UK economic growth. I distinctly remember a BBC Question Time programme just before the Brexit vote in which it was claimed that Europe did not matter for the UK economy because it was low growth and the UK needed to open itself up to high growth countries elsewhere in the world. This claim always struck me as odd. For a start, what matters is the volume of trade with between two economies not their overall relative growth rates. Geography matters when it comes to trade. Secondly what matters again is the solvency of the country one is trading with - can it pay its bills? And finally, no evidence has been produced to demonstrate that the UK's membership of the EU was hindering its trade with non EU countries. In fact, most high growth economies would rather deal with the EU than a UK outside the EU; after all, the EU is much the bigger market. The next thing that has puzzled me is that if the claim was true, namely the UK economy would boom once freed of its EU shackles, one would have expected sterling to have risen post the vote to leave the EU. Instead it has fallen, by 15% on a trade weighted basis, to August last year but it has recovered 1/3rd of that fall since then partly reflecting dollar weakness. Brexiteers have made much of the Remainers claim that the UK economy would crash if the UK voted to leave the EU. That of course did not happen; what happened instead was the fall in sterling. It was the currency that took the strain of the vote, not the economy. Finally much has been made of the UK's better than expected economic growth since the Brexit vote. This, however, is not because of Brexit but because world economic growth has improved and most particularly EU growth has recovered substantially. The lie of the Brexiteers' position can be seen by comparing the UK's growth rate relative to that of Europe. In 2015 it exceeded that of Europe by 20% (2.4% v 2.0%), in 2017 it was 62% of Europe (1.5% v 2.4%) with a similar outcome forecast for 2018. It seems to me self evident that the UK economy has suffered because of the Brexit vote and the uncertainties over the UK's position vis-a-vis the European Single Market. Whatever the potential merits of Brexit (and there will be some), there will be substantial short run costs. These will be alleviated to a certain extent by the cheapness of the currency and a booming global economy. In conclusion, it is the short run costs that matter and are visible; any potential merits of Brexit are simply pie in the sky.

Carillon Carillon’s bankruptcy is a seminal event but possibly not for the reasons that many think. It certainly does not prove that privatisation doesn’t work and indeed the notion is absurd. Private companies go bankrupt all the time. Equally absurd is the idea that reliance on Government contracts is a recipe for success. Another absurd idea is that Carillon’s demise represents private gain, public loss. Carillon’s shareholders will be wiped out, most of the bonds’ value will be lost and the banks will take a huge hit. There is no shortage of private sector loss. Whether there is a public loss is debateable. Carillon quite clearly did not make money out of its Government contracts so one could argue that it was the Government that was exploiting Carillon rather than the other way round. There is obviously a debate to be had about the role of the private sector in providing a myriad of public services but Carillon’s bankruptcy does not shed any light on that. Privatisation was an exercise in risk transfer from the government to the private sector; Carillon took that risk and failed. The questions that Carillon’s bankruptcy raise are rather different. The first question is over the role of the auditors, KPMG who seem to have completely missed the fragility of Carillon’s finances, and if they didn’t, why didn’t they raise questions. The increase in regulation over auditing, audit reports, audit committees etc does not seem to have worked. Company reports get longer and longer and more complex as a result of this regulation but it seems the net result is that it is more difficult to assess a company’s financial position not less. The second question is the old one of corporate responsibility when directors and senior management are paid huge salaries and bonuses but can still walk away with the money even when things go completely awry. This is the private gain that gets the man in the street so angry and quite rightly so. The third question is what the Government was doing in all this, seemingly awarding new contracts to Carillon in the vain hope they might solve Carillon’s cash flow problems. I call this ‘Micawberment’ rather than government. What conclusions do we draw from this? There will be increased pressure on the auditing profession without actually changing much. Governments will continue to govern but will do a lousy job of it as always. We might, and should, make some progress in holding directors and senior management accountable albeit not much progress has been made. The real lesson is a more general one. Companies go bankrupt all the time and there is nothing that Governments or any-one else can or should do about it. It is called risk and there is no escaping it.