Actual economic effects cont...

[ManonLescaut]

Telegraph: Britain could be up to 70 billion worse off if it leaves the single market IFS warns

The respected economic think tank said that Britain could enjoy an extra 4 per cent in national income if it remains in the single market, equivalent to two years worth of growth.

The report claims that while leaving the EU will free the UK from an estimated £8 billion a year of budget contributions, the loss of trade from Brexit could hit tax receipts by a larger amount.

It found new trade deals would be unlikely to make up for lost EU trade, which accounts for 44 per cent of British exports and 39 per cent of service exports.

Telegraph: Treasury looks at quitting the single market

Officials say the talks have revealed a willingness among some top figures to scrap passporting despite early calls to stay in the single market from some quarters...

Mr Boleat cast doubt over the UK’s ability to secure a Norway-style deal to remain in the single market. He said accepting free movement of people and paying large sums to Brussels while accepting its rules would not be politically acceptable.

The BBA wants the UK to leave the single market but retain unimpeded access to EU markets.

I want to work at Oilver Woman. Thnx phone.

"knock-on impact"

Such as management consultancy jobs Oliver Wyman ?

The sensible estimate assuming a static case is about 20% of the revenue at risk, probably a 10% revenue or 5% net profit loss, or around £6bn revenue loss. Still a lot of money.

Strangely though, Commerzbank, ING have been firing people left right and centre even though they are not doing any sort of Gexit or Nexit.

Aren't they suppose to be up sizing to pick up London businesses ?

This is interesting (behind paywall) - deputy governor says BoE to move away from decisions made on the basis of available data (as has been the norm for the last few years under Carney) to basing them on judgment:

Britain has weathered the shock of the European Union referendum far better than expected, but the real damage will come from companies delaying investment decisions amid uncertainty about long-term trading arrangements, Mr Broadbent told The Times. As a result, rate decisions will be influenced increasingly by judgment rather than hard data.

"We have to balance the short-term data against the medium-term outlook,” he said. “When we say data, it’s a broad-term. We know there is an effect coming, we know the world looks potentially very different. We’re pretty confident that the effect of that uncertainty will weigh on investment. It’s difficult, therefore, to weigh those two things.”

www.thetimes.co.uk/edition/business/we-cannot-rely-on-data-the-brexit-effect-is-coming-says-bank-deputy-0k8swfk07

Interesting as they are sufficiently anxious to not trust the data that's coming out.

Where do those figures come from topsy?

Nightofthetentacle

Google "Fifth of City revenues could be hit by 'hard Brexit' FT.

It says (20% / 1/5) = £9bn at risk. 10% is 4.5bn and I added in a little extra headroom and make it £6bn of worst case actual loss of revenue.

I think the flaw in your workings topsy is that that report refers only to investment banking revenues. They are actually pretty small, compared to the total revenues on insurance, asset management, retail banking and all the back office, support and consultancy functions.

The OW report has considered city revenues as around 200bn - take your "a fifth" of that and you have 40bn of lost revenue. That is actually more pessimistic than the 38bn the OW report estimates.

Even your rule of thumb (must show workings ) would give 25bn of lost revenues.

We mustn't start thinking "the city" is just investment bankers in handmade suits, there's a great, great many normal folk in there too (I speak as one).

£200bn is about 9% of the GDP - which the figure used for total financial services.

The local building society down the road isn't going to get affected. What serve the UK, NA and RoW aren't going to get affected. So, the starting value is far far smaller. 1/3 (£66bn) of that is a reasonable starting point. Out of that, some are not at risk, so a £30-40bn figure is probably a reasonable sum that has anything to do with the EU.

Jobs at OW are probably going to affected as their scare mongering report will no longer be needed once the thing is in motion

" to do with the EU. " should read "to do with EU SM/Passporting"

"The local building society down the road isn't going to get affected"

It will if credit streams dry up.

£30-40 bn from GDP from one sector fails to acknowledge the negative multiplier effect of this loss.

"Scaremongering"

Ah back to that are we?

I think the point of the OW report is that you can't just hack out the EU specific functions, that there are wider impacts (suddenly it makes much more sense to move your regulatory compliance function to Ireland, or potentially your entire operation). It is worth a read, and I would be very happy to debate where you think they have overestimated the negative impacts.

