Whistling Past the Graveyard

Denis G Campbell

Walking down most High Streets in the UK, the number of empty storefronts and/or charity shops continues to grow leaving very few chains or Mom and Pop stores to service the market. There are now 12 super store retailers in the UK and even they are showing signs of decline.

  • Sports Direct, the giant sporting goods retailer reported a profit drop of 60% due to a weak pound.
  • Morgan Stanley announced that post Brexit, their European Hub of business will move from London to Frankfurt. They are preparing for a hard Brexit and will probably book the “vast majority” of their assets in Frankfurt. Administrative and other jobs will follow.
  • GlaxoSmithKline pharmaceuticals is about to sell their Horlick’s brand, but more importantly, have scrapped new factory build plans.
  • The US Federal Reserve issued cautious warnings concerning the Fed’s policy. Weakening inflation and stagflation fears coupled with Donald Trump’s “limited legislative potential’ are the key drivers Too, Congress is a bag full of crazy as the US debt limit and default fears rapidly approach bringing further volatility.
  • While retail sales are up, most of it comes from unsecured consumer credit (up 10.3% through May) and that figure is 5x earnings. So, we are likely headed for a perfect storm of Brexit related job losses, a personal credit bubble bursting, a housing market bubble leading to a crash and Brexit intransigence by the current Tory-led UK government.

Steve Rattner, the former US auto industry analyst for the Obama Administration who saved GM and also an economist on a recent US broadcast of Morning Joe, showed the US economy is showing signs of cooling. The projected 3.5% GDP growth has been cut to 2.5% and could be further adjusted downward in the 2nd Quarter. The so-called “Trump Election bounce” is beginning to wane.

Both the US and UK have been pursuing a more protectionist outlook and with the scrapping of global treaties by the US and general shunning of the UK by the EU, the signs are evident that there can be no quick trade deal. So goods made and exported from here will likely be slapped overnight with crushing tariffs when the Hard Brexit happens.

As one who voted Remain, my colleagues and I have been laughed at for more than a year. Equity markets continue to reach all-time high levels, yet the storm is coming. More and more analysts and business leaders grow wary, weary and scared of the lack of real progress.

Chief Brexit negotiator David Davis met his counterpart last week. The meeting ended after 1 hour. While the countdown clock shows 616 days, you need to be meeting around the clock. Not just for an hour to posture and gain political points.

Market forces continue to take hold and that is before a weakened Tory PM May begins to deal with the political fallout of:

  • Scotland and Wales demanding a similar financial sweetheart deal to the £1.1bn pounds negotiated by the DUP from the Tories to join in Government.
  • the growing angst that other UK nations have no say in a Brexit final deal… they insist on maintaining membership in the Single Market, the right of EU nationals to continue to reside here and remaining in the Customs Union. And their message is getting through as May and Team Brexit have backpedalled ever so slightly and
  • that is all before we absorb the impact of the £66bn divorce bill the UK must pay to leave.

We are whistling towards and past the graveyard and face very real crises of confidence. As the advertisers always say… watch this space.

Originally published on UK Progressive

Denis G. Campbell is founder and editor of UK Progressive magazine and co-host of The Three Muckrakers podcast. He is the author of 7 books and provides Americas, EU and Middle Eastern commentary to the BBC, itv, Al Jazeera English, CNN, CRI, MSNBC and others. He is CEO of Monknash Media and a principal with B2E Consulting in London. You can follow him on Twitter @UKProgressive and on Facebook.

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