Thursday, July 05, 2018

Has the Brexodus begun as Doomsday Brexit nears?

With a little under nine months to go before Britain is set to leave the EU, and no clear vision as to what deal Britain might secure, many UK firms that trade with the bloc are setting up European bases or even mulling the shifting of their entire operations to mainland Europe.

One such company is Polydron, a UK-based maker of educational toys. It manufactures in India and China and sells to customers worldwide, including 105 in the 27 other EU countries.

The bloc's toy safety regime makes Polydron, as the importer into the bloc, responsible for checking that its products meet European standards. "It is our phone number on the goods, and if there is a problem it is us who gets called up," says managing director Richard Hardstaff. However if Britain leaves the EU's single market, each of Polydron's EU customers would become an importer instead he fears that relations with customers could suffer.

Given the potential complications, the Cirencester company is opening a branch and hiring staff in Germany to be the EU importer, handling 30% of the company's operations. "We would never have done this without Brexit," Hardstaff says [FT].

Polydron is far from an isolated case. In February 2017 it was reported that around one third of manufacturing firms wanted to move some operations out of UK after Brexit [Independent].

By the end of 2017 the warnings had turned into reality as both financial firms and manufacturers began to make the shift [Verdict].

A gradual Brexodus

Diageo moved its vodka production out of Scotland because of Brexit, shifting its production of Smirnoff and Circo vodka to Italy and US leading to the loss of 105 roles at its plants in Fife and Glasgow.

Barclays was one of the first banks to begin shifting operations, making a move to the Irish capital Dublin for its post-Brexit European hub. But many other financial institutions followed through. Nonetheless by July 2018 some institutions were still dragging their feet with many having failed to apply for appropriate licenses by mid-2018 [Bloomberg].  

Whilst the exodus has been more of a trickle than a mad rush for the borders, the signs are nonetheless worrying.

Almost every week there are reports of companies moving parts or all their operations abroad, though much often gets buried underneath other stories.

In January 2018 reports emerged suggesting many UK chemical companies were shifting operations to other EU jurisdictions ahead of Brexit [ICIS].

It wasn't just companies however. Figures released the same month showed the number of Britons seeking French citizenship had rocketed eightfold in the previous three years [Independent]. 

February meanwhile saw Goldman Sachs mulling the sale of its London HQ as it weighed up the risks of remaining in London post-Brexit [Bloomberg

Store closures

As Britain's high streets saw further declines and the closure of Maplin and Toys R Us, Unilever announced it was upping sticks and moving its HQ to Holland [Reuters].

April saw more closures on the high street with House of Fraser and M&S axing many of its stores as figures showed retailers were suffering the sharpest sales drop for 22 years [BBC / Guardian / Guardian].

May brought more bad news for the high street with Carphone Warehouse announcing the shutting of 92 outlets after a profits warning [BBC].

By June there was little if no respite from the gloom and doom with Rolls Royce announcing it was to cut nearly 5000 jobs at its Derby plant [BBC]. And there were reports that a no-deal Brexit could result in the UK  running short of medicines, food and fuel within two weeks of leaving the EU [Sky News].

Slow growth, weak pound & poor sales

Of course there will be some who might insist the slow growth, a sharp decline in high street sales and the shuttering of retail outlets have nothing to do with Brexit. It could certainly be argued that there are other factors involved. M&S, for example, have had problems attracting customers and creating a model that works. Other retailers have of course been hit by increased spending online.

But the pound has remained consistently weak since the EU referendum and it has resulted in higher prices across the board. Coupled with the uncertainty Britain faces in the run up to March 2019 many consumers are undoubtedly more cautious with their spending.

And whilst it might be easy to dismiss business concerns about a possible hard-Brexit and uncertainty over future trading relationships and customs procedures, one can hardly blame companies making contingency plans.

Airbus and BMW have already warned of the consequences for their multinational, just-in-time operations of leaving the bloc's customs union because of the risk of tariffs and customs hold-ups. But there has been little response from May and her government other than vague promises that it will be OK.

But business cannot plan future investments and deals on vague promises. They need certainties and definite and clear regulations. One cannot plan with the hope that just-in-time deliveries continue. One needs to know that deliveries WILL continue and arrive ON TIME.

If a supply chain fails, so too does the production line. And if the product does not get made it can't be sold and profits are lost.

The recent reports of a possible 'Doomsday Brexit' have been dismissed by many as scaremongering and a repeat of 'project fear'. But small disruptions can quickly result in very serious supply chain problems.

Fragile supply chains

In 2000 and 2001 there were a number of fuel protests and blockades with pickets stopping fuel deliveries to forecourts up and down the UK. Within days some 3000 petrol stations were out of fuel and the government was on the verge of introducing emergency measures and even considered bringing in the army to deliver fuel.

More recently something as simple as a shortage of food-grade CO2 has resulted in lager and cider running out in some pubs. Meat supplies have also been affected as CO2 is used in the slaughter process and also in prepackaged meat to preserve it longer [Bloomberg]. Interestingly the UK is one of the countries which has been the hardest hit as it imports the majority of the CO2 it uses. It is not clear how future customs arrangements might affect such things as CO2 imports but the recent problems only highlight the obstacles Britain might well face come Brexit day.

"It's like water — it's everywhere but no one knows how important it is until it suddenly stops being there," says Tim Lang, professor of food policy at City university.

For Richard Griffiths, chief executive of the British Poultry Council, the CO2 shortage has highlighted broader issues of supply chains and food security.  "Nothing like this has happened in this part of the supply chain, so no one has focused on it. This does illustrate the vulnerability of these, usually robust, integrated supply chains when something so fundamental is affected," he said.

With Brexit looming, Professor Lang, co-author of a 2017 report on the implications to the UK's food system on leaving the EU without adequate planning, says, "The CO2 shortage is a useful reminder of the enormous implications of disrupting the efficiency of the food system." [FT]

This week concern within the car industry grew  as Jaguar Land Rover warned that a "bad" Brexit deal would threaten £80 billion worth of investment plans for the UK and may force it to close factories.

The UK's biggest car maker, owned by India's Tata Motors, said while its "heart and soul is in the UK", a hard Brexit would cost £1.2 billion a year in trade tariffs and make it unprofitable to remain in the UK.

The warning came as Downing Street set out details of a possible post-Brexit customs arrangement and only days after Airbus and BMW voiced their concerns over the direction Britain is taking, that of not only leaving the EU, but also the customs union and the single market [BBC / FT]. 

There may well be some interesting if rather painful days ahead should Britain pursue its current course.

tvnewswatch, London, UK

Monday, June 04, 2018

Doomsday Brexit or just not the success promised?

A recently leaked government report has suggested that Britain would see fuel, food and medicine shortages should no deal be reached with the EU.

It is very easy to dismiss such dystopian projections as alarmist and a part of a project fear agenda. But a hard Brexit will result in some significant changes in the way everything is done when dealing with other countries.

