Cliff Edge

Published: Jan 26 , 2017
Author: Stephen White

There has been much talk over the last few weeks about what might happen if, at the end of 2 years of negotiation with the EU after Article 50 is triggered, no deal is agreed. ‘Cliff edge’ refers to this doomsday situation where the UK is out of Europe and not in anything except trouble. Hence the focus on transitional arrangements which Mrs May said she didn’t/did want within the same paragraph of her speech last week – see the previous Scotwork blog for this and other peculiarities in that speech.

If you want to see a visualisation of a financial cliff edge Google the BT share price for the last week. Losing £8,000,000,000 – yes, £8 billion - from your stock market valuation in a day is no mean feat, but BT achieved it on Tuesday after they revealed that they had a number of problems. Most acutely there had been ‘inappropriate management behaviour’ at BT Italia which was likely to impact cash flow by about £500,000,000. The problem was obviously too small to be spotted either by their internal accountants or by their auditors over several years.

‘Inappropriate management behaviour’ is a phrase often used at Industrial Tribunals by troubled ex-employees who claim that their bosses have physically or sexually abused them, made them work unreasonable hours or failed to provide basic human rights. But today it is also used to describe irregular financial activities by big corporations; think VW ‘s Dieselgate, allegedly replicated by several other car manufacturers, and Tescogate in 2014.

Corporations so accused almost always blame middle and  junior management for these scandals. Invariably no-one in the Boardroom ever knew, until a whistle-blower told all. I think that is bunkum. Corporate policy sets the ethical tone in every organisation, corporate policy is the reason Boards of Directors exist, and governance of policy is the most important Board responsibility.  

In 2 years’ time my view is that the UK will fail to do a deal with the EU. Not because of the complexities (they are huge) or because of the lack of will on both sides (it is in both parties interest to do a deal) but because of the lack of negotiating capability on both sides. There aren’t enough negotiators, and they are not skilled sufficiently. The evidence for this is the pathetic result of the negotiations David Cameron engaged in 2 years ago; pathetic because neither the UK negotiators nor the EU negotiators came anywhere near understanding the real need for both sides which was keeping the UK in the EU and negotiating accordingly. 

Word on the street is that the UK Civil Service is having difficulty in recruiting new negotiators of the right calibre, and is reluctant to upskill existing negotiating competence. Perhaps another example of ‘inappropriate management behaviour’?

Look out for the cliff edge.

Stephen White


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Muck Shift

Just when is a deal not a deal…? I heard this story from a friend of mine the other week; there are some lessons to be learned! So, my pal is a developer and is building some houses on what is essentially a square site. Two sides of the square can be accessed from the road in a neighboring housing estate and the other two are beside a field owned by another developer. There is a huge pile of muck to shift before the actual building project; this phase is known in the trade – and not unreasonably - as a "muck-shift"! As there will be 80 -100 lorries coming in and out each day for 6 weeks, it was considered more convenient to access the site over the field, so an approach was made to the developer to discuss the terms under which he would allow access. This is a standard arrangement and the deal typically is that the field would be returned to the owner in its original condition. Developer makes a bit of money, where otherwise he wouldn’t; homeowners in the adjoining estate are less inconvenienced; builder does not need to spend money cleaning the streets and getting them back to a usable state at the end of the project. Win-win.

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