The UK’s exports of goods to the rest of the EU is a little under 10% of our total output. That means that if, for example, there is an EU recession and we lose 10% of that business as a result, the UK economy will lose just 1% of output. At a time of little or no growth that is not helpful. It compares with the government forecasts of Uk growth averaging over 2% per annum.
However, at the same time the emerging market economies are likely to grow at a decent pace. The UK sells too little there at the moment. Exploiting the growth in those economies, and building up our low market share, we could offset a possible 10% fall in EU exports by a compensatory increase in non EU exports. The government is rightly seeking to help companies export to these faster growing markets. This will be an urgent priority not just for the next year but for the next decade, as the Euro scheme and banking problems in Western Europe damage its prospects.
There is also considerable scope to replace imports with home manufactures and services. That too could offset any loss of output from Euroland contraction. All these routes would be helped by the actions to promote UK growth we have often discussed here.
June 13, 2012
Only 10%!
If – big if – we have the inevitable in-out referendum and if we actually allow the nations that want to to form one big country while we, with the Swedes, the Norwegians, perhaps the Swiss and the Danes go back to the EEC, then we can really start to prosper like the Swiss and Norwegians are at the moment.
Taking the experts at Berlaymont out of our faces ought to do the trick nicely. And taking the LIbDems out of the picture, too, would help. That way we can use the power of our immigrant population to get us back into manufacture and prosperity fairly sharpish.
June 13, 2012
Current Government “logic” suggests that if a EZ crash would wipe 1% off GDP, they would think it was a good “investment” to borrow 2% of GDP and gift it to the Euro banks.
They are wrong.
If the UK is growing at 0.5% and loses this 1%, we are treated to the unedifying sight of Mr Balls crowing and making silly salutes in Parliament. Offensive, but we have to put up with it – in practice it makes little difference. The problem comes when the extra 2% is borrowed, giving us an entirely unnecessary -2.5% and reminding the markets that Mr Osborne is as economically illiterate as Mr Balls and Mr Brown.
June 13, 2012
The aptly-named Mr Balls would then be an east target for anyone so disposed as to take advantage of his ridiculous position. It was he and his cronies who delivered this mess, it’s only right he gets take to task.
Tad
June 13, 2012
Tad:
In principle, you are correct. It is not to the credit of either Mr Osborne or Mr Cameron that they have failed to do so.
June 13, 2012
And that always makes me wonder why Mick! I’d rub their noses it it, but then our hands are clean.
Tad
June 13, 2012
Indeed we can switch our efforts elsewhere outside the EU to recover the perhaps 1%. We could easily improve efficiency and head towards 10% growth. We just need to do all the actions, you I and many others have listed endlessly. Alas we have Cameron, Cable and Osborne who just continue the tax, borrow and waste and the over regulation of everything. Quack fake greenery, no retirement and PC fake equality drivel like the gender insurance rules. No easy hire and fire.
Soon, doubtless, we will have laws to say life and medical insurance for the elderly and the young should be the same cost, not just by gender but age too. We are governed by PC, socialist, lunatics. People who think daft laws will somehow change the laws of energy/physics, life, death and human biology.
Just a sign we were heading the right way would make a huge difference. Get rid of IHT say. Or at least the £1M limit promised.
June 13, 2012
How is the government planning on helping these companies? Relaxing red tape and regulations? Nope, can’t be done, even if you’re exporting outside the EU still bound by EU rules.
Lowering taxes? Nope, can’t be done, we have a deficit to wipe out before 2015 (remember when that was taken seriously?).
Seminars, quangos, and advisors? Yep, that’s the ticket, I’m sure what these companies really need are visits from jobworths who have no clue to explain the bleeding obvious to them.
Debasing the currency / theft from savers? Yep, I daresay this government could find it in themselves to print off a couple of hundred billion before 2015.
June 13, 2012
Cameron’s Calamity Coalition are quoted in the Telegraph today as saying that the public don’t want an In/Out referendum on the EU. This is at a time when a survey reveals 82% of the public want this now or in the next two years. Of course we do as qualified majority voting from the Lisbon Treaty is effective from 2014. With so much power and competancies now ceded to the EU it is becoming a national emergency. No one here in the real world wants the EU unelected dictatorship costing us £10 billion net annually with a trade deficit of over £50 billion with them. Its all CAP, CFP, regulation and directives costing us an absolute fortune. It also keeps 1000,000 of our young people unemployed and billions in costs to our housing, education and health.
