As we do at the beginning of every month, we are looking back at the month that has just ended. March began with the UK in the grip of the Beast from the East: but away from the weather, what was the main economic and political news? Did we finally make some progress on Brexit and – most importantly – was there anything to make us smile?
Please note that nothing in this Economic Round-Up should be taken as financial planning advice: it is for general information and interest only.
What was the big story in March?
It is tempting to look abroad for the main story of the month. Facebook – as we will see below – had a dreadful month: Donald Trump slapped tariffs on Chinese imports to the US and Vladimir Putin secured another six years as Russian President. But in the UK the big news was agreement with the European Union over the ‘transition deal’ – the relationship and arrangement we will have with the EU after we leave, which is now less than a year away on March 29th, 2019.
Your view of the transition deal will very much depend on your initial stance of Brexit: but let us try and summarise the main points as impartially as possible:
- The transition period will end on New Year’s Eve 2020 – three months earlier than had been predicted
- The UK will be able to negotiate, sign and ratify trade deals – for example with the USA – during the transition period
- Existing international agreements and EU trade deals will continue during the transition period
- The financial settlement we have already agreed is locked in, and both sides are committed to ‘acting in good faith’ during the period
- It is less good news for the UK’s fishermen: the UK can only ‘consult’ on fishing during the transition period
- New EU citizens arriving in the UK during the transition period will have the same rights as those EU citizens already here
- And nothing has so far been agreed regarding the border between Northern Ireland and the Republic of Ireland.
It has been repeatedly said of the EU negotiations that ‘nothing is agreed until everything is agreed’ – but you have to think that the above will be the basis of our relationship with the EU for the 21 months after March next year.
Those in favour of Brexit generally see greater control of trade policy and the agreement to act in good faith as ‘wins.’ They are less keen on the extension of free movement and the fisheries policy. Those in favour of staying in the EU see it all as a mistake – but we are moving inexorably towards March 2019 and the UK will be leaving the EU.
What else happened in the UK?
Inevitably there was more doom and gloom for the retail and restaurant/hospitality sectors in the month, as restaurant chain, Prezzo announced plans to close 94 branches with the loss of 1,000 jobs. Next admitted to the ‘toughest trading for 25 years’ and even the Bargain Booze chain said it was close to administration.
There was some good news, as inflation eased to 2.7% thanks to a drop in petrol prices, and Chancellor Philip Hammond confirmed in his Spring Statement that most people should expect to see an increase in their real wages by the end of the year. There was less good news for our balance of payments, though, as the gap between what the UK imports and what it exports rose to £8.7bn, largely thanks to increased imports of fuel.
What about the UK stock market? The FT-SE 100 index of leading shares did not have a good month. It was down 2% in March to end the month at 7,057 and is down by 8% for the first three months of the year – its worst opening quarter since 2009, when we were mired in the financial crisis. So why has it started the year so poorly? It is a combination of factors: the threat of trade wars affecting the world economic outlook, the likely rise in interest rates (now expected around May) and our old friend, uncertainty over the final shape of the Brexit deal. But it was a good month for the pound, which will at least give you more spending power if you go abroad on holiday. The pound was up by 2% against the dollar in March and is now trading at $1.40.
What happened in the rest of the world?
March was a busy month. Russia went to the polls to elect a new President and in the least surprising result of the year, Vladimir Putin won another six-year term. With the Chinese Communist Party removing the rules limiting Xi Jinping to two terms in office, two of the world’s three superpowers now effectively have presidents for life. North Korean leader Kim Jong-un jumped on the train and headed to Beijing for talks, ahead of his meetings with the South Korean leader and with Donald Trump. Presumably, Kim and Xi Jinping did not discuss sanctions: China is supposedly imposing harsh UN sanctions on North Korea – and yet Kim saw his economy grow by more than 3% last year. ‘Curious and curious-er’ as Alice would have said.
Talk of sanctions and trade tariffs brings me to Donald Trump, who kept one of his pre-election pledges as he imposed a 25% import tariff on foreign steel and a 10% tariff on aluminium. The world may be worrying about a trade war between the US and China – and as I am writing this China has just hit back with tariffs on US imports – but Trump is sticking to his ‘America first’ policy, and figures for February showed that the US added 313,000 jobs in the month.
But if March was a good month for jobs it was a dreadful month for Facebook. The company had $58bn (£41bn) wiped off its value after the Cambridge Analytica data breach scandal, leaving CEO and founder Mark Zuckerberg with a lot of apologising and explaining to do.
February saw the virtual currency Bitcoin have a rollercoaster month, but at the end of it very little had changed, with the value on Coindesk at $10,669.
It was a different story in March: Bitcoin moved in only one direction, and that direction was down as more and more governments and central bankers weighed in against the currency. The month ended with the value of Bitcoin down (as I am writing) at $6,919 (£4,936).
Like a middle-aged man admitting the truth after a mid-life crisis, KFC has now repented their error and begged Bidvest for forgiveness. A new agreement has been reached and at least 350 of KFC’s 900 restaurants can look forward to what Bidvest promise will be a “seamless return.”
Rather less seamless may be the foreheads of Apple engineers at their new $5bn (£3.6bn) headquarters in Cupertino. Here was Apple’s problem: according to Reuters, “if engineers had to adjust their gait when entering the new building they risked distraction from their work.”
The solution at the 175,000-acre campus which is home to 13,000 employees was doors with completely flat thresholds and massive glass windows with extra transparency and whiteness. So transparent and white that “when the walls have been cleaned you can’t even tell they are there.”
Which is bad news for engineers lost in thought – with Apple employees being left bloody and concussed after walking through the doors and windows. The San Francisco Chronicle has published transcripts of three 911 calls made after Apple employees injured themselves in this way. “We did recognise that this could be a problem, especially after the doors and windows had been cleaned,” said an Apple spokesman.
With that I will leave you for another month, from an office that may not be as clean, white and minimalist as some in California but where – at least as far as I can remember – I have never walked into the door…