UK DOWN - EU UP!

The Telegraph of all papers, has a report about the growth of the eurozone (HERE) which has apparently hit a six year high.  In the same week Reuters says UK consumer morale is dipping as inflation begins to take off (HERE).

It would be a huge irony if after years of crowing that we are growing faster than any other G7 economy, after Brexit we slow down and the eurozone takes off!

The Resolution think tank says the chancellor is on course for a £29 billion windfall in April with the PSBR set to fall to £56 Bn instead of the £68 Bn forecast last November which will, apparently, cause the cumulative borrowing figure over the parliament to fall by £29 Bn (HERE). We are at a high point with unemployment at historic lows and the public finances, although still weak with a £60 Bn deficit, at least showing some resilience. Brexit can only go one way - down!

THE TELEGRAPH'S ROSE TINTED SPECS

The Telegraph (HERE) has a piece this week claiming the UK economy is firing on all cylinders as signs of more balanced growth emerge. It's true the economy has held up well over the past few months but inflation is creeping up and labour shortages are appearing. I am certain it is just a matter of time before it all begins to go south. 

When it does I'll remind The Telegraph what it said.

POST BREXIT PENSION ISSUES

A report in The Telegraph (HERE) claims that the pension age will have to be increased to the perhaps 75 to cope with the effects of brexit on immigration. Because there will be fewer people of working age it follows there will be a higher proportion of people in retirement. The government will be faced with the choice of increasing taxes, reducing the amount of the state pension or increasing the retirement age.

All those leavers who are mid fifties now will no doubt think it's all a bit of scaremongering. That's of course if they think at all.

The effects are already being felt in the labour market according to this report in The Independent (HERE) which says a drop in EU workers is contributing to shortages in filling both skilled and unskilled jobs. Others think that Brexit will result in a vanishingly small reduction in EU workers (HERE) and this is the governments dilemma. Cut immigration too much and the economy is badly hit, too little and leavers will not be pleased.

Personally, I've always thought that Brexit will be a vast expense to stop about 50,000 people a year coming here - that's about 0.007% of the population.

BAD NEWS BEGINS TO EMERGE

The banks are now convince we will lose access to the single market and are said to be accelerating plans to pull staff out of London (HERE). With the legal judgement coming tomorrow the government are said to have prepared four different versions of the Article 50 bill, depending on what the Supreme Court says (HERE) although the Telegraph thinks it is "in the balance". We shall see.

Northern Ireland's exit from the EU will destroy the peace deal. Apparently the Good Friday agreement gives people in the north rights to Irish citizenship and this will be difficult if not impossible to continue to have effect (HERE).

Meanwhile a cross party group of MPs are trying to block plans for what they call a hard brexit (HERE).  The BBC have a report about the difficulty under WTO rules to have what the PM describes as "sectoral deals" since and free trade agreement has to cover "all or substantially all" trade between two countries (HERE) and finally, retail sales took a nose dive in December (HERE). Since consumer spending is what is keeping the economy going these are dangerous times.

Prosper like never before!

TOYOTA CONSIDERING HOW TO SURVIVE AFTER BREXIT

Toyota (HERE) have said they are now going to consider, along with their suppliers, how they can survive in the UK after the prime minister outlined her plan to take the UK out of the single market and the customs union. We don't yet know the terms of the deal with Nissan but it looks like the taxpayer may be saddled with a big bill!

What Jaguar Land Rover and BMW are thinking or planning we don't yet know.

Update: Nissan have now said they would "re-evaluate" their investment in the UK if competitiveness is adversely impacted by the terms of the deal (HERE). So perhaps the bill will will be even bigger. And Hitachi are suggesting their plant may also be affected when it begins to export after 2019 (HERE).

Update: Now Airbus are suggesting that brexit has put Britain's aerospace industry "in a dangerous place" (HERE).

PAUL JOHNSON IFS DEFENDS HIS POSITION

Paul Johnson, the much respected director of the IFS has been speaking to the Huffington Post (HERE). He takes issue with the Daily Mail for attacking the IFS for "doom mongering" over a report saying the last decade was the worst for growth since the 1920s. He points out this wasn't even a forecast but a statement of fact!

However, his substantive point is about economic forecasts is that some of them before the referendum were wrong but mainly on timing. The fall in the value of the pound is he says a bit like boiling a frog - it may take some time before the effects come through. Also he says, if trade with our biggest partner is harder, it will make us poorer and “If that doesn’t have a negative economic effect then frankly the economics profession really is in trouble,”

I think this must be the overwhelming view of all right thinking people.

