Broken!                                                                                   21 June 2024

Aqua Properties posted that it has already sold over nine hundred units in The Central Downtown project, within just one hundred days of its launch; this is the firm’s seventh project. The leading real estate brokerage and developer estimates that it has captured an impressive 40.5% of all May transactions in Arjan. Its current project, spreading over a sprawling seven-acre hub, is the largest development in the community. The Central Downtown comprises four towers offering studios, and 1-3-bedroom apartments, featuring a 200k sq ft podium level, with over twenty-five amenities; they include, inter alia, a golf simulator, wave pool, basketball court, outdoor cinema, padel tennis, and organic farm, along with a 150k sq ft shopping mall, located under the four interconnected towers. Ali Tumbi, founder of Aqua Properties said, “this rapid sales success underscores Aqua Properties’ formidable presence in Dubai’s real estate market and highlights the high level of investor confidence in our projects.”

In early 2020, when the pandemic broke out, property prices and rentals witnessed a major slowdown with the country’s GDP shrinking 6.1% and account balance shrinking to 6.0% of GDP that year, as the population was largely ensconced at home, companies cut jobs, and many people leaving Dubai. However, the country recovered a lot quicker than many other nations for a variety of reasons, including progressive government measures, so that within less than a year, Dubai was showing marked signs of recovery. By the end of Q1 2021, the economy saw strong inflow of foreign funds, into the local realty sector, which started to push up property prices, with the other factor being a marked increase in the population – which grew by 295k, (8.71%), to 3.681 million in the four years from 01 April 2020 to 31 March 2024.

A study by Asteco points to the fact that Palm Jumeirah, Dubai Marina, Downtown, Jumeirah Village and Jumeirah Beach have seen the highest rental growth, in the apartment category, in Dubai, following the outbreak of the pandemic, i.e. from Q1 2021 to Q2 2024; the increases over the three years to Q1 2024 were 84%. 69%, 69%, 68% and 65% respectively. In the villa sector the leading five locations, with the highest rent increases, were seen in Jumeirah Islands, (106%), Palm Jumeirah, (100%), Dubai Sports City, (100%), Dubai Hills Estate (99%) and Damac Hills (96%).

On the flip side, the report shows that Meydan/MBR City, Mirdif, Bur Dubai, Dubailand and Deira saw the lowest rental growth in the apartment category in Dubai, following the outbreak of the pandemic, i.e. from Q1 2021 to Q2 2024; the increases over the three years to Q1 2024 were 16%, 23%, 28%, 30% and 35% respectively. In the villa sector the leading five locations, with the lowest rent increases, were seen in Damac Hills (29%), Dubailand (31%), Dubai Silicon Oasis, (37%), Mirdif (37%) and Reem (44%).

Obviously favourable locations, with features such as proximity to key business districts/ leisure attractions/educational facilities/shopping malls/green space etc. come with a premium; such areas include Dubai Marina, Downtown Dubai and Palm Jumeirah. Other locations that may have experienced oversupply – usually more affordable housing in tertiary locations and older properties, with limited amenities – will have seen rent rises but at a much slower pace but still a minimum 16% rent hike.

Asteco noted that “we anticipate that tertiary locations, such as those along Dubai-Al Ain Road, Lehbab Road, Al Qudra Roundabout, the E611 corridor, and areas near Al Maktoum International Airport, are poised for a marked uptick in rental rates”. The main driver being that these locations are benefitting from tenants who have been priced out of more centrally located and established communities. Such communities, considered to be on the outskirts of the city, are growing in popularity because of relatively cheaper, and newly-built accommodation, with most new communities boasting improved infrastructure and accessibility, coupled with attractive amenities. Many have already become MSSS (mini self-sufficient satellite) cities.