June 13, 2012
Well said!
Tad
June 13, 2012
Timaction
I see it is reported that the Falkland Islanders are to be given a referendum in the early part of next year.
Do they want Argentina or UK Rule ?.
Scotland are still negotiating the terms of their referendum.
It seems referenda are popular at the moment, except in the UK, unless it is on stupid topics like a new voting system that few could ever understand, or perhaps the house of Lords which even fewer understand..
June 13, 2012
It’s not the loss of exports to a crashing Euroland that will be the worst effect. More likely is that the banks will face runs plus contagion and the pound will come under pressure as markets realise we have more debt than anyone except Japan. Still with George the pasty taxer in charge we’ll be fine.
June 13, 2012
A while back JR, you commented on the number of Quango that are now making decisions that modern politicians are too frightened to take; fearing the wroth of the voters. We are seeing it in spades at the moment. The Leveson enquiry, (should be good for a BAFTA next year); ministers being refereed to one of many Grand Poobah as supposedly dis-interested factotums. All part of the current “act green stay clean” brand of politics.
Do you think the day will come when there will be a Grand Poobah Mega Computer that will make all these decisions for us. I think there was a Star Trek episode that covered this. Michael Rennie did similar in the film “The Day the Earth Stood Still”
“There is a strand of thought in Europe that regards the disinterested professional as both safer and likely to make better decisions than the popular will and its politicians. This is not an altogether anti-democratic view, but it is a view that says that politics must be moderated by disinterested experts. This idea heavily influenced the structure that was created to manage the European Union and is clearly behind the idea of a European budget board.
June 13, 2012
I watched an excellent programme on BBC2(!) called ‘The Secret History of our Streets’ episode 1 last night (recorded) and it demonstrated quite clearly that both politicians and bureaucrats are very capable of doing huge damage to the urban landscape and communities whilst attempting to engineer a modernist Utopia. Politians should not be let off the hook for decisions taken by bureaucrats under their authority since, as this programme demonstrated, decisions may be taken even when requiring fraud to implement: the EU, anyone?
June 13, 2012
Agreed, an excellent and revealing programme about the failure of an over-weening bureaucracy and the destruction of a close knit community in Deptford. The comment of a former councillor expressing surprise and disappointment that residents, forcibly removed from their homes, were not “grateful” for their new tower blocks, told us all we need to know about busybodies determined to run other peoples lives for them.
June 13, 2012
forthurst
Yes an excellent programme which proved the people in power at the time, from Councils to politicians lied to the population.
German bombers could not destroy the area in 5 years, but the architects and councillors did it far quicker, they also broke the peoples spirits at the same time and created slums for the future.
Once again bigger meant better type of thinking.
June 13, 2012
I have never understood the shortsighted attitude to trade and business of focusing on the countries of Europe. Throughout my working life the companies I have worked for have supplied our UK home market and exported all around the world. The idea of limiting business opportunities to Europe would have been considered crazy.
June 13, 2012
I feel an overall reduction in our unit labour costs would help a concerted export drive. We need to be more competitive.
Tad Davison
Cambridge
June 13, 2012
So is this going to be accomplished by paying people less, having fewer employees, or by devaluing the pound?
June 13, 2012
As I say elsewhere, ‘A job’ is better than ‘No job’. We’re still paying ourselves over the odds. If country A makes an item for less than country B, country B loses out. It’s the way it is. Darwin as applied to business. Quite simple really. The EU keeps uncompetitive tendencies going. Take French farm subsidies.
June 14, 2012
Try reducing employers’ NI, which your beloved Labour government raised, and lowering the burden of public expnditure. Tax cuts can follow in due course. Note that public sectors workers are still paid more than private sector workers for all levels of employee education except degree holders. There is room for another year or two of a public sector pay freeze.
June 13, 2012
Your impact assumes that British goods and services are average. Some items are clearly better than average and will still be bought – the competition will take the hit in these cases.
What all should aware of is not talking ourselves out of markets in Eurozone. Overall we need extra sales and not a flip flop from one market to another.
