On the Money
The economy: what if Brexit wrecks it?
According to the heavily fortified Remain camp, if on the 23rd of the month the UK votes for no more EU then we’re doomed. Barack Obama has already announced the US will stop speaking to us. I read somewhere the G20 widnae be pleased either, while the IMF reckons the world economy could collapse.
Closer to home the Treasury predicted a catalogue of nasties, from UK GDP falling by up to 15% to pensioners losing £197 a year, rising to £3,00 a year for higher earners. It says the pound will fall by up to 20% against other currencies.
Many of our clients say they don’t know which side to believe. Take for example a radio interview between a Today presenter, and celebrity pensions “guru”and economist Baroness Ros Altmann which went as follows….
Presenter: “Neil Woodford the star investor, who set up his own fund (after running from the mid 1980s the hugely successful Invesco Perpetual Income funds) says the fundamentals of the UK economy will be unmoved (by Brexit) either way.”
Altmann: “Well, I’m afraid that every, every serious economic forecaster would not agree with that.”
Presenter: “Are you saying he’s not serious?”
Altmann: “Not for economic forecasts, clearly.”
Presenter: “He’s an investor on behalf of pensioners.”
Altmann: “I’m talking about every major economic forecaster. Weaker economies mean lower wages, lower profits, lower dividends, lower investment returns and…lower pension fund investments. This…is consensus. What do pensioners want more than anything else? They want certainty.”
Now I don’t know about you but Altmann’s talking political drivel. It’s hard to know where to start, but to rubbish Neil Woodford after his stewardship of investment funds has outperformed the FTSE Total Return (after all charges) by threefold over the last 25 years is breathtaking.
As is Ms Altmann’s statement that every serious economic forecaster would disagree. Have a look at what Philip Tetlock established in his study of “celebrity forecasters” and the accuracy of their predictions. Hint ..you’re more likely to beat them by just tossing a coin.
Consensus has an awful record in such matters. Go check history, Ros. But wait a minute, if the pound plummets that would be good news for UK exporters wouldn’t it ? Or have economists changed their theory about that?
So what’s going to happen if we stay or if we go? Truth is, nobody really knows. But here’s a thought. Do you remember “Yes Minister”? Here’s a clue to what’s likely to happen after the 23rd from an early episode when the senior civil servant Humphrey was briefing Minister Jim Hacker about the case for Europe…
Humphrey: “Britain has had the same foreign policy for at least the last 500 years…to create a disunited Europe. We have to break the whole thing up, so we have to be inside. We tried to break it up from the outside but that didn’t work. But now we are inside we can make a complete pig’s breakfast of the whole thing.”
Hacker: “This is appalling cynicism.”
Humphrey: “Yes Minister, we call it diplomacy.”
Looks like it still makes sense to stay in then. Whether I like it or not.
Alan Steel is chairman of Alan Steel Asset Management
Alan Steel Asset Management is regulated by the Financial Conduct Authority. This article contains the personal views of Alan Steel and should not be construed as advice. Do check your individual circumstances with your advisers.
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