Brexit the economy and house prices part 6

Thrugelmir

Zero_Gravitas wrote: »

Fixed that for you.

Time to move on. Having a chip on your shoulder will do you no good.

Thrugelmir

Ballard wrote: »

If companies do opt to leave these shores and aren’t sufficiently replaced then we will have less money to spend.

Companies are having been moving production off shore for decades. Nothing to do with Brexit. Even the EU as a whole relies predominantly on service industries. Not healthy for the long term.

Zero_Gravitas

Thrugelmir wrote: »

Time to move on. Having a chip on your shoulder will do you no good.

What? You mean just like you haven’t?

And no, it’s not. This isn’t over, and not by a very long way.

Ballard

Thrugelmir wrote: »

Companies are having been moving production off shore for decades. Nothing to do with Brexit. Even the EU as a whole relies predominantly on service industries. Not healthy for the long term.

Just saying that companies won’t leave because of Brexit doesn’t make it true. Note that I’m not saying that they will leave but I think that it’s foolish to think that they definitely won’t.

AFF8879

Ballard wrote: »

Just saying that companies won’t leave because of Brexit doesn’t make it true. Note that I’m not saying that they will leave but I think that it’s foolish to think that they definitely won’t.

Agreed but you also have to weigh up the balance of probabilities. The economic opportunity cost of Brexit is not as simple as units exported x X% increase in tariffs. They also need to consider;

- the cost of relocating premises: if currently renting, will there be a penalty payable? If owned - will they achieve the value required?
- staff (thinking more of higher earnings/ senior managers here): are staff willing to move their families from a nice suburban English town with good schools to a dodgy Paris arrondissement, or some Eastern European backwater? If not- can the business source the requisite skills and experience in these areas? Also accounting for the knowledge that is accumulated in the current workforce
- (for manufacturing based industries) how do the logistics compare to their current UK base? Will effective transport of materials be more expensive and if so how will that be funded?

Of course I am not saying nothing will move or change, but I think many people underestimate just how costly relocating a business is. I think what we will see in reality mimics what we have already, a minimal relocation of core functions to satisfy legal requirements and usually impacting the low-power unskilled labour which tends to be threatened with outsourcing anyway.

Ballard

Interesting that the choices seem to be limited to Eastern Europe or a dodgy bit of Paris. If we’re talking of senior executives, as you are, I rather think that they’d be able to find a lovely part of whichever city they’d move to.

Anyway, if there is no trade agreement then it may be that for the company to continue to trade profitably they will have no choice but to relocate. At this point we have no idea what customs will look like but it could be a nightmare to transport across the channel. Hopefully not but if it is then that’d be a big factor.

Herzlos

It's also worth noting that leases will run out eventually, offices will need refurbished, assembly lines replaced. When these costs come up then moving into the EU will get serious consideration for businesses that value single market access.

There's also no reason to think they'd need to move all of their staff; a few managers to get the EU site running and then replace UK staff with EU staff as they leave, and you'll be able to shift entire businesses without upsetting people that don't want to move.

But apart from inertia; what does London have that Berlin, Paris or Rome don't?

Thrugelmir

Ballard wrote: »

Just saying that companies won’t leave because of Brexit doesn’t make it true. Note that I’m not saying that they will leave but I think that it’s foolish to think that they definitely won’t.

If you were a CEO earning £10m a year. You would have no hesitation in doing what was in best interests of your shareholders. That's the bottom line. I first encountered aggressive US capitalism some 30 years ago. Nothing since has changed my opinion.

Thrugelmir

AFF8879 wrote: »

Of course I am not saying nothing will move or change, but I think many people underestimate just how costly relocating a business is.

Tata began building the new Jaguar plant in 2016 in Slovenia. Let's say a 3 year decision and planning lead time. That takes us back to 2013. Brexit wasn't even on the agenda. The decision was cost based. Land, labour etc etc.

AFF8879

Herzlos wrote: »

But apart from inertia; what does London have that Berlin, Paris or Rome don't?

How about skilled labour pool, English as a first language, superior legal system, superior universities, better transport and logistics networks, financial services infrastructure, more varied culture and nightlife....

Though Berlin would be an infinitely better option than Rome IMO; but the reason London is more sought after both by professionals and tourists for decades is something that would take something catastrophic to reverse. If Brexit meant all trade with Europe would stop, then I might agree....