Why the Singapore model could teach Brexit Britain a thing or two

We’ve heard every iteration of a ‘country’ plus or minus, model or deal, and I can’t help but feel like each vision for post Brexit life has sounded like a half-baked Frankenstein job. Sure, UK governments can and should learn some lessons from policy success stories overseas, and there are plenty of them. Finland has its employment and housing scheme to ‘end homelessness’, New Zealand has its well-being budget, Norway has its inclusive economy and Costa Rica has its 100% renewable energy reliance. The list goes on, but the model that frequently captures the imagination of British – especially Conservative – politicians, is the Singapore model. This news will be little surprise to most. The party focused on GDP growth and productivity maximization, likes a country which burns a relentless work ethic into its youth and has gone from economic zero to hero within a matter of decades. The response to the likes of Sajid Javid, Michael Gove and Jeremy Hunt applauding Singapore’s efforts has been anything but entirely positive, though. Speaking in response to the praise delivered by Jeremy Hunt, Guardian Diplomatic Editor Patrick Wintour said, “Quite how Singapore, an authoritarian state capitalist economy akin to China, has become the pre-eminent Tory model for the UK post-Brexit, as opposed to other more democratic economies, is puzzling.” “Brexit critics often claim the Tory party vision is for a deregulated Singapore-on-Thames, and here is a senior cabinet minister only weeks before the key Brexit vote travelling 6,700 miles to confirm this to be the case.” “For EU negotiators, anxious that a bargain-basement Britain does not have privileged access to its single market, the warning could not be clearer.” “It is also not clear if Singapore’s transformation into an export-orientated manufacturing base for international capital is relevant to the modern UK. Singapore grew at a time when globalisation allowed multinational corporations to take advantage of different labour and production costs in manufacturing. There is little chance, for instance, of the UK becoming a major exporter of electronic goods based on low wages.” These are all damning contradictions: an authoritarian government, a kind of market liberalism that would exclude us from the single market and wages too low to be acceptable to most UK citizens. Not to mention the fact that most of Singapore’s housing is nationally owned, while it provides neither a national health service nor state pensions.

So, what can we learn?

Well, from the approach of negative principles (or put simply, what we shouldn’t do), we can ask ourselves about why we detest some of the components of the Singapore system. We should imagine what we’d miss most if such a system were imposed on us – free participation, healthcare which is free at the point of use, and decent wages and workers’ rights, among other things. From a positive approach, we should certainly aspire to adopt certain principles, if not practices. For me, the successes of their system draw primarily from their attitude towards education. Singapore celebrates its people as its primary commodity, and the fact that they’ve been raised with a first class education and strong work ethic makes them an extremely skilled and productive workforce. What I wouldn’t want the UK to emulate is Singapore’s dismissal of creative and critical thought faculties, which is likely done to optimise vocational skills. What I do agree with is an educational ethos which doesn’t just equip citizens with basic necessary skills, but prepares them to be an active and meaningful part of national productivity. The fact that Singapore has an economy made up 22.0% of manufacturing, 17.6% wholesale and retail, 14.9% business services, 13% financial services (etc) is also worth observing. To many, the very activity of measuring the UK alongside Singapore is contrived, with Singapore being more comparable to London than an entire country. However, we should take on board two things if nothing more. First, the intuitive point that it isn’t prudent to have an economy so overly biased towards particular sectors. Second, the productive capacity of a country, and perhaps the quality of life of its citizens, is only maximized if we have an economy which attempts to utilise the productive potential of as many people as possible. Granted, the UK faces the challenge of trying to revive once-lively hubs of productivity, as well as regions which are far away from urban metropolises. What we should remember, though, is that even if some traditional industries have died (or more accurately, been outsourced overseas), we still have concentrations of potential workers who haven’t been given the chance to fulfil their potential. It isn’t my intention to completely disregard existing efforts to inspire business in places such as the ‘Northern Powerhouse’, but the London bias is still plain to see. This isn’t to say the bias involves continuous and ongoing policies in favour of London’s primacy, but rather not enough is being done to reverse the structures that made it the only global hub in the UK. Two way we could look to kill two birds with one stone in the UK are via:
  1. Implementing a framework of first-mover incentives. This may involve lower taxes, infrastructural spending or some form of subsidy. The bottom line is that any business has strength (and a country creates a specialisation) in numbers and in density. If we want to inspire other sectors to set up base in the UK, and specifically not in London, we have to make it as easy as possible for them to do so.
  2. We should consider a return to manufacturing. I’d ask readers to resist the temptation to eye-roll and consider for a moment, the possibility of the UK being at the forefront of both developing and using automated hardware and software. It is self-evident to anyone in touch with the times, that a major power play that is occurring (and will continue to occur) is the race to develop and patent automated and AI systems. If we cater our education system to help the generation understand and design the machines of the future, we could aspire to be a hub of automated manufactured goods and technology patents.
Apart from the two principles I’ve laid out, the efforts of our government should be directed away from making the UK more like Singapore. First, we’d benefit from a more substantive effort to build council houses, especially within a right-to-buy scheme which focuses on first-time buyers and consults Local Housing Authorities. Increased access to the property market would not only give people an incentive to work towards a goal (and encourage them to work to pay off mortgages) but gives them an asset which provides stability and an incentive to be enterprising and work to advance their position. Secondly, it’d be greatly beneficial to the collective national narrative to consider greater scrutiny of unfair electoral practices, greater parity in education and where possible, enforcement of tax collection on the highest earners and companies not paying taxes on their UK operations. These goals are less straightforward than my first suggestion, but important in achieving the ends of creating a sense of fairness, reciprocity and collective participation, which are necessary preconditions for bringing about a greater sense of belonging and solidarity within a national community.

