The Month That Was......September 2019

Brushing aside the deluge of overly proud parents flooding social media with the compulsory pictures of anyone under the age of 18 returning to education in their overpriced shiny shoes (OK – I’ll come clean – I conformed with the masses!), it has been difficult to avoid the subjects of Brexit, ‘politics and the economy.

 

It makes absolutely no difference whether you are bored with it, agree with it, understand it, voted for or against it……Brexit and the resultant political and economic consequences has slapped you in the face every day throughout September.

 

Not even the prospect of The Trump being impeached or the start of Strictly could budge BoJo from our screens / radios / newspapers.

 

So how will September 2019 be remembered?

 

 

BoJo KO Legally So

I will forgive you if you have given up with where we are up to with the whirlwind that is Brexit, politics and the economy. It’s a tangled knot with far too many players who have their own rules to untangle the chaos.

 

The current position with the economy is pretty straight forward……little or no economic growth has left the UK close to recession as there is little overseas confidence or investment on the back of 3 years of little progress in exiting the EU nicely.

 

The current position with Brexit is pretty straight forward also……little or no political stability has left the UK close to political meltdown on the back of 3 years of adolescent bickering by those paid to represent us.

 

The politics bit is less straight forward but the most important part. To get the economy right, we have to get the Brexit deal right. But to get the Brexit deal right, we have to get the politics right. So, let’s recap September 2019 in Westminster……

 

 

BoJo closes Parliament for 5 weeks so that he can increase the risk of a no-deal Brexit, put the heebie-jeebies up the EU and ride off into the sunset with a Brexit deal to save the UK.

 

This annoyed too many MP’s and the Supreme Court ruled that it wasn’t lawful to stop Parliament carrying out its duties in the run-up to the Brexit deadline on 31 October 2019.

 

Just consider that for a minute……our Government breaks law and its actions have to be stopped to uphold our democracy. That is legal, constitutional and political dynamite normally reserved for emerging nations. Unprecedented, extraordinary, ground breaking.

 

Perhaps what was more surprising is the number of MP’s that complained about not being able to do anything for five weeks when they have done absolutely nothing since June 2016!

 

Having been able to actually do their jobs, MP’s then press ahead with a Bill to stop no-deal happening on 31 October. It gives BoJo until 19 October to either pass a deal in Parliament or get MP’s to approve a no-deal Brexit. After this deadline, he would have to write to the EU asking for an extension to the UK's departure date from 31 October 2019 to 31 January 2020.

 

BoJo has previously said he would “rather be dead in a ditch than negotiate a Brexit extension”. Oh, dear.

 

BoJo then sacked 21 MP’s from his own party for voting in favour of the Bill and against his wishes……how dare they. More MP’s then resign in protest of the sackings including BoJo’s brother Jo Johnson. In his resignation, JoJo said that it was in the national interests to resign (rather than support his own brother!).

 

Or to put that another way, BoJo’s brother sacks himself to spend less time with his family. What next……Stanley Johnson resigning as BoJo’s dad and defecting to the Milibands?

 

Such was the chaos at this time, an amendment to legislation actually happened by accident. Farcical.

 

BoJo then flexed his muscles by challenging Labour to the General Election they had been asking for……for 2 years! But Jez Corbyn declined, ran away and hid behind legislation fearing that it was a trap to allow BoJo the opportunity to allow the UK to crash out without a deal.

 

Still with me?

 

In summary……

 

BoJo tried to stifle democracy by suspending Parliament illegally, got his writs slapped by the Supreme Court, had to apologise to the Queen, caused chaos in his own party, lost his small majority in Parliament, lost the backing of his brother, lost every vote he has put to the House of Parliament and now has the UK further away from Brexit.

 

Not a great start is it BoJo?

 

As I said earlier……to get the economy right, we have to get the Brexit deal right. But to get the Brexit deal right, we have to get the politics right. What hope do we have when politics is hampered by too many agendas that are all wrapped up in hundreds of years of law and rules that can be whipped out to feed an agenda at any stage?

 

It’s been 3 years, 3 months, 1 week and 1 day since the referendum result……and counting.

 

 

QE or Not To QE……That Is The Question

The lack of Brexit progress is also impacting the economic position of the EU (our biggest trade partner). A no-deal Brexit weighs heavily on both sides of the water.

