Sunday, July 21, 2019
Counting the cost of a Johnson government
Posted by David Smith at 09:00 AM
Category: David Smith's other articles

My regular column is available to subscribers on This is an excerpt.

When a new prime minister is about to take over, there is normally a sense of excitement, even optimism. In the case of Boris Johnson, however, assuming the polls are right and he is duly elected by Tory party members this week, there is also a powerful sense of trepidation.

New prime ministers normally take office as a result of a general election. On the road to victory, their policies, as set out and costed in manifestos, will have been subject to the closest scrutiny, from the opposition and from the media. Before even making it into the manifesto, they will have been subject to a long, behind-the-scenes process of scrutiny, to make sure that they are credible.

Where this does not occur, it often goes wrong. Nobody was more pivotal to the New Labour government of Tony Blair than Gordon Brown. But when he took over as prime minister without an election in 2007, the policy cupboard was bare even before the financial crisis hit, and his premiership did not work out well.

Theresa May, who also succeeded to No.10 without an election, had ideas, but most of them turned out to be unworkable and were quietly dropped after the 2017 election. Her legacy speech, delivered last week, suffered from a distinct lack of material.

Johnson is in a much weaker position than either of them. Both had been at the heart of government over several years, 10 in the case of Brown as chancellor, six for May as home secretary. Johnson, in two undistinguished years as foreign secretary, was a peripheral figure. The wheels of government did not depend on his presence.

Though he has been dreaming of the top job all his life, he is probably the least prepared for it of any recent prime minister, as he has sometimes shown over the past two or three weeks. Instead of carefully-tested and costed policy proposals, ideas have been tossed out, almost daily, to get through the next hustings or interview.

There is a positive element to this. It could suggest that once he is safely ensconced in 10 Downing Street, again assuming not late and successful burst from Jeremy Hunt, many of the most expensive ideas will be either quietly forgotten or put in the filing cabinet marked “long-term ambitions”.

Philip Hammond, who has been enjoying his last few days as chancellor by settling out markers against a no-deal Brexit, is fully expecting to return to the backbenches for the first time in two decades. His successor, and the assumption in Westminster is that it will be Sajid Javid, the current home secretary, will not want to preside over a borrowing binge which, alongside the sterling crash that would result from the wrong kind of Brexit, would mean that the new chancellor’s immediate task would be one of crisis management. Poisoned chalices do not become much more toxic than that.

Fortunately, there is an easy way out of this. It used to be said of currency forecasters never to combine a forecast with a date, because that way you would be right in the end. The same goes for tax and spending promises.

No timeline has been attached to the tax and spending promises that Hammond, with a nervous eye on the public finances, has been getting very jumpy about. The two most eye-catching Johnson promises – increasing the higher rate threshold (the point at which people start paying the 40% tax rate) from £50,000 to £80,000, and raising the National Insurance threshold to £12,500 - do not come with a timeline attached.

Sunday, July 14, 2019
Friendless pound needs the kindness of strangers
Posted by David Smith at 09:00 AM
Category: David Smith's other articles

My regular column is available to subscribers on This is an excerpt.

Even before Sir Richard Branson offered his opinion on the pound, I was intending to write about sterling this week. This is a time of year when many people think about the exchange rate more than at other times and encounter the reality that businesses and the markets have been dealing with for the past three years. The pound, unsurprisingly in the light of the current uncertainty, has taken on a weaker tone recently.

Branson thinks sterling will go to one-for-one parity with the dollar in the event of a no-deal Brexit this autumn, from $1.25 now, and, while that is a touch below market expectations, it is in the right ballpark. With the euro worth almost 90p, equivalent to a euro-sterling rate of €1.11, the pound would be headed below parity with the single currency, embarrassingly.

Already, for tourists, even current very low market exchange rates are an unattainable dream. Those leaving it late and changing currencies at the airport have already experienced the reality of a sub-parity euro. Staycationing has its merits.

Sterling has been the Brexit barometer over the past three years. Even knowing that, I found it hard to believe, as has been claimed, that the pound’s fall on the referendum result in June 2016 was the sharpest for any major currency in the floating rate era, which extends back to the early 1970s. Surely there have been bigger sterling falls, not least when the pound tumbled out of the European exchange rate mechanism (ERM) in September 1992.

