[Law] How Brexit may affect your wallet.

[Dixie]

The Times reports today a "stellar" performance by the UK industrial sector in the run-up to the referendum, delivering its biggest increase in output for 17 years. FTSE stands at its highest level of the year, and annual growth in the economy accelerated to 2.2% compared to the Eurozone average of less than 1%.

On the other side of the coin, Philip Aldrick writes on the business pages that(I summarise heavily) the main predictor of a downturn is the gloom and doom spread by the disappointed remainers, with the commentariat continually talking the country down turning into a reality as confidence dissipates.

Ultimately, of course, it's all guesswork.

(I'd offer a link but it's behind a paywall)

 

[Paule23]

I find the suggestion that lack of education makes someone thick or stupid quite, well, stupid.

The families of those caught up in the Nice atrocity are probably justifiably feeling a bit xenophobic at the moment.

Xenophobia would not be justified. Anger yes, but directing it at all people who are not native to the country would not be justified, any more than anger at any race, colour or creed would be on the actions of a minority.

Oh and in this case I understand the attackers were French born.

 

[Taff]

The Times reports today a "stellar" performance by the UK industrial sector in the run-up to the referendum, delivering its biggest increase in output for 17 years. FTSE stands at its highest level of the year, and annual growth in the economy accelerated to 2.2% compared to the Eurozone average of less than 1%.

The really important figures will be the ones that show the current Quarters output. I guess it will show a small slow down - especially from the last impressive Quarters figures.

 

[L'irlandais]

BBC states:

Data from IHS Markit's Purchasing Managers' Index, or PMI, shows a fall to 47.7 in July, the lowest level since April in 2009. A reading below 50 indicates contraction.
Both manufacturing and service sectors saw a decline in output and orders.
However, exports picked up, driven by the weakening of the pound.
The report surveyed more than 650 services companies, from sectors including transport, business services, computing and restaurants.

 

[RobLev]

The Times reports today a "stellar" performance by the UK industrial sector in the run-up to the referendum, delivering its biggest increase in output for 17 years. FTSE stands at its highest level of the year, and annual growth in the economy accelerated to 2.2% compared to the Eurozone average of less than 1%.

On the other side of the coin, Philip Aldrick writes on the business pages that(I summarise heavily) the main predictor of a downturn is the gloom and doom spread by the disappointed remainers, with the commentariat continually talking the country down turning into a reality as confidence dissipates.

Ultimately, of course, it's all guesswork.

(I'd offer a link but it's behind a paywall)

The Indie reported today that Ford is talking about shutting its remaining UK engine plants (Dagenham (62% Leave vote) & Bridgend (55% Leave)) because of the Brexit vote; the £-$ exchange rate is costing them real money now; exclusion from the single market would put the tin lid on it.

That's 3,800 jobs down the Swanee.

 

[L'irlandais]

This week's blip will not be welcomed in many quarters :

Analysts at HSBC are forecasting that the pound could fall to $1.10 and could be worth just one euro by the end of next year. "The argument which is still presented to us - that the UK and EU will resolve their difference and come to an amicable deal - appears a little surreal," said David Bloom, head of foreign exchange research at HSBC. "It is becoming clear that many European countries will come to the negotiation table looking for political damage limitation rather than economic damage limitation. A lose-lose situation is the inevitable outcome."

 

[Dixie]

the £-$ exchange rate is costing them real money now; exclusion from the single market would put the tin lid on it.

That's 3,800 jobs down the Swanee.

The exchange rate is of course a problem (assuming that it doesn't export its engines with prices in € or $, thereby increasing its profitability by changing foreign currency into inflated £ - which of course it does). But that's a function of market panic, of the sort which could be triggered by a number of circumstances, including for example a possible Trump presidency, a possible Clinton presidency or a possible Labour government - it's not limited to Brexit.

This idea that "exclusion from" the Single Market would be the straw that broke the camel's back is much more concerning. If there were any possibility of that happening, it would indeed be a disaster. Fortunately, though, there is no possibility of it happening. There is no country in the world that is excluded from the Single Market; not Russia, not China, not Brazil, not the US, not Iran and certainly not post-Brexit Britain. Careless commentators do immense damage by conflating the ideas of membership of the Single Market and access to the Single Market. These are completely different concepts.