There is no doubt that Dubai has proved to be a magnet for wealthy Russians, Indian HNWIs, and a large number of British and European investors. The latter group, most trying to escape high local taxation, have been attracted by UAE’s zero income tax regime, golden visa, luxury lifestyle and strong gains in the emirate’s real estate market; furthermore, high tax rates, a deteriorating political outlook and increased street crime are other factors pushing them to make the move to Dubai, one of the safest global environments. The government is playing their part by providing a secure and safe city, with an unmatched quality of life, a world-class environment, including entertainment/leisure/education/retail facilities, and easy connectivity to all parts of the world. It is estimated that 20% of millionaires, (rising to 60% when it comes to centi-millionaires and billionaires), are entrepreneurs and company founders, are more likely to start new businesses – and create local jobs; they will also bring money with them and spend in Dubai to help grow the economy.

In the first five months to 31 May, there has been a record two hundred and seventy rental transactions, with annual rentals of US$ 272k (AED 1 million) or over, due to unprecedented demand for uber-luxury properties and further proof that the UAE is a magnet for HNWIs from across the world. Betterhomes note the prime locations dominating the high-end market were Palm Jumeirah, Mohammad bin Rashid City, and Dubai Hills Estate. The split sees 61% of the rentals being villas/townhouses, and the remaining 39% for apartments; the average size for luxury apartments was around 4k sq ft, while villas/townhouses average around 6.3k sq ft. Betterhomes data showed that an individual leasing  a luxury property in Dubai has got a cheaper deal than his peers in London, New York, Hong Kong and Singapore; the minimum annual rent for the luxury market is US$ 136.2k in Dubai but US$ 190.7k in London and New York, US$ 318.8k in Hong Kong and US$ 260.2k in Singapore.; the average size of a Dubai unit is much bigger than in the four cities.

On a global scale, the UAE is ranked fourteenth when it comes to homes for millionaires; latest figures indicate that the country is home to 116.5k millionaires, three hundred and eight centimillionaires and twenty billionaires. This year, the country is expected to welcome 6.7k new millionaires, well ahead of the likes of US, Singapore, Canada, Australia and Italy, with figures of 3.8k, 3.5k, 3.2k, 2.5k and 2.2k. On the flip side, China, the UK, India, South Korea, Russia, Brazil, South Africa, Taiwan (Chinese Taipei), Nigeria and Vietnam will have the highest net outflow of millionaires in 2024. Last year, 120k millionaires relocated to different countries worldwide, with numbers forecast to reach 128k this year and 135k in 2025. Dubai now boasts the highest concentration of wealthy individuals in the ME, with a collective net worth exceeding US$ 1 trillion.

The 2024 Cost of Living City Ranking by Mercer ranks Dubai as the fifteenth most expensive global city for international employees – three places higher than last year. To no surprise the main driver was the increase in the emirate’s cost of living, leading to a marked jump in residential property – both for sale and for rental. According to the survey, three-bedroom properties posted a 15% hike in rents, on the year while rents increased by 21% from 2023 to 2024, which is among the highest among the major cities. There is no doubt that inflation has played a large part in eroding the purchasing power of global hires and putting additional strain on their compensation packages. Yvonne Traber, Mercer’s global mobility leader, noted that “high living costs may cause assignees to adjust their lifestyle, cut back on discretionary spending or even struggle to meet their basic needs.”  Using New York City as the base city, and the dollar being used for currency movements, the survey covered two hundred and twenty-six cities, utilising a gamut of over two hundred items – from housing and transportation to food, clothing, household goods, and entertainment. The study showed that the prices of eggs, olive oil, and cup of coffee increased in the emirate while the prices of petrol, haircut, and blue jeans dropped between March 2023 and March this year. Regionally, the next most expensive city in the ME region was Tel Aviv, which has dropped eight places to rank sixteenth, followed by Abu Dhabi (43), Riyadh (90), Jeddah (97), Amman (108), Manama (110), Kuwait City (119), Doha (121) and Muscat (122). The top five expensive cities were Hong Kong, Singapore, Zurich, Geneva and Basel, with Abuja, Lagos and Islamabad at the other end of the scale.

