The Month That Was……February 2020

The Month That Was……February 2020

The reality of wanting a fully functioning political environment that creates a thriving economy has been put into perspective this month with the devastation that has been caused by the coronavirus escalating beyond control.

A shortened and sombre look at February 2020……

Viscous Virus

On the face of it this is a medical problem but it is also an intense political, economic and financial issue that illustrates that it is impossible in a globalised world to isolate a country as rich and important as China.

It is only when a public health issue turns into an economic or political issue that significant publicity is given. I’ve seen it so many times before……until there is political, financial or economic unease, it is not taken seriously.

Well that economic hit has certainly been made with many major stock markets experiencing their worst week since the financial crisis in 2008. That is quite a response to the non-medical threat of the coronavirus. The string of declines pushed investment indexes in Europe and the US down more than 10% from their recent highs.

The moves come as the outbreak weighs on the Chinese economy, restricting travel, causing manufacturing slowdown in China and upending global supply chains. This has led to companies across many industries warning that sales will be hit.

Let’s hope that those who have the power to lead and make a difference remember there is human and not just corporate cost at stake.

Let’s hope.

Sajid Surrender

In any other month the sight of the Chancellor resigning in protest of the Prime Minister would be a big deal. A very big deal.

The background is that Sajid Javid was told to sack his advisers who were not sharing the same ideals as BoJo. He refused and jumped from position as a consequence.

So just to be clear, Dominic Cummings is basically Prime Minister and Chancellor currently. Staggering.

Number 10 is right about one thing……Government works better when the Chancellor and the Prime Minister work together. But there is no shortcut to achieving that and the best way to encourage harmony between Number 10 and 11 is for a Prime Minister to appoint their closest ally to the job. But Theresa May and BoJo share one characteristic……both of them are loners and BoJo doesn’t have a parliamentary best friend he could appoint.

Enter stage left……Rishi Sunak as the next to take on Number 11.

An alternative to appointing your best buddy is to appoint a Chancellor who is at least philosophically aligned with you and committed to the same goals.

Time will tell……but some political love between Number 10 and 11 is essential.

Trading Blows

Perhaps the change at Number 11 is simply BoJo arranging his teammates in readiness for the battle that lies ahead negotiating a trade deal with the EU. We really do need a united cabinet as we take this on.

The latest development is that the Government will decide in June whether to abandon talks with the EU and prepare for a no trade deal on World Trade Organization terms. That decision will be made if insufficient ground has been made in talks with the EU.

The acid test will be if what it calls "good progress" has not been made on areas such as financial services and data, which the Government sees as the easiest areas to negotiate.

In the meantime, expect lots of political chest thumping and media spin from both sides (as if the last 3 ½ years of it wasn’t enough).

Donald’s Democratic Dodge

Given the news coverage elsewhere, you will be forgiven for forgetting that the Senate cleared The Trump after his historic impeachment trial.

He was cleared of (1) abuse of power by a 52 to 48 majority of senators and (2) obstruction of Congress by 53 to 47. Dare I suggest that if his own political party did not hold a majority of seats in the Senate, then the result would have been different? Dare I?

Within 24 hours of The Trump being acquitted, his approval rating reached an all-time high. It seems that there is no such thing as bad publicity for this man.

It’s Been A Bad February For……Option 1 – Sajid Javid

We need strong people in big political positions. Jumping out of a boat at the sight of the first wave is not strong behaviour.

The legacy of his time as the Chancellor is the introduction of a new 50p to celebrate leaving the EU. That’s it. Nothing else was achieved.

If it wasn’t true it would be funny.

It’s Been A Bad February For……Option 2 – Government Storm Response

The days of a ‘once in a lifetime’ storm hitting the UK turned into a ‘once a generation’ storm in my teenage years. Unfortunately, it is now ‘this years’ storm and what feels like half the UK being flooded is now an annual event.

If we can justify spending £106 billion on a slightly faster train (nearly twice the estimate from 5 years ago), surely we can inject money into our economy through flood and storm defences that will stand the test of time?

The Government’s lack of response to the human cost of the storms / flooding is simply unacceptable and lacks empathy.   

The Met Office issuing guidance of “another 10 days of difficult conditions” doesn’t stop the rain. It doesn’t stop the flooding.

