Contact us: 01799 543222

How long until we’re paying with Britcoin?

Archive for the ‘Commentary’ Category

How long until we’re paying with Britcoin?

Wednesday, October 13th, 2021

In the first week of September, El Salvador, a Central American country with a population of just under 7m and ranked 101st in the world according to GDP, created history. It became the first country to accept the cryptocurrency Bitcoin as legal tender. 

Millions of people downloaded the government’s new digital wallet which gave away $30 (£22) in Bitcoin to every citizen. Businesses became obliged to accept Bitcoin as payment. 

It now looks likely that Ukraine will follow suit, with President Volodymyr Zelensky aiming to create a ‘dual-currency’ country by the start of 2023. Zelensky is a vocal Bitcoin supporter, and intends to initially introduce Bitcoin alongside the current currency, the hryvnia, with the intention that it will eventually become the dominant means of exchange. “The people of the Ukraine are prepared for it and they expect it,” he said. 

Ukraine ranks 56th in the world by GDP: with the greatest respect, neither it nor El Salvador are major economic powers. But it now seems inevitable that other, larger economies will follow their lead and introduce a digital currency. This might be Bitcoin – but it seems increasingly likely that a digital version of their current currency will be used. 

China has already tested its digital yuan currency. Earlier this year 181,000 consumers in Suzhou City (near Shanghai) were given the yuan equivalent of £6 to spend at participating outlets in a local shopping festival. Like other consumers who have taken part in Chinese trials, all they had to do was download the Bank of China app. 

…At which point those of you with privacy concerns might start to be worried. “Does this mean the Government could track whatever I spend?” Yes – and for Governments that is one of the huge advantages of a digital currency. Imagine if digital transactions became the norm – all fully trackable and traceable. As cash is used less and less often, and is perhaps even actively discouraged, the unknown economy withers and dies. Rishi Sunak can only dream of what that might be worth to him in tax receipts.

So are we on the way to ‘Britcoin?’ Will we see a digital pound? The Chancellor has already asked the Bank of England to look at the case for a central bank-backed digital currency, allowing businesses and consumers to hold accounts directly with the bank (meaning an account would not be with say, Barclays or HSBC, but with the Bank of England). 

Such a move seems inevitable in the long run. Back in El Salvador they are “excited and worried” in equal measure by the move to Bitcoin, with many people wondering just how stable savings and/or earnings would be in such a notoriously volatile currency. 

Presumably central bank-backed digital currencies like ‘Britcoin’ and the digital yuan would alleviate such worries, but you do wonder how long it would take for another, ‘unofficial’ currency to become established. There will always be people who would rather their transactions weren’t tracked by the authorities.

Is China heading for a Junk Bond Crisis?

Wednesday, October 13th, 2021

It has been 14 years now, but many of our clients will remember the collapse of Lehman Brothers. 

The collapse of Lehmans, a global financial empire founded in 1847, happened in September 2008 and was the climax of the subprime mortgage crisis. Lehman Brothers was notified of a pending downgrade in its credit rating, due to its heavy exposure to subprime mortgages. The US Federal Reserve failed in its efforts to re-negotiate financing for Lehman, which subsequently filed the largest bankruptcy in US history, involving more than $600bn, at the time approximately £333bn. 

Lehman Brothers’ bankruptcy triggered a 4.5% one-day drop in the US Dow Jones index, similar falls around the world and a general financial panic. Fourteen years on, the question is now being asked, could the same thing be about to happen in China? 

Originally called the Hengda Group, the Chinese company Evergrande was founded in the southern city of Guangzhou in 1996, during a period of mass urbanisation in China. In 2009 it raised approximately £400m in an initial public offering on the Hong Kong stock exchange. 

Its principal business is selling apartments, mostly to middle and upper income buyers, and in 2018 it was ranked the most valuable real estate company in the world. It also has interests in any number of other companies from tourism to health to a large investment in electric cars and the Guangzhou Evergrande football team. 

However, Evergrande has hundreds of billions of dollars in debt, and there are increasing concerns over whether the company will be able to service the debt. As long ago as 2012 Andrew Left, a well-known short-seller in the US, was highlighting concerns about the company. In 2016 Left was suspended by the Hong Kong stock exchange, due to his publication of a highly critical report on Evergrande, a company he has labelled “insolvent.” 

More recently many stock markets fell on September 20th of this year, over fears that Evergrande would not be able to meet debt payments that had become due. Earlier in the month the Shanghai Stock Exchange temporarily suspended trading in the company’s bonds (specifically, its 6.98% July 2022 Corporate Bond) over what it called “abnormal fluctuations” following a ratings downgrade. 

Evergrande has been dubbed “China’s Lehman” and supposedly has more than $300bn (£219bn) of debt. If the company were unable to service this debt and subsequently collapsed then the fallout could spread throughout the Chinese property sector and, indeed, the wider Chinese economy. 

Would the Chinese authorities allow such a big company to fail? The answer is, “quite possibly” as there are clear signs Beijing wants to rein in excessive corporate borrowing. According to a report in the Guardian, Evergrande owes money to 171 domestic banks and 121 other financial firms. Bankers UBS also estimate that there are ten property developers in China with combined debt nearly three times the size of Evergrande. In other words, if Evergrande defaults other companies could quickly follow, which would be bad news for China and the wider global economy.

Could Tiny Homes be the future?

