The UK has long depended on heavy flows of investment from abroad to make up for the weaknesses in its own corporate and financial institutions. In 2015 the UK ran a deficit in its external trade in goods and services of 96 billion pounds ($146 billion in 2015), or 5.2 percent of GDP, the largest percentage deficit in postwar British historyand by far the largest of any of the G-7 group of industrialized economies. By comparison, the US ran a deficit of 2.6 percent of GDP, while Germany earned a surplus of 8.3 percent, Japan a surplus of 3.6 percent, and France broke even. In the memorable words of Mark Carney, the Canadian-born Governor of the Bank of England, the UK must depend on “the kindness of strangers” to remedy its trade gap.

The reason for this unusual dependency is that for decades the UK has been unable to produce enough goods that the rest of the world wants to buy. According to WTO statistics, between 1980 and 2011 the UK’s share of global manufacturing exports was halved, from 5.41 percent to 2.59 percent, so that by 2011, according to UN statistics, the dollar value of UK merchandise exports at $511 billion was not far off the level of Belgium’s at $472 billion, an economy with one six the UK’s population, (and not included in the Belgian figures, the value of German exports routed through Belgium ports).

Looking at export industries such as IT products, automobiles, machine tools, and precision instruments, all strongly dependent on advanced R&D and employee skills at all levels, the UK’s performance looks even worse. The period of 2005-2011 is especially revealing because it includes both the years of the Great Recession and the collapse of trade between the advanced industrial economies, but also years in which their trade with China and other BRIC economies such as India and Brazil grew rapidly. Since one of the chief claims of the Brexit campaigners has been that there are now these exciting new markets in BRIC countries waiting for British exporters to conquer, it is worth looking at how British companies actually performed during those years.

All the leading industrial economies increased their exports of advanced goods between 2005 and 2011, some spectacularly. South Korea, with its proximity to China, was the big winner with a 93 percent increase in the value of advanced goods exports, followed by Germany with a 46 percent increase, Italy with a 35 percent increase, Japan with 31 percent, France with 24 percent, and the US with 22 percent. The UK could manage just a 7 percent increase, even though it benefited from an 18 percent devaluation of the pound. What has saved Britain from relegation to the European lower echelons—to the level of Italy, Spain, or worse—has been the pursuit over several decades of an economic strategy that has encouraged global corporations in both manufacturing and financial services to come to the UK and fill the British business vacuum. …

The most telling chapters of Surrender are those dealing with the 1980s, 1990s, and early 2000s, because they give the lie to the claim that Margaret Thatcher as prime minister arrested and reversed Britain’s industrial decline. Some of the most damaging cases of British industrial collapse took place during and following her period of office, and are well described by Comfort. Among them was the implosion in 2004 of GEC, a sprawling engineering conglomerate and a rough British counterpart to GE as the UK’s market leader in power generation, industrial control systems, and defense electronics. …

In his account, Comfort includes similar obituaries of British corporations in such disparate areas as machine tools, mechanical engineering, shipbuilding, steel, consumer electronics, and textiles. In 2007, Imperial Chemical Industries, a corporate giant of the first half of the twentieth century, vanished after a series of ill-judged acquisitions and the sale of its surviving rump to AkzoNobel. And in 2009, ICL, the leading UK computer maker, was taken over by Fujitsu following a series of bad product decisions in the 1980s and 1990s. …

Among the first British companies to go were ancien régime brokerages with names like Fielding Newsom-Smith, Pember and Boyle, Pinchin Denny, Scrimgeour Kemp-Gee, Wood Mackenzie, and Kitcat and Aitken. Their demise was followed by the disappearance of most of the City’s British investment houses, some going back to the nineteenth century. Deutsche Bank took over Morgan Grenfell in 1990; Barings succumbed to the activities of a rogue trader in 1995; S G Warburg, the creation of the legendry Sir Siegmund Warburg in 1946 and once the City’s dominant investment bank, was taken over by Swiss Bank Corporation in 1995, and eventually by UBS; Kleinwort Benson was acquired by Dresdner Bank in 1995; Hambros by Societe Generale in 1998; Robert Flemming by Chase Manhattan in 2000; and the investment banking side of Shroders by Citigroup, also in 2000. N. M. Rothschild, founded in 1811, was one of the very few survivors.

One veteran observer of the City quoted by Kynaston denied that this British rout mattered, drawing a reassuring analogy with the Wimbledon tennis championships. In 1995, Stanislas Yassukovich noted: “Wimbledon is still the world’s greatest tennis event, yet when did we last have an English player in the top ten seeds?” (In 2013, Scottish tennis star Andy Murray finally ended the drought by winning the men’s singles title.) But by 2000, another longtime observer of the City, the financial journalist Andreas Whittam Smith, was less sanguine:

We have given the keys of the City of London to its global competitors. They could, if they chose, on grounds of national rivalry rather than pure commercial calculation, set about dismantling it. The threat is there, even if distant and, in many people’s opinions, improbable. It could be the stuff of nightmares.

The Death of British Business
http://www.nybooks.com/daily/2016/10/18/brexit-death-of-british-business/