Pub owners still smiling despite pokies regulation and falling revenues

With the gap between property values and performance set to widen further this year, it could spell trouble again for heavily indebted landlords and publicans who bought near the top of the cycle, especially as funding costs start to rise.

George Ajaka, head of investments at White & Partners, the private equity vehicle of the White real estate family, said “debt levels” would be the biggest issue for owners and investors in 2019.

“If pub owners can manage this and even go as far as reducing their debt, they will be better placed to handle a shock to the sector, which is beyond our control,” said Mr Ajaka who manages a portfolio that includes the Allawah Hotel in Sydney’s south and the Acacia Ridge Hotel in Brisbane.

“What we can control is debt, so reducing debt is a smart thing right now,” he said, whilst affirming that the group had a good year with all its pubs “trading well across the board”.

Twenty-year pub turnaround veteran Peter Braithwaite rode the recent boom in pub values in NSW, but recently sold up to pursue better value opportunities in Queensland.

Mr Braithwaite bought the Red Lion Hotel in the Brisbane suburb of Moorooka in late 2018 having sold a previous venue, the Commercial Hotel in Lake Macquarie in 2017 at a handsome profit.

He said he saw “comparative value in pricing” and a more stable regulatory environment in Queensland, where pubs have yet to see a huge surge in values at the same time as operating conditions weaken and pubs owners face greater pokies regulation.

“Potential regulatory change represents a material risk, particularly for operators with a higher reliance on gaming revenues,” Mr Braithwaite said.

Redcape’s struggles

While the correction that some thought might happen to pub values in 2018 failed to materialise, the lacklustre float of the Moelis-managed Redcape Group, owner of 32 venues in NSW and Queensland, and a warning about higher funding costs and rising land taxes in Queensland by listed pub landlord Hotel Property Investments (HPI) in November has put the sector on notice.

HPI chief financial officer Blair Strik said he expected funding costs would continue to increase for pubs and the availability of credit would be “tighter”.

Some of the recent deals struck for pubs in the private market “did not make much sense”, Mr Strik said. “Some of these yields can’t be much higher than their funding costs,” he said.

In a sign of potential trouble brewing for the sector, shares in owner and operator Redcape fell 8 per cent from their IPO price of $1.13 on the first day on November 30 and have yet to recover.

Redcape is one of the most heavily exposed pub groups to the pokies sector with 63 per cent of its revenue coming from gaming – compared with an industry average of 21 per cent. Poker machines, KENO and TAB kiosks contribute an even higher proportion of profit.

Despite its poor ASX start, Redcape chief executive Dan Brady said the company was “happy with the listing” when compared to the wider market and when looking at other IPOs that were not successful.

“While the current market conditions are challenging, it is also cyclical, and the current market presents a great buying opportunity,” he said.

Mr Brady said Redcape was undervalued to NAV (net asset value) but the business fundamentals remained strong and the sector attractive for investors looking to get into the space.

Asked if there was a risk of a crash in pub values in 2019, Mr Brady said historically regulatory changes had been the catalyst in driving down prices rather than economic cycles.

Despite its poor ASX start, Redcape chief executive Dan Brady said the company was “happy with the listing” when compared to the wider market and when looking at other IPOs that were not successful. Louise Kennerley

“However the environment is stable and collaborative at present with some strong positive initiatives coming through that I believe will enhance the industry and create positive social change,” he said.

He added that while equity markets are weak, “debt markets are good and currently debt financing globally is in abundance”.

Veteran pub valuer Robert Hunter of Queensland-based Power Jeffrey & Co, was bullish about 2019, but with some caveats.

“We’re pretty upbeat. We’ve seen good trading throughout [Queensland] last year, we don’t see that changing this year,” he said.

Mr Hunter said pubs sold with a blue-chip operator – Woolworths-controlled ALH Group or Cole’s Liquorland – at yields below 6 per cent during 2018 were a reflection of confidence in the market.

Ongoing risks

But he noted two ongoing risks faced by businesses in the industry: interest rates and regulatory change.

