Retreat from Project Fear
The battle for financial sector leadership post-Brexit was always going to be won by the City.
Inevitably, banks, financial firms and asset managers would set up parallel passport arrangements in europe, with Luxembourg, Dublin, Frankfurt and Paris gaining jobs.
Reality is that in a battle pitting AngloSaxon capitalism against the rule-based and risk-averse eU approach to financial dealings, London was always going to win out.
It also looks likely to be a victor as a digital disrupter with platforms such as Monzo, Bo at the Royal Bank of Scotland and Kinetic at hSBC promising great things.
Data suggests that financial incomers to the UK will greatly outnumber exits. Regulatory consultant Bovill reports that more than 1,000 financial groups are heading in this direction to take advantage of the UK’s sophisticated markets.
Yes, some jobs are going in the opposite direction. JP Morgan chairman Jamie Dimon has made no secret of his belief that Brexit is an act of self-harm. his bank is seeking a building in Paris for 450 people to manage intra-european transactions.
But it is leaving about 10,000 staff behind in the UK, and, of all the American banks in
London, JP Morgan has been the most publicly negative.
Britain’s economy lost a great deal of momentum during the three-and-a-half years of uncertainty that followed the referendum. But even the IMF, which once declared the impact of Brexit to be ‘bad, to very bad’, now concedes ‘diminishing concerns of a No Deal Brexit’.
Revised forecasts for the Davos elites show UK output rising up to 1.4pc this year and 1.5pc next. That is far below trend growth, but looks healthier than Germany, France and laggard Italy.
If getting Brexit done starts to release record levels of the £750bn of cash sitting on the UK’s corporate balance sheets, it is possible that there could be upgrades during the forecast period. And it is not just financial firms which are putting their trust in the UK. France’s EDF, which is building the super EPR reactor at hinkley in Somerset, will be pitching to build a second plant at Sizewell, ensuring Britain has a decent base of reliable, renewable energy when the current nuclear fleet is phased out.
The aim is to finance the new project using a similar market model to that for the Thames Tideway (super-sewer) in London, attracting pension and sovereign wealth funds. Normal business resumes.
Vox pop
FEVER-TREE has been a remarkable newcomer to the British fizzy drinks sector, taking a grand stalwart, Indian tonic water, and making it better.
Its astonishing rise, grabbing 23.1pc of the UK market in 2019, has coincided with the surge in designer gins. The firm’s shares have risen more than eleven-fold since they arrived on the AIM market in 2014. The stock climbed from £2-a- share to £40-ashare as profits rocketed 3,000pc to £75m.
Fever-Tree offers something different to established premium rival Schweppes, previously owned by Cadbury but now controlled by Coca- Cola. It is less sweet than Schweppes and other brands, and mixes well with faux, non-alcoholic gin such as Diageo’s
Seedlip. Sales of Fever-Tree are still climbing in the UK but the dizzying rates it once enjoyed have calmed, leading to two profit warnings and a 27pc dip in the stock.
Two big question marks overhang the company. The market for spirits is incredibly fickle and the worry must be that the UK has reached peak gin. Rum made a comeback over the holiday period.
The second question is Fever-Tree’s decision to take its premium brand to the United States. The company’s quirky but arresting advertising should assist, and it could assume cult following on the eastern seaboard and in California. But it will be taking on Coke on its own turf and a beverage distribution network second to none. It won’t be easy if brown spirits are on the march.
Beware circling predators.
Beach therapy
THERE is something magnificently genteel about department stores which are often the glue that holds regional town centres together. That Bournemouth-based Beales has collapsed into administration comes as no surprise.
It has been trading badly for several years. One cannot escape the thought that if it followed the Selfridges model by investing and moving relentlessly upmarket, making shopping feel glamorous again, its flagship store could at the very least be preserved.