Brexit is least of EU woes

BY the standards of seismic events, the decision of the Prime Minister to put on hold today’s meaningful vote on Brexit hardly counts.

Yes, it is unfortunate that the period of uncertainty is being extended, which cannot be helpful in boardrooms as businesses make investment plans.

But that would have also been the case had the Commons rejected her deal as has been universally forecast.

So the next stage in the process is back to Brussels for more concessions, although no one seems any wiser as to how to resolve the Irish border dispute.

The only possible crumb of comfort is that although the EU has remained solid as a bloc during the Brexit negotiations, it is not exactly a thriving entity.

France has been brought to a near standstill by the yellow vest protesters. Italy is in open dispute with Brussels, Greece as disaffected as ever and the whole bloc is suffering under the threat of right-wing movements.

This has led the high priest of inequality, French economist Thomas Piketty, to propose a trans-European budget which would encourage more generous transfers to deal with inequalities.

That is a lot of stuff to deal with, but as we saw with David Cameron’s late stage flight to Brussels in a final push for ‘Remain’, changing the minds of Europe’s bureaucratic zealots should never be taken for granted.

By the standards of Black Wednesday in 1992, when the pound fell 15pc, in the aftermath of the referendum when it dropped by 15pc and even the 9pc ‘flash crash’ of the pound in October 2016, the 0.63pc decline of the pound yesterday to $1.2645 barely registered in spite of headlines proclaiming it the worst level for 18 months.

The idea that even the dimmest trader had not detected that a defeat for May was imminent, and that avoiding action would be necessary, was highly unlikely.

As pointed out here before, UK shares are much more likely to be influenced by an impending bear market and recession fears in the United States than what happens to the pound. With 80pc of the FTSE weighted towards foreign currency earnings, a fall in sterling actually makes income look that much better.

Given the amount of political wrangling and the Brexit domination of headlines one might have thought that the UK would have been feeling the down-draft of recession by now.

The new monthly series of output data from the Office for National Statistics do not suggest a large dip.

Growth was resilient at the start of the final quarter of the year at 0.4pc. That is down from the healthy 0.6pc in the third quarter but nothing much to worry about.

The slowdown, such as it is, looks to have been more of a pull-back from consumer spending from the sizzling World Cup summer than anything else.

As the year ends it is going to be Christmas that defines the outcome rather than anything else.

We are told footfall is down dramatically, which is hardly surprising given that Britain has the highest online sales penetration of the larger Western nations.

It is also worth noting that the latest Manpower survey, just released, shows that the hiring intentions of UK employers have climbed to their highest level in 18 months. Investment in plant and machinery may be lagging, but corporations have to be fairly confident of the eventual outcome of Brexit – in, out or stuck halfway – to be making jobs decisions at this stage.

The second shoe may yet drop on the financial markets and there will be a wholesale pull-back from the pound and equities.

But it is certainly not happening yet.

Last chance

THE City and free market capitalism still has a chance to redeem itself at Interserve.

The support services and construction group has already done the right thing in replacing time- servers chairman Lord Blackwell and chief executive Adrian Ringrose with lively new models.

Now it is up to Ringrose’s replacement Debbie White to persuade lenders and shareholders that it is in the broader public interest to swap up to £650m of debt for equity and maybe inject some fresh capital at the same time.

If Ms White can show that margins have been restored and the bad projects are behind it, Interserve, and the future of outsourcing, could still have a fighting chance.

There is no point in giving Labour leader Jeremy Corbyn fresh ammunition to throw at the private sector.