Sunday 31 May 2020

Weekend Reading: Spare Capacity vs Efficiency - continued ...

Further to this long-running occasional C@W theme, here's an apposite Graun piece. 
Coronavirus is our chance to completely rethink what the economy is for
And split an infinitive or two.  By someone called Bull [sic], a professor of cunning History of Art [sic] and Ideas at Oxford University, it's very scrappy.  No particular thesis that I can discern.  But it throws a few, errrr, ideas into the pot.

There you go.


Friday 29 May 2020

We're Saved - The Unions Are Coming!

The signs are everywhere: t'unions reckon their hour of revival is arrived.  Well, the heroes of the hour are Key Workers and they are all unionised (well, errr, some of them), and lionised, and recognised, belatedly, for how important they are.  And the economy needs to be rebuilt, and the unions definitely need to be consulted about that.  And the Labour manifesto promised to make the new green future fully unionised ... etc etc etc.  Why, L'il Owen Jones has even changed his moniker!

Many of us hereabouts don't routinely think about unions, have anything to do with unions (pace, E-K), nor expected ever again to be troubled by unions.  Last time I personally dealt with a union delegation, was when they were begging (I think that's the word, really) to be allowed to come onsite at a shiny new plant I was responsible for in the North East in the '90s.  Rather cruelly, I replied: why would we?   All our non-managerial technical staff had been recruited from traditional unionised backgrounds in the locality, and were delighted to be under training to be multi-skilled.  As they (our staff) would tell us, if you'd volunteered to become multi-skilled in their previous employment "the union guys would break your legs".

Anyhow, it would be foolish not to recognise that there's a bit of a seachange underway, if only in the morale of these dinosaurs.  Here's some disparate thoughts on a union resurgence.

1.  They're actually a bit nervous

Well, after the beatings they've endured over the past 35+ years, wouldn't you be?  And they are of course deeply cognisant of how dependent they are on the policies and handouts of our dynamic new Covid Chancellor, who has basically "outflanked them on the left", moving faster and further than they were even asking for!  They'd like to be telling him what to do: but they are also pretty grateful for the substantial crumbs cascading from his table.  Could we please, errrr, just have a seat at this table?  Please?  They know where all the initatives are coming from.  And the £££.  And who's in charge for the next several years.

2.  Green Deal to be unionised - really?

Now Rebecca's "Green Deal" was for a fully unionised new industrial revolution, of course - and it was green in name only.  The noteworthy central plank of this policy was the "just transition", which meant, well, anything really, provided unionised industrial jobs were front and centre - new car factories, plastics factories, steel works, you name it.

I'm sure we can easily envisage Boris going for a massive Keynsian splurge.  And cars, steel & plastics may well feature - along with even easier quick-wins like roadbuilding and infrastructure renewal.  He may even call it a Green Deal, to steal Labour's thunder and give the pudding a bit of a spurious theme.  But: unionised?  No more so than normal-for-2019, I'd guess.  The big advocates of this kind of green Keynsianism, all the way to Ed Miliband (remember him?) are quite keen to be non-partisan (see 'nervous' above).

3.  Unions & Starmer: is he particularly keen?

Some say not, nay, they fear not.  You could see why.  What's less attractive than Unite, the Union and bad-boy McCluskey and his bad-old-days fixer reputation? 
Keir Starmer is pivoting Labour away from the support it has given to trade unions in recent years ... leading figures in two Labour-affiliated unions – the Fire Brigades Union and the Bakers, Food and Allied Workers Union – released statements condemning Starmer’s favoured [and of course successful] candidate, David Evans, for party General Secretary as “divisive.” The former Blair-era fixer is deeply unpopular with many of Labour’s affiliated unions and seen as likely to diminish their influence
And never mind Starmer and his pivoting: there are plenty on the purist Left who despair of the undemocratic, unrepresentative machinations and general corruption (not to mention conservatism) they see amongst the ranks of the dinosaurs. 

