Leaving the EU


Todays agreement on the transitional period for exiting the EU is a decent step forward and welcome. The nation has seemingly been divided in the months since the vote and there has been much hysteria on both sides of the argument. As someone who despite giving much thought, was very much undecided, I will say that the reaction of many of those that have voted remain has been surprising and often amusing

I wont go into examples but I believe todays developments will signal the ebb from grief to acceptance.

So what do we have to fear? Im not at all sure that the changes are going to materially affect the UK to any substantial degree. This will both disappoint the more committed remain and leave votes.

Here are the reasons why. Some of these will be familiar points but the last has has not been highlighted by any commentator or economist i’ve encountered

  1. Migration. Personally I regret the end of freedom of movement but skills will be strongly demanded at all levels and anyone believing that immigration will drop off a cliff is in for a rude awakening.
  2. Trade agreements. Have almost beome fetishised. It seems to be continually forgotten that the EU (therefoe us) does not have trade agreements with the vast majority of the worlds trading nations, including US and China. There are some that still seem to believe you need an agreement to actually trade.
  3. Multinationals and banks. Were going to be leading a stampede to Amsterdam and Dublin. Really? They better get a move on because so far there has barely been a ripple of movement.
  4. Tariffs. Maybe not as an important a aspect as pure access to markets but do these matter at all? Think of what we produce and supply. We are simply not a nation that competes on price. We are actually world leaders in many industries but these are not generlaly price sensitive. Tee shirts being made in Thailand are  one thing but scotch Whisky and Aerospace technology is another.

There will be squabbles but as alluded to above, the whole process has parrallels to a bereavement with rage, shock, grief, acceptance being the process on one side of the argument and with some black humour I could suggest joy followed by gradual acceptance and maybe disappointment on the other.

But last week also reminded up of who we are dealing with. With one glaring exception this country was shocked disgusted and angry with Russias attempted and likely assasination in Salisbury last week. Whilst a distinct party in this country refused to stand up to the aggressors our friends did. They did so with no material benefit to themselves which is what real friends do.

Germany and France as well as the many other EU states are genuinely our friends. We must never forget that.


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My appearance on Youtube.



Ok it was a little while ago now but do feel free to watch here  as I discuss credit management and invoice financing


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Trumps trade wars



It is difficult to know what to add to the torrent of disdain for Trump’s ludicrous statements. Perhaps the first thought that came into my mind was that this dwarfs any concerns about brexit (which I do consider to be overplayed) and will probably not receive the same level of attention.

In the distorted minds of many brexit has largely become a social tool whereby which way you voted in the referendum is more about fishing to find out whether you went to Benidorm or Tuscany for your holidays.

Trumps recent pronouncements have alarmed many within his own party and I assumed that he would have deep diffculties passing such a bill through congress. Wrong. He can actually simply dictate this stuff.

So what do we have to fear? As much as I enjoy the sound of my own voice, there are occasions where you simply cant trump (pun intended) the writings of a great economist.   Paul Krugman of the New York Times is that person

We’ve known all along that Donald Trump is belligerently ignorant about economics (and many other things). But up to this point that hasn’t mattered much. He took office amid a sustained recovery that began under his predecessor, and that recovery had already lifted the U.S. economy to the point where “normal” policy rules apply: interest rates are above zero, monetary policy is effective again, so short-term economic management is in the fairly reliable hands of the Federal Reserve, not the chaotic Trump White House. What the president didn’t know couldn’t hurt us.

But there was always reason to be concerned about the possibility of crisis — either a crisis created by outside forces, like some kind of financial collapse, or one created by the administration itself. In that case the Fed’s rationality wouldn’t be enough. And it’s starting to look like we have a trade policy crisis on our hands.

Trump has always had a thing about trade, which he sees the way he sees everything: as a test of power and masculinity. It’s all about who sells more: if we run a trade surplus we win, if we run a trade deficit, we lose:
This is, of course, nonsense. Trade isn’t a zero-sum game: it raises the productivity and wealth of the world economy. To take a not at all random example, it makes a lot of sense to produce aluminum, a process that uses vast amounts of electricity, in countries like Canada, which have abundant hydropower. So the U.S. gains from importing Canadian aluminum, whether or not we run a trade deficit with Canada. (As it happens, we don’t, but that’s pretty much beside the point.)

It’s true that trade deficits can be a problem when the economy is depressed, and unemployment is high. That’s why I, like many other economists, wanted us to take a tougher stance on Chinese currency policy back in 2010, when we had around 9 percent unemployment. But the case for worrying about trade deficits, like the case for running budget deficits, has largely evaporated now that unemployment is back to 4 percent.

