Don’t fear a hard Brexit
THE idea of Britain leaving the EU without a deal is understandably terrifying. Unilateral economic actions rarely have good outcomes. The immediate impact of a hard Brexit would be that of an economic shock.
The pound would plummet and some £ 40bn of insurance contracts and £29 trillion of derivatives contracts would be in a legal limbo. If our European allies decided to play hardball then the ‘stack’ of trucks at Dover could stretch all the way to John o’Groats.
Business would be faced with its worst enemy of uncertainty and threats by Airbus and Jaguar Land Rover to pull production out of Britain could become reality.
The more one learns of compromises in Theresa May’s plans to sign up to EU rules for the trade in goods and agriculture while leaving services out, the more attractive a clean Brexit, which does not bend to the diktats of Brussels, becomes.
Those who support Remain and a customs deal wrap the issue in the flag of UK jobs. Reality is that more Continental jobs would be put at risk by a hard Brexit than those in the UK because when it comes to the goods trade Britain runs a huge deficit.
Whereas much of Europe has a jobless problem, the UK doesn’t. Flexible labour laws mean British unemployment is at its lowest level since the mid-1970s.
Among the responses to a hard Brexit might be to re-shore the supply chain. British based car makers currently source 44pc of parts in the UK, up from 41pc a few years ago. The manufacturer Liberty House is, for instance, investing in an aluminium wheelpressing plant in the UK rather than bringing parts in from overseas.
Change can be painful as Britain learned when it was dumped out of the Exchange Rate Mechanism, and after the financial crisis when the banking sector was valued at 400pc of the nation’s total output. The financial system adapted and came back stronger than ever with financial services generating £77bn of trade surpluses, according to City UK.
A report by Frontier Economics for the Publishers Association says that it has significantly increased the value of Britain’s £92bn creative industries sector, another which is barely recognised in the recherché debate about borders and customs.
A hard Brexit would be disruptive. But so would a rules-based arrangement which constrains the animal spirits.
Sun strife
THE frighteningly hot summer has poisoned the atmosphere in the nation’s boardrooms. The latest spat is at inter- dealer broker TP Icap where the chief executive John Phizackerley has been unceremoniously dumped and threatens legal action unless he is allowed to get his hands on £15m of options.
This comes hot on the heels of the decision of the Stobart board to remove founder Andrew Tinkler as a director just hours after he reclaimed a seat at the company.
Meanwhile in media land, Sir Martin Sorrell has cocked a snook at WPP chairman Roberto Quarta by buying Dutch firm Mediamonks. This in spite of WPP’s threat to challenge its former chief executive’s ‘good leaver’ status and deprive him of £20m of stock options.
Premier Foods boss Gavin Darby is hanging on by his fingertips after an assault by an activist investor.
At York-based housebuilder Persimmon chief executive Jeff Fairburn is clinging onto office and a pay-out of up to £75m despite the resignations of the chairman and head of the pay committee.
The governance idea of splitting the roles of chairman and chief executive so that not too much power was vested in any one person was a sensible reform.
But hostilities between chairman and chief executive at TP Icap and WPP show a falling out among the big beasts hurts investors. Robust board responses to fatcattery are refreshing. The fisticuffs among bosses drags down the reputation of free markets and is a gift to Corbynites.
Super tech
AFTER a £9m first-half loss, Ocado’s Tim Steiner points out that the online grocer is a technology firm and profit margins are different to ‘selling kale’.
In the early days of Amazon, investors would complain that Jeff Bezos ignored requests for earnings and just piled money back into investment such as the Cloud. Now it is regarded as the most scary competitor in the world. Patience rewarded.