Over to you Number 10 and 11.

It’s Been A Bad February For……Option 3 – Public Health

Coronavirus.

No further questions.

And Finally……

A character in an Asterix comic book was named after the coronavirus - three years before the deadly Wuhan outbreak. In Asterix and the Chariot Race (2017), a masked villain taking part in the titular race was named Coronavirus. It certainly is a villain.

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!

The Month That Was……December 2019

After 3½ years of political constipation, a truly remarkable General Election provided a well received laxative.

Regardless of your political alliance, there is no doubting that the stodgy political position has changed for the next 5 years. Good news? Bad news? We shall see.

As I keep reiterating……(1) Fix the politics to (2) fix Brexit to (3) ignite the economy.

Here’s how December 2019 will be remembered……

(1) Fix The Politics

So there you have it……BoJo won by such a margin that he created the highest Conservative majority since Margaret Thatcher in her powerful pomp.

In a symbolic move, BoJo gave a maiden speech in former Labour Prime Minister Tony Blair’s constituency of Sedgefield (a Labour safe seat for years……but now Conservative). Bojo proclaimed, “this is a brave new dawn”, yet 48 hours earlier he hid in a fridge rather than speak to the media. You couldn’t script it.

The next 5 years should look like the complete opposite of what has transpired since the referendum. For all the frustrations of blocked politics over the past 3½ years, a political party in power with an 80 strong majority can pretty much get on with whatever it wants over the next 5 years.

I am not suggesting that a Bojo majority fixes politics……but it will stop the quick sand politics we have had and that has got us nowhere very quickly.

It would take a monumental political disaster (on an unprecedented scale) for anything other than the Conservatives passing all they want in Parliament. Surely even BoJo couldn’t mess this up……surely?

We should now get political consistency over the next 5 years and, regardless of which party came into power, this can only be a good thing for the UK.

Hold on to your hat, the pace of change should be supersonic in comparison to the past few years.

(2) Fix Brexit

The previously negotiated BoJo Brexit deal was passed in Parliament when he held a majority of minus 44. Given the new significant majority, there shouldn’t be much opposition to it being passed again.

The key thing will be to get the legislation to support Brexit agreed and passed during January 2020. Again, with a majority of 80, how could it not?

Most of the major detail regarding leaving the EU is yet to be decided……those blanks get filled in when we leave and 31 January 2020 now looks very realistic.

The most fundamental decision for BoJo after the UK legally leaves the European Union is where to position our relationship with our biggest trade partner.

The public backing for his renegotiated deal creates the room to go for a straightforward Canada-style free trade agreement, detached from European regulation and standards. That could mean trade frictions and trade taxes payable at the border. There is a lot to consider……and that is without The Trump throwing his opinion and flexing political muscle.

Much to decide and the economy stands at a cross-road waiting.

(3) Fix The Economy

The current position with the UK economy is horrible…… economic growth is at its slowest since early 2009.

Released data by Office for National Statistics (ONS) the day before voting showed that, of the three major components of the economy, two (Production and Construction sectors) shrank and the powerhouse Services Sector managed growth of only 0.2%

Brexit uncertainty and pre-election concerns have clearly taken their toll. It’s horrible in fact.

The hope is that political certainty and a clear direction of travel with Brexit will provide the catalyst for confidence in the UK from foreign investors and UK consumers.

There are no guarantees, but having as much clarity as possible moving forward can only help.    

(4) Trumpeting America

There is another component to the UK economic puzzle……The Trump. How could he not have his fingers in the UK pie!

After the EU, the US are our next biggest trade partner by quite some margin. They are a big deal……which means The Trump is a big deal when we leave the EU and need to negotiate a trade deal with Uncle Sam.

Bizarrely, pursuing a full on trade deal with The Trump (who would like to brag about progress ahead of his own elections next year) may be seen as a way to get the best possible offer out of the EU.

This is a vitally important new reality for BoJo as he needs to decide the trade-off between economic alignment with the EU or economic alignment with the US.

Tricky decisions clearly and changing the UK's trade stance is a process that will create winners and losers up and down the country.

It’s Been A Bad December For……Option 1 – Jeremy Corbyn  

In the past 100 years, no opposition political party has lost seats after 9 years in opposition. None. Labour will blame Brexit but the reality is their leader was as useful as a cat at a dog show.

