Brexit: More or less

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Brexit greatest enemy? Maths!

Contrary to much expert opinion, it is argued by brexiters of the so called European Research Group that leaving the EU without any deal, a so called “hard brexit“, won’t be so bad. And in any event, it would make sense to play brinkmanship with the EU, to get the best deal. Hence they have argued for example that the UK should start to stockpile food to show we’re serious.

Any sort of delays at the border present massive problems due to the fact most UK factories operate on a Just in Time basis (where as little inventory as possible is kept by the factory, with supplies arriving “just in time”), notably the car industry. However, Brexiter Brenard Jenkin suggested that trucks should just leave several days early and so what if they end up stuck in a queue at Calais (which suggests he has no clue about how JIT works!).

There appears to be a lack of awareness among brexiters of the magnitude of what they propose. So I thought it would be useful to put some numbers to these proposals, a sort of hard brexit version of “more or less”.

Let’s take car production for a start. How much warehouse space would you need to store all of those car parts? Or, if they are going to be stuck in a massive queue at Calais, how many trucks would we need? Well the approximate volume of a vehicle is 10-40m3. Note I use the term “vehicle” because the UK doesn’t just make cars, but also things like vans, construction equipment, military vehicles, ice cream vans, lorries, etc. So let’s take something broadly in the middle, 15m3 is the average volume of a medium sized SUV or an estate car.

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Next, we need to consider packing efficiency of the trucks or the warehouses. While some components can be neatly packed into boxes and stacked without taking up too much space, others are a bit on the bulky side. There’s only so many you can pack in at any one time. Some are either too heavy to be stacked one on top of the other, too fragile, or too big and awkward. And we need to remember that with logistics time is money. Yes, we could spend all day playing Tetris, but that’s going to cost more money than it would save. So let’s assume a 60% packing efficiency. 25% of UK car parts are of UK origin, so that’s 75% that comes from across the channel. Multiplying out those numbers, 0.75*(1/0.6)*15 = 18.75m3. We’ll round up to a nice even 20m3.

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The UK produces 1.7 million vehicles a year (currently 1.65 million, its slipped a little bit since brexit, but we’ll round up to 1.7 million all the same), so that’s 4,658 vehicles per day. So a seven day stockpile means parts for 32,606 vehicles, which means we’d need storage space for 652,120 m3. Assuming warehouses 10m high (which yields 7.5m of useful storage space), you’d need 86,949 m2 of floor area, which would cover about 12 football pitches. I’m going to pause and let you imagine 12 times the area of a football pitch covered in warehouses 4 stories high.

How many truck would be needed? Well assuming 80m3 per truck, that’s 8,151 trucks. BMW recently mentioned that they depend on 150 truck deliveries a day to manufacture the Mini. This gives us an alternative means of calculating the number of trucks. At 800 cars per day, that would imply that 32,606 cars would require 6,113 truck deliveries, noting of course that the Mini is at the lower end of our size scale (the clue is in the name!). Parked end to end, these trucks would stretch for between 110 to 147 km’s.

And that’s just the logistics of getting car parts across the channel and were assuming only one trip, when some components take multiple trips. About 80% of the UK’s car production is currently exported, mostly back to Europe (or transitions through Europe to other destinations), so that’s 26,084 vehicles you’re looking to move back over the channel every week. Parked end to end, they’d stretch for 107 km’s. It would take 4,075 trucks to carry them back over the channel (assuming 6 vehicles per truck) and those trucks would form a queue 73 km’s long.

I’m going to hazard a guess that we don’t have 10 to 12 thousand trucks going spare to handle these logistics. Should you wonder how the car industry copes at the moment, well they do so by not taking 14 days for their trucks to make a round trip across the channel (according to Google maps its currently an 8 hour journey from the Ruhr to the UK Midlands, or 4-5 hrs to the main industrial zones around Northern France & Belgium). And they also make use of railways, so its not just trucks queuing either side of the channel, but trains as well.

And should anyone accuse me of being mean, vehicle parts are easy (and represent only 12% of UK exports btw). It would be very expensive to have them stuck in a queue for a week, but at least they aren’t going to rot. But we can’t say the same for food. Faced with produce from the UK arriving late, as well as either rotten or frozen solid, it won’t be long before retailers the opposite side of the channel start buying local produce instead, even if its more expensive. And some chemicals or biomedical products are also time critical. They will not only spoil if they don’t get to their destination in a timely manner but can actually decompose and become hazardous (i.e. they catch fire!). So this would mean several industries that depend on such supplies, would have to shut down on brexit day itself, unless they can secure alternative supplies.

Indeed, even assuming shorter delays, say 24 hrs, you are still talking several thousand trucks being affected, all of which need to be checked (are there facilities at the ports to handle all of those vehicles? Do they have the staff?). Recall that delays happen at the ports as things stand due to various factors (weather, strikes, IT problems, etc.). The introduction of additional border checks will thus amplify the consequences of any such delays. Hence I’d argue that while perhaps it won’t be as bad as 7 days most of the time, that’s probably the sort of time frame you’d want to plan according too.

Currently the port of Dover handles about 5,000 trucks a day while the tunnel handles a further 5,000. The current plan, to stack trucks by closing off part of the M20 to hold 1,400 of them, will clearly become unstuck very quickly if delays build to any more than 4 hrs (which just a few minutes delay per truck at the front of the queue could quickly produce). And everyone seems to be forgetting that the main hub for freight traffic with the EU is actually Felixstowe and neighbouring Harwich, which handle between them 3 times the traffic that goes through Dover as well as nearly half of all the UK container traffic.

