Chris White is doing a roaring trade. The patriotic fervour surrounding the Jubilee has boosted sales for the chief executive of England’s biggest vineyard, Denbies Wine Estate.
But while his Surrey wine is in demand, his ability to produce it has been dealt a heavy blow by Brexit. Even though he does not sell to the EU, he relies on the established French and German wine industries to supply and service his equipment. And due to Brexit red tape, some businesses on the Continent will no longer deal with him. Others — partly reflecting the higher costs of doing business with Britain — have put their prices up so much that White can’t afford the new kit that will help his enterprise grow.
So, rather than import the 5,000-litre tanks he needs, he must hire smaller ones in the UK on expensive short-term contracts that will eat into his profits. Meanwhile, delivery times from the EU are now so unreliable that just-in-time supplies of bottles and corks no longer work. Instead, he buys the whole year’s supply in one batch. That’s a cashflow headache, and now he needs new sterile warehouse space to store the bottles for half the year when they are not needed.
This vignette of inefficiency is repeated in small businesses up and down the UK, and goes some way to explaining why the pound is so much weaker than comparable currencies.
A currency’s strength is, in large part, a reflection of the market’s view on the productivity and strength of the economy behind it. And, since Brexit, sterling has been valued at a discount to its peers because the world’s investors believe British enterprises will not be as productive as they would have been.
Worryingly, despite a weak pound making our goods cheap for foreign buyers, exporters are also struggling. First-quarter figures last week showed exports of food and drink to the EU were down 17 per cent, or £614 million, on pre-Covid levels. Exports to non-EU countries increased by 10.7 per cent, or £223 million, but not enough to offset the European decline.
And that is before we get to labour shortages, which are also stopping businesses trading to their full potential. For reasons still baffling the experts, Britain seems to have had more people quitting the workforce than comparable countries. Before Brexit, it would have been easier for employers to make up the difference with EU workers.
Britain is, in short, undergoing a shock to the supply side of its economy that, as the pandemic retreats, appears largely of Brexit’s making.
As a result, the pound is now trading at a 16-month low against its peers on a trade-weighted basis. Research from Panmure Gordon — one of the less hysterical Brexit bears — shows there are more short-sellers lining up to bet against it than at any point since August 2019, when Boris Johnson looked set to crash us all into a no-deal Brexit. Fears of a trade war over the Northern Ireland Protocol are not helping.
Bank of America loudly declared last week that the pound was beginning to resemble a currency from an emerging market — Brazil, say, or Kenya.
Hyperbolic, probably, but it is true that sterling no longer behaves like the hard currency it once was. When the US Federal Reserve raises interest rates to tame inflation, it does so against the backdrop of a strong economy — so the dollar rises, too. Since December, the Bank of England has hiked rates four times — but the pound has barely reacted. This is largely because of the world’s dim view of our bungled Brexit.
Partygate, policy drift, and the other petty messes tangling up ministers who took us out of the EU, should not make us lose sight of that. Their mishandling of Europe has hobbled wealth-creators, as the sickly pound testifies.
*All aboard the transport bandwagon*
For the first time since the Second World War, car ownership has declined for two consecutive years. This could be a blip — supply-chain issues have meant you would struggle to get a new Merc even if you wanted one. But some company bosses are drawing deeper conclusions.
As we report today, after studying the car-buying data, Ikea is moving away from opening new out-of-town behemoth stores to building smaller ones in city centres. Customers will get to these shops by public transport and order for home delivery.
This change is little short of seismic for Ikea. It has built an empire on mass car ownership, much as Facebook did with smartphones. But the canny Swedes worry about missing out on an urban, green generation of younger customers — people who don’t see the point in learning to drive, let alone owning a car big enough for a Billy bookcase.
Private equity investors are also betting on the no-car trend. Train and bus companies have been on the receiving end of a flurry of takeover approaches. Stagecoach and FirstGroup in the UK have been bid for, and Britain’s Basalt Infrastructure has bought Nobina in the Nordics.
This may seem odd, given that Covid lockdowns so recently brought the transport sector to its knees. But private equity — particularly long-term infrastructure funds — sees a bright future. You can see why: local councils, fretting about pollution and congestion, are pushing cars out of cities and state investment in buses is resurgent.
Rail may not offer exciting returns now that companies work under contract for the Department for Transport. But the new system ends the boom-bust cycle of the old franchises and offers a safe, annuity-style income for years to come. That is appealing to funds seeking dependable returns.
The whole sector is set for a wholesale increase in its lowly stock market rating. Schroders, the biggest investor in FirstGroup, gets this and is opposing the takeover bid. It’s right to. Long-suffering shareholders must not sell out cheaply to the private equity tycoons.
*Jim Armitage*
Sunday June 05 2022, 12.01am, The Sunday Times
This just shows how the media control our political agenda and our behaviour. Journalists knew about Partygate real time but didn’t report it. Had they done so the consequences would have been catastrophic. By not facing up to Brexit the consequences have been catastrophic
Well, I for one am absolutely shocked, why didn’t anyone tell us that Brexit could be bad for the economy in 2016, and every year since then
Sterlings been in crisis since the 60s
It won’t stop them trying though.
It’s (not) unbelievable, Jeff!
We need to get him back in the team in the place of Mason Mount.
Funny what happens when you print a shitload of money, keep interest rates at ridiculous lows and let the housing market defy gravity for two decades, isn’t it?