Brexiteers are perhaps right to say that new deals and procedures can be put in place. But it is all a matter whether such things are implemented and readied by the time Britain leaves the EU.

Given that nearly two years after the EU referendum there is still no clear vision for Brexit laid out by Theresa May and her government. There have been few concrete plans put in place to deal with the potential fallout that might result in any number of possible Brexit scenarios.

Cliff edges and hard borders

A so called hard Brexit and a crashing out of the EU without a deal is seen by many as being the worst possible outcome, although there are many advocates within the Tory party such as the likes of Jacob Rees Mogg.

Few if any contingency plans have been put into place for a so-called hard Brexit which in the first instance would hit ports, such as Dover, airports and docks - indeed anywhere where imports from Europe and beyond arrive.

As it stands there is relatively little paperwork needed to import into the UK from the EU since it is part of the Customs Union. People and goods can move across the EU without problems. But unless Britain can remain in the Single Market or quickly work out a trade agreement once the UK leaves the EU, small businesses could see any potential benefits of international trade eaten up by a tangle of red tape.

Any extra tariffs imposed by the EU on imports from the UK could push up the sale price of those goods, devouring any competitive advantages Britain might have.

While a member of the European Union, Britain is part of what is called the Customs Union, meaning it enjoys the benefits of trade liberalisation – namely, the easy transit of goods across national borders. If the UK leaves the Customs Union – an outcome looking more likely as the idea of a "hard" or "no-deal" Brexit takes hold – then it will lose the benefits of free trade and it will instantly become much more difficult for goods to travel.

Trading will likely involve a great deal more paperwork. This is a particularly nasty outcome for SMEs [Small and Medium-sized Enterprises] with complex supply chains, for whom business could become almost impossible. Indeed many businesses have planned for a possible move from the UK if this happens, whilst others have already shifted some or all of their operations to mainland Europe [The Week]. Indeed financial services have already seen the strongest shift to the continent [Ev Standard].

There are also issues concerning VAT and tax rules which could add to the headache for many small exporters as well as increased prices for UK consumers [Guardian], though a recent FT article suggests Britain may try to be negotiating a deal on VAT rules. However, if Britain seeks to remain inside the EU VAT area, it will continue to be bound by rules set in Brussels.

Rewriting the existing deals after Brexit could also prove a herculean task, with the Financial Times reporting the UK could face reworking more than 750 individual global trade agreements.

Whilst there has been much talk and discussion, little, if anything, has been set in stone.

Last month it was revealed that part of the M20 on Kent would be used as a 'car park' for lorries to counter so-called Brexit traffic jams [Guardian]. This came only months after customs officials said they had no idea what reality they must start preparing for in April 2019 when Britain was set to come out of the EU [Independent].

A former civil servant Ruth Lea has dismissed the recent leaked Brexit report that suggested the port of Dover would collapse within a day as "absolutely bizarre" and suggested it was just a re-run of "project fear" [Express] .

However, if there are no clear guidelines or rules for customs officials at Britain's ports there could very well be serious problems. Currently there are few if any major checks of lorries going into or coming from mainland Europe. But even the slightest delay can result in tailbacks and heavy congestion around the ports.

Anyone who has ever used the Dartford River Crossing, which crosses the River Thames via the M25 from Essex into Kent, will perhaps remember the huge tailbacks resultant from the tolls where every vehicle had to stop and hand over money - even the DART prepaid scheme made little difference as vehicles still needed to slow down at the allocated tolls before the barrier was raised. Since the implementation of ANPR [Automatic Number Plate Recognition] cameras and online payments traffic flows pretty much unhindered.

There have certainly been problems since the implementation of the automatic charging system in particular the fact that many foreign drivers avoid payments and fines [BBC]. However, it would hard to find anyone wanting to return to the old system of toll gates and the resultant traffic jams.

But even with the fast track automatic tolls there can still be problems. A simple breakdown or accident can quickly result in long tailbacks.

The problems with the DRC highlight how simple hold-ups can quickly create traffic chaos. Should paperwork problems at Dover and other ports cause delays the speculation that the port could 'collapse' is not too far fetched.

Some have suggested the government might in effect throw open Britain's borders in the event of a no-deal Brexit. But officials fear the EU, particularly the French, would not do the same. Furthermore, 'throwing open' the borders would have many undesired effects especially in terms of thwarting people, drugs and weapons smuggling.

It is very easy to point a finger at the bureaucracy of paperwork. Brexiteers will no doubt blame the EU should it impose strict checks on traffic coming from Britain. But it has to be remembered it already applies such checks on other non-EU countries where no formal trade agreements or customs agreements are in place. 

There are some examples which highlight the difficulties in transporting goods between the EU and countries not in the Customs Union, such as Norway and Switzerland.

Carnets and other documents are often required with heavy fines imposed for incorrectly filled in submissions. There are additional costs too for the documents themselves and those transporting the items may often be required to submit to checks which could take many hours.

"I've delivered goods across the Norway border and it's not as straightforward as we are being told by the politicians," says Ciaran Donovan, the owner of a courier firm which transports exhibition materials as well as vehicle parts all around Europe.

"Due to the nature of the goods I was delivering, I was advised to get a carnet - a passport for goods. They vary in price but this one cost £750. It took my customer one week to compile the carnet, and everything had to be listed."

"I arrived in Norway, I was stopped by customs and told to park up while they check everything in my van against what was listed on the carnet, a process that took five hours." [Mirror].

This is of course just one business owner's experience, and how he sees huge problems ahead should Britain pursue its course for leaving the EU and in particular the Customs Union.

But it is surely clear that simply dropping out of the EU, and along with it the Customs Union and Single Market, without contingency plans is a recipe for chaos.

Empty supermarket shelves

On the surface it might seem an over-egged exaggeration that Britain might see empty supermarket shelves, medicines becoming unavailable and fuel shortages. But it takes very little for such crises to develop.

In the last year or so there have been scenes of empty supermarket shelves in Britain, not because of Brexit and customs checks but because of inclement weather. In March this year supermarkets saw shelves emptied of bread and tinned soup as the so-called Beast from the East snow storm disrupted deliveries and precipitated panic buying [Sun / Metro]. And in February 2017 there were vegetable shortages due to weather problems in Spain resulting in many supermarkets rationing certain items whilst others found themselves almost stripped of fresh produce altogether [BBC].

It's not hard to see how delays at the ports could result in similar issues. Indeed the problem could be further compounded should Britain's domestic farming industry suffer from labour shortages, as some have also predicted [Guardian].

One official told the Times that "supermarkets in Cornwall and Scotland will run out of food within a couple of days" of Britain's leaving the EU without a deal, and that the government would have to charter aircraft or use the RAF to ferry supplies to the furthest corners of the UK.

This would certainly not improve Britain's image around the world as a country open for business.

Medicine shortages

Most medicines distributed around Europe are certified under one umbrella, specifically by the European Medicines Agency, a European Union agency responsible for the protection of public and animal health through the scientific evaluation and supervision of medicines.

