Friday, 11 May 2018

Protection Rackets

I was having a discussion yesterday with a Brexiteer. He gave his voting Leave as being influenced by his experience of immigrants forcing down wages to the detriment of British workers. I countered with the argument that most immigrants perform menial work at the minimum wage, which can't be depressed.

He said he was forced out of his business by Polish immigrants who had set themselves up as competition in the plumbing sector. He had employed some 5 people in his business and, gradually, had to let them all go and give up himself.

So, legitimate competition - the Poles too have business expenses and wages to pay plus, possibly, sending some of the proceeds home. In some ways, their overheads would be in excess of my antagonist, yet they manage to do the job at a lower cost. Quality of the work is another matter, but that wasn't discussed.

I have been in the export business most of my life and was once made redundant by a South Korean manufacturer entering the market with a competitive product we could never hope to match in price. I didn't demand protection from the British government - I couldn't, as my customers were global and my product was Israeli. It's what we in the export market experience on a daily basis, yet the chap I was arguing with wanted special protection while simultaneously arguing that the EU is protectionist.

My neice's new husband set himself up as a plumber some years ago on returning to the UK from Australia, having no previous experience. He put himself through a course and entered the business. Now he works in Merseyside, an area with a relatively large Polish population, and I dare say a few of those will be plumbers. He seems to have no problem competing against them and his business is thriving.

It strikes me that the chap I was arguing with wanted a scapegoat for his business failure. It might be more complicated than this, but that's the prima facie reading of the situation. Perhaps he was simply charging too much (which is not exactly unknown in the plumbing world) and was living a lifestyle that couldn't cope with a reduction in what he charged. The fact the competitor that put him out of business was Polish is immaterial - it could as easily have been my neice's husband who, on entering the market, decided to set his prices below the established competition.

New entrants to a market are always at an advantage, as they can easily discover the hourly rate of the established operatives and undercut them, ensuring their expenditure doesn't rise above a certain amount, commensurate with their hourly charge and business volume. Established operatives will, with time, get a bit bloated and lax and won't have the necessary drive to cut costs. We're all aware of the, possibly apocyphal, stories from not so long ago about plumbing being a path to untold riches due to scarcity of operatives.

Welcome to the cut-and-thrust world of export sales, where cheap competition is par for the course...

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