As part of its strategy to increase capacity across Latin America, DP World has finalised a US$ 400 million expansion project at the Peruvian port of Callao; it is expected that container handling capacity at the port’s south terminal will increase by 80% to 2.7 million twenty-foot equivalent units, “solidifying Callao’s position as the key gateway for global trade on the west coast of South America”. The port’s pier has also been extended by 61.5%, to 1.05k mt metres, allowing Callao to accommodate “three ships or two mega-ships at once”, making it one of the few ports in South America with that capability. DP World is also heavily investing in Ecuador and Brazil to boost capacity and operational efficiency, spending US$ 140 million, with plans to extend its berth at the Ecuadoran Port of Posorja to 700 mt. DP World also manages a special economic zone adjacent to the port. The Dubai-based port operator has also teamed up with Brazilian railway operator Rumo to build a terminal at Brazil’s Santos port – one of the largest ports in Latin America – to manage 12.5 million tonnes of cargo annually; the construction cost for the new complex at Santos is estimated to be US$ 500 million.

In the annual IMD World Competitiveness Ranking, the UAE moved up three places to seventh behind first place Singapore, Switzerland, Denmark, Ireland, Hong Kong and Sweden; Qatar nudged one place higher to eleventh, place, Saudi Arabia one notch to sixteenth and Bahrain four spots to twenty-first in the table of sixty-seven global economies evaluated. China and India came in at thirteenth and thirty-ninth. The country was ranked among the top ten globally in more than ninety key sub-indicators, including second spot in terms of economic performance, fourth place for government efficiency and tenth for business efficiency. It was also rated highly for its business-friendly environment, the dynamism of its economy, reliable infrastructure and its competitive tax regime. HH Sheikh Mohammed bin Rashid commented “our thanks and appreciation go to all the teams in the government, economic, and development sectors who work with one spirit to achieve a single goal: the progress of the United Arab Emirates.” The report posted the three most influential trends, having an impact on businesses in 2024, are the adoption of AI, the risk of a global economic slowdown and geopolitical conflicts.

According to the UN Trade and Development’s World Investment Report 2024, the UAE was ranked second to the US in 2023 in the number of greenfield FDI project announcements – at 1,323, 33% higher on the year. In terms of inflows, there was a 35% hike in value to US$ 30.69 billion, whilst outflows came in 10.1% lower at US$ 22.33 billion. FDI outflow stock was 9.3% higher at US$ 262.21 billion. FDI outflow stock grew to US$ 262.208 billion in 2023 from US$ 239.880 billion in 2022. Last year, global FDI decreased by 2.0% to US$ 1.3 trillion. The report noted that there had been another year of double-digit declines in global foreign investments, driven by increasing trade and geopolitical tensions in a slowing global economy. It also added that “modest growth for the full year appears possible”, citing the easing of financial conditions and concerted efforts towards investment facilitation – a prominent feature of national policies and international agreements. FDI flows to developing countries fell by 7.0%, to US$ 867 billion, in 2023 reflecting 8.0%, 3.0% and 1.0%  decreases in developing Asia, Africa and Latin America/Caribbean. On the other hand, flows to developed countries were strongly affected by financial transactions of multinational enterprises, partly due to efforts to implement a global minimum tax rate on the profits of these corporations. Inflows to most parts of Europe and North America were down by 14.0% and 5.0%. With tight financing conditions in 2023, the number of international project finance deals – crucial for funding infrastructure and public services such as power and renewable energy – fell by 25%. This triggered a 10.0% reduction in investment in sectors linked to the Sustainable Development Goals, most notably impacting agri-food systems, and water/sanitation. These sectors registered fewer internationally financed projects in 2023 than in 2015, when the goals were adopted.

Latest figures from the Central Bank of the UAE reconfirm the importance of small and medium-sized enterprises to the national economy, as do figures from the Ministry of Economy, indicating that the SMEs sector represents more than 95% of the total number of companies operating in the country, whilst providing 86% of all jobs in the private sector. It is estimated that the accumulated balance of financial facilities and loans, extended by banks operating in the UAE, to SMEs reached US$ 22.26 billion by the end of Q1, whilst loans to SMEs accounted for 9.7% of the total accumulated balance of financial facilities for the trade and industrial sector which stood at US$ 229.35 billion by the end of March 2024.

The value of gold reserves of the Central Bank of the UAE grew 12.6% on the year to reach US$ 5.34 billion by the end of March 2024, and by 9.8% on a monthly basis from February’s balance of US$ 4.87 billion. Over the past five years, the value of gold reserves has more than quadrupled from 2019’s balance of US$ 1.10 billion.

