Monday, February 17, 2020
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The truth behind the Sunday Times’s Operation Doomsday

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I WAS in Ukraine during the 2014 protests. It surprised me that people refused to accept news from radio, TV and newspapers. Instead, they relied on social media.

With all the hysteria about no-deal Brexit filling the UK’s mainstream media, I now understand why. Instead of news, we are being fed a diet of propaganda, speculation, fabrication, rumour and re-hashed stories. Old-fashioned journalistic standards have disappeared, along with respect and courtesy to those who hold different views.

Recently the Sunday Times published extracts from what it claimed were leaked ‘Operation Yellowhammer’ documents, dealing with government preparations for a no-deal Brexit. The paper doesn’t mention which documents, or who wrote them. In the absence of any clarity, I assume the documents were risk (impact) assessments or summaries produced by civil servants at the request of the government.

Technical and commercial risk assessments normally contain a preface laying out the terms of reference that define the scope, purpose and limits of the reports. This information hasn’t been reflected in the newspaper’s articles.

It is unclear if the extracts were taken directly from the leaked documents, or if they are a summary of the contents compiled by the newspaper’s journalists. If the second is the case, it is not possible to determine how accurately the article reflects the original text.

In considering the contents of formal risk assessments, it is important to remember:

The report’s aim is to highlight potential problems caused by a no-deal Brexit. It is therefore not surprising that the article contains lots of doom and gloom with no sunlit uplands. However, even by industry standards, the leaked document appears unduly negative in tone as well as in content;

Civil servants are by nature conservative, risk-averse and likely to adopt a ‘covering my back’ attitude. They will have included any circumstances (no matter how extreme or unlikely) that could arise following a no-deal Brexit;

It is important to recognise that some events are mutually exclusive. In the same way that your house can burn down and the roof can be blown off in a storm, it is unlikely the two events will occur at the same time;

Typically, risk assessments will identify all source documents, references, related correspondence, and reports. None of that is obvious from the newspaper’s articles.

Risk assessments should state the known facts and the variables (including unknowns). From these, the authors can make forecasts based on historical evidence, extrapolation, industry statistics or experience in similar situations. It is unclear in the leaked documents how the authors have come up with many of their forecasts, whilst some are merely statements of the blindingly obvious.

Risk assessments can take a variety of forms depending on the information available and the client’s expectations.

The simplest form of assessment is to assign colours to show risk, green being the lowest risk and red the most severe. This is not an accurate way to display risk as you are limited by the colour palette, but it gives a simple visual indication of the level of impact.

A commonly accepted method is to produce a quantified analysis, to enable critical issues to be identified and risks to be prioritised. Typically, this involves considering the likelihood of an event happening and the severity of its potential impact. We assign each a ranking, typically between 1 and 10. Multiplying the two figures will give each risk a value. The risks with higher numbers deserve more priority when mitigation measures are allocated.

An alternative way of presenting the data is in tabular form. Typical column headings will be Risk, Mitigating Actions, Target Completion Date, % Progress to Date and Risk Owner. The leaked documents (or at least, the Sunday Times article) do not contain any of this analysis or important data.

The impact and probability of an event happening varies over time. The speculation regarding potential delays at Dover is a good example of the time effects.

In the weeks before Brexit Day we can presume that traffic flows will be high as importers and exporters try to complete deliveries ahead of the deadline. On BD+1, it is a reasonable assumption that traffic through Dover will be significantly reduced as nobody will want to be the guinea pigs for the new EU customs procedures. We can assume traffic volume to increase progressively from then and presumably return to pre-Brexit levels within weeks. The probability of transit delays and the extent of delays during that period will fluctuate over time. At peak periods, traffic flows will be higher, and disruption at the crossing at these times could lead to significant delays for some vehicles. However, delays at Dover and the Eurotunnel terminal are not unknown now, for reasons which have nothing to do with Brexit.

Traffic flows vary seasonally as well over 24 hours. It is important to recognise that half the trucks are entering the UK whilst the other half are going to France. Many trucks will be empty. It follows that the number of trucks requiring customs clearance at any one time is substantially less than may appear from the traffic movement statistics alone.

It is unclear how the predictions of a significant reduction in vehicle movements in the longer term at Dover are to be interpreted. It is the Sunday Times’s intention to imply that the volume of UK exports will reduce as a direct consequence of a no-deal Brexit. However, it is a reasonable assumption that any delays at Dover/Calais will lead to increased use of alternative ports. It may affect imports to the UK due to port congestion or by new import tariffs, but over time UK importers will identify alternative suppliers outside the EU or away from the congested Channel ports. We can also assume that import duties will reduce the volume of imported products and locally produced substitutes will become financially viable as UK producers seek alternative markets. A reduction in the number of vehicles passing through Dover cannot be assumed to reflect a reduction in UK imports or exports, or a reduction in UK manufacturing and production overall.

Where the reports contain quantitative predictions, there is no attempt to justify the figures or explain how they were derived. There is a suggestion that two oil refineries will close as an unintended consequence of a no-deal. There have been a significant number of refinery closures in the UK in recent years, principally due to high energy costs, high labour costs and environmental constraints. Alternative supplies from newer, larger and more efficient refineries overseas are making the economics of local production difficult. To describe the potential closure of the UK refineries as being a consequence of Brexit is disingenuous.

Likewise, no attempt is made to justify the prediction of fuel shortages in the UK. Although imports of fuels to the South East from Amsterdam/Rotterdam/Antwerp may become more costly, the UK currently exports about 30 per cent of its production. This could be diverted back to the UK and supplemented by imports purchased on the spot market if required. Whilst this may lead to increased fuel costs in the short/medium term, there is little to support the view that fuel shortages are inevitable.

An interesting omission from the Operation Yellowhammer documents is the impact of the diverse market on the decision-making process. Civil servants may assume all critical decisions are made centrally by the government. In the real world, things happen differently. Producers and service providers see the problems, potential solutions and opportunities first-hand. Before the government can act, businesses will have taken measures to minimise the impact on their profitability or to increase their market share. To explain the logic, let us assume that post-Brexit there is a shortage of avocados in the shops. Distributors find alternative suppliers outside Europe and prices to consumers increase to reflect the additional transport costs. Consumers decide they don’t want to pay more and buy alternatives to avocados. Now there is a glut of avocados, prices fall and the market stabilises. The government doesn’t have to intervene to solve the avocado crisis.

The Operation Yellowhammer documents refer to all consequences of Brexit as problems to be solved by the government. The government should concentrate on medium and long-term issues. Short-term issues can be resolved by businesses and local organisations which can make decisions quickly. By acting in their self-interest they will collectively be looking after the best interest of the country.

Risk assessments should reflect that solutions can come from the bottom up, not necessarily from the top down. Government intervention sometimes is not only unnecessary, but positively unhelpful. That is why speculation about potential congestion at Dover is something of a diversion as ultimately the traffic flows will sort themselves out.

The leaked documents comprise a list of potential post-Brexit problems which could have been created the day after the referendum by any Remainer with an active imagination. There is no supporting evidence. There is no serious attempt at objective and balanced analysis of the immediate impact and direct consequences, let alone the impact in the medium term and potential indirect consequences. There is little information on the probability of an event occurring or the severity of its impact if it occurs. The documents do not adequately reflect how the risks will evolve over time. There is no mention of any mitigating actions, the progress in implementing the mitigation measures or who is responsible for them. They amount to nothing more than a prediction that ‘we are all doomed’.

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Alan Polain
Alan Polain
Alan Polain is a chartered enngineer and provides technical and commercial advice to banks, lenders and governments on mergers, acquisitions and re-financing.

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