Thread by @nicktolhurst

2021 - a short thread.

In a few months it will be confirmed that going into Brexit year UK govt debt will exceed 100% of UK GDP - for the 1st time since the 1960s when the UK & global economy where swinging along nicely...

2/

As interest rates are low the UK govt will be faced with a choice
1. Borrow more
2. Raise taxes
3. Spend less

Nr. 3 will be impossible as it now appears UK is entering COVID 2nd wave in worse shape than rest of EU.
So then what...?

3/

Tax raising also difficult for a Tory govt faced with low growth & a restless No-longer-loyal-rightwing-media.

So my prediction

UK will spend next 2 years attempting to reflate economy on borrowed money.

But here’s the problem...

4/

Debt fuelled reflation is not a bad idea if everyone else growing and/or your debt level is low. Both are likely to be untrue in 2021.

& at this point Brexit kicks on properly. So you can see where this is going....who will be sure about “holding £ & £ debt”?

So I predict..

5/

I predict 2021 the £ will - if there’s a bad or no deal Brexit - that £ will drop below € parity level and perhaps significantly below that.

At this point EU will not want to cut UK slack on trade as £ collapse makes “simple” exports cheaper..

That’s why I think Boris..

6/

It’s why I think Johnson is panicking over economy already. & why I think remainers are wrong about COVID.

If UK was a beacon of “relative“ stability in a COVID world you could imagine ways UK could leverage this to finesse/mitigate Brexit.

But what if opposite true...?

7/

In a Europe where U.K. has high debt AND an appalling COVID these don’t hide Brexit costs...they accelerate them.

Johnson has just 3 years now to show his strategy works - that is why he’ll borrow more than any PM in history and why I predict £ decline.

But there’s more...

8/

A £ decline plus worse COVID situation puts in doubt UKs one Trump-card:
London.

London is the place the rich store & spend their money. It’s what keeps us going.
But if theatres, restaurants & airports close..& property assets decline in int currency terms...what happens?

9/

I’ll tell you:

I don’t know.

But I can tel you this - it won’t be pretty.

/ends