4.  Good news for the rest of us

However, it is I think to be expected that they do elbow into a few more seats at a few more tables in the coming months and years - including various organs of the Peoples Party.  The great thing about this is, they are really incompetent.  Any board or body with heavy union influence is going to be that much more dull and leaden-footed, not to mention conservative - at a time when agility and sharp-sighted radicalism is what's needed.  The best you ever get is when some relatively bright union research-department wonk comes up with a load of incredibly well-researched, detailed, earnest, but essentially wrongheaded "roadmap" which may accidentally contain a nugget or two, but which nobody ever reads (case in point: Rebecca's bizarre 2019 energy policy which I believe I might be the only person on the planet ever to have gone through to the very end).

Boris has always been lucky.


Thursday 28 May 2020

V shape recovery on the cards?

With the Corona Virus in the UK seemingly evaporating at the moment, we may see a V shaped recovery for the economy. This would be amazing news as I have been thinking for a long-time that the recession we see will be awful. However, the virus is seemingly petering out much faster than the Government thought, just as it spread much more quickly than the Government could adjust for.

They key will be whether the Government, under intense media pressure, will have the confidence to say that things are more or less back to normal by July and as long as we wash hands and stay alert then everything can go back to normal. It seems a brave call, but there are 40 odd districts now corona free and that list gets longer everyday - July is a long way off from here at this rate.

Too optmisitic a take?

Tuesday 26 May 2020

A cure at last!

It has been hard with Lockdown to get to grips with the virus. It creeps up unseen, an invisible enemy as President Trump says. You don't know who has it, it could be your spouse or close family, your neighbours, even as we have discovered, the Prime Minister.

It is a nasty virus to if you catch it. Some people do seem to be able to wear it lightly and get by, but for other the symptoms get worse and worse. Fever seems to be one of the maing signs, and the lying around lethargic with the odd peak of howling rage.

I am of course talking about social media addiciton virus, which is a curse of our age. All of our political and media class suffer hugely from this debilitating disease. With it, they lose most sense of reason and all sense of proportion. The current ridiculous and confected issue with Dominic Cummings is the latest example.

It proved for me though a release, having watch some loopy lady on Sky insist that he was patient zero for the North East and could be prosecuted for murder, enough was enough. Already I had been recovering (a nice email from a regular reader here helped too), but slowly I was looking less at Twitter, ignoring the daily briefings and generally getting on with a bust job and life. Now was the time for the big switch off.

I feel a lot freer for it, to limit the interaction with 24 hour news is good for the soul. One or two bouts a day for 10-15 minutes will keep you in the know but not consumed by it. The nature of the Corona virus impact and how much it changed our lives nescessarily made following the news a key element in all our lives. But now, as lockdown ends, perhaps the height of super tension will reduce too. Sadly, I fear for the media it is far too late, in their desperate search to keep up with free news, they have reduced themselves to the same level as those whom they used to criticise for sensationalism,

