I am more and more convinced it’s time to buy UK Plc.

7 mins. to read
I am more and more convinced it’s time to buy UK Plc.

There is nothing we Brits like as much as talking ourselves down. The stories of rotting fish, Irish threats, and lorries stuck on the border, have convinced us we’ve made a right Horlicks of Brexit and doomed our economy for eternity by closing the door on Europe. We’ve been hit hardest by Covid deaths. The UK economy has apparently been battered worse than any other by lockdown shocks. It’s no wonder the FTSE is the worst stock market index on the planet… at least that’s what it feels like.

Damn the torpedoes and all that crap. Just as it feels darkest… it’s time to put your buying boots on. Let me give you a different perspective.

Yesterday, I was watching out the window of our office overlooking Southampton Water, leading into one of the biggest ports in the UK, as one of the largest container vessels on the planet was departing fully loaded to parts unknown. As it went out there was another big container ship was coming in. I’ve noticed a larger than usual number of deep-laden car-transport ships heading out to export markets – deep to the plimsol line because they are full of UK built cars.

Let’s start by thinking logically about the Coronavirus.  There is great news. The UK has achieved over 10 million vaccinations. Analysts think the UK numbers are set to dramatically improve as infection rates tumble: the time lag means hospital admissions and deaths will collapse over the next two weeks even as vaccinations are completed for the vulnerable in society (by mid-Fed.) The data on the effectiveness of the vaccines in preventing severe illness and transmission/infection are very promising. There is a realistic chance of limited lockdown easing in March.

It feels like the sun has just flashed over the horizon after peak miserableness and despair. We are about to get insanely happy again. There is going to be such an outbreak of repressed spending we’re going to see a screed of apparently distressed stocks and bonds soar higher.

There will be some obvious upside plays to garner upside from recovery; easyJet, distressed cruise liners, Artisan Coffee shops, and more prosaically; Greggs. It might be time to sell Games Workshop on the basis spotty boys will be forced back to school and stop playing Warhammer. 

Even more importantly, over the next few months I reckon we’re going to figure out some key relative facts about the UK. Maybe… it’s not nearly as bad as you think.

The accepted wisdom is the UK has been clobbered as the worst hit nation in Europe in terms of death and economic damage, while Brexit makes the economy look terminal relative to Europe, and will trigger the disintegration of Union. For all these reasons – Sell UK.

But are any of these true?

Even the Government (who looked intent on scaring us to death every evening) admit the UK has probably inflated our own numbers and damage done in comparison to everyone else.

The economic damage to the economy is less than we think. A publication: “International comparisons of GDP during the Pandemic”, written by the Office of National Statistics, no-less, highlights :“The UK has experienced the largest fall in volume or “real” gross domestic product (GDP) over Quarter 1 to Quarter 3 2020 of the G7 economies, reflecting the effects of the COVID-19 virus itself, the imposition of public health restrictions and voluntary social distancing to contain its spread; on the other hand, the current price or “nominal” UK GDP fall is broadly comparable to G7 economies and saw a lower fall than Canada, Italy and Germany.”

Do read the whole report – but basically it says we count things in a different way. As we all know; there are lies, there are damned lies, there are statistics and there are government statistics. While there has been a contraction, the impact is less than it looks on a relative basis.

And was our handling of the virus worse than every other country?

Our numbers are the second worst in terms of numbers per million. But while the UK Government has used high numbers as the whip with which to terrify the nation into accepting lockdown to save burdening the NHS, other nations haven’t adopted similar standards. Some say we still undercount the numbers – that they are even worse. But the reality remains.. the massive majority of deaths are the elderly over 70. Tragic as every death is, from an economic perspective many of the people who died were going to die soon anyway. Brutal, but fact.

From the 2000s the UK successfully reduced the number of deaths due to cancers and heart-disease by some 20%. But people don’t live better. Lower heart attack deaths meant a 20% increase in the numbers dying from dementia. It’s also clear we don’t count our death in the same way as other countries – some don’t count deaths in care homes, not all are as willing to subscribe any unexplained death to Covid, nor is there the same presumption that every death within 28 days of a test was due to Covid.

I suspect the reality is either the UK has counted our Covid deaths more diligently than other countries, or that they have been undercounting.

Mistakes were made., but what actually matters is the success of the UK Government in combatting the virus.

Then there is Brexit. Remainers believe we’ve committed economic suicide. Brexiteers blame Europe for all the ills. There is balance between them.

Post Brexit was never going to be easy. There is a distinct sense the EU is punishing the UK. The blame for fish rotting on the docks, for shortages and delays, for UK shellfish being permanently banned from Europe, are all laid at the Brexiteer’s feet. Look what we have lost – scream the remoaners. It’s clear it was less than a fully thought out deal. Many believe the deal hammered out over Christmas may well collapse and the UK and EU will trade on WTO terms.

On the other hand, it looks like there is a distinct element of envy in what the Europeans are saying about the AstraZeneca-Oxford jab’s effectiveness. I’ll trust the UK data on the basis most of vaccine science has been pioneered here in Blighty ever since Edward Jenner stuck a needle into a cowpox pustule. Europe would rather paint the UK’s vaccine success as a dangerous outsider, putting the UK’s vaccine into the same bracket as Russia’s Sputnik.

