The reality of a No Deal

The easy thing for quarrelsome MPs and Remain supporters would be to dismiss Lord King’s remarks on a No Deal Brexit as the ravings of a long-time critic of the european Union and the eurozone.

Maybe. But King was also a two-term governor of the Bank of england, the person responsible for translating the last Labour government’s plan for an independent Bank of england into a fixture of the financial landscape and an economist of the highest order.

his successor Mark Carney, criticised by Brexiteers for being a traitor for his Remain views, has, to his credit, been more prepared for Brexit than anyone in Whitehall.

The Bank prepared a fat dossier on the potential impact of Brexit on the City, Britain’s biggest overseas earner, only to see it gather dust in Whitehall.

Once Carney managed to capture the attention of Westminster he was able to resolve one of the biggest threats to the original March 29 deadline – the fate of £41bn of derivatives contracts.

The current governor also forged a transatlantic derivatives deal and started to

make the case for supranational leadership of the global economy.

In his BBC interview, King was critical of the Chancellor for delaying No Deal preparations until it was too late. We know that Britain’s best-run companies, some of our european trading partners and the financial community have not been so foolish.

The world’s biggest asset manager ,Blackrock, had booked plane tickets to New York for a group of senior staff to make sure that investors did not suffer if an exit on March 29 turned out to be hugely disruptive to trading.

One of Germany’s biggest northern ports, Bremerhaven, has worked overtime to make sure exports of Volkswagen cars and parts can be smoothly shipped to Britain irrespective of customs arrangements. Astrazeneca set up an alternate production line for its prostate cancer medicines in Sweden, just in case of supply problems in the UK.

Toyota, the world’s biggest car maker, plans for production in the UK and there is intense speculation that BMW, far from shifting Mini production to Germany, wants to buy some of the honda facilities in Swindon when it ships back to Japan in 2020.

This is not fantasy economics. Planning is what well-run companies do when faced with known unknowns.

It may be harder for small and mediumsized firms to prepare in the same way. But if the representative business groups, such as the British Chambers of Commerce, spent less time publicly groaning about ‘corrosive damage’ and more time assisting members with preparations then the landing might not be so bumpy.

King also reiterated a basic truth about the eU and the eurozone. It is far from being a perfect market of 500m, as has so often been claimed. Greece remains an economic basket case where one quarter of output has been wiped out. Italy has seen no increase in its output for 20 years.

The monetary union, in King’s view, has been ‘disastrous’, and he notes that the British economy has done better than Germany’s since the referendum and is still doing so. Diplomacy teaches us that unilateral actions rarely work smoothly, so the unloved Theresa May deal (even with a £39bn bill) remains the sound option in spite of a partial third defeat.

But as King reiterates, there is no reason to fear the kind of well-prepared No Deal that large swathes of corporate Britain and parts of europe have been planning for.

Lyft off

AMeRICAN brokers and investment bankers are masters of hype.

Before the ride-service Lyft offer, the last tech initial public offering to hit Wall Street was social media site Snap.

The stock soared 44pc on its first day of trading. Two years later the shares are trading at just above $10 against a float price of $17 per share.

Lyft’s early trades were 20pc above the IPO price.

With a queue of other tech floats waiting to follow – including Uber – there was reason not to oversell Lyft, which has never made a profit.

Worryingly, Lyft founders Logan Green and John Zimmer learnt nothing about governance from previous tech floats. They will have 20 votes for each share they hold, against just one for everyone else, giving them 49pc control.

Silicon Valley finds it hard to ditch a controversial structure.