Economy watch

The value and growth potential of the British economy is the single most important common factor in determining the quality of our collective lives and the prospects for our children.
Right now we are rapidly approaching a watershed that will determine which way it will go. On a day-to-day basis, it's up and down like a bride's nightie and the effect of these moves tends to take months to have an impact. For example if we buy crude oil to refine (we have to pay in US dollars) and the pound crashes, the stocks we have will last a while before they start to pass on the price increases to consumers - but it will happen sooner or later.
We have one group of people who believe that unrest in the markets is only a temporary state of affairs and that we'll be able to negotiate trade deals similar to the ones we had prior to the referendum. 
So when will this happen? (I am assuming that the bull about not negotiating until we press the button is nonsense as we have very close relations with our partners))
Will we ever get back to having a stronger economy than France as we used to have a couple of months ago?
Thought a thread monitoring the economy might throw some light on what our future holds and where Britain's place in the world will be once the dust settles:

Today is not a good day for the economy as we have the first post-referendum data available and it shows that the economy has slumped in July with manufacturing, construction and the service sector showing significant reductions in both output and orders during the month.
This in turn caused a fall in confidence in the pound which slid further today. 
On the positive side, there is a slight increase in export demand due to the weak pound so it looks like the volume may return even if the profits don't. FTSE has also put on a brave face and is trying to rally but is holding at best.
The situation isn't being helped by European media now starting to be more bullish about the situation with e.g. Italian papers saying "Brexit will hurt them more than it hurts us".
We'll see.

I shall watch with interest Wander. Such is the speed of change nowadays, that I believe the figures in the report have already changed for the better, (slightly), so were certainly not as bad as we were expected to be by some. Even mark Carney is slightly more optimistic.

gloswhite wrote:I shall watch with interest Wander. Such is the speed of change nowadays, that I believe the figures in the report have already changed for the better, (slightly), so were certainly not as bad as we were expected to be by some. Even mark Carney is slightly more optimistic.

Have to say that Mark Carney has done an amazing job trying to keep the markets calm from the very beginning. It's amazing to think an Irish Canadian is Governor of the Bank of England and fortunately for us, Chairman of the G20 financial stability committee which seems to have come in very handy in the media battle to keep Britain afloat. 

The latest is that our new Brexiteer Chancellor - Phillip Hammond - has pissed all over the referendum promises already.
First he said that getting out of Europe won't happen until 2022.
Then he said that the negative effect of the referendum on the economy has been greater than expected. (You should have listened to the experts you dumb f***!)
Now he's saying that the economy will have to be "reset" (i.e. downgraded) in the Autumn Statement so he'll abandon the proposed budget surplus (which I assume Osborne would have used to reduce borrowing/national debt) and effectively go for a policy of borrowing even more to prevent British people feeling the pain of what they've done - although I'm not sure that passing the cost of our mistakes on to future generations is any kind of solution. Having done it for the last few years, Osborne had realised he'd have to start paying back some of the money he's borrowed so that repayments don't bankrupt Britain, but Hammond wants his day in the sun too so we can all go to hell in a handcart and pay for it another day.
Although I'm really struggling to work out what we've got left to use as collateral since we closed down our manufacturing and sold off our natural resources. Military threat I suppose since we lost our top credit rating the other week.

If I understand this correctly, Hammond will effectively manage the country a bit like a low income family that buys matching Mercedes, a jacuzzi and all the latest technology, fashion and consumer goods on credit. They know they've got to start paying the bill back at some time or other but don't want to face a period of austerity to save the money to do it, so they borrow more to pay the interest. The amount owed piles up, so the interest payments rise and eventually they are forced to spend every penny they make on interest repayments without the actual debt reducing.

But today we won't worry about it because we can still borrow more to make the problems go away - for now. And Hammond will be spending borrowed money like crazy in Autumn to give the false impression that it's all OK.
Hammond at the G20 this weekend so presume he'll be outlining his borrowing plans.

FTSE closed 0.3% down again today.
Meanwhile Hammond is trying to negotiate a trade deal with the Chinese - we'll soon know how that's gone as there will be an announcement in the next few days if it's a good outcome and silence if it's not.

Couple of good articles in the New Statesman this week

The English Revolt and The New Brexit Economics.

I have some concerns with the selling of ARM. Seems a bit like a sell now, worry later policy.

gloswhite wrote:I have some concerns with the selling of ARM. Seems a bit like a sell now, worry later policy.

Are you referring to the semiconductor company in Cambridge Glos? They're quoted, although their share price has gone through the floor since the referendum. Haven't heard any news about a sell off though. If true it's more a case of sell now and blow our chances of ever leading the world in semiconductor technology.

I have heard that our new Minister for Trade (Fox) has been cold-shouldered on his first visit to the USA so it looks like he's going to get a very rough ride trying to negotiate trade deals for us. As Obama said before the referendum, we'd be sent to the back of the queue if we voted Leave and it looks like that's exactly what's happening.

The decision to keep the BT monopoly of broadband infrastructure has actually halted the market slide for now - despite the fears surrounding the UK having all our eggs in one basket. I think this is because the market found that preferable to more months of indecision.

It was also announced that business loans have plummeted since the referendum so it looks as if "entrepreneurial Britain" is treading water to see where we end up.