It is, however, true. The sterling index, which measures the pound’s average value against other currencies, fell by 9.2% in the 48 hours after the referendum, and by 11.4% over two weeks. That compares with 5.7% and 8.6% respectively when sterling crashed out of the ERM. The pound had a bigger cumulative fall over 2007-8, during the financial crisis, falling by more than 25% in total. But what was a drawn-out affair and was followed, as is typical, by a recovery. Currencies tend to overshoot.

This time, however, there has been no recovery. Sterling is lower now than it was in the early days after the referendum, against both the dollar and the euro. A measure of how weak the pound has been over the past three years is its average value against the dollar, $1.30, compares with $1.65 over the 10 years leading up to the summer of 2016, and $1,66 in the 30 years leading up to it.

Sterling’s recent fall was halted briefly last week by testimony from the Federal Reserve Board chairman Jerome “Jay” Powell, pointing to an early cut in US interest rates, and by the release of monthly gross domestic product (GDP) figures in the middle of last week. It is worth briefly reflecting on them. The 0.3% rise in monthly GDP in May, reported by the Office for National Statistics (ONS) was in line with the consensus, and represented a partial bounce from the 0.4% drop recorded in April. Car factories had shut down in April as a result of the original March 29 Brexit deadline and restarted again.

The figures also showed a 0.3% rise in GDP for the March-May period compared with the previous three months, which was better than expected, but was entirely the product of data revisions. The nerdy explanation is that the ONS revised down February’s monthly GDP slightly, shifting it into March. That made March-May better but the question for the second quarter as a whole remains. If June was as gloomy as the purchasing managers’ surveys suggested, there will be a small fall in GDP in the quarter. If not, it will be flat, or there will be a tiny rise. Whichever way, growth has slowed significantly, though it is too early to say whether that has continued into the third quarter.

Sunday, July 07, 2019
Brexit bluster comes home to roost as growth hits the buffers
Posted by David Smith at 09:00 AM
Category: David Smith's other articles

My regular column is available to subscribers on This is an excerpt.

Sometimes a figure comes out which really pulls you up short. Just such a figure was published a few days ago. The purchasing managers’ index (PMI) for Britain’s construction sector slumped last month. Already weak at 48.6 in May (levels below 50 signal a decline in output), it plunged to 43.1 last month. Not only was this exceptionally weak, but it represented the biggest fall in output since April 2009, when the economy was still mired in the 2008-9 recession, the worst since the Second World War.

The details of what IHS Markit,, which compiles the survey, described as “an abrupt loss of momentum” for construction were as bad as the headline figure. As Tim Moore, an associate director of IHS Markit put it: “The latest survey reveals weakness across the board for the UK construction sector, with house building, commercial work and civil engineering activity all falling sharply in June. Delays to new projects in response to deepening political and economic uncertainty were the main reasons cited by construction companies for the fastest drop in total construction output since April 2009.”

Construction is, of course, only one part of the economy and, while as noted last week it has recovered well since the crisis, it only accounts for about 6% of gross domestic product. Isolated weakness in construction does not mean trouble for the whole economy.

Except that the construction PMI was accompanied by weakness in the surveys for other parts of the economy. The manufacturing PMI fell to 48 last month, from 49.4 in May. It had been expected to bounce back after the stockpiling boost in the first three months of the year.

The service sector PMI, meanwhile, dropped from 51 to 50.2, with “subdued activity often attributed to sluggish domestic economic conditions and greater risk aversion among clients in response to ongoing Brexit uncertainty”. The “composite” PMI, a weighted average of all three sectors, dropped to 49.2, signalling the first drop in private sector activity since immediately after the referendum.

These PMIs, suggesting the lights are going out all over the economy, are not isolated reading. The CBI’s growth indicator, published last weekend, show3ed the fastest fall in private sector activity since 2012.

The British Chambers of Commerce quarterly survey for the second quarter, also last week, showed a very weak manufacturing sector and a slight uptick for services, but pointed out that “the uptick in activity was not enough to outweigh the significant drop in these indicators in the first quarter”.

We will see this week if the weakness in the surveys is matched by the official data, with a string of releases, including construction, production, services and monthly GDP for May. Even if GDP showed a monthly bounce in May, the arithmetic for the second quarter, and avoiding a quarterly drop in GDP, is very challenging.

The significance of the surveys, meanwhile, was that they showed that we have seen a weakening through the quarter, and a downward trend that accelerated last month.

It is easy to see why this is. Three years ago Britain voted for Brexit, even though its advocates had not serious idea or plan on how to deliver it. Boris Johnson, who was instrumental in securing a vote to leave, had no clue then about how to achieve Brexit and, three years on is not providing much of a clue now. Many “Back Boris” supporters, I think, must be similarly clueless.

