Brexit and the waning days of the United Kingdom

[Zanza]

Turning the fifth biggest economy in the world into a tax haven seems to be a silly idea. In tiny island nations it works because you can overcompensate lower tax earnings from local businesses with taxes from international companies or just managing international finance is itself a big enough industry to pay for the lower taxes.

However Britain has a huge diversified economy that mainly serves domestic customers with services. If you lower taxes, international companies will not all of a sudden relocate to Britain as taxes are just one of many factors to the cost of doing business. So all this will do is gut public finances and make sure the Tories have reason to privatize even more public services, e.g. sell the NHS.

[Admiral Yi]

Turning the fifth biggest economy in the world into a tax haven seems to be a silly idea. In tiny island nations it works because you can overcompensate lower tax earnings from local businesses with taxes from international companies or just managing international finance is itself a big enough industry to pay for the lower taxes.

However Britain has a huge diversified economy that mainly serves domestic customers with services. If you lower taxes, international companies will not all of a sudden relocate to Britain as taxes are just one of many factors to the cost of doing business. So all this will do is gut public finances and make sure the Tories have reason to privatize even more public services, e.g. sell the NHS.

As a minor quibble, most people use tax haven to mean a place where wealthy individuals park their assets to avoid taxation, not a place like Ireland that holds corporate taxation low to attract investment.

[Josquius]

I wonder what the plan is. Turn the UK into a tax haven?

As I always say and have been doing since before the referendum that does seem the only viable option for a post brexit Britain.
And why this "Think of the NHS! Vote leave!" stuff was so disgusting.

[The Larch]

I wonder what the plan is. Turn the UK into a tax haven?

Have you taken up mind-reading lately? 

Brexit: UK 'could change economic model' if single market access denied

The UK may be forced to change its "economic model" if it is locked out of the single market after Brexit, Chancellor Philip Hammond has said.

Mr Hammond said the government would not "lie down" and would "do whatever we have to do" to remain competitive.

He had been asked by a German newspaper if the UK could become a "tax haven" by further lowering corporation tax.

Labour's Jeremy Corbyn said his comments sounded like "a recipe for some kind of trade war with Europe".

Having so far refused to offer a "running commentary" on her plans, Prime Minister Theresa May is expected to spell out the most detail so far of her Brexit strategy in a speech on Tuesday.

Reports have suggested she will signal pulling out of the EU single market and customs union, although Downing Street described this as "speculation".

In an interview with the German newspaper Welt am Sonntag newspaper, Mr Hammond said he was "optimistic" a reciprocal deal on market access could be struck, and that he hoped the UK would "remain in the mainstream of European economic and social thinking".

"But if we are forced to be something different, then we will have to become something different," he said.

"If we have no access to the European market, if we are closed off, if Britain were to leave the European Union without an agreement on market access, then we could suffer from economic damage at least in the short-term.

"In this case, we could be forced to change our economic model and we will have to change our model to regain competitiveness. And you can be sure we will do whatever we have to do.

"The British people are not going to lie down and say, too bad, we've been wounded. We will change our model, and we will come back, and we will be competitively engaged."

'Extremely risky'

Asked about Mr Hammond's comments during an interview on The Andrew Marr Show Mr Corbyn said "He appears to be making a sort of threat to EU community saying 'well, if you don't give us exactly what we want, we are going to become this sort of strange entity on shore of Europe where there'll be very low levels of corporate taxation, and designed to undermine the effectiveness or otherwise of industry across Europe.'

"It seems to me a recipe for some kind of trade war with Europe in the future. That really isn't a very sensible way forward."
Mr Corbyn also said Mrs May "appears to be heading us in the direction of a sort of bargain basement economy", adding: "It seems to me an extremely risky strategy."

Scottish First Minister Nicola Sturgeon said it appeared Brexit would mean a "low-tax, deregulated race to the bottom", with workers' rights and environmental protections threatened.

She wrote on Twitter: "If that is the case, it raises a more fundamental question - not just are we in/out EU, but what kind of country do we want to be?"

In her speech on Tuesday, the prime minister is expected to call on the country to "put an end to the division" created by the EU referendum result.

She will urge the UK to leave behind words such as "Leaver and Remainer and all the accompanying insults and unite to make a success of Brexit and build a truly global Britain".

Several of Sunday's newspapers claim Mrs May will outline a "hard Brexit" approach, a term used to imply prioritising migration controls over single market access.

Northern Ireland Secretary James Brokenshire said he did not think it was a "binary choice" between trade and migration, but added that the "very stark message" from the EU referendum was that "free movement as it exists today cannot continue in to the future".

Speaking on the BBC's Sunday Politics, Liberal Democrat leader Tim Farron said a "hard Brexit" had not been on the ballot paper in June's referendum and accused the PM of adopting "the Nigel Farage vision" of Brexit.

Mr Farage, the former UKIP leader, told Sky News he had "yet to be convinced" by the PM's approach.

More like Singapore?
by BBC business correspondent Joe Lynam

According to Philip Hammond, Britain might be "forced" to change its economic model. To what?

For some, the true advantage of leaving the EU would be to tear up the 'rules' and make Britain more like Singapore.

Singapore abides by World Trade Organisation and ASEAN (the Association of Southeast Asian Nations) trade rules, but it's famed for its light touch regulation - especially when it comes to financial services - which some Brexiteers feel is the opposite of EU "meddling".

But turning a large G7 economy with a robust social model into a city state might be difficult. It might involve the government handpicking which industries it thinks will be successes and rapidly neglecting existing sectors.

