Wednesday, 24 January 2018

Are we negotiating the wrong Brexit?

Trade and commerce post Brexit has been the core of all discussion since 2016. But when it's discussed, what is discussed is B2B - bulk trade; tankers and shiploads, containers, cheese by the thousand tonnes, wines by the lake. It's all based on the traditional model of shippers, wholesalers and retailers. But just exactly how robust is this model? 

We know that web-enabled B2C - business to consumer - trade volumes are substantial enough to have hollowed out our high streets, and the effects do not stop at national borders. Once every ten days I place an order with Screwfix, and kit - including radiators - is delivered to my front door from the UK four days later. For Christmas I ordered a mixed case of Port from Portugal at about €8 a bottle compared with about €25 locally. English crisps, French cheese, Italian stone tiles are all ordered either directly from producers or their local agents. My music CDs are from the Netherlands and my English bookseller ships via a postal aggregator in Hungary. My work shirts are ordered direct from the US. When I ordered a knock-off Poulsen light from China at a quarter of the £500 price tag of the real thing I had to pay thirty-odd Euros in import duty and VAT - to the postman, all of whom carry cash wallets here as COD remains common in Austria.  

It's not just postal-sized items, either. I saved €1,200 including transport by ordering loft insulation from Germany rather than locally; my snow blower was €250 cheaper from the Czech Republic and I source other plumbing and heating kit from in Poland - a building store that has embraced a Europe wide B2C trade model. The cost of a pallet load from the UK is about £160.

I'd be really interested to know just what the figures are for this sort of business - including the post and pallet-carrier and courier firm jobs. From my point of view, the global consumer market place is now so well established that it is impossible to sever a single limb. And if, after Brexit, I buy my goods from Screwfix at Zero VAT rate and the local postman has to collect it here, the cost is the same to me - but the frictional costs of the tax transaction pass from the UK to the EU. Of course, if vehicle fuel prices increase substantially it would wreck the model - but what are the chances of that?

If anyone has a source for UK-EU B2C trade balances, please do share them.

Monday, 22 January 2018

Indirect Fire

I like stories about Russian ingenuity. I know they're probably not true, but they really ought to be. NASA spent five years and forty million dollars, the story goes, developing a biro that would write in space. The Russians used pencils. That sort of thing.

The most recent is about indirect artillery fire - the sort in which the gunners fire hopefully into the air relying on their maths skills to predict where the shell will land. Thankfully the cerebral activity of gunner officers is usually augmented by forward spotters, who can report where the shell lands and instruct corrections. A hundred years ago, frail canvas biplanes would hover above no-man's land, or poor sods would be hoisted in balloons. Today we've spent millions developing highly skilled forward observers, trained special forces, equipped with high frequency burst radios, laser target designators and the like. The Russians use drones from eBay with go-pro cams. 

Modern steels, unworn gun tubes and munitions assembled by sober workers are century old technologies easy to achieve today. Add simple electronic fire calculators and eBay drones and you have - or rather the Russians do - an indirect fire artillery capability that recently destroyed two Ukranian mechanised infantry battalions in the space of fifteen minutes. 

Our generals are worried. Defence development in the UK is like the Great War; we fling another billion of public money into research and advance a few millimetres. Or not at all. Our ships are equipped with fire control systems that can track a cricket ball but not a Russian or Chinese boosted missile. We simply can't seem to produce the bangs for the bucks any more, whereas Russia, with the GDP of Italy, races ahead with advanced weapons and systems. 

Service chiefs naturally call for more money in much the same way as they call for reinforcements. And I agree that more men, more ships and more tanks are better (the army now has more horses than tanks). But will throwing billions more at defence contractors produce results? It hasn't so far. 

So here's a suggestion. For as long as I've known we've resisted Russian and Chinese spying on our miltech and hardware. Now is the time to turn the tables. Now that we want to make exactly the same leaps without doing the research - i.e. by stealing their secrets - we need to invest more in spies, invest more in bribing their scientists and call for the flower of English womanhood to volunteer itself to staff honey traps for Chinese generals. We should send a battalion of plane spotters to Ukraine, mount 'scientific' research expeditions, equip our trawlers with GCHQ spy gear. Any of which, I suspect, would pay greater dividends than throwing cash at the fatcats of our second rate defence companies.  

Sunday, 21 January 2018

Diehard Remoaners will drop to 15%

The polling is becoming consistent. Michael Ashcroft, a businessman from Belize who takes an interest in British politics, has recently carried out his own polls. These reflect the many ongoing polls collated by the ESRC at What Britain Thinks. Both find by a clear margin that we don't want another referendum. And the indications are that a growing number of Brits are now accepting the last one; the Leavers have hardly changed their views, and moderate Remainers are joining us in accepting that Brexit will happen.

