The Truth About Britain’s Collapse (It’s Worse Than You Think)

What's actually broken in Britain? If you walk into any pub, any reel on social media, there's nothing but negativity. Everybody's pissed off with politics at the moment. I want to sit back and make an objective assessment of what's going on with the country, what's actually broken and whether or not we've reached the point of maximum pessimism. Because if there's one thing that I've learned in markets, when sentiment approaches an extreme, it's usually the time to do the opposite sometimes. So this video is going to go through the exact process that I developed over the course of my career as an expert in both stock picking, but also seeing the 40,000 foot view of ultimately very complex puzzles. Let's get into it. So let's begin with a look at the stock market. It's at an all time high, so this for me and likely for you and your pension is good news. Because the US dollar has weakened considerably this year. It makes the pound look stronger than it actually is. So comparing it against something like the Swiss franc, which is kind of a neutral currency, you can see here a fairer representation of its relative purchasing power. So it's been weakening, which means that exports have basically become more attractive to their customers. But here's the thing, as we move on to take a look at interest rates, you can see that the bank of England's been cutting rates for over a year now, since last August, in fact, and it continued cutting whilst the US held. Now the US has returned to cutting. And what that means is that it doesn't give the bank of England as much power in its future cuts and ultimately the same potential to boost the stock market. So let's get into the core of the issue now. With inflation higher than it was any point in the five years prior to the pandemic, the bank of England doesn't have any real leeway to to cut rates further. And that's of course bad news for us all. But in terms of wage growth, it's actually kept up with inflation. I think that flies in the face of a lot of the popular wisdom or current sentiment in the uk, where there's talk of a cost of living crisis. So it's not to deny that it exists. I think it's very clear that there is a problem there, but this data contradicts that. So let's look at the growth numbers. In a healthy economy, inflation would be a product of excess demand or higher growth. We'd have to go back all the way to late 2017. Beginning of 2018 to see the last time UK's growth kept up with the US. There's a lot of volatility during the pandemic, so I'm just going to disregard that. But the shocking reality here is that we're seeing GDP growth of barely 1%. To, to go back to late 2017, growth in the UK was nearly 3%. We haven't seen that now for seven years. It's been 84 years. So we've got prices rising at 4% working against us, and economic productivity or expansion at only 1%. Now, when we look to the consumer, year over year, retail sales growth is less than 1%. And you can see how that's lagged the U.S. again, again, all the way back to 2016, 2017, we had retail sales growth of nearly 7%. It's been negative throughout 2022, 2023 and basically flatlined for the last 18 months. Now, this is known as the Purchasing Managers Index. And basically what you need to know is that 50 is the threshold for expansion or contraction. Below 50 is negative, above. Above 50 is positive. You can see how we've been below 50 for a number of months now. And within this survey you also get feedback from the respondents. This was the 11th consecutive contraction occurring at the sharpest pace in three months. So things not only have been getting worse for nearly a year now, but it's accelerating. To the downside, it says that it's coincided with a faster drop in new orders following the increase in the minimum wage and employer contributions to national insurance, which has been a politically driven policy. Consequently, the lower demand for capacity has caused factories to cut employment levels. So to lay people off input cost, inflation rose to its highest since May. But turning to services, now it's above 50. Currently, new business rebounding, but there's also been more evidence of job cuts. Headcount has been contracting for 11 consecutive months and that's the longest stretch outside of the pandemic since the 2008-2010 crisis. And once again, inflation has been cited as a problem here, so the outlook isn't great on balance. Now, let's look at the unemployment data and you can see me take an inhale here, because it's climbing in the depths of the pandemic, mainly due to furlough and other job retention schemes. The rate didn't exceed 5.3% and we're not a million miles away from there now. We're about half a percent off that. But it's little surprise, given what we've just read in Both the services and the manufacturing pmi. Now let's get on to housing. So this is one of the most contentious issues in the uk. Here we can see the cost of rent inflation. So the rate at which landlords are jacking up the rent, it was double digits just last year. And remember, this is a rate of change. If it's only 1% and it was 3 or 4, it doesn't mean that prices are going down, it just means that the rate of change has slowed. Prices are still higher than they were a year ago. So this is absolutely