The economic consequences of Brexit

[AC43]

don4l said:

Ghibli said:

I'm sure it will be fine as long as the UK doesn't think about the export trade it has with France and Germany.

Please explain why you think that free trade with Germany would be good for Britain?

Well I presume we're still going to be financing loads of diesel 4 pots from Germany. Can't see us building a vest new car industry between now and, say 2020.

Out trade deficit is already on the floor.

So we'd better be able to continue to sell what we currently do to the EU.

And to do that we need to abide by a bunch of regs.

Inc free movement of labour.

Seems pretty straightforward to me.

Or maybe the EU just shrug and give all that up because they agree with our view that they should.

As ever, I'll be happy to be proved wrong but I can't see why the EU would lower the barrier to entry for the UK.

[don4l]

Ghibli said:

don4l said:

Please explain why you think that free trade with Germany would be good for Britain?

Why would I need to explain anything to you? You are vocal and have all the answers and insults.

The reason that I asked is that I have explained many times why we don't need for a special deal.

I don't appear to have persuaded anyone, so I thought that I would give you an open floor.

My question contained no insults. I genuinely do not understand why people feel that a free trade deal is at all desireable.

If you don't feel like answering my question, then anyone else can feel free to step in.

You are not alone in thinking that Britain should try to secure a free trade deal. Even many Leavers would agree with you. I would just like to hear why they think this would benefit Britain.

[mike9009]

Ghibli said:

don4l said:

Please explain why you think that free trade with Germany would be good for Britain?

Why would I need to explain anything to you? You are vocal and have all the answers and insults.

Can I answer this one?

Because many big UK based manufacturing businesses sell into Germany and Europe. (A few I can think of are Nissan, Honda, Toyota, Rolls, MINI, BAE Systems, GlaxoSmithKline). Although I can't quite understand why they bother dealing with these EU based autocrats?

These businesses 'may' decide on their next factory upgrade/ investment/ model launch/ engine launch, that they 'could' increase market share and shareholder return by moving into a bigger market with free trade. Exporting everything from the UK to satisfy EU demand would be more expensive than manufacturing in EU and exporting the UK demand back in due to the market size ($19.2 trillion EU GDP versus $2.8 trillion UK GDP)

I believe if these 'dirty capitalists' decide it would be a good plan to relocate, it may have a negative effect on UK employment. But at least that may persuade some of our EU migrants in the UK to move back home? Job jobbed


Mike

PS I underwrite all this based on the EU sticking together - which I strongly believe may not happen, primarily due to Brexit vote.

[don4l]

AC43 said:

don4l said:

Ghibli said:

I'm sure it will be fine as long as the UK doesn't think about the export trade it has with France and Germany.

Please explain why you think that free trade with Germany would be good for Britain?

Well I presume we're still going to be financing loads of diesel 4 pots from Germany. Can't see us building a vest new car industry between now and, say 2020.

First, thank you for answering... and answering honestly.

If we have to resort to WTO rules, then German cars will become 10% more expensive. Currency fluctuations already mean that they are 8% dearer. So, cars made in Germany could see an 18% price increase.

Jaguar still has some spare capacity. I have visited their factory.

BMW probably has some spare capacity at Cowley. Some of the raw materials will have gone up in price because of the weak pound, but the labour and profit margins are now more competetive. They would shift production to the UK to maintain their sales. Audi and Mercedes are in the same position.

AC43 said:

Out trade deficit is already on the floor.

Agreed.

AC43 said:

So we'd better be able to continue to sell what we currently do to the EU.

Well... yes. But they would also be better able to sell to us.

When we joined the EEC, we had trade balance with the other countries. Our trade defecit has grown every year since.

AC43 said:

And to do that we need to abide by a bunch of regs.

Inc free movement of labour.

Why should these regs apply to companies who only sell to the domestic market?

Why should we let our drainage systems silt up? (Somerset floods)

Why should we allow in the equivalent of two Oxford Cities every year? Should we do this without building extra water resevoirs, power stations or roads?

If anything that I have written doesn't make sense, then I am very happy to accept that I didn't express it correctly. Feel free to highlight parts of my post and say that they seem wrong.

I'd love to engage in proper discussion. Unfortunately, there seems to be far too much passion involved.

I tried earlier with Ghibli, but failed.

[Jockman]

don4l said:

Why should these regs apply to companies who only sell to the domestic market?

Are you alluding to the 87% or so of UK Companies who do not export to Europe?