Norway is a member of the Single Market. it pays a very heavy financial membership fee, and is happy to participate in the free movement of people. In trade in tangible goods, its exporters have to produce a form EUR1, certifying that the goods actually originate there. Upon receipt of the form, EU customs authorities will grant 0% duty rates on import.

Morocco, Tunisia, Algeria, South Africa, Israel, Mexico and Korea (among many others) are not members of the Single Market. They do not share Norway's heavy financial membership fees, nor do they participate in the free movement of people. In trade in tangible goods, their exporters have to produce a form EUR1, certifying that the goods actually originate there. Upon receipt of the form, EU customs authorities will grant 0% duty rates on import.

In light of the similarities (is "identicalities" a word?) between trade mechanisms for members and non-members, can anyone explain why the (apparently uninformed) commentariat feels that membership of the Single Market is a big deal for industrial companies?

 

[RobLev]

The exchange rate is of course a problem (assuming that it doesn't export its engines with prices in € or $, thereby increasing its profitability by changing foreign currency into inflated £ - which of course it does). But that's a function of market panic, of the sort which could be triggered by a number of circumstances, including for example a possible Trump presidency, a possible Clinton presidency or a possible Labour government - it's not limited to Brexit.

This idea that "exclusion from" the Single Market would be the straw that broke the camel's back is much more concerning. If there were any possibility of that happening, it would indeed be a disaster. Fortunately, though, there is no possibility of it happening. There is no country in the world that is excluded from the Single Market; not Russia, not China, not Brazil, not the US, not Iran and certainly not post-Brexit Britain. Careless commentators do immense damage by conflating the ideas of membership of the Single Market and access to the Single Market. These are completely different concepts.

Norway is a member of the Single Market. it pays a very heavy financial membership fee, and is happy to participate in the free movement of people. In trade in tangible goods, its exporters have to produce a form EUR1, certifying that the goods actually originate there. Upon receipt of the form, EU customs authorities will grant 0% duty rates on import.

Morocco, Tunisia, Algeria, South Africa, Israel, Mexico and Korea (among many others) are not members of the Single Market. They do not share Norway's heavy financial membership fees, nor do they participate in the free movement of people. In trade in tangible goods, their exporters have to produce a form EUR1, certifying that the goods actually originate there. Upon receipt of the form, EU customs authorities will grant 0% duty rates on import.

In light of the similarities (is "identicalities" a word?) between trade mechanisms for members and non-members, can anyone explain why the (apparently uninformed) commentariat feels that membership of the Single Market is a big deal for industrial companies?

Because it's not quite as simple as that:

https://twitter.com/barryjbutler/status/781597053126316033

Norway is outside the customs union - hence the requirement for certificates of origin shared with other FTA partners with the EU; but they are inside the single market (other than for fisheries and agriculture) - hence the lack of requirement of any paperwork about compliance of the goods with EU standards. It's the non-tariff barriers that are the major issue.

With complex supply chains, going back and forth between UK and the rest of the EU, and "just in time" stock arrangements, those barriers will kill UK to EU export industry. Nissan is already being promised (illegal under both EU and WTO rules) state aid to stay here if we do leave the SM.

And of course, a significant chunk of our exports to the EU are in services, and without regulatory passporting, that will also take a hit.

As for Norway - more than half of her exports to the EU are raw materials - 49.9% fuels, and 2.3% other raw materials. Less than 20% are manufactured goods.

FWIW, because Norway's fisheries are outside the EU, and tariffs differ between raw and processed fish, its fish processing industry is moving to Denmark.

I'm not entirely uninformed; but I am not a specalist in many of the relevant areas of law (although I do have public law expertise). George Peretz QC is - I follow his twitter account, and a lot of what I do know I have learnt from him and those he cites.

 

[RobLev]

...

Norway is a member of the Single Market. it pays a very heavy financial membership fee, and is happy to participate in the free movement of people. In trade in tangible goods, its exporters have to produce a form EUR1, certifying that the goods actually originate there. Upon receipt of the form, EU customs authorities will grant 0% duty rates on import.

...

Following on from my previous comment; the costs of compliance with rules of origin is estimated at between 4 and 15% of the value of goods.