insane. And I've overlaid real wage growth beneath that to demonstrate how wages are not keeping up with rents, despite the fact that landlords are fleeing the sector due to all of these tax changes, which, which have made it less attractive to be a landlord. Here is the relative cost of ownership compared to renting. So the price to rent ratio has been falling. The reason probably isn't houses becoming cheaper or more affordable, but rather the horrendous pace at which rents have been exploding higher. When we look to the cost of ownership, even if you are lucky enough to get on the property ladder, mortgage rates, even though they've come off a little, are still at nearly 7%. House prices, of course, are not keeping up. Your mortgage is costing you a lot more than the appreciation in your property. And there's still the affordability issue. It's not like this ratio has come down, it's around seven times. And that's why people are getting screwed and can't go on the property ladder. Let's take a look at the debt picture. So at a national level, so debt is basically 100% of GDP. This obviously jumped back up during the pandemic, as it did for a lot of developed nations, as they had to come in and do stimulus. But compared to where we were pre pandemic, there's no signs of improvement whatsoever. And other countries have improved their position. We're spending and as a nation, living beyond our means, this is the difference between tax receipts and what the government needs to spend on welfare. So there's only a couple of ways out of this. Now, the first would be inflation that we looked at earlier because that erodes the value of debt. But on the income side, we need more people in the workforce to boost tax receipts long term and to boost productivity. The UK's population is only growing at about 1%. We're going to need to see an uptick in fertility rates or cut back on pensions and social welfare. Looking at this next chart, it shows you the burden of non taxpayers who are consumers of welfare versus those of working age who are taxpayers and contributors to that budget. Due to the same demographic themes that are playing out across the west, we're getting older. As a nation, we've looked to offset population decline in recent years and decades, or slowing population growth, I should say it's not in decline by basically importing new people. There's been a big cut, believe it or not, in the number of people arriving in the uk, but just like inflation, there's still a hell of a lot arriving. It's not that there's fewer than last year, there's a net outflow, it's just that the rate of increase has slowed, that's all. The emigration number, which is people like myself leaving the UK continues to climb. It's not quite at the peak of a couple of years ago, but it's getting there. So the only other way that the government can manage the entire situation is to raise taxes. And this is why wealth tax has become another hot topic from my perspective. If you're going to reduce, and I think necessarily reduce, the number of migrants arriving in the uk, certainly for as long as you're attempting to sustain social welfare budgets to government spending, you're going to have to increase taxes. So let me just conclude, and then I'll give you some hopefully actionable takeaways. So we've seen stocks and the value of your pension perhaps boosted by a weaker pound, but the bank of England is now running out of ammo, so to speak, with further rate cuts, they're not going to have the same potency. Inflation is threatening not only consumers, which I'm sure you're all familiar with when you go to the shops, but also firms. We've seen the comments in both the manufacturing and the services sectors saying exactly the same thing now for months on end. And you can see it in rents, which have outpaced increases in wages by a long chalk. All the while, new buyers can't get on the property ladder and those that are currently owners with mortgages are getting absolutely rinsed. And the bottom line is that ultimately there's going to be tax hikes ahead. Now, in terms of my action plan, leave or stay out of the UK for the time being, the next step to take is to ensure that you've got access to a tax efficient structure. Now, I'm not a tax advisor, but I am somebody who knows how to manage money and manage taxes personally, both inside of the UK and also internationally through various structures. So these can all be utilized efficiently, even if you're still living in or registered to the UK as a taxpayer, whilst broadening your horizons and safeguarding your assets. And my third step to conclude is to invest globally. That's not to say you shouldn't own any UK assets, because there might be opportunities there, particularly as sentiment reaches an extreme. But the world is a big place and it's full of opportunities, so there's no reason for you to remain shackled to, say, your workplace pension that's invested in some boring 60, 40 split between the FTSE 100 and gilts or some shit like that. Get yourself a sip. Get yourself a corporate vehicle or entity where you can avoid paying capital gains tax legally, not incur income tax on dividends necessarily. You can offset those and manage those for a period of time. If you found this useful, maybe check out this video, which YouTube thinks you're also going to love.