8 comments
Chris White is doing a roaring trade. The patriotic fervour surrounding the Jubilee has boosted sales for the chief executive of England’s biggest vineyard, Denbies Wine Estate.
But while his Surrey wine is in demand, his ability to produce it has been dealt a heavy blow by Brexit. Even though he does not sell to the EU, he relies on the established French and German wine industries to supply and service his equipment. And due to Brexit red tape, some businesses on the Continent will no longer deal with him. Others — partly reflecting the higher costs of doing business with Britain — have put their prices up so much that White can’t afford the new kit that will help his enterprise grow.
So, rather than import the 5,000-litre tanks he needs, he must hire smaller ones in the UK on expensive short-term contracts that will eat into his profits. Meanwhile, delivery times from the EU are now so unreliable that just-in-time supplies of bottles and corks no longer work. Instead, he buys the whole year’s supply in one batch. That’s a cashflow headache, and now he needs new sterile warehouse space to store the bottles for half the year when they are not needed.
This vignette of inefficiency is repeated in small businesses up and down the UK, and goes some way to explaining why the pound is so much weaker than comparable currencies.
A currency’s strength is, in large part, a reflection of the market’s view on the productivity and strength of the economy behind it. And, since Brexit, sterling has been valued at a discount to its peers because the world’s investors believe British enterprises will not be as productive as they would have been.
Worryingly, despite a weak pound making our goods cheap for foreign buyers, exporters are also struggling. First-quarter figures last week showed exports of food and drink to the EU were down 17 per cent, or £614 million, on pre-Covid levels. Exports to non-EU countries increased by 10.7 per cent, or £223 million, but not enough to offset the European decline.
And that is before we get to labour shortages, which are also stopping businesses trading to their full potential. For reasons still baffling the experts, Britain seems to have had more people quitting the workforce than comparable countries. Before Brexit, it would have been easier for employers to make up the difference with EU workers.
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>>[Bank of England exchange rate index – graph](https://archive.ph/Sxovi/7dee0b79adbef5a69c3ed589d5a69b3d337578f2.jpg)
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Britain is, in short, undergoing a shock to the supply side of its economy that, as the pandemic retreats, appears largely of Brexit’s making.
As a result, the pound is now trading at a 16-month low against its peers on a trade-weighted basis. Research from Panmure Gordon — one of the less hysterical Brexit bears — shows there are more short-sellers lining up to bet against it than at any point since August 2019, when Boris Johnson looked set to crash us all into a no-deal Brexit. Fears of a trade war over the Northern Ireland Protocol are not helping.
Bank of America loudly declared last week that the pound was beginning to resemble a currency from an emerging market — Brazil, say, or Kenya.
Hyperbolic, probably, but it is true that sterling no longer behaves like the hard currency it once was. When the US Federal Reserve raises interest rates to tame inflation, it does so against the backdrop of a strong economy — so the dollar rises, too. Since December, the Bank of England has hiked rates four times — but the pound has barely reacted. This is largely because of the world’s dim view of our bungled Brexit.
Partygate, policy drift, and the other petty messes tangling up ministers who took us out of the EU, should not make us lose sight of that. Their mishandling of Europe has hobbled wealth-creators, as the sickly pound testifies.
*All aboard the transport bandwagon*
For the first time since the Second World War, car ownership has declined for two consecutive years. This could be a blip — supply-chain issues have meant you would struggle to get a new Merc even if you wanted one. But some company bosses are drawing deeper conclusions.
As we report today, after studying the car-buying data, Ikea is moving away from opening new out-of-town behemoth stores to building smaller ones in city centres. Customers will get to these shops by public transport and order for home delivery.
This change is little short of seismic for Ikea. It has built an empire on mass car ownership, much as Facebook did with smartphones. But the canny Swedes worry about missing out on an urban, green generation of younger customers — people who don’t see the point in learning to drive, let alone owning a car big enough for a Billy bookcase.
Private equity investors are also betting on the no-car trend. Train and bus companies have been on the receiving end of a flurry of takeover approaches. Stagecoach and FirstGroup in the UK have been bid for, and Britain’s Basalt Infrastructure has bought Nobina in the Nordics.
This may seem odd, given that Covid lockdowns so recently brought the transport sector to its knees. But private equity — particularly long-term infrastructure funds — sees a bright future. You can see why: local councils, fretting about pollution and congestion, are pushing cars out of cities and state investment in buses is resurgent.
Rail may not offer exciting returns now that companies work under contract for the Department for Transport. But the new system ends the boom-bust cycle of the old franchises and offers a safe, annuity-style income for years to come. That is appealing to funds seeking dependable returns.
The whole sector is set for a wholesale increase in its lowly stock market rating. Schroders, the biggest investor in FirstGroup, gets this and is opposing the takeover bid. It’s right to. Long-suffering shareholders must not sell out cheaply to the private equity tycoons.
*Jim Armitage*
Sunday June 05 2022, 12.01am, The Sunday Times
This just shows how the media control our political agenda and our behaviour. Journalists knew about Partygate real time but didn’t report it. Had they done so the consequences would have been catastrophic. By not facing up to Brexit the consequences have been catastrophic
Well, I for one am absolutely shocked, why didn’t anyone tell us that Brexit could be bad for the economy in 2016, and every year since then
Sterlings been in crisis since the 60s
It won’t stop them trying though.
It’s (not) unbelievable, Jeff!
We need to get him back in the team in the place of Mason Mount.
Funny what happens when you print a shitload of money, keep interest rates at ridiculous lows and let the housing market defy gravity for two decades, isn’t it?