There is also a prediction that a rump of diehard Remoaners will continue; currently estimated at twenty something percent, half the referendum total, this rump is predicted to shrink to some 15% or fewer of implacable EUphiles, some of whom will devote every second of their lives and every pound of their fortunes to punishing their fellow citizens for disobeying. 

These are not ordinary people. These are the wealthy, the powerful, the influencers and manipulators who are used to pulling the levers of society. With access to money and media and the support of global finance and government, they remain incandescent and consumed by bile, derision and contempt for we ordinary folk who dared to disobey them. Gina Miller, her face contorted in fury and hate, on live TV becoming a caricature of a bitterly unhinged woman now showing her years. AC Grayling's very public and ongoing meltdown on Twitter. Blair. Campbell. Adonis. All will be part of the 15% that will never let it go.

Gina Miller before and after the Referendum
They will of course destroy their own lives and happiness with this obsession. It will be a ginormous national sulk that will be turned to humour by a British public. That, at least, is something for which to look forward. 

Thursday, 18 January 2018

The dangers of the media echo chamber

We have moved into an age in which the traditional news media no longer merely report the news but seek to shape it. Newspapers and broadcast media have become political actors, campaigns and even parties. As a consequence, the trust that the public used to invest in establishment entities such as the BBC, or the 'broadsheet' press, has disappeared. They are all guilty of disseminating 'Fake News', and public trust of journalists and journalism is now in the gutter. Alongside that of politicians. 

The consequence of this is that most of us now communicate only in echo chambers, with those who share our views and beliefs, using sources that confirm such opinions. The more pronounced this becomes, the more polarised our nation and society, the greater the mistrust and the more egregious the Fake News. From both sides.  

I have written before that I respect greatly the journalistic integrity of Der Spiegel, an openly left-liberal publication but one that fights the loss of journalistic professionalism in a way that the Guardian would simply not understand. It takes a certain courage for Spiegel to ask 'Is there truth to refugee rape reports?' and then to answer the question in a conditional affirmative. Something I suspect strongly that the Guardian would never do. 

Germans are particularly sensitive to notions of mass rape. Antony Beevor helped lift the lid on the extent of Soviet rape in Berlin - the Downfall, bringing to a popular audience hidden records that both German and Russian authorities would rather have remained hidden. Rape and conquest, rape and invasion, are linked in German historic memory, so sex crimes attributed to migrants are big news. In the German echo chamber, no mainstream news outlet references the website - but Spiegel sought to challenge what it displayed.  

They found that though many of the rape reports were either false or referred to sexual assaults that fall short of rape under German law, many others were based in fact. Now after finding this unwelcome result, a dishonest media outlet would have shelved the result. All credit to Spiegel for publishing. They write;
The classical media find themselves in a quandary here. If we don't write about the issue and about the rumours circulating on the internet, skeptics see that as proof that something is being hidden. Yet if we do write about specific websites like the one covered in this story, we run the risk of enhancing the profile of pages meant to incite hatred online.
So yes, the pandemic of sex assaults carried out by migrants is based on reality. Police statistics back this up. But the real benefit of honest reporting across the echo chambers is to challenge prejudice and preconceptions; migrants commit sex assaults not because they are Muslims or brown, it is suggested, but because they are "more frequently young and male and are more likely to live in a large city, lack education, be unemployed and have no income".

Well, to a point, Lord Copper. I think why they commit such a high level of sex assaults is still open to judgement. But acknowledging that there is a problem is a good start for both polarised sides. And perhaps our UK media, including the BBC, can even learn a lesson that will allow them to raise their own gaze from the gutter. 

Wednesday, 17 January 2018

EU to ban stun fishing. For the second time

The EU's identity as a corrupt but inept bureaucracy was confirmed yesterday as French, Belgian, Irish and British MEPs dealt a kick to their Dutch colleagues in requiring the Council to add a new ban on stun fishing to a change in fishing rules. The Dutch fishing minister now faces another kicking from Dutch trawler owners who have spent over £300k per boat converting vessels to electric stun fishing. The vote was 402 to 232 - by no means overwhelming, indicating nations other than the Netherlands have a snout in this eco-destructive trough. 

The story to date is this. First, the EU banned stun fishing in 1998. Then produced a scientific / technical report in 2006 recommending continuing the ban. Despite which, Dutch lobbying, blackmail or string pulling managed to get an exemption for Dutch trawlers - with the effects described in a previous post HERE.  However, British, French, Belgian and Irish fishermen have mounted an effective and concerted campaign to expose the deep harm caused by the Dutch - with the result that MEPs, fearful of the political reaction at home rather than out of principle, I suspect, have acted. 

