The choice before us is not leaving with or without a deal. The choice is simple. We either leave without signing the Withdrawal Agreement or we stay in for an indeterminate transition period with no agreement on what we are trying to transit to.

Were we to sign a version of the misnamed Withdrawal Agreement we stay in for 21 to 45 months more under full EU legal control and making large payments to them. This time is available to try and negotiate an exit. Who can doubt throughout such a time Remain would be urging more delay in exit? And why should the EU rush to offer us good terms for exit when they had secured everything they wanted in the deliciously misnamed Withdrawal Treaty? They would have the UK’s money and compliance without facing our voice, vote and veto as they develop their centralising plans further.

What Mrs May and her officials probably had in mind for the eventual Future Partnership Treaty was a beefed up EU Turkey or EU Ukraine Association Agreement, locking us in in Perpetuity to many of the features of the EU we wanted to leave. Mr Johnson has made clear he just wants a Free Trade Agreement, which is greatly preferable. In which case the best course is to short cut these things and find out now if the EU will sit down and negotiate one or not. Either way we can then leave on 31October.

The PM has done well to get the EU to talk. He must now ask for enough change to honour the referendum result.

As the world manufacturing downturn intensifies the Fed has joined the Bank of Japan and the European central Bank in trying to ease the situation. The Fed has decided to create money and expand its balance sheet to ease the obvious shortage of cash in the short term lending markets between banks. This is welcome and necessary.

All the main Central Banks of the world with the exception of the Bank of England are now taking belated action to ease, to try to turn round the manufacturing slowdown created by past policy tightness , by other tax and regulatory policies targeting vehicle manufacture in particular, and the impact of new and additional tariffs.  I must ask again why is the Bank of England standing out against this trend? Who doesn’t it share the analysis and conclusions of other Central Banks?

The Bank of Japan is creating as much money as it takes to buy in government bonds to keep interest rates at zero for 10 year money, and negative rates  for shorter terms. The ECB is keeping the official short rate at zero, with negative rates for many government bonds for longer terms. To do so it is now buying in Euro 20bn a month of bonds. The Fed is putting $75bn overnight into money markets to keep the repo or short interbank rate down in line with official rates. The official rate has been cut twice recently and is probably about to be cut again.

Central banks in India, Turkey, Brazil, Australia, New Zealand and elsewhere have been cutting official rates. All this is seeking to offset the negative impacts of higher taxes, tariffs and tighter lending conditions. So far the actions have not turned the corner for manufacturing, though they have prevented a even faster and deeper slump.

As highlighted here before, the UK not only refuses to join in  with a general  move to assist manufacturing, but the authorities are considering a further restriction on car loans which lies at the heart of part of the problem of insufficient demand for new vehicles.  The latest GDP figures which suggest there will be no recession in the second and third quarters of the year continue to show a very weak vehicle manufacturing sector for the reasons forecast here.

The Bank’s new £20 note shows  the  great Turner painting of the Temeraire on the back. It’s a curious choice for an institution so concerned about our relations with the EU.

Part of the problem facing the world economy and assisting the global manufacturing recession is the outbreak of tariff and trade wars.

The largest is in the headlines regularly as China and the USA battle out a new basis for trade between them. There are others. There is the South Korea/Japan trade war over historic conflicts and grievances. There is the interruption to trade created in Kashmir by the clash between Pakistan and India. There are the tariffs the US has imposed on the EU following the adverse finding over Airbus subsidies. There is the US attempt to get Iran to change her approach to Middle Eastern politics by imposing a wide range of sanctions on trade with Iran, and now seeking to prevent payments for exports to Iran through the western banking system.

None of these is helpful to world growth, jobs and output. Many of them individually are not significant in their impact on the world economy, but cumulatively they are now having a measurable impact. More importantly they are also damaging confidence, which leads to cancelled investment programmes, less demand and a further slowdown in economic activity.

The US has escalated its dispute with China to include criticisms of China’s approach to the Hong Kong protests, and to encompass bans on the sale of US items to Chinese technology firms . The US is critical of China’s approach to intellectual property and concerned about the potential use of certain technologies for strategic and political purposes.

The UK’s recent tweaking of its proposed tariff schedule for post Brexit trade is a welcome example of an attempt to go the other way. Tariffs will be removed from certain items altogether, so 88% of our trade is tariff free once out of the EU. Economic analysis suggests removing all tariffs would boost consumers more and would benefit the economy over all but would come at a potentially high cost to sectors at risk, mainly in agriculture.

The government has sought to find a balance,. offering some tariff protection to UK farmers but otherwise opting for a freer system. IT is a pity the world as a whole cannot move on from this period of tariff wars, which are adding more downward pressures on growth to the monetary policy and economic policy mistakes of the major players .

Germany yesterday we are told asserted herself again as the leader of the EU. In a few harsh words Mrs Merkel effectively said to Mr Johnson he was wasting his time and the time and energy of the UK government in seeking changes to the Irish backstop. As far as she was concerned the EU needed the full backstop, customs union and single market alignment.

