Waiting For The End

Waiting For The End                                                                                25 March 2021

This week came the sad news of the death of Sheikh Hamdan bin Rashid Al Maktoum, the country’s Minister of Finance since the UAE’s 1971 formation. He was the second son of HH Sheikh Rashid and the elder brother of Dubai’s current Ruler, HH Sheikh Mohammed bin Rashid. From the start of public life, he followed Sheikh Rashid’s vision of developing Dubai as a diverse economy that would become a world city and his father put him in charge of Dubai Aluminium (now EGA), Dubai Natural Gas (Dugas), Dubai Cable and the Dubai World Trade Centre. Later his portfolio expanded to include Dubai Municipality and to become president of  Dubai Ports Authority. He also became the country’s chief representative to the International Monetary Fund and the Opec Fund for International Development. He also created the Hamdan bin Rashid Al Maktoum Award for Distinguished Academic Performance, to improve the quality of education and teaching, as well as the Sheikh Hamdan bin Rashid Al Maktoum Award for Medical Sciences, rewarding medical research that serves all humanity. Sheikh Hamdan will also be remembered for his contribution to education, science and philanthropy, giving generously throughout his life.

For the past fifty years, Sheikh Hamdan devoted his life to the duties of government, as a minister, and from 1995, Deputy Ruler of Dubai. His second love was racing and forty years ago he founded Shadwell Racing, a distinguished breeding and racing operation, encompassing eight stud farms – with hundreds of Arabian and thoroughbred horses – in the UK, Ireland and the US. Between 1990 – 2005, he was the British Flat Racing Champion Owner five times, with victories in the English and Irish derbies, the 2,000 Guineas, the Ascot Gold Cup and the Dubai World Cup in 1999 and 2007.

Figures for the week ending yesterday, Wednesday 24 March, show that 1,131 real estate and property transactions valued at US$ 817 million were registered, including 115 plots, worth US$ 149 million, and 721 apartments valued at US$ 340 million. The top three values all involved land transactions in Palm Jumeriah with the highest valued at US$ 15 million. The top three transfers for villas/apartments were in Marsa Dubai – a US$ 37 million apartment – US$ 28 million for a villa in Hadaeq Sheikh Mohammed Bin Rashid and a US$ 25 million apartment in Palm Jumeirah. The three top areas for actual transactions were Al Hebiah Fourth, with 25 sales transactions worth US$ 24 million, followed by Nad Al Shiba Third with 22 sales transactions, valued at US$ 15 million, and Hadaeq Sheikh Mohammed Bin Rashid with 16 sales transactions worth US$ 37 million. Over the week, there were 44 properties granted first-degree relatives worth US$ 42 million. Mortgaged properties this week, valued at US$ 272 million, with the highest one in Al Barsha First at US$ 52 million.

A report by Mortgage Finder estimates that 83% of people taking out a mortgage last year planned to live in the property and that 97% of mortgage transactions in 2020 were taken out by UAE residents. However, when global lockdowns and travel bans begin to get lifted, it is inevitable that an increasing number of non-residents will re-enter the Dubai property market. The 2020 mortgage transactions saw a 51:49 split between villas and apartments, with a 40% increase in H2, as restrictions and lockdowns eased. The report also found that the average mortgage amount was US$ 436k, with a 21-year term, with completed properties seeing an average mortgage of US$ 468k and for off-plan properties (finance upon handover), it was US$ 378k. The leading locations registering mortgages were Dubai Marina, Arabian Ranches, Palm Jumeirah, Dubai Hills Estate, Jumeirah Golf Estate and Jumeirah Village Circle. Two other points indicated the growing trend in the popularity of villas/townhouses, which will continue into 2021, and that 65% of overall mortgages were for completed properties, with the mortgage percentage for off-plan declining.

According to Nakheel, its Palm Tower project is in the advanced stages of fit out, with all exterior cladding completed. The 52-storey, 240 mt high building, located on Palm Jumeirah, is 95% complete and is expected to open in October. The development, has 432 luxury, fully furnished 1-3 B/R apartments, (which will be on levels 19 to 47), and a 290-room St. Regis hotel, that will occupy the first eighteen floors.