However, the law will be written by the EU Council. This leaves the Dutch some wriggle room to water down the requirement, delay it or fail to implement what the EP have requested. These delaying and blocking tactics are all part of the wonderfully corrupt way in which the EU works. 

For the UK, one major problem remains. As I wrote in November:-
One current problem is that Dutch boats can fly the red duster and take UK quotas; the previous requirement on UK flagged vessels being owned by Brit nationals was overturned. Our 1988 Merchant Shipping Act was challenged by the European Court of Justice in the Factortame case and overturned - requiring us to register foreign-owned fishing boats.  A single Dutch owned and crewed vessel, the Cornelis Vrolijk, but UK flagged, accounts for almost a quarter of the entire English catch and about 6 per cent of the total UK quota. It lands all catches - some £17m annually - in the Netherlands.
Michael Gove must act now to prepare to reverse the effects of Factortame and to restore the 1988 Merchant Shipping Act to the form in which it was agreed by our sovereign parliament. 

Tuesday, 16 January 2018

Carillion - sub contractors and suppliers

For the construction arm far more than the FM concerns, intelligent journos have started to pick up on the impact of the firm's collapse on other than direct employees. The real pain is likely to be felt by sub contractors and suppliers - with an impact on tens of thousands of people working for smaller firms carrying out specialist works for the fallen behemoth.

Subbies are always the last to be paid anyway, and have the longest wait for their money as main contractors will generally not pay until their own monthly claims have been passed, and even then may pay only a percentage, with their own retention in place. Main contractors who have won work by underbidding will also squeeze subbies already contracted. I know from personal experience how very close to the edge many subbies on big jobs walk.

Ideally, if the job is to be finished, the subcontractors will be novated to the new main contractor on the same terms - but even this takes time, and when it is likely that Carillion haven't paid them for three months (and they may end up with nothing) the prospect of waiting another three for a payment from a new principal contractor will force many to the wall. 

Clients will only find main contractors to replace Carillion on cost-plus terms if continuity is to be maintained; there is simply no time to cost and negotiate new contracts. And rescue firms will know they must secure rock solid fee agreements now, up front; clients happy to agree crash costs at times of crisis will always backtrack once the hiatus of the rescue is over; getting it sewn up tight whilst you have the advantage is the only way. 

And make no mistake, it's the clients that will pay. As long as the crash costs now are equal to or less than costs of demobilising the schemes, mothballing, re-tendering and re-mobilising, with all the substantial costs of delayed delivery, they will pay. And that means us - taxpayers - in many cases. There really is no alternative. The least-cost options will still cost us a fortune.

Monday, 15 January 2018

When construction pigeons come home to roost

Balfour Beatty must be breathing a sigh of relief this morning that Carillion's recent takeover bid was not successful. BB was lined up to follow Mowlem, McAlpine and Eaga to boost Carillion's sales and potential profits in a process that only works so long as there are more companies with which to merge or take-over; once the music stops, the whole thing generally collapses. 

Carillion was overburdened with debt and major construction contracts were simply not providing the profits to service them. This was disguised for a while by accounting for 'other receivables' i.e. money expected to be released from construction contracts, but never materialising. And this is a tale that is common throughout the construction industry. 

I once let a large contract to a subsidiary of a well known mega firm. It was a newish subsidiary run by set of very confident managers, but with no great track record. Still, their bids were excellent value and they were underwritten by their parent. Shortly after my contract started, rumours came in of heavy time over-runs on another job. They moved key contract management staff from my job to the problem job, and as a result they fell behind on my job. Their solution was to bid low for yet another job; the ever-growing order book made the risk of losses look unimportant. They failed to perform adequately on the third job, too. All the while they were reporting expected contract out turn as close to budget - even when they were into LADs for late completion. A few weeks after my job finished and the final account on their first job became clear, they submitted requests for additional payments of several millions. All the while they were still reporting to their board high levels of profitability - the cost claim was 'income' and contrived to maintain the fiction for as long as possible. 

Well, we demolished their silly claims without breaking sweat, but that took time. By the time their major losses on all three jobs became clear, the parent company decided to close down the subsidiary. The very confident managers became ex-managers. The fact is that they were able to continue forecasting profitability long after the point when it was blindingly obvious they'd cocked up hugely.

In effect, the head company shareholders subsidised my scheme by their cocky managers underbidding and hoping to make up the profits from changes, additions and variations. The form of contract I used didn't allow very much scope for that. 

Well, I'm sorry for all the good folk at Carillion including those I know and have enjoyed working with. But that's mega construction firms for you.