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Brexit, you’re going to need a bigger motorway!

There’s also the not so small matter of the 12,800 good vehicles that cross the Irish border every day. Or further traffic that enters the UK via the ports of Fishguard, Pembroke & Holyhead.

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The Irish border is busier than Dover and the channel tunnel combined and has almost double the number of crossing points then the entire eastern border of the EU!

And what about non-EU trade? Recall that the UK’s customs relationship will alter for practically everything entering the UK from overseas. To join the WTO (a critical part of any brexit plan, else the UK becomes the equivalent of North Korea!) the UK needs to agree a deal to split its WTO membership from the EU. All of the other 164 countries have to agree to the terms of this (unanimously, oh and btw a no deal raises the risk of an EU veto) and its already expected that several will object (including the US, Canada & Australia, you know the countries we’re going to get these brilliant trade deals with).

Speaking of food, how much storage space would the UK need to stockpile food? Well a standard can of food is 73mm in diameter and 106mm high. That’s a volume of 4.43×10-4 m3. Let’s assume we need 2 cans per person per day. And we’d want at least a month’s supply. So that comes to 3.6 billion cans with a volume of 1,596,000m3. Assuming a packing density of 75%, storing all of those in warehouses 10m high (which again yields 7.5m’s of useful storage space) they’d cover 37 football pitches (stacked with pallets of cans 7.5m high!)….so just to handle the cars and food, the UK needs over 50 football pitches covered in warehouses…..all of which needs to be built in 8 months time! So no pressure!

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Taking back control! Then again, the brexiters seem to live in the 1940’s, so they may just get their wish!

Possibly sensing the impracticality of what they propose, its being suggested by the brexiters that certain “priority” items such as food or medicines will be just waved through customs. What’s wrong with that? Well, firstly the EU might not reciprocate. And secondly, In the absence of a permanent solution, such temporary measures are likely to break down pretty quickly, so you’re just delaying the inevitable. Remind me, how did the foot & mouth outbreak a few years ago start? How long before smugglers just start labelling their shipments as “food”, stacking a few trays of week old potatoes at the door and fill the rest of the vehicle with whatever contraband they want to move? (fake Burberry, booze, cigarettes, weapons, migrants, etc.). And thirdly, why are we leaving the customs union if we’re not going to implement any border controls? That kind of defeats the purpose of the whole exercise. Its like going to the pub to get legless drunk but then only having mineral water all night.

But its not food or car components that worries me in the event of a no deal. Its energy supplies. The UK is a net importer of energy. There was much talk about how to provide for Northern Ireland in the event of no deal, with suggestions it would be buzzing with diesel generators, many of them on barges moored around the coast.

However, I’d worry less about the few hundred megawatts NI uses and be a little bit more concerned with the 3GW’s that Southern England draws from the European grid, which is often critical in winter. And the UK also imports 35.2 billion cubic metres of gas from the EU and Norway every year. Note that as Norway is part of the EEA they would get caught up in any trade dispute, particularly if the UK refused to pay its bills (Norway is a contributor to the EU budget). That’s an average of 96 million m3 of gas every day and several times that amount on a cold winter’s day.

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The UK has a grand total of 30 GWh’s of pumped storage, so that’s only 10 hours of reserves. In terms of gas the UK has a storage capacity for 4.3 bcm. So that would be exhausted with 1-2 weeks (depending on the level of demand). However 70% of that reserve capacity is contained within one facility (Rough), which recently closing down (which would cut the UK’s reserves to just a few days supply).

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Nearly all of the UK’s gas storage capacity is in one facility….which has just been shut down! Note that even prior to this, the UK has woefully small gas storage compared to other EU countries

And I suspect the national grid would point out that the UK’s pumped storage and gas storage facilities do not exist as a strategic reserve in case of a hard brexit. They are there to help even out the peaks and troughs that exist between supply and demand. And power cuts are usually not so much a lack of power on the grid, its a lack of grid capacity to shunt the power to where its needed.

So the reality is that the UK, particularly the South East of the country, could be experiencing an energy crisis within days or potentially hours of a hard brexit (depending on demand, e.g. a late Autumn cold snap). Its is difficult to see how the UK could make it through a winter if supplies were cut off. And given that the ERG plan is to essentially sacrifice farming and manufacturing in a hard brexit to the benefit of the financial services industry, rolling blackouts in London would be more than a little inconvenient. It would be a national crisis.

Pretty soon those barges up in NI will be unmoored and heading down to London (not that they’d do much good, you’d need tens of thousands to match London’s demand) with the DUP basically left to fend for themselves. If you want to annoy the public and start a riot, try turning off the lights for a while, at the same time as there’s shortages in the shops. I suspect that such a crisis would very quickly lead to a border poll in NI and a 2nd indy ref in Scotland (and possibly even one in London, which recall voted overwhelmingly to stay in the EU as well) and the UK starts to break up.

Now I’m not attempting project fear here (reality appears to be doing that for me!), I’m merely pointing out to brexiters the logistics of what they are proposing, and the potential consequences if they get things wrong. Its not being anti-brexit, its being pro-maths, and the numbers for a hard brexit just don’t add up.

And if the brexiters plan is to try and bluff the EU, well that is also unlikely to work, in fact it could be counter-productive. No doubt, some bureaucrat in Brussels has done the same sums I’ve just done and has realised that the hard brexiters are bluffing and the EU can easily afford to call their bluff.

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Worse still, they’ve also likely concluded that only a deranged lunatic would even consider a hard brexit. Which means that if they think the British are actually seriously considering a hard brexit, there is little point in the EU making any concessions, because you’d never be able to guarantee someone that crazy would stick to their side of the bargain. Hence why the UK threatening to withhold payment on the divorce bill is rather dangerous, as it implies the UK is undertaking these talks in bad faith.