I doubt Mrs Merkel had phoned round the other 25 member states and checked their view on this. She does regularly clear things with France. I do not think she was formally speaking for the EU, which has entrusted this to their Negotiator in chief. I do think once again she revealed how the modern EU works. Germany is the leader, and Germany feels she can say these things, safe in the knowledge the others will accept them. There was no sudden outpouring of disagreement or protest at her reported words, nor any official denial.

As someone who thought simply renegotiating the backstop was insufficient given the nature of the rest of the Withdrawal Agreement, it serves to underline just how committed to this draft Treaty the EU is that they will not even countenance changes to one of its worst features. It does not augur well for future talks or imply with some more give and take there might be an agreement. Mrs Merkel has condemned a modest UK proposal to deal with one of the bad features of the Agreement without offering anything back and without implying she is willing to compromise on anything else.

Yesterday the government confirmed it will be leaving the EU on October 31st, deal or no deal. It looks as if the EU wants a no deal result or think they can find a way to stop Brexit altogether. Such is the damage to the UK’s negotiating position the Parliamentary opposition to Brexit has now done.

I read in the weekend press there are new fears about the volume and size of car loans or lease arrangements for new vehicles. There are concerns about “mis selling” and efforts to dampen down the current volume of these advances.

Of course people should not be pressured into taking  out a loan that is too big for them and could end in  tears. That is why there are cooling off periods, procedures to explain the terms, and a general duty on regulated personnel to sell responsibly.

There are two important  risks in car loans that need managing. One is the risk that the person taking it out is unable to continue to meet the payments. Proper assessment of a person’s income and prospects should keep this risk down a small proportion of the total, occurring when someone unexpectedly loses their job, has a serious accident or some other life changing event. Were the authorities to induce a job destroying recession as in 2008-9 then there is more risk of this happening.

The second is the risk to the lending institution if the second hand value of the car handed back when someone can no longer meet the payments is below the amount of the debt outstanding. This can be managed by requiring a sensible level of initial payment or deposit and of subsequent payments, so the lending institution experiences little or no capital loss were the borrower to default.

It is difficult to see that there is a major systemic problem over car loans in  the way some suggest, short of the authorities triggering a large general downturn which would hit second hand car prices and cost many people with car loans their jobs. As surely it is the purpose of monetary and fiscal policy to avoid such an eventuality attention should be more directed to that.

As I have forecast for some time, various policies have greatly slowed car sales and led to a big fall in especially in diesel sales. Given the high propensity of UK car buyers to import this is particularly a problem for the German car industry that has sold a lot of cars into the UK and is now in recession. It also has an impact on our domestic industry. Allowing people to renew their vehicles from time to time and choose cars they like is not some kind of crime, and does require a common sense approach to car lending.

I point out that I have no financial interests myself in car lending. I own just one  car bought with savings out of income.

The Prime Minister has made an offer to the EU to get talks started to allow us to leave with their blessing on October 31. The EU has responded in their time honoured way by rubbishing any feature of the proposal that is better for the UK than the unacceptable Withdrawal Agreement which perished in Parliament and got under 9% support in the  last European elections. It is most important now that the UK does not do what it always did under Mrs May and make further concessions. The EU has found it all too easy to refuse to budge and watch as the UK negotiates with itself and against itself.

I voted for Boris Johnson as leader because he promised to take us out by 31 October, and he confirmed the Withdrawal Agreement was dead. He must learn from the bitter experiences of Mr Cameron and Mrs May that the EU does usually overplay its hand and radicalises many UK voters against it by its conduct.

Mr Cameron asked for too little in his attempted renegotiation and was offered even less as a result. That led directly to the referendum defeat, as he did not even secure the return of UK control over benefits when we had often be assured by UK governments that social security remained under our control.

Mrs May always refused to dig in or to cease making concessions. Every tine the EU dug in she gave more ground. The result was a disastrous Withdrawal Treaty which united Leave and Remain in opposition to it.

The present PM needs to tell the EU that his Irish border proposals to get talks going are neither an invitation to assume the text of the rest of the Withdrawal treaty is fine, nor an invitation to get rid of all the best bits of the border fix from the UK point of view in subsequent one sided compromises.. The press when the PM launched the ideas said it was take it or leave it. To change that approach now would be seen as weakness in Brussels.

The best way forward now is to offer a Free Trade Agreement and no Withdrawal Agreement.

It was thoughtless of the Dutch to arrive in our waters with their huge factory ship the Margiris so close to the PM’s leaving date from the EU, as if to hoover up as much of our fish as possible before we leave.

This vessel can catch and process 250 tonnes a day. It was barred from Australia owing to its size and possible impact on their fishing ground. The ship and its nets are designed, we are told, to target pelagic species. The ship is guided by radar to the shoals, and we are assured the nets do not scrape the bottom damaging the sea bed. We are also told this vessel was fishing entirely legally under the rules of the EU’s Common Fishery Policy.

