Sunday, September 04, 2016

Some Thoughts - Post Brexit Referendum

As one who voted to remain in the EU, the Brexit outcome took me and by all accounts the nation by surprise.

Nonetheless there may be some major advantages arising from the result of the referendum, albeit more by accident than design For example, the real reason for the UK not joining the Euro really arose from our rather ignominious exit from the ERM after the UK had spent £billions in  the failed endeavour to remain within the European Exchange Rate Mechanism. That 'accident' almost certainly is turning out to be hugely advantageous to the UK.

Similarly  the accidents and incidents resulting from the outcome of the Brexit referendum already include the departure of David Cameron and may yet include the decision of the new Prime Minister Theresa May to terminate the deal with the French and Chinese to build an huge new nuclear power station at Hinkley Point on the Bristol Channel.

David Cameron the previous PM who resigned following the nation's surprise Brexit decision appeared extraordinarily keen on the nuclear power station deal with French and Chinese concerns. Yet  many in the French company seemed to lack enthusiasm and similar nuclear power projects elsewhere are uncompleted and hugely over budget, for example in Finland where Carbon Brief reports:

A 2006 article in the Telegraph spoke of the rebirth of Finnish love for nuclear power, describing the Olkiluoto site in phrases that could have been lifted from a pastoral poem: a “Baltic island of foraging swans”, “pine-scented” air and “unusually large salmon”.But this source of hope has turned sour. Olkiluoto 3 — almost unpronounceable to non-Finns — is now nine years behind schedule and three times over budget. It has been subject to lawsuits, technology failure, construction errors and miscommunication. A rift between the companies behind the plant has been described as “one of the biggest conflicts in the history of the construction sector”.

Almost certainly the Hinckley Point project would have proceeded under David Cameron's government possibly because of that government's understandable but imho short sighted, wish to be very friendly with the Chinese government. Following the resignation of Mr Cameron given his support for the losing 'remain in the  EU' campaign, Mrs May has put the new nuclear power station deal on hold for a re-think.

Times have changed considerably since the nuclear power project was first discussed with the French. Apart from the huge difficulties and costs increases  affecting the  not too dissimilar Finnish project, the price of oil has plummeted, fracking  in England is probable and other forms of electricity generation are becoming less expensive and more practicable for example solar or wind power and/or perhaps even  building a barrage in the Bristol Channel itself which could generate large amounts of electricity given the huge tides that occur  in that whole area. 

Furthermore an article published in the Telegraph in March 2016 well before the Brexit issue stated:

Rolls-Royce is positioning itself as a “white knight” that could rescue Britain’s faltering nuclear power strategy and stop the UK’s lights going out.The company best known for its jet engines has met with Government to put forward plans for a fleet of small reactors built around Rolls’s expertise gained producing powerplants for the Royal Navy's submarines.The UK’s current plans for a new wave of huge nuclear power stations is spinning out of control. The first, Hinkley Point in Somerset, was set to start generating in 2017 but questions over design and financing of the £18bn, 3,200 megawatt plant have put it years behind schedule.The scheme was thrown into further doubt earlier this month when the finance director of EDF, the French company which will build Hinkley Point, quit over fears the company's balance sheet could not withstand the huge costs.

 Thus more by accident than design, the Brexit decision may save the UK from making a serious  mistake costing £billions not only in building costs but also assuming that the building was ever successfully completed which the Finnish experience causes one to wonder, the costs of  the electricity eventually produced from the scheme which would be set at a very high level to pay off the French and Chinese builders.

Quite apart from the possible nuclear power debacle that remaining in the EU could have created, there is the risk of the failure of the whole Euro scheme coming to the fore once more with the sad problems facing the Italians. There, rescuing the banks as happened elsewhere eg RBS in the UK, will be very much more difficult as ordinary Italian people have invested in their banks' bonds so the effects of writing those off,  would not be mainly limited to large financial institutions. 

Of course Germany could agree to alter the EU rules somewhat to assist the Italian authorities in limiting the damage  but the Greek scenario to date does not give much cause for optimism in that area and at the same time if I was German, I would not be too keen on the huge cost of bailing out southern European countries from such problems. In other words to me at least the prospects for survival of the Euro at least in its present form seem bleak.

Hopefully the Brexit decision by the UK people  will spur on  other EU countries to make considerable changes to the structure, accountability and most importantly the democratic nature of the whole EU project.

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