Hotel Chocolat growth rate slows

At times it seemed that chocolate maker and retailer Hotel Chocolat (LON:HOTC) could do no wrong. That has changed as slowing growth in the second quarter has led to a downgrade, albeit small.
Given the high rating enjoyed by Hotel Chocolat it is impressive that the share price has held up so well, falling 12.5p to 415p. There is normally a disproportionate reaction to a downgrade. However, it is in the minority of AIM company share prices that are lower now than at the time of the General Election.
Peel Hunt has trimmed its pre-tax profit forecast by £500,000 to £14.5m. The shares are still t...

Why savvy investors are buying wine En Premier in 2020

While the rest of us are recovering from the excesses of the holidays and broken New Year’s resolutions, January is a frenetic time for the fine wine market. Traditionally it’s the month for Burgundy En Primeur campaigns when top wines from the region are released for sale while still in the barrel. In a few frenzied trading weeks across January and February Burgundy’s finest and most sought-after wines are sold in this way, with some selling out within hours of being released. “Buying wine En Primeur is a truly unique opportunity since it allows you to enter the market ahead of the crowd,” explanis Daniel Carnio, Director and Co-Founder of fine wine investment company OenoFuture. “The French term ‘en primeur’ is usually translated as ‘wine futures’ as you’re buying wines before they’ve even been bottled at the winery. This is brilliant news in investment terms because it means you’ll usually get a great price and you can be certain of the provenance and optimal storage of your purchases.” En Primeur purchases also have the advantage of being relatively low-risk. Although you’re typically buying wines 6-24 months before they are bottled and released, En Primeur prices are nearly always much lower than the price after the wine is bottled. In some cases, prices can rocket to double the En Primeur price or more after the wine is bottled following a positive review from a top wine critic. Another key advantage of purchasing wines En Primeur is that the wines are not initially subject to VAT and duty. While the wines remain at the winery or in a dedicated bonded warehouse in the U.K. these taxes do not need to be paid. This means investors have less initial outlay and more of their capital can be invested rather than used to pay taxes. It is worth bearing in mind that VAT and duty must be paid on any wines once they leave the winery or bonded warehouse. “There’s never been a better time to invest in Burgundy En Primeur,” adds Carnio. “Over the past decade the wine collector’s favourite, Bordeaux, has continued to lose market share. According to Liv-Ex during 2019 Bordeaux accounted for just 55% of the market, down from over 95% in 2010. Much of this ground has been taken by Burgundy as well as other regions like Italy and Champagne. Burgundy’s market share for 2019 hit 19%, beating 2018’s figure of 15%. Demand is especially strong in China and in the U.S. Proof of the region’s potential can be seen in the Liv-Ex Burgundy 150 index which has shown growth of 88% over the past five years. This is a trend which is almost certain to continue given the exceptional quality of the 2018 vintage.” Sponsored by OenoFuture