[230TE]

Or even more simply, free trade between two countries enriches both. It works better than anything else, and it's also much simpler. Asking a country to pay for mutual free trade is like saying "Give me some money, or I'll set fire to your wallet, and mine as well".

The Economic Freedom Index seems to show a close inverse correlation between economic freedom and economic fkedness. Greece (the most economically fked country in Europe) ranks between Bangladesh and Mozambique.

http://www.heritage.org/index/ranking

[anonymous-user]

don4l said:

First, thank you for answering... and answering honestly.

If we have to resort to WTO rules, then German cars will become 10% more expensive. Currency fluctuations already mean that they are 8% dearer. So, cars made in Germany could see an 18% price increase.

Jaguar still has some spare capacity. I have visited their factory.

BMW probably has some spare capacity at Cowley. Some of the raw materials will have gone up in price because of the weak pound, but the labour and profit margins are now more competetive. They would shift production to the UK to maintain their sales. Audi and Mercedes are in the same position.

That's all very well-but jaguar have just opened up a new factory in Slovakia.
And they buy many European components including zf transmissions and Bosch management software (I think!)

So it might be that when you tot up the additional costs from tarriffs and exchange rates for European components etc, and then importing the cars again that it's more economical for jaguar to manufacture their European market cars in Slovakia.

I think also one of the things that people are seeing as a major downside is not just the cost but also the complexity of tarriffs/being outside of the free trade area. With just in time delivery and people trying to keep minimal stock levels-it becomes a massive pain when going across customs etc.

Industry 4.0 is becoming one of the major things in manufacturing at the moment, with interconnected systems and other things that just work so much better in a free market-with no hinders car from clearing customs etc.

[mike9009]

Jockman said:

don4l said:

Why should these regs apply to companies who only sell to the domestic market?

Are you alluding to the 87% or so of UK Companies who do not export to Europe?

I always find this stat quite amusing, but cannot find any facts to back up my assumptions.

My assumption is that there are a few large companies in the UK that export to the EU (approx. 13%). There are many smaller companies which do not.

As an example, Nissan directly support many jobs in the UK and export to the EU. But Nissan use many small UK companies to support their operations - these small companies do not directly export to the EU. (For example, IT companies, training companies, construction companies, tooling companies, sandwich making companies, small parts companies, research companies, consulting companies, marketing companies, print companies, plumbing companies, electrical install companies, legal companies, accountancy companies, local hairdressing companies, etc) I would imagine the ratio of companies supplying Nissan (and not exporting to the EU) versus Nissan (exporting to the EU) might be about 87%? So although 87% of companies do not directly export to the EU, many are reliant on UK exports to the EU.

Or 87% of UK are not big enough or ambitious enough to export to the EU. It would be interesting to see the % of UK companies exporting to the ROW.

Like I said, no facts to back this up, but the headline figure of 87% might be a little misleading

Mike

Edited by mike9009 on Thursday 8th September 21:13

[anonymous-user]

don4l said:

I tried earlier with Ghibli, but failed.

We obviously differ on our views. It strikes me after reading many of your posts that the Evil EU is out to get us and forces us to have a trade deficit with them.

My view is different from yours. I look at it that they have products that we want, why else would we buy them? IMO we don't have as many products to sell to them that they don't already make or want.

Your view appears to be that they need our business and we don't need theirs, yet on the other hand you would rather the rest of the world had that business.

My view is that when we are trading with the rest of the world we will import more simply because other countries will want and need to sell to us. We will not be able to provide more than they can provide to us. Unless we have cracking trade deals where they buy from us and we don't buy from them.

Maybe it's a moaning remainers view?

[catso]

don4l said:

It's all tremendous fun. And, we haven't even got to the bit yet where we say "I told you so". That is going to be the icing on the cake.

How very mature.

[AC43]

don4l said:

AC43 said:

don4l said:

Ghibli said:

I'm sure it will be fine as long as the UK doesn't think about the export trade it has with France and Germany.

Please explain why you think that free trade with Germany would be good for Britain?

Well I presume we're still going to be financing loads of diesel 4 pots from Germany. Can't see us building a vest new car industry between now and, say 2020.

First, thank you for answering... and answering honestly.

If we have to resort to WTO rules, then German cars will become 10% more expensive. Currency fluctuations already mean that they are 8% dearer. So, cars made in Germany could see an 18% price increase.

Jaguar still has some spare capacity. I have visited their factory.


