Theresa May Tries to Pass Off Handwaves as Meaningful Planning in Case of Disorderly Brexit

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Preppers should find that they will have a great business opportunity in the UK once the great unwashed citizenry realizes how utterly unprepared the UK is for a disorderly Brexit. That outcome that looks more likely with every passing day.

The latest proof comes via two papers released by the Government that describe how the UK plans to handle trade in the event that Brexit talks fail. They apparently have the joint aim of reassuring businesses and the public and strengthening the UK’s negotiating position with the EU.

To any discerning reader, these documents are a monster own goal. They demonstrate how the officialdom hasn’t even begun to grapple with the enormous operational challenges that Brexit presents. The papers are so threadbare in terms of their discussion of “rubber hits the road” issues like what will happen at borders generally and with the Irish border specifically that they fall short of even qualifying as plans to come up with a plan. Those would at least would define issues to be tackled with deadlines, allocation of work, staffing levels, and clear end products.

If I were a businessman in the UK whose business had any meaningful exposure to imports and exports, I’d be hitting the panic button.

And EU officials may be getting a form of double vision. On the one hand, the spectacle of the Brits unable to get past the analysis paralysis stage will only reconfirm that they have the upper hand and can hold firm to the positions they have already staked out. On the other hand, they have to be getting even more frustrated with dealing with the UK’s bizarre combination of arrogance and gross ineptitude.

Normally, a performance this pathetic would lead third parties to want to help such an incapable counterparty, or at least not rough them up too much. But UK has acted for years as if it didn’t need friends in the EU and has only doubled down on its high-handedness since the Brexit vote. Lack of preparation, bad faith, inability to settle on a strategy, and continued outright delusion are enormously trying to deal with. The EU was likely annoyed with the UK wanting to negotiate only one week out of a month because that was obviously far too little time to resolve the dense thicket of Brexit issues. They now are probably relieved, since they probably need that much recovery time to be able to keep their cool.

Normally, I’d make at an effort to give the two documents a careful reading, particularly since neither one is very long. But both are such obvious handwaves that they aren’t worth any more than a quick look.

It’s obvious even on a mere flip through that they natter on about principles or presen data that might have a place in a much longer treatise but isn’t on point for the task at hand, figuring out how to handle the movement of goods if the UK has no exit deal as of March 2019. In keeping, it sketches the types of things a Customs Bill ought to include, as opposed to making recommendations or offering alternatives.

For those who are brave enough to have a look, it’s not hard to see that the first paper, Preparing for our future UK trade policy, is hot air with a few charts to give it an air of substance. The Twitterati could barely be bothered to discuss it:

There admittedly are a few tidbits but not many. Section 3.2 might rile Scotland, since it reads like a plan to abrogate devolved powers:

As parts of these agreements will touch on devolved matters, legislation will create powers for devolved administrations to implement them. These powers will be held concurrently by the devolved administrations and the UK government.

…..but I was relieved to see I wasn’t the only one scratching my head about that section:

The Customs paper at least occasionally skimmed the surface of border issues. But all you needed to do was encounter pablum like “government is committed to developing solutions” in the “no deal” scenario to know the officialdom has barely started to think things through.

And as we’ve pointed out repeatedly, trade isn’t managed with clerks and green ledger paper any more. IT systems are the core of customs operations. The UK would have had to have had detailed specs completed months ago to have a thin hope of being ready by March 2019. There is no evidence here that the Government has begun to think though what goods might go through what channels and how.

Anyone who has even a dim appreciation of the systems requirements can see that the grand idea presented below couldn’t possibly be in place for years, given large IT system lead times (and that’s before you get to their high failure rates):

5.16 One potential approach the UK intends to explore further with the EU would involve the UK acting in partnership with the EU to operate a regime for imports that aligns precisely with the EU’s external customs border, for goods that will be consumed in the EU market, even if they are part of a supply chain in the UK first. The UK would need to apply the same tariffs as the EU, and provide the same treatment for rules of origin for those goods arriving in the UK and destined for the EU.

5.17 By mirroring the EU’s customs approach at its external border, the UK could ensure that all goods entering the EU via the UK have paid the correct EU duties. This would remove the need for the UK and the EU to introduce customs processes between them, so that goods moving between the UK and the EU would be treated as they are now for customs purposes. The UK would also be able to apply its own tariffs and trade policy to UK exports and imports from other countries destined for the UK market, in line with the aspiration for an independent trade policy.

Folks, a mirror system is still a new system, and one that has to handle vastly more goods than now, since EU goods going into the UK and UK goods going to the rest of the EU aren’t subject to customs or tariffs. Now admittedly, this is only one of several ideas, but that actually makes matters worse. The fact that UK bureaucrats haven’t the foggiest idea what path they might wind up taking means that they can’t get going on any action plan. And the the fact that this “mirror system” scheme it tossed out as if it were easy-peasy should set off alarm bells.

