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Posts from the ‘UK’ Category

Avoid Brexit Cliffs Of Dover: Build Affordable Homes

While Brexit negotiations trundle along economic warnings are building up. Former Labour Chancellor during the financial crisis of 10 years ago Lord Darling and former deputy BoE governor Charlie Bean have both recently shared concerns over debt remaining high since the 2008 crisis and an economic slowdown in the UK economy continuing into 2018. The latest construction purchasing managers’ index survey recorded a fall in activity from June-July 2017 and a reduction in new business since August 2016.

Widespread wealth and job insecurities from low wage growth evident with public sector wage increases of only 1% and worries over technological displacement of workers are not helping consumer confidence. The combination of lower real wages and rising inflation from a falling pound, a consequence of Brexit, and political uncertainty are producing the weaker consumer and construction sectors which are already showing the strain.

Will exports of now cheaper finished goods and services fill the gap the consumer and construction sectors make in the GDP projections for H2 of 2017 into 2018?

They could certainly help however all kinds of investment decisions are dependent on the meandering Brexit talks finally making some solid progress. The split in opinions within the Conservative government over Brexit does little or nothing to inspire confidence to help business make investment decisions.

In 2018 Retailing spending will remain weak as cash strapped consumers will maintain their C.21st century “Amazon effect” approach to consumption where an internet search helps compare prices, discounts are routinely expected thus squeezing retail margins and constricting growth remain particularly for non-essential purchases. When cash is hard to come by price is king.

A suggestion for an impetus for the economy and in light of the Grenfell Tower disaster (June 2017 blog) concerns over public housing procurement. This combined with comments on UK housebuilders and housing associations never constructing enough homes at affordable prices. A fresh public housebuilding policy focussed on this critical aspect of economy would surely provide a boost for the ailing construction industry and provide new homes and some job security across many sectors of the UK economy. The government Help-to-Buy scheme does more to prop up existing prices than to build the numbers required. So a more radical house production solution is urgently required although with industry skill-shortages it would struggle to make any policy happen quickly.

Nevertheless, a new or re-invigorated agency and overhauled construction regulations would improve safety and procurement processes. However how to finance such a programme may require some adjustment and planning issues would raise their NIMBY objections as usual. The government needs to do something to provide a swithering electorate to support them regardless of some resistance in the Shires. It would certainly be a bold urban investment strategy to embark upon to help a slowing uncertain economy. Unless the entire UK government remains in a policy initiative funk incapable of anything except bickering over Brexit until the economy does go over the Cliff in 2019.

Let’s see if we’ll be crying over the White Cliffs of Dover…



The UK in 2017: Sinking or Burning?

The spring time terrorist attacks in both London and Manchester along with the Grenfell Tower fire tragedy in London’s Borough of Kensington and Chelsea have left a painful and fearful legacy in the UK at present. While the new diminished government barely copes.

The UK Election

The June 2017 General election was premised on Brexit. It aimed to provide Prime Minster Theresa May with a larger majority and a stronger mandate to negotiate a hard line in the Brexit negotiations with the EU which commenced this week. She failed and now her tenure in Number 10 hangs by a thread. A confidence and supply deal agreed has been struck with the Democratic Unionist Party of Northern Ireland (DUP) to provide a small working majority which some in her party find distasteful.

The Brexit deal or the stance of the DUP on parliamentary legislation presented, although much reduced from the election manifesto, could cause her government problems. The SNP may attempt to thwart the Repeal Bill’s passage through parliament by the legislative consent motion (LCM) requiring the consent of devolved administrations over repatriated EU laws. The ascendant Scottish Conservatives also have more influence and concerns over the forthcoming Brexit Bill as Conservative leader Ruth Davidson MSP wishes for an open Brexit rather than a hard exit from the EU (Guardian, 2017).

Also, LGBTQ issues opposed by the DUP have raised concerns with openly-gay Scottish Secretary David Mundell MP and Davidson MSP. Although Theresa May has given Davidson some reassurances that this won’t transpire. This hopefully will be more reliable than she hoped, for a majority and strong and stable leadership (Telegraph, 2017).

This blog’s prediction for the election result was way off the mark (LDC blog for May 2017). However, the prediction is now for awkward times ahead for No.10 and the UK Brexit negotiators as the more certain guess.


The terrorist attacks, although widely condemned throughout the world, perhaps now seem destined to become part of modern life in western countries. This replays awful similarities with the IRA, Basque, Red Brigade or ETA bombing campaigns in the UK and Europe from the 1970s-1990s. Notably, these despicable atrocities were sometimes accompanied by a warning beforehand.