 

In response, the European Central Bank (ECB) has cut interest rates to a record low and restarted quantitative easing in an effort to revive the eurozone economy.

 

In a widely expected move, Mario Draghi (ECB President) announced a significant stimulus programme to pump more cheap credit into the economy and encourage lending. The deposit rate was cut by 0.1 per cent to minus 0.5 per cent and the ECB will begin a €20 billion a month bond buying programme in November.

 

3 years, 3 months, 1 week and 1 day and still counting.

 

 

Government Rejection #1 - Thomas Cooked

The past month has offered an insight into why most British Governments have avoided bailing-out the private sector. You see, once you help one business, everyone looks for it.

 

Thomas Cook provided a unique predicament for the Government. The 155,000 people on holiday with the travel company needed to be brought home somehow. If it does go bust, then the Government will have to lead the biggest repatriation of British people since Dunkirk at an estimated cost of £600 million. Perhaps this is why Thomas Cook’s plea for Government support seemed to gain little traction.

 

From a business perspective, there was little logic in helping Thomas Cook. The company was in difficulty after a series of poor decisions over the past decade, including ill-judged expansion on the high street, brutal cost-cutting and failing to tackle its debt more quickly. It also operates in a rapidly changing industry where the launch of online rivals such as Expedia and the growth of budget airlines such as Ryanair has transformed how we book holidays.

 

Then add in the fact that the taxpayer-owned Royal Bank of Scotland is one of Thomas Cook’s lenders……it adds to the complications.

 

At a time when a General Election looks highly likely, the Government choosing the least damaging option seems far from a surprise!

 

 

Government Rejection #2 – Serious Minerals

No sooner had it emerged that the Government had rejected a plea from Thomas Cook for state support then Sirius Minerals was next in line seeking help.

 

There is more sense in saving Sirius Minerals. The project to develop a mine in North Yorkshire for a type of potash fertiliser is more of a national strategic asset than Thomas Cook. The project eventually could produce a valuable mineral that will be exported and boost UK trade (projected to be worth $29 billion by 2030).

 

Whilst there is scepticism about the quality and quantity of the minerals that the project can deliver and construction is complex and risky, the project already sustains hundreds of highly skilled jobs in the North East and will help to regenerate the local area.

 

For those sceptical about why the Government should support the project, consider this: what happens if a sovereign wealth fund or rich investor from another country takes it on? Given the slump in the company share price and the fall in the value of the pound, some are sure to be running the rule over the project. Qatar’s sovereign wealth fund and Gina Rinehart, the richest woman in Australia, are already investors.

 

Whilst many will say that the Government should steer clear of interfering in the private sector, the UK also needs to be smart. Much of our infrastructure is already in the hands of foreign state-run companies or international funds, including trains, water, and electricity suppliers. Is it really that wild to consider putting UK support into Sirius?

 

 

Trump Dump?

Well, it’s official……The Trump will be the fourth President in history to face an impeachment investigation.

 

Despite flirting with the idea for some time, there now appears to be some mud that may actually stick.

 

The issue stems from a phone conversation between The Trump and Ukrainian President Volodymyr Zelensky. The transcript of the call shows that The Trump pressed his Ukrainian counterpart to investigate former Vice-President Biden (and potential opponent in the next year’s Presidential Election) who was a board member for a company owned by a Ukrainian oligarch.

 

The Trump’s request came after the US had confirmed that it was delaying releasing US military funds to Ukraine until mid-September. Hmmmmm.

 

This controversy once again highlights the blurred lines between the ‘personal’ and the ‘official’ that has frequently typified the Trump White House.

 

The big question to answer is whether The Trump used the Presidential powers for personal political benefit?

 

 

September’s Biggest Loser……Option 1 – BoJo

His only task was to get the UK closer to leaving the EU. We are not only further away, but we are now a laughing stock internationally. You know it is bad when American’s are laughing at how bad our leader is. 

 

The situation is so bleak that it makes Theresa May’s tenure look almost creditable. Almost.

 

 

September’s Biggest Loser……Option 2 – Dominic Cummings

Let’s be honest, BoJo isn’t the brightest of buttons and is simply a semi-likeable chap (to some) who fronts the ideas of those around him.