And more generally, the handling of goods at the border can’t be finessed for a whole host of reasons. For starters, any imports that will be incorporated into products for export have to have their content documented properly. Lord only knows what sorts of contraband, defective or adulterated goods or illicit money-movement via invoicing games could take place with slipshod border controls.

The section on the Irish border illustrates how insanely unrealistic the Customs napkin-doodle is:

5.22 In line with these shared objectives, the UK has already published a Northern Ireland and Ireland Position Paper. The paper set out nine key principles on which to base a future customs solution. These include aiming to avoid any physical border infrastructure; preventing any new barriers to doing business within the UK, including between Northern Ireland and Great Britain; and agreeing at an early stage a time-limited interim implementation period. Based on these principles, and in recognition of the unique circumstances of the Northern Ireland-Ireland land border, the UK government proposes two creative solutions to explore with the EU, as outlined in the Future Partnership Paper. The Northern Ireland and Ireland Position Paper also sets out that the UK will seek to ensure that individuals travelling to the UK from the EU, and vice versa, can continue to travel with goods for personal use as freely and as smoothly as they do now.

5.23 Under the highly streamlined customs arrangement, the UK believes it would need to go still further to agree specific facilitations for the Northern Ireland-Ireland land border. A cross- border trade exemption acknowledges that many of the movements of goods across the land border are by smaller traders operating in a local economy, and they cannot be properly categorised or treated as economically significant international trade. The cross-border trade exemption would ensure that smaller traders could continue to move goods with no new requirements in relation to customs processes at the land border. In 2015, over 80% of north to south trade was carried out by micro, small and medium-sized businesses.

Did you get what happened in these two paragraphs? This is “assume a can opener.” The text breezily acts as if there will be a “highly streamlined customs arrangement” when no one has the foggiest idea how to have that happen in the face of a hard border between the two Irelands.

And the excuse? “Well, there isn’t that much trading happening across that border now, so this isn’t a big deal.” This completely ignores the issue that the EU finds unacceptable: a porous border between Northern Ireland and Ireland post-Brexit will become a gateway for all sorts of goods and foodstuffs that don’t comply with EU rules to get into the single market. The current trickle now is likely to become a flood.

And mind you, this is under the optimistic scenario, that the two sides work out some sort of transition period. The next section, on “Preparing for a contingency scenario” is just clueless. For instance:

5.35 In this scenario [roll on, roll off ports], the government would need to be able to confirm that businesses have complied with customs obligations. The government will work closely with industry on what would be required.

Yet another “assume a can opener”….

And on top of that, the UK has vastly more “trade” in the form of services than goods. Both papers are silent on this critical topic. Even worse, as any trade negotiator will tell you, trade deals are much easier to negotiate than services deals. So you can kiss the UK’s current account balance, and with it, the pound, goodbye.

Even with the thin details, the Government couldn’t hide the fact that life after Brexit, particulary a messy Brexit, would impose more costs on businesses…contrary to earlier promises of a Glorious Brexit. From the Guardian:

Crashing out of the EU without a deal will impose a raft of new regulations on business, according to the government’s first detailed contingency planning for Brexit…

Despite pre-referendum promises that Brexit would rid Britain of both excessive red tape and bureaucrats, Theresa May said the new proposals were necessary to “minimise disruption” in the event of talks collapsing.

Among the hardest hit in such a scenario would be exporters and importers who trade between the UK and EU but potentially face more complicated consequences than anticipated if new border tariffs are introduced.

The Guardian also pointed out, as did quite a few tweets, that the papers had typos and the Customs paper, a duplicate paragraph. You also had to get halfway into the piece to learn “Most of the methods of mitigating border chaos remain to be formulated however.”

Sadly, the Financial Times treated the two documents with far more respect than they deserved. For instance:

The customs paper sets out a contingency plan in which traders would need to present goods for inspection “as inland as possible” because of space constraints at the majority of ports.

It added that the UK could also manage a “no deal” scenario by introducing measures to replace border checks, such as businesses “pre-notifying” or “self-assessing” imports.

In other words, an honor system. Help me. But some snippets of reality sneaked through:

But British officials admit contingency planning is at an early stage and that the government has not started spending the large sums of money on staff, IT systems and real estate needed to build a new customs and regulatory system by March 2019…

Some rightwing Conservative Eurosceptics are sanguine about Britain leaving the EU without a deal, since it would mark a decisive break from the bloc’s regulatory system and force Britain to change its economic model to compete globally.

But it would require the creation of a new British bureaucracy to replace EU regulatory bodies and a vastly increased customs service and is seen in some European capitals as an empty threat.

“Far from having more for public services, Brexit Britain will have to spend tens of billions it doesn’t have on new quangos — brilliant,” tweeted James Chapman, former chief of staff to Brexit secretary David Davis.

