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Business Development & Marketing General

The future of global sea freight transport post lockdown

sea freight faces a difficult futureThe words “new normal” have become something of a cliché in predictions for a post pandemic world but there is little doubt that global sea freight transport is likely to be very different for some years to come.
Even before countries started closing their borders and taking other measures to protect citizens from Coronavirus the sea freight industry was facing pressures.
Much of the pressure relates to concern by the IMO (International Maritime Organisation) about the industry’s impact on the environment and specifically its use of sulphur oxides which is harmful and is considered to be the cause many premature deaths.
From January 2020 the IMO had imposed new emissions standards designed to significantly curb pollution produced by the world’s ships which will be no small feat given estimates that more than 90% of the world’s trade is carried by sea.
To achieve this target, it proposed to ban shipping vessels using fuel with a sulphur content higher than 0.5%, compared to the present upper limit level of 3.5%.
The challenge is immense since the commonly used marine fuel has a sulphur content of around 2.7%.
The move is generally predicted to be likely to add to shipping costs.
However, an even more significant factor has come into play with the advent of Coronavirus which has highlighted individual countries’ vulnerability to their dependence on global supply chains.
As a result, there have been calls for a revival in UK manufacturing and the onshoring of the manufacture and processing of critical products, such as medical supplies and pharmaceuticals, among others.
At the same time, there have been calls from more than 200 top UK firms and investors who demanding that government deliver a Covid-19 recovery plan that prioritises environmental initiatives that tackle climate change and propel a “green” economy.
It has been argued, notably in an article in the Economist, that globalisation was “in trouble” even before the pandemic took hold.
Then, argues Prof Richard Portes, professor of economics at London Business School, “Once supply chains were disrupted [by coronavirus], people started looking for alternative suppliers at home, even if they were more expensive.
“If people find domestic suppliers, they will stick with them… because of those perceived risks.”
While inevitably there will be a need for global sea freight transport once things return to ”normal” it would seem likely that the volume of freight moved by sea will be considerably reduced.

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Banks, Lenders & Investors Cash Flow & Forecasting Finance General Turnaround

Key Indicator: no respite for the global economy as conditions get worse

perfect storm over the global economyAs we head towards the end of the year it is a good time to look at the current state of the global economy.
Trade wars and the threats of tariffs being imposed by the US on China have become a wearyingly familiar story as US President Donald Trump continues his policy of ‘putting the American economy first’ at all times. It is not just China in the firing line, the rhetoric has escalated with his threat made in October to introduce a series of 25% tariffs on a range of exports worth an estimated £5.8bn from the EU.
But this is not the only trade dispute in the global economy as Japan and South Korea’s disagreements threaten the production of smartphones, computers and other electronics, while yet another Brexit delay, and now a UK general election, all add to the uncertain economic outlook in both the EU and the UK.
Growth has been slowing in India, particularly in its automotive sector, and to an extent in China also.
At the same time there seems to have been an upsurge in popular political protests across the world with demonstrations taking place in Spain, Iraq, Lebanon, Chile, Venezuela and Hong Kong, to name but a few.
Arguably, political unrest, too, has consequences for the global economy, particularly in a place like Hong Kong, which has for years been a focus for dynamic business activity but is now in recession after five months of civil unrest. Unrest has also led to Chile having to cancel its hosting of the November APEC (Asia-Pacific Economic Cooperation) meeting at which the United States and China had been expected to sign a deal to ease their trade war.  As yet no alternative venue has been announced.
The growth in global trade may have slowed to 3.0% this year – the lowest since the 2009 recession – according to International Monetary Fund (IMF). Data provider Refinitiv has reported that Global deal making has eased to the slowest pace in more than two years, with activity falling 11% so far this year to $2.8 trillion.
Not surprisingly all this has prompted the IMF to predict that global economic growth will be just 3% this year, its lowest level since the financial crisis and a downgrade from the organisation’s April prediction.
Earlier in the year it also warned in its global financial stability report that the next major economic crisis would be similar to the financial crisis of 2008; while it didn’t say when it believed this is a likely consequence of the estimated $19 trillion corporate debt mountain in eight major economies. This warning was echoed by the Bank for International Settlements (BIS) in its annual health check of the global financial system.
The new IMF head Kristalina Georgieva has also warned that Brexit in whatever form will be “painful”, adding to the effects of a global slowdown.
Meanwhile with Germany in recession and the EU economy stuttering, ECB chairman Mario Draghi announced a cut in interest rates to a new record low at minus 0.5 percent as part of a broader stimulus package making it expensive for banks to hoard cash.
The signs are not looking good for improvements in the global economy in 2020 and it is becoming increasingly clear, in my view, that politics is contributing to and inextricably entangled with the stormy economic weather besetting business.

