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The Financial Ironmonger Blog No 13/2017

The Financial Ironmonger Blog No 13/2017

Every week our guest blogger, David Oakes of Mosaic Money Management (aka The Financial Ironmonger), shares with us his take on some of the major UK and overseas macro and political events that shaped the previous week.

Please be reminded the value of investments, and the income from them, may fall or rise. The views expressed in this article are those of the author at the date of publication and not necessarily those of Chelverton Asset Management Limited or Mosaic Money Management. The contents of this article are not intended as investment or tax advice and will not be updated after publication unless otherwise stated.


Wednesday was Wednesday, as the Prime Minister might have said, and thus was the Brexit process finally triggered, still to the disbelief of many. The letter itself had been taken by Eurostar on Tuesday evening, reflecting one of the many changes during the 44 years of membership; there was no channel tunnel when we signed up.

The letter did not say very much of substance, but it could have done without a reference to our security assets, and the not very subtle implication that these were a central part of the negotiations. Our other trump card is exactly that, ironic that Nigel Farage, former head of UKIP, has been at the forefront of building the relationship with America.

Some two hours before the letter was handed over, the EU Parliament response to it was leaked to the Guardian, so maybe that is going to be the new “back channel”, (ghastly phrase), to get to the public over the heads of the politicians. Some things are already clear. The bill for leaving is going to have to be sorted before negotiations can begin, which might be in the region of £25bn. This is to pay for commitments that we have already entered in to, and seems fair enough.

It would be contrary to EU law for the United Kingdom to begin, in advance of its withdrawal, negotiations on possible trade agreements with third countries, the document states. Obviously, were we to do so, it would impinge on our ability to reach a trade deal with the EU. This point is disputed; the EU cannot, legally, stop the UK having agreements ready to sign on the day we exit, in two years’ time.

Furthermore, bilateral deals with individual members of the EU 27 are banned, as is any trade off of access to the Single Market for financial service companies in exchange for allowing EU citizens, already in the UK, to stay. Given the uncertainty over passporting access, banks and insurance companies are moving to establish legal entities within the EU, allowing them to by-pass any restriction placed on UK domiciled companies.

All the companies who have gone public on their plans have stated that they wish to retain London as their core operation centre, so job losses are likely to be relatively few. And, within a short space of time, the UK will be free to decide for itself the regulations for this global financial hub, which can only increase its attraction.

Finally, the document states that any agreement reached cannot leave the UK in a better position than it presently enjoys, and that there is a three year time limit on transitional arrangements, although it is not clear whether we have two years, plus another three, or two years, plus twelve months.

Whilst the UK wants to run parallel talks on the exit process and the new trade deal, the EU stance is that these must be sequential, but I wonder how long the EU 27 will be able to hold to that line, given that no deal would be very detrimental for both entities. It should be clear, by the summer, if there is a serious desire to reach agreement, and if not, then all the threats outlined above become meaningless, and the UK should strike out on its own. The resultant massive hole in the EU budget is for them to solve.

So far, financial markets seem to have taken these events in their stride, but they will enter more choppy waters as events unfold, and there are plenty of those coming up, next being the French elections in April, and May. This is the key political event within Europe this year, and were Marine Le Pen to win, it would be the most dramatic twist since the EU was established. Her gap in the polls, should she run against Macron looks unbridgeable, less so if it is Fillon. Certainly, her failure to win would give a massive boost to European stock markets, where tentative signs of economic growth are starting to show through.

It was inevitable that this blog edition would concentrate on Brexit, but everything needs perspective. Having settled down to watch Andrew Neil interview the Prime Minister on Wednesday evening, and failing to land even a soft blow, followed by Corbyn, who was just there to fill the air time, I went off for a shower before supper. On my return, MasterChef was playing, and it occurred to me that far more people would be watching that than the previous programme.

One little recognised benefit of Brexit is that it will see the return of duty free shopping, abolished nearly twenty years ago, proving that every cloud has a silver lining.


David joined Manchester stockbroker Henry Cooke, Lumsden in 1977 and after becoming a member of the London Stock Exchange in 1984 held a number of senior positions within the firm including Managing Director of the in-house fund management company and member of the Executive Committee.

After senior appointments at Cazenove Fund Management and latterly Mercater Capital Management, David joined Mosaic Money Management in 2013. He has successfully managed private client and fund portfolios for over thirty years and has particular expertise in providing a multi manager service to his loyal client base.

The Financial Ironmonger is a hat-tip to Ironmonger Lane, the location of Chelverton’s London office.