The agency has been based for some years in Canary Wharf, London, but has already finalised plans to uproot and move to Amsterdam [Guardian]. But aside the obvious snub, comes a much harsher reality. The relocation will lead to a loss of investment from pharmaceutical companies with some also relocating closer to the agency. There will also be a local economic loss particularly for the London hospitality and service sectors. The EMA reportedly generates demand for 350 hotels per night, five days a week in order to host its 40,000 visiting guest experts.

The relocation will also harm UK academia. With the EMA's departure, London loses its status as the focal point for European medical research and technology, with all the positive impact this has brought in terms of collaboration with local universities and institutes. And there is also the human impact this decision will have. Some 900 staff who have built their homes and lives in our capital are now having to choose between relocating to another country, opting for an elaborate and impractical commuting arrangement, or finding another job.

But aside the blow to the UK's economy, global standing and patient services, it may also prompt an EU-wide public health crisis due to the disruption caused to the agency's work. It has also been suggested that UK patients may soon find themselves cut off from accessing potentially life-saving drugs.

Without agreement between Britain and the EU there would be serious disruption to patients' continued access to existing and new medicines, with a recent estimate that a hard Brexit could mean UK patients end up waiting six to 12 months longer than those in EU states for new, potentially life-saving drugs.

One reason for this is that the EMA currently undertakes a significant proportion of the work required for licensing new drugs in the UK. Outside EMA membership, Britain's national body, the Medical Health Regulatory Agency [MHRA] will need to urgently find the resources to carry out 25% more licensing of new drugs come March 2019 [New Statesman].

The issues surrounding any possible deal between the UK and EMA is just one factor when it comes to medicines. Another important and much overlooked issue is that of Britain's membership to Euratom. While Euratom is not a part of the EU as such, Theresa May, on attaining office, quickly put forward her vision of Brexit as not only leaving the entities of the Single Market and the Customs Union but of Euratom too.

At the same time her government has said it wants to have close ties and to sign an agreement which would facilitate Britain maintaining provisions set out under the oversight of Euratom.

But the UK's nuclear chief has described the leaving of Euratom an "existential threat" to the industry and that the nuclear industry faces "disruption to absolutely everything".

The transport, trade and regulation of nuclear materials, components and know-how is governed by a series of nuclear safeguards that have operated in the UK for four decades through the Euratom treaty. And without a deal there could be significant problems concerning the transport of nuclear fuel [Sky News]. 

But there is also the issue concerning the supply of medical isotopes, a byproduct of the continental European nuclear industry, critical for cancer treatments.

Without a deal, such treatments could also be in jeopardy. And Britain has already missed a number of important deadlines [Guardian].

With no extra £350 million for the NHS - indeed there's been talk of increasing taxes to fund it [Sky News] - and possible shortages of medicines Brexit is going to be an extremely bitter pill to swallow.

Sorry, no fuel

Could Britain really run out of fuel because of Brexit. It might sound laughable but a short fuel strike in 2001 almost brought Britain to a halt. Petrol was rationed for drivers providing essential services and forecourts across the country ran out of fuel in days.

It's easy to see how a key disruption in a supply chain can quickly halt deliveries, but how would Brexit affect the fuel industry.

Press articles, including the Times which broke the story, have not made clear how forecourts would run out of fuel within a week because of a so-called hard Brexit. However, Britain is increasingly reliant on foreign imports and with the UK already facing significant threats to the future security of the UK energy system they are likely to be enhanced by the uncertainties of the Brexit process [Impact of Brexit on UK Energy System - Durham University].

So will there be a disaster as of midnight on 29th March 2019? Will there be 20 mile tailbacks from Dover, Harwich and other major ports with similar scenes across the channel by the morning? Can we expect to see panic buying and food shortages as shoppers begin their weekend shop? And will people grab more petrol than usual as the hysteria sets in?

No-one can really predict for certainty. It has to be said there will definitely be disruption should Britain get no deal. And that could well precipitate a domino effect. And things could get very messy indeed.

Should you feel you need to start prepping now you could save up and get your very own Doomsday kit from Costco, a snip at only $6000 [Guardian].

Or perhaps you'd prefer the calming reassurance from the government who maintain that Brexit won't mean Armageddon [The Times] even if UKIP's former learder Nigel Farage has apparently turned tail and claimed he never said Brexit would be a success [Twitter]. Well, that's a relief! It won't be Armageddon. But it won't quite be the success we were told it would be either!

Doomsday Brexit: The Times / Business Insider / Bloomberg / Sky News / Sun / Daily Mail / Mirror / Guardian / Independent / Telegraph /

tvnewswatch, London, UK

Friday, April 06, 2018

Waking the dragon: Trump's trade war is a risky strategy

President Donald Trump has started a trade war claiming he is protecting American jobs and interests [FT / BBC / Time / CNN].

Starting with steel, to appease US workers that have seen a decline due to cheap imported steel especially from the likes of China, Trump has focused more specifically on the Middle Kingdom imposing a wide range of tariffs in retaliation to China's failure to tackle the issue of intellectual property theft.

It is true to say that China has ignored the issue of IP theft over the years. From cheap ripped off DVDs and fake Gucci handbags to reverse engineered technology covering mobile phones, cars and wind energy technology, China is awash with copied products.

But Trump's trade war will do little to persuade Xi Jinping and China to crackdown on IP theft. Indeed it will only only reinforce well established anti-western and anti-American sentiment and lead to growing nationalism.

Hostile foreign forces

In 2012 as tensions grew over territorial claims connected to the Daiwu Islands anti-Japanese protests took place in cities across China.

Thousands of people took to the streets in Shenzhen, Guangzhou and a number of other cities demanding that Japan leave the islands in the East China Sea where a Japanese flag had been symbolically raised on what the Japanese called the Senkaku islands. In Shenzhen, some demonstrators attacked Japanese restaurants and smashed Japanese-made cars [BBC / CNN / Wikipedia].

So could Trump's trade war, directed at China, trigger similar nationalistic feeling?

Since Nixon, every successive US president has toured China. Relations with China have strained under Barack Obama's Asia pivot strategy, US support for Japan in the Senkaku Islands dispute, as well as Donald Trump's threats to classify the country as a "currency manipulator" as part of a potential trade war.

Trump's latest policy however could sour relations significantly and the US has much to lose. It has been said that no-one wins in a trade war. But China could out manoeuvre the US in many ways.

Working towards self-sufficiency

Although China does much trade with the US it is not entirely reliant on the world's largest economy. And while it currently imports many products from the US and the rest of the world China has already begun initiatives to become self-sufficient by 2025 [China Daily / Trade Ready].

China has welcomed global trade with open arms. But it is clear that China does not want a gun held to its head when trading with other countries. China is already embarking on a $300-billion plan to become nearly self-sufficient by the year 2025, a move that will give Chinese companies a major edge in the push to squeeze out foreign enterprise.