Millions of people would need to get brand new qualifications while those with undesirable skills would become surplus to requirements. Massive infrastructure projects might be rushed through with minimal consultation.

For a country with Britain's past and present, is that a possible future?

[Josquius]

Should I be happy I'm right?
As I just feel deathly afraid....

[Archy]

I think the Tories would love the Singaporean "democracy" also. 

[Zanza]

No more money for the NHS, says Philip Hammond

"We don't have any spare cash," the chancellor insists

Britain-wide spending on health as a share of GDP in 2014-15 was 7.3%, lower than in most of its peers. That figure is projected to fall to 6.6% by 2021. No other rich European country is going through as steep a deceleration in funding.

I wonder what other purpose they'll spend those 350 million GBP per week on. Probably tax cuts for multinational companies. 

[Josquius]

Trying to plug part of the hole in the economy I guess.

[MadImmortalMan]

Not too bad actually.

Data continue to defy pre-referendum warnings of Brexit slowdown


   More signs are emerging of a UK economy that continued to grow robustly in the fourth quarter of 2016, with few indications yet of a slowdown caused by the Brexit vote.

   An increasing body of evidence suggests that the story of steady growth, in defiance of warnings before the referendum on the effects of a vote to Leave, carried on into the final months of the year. On Wednesday, the National Institute for Economic and Social Research, a think-tank, estimated the economy grew by 0.5 per cent during the fourth quarter, only slightly slower than the 0.6 per cent growth achieved in the second and third quarters.

"Our estimates suggest the economy grew by 2 per cent in 2016, in line with the long run potential growth rate of the UK economy," said James Warren of Niesr.



   Activity in Britain's factories, chemical plants and oilfields increased faster than expected in November, according to official figures from the Office for National Statistics, also published on Wednesday. Industrial production grew by 2.1 per cent compared with the previous month. Analysts were expecting growth of 1 per cent.

Activities related to crude petroleum and natural gas accounted for just under half the growth in the index, as the Buzzard oilfield — the UK's largest — was switched back on after temporarily shutting down in October. Activity related to manufacturing pharmaceuticals also grew strongly, by 11.4 per cent, during November, although the ONS warns this can be "highly erratic".

This means 1.6 percentage points of the 2.1 per cent growth in industrial production in November was due to just two sectors — pharmaceuticals and oil.

The good news was tempered by ONS figures showing that the trade deficit widened in November — although a rally in sterling helped counter some of the rise in the cost of imports from the previous month.

   The value of goods imported into the UK exceeded the value of those exported by £4.2bn in November, a widening of £2.6bn from October and a larger deterioration than forecasters had been expecting. There was particularly strong growth in imports of manufactured and semi-manufactured goods.

The first official estimate of growth in the fourth quarter will be published at the end of January.

"The data continue to suggest that momentum in UK activity edged up in quarter four and that consumer-facing services sectors of the economy in particular support that momentum," said Andrew Benito of Goldman Sachs.

Output in the construction industry, which accounts for 6 per cent of total output, fell by 0.2 per cent in November compared with October, according to figures from the ONS on Wednesday. This was mainly driven by a fall in "non-housing repair and maintenance".

But construction figures are notoriously volatile. In October, the official data found activity had fallen by 0.9 per cent compared with the previous month.

Wednesday's figures follow recently released surveys of purchasing managers in construction and manufacturing that pointed to strong growth during the final month of 2016.


   The figures will feed into the debate about the strength of the British economy since the referendum on membership of the EU. Most data suggest that increased uncertainty has not led to a slowdown.

"Overall, the generally broad-based better news in November fits better with the survey evidence than the October weakness did," said Sam Hill, senior UK economist with the Royal Bank of Canada.

However, many economists and investors remain pessimistic about the long-term impact on growth if leaving the EU leads to a reduction in Britain's ability to trade and threatens its status as Europe's financial services hub.

On Monday, the pound fell to its lowest level against the dollar since October after comments from Theresa May, the prime minister, were interpreted as ruling out the possibility of continued membership of the single market.

[Valmy]

No more money for the NHS, says Philip Hammond

"We don't have any spare cash," the chancellor insists

Britain-wide spending on health as a share of GDP in 2014-15 was 7.3%, lower than in most of its peers. That figure is projected to fall to 6.6% by 2021. No other rich European country is going through as steep a deceleration in funding.

I wonder what other purpose they'll spend those 350 million GBP per week on. Probably tax cuts for multinational companies. 

Ok so the British government neither spends sufficiently on their military nor healthcare.

What do they spend their money on?

[MadImmortalMan]

Trident   

[Syt]

Ok, that's nice for industry, manufacturing and mining, but what about services which is over 3/4 of the UK economy? The article only says "consumer-facing services sectors of the economy in particular support that momentum".

[Gups]

Ok, that's nice for industry, manufacturing and mining, but what about services which is over 3/4 of the UK economy? The article only says "consumer-facing services sectors of the economy in particular support that momentum".

Services are doing well.  Markit's PMI for the sector in December was 56.2, highest for a year and a half or so.

http://www.bbc.co.uk/news/business-38515971

[Josquius]

The current state of the economy:



We've got positive momentum since before the referendum. And post-referendum the current state of things is very good for gaining short term contracts, we're still in the EU but we have the massively weakened pound.
Give it time, this year the negative side will start to kick in as prices go up across the board.

Already there are plenty of signs that the current situation is unnatural and unsustainable.

[Richard Hakluyt]

The IMF is projecting 2.2% for both this year and the last (not all data in yet) :

http://www.imf.org/external/pubs/ft/weo/2016/update/01/

We've had quite a devaluation so this decent performance is unsurprising.