HERE) is claiming this morning that Brussels thinks we are completely lost and will end up begging for a deal.  Whether this is true or not I really don't know but I suspect as time goes on even the most hardened Brexiteers will begin to see the problems that Brexit has the potential to cause.

I don't think we will ever beg.  This is not in our national psyche but I can see we might concede quite a lot and end up negotiating a deal which is so close to the one we have now with no real advantages and some serious disadvantages so that our economy doesn't suffer too much. We can still say we didn't beg and no doubt we will claim success. This is how politics works.

FOX PUTS HIS FOOT IN IT - AGAIN

In a speech to some of his supporters he has been recorded (HERE) saying Britain has become "fat and lazy" and that business executives would rather play golf on a Friday afternoon than negotiate export deals.  He thinks we have relied on our past successes although I am not sure what he means since we haven't been successful for years. We have lost entire industries in my lifetime.

He is right that we don't export enough but wrong in his analysis.  He seems to think we have the best products but simply don't sell them properly abroad. I have heard this from many a chief executive but it is still wrong.  To be successful you have to make the best products and the uncomfortable truth is all too often we don't. This is why we buy foreign products over domestic rivals.  Dr Fox thinks the answer is to open up trade and become unapologetic free traders and to avoid any sort of protectionism. I hope the workers at Tata Steel in Port Talbot are listening.

He is partially right but simply opening our doors to cheap imports will lay waste to many companies. The answer is to first become competitive and then open up trade. Opening up trade and hoping we will cope is not a strategy - except for failure.

LONDON TO BECOME A POWERHOUSE AFTER BREXIT - REALLY?

The Telegraph is carrying a story here about a report by Price Waterhouse Coopers with the headline suggesting that London will become an economic powerhose after Brexit (HERE). Unfortunately, the text doesn't say anything like this - in fact all the research was done before June 23rd and the report actually says:

“We cannot predict what Brexit may mean to the future of London as a pre-eminent world city, we do know it is today one of the world’s most cosmopolitan and well balanced cities, as shown by our research. Any effects Brexit may have on London will take place in a process that will evolve over time and not overnight,” 

Never let the truth spoil a good headline.

SWISS ROLL?

There are some interesting developments in Switzerland.  They narrowly voted in a referendum i n 2014 to curb freedom of movement of people and have been negotiating with the EU ever since. The deadline is fast approaching and new talks are scheduled for next week (19th Sep).  Switzerland seem to be backing down in the face of the EU's hard line (HERE) with most political parties now supporting a plan to ask companies to prefer local candidates over those from the EU, a significant watering down of the original proposal and even then the EU may not accept it.

I think it shows how much Switzerland values the limited access to the single market that they have (it excludes financial services).

However, now they are to visit the UK for discussions with our government on ways in which the two countries together can force the hand of the EU.  The Swiss are some 8 million people so they don't add an enormous amount of weight and many eastern European countries are adamant about the free movement principle. Nonetheless, it will be interesting to see how it all pans out.

SPECTATOR'S TAKE ON THE BREXIT BOUNCE

Ross Clark, a journalist on The Spectator, has written a typical piece (HERE) about how the Brexit bounce has made the worried remainers and the experts who were behind the warnings look foolish.  He says, "one thing is for sure: those who said that leaving the EU would lead to economic collapse, and who claimed that they couldn’t possibly be wrong because they had a consensus of experts behind them, are already looking a tad silly".

Earlier he talks about the warnings of an "immediate financial meltdown" but doesn't say who actually said this.  I am not surprised because, as he well knows, no one said any such thing.  He does quote Osbourne when he said Brexit might have some advantages but being economically better off wasn't one of them.  I think this is right and the next few years will demonstrate it.  The effects will be slowly felt as every expert said they would.

To imagine that withdrawing from privileged, tariff free access to the world's largest and richest single market is going to improve our prospects is just ridiculous.

UK BANKS TRY DIFFERENT TACK

The banks are obviously getting nervous.  They have lobbied for some kind of special transitional arrangement (HERE) to avoid a "cliff edge" presumably thinking that we will indeed face a hard Brexit, as The Telegraph now believes (HERE) including work permits for all EU workers.

