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BREXIT

Johnson arrived in Downing Street last month intent on putting “rocket boosters” under the economy. But after the dismal growth figures released on Friday, the prime minister may count himself lucky if the UK manages to avoid falling into a recession by October 31, when he insists the UK will leave the EU. A second quarter contraction of 0.2 per cent in GDP reflected a weaker than expected performance in almost every part of the UK economy, with a sharp fall in manufacturing and construction output, a renewed slump in business investment and barely positive growth in the all-important services sector. Much of this was because of swings in inventories and net trade, as companies ran down stockpiles they had built in the run-up to the original March Brexit deadline. But the underlying growth rate has also slowed — reflecting the global downturn in manufacturing, and businesses’ fears that the risks of a no deal Brexit are rising. “It’s not just problems at home, it’s problems abroad as well,” said Kallum Pickering, economist at Berenberg, adding that growth was likely to remain well below trend in the second half of the year. Sajid Javid, the UK chancellor, attempted to put a positive spin on the data, arguing that forecasters still expected the UK to grow faster than Germany, Italy and Japan. But these countries are among the world’s worst performing major economies. Export-focused Germany and Italy are especially exposed to the global slowdown in trade and Japan suffers from endemically low growth. The IMF expects the UK to grow at half the rate of the US and no better than the eurozone average over 2019. John McDonnell, shadow chancellor, on Friday said the figures were “a direct result of Tory incompetence”, and warned that “Brexit bungling” was “breaking the economy”. Most forecasters expect UK growth to pick up in the near term — with Britain escaping a recession on the technical definition of a contraction in two consecutive quarters. “The UK should avoid a recession . . . unless there’s a no deal Brexit,” said Thomas Pugh, at the consultancy Capital Economics. This is partly because manufacturing output should recover — with some companies starting to rebuild stockpiles ahead of the October Brexit deadline, and car factories remaining open throughout August, after having brought forward their annual shutdowns as part of March Brexit planning. However, the near-stagnation in the services sector — the mainstay of the UK economy — is a significant setback. Economists also noted the lack of momentum at the end of the quarter. GDP was stagnant in June, offering “a poor launch pad for growth in the second quarter,” according to Martin Beck, at the consultancy Oxford Economics. The one bright spot in the UK economy is the continued strength of consumer spending. Economists believe consumption will continue to support growth over the next few months, provided there is no sudden shock to the labour market. Household finances are in good shape, thanks to high employment and a recent pick-up in wage growth, and as George Brown, economist at asset manager Investec, noted, consumers do not seem to share businesses’ angst over the risks of a disorderly Brexit. Friday’s data suggests the government also supporting growth: its spending was up 0.7 per cent quarter on quarter and has been rising since the end of 2018. Mr Pickering said this could reflect increases in public sector pay and spending on Brexit preparations — but added that it was possible, even without holding a budget, “to do a lot of fiscal stimulus just by asking departments to overspend”. Mr Javid is spending the summer planning a fresh injection of public money. He has promised to announce a one-year spending settlement for government departments next month, including new money for schools and policing. On Friday, he also said he would announce plans for a “step change” in infrastructure investment in the autumn. However, the overall picture remains one of a flagging economy, where businesses are reluctant to invest and continued growth relies on consumers. Matt Whittaker, deputy chief executive of the Resolution Foundation, said persistent Brexit uncertainty and global weakness “doesn’t necessarily mean we’re heading for recession” but that the risk was certainly heightened — and many lower income households were not equipped to cope with a new downturn. The Bank of England cut its outlook for UK growth earlier this month, predicting an expansion of 1.3 per cent this year and next — assuming a smooth Brexit. But even on this basis its forecasts showed a one in three chance of the economy shrinking at the start of 2020. Mark Carney, BoE governor, made it clear that a no-deal Brexit would lead to job losses and a spike in inflation, hitting real incomes. “The outlook for the UK economy remains very fragile in the short term, with the odds of a technical recession relatively high,” said Yael Selfin, economist at KPMG.