British bureaucrats were once the envy of the world. To see what passes for leadership in the UK exposed as utterly unfit has to be a shocker even for hardened critics in Europe.

This is one of the costs of neoliberalism, particularly for early and enthusiastic adopters like the UK and US. Competent governments are valuable things to have around, particularly when you put yourself in the position of needing one badly.

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  1. Watt4Bob

    Competent governments are valuable things to have around, particularly when you put yourself in the position of needing one badly.

    So eventually, Grover Norquist, and the Koch brothers are going to be standing around the bathtub, possibly in the dark, or with the house on fire, arguing about who’s gonna do the CPR thing.

    I’m so embarrassed for them.

  2. Andy Blatchford

    “trade isn’t managed with clerks and green ledger paper any more”

    Sorry but this isn’t quite correct. the only difference between green ledger paper to now is that it is entry clerks (freight forwarders mostly) entering the data into the systems. I have just finished a 55 line (55 different tariff headings) export entry which took me nearly an hour by the time I had to go through possible export licence headings and check they didn’t need one.

    1. Yves Smith Post author

      Huh? I started out on Wall Street before the era of PCs. I did financial analysis on green ledger with a calculator and found and copied entries from hard copy 10-Ks, 10-Qs, and other documents. That included ordering them from the library and having the in-house messengers bring them to my desk before I could get started.

      Oh, and then people like me had to take the number in those spreadsheets, prepare hand-written drafts that laid out the various headings and data and then have secretaries type them up. Meaning on typewriters. Then we had to proofread and have them make corrections (with white out if minor, a redo if more significant).

      And on Wall Street, they fetishized consistency as well as computational accuracy, so if you goofed and had headers in all caps on one page of a presentation and forgot and did them in initial caps only on the next, you’d have to fix that if you weren’t lucky enough to have the secretary catch it for you (and since we almost always had a lot of the work done at night with temps, you were often stuck with the consequences of inattention, in terms of how long it took you to finally get done).

      And you are seriously trying to pretend that IT systems don’t amount to a revolutionary change in the world of business and finance? And that managing trade via paper systems would be a nightmare?

      I also did a major study for Citibank in the early 1980 on their international trade systems (documentary and financial letters of credit) which were still heavily paper based, so please don’t try telling me I don’t know that terrain directly. I can tell you what a nightmare it was to process documentary letters of credit even when all the required paperwork was in order.

      If you think the work you do personally via data entry you do compares remotely to the amount of labor involved in handling trade with entirely paper based systems, you are smoking something very strong. The dirty secret of customs is it is tedious and difficult. The idea that IT systems don’t make things a lot less time consuming is absurd.

      1. Andy Blatchford

        As I have been doing customs entries for over 30 years I think I do have some idea :)

        Of course they make things easier I didn’t say otherwise, quicker keying in than hand writing on paper forms definitely and I do go back far enough for those, but I read that as there were no clerks doing it anymore (apologies if that wasn’t your intention). Most of the time consuming stuff is taken up with classifying goods, procedure codes (there are a lot of those and your entry requirements reflect those codes) sorting values (it isn’t just the value that is on the invoice) licencing requirements etc etc.

        Still get a few letters of credit funnily enough, nothing like we used to though thankfully.

        1. Clive

          You are apparently confusing the needs of small scale import-exporters and large scale ones. And as you’re obviously familiar with freight forwarders, you must be aware that these businesses simply cannot operate without a high degree of process automation? Literally, without systems to handle the back-office, you don’t have a remotely viable business model. Not only is the entire system dependent on IT supported transaction processing (in anything over and above a few hundred orders a month) but there would simply be insufficient trained labour to revert to a pre-IT method of managing the requirements of imports/exports.

          If you say they “make things easier” this not the correct evaluation of what IT systems role is. It isn’t a case of adding a little bit at the periphery in terms of efficiency. You must be aware of ICS (Import Control System) surely ? Even my TBTF is a registered gateway user (and that’s a bank, for goodness’ sake) because certain account goods (credit cards in white plastic, embossing, card carriers) need to be shipped out and brought back in house again or handed off from one supplier to another but the TBTF owns the consignment even though it never actually ends up at our premises.

          ICS updates to take into account whatever the post-Brexit requirements are is a *huge* deal. A massive undertaking. We’ll need baselined specifications, validated Use Cases, the delivery of the changes themselves, technical / system testing, User testing, roll outs… That — alone — will be one of the biggest and most complex IT projects to come down the tracks in years. Are you seriously implying that it can all be just left for another day or that ICS won’t need to be made Brexit-compatible and system users can come up with their own paper-based solution(s) ?

          It’s thinking like that which is getting the UK into the grizzly situation which it’s heading into. If David Davis is surrounding himself with people who spout this sort of wishful thinking disguising itself as “being optimistic”, that would explain a lot.