Wednesday, October 6th, 2021

If you want to frighten yourself, type “world population clock” into Google. The figures go up with terrifying speed: the number (as this article was started) was 7,894,590,038 – rapidly approaching 8bn. 

In the UK, the latest population figure is 68.32m, but wherever people live, one thing is self-evident: we are going to need more homes in the future. Increasingly, what are known as “tiny homes” are being seen as the answer – not just to ever-increasing populations, but to more people living alone, and the finite amount of space that is available. 

First things first. What is a tiny home? According to the tiny house movement a tiny home is defined as a “dwelling unit with a maximum of 37 square metres (400 square feet) of floor area, excluding lofts. Your first thought might be: ‘Six metres by six? That’s bigger than my lounge. Not so tiny after all…’ 

Then you consider that it has to cover a kitchen, a bathroom, somewhere to live, somewhere to sleep – and maybe it is not so big after all. 

Another key element of the tiny house movement, which goes some way to explaining its growing popularity, is its commitment to sustainability. Many people opting to live in tiny homes, especially post-pandemic,  have reassessed what they want from life and want a more eco-friendly solution to their housing needs. Built with eco-friendly materials almost always including high-quality insulation and only needing a very small plot of land, tiny homes exactly tick this box. 

The other huge advantage of a tiny house is, of course, affordability. Depending on which source you use the average price of a house in the UK is a little over £250,000. According to the Tiny Housing Co. the average price of a tiny house is just £55,000. 

As we noted above, virtually all countries face the problem of an increasing population. What they also face is a big demand for housing in certain regions – in the UK London and the South East is the obvious example. In areas like this even traditional “affordable housing” (defined by the Government as houses sold at 80% of average market value) may not be that affordable. If the average price in your area is £300,000 then an ‘affordable home’ at £240,000 could still be a long way out of your price range. 

All this goes a long way towards explaining the ever increasing popularity of tiny homes. When you factor in the number of people re-assessing what they want from work and life in the wake of the pandemic, we’re certain to see far more tiny homes in the future as populations continue to increase. 

…Speaking of which, the population of the world is now 7,894,593,888. In the time it took to write this article, the population of our planet increased by 3,850.

The Pensions Triple Lock: broken promises!

Wednesday, October 6th, 2021

At the last General Election the Conservative Government made a promise, a so-called “manifesto commitment.” That pledge is commonly known as the “pensions triple lock:” that the state pension will be increased each year by annual price inflation, average earnings growth or a guaranteed 2.5%, whichever is the greater. 

For pensioners this has been good news. It meant that pensions would keep pace with wage growth and inflation and, if both those were low in one particular year, pensioners would be a little better off. 

That, of course, was before the pandemic, the enormous cost of it and the financial juggling the Chancellor will need to do to pay for all the support measures put in place, and the consequent sharp rise in Government borrowing. 

In early September, as had been widely rumoured, the Government broke not one, but two manifesto pledges. It increased national insurance to pay for social care and, crucially for pensioners, it suspended the triple lock for a year. 

This was obviously bad news, and the move begs an immediate question. If the Government has suspended it for one year, could it do it for another year? After all, the bill for Covid-19 is not going to be paid any time soon. 

Unsurprisingly, a poll showed that two-thirds of pensioners were against the suspension. Interestingly though, the research carried out by ComRes suggested that the move would be largely forgiven by the next General Election. 

In this instance the triple lock has been watered down and become a “double lock,” with the wages element removed. But as we hinted above, we might well see other elements removed in the future, now that the precedent has been set. Many commentators expect inflation to hit 4% by the end of the year, could the Government remove that element in the future, too? 

It will be interesting to see what Chancellor Rishi Sunak has to say when he delivers his Budget speech on October 27th. He will presumably be setting out plans for starting to repay the enormous cost of the pandemic. Given the cost of servicing all the new borrowing the Government is vulnerable to a rise in interest rates, and nothing, including the triple lock, can be ruled out. The next Election is not due until December 2024 and the Government may gamble on the pandemic and the measures taken to counter it being a distant memory by then. 

The uncertainty for pensioners means that your ongoing financial planning becomes more important than ever. It is important that your existing savings and investments are arranged as tax-efficiently as possible and that you make use of all your available allowances. All this is an integral part of our regular review meetings with you, but any clients with immediate questions on the ending of the triple lock should not hesitate to get in touch with us.

What is ESG?

Wednesday, October 6th, 2021

There have been a thousand-and-one articles written since the pandemic on people’s changing attitude to work. Millennials and the generations that follow them – so we are told – want different things from work. Flexibility, the option of working from home and, above all, to work for a company that shares their values: that values purpose as much as profit. 

It is not surprising then that we are hearing more and more from companies about ESG – their environmental, social and governance credentials. What really is ESG? And can it possibly matter as much as profits? After all, without profit you cannot pay your employees: you cannot re-invest in the business and you cannot pay dividends to your shareholders. 

You could argue that companies’ concerns with ESG are not new. The origins could be traced back to the 1800s when religious groups such the Quakers and Methodists ran their businesses according to socially responsible principles, and established socially responsible investment guidelines for their followers. 

More recently – in 2006 – the United Nations launched a set of six investment principles which perhaps started the incorporation of ESG into mainstream investment practice. Simply put ESG criteria judge how a company meets its environmental obligations, how it manages relationships with employees, suppliers, customers and the local community and the principles, composition and behaviour of the leadership team. 

