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Are we Right to be optimistic about the UK Economy?

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Are we Right to be optimistic about the UK Economy?

Thursday, July 22nd, 2021

Is the glass half full or half empty? It’s one of the oldest questions (and clichés) there is. But right now you could be forgiven for thinking that as far as the UK economy goes the glass is not just half full, it’s completely full. 

The last few weeks have brought us a steady stream of good news. Post-Brexit the UK has agreed – or is very close to agreeing – trade deals with Norway, Iceland and Australia. According to recent reports International Trade Secretary Liz Truss is aiming to sign a free trade deal with New Zealand ‘by August.’ 

Manufacturing growth is at a 30 year high and even car sales – which were hit so hard by the pandemic – have recovered. The UK “optimism index” is at a six year high, and recent figures showed the average price of a house in the UK rising to record levels. 

Optimistic forecasts abound, with the CBI predicting that the UK economy will grow by 8.2% this year, up from a previous forecast of 6% and taking the economy back to pre-Covid levels. The economy will grow by a further 6.1% in 2022, the CBI forecasts, up from a previous figure of 5.2%. 

Still not convinced? The UK is now officially home to 100 “unicorns” – new tech firms with a valuation of more than $1bn (£721m). Tractable, an artificial intelligence start-up building computer vision tools became the latest, joining companies such as Skyscanner (from Scotland), Durham-based challenger bank Atom Bank and Darktrace, based in Cambridge, which uses AI to develop cyber-security solutions.

There are, of course, areas for concern. All is looking up, apart from the fact that ‘Freedom Day’ – originally scheduled for June 21st – has been pushed back. Apart from the fact that the UK could well face a third wave of the virus as the seemingly more infectious Delta variant holds sway. Apart from the fact that many UK businesses – especially in the hospitality sector – are struggling to re-open because of a shortage of staff.

The simple fact is that there is likely to be a mixture of good and bad news for the foreseeable future. This good and bad news will be reflected in stock markets, not just in the UK but around the world. So the only certainty is that regular contact with your financial advisers will be essential – and that your financial planning will need to be flexible and regularly reviewed. 

Yes, there is an increasing amount of good news but no economy – either in the UK or anywhere else – is out of the woods. We will continue to keep you up to date with developments and keep your financial plans under regular review. 

Will Biden’s stimulus package work?

Wednesday, July 7th, 2021

When Joe Biden was inaugurated as President back in January there was much talk of his proposed stimulus package for the US economy. The figure generally talked about was $1.9tn (£1.36tn), an eye-watering sum of money. To give you a comparison, the National Audit Office in the UK is currently saying that the Government has spent £372bn on Covid-19, with £150bn of that going towards support for businesses. 

By May, however, $1.9tn was looking like small change: when Joe Biden presented his Budget he revealed $6tn (£4.3tn) of spending commitments, largely funded by tax rises for wealthy Americans and business. Unsurprisingly the spending plans were condemned by the Republicans as “insanely expensive,” with claims that they would lead to record levels of debt. 

So what is the President planning to spend the money on? How will he pay for it? And, most importantly, will the huge level of spending work? 

Joe Biden’s budget is aimed at growing the US economy “from the bottom up and the middle out.” It includes more than $800bn for the fight against climate change, free school places for all three and four year olds, two years of community college for all Americans and massive investments in both physical and digital infrastructure. 

As we have noted above the plans have been fiercely criticised, and there is a chance that some members of the President’s own party may side with the Republicans over some of the proposals. The chief criticism, though, has centred on debt, with estimates that the proposals could add $14.5tn of debt over the next decade, taking US Government debt to 117% of GDP by 2031 – a level not even reached during the Second World War. 

Will the plans work? Your opinion on that almost certainly depends on your view of Joe Biden. Republicans are fiercely critical of something they see as taking US debt to a whole new level and – very possibly – driving up inflation. The Biden administration argues that inflation will stabilise at around 2% and that the higher taxes will see the whole programme paid for within 15 years. 

In 1996 Bill Clinton famously said that the “era of big Government is over.” Joe Biden appears to have brought it back. While his plans still have to go through Congress and the Senate, it seems certain that enough of his spending commitments will remain to make the fiscal hawks in both parties wince.

Is cash too safe?

Wednesday, July 7th, 2021

One of the great themes of the past 15 months has been accidental savings: the amount people in the UK have “saved” by the simple expedient of not being able to go out and spend. 

“Thrifty Brits stash the cash in lockdown” has been a typical headline, quickly followed by an estimate of how much cash we might have “stashed” through not going to the pub, eating out or buying new clothes. One estimate put the figure at £160bn, with the Bank of England suggesting that up to 5% of this could be spent, and hence boost the UK recovery, as lockdown eases. Economists at Deutsche Bank went further, suggesting that around 10% could be spent on nights out, holidays, cars and more. 

“Would I be shocked by £20bn of extra spending? No,” said economist Sanjay Raja. Spending on this scale would comfortably add between 0.5% to 1% to UK GDP. 

But however much is spent, that still leaves a huge amount of money that is not spent – a huge amount of money that remains “accidentally saved.” According to Peter Flavel, the CEO of Coutts, however, we are not saving wisely. 

Looking at it from the point of view of an Australian who has lived and worked in several countries, and is now in the UK, Flavel makes a simple point. The UK’s Individual Savings Account (ISA) is “potentially the best medium term savings product globally.” But, he argues, “they are not used very well, [in fact] they are used badly.” 

