Monday, August 22, 2016


Normal service is resumed, as the author is again connected to this site after three weeks of very limited broadband access.
My last comment, on the subject of Hinkley C, failed to anticipate just how much the issue might be linked to broader diplomatic and trade issues. I focused on what I thought were the big technical and economic questions, and the position of EdF as one of the main contracting parties. Shortly afterwards, the UK announced that it would be reviewing the matter, and postponing its final decision to the autumn. It emerged that this was not because of doubts over the economic and strategic case, or concerns over the technology, but on broader grounds of national security.
Prima facie this episode represents a remarkable change in political philosophy. Under the prevailing globalisation and neo-liberal paradigms, and under Thatcher and subsequent governments, the UK has been remarkably relaxed about allowing foreign control not only of major British companies but also of key elements of infrastructure in the power sector, water, ports and airports. This has happened to a much greater degree than in other major economies such the US, France and Germany. But Chinese involvement in Hinkley seems to be the issue that is provoking a degree of doubt, and one of the concerns is national security. Or does this represent a high water mark for the philosophy of unfettered global markets?
A lot of features of the project remain unclear. If the Chinese involvement were purely a matter of debt finance, with EdF taking primary responsibility for construction, then it is hard to see why security should be a matter of major concern. However it has already been anticipated that the Chinese will play a much bigger role in subsequent development of the UK nuclear programme, at Bradwell, using Chinese technology, so we must assume that the Hinkley financing arrangements go beyond a simple matter of providing funds. No doubt all will be revealed when the final decision is announced.
Moreover, in the context of the referendum vote, and UK prospects for expanding its non-EU trade, the diplomatic significance of postponing the decision is also considerable. Government ministers are already wrestling with the problems of whether the EU exit vote implies leaving the customs union and the single market, and no clear position has emerged. In early July the UK also received a substantial rebuff from the US, with the US trade representative making it clear that trade discussions could not even begin until relations with the EU had been settled. There is no real reason that this, ie no discussion even in principle, should necessarily be the case. But it is a reminder that when US presidents offer formal diplomatic advice to an ally, they deserve to be taken seriously; this is something of an object lesson for the hapless ministers charged with steering a path to an EU exit that does not seriously damage the UK economy.   
Hinkley point has now caused a serious upset to the prospects for closer trading relationships with China. That is not to say that security concerns are unjustified, but just that trade relations are a complex matter, and may involve very serious compromises over sovereignty. The bottom line though is that in the space of a few short weeks, the UK has undermined its trade and business links with the three largest economies in the world, the US, EU and China.

Expect more trade related issues for the energy sector. One very substantial issue will be the UK’s continued membership of the EU emissions trading scheme. Prima facie this could sit outside the customs union and the internal market. Moreover trading emissions, in principle, and like other theoretical and practical benefits from trade, should allow UK emissions targets to be met at lower total cost. This has to be set against the deficiencies of the actual scheme that is in place. But this remains a large topic for the future, and one to which I suspect this author will return.

I have learned a great deal about the history of the UK nuclear programme, and some of the background to the Hinkley story, from listening to talks given by Simon Taylor of the Judge School at Cambridge. Simon has a blog at
His new book on the subject is now available: