ANALYSIS: The inevitable collapse of the UK economy, and why delayed Brexit will make it far worse

metough The current global obsession with Brexit is not, in the fullness of time, going to fool historians. The one regrettable thing about the UK vote to leave the EU is that is has allowed most Brits to ignore one certainty: our economy is hopelessly unbalanced, and dangerously exposed to Crash2. Rigid ideology has extinguished the British voyager gene.

In Autumn 2013, the services sector of the UK economy was 72% of gdp. Today – just three years later – it’s 79% of gdp.

On the same basis, manufacturing was 10.8%, and today it’s 9.1%. This simple table shows the obvious trend over time:


If these rates of relative increase and decline between the two continue, by 2020, we will be an 87% services and 7.7%  manufacturing economy. But if that sounds lopsided, it gets worse when one moves into the export sector.

In net terms, we lose money on every single manufacturing activity that we export – going forward, to the tune of £108 billion. The less we make, the more we have to import. This is especially true of vehicles and food.

To all real intents and purposes, the UK’s profitable trade is almost entirely made up of services.

Now every day, you can switch on business channels and hear Muppets like David Buik wittering on about how we can’t do without the City – and the more money it makes, the more we should invest in it. But this level of overdependence on one sector is insane. If the breadwinner for us was crack cocaine and it was legal, it might be a different matter, ethical considerations notwithstanding. But these services are in many cases pure frippery. They involve, among other things:

  1. Pushing buttons on electronic shares, commodities, futures and so forth
  2. Education, which is often the selling of further education courses to foreigners
  3. Insurance services
  4. ‘Knowledge services’ or writing market studies etc
  5. Personal recreation – fashion, TV programmes, movies, electronic publishing
  6. Investment advice and banking services.

First up, we saw in 2008 how badly wrong things can go in areas 1, 3 and 6. So biased to ethereal financial fantasy is our economy, when everyone else catches a cold, we get pneumonia. And that fantasy is a far bigger nightmare of exposure in 2016 than it was in 2008.

Second, any real business entrepreneur knows only too well that selling information and training is a finite seam: the minute any emerging nation can use its own people and make its own stuff, then the business is over. Furthermore, the dumbing and dilution of college course quality in Britain is a standing joke: very soon, our dominance of this sector is going to be found out. So sectors 2 and 4 are equally dodgy.

That leaves fashion and entertainment….along with knowledge services, the very first thing to be cut by consumers and corporate entities in times of recession.

These are the facts: we don’t grow stuff any more, because multiple supermarkets import like crazy – and construction companies giving donations to the Conservative Party keep gobbling up such land as we have left; we don’t make stuff that’s innovative and competitive any more, because fat directors prefer engorged bonuses to research, cost control and development; and none of this is being rebalanced, because neither major Party understands organic entrepreneurial manufacturing: one lot only knows how to financialise it, and the other shower only know how to spend it.

As the undeclared world recession gets worse, the EU collapses, and banking failures start to come on stream, Britain’s profitable trade is going to collapse. Really: it won’t just take a dive, it will virtually disappear.

And here’s the real irony: it will be much, much worse if at that moment we’re still in the EU….because that’s where the worst debts are, that’s where the weakest banks are, and that’s where our biggest trade losses are. Our EU trade is now 40% of all exports but only 18% of profitable exports. The EU itself issued forecasts eighteen months ago showing that within ten years, 90% of all new world trade will be outside the EU.

But the blame for Britain’s export failure overall lies with political ideology in general, and political leaders in particular, not the EU. My own personal distaste for Brussels hinges around its illiberal, undemocratic structure of governance, and its use of both media lies and illegal fiscal pressure to bully member States into submission: for me, it has little or nothing to do with business.

Three economic ideologies have dominated British life in the last 70 years: in turn, socialism, Thatcherism, and neocon globalism. Socialism gave British citizens a profoundly compassionate health, education, welfare and pension system that both led – and was the envy of – the world. But the taking of power in the Labour Party by an uneasy alliance of bourgeois intellectuals and trade unionists during the 1960s perverted the system on many levels. Margaret Thatcher’s revolution after 1979 was an archetype of Year Zero ideology, in that it put the TUC back in its box – but also spitefully killed off manufacturing areas and communities, while providing little or no real help in the process of redeployment. Most of all, its programme of privatisation and financialisation was disastrously naive in the trust it put into greedy hands tempted by deregulation.