“The interest rate environment is favourable. We don’t want to see any upward movement, which may trigger consumers to tighten spending,” he said.

Mr Hunter said that while some pub operators were focused on gaming, stronger businesses had balanced revenue sources.

Andrew Wilkinson, managing director of ALE Property, said the overall sector remained stable and ALE had maintained a “good quality position”.

 Jessica Hromas

“If there was regulatory change that affected your business, like gaming, your other revenue streams will offset that.”

Fears of a downturn are not uppermost on the mind of Andrew Wilkinson, who last financial year guided the country’s biggest listed pub landlord, ALE Property Group to top position on on the BDO A-REITs survey.

ALE delivered a 24.5 per cent total return to shareholder with the value of its 86 pubs, all leased to Woolworths-backed Australian Leisure and Hospitality rising 5 per cent to $1.14 billion.

The A-REIT also saw weighted average yields on its portfolio fall below 5 per cent for the first time last year

Mr Wilkinson said the overall sector remained stable and ALE had maintained a “good quality position”.

“If rates remain stable and all other factors remain unchanged, I’d be surprised to see values move significantly, but only time will tell.

“High-quality properties always perform better if there is volatility.”

Pup brokers Andrew Jolliffe and Dan Dragicevich of HTL sold 20 NSW pubs worth $300 million in the second half of 2018 including the Bells Hotel to Rich Lister Arthur Laundy for $15 million and Paddington’s Four in Hand and Bellevue Hotels.

“We remain convinced that yields for AAA-grade commercial property indexed to a hospitality function will contract through and beyond 2019,” Mr Jolliffe said.

“Our view has been both consistent and accurate in this respect over the past 24 months, and we see no compelling reason to amend this view,” he added.

JLL’s John Musca who brokered Redcape’s $50 million off-market acquisition of the Australian Hotel and Brewery in Rouse Hill last year was also bullish about the prospects in 2019.

“Hotel trade has historically proven to be very resilient to economic uncertainty and values are a function of earnings and demand,” Mr Musca said

“There remains significant latent demand for hotels across cities nationally and, other than the cost of debt, there is little foreseeable reason that the weight of capital for the sector will dilute significantly.”

Despite choppy equity markets, changing consumer habits and the weak Redcape float, Queensland hospitality king Godfrey Mantle hopes to float his Mantle Group later this year.

The group, which which comprises 15 venues including the British-themed Pig ‘n’ Whistle pubs and recently renovated Jimmy’s on the Mall venue on Brisbane’s Queen Street Mall, has little exposure to the pokies sector and leases rather than owns its own real estate.

It’s focus is on quality food and beer, including a growing demand for craft beer.

Mantle Group chief executive Arj Rupesinghe said the group was “bullish” about the sector and had aggressive expansion plan, including opening two rooftop venues above Westfield Sydney in the CBD in early 2019.

“It’s not our intention to go down the pokies path. We’re focused on large format venues in prominent locations,” he said.

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European Tour video puts US rival in shade in social media stakes

Glove Island? Monty’s Pythons? Is this the greatest golf sketch ever?

While there has been plenty of discussion about the European Tour playing second fiddle to its American counterpart, there is little doubt it leads the way in one vital element for the game.

The continental circuit comprehensively outguns the PGA Tour when it comes to social media content and promoting its star players.

This may seem small beer compared with the gargantuan prize funds and stellar fields Stateside, but it is thought to be crucial to the promotion of golf.

The tour is making great efforts to take the sport to new audiences. Its newest offering, a film called The Content Committee is the latest example.

This four-minute mockumentary starring Tommy Fleetwood, Henrik Stenson, Eddie Pepperell, Thomas Bjorn and Lee Westwood is a clever, witty addition to social media channels.

And it comes at a time when golf is often marginalised in terms of traditional coverage. This is a prime example of the tour exploring other avenues to stimulate interest in its golfers and the game at large.

Ironically, The Content Committee, unlike most of their other films, does not include any golf whatsoever. Instead, it plays to the personalities of the players, seeking to bring them alive as characters.

