Grow up and listen to business

THE chaos continues. There is the Brexit vote in the Commons on Tuesday and more about that in a moment. But there have also been the vicious movements in share prices around the world, which in the case of the UK have wiped out all the gains of the past two years. And not just in Britain. The Facebook share price is back to its level in the spring of 2017 and the price of even the mighty Apple is where it was in January.

The trigger for these collywobbles was the detention of a woman in Canada.

That might seem bizarre, but Meng Wanzhou is Chinese commercial royalty. She is the daughter and potential successor of Huawei founder Ren Zhengfei. She is also chief financial officer of Huawei, the second largest manufacturer of communications equipment in the world.

So her detention and request for extradition to the United States, reportedly on Huawei’s exports to Iran, was a red rag. Suddenly, the idea of a lull in the trade war between the two countries evaporated.

So we have three elements to the chaos. There is political disruption, certainly in the UK but also elsewhere (look at France where the government has been shaken by protests around the country by campaigners in yellow jackets). There is financial market disruption. And there is the growing evidence of a trade war between the world’s largest and second largest economies.

Lord King, Mervyn King, the former governor of the Bank of England, has likened the UK political situation to that of the late-1930s and the 1970s, two earlier periods when the political establishment lost control. When one of the great economists of our generation says something like that, you sit up. But I think the analogies are unhelpful.

Very few people alive now remember the 1930s, but I do recall my parents talking about their sense of despair about the policy of appeasement, and how they felt Chamberlain’s Munich accord with Hitler would make war inevitable.

But whatever view you take of Europe’s negotiating tactics over Brexit (and I think they have behaved both unpleasantly and stupidly), this is not Munich.

Nor is this the 1970s, when I started work. That decade saw the break-up of the fixed exchange rate system; the oil price shocks; the secondary banking crisis; interest rates hitting 15 per cent; inflation touching 25 per cent in 1975; the Government bowing to the International Monetary Fund’s programme in 1976; and the decade ending in the ‘winter of discontent’ strikes – a level of chaos that led to the election of Margaret Thatcher’s Government in 1979. If you think things are bumpy now, it is nothing like the mess we faced when we hit the job market in the 1970s.

Nor is the geopolitical situation so fragile. The Meng Wanzhou detention reminds us that we are entering into a period of trade tension as the two giants, the US and China, square up for a series of economic fights. In about ten years’ time, China will pass the US to become the world’s largest economy, but the US will remain the dominant power. This is not a recipe for harmony.

But a trade war is only a trade war. The Cold War was much more dangerous. The memory of the Cuban Missile Crisis of 1962 lingered on into the 1970s. The US and the Soviet Union were so alarmed by what might have happened, that they agreed the first arms reduction treaty, SALT 1, in 1972. But a more comprehensive treaty was not reached until 1991. Now see Brexit in this context.

You may think that the more extreme scenarios in the event of a no-deal Brexit painted by Lord King’s successor, Mark Carney, are absurdly negative. You may agree with Lord King that it would indeed be madness to ‘align the country indefinitely with laws over which it has no influence’.

But when, as we report on Page 12, you get a substantial majority of UK businesses supporting the compromise that has been negotiated, then we should take that seriously. This is only the exit deal. Future trade relations will evolve, and almost certainly away from Europe because the rest of the world will grow faster.

But this weekend, politicians should care to listen to the people who are still driving the economy forward – and respect their views.

Take it seriously when a majority of UK firms support a compromise