So we can’t “win” a trade war. What we can do is start a cycle of tit-for-tat, and when it comes to trade, America — which accounts for 9 percent of world exports and 14 percent of world imports — is by no means a dominant superpower.

A cycle of retaliation would shrink overall world trade, making the world as a whole, America very much included, poorer. Perhaps even more important in the near term, it would be highly disruptive. We live in an era of global supply chains: just about everything produced in America (and everywhere else) uses inputs produced in other countries. Your new car may well have a chassis assembled in the U.S., an engine and wiring system made in Mexico, electronics from Korea and China, and, of course, steel and aluminum from Canada.

Could we produce cars without all those imported components? Yes, given time. But getting from here to there would be a huge mess: hundreds if not thousands of factories would have to close or convert over to other uses. Never mind the net loss of jobs from a full-scale trade war, which would in the end probably be a relatively small number. The point instead is that the gross job losses would be huge, as millions of workers would be forced to change jobs, move to new places, and more. And many of them would suffer losses on the way that they would never get back.

Oh, and companies on the losing end would lose trillions in stock value.

So the idea that a trade war would be “good” and “easy to win” is surpassingly stupid. And the way Trump seems to be starting his war is also remarkably stupid: start by protecting goods that are inputs to industries that employ far more people than those being protected? Do so in the name of national security — a justification that is, for good reason, almost never invoked — when the biggest source of those inputs is that hostile foreign power Canada?

In themselves, these tariffs aren’t that big a deal. But if they’re a sign of what future policy is going to look like, they’re really, really bad.

Follow me on Twitter (@PaulKrugman) and Facebook.


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The six reasons for the high street failures


What we are told are the six main reasons for the collapse of high street businesses are outlined here

Some would say that it is inevitable that the BBC would lead with Brexit and its supposed negative effect on the economy as a prime reason. To my mind a rational look at the numbers quoted would surely indicate that that is probably the least significant factor. Retail chains have weathered far worse economic headwinds.

Over expansion. bad presentation and too much debt are all familiar factors and appropriate to Toys r us, Byron, Maplin and Jamies to varying degrees but there is one factor that is hitting everyone equally hard and is surely going to have to be reviewed for a variety of reasons

Business Rates. The government is going to have to consider whether they want to assist the high street or let it die. On line retailers have a significant advantage when it comes to taxation and thats stretches well beyond just the rates as we know all to well with Amazon.

Landlords are going to have to bite the bullet too and market forces should kick in but the whole matter of taxation of retail businesses requires a significant rethink


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Why did Maplin go bust?


It has been quite a week for retail collapses and this surely isnt the end of the story. Toys R us has been predictced for some time of course and Maplins was hardly a shock given the removal of credit insurance.

Maplins results were steady over the last couple of years with £3m losses against near identical turnovers of £235m. Not catastrophic maybe but the net worth of the business had sunk from £20m to £7m. Clearly that was a trend that was unsustainable and this is where the credit insurers took their view.  To recap for those who may not be entirely familiar with insurance, many suppliers seek credit insurance against their debtors where by they are largely reimbursed if their debtor goes into an insolvency arrangement. Without that cover (and this is particularly prevalent in retail), suppliers stop supplies unless paid on delivery, which in turn squeezes the debtors cashflow or damagingly reduces their stock and retail profile.

In essence, once a credit insurer withdraws cover then they have signalled the death knell of the retailer. They have the difficult decision of whether to support or effective minimise inevitable losses but the consequence of this is that the credit insurers are those that are blamed by the debtor and frequently the media too

But do they have a point? Were they possibly overreacting to Maplins predicament? In my experience, credit insurers are far from perfect in their judgement.

The key here is the business model itself and this is why understanding a business is so vital to credit decisions. Maplin had maintained their turnover but rightly or wrongly the insurers were taking a longer term view over the viability of high street electrical retailers assuming that internet sales would continue to eat away. This has been the narrative in the media in the case of Maplins

Fair? Im not sure. They maintained their turnover across 2016 and 2017 so the decline was clearly not inevitable and given their product range, is customer service entirely out of the equation?

Have the insurers overreacted? Have they been overwhelmed by a fashionable viewpoint rather than a realistic one?


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Remarkable collection of East End colour photography

Can be found here  but here is a sample





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Should insolvency practioners carry out “turnaround”?

Here is an excellent piece from my friend Tony Groom

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