“The players are now buying into this and have done for a wee while,” Tom Greaves, who leads the production of original content for the tour, told the BBC golf podcast The Cut.

“I suppose that’s a lot to do with trust. Obviously, we have very good relationships with the players but I think it takes a bit of time to build up the trust with them that we know what we’re doing and that we execute it well.”

So, before last week’s Abu Dhabi Championship, the big-name quintet were taken into an imaginary boardroom and given what, at first glance, must have seemed an off-the-wall script.

“The conceit is that the European Tour players are now in charge of the next viral video and that they’re sick and tired of the ideas that we have come up with,” Greaves explained. “They are coming up with the next idea.”

But the script still had to be delivered. It helped that Fleetwood enjoyed drama at school, but the thousands who have now watched it will acknowledge the narrative is convincingly delivered by all of the participants.

“We really didn’t have any idea until they came into the room and did the first couple of scenes how good they would be,” Greaves said.

“It’s a tough proposition to get five world-class sportsmen to deliver quite a tough brief, to be dry, low-key with naturalistic acting.”

Perhaps the only genuine sentiment in the entire piece came, somewhat hammed-up, from the European Tour’s chief executive Keith Pelley.

“You know it’s pretty simple,” he said. “Everybody knows that and here at the European Tour content is king.”

It follows a succession of films including Little Billy Interviews where a young boy asked the likes of Rory McIlroy and Bjorn a string of cheeky and awkward questions.

There have been attempts to complete a hole in world-record time, efforts to make a hole-in-one on a given day and the delightful car journey given to a youngster by Andrew “Beef” Johnston, Justin Rose, Stenson and Martin Kaymer.

Nine-year-old golf fan gets birthday surprise

The idea behind them all is very straightforward. “Allowing European Tour and golf fans to see what their heroes are really like,” Greaves stated.

While this latest offering was tightly scripted, there was still room for a bit of freestyle, particularly Pepperell’s heavily bleeped explanation of his idea for the project.

“His bit was so risky and controversial, he could say whatever he liked and he knew we would bleep it out,” Greaves added.

“It was Eddie Pepperell’s brand, everyone knows he’s fantastic on social media and we wanted to give the guys the chance to portray themselves as they actually are. The roles were based on what they are actually like.”

It makes for fun viewing, but comes from strong tour commitment and proper investment because of the perceived importance of these projects.

“Engaging not just a youth audience but a different audience, is absolutely up at the top in terms of priorities,” Greaves said.

“We are trying to get golf out there and the European Tour as a brand and this is a great avenue for it.”

This latest film has been picked up by plenty of content providers and social media avenues. This site showed it prominently from the moment it was released last week, asking if it was the funniest golf film ever made?

Connoisseurs of classics such as Caddie Shack might beg to differ, but the impact the European Tour is making cannot be denied. Hundreds of thousands of people have now engaged with players that some may never have heard of before.

“Numbers are a big thing but what we hope is that positive sentiment is a big part of how we are recognised,” Greaves said.

Borrowing from one of the content committee’s ideas, he added: “You could have a cat playing the piano on YouTube that gets 53 million hits, but what does that mean if it’s just chasing numbers?

“It’s got to be something that people appreciate and like and approve of.”

They seem to doing exactly that, portraying their core product of golf with a sense of fun and mischief, yet with the serious objective of promoting their brand and the game in general.

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Why so many Yakima Valley farmers don’t support Trump’s wall: ‘America is supposed to be a nation of immigrants’

Like most small farmers, Dan Peplow earns the callouses on his hands.

Early mornings, long days and an ever-shifting agricultural economy that guarantees nothing but uncertainty. With the government shutdown closing the Yakima office of the Bureau of Indian Affairs (BIA), a federal agency that has been dealing with a disputed water charge, he received a succession of payment demands in the post. The BIA official dealing with his case quit their job, he says.