However, deranged lone wolf attackers are extremely difficult to identify and stop before committing their dreadful atrocities. The opportunist claims by ISIS or other terror groups to claim “credit” for any attacks are deplorable. Consequently, any proposed draconian measures for the public to spy and inform on suspicious neighbours has Orwellian implications for freedom of speech, association and movement. What needs to be done to improve intelligence to thwart these atrocities? It needs local knowledge with communal care and attention with a willingness to help friends, neighbours and colleagues long before they become radicalised, hateful or simply mentally disturbed. No easy task in a busy world.

The unfolding consequences of the Grenfell Tower fire, poor regulation and building procurement.

The residents and local inhabitants of Grenfell Tower in North Kensington demonstrated some genuine kindness and commitment to help other after the recently renovated 1970s tower block ignited like a Roman candle in the early hours of the 14th of June. The final numbers of dead are yet to materialise with 79 killed or missing so far and 65 rescued from an estimate 400-600 residents according to a BBC News report on the 23rd June 2017 (BBC, 2017).

Construction Industry commentators have declared the deaths as tragic and totally avoidable. How a multi-million pound recently renovated building was left without an adequate means of escape, firefighting systems and external cladding which was seemingly flammable is a scandal set to run for years.

The cladding panels have failed a government safety inspection since the fire causing more fear and upheaval. In Camden residents have been evacuated to temporary accommodation for months while building repairs are made to affected buildings in the Chalcots Estate (Evening Standard, 2017).

Reports suggest there will need to be cladding removed from a wide variety of public buildings so far in 76 local authorities throughout the UK which have failed further Building Research Establishment (BRE) safety checks.

What this suggests about the state of public sector building procurement and contracting is dire. This is an utter shameful debacle for the UK construction industry as it will take many years and many millions of pounds of taxpayers’ cash to rectify.

The entire process and professional competency in many parts of the construction Industry are clearly inadequate and substandard. The industry is littered with building regulations, codes of practices and health and safety legislation such as the Construction, Design and Management Regulations literally designed to design out hazards like flammable cladding. Clearly, the building regulations need addressing to include fire systems in residential blocks of all types.

However, the plethora of safety management documents required for public sector housing contracts and the professionals producing them should prevent catastrophic occurrences. Are these safety management documents just a pointless paper chase? Is there hands-on supervision of building works and adequate material specification during these contracts-seems unlikely? In Edinburgh 17 new high schools were built, using PFI contracts, that lost their cladding due to high winds and the causes of the failures are reported in a damning independent report (Architect’s Journal, 2017).

Parsimonious building owners or government austerity are one issue and another is an industry obsessed with cost control and budgets without competent design and building supervision.

Somehow in spite of all this UK focussed incompetence the stock market has risen while the pound has fallen. This adjusts for the foreign earnings of FTSE100 and 250 constituent companies. Shall more UK focussed companies fair worse with a weakening pound, slipping UK consumer spending, rising inflation and stagnant wage growth amid political uncertainty? Seems highly likely as combined with the UK’s poor productivity wealth creation is dipping.

It’s time to spend some more borrowed money on housing provision, infrastructure and education in a manner that benefits a declining world power to at least care for its citizens and children without squandering it on the meaningless procurement process.

If we’re going to sink in global prestige let’s not burn money and especially life on inadequate edifices.

The UK can do better but some bold changes and moves are required by competent people. Let those who are not capable either step aside or be made accountable for their failures.


References and Further Reading-

Architect’s Journal; (2017); ”Poor Construction and Lack of Scrutiny Caused Scottish Schools Defects’, by Richard Waite, Emap Publishing Ltd, UK. Website accessed Mon. 26th June 2017:

BBC News Service; (2017), “London Fire: What We Know So Far About Grenfell Tower”, BBC, London, UK. Website accessed: Mon.26th 2017:

Evening Standard; (2017),” Hundreds of Fire Doors’ Were Missing From Tower Blocks Evacuated In Camden,” by Patrick Grafton-Green, Evening Standard, London, UK. Website accessed Mon.26th June 2017:

Guardian; (2017); “ Ruth Davidson Dismisses Reports of Scottish Tory Breakaway,” by Chris Johnston and Anushka Asthana, Guardian News and Media Ltd, London, UK. Website accessed: Mon.26th June 0217:

Telegraph; (2017); “Scottish Secretary Urges DUP to Change Its Position on Gay Rights Issues”, by Auslan Cramb, Telegraph media group Ltd, London, UK. Website accessed: Mon.26th June 0217:


Local Council Elections Results: Is Britain going BlueKip?

Just 35 days before the UK General Election the Conservative had their best local government election’s result in years. They recorded 558 gains with labour losing 328 and UKIP being almost annihilated to 1 seat from 114. UKIP claimed to be a victim of their own success after last year’s Brexit Referendum. This was cited as one of the main reasons for holding a General Election to provide a stronger mandate to negotiate for the EU exit deal. Surely the domestic economy’s tax and spending plans should be a higher priority manifesto consideration as Brexit is now only for the negotiators as it’s over as a concern for voters (Irish Mirror, 2017).