It is expected that Q3 will see the finalisation of a deal between a consortium led by Brookfield Asset Management and Gems Education. Dubai’s largest education provider, which expects, next term, to have a record 140k student enrolment, and forty-six schools in the UAE and Qatar, already has an impressive array of financial backers including Gulf Islamic Investments, Marathon Asset Management and the State Oil Fund of Azerbaijan. No financial details were made available, but some reports put the investment at the top end of US$ 2.0 billion. Gems’ CE, Dino Varkey, commented that “we are well positioned for future growth, thanks to a supportive operating environment that is driving record enrolments, underpinned by a strong UAE economy and a growing population,” and the investment will help the company prepare for its “next phase of growth”.

The DFM opened the shortened week on Wednesday 19 June, 6 points (0.1%) higher the previous fortnight gained 28 points (0.7%) to close the trading week on 4,012 by Friday 21 June 2024. Emaar Properties, US$ 0.09 higher the previous week, gained US$ 0.04, closing on US$ 2.15 by the end of the week. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.62, US$ 4.43, US$ 1.52, and US$ 0.35 and closed on US$ 0.60, US$ 4.47, US$ 1.57 and US$ 0.35. On 21 June, trading was at one hundred and eighty-nine million shares, with a value of US$ 104 million, compared to ninety-seven million shares, with a value of US$ 47 million, on 14 June.

By Friday, 21 June 2024, Brent, US$ 3.09 higher (2.8%) the previous week, gained US$ 2.49 (3.0%) to close on US$ 85.15. Gold, US$ 44 (1.9%) higher the previous week, shed US$ 27 (1.1%) to end the week’s trading at US$ 2,322 on 21 June 2024.

Swifties may wish to know that the singer has reportedly ordered forty-five large kebabs for her team ahead of her Wembley Stadium show, starting tonight; Taylor Swift is set to perform in front of up to 90k fans in the first of eight Eras Tour shows at the London venue. It has also been reported that she had bought hundreds of Greggs sausage rolls, steak bakes and bakery goods for her team when performing in Edinburgh earlier in the week.

Another week and further nails in the coffin for the embattled plane maker Boeing, now being involved in reports of a Southwest Airlines Boeing 737 Max 8 being rocked side to side while in air, a potentially dangerous movement known as a ‘Dutch roll’. The incident took place last month and US regulators, with the FAA, noting the aircraft regained control and no-one on board was injured, but the plane suffered “substantial” damage. A post-flight inspection of the two-year-old plane revealed significant damage to a unit that provides backup power to the rudder.

The other ongoing investigation, which is giving the plane-maker another major headache , is that it was found to have potentially falsified documents used to certify titanium in its planes – Boeing had initially reported the problem. It also noted that the titanium issue was “industry-wide”, involving shipments from a limited set of suppliers, but that tests performed so far indicate that the correct alloy was used, despite the false documentation.

This week also saw the release of another damning report by a whistleblower that included allegations that defective parts may be going into 737 variant aircraft; the quality assurance investigator, at an assembly plant near Seattle, also claimed that Boeing hid evidence after the industry regulator, the Federal Aviation Administration, told the company it planned to inspect the plant in June 2023; it “ordered the majority of the (nonconforming) parts that were being stored outside to be moved to another location”, and that “approximately 80% of the parts were moved to avoid the watchful eyes of the FAA inspectors.”

Following the two fatal 737 MAX crashes, in 2018 and 2019, Boeing signed a deferred prosecution agreement in 2021, agreeing to pay US$ 2.5 billion to resolve the investigation into its conduct, compensate victims’ relatives and overhaul. The terms of that deal were due to expire in January 2024 but, two days beforehand, the Alaskan Airline 737 MAX 9 mid-air panel blowout occurred. Now some relatives, of the three hundred and forty-six persons who perished in the two crashes, say that Boeing should be fined almost US$ 25.0 billion and face criminal prosecution, being guilty of the “deadliest corporate crime in US history”. The plane maker has breached its obligations in the 2021 agreement that shielded Boeing from criminal prosecution. Boeing denied last week that it had violated the terms of the deferred prosecution agreement through its production practices ahead of the Alaska Airlines incident.The Department of Justice will make a final decision on the case by 07 July. Despite its market cap falling by a third YTD, its CEO’s 2023 pay package of almost US$ 33 million was signed off by shareholders last month.

