The December breakthrough in the Brexit negotiations led to a relief rally in sterling, and a more general sigh of relief that 2018 would not begin with deadlock.
But despite the recent optimism over the progress of negotiations, I am preparing for a sense of uncertainty and foreboding to return.
We are certain to be warned regularly through 2018 that a bad Brexit outcome is not only possible, but likely. There are too many “Remainers” here, and “anti-Brexiteers” across the EU’s Commission and Council, who will self-interestedly claim that the UK’s EU exit will be more tortured that it actually will be. Indeed, many supposed experts are charging lucratively to speak at investor conferences where they exaggerate matters to justify their “repeat fees”.
So, with the warning in place that 2018 will be full of “fake news”, let me reflect on some fundamental truths.
First, consider UK employment, which is at an all-time high. Recruitment firms are registering hiring intentions widely across sectors – a feeling that appears to be vindicated by the record high job vacancy levels.
Look more specifically at what the likes of Goldman Sachs and Bloomberg are doing in London (rather than what their top brass are saying about it). Just like Siemens, Boeing, Merck, and many other multinationals, they are actually building out their presence here.
Second, what of the argument that other EU countries are looking to capitalise on the UK’s misfortune by attempting to poach British jobs for their own labour market, in particular the lucrative jobs of London?
Here again we are up against very much fake news.
Earlier this year, UK-owned National Express made a lucrative sale of its C2C rail franchise. This starts at Shoeburyness in Essex and ends at Fenchurch Street in the heart of the City. It is a line that crucially relies on those working in financial services.
If the prevailing narrative of a stampede of jobs from the City were true, one would think the line’s owner would be seriously hurt financially, and that this might explain why it was put up for sale. But it changed hands not because of a distressed sellers, but rather keen buyers, as evidenced by the fact it was not sold cheaply or without keen competition.
What makes the deal so instructive is that the successful bidder, FS Group, is owned entirely by the Italian state. Moreover, the frustrated under-bidder was Abellio Group, a rail operator owned wholly by the Dutch state.
Here we had essentially two EU governments vying over a rail franchise reliant on a good Brexit. Actions speak louder than words, and in their actions, EU government after EU government is telling us that they want to remain closely engaged with a healthy UK economy.
On this note, we come to my third point: what of UK inflation in 2018 and the course of the base rate?
At its last reading, consumer price inflation was 3.1 per cent, slightly above the top of the range it is supposed to remain within.
Some suggest it will go higher through 2018, forcing interest rates to rise with it. But if inflation does go higher, it is likely to be a small and temporary breach, which would only act to lift sterling which would be disinflationary.
For my part, I am convinced the Bank of England will be careful in moving the base rate, which, having returned to 0.5 per cent, is likely to be only modestly higher in a year. Against this monetary backdrop, I see no threat to UK house prices, and totally dismiss concerns that the average price in London will fall.
Please dismiss any such negativity as the fake news which it is.