Article taken from: www.theguardian.com
Theresa May says any delay to article 50 will force companies out of Britain. But the alternative – a bad Brexit – is worse. O ne of Downing Street’s many arguments in favour of Theresa May’s Brexit deal is that further delay will persuade many of the UK’s biggest companies to stop procrastinating about their investment plans and move some or all of their activities abroad.
Bosses have spent long enough watching and waiting to see what kind of Brexit unfolds. Another six months, while parliament moves in the direction of a general election or a referendum on the current deal with the European Union , would break their resolve, say May’s supporters.
Businesses have certainly delayed investment decisions. The latest figures show that business investment fell by 1.1% to £47bn between the second and third quarters last year. Worse, this was the third consecutive quarter-on-quarter fall in business investment and the first time since the recession of 2008-09 that such a prolonged squeeze on investment has occurred.
Manufacturers are among the worst hit. They have not only squeezed investment: they have suffered a serious dent in output.
GDP figures last week covering November appeared at first glance to spread a little cheer. The monthly measure of Britain’s income and expenditure showed a small increase from 0.1% in October to 0.2%. However, a deeper dive into the data revealed that almost all that boost came from shopping on Black Friday and Cyber Monday, and that most of these gains are likely to be revised away once the Office for National Statistics applies its seasonal adjustment methods.
That leaves the glaring and declining trajectory of manufacturing output, which fell for a fifth straight month, something that has also not happened since the 2008-09 recession.
Across a broader swath of Britain’s industrial sector, which draws together energy production, water supply, and mining and quarrying alongside the manufacturing sector, there were declines in November across all four industries for the first time since 2012.
The car industry was especially badly affected, making a difficult period – following declines in demand for cars from China and the diesel emissions crisis – even worse. On just one day last week Jaguar Land Rover and Ford announced thousands of job cuts , while figures from China revealed the first drop in car sales for almost 30 years .
Remaining inside the EU is hugely important to the areas where these companies are based
Nobody would want such a dire situation to drag on any longer than necessary. Everyone can see that the cost of negotiating an exit has proved to be high in lost investment and output.
All the studies, even those of the arch Brexiter Patrick Minford – the Cardiff academic whose Panglossian optimism meant he came bottom in a league of economic forecasters for 2018 – show the UK’s metal-bashers will be the most badly affected by leaving the EU’s customs union and single market.
It means that the north-west, the Midlands (east and west) and Wales, which have disproportionate numbers of well-paid residents working in manufacturing, have the most to lose. Manufacturing accounts for 10% of the economy and keeping it at that level in recent years has required considerable investment from companies such as Nissan, Jaguar Land Rover and Airbus.
So remaining inside the EU, or at the very least, getting the best possible Brexit deal, is hugely important to the areas in which these companies are based and the manufacturing industry more generally.
If a delay to article 50 is needed to decide on the best route forward, or even a general election – this newspaper’s preferred option is a referendum – then investment decisions can wait a little longer.
It will hurt, of that there is no doubt. But a bad Brexit will hurt much more.
The nuclear revival is failing. Ministers must think green To have one nuclear power project collapse looked like bad luck for the UK government. But to allow two to fail in as many months would be careless and could prove fatal to ambitions for a nuclear revival. Toshiba pulled the plug on a Cumbrian plant in November and now Hitachi is poised to cancel its plans for a power station in Wales.
The withdrawal of the two Japanese players leaves a pair of state-owned firms, EDF of France and CGN of China, as the only serious contenders. Both face huge challenges. The backlash in some countries against the Chinese telecoms firm Huawei shows the risks CGN could face if authorities raise concerns over a Chinese state company putting its technology at the heart of the UK energy system .
EDF’s challenge is more prosaic – it has a mountain to climb to raise the finance needed for a second plant after Hinkley Point C in Somerset, even if it is able to cut the project’s costs as it claims .
The former MP Tim Yeo, a supporter of nuclear, has warned that if Hitachi walked away it could spell the end for the nuclear reboot. Well, that is now coming to pass. Despite the government tilting the playing field, projects are just not progressing as ministers had hoped.
There is no doubt that nuclear is good for achieving climate goals and augmenting the variable nature of renewables. But not at any price.
If and when Hitachi’s Wylfa project is scrapped, the government must do more than just reiterate its support for new nuclear. It must launch a major review of the future of low-carbon energy in the UK. There is still time to pivot to alternatives to new nuclear as old reactors are retired over the next decade.
Affordability, climate targets and energy security matter more than the loss of face from a change of mind on nuclear energy.
Debenhams can still fend off Mike Ashley’s advances Last week, controversial sportswear tycoon Mike Ashley rolled another grenade into the Debenhams boardroom, deftly using his near-30% shareholding in the company to oust the chairman and chief executive from the board at its annual meeting. So what now for the struggling department store, which has seen its share price drop 86% in the last year?
Erstwhile chairman Sir Ian Cheshire has quit but chief executive Sergio Bucher, a former Amazon executive, is apparently hanging on despite losing his seat on the board.
Ashley insists it is not in his interests for Debenhams to fail – his Sports Direct has already lost more than £100m on its investment in the company’s shares. But then why pull the rug out from under the management team? It looks like Ashley is trying to win control of the business on the cheap.
Given that there was such a threat at their door, investors and the board were caught napping. Less than 70% of shareholders bothered to cast the votes that could have saved Cheshire and Bucher from humiliation.
Interim chairman Terry Duddy, a retail veteran whose last job was running the now-defunct Home Retail Group, which owned Argos and Homebase, now takes on the Herculean task of stabilising Debenhams’ finances. It’s a big job, with debts of nearly £300m to be refinanced and a need for a fresh injection of funds to complete its turnaround plans.
Some argue shutting a number of its 165 department stores is the answer, via an insolvency process known as a company voluntary arrangement, but that is a hard trick for a Quote: d company that is not at death’s door to pull off. Debenhams is still profitable, for the time being anyway.
No one wants Debenhams – which employs 20,000 staff across the country – to become another high street statistic, but Duddy and co need to convince its lenders, suppliers and shoppers that it has a raison d’etre – and outsmart Ashley.
Topics Manufacturing sector Business leader Brexit Foreign policy Article 50 European Union Europe Nuclear power comment