 

The most forceful of those is Dominic Cummings (BoJo’s Senior Adviser), a ruthless political strategist who was director of the official Leave campaign in the 2016 referendum and is viewed as a disrupter who has brought a win at all costs mentality to delivering Brexit.

 

As BoJo’s biggest influencer, he must share the biggest portion of the blame at the current mess.

 

 

September’s Biggest Loser……Option 3 – Peter Fankhauser

See ‘Thomas Cooked’ above.

 

The signs were there a number of years ago when Thomas Cook Shareholders opposed the company’s plan to pay Chief Executive Peter Fankhauser long-term bonuses. Despite this, he has £4.6 million of bonuses outstanding and he is legally entitled to them.

 

Bonuses for failing……completely legal and acceptable……apparently.

 

 

And Finally……

Such is the chaos with our Politics that BoJo could actually trigger a vote of no confidence in himself to spark a General Election. As bizarre as that sounds, would you bet against it?

The Month That Was……August 2019

Historically, August is a dead month for economic / political news. Commentators, press / media and MPs vanish as part of the House of Commons break for a six-week summer recess.

 

But not this year. The small matter of BoJo being ‘elected’ as our new Prime Minister just hours before the recess commenced has ensured that the surrounding circus has been compelling.

 

As BoJo’s first month as Prime Minister passes, his performance has been nothing short of astonishing and ensured he is front page every day. As I said……compelling stuff.

 

Here’s how August 2019 will be remembered……

 

Brexit Narrative Change #1

The narrative from Number 10 has changed……Brexit will happen on 31 October 2019……deal or no deal.

 

August has been a month of BoJo and cabinet support crew filling as many column inches and media channels with one simple message…...all political and financial efforts are being made to prepare for a no deal Brexit.

 

Whether that is now having a clear plan to deal with the expected border chaos, having a sufficient bailout fund to prop up businesses through turbulent times or simply swelling the number of bodies in political teams to draw up contingency plans……the message from BoJo is clear……we will be ready for a no deal Brexit.

 

Regardless of whether we will be ready or not, at this stage matters little. As long as the narrative is that we are all set to leave without a deal, it should (in theory) strengthen our stance when negotiations recommence with our EU friends.

 

The EU are adamant that they do not want a no deal Brexit and they are not ready for such disorder. Yet ‘our’ new narrative will increase our negotiating hand.

 

And just to make sure the narrative is crystal clear……he has managed to play his political joker card (or should that be the Queen?) to shut down Parliament until 2 weeks before the Brexit deadline. Yes, it has sparked outrage. Yes, Jeremy Corbyn vows to fight suspension of Parliament (as it disrupts Labour’s plan to do absolutely nothing during that time). Yes, it seems undemocratic. Yes, it has split opinion across all four corners of the UK (but hasn’t Brexit done that anyway)? Yes, it has given air time to Jacob Rees-Mogg spouting 300 year-old constitutional law intertwined with pointless Latin. However, it has also put ‘no deal’ right in the faces of the people we are actually negotiating with.

 

The narrative of accepting a no deal Brexit could just be a brilliant idea…...as long as we do actually get a deal! Let’s hope BoJo understands that!

 

 

Brexit Narrative Change #2

The narrative has shifted with our biggest trade partner (after the EU) and best friend also……Uncle Sam.

 

The US have been very careful to sit on the fence with the EU and UK, thus ensuring they can trade with both successfully post Brexit.

 

But their narrative has changed when John Bolton (The Trump’s National Security Adviser) proclaimed to “enthusiastically back a no-deal Brexit and work with Britain immediately on sector-by-sector trade agreements”. There was a promise of a fast-track approach that would achieve progress more quickly than a comprehensive agreement.

 

“We are with you,” said John Bolton after meeting Boris Johnson. If the UK decided to leave with no deal “we will support it enthusiastically”, he said. “President Trump and I were leavers before there were leavers.”

 

Very bullish, very American. But critically, very helpful in supporting BoJo’s negotiating hand.

 

 

Short Term Pain #1

Whilst BoJo flexes his political biceps to fight them on the no deal beeches, the rest of the world looks on with great concern that he might actually go through with a no deal Brexit. To be fair, that is exactly what he is shouting from Number 10.