<a class="break-all" href="https://www.google.co.uk/url?sa=t&source=web&rct=j&url=www.oliverwyman.com/content/dam/oliver-wyman/global/en/2016/oct/Brexit_POV.PDF&ved=0ahUKEwiW4JmhhMbPAhXhD8AKHVXkAzEQFggbMAA&usg=AFQjCNG8Z5a1k3DlmRJ1z5dWskA5R4P7fw&sig2=icbIMAsJ0vlTLpfwIsMf_A" rel="nofollow" target="_blank">www.google.co.uk/url?sa=t&source=web&rct=j&url=www.oliverwyman.com/content/dam/oliver-wyman/global/en/2016/oct/Brexit_POV.PDF&ved=0ahUKEwiW4JmhhMbPAhXhD8AKHVXkAzEQFggbMAA&usg=AFQjCNG8Z5a1k3DlmRJ1z5dWskA5R4P7fw&sig2=icbIMAsJ0vlTLpfwIsMf_A

I am, btw, a great fan of "back of the fag packet" calculations, but they only work if you have some better, detailed thinking to reference them against. Otherwise, you're just making stuff up to suit the argument.

Cf also "if we take 100% of 350m, and allocate it to the NHS...

I also realise that although I might view myself as "normal folk", having dragged myself across the snowy moors to obtain learning, and up through interview, sales pitch, and through many a tedious document to where I am today, I am probably now a member of the sneering metropolitan elite and so should rightly keep my opinions to myself.

The elites narrative is just nicked from trump, its frankly a load of rubbish to try to get the disenfranchised on board.

I know - it's a bloody playbook. The terrifying thing is that people I know parrot it - bright people who would view themselves as politically engaged - and then follow up with "but not you obviously"

Oh, posted too soon: here is a nice definition of "populism" via Princeton.

(n) populism (the political doctrine that supports the rights and powers of the common people in their struggle with the privileged elite)

I have the data and there is no point for being precise on these sort of estimate as only true economists think they can achieve precisions in economic forecasting.

My interpretation of the data guides my investment and business decisions. You are of course welcome to interpret it in your own ways and back those decisions using your shareholders money.

"pound hits new 31 year low"

www.ft.com/content/492dbc41-f948-3d6b-a165-8bd246ab1d78

Just so you know what the 31 year low we are aiming for might at some point overshoot, it is 1.042, so there is a bit to go next.

There seems to be a lot of betting that the £ will fall below 1.20 this year, although i appreciate this is not really economic data. It does mean my holiday money still languishing in my purse is feeling like one of my better investments.

I wouldn't trust your analysis topsy, overly optimistic and without the negative multiplier considered.

this isn't about precision: all economic predictions will (safe to assume) always be wrong.

This is about making sure that people (gov't, business, public) are able to understand the series of things that might happen, and trying to estimate the effect that might have.

If I took a nice powerpoint presentation to a board and said:

Me: We think we'll lose about half of a third of all revenues.
Board: so why a half of a third? What's that made up of? What's going to happen to the datacentres? Should we consider a hiring freeze? Is there a chance that we could lose more?

Me: it sounded about right? I trust my data. Maybe?
Board:...

But you would expect the board to have prior knowledge of basics such as £200bn represent the entire market rather than the firm's specialisations and geopgraphy.

Neither the board or I has time to start everything from 101.

You are free to make your own decisions.

For a decision of this magnitude I would think the board would want a pretty detailed assessment of what's at risk and by how much. I think OW have given that a game stab, although I would be delighted to hear what they might have got wrong.

Alternatively:

Me: proffers fag packet with almost legible "halfathrid"
Board: "tremendous analysis - trebles all round!"

Poundwatch - it's gone lower: 1.263

Almost doing as bad as the argentinian peso
www.ft.com/content/5d656518-e690-35f3-9aac-6acf904df164

Let me make you another offer. You go away and produce a detailed (financial) sector by sector breakdown, what they do, number employed and revenue and then we take it from there.

I do not think spending hours producing analysis which we be taken out of context for free is a good way to spend my afternoon while the work is piling up.

www.telegraph.co.uk/business/2016/10/06/sterling-falls-to-record-low-against-top-trading-partners/

The pound is now at its lowest level ever when measured against the currencies of the countries with which Britain trades.

Can't believe how much the £ has fallen and still falling

Wild isn't it? And now we have a 6% flash crash- briefly down to 1.18%.

"fat finger" trader error or trading algorithm balls up

www.ft.com/content/dfb375be-8c23-11e6-8cb7-e7ada1d123b1

On twitter, remembering gentler times:

Kate Martin
@katemartinfx
From the archives: a brief history of FX flip-outs, from back when a 1% drop in sterling was a big deal

blogs.wsj.com/marketbeat/2010/07/21/rabobank-computer-glitch-eyed-as-source-of-sterling-blip/