Progress relating to the UAE’s vaccination campaigns is expected to boost demand in H2, and attract consumers and tourists back to traditional stores. Expo 2020 Dubai, scheduled to kick off  this October, is expected to be a major catalyst for the recovery of the retail sector, in addition to the support and incentives provided by governments to business sectors at the federal and local levels. The UAE currently leads the Middle East and North Africa region in terms of household spending on e-commerce at $2,554 per household, which is twice the value of the global average of $1,156, and four times the value of the average in the MENA region ($629). JLL’s latest data sees Dubai‘s retail gross leasable area increasing by 761k sq mt, (18.1%), to almost five million sq mt by year end, having risen by 110k sq mt, (2.7%), to 4.2 million sq mt last year. Traditional retail may see a glimmer of hope with lower rents and more available options.

After HH Sheikh Mohammed bin Rashid Al Maktoum launched the first ever World Logistics Passport at last year’s Davos meeting, it has now been rolled out to include eleven nations. This global network of trade mega hubs aims to increase opportunities for trade, with the likes of India, Indonesia, Thailand, Brazil, Colombia and South Africa, among the nations that have signed on to the Dubai-led WLP in the past 12 months. The Dubai Ruler noted that “in just one year, we have taken the WLP from vision to reality, bringing together a number of leading nations, logistics partners and multinational corporations in a close-knit alliance focused on trade growth.” In addition, many MNCs have signed up to be members, including UPS, Pfizer, LG, Sony and Johnson & Johnson, and are already registered WLP members which offers them over a hundred operational and financial benefits. This initiative is yet another example of Dubai’s willingness to work in tandem with other countries for the benefit of all parties involved, as by its nature WLP expands growth opportunities. It also enables companies to remain competitive, with its twin aims of reducing costs and increasing the efficiency of the logistics value chain.

The UAE Cabinet has approved a multiple entry tourist visa for all nationalities, with HH Sheikh Mohammed bin Rashid Al Maktoum, saying the new scheme aims to “strengthen the UAE’s status as a global economic capital”. At the same meeting last Sunday, he also announced a remote work visa that lets overseas remote working professionals reside in the UAE, as they connect to work abroad virtually. Both visa schemes aim to boost the economy by assisting investors, entrepreneurs, qualified individuals and families.

The Ruler of Dubai announced on Monday that the government had launched a national industrial strategy, known as Titled Operation 300bn aimed at raising the manufacturing sector’s contribution by 225% from US$ 36.2 billion to US$ 81.7 billion (AED 300 billion) over the next decade. The main aim of the exercise, to be managed by the federal Ministry of Industry and Advanced Technology, is to support the establishment of 13.5k industrial companies in the next ten years. It will also be a catalyst to create new jobs, stimulate R&D, boost competitiveness and ultimately build resilience by producing more domestically and reducing the country’s reliance on imports. At the same time, the ‘Make It In The Emirates’ campaign was also launched to highlight the country’s identity to support domestic products and promote the sector globally. To support both strategies, that aims to bring together the private and public sectors to re-imagine the future of industries, R&D expenditure will jump 171% to US$ 15.5 billion. Both the Operation Dh300bn and Make it in the Emirates initiatives are part of a shake-up of the industrial ecosystem which will result in a major change by reducing red tape and updating legislation.

It is reported that the UAE plans to invest US$ 10 billion in the Indonesia Investment Authority – the country’s sovereign wealth fund which aims to implement strategic projects to support national progress, which will include a new capital in Kalimantan, to replace the overcrowded Jakarta. Any investments, that will assist the country’s economic and social progress, will be considered including infrastructure, roads, ports, tourism and agriculture. There are strong bilateral economic, political and cultural ties between the two countries, which have grown since the start of diplomatic relations in 1976. Over that period, the volume of trade exchange has grown to US$ 3.7 billion.