Phillip Hammond was obviously unable to reassure them (HERE) yesterday because now they are issuing veiled threats to the EU that their economies will be damaged if they lose access to London's financial resources and expertise (HERE). I don't think the EU is expecting to lose access - they are working hard to tempt financial institutions to move the EU and it will only take one to open the flood gates.  In the City it is dog eat dog and if a competitive advantage is gained by moving first someone will do it. We are going to lose the right to Euro trading for sure anyway and if banks move this function other functions will follow.

Prosper like never before.

ARTICLE 50 CAN BE REVOKED - POSSIBLY

The lawyer who helped to write many of the EU treaties including Maastricht and Lisbon says he believes it is possible to reverse article 50 once it has been triggered (HERE).  He may be right but there have been other legal opinions to the contrary and it would be unwise to trigger it before we know the attitude of the EU Commission.

Mr Jean Claude Piris also told Sky News that we will have at least 15 years of pain while we extricate ourselves but we may be better off in 30 years.  Personlly, I don't believe we will be better off ever. It seems completely irrational to me to leave the largest, richest market in the world (one that other countries are clamouring to join) that is on our doorstep and expect to be better off.  It is literally incredible.

TELEGRAPH LETTERS PAGE

The letters page of The Telegraph is often good for a laugh but never more so than this week (HERE). A reader from Portsmouth says he voted to leave the EU to automatically remove the right of any EU citizen to come here without our approval. He does not seem to know that Norway and Switzerland are not in the EU but still allow freedom of movement and if we leave and join the EEA we could easily be subject to the same rules and the government would have clearly met the referendum objective.

Another writer from Overton in Hampshire says the objective of our negotiation should be tariff free access to the single market without payment and without freedom of movement and this should be without preconditions or assumption of failure.

I assume these people are both avid readers of The Daily Mail and The Express. They are not even in cloud cuckoo land.

THE SPECTATOR SEES CLUES IN DAVIS' STATEMENT TO PARLIAMENT

The Spectator was a cheerleader for Brexit and James Forsyth has gone through David Davis' statement and the follow up answers to see if it can discern the direction the government is taking (HERE).  He sees says this:

"...Davis indicated that he didn’t favour paying anything or conceding anything on border controls to get a free trade deal with the EU. When Andrew Tyrie, the chairman of the Treasury select committee, pressed him on whether the UK would remain inside the customs union once it left the EU, Davis said the government hadn’t yet decided whether to do this. But the language of his answer strongly suggested that he agreed with Liam Fox, the Secretary of State for International Trade, that the UK should leave the customs union so that it has a free hand to do trade deals outside it."

On this basis the UK will not be part of the EU, the EEA, EFTA or even the customs union.  In Europe we will be totally different to every other nation and means a deal similar to the one Canada has with the EU.  This does not include financial services at all and has quotas on some agricultural products. Manufacturers have to abide by EU regulations and when shipping into the EU must provide certificates of origin (costed at £3Bn per year for British Industry).  

I wonder how Phillip Hammond's meeting with the bankers went after this?

FORD SCALES BACK ON WELSH INVESTMENT

Ford have announced a sharp reduction in the planned investment at its Bridgend plant which makes engines for various models (HERE).  They will reduce investment to £100m from the planned £181m and will halve number of engines made from 2018 to 125,000 per year.

There is no suggestion in the report that this has anything at all to do with Brexit and probably Ford have had this in the pipeline for some time.  But the Unite union said it was "deeply concerning and must raise serious questions over Ford's long term commitment to Bridgend".

It is a long time since Ford produced vehicles in the UK but they have invested heavily in engine production here but now it appears even that is coming to an end.

PHILLIP HAMMOND MEETS THE BANKS

There is a meeting today at The Treasury between Phillip Hammond and various large bank and financial institutions (HERE). They are apparently seeking clarity on the government's plans for Brexit and in particular what this will mean for the passporting system that allows them to trade with other EU countries.  Banks want to keep the status quo according to Bloomberg (HERE).

I am sure they will be disappointed. I don't think the government knows what it will get from the EU and even if it did, they will not tell the banks in case (a) it's bad news and (b) it leaks out.  One unnamed banker said:

"If the government doesn't have a clear idea of what it wants the banks will just go," said one senior banking source, who asked not to be named. "They are not going to be hanging around waiting for the cliff edge."

