Now, to be fair, Cummings was not saying that leaving the EU is bound to be a disaster: rather, that failure is just one possible future. (I think he was using the word “branches” in the sense of a decision tree, which envisages a series of possible choices and their consequences.) Earlier in the exchange, he explained his view that Brexit alone, while necessary, was not sufficient. For leaving the EU to work, there would also have to be wholesale reform of Whitehall, British education, science and productivity. But even in that context, it’s still a striking statement, given who’s making it. The man who led the drive to pull Britain out of the EU is admitting that it may well not work.
UK health secretary Jeremy Hunt argues on Twitter that “people are COMING to UK post Brexit vote” and cites 4,000 new nurses arriving from the EU in the year to March. What he fails to mention, as pointed out by Jonathan Portes, is that virtually all of them came before the referendum
07-10-2017, 01:36 AM (This post was last modified: 07-10-2017, 01:36 AM by admin.)
Sir Vince Cable - the likely next Lib Dem leader - says he is "beginning to think Brexit may never happen". He said "enormous" divisions in the Labour and the Tory parties and a "deteriorating" economy would make people think again. "People will realise that we didn't vote to be poorer, and I think the whole question of continued membership will once again arise," he said.... "The problems are so enormous, the divisions within the two major parties are so enormous. I can see a scenario in which this doesn't happen." MPs are set to vote on the Repeal Bill, a key piece of Brexit legislation, in the autumn. Sir Vince has said he wants to form a cross-party coalition including like-minded Tory and Labour MPs to oppose Britain's exit from the single market - the official policy of both the Conservative and Labour parties.
The Bank of England has issued a new Brexit warning. A reduction in trade with the European Union after leaving the bloc would be damaging to the U.K. by forcing it to refocus production away from its specializations, Deputy Governor Ben Broadbent said in a speech in Aberdeen, Scotland on Tuesday. It would also hurt EU growth, albeit on a much smaller scale, he said. “Trade really is mutually beneficial and less of it costs us all,” Broadbent said.
Whether you are in favour of hard Brexit, soft Brexit, clean Brexit or no Brexit, it should be clear that there is something fundamentally wrong with the economy. The same old problems keep surfacing: too small an industrial base; too much debt; too great a geographical divide between the rich south and the rest of the country; too many poorly paid low-productivity jobs.
In the 1970s, both left and right were agreed that the economy required fundamental changes. The Conservatives had Thatcherism, a blast of the free market designed to shake Britain out of what was seen as corporatist complacency; Labour had the Alternative Economic Strategy built around nationalisation, planning agreements between state and industry, and reflation behind tariff walls.
JPMorgan chief executive Jamie Dimon has warned that US banks would have to uproot their London-based staff if the EU orders them to do so after the UK leaves the political bloc, underscoring the potential impact of Brexit on the City of London. While JPMorgan currently plans to shift “several hundred” of the bank’s 16,000 UK staff to the continent as soon as the UK leaves the EU, Mr Dimon said the bank would have no choice but to move more people if European banking supervisors insisted. “If the EU determines over time that they want to move a lot more jobs out of London into the EU, they can simply dictate that,” he told European finance executives and politicians gathered in Paris on Tuesday.
Britain’s economy will lose momentum this year amid squeezed living standards and uncertainty over Brexit and the inconclusive election result, leading ratings agencies have predicted. Moody’s said the qualms about talks in Brussels and the minority government have increased the UK’s political and financial risks. Analysts at the ratings agency said the UK economy has started to slow and they expect it to weaken considerably throughout the rest of the year, adding that it was unclear if the government could deliver a “reasonably good” Brexit deal.
A drop in manufacturing output, a slowdown for the construction industry and a widening in Britain’s trade deficit have added to fears that the economy will struggle to eke out much growth this year. In the latest sign that the resilience seen after last summer’s Brexit vote has waned, a trio of weaker-than-expected reports from the Office for National Statistics knocked the pound lower against the dollar and the euro on Friday. The figures also dampened bets that the Bank of England could raise interest rates in coming months.
