The State of Britain

Cumbria’s low unemployment rate in focus across the EU, blue sky thinking on the railways and Brexit benefits (for some)

Reading Time: 4 minutes

Cumbria in the spotlight in Europe. In its assessment of regional unemployment rates across the EU regions in 2018, Eurostat – part of the European Commission that provides EU statistics to the EU institutions – stated the lowest rates recorded were two Czech regions, Prague (1.3%) and South-West (1.5%), then Mittelfranken (1.8%) in Germany, followed by Cumbria (1.9%). The euro zone project can have few supporters in some parts of Greece and Spain, however, where unemployment rates are very high, particularly West Macedonia (27%) Western Greece (24.1%) and Extremadura (23.7%).

More positively, the euro zone area’s seasonally-adjusted unemployment rate was 7.7% in March 2019, down from 7.8% in February 2019 and down from 8.5% in March 2018, according to Eurostat. That is the lowest rate recorded since September 2008, the start of the global financial crisis. The unemployment rate in the wider EU also dropped to 6.4% in March 2019, down from 6.5% in February 2019 and from 7.0% in March 2018.

Also, the flash estimate of European GDP for the first three months of 2019 showed an uplift to 0.4% in the euro zone and to 0.5% in the wider EU, compared with the previous quarter. France’s economy grew by 0.3% in the first quarter of the year – helped by a pick-up in consumer spending – and Italy posted a 0.2% growth rate in the first three months of 2019, marking the end of a technical recession. A concern remains over French and German manufacturing which data suggests is still in contraction. The German manufacturing sector figures showed a marginal rise to 44.5, below the 50 point level which would mark expansion. In France, manufacturing output fell from 49.7 to 49.6.

Outside Europe, the US economy grew by 3.2% driven by net exports, an acceleration in inventory building and government spending especially on highways and roads. China’s economy grew slightly faster than expected in the three months to March, expanding at 6.4% in the first quarter from a year earlier.

In the UK, some mixed data. Car production in the UK fell by 14.4% from the same month last year to 126,195 cars but monthly retail sales were up 1.1% as British shoppers spent heavily in March, meaning retail sales volumes were up a startling 6.7% year-on-year. UK house prices grew by 0.6% for the year to February 2019, compared to the year to January 2019, when prices fell 1.7%. Heathrow saw more than 6.5m passengers in March – the 29th consecutive month of record growth for the airport. The unemployment rate was 3.9%, the lowest since November 1974 to January 1975, but the number of personal insolvencies in Scotland rose by 5% in 2018-19.

Government borrowing last year fell to its lowest annual level in 17 years, at £24.7bn it was £17.2bn less than in the previous financial year. This equates to 1.2%, of UK economic output.

A vote of confidence in the UK as a report from accountants E&Y into global investment destinations found that the UK accounted for 10% of Mergers & Acquisitions globally worth a combined £305bn – its second-best year since the financial crisis. Also Norway’s state investment fund has said it will increase its investment in the UK. The sovereign wealth fund, which has £750bn to invest from Norway’s oil and gas income, said that it will continue to be a significant investor in the UK, despite Brexit. The fund takes a long-term investment view of 30-years and expects its UK investment to rise over that period.

Does the UK want a shale gas industry or not? Natascha Engel, the shale gas Czar who has resigned – after only six months – has criticised laws that force companies to stop operations for 18 hours if there is an earth tremor greater than 0.5 on the Richter scale. In the US – which is experiencing a shale gas boom – the threshold is 4. The UK’s gas imports, particularly from liquefied natural gas, are increasing every year.

Some blue sky thinking on the railways this month. The Rail Delivery Group (RDG) – in submissions made by the rail companies to a government-appointed review into rail – suggests an independent body should oversee the rail network and that commuter routes should be handed over to local authorities and organised in a similar way to TfL’s London Overground. It also recommends long-distance routes should be serviced by more than one company.

The Strategic Rail Authority, which was established in 2000, used to oversee the network, but it was abolished in 2004. Currently, most UK rail services are operated by fixed-term franchises which train companies submit bids for; the DfT then selects the best bid. In London, local government oversees timetables with private operators subcontracted to provide the services. Virgin Trains has also suggested an airline style model for long-distance operators which would see them competing against each other via slots that they own indefinitely.

In the air, Scottish ministers’ plans to set up a devolved air departure tax (ADT) which would immediately cut the levy by 50% have been put on hold until at least 2020. The Scottish Parliament was given powers to charge tax on passengers leaving Scottish airports under the Scotland Act, which came into force in 2017. Tensions with the Scottish Greens – whom the SNP relies on for its majority at Holyrood – over the environmental impact and complexities with EU state aid rules, which currently see airports in the Highlands and Islands given an exemption, have forced a delay.

Also on state aid, P&O is taking legal action against the UK government, claiming Eurotunnel was unlawfully given a £33m subsidy. Last month, the DfT settled out of court with Eurotunnel, which had challenged the procurement of no-deal Brexit shipping contracts. As part of this deal, Eurotunnel agreed to make improvements to its terminal which P&O argues put its business at a disadvantage. The case will likely turn on whether securing improvement projects as part of the Eurotunnel settlement means an otherwise lawful settlement agreement becomes an unlawful public contract. P&O may also argue that the settlement amounts to unlawful state aid, on the grounds that it confers an advantage on Eurotunnel over its competitors.

It was never really in any doubt that there would be some benefits from Brexit – for lawyers.