And if the UK is a basket case.. what about Europe? Its problems have a special quality all of their own…

The overriding theme in Europe today is the stalled vaccination programme. It’s been riddled with errors and is at least a month behind. It will be solved – but Ursula von der Leyen’s failings and dither highlights the dangers of handing sovereignty to Brussels. That’s a fact anti-EU parties across Europe will latch onto through the coming electoral cycle.

The big news is Mario Draghi, a man with zero experience of standing for election, being appointed to build the new Italian government as prime minister. We’ve seen this movie before. He has one-year tops I reckon.  Draghi is the consummate EU insider – the skilled ECB president who saved the Euro. His appointment will greatly relieve France, Netherlands, Finland, Germany and the rest about where their money is going; the €200 billion from the EU recovery scheme everyone thinks is going to turn-around and restore Italy.

Nope. It won’t. No matter how much or whom the EU throws at Italy, it won’t overcome the internal dissent or fractured Italian politics. Not for one moment am I suggesting Europe and the Euro are on the verge of collapse again because Draghi has been appointed – he’s the least bad solution to a hopeless situation – but it ultimately solves nothing. Southern Europe is uncompetitive and doomed to recession because of the Euro, and the bureaucratic mission creep in Brussels offers member nations little upside. If domestic governments can’t do it, why should a faraway Brussels do it any better? – as the vaccine farce demonstrates. 

In contrast, the UK is about to bounce out of the Pandemic to discover its… actually done rather well. Trade with Europe will remain a handicap and hurdle – but that bites both ways… and may change sooner than we think.

Comments (4)

  • Ismo says:

    I like the objective approach you are taking as investor.
    Obviously you can just admit that UK or at least England is much better country than any of the other 191 on the earth.
    Just trust Gavin W and success follows….

  • John Davis says:

    Post Brexit was never going to be easy? That’s NOT the story that was given out. Let me remind you as your memory seems to be rather partisan:

    Vote Leave – ‘Not only can Britain leave the EU and have access to the Single Market, we’d actually get a better deal’ and ‘vote leave to cut red tape’. Andrea Leadsom – ‘We will have the same access to the single market if we leave the EU’. Boris Johnson – ‘there will be no palisade of tariffs on 1 Jan, and there will be no non-tariff barriers to trade’ and ‘Brexit would leave arrangements on the Irish border “absolutely unchanged” and ‘there will be no forms, no checks, no barriers of any kind between Northern Ireland and the rest of the UK. You will have unfettered access’ and ‘there is absolutely no threat to the Erasmus scheme’. Digby Jones – ‘not one job will be lost because of Brexit’. Dominic Raab – ‘consumers will get cheaper prices’. Iain Duncan Smith – ‘German carmakers will rally to our cause’. John Redwood – ‘Getting out of the EU can be quick and easy – the UK holds most of the cards in any negotiation.’

    Not quite the story you are trying to present is it, and that’s just a small taste of the Brexit lies, a fraction of the list. But my favourite is: David Davis – ‘There is no downside to Brexit, only considerable upsides’. Today, 11th Feb 21 the government announces new £20 million pound fund to help SME businesses cope with the non-existent downside. Firms can claim a grant of up to £2000 pounds each, referred to by one SME owner as the proverbial drop in the ocean of help with the additional costs.

    No optimism for a ‘bounce’ there I suspect, not when total exports have collapsed by around 30% (68% of EU43%). So before you rush to judgement I would advise you to wait to see how quickly EU countries recover their economies after the pandemic compared to us, and how quickly Northern Ireland and Scotland move to push for their own ‘taking back control’ leading to the breakup of the UK union.

  • TonyA says:

    Good grief, will you *please* get over yourself and this nauseating boring Remain-Brexit issue? Are you still going to be bleating “I told you so” in 2, 5, 10 or 20 years time? We have left the EU. The end. It is time to grow up and move on. And by the way, the Remain side totally abused statistics too, so it cuts both ways.

    FWIW, I voted Remain, just, but have became more sympathetic to Brexit as the EU showed its protectionist, regulation-obsessed and frankly nasty punitive sides more and more through the “negotiation” of the departure terms and trade deal (“money first, then you do what we, the EU, say, and by the way we’re taking sides in the Northern Ireland issue and back the Nationalists 100%”). And the EU continues to behave unfairly and nastily in its approach to customs regulations and ludicrous form-filling (British fresh fish has suddenly become a major health hazard because of our new third-world status in their eyes, while EU-sourced fish hasn’t, coming into the UK) and areas like financial services. Why be a member of such a closed-minded organisation with its tariff barriers imposing taxes on its own people and its animal welfare and business subsidy policies that the UK largely enforced but other countries regularly flout? (Danish bacon from tiny concrete pens, anyone? Hormone-injected French beef? I think not). But overall, I’m just sick of the whole debate and just want to move on, for better or poorer.

  • David Rawcliffe says:

    Well said Mr Davis

Leave a Reply

Your email address will not be published. Required fields are marked *