British
expats need to ensure that they are registered to vote in the UK’s forthcoming
general election this December sooner rather than later.
This
is the warning from the CEO of one of the world’s largest independent financial
advisory organisations.
Nigel
Green, chief executive and founder of deVere Group, which has more than 80,000
mainly expatriate clients in 100 countries globally, is speaking out after it
was confirmed that the UK is going to have a 12 December general election after
the opposition Labour party agreed to a vote called for by Prime Minister Boris
Johnson.
Mr
Green notes: “Many expats, quite rightly, remain angry and frustrated that even
if they were eligible to participate in the 2016 Brexit referendum, the
registration process took too long and was too burdensome, and ultimately they
were unable to do so.
“It
is particularly galling as those expats resident within the EU27 are
disproportionately affected by Brexit.
“For
instance, if there is a no-deal Brexit, which remains a slight yet dangerous
possibility, it is likely that their pensions, insurance and healthcare will be
adversely affected overnight.”
He
continues: “As this critical general election is, in effect, a second Brexit
referendum, they should act now to register to vote in order to ensure their
voice is heard.
“This
will also help to counteract the injustice of the fact that 700,000-plus
British expats are disenfranchised from the UK political system after 15 years
overseas and were denied the vote on something that directly affects them.
“All other G7 countries except the UK allow their citizens voting rights for
life. Why is Britain different? It’s especially frustrating that many are still
liable for UK inheritance tax, amongst others, but are not allowed to vote in the
UK after 15 years.
“Whatever
happened to ‘no taxation without representation’?”
Mr
Green concludes: “Expats’ futures hang in the balance with this general
election as it will inevitably shape Brexit’s direction of travel.”
“If
they are eligible to do so under the current archaic rules – which must be
updated in the next parliament – expats should register to vote sooner rather
than later.”
Few
theories have caused so many discussions as the Modern monetary theory (or MMT),
which has been popularized by the leftmost sector of the Democratic Party, US, when
it recurred to it to defend the huge expenses of the federal government on an
attempt to detoxify the country from the fossil fuels and to finance a Medicare
coverage for all.
The re-birth of the Modern
Monetary Theory
MMT was
created in the 1970s by the American economist Warren Mosler and shows
similarities with older schools like Chartalism and Functional Finance. It was congresswoman and activist
Alexandria Ocasio-Cortez who brought the debate to the table. In January 2019,
she claimed that the government should implement Modern Monetary Theory to
finance the Green New-Deal, applying political measures similar to those of the
1930s to augment the expenses but for ecologic reasons. In a public interview, she expressed that MMT should “be
a larger part of the conversation.”
The approach
Despite the
complexity and debate around MMT, there are some basic concepts shared by most
of its adepts. The fundamental idea is that since the abandonment of the gold
standard, a sovereign estate can print as much money as needed to finance
public expenses and inject money into the economy, which they later withdraw in
taxes. They sustain that governments
cannot go broke, as they can always create more money to pay off debts.
According
to MMT theorists, we have been misled to think that substantial government debt
is followed by financial collapse. Moreover, they state that if the spending
creates deficit, it isn’t a real problem, as the national deficit is, in fact,
the private sector’s surplus.
Modern Monetary Theory and
inflation
Mainstream
economists argue that it is ridiculous to think that central banks can finance
massive spending without causing high inflation or even hyperinflation. Modern
Monetary Theory, on the other side, reckons that there is a direct relationship
between the circulation quantity of money and the level of prices. Yet,
although they recognize the risk of inflation, they see it as a constraint that
will keep decision-makers honest. Inflation is perceived as a result of real
resource limits, and the Congress should set the spending, tax, and industry
policies to keep inflation under control.
Restrictions on Modern monetary theory
Modern
Monetary Theory advocates state that governments don´t have a budget constraint,
and the only limit they have is the availability of real resources, like
supplies and workers. If government spending is excessive in relation to the
available resources, inflation could occur; therefore, the importance of proper
policies.
It´s
undeniable that Modern Monetary Theory keeps gaining attention and adepts,
especially in the progressive political sectors. However, they haven´t provided
a convincing response to the inherent problem of inflation yet.
Is Modern Monetary Theory the panacea that will solve the world´s woes? Or is MMT just a new buzzword that keeps rising popularity? Implementing it would be a bold, risky experiment with no point of return or the miracle-solution we all crave for?
The
pound and UK financial assets will be volatile in the run-up to Britain’s first
December general election since 1923 – and will remain so in the event of
another hung parliament.
This
is the warning from Nigel Green, CEO and founder of deVere Group, one of the
world’s largest independent financial advisory organisations, as Labour
announces it is now backing the government’s bill for a December election,
regardless of the date.
Mr
Green comments: “This is a critical stage in the slow-moving, damaging,
torturous Brexit saga.