A new study by the Dubai Chamber of Commerce and Industry estimates a 13% hike in 2021 UAE retail sales, driven by the triple whammies of the country’s impressive vaccination programme, the release of consumer pent up demand in H2 and the impact of Expo 2020/UAE golden anniversary. Euromonitor estimates that by 2025 retail sales will top US$ 70.5 billion by maintaining 6.6% annual growth in the medium term. The growth gap between bricks/mortar and click/collect widens with the former only expanding at a CAGR of 5.7%, and the latter by 14.8%. Currently, the average UAE household will spend nearly US$ 2.6k on e-commerce – twice more than the global US$ 1.2k average and four times the MENA total of US$ 629.

Following an agreement between the Dubai Multi Commodities Centre and the UAE’s Securities and Commodities Authority, crypto-based businesses will be permitted to operate from the free zone. The free zone’s Crypto Centre will offer bespoke licences and a range of incentives to prospective businesses, with the aim of making it easier for crypto and blockchain businesses to set up and operate in the emirate. Although the UAE Central Bank has yet to accept or acknowledge crypto or digital assets as a legal tender, companies “offering, issuing, listing and trading crypto-assets” can set up their business within the DMCC. Approval will have to vetted by the regulatory authority, who will also oversee crypto activities, in line with rules issued last year.

For the first nine months of last year, Dubai Airport Free Zone Authority posted a 64% hike in companies registered and generated US$ 23.8 billion of trade, equating to 10% of Dubai’s total.   Although no actual numbers were available, sales were 7.6% higher and DAFZA now boasts 1.8k companies, including Airbus, Boeing, Panasonic, Richemont and Toyota. 75.8% of its exports and re-exports comprised machinery, televisions and electronic equipment, with pearls, semi/precious stones and metals making up a further 17.1%. The free zone’s three main trading partners, accounting for 43% of the total, were China, Iraq and India with shares of 25%, 10% and 9%. Its chairman, Sheikh Ahmed bin Saeed Al Maktoum, noted that Dubai “maintained its role and position as a global economic and trade hub”.

Having been shortlisted to four bids, the RTA has awarded the contract to a French Japanese consortium. Keolis Group, Mitsubishi Heavy Industries Engineering and Mitsubishi Corporation, will operate and maintain Dubai’s Metro system. The contract, equivalent to US$ 148 million per annum, will come into force on 08 September, (exactly twelve years since the Metro’s inauguration), and also cover Dubai Tram operations; Serco, the current operator, will be involved in a smooth handover to the new consortium until then. Part of the deal sees “calls for providing senior, technical and administrative posts for Emiratis and training them on the rail systems”.

Covid has resulted in Q4 outward remittances dipping US$ 463 million (4.1%) to US$ 10.65 billion – the third straight quarter when remittances from the UAE have declined. Despite being biggest loser, with a 15.9% decline, India still maintained its number one position, accounting for 31.1% of the total, followed by Pakistan and the Philippines having 12.2% and 7.1%.

 On Sunday, embattled construction company Arabtec finally filed a bankruptcy application, more than six months after shareholders had approved such a move last September. It is reported that a panel of seven experts would be responsible for producing a report on the holding company and its subsidiaries including Arabtec Construction, Austrian Arabian Readymix Concrete Company, Arabtec Precast, Emirates Falcon Electromechanical Company, Target Engineering and Arabtec Engineering Services. There was a chance that the last two named subsidiaries could have been sold to protect the value of its assets amid liquidation, but this has not yet occurred. It will also decide the way forward for the company that may include the possibility of restructuring.

The bourse opened on Sunday 21 March and, having gained 67 points (2.6%) the previous three weeks, lost 108 points (4.1%) to close on 2,496 by Thursday 25 March. Emaar Properties, US$ 0.01 higher the previous week, fell US$ 0.05 to close at US$ 0.94. Emirates NBD and Damac started the week on US$ 3.22 and US$ 0.30 and closed on US$ 2.97 and US$ 0.30. Thursday 25 March saw the market trading at only 69 million shares, worth US$ 36 million, (compared to 118 million shares, at a value of US$ 73 million, on 18 March).

By Thursday, 25 March, Brent, US$ 5.95 (8.6%) lower the previous week, lost a little more ground, shedding US$ 0.98 (1.5%) in this week’s trading, to close on US$ 62.59. Gold, US$ 41 (2.4%) higher the previous three weeks, was US$ 2 (0.1%) lower, by Thursday 25 March, to close on US$ 1,727.

