I wonder if Boris Johnson and our beloved Nigel Farage listen to Fool’s Garden Lemon Tree song every morning. I feel the song was written for them by the Prime Minister Theresa May (take few minutes to read the lyrics and imagining Theresa 10 Downing Street with her ink and paper):
I’m sitting here in a boring room, it’s just another rainy
Sunday afternoon. I’m wasting my time, I got nothing to do.
I’m hanging around, I’m waiting for you,
But nothing ever happens – and I wonder.
I’m driving around in my car, I’m driving too fast, I’m
Driving too far. I’d like to change my point of view.
I feel so lonely, I’m waiting for you,
But nothing ever happens – and I wonder.
I wonder how, I wonder why yesterday you told me
‘Bout the blue blue sky and all that I can see is just
A yellow lemon tree. I’m turning my head up and down
I’m turning, turning, turning, turning, turning around.
And all that I can see is just another lemon tree.
Sing: dah…
I’m sitting here, I miss the power, I’d like to go out,
Taking a shower, but there’s a heavy cloud inside my head.
I feel so tired, put myself into bed, where nothing ever
Happens – and I wonder.
Isolation – is not the good for me.
Isolation – I don’t want to sit on a lemon tree.
I’m steppin’ around in a desert of joy. Baby anyhow I’ll get
Another toy and everything will happen – and you’ll wonder.
I wonder how, I wonder why yesterday you told me
‘Bout the blue blue sky and all that I can see is just
Another lemon tree. I’m turning my head up and down
I’m turning, turning, turning, turning, turning around
And all that I can see is just a yellow lemon tree.
And I wonder, wonder
I wonder how, I wonder why yesterday you told me
‘Bout the blue blue sky and all that I can see
And all that I can see
And all that I can see is just a yellow lemon tree.
Funny isn’t it? So what has happened a year on after Brexit was declared through a referendum? I wondered as when I returned from mainland Europe, a border officer asked me if I lived here, to which I confirmed and told him for at least another year. He laughed and we got talking about Brexit (to be fair it was close to midnight and not many customers). He was adamant Brexit would happen and it would be good for the UK. Of course, I had to argue the other way (not that Brexit won’t happen but that the UK will feel the positive impact). We did agree on one thing. He is not going to be made redundant anytime soon (Lots of Migrants in Calais waiting for that day).
- Theresa May failed election shows poor leadership going into the most important negotiation of the UK History
- Living standards hugely under pressure
- Pound falling sharpely
- EU skilled labour exiting
- House prices growth have halved
Failed gerneral election
The general election result has plunged Britain into political chaos just 10 days before the government was due to begin the all-important Brexit negotiations. Mrs May teamed up with Northern Ireland’s Democratic Unionist Party (DUP), which narrowly gave her the numbers she needs to pass legislation in the Commons, but it’s clear a significant period of political instability lies ahead. The split within the Conservative camp is greater than an Oak Tree.
It is hilarious to see Boris Johnson laying down his vision ahead of his boss. The power struggle going on currently is mismerising. This weekend plenty of dismayed Tory MPs – even some who share Johnson’s views on Brexit – are calling on May to dismiss him, while recognising that she is probably too weak to do so. One former minister said: “It is completely disgraceful. You do not write an article like that without consulting the prime minister and your cabinet colleagues. It is a complete abdication of cabinet responsibility. This is all about Mr Johnson, Mr Johnson, Mr Johnson, not about the interests of government or the country.” Another said that Tory MPs would be writing to the whips demanding that he be sacked as foreign secretary because he was a law unto himself and a liability: “He is deliberately tempting May to sack him but the awful thing is that she is too pathetically weak to do so. So we have a cabinet openly at war on the most important issue of the day and that is what we have to live with.” Scottish Tory leader Ruth Davidson, a long-standing critic of Johnson, tweeted her disapproval pointing out that priorities should have been elsewhere the day after a terror attack in London
Leave Barometer: Negative
Living standards under huge pressure
Living standards still face squeeze as earnings have failed to keep pace with rising inflation.
The good news. The ONS said unemployment in the quarter ending in June was down 57,000 on the previous three months at 1,484,000. The jobless rate fell to a 42-year low of 4.4%. Employment was up by 125,000 at 32.1 million in the three months to June, the highest rate (75.1%) since modern records began in 1971.
