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Saturday 17th October 2020
Hi Friend,
Brexit Break ...
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| Aussie Rules Not O.K. ...
Ten weeks to go to the end of the transition period, the Prime Minister has realized a Canada style deal with the EU, is not on offer. "A relationship based on friendship and free trade will not be available from our partners of forty five years." said the PM.
"The EU has refused to negotiate seriously for much of the last few months" said Johnson, (and simply agree with the UK government he could have added). Michel Barnier has been told not to take the train to London next week. Mind the gap! A level fishing ground, remains the catch.
Boris Johnson has reached the conclusion, it is time to prepare for a deal more like Australia. No car exports, no involvement in Airbus and no syndication for big pharma, presumably.
The deal would be based on the simple principles of global free trade. That's a no deal in any other language. The comparison with Australia is of little comfort. Exports from Australia to the EU were worth some £25 billion in 2019. Compare that to £172 billion of UK exports to the EU in the same year and it's small change.
"With high hearts and complete confidence, we will prepare for a future, in which we will prosper mightily, as an independent, free trading nation, controlling our own borders, fishing our own fisheries and setting our own laws."
So what of the city of London? According to Phil Aldrick in the Times today, the financial services sector has been betrayed by a government which no longer cares. "There is nothing in the negotiations, for a sector which accounts for almost 7% of GDP, employs one million people and pays £75 billion per year in taxes. Fishing in comparison, accounts for 0.1% of GDP, employs 24,000 people and is reliant on state aid.
Johnson promised in December last year, he could "absolutely guarantee we will get a deal, not just any deal but a great deal". He had a deal which was oven ready. Now time is running out. Whatever happens in the remaining weeks, there will be, no deal for financial services. The bankers are preparing to relocate to Europe.
For parts of the manufacturing sector, relocation may also become an option. Despite the reassuring words of the Prime Minister, Aussie rules are not O.K. ...
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| IMF World Economic Outlook ...
The IMF released the latest World Economic Outlook this week. Gita Gopinath, Chief Economist was on hand to deliver the news.
The global economy is expected to contract by -4.4% this year with a recovery of over 5% anticipated in 2021. This is slightly better than the outlook in June, which predicted a setback of -4.9% this year and a recovery of +5.4% in 2021.
China is now expected to grow by almost 2% in the current year. Growth of just 1% was expected in June. The setback in the USA has been mitigated with the loss of output of -8% forecast in June, now expected to be just over -4% in October. US Government borrowing of $3 trillion dollars in the financial year just ended will have assisted the process.
The setback in the EU will be around -8%, the loss of output in the UK around -9.8%. Concerns for the Indian subcontinent have increased as the total Covid cases increased to 7.5 million. Output is now expected to fall by 10% in the year.
The IMF warns, although the global economy is "coming back", the recovery will be long, uneven and uncertain. Economies will face difficult paths to pre-pandemic levels of activity. Preventing further setbacks, will require that policy support is not withdrawn prematurely. "It is important for governments to continue to support viable firms, as millions of jobs are at risk."
It is a message all to pertinent for the Chancellor Rishi Sunak. The latest data for the UK suggests the unemployment rate increased to 4.5% in August with 1.5 million out of work. The increase in the claimant count to 2.7 million in September, suggests much worse is yet to come. The furlough scheme ends this month, with the UK economy in tiers ...
That's all for this week! Have a great, safe, week-end ... Hands, Face and Space ...
John |
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