Although Saudi Aramco announced that its 2020 profits fell by nearly 45%, it still made a US$ 49 billion profit and declared shareholders’ dividends at a mouth-watering US$ 75 billion. The main reason behind “one of the most challenging years in recent history” was that the pandemic global lockdowns curbed demand for oil, and over the year energy prices slumped 20%. Saudi Aramco, with the government its main shareholder, was not alone among the energy giants to post disappointing profits and joined the likes of Royal Dutch Shell, BP and Exxon Mobil which posted its first ever loss. However, it has a further unique problem at a time when oil prices are steadily moving north and that is, recent drone attacks on its assets, reportedly carried out by the Houthis because of the country’s involvement in the war in Yemen.

John Lewis has announced that it would close a further eight shops, that had been marked as being “financially challenged prior to the pandemic”, putting 1.5k jobs at risk.

The retail giant said some locations could not sustain a large store and that four department stores, in Aberdeen, Peterborough, Sheffield and York, would be axed along with four “At Home” shops. Eight stores were closed in 2020. The company said it planned to create more places to shop for John Lewis products country-wide and that it expected that between 60% to 70% of its future sales would be click-and-collect. Since 2007, it had seen its outlets almost double from 26 to 49; of the 23 “new” stores, only twelve will be in operation after the lockdown. The retailer is also reining in on its smaller “John Lewis at home” stores, with only four of the original twelve still open for business. It made its first ever annual loss for the year ending 31 January, (of US$ 710 million compared to a US$ 200 million profit a year earlier), mostly attributable to a write down in the value of its stores because of the shift to online shopping, as well as restructuring and redundancy costs.

Following the loss of 166 shops, (affecting 900 employees), Tui is set to close a further 48 in the UK, with the loss of 273 jobs – a move brought on by an increasing number of people making online holiday bookings. Subsequently, the travel firm will still have 314 outlets in the country and is hoping to offer to redeploy employees to other stores or to work from home. Figures speak louder than words to explain what has happened to Tui and other travel agencies – Q4 income fell 87.8% on the year from US$ 5.30 billion to just US$ 642 million.

Tesla has announced that it will accept Bitcoin as payment for its electric vehicles in the US – this will be extended globally later in the year. CEO Elon Musk confirmed that any Bitcoin paid will not be converted to US$ or other currencies. Last month, he surprised the market by investing US$ 1.5 billion in the cryptocurrency which sent Bitcoin value to record highs.

There is no doubt that Australia’s AMP got savaged at the country’s 2018 banking royal commission in which it was found that the company had lied to regulators and engaged in serious misconduct (in particular, the “fee for no service” scandal). Since then, the embattled wealth manager has never regained its reputation and credibility, and this has been reflected in its share price which has lost 67% in value. Today, 24 March 2021, when Nine’s newspapers reported that Francesco De Ferrari, the chief executive appointed following the commission’s findings, would “resign from the company today”, the share value sank 3.6% to US$ 1.02. AMP issued a statement mid-afternoon that its shares would be “temporarily paused pending a further announcement” and later in the evening that “Francesco De Ferrari remains as chief executive officer of the group.”

Troubled Australian casino operator, Crown Resorts, has confirmed that it had received a US$ 8 billion unsolicited takeover bid from Blackstone, comprising a non-binding offer of US$ 9.17 a share; the US private equity giant already owns nearly 10% of shares, (acquired in April from Melco Resorts at US$ 6.31 a share), with James Packer the largest shareholder owning 37% of the equity. The current bid represents a 19% premium on the share price noted in its latest financial report. Blackstone already owns the Bellagio casino in Las Vegas, which it recently acquired for US$ 4.25 billion and The Cosmopolitan in Las Vegas, as well as Spanish gaming hall operator Cirsa. It also owns the MGM Grand and the Mandalay Bay, with MGM managing the casino operations and paying rent. However, this is not a done deal as Crown still has its own regulatory problems to overcome after the damming conclusions of the recent Royal Commission, whilst Blackstone will have to prove to the Australian regulators that it is a suitable person to own and operate the three Australian Crown casinos. On the day, Crown shares jumped 17.6% to US$ 8.97.