The bad news. But despite the additional jobs and the acceleration in earnings growth, living standards remain under pressure because pay has failed to keep pace with inflation, which stood at 2.6% in June. Basically, if you received a pay increase lately, the reality is that you are saving less than a year ago (look at that difference in the graph below)
Leave Barometer: Negative
Currency dropping sharply
Winners from weak Pound
- UK exporters who will be more competitive.
- Foreign tourists coming to UK (a little ironic given context of Brexit vote!)
- Foreign investors who find British assets/housing cheaper.
- UK firms who earn profits abroad. (e.g. firms who have investments in the US)
Losers from weak Pound
- Foreign firms exporting to UK (e.g. Irish farmers hit by fall in Sterling)
- British holidaymakers going abroad will find US and EU more expensive
- Foreign workers in the UK. Working in the UK is relatively less attractive (could reduce incentive for net migration to the UK)
So has the UK benefitted from a weak pound?
Britain’s trade position with the rest of the world worsened in June as the sharp fall in the value of the pound since the Brexit vote failed to lift sales of UK-made goods abroad.
The trade in goods deficit widened unexpectedly to £12.7bn, from £11.3bn in May, as exports fell by 2.8% but imports rose by 1.6% according to the Office for National Statistics. It was the biggest deficit in nine months and much wider than economists’ forecasts of £11bn.
The figures are the latest sign that a weak pound is failing to boost exports, despite making British goods cheaper abroad. The pound is 13% lower against the dollar than it was on the day of the EU referendum, at $1.2988. It is down 15% against the euro, at €1.1052.
Weaker exports in June were driven by a 7.9% fall to countries outside the EU, while goods exported to EU member states rose by 2.7%.
“The UK is becoming more and not less dependent on the European Union, whatever the result of the referendum last year,” said Edward Hardy, an economist at World First. “The numbers are a firm signal that the continent is still the place to be for selling overseas and making the most of the weaker pound.”
Leave Barometer: Negative
EU skilled labour exiting
More Europeans, especially from the East, have left the uk +36% vs. LY. EU migrants are leaving Britain because of uncertainty over Brexit, slower economic growth and higher prices. The slump in the value of the pound — down 14% since the referendum — and stagnating real wages have made salaries earned in the U.K. worth less when transferred abroad.
There has also been an increase in the number of racist attacks on immigrants in the aftermath of the referendum.
“The slowdown reflects uncertainty about both the current and future position of migrants,” said Douglas McWilliams, president of the Centre for Economics and Business Research
The U.K. government has pledged to bring net migration down to “tens of thousands” of people in the wake of Brexit. Net migration — the number of people coming to the U.K. less the number of those who’ve left — has slumped by roughly 25% to 248,000 in 2016. But businesses and experts have warned that the U.K. economy depends on the steady stream of immigrants and will be hurt if they stop coming. U.K. unemployment is at its lowest level in more than 40 years, and many sectors including hospitality, healthcare, tech and construction, are struggling to find staff.
Leave campaigners will have to be thrilled with this. Afterall this is what they wanted. I can’t help to wonder who is going to fill the gaps.
Leave Barometer: Positive
House prices growth have halved
The lender’s latest house price index showed that property prices were 3.8pc higher in March than in the same month last year, the smallest annual increase since May 2013. This was down from an annual growth of 5.1pc in February and far below the peak of 10pc reached in March 2016. Oh no, homeowners are now poorer than they were pre-Brexit vote!
Two options on the table to keep prices up, stop building new homes to tighten the demand, but then unemployment will go up.
Leave Barometer: Negative
Conclusion
So, not all indicators are as bad as I thought a year ago (predicted all of them apart from unemployment rate), but it takes no genius to take a step back and see that the Brexit decision has put the UK in a worse of situation. And the reality is that it won’t improve any time soon. In fact it will get worse. My father once told me that only imbeciles do not change opinion. Too many imbeciles still left to face the facts.
The UK political landscape is a joke and I hope that Jean-Claude Juncker squeezes those conservative clowns as much as possible. Would I want a hard brexit? No. But would I care if it did, no. Why? Mainland Europe will welcome me and my fellow Europeans (incl. my investments) with open arms. So who is to lose out in the whole brexit situation? 49% of those that voted to remain and 51% of those that voted to leave.
Benoit Mercier
Benoit Mercier 