As you may well know, a couple can invest £40,000 per year into ISAs. Junior ISAs have a limit of £9,000 per year. The products enjoy tax advantages and give immediate access to your cash if it is needed. Small wonder that Flavel describes the ISA as a “World Champion” amongst saving options.

According to recent statistics around 20% of the UK adult population have invested in an ISA – but what concerns Flavel is that the overwhelming majority of these ISAs (76%) are held in cash, meaning that with low interest rates and inflation, the real value of the ISA could actually fall over time. 

We take a balanced approach to financial planning. It’s often a good idea to keep some money in cash, after all none of us know when we will need access to our “emergency fund.” But Peter Flavel makes a very valid point: it is important that we don’t allow a disproportionate amount of our savings to accidentally accumulate in cash. It runs the risk of unbalancing your overall financial planning portfolio, giving you a more cautious approach than you might otherwise want or need, and, with low-interest rates likely to be the norm for some time, it also risks poor returns. Of course, where that balance lies is different from one individual to the next.

If you are interested in finding your own balance then do not hesitate to get in touch with us. While “I’ve accidentally got too much cash” doesn’t sound like a problem, in financial planning terms it very well could be.

Is the UK’s Future in the Far East?

Wednesday, June 23rd, 2021

In April it was announced that the UK and Australia had agreed the “vast majority” of a trade deal. Although talks between International Trade Secretary Liz Truss and her Australian counterpart broke up without a deal, both countries were “confident that the remaining issues will be resolved.” The final deal is expected to be completed by mid-summer

The numbers involved in the deal with Australia are relatively small – it is estimated that it will add perhaps £500m to UK GDP over the long term – but perhaps the geographical significance of the deal is more important than the numbers. 

It was widely reported that the deal with Australia could pave the way for the UK to join the CPTPP, a trading agreement between 11 Pacific Rim countries signed in 2018. 

The initials stand for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. The 11 countries involved are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. Notably, it does not include China, but between them the 11 countries have a population of 500m and – according to an article on the BBC – generate 13% of the world’s income. (In comparison the population of the European Union is currently put at a little under 450m.)

The CPTPP gives member countries greater access to each other’s markets, with a pledge to eliminate or reduce 95% of import charges and tariffs. Manufacturers who source products from member countries can also qualify for preferential treatment. 

In return countries are obliged to cooperate on regulations such as food standards, but unlike the EU the CPTPP is not a single market or a customs union, so countries are not required to have identical regulations and standards. 

Clients who know their Geography will very quickly realise that the UK is nowhere near the Pacific Rim. So will we be allowed to join? And why should we want to join? 

The answer to the first question is almost certainly “yes.” Speaking in April Liz Truss said she hoped the UK would be a member “by this time next year.”

Why would the UK want to join? The Eurozone economy contracted by 0.6% in the first three months of this year, officially putting it back in recession. By contrast the Pacific Rim is one of the fastest-growing parts of the world economy. “We need more access to these markets,” said Liz Truss. “That’s where the future lies for British business, whether it is the whisky industry, the car industry, financial services or digital industries.” 

The Government is currently setting up a new unit to explore Brexit opportunities, with the emphasis on “shedding EU regulations.” Whether you are in favour of this will probably depend on your political viewpoint, but it would certainly sit comfortably with the UK being a member of the CPTPP. The initials may be unfamiliar now: they are unlikely to remain that way especially if – as he has hinted – President Biden also commits the US to joining.

Who will Pay the Bill for Covid-19?

Wednesday, June 23rd, 2021

Government borrowing is at its highest level since the Second World War. According to the Office for National Statistics it reached £303.1bn in the year to March – nearly £250bn higher than in the previous year. Borrowing in March was £28bn – the latest month to set an unwelcome record. Borrowing in the year to March was 14.5% of Gross Domestic Product: at the end of the War it was 15.2%. 

Many pundits are expecting a spending boom: depending on which article you read, we “accidentally saved” between £100bn and £125bn during lockdown. Nationwide, for example, have reported that customers’ savings “more than doubled” to £10.6bn during the pandemic. 

With the lockdowns now easing, surely this money will be spent, kick-starting the economy and fulfilling various predictions of the fastest growth since the Second World War? 

Perhaps not: a recent survey suggested that the army of accidental savers lockdown created has plans to stay prudent. As the BBC report put it, consumers are likely to “play it safe” as the UK emerges from lockdown. Neither can the Chancellor expect a windfall from Corporation Tax: with the pandemic having hit the profits of many, many companies’ tax receipts from business are certain to be reduced. 

But at some point the Chancellor has to start paying the money back. So just who will pay the bill for Covid? And how long will they be paying the bill for? 

It hardly sounds like a prudent way to run a country but perhaps the UK will never pay back the debt. In the last 100 years the UK has never not been in debt: in the last financial year (before Covid struck) the Government was planning to borrow £160bn – of which £100bn was to pay back old debt. 

Some of you – brought up with a strict understanding that debt must be repaid – will recoil in horror, but Government borrowing is not like a credit card: the debt (at least according to the experts) does not need to be paid down as quickly as possible. 

Borrowing is cheap at the moment, with interest rates at historic lows – so low that last year the Government issued negative-yield bonds. Effectively, institutions that bought the bonds were paying the Government to look after their money. 

What the Chancellor really needs is a healthy dose of inflation. In years gone by, when annual inflation was in double digits, that very quickly reduced the “real” amount of Government debt. But even though inflation increased to 1.5% in April, a sustained period of high inflation looks very unlikely. 

