September 9th 2016
Well, Did We Go Bankrupt Then?
It’s almost three months since we ignorant white oldies destroyed the United Kingdom by taking it out of the EU. What a price would be paid. The stock market would crumple, the pound collapse, the economy go into a spiralling recession, business confidence disappear, house prices plummet, and a plague of frogs infest Hampstead.
Of course it was only because we racist dum-dums, too stupid to make up our own minds, “believed Boris’s lies” that we had voted out. Meanwhile the people of Notting and Primrose Hills were far too smart to believe Boris. Instead they believed the lies told them by Osborne, Cameron, Lagarde, Carney and the Brussels pygmies.
So, what’s up? Just about everything as we move into Doomsday + 90 days. The stock market’s up. It’s booming. The pound, after an initial swoon, is doing rather well. House prices are strengthening. Business confidence in the UK has just had its biggest one month jump ever, unlike in Germany and France where it is collapsing. And Mr Carney has admitted that the Bank of England was making it all up when they said there was going to be a recession. Poor old Little England is actually the best performing major economy in Europe. But don’t expect to read that in the FT, Guardian, or Economist, the Pravdas and Izvestias of the Remainers.
You might also note that, unlike our EU friends, the UK has a determined and popular Prime Minister while France, Germany, Spain and Italy are either run by deeply unpopular leaders (France and Germany) or no leaders at all (Spain and Italy). Compared with the narcissistic chaos of the EU, the UK is an island of political stability.
Access . . . Access . . . It’s All In The Trade Agreements
“Never mind,” say the Doomies, “Once the UK has left it will have no Trade Agreements. We’re lost without them. And, as the EU has been doing all the trade negotiating for its members England doesn’t even have any trained trade negotiators. We’re doomed. How can we trade without Trade Agreements?” So runs the mantra repeated daily in the EU Pravdas as the Guardian and FT advise Mr Davis which knee he should bend to Mr Juncker as he begs for Access.
Scary stuff. I was worried too by this dandruff of doom and so I did a bit of nosing around to find out which of these important EU Trade Agreements we will be missing out on after we leave. In the forty-three years that we have been an EU member they must have negotiated some great deals on our behalf.
The EU’s biggest trade partner is the US. Well, thank God for the TTIP, the Transatlantic Trade and Investment Partnership between the US and the EU. The EU’s super-skilled negotiators have now been negotiating this for, er, 26 years, having started in 1990. Is it signed? No. Will it ever be? No. Why not? Because Brussels’ super-skilled technocrats have allowed the Americans to write an agreement which lets US multinationals do what they want in Europe without being answerable to European courts. Even the EU politicians gagged on that. Great negotiating, Pierre. The TTIP is never going to be signed. It’s loo-paper. When Mr Obama says the UK is at the back of the queue we could tell him that there is no room left as it already has 28 EU countries standing there sucking their thumbs knowing that they will never have a trade agreement with the US.
Oh OK, forget the US. We need to trade with China. That’s where the action is. China is the EU’s second biggest partner. How can we trade with them without the benefit of the famous EU-China Trade Agreement? Ah yes. Would that be the one that the EU’s super-skilled negotiators have been working on for ten years? Yup. How many summit trade meetings have they had in that time? Sixteen. And how close are they to signing an agreement? Well, put it this way, the Labour Party is more likely to win an election first.
Well, India, then. They’ve just falsified their numbers to show they are growing even faster than China these days. The EU is India’s largest trade partner. Must be because of the EU-India accord. Ah, that accord, the one the Brussels and Delhi bureaucrats have been negotiating since 2007 and are nowhere close to agreeing. Mr Modi seems keener on signing an agreement with the UK than he is with the EU. At least we speak the same language.
Wow, Puzzling. Does that mean the EU has never succeeded in signing a trade agreement with any of its major trading partners? It does. Never, and not in sight of doing so. One hates to think where they would be without their “skilled negotiators”. It’s true that the EU does have some agreements with other European countries and trade associations, like Switzerland, Norway and the EEA, and a number of agreements with countries that used to belong to the Europeans’ various empires, like Algeria and South Africa, but, as far as actual signed trade agreements with non-Europeans are concerned, the EU has signed a “customs union” with those nice Turks and has agreements with Chile and Mexico. No idea if drugs are included in that one.
And, since you ask, the EU has no free trade agreement with Japan, the world’s third biggest economy, nor with Russia. Nor Canada. Nor Singapore. Nor Australia. In fact, South Korea is the only major economy with which it does have an agreement. But, wait, the EU is close to finalising an agreement with Zimbabwe.
Our betters in Notting and Primrose Hills tell us though that “without access” to the market of the soon-to-be-bankrupt EU we are doomed. Free access is the only thing that will save the UK, say they. We must go on our knees to Mr Juncker and pay him bribes for “access” while he “punishes” us, his words, for voting the wrong way.