Saturday 23 May 2020

Some Authoritative Covid Stuff

Well there's been a lot of tripe and premature stuff to contend with, n'est-ce pas?  Today I attended a (virtual) lecture by this fine chap and (to the extent I've understood them aright), here are some of the things he had to say.
  • For a very long time, progress on anti-viral medecine lagged many miles behind anti-bacterial.  Then HIV came along,followed by some serious effort, the resuts of which are impressive.  HIV has broadly been tamed, and one of the hepatitis family (I forget which) can be cured easily now.  They've really got the bit between the teeth, and he's confident something will soon be available by way of treatment for the various types of corona virus: there are several promising angles of attack
  • When it is, it will be generic, able to be stockpiled, and probably good against any of the corona family.  He even went so far as to say:  this could be the last coronavirus pandemic ever.  (Brave man ... but I only report what I heard)
  • One of the problems researchers face is ... shortage of experimental human subjects!  Last month you could step into any European or US hospital and have as many as you needed.  Now, the number of new cases coming forward is very small (!)   They think they may need to ... (wait for it) ask for volunteers to be infected.  Some would die
  • The UK testing regime is now excellent (you hear that, Starmer?) - the expertly delivered tests, that is: home testing is not much use
  • The idea of of a 'passive' herd immunity strategy was utterly bonkers.  In no part of Europe has more than 4% of the population had the virus, and you need >>20%.  Any health service would be overwhelmed along the way, long before that % could be reached
  • It's entirely possible, indeed likely, there could have been corona virus outbreaks in Victorian times (this stuff has been around in animals for yonks).  It's just that nobody would have noticed it, in amongst all the other illness and death in crowded areas.  He suggested the Tudor-era sleeping sickness (made famous by Mantel) might have been a corona virus.  Like the 1918-19 'flu, these things can just burn themselves out
Finally, another fine speaker at the same event (to whom I will return in another post) said that it's wrong to claim (as some do these days) that the current generation of youngsters is the first that will have a lower life expectancy than their parents.  They'll live longer, she said, because medics and pharma will continue keeping horribly unwell oldies alive for ever increasing amounts of time.  They'll just have an unhappier time of it than their elders - unless they sort out their lifestyles (= over-eating).


Thursday 21 May 2020

Landlords should move on lease terms

One of the key areas coming out of the current Covid crisis is the frankly terminal shock to the retail and leisure sectors. There simply has been nothing like this in history to compare it to in the modern age.

Restaurants and shops will fill up again, people are desperate for some normality as mile long queues to McDonalds' as they open up is demonstrating. However, it could be months or even years until social distancing restrictions, both regulated and emotional, are relaxed. Restaurants can't make money at 50% occupancy snd neither can many shops.

Equally, retail landlords are in a big fix, June rent roll is coming up and it could be a bloodbath. As the next quarter kicks in a lot of retailers will give up the pretence of trying to come back. Better to emerge with a fresh business and new rent rates than try and limp on with the accrued debt.

But the US and Europe have an answer, the answer is that lease terms move to share of turnover rather than fixed, upwards only, rents. Share of turnover, or even share of net income, will see businesses able to operate at reduced levels, but still pay some rent. Plus when the good times return, so do the rents to the landlords.

Crisis is a time for flexibility, the UK has long be afflicted by the deformities of the rent and business rates system which has ruined our high streets and many of our once thriving retail industry. With the additional burden of Amazon and now Covid the situation is dire, but the proposal above will show a way out that shares the costs appropriately between landlord and tenant.

Wednesday 20 May 2020

The Wage Slave Model of Capitalism

Pretty much everyone in the western world has in mind a wage-slave model of how economies work, the emphasis being on 'wage'.  You (and/or your spouse) get a regular job with an employer for a regular wage, a degree of security and stability, perhaps even prospects; and other benefits besides - some financial, and some social (the companionship of colleagues etc).   The job, or perhaps a succession of jobs in a serial-monogamy manner, will see you through to retirement, hopefully with not too many unwanted episodes of unemployment along the way.  

More recent developments like zero-hours contracts and the gig economy are widely seen as a baleful departure from this ideal, dragging people into membership of the 'precariat' (and ignoring aspects such as (a) quite a few people enjoy the flexibility of piece-work; (b) many Labour councils are at the forefront of zero-hours; and (c) some of our wealthiest and most glamorous citizens operate in this manner, from choice.  OK, not very many in the grand scheme of things.  But it's how I've operated for many years**, following on from an early career of a more conventional type.)

Easily forgotten, then, that at the first flowering of the industrial revolution, the wage-slave model was itself widely viewed as an abomination, and a dangerous one at that, putting the entire economy at risk.  How so?  I was reminded of the issue by a recent BTL comment from our friend Andrew:
We may be going back to the pre-industrial revolution days where it was normal to wfh. Some of the nicer terraced houses in Weston Super Mare still have large workshops at the end of the garden. Back in the day, that was where the artisan did his/her work^^.
It's a bit more complicated than that.  Prior to the introduction of the factory system, large quantities of properly marshalled labour were periodically required, regular examples being for the harvest, and for war.  But other large-scale projects (inevitably labour intensive) were conducted as well: the construction of large buildings, canals, drainage schemes, country parks.

