Home » British Industrial Policy
Category Archives: British Industrial Policy
There’s no getting around it, the UK rail system is in trouble!
UK rail systems were already facing significant challenges prior to the COVID-19 crisis, let alone what is expected to become a prolonged economic recovery — perhaps with successive waves of Coronavirus to further complicate things — and with some of the country’s rail operators falling into administration possibly within days. That disaster could unfold every week until every train in the country winds up parked.
Therefore, rather than allow a complete unravelling of the UK rail system via government inaction, Parliament needs to nationalize every rail operation in Britain and during this time of light ridership — solve every rail-related problem — beginning with standardizing the customer experience to the highest possible level.
Whichever rail operator has shown itself to be the most successful railway company over the past two-years (success = a good indication how a rail operator handles the profitable times AND an unprecedented national health crisis) should have their key managers hired by the government and placed in overall charge of the (proposed) then-government-run British Rail. That way the country will have the best-of-the-best operating that newly created pan-UK entity.
Click here to see Britain’s 2019 railway rankings.
Boris Has a Lot on His Plate, but This Is Important
Brexit is ultra-important, of course. No serious person would advocate for dropping things where they are and letting the present uncertainty continue. The government’s response to COVID-19 is super-important too, that goes without saying.
But millions of Britons ride UK trains every year; To work, to sporting events, to visit family, and to check on elderly friends who have no ability to run their own errands, or for some much-needed ‘retail therapy’ or for other reasons. Which makes the British rail system the 3rd-most important issue in 2020 for UK politicians, IMHO. Whatever else goes on in Parliament are politics that will inevitably work out over time.
Fixing the country’s rail system can’t wait because whether you’re a student, an employee, or an employer, trains are essential transportation in the UK.
Switching to Government Ownership
The government should purchase all rail systems at full market value and combine them into one mega-unit and merge them with Network Rail ASAP — putting the government in the position of owning ‘everything rail’ in the country. That way, there would be no delays or pushback whenever vital changes need to be made.
Some rail operators were in such rough shape financially — even before COVID-19 wrecked the economy! — that the purchase price might be £1 (only) along with assuming the existing operator’s corporate debt.
The government would be wrong to assume they have weeks or months to ramp-up to take control of every British rail company; Expect one rail company per month to fall under administration, beginning October 2020.
After a railway is shut down it’s more difficult to begin the process of fixing deficiencies once the former employees have moved-on to other jobs and management is consulting with the banks (and law courts) on outstanding financial issues, and their regular ridership are by then car-sharing or have made other lifestyle choices like quitting their jobs. (Why do that? No train, boss!)
Therefore, whatever the government does, they must actually begin to do it — next month. There’s no luxury of time here. Other than Brexit and COVID-19, this is the country’s most pressing issue and it needs to be handled. Yesterday.
- The UK rail system is powered by high voltage (24,000 volt) overhead lines. This was done to make the UK rail system as CO2-friendly as possible. And while that part of it works well, those locomotives are only as clean as the National Grid that provides the electricity of which only 30% is renewable energy annually — much of it produced at night when the wind is blowing but no trains are running. Therefore, electric trains are dirty trains but only because of the source power plant emissions and the high-ish electricity transmission line losses experienced when dispatching electricity over long distances. However, as many electric locomotives are now nearing time for replacement, clean-burning bio-diesel locos could replace today’s electric locos, helping to create a more reliable railway. And bio-diesel locomotives feature 80% lower emission levels compared to old-style diesel locos and (bonus feature!) schedule disruptions due to electrical grid failures will no longer occur.
- With the huge resources available to government, whatever major problems have been deferred by today’s rail operators due to the inability to afford expensive maintenance or upgrades would easily be afforded by the government acting as sole owner/operator of the country’s entire railway infrastructure. Yes, some immediate infrastructure spending would be required, but as the man says, ‘You can pay me now (a little) or you can pay me later’ (a lot) yet, once the upgrades would be completed the entire UK rail infrastructure would last several decades.
- The profound and expensive changes needed throughout the British rail system haven’t been made, can’t be made, and won’t be made by leaving them in the hands of private companies. There isn’t enough profit at the best of times to make both Profit and Necessary Upgrades to their systems. UK rail operators can either have profit or they can make necessary upgrades — not both.