Sunday, June 30, 2019
Ten years of recovery, yet not a happy anniversary
Posted by David Smith at 09:00 AM
Category: David Smith's other articles

My regular column is available to subscribers on This is an excerpt.

This is an important moment. Ten years ago, 10 years tomorrow to be precise, Britain’s economy began to crawl, bleary-eyed, out of the deepest recession since the Second World War. The anniversary brings with it questions. How strong, or weak, has the recovery been? What kind of recovery, in terms of sectors of the economy, was it? And, the question I get asked most often, how long can it last?

The recovery itself was slow to get going. I well remember the concern, in those dark days of 2009, when it appeared that other economies had begun their post-crisis recoveries but Britain had not. Initial figures from the Office for National Statistics (ONS), indeed, suggested that the upturn started later. Its first estimate for the third quarter of 2009 was a drop of 0.4% in gross domestic product, a sixth successive quarterly decline, and economists were criticised for predicting a small GDP increase.

The economists were right. ONS figures now show that GDP edged up by 0.1% in that third quarter of 2009, giving way to somewhat stronger growth later. It has not been unbroken growth. In 2012 there were small GDP declines in the second and fourth quarters. Because they were not consecutive they did not count as a recession, though initial figures from the ONS did show that the recovery “double-dipped” back into recession in 2012 and was on the brink of a “triple-dip” recession.

On the basis of the latest ONS figures, which include last week’s revisions to growth rates up to 2016, the economy has achieved an average growth rate of 1.9% over the past 10 years. Its strongest years were 2014 and 2015, its weakest was last year. You can draw your own conclusions about that.

The growth average over this recovery, 1.9%, compares with 2.8% over the long recovery from 1992 to 2008, which was brought to an end by the financial crisis, and 2.9% for the 1981-90 recovery under Margaret Thatcher. Growth has been around a percentage point lower on average, than during those two previous upturns. One caveat, though it is a small one, is that recent figures are more prone to revision.

A below-par recovery has happened despite an exceptional monetary stimulus. Every member of the monetary policy committee (MPC) who voted to cut interest rates to 0.5% in March 2009 would at the time have been astonished to think they would be only fractionally higher, at 0.75%, now. None of them, by the way, is still on the MPC. There has been £435bn of quantitative easing.

That has saved the economy from even weaker growth. The fact that growth has not been stronger would be put down by some to deficit-reduction, or austerity. Nobody would seriously argue against the proposition that a fiscal tightening will give you weaker growth than otherwise, but it would also be wrong to attach all the blame for the growth disappointment to fiscal policy. The hangovers from the crisis, particularly the banking hangover, played a big part and the causes of productivity stagnation run deep, and are for another day.

Sunday, June 23, 2019
Our export prospects can burn bright - as long as we dodge a no-deal Brexit
Posted by David Smith at 09:00 AM

My regular column is available to subscribers on This is an excerpt.

What will lift us out of the doldrums, this period of very weak growth and flatlining productivity Britain’s economy is stuck in? It will not, I judge, anything to do with Brexit. A survey of economists by Consensus Economics shows an average expectation of 1.35% growth this year and next, even in the context of a “smooth” Brexit; leaving under a withdrawal agreement,

A no deal Brexit would see growth drop below 0.5% next year, according to the survey, which was carried out among the 37 economists on Consensus’s UK panel, a prediction that is likely to encompass a technical definition of recession – two consecutive quarters of falling gross domestic product. Some are rather gloomier than that. Even the most optimistic outcome, no Brexit at all, only lifts growth to an average of 1.63% next year.

Confidence in the political system has been badly damaged – and a dispiriting Tory leadership contest has made things worse – so while there is certainly plenty of pent-up investment as a result of the clouds over the economy of the past three years, businesses will be cautious about unleashing it until they are sure they are on solid ground.

The backdrop to this malaise is that we are in a period of rapid technological change which ought to be having a positive effect on growth and productivity. Machines can do things better than ever and we have barely scratched the surface of what they may be able to do in the future.

A couple of decades ago, fewer than 10% of UK households had internet access, and clunky dial-up access at that, smartphones and tablets were yet to appear, and the vast majority of communications were by surface, or “snail” mail.
In two decades time, we will regard the way we live now as quaintly old-fashioned.