DAILY MAIL DOES NOT SEE IRONY

The Daily Mail last week printed an outraged report about the state of the NHS (HERE) and inter alia compared us to the rest of the EU in bed numbers and length of a maternity stays.  The figures are eye opening, particularly in the week when the NHS is under the usual winter pressure and patients are waiting for hours on trolleys in corridors.

The article headline tells its readers we trail the EU average for medics, beds and scanners but the figures for beds is the most shocking. We're well below the average (5.2) with just 2.7 beds per 1000 head of population, with only Ireland and Sweden below us.  But the really shocking figure is Germany with 8.2 and Austria with 7.6 - nearly three times as many as we have. I wonder what patients waiting in a public corridor on a trolley think?

However, the Mail does not mention at all why the EU - a "failing organisation" according to them can arrange things so much better than we can.

TRADE GAP WIDENED IN DECEMBER

The Guardian (HERE) report on the latest ONS figures on the economy which show the trade gap widened in December by £2.6 billion. Exports increased by £700 million but imports also rose by £3.3 billion.  Reuters' take on it is HERE

So much for the depreciating pound being a corrective to our record trade deficit.

LEAVE MEANS LEAVE URGES HARD BREXIT

The campaigning group Leave Means Leave are urging the PM to get out of the EU with a hard brexit and without any transitional deal (HERE).  Not satisfied with getting us over the cliff they want us to have a jetpack on the way down.

"The UK must leave the EU within two years of triggering Article 50," Richard Tice and the completely mad John Longworth, the co-chairmen of the organisation, wrote in a letter to the prime minister setting out their principles for the talks ahead.

Meanwhile another prominent brexiteer Moulton was on radio 4 yesterday morning says he was and is still in favour of Brexit but he admits to being surprised how complicated it all is. I am surprised that he is surprised. Given all that was said and published by those in government who knew just how difficult it would be it is amazing that any intelligent human being could be surprised.

Essentially he says no one knows what Brexit is going to be like and yet he is still in favour of it!

He always seemed to me a smart business man but he seems to think we are in the worst possible position now and hence anything is preferable to it. We shall see.

PROSPER LIKE NEVER BEFORE - WE SLIP TO SIXTH IN GDP TERMS

Six months after the vote and with very little idea of what our future holds, far from prospering like never before we learn we have officially slipped into sixth place behind France in the world GDP league (HERE).  The Independent's take on it is HERE

And although we are expected to get ahead of the French again by 2021, we will both fall behind India and Korea and we will be in eighth place by 2030.  And remember, this is before the Trump presidency with all its protectionist rhetoric or the brexit negotiations have even started,

ANDREW MARR - AN OPTIMIST FOR BREXIT

Andrew Marr has written a piece for The New Statesman (HERE) titled An Optimists Guide to Brexit which demonstrates perfectly why journalists should stick to talking about things they know. 

He says we should be optimistic about our future prospects and thinks the government should have a more "direct influence on business and industry generally" something he says "politicians have been talking about since the 1970s, from Harold Wilson to George Osborne, to relatively little effect".

He talks about the "lack of German-style support for industrial manufacturing" and "Some of the measures the left would like to take to support and protect the steel industry, or engineering, or to enhance our growing advantage in robotics, are made impossible not by British Conservatives, but by EU regulations on competitiveness and state funding".

One can only shake one's head at the sheer wrongheadedness of it all. If he thinks Germany's success is all down to government support and that we have a growing advantage in robotics he is truly living on a different planet to the rest of us.  Either he has made it all up which would be bad enough or he's been talking to industrialists who think like that, which would be even worse.  As for the government influencing things - God help us!

BCC WARNS OF SLOW GROWTH AHEAD

The British Chambers of Commerce have issued a warning (HERE) that although growth this year will be above their earlier forecast at 2.1%, next year it will fall to 1.1% and in 2018 to 1.4%. It said, business optimism was continuing to fall, and it expected "a bumpy road ahead in 2017 for British businesses and the economy".

Prosper like never before!

REGULATIONS AND PRODUCTIVITY

This morning there is a stark contrast in the analysis of Britain's productivity problem. The BBC (HERE) has an item about investment in R & D by British companies showing we are 152nd in an IMF league table of business investment as a percentage of national income. A newly announced innovation fund from Oxford University of £600m we are told contains nothing at all from British companies. The writer seems shocked but I am not in the least bit surprised.

On the other hand The Guardian (HERE) has a story about Gove and Whittingdale asking British companies for a list of regulations they want to scrap after Brexit. They think our poor productivity is down to stifling regulation. My guess is that they will be surprised how little of the EU regulatory
regime industry will ask to be scrapped.