Able-bodied people - mostly of course, a rural population - lived primarily in smallholdings++.  They had various basic skills, often crafts, and of course they represented a "reserve army" of raw labour since routinely they were more than somewhat self sufficient at the margin, if not strictly subsistence farmers.  When a project was in the offing the menfolk could fairly readily drop what they were doing (a bit of work around their plot or in the little workshop), leaving that to the wife and children, and for several months, if needs be, go off and sell their services to someone who could make profitable use of them, be that commercial or the in the King's pay for a summer's campaigning season.  When times were quiet they would return to their homes.

As a socio-economic system, this had tremendous flexibility.  The theoretical fear was that by taking adults away to the newly expanding towns and cities to work 60-70 hours a week exclusively for one employer, all flexibility and social resilience would be lost.  Somebody could no doubt explain how this danger was mitigated in the industrial transformation that brushed past all objections (there were of course moral as well as economic dangers foreseen by many - not least concerning how many people, newly-rich and poor, would no longer go in fear of the lord of the manor).  We know, however, the transition was made triumphantly if not painlessly.

I haven't formed a theory of how this pertains to 2020.  But it's an interesting input.  As you know, along with our good friend Sackers I'm always intrigued by questions relating to flexibility / resilience vs efficiency.  What's the perfect balance?  Difficult to assess.

** and you know how glamorous I am
^^  a neighbour of mine who was a silversmith worked in that manner until around 1990; and my next door neighbour today, a prosperous IT developer, has always worked mainly from his converted garage at the end of the garden
++ when I was first a local councillor (in a London borough), my ward still contained a number of smallholdings on a peripheral site of 15-20 acres - people living in railway carriages and the like, on plots like glorified allotments.  They were all bought out for a housing development after only a couple of years of my tenure

Monday 18 May 2020

no work = no pay

It has been a long time coming, but finally the penny is dropping that lockdown is over and the Covid party can start to end. Unfortunately, the Government was so harsh in its biding in March and April that we now have a very scared population indeed.

Led by the Public Sector Unions and media cheerleaders like Pies Morgan, the scaring must go on. The fact that outside of care homes and hospitals there is only a tiny amount of Covid-19 now present must be ignored. The fact hat Covid is only bad for a small fraction of those that catch it must be ignored. The fact that Australia has completed a month long study to show kids don't really infect people (they carry too little virus in all likelihood ot pass on) must be ignored.

Nope, instead it is too dangerous to go back to work or have any sort of normal life. No pubs or restuarants, no airplane travel. No going back to to work.

The Government is in a fix here, after all, they started the panic and it becamse obvious when Boris himself was so ill with Covid.

But here we are with lockdown ending and the trains have gone from 97% below normal to 93% below normal. This is not good, far too many people want to stay at home.

The only solution will be a bit of stick at this time and a removal of carrot. Furlough must be run down quickly, with this the last month at 80% pay. Next month 40% would do, also teachers mus tbe told if they refuse to work that is their right, but the Government can also refuse to pay them (illness and shielding for the elderly teachers will have to be factored in).

The sooner we get things going the better for the social and economic health of the County, plus the quicker we find out if the second wave theories are true or another scare story.

Saturday 16 May 2020

The Unlikely Hegemony of 'Thatcherite' Economics

You've probably gathered that I have a hobby of observing the loose cadre of idealistic, educated Corbynist / Momentumite types, dating from the 2011 riots.  It's a serious and important social phenomenon: the evolution of an officer-class, potentially to lead the *revolution*.  This isn't going to be my magnum opus on the subject, but rather an interesting snapshot from last week.

The Corbynist in question is one Aaron Bastani: look him up for yourself, he is as wrongheaded as it is possible to imagine but transparently, ingenuously, painfully honest.   He has also (supposedly) worked up a fully-developed new vision of the future that glories in the title fully automated luxury communism (sic): needless to say his vision is revered in some leftist quarters, and scorned in others (they all despise each other cordially in best Life of Brian fashion - it's all that earnest thinking).