What is happening from the fall-out in the Greensell debacle (and possible scam) is the oft-unseemly relationship between industry, finance and government, represented in this example, by Sanjeev Gupta, Lex Greensell and David Cameron. Gupta got a name for himself for almost single-handedly saving the UK heavy industry entitles which were in financial trouble by buying up steel plants in twelve different UK locations. His money sources were unknown because most of the acquisitions were financed by the Gupta Family Group (GFG), so the companies were interconnected but, importantly, not consolidated – hence no real financial details and no detailed public accounts, despite employing 35k and sales of US$ 21 billion, were readily available.

Following reports in the Financial Times that former Prime Minister David Cameron had met Treasury officials to lobby for Greensill Capital and tried to increase the specialist bank’s access to government-backed Covid-19 emergency loan schemes, there are calls for an official enquiry. There are rightful concerns about how did Greensill representatives obtain ten virtual meetings between March and June 2020 with the two most senior officials at the Treasury, as they sought access to a Bank of England Covid loan scheme. Not surprisingly, the Treasury confirmed that it had had a meeting but decided not to take things further. Not another surprise was to see that when campaigning in 2010, the former PM criticised the role of lobbyists., noting that “secret corporate lobbying” was undermining public confidence in the political system; he has obviously not practiced what he preached since becoming an adviser to Greensill in 2018.

What went wrong with what seemed to be a fail-safe scheme? The plan involved the bank’s main customer, Sanjeev Gupta, who was responsible for 50% of Greensill’s turnover, to invoice his clients (with say payment terms of up to 180 days) and then forward them to Greensill for payment of these invoices at a discount. Greensell would then sell “bundles” of these invoices to investors, taking a fee for arranging the deal, and would then use the proceeds to buy more businesses which generated even more invoices to bundle and sell. The more Greensill could sell on to investors the more valuable the company became. But then the perfect tie-up started unravelling when both investors and insurers realised that the business relied heavily on one client and once funding (and insurance) was cut off, the end came quickly for Greensill Capital, (that late last year was valued at US$ 7 billion), and became uncomfortable for Sanjeev Gupta, as his finances from various sources dried up.

Last year, Scott Morrison led the critics who lambasted former Australia Post chief executive Christine Holgate for rewarding four senior employees with Cartier watches, worth a total of US$ 15.2k; she left her highly paid government post (earning over US$ 1.1 million) shortly after the incident. Now questions are being asked about why his government has let US$ 59 million be paid as bonuses to senior staff of NBN, an entity, owned by the government, in only five months in H2 2020; last year, bonuses paid for the twelve months were only US$ 26 million.

Euromonitor International estimates that, over the next five years, e-commerce will account for at least 50% of the total growth for the global retail sector – an expansion that equates to US$ 1.4 trillion. If it were not Covid-19, the growth would have been much slower. Over the past five years to 2020, the value of goods bought online doubled from 8% to 16% of the total. The report forecast that the US, China and Mexico will record the highest e-commerce value growth during the period, at US$ 386 billion, US$ 361 billion and US$ 77 billion, respectively. The three regions, forecast to have the highest e-commerce growth to 2025, were Latin America (21%), Eastern Europe (12%) and MEA (11%).

In a post-Brexit deal, Abu Dhabi is reportedly planning to invest up to US$ 7.8 billion in various UK sectors, including health, tech, green energy and infrastructure. Mubadala is to pay US$ 1.1 billion into life sciences over five years, along with a UK government investment of almost US$ 275 million. UK’s investment minister Lord Gerry Grimstone has indicated that he hoped for investments in clean energy would be spread across the country. This investment is part of Abu Dhabi’s strategy to diversify its economy away from oil and gas.