John Longford, the former chair of the British Chamber of Commerce, who campaigned to leave, speaking to the Brexit Select Committee, told them that he thought the “opportunities for deregulation are legion. Some of it will be to do with employment rights. Some of it will be to do with the fact that people might not be allowed to do overtime that they wish to do,” he said, citing lorry drivers as an example.

“But the fact of the matter is also that there is a lot of regulation that is nothing to do with employment rights that causes cost to business.”

One example he mentioned was the EU ergonomics directive, which he said made small businesses keep a ledger of checks of the positioning of computer screens and chairs. As far as I can see this has never been adopted and a H & S website (HERE) claims it "bit the dust" in 2013.

So there we have it. Our poor productivity is down to regulations - the same ones that German and French companies operate under without any problems - and not working long enough hours driving HGVs. According to the leading Brexiteers is is nothing to do with lack of investment. It was good to see Carolyn Fairbairn caution the select committee about focusing on “silly” anecdotal stories about over regulation (ie John Longworth's), which she said were of less concern to her members than the threat of losing access to European markets.

MANUFACTURING OUTPUT DROPS

UK Manufacturing showed an unexpected 0.9% drop in October (HERE) compared to the anticipated 0.2% increase. This was the biggest decline since February. Industrial production fell 1.3% led by a slide in the oil and gas sector.

I think also the fall in investment that we have seen will increasingly feed through into manufacturing output figures next year.

AUTUMN STATEMENT REACTION

Phillip Hammond's Autumn statement brought a mixed reaction.  Prominent leavers have dismissed the OBR forecasts as far too pessimistic while anti-brexit newspapers all focus on the £122Bn of extra borrowing over the next few years, £59Bn of which is said to have been caused directly by brexit (see The Independent's take HERE).

Alastair Darling in The Guardian says Mr Hammon has failed to set out a clear direction (HERE). John Longworth, former head of the CBI says the opposite (HERE). Infacts has take a leaf out of the leave campaign's playbook and used a weekly figure for the extra amount we will need to borrow to fund brexit - the £59Bn is shown as being £226 million a week (HERE).  How will Vote Leave react to that?

POOR LEAVE VOTERS WILL SUFFER

The World Bank's Chief Economist for Europe, Hans Timmer, says brexit is not going to help the poorer section of the community who voted for it overwhelmingly (HERE).

He also warned a lack of ideas on how to assist these voters creates the risk they’ll adopt more extreme views in the future. He said, “The changes that are in the making at the moment will not help these people. They haven’t lost their jobs because of immigration – or otherwise these jobs will still be there – but because of technology and globalisation, which the UK will still continue because they still want to be a part of the global trading system.”

I wonder what this section of the electorate will do when they realise they were conned?

WHO WOULD BE CHANCELLOR?

One has to feel some sympathy with Phillip Hammond. He has the autumn statement to make tomorrow and appeared on the political shows this weekend warning of the "eye watering" levels of debt (HERE) which I think is quite obvious.

In response he is attacked for his relentless negativity (HERE) by those leavers who are blind to every problem and will only accept a sudden, abrupt and damaging exit from the EU and any bad news is still seen as scaremongering. The OBR forecasts on Wednesday will show what the government think the cost of brexit will be - but knowing the brexiteers they will all say the OBR is wrong!

Prosper like never before.

UK INVESTMENT IN TECHNOLOGY AND TRANSPORT AMONG WORLD'S WORST

A report by the OECD (HERE) claims UK spending on transport equipment and technology is among the lowest in the world. In fact, in transport equipment we are actually 34th out of 34 countries surveyed. 

And for spending on the latest technology and industrial kit we are 20th out of 21 countries for whom data is available.  This is part of the reason for our appalling productivity record but withdrawing from the EU is not the answer, if anything it will make matters worse.  I wouldn't mind betting that what investment we do make is mostly by foreign owned companies who may even consider relocating after brexit.

TOURISM SLUMPS

Oddly, after a brief boost when the pound dropped, tourism is now suffering a post brexit slump (HERE) with hotel rooms empty and business travellers and tourists turning their back on London.

Preliminary figures from the global hotel data firm STR, analysed by The Independent, show that the number of empty hotel beds in the capital increased by more than one-third in October compared with a year earlier. Average rates fell by 7.7 per cent to below £150.

Oh well, Prosper like never before.

LOSS OF EURO CLEARING WILL COST BANKS $77 BILLION

The CEO of the London Stock Exchange has said banks will have to find an extra $77 Billion in additional collateral (HERE) if Euro clearing is lost as seems almost certain to happen. 

Xavier Rolet said, “It will never come back to London, if the clearing operations are removed, what is most likely is that it will be New York that will benefit the most".