By the same token ESG investing looks to invest in companies that espouse those values. This, in some ways, brings us back to the generations mentioned above. Millennials and their successors not only want to work for companies that share their values, they want to invest in them as well. Often they want to go one step further, and make investments that have a positive and measurable social and economic impact. 

“Impact investing,” as it has been dubbed, is now the fastest growing area of responsible investment. The World Economic Forum estimated that $1tn (£730bn) of assets were committed to impact investing in 2020, with the sector forecast to grow at $250bn (£183bn) annually. 

It is small wonder then, that companies are paying more and more attention to meeting their ESG obligations. Of course the bottom line remains important – although many of us remember Uber famously being valued in the billions despite saying that it may never make a profit – but now both investors and employees are using other criteria to judge companies. You will hear a great deal more about ESG and impact investing in the months and years to come.

October Market Commentary

Wednesday, October 6th, 2021

You will no doubt be aware that September was a month when shortages dominated the headlines. As we will see below, it was by no means a problem confined to the UK: sadly it does not look like a problem that will quickly disappear. We have, for example, written previously about the shortage of semiconductor chips which has hit car production around the world. In September the boss of Daimler suggested that this could last through 2022 and “into 2023.” 

September was also a month when global diplomacy, and its possible implications for trade, reared its head. Chinese jets flew into Taiwan’s air defence zone and North Korea launched a test cruise missile into the Sea of Japan. Most significantly, the US, UK and Australia signed the AUKUS deal, allowing Australia to receive nuclear powered submarines. 

Predictably China criticised the deal as a “threat to stability” in South East Asia, and France was said to be outraged after losing the contract to build the submarines. Any Australia/EU trade deal will now not happen until next year at the earliest.  Despite talks between Boris Johnson and Joe Biden, a UK/US trade deal also looks unlikely at the moment, with the US President saying, “We’re going to have to work that through…” 

September saw the oil price rise above $80 for the first time in three years and, perhaps unsurprisingly, it wasn’t a good month for world stock markets, with the majority of those we cover in the Bulletin falling in the month. 

As Joe Biden might say, let’s “work through” all the details…


When he was Chancellor of the Exchequer, George Osborne seemed to preface every Budget speech by reminding us that the UK was only a small part of the world economy. Whatever action he took, events elsewhere could easily render it irrelevant. September, and perhaps the months running up to Christmas, may well be a period when Osborne’s Law holds true. Supply-chain problems have caused shortages, whether that is on the supermarket shelves or at the petrol stations. As City AM reported, the shortages also “clamped down on UK manufacturing growth.”

Where you put the blame for the shortages may well depend on your political point of view but, as we report below, supply-chain issues are not a problem confined to the UK, and the power shortages in China may make the position worse, and push up prices, around the world. 

Away from the headlines about shortages there was the usual mixture of good and bad news. In the middle of the month it was reported that the UK economy grew at the fastest rate of any of the G20 countries in the second quarter, with growth of 4.8% between April and June. By the end of the month this figure had been revised upwards to 5.5%. The ratings agency Fitch has predicted that the UK economy will grow at 6.6% this year which is well ahead of the forecast from the Office for Budget Responsibility. 

The UK has applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and September brought the formal start of the talks. The CPTPP is a $9tn (£6.7tn), 11 country trading bloc. Donald Trump famously withdrew the US from the agreement but, as we report below, China has now applied to join it. 

Much of the work on the UK’s application to join the CPTPP was done by Liz Truss when she was International Trade Secretary. In September’s re-shuffle she became Foreign Secretary, with Anne-Marie Trevelyan taking over her previous role. 

The Government was in the news for much more than a reshuffle in September, as it broke two manifesto commitments, increasing national insurance to pay for social care and temporarily suspending the triple lock on pensions. 

The end of September brought the end of the furlough scheme, the Coronavirus Job Retention Scheme to use its full title, which will unquestionably see some workers lose their jobs. The BBC reported that approximately 1m workers were still on the scheme as it ended. 

That said, job vacancies went past the 1m mark in September, and there are plenty of stories of companies, including Amazon, offering inducements as they look to recruit temporary staff for the Christmas period. 

Let us end the UK section where we began it, with the Chancellor of the Exchequer. Rishi Sunak will present his second Budget of the year on October 27th. What was a difficult task in March looks even tougher eight months on, as he tries to keep the recovery going and start to pay the Coronavirus bill. He will also need to keep a lid on inflation, which reached 3.2% in August as food prices rose, and has been forecast to reach 4% by the end of the year. 

For now the Bank of England is saying it does not expect any interest rate rises, to counter inflation, this year. Any rate rises would, of course, push up the cost of servicing the Government’s debt. Borrowing in August was higher than expected at £20.5bn, down on the same month last year but still the second-highest August figure on record. 

The FT-SE100 index of leading shares had a relatively quiet month. Having started September at 7,120 it ended the month down just 34 points at 7,086. The pound was down by 2% against the dollar, closing at $1.3458. 


September got off to a positive start in Europe, with Ryanair predicting a rapid rebound in air travel and revealing that it had beaten its forecast numbers for August. 

Wizz Air announced similar figures, with passenger numbers up more than 50% in August to around 3.5m. However, passenger numbers were down 44% for the twelve months to August, illustrating the long shadow the pandemic still casts over the travel industry. 

