Any other business

Are Boris’s hedge-fund pals conspiring to ‘short the UK’? I doubt it

12 October 2019

9:00 AM

12 October 2019

9:00 AM

Minding my own business at 67 Pall Mall — the private members’ club favoured by oenophile West End hedge-fund managers that will serve as this week’s restaurant tip — I’m watching two tieless but well-tailored gents at the next table sampling different vintages of Château Pichon Longueville. And I’m thinking: ‘Bastards! These must be the friends-of-Boris who are conspiring to reap billions from a no-deal Brexit!’

It was former chancellor Philip Hammond who wrote recently of Johnson being ‘backed by speculators’, citing the PM’s sister Rachel who had spoken of the influence on him of ‘people who have invested billions in shorting the pound and shorting the country’. The novelist Jeanette Winterson — also quoting Rachel — repeated the allegation on last Friday’s Any Questions? So it must be true, mustn’t it?

Well, no actually, you don’t have to dig far to find how fanciful it is. The hedgie they all seem to have been talking about is Crispin Odey, who certainly looks like a plutocrat — the Sunday Times credits him with a fortune of £775 million — and who gave £10,000 to Boris’s leadership campaign. He says the story is ‘absolute rubbish’, but more to the point, his short positions are available for all to see on public websites such as ShortTracker. He currently has 14 of them, mostly quite small, his biggest negative bets being a longstanding one against the failing store chain Debenhams and a more recent one against the troubled Metro Bank; he also takes a dim view of a Bermuda-based, FTSE250-listed insurer called Lancashire Holdings and a couple of housebuilders. Make a conspiracy out of that, if you will.

Odey isn’t even the biggest player in this game: his rivals BlackRock, GLG and Marshall Wace each have more than 40 short positions. But I defy any analyst to find a pattern that constitutes ‘shorting the country’. The truth is that every fund manager’s portfolio is shaped to reflect economic expectations, including defensive positions in case of shock. There’s an argument that short-selling of equities is destructive and ethically dubious, but that has nothing to do with politics and exponents of it say it’s just one more tool in their box. Right now, there’s probably more to be gained simply by holding blue-chip FTSE100 stocks whose revenue streams are in anything but sterling. There must be many people out there — some of them outright speculators but many just trying to protect their savings or their businesses — who are betting in all sorts of ways on a further fall of the pound; but that’s a different story and I doubt they’re the ones sniffing claret in Pall Mall.

As the going gets tougher…

It’s not easy to stay cheerful these days. In the high street, retail sales dropped by 1.3 per cent last month compared to a year earlier— their worst September since record-keeping began in 1995. Hopes of continuing trickledown from the City were dashed by news that the market for London Stock Exchange listings is at its lowest ebb for a decade, with delistings outnumbering new entrants: an obscure Kazakh financial group called has just pulled its IPO because of ‘unfavourable and uncertain market conditions’. The office property sector is rocking from the sudden retreat of WeWork, while the travel industry is sifting through the debris of Thomas Cook. And a survey of 5,900 UK firms by the National Bureau of Economic Research found that business investment has fallen by 11 per cent in the past three years as productivity growth has also slowed, with the biggest declines in firms ‘with the greatest Brexit-related uncertainty’ and managers most distracted by Brexit preparations.

On the brighter side, however, Barclaycard reports a modest 1.3 per cent overall uplift in September consumer spending, due in part to splashing out on entertainment. And in that spirit, what could be more uplifting for your columnist than a day on the Thames with the Spectator Wine Club’s ‘Clays, Claret and Cognac’ cruise?

…the tough go cruising

As an extra deckhand, I felt it my duty to add a couple of points to the skipper’s health and safety briefing. First, if the river’s occasional swell should cause you to drop your knife or napkin at the lunch table, do not reach down for it in the vicinity of your neighbour’s thigh; second, if you start fighting about Brexit, we’ll have no choice but to throw you overboard. Our guests took that warning in good heart, but of course the dreaded topic could not be avoided. And what I took from talking to the business owners among them was downbeat — but with a positive twist in the tale.

Here were entrepreneurs in construction equipment, materials handling and posh holidays; even one that slices human brains, for medical research, into 7,000 sections. None said, ‘It’s fine, we’re ready’, as Michael Gove, the cabinet’s silver-tongued Brexit-prep overseer, might hope or claim. How could they, when all outcomes — deal, no deal, extension, remain — are still possible with three weeks to go? The last word went to the entrepreneur who brought most to the party, Laura Taylor of wine supplier Private Cellar: ‘We’ve no idea what’s going to happen to the pound, or about tariffs. We’ve prepared as best we can and we’ll just get on with it whatever happens.’

And that, of course, is the spirit that will actually keep the UK economy afloat. If Johnson’s pirate crew are still in power in a few months’ time and able to say, ‘We told you so, it wasn’t all bad’, it won’t be because of anything ministers planned or achieved, but because entrepreneurs, factory managers and import-export traders have just got on with it. They’ll even cope with Corbyn if they have to. The silent majority of business–builders has been ignored and derided these past three years, but — here’s the positive bit — we’re entering an economic phase in which only their resilience, ingenuity and habitual optimism will save our bacon. I raise a tumbler of cruise-surplus Delamain XO cognac to them.

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