The UKIP vote may well have collapsed as a result of a drift back to the Conservatives of Conservative leaning EU Leave voters. However the wide ranging losses across all parties, including even a modest drop in SNP councillors in Scotland, projects a majority of 48 approx. for the Conservatives in the June 2017 election. Pundits predict solid gains even in Wales and Scotland.

The SNP with 431 seats remained the party with the largest amount of councillors in Scotland. The Conservative are now the opposition with 276 and Labour trailing 3rd with 262. It must be noted that the Conservatives gained seats in Shettleston, a poorer area of Glasgow, and Cowdenbeath in Fife. This has been taken as positive proof of a Conservative revival under Ruth Davidson’s leadership.

Whether the momentum can be kept or lost will play out over the next few weeks. However by the result posted for last week’s council elections it spells out that Ruth Davidson’s political fortunes are in the ascendant. The SNP is still bent on a 2nd Independence Referendum will face criticism on their record in government. Yet it’s highly likely they will return by far the most Scottish MPs back to Westminster on the 9th June. It’s going to be interesting how many Conservatives join them?

As for the UK result as a whole this blog’s prediction is for a Conservative majority of 75 on the night although this blogger thought Remain would win and Trump wouldn’t so may we live in interesting times…….or perhaps a new Centrist Party?


Irish Mirror; (2017); “Who won the 2017 local elections in my area? Detailed results for mayoral votes and all 88 councils”, by Dan Bloom, MGN Ltd. Website accessed: Mon. 8th May 2017.

BBC News; (2017); “Full Scottish council election results published” Scotland: Politics, UK. Website accessed Mon. 8th May:


Energy from Waste or Wasted Energy as UK Contractor Interserve Has Found to Its Cost.

I have a holding in Interserve a UK based support services and building contractor. It was until recently one of my larger holdings. From the 2009 financial crisis share price lows of sub 200 pence per share it climbed to peak at over 700 pence per share in early 2014 and has since retreated again to circa. 240 pence per share at the time of writing.

It has recently announced it will cut its final dividend to conserve cash. The company has hit some headwinds of a managerial and contract nature and not just market based volatility.

This company’s performance to date demonstrates well the high risks and rewards (for the patient and prudent) of buying, holding, taking profits, dividends and timely selling of holdings by small private investors in volatile stocks such as Interserve.

It’s never easy or dull that’s for sure however as the blog title suggests one of the reasons for the recent share price fall and poor performance financially, with a pre-tax loss of £94.1Million on a £3.2 Billion turnover, is a huge provision at a Glasgow energy from waste project with Viridor, a waste management company, which has clearly gone spectacularly wrong for the company.

The contract was worth £146 Million and the financial provisions made in 2016 were £70M has now increased to a whopping £160 Million. The company has been replaced on the contract and as the numbers indicate legal action against it seems likely.

Unsurprisingly, Interserve is divesting its energy from waste (incinerators) business units. Indeed analysts at the broker Liberum informed their clients in a recent research note, “we can have no confidence the provision is adequate,” (Money Mail, 2017). This is a damning comment.

Can management be trusted to sort out the business, will there be other problems emerging from the huge low margin turnover and disparate operations? Should there be a top to bottom purge of the incumbents with a new team taking the helm? Where hopefully, after completing their own purging of any further bad news, they will steer the company to a more profitable and stable future similar to their construction competitor Balfour Beatty.

The large corporate shareholders, pension and insurance companies, will be having their discussions with the management no doubt although I guess those will not be as widely reported as the recent results and the rather public ousting from its contract in Glasgow.

In my opinion, there is execution risk in either buying or holding this stock and any share price recovery to previous highs certainly won’t be this year either or maybe not even in 2018. However, I will continue to hold as I believe, along with Balfour and Carillon, Interserve will play its part in the UK infrastructure projects of the coming decades. Royal assent has now been given for HS2 to commence in a matter of weeks with the £22 Billion first phase from London-Birmingham line, “scheduled to open in December 2026, with a second Y-shaped phase launching in two stages with a total bill estimated at £56bn,” (Plimmer, 2017, FT).

Surely, a reinvigorated Interserve can take advantage of this massive project in its home UK market. It’s a long hold for me as a patient little deal clincher.


References and further reading

Money Mail Reporter; (2017); This is Money: “Interserve’s failed energy-from-waste project black hole deepens to £160m – more than double original estimates,” Associated newspapers Ltd. Website accessed- 6th March 2017:

Plimmer, G; (2017);“HS2 line construction to start in weeks after royal assent,” The Financial Times Limited, London, UK. Website accessed 6th March 2017:


Don’t Go to Davos: Time to Be a New Rebel in the Brexit/Trump Era.