June 13, 2012
We should be free to trade with anyone (within reason), in an unfettered way. As for quality, I’m into model engineering (amongst other things), and it is widely recognised that goods and accessories from China and the Indian sub-continent are of inferior quality.
On the other hand, I have been playing the guitar for over 40 years, and Chinese-made instruments are grnerally good.
Britain has to concentrate on those things we do best, and undercut the competition. We can’t do that, if we are bound by endless EU rules, a lot of which need to be modified if not scrapped altogether.
The lefties will moan and groan about that, buy they need to understand that ‘A job’ is far better than ‘No job’.
It can be done! Britain can be prosperous once more, but at the moment, it’s like swimming in a stormy sea whilst wearing handcuffs.
Tad
June 13, 2012
Certain goods in China and India are “inferior quality” because these countries have to make things that their people can afford to buy. Higher quality good are unlikely to sell well unless they can compete on price.
The problem with many jobs in the UK is that they’re worse than no job; mainly because you’re expected to work long hours for a pittance. This is why only immigrants work in some industries.
June 13, 2012
So what’s your solution then, for immigrant labour to take all the jobs and for the rest who don’t want to get their hands dirty, to sign on the sausage roll? Isn’t that a form of exploitation that lefties so vehemently object to?
June 14, 2012
Believe me, they worked for even less in their former countries. A colleague in Sri Lanka informed me that the majority of the population spend more than 50% of their income on food. Those can’t be very high incomes, can they.
June 13, 2012
I doubt we would ever see you working for a quid a hour Tad. Worthless job better than no job? For who? Your guitar is probably made by a skilled Chinese guy working for rice in a particular area of China. Tradesman in this country should do the same?
June 13, 2012
One of the problems of increasing trade elsewhere is that our products are too expensive, in large part due to all the EU rules and regulations which help push up the prices.
I am aware of one US company that 5 or so years ago was totally uncompetitive in a number of traditional British markets, but is now winning contracts, not because it has reduced costs, but because our prices have soared due to regulations and the need for our goods to meet EU standards, even if such standards aren’t required elsewhere.
I think we could do far better outside the EU, but only if our government would then roll back all the unnecessary EU regulation that did not originate here.
June 13, 2012
On the broader matter of the European ‘Union’ : I was amused to hear Jeremy Browne, M.P., Minister at the Foreign Office, extolling, in a Home-Service interview, the virtues of self-determination and saying how steadfast Mr. Heath’s government would be in defending it. To this end a plebiscite would be held in the Falkland Islands …
ΠΞ
June 13, 2012
Now that one made the hairs on the back of my neck stand on end!
My wife keeps telling me off for swearing, and that didn’t help!
Tad
June 13, 2012
The best thing for the people of the Eurozone and their future generations is the collapse of the Euro. As to the effect on us it is very reminiscent of Y2K which was bureaucracy and scaremongering of the first order.
June 13, 2012
I agree. The compensatory effect of being liberated, should well outweigh the present and imminent disadvantages of the EU and it’s impending implosion. If we left the EU, we could even have a bigger tax-take from all the extra goods we’d sell to celebrate the achievement, not to mention the street parties. It would be the re-birth of a nation!
Tad
June 13, 2012
Working for pennies is liberating?
June 13, 2012
You are right to emphasise the importance of exporting to non-EU markets. In answer to your question is ‘a lot, unless the Euro area behaves in a less insane manner’.
At the moment, insolvent Member States are lending money to prop us insolvent banks, who are then investing some of the limited money that they have in government bonds of the insolvent Member States. This is pure madness, a very specialised Ponzi scheme.
Germany cannot finance this nonsense; it doesn’t have enough money. Not even America could finance this nonsense; it doesn’t have enough money.
Let failed banks fail, keep private debts private, acknowledge that it is impossible to give 100% protection to depositors and that it is very silly to try.
June 13, 2012
Linsay, I read yesyerday that Italy is on the hook for 17% of Spanish debt! This nonsense just gets worse!
Tad
June 13, 2012
tad
I wonder what contribution Greece and Ireland are making to Spains bailout as well.
Come to think of it, you may also find that Spain has to contribuite to its own bailout.
I think thats how it works.
June 14, 2012
As I wrote, a special form of Ponzi scheme.