The funny thing is that the EU does a huge amount of bilateral trade with the US, China, India, Canada, Japan, Russia, Australia, Brazil and many more. None of these countries has “free access” to the EU yet they don’t seem to be doing too badly at trading with them. In fact, no country of consequence apart from South Korea has free access to the EU. If we don’t either, is that going to kill us? We’ll be in good company, along with the US, China, Japan, Russia, Canada, and Australia. And, somehow, I suspect our civil servants will get by without the help of the skilled EU trade negotiators who, in the seventy years since the founding of the EU, have yet to sign a free trade agreement with any of the world’s top five economies.
If Trade means making things to sell to other countries we in the UK are no longer much good at that. Time was when we were Numero Uno. Britain was the China of 1900. But these days we leave manufacturing to others. It’s true we still do manufacture a few things: deadly weapons to sell to Muslim dictators; drugs; aero engines and wings; Mr Dyson’s vacuum cleaners; and Formula One racing cars. [Eight of eleven F1 teams build their cars in “Motorsport Valley” within a fifty mile radius of Silverstone . . . ] But that’s about it.
But making stuff is so yesterday. It’s a mucky business best left to the Chinese and Koreans. Or the Germans. We’ve moved on. We English are post-industrial. We are good at doing things where we get giant cheques from Johnny Foreigner for sitting at our desks adding zeroes to the bill. The Americans are good at that too. Between us, no-one can touch us.
Let’s take a look. The world’s most profitable occupation on a time-spent basis is being a hooker. After that it is providing legal services. Sullivan & Cromwell, Slaughter & May, Linklaters, Skadden Arps. Those guys. No commerce happens without them being involved. AB InBev wants to buy SABMiller? That will cost them around $250m in legal fees, largely to English firms. That’s quarter of a billion dollars for filling in the small print. Beats making Renaults. You would have to sell 250,000 Renaults to make that amount of money. Of the top 50 law firms in the world 48 are English or American. One is in S Korea, and one in Hong Kong. The EU has no top 50 law firm.
Accountancy. Another grotesquely profitable industry without which nothing else could function. Big multi-nationals pay their accountants literally billions of dollars. Nineteen of the top 20 accountants in the world are head-quartered in the UK or US, with the majority in the UK. KPMG is head-quartered in Amsterdam. Score one for the EU even though KPMG do most of their work outside Europe and they are slipping behind the other Big Four firms. They might do better if they moved to London.
The biggest fee-earner of them all is investment banking. Big deals can generate half a billion dollars in fees for the bankers. You have to make an awful lot of widgets to earn half a billion dollars. The investment banking scene is like Wimbledon where the top players are usually foreign but London owns the venue and everyone who is anyone wants to play on our courts. In addition to the English-owned investment banks, mainly highly profitable boutiques, the Americans, the Japanese, the Germans, the Dutch, and even the chauvinistic French, run their investment banking businesses out of London. London is as much the centre of excellence for investment banking as Silicon Valley is for technology. There is more investment banking expertise on the Isle of Dogs than in the whole of continental Europe put together.
The Doomies jump up and down when banking is mentioned squeaking “passporting” saying that after we leave the EU the investment banks will have to move to Frankfurt or Paris. That’s as likely as Donald Trump moving to Mexico. Passporting refers to selling savings products in different countries. If the EU cuts what is left of its own throat by denying us passporting rights, then people in the mutual fund business will move a few of their junior staff to Dublin to allow them to sell their mutual funds into the EU but that is small potatoes.
You don’t, on the other hand, need an EU passport to be one of the advisers soaking up fees for advising AB InBev and SABMiller on their merger, the biggest deal of the year in which a Belgian company run by Brazilians which owns the US’s biggest beer company is taking over a South African company which emigrated to England in 1999 and is the biggest beer company in China and Africa. You don’t need a passport from Herr Juncker to advise on that and that advice is coming from London. The world’s top ten financial centres, according to this year’s FT ranking were, in order: London, New York, Hong Kong, Singapore, Tokyo, Seoul, Zurich, Toronto, San Francisco, Washington DC. No EU city makes it into the top ten list. None of these top ten cities other than London has a “passport” from Herr Juncker.
Whatever You Want, We Do It
It is not just financial services. Post-industrial England has achieved extraordinary global prominence in services generally, a field where Little England (a badge I wear with pride) either by itself or jointly with the ever-creative but much larger United States, dominates.
Would you like to auction an important painting? You won’t go to Frankfurt or Paris for that. You will go to London or New York. The EU, egged on by the jealous French, has been passing laws recently to undermine Sotheby’s and Christies’ businesses. These two English-based firms dominate the auction trade now but will do so even more after Brexit.
Want to advertise? The world’s biggest advertising agency, WPP, is here in London whose $19bn in billings make it more than twice the size of Publicis, the biggest EU firm.
Want to buy some international property? The top ten real estate agencies in the world are English or American, think Knight Frank, Jones Laing, Richard Ellis and the rest of them, all English or Anglo-American.
Want to build a building? There are many excellent EU and US based architects but Norman Foster, Richard Rogers, Zaha Hadid, David Adjaye and twenty other London-based firms will be on anyone’s shortlist.
