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Will a ‘No Deal’ Brexit Harm UK Manufacturing?

by John Brian Shannon

Certain pro-EU commentators paint a picture of either a catastrophic Brexit crash-out (Hard Brexit) or a ‘non-Brexit’ where the UK would retain few of the rights gained by a full Brexit but would still be chained to the responsibilities of EU membership (Soft Brexit) whether via the so-called ‘Norway’ model or the ‘Norway-plus’ model, or via any other model such as the ‘Canada’ model.

Those same commentators excitedly cite potential UK manufacturing job losses in the post-Brexit timeframe even though the UK is primarily a service based economy (80.2% in 2014 and rising) and they forget to factor-in the astonishing changes occurring every day in Britain’s manufacturing sector.


UK Manufacturing = Less Than 10% of GDP

Manufacturing in the UK accounts for less than 10% of GDP (2016) and provides jobs for 3.2 million workers (2016) but a recent PwC report says that by 2030 half of all UK manufacturing jobs could be automated. That’s less than 12-years from now. And it could happen much faster and on a much larger scale than that.

Repeat; Up to half of all UK manufacturing jobs will be lost within 12-years. It’s uncertain whether British workers are aware of these looming changes.

Economic impact of artificial intelligence on the UK economy

The economic impact of artificial intelligence on the UK economy. Image courtesy of PwC. Click on the image to view or download the PDF report.


What’s Great for UK Businesses Won’t be Great for Foreign Workers

In 2018, of the 3.1 million UK manufacturing workers (a stat that falls with each passing year as automation increases) we find that over half of manufacturing workers in the UK are citizens of other countries — primarily from eastern Europe, but also western Europe.

So, expect UK-based eastern European workers to be replaced by automation.

Increasing automation and Artificial Intelligence (AI) will cause UK companies to choose between UK-born workers and eastern European workers, and it’s likely that hundreds of thousands (perhaps millions) of eastern Europeans will be returning home with plenty of UK coin in their pocket. (And why not, they earned it)

I hope you didn’t expect the UK to lay-off its own British-born workers in order to protect the jobs of eastern European-born workers as automation proceeds, did you? Would EU companies show that level of courtesy to UK workers in the European Union, were the situation reversed?

Profits for UK manufacturing companies are projected to rise significantly as automation and AI become one with the system, while UK-born manufacturing workers should find themselves at 100% employment.

What’s not to like?


UK Manufacturing Job Losses Due to Automation – Not Brexit

If you’re one of the EU elites who fear that hundreds of thousands of eastern European workers in Britain will lose their UK manufacturing jobs due to Brexit you couldn’t be more wrong.

Let’s be perfectly clear; Half of all UK manufacturing jobs will be lost to automation by 2030 — and it won’t be on account of Brexit!


Summary

The narrative that says the UK economy will be severely damaged on account of manufacturing job losses due to a Hard Brexit is a complete and utter fantasy.

Every day from now until 2030, automation and AI will replace eastern European workers, Brexit or no Brexit. Meanwhile, British-born manufacturing workers will find themselves at full employment.

It’s all good!


Related Articles:

  • How will artificial intelligence affect the UK economy? (PwC)
  • The economic impact of artificial intelligence on the UK economy (PwC)
  • What would be the cost to the UK of regulation by a foreign power and major competitor? (BrexitCentral.com)

Austerity Has Changed How the World Views the UK

by John Brian Shannon

Why, for the love of God, don’t governments utilize the most obvious solutions to solve their budgetary challenges whenever a global financial crisis hits, instead of defaulting to budget cuts that can appear either inept or mean-spirited?

Finance Ministers don’t set out to craft inept or mean-spirited policies during times of economic crisis, but that’s how it plays out in the media and in living rooms across the country or wherever people gather to discuss the economy.

In the UK, this manifests itself in the names that people call their political parties.

If government austerity cuts don’t affect you, you continue to call the Conservative Party by its rightful name. But if austerity hits you hard, then you’re one of those who’ve taken to calling the Conservatives ‘The Nasty Party’ — and they’ll never get your vote ever again, etc., etc. (Yes, I do empathize, BTW. But that’s not what this blog post is about)

It just depends upon which side austerity hits you.