Artificial intelligence and robotics will be the norm, as will driverless, low-pollution cars. Driving a diesel or petrol car will seem as anachronistic as smoking in the office does now. And there will be technological changes which at the moment are only twinkles in the eyes of futurologists.

Technology can and should be an important driver of productivity, and thus prosperity, and as new research to be published this week demonstrates, an important driver of trade. Trade and economic openness is, of course, one of the ingredients of rising productivity and prosperity.

KPMG, in its Economic Outlook, due to be published this Thursday, devotes a special section to technology and trade. As it describes it: “Investment in innovation and technological change can drive a step-change in trade and an acceleration of trade growth in post-Brexit Britain.”
It looks at three scenarios, which it describes as “technology convergence” – its central scenario – the more optimistic “high connectivity” and a less promising “robotics and reshoring”.

To summarise these in brief, technology convergence will mean lower transport costs, widespread use of 3D printing, fully-automated and vertically integrated manufacturing and an increasing share of services in global trade, which will benefit Britain, which has a competitive advantage in services.
High connectivity, according to KPMG, implies “advances in communication technologies, such as the internet of thing …. advances in mobility and autonomous transportation lead to lower costs and greater efficiency in logistics … service sectors would benefit too, particularly from improved digital communications, service would increasingly become more tradable”.

As for robotics and reshoring, the least optimistic outlook, this would allow the use of technology, including £D printing, “to move the production of customisable components closer to their customers as digital information flows replace the transport of manufactured goods”.

All three offer considerable promise for exporters, even in the context of Brexit, according to the research. Export volumes to the Asia-Pacific region over the period 2019-50 would average 3.9% a year under the low scenario, 5.5% under the central outlook and 6.6% under the high scenario. For exports to North America, the figures are 1.8%, 3.1% and 3.8% respectively. For Europe, under the assumption of a smooth Brexit which does not hinder trade they are slightly better, 2.2%, 3.4% and 4.1% respectively.

Sunday, June 16, 2019
Johnson's dead cat tactics on tax and a no-deal Brexit
Posted by David Smith at 09:00 AM
Category: David Smith's other articles

My regular column is available to subscribers on This is an excerpt.

Now that Boris Johnson has decisively won the first round of the contest among Tory MPs, and is runaway favourite to win among the membership, we have to take seriously the prospect of a Johnson premiership. In this strange tribal mating contest, in which those who have the biggest and most colourful tail feathers to shake do best, he will be hard to beat.

There are two things that, so far, define the Johnson pitch. One is a stonking great tax cut for higher-rate taxpayers, by means of raising the basic rate limit, the higher rate threshold, from £50,000 to £80,000. On its own, when fully in place, that would cost £20bn a year, but about half would be clawed back by increasing the National Insurance ceiling. People with earnings in that bracket and above would see their marginal rate of income tax and NI in that range, currently 42%, drop to 32%. This is a huge tax cut for the better-off.

The other main feature is his willingness to embrace a no-deal Brexit. The scale of Johnson’s first round victory and the defeat of a cross-party (but Labour-led) bid to rule out no deal has seen those who follow these things in the City raise the probability of a no-deal Brexit on October 31 from 10% to around 25%. Sterling slipped as a result.

There is still a belief in the markets that Parliament find a way of avoiding a no-deal Brexit, even if it means a vote of confidence and a general election under the new leader. That, for the markets and for business, might be just an out of the frying pan and into the fire moment. They, to slip into the kind of phrase beloved of the new Tory leader, would have no obvious way of steering between the Scylla of a Johnson no-deal government and the Charybdis of a Corbyn administration.

The question, as always with Johnson, is how seriously we should take the things he is saying. Indeed, a possible explanation was provided by the man himself, six years ago, when he was London mayor. Writing about a European Union proposal to put a cap on bankers’ bonuses, he said it was purely a distraction, a “dead cat” strategy.

Borrowed from the “rich and fruity vocabulary of Australian political analysis”, as he put it, the best thing you can do to divert attention is, as Johnson’s Australian friend put it, is “throwing a dead cat on the table, mate”. The key point made by the Australian friend, who I am guessing is Lynton Crosby, who has successfully managed campaigns for Johnson, is that instead of focusing on other things, everybody will be saying: “Jeez, mate, there’s a dead cat on the table!”

On this view, Johnson’s proposed tax cut, together with all the talk of a no-deal Brexit, are not only aimed only at the narrow electorate of Tory members, but are also dead cats.