Anyhow, à propos of "The Treasury is modelling a potential £500 *billion* deficit for this financial year. That would be around 25% of GDP", last week he went on to tweet:
You have to suspect Tories will go for pensions if deficit is as bad as it could be. They are going to massively rise in coming decades anyway so might as well deploy some shock doctrine. I think they’ll plump for that, citing ‘generational justice’, and VAT/NI.
Now let's immediately accept that one interpretation of this, is: Bastani is merely predicting what the Tories will do next, because he assumes that they (foolishly) think "it all needs to be paid back eventually".  But that's not how I read it.  It seems to me (and others in the thread following his tweet) that young Aaron himself thinks it all does indeed have to be "paid back" - 'cept he'd do it via a wealth tax etc etc.  He's just mulling over the conventional options for doing so, and speculating on the politics around the choices available.  (I have no intention of ringing him up and finding out which is correct.)  In any event, he didn't rise to the chiding of one of his BTL commenters who retorted: 
Love the comments on here from Corbynistas implying the Govt have spent too much! Pot/Kettle.
So for now, I'm sticking with my interpretation.  Deep in the public psyche, plain vanilla grocer's-daughter Thatcherism rules, OK!


Wednesday 13 May 2020

How long can the markets be wrong this time?

The FTSE today closed at 5900. It is a long way off January's 7674 level  - a nice 24% down.

From just that you would expect a bad year, but actually this is a pretty shocking level to me in terms of resilience. The UK economy contracted 2.5% in Q2 and is expected to drop anywhere from 15% to 30% in Q3. This is much worse than 2008/9.

In 2008/9 it did take 6 months but in the end the market ended up 50% down for a short while, albeit with recovery also very sharp due to all the algo trading, so the low did not last that long, a matter of days and weeks.

This time though is it different? On the plus side the banks are not bust, on the downside....everything else is.

Another indicator is the oil price, which is rising slowly back towards $30 per barrel. Whilst this is a 50% drop so far this year, there ia a huge glut in the market. Look in the sky, there are no planes. It takes seven barrels of oil to make one of Kerosene. How, with Saudi and Russia still exporting, is the price holding up?

To me the answer to both questions above is twofold. Part A is there is a huge amount of trading going on and some people taking some very silly naked positions. The Covid situation may only just be beginning of the pandemic but the markets are pricing it in as if it is over. I hope they re right, but it seems a very risk-on for a position. Part B is the huge printing of money by the Fed and others to give liquidity to the banks has seeped, as always, into assets. Fake money swapped for real assets by those happy recipients banks. This is the desired effect as far as the central banks are concerned.

I don't but it myself, when the next set of GDP figures come out or anyone one of hundreds of potenitla covid-related bad news stories the markets are going to head back down at least a thousand points on the FTSE, two thousand it events go badly. Apparently the markets can stay wrong longer than I can stay solvent....doubt it this time but I guess we will see.

Tuesday 12 May 2020

Are We All "Key Workers" Now?

Yesterday I needed to take a longish car journey for the first time in weeks, and was listening to the radio accordingly.  In every bloody commercial, the advertiser referred proudly to all their loyal staff as "key workers" - all working hard for me at this difficult time, natch.  

Then, upon encountering some roadworks, the sign said "Caution: Key Workers In The Road"!

OK, we get the message: everyone expects "key workers" to be getting big, richly-deserved, state-funded pay rises shortly; so that's what we all must be!  (Well, I know I am ...)  What, exactly, do you need to be, NOT to qualify?  A betting-shop clerk?  A bitcoin speculator?  A professional daytime TV watcher?  Nah: I reckon that with a modicum of ingenuity you can qualify everyone.  Talk about devaluing the currency, eh?

Anyhow, practitioners of the fine and vital art of corporate restructuring are definitely key workers.  Well, who was it that sorted out the Far East financial crisis of the later 1990's?  There will be no shortage of requirement for this service in the coming months and years ... and as luck would have it, I've been working on one for the past several weeks.