And Trump's trade war with China could make the country less hospitable on a number of fronts.

Increased tariffs could make US products less attractive to Chinese consumers. Furthermore as China targets particular sectors such as soybeans could have particular marked effects.

China has hit the US with proposed tariffs on pork, beef, soybeans and cars which are mostly produced in regions mostly supportive of Trump. As exports dry up and prices slump US producers could find themselves in a world of hurt.

China's nationalism

US companies could find themselves being targeted in China should nationalistic fervour increase especially if America is seen as an aggressor. The line Western anti-China forces is never far from the lips of the nationalist propaganda machine in China. History is much ingrained and memories run very long indeed.

Just as China has never forgotten the Nanjing massacre, when Japan slaughtered thousands of Chinese as it attempted to take over China, so China remembers the humiliation it experienced from imperialist colonisation.

For much of the second half of the nineteenth century, China suffered humiliating defeats in the First and Second Opium Wars with the British, wars with the French, Portuguese, and even the Japanese.

The sense of humiliation is so deeply entrenched in the Chinese psyche, that even today while the rest of the world considers China a strong and powerful nation, many Chinese often feel they are being singled out, bullied and mistreated. As such there is a constant and watchful eye for "hostile foreign forces."

This complicates the Sino-US relationship. A simple trade dispute can be interpreted by the Chinese as a Western way to undermine China. Indeed, some extremists already regard China's holding of trillions of US foreign reserves as a conspiracy by the US government to colonise the Chinese economy. There is increasing anti-American rhetoric in Chinese social media, with posts accusing Uncle Sam of plotting to dismantle China "in the way it did to the Soviet Union." [Forbes]

China's secret weapons

As a week of tit for tat rhetoric and proposed implementation of tariffs has racked up China has declared there will be a series of comprehensive measures to follow should Trump continue with his trade war.

It is unclear what measures might be implemented, but China certainly hold many cards.  Life could become very difficult for US companies operating in China. Few see it as a possibility, but China could begin off-loading US treasuries which could have a disastrous effect on the US and world economy [CNBC].

China holds $1.17 trillion of US government debt and some economists and investors worry if there is a trade war, China could reduce its US debt holdings as a political weapon against the Trump administration tariffs proposal. Should that happen, the US dollar could fall and other countries could follow suit and sell their holdings.

There is also the virtual monopoly China has in terms of its global supply of so-called rare earths without which the technological world could grind to a halt.

China is still responsible for roughly 95% of the world's production of rare earth elements. Whilst China has found itself criticised by the World Trade Organization for imposing export quotas in the past, but that is unlikely to deter it from repeating such actions [Investing News].

Rare earths are used in TV sets, cancer treatment drugs, camera lenses, battery-electrodes, welding goggles, computer hard drives and electronic components. Indeed without rare earths even America's military could find itself up the creek without a paddle.

Napoléon Bonaparte is reported to have once said, "China is a sleeping giant. Let her sleep, for when she wakes she will move the world."

One Chinese proverb is also rather apt. "If you ignore the dragon, it will eat you. If you try to confront the dragon it will overpower you. If you ride the dragon, you will take advantage of its might and power." A metaphor perhaps that it's better to cooperate than to resort to conflict.

In this spat between the US and China it all depends who you believe represents the dragon.

tvnewswatch, London, UK

Friday, March 09, 2018

China may hold trump card in Trump trade war

On Thursday 8th March 2018 the US President Donald Trump signed an order which pushes forward a plan for 25% tariffs on imports of steel and a 10% tariff on aluminium.

Trump claims it is all about protecting American jobs and to stop cheap foreign steel imports being dumped in the US. But while his motives might be laudable his methods could well spark a trade war which could damage not only the US but slow the global economy which could in turn precipitate another global recession [Guardian].

There is no nation that is 100% self sufficient. Globalisation has made every country reliant on another. But some nations are more resilient than others. The more developed a nation is the greater its susceptibility to a disruption of imports of raw materials, agricultural products or energy supplies.

Fiery rhetoric

In a recent tweet Trump proclaimed that "trade wars are good, and easy to win". But he was immediately slapped down by European Council President Donald Tusk who said the very opposite was true.

"President Trump has recently said and I quote, 'trade wars are good and easy to win.' But the truth is quite the opposite. Trade wars are bad and easy to lose," Tusk told a press conference in Luxembourg [RTE / Guardian].

As the EU drew up a list of products which might have increased tariffs upon them Trump merely retorted that he would respond in kind.

After Trump announced he would impose tariffs on steel and aluminium the EU suggested it might impose tariffs on US imports such as Harley-Davidson motorbikes, Levi's jeans and Kentucky bourbon whiskey [Bloomberg]. Trump then responded saying tariffs could be extended to European cars. The EU's list then grew to include peanut butter, cranberry and orange juice [BBC].

Waking the dragon

But this tit for tat reaction will be nothing compared to the trade war that could break out between the US and China.

There has been much talk over China's dumping of steel on world markets. This is certainly an issue and China should arguably be taken to task. However, Trump's methodology could unleash a hornets nest. And at the very least could be described as using a sledgehammer to crack a nut.

China might not be able to bring the US down but it could seriously damage the US economy. That said there are many myths surrounding the economic relationship between the United States and China.

The fact that China has become the largest foreign holder of US government securities is often taken as indicating that the United States is heavily dependent on China to finance its budget deficits. Similarly, since China is a major source for US imports, US consumers are seen as dependent on cheap Chinese goods.

Dumping its US government securities could cause problems as much for China as it might for the US [CFR].

However while the average consumer may not be affected if cheap imports of clothes and toys were to dry up there are some imports that are far more vital to the US.

There is much interconnectedness between China and the US [Business Insider]. Some is economic and some has to do with manufacturing.

One particular concern for some in in the US is whether China could pull out the rug from the US technology industry.

Rare earth reliance

Apple and other tech firms have relocated to China and any disruption to this supply chain could hurt the US [Bloomberg]. But this is just the tip of the technological iceberg.

China supplies much of the world's so-called rare earths, elements such as lanthanum, cerium, praseodymium, gadolinium, yttrium, terbium, europium [BBC / Wikipedia]. Despite their name, most are abundant in nature but are hazardous to extract [BBC]. Thus many countries have significantly reduced their mining operations on environmental grounds leaving China as one of the few countries to corner the market.

But why are rare earths important? Rare earths are a big part of our modern world.  They are in clean energy technologies like wind turbines and solar cells and in many things we use everyday such as cars, cell phones, computers and televisions. Without dyprosiumif there might be no smartphones or MRI scans [].  

But the biggest concern for the US is the fact that many rare earths are necessary for high-performance guidance systems. US military technologies such as guided bombs and night vision rely heavily upon rare earth elements supplied by China, and rebuilding an independent US supply chain to wean the country off foreign dependency could take up to 15 years, according to a 2010 report published by the US Government Accountability Office [GAO report PDF] [Live Science].