Throughout the days of anxiety and bureaucratic hassle – the payment company advised him to obtain a letter of support from his local congressman – the 65-year-old farmer has held true to two beliefs: that the border wall demanded by Donald Trump is wrong, and that migrant labourers have long been vital to the farming community where he is raising his family.

“Migrant labour has been a big part of agriculture from the beginning,” he says. “If it was not migrant labour, it was the underclass – like my grandparents living in a tent. When [the labour’s] not there, it stops.”

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He adds: “As a third-generation descendant of German Russian immigrants, it would be indefensible and unjustifiable to support the wall, and not support those fleeing conditions created by the Free Trade Agreements.”

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Washington’s Yakima Valley is famous for its production of everything from fruit to hops and cattle. It is the US’s largest provider of apples, cherries, grapes and pears. The valley has huge skies, and at times the rows of crop seem to run to the horizon. 

It is also located in the fourth congressional district, one of just two of the 10 districts in Washington state that has a Republican member of congress. Trump won Yakima county 54-40 in the 2016 presidential contest with Hillary Clinton.

Farmers across America have been affected by the decision to shut the government, a record-setting shuttering that has impacted 800,000 federal employees, who have either been sent home or are working without pay. The shutdown has now dragged on for a month, as Trump fails to agree a spending package with Democrats if it does not contain $5.6bn (£4.35bn) for a wall.

In the summer the valley employs thousands of workers (Getty)

Those farmers affected by last year’s tariff dispute with China, especially soy producers and cherry growers whose products were among the items targeted by Beijing, have not received the compensation payments offered by the Trump administration, because the farm service agency, part of the department of agriculture, has been closed.

Others have been unable to obtain loans that some turn to the agency to provide. Overseas exporters have been affected by the fact the government’s electronic system for approving exports is not working as it normally does.

“Right now, I need seed and diesel fuel; I do not need a damn wall,” John Boyd, a farmer from Virginia, recently told the Washington Post.

In Yakima, 120 miles southeast of Seattle, few said they had been impacted directly by the shutdown, though many said they knew of friends who had been.

Lon Inaba, a fifth-generation farmer whose family owns the Inaba Produce Farm, says he had some friends who had missed government payments because of the shutdown. He says the media rarely focuses on farmers, because people take the work they do for granted.

He says in Yakima, much of the labour that harvested the crops was either migrant, or else the descendants of migrant families. Under the rules of the H-2A visa scheme, an employer must guarantee a job and somewhere for the worker to live.

“One of our concerns with regard to our H-2A programme is that the Department of State will continue to process visas in (foreign) consulates until they run out of money,” Michael Marsh, president of the National Council of Agricultural Employers, told The Packer, a trade publication of the fruit and vegetable industry. “We know we’ve got some applications that are in play right now and that could be a real problem if we can’t get the workers in here.”

A 63-year-old apple farmer called Don, who asks just to give his first name, says that getting labour is a problem for major employers, and that they rely on the H-2A scheme. Don says he is frustrated with politicians from both sides for failing to compromise and solve the shutdown. He also expresses anger towards the Mexican coyotes and traffickers who were bringing migrant people into the country illegally.

The situation in Yakima is made more complex by the demographic make-up of the valley and the patchwork of ownership of the land – Anglo, Latino and Native American.

Gallo Vasquez, who moved to Yakima in 1972 from Mexico, claims the shutdown is affecting poor people and that the rich rarely suffer. He denounces Trump’s demand for a wall, saying: “We are not terrorists.”

He says people choose to ignore those working the land. “There is racism here. When people sit down at night, they don’t think about where their steak came from or their perfect apple.”

Some in the valley support the idea of a wall. Reagan Hass, 17, who works with his brother and father on a family farm producing apples, pears and cherries, says the shutdown has not impacted them. “I think Trump is right to stand his ground, otherwise people will not vote for him next time.”

Bob Shroeder, 75, who once grew apples and managed a packing plant, says there is a different mindset in the valley to that in places such as Seattle.

“On that side of the hill, they expect the government to do everything. They are reliant on someone to pay their wages,” he says. “A farmer has to grow something. If he doesn’t. He won’t get paid.”

