BBB Summer into Fall, or fall into Chequers

19 Sep 2018

August ended with the EU and British negotiators agreeing on one thing; there had not been much progress.  So in September they started to make progress.

The EU's crackpot idea that somehow Britain would pay to fund future EU costs before they would discuss future trade relations is a root cause, and how you can agree border issues without agreeing how trade in regulated across them Brexit Bear finds unbearably dim.  The easy win of agreeing citizen rights has somehow been left unresolved while the teams were at it.

One minute we were told that Small UK businesses are bullish about international trade, and have been taking advantage of the weak pound to increase overseas sales since the EU referendum, the next minute the end in nigh. Of 500 owners and senior managers surveyed by the OFX, 67% said they feel confident about doing business overseas. Since the EU referendum, almost half (48%) have increased international sales, while 36% expect to start or increase exports in the next twelve months. Since the EU referendum, 28% of the SMEs surveyed have seen sales decrease to UK customers, while 44% say rising inflation is the biggest current concern for their business: the next minute we learned that business confidence has dropped as political uncertainty takes a toll, according to the ICAEW. Its index of optimism, where anything above zero suggests firms are positive, fell from 6.7 in the second quarter to -8. Matthew Rideout, director of business at the ICAEW, said the fall back into negative territory was "not unexpected". He said: "The industrial strategy has been lost in the void, coupled with no clear signal towards post-Brexit policy," he said. "As a result, businesses cannot see through this haze of uncertainty and are struggling to look further than the end of the next quarter in terms of their decision making."  Information in the referendum was scant and skanky, now it is extensive and skanky (sorry “conflicted”).

According to The Share Centre's profit watch report, the UK's top 350 listed firms saw revenues rise at the fastest rate since 2014 over the past year, climbing 5.7% to £346.1bn, while profits jumped 41% to £22.7bn. The ratio of sectors with rising profits compared to those with falls was the highest on record, with just one in 20 businesses posting a loss for the year to March 31 versus one in nine in the previous two years. However, the study warned of darker days ahead. "Even those that performed extremely well may not continue to do so," it said. "Since the beginning of the year, the economy has slowed markedly, sparking a succession of profit warnings. The UK is now the worst performing economy in Europe."   The Greeks will be surprised to learn this.

Britain's factories enjoyed a surge in sales to the EU in the first half of 2017, as export growth outstripped import growth. The UK's goods deficit narrowed to €53bn (£48bn) for the six months to June in its trade with the EU, down from €57.8bn in the same period of 2016. The UK's total trade deficit has shrunk from €102.2bn in the first half of 2016 to €83.7bn this year.  Of course, it depends how you look at lies, damn lies, or statistics; Figures from the ONS show the trade deficit widened to £4.6bn in June - the biggest monthly deficit of the year. The ONS noted that the depreciation in sterling since the Brexit vote has had little impact on trade. Separate data revealed that manufacturing output stagnated, largely due to weak car production. “The buoyancy of manufacturing surveys continues to be at odds with the weakness of the official numbers,” said Howard Archer, chief economic adviser to the EY Item Club. “With sterling's deprecation and a healthy world economy supporting exporters, one would hope that the gap between the two will narrow in a favourable direction [but] there was little sign of this in June's trade numbers.”  Maybe Skanky is the better term, but certainly there is as yet no clear picture of how things are going (or in the case of the negotiations, not going).

Still, the EU itself, if not the member states, is pretty flush until the UK money runs out. 

Accountant Brian Foster wrote to the Daily Telegraph to say he is not surprised that EU officials have spent thousands on junkets, but he is surprised they produced the figures. He says: “As an accountant, my main reason for voting Leave was that those who rule over us are not trustworthy and don't keep proper financial records.”  Have the EU accounts ever had a “clean” audit report?

The European Commission has proposed that the European Banking Authority should actively enforce anti-money laundering supervision across member states. Under the plans, the EBA would be able to order national regulators to investigate breaches and specify remedies such as sanctions. If national regulators failed to act, the EBA would have the power to step in “to address decisions directly” to banks, so the project goes on and the question remains are we jumping out of the canoe before the rapids, or throwing ourselves into a whirling maelstrom?