It's a classic of its kind.  All blew up at short notice.  The distressed parties are overseas companies.  The debt holders are overseas companies.   All the likely "bidders" are overseas companies.  With one single exception (a New York law firm retained by one of the financiers) ALL the advisers in all disciplines for all parties are London firms.  And, being 2020, the whole thing is being conducted very effectively by Zoom.  (Less splendid City dining-rooms and bespoke sandwiches, but there you go.  Mrs D does a great avocado, bacon & ketchup sarnie too.) 

Call me complacent: but I just can't see how Frankfurt could muster half a dozen instant, multi-discipline, fully staffed, 24/7-working teams like that.  Or Paris? - don't make me laugh. HK? SG? (Geneva?) 

How long can we retain this advantage?   How might it slip away from us?  I suppose everything's possible: but hey, a service is a service, and people the world over have become addicted to it.

And so us keyworkers soldier on.  Oh, it's a real service, be in no doubt.  The restructuring and recycling of sunk-cost assets is a Real Thing, and it keeps the globe spinning in its orbit (see sunk costs / capitalism, passim).  We'll be needed quite a lot in the coming months and years ... until Jeremy Corbyn rises from the dead and does away with us all.


Saturday 9 May 2020

Guest Post: At The Blunt End

From our longtime BTL champion, Electro-Kevin

Well here we are, regulars at the Capitalists (not) @ Work Arms and how honoured I am to spend a moment serving behind the bar rather than arguing with customers in front of it.  (If I've offended anyone I didn't meant it.)

We may be a nation all in this together but I disagree that we are a nation united, as The Sun trumpets this morning.  We are not.  We are one that is deeply divided.  This disease has opened up every fissure in this land and by golly, aren't there a lot of them!  Continuity Remain vs Brexit for one, managers struggling to start up businesses vs no-win-no-fee lawyers (aka 'elf 'n' safety); then there's devolution.  Oh my!  Whatever England may need right now, we are going to get what Scotland wants.  Boris could not make a bold decision even if he wanted to because Nicola Sturgeon simply says in advance of his addresses "This is what Scotland's doing [financed by, errr, the Treasury] and we don't want to come out of lockdown".  So England can't come out of lockdown because if we do the death rates will undoubtedly climb and will contrast badly with Scotland's which the BBC will point out with glee.

We are in a game of duck-and-cover, soon to turn into Whack-a-Mole because we simply have to start thinking about making a living once more.  I feel it in the air that we are about to see the return of soup kitchens and there is no assurance that there will be a vaccine any time soon to stop that.  I'm pretty sure it won't all be over by Christmas so the only thing that can prevent us from tipping into the economic abyss are very hard decisions of which our comfortably furloughed and suntanned people (particularly on state wages) are unready to stomach.

I really don't envy anyone in a position of authority in our divided country these days. There are no easy decisions.  The situation is awful from every angle, especially politically.  This the most exquisitely wicked disease to screw up the West.  The Goldilocks disease.  Not too strong, not too weak, not too impossible to cure... juuuust right.  Tepid enough to royally bugger us up.  And on that note I'm afraid to report that owing to social distancing, C@W Arms can no longer serve you the All-Day-Breakfast.  We can, however, chuck some tepid porridge at you with a ladle - the bad news is that it tastes foul, the good news is that there's plenty of it.

Tuck in!


Friday 8 May 2020

How has the UK Government done re Covid-19?

Here are we, about 10 weeks into the depths of the crisis. It came very suddenly and took the whole of the West by surprise. East Asian countries, more used to China's lies and the SARS pandemic, were much better prepared overall.

With Lockdown weeks long now and the media going from one panic about not long enough to another about it being to long depending on what day it is, it is hard to judge what is going on.

The media are obsessed by narrative and story. They can whip up a storm about the danger of covid just as easily as downplaying it to a mild flu. I give the Labour party some credit here, they are manipulating this well with constant placemen and women able to go on about lack of PPE - following and feeding any negative narrative on the Government. Fine practice at the dark arts.