Your grandmother would not approve, but for now it looks like the Chancellor’s emphasis will be on servicing the debt, rather than paying it back – and on keeping his fingers crossed the predicted rebound in the economy really does happen, finally starting to swell his tax coffers.

June Market Commentary

Wednesday, June 2nd, 2021


In some ways, May was a relatively quiet month. Although, it did bring us the marriage of Prime Minister Boris Johnson, the first PM to marry in office since Robert Jenkinson, 2nd Earl of Liverpool, in 1822. 

Having eaten a slice of wedding cake and gone straight back to the office, Boris Johnson will be relatively pleased with what he saw in May. There were plenty of optimistic forecasts for the UK economy and the stock market ended the month above the 7,000 mark. 

In the wider world, both China’s exports and imports surged in April as the first trade talks were held with the new Biden administration. The jobs figures in the US were disappointing, despite a recovery in the economy. However, Amazon, in the news as always, seems to be trying to tackle the jobs problem on its own. 

It was a good month for the stock markets we cover in the Bulletin, with most of the major markets making gains in the month. Those that didn’t make gains at least managed to hold their own. 

It was also a month in which a herd of cows brought British Rail to a standstill, and the UK was rocked by news of a devastating crisis for ice cream lovers. As always, let us look at all the details. 


The month started in the UK with our glass not so much half full or half empty, but having never been filled in the first place. Even as the lockdown restrictions were eased, thousands of businesses in the hospitality sector were unable to reopen, simply because they could not find any staff. It was a story echoed in other countries, thousands of staff have left the hospitality sector in the past year, leaving many pubs and restaurants desperate for someone to pull pints and serve food. 

More generally, UK job vacancies hit their highest level since the start of the pandemic, with 675,000 vacancies reported in the February to April quarter as the unemployment rate fell slightly to 4.8%. 

Sadly it looks like the ranks of the unemployed could soon be swelled by more retail staff, with many stores reported to be facing closure over unpaid rent. A moratorium was agreed at the start of the pandemic which stops landlords taking legal action over unpaid rent. That ends on June 30th, with two thirds of retailers have apparently been told that they will be subject to legal action. With shopper numbers reportedly still down 30% on pre-pandemic levels, good news for the high street was hard to find. 

Perhaps symbolically, the last Debenhams closed its doors in May. Equally symbolically, Amazon announced plans to take on 10,000 more staff. 

Away from the high street the news was mostly good for the UK, especially at the end of the month. The Organisation for Economic Co-operation and Development (OECD) predicted that the UK would grow at its fastest rate since the Second World War this year and next year. The OECD is forecasting growth of 7.2% this year and 5.5% in 2022, in contrast to a 9.8% contraction last year. 

Business optimism was reported to be at a five year high, with the CBI saying that optimism over the future of the service sector increased at the fastest pace on record in the three months to May. 

Car production, a tale of unremitting gloom last year, was also reported to have bounced back to near normal levels, with Nissan apparently in talks to build a huge electric car battery plant in the UK. The FT reported that Nissan wants the UK to be “its main hub outside Japan.” There were even rumours of a Tesla factory, following CEO Elon Musk’s two day visit to the UK. 

House prices increased by 10.2% in the year to March, the highest annual growth for 14 years according to official figures. With Nationwide reporting that ‘accidental savings’ had seen an extra £10.6bn added to them during the pandemic, it looks like we might be spending that money moving or improving. One slightly negative note was that inflation more than doubled to 1.5% in April. 

The Government announced the setting up of a “Brexit Opportunities” unit, and looks set to offer Australia a tariff free deal, despite the concerns of farmers. Trade and investment deals worth £1bn with India were announced which, according to our newlywed PM, would “create 6,000 jobs.” 

There was, therefore, plenty of positive news in May. The FTSE-100 index of leading shares took it all rather cautiously, gaining just 1% in the month to close at 7,023. The pound had a good month against the dollar, gaining 3% to finish May at $1.4233. 


We commented last month on the rise of the Green Party in Germany. With the elections due in late September they continue to lead in the opinion polls, with the very real possibility that the Green candidate, 40 year old Annalena Baerbock, could take over from Angela Merkel as Chancellor. 

Should she win the election, one thing she, along with other EU leaders, will undoubtedly turn her attention to is the amount of tax paid by companies like Amazon. 

Amazon reportedly did not pay any corporation tax in Europe last year. The firm, which has its European headquarters in Luxembourg, recorded a sales income of €44bn (£38bn) last year, but did not pay any tax having apparently made a loss of €1.2bn (£1.03bn). Amazon’s European unit was also granted €56m (£48m) in tax credits and has €2.7bn (£2.3bn) of carried forward losses ready to be used against any future profits. 

A Green government in Germany would be set to commit to significant levels of spending, but it doesn’t look like Amazon will be contributing.

You may have heard about the shortage of specialised computer chips which is hampering car makers around the world. That hit home in May as Audi was forced to “idle” 10,000 staff for the second time this year due to the ongoing shortage. It has been suggested that the shortage of semiconductors will cost carmakers around the world more than $100bn (£70bn) this year. 

There was some good news as Greece announced that it was “putting the lockdown behind us” and opened up its tavernas and beaches to tourists. Not that the news boosted the Athens stock market, which was down 2% in May at 895. 

Fortunately the major European stock markets did rather better. Germany’s DAX index was up 2% to close the month at 15,421. The French market went one further, rising 3% to finish May at 6,447. 