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Banks, Lenders & Investors Business Development & Marketing Finance General

Politicians’ ignorance can have a negative impact on the global economy

beware the influence of politicians on the global economyAs 2018 draws to a close it makes sense to look at macro-economic trends that might inform our view of the future.
Economies tend to move in cycles from positive to negative and this is true for both national and global economies.
However, while it is true that the cycles rarely match simultaneously in different parts of the world, clearly a downturn in one region can have knock-on effects in another, as was the case in the financial crisis of 2008.
For some time now, various bodies, such as the IMF, have been predicting that another major global recession is looming. Some are even predicting that the next crash will be worse than 2008.
This is partly because the accepted wisdom is that the cycle tends to be over a 10-year period, but it is also because there appear to be headwinds building up.
A snapshot of the current state of global confidence, the global ECM (Economic Confidence Model) from July this year suggests that the USA may be moving into a serious high in 2020 regarding liquid assets (non-fixed), while the rest of the world is heading in the opposite direction. The Dow Jones has been heading ever upwards, while the UK, European and Chinese markets seem to have peaked and are heading downwards. This also applies to currency values.
According to Richard Partington, a Guardian economics correspondent, the potential headwinds for 2019 include a plateau in global growth along with slower growth predicted for the US and China, plus both public and private debt around the world being at a record high. Added to these, he says, are the risks from Brexit and from the US Fed hiking interest rates.
This is where the politicians come in
Despite the 2008 crash, and the subsequent measures taken by Governments and Central Banks such as using quantitative easing and keeping interest rates low to stimulate economic activity and requiring banks hold more capital to avoid a repeat collapse, both Governments, and investors, still have faith in Government debt in the form of bonds and property on the basis that economies are stable and will continue to grow.
Both are deemed “safe” and property is used as collateral for more debt. Nevertheless, some economists argue that the restrictions now placed on foreign investment in property have actually had the effect of devaluing it and also damaging consumer confidence.
So, by this logic, policies such as those of US President Donald Trump’s “Make America Great Again”, that encourage investment to return to the US, and his threats of trade sanctions against those economies that are perceived as competition to the US economy are unlikely to help to stabilise the global economic situation and instead would build up the recessionary pressures in the rest of the world.
The UK Government, too, has been taking steps to deter foreign investment in property. Then there is the rise of various so-called “populist” movements across the world, such as in Italy, Turkey, Hungary and elsewhere, which again focus on national interest above all. Another danger, according to Partington, is victories for populist parties in the forthcoming EU parliamentary elections in May 2019. The mood would appear to be one of increasing restrictions on global trade.
Inevitably, in the event of another crash on the scale of 2008, or worse, such policies will come back to bite us all, not just the politicians. But then we did vote for them!

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Banks, Lenders & Investors Business Development & Marketing Cash Flow & Forecasting Finance General Rescue, Restructuring & Recovery

Businesses exporting outside Europe – in this climate?

For some time now small businesses have been encouraged to look outside Europe for markets for their goods and services.
Indeed research by UPS found that UK SMEs have been outperforming those in Europe in developing their exports beyond the EU and increasing their turnover.
While the bulk of UK exports are still to the EU, 54% of UK SMEs had exported to other English speaking countries, such as the USA, Canada, Australia and New Zealand.
One could argue that SMEs should be looking even further afield. But how realistic is all this as a recipe for recovery and growth?

Export growth?

Markets across the world are increasingly jittery. There is doubt about whether the Bank of England will now raise interest rates this side of the forthcoming election for fear of destabilising UK recovery.
The 2008 Great Recession was a massive shock to the global economic system and the fear that it caused is nowhere near abated. There is even talk of another major financial meltdown looming in the next couple of years.
The IMF has been sending out dire warnings about global growth for 2015 because of the Eurozone’s ongoing failure to recover.
It is becoming ever clearer that the global financial system is now so interconnected that what happens in one part of the world has an impact on economies, wherever they are on the planet.
What price increasing exports in this atmosphere?