Earlier in the year, video games retailer GameStop was in the news when it was the centre of a trading war between asset managers and amateur investors. The Texas-based video games retailer’s share value started the year at less than US$ 20 to trade at US$ 350 by the end of January and even by the beginning of this week was at just less than US$ 150. However, its financials paint a different picture with revenue falling in the quarter to January by 3% to US$ 2.1 billion – its ninth straight quarterly revenue decline – driven by significant store closures, although there was a 175% leap in e-commerce. Its quarterly profits did move north, whilst annual losses narrowed US$ 255 million to US$ 215 million. It is obvious that the continued investors’ interest in the stock is not attributable to financial fundamentals but more to small time traders taking on Wall Street by buying shares and putting their value higher; theoretically, this would force the firms that had bet against the shares going higher to buy more at a higher price, resulting in a buying frenzy or “short squeeze” – and an opportunity for the small-time traders to sell and cash in their profits.

Having brought the lira back from its historic lows, (by raising interest rates to fight an inflation rate running above 15%), in his four-month tenure, Turkey’s central bank governor, Nadi Agbal, was surprisingly shown the door and removed by President Recep Tayyip Erdogan. The market, which had been praising his efforts to rein in inflation, reacted to this shock by selling the currency which dived as much as 14% on the day; earlier in the year the lira was the best performing emerging market currency, having gained almost 20% against the US dollar. Only last week, the departing governor had increased rates by 2% – double the figure that the market had forecast – to 19%. His successor, Sahap Kavcioglu, a professor of banking, is known to be against high interest rates as a way to fight inflation, but some analysts consider that the President could soon be looking for his fifth governor in three years.

The UK government borrowed a record US$ 26.5 billion last month, bringing the fiscal eleven-month YTD figure to US$ 386.7 billion. There is no doubt that huge public funds were needed to support the faltering economy as well as to protect lives and livelihoods. The Chancellor has estimated that government financial support has topped US$ 488 billion, with government finances badly impacted by the cost of schemes such as furlough payments, (last month, the government spent US$ 5.4 billion on job support measures alone), and the fall in taxable receipts including from income tax, lower VAT, business rates and fuel duty.  Interestingly, tax payments from the self-employed sector rose by US$ 1.25 billion in 2020. Total public sector debt has risen to US$ 2.95 trillion, equating to debt having reached 97.5% of annual economic output.

Despite entering its third lockdown – and earlier dire forecasts – UK’s unemployment rate fell 0.1% to 5.0% in the three months to January. During that three-month period, about 1.7 million people were unemployed – 26.9% higher than the corresponding figure twelve months earlier. This decline is not only an indicator of the success of the government’s furlough scheme in protecting jobs but also helped by the fact that the number of people, counted as economically inactive and outside the workforce, who have lost their job, have now given up searching for a new position; a total of 4.8 million employees were furloughed at the end of January ensuring that the unemployment rate did not skyrocket. Other data indicate that the number of redundancies dipped to 11 per 1k people in January – down from November’s 14 per 1k, average wage growth rose 4.8% (its highest in thirteen years) and the number of employees on payrolls rose 68k in February, the third monthly increase in a row; job vacancies from December to February increased 8% to a total of 601k. The worst impacted sectors appear to be the under 25s, services and hospitality. There were 700k fewer people working in February compared to twelve months ago, with 67% of that total comprising young workers. Since the start of the pandemic in March 2020, 368k payroll jobs have been lost in the hospitality sector and 123k in retail; it is thought that the furlough scheme is now providing support for 600k retail workers, a 50% rise since December.

To the surprise of many analysts, UK’s February inflation unexpectedly declined from 0.7% to 0.4%, month on month, driven by marked falls in the cost of clothes and second-hand cars; the general consensus was that inflation would rise to 0.8%. The fall in clothing prices has been put down to the third lockdown in January which left retailers with excess stock, as prices posted their biggest annual decline – at 5.7% – since 2007. Prices were cheaper for children’s toys, computer games and second-hand cars. With prices edging 2.9% higher, the cost of factories’ raw materials was up 2.6% on last year. If there are no further lockdowns and restrictions, there is every chance that the inflation rate will reach the BoE’s 2% target by the end of Q3. However, the good news for mortgage holders is that the inflation will not rise much higher until the start of 2023 so that any hike in interest rates is unlikely over the next two years.