I don't know what the government are expecting. The EU have already made it perfectly clear that banks will lose access if we leave (the last time just a few days ago HERE) but they continue to hold out the prospect that something can be negotiated. Other countries have no interest in conceding passporting rights when it is they who will gain when banks move to the EU.  Bankers are among the most cynical of people and if one bank announces a major relocation you can bet there will be a domino effect.

This morning's Brexit Bulletin from Bloomberg says:

"Hammond's meeting is well timed. UBS Chief Executive Officer Sergio Ermotti said yesterday that he may have to move as many as 1,500 jobs, the equivalent of 30 percent of the total, from the U.K. Lloyds of London Chairman John Nelson warned on Monday that he and other insurers would be forced to go elsewhere if the government fails to secure continued access to the single market."

TRADE DEAL WITH AUSTRALIA?

The BBC (HERE) are reporting this morning that we are beginning preliminary talks with Australia about a trade deal although yesterday Reuters (HERE) said Australia have claimed it will take years for the UK to negotiate withdrawal from the EU and only then can we begin formal negotiations and think about actually signing a trade deal.

The article says Sydney will press on with a trade deal with the EU in the intervening period.  So, we would have a trade deal with Australia quicker if we stay in the EU.  Amazing.

MIXED MESSAGES FROM THE PRESS ON JAPAN

The warnings from Japan about investment in the UK if we give up membership of the EU are taken seriously by The Independent (HERE) which says they won't be alone in quitting the country if we fail to heed the warnings.

Meanwhile, over at The Telegraph (HERE) they say Jexit would hurt us but is unlikely to come true. They think it doesn't "reflect the public aims of the EU".  Oh really?  What about the countries actively trying to attract our businesses already?

One can easily imagine when Nissan and Hitachi and others announce they are moving or building new facilities inside the EU that part of the press most enthusiastic about Brexit will be saying don't worry they'll soon come back. For some people reality never appears.  Read the letter (HERE)

COUNTRIES MAKE PITCH FOR UK JOBS

A number of countries are making a pitch for UK jobs in the financial sector as we know. Now Sweden has joined the list with a proposal to attract the European Medicines Agency (EMA) when it moves out of London as it is almost certain to do (HERE).

This follows the Japanese government saying yesterday that their pharmaceuticals companies would seek to move to the EU if the EMA leaves the UK.  I assume this will also have an impact on other pharma companies and even research in the life sciences.

Even Poland is now getting in on the act with this item from The Guardian (HERE) about the Polish foreign  minister being in London to attract financial businesses to Warsaw.

Prosper like never before.

CAN THE UK EVER BE INDEPENDENT OF THE EU?

I came across this very interesting article (HERE) published by Edinburgh University's European Futures website about what the EU is like for non-members in Europe, as we are likely to be in a few years.  The point of the article is that the EU has become so large and powerful that it completely dominates Europe or has hegemony over it as the article puts it.

Countries like Norway and Switzerland have voluntarily entered into agreements where they accept EU rules and directives and shape their laws to be directly equivalent to EU laws. They have allowed the EU to have hegemony in Europe.  If we leave the EU and do not become part of EFTA or the EEA and we even exit the customs union (as we must if we are to sign separate trade agreements) we will be the only European nation to be completely independent of the EU.  But in practice, how independent would we really be?

We would have to abide by a lot of EU rules if we are to continue to trade with them. Our financial services sector would have to show equivalence with EU financial regulation.  There is bound to continue to be cross border cooperation on environmental issues as well as security.   EU citizens in the UK will almost certainly continue to enjoy the same rights as they do now and UK citizens in the EU will have reciprocal rights.

The UK will therefore ipso facto be forced to accept many rule changes and new directives but will have little or no influence in shaping them. The article puts it this way:

"What is peculiar about the form of dominance that the associated non-members experience is that it is both structural and at the same time voluntary. It is an arrangement that accidentally inhibits and intimidates the parties. The management of externalities and collective action problems created by interdependence is skewed by a European political order in favour of full members of the EU. By being excluded from common decision-making procedures, the citizens of the associated states find themselves as second-rate Europeans".

STATEMENT TO PARLIAMENT

David Davis the SoS for Brexit made a statement to parliament this afternoon - although I am not sure why since we learned nothing new.  The government does not know what Brexit means beyond meaning Brexit.

