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ALEX BRUMMER: Brexit is not the enemy

Misleading: Office for Budget Responsibility predicts Brexit to cost UK economy £100bn a year - reportedly writing itself

Here is an imaginary story to conjure up. Ford announces plans to move electric car component manufacturing from Halewood in Liverpool to Cologne.

The headline for another blow from Brexit – which the Office for Budget Responsibility (OBR) has predicted will cost the UK economy £100billion a year – would have written itself.

The reality is the other way around, with Ford increasing its investment in the UK by £150m.

Misleading: Office for Budget Responsibility predicts Brexit to cost UK economy £100bn a year - reportedly writing itself

Misleading: Office for Budget Responsibility predicts Brexit to cost UK economy £100bn a year – reportedly writing itself

It is expected that by 2026, two-thirds of the components of all Ford electric vehicles in Europe will be made in the UK.

This, one might say, will make little difference given the Brexit tsunami predicted by the OBR, the Bank of England and countless others, and presented as an inalienable truth.

A Sunday paper gleefully declared last week that Brexit had to be a failure because Britain’s ‘historic’ trade deal with Japan had failed to produce the £15billion hike predicted at the time. of the signature by Liz Truss.

Instead, trade with Japan fell from £12.3bn to £11.9bn in June 2022.

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But wait a moment. The year in question was among the most disrupted in modern times due to logistical bottlenecks, Covid restrictions in Japan for most of the period, and Russia’s war on Ukraine.

Moreover, physical trade is only a fraction of the relationship between Japan and the UK. Tokyo is a big foreign investor in the UK and plans to spend a substantial part of its £13.2billion investment on vehicle electrification in Sunderland.

And the City of London, the global headquarters of most Japanese banks, is a major player in foreign exchange, derivatives and other financial markets. The problem with much of the data we talk about is that it doesn’t paint the whole picture.

Trade figures are incredibly unreliable, often subject to large revisions. Earlier this week, I was among those invited to a McKinsey briefing on how UK businesses can aim for growth amid economic uncertainty.

It was fascinating to point out, for example, how UK pension funds are doing very little to support the FTSE by investing just 2% (yes, 2%) in UK listed companies.

Tera Allas, director of economics at McKinsey, offered a different perspective on the relevance of economic forecasts.

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Labor was eager to pounce on recent OECD growth forecasts showing the UK had among the worst prospects of advanced countries.

In the figures, she observed, the difference in expansion between the UK and the rest was just 0.1%, despite all the hype.

That, she argued, was within a margin of error that could swing several basis points up or down.

In other words, the OBR’s Brexit damage forecast might be a useful pointer, but it’s not the King James Bible.

Summit preview

After all this skepticism, it may seem contradictory to extract some optimism from a Bank of England survey.

Whisper it softly and there seems to be a glimmer of joy in the direction of price moderation.

Companies say they raised prices 7.2% in the year to November, the smallest amount since April.

General public expectations for the cost of living have also fallen from their all time high.

Interest rates have yet to peak, with markets pricing in another half-percentage-point hike in the Bank’s base rate from 3% to 3.5% on Dec. 15 after a three-quarter hike point the last time. The top may be closer than people feared.

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Molten

Two of my passions, in no particular order, are a fondness for my hometown of Brighton, where I worked as a deckchair, and chocolate.

Both led me to the mistake of investing in hobby stocks. As my deckchair stand was adjacent to Brighton Pier, I couldn’t resist a little flutter in shares of Brighton Pier plc, which then halved in value.

Likewise, when Hotel Chocolat became a thing, I invested. All was well until founder Angus Thirlwell made the classic mistake of thinking that because Americans are big chocolate eaters and speak the same language, nothing could go wrong.

The result: a loss of £9.4m after amortizing the cost of store closures in the US.

The shares which stood at 513p earlier this year are down to 147p.

Bitter!

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