And in related brexit news, the association of British insurers have warned that it might not be legally possible for them to pay pensioners living abroad their pensions in the event of a no deal brexit. Elsewhere MP’s were warned terrorists and criminals could walk free from jail in the event of a no deal.

While I would take these stories with a pinch of salt, equally I would point to real world examples which have already occurred, as I discussed in a prior post. The problem with a no deal brexit is that the UK government ceases to have any say in what brexit means. It will in many cases be left to lowly civil servants, judges and corporate lawyers around the world to decide what brexit means.

Another line of reasoning that is being pushed (which kind of shows how desperate they are getting) is that the EU should be nice to the UK, because the British people will blame them for the consequences of a hard brexit…..WTF? Oh, and apparently its the fault of those who voted remain that the UK voted to leave (conservative logic, don’t even try to understand it!). So the EU, and remainers, who wanted the UK to stay in, should be punished because leave voters (who were told all of this would happen prior to the vote) are such spoilt little snowflakes they’ll start to cry like a baby when they realise they aren’t going to get their lolly.

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The hard brexiters plan, hold their breath until they turn blue, hope the EU/nanny panics and gives them an ice lolly

And in any event, let’s get one thing clear, regardless of how well, or how bad brexit goes, regardless of what concessions the EU grants the UK, the tabloids and the brexiters will blame the EU (and remain voters) for whatever negative consequences come out of brexit. After all, their only other alternative would be to admit that this brexit thing they’ve been banging on about for twenty years was in fact a very bad idea. And as we’ve seen they value their ego well above the well being of the country.

As I see it, there are only three viable brexit options. Firstly, the hard brexit option. Revoke article 50 and agree some deal with the EU in which the UK stays in for at least a decade or two to give the country time to prepare and build the necessary infrastructure (i.e. those 50+ warehouses, new port facilities, etc.). Of course you’d want to be absolutely sure this is the “will of the people” before even considering this option (so a 2nd referendum would be recommended), else a future pro-remain government might come to power and just cancel the whole thing.

Secondly, go for the softest brexit possible, the Norway or Swiss models being good examples. This would be negotiated as an interim solution (a sort of “trial separation” as it were), leaving open the option at a future date to break further away (e.g. leaving the single market/customs union and ending freedom of movement) or re-joining the EU. I would note that this the option is the closest to May’s proposals. But its also the only one of the three that guarantees an immediate UK exit from the EU (something the brexiters need to consider next time her plan comes before the house).

Or thirdly, start over. If a hard brexit is undeliverable (in the short term) and a soft brexit just leaves the country a “vassal state (to quote several brexiters), then it might be best to question the wisdom of trying to undertake it in the first place. So you’d have to revoke article 50. Then after a suitable cooling off period (say 5 years), have another referendum, but this time asking the right questions (i.e. hard or soft brexit) and make sure everyone’s on board (i.e. a requirement that say 50% of the country has to vote for it and all major regions must back it).

The brexiters need to pick one of the three, they can’t have it both ways and they can’t just try and wing it and hope for the best.

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The trouble with plastic waste

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eightmillion Figure 1: The great Pacific Garbage patch [Phys.org, 2018]

With large garbage patches of plastic growing in the oceans, the ecological impact of our oil addiction is now a major crisis. And it’s also starting to impact on human health, with particles of plastic finding its way into human food chain and water supplies. It’s becoming less the blue planet we inhabit and more the plastic planet.

How Long Garbage Lasts in the Ocean Figure 2: Plastic can stick around for a surprisingly long period of time!

And the bad news is that this is only for openers. Some plastics can take centuries to biodegrade completely (leaching chemicals into the environment as they do so). So even if we ceased production of them tomorrow, that still leaves a huge toxic legacy to deal with. In many respects its proving the parable of the lily pond….just on a planetary scale!

not-happy.png Figure 3: Consumerism is serving…

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Brexit deal or no deal

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Theresa May, aka the yellow submarine, is famous as a politician who doesn’t actually advocate any particular policies. Largely because she knows that any idea she comes up with is generally going to be a bad idea (e.g. the treatment of the Windrush or the dementia tax).

So its probably not a huge surprise to hear that her brexit trade policy has been criticised from both sides of the house, with both leavers and remainers arguing against it. Even Donald Trump turned his nose up at it. And its almost certain to be rejected by the EU. Its effectively been declared dead before the ink’s had a chance to dry.

And the Tories are now taking a pounding in the polls, slipping behind labour again, with a sharp rise in UKIP support (recall that in some marginal seats every vote for UKIP is effectively a vote for Corbyn, given that labour is often the 2nd party in those constituencies).

The downside is that the brexiters will see this as furthering their goal of a “no deal” brexit. However there is a dangerous flaw in their logic (inevitable really, most of them are posh kids used to getting their way by holding their breath until they turned blue and the nanny panics). Arguing no deal is better than a bad deal, is the sort of thing you’d hear a dead beat husband say to justify not show up to his divorce hearings (which just means his ex gets the car, the house, the kids, the dog and half of all the money!).

They seem to think we’re playing a version of the TV gameshow Deal or No Deal, with the EU cast in the role of the unseen banker. However, the truth is a little different. And if we were playing a version of Deal or no deal, then the box is already opened and we know what’s in it (a bill for tens of billions of euro’s and a drop of several points of GDP) and the banker/EU can decide what else to put in the box or how much its worth and make the UK accept the deal regardless of how awful or unfair it is.

