17 March 2021
Dear Richard and Montserrat,
In 1938 Churchill ordered Spitfires in volume not knowing how to pay for them! However, dedicated imagination led to countless fund-raising ideas. All could "do their bit" as towns created Clubs to fund planes and one farmer charged sixpence (2.5% of the old pound) "to see the only field in Kent without a German aircraft in it". To ensure that production avoided bombing, the jigs, skills, and machine tools were dispersed across localised facilities.
As todays Chancellor compares Covid-19 induced borrowings with World War II levels of debt, the post Brexit UK looks at repurposed institutions, entrepreneurial science centers and next generation technologies to be dispersed across the land.
For ‘War Bonds’ the BofE sees Companies with a war-chest of £100bn and a Home Front with £250bn of unspent income along with foreign billions looking for opportunity and a safe-haven.
For Cost look at interest rates and counterpartying with UK Gov Green Bonds & financial initiatives.
For Investing look at FINTECH, fractional investor models and start-ups with sheltering via Freeports, enhanced capital allowances and tech-hubs with models and funds purposed for green technologies and digital infrastructure.
For the City under an EU post-Brexit blitz watch as it restructures to embrace global markets with SWISSLON and NYLON. It maintains equivalence, which the EU fights, as it welcomes some 1500 EEA-based firms under the Temporary Permission Regime. Its cost efficiency, savings and liquidity for multi-currency clearing has a compelling logic against the under-capitalised EU27 banks with their over-controlled, fragmented banking largely ill-liquid retail rather than wholesale orientation. Here, London has a tight grip on the complications of clearing under UK common law, established time zone, its’ sheer breadth of financial markets and its ability to innovate.
For Europe look at an economic drag of bungled vaccinations, bureaucratic processes, and squabbling politics as EU bureaucracies eventually free up trade processing if only to appease EU businesses need for UK trade; Covid-19 will hamper their economies long into 2022.
Don’t underestimate the energy released by separation from EU Bureaucrats. With rapid vaccinations accompanying the spring, there is the beginning of a nervous excitement as with the Merchant Adventurers of yore breaking free of the stultifying Guilds. In this our vessels of enterprise face passive, inflation driven, higher taxation and known future tax thresholds, so carefully review holding and trading structures. These need to be robustly built with flexibility for the coming tax challenges and opportunities alike.
As the Chancellor speaks of War levels of debt, avoid Europe’s Lord Haw-Haw’s belittling little Britain. Listen rather to the roar of the Merlin engine cradled in brilliant science. Threat and change are never easy, but as with WWII this is a time of widespread innovation and our economy is set for rapid recovery. Have robust well thought through structures ready for the evolving dynamics before us.
Best Wishes,
Alistdair