Peplow says several years ago, he sought to transform his farm by feeding his cattle only naturally, ending the use of artificial irrigation and fertiliser, and reducing damage to the scrub and restoring natural plants that are less thirsty. He, his son Micah and wife Sarah frequently see coyotes, eagles, badgers, bears and once even a cougar.

“Our business model has been designed for the 21st century and intergrates conservation and beef production,” he says in a letter asking for help from Republican congressman Dan Newhouse.

The fifth-generation farmer points out that his ranch, with 40-odd cattle, does not use irrigation water allocated by the BIA. Usually he receives a waiver.

This year, because of the shutdown, he has received the bill. “Usually I go and talk with them, but there’s nobody there to talk to.”

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‘I’m selling now to beat crash,’ says disillusioned property investor

Mr Smith, 45, is planning to reinvest in a balanced portfolio of equities and fixed income generating a return of about 6 per cent.

He invested in 2009 in the belief that property prices doubled every 10 years, which is a typical sales pitch used by real estate agents.

Prices for properties in popular Sydney and Melbourne locations did more than double, fuelled by record low interest rates, strong population growth, exuberant markets and supply pressure.

Government statistics reveal the share of investors in Australia’s home loan market has also dropped to its lowest level since 2009 because of weakening sentiment and tighter credit.

 

Investor lending is down more than 22 per cent on the same time last year.

Mr Smith has grown disillusioned with low rental returns and increasingly fearful that a market crash will slash his slender capital gains.

“I’m sick of losing money all the time,” he said about negative gearing. “It has not been a great investment and I am now worried it will get caught when the property bubble bursts.”

Mr Smith said he might then consider buying back into the market at a cheaper price.

 

He is growing more anxious as prices fall, some lender rates rise, incomes remain static and the likelihood grows of tax changes if a federal Labor government is elected this year.

Cate Bakos, a buyers’ agent for Melbourne-based Cate Bakos property, believes lower prices and increased supply will attract more buyers back into the market.

Ms Bakos said tight credit was the biggest problem weakening demand, particularly checking income and spending details provided by applicants.

“Banks are still being very picky,” she said.

Demand is resilient in the first time home buyer $400,000 to $700,000 range where first time purchasers qualify for exemption from stamp duty.

Some analysts estimate there has been a five-fold increase in the number of loan applications rejected by banks during December compared to the previous year as lenders continue to crack down on lending standards.

“With prices forecast to keep dipping, it’s only natural that some home owners and investors would be looking to cut their losses or get out of property entirely,” said Graham Cooke, insights manager for Finder.com.au, which monitors rates and fees.

“A positive take-out of all this is that housing continues to get more affordable for those who have been saving a deposit and waiting to get into the market.”

Mortgage brokers, who act as an intermediary between lenders and banks, claim concerns about the findings of the Hayne royal commission are adding to lender nervousness.

Sentiment is also being weakened, particularly for off-the-plan buyers, by public alarm about building problems, such as the defective Opal apartment building in Sydney’s west.

Phil Dwyer, national president of the Builders Collective of Australia, said Opal was “having an enormous impact on property buyers, particularly off-the-plan buyers considering a high-rise apartment”.

Mr Dwyer, an award-winning builder of more than 45 years’ experience, added: “It is refreshing potential buyers’ memories about previous incidents involving high-rise apartments and shoddy workmanship.”

Combustible cladding on Melbourne’s Lacrosse building caused millions of dollars in damage after fire raced up 13 storeys of the building in as little as 10 minutes in November 2014.

It also sparked a row between tenants and builders about who was responsible for the fire and cost of repairs.

Major lenders are responding to the mixed messages by focusing on high quality loan applicants with a deposit of about 20 per cent who meet their tough new income and spending requirements.

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Planet Nine is not real but there’s something else strange on the edge of our solar system, scientists say

Scientists think they have found the cause of mysterious movements at the edge of our solar system – and it is not Planet Nine.

