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You can find the current article at its original source at https://www.theguardian.com/business/nils-pratley-on-finance/2017/jun/12/uk-political-uncertainty-brexit-eu
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| Bosses are right: political uncertainty will damage the economy | Bosses are right: political uncertainty will damage the economy |
| (21 days later) | |
| “It is hard to overstate what a dramatic impact the current political uncertainty has on business leaders, and the consequences could – if not addressed immediately – be disastrous for the UK economy,” says Stephen Martin, director general of the Institute of Directors, pointing to a poll of members that showed 57% were quite or very pessimistic about the economy over the next 12 months. | “It is hard to overstate what a dramatic impact the current political uncertainty has on business leaders, and the consequences could – if not addressed immediately – be disastrous for the UK economy,” says Stephen Martin, director general of the Institute of Directors, pointing to a poll of members that showed 57% were quite or very pessimistic about the economy over the next 12 months. |
| We heard similar predictions of gloom from the business world after last year’s referendum, of course. They did not materialise, or at least not in the style imagined. The Brexit flunk was a brief affair and the Bank of England and almost every other forecaster was obliged to admit that Armageddon would not be arriving as previously advertised. Could the plot run so happily again? | We heard similar predictions of gloom from the business world after last year’s referendum, of course. They did not materialise, or at least not in the style imagined. The Brexit flunk was a brief affair and the Bank of England and almost every other forecaster was obliged to admit that Armageddon would not be arriving as previously advertised. Could the plot run so happily again? |
| Don’t bet a penny, or a euro cent, on it. Two factors behind last year’s breeze-on-through attitude have run their course. First, real incomes are now falling. When they were rising last year, it was relatively easy for consumers not to fret about an event due to happen, in yet-to-be-defined form, in 2019. In any case, 52% of the voters had got want they wanted. Exporters, too, had to be concerned that slashing investment overnight could be costly. The gift - for them - of a lower pound had to be exploited. | Don’t bet a penny, or a euro cent, on it. Two factors behind last year’s breeze-on-through attitude have run their course. First, real incomes are now falling. When they were rising last year, it was relatively easy for consumers not to fret about an event due to happen, in yet-to-be-defined form, in 2019. In any case, 52% of the voters had got want they wanted. Exporters, too, had to be concerned that slashing investment overnight could be costly. The gift - for them - of a lower pound had to be exploited. |
| The second factor was that article 50 had not been triggered. Now, of course, the clock is ticking, which adds a truly dangerous current to the turmoil in Westminster. Theresa May’s vision of a hard Brexit may be dying - let’s hope so - but the odds must also have shortened on a chaotic Brexit in which no deal is done because consensus proves impossible. In these circumstances, it would only be natural for a board of directors to adopt extreme caution when making investment decisions. | The second factor was that article 50 had not been triggered. Now, of course, the clock is ticking, which adds a truly dangerous current to the turmoil in Westminster. Theresa May’s vision of a hard Brexit may be dying - let’s hope so - but the odds must also have shortened on a chaotic Brexit in which no deal is done because consensus proves impossible. In these circumstances, it would only be natural for a board of directors to adopt extreme caution when making investment decisions. |
| The forces pushing in the other direction look weak. The government could give the public sector a pay rise, for example, but that may not be enough to shift the dial on real incomes. The second quarter GDP figures may not be affected by the uncertainty since most surveys suggested an improvement from the first. By the autumn, however, the picture could look very different. The IoD may be overdoing it with words such as “disastrous”, but it is basically right. The political mess, for as long as it lasts, is bound to damage investment. | The forces pushing in the other direction look weak. The government could give the public sector a pay rise, for example, but that may not be enough to shift the dial on real incomes. The second quarter GDP figures may not be affected by the uncertainty since most surveys suggested an improvement from the first. By the autumn, however, the picture could look very different. The IoD may be overdoing it with words such as “disastrous”, but it is basically right. The political mess, for as long as it lasts, is bound to damage investment. |