This is the message I give to Davos man or woman for the 2017 January meeting of the World Economic Forum in Switzerland, unless you want to go skiing of course. Picking a theme like inequality or climate change is all well and good.

However, with the inauguration of Donald Trump as the 45th President of the USA on the 20th January and Theresa May, UK Prime Minster, taking a harder line with Brexit from the EU once Article 50 of the EU Charter is triggered. The opportunity has arisen for a new type of rebel against the new anti-establishment establishment now that Brexiteers and Trumpites are in their ascendancy.

Global business executives, politicians, commentators and celebrity activists instead of lamenting about the ending of the Obama Presidency now need to embrace not just a new agenda of defending and improving liberal democracy, as the best political engine for raising living standards around the world, but a better way of involving its increasingly disparaged citizens in the process.

More elite group thinking in the cool mountain air is not going to resolve any loss of confidence in Western political systems that caused the political upsets of 2016. It has allowed the rise of nationalism and nativism across Europe and the successful isolationist rhetoric of the Trump presidential campaign.

Will he and his new administration be all bad? He seems to be rather thin skinned and rises to the bait or “tweet” far too quickly for trouble not to be too far away.

However, global stockmarkets have rallied, perhaps too far, in anticipation of looser fiscal policy, reflation and rising bond rates. Investment strategists have suggested the US should publicly finance infrastructure as one area of fiscal policy earmarked to get a boost under Trump.

How the new administration deals with Russia’s President Putin over claimed election interference with Rex Tillerson as the new Secretary of State, a lifelong oilman with business dealings with Russia, will be worth following. So too will the complex negotiations with Iran and Saudi Arabia over Syria, Yemen, trade sanctions and global terrorism. Furthermore, China’s territorial claims in the South China Sea with its neighbours will test and stress his administration to the limit no doubt.

Although it’s likely he’ll rely on his team to do the job for him and I suspect he’ll be as much of a part-timer as possible with Kellyanne Conway and his daughter Ivanka likely to feature a lot in managing the media (and his tweets) in the months ahead.

So what can the new establishment rebels do to make sure they don’t experience the political shocks that upset them so much in 2016 continuing in 2017?

Well to begin with, as it will take more time than a 4 year presidential term or the timeframe for the UK to exit the EU formally. By engaging with people and organisations not based in capitals or large metropolitan areas to better understand, argue and formulate changes to the political system.

Politicians and political elites should promote and introduce deliberative democracy techniques using sortition and lots for forming representative bodies. As in Finland, organise trials for universal basic income models to help alleviate anticipated long term employment or lifestyle changes due to technological advancement.

Well intentioned worries over inequality at Davos won’t produce any worthwhile solutions unless more people perceive they aren’t excluded from society or its opportunities by distant wealthy elites. This is surely the lesson from 2016 and any time now would be a good time to address it. Lest unpalatable results materialising further for those who claim to know best what’s good for society.

It might even be interesting experience transitioning to a new democratic system of governance now that could be worth talking about at some future Davos gathering.



2016: Goodbye to All That Nonsense and Hello to 2017

I’m looking forward to seeing the back of 2016.

However it’s not particularly as an investor that I’ll be glad to see the start of 2017 but as a voter. I have voted 5 times since 2014 in elections for EU, UK and Scottish parliaments, 1 Scottish referendum and in June 2016 the Brexit referendum. It has been the latter that has seemed to matter the most and it has caused all the political upset although markets have been benign about the result so far except with currency markets against Sterling. Unfortunately that does matter as prices are rising and inflation will creep back in to the UK RPI figures as 2017 progresses.
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Brexit and the Philippines’ President Duterte “Harry” Show the US Has Problems With Key Allies Doing the Unexpected.

Before the UK’s referendum on leaving the EU in June 2016 plenty of world politicians advised the British to remain most prominently was the current US President Barack Obama warning the UK would be, “at the back of the queue,” in any future trade negotiations with the US if it choose to leave.
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Post Brexit Bounce: It Will Need To Keep On Bouncing For Years

A Datastream chart of the month showing, “bumper UK retail sales in July as consumers shrugged off Brexit gloom,” was sent to me as a client of Cazenove Captial, a well known UK investment manager. Read more


Sow the Seeds and Scatter: Will UK Farmers Reap What Profits They Sow in A Post-Brexit Britain?

Harvest thanksgiving services in many rural parish churches were for centuries well attended events in the church calendar which celebrated the harvest had been successfully gathered in for another year and the prospect of famine and poverty avoided.
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In the summertime when the FTSE 100 is fine, it can stretch right up and touch the sky…

The performance of the FTSE 100 share index appears to be fine so far after the UK’s Brexit vote, to paraphrase Mungo Jerry’s 1970 hit ,” In the summertime,” before the UK joined the EU, with global investors seeing US and other major indices rise too.
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