Tuesday, 2 July 2019

Britain urgently needs a coherent post-Brexit strategy


I saw the 2008 financial crash coming. Or rather I seriously suspected something was wrong. I wasn't looking at any charts or economic metrics. My bellwether was a sunny Saturday afternoon in Bradford. That day I remember vividly. It was was busy and there were a lot of people around spending money. That was the glitch in the Matrix. Bradford isn't like that. If there is money sloshing around then something is wrong.

But then I had a similar feeling a little under two years ago. I'm quite used to driving old bangers but one day I noticed just about every car around me was substantially newer than mine. A friend of mine even bought himself a posh looking Mercedes. That wasn't right. People like me don't have brand new Mercedes Benz cars. A Merc is a bosses car; for them with serious money or those with a very clean credit record.

It turns out we were at the peak of a global oversupply problem with the auto industry entering a recession. This has caused a major contraction seeing job losses right across the USA and Europe. No doubt Brexit uncertainty has influenced some of the decision making but Brexit is far from the cause.

When it comes to this stuff I always trust my hunches. I can't always say what is happening or why but I have a sixth sense for when something is up. I rather expect most people do, which is why I put my faith in democracy. Democratic decisions are not always rational and are often in defiance of what the wise men of money are saying, but lived experience is every bit as important as economic metrics which very often don't give us a complete picture.

One of those real world signals has traditionally been the state of the high street. I recently came upon a picture of Darley Street in Bradford. It wasn't so long ago that retail was thriving. Now it looks derelict. Doubtless the internet has taken its toll. Search engines now do the job of travel agents and and hobby shops can't compete against the internet, and now even clothes retail is fighting for its life.

Of course, a lot of British businesses do themselves no favours at all. As a modeller I've lost count of the number of decent model shops up and down the country that went under. They were always valuable in that you could nip out on a Saturday afternoon to get the tin of paint you'd run out of. I'm not at all surprised though. They were slow to build a web presence and did little to maintain it, with some neglecting to even have a website. Similarly, the small dormitory towns have niche shops opening that don't make it to their first birthday largely because everyone's at work during their opening hours.

Obviously there are other pressures, not least councils milking them for business rates and killing passing trade by eliminating parking and vehicle access. Some councils have in effect declared war on small businesses and shops and they won't be satisfied until the high street stands empty. Now we complain about shabby high streets and shopping parades that depress the over all aesthetic.

So what's to be done? I don't know exactly. I rather suspect that even if we zeroed business rates for the high street and introduced free parking, it would still only be a sticking plaster because the internet has fundamentally changed our habits. Today I have a new hoover and a fridge on the way and I've not been near any shop.

The last man standing appears to be clothing retail, but having misjudged the market, making rapid expansions in the previous decade, signing long term leases in redeveloped malls, they now find they can't compete with the internet either. This is less to do with online competitors having fewer overheads as it is a barrage of cheap tat from China.

Here's where the stack of EU customs and regulatory controls make virtually no difference. Chinese produce, likely produced to a stolen copyright, manufactured on the cheap with appalling working conditions flood into the UK, often bypassing any tariffs, and even with relatively high tariffs on certain categories of goods (if they are applied) make little difference when the price comes in at peanuts. Legitimate businesses have no way to compete when the consumer is all too happy to take a punt.

This is where Amazon could be held to account. Amazon serves as a back door to the entire regulatory system and doesn't seem to take any interest in cleaning up its act. This is why I'm not especially opposed to an Amazon tax. Multinational e-commerce has a lot to answer for. Whether that is the right tool for the job, though, I really don't know. It's not something readily tackled at the borders since packages are often shipped individually direct from China rather than by the container load.

Were there to be an e-commerce tax, it would need to fund a business rates cut for the high street in recognition that retail, though no longer competitive, serves a social function. The difficult business of statecraft. This is when we also have to make the same sorts of decisions over agriculture. For sure we can open up our markets to cheaper beef produce from Argentina and lamb from elsewhere, but then the cost of that is giving over our countryside to hectares of solar panels, thus destroying a natural asset that adds value in its own right.

This is why we should not be in any rush to secure trade deals for their own sake. It's easy to crunch the numbers and say that on balance a trade deal is a net gain, but if that means more services exports for London at the cost of a factory in Dewsbury, we need to start asking how the local economies in the regions can absorb these kinds of hits. That these northern towns are now desolate wastelands is the cumulative effect of trade liberalisation and globalisation.

The point is clumsy obviously, but the regions of he UK are littered with post-globalisation slums from Huddersfield to Lowestoft. Protectionism is obviously not going to bring them back to life, nor can we permanently subsidise and prop up manufacturing, and certainly not with our new found fondness for WTO rules, but there certain imperative on government to consider the impacts on the whole nation at a time when the UK has never been more divided.

In a lot of respects Brexit is shutting the stable door after the horse has bolted, and with many places now dependent on major multinationals operating inside the single market, we are likely to exacerbate all these problems in the interim. More so if we commit to a careless policy of unilateral tariff disarmament. If Britain is to have an independent trade policy then it needs to have certain objectives in mind rather than scoring deals for the sake of it. Trade is a political policy instrument and if our objective is simply a blanket one of "free trade" then we might as well have stayed in the EU for all the difference it makes.

Ultimately decisions need to be made as to what we are hoping to accomplish, noting that a primary political objective is to somehow find a new balance that can accommodate the gulf between London and the regions where the regions get a say in what is done to them. If there is still a Union to speak of, then the constituent nations, and the north of England need a voice of their own - and a veto on any future FTAs. For me, Brexit is somewhat pointless is we are shifting the decision making from one unaccountable elite in Brussels to a similar one in London comprised of most the same people in hock to the same short sighted ideologies.

As with the 2008 crash and the auto industry recession, my hunch tells me we are again at a certain crossroads. House building is not keeping pace, which is a problem in its own right, but that which is underway is creeping out into Wiltshire and East Anglia, which tells us that development is all in the service of London where people are exchanging the cost of living in London for exhausting unsustainable commutes, necessitating further road and rail expansion, again to service London. For all this talk of "one nation conservatism", we see precious little acknowledgement that anything north of the M25 exists.

Brexit made it abundantly clear that ours is not a united kingdom. Far from it. The disparities may even be too wide to ever bridge, in which case the North and the regions can no more tolerate central diktats from London any more than from Brussels. As much as Brexit of itself is not an economic remedy, there is precious little to suggest it offers any political resolution either. The immigration question is not going away nor is the widespread sense of revulsion at our politico-media class. Without a major constitutional overhaul, Brexit is unlikely to solve anything at all.

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