“Expect
the pound and UK financial assets to be increasingly volatile in the run-up to
the general election, given the wide-ranging set of outcomes.
“The
most detrimental of these outcomes for sterling, UK financial assets and the
wider British economy, include another hung parliament or a victory for
Jeremy Corbyn’s Labour party.”
He
continues: “Boris Johnson’s intention to secure a majority within the House of
Commons is by no means guaranteed.
“The
Brexit Party will use the fact that Mr Johnson did not deliver Brexit by
October 31 – something on which he staked his whole premiership.
“The
Remain vote could also be split between Labour, the Lib Dems, the Greens and
the SNP.
“Political
fragmentation on this scale has never happened before in the UK.
“Therefore,
a hung parliament looks like an alarming possibility, meaning there could be no
majority to quickly and smoothly resolve the Brexit chaos.
“Should
grinding deadlock continue, the UK economy would still
haemorrhage investment and confidence. The fallout of Brexit has cost the
UK three and a half years of lost opportunity and many, many tens of billions
of pounds. This would only intensify with another hung parliament.”
He
adds: “Meanwhile Jeremy Corbyn’s Labour party will campaign on the most
radical, left-wing manifesto in more than a generation.
“Should
he win this election, his anti free-market policies – such as the
re-nationalisation of industries from utilities to railways to postal services,
and the forcing of companies to give 10% of their shares to staff – plus
his high-tax policies, including a possible wealth tax, will spook the financial
markets, hit long-term sustainable growth of the British economy, put more
pressure on UK financial assets, and lead to a significant sell-off of the
pound.
Mr Green concludes: “The general election is set to be the most contentious and uncertain in generations. Investors now need to protect and build their wealth and assets by ensuring they are properly diversified across asset classes, sectors, currencies and regions.”
deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients. It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement
How could a further three months of uncertainty affect investment and small business?
Leading finance experts discuss the impact of a further Brexit delay.
This morning, President of the European council Donald Tusk tweeted: ‘The EU27 has agreed that it will accept the UK’s request for a #Brexit flextension until 31 January 2020. The decision is expected to be formalised through a written procedure.’
Tusk made the announcement after the 27 countries that will remain in the European Union when Britain leaves agreed on Monday to accept London’s request for a Brexit extension.
But how might another three months of uncertainty and debate affect the vital community of small businesses and the investors that support them? Luke Davis, CEO and Founder of IW Capital, discusses the impact of the outcome on investment:
“Small businesses in the UK are undoubtedly hoping for increased certainty over the Brexit deal and leaving date. Once the deal is confirmed the sentiment to push on with business will really be able to take off. As entrepreneurs and investors look to capitalise on new opportunities that are bound to exist after Brexit. Over the last year or so, we have seen a concerted effort to get on with business, regardless of Brexit and the eventual outcome.
One thing that we need to ensure is that entrepreneurs and investors looking to start or support a small business are not put off by the turmoil in Parliament. At IW Capital, we have experienced record deal flow and buoyant investor confidence. What Brexit ends up looking like will not affect the fantastic range of innovative, growing SMEs we work with that are likely to drive our private sector forward.”
Jenny Tooth OBE, CEO of the UK Business Angels Association, shared her views on what the delay could mean for regional businesses:
“As negotiations continue to drag on and eat into the transition period, which was put in place to help business prepare for the imminent loss of EU support, we are at risk of running out of time to plan and make changes. Funding for SMEs in the regions has been somewhat forgotten about recently. This will subsequently impact regional SMEs more than larger businesses that can take the hit, or areas such as London or the Golden Triangle which receive the majority of domestic investment.
The potential loss of investment from the continent including the European Regional Development Fund, Horizon 2020 and the Jeremie fund could create a huge investment gap in UK. This is concerning not only for the loss of EU money, but the risk that Government support for finance to replace this EU funding may take time to have an impact on the ground.”
If you would be interested in speaking to Luke or Jenny or if you have any questions at all, please don’t hesitate to get in touch.
James Lester Senior Communications Executive 42Bruton
Will growth continue to slow, or will Europe fall into recession as global economic risks overtake it? Whatever the result, rather than being a distraction from politics, the economy will probably intensify the political challenges.
Economic Growth continues to slow
The Euro Area is heading for a second straight year of slowing economic growth. In 2017, GDP growth was at 2.4%, while 2018 is expected to be around 2%. In 2019, the IMF has forecast 1.9% (World Economic Outlook, Oct 2018), while the World Bank has forecast 1.6% in 2019, 1.5% in 2020, and 1.3% in 2021 (Global Economic Prospects, Jan 2019).
Some key countries will fare worse. Germany and Italy recorded negative growth in the third quarter of 2018, with notable decreases in industrial production. In contrast, EU members in Eastern Europe are experiencing strong growth.