And given that Norway pays a "very heavy financial membership fee" for the SM, whereas Morocco etc don't; do you suggest that Norway doesn't know what it's doing?

 

[Rich_NL]

In light of the similarities (is "identicalities" a word?) between trade mechanisms for members and non-members, can anyone explain why the (apparently uninformed) commentariat feels that membership of the Single Market is a big deal for industrial companies?

Seems the Norwegians are either pathologically generous, or deeply stupid, doesn't it? Or perhaps that's a sign there's something amiss with the argument?

 

[RobLev]

On complex supply chains; look at the graphic for the fuel injector - crosses UK-rEU borders no less than 5 times... Racking up tariffs and potential customs inspection delays every time, assuming no SM or CU post-Brexit.

 

[Taff]

... Norway is a member of the Single Market. it pays a very heavy financial membership fee

I don't understand why this is a one-way street.

If the UK has to pay the EU just to allow us to sell into the single market - given that we import far more than we export - why doesn't the EU pay us for selling into the UK? I know not all of our imports come from the EU but we still import more from the EU than we sell to the EU. Or to put it in simple terms - they need us more than we need them. Remind me again what we would be paying them for.

 

[RobLev]

I don't understand why this is a one-way street.

If the UK has to pay the EU just to allow us to sell into the single market - given that we import far more than we export - why doesn't the EU pay us for selling into the UK? I know not all of our imports come from the EU but we still import more from the EU than we sell to the EU. Or to put it in simple terms - they need us more than we need them. Remind me again what we would be paying them for.

Look at it this way; as a result of Thatcher putting her weight behind the Single European Act, and then as a result of Maastricht. the SM was created which gives us effectively a domestic market of 500m people. We pay into the budget for the institution - the EU - that runs that market and provides other benefits across the Union. All other members pay into and take out from that budget - some (eg Germany) pay in, net, more than us; others receive more than us and indeed more than they pay in. That's not unusual in a club that exists for the overall benefit of all; think of the full members at your local golf club who no doubt subsidise the junior members.

Norway chose to stay outside the club; but still wanted the benefits of the Single Market, so is required to make significant contributions to the club/EU budget - similarly to non-members paying green fees (and somewhat higher than members) of they want to use the gold club facilities.

 

[FlipFlop]

Look at it this way; as a result of Thatcher putting her weight behind the Single European Act, and then as a result of Maastricht. the SM was created which gives us effectively a domestic market of 500m people. We pay into the budget for the institution - the EU - that runs that market and provides other benefits across the Union.

And if that was all the EU did, then I am sure the Brexit result would have been different. But how many people voted Brexit, to leave the political union, but wanted to remain part of the Single European Market? (so called "Soft Brexit" now).

The biggest issue with the EU was it was formed as a Common Market, and then the political side of it was expanded. (In fact when the UK voted to remain in the ECC in 1976, they were told it was only a single market, not a political union). Those seeking greater integration, moved the agenda forward. And not necessary in a sensible order.

The Euro was brought in, not at a sensible economic time, but as a concession to France to allow the reunification of Germany. There was never proper control over individual budgets of countries, there was never a set up of fiscal control, or financial transfer from rich to poor, etc. Countries lost the ability to devalue, but didn't gain other benefits, and the European South is feeling that now - Greece, Italy, Spain, Ireland....

The Schengen Area was created, allowing internal borders to be removed, but without the necessary structures in to place to strengthen the outer borders (so cost of protecting the area, fell to those at the edge).

The Lisbon Treaty (or EU Constitution as it was meant to be) was bought in, despite 2 votes against it (reran to get the "right" result), which gave the ECJ the right to overrule on any subject that was not in a written constitution.

And lets not forget that the budget has not passed an audit. The accountants have always refused to sign off the accounts. And often the Fiscal rules are broken on a daily basis.

The EU as it stands currently, is a huge Institution, that has grown organically, and pushed in directions that perhaps were not right. It needs a huge overhaul. It needs to be brought down to earth, to become more democratic, more accountable, and to be given a clear "mission statement" that it should act towards. (Is it a single market, is it a political union, is it......?)

I think most people would happily belong to a Single Market, and pay into a regulatory body that oversaw that all played by the rules, and had the power to enforce. And if that meant there was freedom of movement of labour, goods, capital and services, then I am sure this would also be acceptable to most. But that is not ALL that the EU is.