Atlantic Capital Markets select Persimmon as their pick of the house builders

Atlantic Capital Markets have selected Persimmon (LON:PSN) as their pick of the house building shares following a raft of results from the sector. John Woolfitt, Director of Trading at Atlantic Capital Markets said “after the recent flurry of figures from the sector I would lean towards Persimmon for investors as my pick of the big three.” Atlantic Capital Market‘s view is derived from weakness they suffered last year causing underperformance against their peers. “Despite the reputation being knocked last year due to poorer build quality and high executive pay they have taken strong steps to counter this problem which did weigh on figures. They have announced bigger investment into ensuring better build quality which did delay some completions in the short term but will good for the longer term.” “From an investors point of view both the high dividend yield and low P/E makes for an appealing buy.” Mr Woolfitt also touched on how Persimmon focused on their customers and that this is likely to provide support for their properties over the long term. “From a home buyers point of view they are the first housebuilder to introduce a customer retention scheme and make a concerted effort to improve build quality which will have a good long term impact on sales.” Although Atlantic Capital Markets are bullish on Persimmon, there were reservations on the rest of the sector saying they would “highlight caution in investing fresh money into the sector in the near term, based on the run they have all had since the election. Analysis on Taylor Wimpey, Barratt Developments and Persimmon all indicate overbought in the short term.” “Existing holders should keep holding and any fresh investors should wait for a pullback in share prices to find an entry level.” Persimmon (LON:PSN) shares were trading at 3,029p in Thursday afternoon trade, just shy of all time highs.

Wetherspoons toasts a further £80m of pub expansion

Well-known home of the cheap tipple, Wetherspoons (LON:JDW), enjoyed a strong festive period, which was crowned by the announcement that it would be expanding its pub portfolio during 2020. The company reported like-for-like sales growth of 4.7% during the 12 weeks to the 19th of January alongside sales growth of 4.2%. This positive financial performance was echoed by Revolution Bars (LON:RBG) which saw its shares jump following its announcement that it had booked a seventh consecutive year of record Christmas sales. Unfortunately, the same couldn’t be said for City Pub Group PLC (LON:CPC), whose festive performance was “subdued” and anything but cheery. The firm saw its shares dip 8% on the announcement and said they would miss market expectations. Wetherspoons’ progress, though, was expected and therefore somewhat overshadowed by the news that it had opened 1 pub and sold 5, and planned to open between 10 and 15 additional sites during the course of the financial year. This is part of the pub’s strategy to spend £80 million on new pubs and pub conversions during the year. So far this financial year, Wetherspoons has spent £57 million on buying the freehold reversions of 18 pubs of which it was previously the tenant. It expects full-year reversion expenditure to be around £85 million.

Additionally, the company announced it had spent £320 million on reversions since 2014, alongside £516 million on buying back or cancelling 53% of its own shares since 2003.

Wetherspoons court case

Commenting on a high court case involving the pub chain, Chairman Tim Martin stated,

“In an important high court case involving Wetherspoon, the judge said that he would assume written statements by witnesses were true, unless contradicted by barristers in cross-examination.”

“This sensible principle of justice is also implicit in the ‘comply or explain’ provisions of corporate governance guidelines (the ‘code’).”

“Comply or explain must mean that the code envisaged flexibility and did not advocate a ‘one-type-suits-all’ approach.”

“If shareholders say nothing in response to company explanations, which have been made in order to comply with the code, it is reasonable to assume their assent.”

“However, in reality, detailed explanations are ignored by many fund managers and their corporate governance advisers – comply or explain has been corrupted to mean ‘comply or be humiliated in public and voted off the board’ – a risk which most NEDs are understandably reluctant to take.”

“A likely reason for ignoring explanations, in defiance of the code, is that it’s simpler and cheaper to apply arbitrary standards such as the ‘nine-year rule’- rather than engaging with companies and considering their explanations.”

Brexit chat over a pint, anyone?

In his usual fashion, the Wetherspoon Chairman also had to say his piece on Brexit:

“It is disappointing to note that pro-remain organisations like the CBI and the Food and Drink Federation are, even at this late stage, doubling down on ‘project fear’ stories.”

“A dramatic headline on the BBC’s main news website (“Brexit: Price rises warning after chancellor vows EU rules divergence”, 18 January) predicted dire consequences in the event of ‘divergence’ from the EU.”

“The article contained a jobs warning from the CBI, which previously promoted the disastrous exchange rate mechanism and the euro, and a food prices warning from the Food and Drink Federation (FDF).”

“The CBI’s warnings about job losses and recession in the event of a leave vote in 2016 have proved to be mythical – over a million jobs have been created.”

“The FDF’s warnings about food price rises are absurd- the EU is a highly protectionist organisation which imposes tariffs and quotas on about 13,000 non-EU imports including many food and drink products such as bananas, rice, oranges, coffee and wine.”

“Elimination of tariffs will obviously reduce prices.”

“It is high time these organisations took a wise-up pill and supported the democratic decisions of the UK.”

