August Economic Round Up: Hammond, Greece and Virtual Land

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August Economic Round Up: Hammond, Greece and Virtual Land

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As we do at the end of every month, CL News looks back over August, a month that brought us the usual uncertainty over Brexit, serious troubles for Venezuela and Argentina, good news for Apple and the uber-charismatic Philip Hammond making the headlines. August also brought us grim news for the UK’s farmers and a cautionary tale about online dating…

By Mark Richards.

Please note that nothing in this Economic Round-Up should be taken as financial planning advice: it is for general information and interest only.

The big story

He is perhaps the least charismatic person ever to be Chancellor of the Exchequer, but Philip Hammond is at the centre of our ‘big story’ for August.

The month started with news that Amazon’s UK profits had jumped from £24.3m to £72.3m. At this point, the Chancellor must have been rubbing his hands in the expectation of some juicy tax receipts but no – Amazon’s tax bill came in at just £4.6m and it was able to defer £2.9m of that, meaning that the Chancellor could expect a cheque for just £1.7m.

As we will report below, August was a month which saw the familiar tale of gloom for UK retail and the Chancellor has often spoken of ‘levelling the playing field’ between online retailers and the traditional high street.

So August saw him float the idea of an ‘Amazon Tax’ – a specific tax on online sales platforms to help traditional retailers.

“We want to ensure the high street remains resilient,” he said, “And make sure taxation is fair between businesses doing business the traditional way and those doing business online.”

Will it work? I have my doubts. Rewind the clock to the beginning of the last century and Hammond would have slapped a special tax on cars to protect the horse and buggy economy. But France and Germany have already introduced their own version of the tax: do not be surprised to see it included when ‘Spreadsheet Phil’ delivers his Budget speech on November 22nd.

What else happened in the UK?

August Economic Round Up: Hammond, Greece and Virtual Land

As we mentioned above, August was another poor month for the retail sector in the UK. House of Fraser went into administration and was bought by Sports Direct for £90m – around a tenth of the previous valuation. Marks and Spencer’s mooted more store closures and the month ended with the future of Homebase looking uncertain. However, Coca-Cola did give the high street – and the coffee business – a double espresso vote of confidence by agreeing to buy the Costa Coffee chain for £3.9bn.

The sun continued to shine in August and the Office for National Statistics reported the good weather had helped boost the UK’s Gross Domestic Product by 0.4% in the second quarter of the year. There was gloom for the housing market though, with August seeing house prices suffer their biggest month-on-month fall since July 2012. UK car manufacturing was also down in July, but one fall that was good news was yet another drop in unemployment, as it came down by 63,000 to 1.36m – the lowest level since 1975.

What did the UK’s FT-SE 100 index of leading shares make of it all? As I am writing on Friday morning the FTSE is at 7,498 where it is down 3% for the month. The pound is trading at $1.3016 and is down 1% in the month.

Countdown to Brexit

There were – inevitably – any number of stories about Brexit during August, the vast majority of them centring on the consequences of a ‘no deal’ Brexit, a fantastic opportunity for the UK or a potential disaster depending on your existing viewpoint. What did gradually emerge through the month was the realisation that ‘no deal’ holds as many terrors for the EU as it does for the UK. Perhaps the most relevant story came on the last day of the month, with City AM suggesting that leaders of the EU27 were preparing a ‘fudge’ agreement, allowing both sides to claim victory.

That would be entirely in line with the way the negotiations have preceded so far, and there is still plenty of scope for a last minute decision to extend the UK’s two year notice period beyond March 29th next year. There is a French saying which roughly translates as ‘only the temporary endures:’ you would not bet against reading our Economic Round Up in August 2028 and seeing a comment on the UK’s ‘temporary agreement’ with the EU…

What happened in the rest of the world?

August Economic Round Up: Hammond, Greece and Virtual Land

In Europe, the Greek bailout finally ended. On the surface this is good news: Greece is no longer borrowing from the EU, and the government is finally running a surplus. Dig a little deeper though and it is much less cheery – Greece has been left with severe debts which will take generations to repay. A fifth of the population – and a quarter of Greek children – live in severe material deprivation. The unemployment rate remains around 20% with youth unemployment twice that: half a million Greeks have left the country and the financial crisis has wiped out a fifth of the economy. As the old saying goes, only death and taxes are certain, but we can be fairly sure that sooner or later the headlines will be saying ‘Greek Crisis’ again.

Other countries in crisis were Venezuela – the country with the highest oil reserves in the world but brought to its knees by the current government and now seeing the largest exodus of people in South American history – and Argentina, where the country has once again had to beg the IMF for help and, as I write, interest rates have increased to an eye-watering 60%.

Two rather more successful countries, America and China, continued their trade war as the US imposed an additional round of tariffs on Chinese imports and Beijing inevitably retaliated. Domestically there were more woes for Donald Trump and more members of his former inner-circle decided they would rather do a deal with the prosecutors than the President. Could he be impeached? At this stage, I would bet against it, but the net is tightening.

In company news, Apple won the race to become the world’s first trillion dollar company as its shares rose following better than expected figures.

Bitcoin

We left Bitcoin standing at $8,229 (£6,282) at the end of July, having risen 30% in the month. In August the price drifted down 14.5% to $6,985 (£5,373) although it was once again a case of the currency being much lower in the middle of the month – down to just above $6,000 – and then rallying towards the end of the month. But in the volatile world of Bitcoin, that represents a month of relative calm…

And finally…

August used to be known in news circles as ‘the silly season.’ It was the month when nothing happened – everyone who made the news was on holiday – and rather more unusual stories made the headlines, simply because the newspapers had space to fill.

Well, there were certainly plenty of ‘rather more unusual stories’ this August. It was a bumper month for the ‘And finally’ section of the Round Up. Let’s get cracking…

We’ll start in the dangerous water of dating, where a divorcee looking for a wealthy boyfriend won £13,100 in damages from a dating agency after it failed to introduce her to “the man of my dreams.” Tereza Burki had paid the Seven Thirty agency – based in Knightsbridge – £12,600 but sued for ‘deceit and misrepresentation.’ The judge ruled that the dating agency had “made promises but failed to produce the goods.”

Not so much ‘plenty of fish in the sea’ as not enough. Poor old Ms Burki spent £12,600 to catch a mackerel but obviously only dated sprats…

August Economic Round Up: Hammond, Greece and Virtual Land

Also not having much luck are the UK’s farmers, who are increasingly the victim of rural crime, with villains reportedly enjoying a day out in the countryside and then finishing it by going home on a farmer’s quad bike. Rural crime is now a £44.5m a year problem and while some farmers are fighting back with CCTV and infra-red motion sensors, others are apparently using medieval fortifications, with earth banks, ditches and moats making a comeback. And there’s you thinking the only people who had moats were Conservative MPs…

Farmers, of course, have plenty of land, but the land everyone wants these days is in cyberspace, with the BBC reporting that people are spending real money to buy virtual land in a new city called Decentraland. When I say ‘real money’ I obviously mean a virtual currency – Ethereum in this case – but I assume the virtual currency has to be bought with ‘real money.’ So you invest money that only exists online buying land in a city that only exists online. I sometimes think the world is getting too complicated for me…

By | 2018-12-14T09:30:22+00:00 August 31st, 2018|Economy|Comments Off on August Economic Round Up: Hammond, Greece and Virtual Land

About the Author:

A previous financial services business owner, Mark is an experienced Journalist Speaker, Speechwriter and Coach. He has written for a number of websites related to the financial sector and won numerous awards. Mark has also published a number of books.