Good morning,

As the January lockdown continues, the news flow isn’t giving us much in the way of a break from the routine – though yesterday’s snow was a welcome distraction!

In the UK: Rishi Sunak has offered a one thousand pound up front payment in lieu of extending universal credit. The chancellor apparently fears that if the extension were to be granted that it would become the norm and as such would be a recurring cost to the treasury of £6bn a year.  By paying a year up front as a one off, the chancellor is hoping that he can avoid the increase on a long term basis – with the added benefit that the money could provide a mini spending spree into the economy (though given the amount of uncertainty and hardship, we think the vast majority will be spent as prudently as possible)

The FT report that Mr Sunak won’t extend the stamp duty holiday when it comes to a close at the end of March. Data on the housing market show that whilst the tax holiday has supported the market and even fuelled a mini boom, it has also served to put first time property ownership even further out of reach for many.  The amount of properties sold in December was almost a third higher than the previous year and almost every month since the holiday was introduced has seen an outperformance versus the year before.  House prices have also risen as a result by almost 8% in the year to November, the biggest single year rally since 2016. The property industry is urging the treasury to reconsider an extension, but the concern from within Whitehall is that it’s just pushing a cliff edge further down the line.  A happy medium would perhaps be a tapering of the scheme, as is suggested in the article.

In the response to coronavirus, the government is said to be days away from implementing enforced quarantine for all arrivals into the country, possibly including British nationals.  The plans would look similar to Australia where you have to quarantine at a hotel at your own expense.  This comes as they’ve so far identified 77 cases of the South African variant of the virus, all of which can be traced to an international arrival.

France is just days away from going into a full national lockdown, according to newspaper Dimanche.  They say that Emmanuel Macron could announce on Wednesday that people must stay at home, but will aim to keep schools open.  The lockdown could last for at least three weeks, but given what we’re currently facing, it’s likely that it would need to be longer.  There’s another interesting FT article that quotes the head of hedge fund Element Capital: He says that people are failing to grasp how deeply the new variant of covid is going to damage the economy and extend any recovery past the second quarter, particularly in Europe where vaccination rates are that much lower than here and in the US.

The pace of vaccinations in Europe is set to stay low for a while, as AstraZeneca is going to miss the contracted deliveries to the EU in the first quarter of the year.  This comes on top of supplies slowing down from Pfizer, who are upgrading their manufacturing facilities. Italy has threatened legal action against AZ on the basis that the contracts were entered into freely by both parties and the failure to deliver is obviously going to have impacts to how quickly Italy can get out the other side of this.

Italian PM Conte has another immediate concern though, as he will try to get some legislation passed later this week, but might lack the support he needs to get it through.  The vote would really be the canary in the coalmine and if it doesn’t make it past then general elections are probably inevitable.  Last week he survived the no confidence votes in both parliamentary chambers, but only though people abstaining from the votes, rather than people actively supporting him.

Portugal managed to get to the polls over the weekend for a presidential election and re-elected their current president for another five year term. Marcelo Rebelo de Sousa has been a president supportive of the minority government in Portugal and campaigned on continuity and stability, which won him 61% of the vote.  The turnout at the election is said to be a record low, at below 40% – which might serve as a warning to those planning elections during these times…

Nicola Sturgeon thinks May’s Scottish elections will go ahead and says that if the SNP were to take a majority from them, then a referendum would definitely be on the cards and it would be a legally binding: “If the SNP win the Scottish election in a few months’ time on a proposition of giving people that choice, what democrat could rightly stand in the way of that?”. Boris Johnson has said that referendums should be forty years apart and will no doubt exhaust every route in trying to stop one taking place on his watch.  Let’s see first if elections do run to time though.

Looking to the week ahead: the data calendar is reasonably well populated, albeit with more historical data than anything too up to the minute.  We’ll hopefully see more from the US in terms of concrete spending and stimulus plans, as well as get some details on the timing of the Trump impeachment.  On the UK front, we’re starting to see more column inches around the issues that Brexit is posing to doing business with Europe and though the government is throwing money at it, we’ve not yet heard of any magic upgrades to capabilities or processes that will solve the problems being faced – if anyone has any live scenarios of those situations they can share with us, please get in touch.

Be well.


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