Ferrari’s first foray into the EV sector will see the Italian automaker opening a new plant, manufacturing a vehicle that will cost at least US$ 535k to put on the road. Ferrari has faith in the success of this new venture, bearing in mind that the price tag does not include features and personal touches that typically add 15% – 20% to the base price. It expects that overall production will be up 33%, even in a period that there is declining demand for such mass-market vehicles. The 2022 launch of its Purosangue SUV indicated that Ferrari could survive in a sector of the market, other than its traditional two-seat sports cars and grand tourers. Its new factory, to be completed by Q4, will give Ferrari an additional vehicle assembly line and will make petrol and hybrid cars as well as the new EV, plus components for hybrids and EVs. It is reported that a second EV model is also under development, but at that time, the company might not want to increase overall production to 20k vehicles per year, at least in the short term.

Having only recently supplanted Apple as the world’s most valuable company, Microsoft has now been dethroned by Nvidia on Tuesday when its market cap topped US$ 3.326 trillion – a huge leap bearing in mind that in February, it had hit US$ 2.0 trillion for the first time; YTD its share value has jumped 170%, compared to Microsoft seeing its value only 19.0% over the same period. The stock has risen more than 170% this year given the chipmaker’s leading position in the AI race with 80% of the processor market. By today, 21 June, Apple had returned to pole position.

Despite posting a Q1 “strong performance”, including a 1.0% increase in revenue to US$ 938 million, Premier Inn owner Whitbread still aims to go ahead with earlier announced job cuts of 1.5k. The brewer had said the cuts were part of plans to build more hotel rooms and slash its chain of branded restaurants by more than two hundred; it owns restaurant chains including Brewers Fayre, Beefeater and Bar + Block. In a trading update on Tuesday, the company said it was “confident” in its outlook for the year “underpinned by our strong commercial programme and good progress on cost efficiencies”. However, the Unite union is not so content and has organised the protest outside the Dunstable headquarters of the hospitality company. The union, which is not formally recognised by Whitbread, claims that it has failed to answer, “basic questions” about the redundancy process and also claimed it has not properly consulted staff, some of whom live in accommodation tied to their workplaces, and noted that “generating runaway profits while trampling workers is business as usual for Whitbread”.

With Sainsbury’s moving out of banking, to focus on its core business, an agreement has been reached with NatWest for it to buy the supermarket’s banking  sector which will see the high street bank gaining about one million customer accounts, whilst taking on US$ 1.78 billion of unsecured personal loans and US$ 1.40 billion of credit card balances, along with US$ 3.30 billion of customer deposits. The deal will result in Sainsbury’s Bank paying out US$ 159 million to NatWest and US$ 317 million to Sainsbury’s, with NatWest taking on the credit cards, loans and savings accounts of Sainsbury’s Bank. The buyer is not acquiring the Sainsbury’s Bank brand, or its cash machines, insurance or travel money businesses.

Movie history has been made this week with Pixar’s Inside Out 2 becoming the highest-grossing animated film opening of all time, grossing an estimated US$ 295 million at the box office. Ticket sales topped US$ 155 million in North America, the film’s largest market, well clear of the US$ 90 million made by the original movie in 2015, going on to US$ 858 million worldwide while in theatres. However, the number of cinema tickets sold in North America this year is down by 25%, compared to the same period in 2023.