Labour lost safe seats in the heart of old mining communities to BoJo, such was the unappealing prospect of Jeremy Corbyn.

A horrible General Election for Labour. A horrible General Election for Jeremy Corbyn.

It’s Been A Bad December For……Option 2 – The Trump

Donald Trump has become only the third US President to be impeached by the House of Representatives.

Democrats stating that the President is “a clear and present danger to democracy”. Ouch.

It’s Been A Bad December For……Option 3 – Electoral System

It is clear that the current make-up of constituencies is broken. Over the years, the distribution of the country’s population has changed significantly and readjustment is needed. To illustrate this, the Conservatives won 43% of the votes yet won 56% of the seats.

There is talk that BoJo might address this during his honeymoon period and reduce the number of MPs to around 600. Turkeys voting for Christmas could be a hard sell though.

One thing is for sure, we need a more appropriate voting system to reflect the needs of the UK going into 2020. 

And Finally……

Since The Trump’s impeachment, his political party has seen a sharp pick up in donations for his 2020 Presidential campaign as his supporters rally around him. I have a funny feeling that the impeachment could backfire for his opponents.

 

“There's no such thing as bad publicity except your own obituary”, Brendan Behan

The Month That Was……November 2019

General Election, Farage, party politics, Brexit, the NHS, manifestos, Brexit again, economic boom if we get Brexit done, taxes, more Brexit……a political soup that appeals to few. But to fix the economy, we must fix the politics.

I will forever remember this month for Nicky Morgan (the current Culture Secretary) and her amazing power of maths……I have £10 in my wallet today and will have £10 more tomorrow by simply not spending the first one. Then if I can convince that £20 to stay another day I’ll be up to £40 the day after.

This is the political message that voters are up against (see below: It’s Been A Bad November For……Option 3).

Elsewhere, here’s how November 2019 will be remembered……

 

Festive Farage Frolics

UK politics feels like death by a thousand cuts……the third General Election in 4 years.

Standing in front of Number 10, the man who wanted a General Election, who campaigned for a General Election, who voted for a General Election and whose party voted for a General Election informed all that he didn’t want a General Election. You still with me?

Is there anything BoJo won’t say to get what he wants? Anything? To be fair, the same could be said for many in politics. Sad, but true.

It seems to me that any party that manages to get within touching distance of the ‘not completely useless’ level in their General Election campaign will probably win. I fear that no party will get remotely close though.

All you need to know about UK politics is summed up in one man……enter stage left……Nigel ‘Flaky’ Farage.

After 7 failed attempts to become an MP, Flaky Farage announces he won’t be running for election. Yet he will be his political party’s leader during the campaign.

He then states his party will not contest any seat that the Tory’s won in the last General Election (thus reducing the threat of the Conservatives losing seats). This was declared just 48 hours after he met with The Trump and a further day after a peerage was ‘offered’. Lord Farage…..just let that sink in for a minute.

UK politics summed up perfectly……the power and threat of just one man that isn’t even running for election.

In a bizarre twist……this increases the prospect of a hung parliament being avoided, the Conservatives gaining enough seats to form a majority Government and their Brexit deal getting over the line at the end of January 2020.

But then you remember the loose cannon that is BoJo and all bets are off. 

What a bloody mess.

NHS Battle Ground

Aside from Brexit, the NHS is clearly the battleground that parties have chosen to attack.

Why?

Firstly, we spend more on the NHS than ever before. In 2018 more than £156 billion was spent on health across the UK. It means about 30p out of every £1 spent on public services goes on health.

Secondly, the performance of NHS services is getting worse as a consequence of the austerity cuts over the past decade.

Thirdly, the UK population is ageing. Medical advances have meant that people are living longer. When the NHS was created, life expectancy was 13 years shorter than it is now.

Fourthly, the NHS is one of the largest employers in the world and is the biggest in Europe (with over 1.3 million staff). Which means a lot of voters work there!

Recession Sidestep

The UK economy dodged the recession bullet…….just. In fact, by the smallest possible margin and at the slowest annual rate in almost a decade.

Clearly the economic situation caused by the political uncertainty around Brexit is painful. Very painful. But the idea of the UK economy being ‘officially’ in recession would have compounded the issue and sent negative shockwaves around the world.