It was snakes and ladders at the beginning of the month in the US. All the expectations were that the payroll data would see another 1 million jobs added as the US recovered from the pandemic and the Dow Jones index climbed to a record high. Until it went swiftly down the snake as the jobless figures came in well below expectations. Just 266,000 jobs were added in April, a month which saw the Government send $1,400 (£1,000) cheques to most Americans, as the unemployment rate edged up to 6.1% with 9.8 million people remaining unemployed. 

Worse followed when the Colonial Pipeline, which carries 45% of the East Coast’s supply of diesel, petrol and jet fuel, was put out of action by a ransomware attack. The hackers, an organisation called DarkSide, cheerfully acknowledged the attack and apologised to the public. “Our goal is to make money,” they said, “Not creating problems for society.” They appear to have succeeded in their goals, with reports emerging a few days later that the pipeline had paid a ransom of $5m (£3.55m) to restore order. 

Back to Amazon, another organisation that has met a few goals, even if it hasn’t paid much tax, announced that it was set to hire a further 75,000 people in the US and Canada and then went one step further by agreeing to buy the historic MGM Studios for $8.45bn (£6bn). This will give Amazon’s streaming service access to a huge back catalogue, including all the James Bond movies and The Handmaid’s Tale series. This came in the same month that AT&T and Discovery announced plans to create another “streaming giant.”

The month ended with President Biden setting out spending plans for the trifling sum of $6tn (£4.23tn) which were not surprisingly criticised by Republicans as “insanely expensive.” The plans, which would mean steep tax rises for wealthier Americans, would include huge new social programmes and significant investment in the fight against climate change. 

We have, in the past, brought you news of many tech startups in the US that have excessive valuations (at least by conventional measures). May perhaps brought the biggest example yet, with news that electric truck startup Rivian is planning a stock market debut that will see it valued at $70bn (£49.3bn). How many trucks have so far rolled off Rivian’s production line? That would be none.

The Dow Jones index, perhaps remembering those conventional measures, was up just 2% in the month to close May at 34,529. The more broadly based S&P 500 index was up 1% at 4,204. 

Far East 

May was an unusually quiet month for news in the Far East section of the Bulletin. As regular readers know, there are months when there are as many stories in this section as in, say, the UK or US sections. 

The month started with good news for Chinese exports. As the US economy began to recover, and production in India stalled due to the pandemic, Chinese exports surged in April, up 32% from the previous year (admittedly during the Covid crisis) to almost $264bn (£186bn). April also saw imports rise at their fastest rate in more than a decade, up 43% on the previous year. 

The month ended with trade negotiators from the US and China holding “candid, pragmatic” talks to discuss the trade relationship between the two countries. Where did they meet? It was a virtual meeting, obviously. It’s not just parish councils that use Zoom.

Long working hours have been much in the news lately, and in May a study was released by the World Health Organisation, suggesting that long working hours are killing “hundreds of thousands”  of people a year. The WHO put the figure at 745,000 with anyone working more than 55 hours a week having a significantly increased risk of both strokes and heart disease. The report found that people living in South East Asia and the Western Pacific Region were the most affected. Some readers will remember a story from two years ago when Alibaba founder Jack Ma called for China to return to “996.” Working from 9am to 9pm six days a week, a 72 hour working week. 

May, otherwise, was a story of the Chinese government cracking down. Shares in food delivery giant Meituan fell sharply after its billionaire CEO Wang Xing posted a thousand year old poem online. The Book Burning Pit was widely seen as a criticism of Xi Jinping and his government, with the company one of many under investigation, like Alibaba last month, for abusing a dominant position in a particular market. 

May was a very bad month for the cryptocurrency Bitcoin, which was down 37% for the month as a whole. It fell 10% after carmaker Tesla said it would no longer accept it as payment, a position which worsened significantly when the Chinese government banned banks and payment firms from providing services related to cryptocurrency transactions. It also warned investors against speculative trading in cryptocurrencies. 

Fortunately there were no 37% falls on Far Eastern stock markets during the month. China led the way, the Shanghai Composite index rising 5% in the month to close at 3,615. The markets in both Hong Kong and South Korea rose 2%, to end May at 29,144 and 3,204 respectively. Japan’s Nikkei Down index was unchanged in percentage terms, closing the month at 28,860. 

Emerging Markets 

April was, of course, dominated by the surge in Covid cases in India. Mercifully the rate of infection appeared to be slowing in May, although that did not stop calls from opposition parties for a full national lockdown, something Prime Minister Nerendra Modi resisted due to the economic impact. 

We have written previously about tensions between India and China, and the misgivings many countries have had about Chinese companies being involved in their 5G networks. It was therefore no surprise to see India’s telecoms ministry leave Chinese companies Huawei and ZTE out of its 5G network trials. The ministry granted permission to a dozen firms, but the Chinese companies were notable absentees. 

All the three major stock markets we cover in this section had good months in May. Perhaps in response to Nerendra Modi’s controversial decision the Indian market rose 6% to close at 51,937. The Brazilian market was up by the same amount to end the month at 126,216 while the Russian market did only slightly less well, finishing the month up 5% at 3,722. 

And finally…

May wasn’t a vintage month for the “And finally…” section of the commentary, although a herd of cows in Nuneaton gave it their best shot. Trains were unable to moo-ve (sorry) through the station as the herd of cows trotted through just before 11am one day. Sadly we have no information on which platform they arrived at or, indeed, whether they were on time. Network Rail duly halted trains while the cattle sauntered out of the station, and confirmed that they had spoken to a local farmer…

Regular readers will know of a rather larger traffic jam that we reported on recently. The giant container ship Ever Given blocked the Suez Canal and was, along with the pandemic, duly blamed for the UK facing shortages of pet food pouches and garden gnomes among other essentials. 