          1. Andy Blatchford

            I am afraid you are still missing what I am saying If you look at my original comment I said that wasn’t “quite” correct, I didn’t say it was wrong I was making the point that . Customs entries even with automation are still labour intensive in the preparation work. It was reading as if Clerks have no input and I said sorry to Yves if I had misunderstood her intention.

            The data that needs to be entered on the same form (a C88 but the data needed is different with which CPC you use (see my reply Quanka to a link and run through them and see the differences) so can only be automated a certain amount with mostly base information, EORI’s that sort of thing, AEO numbers, Procedure codes, HS codes, Values, additional info statements, licences etc (its a long list) have to be entered manually.

            I am not blind to what is going to be needed WRT IT systems. I don’t think the new system will be ready and we will be relying on CHIEF, good luck with that as it wont be able to cope (that is of course if we have the same amount of trade as we currently do…somehow I doubt that). There are fall back procedures (yes basically writing out entries) but everything will grind to a halt quickly.

            If you think I in anyway I am suggesting there isn’t a problem then you are wrong as I think it is even worse than you think. We don’t have not the trained staff to do these entries (one estimate of clearance people at Dover by someone who does imports and lives in Dover is that before the single market there were 5000 clearance clerks, he estimates around a 100 now) and as it is complex takes time to train (couple of years really).

            Let alone there isn’t the BIPs to do the required inspections either on imports or exports (yes in the case of CAP exports there is requirement for some inspections leaving the single market, that means any food coming from the continent will have CAP entries…so get ready for empty supermarket shelves)

            There are all sorts of issues. In fact if you remember a post from a couple of weeks ago which included “the curious case of the pallets” well if you note it was an Andy B on medium who wrote that, it is no coincidence I am an Andy with a surname starting B.

            I am not optimistic at all and am making the appropriate preparations.

            1. Clive

              It would, for future reference, save a lot of unnecessary clarifications if, in light of the above, you don’t start a comment with, where a post has been made with clear, unambiguous facts such as “trade isn’t managed with clerks and green ledger paper any more” (which is what Yves wrote) by saying — as you did — “Sorry but this isn’t quite correct…

              It was correct. Not just a little bit correct but 100% irrefutably correct. You were incorrect to say otherwise. If you want to contradict what the writers here say, you need to come armed with good facts and good arguments. And we’re not, generally, fooled when people comment, get proved wrong and then try to row back on what they originally said.

              And you don’t have a get-out-of-jail-free card by prefixing incorrect ideas with “quite”. Just like saying “you’re quite fat” is just as rude and insensitive as saying “you’re fat”, “quite” won’t cause readers to overlook unsubstantiated statements.

              1. vlade

                Yves comment was ‘managed by clerks and green ledger paper’.

                The process (even within EU trade, especially for items like say alcohol, pharma, animal products etc., it’s worse for third party) is now simplifed to ‘clerks and equivalent of Excel’.

                The commenters post was that that despite advancing from paper forms to EoE, the process still requires massive amounts of human skilled labour.

                So Yves’s comment was actually overoptimistic, assuming it’s ‘only’IT bit that need to be changed. In fact, it also requires a lot of manpower.

                I was told by a friend who does this for a living for a few decades that it takes a good few years to train one ‘clerk’, and mistakes can be costly (she was talking about how she once miscategorised some kind kind of alcoholic drinks, with large impact on duty and alcohol tax).

                The repeated/most traded imports/exports can get simplified (and automated under some circumstances) but its still the case of 80/20 split.

              2. andy blatchford

                As Vlade has pointed out below, it looked to me as if clerks ‘managing’ doesn’t matter, it does.
                I am sorry for any offence caused as wasn’t my intention.
                Also getting fined by customs for screw ups is a bit of an occupational hazard had a couple myself but not for a long time.

                What is interesting I find about this shambles is the Govt thinks it can fix everything just with some hitech solutions without understanding the processes (if what I was told by someone else in the company who does middle east trailers late this pm that in meetings with people from a certain govt dept, everyone of them was under 30…make of that what wish)
                So on one hand you have a usual IT screw up and on the other (even if it by some miracle works) we don’t have the trained staff to do it, the journos I have seen keep saying we don’t have enough customs/Border staff…not 1 has realised it isn’t them who do the entries, no one has asked us.

          2. andy blatchford

            I have been thinking through ICS today and it’s effects , is there a problem well definately, is it as big as you think no I don’t think so.

            [*****] ICS is for carriers, in the event of a hard Brexit likely a comparitvely minor issue like my pallets piece, just add it to the list and it’s a big list (but an issue nonetheless tbf).

            We have those systems in place because the EU isn’t the only country that runs automated manifest systems, we are quite late on the scene as been around for years, the information required for ENS is pretty basic (shipper,consignee, pieces, weight, description and that’s about it) we do send that header data to carriers as some give us a discount some don’t (we are talking peanuts a couple of quid a time).