And budget cuts (at least budget cuts perceived as unfair by a significant percentage of the population) almost always result in either a lost election or loss of parliamentary majority at the next election. Check out those stats! (You’ll see how true that statement is)

Theresa May’s ‘hung Parliament’ election result in June 2017 is 100% attributable to the UK austerity budgets that have been in effect since 2010, and hers is just one example out of many majority governments around the world that have suffered as a result of their austerity policies.


There IS a Better Way!

Due to market conditions, about every 25-years a recession comes along in the capitalist countries. You can almost set your clock by it. It’s the ‘nature of the beast — carry on’ is how recessions are described by economists, and nobody tries to prevent recessions, as such ‘resets’ help to prevent even worse economic crashes in the future.

Still, there’s a way for countries to survive economic downturns WITHOUT shooting themselves in the foot every day of the recession. (A novel idea!)

The public knows an economic downturn when they see it. In fact, they have enough experience in their own lives balancing family finances when times are good, let alone when domestic financial challenges appear such as a job loss or (suddenly) another mouth to feed. Therefore, they know the government must compensate whenever the country faces a financial challenge.

The question for governments is how to do it and not lose the next election. Or the one after that.

And the answer is; To do it fairly.

That is; Apply cuts that will be perceived as ‘fair’ by a majority of the public  — instead of deep cuts to some departments while other departments see no cuts at all, or worse, are able to increase their spending.

Does it seem fair to you while in recession that Health or Education should receive deep cuts, while spending on the military or the environment is unaffected? (I’m just using hypotheticals here for an example. Every Briton knows their military is chronically underfunded and few begrudge the UK military being exempted from budget cuts)

Back to the subject at hand; Every department in practically any organization on the planet has 5% ‘fat’ built-in to it. It’s just the way of organizations.

Budgets tend to be tightly managed in the first few years, then, over time, surpluses accrue or unused properties aren’t sold off as quickly as they could be, or in other ways there’s potential for either budget savings or revenue increases. Or, depending on the department, perhaps a combination of selling off unused assets and departmental savings could meet the new budget targets set by the government.

If you’re a large organization like the UK government and you expect your revenue to fall by 7% (for example) here’s the way to do it fairly!

Simply inform your departments of the 7% budget exigency, and instead of arranging deep cuts for some departments and zero cuts to others which sets the seeds for future electoral defeat, inform all departments to cut their budget by 7% — or alternatively — tell them to find ways to increase their revenue by the shortfall amount.

Let me be clear, if former Chancellor of the Exchequer George Osborne had simply told every government department in 2010, “We’re facing a 7% (or whatever percentage) cut in revenue, therefore, each government department must cut 7% from their annual budget until further notice,” each department would’ve done exactly that and hardly anyone would’ve noticed. (Remember, every organization/department already has 5% ‘fat’ in their system, so only a 2% budget challenge remains in this hypothetical example. At that point, accounting for the final 2% equates to selling off surplus real estate assets until that amount is obtained)

On the other hand, some departments might be real estate ‘heavy’ and could counter their entire 7% budget challenge by simply unloading their surplus real estate, thereby meeting the government’s directives to cut costs by 7% or increase revenues by 7% (or any combination thereof) to hit their departmental budget targets.

Wouldn’t that have been much better than the pain inflicted on the bottom-two economic quintile people in Britain (and which cost Theresa May a parliamentary majority) all of which has conspired to cheapen the ‘British brand’ around the world?

Read here, in the New York Times just how ‘fairly’ or ‘unfairly’ (depending on your worldview) the United Kingdom’s austerity plan has been portrayed around the world.

A country’s fortunes (fairly or unfairly) can rise or fall based on the perceptions of large numbers of people. Let’s hope that future UK budget cuts will not only be fair, but be seen to be fair by large numbers of Britons and by people around the world.

Brexit: The Trigger for a New Atlantic Alliance

by John Brian Shannon | October 4, 2016

Britain, more than any other Atlantic Ocean nation, would benefit from an Atlantic Alliance free trade zone precisely because it is an island nation, and as such it depends on free trade and movement of goods in order to thrive to it’s full potential.

Since the Roman era Britain has enjoyed a historic presence in the Atlantic Ocean for good reason — island nations need regional trade to survive and international trade to thrive.