Meanwhile, the flash IHS Markit/CIPS UK Composite Purchasing Managers’ Index jumped 7.0 to a seven-month 56.6 high in March, driven by a rush of new orders in anticipation of the easing of Covid-19 lockdown restrictions early next month. This surprise pickup in business activity will see the knock-on effect of only a slight decline in Q1 GDP – not the 4% widely tipped at the beginning of the year. The UK’s January House Price Index sees prices falling 0.6% on the month, but the average price of a house is now US$ 365k – 7.5% higher than January 2020.

To keep any economy going, there has to be spending and because of the pandemic, consumer spending has fallen drastically, since so many jobs have been lost – and people have not got the spending power they once had – and those that have been lucky enough to remain in employment have not been able to spend on the likes of holidays and eating out because of the various lockdowns. Without the additional government spending the economic contraction would, without a shadow of a doubt, be worse. In short, if consumer spending contracts, the shortfall has to be picked up by public spending.

Official statistics showed that total household savings have increased, and total household debt remains mostly unchanged, largely due to a fall in spending on non-essential items over the various lockdown. Q2 2020 household savings ratio (household savings as a proportion of household disposable income) increased from 9.6% in Q1 2020 to 29.1% in Q2 of 2020, with deposits in bank accounts increasing by US$ 61.9 billion in Q2 2020. Unsecured debt fell in each month between March and November in total, as many households reduced their spending (and so were less likely to borrow).

Mr Micawber was half right with his observation, ‘Annual income 20 pounds, annual expenditure 19 [pounds] 19 [shillings] and six [pence], result happiness. Annual income 20 pounds, annual expenditure 20 [pounds] nought and six, result misery’. What was said is right when it comes to households and businesses, they have to be able to ‘balance the books’. Fortunately, the same does not apply to governments because, unlike the private sector, they cannot go bankrupt because they issue their own sovereign currency, and because they literally print the money. Furthermore, most of the borrowed money, utilising gilts, is from another public sector body, the BoE. If the Johnson administration had not spent so much money on the various stimulus packages to counter the negative impact of the pandemic, it is certain that the economic contraction would have been doubly worse and the recovery time a lot longer.

Time will tell whether the Biden confrontational approach to Russia, compared to his predecessor’s less adversarial style, will pay dividends. However, his first meeting with Vladimir Putin got off to a rocky start, as bilateral relations have sunk to historic lows. The Kremlin recalled its ambassador, Anatoly Antonov, after the new US incumbent had referred to the Russian president as a “killer”, with Putin’s spokesman noting that Biden “does not want to normalise relations with our country. This is what we will be guided by from now on”. Meanwhile, the US is said to be in the throes of imposing further sanctions, in response to the detention of Russian dissident, Alexi Navalny, 2020 US election interference and the recent cyber espionage attacks on US governments and businesses.

The US also seems to be at loggerheads with China as both parties traded insults at the start of a meeting in Akasaka last Friday – a sure indicator that relations are strained. The US started proceedings, with Secretary of State, Antony Blinken, hitting out at China’s stance of undermining global stability with its approaches to Hong Kong, Xinjiang and Taiwan. His Chinese counterpart retaliated, claiming that the US had a “cold war mentality” and that the country had used its military and financial clout to “suppress” other countries and to “incite some countries to attack China”. A spokesman for China commented that “when Chinese delegates came to Anchorage, not only did they feel the cold weather of Alaska but also the (cold) way the US treated their guests”.

A report from the Centre for Economics and Business Research estimates that Covid-19 has cost the UK economy US$ 344 billion, which equates to twice the annual output of Scotland. This is based on the reduction in the UK’s gross value added (GVA), a figure that measures the value of goods and services produced by the economy minus the costs of inputs and raw materials needed to deliver them. On the anniversary of the first lockdown, parts of the UK have now faced two more, resulting in high unemployment rates, businesses closing down and consumer confidence (and demand) plummeting. Furthermore, the economy has contracted by 10%, with last month’s GDP 9% lower on the year, as the government pumped in US$ 482 billion to keep the economy afloat. Cebr estimates that the three with the highest losses were London, the SE and the East of England with totals of US$, 70 billion, US$ 48 billion and US$ 36 billion. It still expects the economy to return to pre-pandemic levels by Q1 2022. After more than a year living with the pandemic, there are many Waiting For The End.

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