Almost a quarter of the teachers who have qualified since 2011 have already left the profession, according to official figures that have prompted further concerns about the pressures on the profession. Of those who qualified in 2011 alone, close to a third (31%) had quit within five years of becoming teachers, the figures show. The official rate of dropouts from the profession was published as the government came under pressure to relax the 1% pay cap that has been placed on teachers’ pay until 2020.
Regular pay adjusted to account for the impact of inflation fell by 0.5% year on year over the period, shrinking family incomes and signalling a weaker outlook for consumer spending. It followed a 0.6% drop in real pay in the three months to April, and a 0.4% fall in the previous three months, according to figures from the Office for National Statistics. Real pay fell despite a surprise drop in the unemployment rate from 4.6% to 4.5%, which was the lowest since May to July 1975.
Privately, Brexit officials appear to have conceded that a cake cannot be both kept and eaten. They are telling ministers not only that they will have to choose between sovereignty or the economy, but that they must choose the latter. While this was always the subtext, it was not meant to be so explicitly in the script. Theresa May’s Lancaster House speech and the subsequent Brexit White Paper made clear the Government would pursue a full free trade agreement on both goods and services (something no third country has ever achieved with the European Union), while removing itself completely from the jurisdiction of the European Court of Justice and ending free movement. This entirely imagined reality was meant to charm the voters to sufficient degree to allow May to sack the Chancellor. But the script did not run to course, to the extent that she is no longer the one writing it. Now, the prevailing mood music is one in which ministers have to accept political compromises in order to hang on to conditions similar to those in the European Economic Area, like Norway, who accept free movement of people.
Quite what can be negotiated in the year and a bit that remains is highly uncertain (the terms must be broadly agreed by October 2018), but the further the Government and in turn the public walk down this line, the sharper the reality will come into focus, that the UK’s current – and they are still current – arrangements with the EU, are themselves the product of decades of hard negotiation, and are already uniquely favourable.
Britain’s economy will lose momentum both this year and next as the squeeze on living standards caused by higher inflation outweighs the benefits of the cheaper pound on exports, one of the world’s leading rating agencies has predicted. Standard & Poor’s said that after holding up much better than predicted in the period immediately after the June 2016 EU referendum, the UK’s growth rate would slow from 1.8% in 2016 to 1.4% in 2017 and 0.8% in 2018. The rating agency warned that the outlook for the economy might be even worse than it was predicting if the Brexit talks between the UK and the EU went badly.
Deutsche Bank AG may shift about 300 billion euros ($350 billion) from the balance sheet of its U.K. entity to Frankfurt as client trading and assets migrate to the continent following Britain’s decision to leave the European Union, according to a person familiar with the matter. The project, dubbed Bowline, calls for trading in the German city to go live in September 2018 and for the assets to be moved over by March 2019, said the person, who asked for anonymity in discussing internal matters. Shifting 300 billion euros would be equivalent to almost a fifth of Deutsche Bank’s balance sheet, which listed 1.59 trillion euros in total assets at the end of last year.
The only surprise is that the experts’ predicted economic consequences of Brexit took so long to materialise
The Brexit debate is an endless source of mirth for anyone with a dark sense of humour. My favourite quote is from Michael Gove, Britain’s environment secretary.
Just before the EU referendum in June last year, Gove, then justice secretary in David Cameron’s government, dismissed the all-but-unanimous view of economists and others that a decision to leave the EU would deeply damage the British economy. “People in this country have had enough of experts,” Gove testily explained, referring to “experts from organisations with acronyms, saying they know what is best and getting it consistently wrong”.
The early post-referendum evidence suggested, to the surprise of many – or at least to many of the experts – that Gove was right and they were wrong. There was in fact no immediate recession in the UK after the vote for Brexit; indeed, there was not even a slowdown in growth.
To explain this, observers pointed to the nimble response of the Bank of England, which cut interest rates to prevent any softening of demand. They pointed to the big post-referendum depreciation of the pound, which promised to make British exports more competitive and offset any problems with the transition to a new trade regime. They suggested a UK freed of burdensome EU regulations could offer a more business-friendly environment and lower corporate tax rates, and thus become a magnet for foreign investment.