The main story in Europe, though, was the German General Election, held on September 26th. Having stepped down as leader of the Christian Democrats (CDU) in March 2018 Angela Merkel had made it known that she would not be seeking a fifth term as Chancellor, leaving new leader Armin Laschet as the party’s candidate. 

Opinion polls throughout the campaign did not make good reading for the CDU. The Social Democrats (SPD) topped the poll with 25.7% of the vote and a provisional 206 seats in the Reichstag, with the CDU on 24.1% and 196 seats. With 368 seats needed to form a government there could, in theory, be a CDU/SPD coalition. However, at the time of writing both Laschet and SPD leader Olaf Scholz are claiming that they will be able to form a government and a three way coalition made up of one of the main parties, the Greens (who came third with 14.8% of the vote) and the pro-business Free Democrats (who came fourth) looks much more likely. 

Like other major economies around the world Germany is suffering supply-chain problems and shortages in the wake of the pandemic. What it emphatically does not need is a prolonged period of paralysis while a new Government is formed. 

Germany is also facing worries about inflation and demand for gold coins and gold bars in the country has reached its highest level since 2009. According to the World Gold Council demand for coins and bars in Germany was up by 35% in the first half of the year, compared to a rise of 20% for the rest of the world. 

While Germany was preparing to go to the polls Europe as a whole was reacting to the AUKUS submarine deal, with France predictably outraged. It now looks as though any trade deal between the EU and Australia won’t happen until after the next French elections, due to be held in April next year. 

The EU also unveiled a new strategy for boosting economic, political and defence ties in the Indo-Pacific region in the immediate aftermath of the AUKUS deal. The aim of the strategy is to “strengthen and expand economic relations, help partners fight and adapt to climate change and boost co-operation on healthcare.” Make of those grand ambitions what you will!

There was definitely no grand ambition on Europe’s major stock markets in September. The German DAX index was down 4% to close at 15,261: the French stock market fell back 2% to end the month at 6,520. 


The US, like every major economy, has had its share of good and bad news as it recovers from the pandemic. But is the bad news starting to outweigh the good? 

The month began with disappointing news on employment, with the US economy adding just 235,000 jobs in August, well down on the 1.05m created in July. The unemployment rate did fall, from 5.4% to 5.2% but the jobs figures, combined with a decline in consumer confidence, prompted several banks to cut their forecasts for US GDP growth in the third quarter. Morgan Stanley did not so much cut their forecast as slash it, reducing it to 2.9% from a previous 6.5%. Goldman Sachs cut its forecast from 5.5% to 3.5%. 

The other worry, which it shares with every major economy at the moment, is inflation. Prices rose again in August to take consumer price inflation on a year-on-year basis up to 5.3%. 

There was, though, some good news. The US manufacturing sector strengthened, largely driven by an increase in new orders. The Purchasing Managers’ Index rose from 59.5 in July to 59.9 in August. The housing sector remained strong, with one index measuring US house prices showing a 19.1% annual increase in June 2021. 

The US Federal Reserve was certainly in the glass half full camp, saying in a statement that the US economy was continuing to strengthen, that the jobs market was improving and that “currently high levels of inflation remain transitory.” In the accompanying press conference Jerome Powell, Chairman of the Fed, gave a clear indication that the central bank would start to reduce its economic stimulus measures later this year. 

None of the above, of course, mattered to the good ship Amazon, which continued to sail merrily along. September brought the news that it would need to recruit another 55,000 people, to add to the 1.3m it already employs worldwide. That’s roughly equivalent to the population of Estonia. 

This was in stark contrast to the “old economy,” with GM announcing that it would halt production at most of its US plants in September, as the shortage of semiconductor chips continued to hit carmakers. Ford and Toyota also reduced production during the month. 

The Federal Reserve may have had its glass half full in September, but for Wall Street it was very much half-empty. The Dow Jones index fell 4% to end the month at 33,844 while the more broadly-based S&P 500 index fared slightly worse, dropping 5% to 4,308. 

Far East 

There has been so much news in the Far Eastern section of the Bulletin this month, especially with regard to China, that it is difficult to know where to start. 

Perhaps the most appropriate place is at the end of the month, when Goldman Sachs became the latest bank to cut its growth forecast for China, as the country continues to struggle with energy shortages. Having previously forecast that the Chinese economy would grow by 8.2% this year, the bank is now forecasting growth of 7.8% following estimates that up to 44% of China’s industrial activity has been adversely affected. 

Perhaps even more significantly, the bank is forecasting zero growth for the third quarter, citing a ‘perfect storm’ of increased regulation, tight global energy supply, surging coal prices and a crackdown on carbon. China’s “factory gate inflation” is the highest it has been for 13 years, due to a shortage of raw materials. 

The other major story was Evergrande, the Chinese property company which was ranked the most valuable real estate company in the world in 2018. It now has hundreds of billions of dollars of debt and, according to one source, owes money to 171 domestic banks and 121 other financial firms. 

There are real worries as to whether Evergrande will be able to meet its debt repayments. Will the company be bailed out by the Chinese government? Is it “too big to fail?” We may not have to wait long to find out, by the end of the month Evergrande was selling assets to meet debt repayments and reportedly missing a payment of £35m to foreign bondholders due on the 29th. Angry investors in the company have apparently moved on from simply protesting outside the company’s headquarters to taking senior management hostage. One executive in the south eastern province of Jiangxi was blockaded in his office by 300 protesting investors. They were described by one publication as having gone “full pitchfork.” 

