Brexit: misdirection

02/01/2019

A small piece of information has emerged from the Seaborne Freight controversy which has such massive implications that one begins to wonder whether the whole "ferrygate" affair is really misdirection, to steer us away from confronting the real predicament.

The information comes via the Financial Times, a beguilingly simple claim that Ministers believe that under a no-deal Brexit, the Dover corridor (port and tunnel) could run at just 12-25 percent of normal capacity for up to six months.

This, in itself, does not tell us very much, but once we look at some relevant figures on trade an alarming picture starts to emerge. We start with the latest estimates for trade (in goods) with continental Europe which passes through the corridor.

In 2017, this was valued at approximately £220 billion (allowing for currency conversions) - the split roughly £120 billion to the port and £100 billion to the tunnel. And with total trade in goods with the EU recorded at £422.6 billion, this means the proportion of trade with Europe handled by the corridor worked out at about 52 percent by value.

If we then take the Minister's worst case scenario for the corridor running at 12 percent capacity for six months, trade levels drop from the expected £110 billion in the period to a mere £13 billion, representing a loss of throughput of just short of £100 billion – roughly equivalent to twice the value of the six-monthly traffic through the Tunnel.

This, then, is the crunch. The purpose of the £107 million ferry contract, of which Seaborne is part, is route substitution. But when we look at the figures, we see the scale of the problem. Ministers are faced with a need to provide capacity equivalent to twice the throughput of the Tunnel. Yet the entire (shipping) capacity bought by the contract is only about five percent of the corridor throughput.

If we do the assessment a different way, in terms of vehicles handled, a similar position emerges. Dover Port claimed to have handled 2,601,162 lorries in 2017. The Tunnel handled 1,637,280, making a combined total of 4,238,442 lorry movements in the year.

Worked out on a weekly basis, movements are running at 81,500. If we lose 88 percent of that traffic, the corridor will end up moving less than ten thousand vehicles a week (in both directions). That leaves more than 70,000 to find, while the combined capacity bought by Mr Grayling's £107 million is 3,700 movements a week.

In short, the additional shipping capacity provided by the Department for Transport will hardly have any measurable impact, while any contribution that Seaborne Freight might offer, through a Ramsgate service, is infinitesimal.

That points to a single, inescapable fact. The attempt to provide a back-up for the Dover corridor is fruitless. As senior officials in Dover Port warn, there is simply no substitutable capacity elsewhere in the UK to handle the trade volumes that might be displaced by a "no deal" Brexit.

And if there really is no point in faffing around looking for alternatives. we have to accept that that price of a "no deal" Brexit is massive short-term trade perturbation, with a loss of trade of around £100 billion from just one port complex. The question which thus has to be addressed is whether the UK economy could take a £100 billion hit in a period of six months. We must then address the question of how fast trade volumes would recover, and whether recovery would be complete.

As to the immediate effects, I can't think of any circumstances where a developed nation has had to face such a situation. For sure, we got this sort of thing with the declaration of war in 1939, and more so with the German invasion of France in 1940. But then effort was shifted to producing war materials so there was no fall-off in economic activity.

In this case, if goods are not being imported into the country to sell through retail stores, or as components or ingredients so that manufacturing operations are unable to produce their goods for sale at home and abroad, there will be knock-on effects on the economy which might be difficult to deal with in the short-term.

To take the famous crankshaft example, if all (or a substantial part) of our engine manufacturing capacity depends on these components being imported, then without them, there will be no engines produced. And, if there are no engines, the car production plants that rely on them will also shut down.

With no cars to sell, the dealers who are franchised to the marque will have nothing to do, while the demand for vehicle distribution, service centres, loan providers, advertising and much else will be reduced. This brings to mind the proverb: for want of a nail, the shoe was lost; for want of a shoe, the horse was lost; for want of a horse, the rider was lost; and so on, until the kingdom was lost.

It is readily acknowledged that job losses in primary industries can have a cascade effect. One job in an enterprise such as car-making might support as many as ten or more people making components. In the wider community, one job lost could trigger the loss of twenty or thirty more in the retail and service sectors.

Such is the complexity of our economy though, that I would warrant that there is no one person, nor any group, who could predict the effect of such a massive perturbation.

Here, it is the famous essay by Leonard Read, entitled I, Pencil, that comes to mind. Written in the first person from the point of view of a pencil, the pencil details the complexity of its own creation. It lists the components (cedar, lacquer, graphite, ferrule, factice, pumice, wax, glue) that go into its making, and the numerous people and skills involved, from the lumberjack who took the chainsaw to the tree, down to the sweeper in the factory and the lighthouse keeper guiding shipments essential to the manufacture of the article into port.  

The core thesis is that, for even such a simple, everyday article, as the pencil asserts, "not a single person on the face of this earth knows how to make me". By that same token, not a single person on the face of this earth knows what the impact of a "no deal" Brexit might be.

That in turn begs the next question. If one accepts that the effects of a "no deal" Brexit are impossible to predict, and could range from short-term disturbance from which we could easily recover to a catastrophic domino effect, who has the right to take the gamble which could so easily do so much damage to so many people?

One is entitled to take risks on one's own behalf, accepting the consequences whenever they arrive, but it is quite another matter exposing others to risks that they themselves would not take, over which they have no control.

The same might be said of Brexit as a whole, which then opens up the entire debate about the role of referendums in a democracy, and whether there should be a distinction between decisions taken by the collective, and those imposed on us by our representatives in parliament.

Arguably, whether to accept the withdrawal agreement or not should have been the subject of another referendum, except that there is no provision for one within the framework of the Article 50 process. Ironically, that points to a defect in the treaty that many of us didn't want to accept in the first place, and we voted to get rid of in the 2016 referendum. And from that stance, had there been a referendum on the Lisbon Treaty, we would not be in the position in which we find ourselves.

For better or worse, however, such questions are not on the table. And the only one that is can only be addressed by our MPs who may or may not respond to lobbying from their constituents who are themselves divided.

If that is a situation that should never have arisen, it is also one about which it is too late to do anything. We will not be able to re-write the constitution between now and 15 January. But it should give us pause for thought about how we got here, and whether we should be seeking long-term changes to prevent anything like it happening again.

That is the true meaning on the vote on the 15 January. With MPs effectively voting on our future, the outcome of which could deliver us into the hands of untold misery, we have to ask ourselves how it ever came to pass that such a misbegotten group was given such power over our collective destiny.

In asking that question, it may transpire that we decide that decisions of such importance should never be left to the vagaries of our elected representatives. If our futures are to be put at risk to such an extent, then surely we are entitled to make such decisions for ourselves.

Equally, when we are confronted with decisions of such complexity that it is not possible to make an informed judgement, we are effectively being caught up in a lottery which will shape our own futures. To have such a lottery where only the privileged few get the tickets seems to me to be unconscionable.

There we have it. In two weeks, our MPs will be making a decision about a deal that many of us don't want, where the consequences of rejection are as undesirable as the deal itself, and which may cause long-lasting injury. That it is MPs who will be making that decision is a historical accident.

And if accidents happen, they should not be repeated. This should be the last time we are ever put in such a position. And we know where to look for our answers: The Harrogate Agenda is ready-made for this occasion.