- No private rail operator would say it publicly because saying so would affect their bottom line and risk upsetting their shareholders, but they’ve taken the business model as far as possible — and nobody likes to admit defeat! — but they did the best they could within the constraints they operate under. They can’t say it, but it’s time for the government to take back control of the country’s railway networks, fix what’s broken, upgrade what needs upgrading, and once the whole enterprise is purring like a kitten, sell it as a (by then) successful and profitable operation via IPO. The entire upgraded and profitable enterprise could fetch £1 trillion (approximately) 10-years from now, thereby allowing the UK government to (more than) recover the cost of righting the country’s rail system. Woot-Woot!
Written by John Brian Shannon
Yes folks, it really does take that many people to build a McLaren supercar!
In fact, it takes many thousands of people combining forces to build any car, aircraft, or other modern and/or technologically advanced vehicle.
And the point of this blog post is to show that the UK can add one million manufacturing jobs in the automotive sector alone, just by adopting the right policies — policies that help foreign automakers become ‘part of the solution instead of part of the problem.’
So, please bear with me while I show you how the UK could emerge a winner in the post-Brexit timeframe, create millions of homegrown jobs, boost the economy like never before, and supercharge UK manufacturing exports.
If you like the sound of that, then you’re a British patriot and you want the best for your country. I salute you!
(If you’re a foreign car manufacturer, don’t panic, it’ll work out for you too in the post-Brexit era. Just keep reading ’til the end)
UK Slaps a £25,000 Tariff on any Car or Truck (New or Used) That’s Imported After Brexit
WOW! That got your attention, didn’t it?
It’s not as bad as it sounds, because every auto manufacturer would be invited to establish their headquarters for all Commonwealth of Nations countries (and this blogger suggests) that the UK government should provide brand-new, free-of-charge, turnkey factories to every auto manufacturer that wants to build cars and trucks in the UK and sell them to every Commonwealth of Nations country including the UK, sans tariffs, simply by manufacturing those vehicles in the UK.
Remember, The Commonwealth comprises 53 countries with a combined population of 2.5 billion people by 2020 and a combined GDP that nearly matches the U.S.A.
The UK alone, is the 5th-largest economy in the world by GDP (6th by PPP) and India is the 6th-largest economy in the world by GDP (5th by PPP) and other countries in the Commonwealth include Canada (10th) Australia (13th) Nigeria (30th) South Africa (33rd) and Pakistan (40th) and many others whose economies are rocketing upwards in this young century.
Nigeria alone will have more citizens than the United States by 2060. Maybe sooner.
How many auto manufacturers want enhanced access to 2.5 billion consumers, most of whom live in rapidly growing economies with upward disposable income?
The Commonwealth consumers not living in those burgeoning economies live in developed nations with high per capita incomes like the UK, Canada, Australia, New Zealand and Singapore.
Brand-new, ‘build to suit’ factories, paid for and owned by the UK government, leased to each manufacturer for £1 per year — with the benefit of zero UK or Commonwealth tariffs for those auto manufacturers, and streamlined access to 2.5 billion Commonwealth of Nations consumers.
If you’re a global auto manufacturer, you can’t lose!
Why Would Commonwealth Nations Agree to This Plan?
The UK unemployment rate is low at present, and falling each year.
In 2019, the UK unemployment rate sits at 3.8% and you’ll remember from your economics class that 2.5% unemployment is functionally a 0% unemployment rate — as exactly that many people are in some kind of transitory employment state without being actually unemployed.
Which means the UK is 1.3% away from zero functional unemployment even with all the Brexit uncertainty due to the overly-long negotiating period. (3.8% – 2.5% = 1.3%)
Q: In the immediate Post-Brexit era and assuming a (functional) 0% unemployment rate in the UK, who will the UK call-on to fill perhaps a million new manufacturing jobs?
A: The Commonwealth of Nations countries, that’s who.
And that’s the benefit of being a member of a large and diverse bloc such as the Commonwealth. For the UK, membership in that group means a huge pool of highly motivated workers ready to jump on a plane and begin working in the UK immediately.