More worryingly, perhaps, bankers UBS estimate that there are ten property developers in China with combined debt nearly three times the size of Evergrande. 

In previous Bulletins this year the words “Chinese authorities” and “crackdown” have frequently appeared in the same sentence. September was no exception as the country’s National Radio and Television Administration trained its sights on “vulgar influencers” as they pursued Xi Jinping’s stated goal of common prosperity. The general clampdown on online games, and the time spent playing them, also continued. 

At the end of the month China’s central bank made the move it seemed to have been edging towards for some time, when it announced that all transactions of crypto-currencies, such as Bitcoin, would be illegal. Such transactions, it said, “seriously endanger the safety of the people’s assets.”

We have commented above on the UK’s continuing application to join the CPTPP. The day after the UK, the US and Australia announced the AUKUS pact China duly applied to join the CPTPP, a move which many analysts saw as a bid to leave the US increasingly isolated on the world stage.  

September proved to be a very mixed month for the region’s stock markets. The Japanese Nikkei Dow index was up 5% to end the month at 29,453. China’s Shanghai Composite index managed a gain of just 1% to 3,568 while the South Korean market went in the opposite direction, falling 4% to 3,069. Hong Kong’s Hang Seng index seemed to bear the brunt of the worries about Evergrande and the possible slowdown in China, falling 5% in the month to close at 24,576. 

Emerging Markets 

September was an unusually busy month for news in the Emerging Markets section of the Bulletin. El Salvador, not a country we have previously covered, became the first country in the world to accept the cryptocurrency Bitcoin as legal tender. 

As we reported above, China has now made cryptocurrency transactions illegal as it trials a digital yuan. However it may well be that smaller currencies opt to go down the Bitcoin route, with Ukraine expected to make it legal tender by 2023. 

Despite a second wave of the pandemic the Indian economy rebounded sharply, with figures for the three months to June showing growth of 20.1%, compared to a drop of 24% in the same period last year. 

Elections were held in Russia, with United Russia, the party that supports Vladimir Putin, winning 315 out of 450 seats in the Duma. No surprise there, but what was striking was the very low turnout in the election, with many constituencies having turnout well below 40%. 

The month ended with the BBC reporting that Afghanistan’s banking system was close to collapse, with international aid to the country having dried up since the Taliban took power. 

On the stock markets, September was a good month for both the Russian and Indian markets. Russia’s stock exchange rose 5% to close at 4,104 while the market in India was up 3% to 59,126. The Brazilian stock market went sharply in the opposite direction, ending the month down 7% at 110,979. 

And finally…

You may well remember the Ever Given, the giant container ship which blocked the Suez Canal for six days earlier this year and was subsequently blamed for all manner of shortages including garden gnomes. 

Now comes news of a fully autonomous ship, based in Japan, which is about to face its first real test as it sets out on a 236 mile journey. Ultimately, Japan hopes that half of its ships will be piloting themselves. Clients may remember the fully autonomous security guard robot which drowned itself in a fountain. The hotel which replaced those irritating, unreliable staff with robot waiters, and had to hastily backtrack. Fully autonomous ships roaming the world’s oceans, what could possibly go wrong? 

September was unquestionably robot month. Amazon launched Astro, the home robot. Or, as it has already been dubbed, “Alexa with wheels. Staying on the subject, there is good news for any reader whose football team may not have made the best start to the current season. Founded by a group of robotics scientists, the Robot Soccer World Cup AKA the RoboCup, has set itself an ambitious target. The aim is that by the middle of the century a team of robot footballers will beat the most recent winners of the real World Cup. 

The robots use artificial intelligence to make decisions such as whether to pass or shoot. There you are, the term “midfield dynamo” could take on a whole new meaning…

Lockdown last year brought us any number of tales of people doing what can only politely be described as unusual activities. An Italian gentleman ran a full marathon round his dining room table, a chap in Cardiff was stopped by the police as he wandered round a local beauty spot in medieval armour and carrying a toy sword. Now comes news from Indonesia, where Agus Widanarko is apparently bringing joy to those isolating in Central Java province by dressing as “Super-isoman”. Donning a Spider-Man costume, with an extra mask for safety, Agus has been providing entertainment to children who have been in self-isolation. Truly an effort to marvel at. 

What does their election mean for the German economy?

Wednesday, September 29th, 2021

On Sunday September 26th Germany went to the polls in the first election of the post-Angela Merkel era. ‘Mutti,’ as she is widely known, has been German Chancellor – and, by definition, Europe’s premier politician – since 2005. But she stepped down as leader of the Christian Democrats (CDU) in 2018 and made it known that she would not seek a fifth term as Chancellor.

Merkel was replaced as leader of the CDU by Armin Laschet, who has served as Minister-President of North Rhine Westphalia since June 2017. His main rival as the next Chancellor was expected to be Olaf Scholz of the Social Democratic Party (SPD) who has served as Vice-Chancellor of Germany and Finance Minister since March 2018.

The CDU and the SPD duly won the biggest percentage of the votes and were projected to take the most seats in the Reichstag. However four other parties also won a significant share of the vote and at the time of writing both Scholz and Laschet are claiming that they will be able to form a government.

