Morning Brief – UK: Mind the Gap

Morning Brief – UK: Mind the Gap

Fri 21 Jan 2022

UK: Mind the Gap


This refers to the gap between UK productivity and G7 productivity where the UK languishes at 13% below that of the average of the G7. While an improvement from the previous 16% deficit, the fact remains that the UK has an ongoing productivity problem. A study by the London school of Economics and the Resolution Foundation lists the following factors behind that poor productivity: low business investment, weak management and too few new commercial patents. Output per hour worked in the UK is 15% below that of the USA, Germany and France.

GBP/USD at 1.3640 and GBP/EUR at 1.2020.


Sanctions on Russia


It has to be said as an introduction that to date the market is not pricing in a Russian invasion of Ukraine, which means that should that happen, the impact on markets worldwide will be all the more pronounced. Currently EUR/USD 1.1327.

In the event that Russia does send its troops over the border into Ukraine, there are a range of sanctions of varying severity that could be imposed on Russia which include: 1. Disconnecting Russia from the SWIFT messaging system that is used for international payments by 11,000 financial institutions in 200 countries. There is a precedent for this: in 2012 Iran was disconnected but that was an entirely different story given the relative sizes and degrees of connectivity between Russia and Iran to the global financial system. 2. Banning the sale of microchips to Russia preventing technological growth. 3. Banning the purchase by international investors of Russian bonds or OFZs thereby depriving Russia of sources of investment financing and economic growth. 4. Lastly and most serious for Russia, the banning of financial transactions by non Russian countries with Russia. This would hurt Russia obviously since it would chiefly deprive it of converting Roubles to USD but it would also impact USA and Germany the most since those are the countries closest connected financially with Russia. USD/RUB 76.55.




Those who believe that inflation is constrained to the USA, EU and the UK should think again: it’s everywhere in the global economy. December inflation in Canada rose to a 30 year high raising expectations of a Bank of Canada rate hike. The BoC has a target inflation range similar to the Bank of England’s but lower at 1-3%. So the December annualised figure of 4.8% with core inflation at 2.1% is furrowing brows at the BoC. The Canadian Dollar strengthened on this rate increase talk with USD/CAD at 1.2489.


Saturday Night Fever


This film soundtrack went to Number 1 on this day in 1978 and stayed there for 24 weeks as disco fever swept the dancefloors of the world. Featuring a clutch of chart hits as well as many other memorable songs, the Bee Gees set the world on fire with both this album and the film. Here is Stayin Alive:


Well, you can tell by the way I use my walk
I’m a woman’s man, no time to talk
Music loud and women warm, I’ve been kicked around
Since I was born
And now it’s alright, it’s okay
And you may look the other way
We can try to understand
The New York Times’ effect on man

Whether you’re a brother or whether you’re a mother
You’re stayin’ alive, stayin’ alive
Feel the city breakin’ and everybody shakin’
And we’re stayin’ alive, stayin’ alive
Ah, ha, ha, ha, stayin’ alive, stayin’ alive
Ah, ha, ha, ha, stayin’ alive

Well now, I get low and I get high
And if I can’t get either, I really try
Got the wings of Heaven on my shoes
I’m a dancin’ man and I just can’t lose
You know it’s alright, it’s okay
I’ll live to see another day
We can try to understand
The New York Times’ effect on man


Have a Great Weekend!




Discussion and Analysis by Humphrey Percy, Chairman and Founder

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