CL News looks back over June, a month that brought a meeting between Donald Trump and Kim Jong-un, more retail gloom for the UK, no further progress on Brexit and the emergence of a new global currency that could well supplant Bitcoin…
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
Sadly, the big story in the UK was one that I have covered many times – the continuing decline of retail and the national high street. As I write (on the morning of Monday, July 2nd) both the Mirror and the Daily Mail lead with ‘the battle to save Britain’s high streets.’
In truth, I am not sure that anything can be done. June brought us almost interrupted sunshine, and it may well be that the retail figures – like those for May – will show a rebound from the depressing figures disclosed in the Spring. The Mail is reporting that 50,000 retail jobs were lost over the last six months and is calling for an urgent review of ‘crippling business rates.’
Even that may not be enough: the simple fact is that it is easier, quicker, more convenient and cheaper to shop online. Even Costa is starting to struggle, reporting a 2% fall in like-for-like sales in the first three months of the year, which it blamed squarely on a lack of shoppers.
The long-term trend was neatly captured by the problems of House of Fraser. On June 4th it ‘rejected talk of a collapse:’ three days later it was announcing that 31 of its stores would close. With M&S also planning a programme of store closures, Debenhams issuing constant profit warnings and chains like Boots and WHSmith struggling for an identity, the UK high street increasingly looks like an idea whose time has passed.
What else happened in the UK?
June was a good month for the economic numbers in the UK. Unemployment was down and the number of people in work rose to a record of 32.4m – up 440,000 on the previous 12 months. That said, wage growth slowed again, so it is to be hoped that inflation does not start to rise again, otherwise we will be back on the realm of falling real wages.
It was good news for the NHS as Theresa May announced a “£20bn boost” – timed to coincide with the 70th birthday of the NHS on July 5th. The money will come from tax rises, but with four out five people apparently in favour of tax rises to fund the NHS, this is presumably a policy that got plenty of ticks from the PM’s focus groups.
For now, the Bank of England held interest rates at their current level but – as we have intimated below – a rise to 0.75% in August is looking more likely than previously thought.
The month ended with MPs voting overwhelmingly for the expansion of Heathrow airport – but do not expect the diggers to move in for a few years. The move will be widely challenged in the courts by local and environmental campaigners. I will be surprised if the work has been started when I write the June 2021 economic round-up…
Finally in this section, what of the UK stock market? The FT-SE 100 index of leading shares had a quiet month. It started June at 7,678 and fell by just 41 points to end the month at 7,637. The pound was also down slightly against the dollar, falling from $1.3299 to $1.3211.
Countdown to Brexit
Every month I religiously make notes on Brexit – as well as all the other economic stories – and every month I seem to throw them away as I sit down to write this section.
June brought us the second anniversary of the vote to leave the EU, but we remain no closer to knowing what the final shape of Brexit will be. Airbus and BMW made veiled warnings about the consequences of ‘no deal’ but with the Theresa May’s cabinet still squabbling about the shape of the eventual customs partnership – the latest crisis meeting is due to be held this Friday – then leaving with no deal is looking ever more likely.
At the time of writing the newspaper headlines are telling us that Friday will be ‘make or break for May.’ My view? That once again a last-minute compromise will be cobbled together and that this time next month we are still no further forward.
What happened in the rest of the world?
Go back to the day after the Brexit referendum. You are offered two scenarios. The first is that two years on, the UK has made no real progress in the inevitable Brexit negotiations. The second is that Donald Trump has been elected President and has had a successful meeting with Kim Jong-un. You would have dismissed both of them as ridiculous, and yet that is exactly what June brought us, as President Trump met the leader of North Korea in Singapore.
…And then a few days later he imposed the threatened trade sanctions on a wide range of Chinese goods, sparking fears of a widespread trade war.
As for the rest of the world, the new Italian government promised to stay in the Euro, a key ally of Angela Merkel’s threatened to resign over her immigration policy and Recep Erdogan won a new five year term as Turkey’s president, with some commentators arguing that it spelled the end of the country as a democracy.
Threatened trade war or not the US announced better than expected data on jobs as unemployment fell to an 18 year low. There was less good news for Facebook as it struggled with another privacy bug – this one affecting 14m people – and the US Federal Reserve announced that interest rates would rise, foreshadowing a similar move in the UK, which – as above – is expected in August.
Each month we report on the virtual currency Bitcoin. The price has been in steady decline over the last two months and, over the weekend, stood at $6,369 (£4,822). Why was June another bad month for the currency? First of all the South Korean cryptocurrency exchange Bithumb revealed that it had lost 35bn won (£24m) in a cyber-attack. That sent the price of Bitcoin down to around $6,600 and it declined further as governments and regulators around the world – the US Securities and Exchange Commission is the latest – made ominous noises about cutting down on Bitcoin fraud.
There was one word that defined June. England football fans might like to think it was ‘inevitable’ as our march to World Cup glory continues: sadly, it was ‘shortage.’ Specifically, a shortage of CO2 (carbon dioxide) which is not just something you vaguely remember from school, but a vital component in the food and drink industry.
It is used to add the ‘fizz’ in beer and fizzy drinks, and to extend the shelf life of meat and other food products. Scotland’s biggest abattoir has closed and – as I write – supermarket group Asda is rationing the supply of fizzy drinks to online customers.
There are also real fears that there could be a beer shortage this summer as Europe continues to struggle with the CO2 shortage – something that is already happening in Russia as “beer crazy football fans”threatens to drink the country dry.
But things can always get worse – and back in the UK, we could now be facing a shortage of … lettuce. The heatwave has apparently boosted demand for lettuce but – according to the brilliantly-named British Leafy Salad Growers Association – the soaring temperatures have stopped the crop growing. Broccoli and cauliflower crops have also been affected and the shortage could hit the supermarket shelves as early as this week.
Forget Bitcoin – by this time next month we could have a new worldwide currency: the Iceberg Lettuce…