In the event of a “no deal or a break down in talks, then the EU will activate its contingency plans and its lawyers will decide what the implications of a no deal brexit are. In effect, they’ll go through what the UK has already agreed to and signed and pick the bits out of that which they like (and ignore the bits they don’t like). In other words the only one who gets to “have their cake” in a no deal brexit is the EU.

And keep in mind what the UK has a agreed to already includes a hefty exit bill, continued freedom of movement and the UK (or at the very least NI) remaining part of the customs union, forever! Which hardly sounds like the sort of outcome the brexiters would want.

Now granted, the UK can try to defy the EU….if we ignore the little fact that over half the UK’s food is imported from the EU and how dependant the UK is on electricity from the continent (southern England depends of several GW’s worth to get through the winter) or gas from Norway (40% of all imports, Norway being part of the EEA and thus trade will be affected by a no deal brexit). I think the definition of the term “fucked” is when experts start to seriously debate how you should go about stockpiling tinned food.

And, as discussed previously, sooner or later a court case will go against the UK government and they’ll be forced into an about face. e.g. a car maker sues them due to delays at the ports and either wins a massive compensation bill or an injunction prohibiting customs officials from interfering with their trucks.

As the Irish labour leader recently pointed out, what the brexiters are proposing to do is renege on international treaties (you know the sort of stuff Hitler and his cronies got in a spot of bother over), which is almost certainly illegal under international law. Contrary to what Trump says (he suggested suing the EU, then again he has a habit of using slapp lawsuits, which he usually loses!) the UK is likely to be the loser in any such legal cases.

Hence why its possible that at some point in the event of a no deal, the International court of justice in the Hague (not to be confused with the ICC, or the ECJ in Luxembourg) will get involved, or more specifically the PCA (the Permanent Court of Arbitration). They are basically the UN equivalent of VAR and they could well be called in to rule on the legality of a no deal brexit.

While I’m not calling myself an expert on this (plus we are into uncharted legal territory anyways), but my guess is that they’ll rule that no, you can’t just break an international treaty because you feel like it (or because Russian trolls managed to con large number of voters into doing something really dumb). The UK can only break treaties its signed by the mutual agreement of both the UK and EU.

Equally however, the PCA might also rule that some aspects of article 50 aren’t legal either. Notably the imposition of this artificial deadline (which is clearly intended to give the EU the upper hand in the closing stages of negotiations). The court could well rule that no, talks have to keep going on for as long as they have to. And if that’s inconvenient for either party, well tough!

So its possible that the outcome of a no deal (e.g. a cabal of hard brexiters ousts Theresa May and ends negotiations), would be several months of chaos, which is then interrupted by court rulings that annul everything, forcing the UK and EU back to the negotiating table. If the UK wants out quickly, then they can just sign whatever exit terms the EU’s lawyers have prepared. Yes it will be an awful deal, but just close your eyes, think of England (because Scotland, NI or Wales won’t be hanging around for much longer in such a scenario!) and sign. Equally if the EU wants the UK out of the room in five minutes flat, then compromise on some of those red lines.

So the consequences of a “no deal” could actually be the UK stays locked in negotiations with the EU more or less indefinitely. Of course it probably won’t get to that. Because it will quickly become obvious to brexiters and remainers alike that the Tory party simply can’t deliver on brexit, at least a brexit that doesn’t involve economic chaos and the breakup of the UK. They will therefore pivot behind Corbyn who will win a snap election.

Corbyn is arguably a more committed brexiter than anyone in the Tory party (in Westminster’s circles he’s known as “May’s chief whip”). Largely because he has bigger fish to fry (overturning every piece of legislation both the Tories and new labour have passed since 1970!) and he’ll want to get the talks over with as soon as possible. And he’s willing to compromise on areas such as freedom of movement or the custom’s union to do it. But of course, this will mean the UK remaining tidally locked in the EU’s orbit forever more (or until the penny drops and people ask what’s the point of being in the EU’s orbit but having no influence over it? leading to a 2nd vote and the UK rejoining).

So before the brexiters reject Theresa May’s policy….or more to the point, the edited version that Brussels will approve of in a few weeks time! Consider that this is probably the best brexit deal they will get. The alternatives are likely to be either one negotiated by Corbyn, or a 2nd referendum overturning the previous result. With the splitting up and/or collapse of the Tory party shortly thereafter.

NATO Funding

Trump, in between insulting his hosts and committing several diplomatic faux pas, criticised other Nato members over their defence spending, most notably Germany. However, the situation is a little more complicated that he suggests. If anything this is a case of the pot calling the kettle black.

Firstly, Germany has a very short coastline, and thus not much of a navy (which means they don’t need to but expensive kit like nuclear subs or aircraft carriers). And they also don’t have nuclear weapons. Both of these factors reduces their military spending considerably, as well as the number of personnel required.

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Overall, Germany has the 5th largest military in NATO. And with the exception of Turkey all of the other 3 are both nuclear powers with a large navy. It also has the 4th largest military budget (in terms of overall spending). And again, all of the 3 ahead of them are nuclear powers, with a large navy.

One could argue that while the Bundeswehr is quite capable of defending Germany itself, they lack in terms of numbers and stockpiles of equipment. This means that in the event of a shooting war they’d struggle to cope with high attrition losses for very long. And they’d be only be able to provide limited help to their neighbours.

However, that said, if there’s two headlines nobody in Europe wants to read over their Sunday breakfast its “Germany rearming” or “German troops in Poland”. So we need to apply some political realism here.

