Gas Prices, Price Caps, Reckless Pricing and Telecom Plus

There was a lot of coverage of the impact of rising gas prices in the media this morning, particularly on retail consumers. The wholesale price of natural gas has been shooting up for a number of reasons – up 17% alone on Monday for example.

The Government imposed “price cap” has protected consumers to some extent, but it has meant that many companies that supply consumers have been losing money. There are as many as 55 companies that supply gas to retail consumers but a number have already entered administration and the forecast is that only 10 might survive.

The price cap is only reviewed every six months and that is clearly insufficient to keep up with the rapid change to open market prices. The price cap was introduced to protect consumers from big companies who had many long-standing customers on fixed expensive tariffs. Many were reluctant to switch to other suppliers which is now very easy. Government action might have been laudable to protect the most vulnerable from exploitation but when you start interfering in markets, the outcome is usually perverse.

As a shareholder in Telecom Plus (TEP) I have some interest in this issue. They have repeatedly complained about new entrants to the market who were promoting prices so low that they were bound to lose money. But they were doing this to build a customer base.

This is what TEP said in their last Annual Report in June: “The level of the energy price cap increased by almost £100 at the start of April, a substantial rise that reflects both rising wholesale prices and higher covid-related costs. Since then, wholesale costs have remained at an elevated level, which makes the switching market particularly challenging for all market participants.

Despite this, many independent suppliers are still setting their retail prices at whatever level is required to attract new customers on price comparison sites, irrespective of the impact it will inevitably have on their profitability and cashflow; as a result, we continue to see them reporting significant and unsustainable losses in their latest published accounts. A number of further suppliers have left the market over the last 12 months, with further insolvencies likely in the event that the current Ofgem consultation (designed to prevent suppliers using customer deposits as a substitute for shareholder capital) becomes effective”.

Business Secretary Kwasi Kwarteng has said that the Government “will not be bailing out failed companies” which is good to hear because it is the companies own fault that they have got into this parlous situation. Gas prices are always volatile and companies that had not hedged the price nor had long-term supply contracts were very likely to come unstuck.

A meeting of supply company leaders with Mr Kwarteng apparently encouraged dropping of the price cap, but he was adamant in retaining it. That is a great pity because this problem would never have arisen if a free market was allowed to operate.

There are other possible ways to protect vulnerable consumers and nobody ever has their gas cut off because their supplier goes bust.  

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

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Scrapping Share Certificates and Clive Sinclair Obituary

The Government is to push ahead with the scrapping of paper share certificates. An announcement yesterday by Lord Frost included this in a bonfire of regulations which also included plans to scrap driving licences (i.e. making them digital only). The dematerialisation of shares was long ago committed to by an EU directive with no new paper certificates to be issued by 2023 and all existing ones replaced by 2025.

There are many share certificates still held by investors – for example I still hold a few, mainly for VCT companies which I have never bothered to dematerialise. A paper share certificate at least ensures you are on the share register of a company and hence are a “member” with full shareholder rights. A replacement system which ensures you retain those rights rather than shares being held in a stockbroker’s nominee system is required but plans for implementation of such a system have been slow in appearing.

See https://www.gov.uk/government/publications/brexit-opportunities-regulatory-reforms for the announcement.

Inventor and businessman Sir Clive Sinclair has died at the age of 81. He developed early calculators, digital watches and the ZX81 and Spectrum personal computers. The latter were the first popular home computers in the UK sold at a price almost everyone could afford (less than £100). I fondly remember playing video games on a Spectrum but they were not much use for anything else. The keyboard was a single sheet of rubber and not fit for much at all.

Despite these short-lived commercial impacts, he never developed these businesses into long-term successes and even proceeded to destroy his reputation with the Sinclair C5 electric vehicle.

He provided a very good example of how in Britain we have good technology innovators but not good businessmen who can develop a company and conquer the world with superior sales and marketing.

Sir Clive seemed to always want to move on to new inventions rather than concentrating on making money from existing ones and doing the boring work involved in developing existing products and markets. Therefore in essence a flawed personality in many ways.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

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Charles Stanley Takeover

   

I attended, via the LumiAGM platform, the Court Meeting and General Meeting of Charles Stanley Group (CAY) to approve the takeover by Raymond James this morning. In other words, these were hybrid meetings with both physical attendees and web attendees.

The meetings were reasonably well run but there were no questions from attendees and I guess it will go through as the offer price is more than 40% higher than the previous closing price for CAY shares. But we will have to await the final vote results (a 75% majority is required plus court approval in due course).

The LumiAGM platform is easy to use and I would recommend it to other companies.

It is perhaps unfortunate that yet another stockbroker is disappearing, therefore reducing competition. Consolidation in brokers and platforms is the name of the game of late as size matters now that profits are being eroded by new entrants while operating and regulatory costs rise. Keeping up technically is now expensive for example.  Raymond James is a good fit because they are primarily a full-service broker like Charles Stanley. But it may leave the execution-only Charles Stanley Direct platform out on a limb. I would expect they might sell that business to another execution-only platform operator in due course but the stated intention is not to change anything in the short-term.