No instant fix

Some 7 years after that report was published and the US is still very much reliant on China to supply these resources [Investor Intel], although another GAO report skims over US reliance on China [GAO report 2016 PDF]

In December 2017 Trump signed an executive order intended to reduce the United States' reliance on other countries for rare earth supplies. But this will be no instant fix. Even Trump's intended shift to buy from other countries such as Australia where companies like Lynas Corp have been mining for nearly two decades is unlikely to fill any gaps left should Chinese rare earth supplies dry up [Bloomberg].

Indeed it could be years before the US becomes self sufficient. In 2016, the US was reliant on imports for 23 minerals including cobalt, lithium, graphite and rare-earth elements, according to a report released this last year by the Interior Department. The country was most reliant on China, which supplied the world's biggest economy with at least 20 critical minerals, the report said.

And this is where China could bite back hard should Trump make things difficult in a trade war.

Past form

It won't be the first time China has used its mining and supply of rare earths as leverage. In late 2009 and throughout 2010, at a time when China produced 97% of the world's rare earths, China tightened its grip on exports [FT / NYT / tvnewswatch - China tightens up on rare earths Oct 2010]

China has already accused Trump of risking a global trade war and says it will retaliate [Sky News]. In a statement China described Trump's decision to levy a 25% surcharge on steel and 10% on aluminium as a "serious attack on normal international trade order".

Elsewhere in Asia, Japan said the move would have a "big impact" on its close relations with the US while South Korea said it may file a complaint with the World Trade Organisation.

Beijing has not yet said how it might react, only that it would "firmly defend its legitimate rights and interests".

China has not mentioned any increased tariffs or block on exports. Indeed only commentators have even mentioned rare earths as being China's secret weapon [Reuters / CNN / ATimes].

Should a prolonged trade war break out and China block rare earth exports then the US could conceivably find itself in a very difficult position.

Recession & war

World Trade Organization Director General Roberto Azevêdo recently said that the "potential for escalation is real, as we have seen from the initial responses of others. A trade war is in no one's interests. The WTO will be watching the situation very closely."

The European Council President Donald Tusk was right to say that trade wars are bad and easy to lose. But he could also added that Trump's trade war could end with more than economic conflict.

The lesson of history is clear. Trade wars have no winners. And they are certainly not good. They can damage the economies of all countries involved, raising tensions and increasing the risk of international conflict.

Most people living today won't remember the last trade war which is blamed for worsening the pain of the Great Depression [CNN / Fortune]. That in turn helped to foster the political extremism that led to World War Two.

tvnewswatch, London, UK

Thursday, March 08, 2018

No winners for UK fishing industry post-Brexit

Both Theresa May and the Chancellor Philip Hammond have been accused of selling out the fishing industry in order to seal a Brexit deal [The NationalTelegraph].

However, the suggestions that UK fishermen might not win waters back after Brexit has been on the table for some time. Indeed a memo published in early 2017 and obtained by the Guardian says that many agreements relating to the CPA would remain in place in order to keep to commitments on sustainable fishing [Guardian]. 

Such suggestions might be difficult for many Brexiters to swallow [Channel 4 News]. Indeed Nigel Farage was screaming "betrayal" as it was suggested the UK might make concessions or apply 'reciprocal arrangements' [Express].

But there may in fact be no deal at the end of all the the wrangling given the rhetoric and and statements coming from both sides in the last few weeks.

Donald Tusk and Michel Barnier have consistently stated there will be no cherry picking or bespoke deals, whilst backed up unanimously by the EU 27. Meanwhile Theresa May [Channel 4 News], David Davis and Philip Hammond repeatedly makes speeches setting out unrealistic visions which boil down to just that; cherry picking.

The UK fishing industry and the Common Fisheries Policy became a divisive issue in the referendum campaign.

There are certainly inequalities and the CFP does need an overhaul. For example under the CFP, overseas fishing fleets can actually catch more of certain fish in areas of UK waters than British fishermen [BBC].

Whilst partially true to say the CFP has affected the British industry it is not the whole story. Indeed overfishing in general has affected the industry across the board [Full Fact].

But will Britain be any better outside the EU? 

Currently some 75% of home-caught fish is exported - and majority of fish eaten by Britons is imported, mainly from Europe [This is Money].

Britain imports big quantities of prawns and tuna from the EU, while its main fish export is mackerel which is caught primarily of the Scottish coast. But this situation could be turned upside down if tariffs were to be imposed on such trades.

As Britain heads inexorably towards a WTO Brexit the likelihood of punitive tariffs looks ever more likely.

Some 666,000 tonnes of fish was farmed and caught in the UK in 2014, of which 499,000 tonnes [75%] were exported, and 66% of those exports went to the EU. Meanwhile the UK also imported 721,000 tonnes of fish, 32% of which came from the EU.

Under WTO rules fish and crustaceans, molluscs and other aquatic invertebrates are subject to an 11% tariff, meaning the UK could lose some £92 million of the average yearly £840 million worth of exports [in 2015] sent to the EU [Source: ONS, WTO, Independent].

Figures and statistics do vary of course. The FT reported that Britain exported £921 million of fish [including £224 million salmon] to the EU in 2015, whereas total landings - the amount brought to the UK - were worth £775 million. Nonetheless, the figure is certainly substantial.

There is also an uncomfortable trend in that fish imports to the UK have increased since 2003 as exports have decreased [BBC]. In plain terms this will mean that British consumers will be paying more for their fish and chips while Britain's fishermen will be struggling to sell their fish to a market which would be put off by tariffs.

For Britain's fishermen this could prove devastating. And chances of government help are unlikely. Fishing is worth £1.3 billion to the UK economy and employs 34,600 people. However in percentage terms it is only a tiny part of the UK economy, contributing less than half a percent to annual GDP. For government any decision to help an ailing industry would be an economic rather than an emotional one. And with the noises currently coming from Westminster concerning the British car industry and financial services make clear that fishing will be last on the list of priorities.

After Brexit it was claimed Britain would be able to "take back control" of its territorial waters up to the 200 nautical miles currently allowed by the CFP.

However the English fleet traditionally catches its fish in Irish, French and Norwegian, as well as UK, waters.

Should no deal be made UK fishing boats will be hemmed in and unable to fish some of its traditional fishing grounds. Meanwhile British authorities will once again face the issue of policing Britain's waters [BBC].

As in many other aspects of the EU negotiation, Britain could refuse to do a deal and go its own way.

But the British government would need to consider the consequences of such a move. The breakdown of any agreement would probably lead to overfishing and the depletion of stocks. It would result in the imposition of tariff barriers. Above all, the British would have to ask themselves whether they could effectively patrol and defend UK waters against fishing boats from EU states. Given these constraints, Britain has little room for manoeuvre in negotiations over post-CFP arrangements. The UK fishing community may emerge from Brexit in a weaker position than it expects.

tvnewswatch, London, UK

Friday, March 02, 2018

Is Brexit killing off Britain's high streets?