BMW probably has some spare capacity at Cowley. Some of the raw materials will have gone up in price because of the weak pound, but the labour and profit margins are now more competetive. They would shift production to the UK to maintain their sales. Audi and Mercedes are in the same position.

Interesting dynamic. Wasn't aware of the WTO tariff, hadn't thought of pricing advantage re UK-built cars

don4l said:

AC43 said:

Out trade deficit is already on the floor.

Agreed.

AC43 said:

So we'd better be able to continue to sell what we currently do to the EU.

Well... yes. But they would also be better able to sell to us.

When we joined the EEC, we had trade balance with the other countries. Our trade defecit has grown every year since.

Not sure how much the EU is to blame for this. A lot of it is down to manufacturing which has been in decline since the 70's. The UK has singularly failed in this regard. When you look at Germany they have the entire ecosystem nicely in place from funding up. We can't even do that bit right. As for the rest, with the notable excepetion of hi tech, we really seems to struggle.

(One of the reasons I bang on about Finance is that it's one area where we have done well and continue to do so - terrified we lose as out history in other areas is worrying to put it mildly).

Not that we shouldn't have a diversified economy of course. I just get jittery and get concerned about throwing the baby out with the bathwater.

don4l said:

AC43 said:

And to do that we need to abide by a bunch of regs.

Inc free movement of labour.

Why should these regs apply to companies who only sell to the domestic market?

Why should we let our drainage systems silt up? (Somerset floods)

Why should we allow in the equivalent of two Oxford Cities every year? Should we do this without building extra water resevoirs, power stations or roads?

If anything that I have written doesn't make sense, then I am very happy to accept that I didn't express it correctly. Feel free to highlight parts of my post and say that they seem wrong.

I'd love to engage in proper discussion. Unfortunately, there seems to be far too much passion involved.

I tried earlier with Ghibli, but failed.

There's plenty of emotion on both sides, yes but you've put forward some interesting points, many of which I hadn't thought of/considered.

Which, ultimately, is why I come here - I am well versed in some of the "facts" pertaining to the FS-related economy, less so on some of the other dimensions.

Happy to learn/take stuff on board.

EDIT; and there is a noticeable lack of discussion like this from the BoJo's and Davis's of this world which leads people like me nervous.

Edited by AC43 on Thursday 8th September 22:03

Edited by AC43 on Thursday 8th September 22:04

[SELON]

Good news: iPhones have gone up in price due to the wonders of the falling £.

Never liked Apple anyway.

[SELON]

Jockman said:

walm said:

I was being a little cheeky.
But you are complaining about population growth which is driven by three things.
Immigrants (which are only 0.3% - not the full 500k you are complaining about)
Death rate
Birth rate

So if it the whole population growth thing you have a problem with ("half a million per year") then births and deaths are you only other options.

Death rate is starting to rise again, slightly.

For many years we have seen the WW2 bubble work its way through from say 650,000 death pa down to say 489,000 deaths pa. Those that died prematurely in WW2 would have died naturally during this period. (I'm keeping it basic).

Ironically, a rising death rate will start to temper immigration flow stats as the population growth slows, assuming a constant birth rate

You're in the new growth business then

...Along with fishing (as long as you don't take on the mighty Icelanders)

[Jockman]

SELON said:

Jockman said:

walm said:

I was being a little cheeky.
But you are complaining about population growth which is driven by three things.
Immigrants (which are only 0.3% - not the full 500k you are complaining about)
Death rate
Birth rate

So if it the whole population growth thing you have a problem with ("half a million per year") then births and deaths are you only other options.

Death rate is starting to rise again, slightly.

For many years we have seen the WW2 bubble work its way through from say 650,000 death pa down to say 489,000 deaths pa. Those that died prematurely in WW2 would have died naturally during this period. (I'm keeping it basic).

Ironically, a rising death rate will start to temper immigration flow stats as the population growth slows, assuming a constant birth rate

You're in the new growth business then

...Along with fishing (as long as you don't take on the mighty Icelanders)

Cloud...silver lining

[Jockman]

mike9009 said:

I always find this stat quite amusing, but cannot find any facts to back up my assumptions.

My assumption is that there are a few large companies in the UK that export to the EU (approx. 13%). There are many smaller companies which do not.

