Thursday, 3 August 2017

Hard Fact vs Fluff


Lots of talk about Brexit. Now I'm no financial expert, but I'm clued up enough to realise there are a few things that are fixed and affect the UK economy and a few things that are mere fluff.

Whereas confidence is a big factor, it's fluff - talking things up can increase confidence and talking them down can reduce confidence. What one minute is a brilliant investment can turn to poo in a nanosecond on the basis of a market rumour. Basing forecasts on confidence is a zero sum game and best left to currency speculators.

Prices and production, however, are different - no amount of talking can change them. The fact is the UK has the lowest productivity of the advanced economies. You can argue this is caused by unions being resistant to productivity increases, but the low and falling GDP is a hard fact that is not easy to address. Investment may address the root cause, but unions have proven time and time again that any gains are invariably wiped out by union negotiated compensation, or outright opposition. Something has to be done, but any programme will be long term and there is no quick fix, certainly not within the Brexit timescale.

Prices for imports from Europe, our prime supplier, are set to increase with the introduction of tariffs. That also is a hard fact. While our prices on the international market are low due to the fall in Sterling, that's a confidence thing and, as we import £10 to £11Bn more than we export. High import costs will outweigh low export costs - and if Sterling recovers (as the Brexit camp maintains - but that's a confidence thing), it will only get worse.

The oft-stated aim of selling more to the rest of the world is an aim. It's by no means certain we can achieve that aim, as FTAs are nothing more than frameworks and not guarantees. Anyone who has been involved in sales, let alone exporting, knows the difficulty of getting new customers and the dangers of losing old customers. This aim relies on confidence, mainly the confidence of people who have never sold anything in their lives - ergo, deep fluff.

A YouGov survey has shown that Brexit voters over 65 say wrecking the British economy or having a member of their family be made redundant is a price worth paying to leave the EU. In this time of remembering Passchendaele, they remind me of WWI generals sacrificing the young for a few imaginary yards that will be lost again.


Never believe something simply because you want to believe it. Opinions don't matter, only evidence is the true arbiter.


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