Daily Brief – UK Economy

UK Economy

Now the dust has settled post Wednesday’s Autumn Statement or Mini Budget which as it turned out, was exactly that, taking the Office of Budget Responsibility’s two key forecasts, the UK economy can expect that inflation will stay higher for longer and that growth will fall in 2027 before increasing to somewhere between 1.2% and 1.5%. Inflation will remain in excess of 3.5% and will on today’s picture peak at 3.8% in 2027. Growth will fall to 1% in 2027. Chancellor Healey’s predecessor Rachel Reeves talked a lot about delivering UK economic growth but did not deliver despite Healey’s fulsome praise of her performance. Whatever one’s politics, it is evident that when it came to taking affirmative action on the UK economy, Chancellor Healey blinked and his Budget neither incentivized business nor prescribed tough love medicine.

GBP/USD 1.3366.

European Central Bank

Prior to the usual press conference to remove the topic from the list of likely questions, ECB President Christine Lagarde announced that she will step down on February 7th. Widely expected, as we have written previously, the race is now on to appoint her successor which is a process far beyond the appointment itself given the attention given to which countries hold the top EU posts. By any measure the Presidency of the ECB is up there and especially so given the list of issues currently piled up in the in tray: widely disparate EU inflation rates, France’s debt, civil unrest and political stasis situations, Germany’s industrial slide given the state of its auto industry and Chancellor Merz’s weak position and elections in all the Big EU Four in the next 12 months.

EUR/USD 1.1165.

Math

No s because this is not just arithmetic, it is American arithmetic: POTUS announced that Venezuela has gifted him and he in turn has gifted 1 million barrels of Venezuelan oil gratis to the American people. The USA has the right to buy the first 20% of Venezuelan oil from NABEP or North American Blue Energy Partners at USD 30 which is the cost of production. What POTUS has not said is that the next 1 million barrels have been agreed at a cost of USD 60 per barrel. The average of those two deals will be USD 30 in line with the agreement, but the first 1 million barrels is indeed free since it will not be paid for…..until the second 1 million barrels. Venezuelan oil is traded at a significant discount to world oil prices at USD 80 so the USA is still doing very well out of its new friendship with Venezuela.

Brent Oil USD 114.85.

European Property

Those investors with liquidity and an eye for value may be able to secure assets at a multi-year low point in continental Europe due to the uncertainty generated by the Ukrainian and US-Iran conflicts, inflation and most pertinently much higher refinancing costs causing existing investors to head for the exits. The UK market is also throwing up opportunities due to high transaction costs especially SDLT, continuing uncertainty of the present government’s policies and fears of higher interest rates. All that is needed are strong stomachs and the belief that there are indeed bargains to catch rather than falling knives.

EUR/GBP 0.8354.

If You Leave Me Now

This day in 1976 this number by Chicago was in the Top Ten and was just one of many hits by the band that described itself as a “rock and roll band with horns”. Be that as it may, the group laced its repertoire with classical, pop, jazz, R&B and…rock music.

If you leave me now
You’ll take away the biggest part of me
Ooh-ooh, no, baby, please don’t go
And if you leave me now
You’ll take away the very heart of me
Ooh-ooh, no, baby, please don’t go
Ooh-ooh, girl, I just want you to stay

A love like ours is love that’s hard to find
How could we let it slip away?
We’ve come too far to leave it all behind
How could we end it all this way?
When tomorrow comes and we’ll both regret
The things we said today

A love like ours is love that’s hard to find
How could we let it slip away?
We’ve come too far to leave it all behind
How could we end it all this way?
When tomorrow comes and we’ll both regret
The things we said today

If you leave me now
You’ll take away the biggest part of me
Ooh-ooh, no, baby, please don’t go

Have a Great Weekend!

Discussion and Analysis by Humphrey Percy, Chairman and Founder

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