The more that people focus on the tax idea, and whether it is fair and affordable (no in both cases) the less that people will concentrate on his record as foreign secretary and a list of foibles as long as both of your arms. Similarly with no deal. There is, as the writer George Trefgarne has suggested, a clear parallel with the infamous £350m a week on the side of the bus in the referendum. It was wrong, and everybody knew it was wrong, but the more that people concentrated on it, the less that other issues got the scrutiny they deserved.

Johnson is not the only one using the dead cat strategy. When Michael Gove pledged last weekend to replace VAT with a version of the purchase tax it replaced when the UK joined the European Economic Community in 1973, it looked like a pretty obvious diversionary tactic.

The risk of all this money flying around in the Tory leadership contest, a combined £84bn, is that it threatens to make even Jeremy Corbyn and John McDonnell look like models of fiscal prudence.

But I am guessing that nobody seriously expects them ever to be implemented, either because they would never get through the House of Commons – ask Philip Hammond about his experience of securing parliamentary approval for even mild controversial measures – or because once the deceased feline has served its purpose, it will be quietly buried.

Sunday, June 09, 2019
As growth stagnates, we yearn for the go-go days of the 80s
Posted by David Smith at 09:00 AM
Category: David Smith's other articles

My regular column is available to subscribers on This is an excerpt.

Sometimes these days it feels a bit like the 1980s. Younger readers will not know, and older readers need reminding, that back then the toll of jobs being lost, mainly in industry, was sufficient for ITN’s News at Ten, to be able to run a nightly map.

The headlines for manufacturing jobs are bad again. Ford’s announcement of the closure of its engine plant at Bridgend, a town I know, will be devastating for the up to 1,700 people whose jobs are directly affected and the thousands more in the supply chain.

Similar considerations apply to the 4,000 jobs directly at risk at British Steel in Scunthorpe, and the 3,500 that will go with Honda’s closure of its plant in Swindon. In both cases, supply chain job losses will add to the woe.

I would not overdo the comparison. The manufacturing shake-out in the 1980s had a much more immediate effect and was much larger in scale. In those days, partly because of demographic factors (the baby bulge of children born in the 1960s) a decent rate of economic growth was associated with high and rising unemployment. There was even a productivity miracle. These days, weak growth is accompanied by very low unemployment and there is no productivity growth. Either despite or because of this, or because of the deep visions in the country, we appear to be nostalgic for the 1980s. A YouGov poll a couple of days ago showed that by 37% to 28% people think life was better then than now.

In the 1980s, importantly, there was a free trader rather than a protectionist in the White House. And back then Margaret Thatcher was instrumental in creating the European single market, providing a greatly expanded home market for British business. Currently, of course, her Conservative party is trying to navigate how to take us out of the single market.

I think of the 1980s because there was a regular debate, certainly in the first half of the decade, about whether growth was petering out. Those worries were largely misplaced; there were four years in the 1980s when growth exceeded 4%, including 1983 and 1985, and the average over the 1982-9 period was more than 3.5%. This was a period when, notwithstanding those manufacturing job losses, the economy rediscovered its dynamism. We got out mojo back.

Now, concern over whether growth is petering out is more justified. Last week saw the publication of the three purchasing managers’ surveys for manufacturing, construction and services. Two of them, for manufacturing and construction,
showed a drop below the key 50 level, pointing to sectors which are contracting.

The other, for services, picked up marginally to 51, but this is consistent with barely any growth. The UK economy, according to these surveys, is performing worse than the eurozone.

And, according to Chris Williamson, chief economist at IHS Market, which produces the surveys, they are consistent with an economy that “remained broadly stagnant midway through the second quarter”. There was a similar message last weekend from the CBI’s growth indicator.

Spring definitely has not sprung, according to these surveys, nor on the basis of other evidence. After a surprisingly strong first quarter for consumer spending, a 0.7% quarterly rise, the British Retail Consortium suggests retailers are struggling, while private new car sales are down on a year ago.

For business, the deteriorating global environment, partly because of Donald Trump’s trade wars, is a constraint on exporters, though we should not expect a repeat of the surge in imports in the first quarter to beat the original March 29 Brexit deadline.

Sunday, June 02, 2019
London bankrolls the rest of the UK - and that's not healthy
Posted by David Smith at 09:00 AM
Category: David Smith's other articles

My regular column is available to subscribers on This is an excerpt.

Today I want to talk about something, based as always on statistical fact, that is guaranteed to raise the hackles. If you live in London and the southeast you will be even more convinced that your taxes are subsidising the ne’er do wells in the Midlands, the North, Scotland, Wales, Northern Ireland and even parts of the South.