This week both Maplin and Toys R Us went into administration putting more than 5,000 jobs in jeopardy [BBC / BBC]. It wasn't the only bad news for February. On the same day Prezzo, the Italian restaurant chain, announced it was to close 100 of its 300 branches risking a third of its 4,500 employees [BBC]. And earlier in the month the bed maker Warren Evans became another victim as it too went into administration putting 300 jobs at risk [City AM].   

Supermarket chains have also made cutbacks. In early February Morrisons announced it was to axe 1,500 jobs in middle management [BBC]. Meanwhile January saw Sainsbury announcing it was to shed thousands of shop floor jobs as part of a major shake-up at the firm [BBC]. Tesco too said it was cutting some 1,400 staff [BBC / Guardian].

January also saw Marks & Spencer put some 500 jobs at risk as it announced the closure of 14 outlets [Guardian].

All these major chains said some jobs would be reabsorbed in other roles, but there would undoubtedly be some redundancies given the continuing trend to make cutbacks.

Statistically the rate of retail store closures less than seen in 2010 according to Consultancy website.  

Since the global financial crisis, British high streets have taken a consistent battering – with retailers Woolworths, media stores Zaavi and HMV, and electrical goods provider Comet among the formerly high-profile casualties of the economic turbulence that began with 2007's infamous credit crunch. Major brands have been vacating bricks-and-mortar presences for years since, a process accelerated by the boom in disruptive ecommerce platforms over the past decade. However, according to the latest analysis from PwC and The Local Data Company (LDC), the number of stores closing in the UK has fallen to 14 a day – the lowest level since before 2010

However, while closures may not be occurring at the same rate there is a growing trend to make cutbacks. And there are still some worrying signs that Brexit is having a marked effect on the high street.

There is growing uncertainty in the retail sector and some firms have specifically cited Brexit as a having a causal link to their cutbacks and closures. Maplin's CEO blamed "sterling devaluation post-Brexit, a weak consumer environment and the withdrawal of credit insurance" for the firm's demise [Retail-Week].

It is nearly a year after Theresa May invoked article 50 and some 20 months after the EU referendum. And the weak pound and the general uncertainty concerning Britain's future trading position is affecting investment and future planning.

After a grim December, many retailers had been hoping for a bounceback, but the figures have showed that consumers were not as hardy as they once were and the retail sector is facing a long-term, continuing slowdown.

Shoppers are being hit by declining real wages, record levels of consumer debt and the prospect of higher borrowing costs [City AM].

Meanwhile a weak pound has resulted in higher costs for importers and retailers. Indeed, rising cost of imports such as food and fuel since Brexit vote is pushing prices to rise at faster rate than anywhere in G7 according to the OECD [Guardian].

With inflation running at 3.1%, Brexit is squeezing living standards. Bread is 5.3% more expensive than this time last year, whilst the price of butter is up by over 21%. Fresh fish is up over 11%, whilst coffee is over 10% more expensive. Overall, on average, food and non-alcoholic drink prices have risen by 4.2% over the last 12 months.

And with job uncertainty and wage stagnation, consumer confidence is dropping. In turn this leads to retailers rethinking their future. Some are making cutbacks and shedding jobs. But others have been forced out of business.

It is easy to point to the advent of the Internet and the effects of online shopping as having causal a causal link to the closure of the likes of Toys R Us or Maplin. But there are other factors that have created problems for physical stores.

In a healthy economy where consumers have the spare cash to buy, real world outlets have fewer issues. A small markup on price is not such a big deal for consumers who like to browse bookstores, record stores, fashion retailers and toy shops. But in a cash-strapped society consumers will be far more savvy.

Physical stores face bigger overheads than online retailers. Employee numbers are often higher, and may often be higher paid than online retailers. Bricks and mortar stores also face higher business rates especially in town where they also face further issues concerning increased problems of parking. Consumers often complain at the ability to park easily in town centres as well as the cost of parking and over-zealous parking wardens.

Brexit may not be the cause of the demise of Britain's high streets. However it may well be the straw that breaks the camel's back.

tvnewswatch, London, UK

Wednesday, February 28, 2018

John Major calls for Commons vote on second referendum

The former Conservative prime minister Sir John Major has launched a scathing attack on Brexit and said MPs should be given a free vote on whether to accept or reject the final Brexit deal.

The ex-prime minister argued that MPs must vote with their "own conscience" on whether the deal on offer will leave the UK better or worse off.

In a speech in London that comes at the lowest point so far in the 18-month withdrawal negotiations [BBC], Major argued parliament had a duty to consider the "wellbeing of the people", as well as the will of the people in the first referendum.

"This must be a decisive vote, in which parliament can accept or reject the final outcome; or send the negotiators back to seek improvements; or order a referendum," Major told an audience  at Somerset House in central London on Wednesday afternoon.

However, leading Tory backbencher and Brexit backer, Jacob Rees-Mogg, said Sir John had been wrong on Europe in the past "and he is getting it wrong again" [BBC / Guardian]

Here is his speech in full:

I would like to express my thanks to the Creative Industries Federation, Somerset House Trust, and Tech London Advocates for the opportunity to speak here today.
Brexit matters to our creative industries. They express our culture and values - but give so much more.

Nearly 10 per cent of our national workforce is in creative industries. They are often the young - and overwhelmingly in small units up and down the UK. Job growth outpaces every other part of industry - especially in the Midlands and Yorkshire.

Their exports total over £35 billion a year, but their added value to our country - both economically and socially - is incalculable… and far beyond cash. Our decision to leave the EU faces the creative industries with a variety of threats that could harm their future, both in financial and human terms.

So I am delighted to be their guest here this afternoon - to talk of Brexit.

For years, the European debate has been dominated by the fringes of opinion – by strong supporters of Europe or convinced opponents. But, as we approach Brexit, the voice of middle opinion mustn't be overlooked.

I am neither a Europhile nor a Eurosceptic. As Prime Minister, I said "No" to federal integration, "No" to the Euro Currency, and "No" to Schengen – which introduced free movement of people within the European Union but without proper control of external borders.

But I am a realist. I believe that to risk losing our trade advantages with the colossal market on our doorstep is to inflict economic self-harm on the British people.

Of course, the "will of the people" can't be ignored, but Parliament has a duty also to consider the "wellbeing of the people".

No-one voted for higher prices and poorer public services, but that is what they may get. The emerging evidence suggests Brexit will hurt most those who have least. Neither Parliament nor Government wish to see that.

The "will of the people" - so often summoned up when sound argument is absent - was supported by only 37 per cent of the electorate. Sixty-three per cent voted either in favour of membership - or did not vote at all.

There was a majority for Brexit, but there was no overwhelming mandate to ignore the reservations of 16 million voters, who believe it will be a harmful change of direction for our country.

