Latest

Silence in the Storm – Business and No Deal Brexit

Day by day Telegraph picture to accompany publication of the leaked conference call – 15th January 2019

The storm in Westminster rages so ferociously that at occasions it’s exhausting to listen to ourselves assume. There’s second by second coverage of the Home of Commons and Downing Road from every conceivable angle. Backbenchers so obscure that we’ve by no means heard of them before are dragged via the TV studios and intently cross-questioned. Others achieve their ‘moment of fame’ although ‘acts of principle’ corresponding to resignation. The journalists watch like hawks the comings and goings of advisors to Quantity 10 for any probability indication of a change in path by the Prime Minister.

Questions swirl around the corridors of Whitehall.

What occurs if we’ve got a No Deal Brexit? What might be the influence on the country, on the financial system? Will the lorries again up around Dover jamming the ports, submitting the motorways and spilling onto the reserved runways of nearby airports? Will the lack of primary foodstuffs trigger social unrest?

The strange thing about this storm is who stays silent at the coronary heart of it. The UK’s three largest corporations on the London Inventory Trade, by market capitalisation, are HSBC, Shell and BP. As they have been for an extended whereas. We’ve heard from the likes of the CEO of Airbus and the UK Manufacturing Director of Honda (neither company are listed on the London Inventory Trade), however the place are John Flint, Ben van Beurden and Bob Dudley, the heads of each of those corporations, in all of this?

John Flint – head of HSBC

The media talks of the question of the UK financial system  and it’s imminent crisis (Will No Deal mean gridlock and panic shopping for?) and the question of its long term prospects (Will Brexit result in corporations winding down funding and shifting manufacturing out of the UK?) as though it’s the ministers or shadow ministers, the backbenchers or advisors, who can or will direct this stuff. However we know in our bellies that this isn’t the case, that selections about whether capital is directed away from the UK, or vans are directed away from Dover, will take place not in the workplaces of public servants in Westminster, however in the workplaces of executives in personal firms.

Ben van Beurden – CEO of Shell

In fact we additionally know that ‘business’, or somewhat giant corporate considerations, are usually not sitting there idly or as bemused as we are. Their process is straightforward, to generate return on personal capital, to generate ‘shareholder return’, and each circumstance needs to be assessed for its potential to take action. If the UK crashes out of the EU – then how can this occasion improve income? If the UK does Brexit – then how can that be used to enhance shareholder return?

Bob Dudley – CEO of BP

Platform’s information is particularly built round the power sector – particularly oil & fuel and wind – so how do these questions apply in this sector:

If the UK crashes out of the EU – how will Shell and BP use this to extend income?

If the UK does Brexit – then how can that be used by Orsted and EON to improve shareholder return?

Solely very sometimes does the media afford us any glimpse that this corporate debate is happening. On the night time of Tuesday 15th January Prime Minister Might suffered the worst defeat of any key government bill in a minimum of a century. It was extensively taken as a provided that the governments’ Brexit Plan can be defeated, however few had predicted that the opposition to it will be so robust. The shock waves in the commentariat have been fast and Minister’s hurried to calm public nerves.

Plainly the first to take action have been three of the most essential UK ministers, after Might, the Chancellor, Phillip Hammond, along with Greg Clark, Minister for Business, Power & Industrial Technique, and Stephen Barclay, Secretary of State for Brexit. Lower than 60 minutes after the vote had been declared they held a conference name with ‘business leaders’ from 330 ‘leading firms’.

Who have been these ‘leading firms’? The reporting was scanty. The Night Commonplace stated they have been “top brass from Amazon, BP, Balfour Beatty, the Post Office, Tesco, Siemens, Carolyn Fairbairn (CBI) and Richard Pennycook (of CoOp Retail and Head of the British Retail Consortium.)”. The Guardian added another identify to the record, Scottish Energy.

Who are these ‘top brass’? What can we find out about them? We in fact have names of those who attended from the aspect of the public – Hammond, Clark and Barclay – and we will discover their biographies on-line, however solely two of the ‘top brass’ have been named in most of the studies in the papers.

Thankfully for us, such is the nature of those turbulent occasions that a tape of the dialog was leaked to the Every day Telegraph. By way of that rare leak, we study that from BP there was Peter Mather. Amazon UK was represented by Doug Gurr, and Tesco by chairman John Allan, who can also be President of CBI. Jurgen Maier was there from Siemens UK, the largest producer of wind turbines in Britain. And there was Kevin Anderson, CEO of Scottish Power, Simon Blagden, Co-chair of Fujitsu UK, Leo Quinn, CEO of Balfour Beatty, Paula Vennels, head of the Publish Office and Vivian Hunt, managing companion at McKinsey & Co. From this we will glean the names of ‘leaders’ from 11 companies, however that apparently leaves 319 unaccounted for.

Greg Clark MP – Secretary of State for Business, Power & Industrial Strategy

We shall should await the launch of any info by way of Freedom of Info requests, and as is the standard approach, the names of those attending may have been blacked out, redacted for ‘commercial reasons’.

The Telegraph leak reveals much of the substance of the discussion (although the paper appears to not have released the full hour of the transcript). The focus, which was at the coronary heart of the Telegraph’s outrage, is the strain that a number of of the executives put on ministers in order to get the government to tug a No Deal Brexit off the desk. Hammond successfully gave his dedication that that is more likely to occur – a suggestion that runs immediately counter to the public announcements of Teresa Might.