US Attorney General Merrick Garland has accused Done’s CEO of running a US$ 100 million scheme to fraudulently distribute over forty million pills of Adderall and other controlled substances. It is alleged that the telehealth company’s clinical president, David Brody, and CEO Ruthia, conspired “to provide easy access to Adderall and other stimulants for no legitimate medical purpose”. These charges are the Justice Department’s first criminal drug distribution prosecutions related to telemedicine prescribing through a digital health company,” after regulations were loosened during the pandemic. The San Franciscan start-up benefitted from Covid as an online way to obtain Adderall, (a medication that helps manage symptoms of ADHD – which can include an inability to focus on a single task), by paying a monthly subscription fee. Part of the alleged scheme included increasing the subscription fee, thus increasing the value of the company to “unlawfully enrich themselves”. They are also accused of defrauding government healthcare assistance programmes Medicare and Medicaid, as well as pharmacies, out of at least US$ 14 million and of conspiring to obstruct justice by deleting documents and emails.

The Department of Justice has charged twenty-four people with offences, that also include distributing narcotics, and has accused a Chinese “underground banking” network, of helping Mexico’s powerful Sinaloa drugs cartel with money laundering and other crimes. It also blames the cartel of assisting to fuel a deadly epidemic by flooding the country with fentanyl, a synthetic opioid up to fifty times stronger than heroin! It also claimed that more than US$ 50 million in drug proceeds were illegally ‘transferred’ between the Mexican cartel and the Chinese “money exchanges”. Law enforcement officers have seized about US$ 5 million  in proceeds, as well as guns and hundreds of pounds of cocaine, methamphetamine and ecstasy pills. In 2022, over 70k Americans died from fentanyl overdoses of the drug, and Washington says Chinese-made opioids are fuelling the worst drug crisis in the country’s history.

Apart from May retail sales beating forecasts, (up 3.7% on the year, compared to 2.3% in April – due to a five day public holiday boost), much of the latest economic data from China paints a largely downbeat picture for the economy, with the slowdown in the property sector still in the doldrums and industrial output still behind official forecasts, growing at 5.6% on the year, compared to the previous month’s return of 6.7%. There are concerns that Chinese solar and electric vehicle producers may see increased global tariffs eating into their revenue streams which in turn will impact their margins and production lines. Property investment fell 10.1%, year-on-year, in January-May, compared to a 9.8% decline in January-April. For the eleventh consecutive month, new home prices slipped 0.7% on the month in May – its steepest drop since October 2014. The property sector, which accounted for nearly 30% of economic output before the downturn, has been hit by a regulatory crackdown as well as demographic and broad economic pressures. China’s property market slump, high local government debt and deflationary pressure remain heavy drags on economic activity.

However, there was some good news. The government has launched a raft of measures to help homebuyers, such as easing mortgage rules. Exports did help bolster the economy, with steel and aluminium output posting sharp jumps in May, whilst January – May manufacturing investment showed strong growth of 9.6%, underpinned by China’s emphasis for “quality growth” through technological breakthroughs and innovation this year. Fixed asset investment rose 4.0% in the first five months of 2024 from the same period a year earlier. Consumption has remained fairly stable. China’s economy grew a faster-than-expected 5.3% in Q1, in line with the government’s 5.0% target but the ‘canary in the coal mine’ remains the sorry state of the property sector.

The 2021/22 annual Taxation Statistics showed that one hundred and two Australians, who earned more than US$ 660k (AUD 1 million) in total income, paid no tax in 2021–22: the previous year the number had been sixty-six. It was estimated that their average income that year was US$ 2.51 million and that they managed to squeeze out US$ 184.67 million worth of tax deductions, (of which US$ 158.77 million was in donations to tax-deductible charities), which reduced their tax bills to zero. Interestingly, 2.3 million Australians declared rental income, with 1.6 million owning only one investment property with 428.0k (19%), 132.3k (6%) and 47.6k (4%) owning two, three and four and over properties; 19.5k and 20.0k own five and over six properties. There was an 87.3% increase in overall rental net income at US$ 3.97 billion. In the year, more landlords made profits than losses, as interest rates were at historic lows for much of that financial year, as the net rental gain median was US$ 708, and the average was US$ 1,725. 950k landlords who made a loss (were negatively geared), the median loss was US$ 2,362 and the average was US$ 4,173.