 

It is no wonder that the pound has fallen against the dollar to its lowest level for a decade ($1.20). To put that level in to perspective, the pound was trading at just below $1.50 against the dollar before Britain voted to leave the EU in June 2016. There would be little surprise from most commentators if that fell to $1 in a no deal Brexit.

 

This exchange rate has bigger knock on effects than our holiday spending money. A weak pound will drive up inflation as the cost of groceries, petrol, etc. will go up as the vast majority are purchased in dollars. We won’t feel it until next year due to the lag effect……but the threat is real.

 

 

Short Term Pain #2

The UK economy shrank for the first time since 2012 after data showed the economy shrank by 0.2% in quarter 2 this year.

 

It is the biggest sign of the critical impact to the economy that three years of Brexit procrastination has caused. Do nothing will cause uncertainty, it stops investment and makes the UK look unattractive to overseas economic mating partners. The biggest show of no confidence Mrs May’s term could receive.  

 

Another contraction of the economy in quarter 3 would see the UK officially in recession, and this would make us look even more fragile / unattractive to the outside world and the negative snowball gets bigger.  

 

If I was being ultra-positive……the negative economic data is similar in some ways to the previous one in 2012 which was pay back after the strong Olympics quarter. The current economic data could be mainly payback after pre-Brexit deadline stock-piling in quarter 1.

 

Time will tell, but plenty to concern us.

 

 

US v China (round 429)

The US trade dispute with China has now morphed into a currency war.

 

In short, to get around the tariffs that the US has put on China’s imports, China has purposely devalued its currency to weaken the impact of the tariffs. Clever. Very clever.

 

Steven Mnuchin, the US Treasury Secretary cried at the hand the US had been dealt……“The purpose of China’s devaluation is to gain an unfair competitive advantage in international trade”.

 

Unfair competitive advantage? What exactly does he think trade tariffs on China imports are? A fair advantage?

 

What does seem likely is that The Trump will use the cover of currency manipulation to intensify his battle with Beijing for economic supremacy.

 

The trade war is expanding into an all-out and open economic warfare and there are no winners for the rest of the world whilst the two largest economies don’t play nicely.

 

 

August’s Biggest Loser……Option 1 – Sajid Javid

As mentioned previously, the threat of recession is real as we have ticked one of the two boxes needed.

 

Sajid Javid, the new Chancellor, denied that the economy was at risk of entering a recession.

 

“I’m not expecting a recession, there is not a single leading forecaster out there that is expecting a recession, the independent Bank of England is not expecting a recession. And you know why they’re not? It’s because the fundamentals are strong”.

 

These ‘strong fundamentals’ are the same ‘strong fundamentals’ that have seen our economy struggle over the past year and see us within kissing distance of recession.

 

As the Chancellor, he has little power to influence the economy in the short term and simply denying the threat of recession is nothing more than positive guff that lacks credibility and treats us like children.

 

We are sick of political rubbish. We deserve better.

 

 

August’s Biggest Loser……Option 2 – Remain Leaker

The Sunday Times obtained the Government’s classified ‘Yellowhammer’ report in full that documents the most likely aftershocks of a no-deal Brexit.

 

The cabinet report confirms that Britain faces shortages of fuel, food and medicine, a three-month meltdown at its ports, a hard border with Ireland and rising costs in social care in the event of a no-deal Brexit.

 

The issue is not the report itself, as I would expect any organised Government to know the ramifications of a no deal Brexit. The issue is the remain-supporting MPs who, according to BoJo, deliberately leaked the details in an attempt to damage Brexit negotiations with European leaders.

 

Is this really in the best interests of our country? Remind me again who MPs are meant to represent?

 

 

August’s Biggest Loser……Option 3 – The Sunday Times

See Option 2. If there wasn’t a market for such moral corruption, there would be no report leaked.

 

And this is all completely legal and acceptable……apparently.

 

 

Word of The Month……‘Prorogation’

Definition (A): the action of discontinuing a session of parliament with the Queen’s consent.

Definition (B): BoJo causing a political meltdown not seen since……well…...errr……the referendum result.

 

 

And Finally……

The Treasury finally released the design for the new 50p to commemorate Brexit (to be released on 1 November 2019). Which got me thinking……we didn't have a new shilling to celebrate the Great Depression or a new ha'pence to celebrate the Black Death. So why are we having a new 50p to celebrate Brexit?