The anger of the Pro-Brexit Proper at this intervention by ‘big business’ in the democratic workings of the British state was neatly expressed by the columnist Janet Daley. Writing in the Telegraph three days later she described how:

‘A British Chancellor, a Cabinet minister in charge of Brexit and a Business Secretary fall over each other to soothe and placate the leaders of over 300 multinationals, sounding like aspiring lobbyists competing for contracts as they assured the companies that they would do everything possible to prevent the no-deal outcome which their boards feared’.

She went on to elucidate ‘the multinationals are now as determined to snuff out the true spirit of free enterprise as they are to control the actions of governments. They are as protectionist in their instincts as an isolationist country and as fierce in defence of their power as a totalitarian regime.’

Stephen Barclay MP – Secretary of State for Exiting the European Union

There’s a lot speak of how ‘business does not like uncertainty’. But only a brief reflection provides the mislead this truism, some business dislikes uncertainty, but a lot of business thrives on uncertainty. All the realm of buying and selling, in equities or commodities, in traded items or currencies, is determined by uncertainty, or turbulence as it’s better described. A static, unmoving market in oil, for instance, is a lifeless market. Cash is made by judging, or guessing, the future value of a commodity. If nothing strikes, and no values change, there may be little revenue to be made on buying and selling. A turbulent market, a market with loads of turbulence, is a worthwhile market. And this doesn’t simply apply to these corporations who’re described as ‘traders’ based mostly in the likes of Canary Wharf, but in addition to the ‘big businesses’ resembling Amazon, BP, Siemens and others. In 2015, BP had the worst monetary results in its century lengthy historical past, it’s worth was successfully rescued by the soaring profitability of its trading arm, BP Integrated Supply & Trading. The top of that division of the corporation, Dr Brian Gilvray, is now Chief Monetary Officer of the entire of BP.

From the leaked transcript it is clear the ‘top brass’ used the name to get a greater understanding of how the Chancellor saw the coming weeks and months. For such intelligence will help BP, Amazon et al to utilise and navigate the unfolding turbulence. Invariably this is reported as being in order to avoid losses, but can also be invaluable in order to generate income.

What then does the authorities need in return from aiding personal firms, from this rush to a conference name within minutes of the vote? Almost certainly it’s after reassurances on how the likes of Amazon, Tescos, BP and the British Retail Consortium will help keep the free move of goods within the UK amidst the rising nervousness over a No Deal export/ import mayhem

Not with out cause the government’s biggest worry is of a breakdown of the distribution techniques, of panic buying in the supermarkets, queues at the petrol stations and social unrest. There are good grounds for their worry. The reminiscence of Whitehall is scarred by such occasions in the past.

The Winter of Discontent – 1978/79

The famed ‘Winter of Discontent’ that contributed so strongly to the rise of Mrs Thatcher in 1979, is remembered for the tales of bodies lying unburied in the morgues and piles of garbage in the streets. However the disruption of two months started in December 1978 with an extra time ban by BP tanker drivers who have been decided to defend the value of their wages in the midst of rising inflation. They struck, petrol didn’t reach the forecourts, queues jammed the streets, and Callaghan’s Labour government teetered on the brink of declaring a National Emergency and calling in the Military.

Just over twenty years later an identical crisis hit Blair’s Labour authorities in September 2000. Lorry drivers, protesting the rising value of gasoline that was destroying their livelihoods, blockaded the UK refineries akin to Coryton and Stanlow and distribution hubs at Buncefield and Trafford Park. Inside hours the supermarkets have been feeling the pinch, there was panic buying and rumours of the cash tills operating empty. Blair reacted with unprecedented urgency, demanding that the oil corporations meet in Downing Road and help get the gasoline flowing once more. Executives from BP and Shell duly attended, however their sluggish response to the authorities’s calls for illustrated their energy and gave them a key device in their battle to extract an improvement in the UK North Sea tax regime. The chief negotiator on the oil corporations’ aspect was John Manzoni – then a senior government at BP Refining & Advertising, now Chief Government of the Civil Service, perhaps the most senior man in Whitehall. How the poachers flip gamekeepers.

John Manzoni – at present Permanent Secretary to the Cabinet Workplace – former government in BP

So the authorities knows nicely what a distribution breakdown appears like, and the ‘top brass’ know Westminster’s nervousness. They will odor their worry. Wittingly or unwittingly, the likes of Amazon, Tesco and BP can exploit that worry – in any case the major perform of these corporations is to generate return on capital, and only secondarily to offer a public service to UK residents that ensures there are avocados on the shelves and copies of cookbooks and DVDs delivered to houses.

At the centre of the political storm are conversations between the government and personal firms over the prospects of the coming months. They’re massively influential in determining the course of Britain right now. Yet they are hidden from public view and we the citizens are unable to hear the dialogue that takes place in those uncommon conferences we’re granted a glimpse of. That is the silence at the coronary heart of the storm.

*

Because of Jo Ram

*

This blog builds on the back of the research being undertaken for the forthcoming ‘Crude Britannia – How Big Oil shaped a nation’s previous and future’ by James Marriott and Terry Macalister. Due out in 2020.

*