From the Fleet Street Letter (Great Britain) –
With the summer behind us, politics is back and it’s all about Brexit. There are already signs of a split as David Davis, the Brexit minister, has told us that we should be prepared to leave the single market as there is no deal without free movement. The European Union (EU) will play hard ball, yet in a world where trade barriers are falling, the worst outcome should be better than the darkest fears. When you consider the new opportunities that will open up elsewhere, the future is bright. It’s the mid-term disruption that is of most concern.
The EU is acting irrationally. By avoiding taxes on the greatest profits the world has ever seen, Apple is smug and greedy. However, a deal is a deal. If the EU disapproved of Apple’s tax deal with the Irish government, it should have changed the rules going forward. By nulling and voiding a contract, and then taxing retrospectively, that will see a reduction in future foreign investment within the EU. I always felt that Apple’s natural home in Europe was the UK. English speaking, free and fair, and presumably its best European customer. I can only imagine that Steve Jobs, for whatever reason, disliked Britain. Or maybe it was purely tax.
Outside of the EU, Britain will be able to attract global companies with a competitive corporate tax regime. In a world of havens and complex avoidance structures, it should probably be zero anyway. That Britain will likely go this way, must be of great concern to the EU. But how important is single market access for foreign companies, and what price must Britain pay?
Japan’s prime minister Shinzo Abe wants a soft Brexit to protect Japanese interests. President Obama reiterates his point that Britain is at the back of the queue. The last time he said that, he lost a million votes for Remain. Britain ignored him then and will ignore him now. The only thing we can be certain of is uncertainty.
This political uncertainty isn’t just at home. There’s the US election in November, followed by the Italian referendum on its constitution later this year. Then there are elections in France and Germany next year. This combination of events could see a total change of the guard.
The views of the majority of the British people were felt in the UK referendum. I very much doubt that mood – to take back control – is solely a British idea. Be prepared for political surprises that all have one thing in common: anti-establishment.
The investment implications for political uncertainty are to focus on trends that are firmly in motion regardless of political change. One of those is the continued progress in the internet.