By admin On Monday, December 21 st, 2015 · no Comments · In

Some of you may remember that early in January 2015, I wrote an article entitled “My Top Ten Predictions for 2015”. Talk about setting myself up for a fall! One never knows how things will pan out. It may seem obvious what is going to happen, but it isn’t – who would have forecast that by this stage in the season Chelsea would be on the skids, having been beaten 1-0 by Bournemouth and Leicester would be heading the Premiership? I certainly didn’t! This just goes to show that common sense doesn’t have all the answers. Clever forecasting requires the knack of looking round corners and consulting your gut feeling.

But, sadly, history can repeat itself. I wrote my article just after the Charlie Hebdo shootings in Paris, and here we are a couple of weeks after the Bataclan shootings, also in Paris…there but for the grace of God go we.

So how did I do? Get ready for a shock….

Prediction No.1

The fight against terrorism will be a top priority. The Government will take more powers to intercept emails and phone calls and ISP’s will be required to co-operate. There will be curtailment of our freedoms. Our challenge will to control and limit those actions.

On the button, I would say.

Prediction No.2

Moving from Paris to the EU, and more specifically the Eurozone, something has to give. The rot at the heart of the project will finally spread to its head. The economic disaster in Greece (and the rest of Southern Europe) will come together with Cameron’s move to reform the EU and gathering public unease about the lack of competence, accountability, value for money and integrity at the heart of the European project.

I said that in 2015 I thought the tectonic plates would start to move, and that in 2016 maybe the earthquake would happen in the EU.

All that is plausible. The mounting problem of Syria, Afghanistan and increasingly large chunks of Africa looking to move to Europe, encouraged by the Germans’ short-lived open door immigration policy, has killed Schengen stone dead and could well do the same for the principle of free movement throughout Europe.

The euro is still under huge pressure. The problems have been moved on, not solved, by circular deals allowing Greece to park its debt and carry on, and by huge amounts of quantitative easing. The death of the principle of free movement of labour will not help.

There has been zero leadership from Europe throughout the immigration crisis, and none looks to be forthcoming in the near future.

This could play two ways for Cameron. Either it could play into his hands by encouraging Europe to reform itself; which would be the best thing for all, frankly, allowing a rational argument that we would be doing the sensible thing by staying in; or he could be a catalyst for the whole thing disintegrating before our eyes as treaty after treaty are ignored by the members of the EU.

One thing is for sure, the EU will not be the same at the end of 2016 as it is now. If we have our referendum by the end of 2016, my bet is that we will vote to leave, just because by then the EU will be a discredited shambles, and if you had the choice now, you would not join.

Prediction No.3

Meanwhile the EU will stumble on. There will be QE as Draghi tries to head off deflation despite German objections. The Euro will fall against the dollar and probably against the pound, and the Eurozone’s impoverishment will dent the recovery in the UK, while we run an ever increasing balance of payments deficit with them.

 Spot-on I think. But please also see my comments re Prediction No.2 above.

Prediction No.4

There will be a general election in the UK [not much of a prediction, that one, but read on], and the electorate won’t want Miliband in power, despite the polls. He will be scuppered by his unfortunate looks, inability to eat a sandwich, and more importantly his party’s economic record and a paucity of sensible policy initiatives.

In England being associated with the spectre of a Lab-SNP coalition will be profoundly off-putting.

I go for a small Tory overall majority. I think that UKIP’s appeal will falter when its supporters clock that they’re not a very nice bunch, by and large, and that they (the voters) can get what they want from a respectable mainstream party that has policies on other things than Europe and immigration, and a record of competence in government.

This is the one I am proudest of. Remember the polls. Ed was definitely going to be PM.

Lynton Crosby, I feel, must have read this prediction when he was putting together his strategy for Dave.

Prediction No.5

The UK will increasingly find itself in a good place, both politically and economically, at least relative to others, and in the light of chaos elsewhere will again be seen as a safe haven. Our economic recovery will continue although we will be constrained by the economic under-achievement of our closest neighbours. But with a strengthening dollar the USA will become an even more important export market than it is already. With common political histories (fragments of Magna Carta are incorporated in 17 states’ constitutions) our relations with the USA will become closer in the light of the Islamo-fascist threat, maybe buoyed by an EU/NAFTA trade deal.

