“Until then men felt they had found the answer to a steady, orderly, civilized life. For 100 years the Western world had been at peace. For 100 years technology had steadily improved. For 100 years the benefits of peace and industry seemed to be filtering satisfactorily through society. Life was all right. The Titanic woke them up.”
We seem engaged in an all-out civil war to determine where to put the deckchairs on this Titanic of a country. Credibility is shot. The UK is holed below the waterline. This ship is sinking. All is lost… all is lost…
It’s difficult to resist a cataclysm of clichés this morning… But, I’m buying dollars and switching out Gilts for Treasuries.
The reality is the UK faces its greatest ever economic crisis. Q2 GDP is going to fall by 25% plus. There will be no V-shape recovery. We are going to fail badly. The Treasury is wrestling with the implications of Project Birch – the plans to bail-out the failing large UK companies critical to the economy. Company balance sheets across the country are being distorted by increasing debt – the only way to pay down will be to cut costs. Retail sales are collapsing. Gilts are at negative yields. Government borrowing in April exceeded £62 billion as expenditure rose 54% (compared to April 2019), while tax revenues tumbled 35%. Unemployment is going to explode. Companies across the nation are going bust at a record rate. Social deprivation is going to go through the roof.
At the same time, we’re fighting to put together a new future for the UK outside the Eurozone, trying to agree the terms of trade deal with our former EU partners by the end of June, and struggling to avoid the breakup of the United Kingdom as nationalist pressures mount.
Last week, the UK was already a screaming sell, but you kind of believed there was hope, and on a relative basis to Europe, it wasn’t so bad.
Never underestimate our ability to make a bad situation worse. Our nation of lemmings found the proverbial cliff and plunged over it.
Whatever the rights and wrongs, the Dominic Cummings farrago feels like it just popped a massive bubble. The outlook is bleaker than ever. So much for wartime spirit and consensus. (My yacht is fuelled up, provisioned, ready to go, and I’m brushing up my schoolboy Spanish… just in case.)
The fervid media hysteria over the bank holiday demonstrated just how badly the UK has lost the plot. Rather than facing up to the acute economic danger, addressing the critical issue of getting the country working again, demonstrating firm leadership and consensus and a plan to recovery… what we got were raging emotional responses from top to bottom of the country.
Emotional responses to looming and very real economic catastrophe are not a good thing.
The results will be to deepen the coming recession, increase the likelihood the UK fractures into a hopeless sub-set of smaller irrelevant countries off the unfashionable edge of an economically depressed Europe. The opportunity for the UK to make something out of our new found Brexit independence will be lost. We just lost the initiative in the EU Trade deal. If anyone seriously suggests we should now rejoin the EU – I shall deck them.
In short… we are… well it rhymes with “rubber ducked” .
It was an extraordinary weekend. But it wasn’t actually about Dominic Cummings – although all the pundits will tell you it was. It was the opportunity for an angry, sidelined establishment to attack an unbalanced, flailing government. Points scoring as our economy crumbles. None of them could resist, and how the dogs turned. The visceral hatred in the mouths of some journalists for Cummings, the sanctimonious opposition politicians calling for Boris’s head, and the general tone of righteous indignation was staggering.
They were just doing their jobs… Problem is… if the aim was to destabilise the country and ensure the coming crisis is deeper and more tragic, then it pretty much worked.
Rather than addressing crisis, we are facing another leadership meltdown – AGAIN! It’s put the UK right back where we were at the depth of the Brexit crisis.
Can Boris win the country back? His best hope is people are so bored, and turned off by Laura Doomsburg and the rest, they quickly forget. The last thing we need is desperately unpopular government at odds with the electorate running around in ever decreasing circles… (or at least that’s how the establishment will paint it).
Why didn’t Boris just do the smart thing and put Cummings up against a wall immediately? I suspect because Government has known about it for weeks and we’re trying to keep it quiet – in the hope it could blow over.
The first challenge for Boris will be to undo the immediate Cummings damage. Dom has become a massive short-term liability, but is part of the long-term solution. Cummings is almost unique in the corridors of power – he gets things done. He knows how to pull the levers. He knows the UK’s Civil Service bureaucracies don’t work and are likely to hamper evolutionary recovery. Some call him a disruptor – and when it comes to bureaucracy, that’s a good thing. When it comes to his ability to really really upset people – he’s at the top of the league.
On the other hand, if Cummings is so clever, why has the Government failed to present a discernible and coherent smart plan to put the UK back on its feet? Communications have not been good. Chancellor Rishi Sunak is apparently the most popular UK politician, and 3 months ago no one had heard of him.
Here in the UK, the virus has become an emotional issue. The population are divided, and I fear we’re heading towards the kind of civil war division we saw during the three years of Brexit. They are divided between those who fear the virus will kill us all today, and those who reckon it won’t be the virus, but economic collapse that kills us all tomorrow.
We need strong and clear communication to the population. You are not going to catch COVID if someone walks past you at less than two metres. You are not going to die because of a bunch of kids are sitting in the park. Sending kids back to school is not the equivalent of Herod’s Massacre of the Innocents.
The rest of global markets don’t make much more sense than the UK. They are rallying because lockdown is ending, but also on yet more hopes for vaccines and drugs. Rising stocks are apparently pricing in recovery rather than recession.
But, if you want a really clear example of how this plays out, look at Hertz.
Bill Blain is a well-known City of London commentator, and has 35 years’ market experience as an investment banker. He currently is Strategist at Shard Capital, a London-based boutique.