Brexit and the Emperor's new clothes.

[Workingman]

Oh my!

We knew the Americans did not want Brexit because they told us so before the vote. We, in turn, told them to sod, off and rightly so. What we are not sure of is how they will eventually react. We are in the same position with a lot of the rest of the world... except Japan. The Japanese government has produced a 15 page report outlining what will likely happen if the Brexit negotiations do not go well.

If the UK loses access to the single market and all that entails there will be "great turmoil" with a series of corporate exits from the UK to the EU. These will be mainly from cars to banks to pharmaceutical companies and Japanese investment into the UK would drop.

Had there been the use of 'could' and 'might' they would no doubt have been seen by Brexiteers as bargaining chips by the Japanese, but they were not used. Instead the Japanese were forceful in their language and that alone puts a fair bit of leverage into the EU's negotiation tool box.

[Suff]

Yes this might be true.

Then again you might note, as I have done, that Marks and Spencer have put their toe back in the EU department store market with a new store in Brussels. This is fairly safe for them because the community in Brussels has extensive exposure to British goods and culture.

However M&S also had a large extension into France once upon a time. M&S, following standard British tactics, decided that France was not a good match for them and decided to exit. They negotiated with several possible companies until they found one to buy out the stores. Then, in secrecy and good British practise, they kept the deal close and announced it at a time of their convenience.

Shortly after this the French courts contacted the directors of M&S and invited them to come to France and explain why they had completely broken French Law, which insists that Union representatives be included in ANY negotiations for the sale of all or part of a company and that the Unions may go to their membership and veto any deal if they don't feel it is in their interests.

There is an extremely good reason why many of the companies choose the UK and not Europe, to invest in and operate from and it has less to do with the language than the restrictions on doing business.

Yes we may lose a chunk of our banking business, for a time, but not for as long as you might think. Currency and transaction restrictions will not allow. Remember the Eurozone agreed to a transaction tax the UK refused to accept. No company is going to move from a lower tax regime to a higher tax regime without significant inducements and those inducements are not even possible given the regulatory landscape of the EruoZone countries. The best they could hope for is Ireland and even there it's no picnic compared to the UK.

Right now those countries around the world are trying to pressurise the UK to accept punishing EU terms so that they can have an easy life. If they had taken a better assessment of the situation, the Brexit team and the new PM, they might find their attentions better presented to Brussels than the UK.

A lot of other world investment is in the UK to sell to the UK, not the EU. Witness Nissan and cars. They don't produce cars for Europe in the UK, all UK models are made in the UK or in Europe and shipped to the UK. The volume models are made in the UK and the others are made in Spain or Eastern Europe. However the Design, project control, testing and modelling are all done in the UK. These functions have nothing to do with manufacture and sales, these functions are independent of borders and also the UK has the largest pool of high quality staff in this area.

So when we look to the Nissan statements about the plant in Sunderland and the possible cutting of investment.... In fact the opposite could quite easily be true. All those RHD models made in Spain and Eastern Europe could, in the light of a bad Brexit negotiation, be moved to the UK. Ditto Renault, PSA, BMW, Mercedes etc......

It is far, far, too early to be talking about hard and fast decisions which "will" be made by companies in the event of a bad Brexit break up. They have to weigh the odds and, right now, they have not done enough investigation into the situation to make a definitive assessment either way.

What we do know is that the UK manufacturing is already selling to the rest of the world. Witness LandRover who sells a small % of it's vehicles to the EU and the vast majority to the UK and the rest of the world. Airbus, of course, is going to get it's wings and tailplanes from somewhere else, given that the only centres with the actual capability to manufacture them to the quality and size are the UK. Otherwise they'd never make them in the UK and transport them to where they are assembled.

I shall wait for all the buzzing nose to stop before I listen to what people are actually planning to do.

[Workingman]

The Japanese statement was an official government document, not from a Think Tank or business, and that makes it a powerful message.

At the same G20 Obama made it clear that when it comes to trade talks the Americans have the EU 1st, then Pacific countries, note the plural, then the UK some way down the list.

Both of those statements put the EU in a strong bargaining position.

One of the cleverest statements of late came from the Russians when they said that the Brexit weakens Europe. The sub-text of that is difficult to work out. On the one hand it could be telling the EU to play ball with the UK, but on the other it could be saying to the UK that if things do not work out they might be willing to work with us. As I say: clever.

The Chinese are wanting movement on Hinkley or.....

The overall message from all of these things is that Brexit negotiations are not confined to the EU/UK, but go further beyond.

We also have news that MPs will debate the petition for another referendum. The irony there is that the petition was set up by a Leave activist when he thought that Remain might win. But the most telling statement is from May herself who has been clear that the points-based selection of EU immigrants will not work. That was a cornerstone promise of the Leave manifesto so to drop it would go against the wishes of the 51.9% winning vote.

[Suff]

Japan is trying to pressure the UK. If that fails, it won't endanger trade with the fifth largest economy in the world just to make a statement. It will be diplomatic.

Obama? Lame Duck. Nobody is interested in what he has to say, they're interested in what his successor has to say and if (and it is a big if), that is Trump, the EU will take second place to the UK.

I have a lot of time for Putin, clever guy. It will be interesting to see how that plays out because we've had quite bad relations with Russia within the EU, Putin may use the UK to punish the EU over the Ukraine.

China? Will play the long game as it always does. China is currently buying up all the manufacturing key resources in the 3rd world. One day we'll wake up and find if we don't buy from China we can't make it anywhere else. Japan has been forced to push billions into alternative resource harvesting like manganese nodules. China won't make a knee jerk reaction any time soon. They'll play all the ends against the middle and just keep on growing.

Brexit may be on the world stage, but the world also needs to understand hat Brexit is about the UK's relationship with the EU and the EU needs firm negotiations. The rest of the world is not going to get EU by the back door so they 'd better stop thinking that, even though our press keeps on pushing that option to an electorate who, when polled since the real economic results have come out, are even more in favour of leaving than they were before. The fear factor is proving to be false (at least in the first instance), and people are emerging into the light to find out that the darkness is not a place they want to return to.

The MP's can talk all they want. Only one person, not one government, can trigger A50 and that person has a mandate from the people. That mandate, when she triggers it, will giver her a lot of current Labour votes at the next election. What would you do? Lots of hot air coming to Westminster soon.

Meanwhile Merkel's party is pushed into 3rd place in her home constituencies over the way she and her party is handling the influx of illegals and the way the illegals are acting.

By the end of next year we could easily see new parties in power in France and Germany, a new President in France and a new Chancellor, from a new party, in Germany. Who wants to base their negotiating stance on the people and parties in place today when such huge changes are waiting in the wings.