            Why are you using ICS? You as far as know as i know you don’t own shipping lines, airlines or channel tunnels where the responsibility lays for filing, you would have to have their permission to file your own, how are they going to know if you don’t?

            In the case of out we can just turn ours off, there is nothing in place the countries do have to do that (exports to the EU are a different case…and through all this everyone misses where the issue is and thats EU ports that are choke points) most countries don’t have these automated manifest system procedures…it is getting more year over year though.

            1. Outis Philalithopoulos

              Hi, Andy. This particular discussion went on at considerable length yesterday, and took up a lot of the thread. If you think it’s possible simply to discuss and clarify interesting questions without any sniping, then go ahead, but if not I would say that it’s better to move on to other topics.

              1. andy blatchford

                I was interested thinking it through why a bank is using ICS procedures, what ICS (and other countries auto manifest systems) does is get your goods across the border but that’s it, it doesn’t mean clearence it gets you to clearence procedures. ICS Procedures as I have said is for carriers who’s responsibility it is. I have a someone in a bank IT department tells me that they are a registered gateway user. Very few traders have that because they don’t need to.

      2. Fazal Majid

        It’s interesting the UK government is so clueless about the IT implications of Brexit when the Secretary for Exiting the EU, David Davis, has a CS degree and a business background, unlike most of his tosser colleagues who tend to go for Oxford’s vapid PPE (Philosophy, Politics and Economics), with the occasional exceptions like Theresa May (geography) and the inimitable Boris Johnson (classics).

        1. Colonel Smithers

          Thank you, Fazal.

          Oxford’s vapid PPE does not have as much economics as outsiders think. Just one term / semester is devoted to economics. There are lots of tutorials and one on one spoonfeeding, so the idiot sons and daughters of the upper classes, traditional and hereditary Labour, can be hand held through. It’s the same for the masters for celebrity students like the former first daughter.

    2. Quanka

      Its all about the IT, dude. You think a well coded program that improves the efficiency of the operation would take you an hour to complete?

      In a backwards manner you proved how out of touch the UK is. “Hey, its just like paper except you punch in numbers on a screen” — not exactly.

      I would guess this is something like what the UK technocrats have in mind … and I refer you to yesterday’s discussion where the volume of goods moving across the border could increase from 50mm parcels to 300mm parcels annually.

      1. Andy Blatchford

        I am well aware of how many entries will be required as I am sitting in an office next to our European road department.

        As said above the IT systems help speed up things no end, that wasn’t what I was getting at, it is still a job that needs a lot of human labour because of the complexity. Not every movement is the same, different codes (that don’t input themselves) for different types of movements…if you are that interested here is the export codes most of the entry is prep.

  3. Frenchguy

    Some Brexiteers are already spinning the coming recession as a “cleansing” one… I guess some people would suffer anything rather than admit they were wrong.

    Effectively we are looking at a ten year recession. Nothing ever experienced by those under 50. Admittedly this is not the Brexit I was gunning for. I wanted a negotiated settlement to maintain the single market so that we did not have to be substantially poorer, but, in a lot of ways I actually prefer this to the prospect of maintaining the 2015 status quo with ever degraded politics with increasingly less connection to each other.

    1. Colonel Smithers

      I forgot to add that economists like Professor (sic) Patrick Minford, an adviser to Thatcher and still hanging around like a bad smell, think like that. He welcomes what he sees as the demise of what’s left of the car industry.

    2. DanieldeParis

      I expect cheap consumables from China will stay at low prices and they manage to circumvent the taxes and import controls anyway

      taken from Pete North blog. IMHO a big yes THAT will happen…

      I expect the custom system to blow out fully. Some will even take advantage of it.
      Nobody will care for a short while.

      I’d certainly follow Yves on her points about the crucial role played by the banking system, central bankers and gov authorities when some even like the potential Catalexit happens. Concerning customs, I reckon that nobody will care.

      An enormous mess will happen. Sure. People will be checked. Sure. Human beings will be doubled-checked including the one were welcome in the past i-e EC passport-holders. But goods will move freely. Including some that should definitely not. At least goods from Asia, Africa and, last but not least, the one delivered by the good ol’ “commonwealth” (sic).

      By the way, yep, I am sure informed individuals and industries are ready to take advantage of this. Including big shops à la Tesco and a couple of others.

      My silly 2 pence stubborn gallic opinion. But I’ll stick to it:-)

  4. Colonel Smithers

    Thank you, Yves.

    None of the UK media, intelligentsia etc., even those in the remain camp and / or with stake in staying / access like the City and supply chain SMEs, are doing anything like the analysis you go slog through. It’s just too much hard work and will also expose the neo-liberal nonsense that was peddled by much of the remain MSM.