The full preliminary result of the election, with the SPD narrowly coming out on top, was as follows:

  • Social Democrats:  25.7% / 206 seats
  • Christian Democrats 24.1% / 196 seats
  • Green Party 14.8% / 118 seats
  • Free Democrats 11.5% 92 seats
  • AfD 10.3% 83 / seats
  • The Left 4.8% / 39 seats

With 735 seats in the Reichstag that means 368 are required to form a government, making a coalition inevitable. The CDU and the SPD could do that, but at the moment both Scholz and Laschet are looking more towards the Greens and the pro-business Free Democrats.

There is, very clearly, going to be a lot of talk and a lot of deals to be done before a government emerges and at this stage a three party coalition looks the most likely. Depending on the party colours, this has given rise to any number of nicknames with the early front-runner the ‘traffic light’ coalition of the SPD (red), the Greens and the Free Democrats (yellow). Replace the red with the black of the CDU and the coalition becomes ‘Jamaica,’ and so it goes on…

At the stage it looks likely that the right-wing Alternative fur Deutschland and the left-wing Die Linke won’t be in whatever coalition finally emerges, although the AfD will be the largest party in the eastern states of Saxony and Thuringia.

Whatever coalition finally ‘wins,’ what’s very clear is that Germany does not need a prolonged period of paralysis. Like the UK it is suffering supply chain problems as it emerges from the pandemic, inflation is rising and the economy – for so long the engine driving Europe – is under pressure as the world places less emphasis on heavy engineering.

This is a story which is likely to develop in the coming days as discussions between the parties take place. We will keep clients updated through the normal communications we send out, but should you have any questions please don’t hesitate to get in touch with us.

More than half of UK adults now seek financial advice

Wednesday, September 29th, 2021

As we look back on the months passed since the UK first went into lockdown one thing is abundantly clear – financially, the last couple of years have been good for some people. We’re not talking about the billionaires who have seen their shares rocket during lockdown but rather the many, many people who have saved money by not commuting, not buying lunch from the sandwich shop and not going on holiday. Depending on which paper you read, people in the UK have ‘accidently’ saved anywhere between £100bn and £125bn during lockdown. 

At the opposite end of the spectrum, lockdown has been hard for millions of people as businesses have failed, jobs have been lost and they have been forced to rely on their savings. 

In both cases there has been a need for financial planning advice. In recent years it might have been assumed that fewer people would need financial advice as a new money management or savings and investing app came out virtually every other day. 

However, according to a recent report from Prudential, the exact opposite is the case. More than half – 53% – of UK adults say that financial problems and changed circumstances over the last 12 months have caused them to seek financial advice. Of this figure, 33% have already sought financial advice, whilst the remaining 20% are planning to do so. 

For most of those responding to the survey the glass was, unfortunately, half-empty, with 85% of people saying they had concerns about the coming months, with the two concerns most frequently highlighted being: ‘having to use savings to make ends meet’ and ‘my investments losing money.’ 

Interestingly, the report revealed that the need for financial advice was felt most among the younger generations – Millennials and Generation Z, exactly the generations we might have assumed would shun traditional advice in favour of apps and online portals. 

Seventy-four percent of Millennials said that they had, or were going to, see a financial adviser, with 58% of Generation Z echoing those sentiments. The key drivers for these generations were ‘avoiding financial difficulties’ and ‘wanting to start [my] investment journey.’ 

Clearly recent months have been difficult. What they have illustrated is that financial planning advice will always be required and that people – of whatever generation – will always value face-to-face advice (even if that has been face to Zoom advice recently…) 

Our clients can rest assured that whatever happens with the pandemic – and however long the restrictions stay in force – our commitment to providing the very best long-term financial planning advice will never waiver.

September Market Commentary

Wednesday, September 8th, 2021

The defining image of August 2021 had little to do with the stock market on the surface, it was, of course, the withdrawal of British and American troops from Afghanistan. As some readers will know, Afghanistan has significant mineral reserves, which some estimates put at $1tn (£730bn). These reserves include lithium, so it will be no surprise if at some stage we see the China/Pakistan economic corridor extended into Afghanistan. 

August was, by and large, a good month for the majority of stock markets we report on. Most markets gained ground, with the Indian stock market having a spectacular month. 

It was a less positive month for the blockchain site Poly Network, where hackers exploited a “vulnerability in its systems” and stole some $600m (£436m) in digital currency tokens. Following an appeal on Twitter the hackers duly returned some of the money in what was one of the largest reported thefts of digital currency. 

There were signs from various purchasing managers’ indices around the world that the pace of recovery from the pandemic may be slowing down. These worries were not helped when China closed Ningbo-Zhoushan, the world’s third-busiest cargo port, due to an outbreak of Covid. 

August ended with images of the last American troops leaving Afghanistan and with Hurricane Ida hitting New Orleans, leaving one million people in Louisiana without power. 


August was a month when the news for the UK economy was mixed. Like many countries around the world the UK is recovering well from the pandemic, but there are worries that staff shortages may hamper the recovery, and that the Bank of England may need to tread a delicate path between stimulating the economy and keeping a lid on inflationary pressures. 

Figures for the second quarter showed that UK GDP had grown by 4.8% between April and June, with the expected strong performance from the services sector. The rise in output leaves the economy 4.4% below where it was in the last quarter of 2019, before the onset of the pandemic. 

International Trade Secretary Liz Truss said that she expects to complete negotiations for the UK to join the Trans-Pacific Partnership by the end of next year, as business confidence jumped to a new four year high. According to the survey by Lloyds Bank employers in the North West are feeling particularly optimistic. 