For Commonwealth countries, it means hundreds of thousands of their young people will have good paying jobs waiting for them in the UK at the end of their schooling, and good kids will send some money home to Mom and Dad — who after all, probably paid for their child’s entire education and the airfare to the UK.
Workers who show up on-time and do a good job will of course be invited to stay on where the manufacturing continues year ’round, or find themselves invited to return to the UK by their company at the beginning of the next production cycle.
For the UK, this plan would reduce UK unemployment to zero, then allow any additional labour to be sourced from Commonwealth of Nations countries.
For foreign auto manufacturers, this plan would provide a specially-built for them factory at a cost of £1 per year, and guarantee them no automotive tariffs in the UK and other Commonwealth of Nations countries.
Saving Money, Streamlining Production, Centralizing Administration
Let’s pretend at present that Ford Motor Company builds the F-150 pickup truck in different Commonwealth nations and earns low profit per vehicle because the sales numbers in each country don’t quite support one factory per country. And all of its vehicles are subject to a plethora of different tariffs and fees in the various Commonwealth countries, depending upon where those F-150’s are built and where Ford is shipping them. Very inefficient!
But if Ford decides to build all of its UK and Commonwealth-destined F-150’s in the UK, it means that one humongous factory in Britain could build all of them. There are economies of scale in that approach! And to have the land and building built and paid for by the UK government guarantees the economics work for Ford.
All Ford must decide is where in the UK it wants the factory, which car lines or trucks to build in the factory, and pay an annual £1 rent payment to the UK government.
And no automotive tariffs for Ford in any Commonwealth nation, including the UK. Ever!
But This is An Expensive Plan!
No, not really. Especially when you factor-in some of the possible alternatives.
Such as the entire auto manufacturing sector in the UK dying completely. Which is happening in slow-motion anyway. (Rolls-Royce, Bentley, JLR, Mini, Lotus, Triumph, MG, Rover cars, BSA motorcycles, etc. are almost gone, or already gone)
There go a million existing UK jobs! (For just one example of it going wrong) And there go the additional one million UK jobs I’ve proposed.
But if UK unemployment hits 0% in the UK as I expect AND if one million new auto manufacturing jobs are created via this proposal, that means (on average) each of those additional one million auto workers will pay an average £20,000. income tax annually, and thousands of pounds in other taxes on their discretionary spending because almost every time you buy something in the UK you pay some kind of tax on it. New house, new car, new baby pram, you get the idea.
What is one million times £20,000. anyway? That’s £20 billion annually in income tax revenue HM government isn’t presently earning.
It’s even better if those one million additional workers spend every pound sterling they earn on taxable items in the UK. Maybe twice as good as the calculation above shows.
- Check the math: 1,000,000 x £20,000. = £20,000,000,000. annual income tax revenue alone.
- Over 10-years, that equals £200 billion in tax revenue alone for HMG.
- Yes, some of the £200 billion would be spent to build turnkey factories over that decade, but nowhere near all of it.
Remember: This is Just One Example of Why Britons Shouldn’t be Shrinking Back from Brexit!
Whether we’re talking Volkswagen Golf, BMW 5 Series, Audi A8, or whatever car you want to buy in the UK — if they don’t build them in the UK after Brexit — each vehicle imported into the UK would be subject to a £25,000 tariff.
Because at present, those cars are built in the EU, by EU companies, by EU workers who pay EU income taxes, in EU-subsidized factories — and the UK is getting no benefit whatsoever — other than UK drivers are encouraged by slick advertising to hand over their hard earned money to EU car manufacturers.
However, if they build them in the UK — a no automobile tariff regime for those auto manufacturers would apply anywhere in the Commonwealth of Nations, under this proposal.
I posit that vehicles destined for the UK and Commonwealth market could and should be built in Britain, and by adopting better policies, UK manufacturing will succeed as never before!
Airbus Execs Say Company May Leave the UK in a ‘Hard Brexit’ Scenario
The most obvious thing in the world has finally occurred and the only surprise is that it took so long!
Yesterday, Airbus said it would “reconsider its footprint in the country, its investments in the UK and its dependency on the UK,” and further stated that if Britain crashed out of the EU without a trade deal it would entail an “extremely negative outcome for Airbus,” and “would be catastrophic,” etc., etc.,
Certainly, UK Prime Minister Theresa May has said many times that she doesn’t intend on crashing out of the EU without a trade deal and she and her Cabinet have devoted much time and effort towards obtaining a deal.