    It’s not just the EU27 who are relieved that negotiations only take place a week per month, not just to keep their cool, but to avoid falling off their chairs laughing, too. The poor bloody infantry in the shrivelled and shadow of its former self UK civil service, including a friend at the UK mission to the EU, are relieved not to have to face their EU27 counterparts, sit with David Davis and grin and bear their way through the arrogance and ineptitude of their political masters too often.

    My friend is like me the child of Mauritian immigrants and a specialist in imperial / colonial history. He hopes to return to Cambridge after Brexit and teach. We keep wondering how the UK, one of our former colonial masters along with France (and Portugal and the Netherlands) was reduced to this. He’s a bit younger than me, so can’t remember Milksnatcher much, but I lay much of the blame at the spivs and vandals who hijacked the Tory party in the late 1970s and came to power in 1979. The road to Brexit started decades ago, not long after the UK joined the then EEC.

    My friend also thinks that once it dawned / started dawning on the government just how complex the creation of Brexitania would be, it was decided not to engage and, watch this space, and ultimately walk out of the talks and blame the EU27 for the collapse of talks. It will probably work. The MSM will play its part as it did in 2003 and does over Russia, Syria, North Korea, Corbyn, Sturgeon etc. Many of the leading lights in the leave camp, and their advisors at Legatum (who are much more involved than my friend, who was assigned to Brussels from the Treasury), are not interested in any deal, so these white papers are just to fool the great British public. It’s working. Readers of NC are far more clued up.

    1. Frenchguy

      Thanks for the insights !

      There was indeed a story at the start of the summer that a “dramatic walk-out” was planned. But while I can see the sort-term political advantage, what is the endgame ? At some point, they will have to actually do something, either prepare for Brexitania or crawl back in the EU (norway-style if they’re lucky). But so far they have made no movement towards either ot these solutions. Or are they really just planning for the next few weeks and hoping that somehow it will end well ?

      1. Colonel Smithers

        Thank you.

        The short-term political and media manoeuvring will continue until after hard Brexit. We might as well leave with effect from 1 January 2018. It will be up to a new generation of leaders, probably Tory, to crawl back in a decade. The (R[est of the])UK that will rejoin the EU in a decade will not enjoy the rebate, opt-outs etc. negotiated by Thatcher and Major, and have to play third fiddle alongside the Benelux, Scandinavians and Visegrad 4.

    2. Colonel Smithers

      I forgot to add that the average age of a Treasury civil servant is about 30. It’s getting younger as the place is demoralised, like most of the UK civil service, and graduates are making way for (more) school leavers / apprentices. The civil servants are being encouraged by the wise old heads and their unions to keep records of what was said, when and to whom, a clear audit trail, so that when the scale of the disaster becomes apparent and a Chilcot style enquiry is launched, the young water and spear carriers won’t carry the blame alone. The finger of blame will clearly be pointed at the ministers and their outside advisors. There are not enough lamp posts in that triangle between Westminster, Trafalgar Square and Buck House.

    3. Yves Smith Post author

      Thanks for the compliment but this is actually horrifying. It took me maybe 2 hours, at the very max 3 hours to do that post ex minor typo cleanup. That included writing and I’m a slow typist. That doesn’t count a quick sanity check with Richard Smith who provided the tweets. The fact that people for whom this sort of thing is critical to them aren’t even doing cursory work (this post was based on a superficial reading) is scary.

      1. Colonel Smithers

        Thank you, Yves.

        Scary yes, but all too par for the course, whether in the public or private sector for the past three decades in the UK. It doesn’t matter as the UK citizenry is so disengaged and encouraged to be – and happy to be “informed” by the MSM.

        A regular complaint about the French from this side of the channel is that they take to the streets too readily / often. Perhaps, the French know what is going on and care about the governance of their country.

    4. PlutoniumKun

      I second very much your appreciation of Yves work, I haven’t found anywhere else with the same level of analysis.

      I don’t have connections anywhere near the quality of yours or Davids, but I was at an event recently where there were a few people I know who are pretty well clued in to Irish government thinking, and by extension whats going on in Brussels. I was a little surprised to come up a complete blank. There seems to be a feeling that everything is out of ‘our’ hands and there was little point worrying about it. A few people expressed the view that some sort of transition period fudge would be worked out at the last minute which would amount to the UK staying in the EU without actually admitting it. From the Irish side I haven’t heard even the tiniest suggestion from people I know in IT or in construction that there is any feeling of urgency in looking at what a hard border represents. I’m either completely out of the loop or there is a very dangerous sense of complacency setting in.

      1. Colonel Smithers

        Thank you, PK.

        Brussels contacts say that the EU27 will offer a unilateral transition of 3 – 5 years, to protect themselves, but also specify that firms relocate within that period, especially financial institutions.

