Remainiacs will talk us into recession if we let them
The remainiacs control the media
Do not underestimate the breadth and depth of the recusant remainiacs. Their mouthpieces are the BBC, the Economist and the increasingly ludicrous Financial Times. But they have extensive influence propagated by Church of England vicars, luvvies, much of the teaching profession as well as trendy entrepreneurs and a throng of bearded American economists. And don’t forget most of the civil service, UNISON, the Scottish National Party, the “Real” IRA and the eggheads who run the Bank of England.
And how revealing that a cornered Owen Smith told Andrew Marr on 11 September[i] that, not only did he want to remain in the EU but he’d like us to join the Eurozone and the Schengen Area. (That’s another swath of Northern Labour strongholds lost to UKIP. Well done, Owen.) I must say I never thought I’d be rooting for Jezza.
The FT has become the mouthpiece of remain-against-the people. Note that the circulation of the FT has been plummeting in recent years – down from 390,000 copies per day in 2010 to 219,000 last year[ii]. Since the title was sold by Pearson PLC (LON:PSON) in July last year to Nikkei Business Publications of Japan for £844 million, its circulation appears to have declined further. Under the editorship of Lionel Barber this world famous brand has massively lost influence. Until August 2015 the FT group had a 50% shareholding in The Economist, which was sold to the Agnelli family for £469 million. So a newspaper with a long tradition of arguing for free trade and liberal economics is actually controlled by a secretive family of Italian billionaires with alleged links to the mafia.
Dear old Aunty – the BBC – has run a frenzy of news-days over the last week dedicated to Brexit, the general tenor of which was how embarrassed ordinary British people should be about the hash that the government is making of the Brexit negotiations (which I discussed last week). And on BBC R4 the documentary series Eastern Europeans in Brexitland[iii] told listeners how much Eastern European migrants in the UK have been suffering since 23 June. Many attest that they have been attacked in the street regularly, although the journalist Gary Younge was not able to find any actual victims to interview. The general BBC line of questioning is one of “How does it feel to live in this climate of hate against hard-working Poles/ Lithuanians/Romanians?” In the BBC’s playbook, all immigration is good – which is a reasonable, though questionable point of view. But the sub-text is that any scepticism about immigration is unreasonable – and leads directly to hate crime. Polish people, says BBC R4, feel “unwelcome” – and all British born people should apparently feel ashamed about that. And they are financed to propagate this view by your license fee.
The theme of a neo-Nazi Britain was deployed in President J-C Juncker’s State of the Union speech to the European Parliament on 14 September. He drew applause by stating Europe’s disgust for the murder of a Polish migrant, Arkadiusz Jóźwik, who died after an attack in Harlow, Essex on 27 August. At the time of writing it has not been proven that this appalling crime was indeed a hate crime. But the real issue is that Mr Juncker has succeeded in associating anti-European sentiment with neo-Nazism. Incidentally, under Polish law, anyone who kills a Pole is liable to be tried in Poland under Polish law – at least according to the country’s foreign minister[iv]; so it is not even for the British authorities to decide the nature of the crime.
Beware the recession-mongers – and look at the metrics
The general trend of argument by the anti-Brexit caucus is that leaving the European Union will leave us morally and economically enfeebled. Recession on the other side of the Single Market, they suggest, is inevitable. Now the tenor of the national discourse is deeply significant for financial markets which are driven by expectations and confidence. The London stock markets have fared remarkably robustly thus far, and stock markets are supposed to anticipate recessions, but what do the economic indicators tell us?
Famously, business confidence, as measured by the Purchasing Managers Index (PMI), slumped in July in both manufacturing and services in the aftermath of the referendum but snapped back in August to a 10-month high[v]. This was further evidence that weaker Sterling was boosting exports. And on 14 September there was pleasing news on the jobs front. The ONS announced that unemployment was down to 4.7% at the end of July – down from 5.5% a year earlier. More to the point, since the referendum on 23 June the number of people in work has actually gone up. Admittedly, these figures are bolstered by the rise of people who opt for self-employment and a rise in the number of part-timers – but that is consistent with a long-term trend. Growth in average weekly earnings at 2.3 percent is slowing but is still well ahead of inflation – which was reported on 13 September to be running at 0.6 percent (still well below the Bank of England’s target). British consumers are still spending money. On 15 September John Lewis Partnership announced disappointing results, but said that this was due to “structural changes in retailing” and had nothing to do with Brexit.