What does worry employers, however, is the shortage of staff. The Purchasing Managers’ Index for August hit a six month low of 55.3: while that still indicates optimism, it was significantly down on the 59.2 recorded in July. 

Equally worrying was a YouGov poll, which suggested that as many as 354,000 small businesses may not be able to repay the Covid loans they have received from the Government, due to cash flow problems and hold-ups in their supply chain. 

Any reader wanting their glass to be resolutely half-empty should, sadly, look no further than the UK car industry. We have written elsewhere about the impact the global shortage of microchips is having and, with staff still affected by the pingdemic, figures for July showed that just 53,438 cars were built in the UK, down 38% on July last year and the worst performance since 1956. Unsurprisingly, sales of second hand cars soared due to the shortage of new models. 

What about jobs and the high street? In the US, Amazon is, apparently, about to go into the department store business. Here in the UK a story on the BBC stated that the UK has lost 83% of its “main department stores” in the five years since the collapse of the BHS chain. To confirm what may well be the changing face of our town centres in the future, trials of shared banking hubs in two towns where all the bank branches have closed, Cambuslang in South Lanarkshire and Rochford in Essex, are to be extended to April 2023. 

If you would like other evidence of our changing shopping, and eating habits, then Greggs are to open 100 new stores, creating 500 new jobs, and Just Eat says it will create 1,500 new jobs in the North East. 

Despite the boost provided by the Euros, though, the high street continues to struggle, with City AM reporting that footfall in July was 34% down on the same month in 2019, with shoppers seemingly still unwilling to return to town centres. 

Online spending hit £10bn in July, the highest monthly spend in 2021 so far, bringing this year’s online total to £64.9bn – a massive increase of 56% on 2019. 

The UK’s FTSE-100 index of leading shares had a relatively quiet month. It rose just 1% to close the month at 7,120. The pound was down by 1% against the dollar, and ended August trading at $1.3755. 


August is, of course, the month when Europe traditionally goes on holiday, so news in this section of the Bulletin was in slightly short supply. 

Tesla boss Elon Musk announced that he hopes to start making cars at the Gigafactory just outside Berlin in October, “or soon afterwards.” The planned start date has been pushed back after battles with local environmental campaigners and what Musk described as “German bureaucratic delays.” 

Like many central banks the ECB has taken the first steps towards establishing a digital currency, beginning a two year investigation phase that could see a digital Euro by the middle of the decade. The ECB is worried that failing to implement a digital currency will undermine the Eurozone’s monetary autonomy, as foreign technology giants – and other digital currencies – gain ground. 

We report below on measures taken by the South Korean central bank to curb rising prices, and the ECB could soon have similar problems. Rising prices, a spike in Covid infection numbers and a drop in vaccinations dented German consumer confidence as Europe’s biggest economy headed into September. 

Despite this, August was a good month for the German stock market, which rose 2% to close at 15,835. The French stock market was up by just 1% to end the month at 6,680. 


August was another month in the US that got off to a good start thanks to the jobs figures. With the US economy growing by 6.5% in the second quarter, figures for July showed that 943,000 jobs had been created, against a general consensus of 870,000. Job vacancies now stand at a record 10.1m as lay-offs fell to their lowest level in 21 years. 

We have written previously about President Biden’s eye-watering $3.5tn (£2.55tn) budget proposals. In August they were approved by the US Congress and it now looks almost certain that the measures – which include significant packages for health, family support and climate schemes – will go ahead. The President also said that he wants 50% of all car sales to be electric by 2030. 

What won’t be going ahead, at least not until 2022, is a return to the office for staff at Apple. The company, which gave CEO Tim Cook a $750m payday, has said that it will delay calling staff back to the office until January at the earliest, citing fears of a further Covid surge. 

In other company news Amazon, having done so much to impact the traditional high street, is apparently considering opening department stores, with Ohio and California already earmarked as possible sites. 

The month ended with the Federal Reserve hinting that it may start to withdraw post-Covid stimulus measures later this year as the US economy continues to recover. However there are currently no plans to increase interest rates, despite a recent spike in inflation. 

In common with most of the markets we cover, August was a good month in the US. The Dow Jones index rose 1% to close the month at 35,361 while the more broadly based S&P 500 index was up 3% to 4,523. 

Far East 

We have devoted a lot of column inches in previous market commentaries to the pro-democracy movement in Hong Kong, and the subsequent crackdowns by the Chinese authorities. Perhaps unsurprisingly, official figures released in August showed that Hong Kong’s population had shrunk by 87,100 in the year to June. 89,200 Hong Kong residents left the city, although this was partially offset by inflows from mainland China. 

The Beijing authorities continued their crackdown on the tech companies in August. Tencent was the latest company to come under fire, with prosecutors filing legal action over claims its messaging app did not comply with laws protecting minors. With the authorities branding online games “electronic drugs” we can expect this tighter control of the tech sector to continue for some time. 

There was good news in Japan with the economy rebounding more quickly than had been expected, ahead of the Tokyo Olympics. The country’s GDP grew by 1.3% in the second quarter of the year, roughly twice the rate that had been forecast. 

