The Month That Was……January 2020

As most in the legal profession will tell you, January is traditionally the busiest month for marital separations. January really is divorce season. Clearly too much time on your hands over Christmas is not always a good thing.

From Prince Harry & Megan divorcing themselves from the Royal Family to the public now able to sever ties with Nigel Farage (thankfully), separation is all around us.  

The biggest, messiest, most tedious, expensive divorce since……well, ever……has also concluded this month. Our political marriage to the EU is done. A new chapter to welcome in the new decade.

Here’s how January 2020 will be remembered……

Boris Bounce

Maybe we are a little Brexit punch drunk but the official leaving of the EU passed without much fuss. Perhaps the ‘excitement’ was in the 3 ½ year hunt for a solution rather than the fatal killer blow.

However, (and say it quietly) there is excitement to be found with the increase in confidence in the UK and a number of rising economic indicators on the back of the overwhelming General Election victory for BoJo. Being termed the ‘Boris Bounce’ is never going to get the pulse racing, but there is evidence that shouldn’t be overlooked.

Firstly, Banks approved the highest number of mortgages in more than four years last month, highlighting increased confidence and reduced uncertainties now that the political blockage has been oiled.

Secondly, UK Manufacturing and Services saw their best month for more than a year and the ‘super exciting’ UK Composite Purchasing Managers Index (PMI) rising to a 16 month high (I know……I need to get out more).

Thirdly, more than a thousand banks, asset managers, payments companies and insurers in the European Union plan to open offices in post Brexit Britain so they can continue serving UK clients (source: Financial Conduct Authority). In practical terms, these figures mean that European firms will be buying office space, hiring staff and engaging legal and professional advisers in the UK.

It's a start……a very welcome start.

Drag Lag

Despite the shoots of confidence, the UK economy grew by just 0.1% in the last quarter of 2019, according to the Office for National Statistics (ONS).

The ONS said growth in the economy year-on-year was at its lowest since the spring of 2012.

With little clarity over the past 3 ½ years due to political stubbornness, a lack of business confidence was always going to hit economic performance. Even with some signs of confidence returning, it will take some time for this to filter through to businesses and consumer confidence.

The economic lag will cause some mixed messages throughout 2020.

Time Is Money

It is fair to say the financial impact of the considerable delays in getting Brexit over the line has been harsh. Very harsh.

Consider this (from Bloomberg Economics)…..

Brexit will soon have cost the UK more than its combined total of payments to the EU budget over the past 47 years. The cost of the UK's vote to leave has already reached £130 billion. A further £70 billion is likely to be added by the end of 2020.

Why? Business confidence and investment in the UK has dipped significantly since the 2016 vote, meaning the UK economy is now 3% smaller than it would have been if the UK had not voted to leave the EU.

Plenty should be hanging their head in shame at Westminster.

It’s All About The Trade (A)

If the excitement of the political posturing, strutting and foxtrotting over the past 3½ years were too much for some……you’ve seen nothing yet. Only now will things get interesting.

We now have only a year to negotiate our trade deal with the EU. There will be winners and losers for sure……we just need BoJo to play his poker hand with flair to ensure we limit our losses.

What’s happened since the referendum simply got us to this point……now the heat is on and our economic future rides on the trade agreement BoJo gets with our biggest trade partner.

The expectation is that BoJo will attack the EU through the back door (probably more likely to be bi-folding French doors with lovely teal chiffon drapes) by agreeing a trade deal with The Trump first. This will then give BoJo significant political leverage to hit the EU with.

This causes many some concerns on what concessions BoJo will make to The Trump. Time will tell.

A classic no win situation for BoJo has come with the issue of the UK’s 5G network. In short, the Government had to decide whether to ban equipment made by Chinese technology giant Huawei from its 5G networks because The Trump has lobbied the UK to exclude it on the grounds of national security (aka spying). Huawei insists it would never take orders from the Chinese Government (to  spy).

Exactly how do you please the largest economy in the world (that is our biggest trade partner outside of the EU) and at the same time appease the second largest economy in the world that you would like to have some more love with?

The UK will have to choose its side and trade deals carefully. Very carefully.

It’s All About The Trade (B)

And it’s not all about the UK trade deals……as we have seen in 2019 The Trump likes to pick an economic fight with China. But there appears to be some middle ground reached.

The US and China signed an agreement aimed at easing the trade war. The Trump said it would be "transformative" for the US economy and Chinese leaders called it a "win-win" deal that would help foster better relations between the two countries.

China has pledged to boost US imports by $200 billion and strengthen intellectual property rules. In exchange, the US has agreed to halve some of the new tariffs it has imposed on Chinese products.

This can only be good news……but it’s only a start and further work is needed as there are still plenty of companies and sectors that are impacted by this.

The big thing for The Trump is that he comes across as a winner……it’s Presidential Election time in 10 months and opinion polls suggest that he has emerged well from this.

It’s Been A Bad January For……Option 1 – Financial Conduct Authority

The retirement scheme of the Financial Conduct Authority has been fined by the Pensions Regulator in a rare instance of one watchdog training its fire on another.

It is the heaviest fine that the regulator can impose for such a breach and is embarrassing for the body responsible for overseeing conduct in financial markets.

If it wasn’t true it would be funny.

It’s Been A Bad January For……Option 2 – Greggs

The UK’s largest bakery chain, Greggs, has awarded 25,000 employees a £300 bonus after a "phenomenal" year.

The ‘good news’ story comes with a twist though……many of Greggs employees are low earners and receive Universal Credit. The payment of the bonus would result in many simply getting less Universal Credit (they would lose 63p out of every £1).

The biggest winner……the Government as they will pay out less Universal Credit.

Could Greggs not have been more creative in allocating staff rewards?

It’s Been A Bad December For……Option 3 – Nigel Farage

Your work here is done and you’ve got what you came for. You are no longer of interest, serve very little purpose and are surplus to requirements.

And Finally……

More than 10 million Brexit 50p coins are to be minted to ‘celebrate’ Brexit, as announced by Sajid Javid. Not a £2 coin or a ‘note’……but a coin that can’t even buy a pint of milk these days. It’s hardly a fitting send off for the EU in which we will have contributed £200 billion by the end of the 2020!