Your assumptions seem reasonable enough.

mike9009 said:

an example, Nissan directly support many jobs in the UK and export to the EU. But Nissan use many small UK companies to support their operations - these small companies do not directly export to the EU. (For example, IT companies, training companies, construction companies, tooling companies, sandwich making companies, small parts companies, research companies, consulting companies, marketing companies, print companies, plumbing companies, electrical install companies, legal companies, accountancy companies, local hairdressing companies, etc) I would imagine the ratio of companies supplying Nissan (and not exporting to the EU) versus Nissan (exporting to the EU) might be about 87%? So although 87% of companies do not directly export to the EU, many are reliant on UK exports to the EU.

Thankfully. The Govt needs only to address the concerns of Nissan in your example rather than the hundreds of companies that supply it.

mike9009 said:

87% of UK are not big enough or ambitious enough to export to the EU. It would be interesting to see the % of UK companies exporting to the ROW.

I would guess less than 13%.

mike9009 said:

I said, no facts to back this up, but the headline figure of 87% might be a little misleading

Mike

It's a headline figure that rather bluntly states a fact. It emphasises that the Govt does not have to address the concerns of ALL UK Companies, simply target the 13% that have direct dealings.

Some of the smaller companies will still take supplies from Europe. I moved my biggest input to a UK based company post brexit due to currency movements but my 2nd largest input cannot be sourced in the UK so I had to increase prices.

[anonymous-user]

ATG said:

A good question, and if its members choose to head in that direction, then so be it, but we could have waited to see how it played out before jumping ship. The Euro doesn't require fiscal union; it requires fiscal discipline. The question is whether the more dysfunctional members can ever manage to impose that discipline on themselves. I expect there will be further economic integration in the Eurozone. I doubt anyone is going to want to cede foreign policy or criminal law, so no superstate. And probably a two speed EU that risks becoming an uncomfortable ride for non-Eurozone members.

The only way the EU will survive with the Euro is full fiscal union, it cant possibly work any other way as no matter how hard they may try, the southern states cant function with such a high value currency.

The issue with this is, do the northern states and Germany in particular, have the stomach for full fiscal union, which will mean a reduction in their standard of living.

The only way I see this working long term, is to scrap the Euro and introduce two currencies that cater for the north and south, or alternatively scrap the whole idea and go back to sovereign currencies.

That will help the southern states recover, but will hit Germany hard in its export markets as they currently have the benefits of an undervalued currency when based against Germany as a single entity.

The whole thing is a massive cockup, I'm not so sure its going to be recoverable without a lot of pain.

[s2art]

ATG said:

Yeah and its 10% of their trade and 40% of ours, so who'd feel more pain if we end up with an ineffective deal?

Probably Ireland. The EU has to throw Ireland to the wolves if they want a bad deal for the UK.

[SELON]

Jockman said:

It's a headline figure that rather bluntly states a fact. It emphasises that the Govt does not have to address the concerns of ALL UK Companies, simply target the 13% that have direct dealings.

Some of the smaller companies will still take supplies from Europe. I moved my biggest input to a UK based company post brexit due to currency movements but my 2nd largest input cannot be sourced in the UK so I had to increase prices.

FFS Brexit means it's going to cost me more when I cop it!!!!!!

On a less serious note, the "12%" who export to the EU also have many suppliers who have to manufacture or provide services to EU standards to ensure the exporters assembled product is compliant. So the "12%" is going to be a lot more than that.

Ford cryptically announced reduced investment into one of its factories. They clearly learned the lessons of others and didn't mention the B word but...

I can't argue with those who want more control etc. But let's be ready for a rough ride for the next 10 years and keep calm...oh that's another 10 years of rubbish on top of the last 8 years of crap. So the kids who entered the job market 8 years ago will almost 40 before we're on an even keel. Luckily they won't be able to retire until their 75 so have plenty of time to enjoy it.

Anyway St Nigel of Orpington has stoked such bad feeling with those who are leading the negotiations that anyone who thinks it going to be a happy divorce is sadly mistaken. He certainly queered the pitch for the negotiators with his vile and personal abuse.

[mike9009]

Jockman said:

Lots of reasoned stuff..

Could you also argue that the 13% of companies who do export to the EU provide 87% of UK GDP or perhaps even more based on the facts below? Therefore, the 87% of companies not reliant on EU exports becomes ever more irrelevant to the whole of the UK economy. Again I assume the '87%' fact is trotted out to show that 87% of the UK economy (assumed correlation between # companies and amount of trade) does not rely on EU trade and so why bother? The EU is obviously not important to UK trade?