GROWTH GROWTH

When Jamie Dimon said a hard Brexit would be a disaster for the UK earlier this year, the JPMorgan chief executive was articulating a view that is commonly held among London’s investment bankers. But since Boris Johnson became prime minister, some senior bankers who were previously staunchly anti-Brexit now privately say their opinions have changed. “We need to get it done; the inertia is worse than a no deal,” the head of one large investment bank recently said, despite once warning of the dangers of such an outcome. Another spoke admiringly of Mr Johnson, comparing him to Winston Churchill, and said: “He has come in with a mission. You cannot keep going on and on without a solution. I’m now more on the side of taking us out and planning for the future.” Perhaps their new-found sanguinity reflects a high level of preparedness in the banking industry, which has been planning for a hard Brexit for years. Global banks that run their European operations from London have set up new entities in Paris, Frankfurt and Ireland, and identified hundreds of staff that will have to move in the event of a cliff-edge exit. One of the bankers said that a managed exit would not make much difference to his company compared with no deal. Although a long transition period would allow banks more time to plan, the City has given up on securing “mutual recognition” for the financial services industry, and has instead focused on preparing for Brexit, he added. Cynics might also observe that highly paid investment bank executives will feel little personal pain in the event of a hard Brexit, compared, say, with a car factory worker in the north of England or a sheep farmer in Wales. These bank executives also seem to much prefer the cut of Mr Johnson’s jib over his predecessor’s understated style. Whereas it is difficult to imagine Theresa May — the taciturn vicar’s daughter — working on a trading floor or greasing the wheels of a large M&A transaction, Boris as banker is not so much of a stretch. They identify with Mr Johnson’s bravado and his penchant for taking big, risky bets. Then there is their abject horror of a leftwing government led by Jeremy Corbyn, which one top banker said would be far worse for his industry than a no-deal exit. He agreed with Mr Johnson’s view that the Tories risk annihilation at the next election, whenever it comes, if they do not deliver Brexit. Recommended The FT View The editorial board Freeports are no panacea for risks of no-deal Brexit Another executive at a global bank said he thought Mr Johnson could ameliorate the economic impact of Brexit with a public spending spree. “Britain has one of the lowest fiscal deficits as percentage of GDP of any country in the world and the 10-year gilt is trading at 66 basis points. You’re borrowing for free. Why limit yourself to 1 per cent of GDP as a deficit? Take it to two, or three.” While most recent converts think that a no-deal Brexit would be painful but bearable, one went so far as to say it could be good for investment banking revenues in the short-term, as fund managers put on a flurry of trades to adjust their portfolios to the new reality. “Theoretically, if you have a disruption like a hard Brexit, you should see higher levels of volatility in interest rates, foreign exchange rates, and credit spreads,” he said. “An intermediary in that world should do better.” Of course, the shifting of opinions among a handful of bankers — no matter how senior — should not be taken as evidence that the City has switched sides. Lots of senior bankers still think Britain is on the brink of a massive act of self-harm. But perhaps Canary Wharf is not such a hotbed of Remainers after all.


FOOTBALL FOOTBALL


 At 5pm on Thursday, the summer football transfer window “slammed shut”, to use the tabloid vernacular. This is the period during which Premier League clubs are allowed to buy and sell players. “Deadline day”, as the final 24 hours of the window are known, has its own highly-ritualised theatre. Sky Sports stations its legion of regional reporters at the gates of training complexes up and down the country, hoping they’ll be able to snatch a word (and with it a scoop) with a manager through his car window. Former Tottenham boss Harry Redknapp was the pioneer of this kind of exchange, delivering bons mots on his transfer targets from behind the wheel of his Bentley. This year there has been a compelling sideshow: the market in players has been accompanied by an unusually busy market in football journalists. Like a club newly flush with investment splashing the cash on so-called “marquee” signings, American sports website The Athletic has been lavish in adding many of Britain’s leading writers on the game to its roster. The start-up, which was established in the US in 2016 by two former employees of Strava, the social network for athletes, launched its UK site, dedicated to football, on Monday. It did so after poaching, at the last count, 44 writers from national and local newspapers, as well as the BBC. The Athletic has tempted all this talent to its offices in Southwark in south London with “extremely competitive” salaries and equity in the company. Quite how competitive the compensation offered has been is unclear. The site’s UK managing director Ed Malyon, himself an acquisition from the Independent, has denied rumours that he had doubled his targets’ pay to get them to sign. But he did acknowledge in an interview with the Press Gazette that “we had a short period in which to hire a lot of people”. (Clubs trying to break into the upper echelons of the Premier League routinely have to pay over the odds, both in transfer fees and what are still quaintly known in footballing circles as “wages”.) The principal focus of The Athletic’s coverage will be the Premier League, although the German writer Raphael Honigstein has been hired to cover the Bundesliga. Sports desks at several national papers have lost their leading lights — notable defections include Daniel Taylor from the Guardian and Oliver Kay from the Times. But the effect of The Athletic’s land-grab has been particularly severe on local papers. In 2017, one of the US site’s co-founders, Alex Mather, vowed to “suck [regional media] of their best talent at every moment”. His partner Adam Hansmann described it as “the largest talent displacement in sports media ever”. Mr Malyon’s rhetoric is less incendiary but his strategy is the same. Each of the Premier League’s 20 clubs has been assigned at least one dedicated reporter, as have a handful of sides in the Championship, including Leeds United. The Yorkshire Post lost its long-serving Leeds correspondent Phil Hay, a departure described by one fan of the club on Twitter as like losing a family member. The Athletic’s gamble is that such loyal supporters will miss Mr Hay and his colleagues sufficiently to be willing to pay £59.99 a year for its “no ads, no clickbait” subscription. And the attention the site will give to the Premier League’s less exalted names — Southampton or Norwich City, for instance — is central to its business model. But The Athletic is not only targeting fans of clubs that are routinely under-reported. One of its most eye-catching summer signings suggests it also has its eye on a different corner of the market. Among those 44 hires was Michael Cox, a writer about tactics and the founder of the highly successful Zonal Marking website (and author of a book of the same name). Mr Cox’s first piece? An exhaustive 3,000-word analysis of Manchester City’s defensive organisation last season. I’m sold


