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The Financial Ironmonger Blog No 4/2019

The Financial Ironmonger Blog No 4/2019

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.


Patisserie Holdings, which own the cake shops of the same name, duly fell in to administration on Tuesday, presumably because the rescue team were unable to find what the base case for the business was. I doubt the banks were too sympathetic having discovered that their overdrafts were both unauthorised and unsecured.

Clearly, they had been able to establish which outlets were unprofitable, since 71 of them closed overnight, leaving a chain of 122, but they kept all 20 sandwich shops, presumably the most profitable part. The next few days will see if it gets broken up with former owners apparently keen to get their old businesses back.

The market cap of £450mn, as recently as October, is now for the birds. There might be a glimmer of hope for the debt holders; the financial statements showed profits of £73.5mn over the last five years, on which corporation tax of £16mn was paid. PwC, who are conducting an investigation, reckon that the losses over that period may be as much as £60mn, and are therefore seeking a rebate of the taxes paid. This would be the “supreme irony”, as one familiar with the situation said, since it was an unpaid tax demand that brought the whole thing to a head.

Quite how such a vast fraud could have been concealed over multiple years is astonishing, and will have huge repercussions for the accountants, and other professionals involved. Even the hapless Serious Fraud Office might be able to nail this one, although having had its case against three senior directors of Tesco thrown out of court this week, it might have had its fill of food retailers for a while.

There seems to be growing support for the Brexit Withdrawal Bill providing the Irish backstop is dropped, something that MPs will vote on next Tuesday. Equally, the polls show most support for leaving with no deal at all, which has sent the authorities, particularly the EU, in to a tail spin, causing them to crash their previously sound PR machine.

Earlier in the week, the EU Commission’s chief spokesman said “If you push me to speculate on what will happen in Ireland after a no deal Brexit I think it will be pretty obvious, there will be a hard border”. Michel Barnier, the chief negotiator, tried to calm troubled waters, by saying “my team have worked hard to study how controls can be made paperless or decentralised, which would be useful in all circumstances”, thus exposing how futile their stance has been all along.

There is already a border between NI and the Republic, covering tax, VAT, excise, currency and security. It is just that nobody was prepared to admit that it would need stiffening up. Now Varadkar, the Taoiseach, has realised that he has pushed his luck too far, since a no deal would be devastating for his country, admitting that there would have to be police and troops on the enhanced border. Its central bank has warned that no deal will lead to food shortages; helpful.

The answer is to drop the meaningless backstop. Every one of the remaining 27 countries will have a veto on whatever future trade agreement is brought forward, so there is still an opportunity to exert significant influence. Maybe his position is too entrenched to row back now, but he should have thought about that before he picked a totally unnecessary fight.

Others who have woken up to life post March 29th, with no deal, include the fishermen. The French, Dutch, Belgium, Danish, Swedish and Irish fleets are heavily dependent on operating in UK waters, and thus the EU have proposed that there should be a “flexible system which allows the EU to exchange quotas with the UK”, having insisted that no such side deals were possible. Up pops Barnier again, (busy week), “The EU’S willingness to take contingency measures should not be seen as a readiness to negotiate mini deals with the UK”. Which is like arguing that night does not follow day. I very much hope that an agreement can be reached, but if not, there will have to be many of these side deals, not least because that is what the voters want, in all countries, as will become increasingly obvious to the posturing politicians.

Monday was Martin Luther King Day in America, and therefore an appropriate time for Kamala Harris to launch her bid to be the next Democratic presidential nominee, although it is a crowded field, with no clear front runner, and she has no name recognition. The next few weeks will determine if she can get any traction, and if she does, the blog will look further at her plans. Meanwhile, the odds of 6/1 don’t look that attractive, when you can get 500/1 on Stormy Daniels; just a thought for those who got it so wrong last time.

The Donald is distracted by the shutdown, so we do not know his thoughts on this. The Air Traffic Controllers, who have not been paid for a month, are increasingly failing to turn in for work, and the airports are therefore reducing capacity. Something has to give soon.


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.