01 0

Posted by  in Current Opportunities

We are in a time when we are being bombarded with information and opinion. We have endured months of campaigning where we have been fed information and misinformation. On Brexit the UK was divided nearly 50/50 but with Northern Ireland, Scotland and London all coming down on the side of Remain. The young voted to Remain and the 45 plus age group voted to Leave. The British never wanted to be part of a German-dominated European federal super state but when David Cameron lit the touch paper in February, whatever the outcome, it was never going to be easy. Nevertheless here we are today with a majority result and it is now going to be down to a new Tory leader to sort out what happens. Back in February Cameron stated “If you choose to stay in, we know what we get. If you choose to leave, I will put in place the arrangements as your Prime Minister that you asked me to do”. Why has he resigned?

So quite rightly, people whether they voted in or out, are feeling a little nervous. These are uncertain times and the sooner a clear vision is established the better. A new Prime Minister, maybe a new Labour leader and a divorce from Europe.

Nobody has all the answers but I just wanted to share some of my opinions with you and those of credible commentators as we hope that these answers become clearer over the coming weeks and months so we can all move on in a positive way.

What has changed? Well nothing for now. We are still part of the EU and the world’s fifth-largest economy. Geographically and economically we are part of Europe and our economies are linked as they have been for centuries. Despite the warnings of disaster from the Remain campaign, at first, nothing very much is going to change. David Cameron has suggested that it will be three months before we invoke Article 50 of the Lisbon Treaty, which lays down a period of up to two years of negotiations between the departing country and the EU. But there is no reason why this period should necessarily be three months. Meanwhile, Britain’s trading relationships will continue unaffected.

There is a strong argument for making it as long as possible, effectively doing pre-negotiations before the legal process starts. This would avoid the loss of bargaining power that would follow from being boxed into the Article 50 timetable, although this would prolong the uncertainty. Unfortunately the British people failed to say exactly what sort of separation they wanted, as they weren’t asked, so we shouldn’t hurry.

The most fundamental uncertainty that needs resolving over the coming months is “are we really going to leave the EU”?

Negotiations with the EU shouldn’t distract us from other issues closer to home. UK productivity has stagnated since the financial crisis. The UK’s infrastructure is restricting growth not least of which is our broadband network with less than 1% of households connected to fibre. Proper internet connection is crucial to our generation and is holding businesses back. We need to upgrade our transport and technical infrastructure, and as a Nation we need to be bold and invest in our future.

There has been a lot of talk about major businesses and banks pulling out of the UK but no one is going to make a major move until they have some certainty about what the next move is.

Roger Bootle of Capital Economics comments that “a major consequence of Brexit that could have a significant impact on the economy is what has happened to the pound. This has been widely portrayed as some sort of disaster. The truth is exactly the opposite. The lower pound will help to improve Britain’s trade balance, and that will boost our GDP, thereby encouraging investment. Given this, and given the current extremely low rate of inflation, the Bank of England should not make any attempt to protect the pound. Indeed, the greatest policy challenge it will face over the next year or two is how to keep the pound down to its new competitive level. It should be prepared to reduce interest rates and even to restart the QE programme, if necessary”. Governor of the Bank of England Mark Carney signalled today that he was prepared to start another QE program over the summer which of course he can as we are not in the Euro.

George Osborne, assuming he stays in the job, should not embark on a renewed bout of fiscal tightening. If the economy performs just as well as before, or even better, helped by the low pound, then there is no reason for the public finances to deteriorate. But if the economy does slow markedly and the government deficit widens, the Chancellor should simply accept this.

How policy evolves will surely depend on who becomes the next Prime Minister, and on the shape of their government. This will affect both the sort of settlement that Britain tries to reach with the EU and the thrust of UK domestic economic policy.

The Germans have been boasting about their booming trade with China. Last year, German exports to the UK were 25 percent higher than its sales to China. One big difference between the two is the fact that the Germans made a huge surplus with the UK, but their China trade recorded a €20bn deficit – a fourfold increase from the deficit in 2014. No wonder then that Chancellor Merkel wants to keep a relationship with the UK. At the same time she is telling her fellow Countrymen that she would negotiate the UK’s exit from the EU with great attention to German interests.

During my 30 year career in the City I have lived through Black Monday, Black Wednesday, the financial crisis and now through this. I have also lived through the dot com boom of the late 90’s and one thing that I have learned is that great investment opportunities emerge for anyone brave and smart enough to take them. As Warren Buffett says, the essence of good investing is to be greedy when others are fearful and fearful when others are greedy.

We will continue to promote SEIS and EIS helping UK businesses with great potential get off the ground. We are the only country in the World where the Government shoulder over 70% of your risk on investment into these types of companies and where the companies invested into are paying a corporation tax rate of just 20%.

Now is surely the best time to be building a Great Britain.