If, on the other hand, you live in those other regions and countries, you will be confirmed in your view that the UK economy is dangerously London-centric and tilted towards the gilded south-eastern corner of the country, a situation that urgently needs tackling.

The figures, from the Office for National Statistics, released a few days ago, show that in 2017-18, the latest fiscal year for which this kind of detail is available, London ran a fiscal surplus, a budget surplus, of £34.3bn. Taxes raised in London exceeded public spending in London by a very large amount.

London has the biggest fiscal surplus, followed by the southeast, the capital’s hinterland, which in 2017-18 had a budget surplus of £20.4bn, The East of England, also influenced by the London factor, also had a surplus, albeit smaller, £5.9bn.

Outside these three parts of the UK, which together account for just under 37% of the national population and 16% of its land area, everywhere else runs a budget deficit. The biggest is in the north-west, £20.9bn. Scotland, based on a geographic share of North Sea revenues, had a deficit of £13.3bn in 2017-18, slightly smaller than that for Wales, which of course has a smaller population, which had a deficit of £13.7bn. Northern Ireland’s fiscal deficit was £9.2bn.

To be fair to the north-west, its large deficit partly reflects its size of population. On a per capita basis, the largest fiscal deficit per head in 2017-18 was Northern Ireland, £4,939, followed by Wales, £4,395, and the north-east, £3,667, the north-west, £2,884, and Scotland, £2,452. In all these places taxes raised fell short of public spending by thousands of pounds on average for every person.

But to also be fair to London, the south-east and the East of England, much of the recent improvement in the public finances would not have happened without their contribution, There were big improvements in the fiscal positions of London and the southeast between 2015-16 and 2017-18, while deficits were becalmed in many other regions. London and the southeast did the heavy lifting.

That is enough figures. What does it mean? We are a single country, the UK, and as such very good at redistributing these surpluses and deficits. The taxes raised in London and the southeast make possible higher spending on public services, and on benefits and tax credits, in the rest of the country.

Just to illustrate that, in 2017-18, London’s tax take was £150.1bn and the southeast’s £121.4bn, a large chunk of the UK total of £753.1bn. The UK’s average revenue per head was £11,434, figures greatly exceeded by London, £17,090, and the southeast, £13,427.

Before coming on to what all this means, let me address a couple of urban myths. One is that, because London is awash with civil servants, it is not surprising that it has an economic advantage over other regions.

It is not true. London has just over 80,000 civil servants, less than a fifth of the national total, and dependence on public sector employment is typically higher elsewhere. Past regional policy involved the dispersion of civil service and other public sector jobs to the regions. This has proved to be something of a double-edged sword in recent years. In the period since 2010 roughly half a million public sector jobs have been cut.

Myth number two is that London gets the lion’s share of infrastructure spending, without somehow paying for it. It is true that the capital has dominated infrastructure spending, on the far from irrational grounds that an international city like London has to be seen to be working, and has seen a lot of spending, from the Olympics through to the yet uncompleted Crossrail project.

This spending is, however, included in the figures. So far this century, London has the third highest spending per head, including capital spending, in the UK, after Northern Ireland and Scotland, but has continued to run a fiscal surplus, because of its higher tax take. The southeast and the East of England, incidentally, both fiscal surplus regions, have the lowest public spending per head.

So what is it? Many years ago, researching a book, North and South, I tracked the decline of regional headquarters, in favour of London. Companies that used to have their headquarters close to their production facilities, in Leeds, Manchester, Birmingham, Liverpool, Glasgow, Cardiff or Belfast, no longer did so, in many cases because those production facilities had been moved offshore. This “headquarters effect” boosts London’s tax take at the expense of the rest of the country. In that respect, perhaps, the streets of the capital are paved with gold.

It is part of a wider phenomenon. The City of London is a huge generator of tax revenues and the combination of financial centre – the biggest in Europe – commercial centre and seat of government guarantees the dominance of London and its hinterland. In America the financial centre, New York, is different from the seat of government, Washington, as it is in Germany, with Frankfurt and Berlin. France is Paris-centric and Italy Rome-centric for the same reason that the UK is London-centric.

Can and should anything be done about it? Brexit, according to the government’s own cross-Whitehall assessments, will widen the regional divide rather than narrowing it. It will hurt the fiscal deficit regions of the Midlands and North, as well as Wales, Scotland and Northern Ireland.