There was less good news for Toyota, which announced plans to slash car production in September from 900,000 vehicles to 540,000 due to the global microchip shortage. At the end of the month the South Korean central bank became the first in the region to raise interest rates (from 0.5% to 0.75%) in a move aimed at curbing household debt and house prices, both of which have risen sharply in recent months. 

On the region’s stock markets China’s Shanghai Composite index had a good month, rising 4% to close August at 3,544. The Japanese stock market was up 3% to 28,090 but the markets in Hong Kong and South Korea were unchanged in percentage terms, finishing at 25,879 and 3,199 respectively. 

Emerging Markets 

There was some interesting company news in the Emerging Markets section. Square, the digital payments platform owned by the co-founder of Twitter, agreed to pay £21bn for the Australian ‘buy now, pay later’ firm Afterpay. The company has more than 16m customers and is used by 100m businesses around the world, and was seen as a key indicator for the no-credit-checks online payments industry that boomed in the pandemic. 

In a rather more conventional industry, Saudi Arabia’s oil giant Aramco saw its profits jump almost four times as the world recovered from the pandemic and demand for oil picked up. The world’s biggest oil producer said net income had risen to $25.5bn (£18.4bn) for the second quarter of the year. 

On the stock markets August was an excellent month for India’s BSE Sensex index, which shot up 9% in the month to close at 57,552. The Russian market was up 4% to 3,919 but it was a disappointing month for the Brazilian stock market, which fell 2% to 118,781. 

And finally…

August was not a vintage month for the ‘And finally’ section of this commentary. The month used to be known as the “silly season:” parliament wasn’t sitting, everyone in Europe was on holiday and journalists scrambled furiously to find stories to fill their column inches. As we covered in the introduction, August 2021 was very far from the “silly season” – but was there anything to lighten the gloom? 

Well, in this continuing summer of shortages McDonald’s ran out of milkshakes thanks to the shortage of lorry drivers. 

Appropriately for August insurer Zurich warned against the increased risk of outdoor fires – up 16% since 2019. Not in the woods though, but in your garage. It is, apparently, the fault of lockdown, as we’ve now all rushed out and bought outdoor pizza ovens, converted our garages into gyms (or bars) and made the old garden shed into a “shoffice.” Perhaps we could point our fingers at former Prime Minister David Cameron, who famously spent £25,000 on what he described as a “shepherd’s hut,” which included a wood-burning stove, sofa bed and sheep’s wool insulation. 

There’ll certainly be no problem for 12-year-old Benyamin Ahmed, from London, if he wants to put a shed/office at the bottom of the garden. He has made approximately £290,000 in his summer holidays, after creating a series of pixelated artworks called Weird Whales and selling non-fungible tokens (NFTs), which allow artwork to be ‘tokenised,’ creating a digital certificate of ownership that can be bought and sold. 

If you have no idea what that last sentence meant then you are not alone: it’s clearly indicative of how quickly the world is changing. But let’s spare a thought for Benyamin’s teacher: any day now they will be struggling to understand an essay, entitled “What I did in my summer holidays…” 


Avoiding the “Scamdemic?”

Thursday, September 2nd, 2021

There has been a rapid rise in phone and online scams over the past sixteen months as criminals seek to take advantage of people’s insecurities regarding Covid. With many processes moving online and onto our mobile phones, comes new opportunities for people to take advantage. This phenomenon has been dubbed the “scamdemic.”

Scams have come a long way from the apocryphal general from a far-away nation who was desperate to share £30m with you. Although some people do fall victim to fraud of that design, the sage advice of grandmothers everywhere;  “if it seems too good to be true then it probably is”  has oftentimes been enough to protect the vast majority of us. 

There is a huge difference, however, between £30m and £2.99. While it is hard to believe that we’ve been chosen to receive a share of a king’s fortune, it is all too easy to believe the text message that appears to come from the Royal Mail. They have been unable to deliver a parcel, there’s £2.99 to pay and all we need to do is click the link to this website. After all, with the rise and rise of online shopping, who isn’t waiting for a parcel? 

According to the credit-reporting agency Credit Karma, more than half the people in the UK have been targeted by text scams since lockdown began. Worryingly, a third of us have fallen for them and, with the average person receiving four scam messages a week, it is easy to wonder if sooner or later we won’t all be a victim. 

Along with the Royal Mail, messages supposedly from PayPal are most likely to have caught us out, but criminals posing as the NHS and HMRC – saying you’ll shortly be in jail if you don’t pay a tax bill immediately – are also high on the list. 

The official term for all this is Bulk Telephony-enabled Fraud (BTF). There are services allowing customers, legitimate and otherwise, to send up to 30,000 messages a minute. Looking on one company’s website, the cost of sending 100,000 messages is just over 2p per message. For the criminals it is purely a numbers game. With so many messages going out, some of them are bound to hit the target. And while the average age for postal scams is 74, the age group most likely to fall victim to text scams are the under-35s. 

It’s unlikely that this problem is going away any time soon. You may ask, well, why doesn’t the Government do something? The problem is that so many of these scams and frauds are based offshore. 

The answer, for now, is in our own hands. Caution and a healthy skepticism can help to protect you. If you’re feeling tired, burnt out or otherwise distracted, ask whether now is the time to be dealing with your messages. Question them when you receive them:  ‘Am I really expecting a parcel?’ ‘My accountant deals with everything, so why are HMRC contacting me?’ Questions like that may not be as straightforward as grandma’s advice, but asking them could save you a lot of money, and an equal amount of heartache.