Brexit has been the most divisive issue of my lifetime. It has divided not only the four nations of our UK, but regions within them. It has divided political parties; political colleagues; families; friends - and the young from the old.

We have to heal those divisions. They have been made worse by the character of the Brexit debate with its intolerance, its bullying, and its name-calling. I welcome rigorous debate - but there must be respect for differing views that are honestly held.

In this debate there are no "remoaners", no "mutineers", no "enemies of the people" - just voices setting out what they believe is right for our country.

In recent weeks, the idea has gained ground that Brexit won't be too bad; that we will all get through it; that we're doing better than expected - and all will be well.

Of course we will get through it: life as we know it won't come to an end. We are too resourceful and talented a nation for that. But our nation is owed a frank assessment of what leaving Europe may mean - for now and the future.

I fear we will be weaker and less prosperous - as a country and as individuals. And - although it grieves me to admit it - our divorce from Europe will diminish our international stature. Indeed, it already has.

For decades, we British have super-charged our influence around the world by our closeness to the US (which policy divisions are lessening); and our membership of the EU (which we are abandoning).

As a result, we are already becoming a lesser actor. No one - Leaver or Remainer - can welcome that.

We are all urged to be "patriotic" and get behind Brexit. But it is precisely because I am patriotic that I oppose it.

I want my Country to be influential, not isolated; committed, not cut-off; a leading participant, not a bystander.

I want us to be richer, not poorer. Yet every serious international body, including the IMF, the OECD, the Institute for Fiscal Studies, the National Institute of Economic and Social Research – as well as Nobel prize-winners – forecast we will be poorer outside the EU.

Such forecasts could be wrong, but to dismiss them out of hand is reckless.

Our own Government has assessed our post-Brexit position upon three separate criteria: that we stay in the Single Market; or reach a trade deal with Europe; or fail to do so.

Each option shows us to be worse off: and disastrously so with no trade deal at all. And the poorest regions will be hurt the most.

If, as negotiations proceed, this analysis appears to be correct, that cannot be brushed aside. I know of no precedent for any Government enacting a policy that will make both our country and our people poorer. Once that is apparent, the Government must change course.

Meanwhile, we are yet again told all will be well. Certainly, the recent fall in the value of Sterling has temporarily boosted our exports. The strength of the world economy may even increase our forecast growth this year.

But this sweet spot is artificial. It won't last. Prosperity isn't built on devaluation of the currency. More exports on the back of other countries' economic growth is not a secure position.

The UK has been at the very top of European growth.

We are now the laggard at the bottom. We have become the slowest of the world's big economies, even before we surrender the familiar advantages of the Single Market.

Our negotiations, so far, have not always been sure-footed. Some agreements have been reached but, in many areas, only because the UK has given ground.

Our determination to negotiate the divorce bill and a new trade deal at the same time was going to be "the fight of the summer" - but instead became an immediate British retreat.

There was to be a "points based" immigration system. There isn't, and there won't be.

We were to become the "Singapore of the North". No more: we have retreated from a policy of lower taxes and de-regulation.

No transition period was going to be needed. But we have now asked for one - during which we will accept new EU rules, ECJ jurisdiction, and free movement of people.

I don't say this to be critical. I do so to illustrate that unrealistic aspirations are usually followed by retreat. That is a lesson for the negotiations to come.

They will be the most difficult any Government has faced. Our aims have to be realistic. I am not sure they yet are.

We simply cannot move forward with leaving the EU, the Single Market, the Customs Union and the ECJ, whilst at the same time expecting à la carte, beneficial-to-Britain, bespoke entrance to the European market. It is just not credible.

A willingness to compromise is essential. If either side - the UK or the EU - is too inflexible, too unbending, too wedded to what they won't do - then the negotiations will fail.

The very essence of negotiation involves both "give" and "take". But there are always "red lines" that neither side wishes to cross. In successful negotiations those "red lines" are traded for concessions.

If our "red lines" are held to be inviolable, the likelihood of no deal - or a poor deal - increases. Every time we close off options prematurely, this encourages the EU to do the same – and that is not in our British interest.

A good Brexit - for Britain - will protect our trade advantages, and enable us to:

  • continue to sell our goods and services without disruption

  • import and export food without barriers and extra cost

  • staff our hospitals, universities and businesses with the skills we need – where we most need them

  • be part of the cutting edge of European research, in which British brains and skills lead the way

  • continue with the over 40 FTAs we have with countries only as a result of our membership of the EU

A bad Brexit - for Britain - will surrender these, and other, advantages. For the moment, our self-imposed "red lines" have boxed the Government into a corner.

They are so tilted to ultra Brexit opinion, even the Cabinet cannot agree them – and a majority in both Houses of Parliament oppose them. If maintained in full, it will be impossible to reach a favourable trade outcome.

Alarmed at the negotiations so far, the financial sector, businesses, and our academic institutions, are pleading for commonsense policy to serve the national interest and now - fearful they may not get it - are making their own preparations for the future.

Japanese car-makers warn they could close operations in Britain unless we maintain free access to the EU. That would be heart-breaking for many people in Sunderland or Swindon or South Wales.

This isn't "Project Fear" revisited, it is "Project Know Your History".

Any doubters should consult the former employees of factories, now closed, in Bridgend, Port Talbot and Newport, where jobs were lost and families suffered. In 1991, employment by Japanese firms in Wales was about 17,000 people: today, it is 2,000. If free access to Europe is lost – that scale of impact, across the UK, could lose 125,000 Japanese jobs.

Over many years, the Conservative Party has understood the concerns of business. Not over Brexit, it seems.

Across the United Kingdom - businesses are expressing their wish to stay in the Single Market and Customs Union. But "No", say the Government's "red lines".

Businesses wish to have the freedom to employ foreign skills. "No", say the Government's "red lines".

Business and academia wish to welcome foreign students to our universities and - as they rise to influence in their own countries - we then have willing partners in politics and business for decades to come. "No", say the Government's "red lines".

This is not only grand folly. It's also bad politics. The national interest must always be above the Party interest, but my Party should beware. It is only fear of Mr Corbyn and Mr McDonnell that prevents a haemorrhage of business support.

Without the comprehensive trade deal the Prime Minister seeks, we risk economic divorce from the EU, and the chill embrace of a "hard" Brexit with WTO rules.

Leading Brexit supporters believe there is nothing to fear from losing our special access to the Single Market.

But that is profoundly wrong. Swapping the Single Market for WTO rules would mean our exports facing the EU external tariff, as well as hidden non-tariff barriers that could be adjusted to our disadvantage at any time.

A Minister has speculated we might face tariffs of three per cent. Not so.

It is more likely that we will face tariffs on cars (10 per cent), food (14 per cent), drinks (20 per cent), and dairy products (36 per cent). Even if a successful negotiation were to halve these tariffs, our exports would still be much more expensive to sell – and this would apply far beyond agriculture and the motor industry.

And if, in retaliation, the UK were to impose tariffs on imports, this would result in higher prices for the British consumer.