It is amazing to me because the new government is trying to do exactly what the previous Cameron administration tried to do albeit from the opposite direction.  Cameron tried to keep the status quo but without freedom of movement of labour.  May is trying to scrap everything then negotiate most things back in except freedom of movement of labour.

What the EU members will make of this is anyone's guess.  Amazingly, Mr Davis did not accept the premise from Anna Soubry that it would come down to a choice between controlling immigration and retaining tariff free access to the single market. He still thinks we can have both!

And in answer to a question about the customs union (which has huge implications for the border with Ireland) he was equivocal to say the least.

And I am struck by how many MPs (usually those who encouraged a leave vote) are absolutely certain what people voted for. It's either controlling immigration, regaining sovereignty or avoiding budgetary contributions.  But none of them think it had anything to do with the £350m per week going to the NHS or any of the other claims made by Vote Leave.

Update:  The only thing of note he said about it being improbable that we would join the single market if we could not control immigration has now been denied by Downing Street (HERE). He was apparently just giving his own opinion.

BRITAIN TO FLY TO NEW HEIGHTS AFTER BREXIT!!

Con Couglin, writing in The Telegraph (HERE) thinks we can fly to new heights as a global trading power after we Brexit.  He doesn't say what has kept us grounded until now but I assume he thinks it's EU regulations and the prospect of new trade deals.

He mentions Australia and India and says, "the world post-Brexit clearly offers Britain a glittering array of new commercial and business opportunities".  This comes just before the Japanese government's letter (HERE) and Obama's warning that the UK will still be at the back of the queue. Mr Coughlin thinks swapping unlimited tariff free access with the world's biggest, richest and closest market for a trade deal with Australia, 20 million people and 12,000 miles away is a good think. Amazing.  Prosper like never before.

That kind of wishful thinking will only get us into trouble.

Japan has 1000 companies located in Britain employing 140,000 people. They are a "global trading power".  I wonder what the equivalent numbers are of British companies in Japan? Japan is twice our size so we should have 2000 companies employing about 280,000 people - but I bet it's nothing like that.

MAY BACKS AWAY FROM KEY BREXIT PLEDGES

The Guardian are reporting that Theresa May in a TV interview (HERE) is backing away from pledges to introduce an Australian points based immigration system as well as refusing to commit to £100m per week extra for the NHS (not even the £350m BoJo promised).

Leave campaigners and voters seem quite relaxed about it all but I wonder how they will feel in a few years when not only has every pledge been broken but none of the perceived benefits have materialised and actually, the economy is doing significantly worse, the jobless total is rising and the balance of payments grows ever wider.

HANNAN AGAIN

Daniel Hannan has written something on the ConservativeHome website (HERE) about one of his favourite topics. He goes on about access to the single market not being the same as membership. He's right in a way but listen to this. He says the Isle of man through Switzerland to Turkey all have "full access" to the single market.  This is not quite true, Switzerland's banks are headquartered in London precisely because they don't have full accees.

This is the main point but Mr Hannan does not even seem to realise it.

SOLVAY QUESTIONS UK INVESTMENT

Solvay are a huge Belgian chemical manufacturer with plants all over the world. They are now saying (HERE) that Brexit has put a question mark over future investment in the UK.

This is exactly what I expected. Any European company is bound to do this. If they plan to build or expand here and import products to the EU there is bound to be a question mark and if tariffs or other trade barriers are erected, they will almost certainly conclude the money would be better spent inside the single market.u

I am sure we will hear more of this sort of thing in the coming years. Prosper like never before.

CALAIS IN THE NEWS AGAIN

French lorry drivers and farmers are beginning a protest today about the migrant camp in Calais and they they want the French government to close it down (HERE).

I am not in the least surprised. If such a camp was on British soil full of migrants wanting to get to France we can only imagine the uproar in parliament and the press all demanding it be closed down. I think by the time Brexit happens the camp, or something very much like it, will be in the UK.  The processing of claims will be done here and not in France.

JAPANESE WARN OF JEXIT

The Japanese government has delivered a 15 page memo to the UK government and the EU warning that many Japanese firms will consider moving their European headquarters to the continent, "if EU laws cease to be applicable in the UK after its withdrawal" (The BBC HERE) and The Independent (HERE).