Doctors continue to dominate in terms of earning the highest average incomes by occupation, with surgeons and anaesthetists earning on average US$ 305k and US$ 285k. Financial dealers came in next, earning US$ 247k. The lowest-paid occupations were classed as “drivers” with an average taxable income of US$ 6.7k and “care workers” with an average taxable income of US$ 8.9k. At the other end of the scale were “boxers” (US$ 10.7k), “leaflet deliverers” (US$ 12.2k) and “cooks” (US$ 13.9k). More than 15.5 million Australians lodged tax returns in 2021–22, with an average taxable income of US$ 47.8k, but when the very high and the very low earnings were omitted, the figure was US$ 35.1k. Total tax revenue collected by the ATO was US$ 350.69 billion, of which 50.3% came from individual income tax US$ 176.43 billion, followed by companies, GST, super funds, excise, Fringe Benefits Tax and Petroleum Resource Rent Tax/Luxury Car Tax/Wine Equalisation Tax accounting for US$ 84.74 billion -24.2%, US$ 50.28 billion – 14.3%,  US$ 19.25 billion – 5.5%, US$ 14.95 billion  – 4.3% and US$ 4.96 billion – 1.5% respectively.

Recently issued Eurostat data showed that, in April, the EU trade balance with the rest of the world showed a US$ 16.08 billion surplus – a major improvement from the previous year’s US$ 11.85 billion deficit – because of an increase in the deficit of the energy sector and a decrease of surplus for ‘chemicals. Exports to the rest of the world were 14.0% higher at US$ 265.02 billion (2023 – US$ 232.48 million), with imports 1.8% higher at US$ 248.86 billion, (2023 – US$ 244.36 billion). In the four-month period to April, the euro area posted a US$ 77.92 billion surplus, compared to a deficit of US$ 21.94 billion a year earlier. Exports and imports to the rest of the world rose 0.8% to US$ 1.02 trillion and lost 8.9% to US$ 943.35 billion respectively. Intra-euro area trade fell 5.1% to US$ 937.67 billion. There was a US$ 14.90 billion surplus in trade in goods with the rest of the world, compared to a deficit of US$ 15.22 billion in April 2023. Both the extra-EU exports and imports were both higher in April 2024, on the year, were 14.9% higher at US$ 238.04 billion and 0.3% at US$ 222.28 billion respectively.

After two years on the sidelines, the London Stock Exchange has regained its position as the most lucrative bourse in Europe, with the total value of companies listed at US$ 3.18 trillion on Monday, overtaking the Euronext Paris total of US$ 3.13 trillion. After several years of underperformance, the UK market is recovering, whilst the French market has recently been impacted by political uncertainty. London had been Europe’s leading bourse for many years but lost that position in November 2022 for a variety of reasons such as the fallout from former Prime Minister Liz Truss’s mini-Budget, a weak pound, recession fears and Brexit. As noted in previous blogs, the LSE has seen several big firms, including ones based in the UK, choosing to list in the US rather than the UK. One of the biggest challenges facing the LSE over the last decade has been pitching to investors and companies tempted by American exchanges. The S&P All-Share index, which tracks the value of every listed company in the US, has soared over 85% over the last five years, whereas over the same time span, the equivalent FTSE All-Share index has increased by less than 10%. However, it must be noted that returns are skewed somewhat by a handful of highly valued tech stocks, including Google, Apple, and Amazon, are taken into consideration.

In 2012, under pressure from MPs, the Post Office commissioned a report from Second Sight to look into claims from sub-postmasters that Horizon had been to blame for shortfalls in their accounts, rather than criminality. At the ongoing Post Office enquiry, a forensic accountant, working for Second Sight, claimed that the Post Office was “constantly sabotaging” the work of independent investigators probing issues and that it had unjustifiably withheld documents. He said protecting the Post Office brand was the priority, rather than supporting sub-postmasters, and added that former Post Office boss Paula Vennells tried to steer investigators away from looking into potential miscarriages of justice. He added that rather than being interested in getting to the truth of what happened, the Post Office had tried to obstruct Second Sight’s efforts, and that “requests for documents were either ignored or responses were excessively delayed,” and that “unjustified claims of legal professional privilege were used to justify withholding documents from us.” The forensic accountants were sacked by the Post Office in March 2015.

