Thread by @pmdfoster

We often hear #brexit economic forecasts were all wrong. Nothing has happened! The doomsters were wrong!

Not right, per fascinating new paper by @DennisNovy et al which shows sterling crash cost h'hold £870/year - or the nation £450m a week! 1/thread

cepr.org/active/publica…

@DennisNovy He calculates sterling ££ slump drove up import costs, which had the effect of increasing consumer prices by 2.9% - and UK prices up by 1.9% compared to Euro area. /2

@DennisNovy So taking into account decline in real wages, the average house hold had to spend 1.4 weeks' more wages to afford same amount of goods. Or collectively, £450m a week! /3

@DennisNovy So what does all that really prove?

Well, for a start, since we don't live the counter-factual, these numbers aren't actually felt 'on the street' in a way that necessarily translates into politics.

After all, @BorisJohnson
just won an 80-seat mandate to double down /4

@DennisNovy @BorisJohnson But it also - and this where things get dangerous, I fear - fuels the idea in the upper political echelons of government that the economy can be 'decoupled' from politics. /5

@DennisNovy @BorisJohnson So you can do really quite damaging things and not suffer political costs.

@realDonaldTrump trade policy has, in aggregate, hit US manufacturers with higher costs, but it might not yet stop him winning re-election. /6

@DennisNovy @BorisJohnson @realDonaldTrump As we contemplate the coming EU-UK trade negotation, we have cabinet ministers airily waving away the concerns of industry, blithely declaring that sectors like cars and chemicals are in "secular decline" /7

@DennisNovy @BorisJohnson @realDonaldTrump After @sajidjavid said the UK would diverge and business would have to face the consequences, groups like @SMMT that represent car makers said it would cost "billions", but this government apparently doesn't care.

So LONG as nobody notices. But will they? /8

@DennisNovy @BorisJohnson @realDonaldTrump @sajidjavid @SMMT Well, that's an interesting one.

Post #Brexit, for example, a UK-car company will have to show that a vehicle is more than 50% made with UK 'content' to export at preferential rates, to say, South Korea. A UK car is typically 30% UK made. One 'fix' is to switch to EU. /9

@DennisNovy @BorisJohnson @realDonaldTrump @sajidjavid @SMMT So this is already happening. In July BMW shifted engine production from its Hams Hall plant to Germany to ensure that its cars destined for South Africa could meet content thresholds. /10

theguardian.com/business/2019/…

@DennisNovy @BorisJohnson @realDonaldTrump @sajidjavid @SMMT And guess what?

@BorisJohnson still won an 80-seat majority, backed by people in living in the West Midlands - Hams Hall is in Warwickshire constituency of @craig4nwarks - Conservativ, Maj, 17,956 /11

@DennisNovy @BorisJohnson @realDonaldTrump @sajidjavid @SMMT @craig4nwarks It will be interesting to so whether Mr Tracey, and other MPs like him, will try and lobby their own government not to inflict further pain?

And at what point the government's political calculation will be swayed by risk of serious disruption? /12

@DennisNovy @BorisJohnson @realDonaldTrump @sajidjavid @SMMT @craig4nwarks If it means a companies relocating jobs quietly inside the EU single market, the government seems perfectly content to wear this. /13

@DennisNovy @BorisJohnson @realDonaldTrump @sajidjavid @SMMT @craig4nwarks It is an odd thing for a govt to do, actively gearing up an entire Whitehall machine to make people poorer, but as we can see, it's not necessarily politically suicidal. /14

The risk for the Government, I suspect, is complacency.

They believe economics and politics are decoupled, and wave away warnings about the cost of #Brexit as over-stated....even though they come from industries that, presumably, know their own business. /15

The word from Whitehall is not really encouraging - staggering levels ignorance and arrogance at the very top of government, backed by much of what I've written above. /16

It must be hoped that fear of a really noticeable, headline making cock-up - say massive queues at Dover, Nissan announcing it's pulling out of UK - will be sufficient for @BorisJohnson to step in and temper some of the wilder ideas. /17

Recall that last year we were definitely having a 'north-south border' and a 'no deal' - "do or die".

Until we were not. Then all those ideas were junked in a trice for a NI-only backstop and the fact of deal - any deal.

This may be the template for phase 2. Or it may not/18

I still think that the message of the election was "get Brexit done".

NOT "come with me on the Long March to the sunny uplands.

I'm still betting that the desire for a quiet life comes to trump the current brave talks. But I can see how I'd be wrong.

Good weekend all. ENDS