It is almost certain that EU laws will NOT be applicable after we exit. The letter (HERE) warns of "dire consequences for the interests of the world if an open Europe cannot be maintained" and calls for tariff free access to the single market and continued freedom of movement as well as passporting rights for their financial institutions.  The letter is a response to concerns expressed by Japanese companies to their own government.

I was surprised to see that 1000 Japanese companies have operations here employing 140,000 people directly and presumably more in the supply chains.  No doubt Brexiteers will resent this intrusion but the letter, it seems to me, is a logical response to Brexit. The stakes could not be higher.  

Some EU countries will be quite happy with the threat to move operations to them. And remember this is only Japanese companies. Others will no doubt be thinking the same things. The EU hold all the cards and I can't see how we will avoid conceding almost everything to keep the companies we have here now and attract others in the future.

CANADIAN TRADE DEAL IN TROUBLE

To emphasise how difficult new trade deals are to negotiate, we now learn that Austria has serious problems with the Canadian trade deal known as the Comprehensive Economic and Trade Agreement (CETA). This doesn't actually include financial services and has taken seven years to negotiate.  Now Austria (HERE) say they will start a conflict to derail the deal because it's very similar to TTIP and has the same problems.

Brexiteers will point out that this is the problem with EU negotiated trade deals. They take too long and are too protectionist.  But this is what we will be up against when (if) we negotiate our own trade deal with the EU.  As the article says at the end national and even some regional parliaments will have to approve it.  If you ask me 2035 looks optimistic.

WE STILL DON'T KNOW WHAT WE VOTED FOR

It's amazing that after two months there is still disagreement about why we voted the way we did. I read that we voted leave to regain control of our borders (Farage et al). Some people (Bojo and Daniel Hannan for example) think it was all about sovereignty.  Now Jeremy Warner in The Telegraph (HERE) is telling us it was all about free trade.

He says Theresa May should reassure the G20 when she meets them later this week that Britain voted "for the advancement of free trade, not against it".

This again highlights the problem. No one knows what Brexit means - except Mrs May perhaps who thinks it means, well .. Brexit. There you have it. What a shambles. There are bound to be tears when 80% of the population find out what Brexit means for them.

Those who voted because they thought migrants were driving down wages will be ecstatic to know that they will now be competing in world markets with folks from India (Per capita annual income about $1500).  No doubt Mr Warner will be able to explain all that easily down at The Dog & Duck.

NO RETURN TO HARD BORDER IN IRELAND

David Davis says there will not be a return to a "hard" border in Ireland (HERE) but I note he adds that there will be no "unnecessary" barriers to trade.  This leaves the necessary ones for us to worry about.

He also says (HERE) that it's in the long term interests of the EU to grant us tariff free access to the single market.  He seems to think that what the EU was not prepared to give us while we are a member they will concede quite readily when we leave!  Amazing.

Brexiteers want to get their act together. They say (IDS among others) that we just just leave without any trade deal while others, now apparently including the Brexit secretary himself, think tariff free access is vitally important.

THE PROBLEM WITH REFERENDUMS

The Electoral Reform Society has released a report about the EU referendum (HERE) setting out what it calls the "glaring democratic deficiencies" with voters turned off by big name politicians and negative campaigning, a report says. The ERS attacked both sides of the referendum campaign, saying people felt "ill-informed" by the "dire" debate.

I agree with this but personally I think the remain arguments are mostly unproven but the leave campaign admitted most of their claims were misleading the day after the vote!

Coincidentally, and on a separate topic (Trump in the USA) the Washington Post has an article (HERE) about the part played in a democracy by emotion over reason when it comes to voting. The author talks about the "indifference to truth and consistency is what happens when the honest efforts of political scientists to grapple with the balance between the rational and irrational in politics become an excuse for absolute cynicism — about voters, their attention spans and democracy itself".

He also mentions the attention span of today's electorate and I have often talked myself about people's need for simple answers to complex questions.  

Yesterday the Joseph Rowntree Foundation published a report on why voters made the choice they did and it's quite revealing (HERE).  A graph shows 27% support for Brexit from people with a post graduate degree against 75% from those with no qualifications.  As I said to someone in the week after the vote at least we know pretty accurately how many stupid people there are in the UK - the JRF seems to confirm this view.