Why the North lost faith in the EU

“The people have spoken, the bastards.”

(Dick Tuck, aspirant U.S. congressman and political prankster)

I’ve been looking for an opportunity to use that quote for years and now looks like as good a time as any. Yesterday’s vote caught me by surprise as it did many others. My expectation was that the margin would have been the same but in favour of ‘Remain’ campaign, especially after the supercharged fear campaign that has been waged over the last few weeks. But I guess that’s now history: we have to look forward and make the new paradigm work for us.

The mainstream media appeared to be predominantly in favour of staying in the EU with one or two notable exceptions. Most of the journalists and TV commentaries seemed to miss the mood of the people who actually voted ‘Out’ largely due to who they talk to and where they live. When I walk through the big cities in the UK I see a different economic condition than that in the rest of country. They have the feeling of vibrancy and wealth, largely untouched by the ravages of the 2008 banking crisis. It is pretty obvious that the journalists marching the streets of our capital city are not confronted by the economic realities of decline and indeed don’t really care about what is happening 50, 100 or 200 miles away. There is an apparent attitude of what’s good for London must be good for Britain. London has prospered through EU membership so a vote to stay-in must be good for the UK.

Well try that argument in some of the towns in the North West, Yorkshire and the North East. The big cities of Manchester, Leeds, Liverpool and Newcastle are fairly prosperous but travel a few miles into towns like Bolton, Blackburn and Burnley and the economic pain is evident. Valliant efforts continue to be made by local businesses to trade through the difficulties of the last few years but the reality is that whatever the average economic indices state these places are effectively in a form of recession. The sense of growth and renewal has been lost, replaced by struggle and more than a small amount of bitterness at the situation.

The EU has probably attracted more than its fair share of blame for this. When I analyse the reasons for the decline of these former giants of the Industrial Revolution I see the structural trends of globalisation and digital probably playing a greater part than the impacts of EU policies but these are often remote concepts to the average worker. Over the past couple of decades jobs have been outsourced to the lower cost manufacturing nations of the East. Add the impact of Amazon and the recent and rapid emergence of on-line and these towns are left with too many empty commercial premises and unused and derelict former manufacturing plants. The banks of course have not helped either. Loans are not as easily obtained as they once were with banks now far more cautious about risk and capital ratios than they were prior to 2008.

There is also the small matter of people not having the money they used to have. I have an interest in a small property company and we recently made a decision to sell about a dozen residential premises. We have already sold several and know exactly what the current market is prepared to pay for a terraced house in Lancashire. It certainly is not the London price paradigm that those national journalists love to write about. The sort of prices paid are at the levels seen nearly fifteen years ago. In other words at recessionary levels. Locals can’t afford higher prices and the prospective landlords from outside the area know that yields will continue to be a challenge.

So what exactly has this got to do with the EU?

My sense is that the average worker, or beneficiary of welfare, in Blackburn, Bolton or Burnley appears somewhat more tolerant of a multi-national’s decision to outsource its manufacturing plant than they are of the political class. Amazon is also a convenient consumer resource rather than a direct threat to local retail employment. These structural threats seem less tangible and more remote.

A worker displaced by redundancy has some choices to make. He or she can look for work elsewhere, perhaps retrain, become self-employed, or depending of circumstances, has to resort to seeking benefits. Herewith is the problem. Not only have these former workers have to seek work in a structurally declining circumstances but they now have to compete for work with hundreds of thousands of EU migrants. Now this is not a seemingly remote concept like globalisation or digitisation but is a visible impact seen on a daily basis. Eastern European workers are competing directly for local work with plumbers, builders, electricians and other skilled and semi-skilled indigenous labour.

It’s not a race issue; it’s a job and numbers issue. For several decades now the former immigrants from Asia have been absorbed into the local social and economic infrastructure. There is still some pushback from certain elements but on the whole the communities have settled in to working together. Many of these former immigrants are now second and third generation, own businesses and make tangible contributions to the local economies. Others are employed by local businesses and are as threatened by a rapid influx of migrant workers as those of us who are fifth or sixth generation immigrants. The more recent immigrants also don’t see why a Pole can simply walk into the UK with little or no entry requirements while an Indian or Pakistani relative faces the full weight of a Border Control checking process.

I know a lot more about the UK government’s migrant ‘asylum seeker’ dispersal policy than I am allowed to write about. However, the simple fact is the political force of councils in the London and the South East ten to fifteen years ago set the template for a dispersal policy which still sustains today. The pressure on local social and health infrastructure in London was recognised as a major problem so the then Labour government’s wheeze was to resettle these prospective UK citizens elsewhere in the UK. It solved the immediate political issue but obviously simply shifted the problem elsewhere. Very little financial support was provided to the recipient councils and I’m not aware of any planning or financial investment made in local infrastructure. Now this may have been primarily a UK government decision but the effect nonetheless was to inject thousands of people into Northern towns just at a time when these economies were starting to feel the effects of those structural trends referred to earlier.

