Any other business

Are we really half a trillion poorer? No, but we’re not pulling in investors like we used to

21 October 2017

9:00 AM

21 October 2017

9:00 AM

How did we mislay half a trillion pounds? Revised data from the Office for National Statistics has just reduced the UK’s ‘net international investment position’ from a surplus of £469 billion to a deficit of £22 billion. Downing Street dismissed this as ‘a technical revision’ — and in truth it’s not as bad it sounds, since what it tells us is that we own fewer foreign assets, and foreigners own more British assets, than had previously been recorded. Does national pride not attach to the idea that the rest of the world sees us as an investment safe haven? So why worry?

Well, past miscounting apart, actual current trends in this respect do not encourage optimism. Foreign direct investment by companies into the UK plunged from a £125 billion surplus in the first half of 2016 to a £25 billion deficit in the first half of this year. That makes a mockery of headlines in the spring about soaring 2016 FDI totals representing ‘a vote of confidence in Brexit Britain’: actually the full-year number (£254 billion, up from £33 billion in 2015) was boosted by multinational takeovers in the brewing and energy industries that had little to do with domestic economics, as well as commitments dating from before the referendum. Meanwhile, City sources say the appetite of global investors for gilts, other sterling bonds and UK shares has faltered markedly since the summer.

Of course — you might argue — there’s bound to be a lull before our top Brexit negotiating team gets it all sorted out and we soar into the global trading stratosphere. Or you might say thank goodness for doses of statistical reality, even when the ONS is merely correcting itself.

Aramco’s choice

‘The IPO process remains on track,’ says a spokesman for Saudi Aramco. ‘A range of options for the public listing… continue to be held under review.’ But those carefully chosen words failed to suppress gossip that the plan driven by Saudi Arabia’s man-to-watch, Crown Prince Mohammed bin Salman, to list the world’s largest oil company on the New York or London stock exchange is, as Oilprice.com put it, ‘on the brink of collapse’. And not everyone is disappointed: this column observed in July that the willingness of London’s listing authorities, led by the Financial Conduct Authority, to bend their own rules in order to win Saudi favour smacked of Brexit-induced desperation.


The prince reportedly favoured a New York listing as another link in the Saudi-US alliance. But others in the desert kingdom’s impenetrable power structure are said to be reluctant to make the required disclosure of hitherto secret oil reserve numbers, and are concerned about potential lawsuits on behalf of 9/11 victims or challenges against Opec production cuts that might be deemed as price-fixing under US law. They’re also wary of shaking the hand of Donald Trump. Worrying too is the possibility, given the governance issues that will inevitably hang over the IPO, that the market will value Aramco significantly below the $2 trillion talked about in Riyadh. ‘It will be an issue of pride not to be valued at a discount,’ texts my source in the camel market there.

The alternative to a public listing (apart from doing nothing, which would look like a humiliating reverse) is a private placement of a tranche of Aramco shares, most probably with a state investor from China. Ever keen to secure large-scale, long-term supplies of natural resources, the Chinese might offer a fatter price than the open market for such a strategic prize — and they certainly wouldn’t bother their new partners with irritating questions about human rights, as western investors might. America shunned, China embraced, London left out? Some might say that’s the way of today’s world.

Aircraft manoeuvres

Last week’s Bombardier story leapt forward with news that the Canadian aircraft maker is selling an interest in its C Series jet to Airbus, which can henceforth assemble the end-product in its Alabama factory, thereby circumventing a 300 per cent import tariff on sales to US carriers. Cue celebrations in Belfast, where 1,000 jobs (making the planes’ wings) have been saved — and chagrin in Seattle, where Boeing (Bombardier’s commercial foe) has been temporarily outflanked. But don’t think for a moment that these manoeuvres represent anything other than a triumph for ‘America first’.

Barnstormer

Ah yes, our top Brexit negotiating team… Sack Boris! Sack Spreadsheet Phil! Don’t bother sacking Theresa because she’s already had the real P45 from her colleagues as well as the joke one from the prankster; she just hasn’t been asked to leave the building yet. That leaves David Davis as the last man standing but there’ll be clamour for him to go too if deadlock persists, as seems likely despite this week’s talk of ‘acceleration’. So who should we send to the table next?

Last week I had the fun of chairing an audience with (Lord) Digby Jones, the irrepressible former CBI chief and trade minister, whose latest book Fixing Business recalls that he was ‘thrilled’ by the referendum result in June last year. I asked him whether he still felt the same 15 months later, provoking a tirade about ‘Michel Barnier’s €60 billion exit bill’ and why we shouldn’t pay it because most of it represents pension liabilities for useless eurocrats.

‘We should offer them €20 billion,’ he plunged on, ‘because that’s roughly what we really owe ’em, and we should tell ’em, “We’ll pay the other €40 billion but not to you, mate, because you’ll just waste it. We’ll spend it on skills training for unemployed young people across Europe that’ll transform your economy.” ’ It struck me as a bold idea and it was followed by a fusillade of sallies, gags and patriotic oaths which I eventually had to interrupt — but not before it occurred to me that Digby is the true believer we need in Brussels, barnstorming Barnier until he begs for mercy.

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