At the very edge of our neighbourhood, some objects appear to be orbiting in an unusual way that suggests something entirely unexpected is happening, without our knowledge.

Various scientists have suggested that could be the consequence of a huge hidden planet, ten times the size of Earth, hiding in the darkness in the distant reaches of the solar system. No such object has ever been discovered, but it has been hypothesised because of the unusual way objects we can see are moving around.

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But now a new paper suggests an entirely different explanation: there is a disc made up of small icy bodies that put together is as much as ten times as massive as the Earth.

That explanation appears to account for the unusual orbits that can be seen in some objects in the distant solar system, the researchers claim.

The study would also help explain why we are yet to see Planet Nine, despite intensive searches for it.

“The Planet Nine hypothesis is a fascinating one, but if the hypothesised ninth planet exists, it has so far avoided detection,” said co-author Antranik Sefilian, a PhD student in Cambridge’s Department of Applied Mathematics and Theoretical Physics. “We wanted to see whether there could be another, less dramatic and perhaps more natural, cause for the unusual orbits we see in some [of the distant objects].

“We thought, rather than allowing for a ninth planet, and then worry about its formation and unusual orbit, why not simply account for the gravity of small objects constituting a disc beyond the orbit of Neptune and see what it does for us?”

Scientists plugged that possibility into a model of our solar system and found that it appeared to explain the unusual movement of those distant objects.

The researchers admit that they have no more direct evidence of the disc than of Planet Nine. But the search is complicated by the fact that it is harder to see the properties of our own solar system, compared with those that we are looking at from the outside.

“When observing other systems, we often study the disc surrounding the host star to infer the properties of any planets in orbit around it,” said Sefilian.

“The problem is when you’re observing the disc from inside the system, it’s almost impossible to see the whole thing at once. While we don’t have direct observational evidence for the disc, neither do we have it for Planet Nine, which is why we’re investigating other possibilities. Nevertheless, it is interesting to note that observations of Kuiper belt analogues around other stars, as well as planet formation models, reveal massive remnant populations of debris.

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China’s balancing act: A slowing economy, debts and a trade war

By most normal standards, an economic slowdown like the one Beijing announced on Monday should have set off alarm bells on financial markets. China said its gross domestic product (GDP) expanded by 6.6 percent last year.

The last time it recorded such a slow growth rate was in 1990. Back then, it was the world’s 10th biggest economy; today, it’s number two and catching up with the United States.

But the slowdown has been engineered by the Chinese government, and the latest growth figure came as little surprise to economists. China does not have much choice. It needs to rein in the massive debts it piled up in recent years to drive its spectacular rise. By one estimate, those debts total around 300 percent of the size of its economy.

Beijing is now trying to perform what economists call a “soft landing”. That is, it wants its economy to cool off, but not by too much. It has reversed some curbs on bank lending and infrastructure spending. These measures amount to an economic stimulus, but of a much milder variety than in previous slowdowns.

“If they were to go for any kind of stimulus that looks like unbridled opening of the spigots, then that’s going to create perhaps some kind of a backlash in terms of how China is managing its overall credit and financial risks,” Vishnu Varathan, head of economics and strategy for Asia at Mizuho Bank in Singapore, told Al Jazeera.

The US-China trade war is hurting China’s economy [Reuters]

Trade war complications

And then there’s the trade war with the US. The dispute makes Beijing’s already delicate economic balancing act even more precarious. Analysts say China’s growth rate would be significantly higher if the US had not imposed punitive tariffs last year on more than $200bn worth of its exports. China has retaliated with its own measures.

The government says it can weather the headwinds.

“Downward pressure on the economy is increasing,” said Ning Jizhe, the director of China’s National Bureau of Statistics. “The Chinese economy’s resilience and ability to resist shocks and the long-term trend of stability will not change,” he added.

But the effect of China’s slowdown is already being felt around the world. Apple, maker of the iPhone, lost $55bn of its market value on January 2 after CEO Tim Cook warned of slowing sales in China, blaming the trade war. Its South Korean rival, Samsung, made a similar warning a few days later.