So how do we think they have done overall. We wont really know for a year or so when this horrid thing has swept around the world, but two months in is enough to make some statements -

A) Preparedness - the NHS has not been tested like Spain or Italy, the Nightingales were built but not needed. Overall, very creditable on this front. The lack of testing and PPE is a global issue for the most part but does show up some failure as does the miss of how important it was to protect care homes and care home staff. 6/10

B) Reaction Speed - Way too slow to close airports from key countries like Italy and Spain where we knew the infection was. This alone has led to a much bigger outbreak. On the other hand, they were much better with holding off on lockdown, knowing it would only last effectively for a few weeks - despite media madness at either end of it. 4/10

C) Medical Policy - By following SAGE the Government has both been senisble and given itself a get out of jail free card. The arguments about whether SAGE is right or not dont matter - literally know one knows better in the Country, it is just that answers are not easy. 8/10

D) Leadership - As the polls show, Boris is flying and Hancock and Sunak have been overall very assured. Raab did a good job standing in at a tough time. In comparison to the endless campaiging and whining from Labour, plus with a very hostile media to cope with, they have been excellent. 9/10

E) Economics - A generous furlough scheme has kept the Country in stasis for now. The scheme was delivered well too in short order. Other elements of the package are expensive but no one seems to care for now, the bill comes later. Hard to fault what has been done, but I fear extending furlough too long will be costly move and affect people too much. 8/10

Thursday 7 May 2020

Covid: Energy Sector Update

All manner of interesting things are happening as the lockdown and general paralysis works through the energy system.  Top of the list is, of course, severely reduced demand: residential up, but everything else significantly down.  Plus, customers' ability (and/or willingness) to pay is diminished.

Here are summaries of several current stories from the industry.     
 *   *   *   *   *  
Ofgem is in negotiations to pay more than £50m to EDF to reduce output from Britain's largest nuclear reactor (SZB) to avoid blackouts this summer.  Low demand threatens to overwhelm the network with surplus electricity, notably from nukes and windfarms that "must run".  National Grid warns of a "significant risk of disruption to security of supply" over the Bank Holiday unless it is granted emergency powers to disconnect excess solar and wind farms.  The costs of paying off all these plants will feed through to consumer energy bills - of course!
Ofgem (again) warns of a potential shock to consumers after research revealed only 35% have thought about the impact of coronavirus on their energy bills.  23% feel their finances are negatively impacted and 44% expect their financial situation to deteriorate in the next six months. 56% say they are using more energy than normal for the time of year, rising to 75% among families with children. Despite this, only 35% have given consideration to the roll-on impact to their bills, prompting the regulator to warn of potential “bill shock” further down the line
UK power network balancing costs for Q1 2020 climbed 36% year-on-year, driven by rising constraint payments to natural gas and wind powered facilities, National Grid data show: £430m, up from £312m in Q1 2019
Wind and solar power have stepped into the baseload role in Europe, with very little coal-fired plant running and less gas-fired plant than usual, wind and solar output having priority on the grid
*   *   *   *   * 
What's interesting about this last snippet is that it offers something of glimpse of where we expected to be in, say, 2030 as ever more renewables are developed, and ever more energy efficiency measures are taken.  Some grid operators are now proving able to manage grids at 70% or more renewable energy and with a much lower level of demand.  This would have been hard to believe until, errr, it actually happened.  Well, those grid chappies are good engineers - and they have a lot of tools at their disposal, some of them rather blunt instruments (see above).  What we'll learn later is, ahem ... the cost!  Which we shall all pay, one way or the other.

Finally, as a rather detailed but potentially significant consequence of all this, the output of gas-fired power plants in the UK and elsewhere has absolutely cratered (down by 90% in UK in April).  It is gas-fired plant that has been the great bulwark and standby in our system for two decades now - the grid's go-to source of flexibility, taking the strain of most of the ups-and-downs caused by intermittent wind generation (coal isn't nearly as flexible, and nukes not at all).  I foresee some very awkward premature closures in this sector - or, as above, the need to throw some big money at them to keep them available.

