June was a fairly quiet month, wasn't it?.
Well.......apart from the chaotic General Election in the UK. Oh – and the decisive win for Emmanuel Macron in the French parliamentary elections. And the start of the Brexit negotiations. And Italy was forced to bail out two more banks. President Trump pulled out of the Paris climate change agreement – and in Brazil, President Michel Temer was accused of corruption – the first sitting President in Latin America’s largest country to face criminal charges. Anything else? Just another global ransomware attack…
In fact, the only things that were quiet in June were the world’s leading stock markets. Of the 11 major markets we cover in this Bulletin, four were up, five were down and two were unchanged – but none of them by very much. If you wanted real excitement in June then you had to head to Greece, where the Athens Composite General, buoyed by EU ministers approving the latest Greek funding deal, was up by 6%.
In the UK, matters were even more chaotic than the Greek economy: the UK General Election of 8th June. It was all meant to be so simple wasn’t it? Encouraged by a huge lead in the polls, record personal approval ratings and an opposition that appeared to be a shambles, Theresa May called the election as she sought her own mandate. Well, not so much an election, more of a coronation. But writing in the Telegraph in May, Nigel Farage sounded a warning note. “The more people see of Theresa May the less they like her,” he said. And so it proved. The Conservatives remain the largest party in the UK parliament, but have had to strike a deal with Northern Ireland’s Democratic Unionist Party. Meanwhile, the Prime Minister’s popularity continues to slump…
Away from the peace and quiet of politics, what of the UK economy? Figures for the first quarter of 2017, released by the Office for National Statistics, confirmed that UK growth was just 0.2% for the January to March period, putting the country next to Italy as the slowest-growing in the league table of the world’s advanced economies. The ONS also confirmed that inflation for May had risen to 2.9% and – with a figure in excess of 3% forecast for later in the year – most people are now suffering a fall in real wages. Not surprisingly, the ONS also confirmed that the UK savings ratio – the proportion of disposable income which households save – was at a record low, falling to 1.7% in Q1, down from 3.3% in the previous quarter.
So the UK glass is very much half-empty. Or is it? A recent CBI survey showed manufacturers’ order books at a 29 year high, with food, drink, tobacco and chemicals leading the way. The same survey showed export orders at a 22 year high: CBI Chief Economist Rain Newton-Smith said, “Britain’s manufacturers are continuing to see demand for ‘Made in Britain’ goods rising. Total and export order books are at highs not seen for decades, and output growth remains robust.”
This was reinforced when the World Bank upgraded their forecasts for UK growth over the next three years, increasing their estimate for 2017 to 1.7% from the 1.2% they had forecast in January. Growth expectations for 2018 and 2019 are 1.3% and 1.5% respectively.
Meanwhile, Rolls Royce has protected 7,000 engineering jobs in the East Midlands after announcing its biggest investment in the UK for more than a decade. It will be investing £150m in Derby, creating up to 200 extra jobs and safeguarding the other jobs for five years. Simon Hemmings, from the Unite union, said it was “a once in a generation investment and a big commitment to the UK.”
The FT-SE 100 index of leading shares closed the month down 3% at 7,313 as the pound rallied against the dollar, rising to $1.3026. The UK stock market is now up by 2.38% for the year as a whole: not a bad performance given the uncertainty surrounding the political situation and Brexit.
The Brexit negotiations formally began on 19th June, 11 days after the General Election. So far – to use Macbeth’s phrase – we have seen plenty of ‘sound and fury’ but little of substance. However, several trade bodies have made their views known: the Engineering Employers Federation, for example, has called for a ‘softer’ Brexit, with access to the single market at the heart of the Brexit negotiations.
Equally, there have been plenty of dark mutterings in the corridors of Westminster: as Theresa May twists in the wind, Chancellor Philip Hammond is supposedly becoming an increasingly pivotal figure – and he is said to prioritise jobs and the economy over control of immigration.
However, it may well be that the real discussions don’t begin until after the summer holidays and the German elections in September. By that time the position of Theresa May should also be much clearer: if she survives the summer, she is likely to survive until the Conservative Party Conference in early October.
20 July 2017
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