Category Archives: Brexit

27/7/19: A Cautionary Tale of Irish-UK Trade Numbers


Per recent discussion on Twitter, I decided to post some summary stats on changes in Irish total trade with the UK in recent years.

Here is the summary of period-averages for 2003-2017 data (note: pre-2003 data does not provide the same quality of coverage for Services trade and is harder to compare to more modern data vintage).


So, overall, across three periods (pre-Great Recession, 2003-2008), during the Great Recession (2009-2013) and in the current recovery period (2014-2017, with a caveat that annual data is only available through 2017 for all series), we have:

  • UK share of total exports and imports by Ireland in merchandise trade has fallen from an average annual share of 23.31 percent in pre-Great Recession period, to 18.06 percent in the post-crisis recovery period.
  • However, this decline in merchandise trade importance of the UK has been less than matched by a shallower drop in Services trade: UK share of total services exports and imports by Ireland has fallen from 64.86 percent in pre-crisis period to 62.97 percent in the recovery period.
  • Overall, taking in both exports and imports across both goods and services trade flows, UK share of Irish external trade has risen from 41.43 percent in the pre-crisis period to 45.4 percent in the current period.
  • Statistically, neither period is distinct from the overall historical average (based on 95% confidence intervals around the historical mean), which really means that all trends (in decline in the UK share in Goods & Services and in increase across all trade) are not statistically different from being... err... flat. 
  • Taken over shorter time periods, there has been a statistically significant decline in UK share of Merchandise trade in 2014-2017 relative to 2003-2005, but not in Services trade, and the increase in the UK share of Irish overall trade was also statistically significant over these period ranges. 
  • Overall, therefore, Total trade and Services trade trends are relatively weak, subject to volatility, while Merchandise trend is somewhat (marginally) more pronounced.
Here are annual stats plotted:

Using (for accuracy and consistency) CSO data on Irish trade (Services and Merchandise) by the size of enterprise (available only for 2017), the UK share of Irish trade is disproportionately more significant for SMEs:

In 2017, SMEs (predominantly Irish indigenous exporters and importers who are the largest contributors to employment in Ireland, and thus supporters of the total tax take - inclusive of payroll taxes, income taxes, corporate taxes, business rates etc) exposure to trade with the UK was 51.2 percent of total Irish exports and imports. For large enterprises, the corresponding importance of the UK as Ireland's trading partner was 13.62 percent. 

In reality, of course, Irish trade flows with the UK are changing. They are changing in composition and volumes, and they are reflecting general trends in the Irish economy's evolution and the strengthening of Irish trade links to other countries. These changes are good, when not driven by politics, nationalism, Brexit or false sense of 'political security' in coy Dublin analysts' brigades. Alas, with more than half of our SMEs trade flows being still linked to the UK, it is simply implausible to argue that somehow Ireland has been insulated from the UK trade shocks that may arise from Brexit. Apple's IP, Facebook's ad revenues, and Google's clients lists royalties, alongside aircraft leasing revenues and assets might be insulated just fine. Real jobs and real incomes associated with the SMEs trading across the UK/NI-Ireland border are not.

Whilst a few billion of declines in the FDI activity won't change our employment rosters much, 1/10th of that drop in the SMEs' exports or imports will cost some serious jobs pains, unless substituted by other sources for trade. And anyone who has ever been involved in exporting and/or importing knows: substitution is a hard game in the world of non-commodities trade.

Tone-deaf May is absolutely the wrong person to lead us into Brexit

If you thought Theresa May was tone-deaf and unresponsive during the actual election campaign, then that's nothing on her performance since.

Following her seriously reduced circumstances I initially thought it was right for her to continue in office.  The electoral arithmetic suggested it as the only viable option, at least until the parliamentary circumstances changed.  She could have chosen to take on board the disastrous result that her cavalier election calling produced and govern as a minority leader but with significant consultation with other parties on Brexit.  That her own Brexit stance - which has been irredeemably, if unilluminatingly of the "hard" variety - would need modifying seemed evident too.

Then came the day after.  The prime minister's speech outside Downing Street was one of the most misjudged exercises I have come across.  She made no reference at all to the lamentable election result.  She simply announced she would be forming a new government, and for good measure she replaced the old "strong and stable" with the word "certainty".  I began to wonder if somehow she had been kept isolated from the election results.  It was a performance of astonishing misjudgement and ineptitude.  Compare it with David Cameron's eloquent and moving "mea culpa" after the referendum.  So utterly disconnected was her speech that she had to follow it up with a hurriedly organised television interview in order to "apologise" to all of the Tory MPs who had lost their seats thanks to her calamitous campaign.

More than anything else, this speech captured exactly why Mrs. May must not be allowed to carry on as prime minister.  The speech bespoke an absolute determination to ignore any circumstances that don't suit her.  It shed light on Mrs. May's utter inflexibility.  Here was someone who was so myopic and incapable that she couldn't even acknowledge the earth-shaking circumstances that everyone else was talking about and which had brought her to this pass in the first place.  She couldn't move from her script.  She couldn't develop a quick response to her massively changed circumstances.  She couldn't find it within herself to express any sort of empathetic understanding to her disappointed supporters and allies.

And if she couldn't do this simple task, part of the basic toolbox of political leadership, then how on earth could we expect her to manage the infinitely more challenging unpredictable and difficult Brexit negotiations?