Other large factory ships with nets that do drag the bottom can do grave damage to the sea bed and the marine environment. These vessels can catch a lot of fish very quickly and may sometimes catch species of fish in low supply which we want to be left to allow recovery of stocks.

The practice of dragging heavy and strong nets across the sea, especially if close to the sea bed, can drag up many species you do not want to catch at the same time as the ones you wish to attract. If the net size is too small it can catch and kill young fish. The net can damage the sea bed and general environment if lowered too far.

Once we have left the EU we will be able to set our own standards for net size, size of vessel, and impact of fishing style on the marine environment. It is another great argument for just leaving on 31 October and for  not making our fish any part of continuing negotiations over our future trade relationship. Mrs May’s unpopular Withdrawal Agreement left our fish at risk.

 

The World Trade Organisation is body designed to lower tariffs and enforce the common global rules on trade to the benefit of consumers. It is a blow when after long and careful deliberation and investigation it feels it has to make a judgement which entails another country imposing tariffs on a trading counterparty.  That is what happened this week thanks to the behaviour of Airbus and the EU.

The WTO found that Airbus had received  subsidies that broke the rules of fair trade, which in turn had cost Boeing sales of planes. They therefore have allowed the USA to impose tariffs on goods up to a value of $7.5bn which reflects their calculation of the amount of sales damage done to the US company. The USA has decided to impose a 10% tariff on Airbus planes, which will hit future sales. The UK makes the wings for these products.

The USA has also chosen some high profile food and drink products from EU countries for a 25% tariff. This  includes Scotch whisky, which is particularly unwelcome.  It is a reminder that the EU which makes us impose high tariffs on food and drink from non EU parts of the world can through its wider policies end up costing us exports in these same areas as countries impose retaliatory tariffs.

None of this is helpful at a time of manufacturing downturn. There is already an intense tariff based trade spat between the USA and China. The refusal of the EU to lower its high 10% tariff against non EU cars is also a continuing sore with the USA which charges only one quarter of that level on EU cars. The danger is this WTO judgement will take us closer to a broad based trade war between the USA and the EU, just as we have seen develop with the USA and China.

The three features I like most about the UK proposals are

1. The whole UK leaves the Customs Union
2. Great Britain  leaves the single market
3. Northern Ireland leaves the single market unless Stormont meets to vote to stay in

This is in accord with what both sides said in the referendum, that leaving the EU means leaving the single market and customs union at the same time.

It turns out these are the three key features of the proposals which the EU dislikes and  now wishes to remove or water down.

The Prime  Minister was right to say this offer represented still  more UK concessions on other things and they should not expect  more concessions . I  recommend stressing the free trade offer within the letter, which could change the nature of the discussions, given the problems with the draft Withdrawal Agreement and costly and cumbersome so called transition period. .

The latest figures from German industry point to a continuing recession, with substantial falls in orders from the peaks last year. The US is still stronger, but even there the forward indicators are now in negative territory suggesting a downturn. As forecast here we are living through a nasty world manufacturing downturn.

I do find it bizarre that a few people write to tell me the UK share index has gone down this week owing to Brexit, when all the world share markets are flashing red over global events led by EU manufacturing figures.

What can the authorities do about it?

The first thing they need to do is to review their policies towards the vehicle market. There is a gap between what the governments want people to buy and what they are prepared to buy. The big transition from diesel and petrol to electric is proving difficult to achieve at the pace the governments want, leading to a shortfall in demand. As the governments want to intervene extensively  in  this market they need to help the industry adjust.

The second thing is to examine other areas where demand is falling short or capacity is too extensive and see if government itself can speed transition to new products or can stimulate demand for things that are still needed and valued.

General demand for industrial products is affected by numbers in employment, by levels of income, and the impact of taxation. India is now joining the USA with a large reduction in company taxation to act as a stimulus to investment and activity. China has introduced some tax cuts to boost consumer demand. The US and UK have good recent records at increasing employment and real incomes, which should help.

Some believe further monetary activism could assist. Clearly if home loans, car loans and other consumer credit is readily available to those who can afford it, at low interest rates, it should help demand. The US car market looks as if it is improving following interest rate cuts. However, in the Eurozone and Japan official rates are already at or below zero so there are limits to how much monetary action can achieve. The UK does have a severe monetary squeeze which is helping slow our economy.

Those who write in saying we should not borrow more should remember that borrowing is an important part of an enterprise economy. Of course it should not be taken to excess, and lenders need to satisfy themselves that practically all of their borrowers will be able to repay. There is everything to recommend a business borrowing to expand where there is a profitable market to serve. There is nothing wrong with an individual borrowing to buy a home or a decent car if they have reasonable prospects of continuing employment with future pay rises.

The manufacturing fall probably means Germany is  now in overall recession, given the salience of manufacture and the car industry to her economy. China is still growing, but as the world’s major manufacturer it too has been slowed by recent trends.