If we and the EU agreed to impose nil tariffs - as some have speculated - WTO rules mean we would both have to offer nil tariffs to all countries. That isn't going to happen.

This is all very complex. But it is crucial. And none of it has yet been properly explained to the British people.

There have been attempts to reassure business by claiming that other nations trade with the EU on purely WTO terms. That statement is simply wrong.

China, the US and Japan all have side agreements with Europe on standards, customs cooperation, mutual recognition and investment. These economic giants did so to protect their own trade even though none of them is exposed as we are - still half our entire exports go to Europe.

Ultra Brexit opinion is impatient to be free of European relationships; to become - in their words - a "global player", "sovereign", "in control". I believe they are deceiving themselves and, as a result, they are misleading the British people.

Before the modern world took shape - their ambition would have been credible. But the world has changed, the global market has taken root, and - if we are to care for the people of our nation - philosophical fantasies must give way to national self-interest. We cannot prepare for tomorrow by living in the world of yesterday.

I don't doubt the convictions of those who long for the seductive ambition of British exceptionalism. But these sentiments are out-of- date and, in today's world, wrong.

It is not my purpose to stir controversy, but the truth must be spoken. The ultra Brexiteers have been mistaken - wrong - in nearly all they have said or promised to the British people.

The promises of more hospitals, more schools, lower taxes, more money for transport were electioneering fantasy. The £350 million a week for the NHS was a ridiculous phantom: the reality is if our economy weakens - as is forecast - there will not only be less money for the NHS, but for all our public services.

We were told that nobody was threatening our place in the Single Market. That tune has changed.

We were told that a trade deal with the EU would be easy to get. Wrong again: it was never going to be easy, and we are still not sure what outcome will be achieved.

We were told "Europe can whistle for their money" and we would not pay a penny in exit costs. Wrong again. Europe didn't even have to purse her lips before we agreed to pay £40 billion to meet legitimate liabilities.

I could go on. But suffice to say that every one of the Brexit promises is - to quote Henry Fielding - "a very wholesome and comfortable doctrine to which (there is) but one objection: namely, that it is not true.".

People should pause and reflect: if the Brexit leaders were wrong in what they said so enthusiastically before - are they not likely to be wrong in what they say now?

The Prime Minister is seeking a "frictionless" border between Northern Ireland and the Republic. She is absolutely right to do so. This is a promise that must be honoured, and I wish her well. But, so far, this has not materialised - nor, I fear, will it - unless we stay in "a" or "the" Customs Union.

Those of us who warned of the risks Brexit would bring to the still fragile Peace Process were told at the time that we "didn't understand Irish politics". But it seems we understood it better than our critics. We need a policy to protect the Good Friday Agreement - and we need one urgently. And it is our responsibility to find one - not the European Union.

Although the referendum was advisory only, the result gave the Government the obligation to negotiate a Brexit. But not any Brexit; not at all costs; and certainly not on any terms. The true remit can only be to agree a Brexit that honours the promises made in the referendum.

But, so far, the promises have not been met and, probably, cannot be met.

Many electors know they were misled: many more are beginning to realise it. So, the electorate has every right to reconsider their decision. Meanwhile, our options become ever narrower.

We have ruled out full membership. Ruled out the Single Market and Customs Union. Ruled out joining the European Economic Area. Dismissed talk of joining EFTA.

A Norway deal won't do. Nor will a Swiss deal. Nor a Ukraine deal; a Turkey deal; or a South Korea deal. No, to them all, say the Government's "red lines".

So, little is left, except for "cherry picking" - which the EU rejects. Or a comprehensive deal - which will be very hard, if not impossible, to get. So compromise it must be - or no deal at all.

It is now widely accepted that "no deal" would be the worst possible outcome. The compromise must, therefore, focus around our accepting Single Market rules (as Norway does) and paying for access.

Or an enhanced "Canada deal" - and it would need to be enhanced a very great deal to be attractive. The Canada deal largely concerns goods - whereas the bulk of UK exports are services.

But what we achieve to protect our interests may depend on what we concede: it is, as I say, "give" and "take". If our "red lines" dissolve, our options enlarge.

Our minimum objective must be that "deep, special and bespoke" trade deal the Prime Minister has talked about.

So, some unpalatable decisions lie ahead - with the cast-iron certainty that the extreme and unbending Brexit lobby will cry "betrayal" at any compromise. But it is Parliament, not a small minority, that must decide our policy.

I spoke earlier of the "divisiveness" of Brexit across our United Kingdom. But, in due time, the debate will end and - when it does - we need the highest possible level of public acceptance for the outcome. It is in no one's interest for the bitterness and division to linger on. I see only one way to achieve this.

It is already agreed that Parliament must pass legislation giving effect to the deal. A "meaningful vote" has been promised. This must be a decisive vote, in which Parliament can accept or reject the final outcome; or send the negotiators back to seek improvements; or order a referendum.

That is what Parliamentary sovereignty means. But, to minimise divisions in our country - and between and within the political parties - I believe the Government should take a brave and bold decision. They should invite Parliament to accept or reject the final outcome on a free vote.

I know the instinct of every Government is to oppose "free votes", but the Government should weigh the advantages of having one very carefully. It may be in their interest to do so. There are some very practical reasons in favour of it.

Brexit is a unique decision. It will affect the lives of the British people for generations to come. If it flops - there will be the most terrible backlash.

If it is whipped through Parliament, when the public are so divided, voters will know who to blame if they end up poorer and weaker. So, both democracy and prudence suggest a free vote.

The deep divisions in our nation are more likely to be healed by a Brexit freely approved by Parliament, than a Brexit forced through Parliament at the behest of a minority of convinced opponents of Europe.

A free vote would better reflect the reality that - for every 17 voters who opted for Brexit - 16 opted to remain in the EU.

But, regardless of whether a free vote is offered, Parliamentarians must decide the issue on the basis of their own conscience. Upon whether, in mature judgement, they really do believe that the outcome of the negotiations is in the best interests of the people they serve.

By 2021, after the likely two-year transition, it will be five years since the 2016 referendum. The electorate will have changed. Some voters will have left us. Many new voters will be enfranchised. Others may have changed their mind.

No-one can truly know what "the will of the people" may then be. So, let Parliament decide. Or put the issue back to the people.

And what is true for the House of Commons must apply to the House of Lords. Peers must ignore any noises off, and be guided by their intellect and their conscience.

I have been a Conservative all my life. I don't enjoy being out of step with many in my Party and take no pleasure in speaking out as I am today. But it's as necessary to speak truth to the people, as to power.

Leaving Europe is an issue so far-reaching, so permanent, so over-arching that it will have an impact on all our lives - most especially on the young and the future. With only 12 months to go, we need answers, not aspirations.

This is far more than just a Party issue. It's about the future of our United Kingdom, and everyone who lives in it. That is what matters. That is why I'm here today.

tvnewswatch, London, UK