Also the German’s would probably counter by pointing out that they have a large industrial base and build almost all of the military hardware that they need. In fact they are the leading supplier of equipment to Nato when comes to things like tanks, military vehicles, artillery and heavy weapons. Indeed, even US tanks use the German made Rheinmetall 120 mm gun. So in the event of a shooting war, so long as Germany can keep those factories open, they’ll simply be able to build replacement equipment for anything they (or their Nato allies) need.

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The German made Leopard 2 equips many Nato armies, with nearly 3,500 in service

And ultimately the German’s are very efficient and stereo-typically Teutonic when it comes to their military budget. That is to say, they don’t waste a lot of money on stuff they don’t need. And they manage military spending very carefully to reduce waste.

By contrast, as I’ve mentioned in prior posts, the UK are hopeless when it comes to managing their military budget, with a litany of overspends and foolish projects that should never have gotten funded.

And across the pond, a significant proportion of America’s $700+ billion budget is wasted. Aside from simple poor money management or incompetence, the US has lots of military hardware it simply doesn’t need. E.g. 11 aircraft carriers, more than the rest of the world combined (at a time when its widely accepted that they are vulnerable to long range missile attack or submarines). Plus they’ve got over a dozen amphibious assault vessels (basically a mini-carrier) as well. And they’ve got large numbers of military bases in the centre of the country which don’t really serve any useful purpose (what do they think is going to happen? Chinese paratroopers are going to drop in and invade Tennessee? And don’t all the locals own guns? Isn’t that the whole point of the 2nd amendment?).

American defence procurement is littered with examples of projects that were ill-conceived from the start (e.g. the Skybolt missile), badly mismanaged (the Sgt. York), overly ambitious (Reagan’s SDI) or with no clear idea about what role the weapon system would perform (e.g. the Zumwalt class). Meaning Congress sometimes just refused to buy the finish product (if you ain’t planning on buying it, why bother wasting billions developing it?).

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At a price of $1.5 trillion, the F-35 is the ultimate example of wasteful military spending

Part of the problem is that Congress has long treated the US defence budget as basically a jobs program. Republicans know that if they actually practised what they preached (small government, low taxes) that would mean the economy of many Republican voting states (who are net receivers of Government money) would collapse, sending millions fleeing for the more prosperous (and often democratic voting) parts of the country. In short, US military spending is the biggest act of socialism on the planet. One which republicans can support, yet still keep a straight face when whinging about Obamacare or the deficit.

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And the brass in charge of the US military are well aware of this fact. Its something which they exploit to get their way (and thus further their careers, both in the army, or as a “consultant” for a defence contractor afterwards), even if the end result is billions of tax dollars going up in smoke, as this clip from the satirical film “the Pentagon wars” illustrates. And of course US military contractors can be some of the most aggressive lobbyists in Washington. Which probably explains why the US defence department has never been audited.

All in all, when it comes to the swamp that is US government spending, the US military budget occupies the deepest and dankest part of that swamp. And clearly by trying to hawk American ware’s overseas, Trump shows he has no intention of draining it. Quite the opposite in fact!

The brexit red flags you might have missed

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Therssa May’s little Brexit away day in Chequers seem to go well, at the time of writing, nobody’s thrown their toys out of the pram yet (save the odd grumble of discontent). As before, with the brexit bill we were toldthe party won’t wear it” that there would be mass resignations, a leadership challenge, rebellion, destruction of the death star, fire & brimstone, etc.

However, instead, nothing. When push comes to shove, the brexiters have about as much backbone between them as an English adder. Although that said, what May is proposing, just doesn’t go far enough for the EU. They’ll likely turn her down and force her and the brexiters to concede more ground, which probably will result in some push back eventually.

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As I mentioned before the brexiters have to oppose a soft brexit of any kind because they know demographics are against them. Sometime over the next decade a significant number of those who voted leave will have died….likely in a pool of their own piss an a dirty hospital floor because the UK can’t hire nurses anymore (thanks to brexit) to treat them. Already recent polls have shown a majority in favour of remaining in (or rejoining) the EU. Hence why the brexiters have to go for a brexit that’s as difficult as possible to unpick or reverse. Its basically what they did with rail privatisation.

So like I said, I suspect some sort of push back will come at some point. However, outside of Chequers there’s been a number of worrying developments over this past week which would give anyone, leave or remain good reason to be concerned and be looking to either halt the brexit process or go for the softest brexit possible.

Trading places

Firstly there’s the issue of future trade deals. One of the assumptions the brexiters are making is that they can get exciting” trade deals in “emerging” markets. However in order to qualify as “British” as part of any future trade deals, said goods, such as cars for example, then the majority of the parts and materials have to have been made in the UK (and yes I know that sounds obvious, but the brexiters don’t seem to get it). Currently many UK made products, most notably cars, are mostly built out of parts coming in from overseas (notably Europe).

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Hence if for example Trump gives the UK this much vaunted trade deal (and that’s a big if, you honestly think he’s going to screw America just to do the brits a favour?), that won’t matter, UK made cars will still count as “European” when they arrive in the US. In fact UK based car companies will be in the worst of both worlds in the event of a hard brexit. They’ll have to pay a tariff on parts imported from the EU into the UK and then pay a further tariff on the car when its exported (and 75% of the UK’s vehicle production is for export, as in they roll off the production line in right hand drive!).

I would note that this scenario is not unusual. Many car makers, particularly in places like China or Mexico, face the same problem. However, they have the advantage of much lower labour costs. If you’re paying half what it costs to make a car in the UK, do you really care if someone slaps a 20% tariff on you. Yes you’ll try to get a trade deal to eliminate that, but ultimately, its not going to break the bank. However for the UK this could immediately render UK car production uneconomic. Further, in order to avoid similar problems, European car makers might stop buying UK made parts as well.