June 13, 2012
You did not consider the effect on imports from the EU. It is likely that the pound would rise against the Euro, making imports cheaper and in doing so reducing the amount produced in the UK for home comsumption.
We need to see the government doing at lot more to encourage import replacement. There are many simple examples:
It is stupid that dairy farms are closing down while we are increasingly importing milk and dairy products.
We import fish from the continent while our own fishermen are increasingly banned from their traditional waters.
Our supermarkets buy and package goods from the continent thatcould equally be handled in the UK. For example most of the jam on their shelves is produced and put into jars in Belgium or some where similar. The fruit used will have been imported to Belgium from elsewhere
June 13, 2012
Exactly, hence my earlier point about driving unit labour costs down.
Tad
June 13, 2012
So do you want people to be paid less money or fewer people to have a job?
June 13, 2012
I’s called the going rate. That is governed by the price to the consumer. If the consumer thinks it’s too high, they won’t buy it. That seems pretty simple to me. As with BL in the 1970s, what the hell is the point of building cars that nobody wants? I actually want as many people as possible to be employed, not a burden on the state. That burden can be both in the form of welfare payments, or in state tax-payer funded subsidies. Labour’s model of state control of industry that took us to the brink of disaster. The EU isn’t that much different. See my earlier reply.
June 14, 2012
Labour costs can be brought down with actions like reducing employers NI contributions. If implemented sensibly this could ctually be cost effective without having to find a replacement source of revenue.
June 13, 2012
Agree .
Why do we honour retail magnates with Knighthoods for pushing all these imported goods too ?
We need to have money circulating in our own economy , not going straight overseas or straight back to the banks and govt .
The glamour of exports over substitution of imports reminds me of companies which spend a fortune trying to recruit new customers and in comparison a pittance on retaining existing customers .
June 13, 2012
Perhaps we should peg the pound to the euro. Then we won’t need to worry about the strength of the pound against the euro.
June 13, 2012
Another ERM you mean? George Soros will be pleased!
June 14, 2012
Like strapping yourself to the Titanic.
June 13, 2012
Surely a major reduction in red tape is necessary to hasten an even greater reduction in the number of civil servants and headcount costs.
Then a transfer from the public to the private sector of a good portion of these savings in the form of reduced corporation tax and other measures to reduce production costs.
A review of the CAGW science by normal scientists [not the post normal variety occupying the Royal Society] could reverse the trend to ever costlier energy once it becomes clear that all parties have been backing the wrong horse for 20 years.
On reflection there is about as much chance of that happening as the EC declaring that the Euro has been a disaster for many countries.
June 13, 2012
Quote “There is also considerable scope to replace imports with home manufactures and services. That too could offset any loss of output from Euroland contraction. ”
Good Point .
John , could you perhaps put together a mini-series on this subject please ?
A number of us would appreciate your insight as to why this has not happened and why the UK seems content to import everything .
June 13, 2012
good old Uncle Ted and successive governments, turning our back on the commonwealth for Europe …..
June 13, 2012
The problem with the euro has been around for a long time. Surely Government and private sector should have been moving their activities to place more emphasis on the emerging market long ago.
June 13, 2012
Yes but the UK will have to go down the same internal devaluation route that the Germans took. In the entitlement culture that now prevails that appears most unlikely to happen added to which the prevailing high taxes, draconian regulations and insane energy policies all mitigate against achieving the required competitiveness needed.
June 13, 2012
I repeat my plea for a detailed analysis of our exports in goods to the EU, after eliminating the entrepot trade identified by JR (containers via Rotterdam, air freight via Frankfurt etc). The more I look at them the less their importance to the UK economy. Major items – e.g. Scotch to Germany, Airbus wings for re-export outside EU in complete aircraft, rough diamonds via Antwerp on their way to India for cutting and polishing; there is not much that seems to depend on the ordinary consumer in the recession countries (except Nissan Micras, but they’re small and cheap so people still buy them).
I used to be a director of a British engineering manufacturing company – medium tech industrial products. Today I asked a former colleague how things were going: just won Queen’s Award for Exports for the second time in four years; EU? Sales to Spain going well, Italy pretty good, Germany OK but strong competitive pressure from German manufacturer, smaller Central European markets fine. And their sales operations in USA and China continuing excellent growth.