By the end of her time in power, the social weal was a butterfly crushed on the wheel of a capitalism busy reinventing itself on financialised Friedmanite lines.

Unable to see that collectivism had been rebuffed, the Labour Party eventually turned to revisionists who reinvented it as Tory Lite, aka New Labour, in the years up to 1997. It gave birth to the  substance-free spin of cynics, who also did nothing to redeploy the working class as was, but exacerbated the situation by letting immigration rip. By this time, globalism was the coming motif, and as immigrants provided cheap labour to keep up the appearance of a nation being competitive in the newly-connected World markets, Tony Blair and Gordon Brown were happy to look the other way as poor immigrants and long-term unemployed indigenous workers began to develop a mutual distrust alongside a joint antipathy towards growing wealth inequities.

By the time the worst-prepared Prime Minister and Chancellor in UK history came to power in 2010, a Crash in 2008 had already clearly identified the myriad faults in the neoconservative ideology. As David Cameron woffled about the Long Term Economic Plan that clearly wasn’t a plan, Chancellor Osborne focused on impressing idiotic debt-vultures in the financial Markets that Britain was getting its debt under control. The equally ignorant eurozone effort to do the same via Wolfgang Schäuble’s Eurogroupe star chamber also impressed the Hedge Funds, and put Osborne in good odour with the Brussels-am-Berlin élite now busy running the EU into the ground.

In 2015, the Camerlot Conservatives were able to dump their LibDem partners and rule alone….despite the obvious fact that the Government had failed on deficit reduction, increased the National Debt by 50%, and spectacularly failed to slow down the immigration rate. It is to the eternal shame of Ed Miliband and Ed Balls that they were unable to focus on Conservative fiscal incompetence, or spot the growing influence of UKip in general and Nigel Farage in particular, during their time in Opposition. It was the unemployment, sovereignty and EU’s clueless corruption that finally formed an alliance of those dispossessed and forgotten by Britain’s Whiteminster élite: to the horror of the globalist clique, Britain voted to leave the EU in May 2016.

The dominance gained by Brexit as an agent of division is unlike anything else I have experienced over nearly seven decades. And yet, it is a chickenfeed issue compared to other dangers like NATO madness, global media in the hands of greedy monsters, Italian bank and debt crisis, massive cross-Europe migration, rising Islamic brutality, Middle Eastern instability, the still parlous nature of China’s difficult role as a global supplier of goods, and the populist backlash against political correctness.

While Brexit has been blamed for everything almost up to the weather, it is a gnat’s bite of further irritation within the socio-economic and constitutional British tragedy that is now unfolding….unfolding before the eyes of everyone except Labour, Liberal Democrat and Conservative MPs.

Brexit is a distraction from a much longer-term problem in the United Kingdom: that of rigid ideology’s deadly effect upon normal economic and fiscal actions. Indeed, it is the thinking and cognition contortions ideologues need to get into that has made Brexit itself such a bitter experience for many of us. Many on the Right claimed it would be easy, and an equal number on the Left gave forth with untutored predictions of doom…while refusing to accept they were in denial about the EU’s innate antidemocracy.

In short, Brexit has been a brief Masturbation Class in what’s wrong with Britain: that is, its preference for poorly developed belief systems based on little beyond “there is no alternative”. But Brexit is not and never will be the downfall of what was once the British Empire. At the moment, Britain is going down the tubes because die-hard neocons are in control, and die-harder socialists are too consumed with power-struggles to control them.

Two years from now, a neocon England outside the EU could be facing a neosocialist Scotland inside the EU….and all Opposition in both countries will have disappeared. But whatever the Tories, Labour or UKip pretend, if tomorrow the answer put forward across Europe was (a) demolish the Brussels bureaucrats and (b) the Frankfurt central bank as part of a return to the EEC, over 70% of EU citizens would vote for it….including those in the UK.

Thanks to rabid fascist ideologues in all the key positions of power, however, it will never happen. Populism could easily morph into the sort of illiberal revolutions that Europe has experienced for nearly a thousand years. A Trumpian America could decide that enough is enough, and choose to deal with Putinesque Russia over our heads.

And still it wouldn’t solve The British Problem. For that is one of blind belief in the past, and thinly disguised fear of a future without that security blanket of correctness.

“Wealth trickles down!” yell the Neocons not for turning

“Socialism produces universal human happiness!”  yell the Collectivists not for learning.

“Oh dear,” murmur the philosophers, “I smell Rome burning”.

Yesterday at The Slog: Why familiarity breed