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But what about Nissan, didn’t they invest in brexit Britain? Well yes, but only because the government effectively bribed them. Further it was pointed out to me this week that basically Nissan far from being naive, actually played May and the brexiters like a fiddle. Car makers chance their car models about every five years or so. But it takes the best part of several years to actually do that. Hence Nissan’s board had probably already decided to continue production in the UK prior to brexit, under the assumption of a remain vote. Aware that it would be several years before any of the aforementioned tariffs actually hit them (when production of the planned models will be winding down) and that shutting the plant now would mean throwing away a lot of money, it is not surprising they decided that this was a hit they could absorb, particularly if they could scare a kick back from May in the order of a few billion.

Now the problem is that sometime around about 2020 Nissan and other car makers are going to have to make the more important decisions about future car production. As things stand many will have to look at introducing hybrid or all-electric version of their vehicles and the UK doesn’t make a lot of that hardware and, for reasons noted earlier, they might not sell such parts (or vehicles in the UK post-brexit). So in the absence of any comprehensive trade deal with the EU, its all but certain that at this point Nissan et al will take their multi billion pound cheque from the government, tuck it in their back pocket, fire a few thousand British workers and ride off into the sunset.

A is for atom, C is for chaos

Secondly, we have news about Euroatom and the UK’s supposed replacement for it. As I pointed out in a prior post, the brexiters assumption that they could leave Euroatom, but yet still somehow be part of it (or just gate crash future meetings) was bollix. Well it seems that message got through eventually (kudos to Barnier for somehow getting that into Dave2’s thick skull!). So they scuttled away and prepared to set up their own version of Euroatom. Whose job it will be, much as I warned, to basically google and then plagiarise all of those pesky EU regulations the brexiters hate and implement them in the UK.

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The UK nuclear industry’s readiness for brexit….all red lights!

Well a recent audit judged the UK’s preparedness for brexit (with around 8 months to go) as regards nuclear regulation and rated the UK at red in all five categories. And just to be clear to the brexiters, no this isn’t something you can fudge or make do and mend at the last minute. WE ARE TALKING ABOUT RADIOACTIVE MATERIAL! You know the stuff that glows in the dark! If the UK isn’t up to speed on this by March 2019 the consequences could be pretty serious. Nuclear plants might have to shut down, hospitals could run short of isotopes, factories could be forced to shut. Hell, even your average smoke alarm has a small quantity of radioactive material in it. So leaving the nuclear industry unregulated isn’t an option.

I know people who work in the nuclear industry and while they will be quick to point out that, they’re name isn’t Homer Simpson and they do take safety very seriously. Unfortunately, they are also the first to admit there’s a good few jackasses in the industry (typically upper class twit’s who went to the right school and have been overly promoted as a consequence) who are only one mistake away from a Darwin award. The many foul ups over the years at UK nuclear facilities are testament to the fact that the UK nuclear industry needs regulating.

And this isn’t a matter the UK government can simply fudge. Private companies might not play ball, if they fear losing their insurance cover or line of credit (quite apart from the consequences if several of their workers ending up glowing in the dark!). And the IAEA has to sign off on everything. And if come March 2019, the UK nuclear regulator consists of a port-a- cabin at Sellafield with a few clueless trainees inside frantically googling what is a Geiger counter?, odds are they’ll shut the whole thing down.

Border polls

Thirdly, a poll has come out regarding Irish reunification that would have Ian Paisley rising out of his grave….and likely going off to beat the DUP leadership to death with a crucifix. Prior to brexit you’d struggle to even get a majority of Catholics to support re-unification, polls (both catholic and protestant combined) typically ran at 65% no, 30% yes (the rest don’t know’s). Well that lead of +30% has now been slashed to just 3% with 45% no and 43% yes (the balance again undecided). Need I point out but 3% is within the margin of error for an opinion poll, but also easily within the margin of what can be overturned in an actual referendum campaign.

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And again, the really bad news economically as a result of brexit hasn’t struck yet. In short, the odds of NI (and recall the DUP campaigned for brexit) becoming part of the south are probably in the order of 50/50.

Reacting to this poll, the Irish PM did point out his best guess that the North probably won’t vote for reunification. However, his comments have to be put in the context that his main rivals politically are Sinn Fein and that the NI economy is much weaker than in the Republic, with a GDP about 20% lower. Hence there would be a price to pay for reunification and I’m not sure if people in the south appreciate that (or are willing to pay that price).

Personally, I’d argue that in a soft-brexit scenario (particularly where it was pretty obvious that a 2nd referendum and the UK rejoining was a likely possibility in the medium term) Varadkar is probably right. However, in hard brexit scenario I’d argue its very likely he’s wrong and NI would in fact join the south. But either way, if this isn’t setting off alarm bells and having unionists wake up in a cold sweat, I don’t know what will. The DUP backing brexit was a historic mistake for the party.

Vote leave’s illegal campaign

Finally, we have the not so small matter of the legality and legitimacy of the brexit vote being called into question (again!). As I’ve pointed out before on this blog a couple of times, questions have been asked about the tactics and funding of the vote leave campaign, not to mention undisclosed links to hedge funds, the misuse of personal data and links to both US far right groups and the Kremlin.

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Well a leaked report suggests the electoral commission is going to find that vote leave broke UK electoral law during the referendum. And this “leak” came from none other than the vote leave camp themselves, suggesting that they wanted to get the news out in advance because the actual report is going to be so much worse. Indeed, they submitted a 500 page rebuttal (the lady doth protest too much me thinks!).

