Sajid Javid's interview with the FT this morning is worth noting because for many it is behind a paywall, and that means people cannot access vital information on the future direction of this country. The report notes:
Sajid Javid, the UK chancellor, has delivered a tough message to business leaders to end their campaign for Britain to stay in lock-step with Brussels rules after Brexit, telling them they have already had three years to prepare for a new trading relationship.
In an interview with the Financial Times, Mr Javid quashed any prospect of the Treasury lending its support to big manufacturing sectors – which include cars, aerospace, pharmaceuticals, and food and drink – that favour alignment with EU regulations.
“There will not be alignment, we will not be a ruletaker, we will not be in the single market and we will not be in the customs union – and we will do this by the end of the year,” Mr Javid said, urging companies to “adjust” to the new reality.
There is, then, to be a hard Brexit. Any pretence to the contrary has gone.
It is exceptionally difficult to understand Javid. What he is saying is that although the world is now very obviously dominated by just three markets, with the standards of at least one of which business has no choice but comply if it is to compete on an international stage, the UK is to go it alone with its own standards which will not comply with those of any of these markets.
I am aware that we are facing a climate-induced economic revolution.
And I am aware that this will, by itself, massively change the terms of world trade, and potentially reduce its significance.
That means I am equally aware of the enormous, global, demands that this will impose on all business as it seeks to adapt to a real change in our economic situation.
To then impose a wholly unnecessary further demand on business as Javid is planning is reckless beyond any rational comprehension.
Let me put my concern as simply as possible. It is that what Javid is doing is deliberately disruptive, costly and profoundly harmful. Simply by saying UK standards will not the same as EU standards he imposes massive costs on all importers and exporters, even if they do actually (entirely rationally) still make their product to EU standards because there would be absolutely no rational reason to do otherwise.
That's bad enough, because it imposes a competitive disadvantage on whole rafts of business. But it also imposes delay. And delay completely undermines the whole rationale of a great deal of modern manufacturing (and even services) to which right now we have no alternative.
What delay means is that a business using the UK as part of its supply chain (and as a country we are critically dependent on those who do) will have to hold more stock or work in progress. And stock is costly for four reasons. First, it ties up capital and that has to be both raised and financed. Second, locating stock imposes a direct cost. And third, there is a loss of flexibility matched, fourthly, by a likely increase in obsolescence costs. And nothing Javid says can avoid any of these. And no amount of preparation by UK business can change these facts either. They will simply be worse off.
And people - call them those who source product from the UK - will notice. They cannot avoid doing so. And they will note that this is a deliberate, and hostile act. And they will respond quite rationally to that. They will not leave overnight. But leave they will go. That is simply inevitable.
It's quite fair to say that never in the field of UK economic management has anyone done so much with so few words to impose so much long term harm on the economy of the UK. Nothing Corbyn said or did, in what some might think his more extreme moments, would ever have come close to this. Wanton vandalism is too kind a description of what is being planned.
And there is still no one - not least Javid - who can provide the slightest explanation fo why he is doing this. Not a single logical reason for doing so can be, or is ever, offered. He says his goals are productivity and growth. I can guarantee a competitive disadvantage does not help growth (even if it is desirable). And I am as certain that imposing vast additional and unnecessary administrative burdens has never boosted productivity.
So what will the outcome be? Let me offer this. In the last week we have seen the government panic over Flybe. And it bailed it out, without obvious economic rationale for doing so. Yet Javid is now saying he will have no sympathy with businesses who have not used the last three years and the coming months to get used to his brave new world - of the details of which they are still wholly unaware.
But the truth is that precisely because they have no chance of making preparations for a situation of which they have no awareness, which will in effect be sprung upon them at the very end of this year, the consequence will be any number of Flybes.
And every time a business says 2,000 jobs will go Javid will react as he did on Flybe. He will relax regulation. He will give a bailout. And he will fleece the Exchequer to support private sector demands to be compensated for the mayhem he has chosen to impose, knowing that to do anything else will destroy the Tory's new popularity in the so-called Red Wall, and elsewhere. Business has already seen this has worked on Flybe. They'll be practicing their lines. And the result will be the biggest hand out to corporate Britain we will have ever seen.
And all because we have a Chancellor who has not the slightest idea what he is doing, and has not the slightest ability to understand the inevitable consequences of his actions.
This is going to be torrid.
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The Brussels effect (regulatory dominance by the EU) is so powerful that any operation that can should re-locate. I know of thirteen firms that are doing this, and more will follow. Brexit is a religion, not something for rational individuals.
Well said.
This aged well then…
https://www.sajidjavid.com/news/sajid-javid-only-thing-leaving-eu-guarantees-lost-decade-british-business
Now a blog, thanks
Nice one, Jo.
You might be correct in that assessment, but the alternative is that the Tories wish to deliberately ‘break the system’ with the ensuring chaos enabling draconian laws and ‘temporary’ measures to quell the riots. The reason FlyBE was given the bailout is that when the proverbial hits the fan at the end of the year there will be massive disruption and the Tories are waiting for the big event. They have no interest in the economy, people’s welfare or any concept of fairness so plunging a good proportion of the country into misery will not bother them one iota.
From the Twittersphere, it seems that the Brexiters relish rubbing remainer’s noses in their win and there are plenty who read the Telegraph who would like some hards knocks dispensed to any group not in their own mould. We have seen how the MSM (BBC included) has given them cover and they plan on the the same support from that quarter in the future.