Yes, I think we are still a safe haven, just not a very affordable safe haven for the very rich anymore in the light of the stamp duty changes. And the dollar has strengthened. And we probably are a bit closer to the USA than we were at the beginning of the year, we are after all in a formal alliance with them in the “war” against Daesh.

I have no idea where the EU/NAFTA trade deal has got to, though.

Prediction No.6

Interest rates will remain unchanged throughout 2015. A brave prediction, I know, but look at the facts. It would suit our interests to let the pound weaken which will boost exports and by being inflationary, mitigate any exported deflationary pressure from the Eurozone. It will keep more households happy than unhappy, and sustain the housing market which is important both as a store of wealth and because we need more housing.

Yes!! Bang on! Way to go!

Prediction No.7

Oil will remain cheap throughout 2015. This is good news for UK consumers, and manufacturing industry, particularly the plastics and chemical industries that rely on hydrocarbon feed-stocks. It is bad news for wind farm enthusiasts, Scottish nationalists, the Russians, large swathes of the middle-east and parts of South America. Low prices will dissuade oil companies from fracking in the UK and a lot of other investment in oil exploration, particularly in hostile environments like the South Atlantic will be put on hold.

The low oil price will increase disposable income and generally help with growth in the UK. It may be seen as one of the most important contributors to a Tory victory in May 2017.

And another bulls-eye. The trouble is, it’s made the Russians mean, and hasn’t stopped the SNP from winning loads of seats at Westminster, and pretending they never really wanted that sort of independence after all.

Prediction No.8

Because of Prediction no 7, Mr Putin’s hold on Russian power will begin to weaken. This could be dangerous. Further adventures in the Ukraine and the Baltic should not be ruled out. It could also be dangerous because the West will need Russia to drive global agreement on what to do about ISIL in Syria and Iraq, and Putin may use this as a bargaining chip to obtain a covert blessing for his expansionism.

There have been Russian adventures in the Ukraine but so far, thank goodness nothing in the Baltic. And we do need agreement with Russia to get a strategy for dealing with ISIL/Daesh. And Putin is using his position in Syria as a bargaining chip to further Russian interests.

Prediction No.9

Although all insolvency practitioners are “optimists on the down-side”, I think that insolvency will remain low again in 2015. There will be pockets of difficulty as companies fail to change with their markets- oil exploration and retail are a couple of sectors which could suffer.

 

The new Statement of Insolvency Practice (SIP) 16 governing the conduct and reporting of pre-pack sales in administrations will be adopted and pre-packs will become less common at the lower end of the market, but will come back as IP’s get the hang of them. I do not think that many public spirited business people will offer a low cost opinion on the price paid or viability of the businesses sold, so in that respect the new SIP not be implemented.

FPN with both insolvency and corporate finance credentials will prosper by offering independent advice and assistance on the valuation, marketing and sale of troubled businesses.

Not a very interesting one, this, but basically right. The insolvency market is very dull, although there may be a little movement just beginning to happen. The effectiveness of the new SIP remains to be seen.  FPN is more active in the business of selling highly profitable SME’s than working in the twilight zone.

Prediction No.10

Mergers and Acquisitions at all levels will boom. At FPN we are already seeing a lot of activity and we have a very good pipeline of company and business sales, acquisitions and MBO’s that should come to fruition in the first half of 2015. We would expect a lull around the election, because of the uncertainty, but if I am right with my other predictions I think this market will remain robust for the whole year.

 It’s been an active year, but more has happened in the second half than the first as confidence has slowly come back into the market. It has overall been a robust year.

Conclusion

Though I say so myself, that’s a pretty good hit rate. Say 85%. I’m particularly happy about my calling of the election outcome, which was spot on, and my base rate call.  Good on the Russians and oil prices too. Wish I had had some money on all this!

I am still thinking about 2016. The one thing I predict is that I will not get that 85% right, and it will be interesting. It could be a bumpy ride economically and there may be a Euro referendum. As for the Middle East, well, wait and see what I have to say.

A Merry Christmas to all my readers and a Happy New Year.

Antony Fanshawe

16th December 2015.