Now leave voters will likely shrug their shoulders at this and say “fake news” (buddy, its an official independent investigation, the very opposite of fake news!). However, you might want to consult the small print of the Vienna commission, which both the UK and US (among others) have signed. Under this, the referendum result should now be annulled and the vote re-held. And there are a number of precedence’s set across Europe where similar votes were annulled and then re-run (most recently in Austria).

But of course the UK isn’t Europe or the US. With no proper constitution, under British law, the UK government can just ignore this inconvenient little fact….until a court ruling goes against them! At some point they are going to face further legal challenges to brexit. And this ruling from the electoral commission means they can’t hide behind “the will of the people” any more (i.e the 37% who voted for brexit, closer to 25% if we consider those who were denied a vote or leave voters who’ve already died since the vote).

And its not the Gina Miller types I’d be worrying about. Its corporations and businesses who will be able to show how brexit has caused them real and serious economic harm. And they can hire high priced lawyers to fight their case. And recall some of these cases will be fought in court rooms in Europe or in the US, meaning it doesn’t matter diddly squat what laws the UK government passes to try and wriggle out from under it.

Such legal cases could get pretty nasty. We are kind of into uncharted legal territory here. The lawyers will start subpoenaing government documents left right and centre, and who knows what will come out from that (nothing good I suspect!). Ministers will be hit with summons to testify in court under oath. Think about, if Boris Johnson ends up in the dock there are three possible outcomes, A) he lies under oath, is found to have committed perjury and gets hauled off to jail. B) He tries to make a joke out of it with a latin quote and gets done for contempt. C) He cracks under cross examination and fesses up to everything, then gets arrested for obstruction of justice and electoral fraud. Or D) knowing Boris, he manages to do all three!

The smart legal advice to the government (well unless they want to hold the next cabinet away day in Wandsworth scrubs!) would be to just settle these cases out of court. Take the lawyers aside, offer them whatever amount of money it costs to make them go away (which is basically what they did with Nissan after all) and hush the whole thing up. Of course once word gets out and you have corporate lawyers queuing round the block, at the same time the public are seeing their taxes going up to pay for brexit, it will probably get to the stage where they’ll have to have another referendum at some point….

…..Or maybe, they won’t. In theory if a pro-EU government were to come to power at some point in future, they could argue, not unreasonably, that brexit was an illegal act undertaken by corrupt ideologically driven bigots, power hungry fifth columnist and traitors in the pay of a foreign power. Rather than have a 2nd referendum, they’d could simply vote to annul the result and proceed with EU membership without even bothering to hold another referendum. So the seeds in brexit’s downfall might have already been sown.

But either way, there’s enough red flags starting to go up that only a fool would ignore them. But unfortunately the brexiters, like captain Ahab, are committed. Brexit is the hill on which they’ve chosen to die on. They can’t back down now, if they do they are finished. It would be the end of Tory party, the DUP and Corbyn.

The Southsea bubble: brexit edition

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I joked before about how when the brexiters talk the talk aboutexciting” trade deals “in emerging markets” they don’t say where are these mysterious new markets. Timbuktu? Peru? El Salvador?….Well actually yes. The brexiters think that they can substitute trade with the largest single economy in the world, for trade with Latin America. Things I’ll say in jest, they’ll say with a straight face. Humour and satire are again being outrun by facts.

So, what’s wrong with this idea? Well firstly the South American economy is worth only about a quarter of that of the EU economy. And while the UK literally has a pipeline to the EU, via the channel tunnel, Latin America is the other side of the world…and on the other side of the inter-tropical convergence zone (if you’re a nervous flyer, you don’t want to fly to south America, it gets pretty choppy).

And while you’ll come out of the channel tunnel onto either a high speed railway line or an eight lane motorway, the transport infrastructure down south isn’t that developed. The roads away from major cities aren’t great and there are large gaps in the network, the unfortunate consequence of living on a continent with vast jungles, massive rivers, high mountains and uncontacted tribes (who’d sooner eat Boris Johnson than buy a Dyson vacuum cleaner off him!).

In short its a bonkers suggestion. Even more bonkers when you realise the UK already HAS a number of trade deals with Latin American countries, with other deals being negotiated via the EU. Deals the UK will lose upon leaving.

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I mean what are we going to sell them? Given that the Tories have been principally trying to re-assure farmers, one assumes they mean beef. Well, you do realise that Argentina is beef country? Order a steak in Argentina, you get a massive steak that’s half the side of a cow (for a fraction of the price you’d pay in the UK), and no sides (and they don’t exactly do vegetarian food out there btw!). So I don’t see how British farmers could compete. And as they’d be looking to export meat to the UK, this would flood the UK market and bankrupt UK farmers. Plus, given the presence of foot and mouth disease, the UK would risk losing its disease free status, meaning it would lose access to the European and north American markets.

Should I be accused of saying south American’s don’t eat their greens, they do, but its more fruit and salads. Brazil also has large sugar cane and grain growing plantations. I don’t see how the UK could compete and it would inevitably be the losers in any such deal. Plus a number of south American countries are somewhat paranoid about their agricultural production and might be reluctant to allow UK imports, as they would worry about diseases being brought in, threatening a vital industry. Its illegal to bring fruit (or in some cases grains of any kind) into a number of south American countries (they search bags at customs and they will fine you if they find some much as an apple core). And speaking of fruit, Argentina and Chile both have a large wine industry. Do the brexiters seriously think English wine (what the French call “du vin roast beef”) is going to compete against that?