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think it was in Wyoming, midway through an elk burger, that I understood Britain’s place in the world. It is routine enough to be asked for your “EPL” team in Washington or Houston, or some other such collision point of expats and Americans back from abroad. You expect less of it in the sparsest state in the Lower 48, in older company, within driving range of the Badlands. It is possible to overstate the reach of the English Premier League, which resumes for a new season this weekend. I believe the broadcast rights for Tristan da Cunha remain unnegotiated. But the longer I spend away, the plainer it becomes that this is not just another of the country’s “soft power assets”. It is the main one. The Premier League is Britain’s biggest remaining calling card in the world other than the royals, and even then, in both depth and breadth of following, it might edge them out. There are people who would walk past Harry Mountbatten-Windsor for a selfie with Harry Kane. Britain has had moments of soft power since the loss of empire. There was one in the Sixties when The Beatles and the James Bond films got going more or less concurrently. There was another in the mid-Nineties. This is different. This is the sustained, year-on-year domination (at least in terms of popular appeal) of one league in the world’s sport of choice, with not just no end in sight, but not even a plateau. Without it, it is not obvious what Britain’s unique claim to contemporary relevance would be. It has the world’s most-spoken language, but then so does Australia, the US, Canada, Ireland and New Zealand. It has huge pop stars but no huger than America’s. As much as his Yorkshire-based late style makes us see the county anew, Britain’s greatest living artist, David Hockney, is ultimately defined by his work in and about California, where he has spent much of his life. As for Harry Potter and Downton Abbey, they deal in an Olde England of private-school whimsy and feudal class tropes. They have very little to do with an overwhelmingly urban country, long commanded by its consumerist middle class, in which 7 per cent of the total population are privately educated, and even fewer go to boarding schools. The Premier League shows a different face to the world. It looks more like Britain’s. It is commercial to the point of vulgarity. It is centred on big cities and former industrial regions. It is somehow jingoistic and unquestioningly open to outside influences at the same time. There are people who would walk past Harry Mountbatten-Windsor for a selfie with Harry Kane It is also a rare field of British life that is not London-dominated. In the Premier League, the English north-west weighs more than the capital, and by some margin. The Midlands has a place at the table. Medium-sized towns count. You end up with pleasing incongruities: the Angelenos who have heard of Wolverhampton, say, or the sound of even farther-flung people saying “Brighton and Hove Albion”. As an ambassadorial service, the Premier League does far more for far more of the country than the entertainment world’s inexhaustible production line of Hughs, Emmas, Emilias and Emilys. What we think of as global success in the arts is often just transatlantic. There is no equivalent of the fixation with Arsenal in Nigeria, the country of my birth, or to Liverpool’s presence in Asia, or to the Coca-Cola-like inescapability of Manchester United pretty much everywhere. Some will question if a “British” asset can be so exposed to foreign players, coaches and plutocrats. They should look up who owns the country’s most famous car brands, who attends its most famous schools and who lives in its most famous neighbourhoods. To draw the outside world while retaining some national quintessence is British. More to the point, the league’s special ingredient is domestic: the live audiences. The volume (in both senses) of the fans is what makes the spectacle. It helps to attract the broadcasters and sponsors who engorge the Premier League with cash. This weekend, people from Anchorage to Wellington will tune in to the start of the new season. They are not just watching football. They are watching the British watch football.