I thought originally that Theresa May should stay and provide some continuity in difficult times, even if those times were largely of her own creation.

Now it seems to me that if we are to have any chance of a successful start to our increasingly unwanted and unloved Brexit negotiations, then Theresa May has to be replaced immediately.  All those foolish Tories who think she will be able to open such negotiations with imagination and flexibility, who have you been listening to?  For Theresa May, alarmingly and bizarrely, "nothing has changed".  This is a woman who can row back on a policy and claim it is the same one.  That level of delusion has now been extended to some sort of weird understanding of the election that suggests it has said nothing of value to her.

The Tory Party may be in a bind because of the lack of top rate talent in its upper echelons, but at the moment almost anyone - obviously excluding Liam Fox - would be better than the delsuional, mad force currently in charge.  Instead of ringing their hands and moaning about her advisers, Tory MPs should step up to the moment and actually try and serve their country.  And they should do it by providing new and better leadership.  If they do, in time we might forgive them for the Mayist aberration.


Tone-deaf May is absolutely the wrong person to lead us into Brexit

If you thought Theresa May was tone-deaf and unresponsive during the actual election campaign, then that's nothing on her performance since.

Following her seriously reduced circumstances I initially thought it was right for her to continue in office.  The electoral arithmetic suggested it as the only viable option, at least until the parliamentary circumstances changed.  She could have chosen to take on board the disastrous result that her cavalier election calling produced and govern as a minority leader but with significant consultation with other parties on Brexit.  That her own Brexit stance - which has been irredeemably, if unilluminatingly of the "hard" variety - would need modifying seemed evident too.

Then came the day after.  The prime minister's speech outside Downing Street was one of the most misjudged exercises I have come across.  She made no reference at all to the lamentable election result.  She simply announced she would be forming a new government, and for good measure she replaced the old "strong and stable" with the word "certainty".  I began to wonder if somehow she had been kept isolated from the election results.  It was a performance of astonishing misjudgement and ineptitude.  Compare it with David Cameron's eloquent and moving "mea culpa" after the referendum.  So utterly disconnected was her speech that she had to follow it up with a hurriedly organised television interview in order to "apologise" to all of the Tory MPs who had lost their seats thanks to her calamitous campaign.

More than anything else, this speech captured exactly why Mrs. May must not be allowed to carry on as prime minister.  The speech bespoke an absolute determination to ignore any circumstances that don't suit her.  It shed light on Mrs. May's utter inflexibility.  Here was someone who was so myopic and incapable that she couldn't even acknowledge the earth-shaking circumstances that everyone else was talking about and which had brought her to this pass in the first place.  She couldn't move from her script.  She couldn't develop a quick response to her massively changed circumstances.  She couldn't find it within herself to express any sort of empathetic understanding to her disappointed supporters and allies.

And if she couldn't do this simple task, part of the basic toolbox of political leadership, then how on earth could we expect her to manage the infinitely more challenging unpredictable and difficult Brexit negotiations?

I thought originally that Theresa May should stay and provide some continuity in difficult times, even if those times were largely of her own creation.

Now it seems to me that if we are to have any chance of a successful start to our increasingly unwanted and unloved Brexit negotiations, then Theresa May has to be replaced immediately.  All those foolish Tories who think she will be able to open such negotiations with imagination and flexibility, who have you been listening to?  For Theresa May, alarmingly and bizarrely, "nothing has changed".  This is a woman who can row back on a policy and claim it is the same one.  That level of delusion has now been extended to some sort of weird understanding of the election that suggests it has said nothing of value to her.

The Tory Party may be in a bind because of the lack of top rate talent in its upper echelons, but at the moment almost anyone - obviously excluding Liam Fox - would be better than the delsuional, mad force currently in charge.  Instead of ringing their hands and moaning about her advisers, Tory MPs should step up to the moment and actually try and serve their country.  And they should do it by providing new and better leadership.  If they do, in time we might forgive them for the Mayist aberration.


7/6/17: European Policy Uncertainty: Still Above Pre-Crisis Averages


As noted in the previous post, covering the topic of continued mis-pricing by equity markets of policy uncertainties, much of the decline in the Global Economic Policy Uncertainty Index has been accounted for by a drop in European countries’ EPUIs. Here are some details:

In May 2017, EPU indices for France, Germany, Spain and the UK have dropped significantly, primarily on the news relating to French elections and the moderation in Brexit discussions (displaced, temporarily, by the domestic election). Further moderation was probably due to elevated level of news traffic relating to President Trump’s NATO visit. Italy’s index rose marginally.

Overall, European Index was down at 161.6 at the end of May, showing a significant drop from April 252.9 reading and down on cycle high of 393.0 recorded in November 2016. The index is now well below longer-term cycle trend line (chart below). 

However, latest drop is confirming overall extreme degree of uncertainty volatility over the last 18 months, and thus remains insufficient to reverse the upward trend in the ‘fourth’ regime period (chart below).



Despite post-election moderation, France continues to lead EPUI to the upside, while Germany and Italy remain two drivers of policy uncertainty moderation. This is confirmed by the period averages chart below:




Overall, levels of European policy uncertainty remain well-above pre-2009 averages, even following the latest index moderation.