Slower growth in the Euro Area is not in itself cause for concern. Despite the downward trend and negative growth in Germany and Italy, the forecasts represent continued solid economic growth. The underlying fundamentals are robust for most countries: inflation is under control, consumer spending is healthy, and Euro Area unemployment is at 10-year lows. The Euro Area looks set to add to the five straight years of growth since 2014.
Europe’s slowing growth must be seen in the context of increasing global risks to economic growth. These include the risk of a US recession,
aggressive US trade policies, and the risks from further tightening by the US Federal Reserve. If any of these risks are realised, Europe, particularly the Euro Area, may fall into recession.
The US economy appears very strong with low inflation and a strong labour market, but the stock market correction from August 2018, and the flattening (and sometimes inverting) yield curve for US treasuries suggests that the US markets are predicting slower growth. Many market-watchers are spooked by the possibility of a recession in 2019 or 2020. A US recession may become a self-fulfilling prophecy.
US trade policies entered a new era in 2018 with the March tariff on steel and aluminium, renegotiation of NAFTA (now USMCA), and the trade skirmish with China. The US has demonstrated that it will play hard on trades issues, even with traditional allies such as Canada and Europe. The steel and aluminium tariffs have had a negative impact on European exports. More tariffs cannot be ruled out.
Europe also needs to be prepared for any collateral damage from a potential trade war between the US and China. Comments after the G20 meeting in Buenos Aires gave hope of a resolution but subsequent reports suggest that negotiations will be complex, particularly as the US leverages a stronger hand with probable slower growth in China.
Another key global risk is continued monetary tightening by the US Federal Reserve in 2019, and the ensuing risk of financial contagion for, and from, emerging markets. Last year marked the long-feared end of cheap liquidity in emerging markets. As the US Federal Reserve tightened liquidity, countries like Argentina and Turkey were put into a tail-spin by markets. Advanced economies, including those in the Euro Area, remain vigilant for any potential financial contagion from emerging markets. Fed chair Jerome Powell has since tried to tone down any hawkish sentiment, and will proceed with more care. The world will be watching the Fed even more closely in 2019.
What can Europe do about recession?
If any of these global risks are realised and the Euro Area falls toward recession, what can Europe do? The ECB and national policymakers appear to have few working levers to stimulate growth. The official ECB interest rate has been below zero since 2014, while the ECB capped Quantitative Easing at the end of 2018. The ECB’s rate would thus need to rely on tools at the margins such as a new round of Targeted Longer-Term Refinancing Operations (TLTROs): discounted multi-year loans to banks. Perhaps the ECB’s biggest remaining lever to mitigate any recession is to do nothing, refraining from raising interest rates in 2019.
Unlike 2007 and 2008, many European governments (including France, Italy, and Spain) have few fiscal buffers to deal with any potential recession in 2019 or 2020. Italy has a public debt to GDP ratio of 133%, Spain 98.8%, and France 97.7% (latest figures are from 2017). Countries such as Germany and the Netherlands do have fiscal buffers, but they alone cannot mitigate a Euro Area-wide recession.
The lack of fiscal buffers will probably feed back into domestic political pressures and anti-EU rhetoric. In the event of a recession, countries with little fiscal space will be tempted to increase their fiscal spending beyond comfortable levels, which will incur the ire of the ECB, and the more fiscally conservative countries in the EU. Local leaders may then deflect this by stirring up anti-EU sentiment – a familiar path. As the economy re-emerges as a key focus, the tensions between many governments, like the new government in Italy, and the EU will probably intensify.
Need for productivity growth to get out of Europe Recession
Beyond mitigating the next recession, what Europe (and all advanced economies) really need is a new wave of structural reforms to reignite productivity-led economic growth. This includes Labour market reforms to increase flexibility and participation, as well as productivity through better vocational education and technology.
In 2017, French President Emmanuel Macron introduced labour market reforms. These included changes to the funding of vocational education and the capping of awards for workplace disputes settled in court. These have already had a positive economic impact, according to many commentators, and will help France through any recession. Macron however has resisted German-style Hartz labour flexibility reforms (part of Schroder’s 2010 Agenda).
Hartz reform supporters claim that Germany’s economic growth in the 2000s was largely because of the reforms, which reduced unemployment benefits, removed incentives for early retirement, and increased labour-market flexibility. Opponents claim the reforms had little impact, and that Germany instead.
Whatever its role in strengthening the German economy, the German electorate did not take kindly to the Hartz labour reforms. and replaced the Schroder-led SPD with the Merkel-led CDU. European governments face a similar challenge today. Economies need a new wave of structural reforms, but they are unlikely to be popular in the face of slowing growth. One of the key election-promises of the new Italian government was the removal of labour market reforms by the previous government, designed to increase labour market flexibility. It seems that economic events are set to make European politics even more interesting in 2019.
