Upside of a Brexit deal
NAvIGATING the ‘fog of Brexit’ has been a nightmare for Mark Carney and the Bank of England.
Carney’s frequent updates and media appearances have been fodder for Brexiteers and Remainers alike as the governor has sought to straddle the line between the economic impacts and politics.
Sometimes the mask slips. He seemed genuinely outraged by the descent of Donald Tusk, president of the European Council, into crude rhetoric.
To those worried about the cost of their mortgages there was nothing from the Bank’s latest Inflation Report likely to give home owners sleepless nights.
Indeed, should the present stalemate continue and a No Deal Brexit emerge, the next move in interest rates could be a cut from the present 0.75pc rather than a rise – unless there were a disorderly run on the pound.
Uncertainty has taken a toll on business investment ever since the referendum in 2016. The remarkable aspect of this is how well the economy has done in expanding (if at subdued rates) and creating jobs. The UK’s steady performance has been a contrast to the eurozone, currently staring in the face of a third recession in a decade. The Bank’s projections suggest that uncertainty is going to have a sharply negative impact this year, with output expanding at 1.2pc instead of the 1.7pc previously forecast.
The 2020 forecast has also been revised down to 1.5pc from 1.7pc.
The Bank is unequivocal about the cause. It is an extraordinary downturn in business investment, which it now says is starting to bleed into consumer confidence.
But before anyone thinks about ordering tranquillizers they must recognise that there is a trampoline bounce waiting if, on, or by, March 29, Britain can leave the EU with minimal disruption.
A deal could yield as much as 3pc extra growth over three years, delivering better living standards for most households.
Robot error
WAREHOUSE fires used to be common among desperate businesses. They were a last-chance saloon for entrepreneurs looking towards an insurance claim to mitigate financial wipe-out.
The horrific blaze at the ‘robotic’ Ocado facility in Andover, Hampshire, is almost the opposite. Ocado’s reputation as an online logistics champion has never been higher following the build-up of overseas orders and the interest in Marks & Spencer. The shares were off 9.8pc in Thursday trading, and have given up more than £1bn in value.
Until now, the big worries about digital traders have been around system meltdowns and cyber- crimes. In Japan there have been worries about robotics following an incident when a mechanical system went loco and killed a worker. This led to intense safety inspections and a requirement that robotics systems be enclosed in cages.
Reports from Andover suggest that the fire began in a corner of the warehouse grid in which robots assemble orders. Ocado’s engineers will need to go back to the drawing board to see where any fault occurred, and, as with aircraft turbines and other safety sensitive technologies, some retro fitting of fire-proof equipment will be required.
Overseas buyers such as Casino in Paris and the Kroger supermarket giant in the US, which have placed faith in Ocado systems, rightly will have some anxiety. There will likely be an impact, not just on safety measures but costs, which could potentially affect the economics.
Ocado has shown itself sensitive to broader societal concerns by paying for the re-housing of residents who were temporarily moved, making a wage promise to affected staff and offering compensation to shoppers who failed to get their smoked salmon and artichokes.
But the fire has reopened the issue of Ocado’s credibility, placing a new heavy burden on the shoulders of chief executive Tim Steiner and his team.
They could show good faith by putting over-generous bonuses on hold.
Cook out
THIS may not look the best time to sell an airline given the difficulties of Flybe and Norwegian and Ryanair’s recent turbulence.
But needs must, and Thomas Cook plans to post a ‘for sale’ sign on its profitable carrier in the hope of slashing debt and giving its tourist and hotels business a fresh start.
Buy-your-planes.com, if there were such a thing, has pinned a value of £1bn to £1.5bn on the fuselage. That’s a big number even if planes are half-full with tourists at the start of every year.