It came as no great surprise that the UK economy contracted by 0.2 per cent in the second quarter, following a first quarter in which growth had been artificially boosted to 0.5 per cent by stockpiling ahead of the original 29 March Brexit deadline. It’s fair to claim, as our editorial did two weeks ago, that the UK has performed better than expected for the past three years — particularly in terms of job numbers, which rose again in April to June despite the growth setback. True also that we’re in no worse shape than our European neighbours, and that our flexible, if painful, exchange rate will help us cope with a downturn. But such consolations have to be set against global indicators, driven by tensions between the US and China and between Iran and the West, that suggest winter is coming for all of us. In that sense, this really isn’t the time for smugness or schadenfreude.
The International Energy Agency, for example, says that global oil demand is now growing at its slowest rate since the 2008 crisis, with only China showing continuing appetite for more fuel; the barrel price has drifted from $75 in May to below $60. Some 30,000 job losses in the investment banking sector since April may not make our hearts bleed, but they tell us that deal-making (a useful indicator of confidence) is at a low ebb. Key government bond yields on both sides of the Atlantic have also been on the slide, reflecting recession fears. And a recent spike in the gold price, from $1,270 per ounce in May to around $1,500, tells us investors are seeking that most traditional of safe havens ahead of a storm.
The return to gold has been led by central banks, Russia and China to the fore, which bought more than 374 tonnes in the first half of the year — their biggest buying spree for two decades. Given so many indicators pointing in the same direction, we might ask why retail interest — in gold producer shares as well as ETFs and bullion — has been relatively slow to follow; sterling-based investors who climbed aboard early would have enjoyed additional gains from the pound’s fall. One possible explanation is that, at least among younger investors of a pessimistic hue, cryptocurrencies are today’s game of choice while precious metals are so last century. But having enjoyed a wild ride on bitcoin from below $4,000 in January to above $11,000 in July, they’re now nervous enough to start switching to gold: even its most fanatical advocates would never call bitcoin a safe haven.
I’m sorry to see Sirius struggling. This is the company whose polyhalite potash mine near Whitby is North Yorkshire’s biggest and boldest industrial venture — and I like to claim that a nudge from this column persuaded the local planning committee to give the project the green light in 2013. Now Sirius’s shares have plunged following the cancellation of a $500 million bond issue that would have triggered a further $2.5 million of credit arranged by JP Morgan, without which the diggings cannot advance towards the mine’s target date of becoming productive in 2021. Sources say the cash is still likely to be found from elsewhere: the bankers may be playing hardball but no one wants to see this project fail. Among names mentioned is that of the fearsome Australian mining tycoon Gina Rinehart, who already has a stake, as do Qatari interests — but whoever rides to the rescue will do so only on terms that will heavily dilute other existing equity holders, including many local punters (though not me, I should add).
A long-standing concern for Sirius has been whether there will be sufficient demand for the ten million-plus annual tonnes of polyhalite fertilizer it aims to produce, given ample world supply and the fact that potash mines in Canada and Russia have been reducing production. But it’s worth pointing out that polyhalite is a premium natural product that is approved for organic farming in both the EU and the US and (according to a rival producer’s blurb, headed ‘Seven Reasons to Love Polyhalite’) that it is ideal for many fruit crops, berries, potatoes, other vegetables and coffee. And what’s suddenly changed is that we have all been urged to abjure meat and go veggie in response to the ‘climate emergency’ — surely placing Sirius right on the zeitgeist. Could a timely endorsement from Greta Thunberg break the financing deadlock?
Blissful conditions here in France — whence I shall continue my theme of value-for-your-buckled-pound restaurant tips disguised as economic parables. This week I set aside gastronomic guides and turned to Eurostat’s index of ‘Labour productivity per person employed and hour worked’ — in which the ‘EU 28’ benchmark is 100, the UK’s score in 2018 was 99 and France’s 116. That doesn’t mean the French economy is stronger than ours overall, since it says nothing about the unemployed. But it does remind us that the French skilled worker is a lot more productive than his British counterpart — whose productivity (according to ONS data released with the job numbers) slipped backwards again in the second quarter.
So like a twitcher in the shrubbery I have been studying the Frenchman in his native habitat to find the secret of his efficiency, and I think it has to do with the hours he doesn’t work, at midday. Auberge de la Nauze at Sagelat, Dordogne, for example, had a fleet of vans in its car park mostly belonging to a local water company, whose operatives were tucking merrily into an excellent no-choice three-course menu — €18 for us, no doubt cheaper for them as regulars subsidised by their employer. But having had to call out the same company the next day, I can report that its service was as swift and effective as you’d wish from any utility. Higher UK productivity in the coming free-trade era will depend, of course, upon radically improved levels of innovation, automation, skills training and capital investment, but let’s also learn the French lesson that better lunches make happier workers.
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