Most provocatively, they questioned predictions that the uncertainty surrounding Brexit would have a profoundly adverse impact on economic performance. Economists cannot measure uncertainty directly, they reminded us, while proxies, like the frequency with which the term appears in the financial press, do a poor job of capturing its effects.
Indeed, we economists have had little success at reliably predicting when and why uncertainty arises. And there is little agreement on the severity of its impact. Maybe we would be better off placing less weight on the effects of uncertainty when making forecasts in general, and in the case of Brexit in particular.
But this view looks rather less compelling with the passage of a couple of additional quarters. British consumer confidence is down, with spending in the second quarter of this year falling to its lowest level in four years. New car sales have been down for four consecutive months. The Bank forecasts a whopping 20% decline in business investment in the coming years; Brexit’s champions predicted the opposite.
The drop in confidence, some might object, reflects an inconclusive general election and a hung parliament, not the Brexit vote. Or worsening conditions can be blamed on the government’s less-than-stellar negotiating strategy and the appearance that it is entering discussions with its EU partners unprepared.
But the inconclusive election reflects the schizophrenia of the Conservative and Labour parties on the Brexit issue. The prime minister, Theresa May, opposed Brexit before the referendum but embraces it as the occupant of 10 Downing Street. The Labour opposition under Jeremy Corbyn officially opposes Brexit but seems to derive peculiar satisfaction from the fact that it is proceeding.
Some argue that if the government adopted a more coherent negotiating strategy the damage would be less. But the fact is that there is no coherent negotiating strategy. May’s objectives – restriction of immigration from the EU while maintaining full access to the European single market – are fundamentally incompatible.
The only surprise is that it took so long for the consequences to materialise. It evidently took more time than expected for the implications to sink in – to understand that “Brexit means Brexit,” as May’s pithy tautology put it. It took time to realise that there would be no smooth break with the EU and that negotiations would not be wrapped up in two years. There might be no free-trade agreement, no passporting rights for British banks seeking to do business in the EU, and not even an agreement on landing rights for British aircraft on the continent.
And now the chickens are coming home to roost with a vengeance (if chickens could be vengeful). Consumers, seeing the pound depreciate, front-loaded their spending in the second half of last year, because they understood that import prices would rise. Having incurred additional debt, they are in no position to continue spending at that earlier pace.
Sterling’s substantial depreciation, moreover, augurs a significant rise in inflation, which means the Bank will have to start raising interest rates sooner rather than later. The consequences for growth will not be pretty. The Bank will no longer be the Brexiter’s friend.
What the late, great MIT economist Rudi Dornbusch – that most expert of experts – said about Mexico’s peso crisis in the 1990s applies to the damage from Brexit as well. A crisis, he noted, “takes a much longer time coming than you think, and then it happens much faster than you would have thought”.
• Barry Eichengreen is professor of economics at the University of California, Berkeley; Pitt professor of American history and institutions at the University of Cambridge; and a former senior policy adviser at the IMF.
Britain will today propose keeping the same customs rules with the EU for an “interim” period after Brexit to avert border chaos, sparking fresh accusations that policy is mired in confusion. Ministers will tell Brussels they want a “temporary customs union” for several years, amid evidence that businesses are already pulling investment because they fear the harm to trade from a cliff-edge exit in 2019. They will ask for “alignment” on customs – making clear that, although Britain would leave the EU’s existing arrangements, little would change on the ground. The proposal will be greeted with relief by business leaders as a big step back from Theresa May’s threats that “no deal is better than a bad deal”, made before her election setback. However, there are huge doubts over whether EU leaders will accept the plan – after two cabinet ministers insisted that Britain must also be free to seek trade deals with non-EU countries, from day one after departure.
The Government has been accused of refusing to publish more than 50 “secret” studies in the impact of Brexit – for fear they could cause embarrassment to ministers. Brexit minister David Jones confirmed in a letter that the Department for Exiting the European Union had “conducted analysis of over 50 sector of the economy”. But ministers are so far resisting calls to publish the findings of the investigations in full – arguing that some findings “would undermine the Government’s ability to negotiate the best deal for Britain” were they made public. It comes after one leaked piece of research by the Department of Health found that Brexit could cause a shortage of more than 40,000 nurses by 2026.