June 13, 2012
Meanwhile His Imperial Wizard Von Rompuy can come up with a plan to save the Euro which does not involve Germany picking up the tab or altering longstanding bad practices in S. Europe. Perhaps SamCam could dispatch Merlin?
June 13, 2012
The UK’s exports of goods to the rest of the EU is a little under 10% of our total output.
Total output = domestic consumption + exports
Exports of goods = 53% to the EU, 47% to the rest of the world.
If exports to the EU are under 10% of total output, and exports to the EU and the rest of the world are similar than the following is true:
Domestic consumption >= 80%
Exports to the EU <= 10%
Exports to the rest of the world <= 10%
May be it would be better to consume more of what we produce than try to export more.
June 14, 2012
Of that 53%, about a quarter is re-exported through Europort to the wider world. The oft stated figures involving Europe are frequently exagerated by the Eu enthusiasts.
Getting any cost benefit analysis on being in Europe is frustrated by the politicians because they don’t want us to know what a lowsy deal we get.
June 14, 2012
Do you have any evidence that a quarter is re-exported outside the EU?
June 14, 2012
This is what we’re up against folks!
Tad
June 13, 2012
growing markets? what like China and India? do me a favour our leaders are completely outclassed by their equivalents in the Chinese and Indian leadership who are ruthlessly exploiting our naive approach
learn from the Germans in this regard
the only way we will increase our exports is by playing to our strengths! intellectual property intensive industries where we can lead the way but we need much better protection of our national IP. producing the highest quality not necessarily the cheapest price and competing at the high quality end of the spectrum is our only chance of success, but again we need to protect the ways we produce tha higher quality much more. ALL markets growing and stagnant will buy the best or cheapest what they wont buy is expensive but average which is where the social manipulation of our political class has led us…
June 13, 2012
John, Look at this to see how the LDs are in major decline.
Latest YouGov/The Sun results 13th June
LAB 43%,
CON 31%,
LD 9%,
UKIP 9%;
June 14, 2012
BobE
What is more worrying is that 43% prefer Labour !!!!!!
June 14, 2012
They’ve got short memories Bob!
Choosing political suicide as a remedy for political suicide. As I see it, the Tories still realistically stand a better chance of beating Labour than UKIP, although I have a greater affinity with the latter. It’s just that the Tories have been very underhanded in taking us towards a federal Europe, and people don’t trust them.
I blame the Toadies in the Tory party who bend with the prevailing wind. If the Tories had a TRUE Euro-sceptic leader, as opposed to one who merely claims to be one, that would change the prevailing wind in our favour, and the weak Toadies would tag along.
That’s it in a nutshell, so perhaps there ought to be a new leader in place before the next election, or the battle will be lost. This is as crucial a time in this nation’s long history, as Waterloo, Trafalgar, or indeed the Battle of Britain. Step forward a Churchill, because we’ve had enough of Chamberlains and Lord Halifaxes!
Tad Davison
Cambridge
June 14, 2012
None. If we trade with the commonwealth (if they will have us back after we broke all our agreements with them when we chose the EU as our master!)
The BRIC countries are growing at 5% pa – Brazil, Russia, India, China. Africa has massive potential that China is exploiting as we miss out. All the growth is there, and Britain has a great proposition, we just need to forget about the EU, which is doomed by Socialism, Communism, backhanders and corruption.
June 14, 2012
One more crucial point, John, is that we run a trade DEFICIT with Europe, as we buy more BMW / Merc / Porsche etc. than they buy beef / lamb / financial services. However, we run a trade surplus with the rest of the world.
Therefore, logically, if we totally cut trade with Europe by 100%, we will be financially far better off. Not that it will ever happen, why would Germany be unwilling to sell a BMW to a British buyer, post – EU?
June 16, 2012
What you could see is British industry being penalised causing the likes of Nissan, Honda and Landrover to name but a few to leave Britain and take their work where a large number of cars are sold. Europe. They are obviously here because of cheap labour and lack of taxation and regulations. Not the workforce as the educational system here is of course laughable. Thought of that one?
A silly fantasy of Britain standing alone selling products to an eager world unhindered by minimum wage laws and regulations such as health and safety and employment laws. Bolstered by an unregulated housing sector allowing workers to freely move around the country. Like wandering minstrels? Ram it.