Blackmock

The fallout from the banking collapse highlighted one overwhelming message……the power that investment banks held over the Government. Investment banks simply make too much money for them to be ignored and they create vast wealth for the UK coffers. This wealth creates power……this then leads to the Government conforming with their political policies and regulation that is very ‘friendly’ to investment banks.

 

Fast forward a decade across various political promises of reform against this power……exactly where are we?

 

 

Exhibit A Your honour……BlackRock.

 

BlackRrock are an investment company responsible for the investment of $5.7 trillion ($5,700,000,000,000)

 

A recent freedom of information (FOI) request has uncovered that Blackrock held 14 meetings with the Treasury in 2017. While there is no suggestion that rules governing how much access a company can have with current policymakers has been broken, exactly why does an investment company need access to the Government every 4 weeks?

 

And that is just one company…… there are many, many more.

 

 

Exhibit B Your honour……Ex-Government Officials.

 

BlackRock has been the next calling point for a number of high-profile Treasury officials in recent years.

 

George Osborne last year started in a contractor role at the company in a four day a month ‘research position’ earning him £650,000 a year.

 

Rupert Harrison, the former chief of staff to George Osborne, joined BlackRock in 2016.

 

Another ex-Treasury official, Antony Manchester joined BlackRock in 2017 to lead the firm’s ‘Brexit position’.

 

 

Given we live in a capitalist society (well, for now anyway), I’m all for a successful Government on an economic level which creates an environment for corporate success. But why does there seem to be an underground secret that big city institutions have open door access to Government. Why is there seamless career progression from Number 11 to city institutions?  

 

The lack of transparency creates concern……and we know where that all led a decade ago.

Driverless Supermarkets

It’s been in planning, production and testing for the past 12 months…..and this week sees the first driverless supermarket go live.

Amazon Go has launched in Seattle with no checkouts at all and no human interaction needed to shop or pay for the groceries. It uses an array of ceiling-mounted cameras to identify each customer and track what items they select, eliminating the need for billing. Sensors on the shelves add items to the bill as customers pick them up and deletes any they put back. Purchases are then billed to a customer credit card when they leave the store.

Which all begs the question……is the driverless supermarket going to be a new reality in the years to come or is it simply Amazon serving up a shiny brand marketing campaign / gimmick?

 

Well, it has some legs that’s for sure. I guess it will all come down to profitability and how long the upfront investment in technology will take to ‘pay back’. When you consider that Tesco alone employs over 300,000 people, it is clear that a significant labour saving will be attractive to supermarkets that work on such low profit margins.

Which brings me to ponder a few points:

Technology in supermarkets. As we are seeing with electric cars, the rate of development and market penetration is far from quick. Let’s be frank, supermarkets seems far from quick to adopt technology and manage it successfully. Just get yourself along to any self-service checkout and watch as customers take it in turn to lose the plot with the “unexpected item in the bagging area”. It’s like a Monty Python sketch.  

 

What about customer identification? On a busy Saturday morning, I am pretty sure I am not the only dark haired (with subtle grey ‘areas’) tall man sighing his way around the isles ramming any screaming kid with his trolley. Just how reliable is the identification? I’d hate to think someone else was paying for my shopping.

 

Then there is the customer experience. If I am not being greeted with a miserable sigh / grunt at the deli counter, treated like I am the thickest man alive when my knowledge of where the piccalilli is located is inferior to staff members with 15 years experience under their belts, endure a 15 minute queue whilst Brenda at the checkout provides a running commentary on the items being purchased by the irritating lady in front, playing adult Tetris on the conveyor belt with my trolley load and having to repeatedly confirm that I do not need any bags or help with the packing, then it will lack the ‘supermarket experience’. A certain irritating and frustrating ‘je ne sais pas’ will be missing in all our lives.

 

Despite these ponderings, money talks. And if the technology is consistent and offers supermarkets significant long term labour savings, it could all become reality.

 

In a consumer driven economy, it will be interesting to see how this will all impact the UK economy.

 

Intriguing times.

Bankrupt State Pension

The latest report by the Government Actuary's Department (GAD) paints a pretty grim picture for the future of the State Pension. It projects the National Insurance fund used to pay out the State Pension will be exhausted within 15 years. The result? The harsh reality is that, as the aging population bites the cost of the state pension will inevitably boom.

 

There will have to be a reduction in public services to cover the cost or taxpayers will have to pick up the slack to the tune of hundreds of billions of pounds. There really are no winners on this.

 

Should we be surprised though?

 

The issue has been known for the past few decades (or more) but no political party in power wants to address the issue. The State Pension, Income Tax and National Insurance are all political decisions. Politicians aren’t exactly famed for their long term thinking and planning given longevity in their position is all too rare. Let me put this into perspective, Esther McVey become the fifth Secretary of State For Work & Pensions since 2012. How can we expect long term joined up thinking with such a high turnover in the key position? (such a key position that only 1 in 1000 people new who she was in a recent survey!!!)

 

Then add to the fact that any Government that does take positive action to address the State Pension blackhole will receive a huge negative snowball from those people or areas that will have to pay for it……hardly any encouragement to show courage and leadership is it. Hardly a vote or popularity winner.

 

We have a very ‘safe’ Government currently that will simply kick the can down the road for someone else to pick up……and there is a readymade excuse of Brexit negotiations that the Government can use to duck taking ownership. Convenient. Very convenient.

 

But make no mistake, at some point extremely tough decisions will need to be taken as demographic reality hits the UK finances.

Trumpeting

In amongst all the magic of Christmas, you would be forgiven for missing President Trump well, errrrrr, trumpeting his latest achievement.

 

In short, Trump managed to persuade the US Senate to pass a Republican proposal for a $1.3 trillion tax cut that is likely to further boost the American economy. Basically, he cut Corporation Tax on business profits from 35% to 21%. It smacks of copying a Ronald Regan move in the 1980’s which is all based on a lower tax intake for the US Government in the short term but then getting a bigger total tax intake in the future from companies making more profits. Time will tell.

 

I guess Trump will just be pleased he’s managed to pass anything looking at all meaningful in his first year of office.

 

Anyway, enough of Trump……what’s the impact for the UK? Tax cuts tend to be an economic incentive for businesses to invest……and for employees to work and spend. An already strong US economy is strengthening and this is likely to boost it further. When the largest economy in the world is strong, those on the coattails receive an economic shot in the arm also.

 

With all the negative impacts that Brexit is having, a shot of economic steroids from Trump can only help.

 

No surprise that economic stimulus comes from afar and not from our own doing. Take note Mrs May.