Investor notes

After swinging to a rally, the company’s shares are now down 0.064% or 1.00p, to 1,562.00p per share. Peel Hunt reiterated their ‘Hold’ stance on the stock, their p/e ratio is 20.25 and their dividend yield isn’t generous at 0.51%.

Tesla breaks through $100bn valuation after overtaking Volkswagen

American automotive and energy company Tesla Inc (NASDAQ:TSLA) announced on Thursday that it had replaced Volkswagen AG (ETR:VOW3) as the world’s second most valuable automotive producer. The company broke through to a valuation of $102 billion or £76.1 billion, after a period of consistent growth in its share price. This news marks just another significant development for the company, which, after earning its reputation as a loss-making enterprise, reported a rare quarterly profit in October. Since then, the Company’s share price has more than doubled, and with this latest milestone being reached, Elon Musk could collect a payout worth $2.6 billion, contingent upon the company also earning revenue of $20 billion and earnings of $1.5 billion. Tesla said that it had delivered more than 367,000 cars during the course of 2019, up some 50% from the year before. This is due, in large part, to the opening of its Shanghai factory (which is little surprise to anyone familiar with the company’s issues with output and a long waiting list). It will also allow Tesla to capture a potentially lucrative Chinese market, which sees its number of affluent consumers grow by the day. Looking forwards, the comapny still has some work to do on its output, with Volkswagen churning out 11 million units during the same period Tesla turned out fewer than 400,000. It also has some way to go, to meet the lofty heights of Japanese car giant Toyota (LON:TYT), which currently has a valuation of $230.95 billion, and produces 9 million units per year. Further food for thought is offered by way of investigations over battery fires and unexpected acceleration in its vehicles. So, not all sunshine and rainbows for Mr Musk yet, but perhaps in a better position than this time last year. Since trading began on Thursday, the Company’s shares have rallied 4.09% or 22.36 USD to 569.56 USD per share 23/01/19 07:08 GMT.

FCA: 7 out of 10 users will be better off or see no change with new overdraft rules

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The Financial Conduct Authority has said that 7 out of 10 overdraft users will be better off or see no change when the new rules are enforced in April. Roughly 14 million people utilise an unarranged overdraft each year. Salman Haqqi, personal finance editor at money.co.uk, shared some comments: “While the new FCA overdraft rules are set to make seven out of 10 people better off or see no change, banks have already announced a huge spike in overdraft interest charges, which may impact the most vulnerable households.” “We mustn’t forget the other third of people who are going to end up paying the price for the change in overdraft terms and conditions, because they rely on their overdraft to make ends meet,” Salman Haqqi continued. “If you are struggling with your overdraft and have no way to pay it off in full before the new rules come into force, other credit options such as a 0% balance transfer credit card, could be a good way to reduce the amount of interest you are paying on your debts.” Salman Haqqi concluded: “We are urging people who do regularly use their overdraft to get in touch with their bank to check what the new FCA rules will mean for them. Moving debts away from an overdraft may help avoid the new extortionate interest rates that banks are set to introduce when the new rules launch in April 2020.” Christopher Woolard, Executive Director of Strategy and Competition at the FCA, commented on the announcement: “Our changes expose the true cost of an overdraft. We have eliminated high prices for unarranged overdrafts.” “This will result in a fairer distribution of charges, helping vulnerable consumers, who were disproportionately hit by high unarranged overdraft charges, and many people who use their overdraft from time-to-time,” Christopher Woolard said.

Markets feeling poorly with Coronavirus and Davos tensions

Asian markets have continued to suffer worst from the spread of Coronavirus, with investors fearing tentative attitudes towards trade and travel with China and surrounding regions. The situation was also dim for European indices, with the FTSE and DAX also suffering losses after trading began, though this was also caused, in part, by the back-and-forth taking place in Davos. Thursday will likely prove an eventful day, as these issues unfurl alongside the ECB‘s first strategic review since 2003, courtesy of Chirstine Lagarde. Speaking on the morning’s events, Spreadex Financial Analyst Connor Campbell stated,

“Though they avoided a major slide, the European indices started the session in the red as the Coronavirus caused significant losses in Asia.”

“The Shanghai Composite suffered its worst day in almost 8 months, falling nearly 3% as Wuhan – the epicentre of Coronavirus – was put on lock down by Chinese officials. That decision came as the death toll rose to 17, with the number of cases now above 500. Elsewhere the Hang Seng slipped 2.2%, the Nikkei 1% and the South Korean KOSPI 0.9%.”

