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The Financial Ironmonger Blog No 3/2019

The Financial Ironmonger Blog No 3/2019

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.


Extraordinary scenes in the House of Commons this week as the government lost its Plan A Brexit vote by a margin of 230, thought to be the largest such humiliation yet. The opposition duly called a vote of no confidence, which the government then won. We are in the somewhat curious position where the Prime Minister cannot be removed by her own party, at least before December, whilst the house has failed to do so. This is almost wholly down to the fact that no one wants the job.

The failure of the Withdrawal Bill was entirely predictable, and delaying the vote by five weeks has not lead to any improvements, or concessions from the EU. Plan B will be presented on Monday, and a vote will be held on the 29th, again with much the same outcome, unless the hardline side of the Tory party think that a failure will lead to no Brexit at all, but what is on offer is so bad that they are more likely to opt for no deal.

One of three things needs to happen before the evening of March 29th. A deal needs to be agreed, unlikely, but I will come back to that. Article 50 needs to be extended, or revoked. The EU is unlikely to extend it if the extra time is to be used for further bickering, whilst revoking it would put Parliament in direct confrontation with the 17.4mn voters who opted to leave the EU.

The third option is that we leave with no agreement, and revert to World Trade terms, disruptive in the short term, but actually the basis on which the vast majority of commerce is carried out. Advocates for each of these positions are stepping up the pressure, just as the clock ticks down. The German  carmakers, after years of global domination, have seen their position completely reversed after the downturn in China, and the Trump trade wars. There is no doubt that their politicians are well aware of their concerns.

And the Irish, who have been such cocksure protagonists for the EU throughout, have suddenly come to realise that a no deal exit, (the legal position as it stands), will annihilate their economy, and have given notice that their agricultural industries would need massive support. I may have missed it, but I did not hear a supportive ping back from Brussels, who by that stage would be looking to fill a £39bn black hole in their budget. The Irish, yet again, will be hung out to dry.

There are ways forward. The central objection to Plan A was the unlimited time on the backstop agreement, since if it is limited, it cannot be a backstop. You are now entering the Catch 22 situation which has engulfed the Prime Minister for more than two years; she is essentially inside the washing machine, looking out through the window. And that is on a good day before it resumes the wash/spin cycle.

There seemed to be general agreement that removing the backstop, and tweaking Plan A to give a final date on trade deal negotiations, would command a majority. The trade across the Irish border is vital for both the Republic and NI, but it amounts to circa 1% of UK GDP, and across the whole of the EU, it barely registers, at all. So, why not make this issue, if it is one, subject to a  bilateral agreement between the two countries? The procedures, and the technology, are already in place, hence the French certitude that Calais will keep functioning.

This can be achieved, but maybe not by the tin-eared politicians that brought us to this place.

Markets, or certainly UK equity markets, have recovered some of their composure, presumably in the belief that the whole thing might not happen, at all. Whatever the outcome, senior managers will have long ago signed off their 2109 budgets against a very uncertain background, withholding all but the most essential capital expenditure, and that damage is baked in to the system already.

The consumer, so vital to the economies of the UK and America, has become far more cautious, even as their economic prospects have improved, so there is going to be no salvation from that quarter. Whether this proves to be a mild economic slowdown, or something rather more serious, remains to be seen. It is difficult enough predicting the present, let alone having any guess at the future.

Meanwhile, spare a thought for the beleaguered directors of the cake shop, Patisserie Valerie, which revealed , before Christmas, that far from having circa £30mn in the bank, it had a debt of £10mn, which most of the board seemed unaware of. A somewhat unconventional fund-raising took place to plug the gap, and in the meantime, both the CEO and the deputy chairman have found other things to do. The forensic accountants have now identified “thousands of false entries in the company’s ledgers”, indicating malfeasance on an industrial scale, When the real story finally  emerges, it is going to be a fascinating read.

Finally, on Thursday afternoon, the Duke of Edinburgh, the 97 year old husband of the Queen, was involved in a traffic accident during which his Land Rover rolled several times, but thankfully neither occupants of the two cars suffered serious injuries. By Friday lunchtime, an exact replacement vehicle, bearing his personalised number plate, had been delivered, and on Saturday, he was seen driving again. Obviously, this has produced strong opinions on both sides; after all, rich enough to have a driver, why risk others, when you might not be as sharp as you were?

Maybe, however, he is an example to our enfeebled government. Put him in charge of the negotiations, given his extraordinary resilience, and maybe, with his Greek background, he might assuage some of the terrible damage that the EU has done to that country, but also show the UK a way forward.

A 1,000 word blog, with no mention of Trump. Wonderful.


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.