Now we bring you news of a real essential. The UK and Ireland are apparently facing a shortage of Cadbury’s chocolate flakes this summer, due to a surge in demand. This would mean a summer without a ‘99 for ice cream lovers. Sundry chocolate bars were suggested as alternatives on social media, but surely there are some traditions that simply cannot be tampered with? 

One tried and trusted tradition is, of course, a gentleman getting down on one knee and proposing. Now one woman in the Punjab has taken Prince Harry to court for failing to do that, demanding a warrant for his immediate arrest. The court was not sympathetic, gently telling the plaintiff that she may have been the victim of an online scam. “There is every possibility that Prince Harry is in a cyber-café somewhere in the Punjab,” said the judge. Let’s hope Meghan doesn’t find out!


The Beijing Billionaires

Wednesday, May 5th, 2021

For the last seven years the title of the city with the most billionaires has been held by New York, but this year a new name has taken over and that city is Beijing. 

According to the latest Forbes annual rich list, the Chinese capital added 33 billionaires last year, taking its total to 100 – one more than the Big Apple. 

China’s quick containment of the Covid virus allowed its economy to grow last year and the country’s technology firms continue to prosper, but what’s interesting about the list of billionaires is the wide variety of industries represented. It’s by no means all technology, software and e-commerce. 

Top of the list of China’s billionaires according to Forbes is Jack Ma, co-founder and former CEO of internet shopping giant Alibaba, with an estimated fortune of $65.6bn (£47bn). 

In second place is Ma Huateng, the founder and CEO of Tencent, Asia’s most valuable company and, according to Forbes, with an estimated wealth of $55.2bn (£39bn). 

Other sources such as the Bloomberg Billionaires Index suggest that both Jack Ma and Ma Huateng lag behind bottled water tycoon, Zhong Shanshan, who founded his company, Nongfu Spring, in 1996. Bloomberg suggests that the recent stock market listing of his company and a controlling stake in a vaccine maker have significantly boosted Zhong’s wealth. The Bloomberg Index credits him with a net worth of $58.7bn (£46bn) – and suggests that  Jack Ma has rather less wealth. 

You do not have to go far down the lists to find plenty of more traditional industries. 

Wang Wei is fifth on the Forbes list with a fortune estimated at $32.2bn (£23.8bn) thanks to delivering packages, and at 13th is Pang Kang, who is worth $24.9bn (£17.8bn) thanks to soy sauce – emphatically proving that you do not need the latest must-have app to make your fortune. 

The oldest person on the list is 86-year-old Xu Chuanhua, worth very nearly $2bn (£1.43bn) thanks to logistics and chemicals. The youngest – at 35 and 333rd overall in China – is Jihan Wu, worth $1.8bn (£1.29bn) thanks to cryptocurrency mining chips. The richest woman – and eighth overall – is Yang Huiyan, who is worth $28.5bn (£20.4bn) thanks to real estate. 

With China recovering rapidly from the pandemic and with a growth target in excess of 6% for this year, we can expect the number of Chinese billionaires to have risen again by this time next year.

May Market Commentary

Wednesday, May 5th, 2021


Some of the numbers in this month’s Bulletin are simply staggering. Whether it’s Amazon’s profits or the ‘investment’ (which could alternatively be considered ‘spending’, depending on your political viewpoint) announced by President Biden. 

There was a time where the ‘standard unit’ of currency we talked about was a million. Company profits and valuations were measured in millions: debt was in millions. If the pandemic has done one thing, it is to change our default unit of currency. Now we deal in billions – borrowing to deal with the pandemic is in billions, company profits – at least if you’re Amazon – are in billions and no self-respecting start-up seems to go anywhere near the stock market unless it’s worth at least a billion. 

After a billion, of course, comes a trillion. That’s a thousand billion. In April US President Joe Biden was dealing in trillions and, if Amazon profits keep rising, it surely cannot be long before the world has its first trillionaire. 

As you will see below, April was a relatively quiet month on the world’s stock markets. The FTSE did at one point go through the 7,000 barrier and although it ended the month just below that level  was one of the world’s better performers. It was certainly a good month in the US and the new President announced unprecedented levels of investment – or spending. 

The International Monetary Fund had started the month with an optimistic forecast, predicting that the UK will have growth of 5.3% this year and 5.1% next year. Forecasts for global growth were upgraded slightly, to 6% this year and 4.4% in 2022. 

The UK and Australia agreed the ‘vast majority’ of a trade deal as Australia stepped back from trade deals made with China. There was gloomy news for the Eurozone economy and a potential political earthquake started to seem possible in Germany. And finally, a record that we thought would never be beaten was comprehensively smashed. 

As always, let’s look at all the details…


As mentioned above, the IMF duly delivered its growth forecast for the UK. There were other, rather more anecdotal predictions of economic recovery this year. Bank of England deputy governor Ben Broadbent said the UK would see ‘very rapid growth’ over the next two quarters as people rush to spend the money they have saved during lockdown. Barclays boss Jes Staley went even further, saying that ‘we estimate the UK economy will grow at its fastest rate since 1948’ as the bank unveiled profits more than doubling to £2.4bn for the first three months of the year. 

