Britain defies the odds
One of the oddest aspects of the referendum campaign is how it has turned the Chancellor from cheerleader for Britain’s economic renaissance into gloomster.
‘Investment and building are being delayed, and another group of international experts, the OECD, confirms British families would be worse off if we leave the EU,’ opined George Osborne in an HM Treasury press release.
If we rolled back the video to last year’s general election campaign, this is just the kind of talking the economy down which might have been heard from Labour leader ed Miliband and his cohorts.
For some clearer sense on the first-quarter growth figures I rely on Goldman Sachs, one of the firms, incidentally, that has made no secret of its preference for ‘Remain.’
Goldman notes that the first-quarter estimate of 0.4pc is based on just half the data, that services output increased by 0.6pc quarter- on- quarter and that construction and production are being hurt by low productivity. There is no mention of Brexit.
Indeed, making the link is wholly misleading. As Osborne noted in both his november Autumn Statement and his Budget speech, a cocktail of bad stuff was affecting the UK long before Brexit uncertainty raised its head.
The dampener on construction has far more to do with the drying up of resources in the Gulf, Russia and elsewhere, than the upcoming vote.
The one place where the impact of the referendum can be seen is on the foreign exchanges. There has been a peculiar ‘reverse ferret’. The pound sold off on fears of ‘Leave’, falling to a 30-month low on April 7. Since then it has bounced back 4pc against a basket of currencies. If the traders were watching the GDP rather than politics, the opposite might have happened. It is clearly assumed on the markets that interventions of the IMF, President Obama and now the OECD make a ‘Remain’ vote a no-brainer.
It may be, as the OECD says, that Britain would have less access to the EU’s market of 500m consumers and investors if we left.
But this assumes trade relations are to do with political and tariff arrangements rather than competitive advantage. In health sciences, aerospace and financial services, Britain and the City of London have goods and services other countries want.
People across europe haven’t stopped buying iPhones or Apple devices because the Transatlantic Trade and Investment Partnership (between the US and EU) has stalled.
What is encouraging is that the UK services sector is holding up so strongly. This is not just about haircuts, cafes and finance but also high-growth creative industries (up to 10pc of GDP), IT and other tech services.
Osborne should be celebrating the brightness on his watch and can only do harm if he fails to focus on the positives.
High hurdles
EVEN the most short-termist City analyst is not going to judge Jes Staley’s stewardship of Barclays on a single quarter.
But the numbers (see Page 69) seem to bear out his early judgment that the investment bank still has something to offer and as a consumer and corporate lender it still has a strong franchise.
Indeed, after the rotten first-quarter investment banking results from Goldman et al, Barclays is proving better than average.
There are many bridges to be crossed before the lowly rated Barclays shares (which I hold) can count on a recovery. Staley could deservedly feel a little early grief today at the company’s annual general meeting over a greedy pay package of £8.25m, something totally out of keeping with the times.
The former JP Morgan banker has a long list of issues to clear away before Barclays can perform anything close to potential.
These include a settlement with the US Justice Department over mortgage securities, further provisions against payment protection insurance selling and a long-running Serious Fraud Office inquiry over funding from the Gulf.
He also has to demonstrate that having declared Africa too capital-intensive, he can find a suitable buyer. Barclays has a real duty of care as, in a totally different context, Sir Philip Green has learned to his cost.
Investors also need to bear in mind the warning of deputy governor of the Bank of england Sir Jon Cunliffe: banks will generate lower returns in the post-crisis world.
There won’t be much weeping and wailing about that.
Get Google
WHEN europe’s competition commissioner decided to take a look at whether Google was uncompetitive in the way it markets and operates its Android operating system, there was disgruntlement across the Atlantic.
It included a thundering attack in the FT from Silicon Valley pioneer investor Michael Moritz, of Sequoia, suggesting it was all terribly unfair.
now we learn that the US’s competition enforcer, the Federal Trade Commission, is seeking to ascertain whether Google is engaged in market abuse by using its Android system to lock out new app developers.
Funny that.