UK retail sales in May surprised the market by posting a higher than expected 2.9% hike, driven by increased footfall, better weather and deals; the previous month had seen so much heavy rain that had kept shoppers away from the high street, with sales falling by 1.8%.   The Office for National Statistics reported a strong monthly growth in non-food shops including the likes of footwear, sports equipment, games and toys outlets posting an improvement in their quantity of sales, with a marked rebound in clothes and furniture sales.

Apart from an improvement in May retails sales, the only other good news that Rishi Sunak has had all year was that, this week, the UK’s inflation rate finally declined to the BoE’s 2.0% target last month, for the first time in almost three years; in October 2022, inflation topped 11.1% – its highest level in over forty years. As expected, the central bank has maintained rates at 5.25% – still the highest rate seen since 2006. The monthly 0.3% dip was down to a slowdown in price rises for food/soft drinks, recreation/culture and furniture/household goods, offset by a sharp jump in petrol prices. The fall in inflation only indicates that prices are still moving higher, albeit at a slower rate, and does not necessarily mean that the prices of goods and services overall are coming down. Indeed, food prices are still  up to 20% higher than at the beginning of 2022. UK inflation is now rising at its slowest pace since July 2021, and it is also lower than in the eurozone and the US, where rates in May were 2.6% and 3.3% respectively. However, it is highly unlikely that the BoE will tinker with rates until August, at the earliest, despite the headline rate being finally reined in at 2.0% because inflation for all services remains at 5.7%. Real prices for food, energy, clothing and rents are all around 20% higher than they were three years ago and for some mortgage repayments have doubled. For the first time UK households are poorer in real terms at the end of a 2024 Parliament than they were at the start in 2019.

Only a fortnight away from the General Election, the people of Birmingham are fully aware that whoever gets the keys for Number 10, conditions in the UK’s second city will remain in a diabolical state. The city, which is heavy in debt and needs to claw back US$ 600 million over the next two years, has child poverty hovering around the 50% level, and the once industrial powerhouse in the eighteenth and nineteenth centuries, cannot now afford to keep its lights on at night and has had to resort to fortnightly garbage collection. Nine months ago, the City Council issued a 114 notice, effectively declaring it was bankrupt. Other cuts to public service will see twenty-five of the city’s libraries close, money for children’s services slashed and a 100% funding cut to the arts and culture sector by 2026. 40% of the city’s population is under twenty-five and it is felt that this sector will be hardest hit from the budget cuts, as frontline and preventative services bear the brunt of the cuts. Birmingham has the highest unemployment rate of all the UK’s major cities.  There are various reason put forward for the sorry state of the city’s finances. The austerity measures – including a marked reduction in government spending on local authorities, welfare, local authorities, police, courts and prisons as well as the cancellation of school building programs – unnecessarily brought in under the Cameron/Osborne administration have seen public services being paralysed across the UK. The largest local authority in Europe, which has a revenue stream of over US$ 4.3 billion, has also been wounded by self-inflicted injuries, including a bill of up to US$ 954 million to settle equal pay claims in a gender-pay dispute settlement and the flawed implementation of a new Oracle IT system; the Oracle project’s cost rose from an initial US$ 24 million to US$ 48 million, and following ongoing issues BCC announced in June 2023 that it would have to spend an additional US$ 59 million to rectify the problems that were being experienced.

The current government’s current Secretary of State for Levelling Up, Michael Gove, who lives in cuckoo land, has a real job when it comes to levelling. To be fair to the man, who sems to have a reputation of stabbing other politicians in the back if circumstances so direct, has an impossible task. Of the UK’s core cities, Birmingham has the highest number of people claiming unemployment support, with 12.0% of residents, relying on government benefits, compared to just 5.0% in London, whilst just under 50% of all children in Birmingham are classed as living in poverty, compared to 32% in the capital. London offers more job opportunities – 76.0% to 69.2% – whilst the crime rate, at 14.0%, is higher in Birmingham compared to London’s 8.7%. To make matters worse, it is estimated that ‘Brummies’ will die three years younger than a Londoner. Welcome to the UK where the NHS, immigration policy, Rishi Sunak’s promises, England’s Euro hopes and the ruling Conservative Party are all Broken!