What about growth? In July the IMF trimmed the growth forecast for the UK in 2016 from 1.9 percent to 1.7 percent. But then they would, wouldn’t they? That still put the UK at second place in the G-7 growth league behind the USA. On 13 September the British Chamber of Commerce (BCC) revised its 2016 forecast from 2.2 percent to 1.8 percent. Its revised 2017 forecast was gloomier – down from 2.3 percent to just one percent. The BCC was adamant, however, that they did not anticipate recession. It should be noted that all of the G-7 countries have been growing of late below their long-term trend rates[vi] – which for the UK is around 2.4 percent. There is a global growth problem across the developed world which has nothing to do with Brexit.
If the Pound remains at historically low levels, as seems likely, inflation is likely to pick up as more expensive imported goods reach the shops. Paradoxically, this would help the Bank of England to edge closer to its inflation target of 2 percent per annum and would give it some leeway to raise rates. (If only it had the will to do so.)
Moody’s downgraded the UK’s outlook from stable to negative immediately after the Brexit shock while reaffirming its AA+ rating. The main determinant of our country’s rating going forward will be the strength of its public finances. Since it now seems that austerity is off the menu, Mr Hammond’s autumn statement is likely to anticipate even higher levels of government borrowing and thus a higher debt-to-GDP ratio in the medium term. Arguably, that was likely to happen anyway.
The devil is in the detail
Of course, Brexit hasn’t happened yet. As of now, the UK is still in the European Union and most people think it will remain so for at least two years. The cleverer remainiacs will argue that things might be bonny now – but just you wait… The real question is whether withdrawal from the Single Market will impact trade. This will not become clear, one way or the other, for a while. Indeed, Mr Van Rompuy (President of the European Council 2009-14) came up for air on 15 September to say that there can be no substantive negotiations until the new German government takes office in October/November 2016[vii]. This gives the lie to all those voices egging Britain on to invoke Article 50 before time.
In any case, the Europe with which we shall negotiate is not the Europe of which we were a member. It is going to be a Europe where each member state will be dragooned, as now we know, to put its armed forces under the control of General Juncker; and to set taxes only with the nod of Finanzminister Schäuble. The Franco-German elites have their feet hard down on the integration accelerator. As I explained in my recent piece on forthcoming European elections, it may all blow up in their faces very soon.
In my view the greatest risk to the British economy is that recession becomes a self-fulfilling prophecy – that the chattering classes talk the country into despondence and despair.
That is why Mrs May’s government must articulate the upside opportunities – Britain as a global trading power, the prospect of CANZUK – more vigorously than at present. If they can do that then recession is eminently avoidable.
When I look at Europe (and I am still a cultural Europhile) I see a continent wracked by political uncertainty and economic decline. The Eurozone cannot survive in its current form. But I wish them well; and I thank David Cameron for unwittingly letting the genies out of the bottle. The next few years are not going to be easy. Mrs May, like Churchill, can offer only blood, toil, tears and sweat. But once on the other side we shall be thankful.
[i] Watch at: http://blogs.spectator.co.uk/2016/09/owen-smith-uk-join-euro-schengen/
[ii] See: https://en.wikipedia.org/wiki/List_of_newspapers_in_the_United_Kingdom_by_circulation#2010_to_present
[iii] Available for download at: http://www.bbc.co.uk/search?q=Eastern%20Europeans%20in%20Brexitland&suggid=urn%3Abbc%3Aprogrammes%3Ab07v7rf2
[iv] https://www.theguardian.com/world/2016/sep/02/poland-runs-own-investigation-of-polish-mans-death-in-essex
[v] See data from MARKIT/CIPS on 01 September available at: https://www.markiteconomics.com/Survey/PressRelease.mvc/b2d9d18dacd14cb3a1c6b7836894b80f
[vi] This is basically the average growth rate over the long-term, normally calculated from 1945.
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