Counting the Cost: Is China’s economy slowing? (24:50)

High stakes talks

The next round of trade talks between the US and China are due to take place on January 30. Economists say a delay in resolving the dispute could hurt the Chinese economy further.

“If there is no trade deal within a reasonable period of time, it would mean that the US reverts to its original plan which was to ramp up tariffs on China from 10 percent to 25 percent on $200bn of their products,” Rajiv Biswas, chief economist at research firm IHS Markit, told Al Jazeera.

“There is also then discussion by President [Donald] Trump over the potential that he could also extend tariff measures to all remaining Chinese exports that don’t currently have these special tariffs on them. If all of those things happen, then of course there’s quite a big downside for Chinese exports,” he said.

Biswas says he’s basing his forecast for China to grow by 6.3 percent in 2019 on the expectation that there is either a trade deal or that a temporary truce that’s due to expire on March 2 is extended.

But any major escalation could result in an even sharper slowdown.

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EU president Donald Tusk says he told David Cameron to ‘get real’ over his ‘stupid’ Brexit referendum

The president of the European Council has revealed that he told David Cameron to “get real” over plans for the referendum that would see Britain vote to leave the EU and plunge the UK into political chaos.

In an interview for a new BBC documentary Donald Tusk said he told the then prime minister that there was “no appetite” among other countries for changes to the EU just because the UK was going to hold a “stupid referendum”.

He also revealed that Mr Cameron thought he could ultimately get away with not actually holding the plebiscite on EU membership because it would be blocked by his then coalition partners the Liberal Democrats.

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Recounting events, Mr Tusk said: “I told him bluntly come on David, get real. I know that all prime ministers are promising to help you, but believe me the truth is that no-one has an appetite for revolution in Europe only because of your stupid referendum. 

“If you try to force us, to hurry us, you will lose everything.  And for the first time I saw something close to fear in his eyes. He finally realised what a challenge he was facing.”

At the time Mr Cameron had publicly said he would try to renegotiate EU membership to get a better deal for Britain, and then hold an in-out referendum on whether to leave to stay. The much-vaunted renegotiation failed to secure any significant changes in key areas such as free movement of people. Mr Cameron went on to lose the referendum, triggering Brexit.

Tusk added: “I asked David Cameron, ‘Why did you decide on this referendum, this – it’s so dangerous, so even stupid, you know,’ and, he told me ¬– and I was really amazed and even shocked – that the only reason was his own party.

“[He told me] he felt really safe, because he thought at the same time that there’s no risk of a referendum, because, his coalition partner, the Liberals, would block this idea of a referendum. 

“But then, surprisingly, he won and there was no coalition partner. So paradoxically David Cameron became the real victim of his own victory.”

He also recounted a telephone call with Mr Cameron ahead of the prime minister’s resignation, describing it as a “day of reckoning”.

The first episode of the three-party documentary, Inside Europe: Ten Years of Turmoil, will air on BBC Two next Monday evening.

Appearing in the same documentary, former French president Francois Hollande, who was in charge at the time, explained why the EU gave few concessions to the UK.

“Any concessions made to the UK on freedom of movement in the EU would be easily requested by any other member state,” he said.

“I said to him, honestly, if he got a special deal for the UK because there was a fear he might lose the referendum, then other countries under populist pressure would try to organise their own referendum and get their own special deal.”

Another former French president, Nicolas Sarkozy, recounted discussions with Mr Cameron about special protections for the City of London as far back as 2011 – which would ominously set the tone for future discussions about EU reform.

He says he told the PM: “If you force our hand, you’ll get nothing. If you try to break our arm, you’ll get nothing. I said to Van Rompuy [then President of the European Council] ‘This is non-negotiable’.”

He went on to say: “I didn’t want to get into lengthy discussions on a subject which was, for me, non-negotiable. No point arguing for eight hours when it could be settled in eight seconds. No, nein, non. End of story.”

Mr Cameron has effectively resigned from public life following his departure as prime minister. He said recently he does not regret calling the Brexit referendum.


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