<95% of the 5.2M UK companies employ less than 9 people. 76% of UK companies do not have any employees. The top 100 UK companies (FTSE100) generates 81% of GDP>

Mike

Edited by mike9009 on Thursday 8th September 23:43

[sanf]

ATG said:

fblm said:

AC43 said:

They're not going to give it to us for free.

You buy 100bn a year more from them than they do from you. If anything they should be paying you.

Yeah and its 10% of their trade and 40% of ours, so who'd feel more pain if we end up with an ineffective deal?

Cards on the table, I voted remain (after a lot of reading both sides), and was a little surprised how down I felt after the vote to leave. But over the last month or so I've moved into the more positive camp - it's happened, now we've got to make it work.

% figures can be misleading - the cold hard figures are more interesting, and show why the negotiations will be so key for both sides when the actual £'s/euro figure is looked at.

The UK is Germany's 3rd biggest export market @ 89billion Euros(7%), Germany is UK's 2nd biggest importer @ 38billion euros (10.1%). So for both countries that is a big figure and both need to come to an agreement.

The UK is France's 3rd biggest export market @ 36billion Euros (7.3%), France is the UK's 5th biggest market @ 27 billion euro's (5.9%). Again big figures for both. Even countries like Germany & France will notice a hole that big in their economy.

ON a Micro level - BMW sold 1 million cars across Europe - Germany and the UK were about half of those, the UK was approx. 230,000 units. France, Italy & Spain combined were 170,000 units. So it show's the UK does have buying power.

7 of the top 10 UK export markets are EU countries - in positions 2,5,6,7,8,9,10. Interestingly the biggest export market for the UK is the USA @ US$66.5 billion -14.5% of exports, and US$20 billion higher than Germany. Switzerland (7%)is 3 and China 4 (5.9%). Outside the top 10 - 11.UAE (2.2% US$10.3 billion), 12.Hong Kong (2.1% US$9.6 billion), 13.South Korea (1.5% US$7 billion), 14.Saudi Arabia (1.5% US$6.7 billion) must all be factored in when the UK is thinking outside the world of EU for trade.

When countries with trade deficits are looked at - 7 of the top 10 are EU countries, Germany leads the way with 50 billion Euro - China & Canada are the two non EU nations, Norway is also there. Netherlands, Belgium, Italy, France, Spain & Poland - the UK has a deficit of approx. 5 billion euro or more. For each of those that is a lot of trade. For Germany the surplus with the UK (50billion Euro) is second behind the US @ 54billion Euro. France is next @ 36billion euro.

The UK top 5 surplus countries are: Switzerland, USA, UAE, Honk Kong, Ireland. Ultimately the UK runs a £96 billion a year trade deficit with the EU and approx. £45 billion with the rest of the world. That is a big chunk of business that either - the UK can try and make in house, or alternatively encourage the rest of the world to come and get it.

The negotiations will be long, complex and difficult - and while it shouldn't be over egged, the UK's value to the main EU countries should not be underplayed. If the smaller EU countries are seen to block/delay trade deals between the EU/UK which will impact the bigger EU countries more that could have the unintended consequence of more populations starting to feel fed-up with the EU - which would not be good for the future. Chuck into the mix the Italian banking issues, and Greece problems re-appearing, elections in France & Germany - all before we leave the EU, it is one seriously complex moving feast.

Ultimately if our negotiating team make a mess of the deal then the country will have some serious issues to deal with - so hopefully they won't. I would like to be positive and hope for the best, yes it could be challenging but the UK is a great innovative place to live, innovation and specialist business sectors are what we excel at and should build on.

I know an angel investor who having made a lot of money in business now re-invests in FinTech start-up's - not only in the UK but globally. His view is the UK is still the place to be (especially London) for up and coming new businesses that are looking to trade with the world, not just the EU.

While it's not yet a bed of roses, it's not dire either, the trade figures with Germany/France/Italy/Spain/Poland are big figures for their economy. Yes the figures are big for us too - but it goes both ways - France as a % of the UK exports is 5.9% where as it's 7.3% for France. While Germany is 10.1% for the UK and 'only' 7% for Germany, but the massive surplus Germany has with the UK makes that 7% just as important.

Sorry the figures are a mixture of Euro & US$ they are the ones I've referenced. Too many people are trying to make Brexit a soundbite with simple answers - it's not it's complex, so far the government seems to be taking a solid methodical approach - and I like the 'not providing a running commentary' approach - which the press may hate. Ultimately I'm optimistic, hopefully time will prove that to correct, it's in the hands of the folks running the UK now