        1. Yves Smith Post author

          Wowsers. One of the staples of the Leave camp is “Oh there is too much valuable infrastructure in the City” as if people can’t be moved or replaced, new dealing rooms set up or current ones expanded, and there aren’t cities in Europe that already have operations. So the bankers would rather stay in London with its shopping and private schools. Wellie, bankers were sent to Tokyo, where aside from the terrific food and jazz, the lifestyle offerings were much thinner than any world city on the Continent. They go where the money is or they have their lunch eaten.

          And what do you want to bet the UK rejects the offer due to the poaching clause? Or do I understand this offer will be made to companies, in that they get some waivers if they commit to certain interim standards and commit to an operations move?

          1. Colonel Smithers

            Thank you, Yves.

            You’re right about bankers going where the money is. This said, a headhunter told me that monoglot anglophone bankers are not wanted by EU27 firms and their supervisors. He foresees repatriation home and back offices to cheaper locations east and south.

            The suggestion is that industry regulators will make the offer on an industry by industry basis after a direction from the commission or even Barnier.

            I may hear more later this month and will update.

            1. Colonel Smithers

              Sorry, yes, waivers from passporting provisions, not necessarily from certain standards, but a commitment and credible plan to move.

              Since Whitsun, the Commission has been expecting the UK to crash out without a deal. It was obvious to the, from early on.

          2. vlade

            TBH, the top (sales, dealing room etc.) are the easiest ones to move. It’s the middle office (even more so than the back office) that is hard, because
            – its larger – we’re talking high hundreds/low thousands of staff vs a few hundred
            – it’s mostly well paid middle class (i.e. not making hundreds of thousands of pounds year, but on average probably around 70-80k) – which means it’s harder for them to move
            – it’s a more skilled work than back office (i.e. to do risk reasonably well, you need a reasonable knowledge of statistic and probability, BO can be trained more easily).
            – it contains a lot of institutional knowledge (systems and processes) – which, admittedly, a lot of companies values little these days, so it may invalidate the whole argument.

            The problem with moving thousands of jobs is that you either have to move a lot of people who don’t move easily (a sales person who makes 500k a year moves much more easily than a middle manager who makes 60), or you have to recruit a lot of people who are likely not going to have the skills necessary for a while. If a lot of companies does it at the same time (even over a couple of years), it’s going to raise the salary expectations a lot.

            1. Colonel Smithers

              Thank you, Vlade.

              You’re right.

              One motivation for putting the firm, especially the middle and back offices, through the dislocation is that it earns the firm going home some brownie points and political legitimacy. This is made / was recently made clear at a certain firm we know.

  5. David

    It’s worth pointing out that the UK system has never really understood Brussels and its European partners very well. This was true of the European Union negotiations in 1991 (I was there), where London began the negotiations with expectations and advertised red lines completely divorced from reality, and which fell to pieces almost immediately. But in those days the system was flexible and expert enough to quickly regroup and to play a relatively weak hand quite skillfully for the rest of the negotiations. This was possible because the system was headed by people who had joined in the 1960s, supported by more junior people who had joined in the 1970s, when morale was high and we attracted the best people, and the SS Panzer Divisions of the Tory party had not yet laid the public sector to waste. That talent has now gone, and has been succeeded by people who have learnt the corporate PR language off by heart but don’t have the skills any more to turn it into reality. I actually doubt if the British government machine – as you say, once the envy of the world – is technically capable of managing these negotiations even under ideal circumstances.
    But these are not ideal circumstances. At least in the days of John Major the UK was negotiating towards something positive, and there were political heavyweights like Hurd who were capable of keeping things on track. But here we have a government that didn’t want to be in this position, doesn’t know what it wants and can’t agree even on what it doesn’t want. In the circumstances, the most brilliant negotiating team would have a tough time.

    1. Colonel Smithers

      Thank you, David. Spot on, as always.

      Professor John Kay’s recent Other People’s Money talks about that change in personnel. He recalls how the brighter students from Oxford, where he taught, headed to Whitehall in the 1970s and 1980s, but Big Bang (reforms of financial services) in 1986 changed all that.

      Mum says the same. She joined the Treasury in 1973, deciding not to return to the City after maternity leave.

      1. Anonymous2

        Yes. I worked a lot with Treasury officials in the 80s. You could see the standard go down as the decade progressed. Many seemed to go to Goldmans (or was that an illusion?). I felt they were being encouraged to go.

        1. Colonel Smithers

          It wasn’t an illusion in the noughties. I recall GS staff swaggering mob handed at the Treasury in 2009.

  6. begob

    I wonder when the panic at the top transmits itself into everyday conversations. The prospect of a BoE rate rise isn’t doing it. Maybe if the BoE stands pat and sterling takes its next big hit? Or when a big food retailer finds it difficult to stock the shelves?

    1. Colonel Smithers

      Thank you.

      I don’t see the UK public doing an impression of Corporal Jones.