I think we are at a point that is beyond reasonable debate after seeing the underhand techniques used over the past 3 years.
I hope I’m wrong and you are right but either way, it is not pretty.
Disaster Capitalists, then, and Brexit will provide the necessary disaster.
That whole “disaster” idea has some seriously doubtful aspects and at times seems too much like a convenience for defeatists.
[…] he reproduced on his personal blog. The headline says it all. But read it. And then appreciate that he knows exactly what he is now doing to British business and is doing it all the […]
He doesn’t know what he is doing or why, just that he is following the orders of Dominic Cummings (who also has little economic sense). The public will have to strap itself in its seats and get ready to live on porridge, or equivalent.
I don’t remember the context, but Boris Johnston in reply to a question replied ‘Fuck Business’.
Well this, apparently, is how we are to go about it. WTF does he think we’re going to all be doing instead ?
“….“There will not be alignment, we will not be a ruletaker,….” Bloody will. American rules. Starting with no deal with Huawei. NHS up for grabs etc…etc….
I don’t see how this can end well. It’s not even a convincing starting point for a bluff play.
Just watched CH4 News on catchup. Krishnan asked the head of the UK Food & Drink Federation Ian Wright as Javid said they had 3 years to prepare what should his members have been doing over the past 3 years. He replied ‘well, as even the government didn’t know what was planned how would companies know?’ And this guy must be a Tory though to his bones.
And he is right
Brexit gave the right wing an opportunity to manipulate the widespread resentment caused by the financial crisis and last 30 + years of less regulated capitalism, for their own advantage. Trump has done the same. Most of his supporters (to judge by the sample I see on facebook where I have a group of American ‘friends’ ) support him because of what he mocks and dislikes.
It was a Heaven -or Hell, sent opportunity to gather support and bring about their ‘free market Utopia’, which they would never get past the electorate in a general election.
They let their judgement be over ruled by the lust for power. How many members of the cabinet spoke in favour of the EU before the referendum and are now enthusiastic supporters? They probably realise by now that it will be a disaster and the Brexit confidently predicted is not going to happen, but they are now trapped . Their can’t go back so they will use any means (like the billionaire press owners) to confuse the issues, blame others and hope they can get away with it.
This is truly remarkable. This looks like a suicide note (for a death that is unfortunately set to drag out over 5 years). Never mind the obvious point that he has arrogantly pre-empted at least one aspect of the EU trade deal and dashed all credibility in doing so.
Then again this could be posturing and bullshit but even if that is so it still seriously undermines all business certainty and confidence. Even the Chinese happily comply with EU standards in a lot of their production because it represents a well accepted benchmark and it makes trade easier. There’s something about Javid’s outburst that just looks too stupid. There are numerous possibilities here, for example:
1. This is an ambit claim bluff that is being made with the EU trade talks in mind.
2. He’s deliberately lowering expectations to base level:
a. So that people feel relatively relieved when a more reasonable trade deal is struck. That way a crap deal would still seem better than it might have been.
b. Just in case the deal does go really badly (even worse than he expected).
3. This is a disingenuous suck-up signal that’s being sent to Trump, the Leave-voting base and other assorted primates.
4. He, his PM, party and Govt. really are that stupid.
Meanwhile Johnson has threatened the cabinet to shape up or lose their jobs…..I wonder what is driving Javid; it isn’t his profound understanding of the situation. I think he is just a useful idiot….(along with the PM, come to that).
Looking on the bright side, this sort of approach risks his backing himself into a corner that only the Green New Deal can get him out of.
It’s easy to bail out Flybe by just bunging them a lump sum. However the government can’t bail out every other business that gets into financial ruin because it’s the circumstances by which they trade that need to be kept aligned and the same as now. Take that away and their costs will always be higher. Surely they will leave if they can.
Another relevant thing is this discussion around Nissan
https://www.chroniclelive.co.uk/news/north-east-news/chancellor-sajid-javid-backtracks-boris-17593151
And how his points explicitly & directly contradict promises Johnson made before the election, when he said:
He said: “It is absolutely vital we protect the supply chain, it is absolutely vital we protect Nissan motors and we make sure people continue to invest in our country – and they will.
“I think, what business, large and small want to see is certainty about the arrangements.
“The thing about the deal we have got ready to go, is that as I say, it does protect the supply chains and keeps them intact and makes sure we have complete equivalence when it comes to our standards our industrial requirements and the rest of it.
“As we come out, it is all protected.”
And, of course, “complete equivalence” and “protect our supply chains” and the like is just what we cannot have.
I am amazed and perplexed at the Rt Hon Javid’s grasp of basic economics (or rather lack thereof) and distain for business. But business also is to blame. Instead of campaigning strongly as it did in the 1975 referendum, it allowed vocal Brexiters in its ranks to sieze the megaphone (most of these being companies which had “suffered” from EU competition cases). I was involved in the CBI’s first campaign. 99% of businesses then supported our entry into the EC: why? because over 60% of UK exports go to Europe. Supporting anything else would have been economic suicide – and now? Is the UK to be the 6th USA “major territory” with US Samoa, Guam, Puerto Rico & the US Virgin Isles or 52nd State? It seems not. And what about reviving the UK Commonwealth – recolonising Africa? Too late, the Chinese, Russia, the EU & US are there already and most ex-colonies (as polite as they may appear in public) dispise their ex-colonial masters. In the end, what is left? We need to follow the money trail – who will win short-term from this free fall? Short-term now means the next 5 years when the Tories have the majority. After which it won’t really matter anylonger.