The issue with the referendum was - it was in or out. No clear policy on what Out was, and the re-negotiation that was given for the In, was effectively "no change". So there was a clear view of what In meant - to carry on as usual. Out was more of a risk, but if you think that the status-quo is wrong, then you need to try and change.

 

[Rich_NL]

I don't understand why this is a one-way street.

If the UK has to pay the EU just to allow us to sell into the single market - given that we import far more than we export - why doesn't the EU pay us for selling into the UK? I know not all of our imports come from the EU but we still import more from the EU than we sell to the EU. Or to put it in simple terms - they need us more than we need them. Remind me again what we would be paying them for.

Erm, what?

If the UK and the EU were the same size, you'd have a point, mathematically, but they're not. Trade with the EU is about 45% of the UK's export market (13% GDP). With the UK, about 15% of the EU's market (3% GDP). Tariffs act as a barrier/disincentive to trade, so the UK is hit several times harder, and has a smaller economy than the EU to buffer shocks. Why on Earth do they need us more than we them? You're hoping to compensate for the loss in trade with tariffs?

Besides, the Brexit vote was primarily a political, not economic vote. Now the cry is "but the EU won't do anything that's economically harmful", not realising that the EU has funds and incentive aplenty to make a political point by punishing the UK to foster internal cohesion.

 

[Taff]

... I think most people would happily belong to a Single Market, and pay into a regulatory body that oversaw that all played by the rules, and had the power to enforce. And if that meant there was freedom of movement of labour, goods, capital and services, then I am sure this would also be acceptable to most. But that is not ALL that the EU is.

Exactly.

I would have voted "In" if the EU was just a regulatory body for a Single Market. It obviously isn't - which is why I didn't.

... Now the cry is "but the EU won't do anything that's economically harmful", not realising that the EU has funds and incentive aplenty to make a political point by punishing the UK to foster internal cohesion.

Then we'll see what is most important to them - political integration or trade.

 

[RobLev]

...

The biggest issue with the EU was it was formed as a Common Market, and then the political side of it was expanded. (In fact when the UK voted to remain in the ECC in 1976, they were told it was only a single market, not a political union)....

No. The "Single Market" as such did not yet exist. But UK electorate voted fully aware of (or wilfully blind to) the fact that the European Community would change - that it would move into an ever closer union, to use the Treaty of Rome (1957) phrase. They were told that UK ministers would be involved in any decisions on that integration; they were not told there would be no such decisions.

The Lisbon Treaty (or EU Constitution as it was meant to be) was bought in, despite 2 votes against it (reran to get the "right" result), which gave the ECJ the right to overrule on any subject that was not in a written constitution.

The referendum in Ireland was rerun on a changed deal and with guarantees that the lies told by the "No" side in the first attemet were indeed lies.

The referendum in France on the EU constitution was superseded by a Presidential election in which the major issue was the EU constitution.

And lets not forget that the budget has not passed an audit. The accountants have always refused to sign off the accounts.

Another inexactitude. The Court of Auditors has just signed off the EU accounts as it has for many years past. Reports here.

And often the Fiscal rules are broken on a daily basis.

The problem that the ECA does have is that national agencies are not as scrupulous about ensuring they have the paperwork in order as they should be.

The EU as it stands currently, is a huge Institution, that has grown organically, and pushed in directions that perhaps were not right. It needs a huge overhaul. It needs to be brought down to earth, to become more democratic, more accountable, and to be given a clear "mission statement" that it should act towards. (Is it a single market, is it a political union, is it......?)

I think most people would happily belong to a Single Market, and pay into a regulatory body that oversaw that all played by the rules, and had the power to enforce. And if that meant there was freedom of movement of labour, goods, capital and services, then I am sure this would also be acceptable to most. But that is not ALL that the EU is.

The issue with the referendum was - it was in or out. No clear policy on what Out was, and the re-negotiation that was given for the In, was effectively "no change". So there was a clear view of what In meant - to carry on as usual. Out was more of a risk, but if you think that the status-quo is wrong, then you need to try and change.

