Toyota warned of a shut down this week if Britain fails to find a solution to the Brexit negotiations. “If Britain crashes out of the EU at the end of March, we will see production stops in our factory,” said Marvin Cooke, the managing director at the firm’s plant in Burnaston, near Derby.
Asked how long the production stoppages would last, he said: ”We can’t predict, it could be hours, days, weeks, even months.”
The Japanese car manufacturer is the latest in a list of foreign car companies to say there could be temporary stoppages and maybe even job losses if there are checks at Dover and Calais as a result of no deal. Toyota follows warnings from Honda, BMW, JLR and more.
Firms across the UK are beginning to build stocks of raw materials and components ahead of the March deadline. Even the NHS has plans to stockpile ambulances ahead of the critical date. An “urgent” £9 million order for 112 new ambulances has been placed by health chiefs amid fears none will be available after Brexit. Built by Mercedes in Germany and finished off in Ireland, the vehicles are desperately needed by London Ambulance Service.
Brexit is looming with firms in a quandary about the implications for business and investment. According to a survey by the British Chambers of Commerce this week, A fifth of businesses surveyed (21%) will cut investment if there is ‘no deal’, 20% will move part or all of their business to the EU and 18% will cut recruitment.
Larger firms and those who are internationally active are the most exposed to the ramifications of ‘no deal’. 28% of firms with over 50 employees and 24% of those who export or import internationally say they would cut investment plans.
Latest figures released by the ONS, suggest growth is grinding to a halt. In the first half of the year, growth was around 1.2%. Investment fell in the second quarter, government spending was flat. The trade in goods deficit increased to £34.7 billion compared to £32 billion in the first quarter. The consensus forecast for growth this year is just 1.3%. Growth boosted by an element of stock build perhaps at the expense of an accelerated trade deficit.
Chequers or Canada Plus? It's hard to see a proposition which is acceptable to the Tory party let alone the EU. Six months to the deadline with no solution in sight. Rollover Brexit may be the only way to avoid a roll-on roll-off crisis at the docks …
Block at the Dock ... The Future of Trade ...
Fears are increasing in the transport industry of a post Brexit crisis for trade. Delays at the ports are inevitable according to experts in the Road Haulage Association.
The industry already faces a driver shortage of some 45,000 at present, forecast to increase to 60,000 in the near term. UK drivers cannot be sure they will be allowed to drive in Europe in the event of a no deal Brexit. Many small business owners are now forced to review their commitment to international trade.
European firms are taking a similar negative view on forward contracts into the UK in 2019. Shipping goods into the UK will be expensive, subject to additional paperwork and vulnerable to inevitable delays. Transport firms in Germany are reviewing options. Polish contractors are deciding transport within the EU, will provide a simpler, less expensive, logistic free solution to building an international business. Who wants to be stuck in a lorry park in the South East of England, with perishable goods on the back of the truck. Freight rates are rising already, as the squeeze begins to take shape.
The Brexit timetable is accelerating. Decisions are now being made which will affect the UK over many years ahead. The reality is dawning, no deal is looming, with all that may entail.
Free to trade with the rest of the world, doesn't look to be such an attractive option as US tariffs begin to disrupt the pattern of trade. The WTO warned this week, Escalating trade tensions and tighter credit market conditions in important markets will slow trade growth for the rest of this year and in 2019.
The WTO anticipates growth in merchandise trade volume of 3.9% in 2018, with trade expansion slowing further to 3.7% in 2019. The new forecast for 2018 is below the WTO's April estimate of 4.4%. Trade growth in 2018 is now most likely to fall within a range from 3.4% to 4.4%.
Does the White House have a plan? It doesn't appear so, according to David Dollar in the Washington Post,
"I don’t think the administration knows clearly what it’s doing. Other countries are confused. We’ve launched a lot of trade measures against other countries and sent a signal of withdrawal from the world.”
Brexit, Trump Tariffs. with Boris Johnson on the doorsteps of Number Ten, many challenges ahead for business in the run up to March 29th 2019 ...
Fed raises rates ...
Jerome Powell avoided pressure from Donald Trump this week and made the decision to raise rates by 25 basis points. It seems clear a further rate rise will follow in December with more to come next year.
No longer will monetary policy be "accommodating" the Fed is forecasting US growth of 3.1% this year, as consumer confidence, business investment and jobs growth remain positive.
The Fed "Blue Dot" forecast suggest U.S. rates could rise to 3.5% by 2020. Ten year bond yields fell slightly to 3.04% this week. Is the yield curve inverting? Probably not. We expect long yields to rise to maintain the spread, if short rates follow the path currently predicted by the Federal Reserve. The Fed Chair was in bullish mode ...
"As the year has gone on, the economy has come in stronger than we expected. And that’s a really good thing. … Some of it is, no doubt, the effect of the fiscal policy changes, the tax cuts and the spending changes. That’s got to be part of the story. Part of it may be higher oil prices which are calling for more investment in the oil patch. But the growth picture is very much supported by very high readings of household confidence, business confidence. So it’s a particularly bright moment. If you look back over the last decade, this is a pretty good moment for the U.S. economy."
"A pretty good moment", which is not sustainable. The trade deficit is increasing, a result of strong growth. The internal deficit is increasing, as result of tax cuts and spending plans. Funding costs for the deficit are heading for over $1 trillion dollars, soon to become the biggest spending item in the government budget. Soaring debts and deficits, it's a long haul back to fiscal probity. Never a strong point on the Trump agenda.
That's all for this week, have a great week-end, Don't Miss Our Monday Morning Update this week,
Don't Miss the pro-manchester economics conference on the 18th October. I shall be anchoring the "show" and providing an update on prospects for the UK and World Economy. Book Now We have great agenda and line up of speakers on the day as we discuss the "Economics of Greater Manchester".
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