That will certainly be the case if International Trade Secretary Liz Truss gets her way. April saw the announcement that the ‘vast majority’ of a trade deal with Australia has been agreed with the deal expected to be concluded by June. It is believed that this deal could be a springboard for the UK to join the CPTPP (the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which includes countries such Mexico, Japan and Canada in addition to Australia) within the next 12 months. 

In the domestic economy it was the construction sector leading the recovery. Figures for February showed that the UK economy edged up 0.4% in the month, driven by a 1.6% rise in the construction sector with both new builds and repair and maintenance doing well. At the end of the month Nationwide reported that house prices were 7.1% higher than a year ago, with the average property now costing £238,831. One analyst said the housing market was ‘on the boil’ and a story on the BBC reported particularly strong demand for property on the south coast, and on the coast of Wales as people looked to move away from cities. 

Inevitably there was some gloom amid the positive noises about the recovery, principally centring on Government borrowing. Measures taken to combat the pandemic have pushed government borrowing to its highest level since the end of the Second World War. Borrowing hit £303.1bn in the year to March – nearly £250bn higher than the previous year. The only consolation was that the figure is £24.3bn less than the £327.4bn expected by the Office for Budget Responsibility in its economic and fiscal outlook. 

What of jobs, the high street and – sadly – the companies still making significant redundancies? 

Defence giant Babcock announced that it would cut 1,000 jobs and Asda – thanks to us all baking at home – is to make 1,200 of its bakers redundant. At the end of the month it was reported that ‘time was running out’ to save 5,000 jobs at Liberty Steel, and the BBC reported that 1 in 7 shops is empty post-lockdown. 

More optimistically it was widely reported that shoppers had ‘rushed back’ to the national high street as it re-opened, with shoppers said to be making ‘revenge purchases’ – treating themselves to what they had always wanted as lockdown finally eased. As will be covered below in the US section, the high street has a huge amount of ground to make up and Hammerson – owner of Birmingham’s Bull Ring – will not be the only shopping centre owner to cut rents (by up to 30% in this case) in a bid for survival. Ominously, the month ended with online retailer Boohoo set to announce ‘soaring’ lockdown sales when it updates shareholders on May 5th. 

…But overall April was a positive month for the UK economy, and the FTSE-100 index of leading shares reflected it. The market rose 4% in the month to close at 6,970. The pound was virtually unchanged against the dollar in percentage terms, and closed April trading at $1.3817. 


The month did not get off to the best of starts in Europe as France began its third period of lockdown, with schools closing and people being banned from travelling more than 10km (just over six miles) ‘without good reason.’ 

German’s Commerzbank did little to lift the gloom when it announced a $3.3bn (£2.4bn) loss as it continued to deal with the impact of the pandemic. The bank has said it will cut up to 10,000 jobs and close ‘hundreds’ of branches as it looks to return to profitability this year. In contrast Ryanair got off relatively lightly, saying that last year’s losses will ‘only’ be £732m. 

The Purchasing Managers’ Index which came out in the middle of the month seemed to confirm that the pace of recovery was lagging in Europe with the service sector in Spain and Italy particularly slow to recover. This was confirmed at the end of the month when figures for the first quarter showed that the Eurozone economy had fallen back into recession, shrinking by 0.6% in the first three months of the year, having been hit by a renewed surge in infections and the consequent restrictions and lockdowns. 

In roughly five months’ time Germany will be going to the polls. Could we see the first Green Chancellor? Currently the Greens are leading in the polls, pledging to spend €500bn (£435bn) on a ‘socioecological transformation’ of the economy, which would see increased welfare payments and wealth taxes, a doubling of carbon taxes, a ban on short-haul flights and increased income taxes – plus a 30 hour working week and the right to work from home. The Green candidate to replace Angela Merkel would be 40 year old Annalena Baerbock. 

Meanwhile on the opposite end of the political spectrum the far-right Alternative fur Deutschland (AfD) appears close to embracing ‘Dexit.’ “We consider a withdrawal of Germany from the EU and the establishment of a new European Economic and Interest Community necessary” said the party. 

Away from the potential political upheaval April was a reasonably good month for Europe’s two leading stock markets. The German DAX index was up 1% to 15,136 while the French market was one of the month’s better performers, rising 3% to close April at 6,269. 


The ‘simply staggering’ numbers referred to in the introduction are, of course – despite the best efforts of Commerzbank – a reference to this section. More of Amazon’s profits and the President’s ‘once in a generation’ plans below…

The month got off to an excellent start on the jobs front as the US economy added 900,000 jobs and the recovery continued. The impressive numbers were largely driven by re-openings at restaurants, bars, construction sites and schools. There was more good news when US medical authorities gave fully vaccinated Americans the go-ahead to begin travelling again, both at home and abroad. 

As will be covered ahead, April brought a trade spat between China and Australia, but the US also had its share of international tension in the month. Three companies and four branches of China’s National Supercomputing Centre were added to the US blacklist, meaning companies cannot export technology to the groups without prior approval. Sanctions were also imposed on Russia for what the Biden administration described as ‘harmful foreign activities’ – cyberattacks to you and me. 

…And so we come to the numbers. As we all know, there have been winners and losers from lockdown. A surge in iPhone sales – especially in China – has seen Apple’s profits double since the beginning of the pandemic. Alphabet, the parent company of Google, saw net profit jump by 162% to a record $17.9bn (£13bn) in the three months to March as advertising revenue grew by a third. Facebook revenues for the first quarter leapt from $17.7bn (£12.8bn) a year ago to $26.1bn (£18.9bn) this year. Tesla made $438m (£317m) in the first quarter of the year, although this was dented somewhat by paying CEO Elon Musk $299m (£216m) – part of the controversial compensation package agreed in 2018. 