If the General Election doesn’t provide a political solution in the first quarter of 2020, expect recession to come knocking again.

Worrying times.

Bonkers Brexit #1

A really interesting piece in the Financial Times looked at the cost of Brexit not happening during 2019. The civil service ‘mobilised’ for a no deal Brexit on 29^th March, 12^th April and 31^st October in a kind of sick, twisted and vile economic / political game. Thousands moved out of their usual day jobs into planning……to then be told to stand down again each time.

Aside from the human and economic cost (and worldwide political embarrassment cost), there is an actual cost to the taxpayers. For example, the Government has spent £100 million on communications during the campaign for Brexit on 31^st October on everything from roadside adverts for lorry drivers to TV / Radio ads.

However, this seems ‘chicken feed’ in comparison to the total spend for 2019……£6.3 billion. That’s……£6,300 million. Or as I like to write it (for pure drama) £16,300,000,000.

And what do we have to show for it?

Bonkers.

Bonkers Brexit #2

Australia and others ask for Brexit trade compensation.

A decent swell of companies have asked for trade compensation from the UK and the EU over Brexit disruption. Fifteen countries (including Australia, US, India and New Zealand), set out Brexit concerns at a World Trade Organisation (WTO) meeting in Geneva.

The main issue for the 15 countries is a system which allows them easier access to the EU's large market for limited quantities of some of their goods, mainly farm produce.

It's a system known as "tariff rate quotas". World Trade Organisation members generally apply taxes / tariffs on imports to many of the goods they buy from abroad. For some products they have made commitments to allow specified amounts to be imported with taxes / tariffs that are lower than what they usually apply (in some cases the reduced tax / tariff is zero).

It makes it more profitable for Australian farmers to sell beef to Europe, for example.

Brexit complicates this.

The current quotas are for the whole of the EU, the UK included. Brexit means the UK and the EU have to decide how to divide them up.

Some countries say that could lead to them having less of the favourable access than they currently have to what is a large and wealthy market. Hence the reason for compensation.

Just for the record, The Trump is arguing that the US could end up with no access to pizza cheese at reduced tariff rates.

Bonkers.

China v US……continued

Trade tensions between the US and China continue at great pace as the prospects of a resolution seem pretty pessimistic. The Trump is reluctant to roll-back existing tariffs……he’s all ego and won’t take a step back for the greater good.

But China is clever……very clever in comparison to The Trump. To be fair, my 5 year old daughter is.

There is more than one way to arm wrestle……enter The People’s Bank of China and their decision to cut the lending rate for the first time since 2015.

Chinese authorities basically altered monetary policy at a time when it is locked in a trade dispute……it was Beijing’s way of letting the US know they can fend them off in the trade battle with one hand, while tweaking monetary policy with the other.

Clever. Very clever. Let’s see what The Trump’s next move is.

It’s Been A Bad November For……Option 1 – Prince Andrew

You know it’s a bad month when your Mum sacks you from doing anything further in public such is the outrage on many, many levels.

No further questions your honour.

It’s Been A Bad November For……Option 2 – Nigel Flaky Farage

Throwing stones from a distance and stirring up anything he can get a spoon in is all well and good if it fits an agenda. But not having the courage to then stand in a public forum to let the public decide if your ideals are what the masses want is simply cowardly and lacks courage.

But are we really surprised? 

It’s Been A Bad November For……Option 3 – Nicky Morgan

BoJo’s pledge to boost the NHS with another 50,000 nurses secured big headlines but quickly came under fire when it included 19,000 nurses who already work in the NHS but are considering leaving.

Culture Secretary Nicky Morgan was wheeled out into the public and tried to defend the 50,000 figure during an appearance on Good Morning Britain but simply couldn’t get the maths to stack up. How could she……but she tried relentlessly!

If you haven’t seen it, look it up. It is TV gold……just not for Nicky Morgan.

https://www.youtube.com/watch?v=CpcY6HsGmAM

(start at 3:30 / 22:36)

And Finally……

The Conservatives raised £5.7 million in the first week of the official General Election campaign, according to the Electoral Commission. Labour raised a total of £218,500, the Lib Dems received £275,000 and the Brexit Party £250,000. The difference is quite astonishing!