For Britain, there is no way forward without enhanced international trade. In principle, islands should always be the strongest proponents of international trade and international law for the very reason that they profoundly need the world to function that way.

Japan set a wonderful example for all island nations in the postwar era, but never moreso since the Arab Oil Embargo of 1973 when U.S. consumers suddenly decided to switch their gas-guzzler cars for lower priced and more fuel efficient Japanese cars.

Not only were millions of cars imported from Japan over the following years, but because the necessary technology to build cars was transferable to home and personal electronics, Japan received a double boost to it’s economy every day since the Arab Oil Embargo.

From one of the worst performing economies in the world in 1946 to it’s peak as the #2 global economy in the 1990’s — the Japanese economic miracle rode its high quality manufacturing base that catered to the needs of billions of consumers. By any standard it remains an impressive accomplishment.

And now it’s Britain’s turn to shine as the world’s next booming economy.

Although much has changed since the oil supply shocks of 1973, the world economy continues to grow, with developing nation consumers seeing comparatively massive increases in their disposable income, presenting a wonderful opportunity for a Britain suddenly freed from an overly bureaucratic political union.

Therefore, let us count the ways that an Atlantic Ocean trading alliance (a free trade zone, that I propose be restricted to nations that front the Atlantic Ocean) could benefit Britain and the other Atlantic nations.

Atlantic Ocean map

Britain, more than any other Atlantic Ocean nation, would benefit from an Atlantic Alliance free trade zone precisely because it is an island. Atlantic Ocean map. Image courtesy of Geography.name

In the North Atlantic, we have the United States, Canada, Greenland, Iceland, Ireland, the United Kingdom, Norway, France, Spain and Portugal.

In Africa; Morocco, Western Sahara, Mauritania, Senegal, Gambia, Guinea-Bissau, Sierra Leone, Liberia, Côte d’Ivoire, Ghana, Togo, Benin, Nigeria, Cameroon, Equatorial Guinea, São Tomé and Príncipe, Gabon, Central African Republic, Democratic Republic of the Congo, Angola, Namibia, and South Africa, front the Atlantic Ocean.

And in South America, we have the South Atlantic nations of Argentina, Uruguay, and Brazil fronting directly onto the Atlantic Ocean — while French Guiana, Suriname, Guyana, Venezuela, Columbia, Panama, Honduras, Nicaragua, Belize, and Mexico and many island nations reside within the Caribbean Sea — which is of course, easily navigable to the open Atlantic Ocean.

All of these nations should receive a warm invitation to join such a trading block.

It is perhaps the best matchup of nations since the Bretton Woods Agreement of 1944. In the list of Atlantic and Caribbean nations, exist the most developed nations to the least developed, from the most overbuilt tourist locations to vastly underbuilt tourism markets, to the astonishing per capita petroleum and mineral resource base. Such opportunity abounds for those who pursue economic interdependence between Atlantic nations! From the most highly skilled labour to the cheapest labour, and among the highest cost real estate to the cheapest agricultural land in the world, everything that a developed or still developing nation needs can be easily found within this trading area.

The economic opportunities are uncountable, and they are sitting there untapped. At the moment, it’s a criminal waste of opportunity that must rank as a negative for every Atlantic nation whether developed or developing.

The obvious move here is for British Prime Minister Theresa May to voice strong support for an Atlantic free trade zone, contacting representatives of each country to find out what Britain offers, that can mesh with the needs of each Atlantic Alliance trading partner. And vice-versa.

Once some activity generates and some new trade begins to take shape, it would be wise to meet regularly to discuss standardization of regulations, whether shipping or other modes of transportation, financial, tourism, and other ways to work together. Even the baby-steps of working together to protect maritime shipping from at-sea piracy, or to form mutual aid groups designed to streamline hurricane or other natural disaster relief would demonstrate ways that Atlantic nations can work together for mutual benefit.

If the NAFTA model is used as the trading template, some of it’s terms could be adjusted to better suit the preferences of all Atlantic Alliance members, or it could be seen as the eventual goal for all members to reach at some point. At the very least it could be used as a reference point, a place to begin discussions.

By leading such an effort Britain would be well-placed — not to own the Alliance — but to offer it’s expertise and experience, so that the end result is a Win-Win for every nation involved. That is what makes for strong partnerships, and strong partnerships always make economic sense.