Our local NHS has to provide a translation service for over sixty languages. The EU is hardly responsible for this but again its unrestricted migration policies have not helped. It is simply an illustration of the pressures faced by local councils and other public service organisations. On 10 June 2003 the Home Office published a report commissioned by the Immigration and Nationality Directorate (IND). It contained forecasts of net migration from the ten new East European members to the present member countries of the EU, particularly the UK and Germany. Estimates for the UK ranged from 5,000 to 13,000 net immigrants per year from the date of accession in May 2004. This estimate range was ruthlessly adopted by the government of the time and was still in use during in the Coalition era. It was politically expedient to use these numbers because it translated into little need for any meaningful incremental investment in social infrastructure attributable to EU expansion. As a point of fact between 2011 and the end of 2015 net EU migration into the UK exceeded 1m people and this has naturally manifested itself in enormous pressures on NHS and local public services. There has simply been no investment or planning for this injection of people and many of the economically challenged areas of the country have borne the brunt. Locals naturally feel resentful. Not only have their jobs and living standards been impacted but they now compete with new EU migrants for school places and hospital appointments.

The Labour party suggest that the answer is more investment in local public services, conveniently forgetting the fact that it was their policy to adopt unrealistically small planning guideline for far too many years. Meanwhile we continue to have ‘Austerity’ as the UK faces the realities of a £1.6 trillion national debt, near £100bn deficits and interest payments of £50bn a year – the net £8.5/£10bn EU payment is barely a fifth of that. The point here of course is that even if a more realistic forecast of migration have been predicted, could the UK have afforded that investment?

There are juniors in commercial and investment banks in London who may well feel threatened by the EU decision. From a London perspective it will no doubt be hard to understand why the rest of the country has voted for an exit. Alas, an unemployed worker in Lancashire, Yorkshire or South Wales for that matter will probably not have much sympathy. If you are unemployed and cannot find any local work are you likely to be less unemployed by voting out? There is also the reputation aspect of the London banking community. I don’t meet many people in the North who think they are a great bunch of people supporting regional economies. There is similar appreciation of the ‘expert’ economic and corporate opinion emanating from the corporate towers in the South East. When you make a decision to outsource a plant to Asia you can’t really threaten someone whose job has already been offshored.

So the issues become conflated and the EU takes the heat. It has not been the primary cause of the economic challenges of smaller Northern manufacturing towns but its open door migration policy has effectively been the straw that broke the camel’s back. The ordinary worker has not noticed the blue EU plaques that adorn some of the buildings littered around some of our towns and cities but certainly notices the labour competition and absolutely resents the falling living standards that it represents. By not recognising that it’s this more than anything else that has catalysed June 23rd’s response, the EU and the London political elite has effectively been the architect of the genesis of what could be its demise. The response to calls for independence referenda in the Netherlands, Denmark and France in the last 24 hours will interesting to watch.

I’ll finish on a more optimistic note. At the moment uncertainty and apprehension has dominated the media, politics and the markets, but it could mark the start of a new EU. It will take a humungous effort from a predominantly sclerotic political infrastructure to change but the Brexit could just be the catalyst that it needs. A different EU, a democratic and flexible EU, and one which adopts far more sensible policies on economic migration may well appeal to a new generation of UK voters in five or ten years. I don’t dismiss the possibility of re-entry into the EU whatever the nonsense uttered by the Brussels elite. The UK represented about 20% of economic activity in the EU and has been the third largest net contributor. With this in mind you really have to ask yourself whether it is in the interests of the EU to favour a net dependent nation or a net contributor in the future. EU re-entry may be a far distant prospect today but with a reformed EU and only a 4% margin in favour of an exit today, it’s is not an impossibility. In the meantime it is now down to the EU to save itself through something more than a few political soundbites.

The jury may currently be out on EU survival but the UK will have its own challenges to face. Scotland and Wales may have some devolved political powers and economic capabilities but the ‘Northern Powerhouse’ concept is really little more than a concept at the moment. As a Northerner I see the EU as a bit of a sideshow in an ongoing economic battle. Perhaps an exit from the EU can be an opportunity for a little more attention from Westminster to its own regions rather than Brussels. I was once budget manager for the £1.3bn ‘North West Fundamental Plan’, the capital infrastructure plan that effectively created the UK’s alternative telecoms network in the North West. It alone created hundreds if not thousands of jobs for people in the region, many of which are still around today. We need something like this today only bigger, much bigger and focused on more than one sector. The current reset of the European political system could not only help change the EU but could perhaps help shape economic policy in the North.

We can but hope.

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