The issues with the referendum were legion. It was held against a background of UK governments having blamed the EU for their own policy choices for decades, and with a press (Mail, Express, Telegraph) that wouldn't tell the truth about the EU even if you paid them (eg the EU has never passed an audit).

It was a binary question when the answers were multiple choice.

It was overshadowed by a refugee crisis that was not of the EU's making, but which the EU was blamed for.

Despite all this, Leave just squeaked home; on a margin that a major Leave campaign leader was very clear would have left "unfinished business" when he thought it had gonw the other way.

I would be interested in what, beyond a single market, you think the EU is but ought not to be?

 

[Pegleg]

And lets not forget that the budget has not passed an audit. The accountants have always refused to sign off the accounts.

One of the biggest and most easily provable lies. I can't believe people are still trotting this one out.

 

[Taff]

One of the biggest and most easily provable lies. I can't believe people are still trotting this one out.

Apparently they HAVE been "signed off" BUT "record significant errors".

See HERE

So what does all this say about the EU’s accounts? The numbers accurately reflect what’s actually happened, it’s just that some of it shouldn’t have happened in the first place.

 

[Dixie]

Seems the Norwegians are either pathologically generous, or deeply stupid, doesn't it? Or perhaps that's a sign there's something amiss with the argument?

That is possible. But as an ex-customs officer, an ex-partner with one of the big global accounting firms in the field of Customs, a 16-year stint as the lead European customs compliance manager for a large multinational responsible for Norway and Switzerland as well as the EU; a member of the International Chamber of Commerce's Customs & International Trade Commission; a member of the EU's Trade Contact Group on Customs; a member of HMRC's Joint Customs Consultative Committee; and the EU's working party drafting guidance on its new Union Customs Code (which formalises such matters), I claim some small competence in this field garnered over the last 30 years. (where's the "stands on his dignity" emoticon? :Looser

On complex supply chains; look at the graphic for the fuel injector - crosses UK-rEU borders no less than 5 times... Racking up tariffs and potential customs inspection delays every time, assuming no SM or CU post-Brexit.

The UK will take into national law the EU's customs rules, including the myriad means by which a company can process intermediate products without entering them to the national commerce of the country - in other words, widespread duty relief regimes which will simply and easily avoid the difficulty you mention.

No. ... But UK electorate voted fully aware of (or wilfully blind to) the fact that the European Community would change - that it would move into an ever closer union, to use the Treaty of Rome (1957) phrase. They were told that UK ministers would be involved in any decisions on that integration; they were not told there would be no such decisions.

Wow! Your recollection of it and mine are significantly different. By my recollection, Ted Heath gained power in 1970 in part due to his clear assertion that it would be quite wrong - and indeed unconstitutional - for any government contemplating joining the European Economic Community to do so without holding either a new general election or a referendum. In the end, because opinion polls at the time (1972)showed the electorate to be against joining the EEC by 2 to 1, he did what he knew was quite wrong - and used executive authority to join, bolstered solely by Parliament's enactment of the 1972 European Communities Act that the PM now proposes to repeal. Consequently, and contrary to your assertion, the British were never given the opportunity to vote on joining at all. At the time, and in the five years leading up to the accession, Brits were repeatedly lied to by their political representatives. An oft-quoted line from Mr Heath’s White Paper (circulated to every household in the country in June 1971 - well after his accession to the Premiership) promised: “there is no question of Britain losing essential sovereignty”.

In a television broadcast to mark Britain’s entry in January 1973, Heath said: “there are some in this country who fear that in going into Europe we shall in some way sacrifice independence and sovereignty. These fears, I need hardly say, are completely unjustified”.

The early 1970s were a period of political turmoil and when Wilson became Prime Minister, he sought to correct Heath's omission by holding the 1975 referendum on "remaining" in the EEC. That referendum took place during intense economic instability - indeed, in the very month in which inflation hit 27%, which I believe remains the British record. The country was in no mood to pile even more instability onto the flames of Wilson's economic policy, and so reluctantly agreed to remain. But it was still being told that it was nothing more than a free trade arrangement.

The cabinet papers from the time have been declassified under the 30 year rule, and those that have read them (which does not include me) conclude that the entry to the EU was based on lies and deliberate omissions. Surely no-one can try to argue that the British public was given the relevant facts on which to make either decision?