It was Amazon’s figures, though, that really caught the eye, and illustrated just how much of a shift we have made to shopping online – and how much damage the pandemic must have done to high streets and shopping malls around the world. 

Although the profits were not as large as Alphabet’s, every aspect of Amazon’s business from video streaming to grocery delivery, has done well during the pandemic. Revenue for the January to March period rose from $75bn (£54bn) last year to $108.5bn (£78bn) this year, with profits of $8.1bn (£5.86bn) – more than treble what it was in the same period last year. City AM did the maths and reported that Amazon made $13,000 (£9,400) per second in sales during the quarter. 

With figures showing that the US economy grew at an annualised rate of 6.4% in the first quarter, one analyst said that Amazon could be on the verge of a ‘golden age.’ 

All the company figures, though, were dwarfed by the President’s announcement of a $4tn (trillion) “once in a generation investment in America itself.” Joe Biden unveiled the American Jobs Plan and the American Families Plan which would, he said, be paid for by rises in corporation tax and by taxes on the ‘wealthiest 1%.’ The plans were met with fierce opposition by the Republicans but, with the Democrats holding the balance of power in both the Senate and Congress, they are likely to ultimately get the go-ahead. 

With the economy accelerating, companies posting record profits and the President announcing that level of investment it was no surprise that April was a good month for US stock markets. The Dow Jones index rose 3% to 33,875 while the more broadly based S&P 500 index was up 5% to end the month at 4,181. 

Far East 

China was one of the very few countries to see its economy grow in 2020. As the major Western economies all contracted, China reported growth of 2.3%. It was therefore no surprise when the Forbes annual rich list revealed that Beijing had overtaken New York as the city with the most billionaires, adding 33 last year to take its total to a nice, round 100. 

…And there could be more next year, as figures showed the Chinese economy up 18.3% on a year-on-year basis in the first quarter as it continued to recover from the pandemic. 

That said, the Chinese regulators are flexing their muscles and no-one – not even Jack Ma, boss of Alibaba and generally reckoned to be China’s richest man – is outside their reach. The regulators slapped a huge fine on Alibaba – equivalent to just over £2bn – saying the company had ‘abused its dominant market position’ for several years. The company accepted the fine, and duly vowed to change its ways. Meanwhile in Hong Kong Jimmy Lai, billionaire owner of the Apple Daily tabloid, was sentenced to 14 months in jail for his part in the pro-democracy protests. 

Away from China, Samsung pushed its profits to the highest level since the pandemic began. First quarter profits were the best since 2018 at $6.4bn (£4.6bn) on the back of strong mobile sales. There was also strong demand for TVs and home appliances – just as in the UK, if you’re going to be trapped at home, you have to spend the money on something…

On the political front tensions between Australia and China continued to escalate. The Australian government used new powers to rip up deals made between the state of Victoria and China as part of China’s Belt and Road initiative. The government said it was backing out of the agreements to ‘protect Australia’s national interest.’ The Chinese government called the move ‘provocative.’ 

Of the region’s stock markets South Korea had the best month – the market there rising 3% to 3,148. Hong Kong’s Hang Seng index rose 1% to 28,675, while China’s Shanghai Composite index managed a gain of just five points, closing the month at 3,447. The Japanese market was down 1% at 28,813. 

Emerging Markets 

The main story in the Emerging Markets section of the Bulletin was, of course, the surge in Covid cases in India. 

The middle of the month had seen huge crowds gather to bathe in the Ganges during the Kumbh Mela religious festival, even as a second wave of the virus swept through the country. We will all have seen the tragic scenes from India on various news bulletins, and the month ended with the daily number of cases passing 400,000 for the first time as the second wave worsened. 

Meanwhile in Russia thousands of people joined unauthorised rallies to protest against the continuing detention of jailed opposition leader Alexei Navalny, amid demands that he receive proper medical care. Navalny finally ended his hunger strike and was described as a ‘gaunt skeleton’ for his latest court appearance. Unsurprisingly, the verdict did not go in his favour.  

It was a relatively quiet month for the three major stock markets we cover in this section. The Indian market drifted down 1% to end the month at 48,782: Russia’s stock market managed to gain just two points in the month to close at 3,544, while the market in Brazil rose 2%, to close April at 118,894. 

And finally…

Last month’s ‘And finally…’ was not one of the best. For some reason the world seemed to be in a disappointingly sensible place in March. Fortunately the natural order of things was restored in April. 

Having recently written that pet food pouches were expected to be in short supply we must, sadly, start the month with even worse news. There is a shortage of garden gnomes. With garden centres being open during lockdown there has, apparently, been a ‘massive upswing’ in sales of garden gnomes. Well, yes, when you’ve only been able to talk to your household for three months, a new face might be appealing.

The situation has not been helped by a shortage of raw materials which – inevitably, has been made worse by our old friend, the Suez Canal blockage. 

