Investments

The Brexit spectacle

Thomas Watts

In his 1973 essay Approaches to What? French philosopher and writer Georges Perec contemplated humanity’s obsession with spectacle:

 

“What speaks to us, seemingly, is the big event…the front-page splash. The daily newspapers talk of everything but the daily.”

In our haste to measure what can be considered as historical or extraordinary, we can forget to take in the quotidian “infra-ordinary”. Perhaps such a malaise can be best characterised, in financial terms at least, by the domestic economy, where despite the prominent events in Westminster, UK plc continues to exhibit a certain robustness. With new Prime Minister Boris Johnson grabbing the headlines for his resolute “do or die” strategy of leaving the EU by 31 October, much has been made of the hurdles he, like his predecessor, has faced within government.

Mr. Johnson has made it abundantly clear since the genesis of his tenure that his administration, despite a now non-existent majority, will not be “held to ransom” by MPs. Any Conservatives that voted against the party line on being able to leave the EU without a deal have now been de-selected, including ex-Chancellor Philip Hammond. The beginning of September has also seen both the electorate and news broadcasters alike scrambling for their political dictionaries to check a word that had remained buried at the back of even the most knowledgeable commentator’s lexicon; prorogation. Although the courts have now ruled the closure of parliament for five weeks unlawful, we must wait to see if a potentially reconvened parliament can break the impasse with the clock running down.

With fears over a no-deal Brexit still driving domestic markets, it would seem that time is now very much at a premium, a concern acknowledged on both sides as the European Commission President, Jean-Claude Juncker, admitted that there is “very little time remaining” to secure a final agreement.

They say time is money; in this case quite literally with sterling acting as a key Brexit Barometer, charting the ebbs and flows of negotiations. Taking its cues from the usual cocktail of ministerial votes, murmurings in Brussels and political soundbites, the pound has been rangebound between $1.20 and $1.30 since the summer months[1].

And yet, despite the inability of politicians to find a conclusion to what many have termed the biggest domestic political crisis since World War II, the UK economy has failed to come to the shuddering halt many predicted it might. If we put aside all the, as Perec would put it, front page splash, we can see that much of the doom forecast has failed to materialise. The labour market is usually one of the most valuable ways to gauge the strength of an economy, with figures showing that average hourly earnings have soared to an 11-year high[2], comfortably exceeding the cost of living, and with statistics also showing that employment is at its highest rate since 1971[3].

Whilst headlines paint a forlorn picture of delayed investment and mothballed highstreets, retail sales remain surprisingly robust. Data from the summer showed that consumers continue to prop up the UK economy with the strongest growth in online shopping for three years[4]. Whilst logic would dictate that Brexit uncertainty would have prompted many to tighten their belts, it appears consumers continue to take any Brexit ambiguity caused in their stride.

Although such numbers can take a backseat to events in Westminster, they are still vitally important to economists and show us how the core of the economy is performing. As Perec summarises:

“It matters a lot to me that they should seem trivial and futile: that’s exactly what makes them just as essential.”

With the Brexit deadline drawing ever closer, the divorce date, Halloween, a day known for its fascination with spectacle, may send chills down the spine of some investors but a focus on the almost mundane, from an investment point of view, really is essential.

[1] https://www.xe.com/currencycharts/?from=GBP&to=USD&view=1Y

[2] https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/timeseries/kac3/lms

[3] https://www.bbc.co.uk/news/business-47622415

[4] https://fashionunited.uk/news/retail/retail-sales-jump-in-july-thanks-to-strongest-online-growth-in-three-years/2019081544773