Whether the EU side has reciprocated in that drive for a deal is another matter. Many of us understand the reason as some in the EU have hurt feelings, and still to this day some continental politicians can’t understand why the UK is leaving and why more than 17-million voters chose to leave the European Union.
Regardless, the UK is leaving. Of that there is no doubt.
If the EU and Airbus want to continue to sell aircraft to the UK they will continue to operate their facilities throughout the UK with no substantive changes.
But if they do leave, it presents an enormous opportunity for the government and companies in the United Kingdom to purchase Airbus properties in Northern Ireland and in Britain to create a homegrown aircraft manufacturer.
When Someone Wants to Leave, Do Yourself a Favour and Let Them Leave (on good terms)
Whether it’s a marriage, a business partnership, or a foreign manufacturer wanting to pull up stakes — do yourself a favour and let them go.
If you stop them from leaving it’s only temporary anyway! So cut your losses and move on brave souls.
There’s plenty to be said about helping them pack and in engaging in some polite small talk until they’re out the door.
Then, as soon as their gone, pull out a blank sheet of paper and design the domestic aircraft manufacturer of your dreams — and get on with it every day until it’s done!
That’s how you get onto the good stuff and prevent yourself from getting bogged down in anger, self-doubt, recriminations, and what-if scenarios. That stuff will drive you bonkers!
Which is why Theresa May needs to take the bull by the horns and politely inquire as to the asking price of all of the Airbus manufacturing facilities which are scattered all over Britain and Northern Ireland — and buy-out Airbus (UK assets only) ASAP.
It’s no time to be a wallflower, it’s time to create a domestic aircraft manufacturer, par excellence!
One that will create just as many (or more) jobs in the UK as Airbus.
Nationalize Airbus, With Intent to Sell
Nationalizing Airbus throughout the UK would cost a few billion, sure, but investors from all over the world would want to get in on THAT IPO!
Commonwealth countries — which make up 2.5 billion people — should be offered ‘first dibs’ on such an IPO to guarantee their participation in that new company, and to help ensure they will choose to order aircraft from that new entity.
The astonishing success story of Airbus, of Bombardier in Canada, and Brazil’s Embraer all point to the success that a UK airline manufacturer could enjoy (assuming the right management team of course) which could also produce their own ‘joint fighter’ and ‘joint bomber’ jets for Commonwealth and developing countries.
Canada could be tapped to produce the landing gear (for example) while Australia and New Zealand could build many of the components for the aircraft, while items with high labour costs (like sheet metal) could be manufactured in India, and seats and luggage bins could be made in Commonwealth nations in Africa and the Caribbean — and all of it shipped to the UK for final assembly and flight testing.
It really comes down to which Commonwealth country can build the best seats, or the best wings, etc., and then simply arrange a build plan around those capabilities.
‘Canada, what can you build better, cheaper, and faster, than any other Commonwealth nation to add to the new [enter name of aircraft here] and deliver it to us for final assembly on a timely basis?’ That’s how you approach each Commonwealth country.
Once the IPO has raised sufficient capital, the UK government could then sell it to that (primarily Commonwealth) investor group.
Not Only Will UK Airbus Jobs Be Saved, But an Entire Commonwealth-wide Aviation Industry Will Have Been Created!
Which is another way of saying; ‘Thank you, Airbus. I love you, and I will always remember you fondly.”
Once Brexit occurs, UK companies and citizens will no longer have the luxury of coasting along like snowflakes caught in a gentle breeze; Rather, UK citizens will need to ‘Man-up’ or ‘Woman-up’ (as the case may be) to rebuild the country into all that it could’ve and should’ve been, all along!
From now on gentle Britons, it’s sink or swim, win or lose, own or be owned… decide how you want to spend the next 50-years.
A great way to start is for the UK government to automatically nationalize every company that wants to pull out of the UK, hold it for up to 6-months, and then sell it to any appropriate investor group that has strong UK and Commonwealth connections and looks viable enough to pull it off in style.
That’s how you ‘Build a Better Britain’ Theresa May!