But what about cars or planes? Well given that a number of car and plane manufacturers are now threatening to leave the UK, that might be a moot point soon. But since we’re talking about, Brazil, Mexico and Argentina have their own car industries (Mexico and Brazil’s each manufacture more cars than the UK).

As a European traveller down south you’ll notice how a lot of their cars (Clio’s, Golf’s Megane’s, etc.) all seem to be a generation or two behind the ones back in Europe. I assume the car manufacturers are moving equipment from Europe down there, allowing them to get a bit more revenue out of model before its retired. And as they’ll have worked out any issues with the car back in Europe, they can build them cheaply in Latin America (quite apart from the lower labour costs). Again, there ain’t no way UK based manufacturers could compete (and as they will no longer comply with EU emission standards and safety requirements, we can’t sell them or even drive them on European roads).

The luxury end of the car industry is dominated by US or Asian brands (Lexus, Cadillac, etc.) so that’s going to be a difficult one to break into and it likely won’t go down well in Washington, where it will be seen as trying to eat America’s lunch.

As for aircraft, Brazil is home to Embraer, the world’s third largest aircraft manufacturer. More famous for small regional jets, they’ve recently begun to branch into medium sized jets. While I can see a few UK airlines buy the odd plane off them….well not that we’ll have many airlines left, most are already registered in the EU (even BA!). But either way, the UK is unlikely to see any real gains.

One feature of south America you do notice is how the contrasts between rich and poor are fairly stark. The poor are very poor and the rich are very rich. Hence why if you hang around the posher parts of Buenos Aires or Rio, you’ll be paying London prices, and that’s the cheap places! There’s also a certain level of social apartheid in south America. This is a part of the world where boys from the favelas can literally get picked up by the cops (or shot!) for just walking down the street in a posh part of town. South America had the misfortune to be where a number of right wing thinkers, in collaboration with various military dictatorships, were allowed to run various social and economic experiments. And needless to say, the results haven’t been pretty.

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That said, the vast bulk of people in this part of the world, while not poor (nor are they rude rich snobs), they ain’t exactly rolling in money. The sort of high value expensive stuff the UK would be looking to sell they won’t want to buy and they can get something similar locally (or made in China) for a fraction of the UK price. So in short, there’s pretty much no way any of the trade the UK will lose post-brexit with the EU can be made up in Latin America. Indeed, given the loss of Latin American trade deals post-brexit (once existing trade deals are lost upon brexit), its questionable whether any of the trade the UK already has with the region can be recovered quickly.

Another consideration is that while many South American countries have free trade agreements with each other and freedom of movement, its not as all encompassing as it is in the EU. In fact it wouldn’t be far removed from the “bespoke” trade deals May often talks about. And the end result is that if you try to go across any border in South America, there’s generally going to be a queue (and a delay of a few hours), as there will be customs and passport checks of some form or another. Its inevitable that the same will happen at Dover and in Northern Ireland, particularly if the UK starts signing trade deals with third parties (such as the US) which aren’t compatible with EU rules.

However, there is one sector of the south American economy where the UK could potentially see a market for its wares – financial services, which they can sell to the many nouveau riche in the region (social apartheid? Our kind of people! you know we used to do great business with the ones committing actual apartheid?). I mean seriously, the Tories have never in their history cared about factory workers , farmers or fishermen. Do you honestly think they’ve gone through some sort of road to Damascus conversion?

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No, instead when they boast about how “we” can get “exciting” new trade deals, they are talking into a mirror. The “we” refers to them and their boarding school chums in the city. The plebs in the factories and fields are snookered. But that’s hardly the Tories problem. After all, why do you think the likes of Farage and Aaron Banks wanted brexit in the first place? (so they could bet against the pound and make a killing from its collapse in value after the brexit vote).

However if this is the plan, its a crap plan. Latin America is not exactly the most politically, nor economically, stable part of the world. Those right wing social and economic experiments I mentioned? Let’s just say that there was a certain level of what the CIA would refer to as “blowback. As we speak Argentina might be about to go bankrupt (again!). In Brazil there’s strikes and unrest, with talk of martial law and military dictatorship. And Venezuela? Don’t ask! Tying the UK’s economic fate to that of south and central America doesn’t exactly sound like a brilliant plan.

Oh, and there’s the small matter of those Islands in the South Atlantic that the UK is occupying, which tends to get up the noses of the locals a bit. I suspect any sort of a trade deal might involve them being jettisoned.

Its also important to remember that the Tories will place their ideology above the well-being of the country. As I pointed out in a prior post, the privatisation of the UK’s railways wasn’t undertaken in a way that would be most likely to succeed and produce an efficient service. It was undertaken in a way that would be as difficult for a future labour government to unpick as possible. That this would destroy British railways long term or cost the government more than it saved was of little concern (they don’t use the train, that’s what the Jag is for!). So to is it with brexit.

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The brexiters are all to aware that demographics are against them. That once the older generation who voted leave have all died off, the odds are the younger generation who voted remain (or were denied the chance to vote at all) will simply vote to rejoin the EU (indeed recent polling suggests public opinion is already turning against them). So a critical goal of the brexiters is thus to achieve “a clean break”, which is code word for a brexit that as difficult as possible to reverse, even if its detrimental to the UK.

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In short, what the brexiters propose is a re-run of the south sea bubble. That bubble grew out a false claim that a UK company had been granted a monopoly on trade in South America (in truth they had permission to send exactly one ship a year!….to trade in slaves!). This was then blown out of all proportion by speculators, not unlike the very spiv types behind brexit, who then buggered off and left an awful mess for a future government to clean up, which bankrupted many in the UK. When you forget the lessons of history….