What stood out for me though is Natwest and RBS now proposing negative interest on accounts i.e. they will charge you just to look after your money! Out effing rageous. 
I struggle to understand why everyone doesn't use the Santander 123 account for their current account though. I mean it's free money and if you keep it topped up to £20 grand you can get £600 per annum free of charge just for banking with them. We all need a current account so we might as well earn interest on it and whilst 3% isn't great, it's better than a poke in the eye with a hot stick. Not sure how long they'll keep that offer up though - they've already clamped down on multiple acounts - so dive in if you're not already doing it. Obviously you're looking at a unit trust geared to buying ISA's for larger tax-efficient investments or some other fund but it's difficult to work out where you can find low risk investments with a return greater than the rise in the cost of living now. Even pension schemes are shrinking.
What is certain is that you shouldn't leave savings in the bank - especially if you bank with those robbing bastards at Natwest or RBS.

What you fight you become.

The selling of ARM is short-sighted, but that is not the first time we have sold off assets like this, even when we were fully committed members of the EU, unfortunately it seems to be a peculiarly British thing to do. The Japanese took advantage of Stirling's weakness against the Yen but it would have been sold in any event they just got a discount.

FTSE finished up today .21%
£ up against the $ and the Euro, though only slightly.

☺

Watching the day to day fluctuations of the markets doesn't give any real indication of trends, the true picture of Brexit will only be visible if and when Article 50 is triggered and I am less than convinced that it will, going to be an interesting few months.

NickFazer wrote:The selling of ARM is short-sighted, but that is not the first time we have sold off assets like this, even when we were fully committed members of the EU, unfortunately it seems to be a peculiarly British thing to do. The Japanese took advantage of Stirling's weakness against the Yen but it would have been sold in any event they just got a discount.

FTSE finished up today .21%
£ up against the $ and the Euro, though only slightly.

☺

Watching the day to day fluctuations of the markets doesn't give any real indication of trends, the true picture of Brexit will only be visible if and when Article 50 is triggered and I am less than convinced that it will, going to be an interesting few months.

FTSE is on it's arse though and today's twitch was the BT monopoly coming through when the market thought they would be forced to give other providers access (which would be good news for consumers) but the regulators bottled it. The trend is obvious though.

It's true we have a very worrying track record of selling off our assets. Thatcher sold off our oil and gas - the resources in our waters and the stuff on mainland Britain so we don't even own the oil and gas under our feet - which really pissed me off. Brits can drill it out but the profits go to America. (Thanks Maggie and your special relationship with George!) Then we closed all the industries we had built Britain on like coal, steel, shipbuilding, mineral mining, heavy industries etc because they weren't as profitable as banking and international finance. Now we've pissed off all the finance people so our money maker is moving from London to Germany.
What worries me is what the hell have we got left to sell? Or more accurately, borrow against? We don't even own half of London these days. And what have we got to pay the loans back with other than a big army that says "you're never going to get the money back suckers". Which means we can no longer afford to piss off the big dogs like the US of A if they go against our interests.

ARM is significant inasmuch we always thought Britain would be OK as we'd always have an edge in technology via the Cambridge group and now even that is being flogged off to support another failing Government. 

Maybe our best hope is that the foreigners who own Britain won't piss on their own investments?

Boom time for the UK.

okocha wrote:GlaxoSmithKline is to invest £275m to expand its UK manufacturing sites, saying the country remains "an attractive location" despite Brexit.

Couple of points:

GSK are a British company and £275m is small change for them.

(Compared to the $3.1 billion they were forced to stump up in unpaid taxes to the IRS in the States not that long ago.)

If this were some foreign company investing a serious amount, it'd be something to crow about but it's not.

It's just more pro-Brexit spin which proves nothing.

But the GSK investment will provide thousands more jobs and sends a positive message to the rest of the world.

And the better than forecast ONS growth figures: are they just spin too?

Breadman wrote:Couple of points:

GSK are a British company and £275m is small change for them.

(Compared to the $3.1 billion they were forced to stump up in unpaid taxes to the IRS in the States not that long ago.)

If this were some foreign company investing a serious amount, it'd be something to crow about but it's not.

It's just more pro-Brexit spin which proves nothing.

Now we know the boat story I can't take anything you say seriously as it's massively biased towards sailors.

The boat story

Fabulous news for the economy ahead of the referendum. Proves we were kicking ass whilst we were committed to staying in Europe and the big question is whether we have blown this momentum or the referendum hasn't made any difference. Economy grew by 0.6% which is 0.1% better than the Bank of England forecast for that period.
Next quarters' figures will probably come out at the beginning of October and that will measure the economy since the referendum so it's going to be fascinating to see what effect the referendum has had.

Great news about GSK not scrapping their expansion plans as well. With the pound dropping 10% against both the euro and dollar they are obviously enticed by the prospect of cheap labour although only 6000 of the 16000 existing UK employees are actually in the manufacturing side of the business. I suppose a 10% cut in labour costs makes it less attractive to move the business abroad so that's good news and hopefully other foreign investors will take the same view and keep their businesses here.

okocha wrote:

And the better than forecast ONS growth figures: are they just spin too?

The ONS growth statistics were for the period leading up to Brexit, so don't show anything in the way of the economies reaction.