| Time for a reboot on nuclear subsidies | Time for a reboot on nuclear subsidies |
| “The momentum behind these [renewable] technologies is unstoppable now,” says Valentina Kretzschmar, director of research at the energy consultants Wood Mackenzie. “They [the oil companies] are recognising it is a megatrend; it’s not a fad, it’s not going away. There is definitely a risk to their core business.” | “The momentum behind these [renewable] technologies is unstoppable now,” says Valentina Kretzschmar, director of research at the energy consultants Wood Mackenzie. “They [the oil companies] are recognising it is a megatrend; it’s not a fad, it’s not going away. There is definitely a risk to their core business.” |
| Well let’s hope so. Let’s also hope that government recognises that the same megatrend that is bringing down the cost of wind and solar generation has implications for the UK’s nuclear programme. Even politicians obsessed by grand Hinkley Point-style projects cannot fail to have noticed some of the milestones achieved by solar and wind recently. Costs of generation are falling to a point that makes Hinkley’s inflation-linked subsidies look even more of a swindle at the expensive of UK bill-payers. | Well let’s hope so. Let’s also hope that government recognises that the same megatrend that is bringing down the cost of wind and solar generation has implications for the UK’s nuclear programme. Even politicians obsessed by grand Hinkley Point-style projects cannot fail to have noticed some of the milestones achieved by solar and wind recently. Costs of generation are falling to a point that makes Hinkley’s inflation-linked subsidies look even more of a swindle at the expensive of UK bill-payers. |
| In the next round of auctions for government subsidies, energy experts predict offshore wind will be demonstrably cheaper than nuclear. That is for windfarms that must be operational from 2023 to 2025. Over the next 35 years – the life on Hinkley Point’s index-linked contract – that pricing gap will only widen. Offshore wind will get cheaper, nuclear won’t. | In the next round of auctions for government subsidies, energy experts predict offshore wind will be demonstrably cheaper than nuclear. That is for windfarms that must be operational from 2023 to 2025. Over the next 35 years – the life on Hinkley Point’s index-linked contract – that pricing gap will only widen. Offshore wind will get cheaper, nuclear won’t. |
| Yes, it’s true, as the nuclear lobby always objects, that increased use of wind and solar requires a corresponding increase in always-on reliable baseload supply. But that does not imply that the UK requires new nuclear capacity on anything like the scale policy currently imagines, especially if the next megatrend arrives in the form of a revolution in energy storage. | Yes, it’s true, as the nuclear lobby always objects, that increased use of wind and solar requires a corresponding increase in always-on reliable baseload supply. But that does not imply that the UK requires new nuclear capacity on anything like the scale policy currently imagines, especially if the next megatrend arrives in the form of a revolution in energy storage. |
| It may be too late to stop Hinkley itself because so many costs have been sunk in Somerset already, but the rest of nuclear programme should be hauled in for review at the earliest opportunity. It would be Theresa May U-turn worth cheering. | It may be too late to stop Hinkley itself because so many costs have been sunk in Somerset already, but the rest of nuclear programme should be hauled in for review at the earliest opportunity. It would be Theresa May U-turn worth cheering. |
| Keep business away from ballots | Keep business away from ballots |
| It’s ghastly when self-important business leaders write mass-signature letters to newspapers telling people how to vote. Writing directly to your staff is worse. Bosses at the privately-owned Storm Technologies and Jennings Racing, authors of two versions of “vote Conservative” dispatches, ought to know better. The latter is a bookmaker and should have remembered the admirable stance adopted by the Ladbrokes boss Jim Mullen in 2015. | It’s ghastly when self-important business leaders write mass-signature letters to newspapers telling people how to vote. Writing directly to your staff is worse. Bosses at the privately-owned Storm Technologies and Jennings Racing, authors of two versions of “vote Conservative” dispatches, ought to know better. The latter is a bookmaker and should have remembered the admirable stance adopted by the Ladbrokes boss Jim Mullen in 2015. |
| Mullen got the job in the middle of the campaign and immediately disassociated himself from his predecessor Richard Glynn’s letter-signing tendencies. “Our business is to take bets on the general election, not to tell people how to vote,” said Mullen. Quite right. | Mullen got the job in the middle of the campaign and immediately disassociated himself from his predecessor Richard Glynn’s letter-signing tendencies. “Our business is to take bets on the general election, not to tell people how to vote,” said Mullen. Quite right. |