All the greenies (and a lot of lefties) are hoping these unexpected developments point the way to the green future of their dreams.  Maybe.  But it won't be cheap.

Oil might be, though ... 


Tuesday 5 May 2020

Can Gatwick survive?

Virgin are closing their hub airport at Gatwick. This is very bad news for those who work in and near the airport. Virgin has been a mainstay there for decades and their HQ is down the road in Crawley. In short this could be the end of Virgin Atlantic, although the owners must be hoping it can limp on in reduced form until the airline industry recovers.

British Airways last week said they were also considering closing Gatwick as a hub. BA management have hated Gatwick for years and never made any money there, the Unions pressured them into keeping it open and now they have the chance to focus on Terminal 5 at Heathrow where they are profitable.

Norwegian had overtaken Virgin at Gatwick in terms of transatlantic flights but they are in bankruptcy and negotiating with their creditors. Perhaps they will not come back tof life post Covid-19 anyway?

Thomas Cook and Flybe have already gone bust pre-Covid. This leaves Gatwick very reliant on Easyjet and Ryanair for sustainability. A rought estimate though is that it is about to lose 30% of long-term slot holdings and up to 50%. There won't be many takers for these after Covid for a while.

I can see Gatwick having to suspend activity altogether at one of it terminals for cost saving purposes after the crisis and potentially for the longer-term.

On the basis of so much excess capacity we can stop worrying about Heathrow expansion for a few more years yet (the court case was lost anyway so that was on a backburner in any event).

Airports are money making machines but they have huge safety and logisitcal demands placed on them. They have not had to adpat as now within living memory. Smaller regional aiports that have suffered like this have quickly closed. Perhaps the national infrastructure vision of the Government will force them to do some kind of bail-out to keep services running.

But there are going to be a lot of demands on Government funds and the greenies will be keen to claim an airport scalp for their mis-guided climate change agenda. One to watch.

Monday 4 May 2020

Elf and Safety culture comes home to roost

Throughout my adult life in the UK, Health and Safety has risen up the agenda like far faster than the banal topic ever deserved to.

It did so for two reasons:

1) The British attitude of jobsworthiness has long been a core part of our working and middle class culture. Health and Safety fits nicely with this approach to life, allowing people to skive and do naff all on some rubbish pretext they made up on the spot. Only now with added local Government regulation and some unhelpful EU regulation handily gold plated in Whitehall, which enables them to justify whatever fancy has taken them.

2) It is part of the left-wing approach to society, everyone must be 100% safe at all times and if they are not then you are a bastard Tory who is wishing them dead. Subtle, it ain't - but it has been a great platform for common purpose on the left. Allowing huge swathes of pointless bureaucracy to be created and thousands of non-jobs created, which the left always think is the same a real jobs being created, but there we go.

So why do I get on my high horse now? Well over the weekend polls came out suggesting the UK is  the most conservative country when it comes to ending the lockdown. As one of the hardest hit globally, it is not that surprising, but that does not make it a good thing.

Not only do people not want to come out and play again, but the Left Wing unions are using HSE excuses to stop their, um, 'workers' from having to actually drive a train or sell a ticket again. The same is true across a swathe of the economy, including teaching Unions pulling the same trick to keep schools closed and their teachers safely at home (at least teachers can distance educate for older kids). We all can see the business models of restaurants won't work with half the table capacity but that is what is being floated as the obvious course to take.

Whilst the true threat of the virus is real, the day to day threat even now is far, far less than when we started lockdown. Undoing lockdown is tricky to keep opening whilst keeping the pandemic manageable. However, the whoel HSE approach to life is going to keep us living more more seperate and less exciting lives than nescessary due to its ability to let jobsworths indulge their favourite pastime of work avoidance and Unions the power to stop school re-opening or buses and trains running.