April looks like it was a good month for our learned friends. Marks and Spencer has begun legal action against Aldi, arguing that their Cuthbert the Caterpillar cake infringes its Colin the Caterpillar trademark. They duly lodged an intellectual property claim in the High Court – and a very expensive Queen’s Counsel will shortly be arguing the merits of a cake being intellectual property. No doubt other barristers will be queuing up for a slice of the action…

You may remember Spanish civil servant Joaquin Garcia, who failed to turn up for work – but was still paid – for six years, and was only caught after becoming eligible for a long service award.  There was a record you thought would never be beaten. But April brought news of a – sadly unnamed – Italian hospital employee who appears to have skipped work in the southern city of Catanzaro for 15 years. He was paid €538,000 (£464,000) in the time he was not working, and is now being investigated for fraud – along with six managers.

…And that’s it for this month. Except for the news that fund manager Standard Life Aberdeen is having a re-brand. Having no doubt paid design and brand consultants plenty, they are to re-emerge as abrdn. The almost vowel-less re-brand (the A is apparently from Standard) is described to be ‘modern’ and ‘dynamic.’ 

Of course it will – and not for one minute will we be left behind. We’ll be back this time next month, with our modern and dynamic MRKT CMMNTRY.


What are Freeports?

Wednesday, April 7th, 2021

Many people will have heard Chancellor Rishi Sunak announce the creation of eight freeports in his Budget speech. The freeports – which are due to become operational later this year – will be at East Midlands Airport, Teesside, the Humber, the Solent, Plymouth, Liverpool City Region, Felixstowe and Harwich, and the Thames. 

But what is a freeport? How will the rules governing them be different? And will they really benefit the UK economy? 

Rishi Sunak mentioned freeports in his first Budget speech, so it was always likely that he would introduce them this year: he’ll be hoping they can play their part in revitalising the UK economy, regenerating areas in need of investment and, in the long run, contributing towards the bill for Covid-19. 

What are freeports? 

Freeports are usually located around ports or airports: the UK had seven between 1984 and 2012, including Southampton, Liverpool and the Port of Tilbury. Goods arriving in a freeport are not subject to the usual tariffs that are levied on imports: these only become payable if the goods leave the freeport and are moved elsewhere in the UK. If the goods are shipped back overseas, no tariffs are payable. 

Each of the new freeports can be up to 45km (27 miles) across – so they’ll cover significant geographical areas. 

How will the rules governing them be different? 

As the Chancellor set out in his Budget, the new generation of freeports will have different rules – including tax breaks and relaxed planning requirements – to make it easier and cheaper to do business. Employers will also pay reduced national insurance for new staff they take on.

In addition, companies will pay less tax on existing buildings and receive tax concessions when they buy new buildings. Clearly the Chancellor wants to do as much as possible to encourage companies to invest in the freeports. 

Will they really benefit the UK economy? 

Supporters of freeports say they help increase manufacturing and encourage jobs and investment in areas that might otherwise struggle to attract them. When the idea of freeports was first mooted, construction group Mace suggested they could create 150,000 jobs and add £9bn a year to the UK economy. This would be a key part of the Government’s proposed ‘levelling up’ agenda, helping rebalance economic growth around the country. 

Opponents of freeports are less enthusiastic. They argue that they don’t boost overall economic activity, but simply shift it from one area to another – with the taxpayer footing the bill through the tax subsidies and concessions the freeports enjoy. 

The Government, though, is committed to freeports. There are around 80 freeports in the European Union and – with the UK in theory having more flexibility now it is no longer bound by European law – the UK freeports could expect to win a lot of business. That’s certainly what the Chancellor will be hoping. 


The Net Zero Innovation Portfolio

Wednesday, April 7th, 2021

Most of the headlines in Rishi Sunak’s recent Budget were made by the tax rises, both for individuals and companies, and by the inevitable bill for the pandemic. 

There was a strong ‘green’ theme running through the Budget. This was shown through the National Infrastructure Bank being established in Leeds, and the Bank of England’s remit being revised to reflect the Government’s stated commitment to move to ‘net zero’ by 2050. In addition, the Chancellor confirmed details of a new Net Zero Innovation Portfolio. What is it? And what will it mean for the UK’s green economy? 

Let us start, though, by answering an even more basic question. What is ‘net zero?’ The term refers to the balance between the amount of greenhouse gas produced and the amount removed from the atmosphere. We reach ‘net zero’ when the amount we add does not exceed the amount taken away. 

The UK is now committed to reaching net zero by 2050 – with the ban on the sale of new petrol and diesel cars from 2030 perhaps the most high profile commitment to  this. 

The Net Zero Innovation Portfolio is another step in this direction, providing funding for low carbon technologies and systems. Alongside it, the Chancellor announced separate funding to support Scotland’s transition away from oil and gas. “If we want a better future,” said the Chancellor, “We have to do things that have never been done before.” Sustainable businesses would have a “key role” to play in his “investment-led recovery.” 

The Prime Minister had put it rather more colourfully the week before, declaring that the UK would become, “the Saudi Arabia of wind.” 

There are, of course, sceptics. Critics point to the huge amount of construction going on in developing economies such as China and India, arguing that the UK’s commitment to net zero will make little practical difference and could come at a huge cost. China, they argue, plans to build 200 airports over the next 15 years. India is investing $6.4bn (£4.6bn) in 32 mining projects as it looks to boost coal output. 

In the West, though, the drive to net zero seems unstoppable – and is a core part of the UK Government’s industrial strategy. The Net Zero Innovation Fund is another step in this direction as it looks to put the UK at the forefront of global markets for clean technology. 

We are likely to see the further development of offshore wind farms, of battery technology to store clean energy, and carbon capture, so that as much carbon as possible is captured and – according to the Government’s briefing paper – returned to under the North Sea.