“The European markets weren’t quite as damaged after the bell. Nevertheless, the FTSE dropped 0.4% to fall below 7550 for the first time in a fortnight, while the DAX’s 75 point slide left it more than 200 points off the record high the German index briefly struck on Wednesday. The Dow Jones, which ended yesterday in the red, is set to slip to a one-week low of 29150 later this afternoon.”

“Complicating the atmosphere somewhat was the trade situation between the US and EU. The European Commission chief Urusla von der Leyen said in Davos that the pair are ‘expecting in a few weeks to have an agreement that we can sign together’. But this push for reconciliation came with a warning from Trump that if a deal isn’t reached the bloc will face ‘very high tariffs’ on cars and other products.”

“After Wednesday’s surge, one that came thanks to the chances of a rate cut next week dropping from 75% to 50%, the pound was relatively muted at the open. Cable was unchanged just below $1.315, its best price for 2 weeks, while against the euro sterling’s 0.1% increase left it at a fresh 5-week peak of €1.185. Those levels will be tested by Friday’s flash UK PMIs.”

“The headline event this Thursday is arguably Christine Lagarde’s second meeting as ECB head, one that will see her initiate the central bank’s first strategic review since 2003. Any clues as to what this will mean for Lagarde’s approach to monetary policy will be poured over by investors.”

Nearly 60,000 jobs shed from UK retail in 2019

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Latest figures revealed on Thursday that nearly 60,000 jobs were shed in the retail sector last year. The news should not come as a surprise given that retail sales growth data for 2019 makes it “the worst year on record”. The British Retail Consortium said that retail lost the equivalent of 57,000 jobs last year. It is no secret that the UK retail sector has been struggling in recent years, with house hold names battling against gloomy trading conditions. “There were many challenges in 2019: businesses had to contend with the repeated risk of no deal Brexit, a general election and the ongoing transformation of the industry, leading to weak consumer demand,” Helen Dickinson OBE, Chief Executive of the British Retail Consortium, said. Indeed, last year was a rather turbulent one for UK politics; the Brexit deadline was extended several times, there was an attempt to prorogue parliament and a general election taking place all in one year. “As a result, employment has suffered in retail, the UK’s largest private sector employer,” the Chief Executive continued. “This matters – retail offers many people their first job, a range of flexible working options, and huge opportunities for progression. Retailers may be investing heavily in their workers, through training and apprenticeships, but more could be done. The current inflexibility in the Apprenticeship Levy system means that much essential training is not covered, limiting the opportunities for many working in the industry.” The Chief Executive continued: “Moreover, it is worrying that the Government is standing by while tens of thousands of jobs are being lost. If the same was true in manufacturing or aviation, one can be sure that the Government would act. There are opportunities for action and the Government’s review of business rates could not come at a more crucial time. It is essential that they reform this broken system and rectify a tax that sees retail, which accounts for 5% of the economy, pay 25% of the burden.” Elsewhere in retail on Thursday, online fashion retailer ASOS (LON:ASC) shares rose as its latest update hinted at recovery signs following its difficulties from last year. Its string of profit warnings from last year suggests that the gloomy trading conditions to hit the sector were not merely confined to high street stores.

ASOS shares rise on recovery signs

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ASOS (LON:ASC) shares rose on Thursday after the online fashion retailer posted a rise in revenue for the four months ended 31 December. Shares in the company were up by 5% during Thursday morning trading. The online fashion retailer said that revenue growth was driven by a “record” Black Friday trading period. The results will provide joy to investors after a string of profit warnings were issued by ASOS last year. ASOS said that, for the four months ended 31 December, group revenue was up 20% amounting to £1.1 billion. Thursday’s update provides some relief compared to the situation ASOS found itself in over a year ago, back when the company issued a shock profit warning during the run-up to Christmas in 2018. It is no secret that the UK retail sector has been struggling in recent years; earlier in January the British Retail Consortium said that figures for 2019 make it “the worst year on record”. ASOS’ struggles over the past year shows that the gloomy trading conditions are not confined to the high street – online retailers also faced difficulty. “ASOS has delivered an encouraging start to the year,” Nick Beighton, CEO, said in a company statement. “Strong customer acquisition activity supported by robust operational performance has driven good momentum in all our markets,” the CEO continued. “As we said in October, the focus for this year is to further enhance our capabilities and leverage the investments we have made. It is still early in the year and much remains to be done, but we are encouraged by the progress we have made so far. We remain confident in our ability to capture the substantial opportunity ahead of us.” Shares in ASOS plc (LON:ASC) were up on Thursday, trading at +5.09% as of 10:07 GMT.