      The late summer fall in Sterling was explained by the MSM, and seemingly readily accepted by the public, as just rip offs by bureaux de change at airports. It does not seem to occur to the disengaged public that FX affects them daily at food stores, petrol stations, electricity mains (as much of the power supply is from France) etc.

      Food shelves going bare? Let’s blame the wrong type of snow or Putin.

  7. sarf

    Minor nitpick: “The Guardian also pointed out, as did quite a few tweets, that the papers had typos and a the Customs paper, a duplicate paragraph.”
    Change “a the” to “the” – this was annoying me since the sentence was about typos itself… or is this perhaps deliberately done by Yves? :)

    Unfortunately, the British Brexit side once again manages to surpass the low expectations in the wrong direction. Is the tactic to become seen as so incompetent that the EU has to do their work for them just in order to avoid a failed state at its border?

  8. Matthew Cunningham-Cook

    “If I were a businessman in the UK whose business had any meaningful exposure to imports and exports, I’d be hitting the panic button.”

    This explains the fact that tech (Google) in particular appears to have begun to embrace Corbyn, despite his antipathy towards Uber, et al. While big business loves austerity, they hate Brexit more.

  9. UserFriendly

    With any luck some of the Tory Europhile MP’s will get a clue about what a clusterf**k this is turning out to be and fall on their sword and vote no confidence and trigger a snap election. I could see the EU27 be willing to not hold May’s incompetence against Corbyn. Of course that would leave no time to actually come up with a deal.

    1. PlutoniumKun

      I strongly suspect the tribal instinct in the Tory party would never be able to bring themselves to facilitate a Corbyn government in the way they would a Blairite one. Even the most moderate and pragmatic Tories genuinely fear a Corbyn led Labour government. And lets not forget that most of the EU27 countries are led by variations on the centre-right and would not be in any way inclined to be sympathetic to a major country being led by a radical leftist.

      I also have to say though, that while I like Corbyn a lot and hope he becomes PM, my feeling is that he has at least a small amount of ideological sympathy with those Tory Brexiteers who see a catastrophic Brexit as a way of creating a ‘new’ Britain. He just would want to create a different version. But I think its equally naive to think that you can create a socialist paradise from the smoking remains of a post-hard Brexit UK as it is for the Tory Brexiteers to think that they can create a free wheeling super Hong Kong (minus the immigrants) from the same situation.

      1. UserFriendly

        Sooner or later they are bound to realise that if the Conservatives are seen as having total culpability on the mismanagement of brexit that it will lead to at least a few decades of labour rule. Once they realise that May has completely lost any chance of not completely bungling Brexit it would be in their interest to pass the batton. That way they can at least somewhat blame the other side. It would only take like 5 or so of them to not vote… surely they could all have a sick grandparent or something.

        The EU27 may be a bunch of right wing tools but they are mostly the center right and don’t like being seen as overly mean spirited. I suspect their own citizens would punish them if they saw the UK go through the trouble of electing a government that was willing to give them better terms and they pushed ahead anyways out of spite. Not to mention the few corporations that do business with the UK who would be pushing them to avoid hard brexit if at all possible.

      2. Colonel Smithers

        Thank you, PK.

        This also explains why industry is not screaming as much as expected. It needs to keeps its powder dry for what it perceives to be the much bigger threat of Corbyn.

      3. David

        PK’s comment on Corbyn is very interesting – I fear that the Labour leader may be at least partly right. I’ve been pessimistic about the EU for a long time now, having dealt with its institutions in various guises, and I had hoped that Brexit might at least have acted as a shock to the EU elites and a spur to reform. But that clearly has not happened, and they’ve just huddled more closely together in their ruling colonial-class bubble. So you have to compare the results of Brexit not with some imagined situation in which the EU starts acting more sensibly, but with the situation in a few years if things go on as they are. Perhaps the smoking ruin is inevitable anyway, in which case the sooner it happens the less traumatic it will be. But maybe I’m just tired and overly pessimistic.

        1. Colonel Smithers

          Thank you, David.

          I agree with you about the EU27. I can see some tinkering at the margins, nothing that can’t be solved with better PR a la Obama, but nothing fundamental. It suited the neo-liberals in the EU27 to have the UK around.

          When the results of the referendum were called, the French ambassador to the US, a former EU official, tweeted that the EU should treat the result as a wake up call for reform, but it’s not happening.

  10. California Bob

    “… they have to be getting even more frustrated with dealing with the UK’s bizarre combination of arrogance and gross ineptitude …”

    Sentient Americans can relate.

  11. SA

    A hard Brexit will be a logistical nightmare, as shippers have been warning since the vote with increasing urgency. On the other hand, the UK will have far less to export, as EU-centric manufacturers pick up sticks and, on the retail side, as UK-origin goods remain unsold on EU shelves, and also the UK will import much less, since they will be in an economic depression.

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