And in law it is not just the commercial legal field where England is so strong. Want to go to international arbitration? Want to get divorced from an oligarch or a Saudi? Want to enforce a cross-border contract? You won’t be going to Paris, Frankfurt or Amsterdam for those services. And you won’t stop coming to England because we’re no longer part of the EU. If you turn up in Ethiopia or India and wave a London QC’s Opinion in someone’s face, you will be listened to. If you showed them something from a German or French notaire you would be laughed at.
You may remember that I wrote something shortly after the referendum in which I said that England is uniquely well-placed to be the world capital for education, information, services, and entertainment. The modish word for that is “soft power”. You can call it what you like but providing these services is a terrific business and a very profitable one. The examples in the previous section show what a great business providing commercial services is. But it’s not just commercial services. We excel in other service industries. And that’s not because we are in the EU.
In entertainment we have been a global leader in popular music since the 1960s. In theatre, London is arguably the theatre capital of the world with a theatre industry whose breadth and depth is unmatched anywhere else. Our film companies are a joke but the giant US film and television companies come to England to make a lot of their movies and to source many of our skills.
Most important though is education. The US is the global force in education. No-one can match their funding. However, the US’s foreign policy, domestic climate, and increasing xenophobia is a deterrent to many who might otherwise go to a US university. England is uniquely well-placed to consolidate its position as the international powerhouse for university education.
We are so accustomed to the British press slagging off everything British that we may underestimate what a power we are. In August the widely-followed QS world university rankings came out for 2016. Four of the world’s top ten, and ten of the world’s top fifty, universities are in Little England. You may wonder how many are in the continental EU. One. One out of fifty. Ecole Normale Superieure, the place where they train the French technocrats who rule Europe (and provide the highly-skilled trade negotiators), is ranked 33. No other EU university makes it into the top fifty. The top German university is 60th, Netherlands 55th, Spain 166th, and Italy 187th.
We are lucky. English is the world’s lingua franca. What Latin was to the Middle Ages, English is to the Millennium, the language of the educated classes, and of international discourse. This is thanks to the uniquely large footprint of the old British Empire and the US’s commercial domination of the world today but whatever the reason, you need to speak English to get ahead. And when it comes to research, the life-blood of a university, you need to publish in English to be read. It is this factor which goes a long way to explaining the strong showing of English universities and the poor showing of the continental ones. Tough if you are German or French but the fact remains that England is the place in Europe where the brightest of the global community will come for a university education.
Doomies say that English universities will struggle when EU money is cut off for research. This is lazy thinking. The EU has no money of its own. All the money it hands out is ours. We are going to stop giving the EU money. Ms May’s government have said they will continue funding universities as before for research, they’ll just cut out the EU bureaucrats as interfering middlemen. At present decisions regarding EU funding for UK universities is made by two unelected bureaucrats in Brussels, a Mr Tibor Navracsics, an ex-associate law professor from Budapest, and a Ms Martine Reicherts, a Luxemburg teacher of law and yoga. We can do that better ourselves.
My brilliant friend, Professor Sir John Bell, Regius Professor and head of the Oxford medical school who has spent his life doing hands-on research wrote a perceptive article on this subject in the Financial Times on Aug 25th. It’s worth quoting at length. “The cultural, ethical and philosophical environment that supports science is in many ways fundamentally different in the UK compared to many European countries. Britain is more inclined towards a relatively liberal risk-based regulatory environment that allows fields to move quickly — to reflect on ethical issues but not to over-regulate. The EU, by contrast, has a record of deep regulatory conservatism, attempting to legislate and control many aspects of science that are not deemed here in the UK to present a significant danger. Consider clinical trials. In the early 1990s Britain was recognised as one of the best places in the world to test new drugs on patients. Decisions were quick and bureaucratic obstacles were few. The introduction of the European Clinical Trials Directive in 2004 ended all this. Needless regulatory hurdles associated with huge inefficiencies and delays in effect killed off the clinical trial industry in the UK, where it declined to just 2 per cent of global trials.” If John is right, and he is seldom wrong, UK university research in regulated areas should flourish in a post-Brexit world.
Whistle A Happy Tune
John’s words are a good note on which to end. The old FDR saying about “nothing to fear but fear itself” have seldom been more true than they are now. I know from friends who work at both places that even the Financial Times and Guardian are now embarrassed about their obsessive anti-Brexit propaganda.
We, in common with the rest of the world, have some tough times ahead but I hope these notes help put our future into better perspective. One thing is certain. The next few years will be better for us in the UK than they will be for our continental neighbours. The outlook for them is bleak as it will be impossible for the Euro to survive this decade as a common EU currency. While Germany, France, Spain, Italy and the rest of them are picking their way through the rubble of their soon-to-collapse currency, England has the opportunity I have sketched out here to become an exciting place to be and one which offers great promise to its young people and to hard-working immigrants.
 It’s like the British team at the Olympics. Nearly all our medals were won at white-men-sitting-down sports like cycling, rowing, sailing and canoeing.