At least this takeover will remove another holding from my portfolio, reducing it to 84 companies and funds, although a number of them are investment trusts and VCTs which require little monitoring. But with the market riding high, it’s a good time to weed out a few holdings.

Postscript: Based on the voting results, it looks like a done deal. Some 99.9% of shares were voted in favour, although the number of shareholders actually voting is astonishing low at only 72 (only 12.5% of those eligible). This should lead the Court to question the outcome, but will they?  See here for the full results: https://www.londonstockexchange.com/news-article/CAY/results-of-court-meeting-and-general-meeting/15138290  

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

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Raising Taxes Was Inevitable

The Prime Minister’s statement yesterday primarily provided an excuse to raise taxes to help the NHS and support social care funding. But this was surely very predictable. In March I said this after the Chancellor published his budget: “Reaction to yesterday’s budget was generally negative, but nobody likes higher taxes. The general view is that the Chancellor has just kicked the bucket down the road. More borrowing in the short term to finance the recovery and keep people in employment, but much higher taxes later. I think the budget is a reasonable attempt to keep the economy afloat and could have been a lot more damaging for business if he had taken a tougher line”.

You only have to consider the many billions of pounds being expended in the NHS to counter the Covid-19 epidemic and to support businesses which had to shut down to see that higher taxes were inevitable.

We are now getting the predicted higher taxes. The main points announced were:

  • National Insurance rates for both employees and employers will rise by 1.25%. Mr Johnson said he “accepts that this breaks a manifesto commitment, which is not something I do lightly. But a global pandemic was in no one’s manifesto”.
  • Those over 60 but still employed will also pay National Insurance for the first time from which they were previously exempt.
  • Taxes on dividends will also rise. Dividends are taxed based on your income tax rate. Basic-rate payers will now pay 8.75% tax on dividends, up from 7.5%, higher-rate payers will pay 33.75%, up from 32.5%, while top-rate payers will pay 39.35% up from 38.1%.
  • The “triple-lock” on state pensions will be suspended which will reduce the anticipated income rise for pensioners.
  • Pensioners will also be hit by a proposal to raise the limit for when obtain free prescriptions from age 60 to 66.
  • In total it is suggested that the total tax take will be the highest it has been since the Second World War and undermine the Conservatives claim to be a low tax party.

What do we get in return?

The extra £12 billion a year raised will mainly be spent helping the NHS recover from the Covid-19 pandemic and, eventually, on protecting people from extortionate social care costs. But there are few details on how the money will be spent. However there is a claim that the extra taxes raised will be hypothecated as a “health and social care levy”, i.e. cannot be spent on anything else, although the rules can be changed later of course.

One specific commitment is to introduce a lifetime social care cost limit of £86,000 per person from 2023. This may help people to avoid having to sell their homes if they have to go into residential care. But it only applies to basic care costs not to food and accommodation.

There will be a new means test if people live in their own homes. They will get all their social care funded by taxpayers if they have less than £20,000 in assets — excluding the value of their home. They will be partially funded if they have assets worth up to £100,000.

Comments:

  • The advantages of the self-employed paying themselves via dividends rather than in salaries will be further reduced. For those who receive dividends on investments it is important to try and reduce those by moving the investments into tax free ISAs, SIPPs or VCTs. Clearly it will also increase the relative value of companies that are growing their retained profits or doing share buy-backs rather than paying out profits in dividends.
  • Will the extra money for the NHS actually improve the services? As a big personal user of the NHS I welcome it but will more money make a difference? The service has certainly declined in the last year with waiting lists for operations growing to millions nationwide (I had to pay privately to get one done for example). There is a shortage of doctors and nurses and that is not easy to fix quickly as training takes a long time as does building new hospital facilities. The total funding for the NHS is now comparable to other European countries but the level of service provided is not as good – just compare the number of hospital beds, particularly intensive care ones, or doctors per head of population. This is where the NHS proved to be so sub-standard during the pandemic. This is a management problem which more money might not cure.
  • Social care likewise needs wider reform but will more money help? It is not clear.
  • The media comments lauded the ability of those who need to go into care homes from avoiding selling their homes. But why should they not be forced to do so? This looks like a sop to the wealthy home owners in the shires who want to pass on their homes to offspring. I do not consider it fair that young workers should be subsidising such funding by rises in taxes on them. So far as I am concerned, I am quite happy to erode my personal wealth to pay for the medical or social care costs I need. My offspring should not be relying on collecting big inheritances.
  • Is it a good idea to impose extra costs on businesses and deter them from employing more people? This is surely a damper on economic activity generally and will reduce returns to investors. But employment levels are high and increasing the cost of employing people might encourage higher productivity. At this point in time, I therefore do not oppose it, but I am not one of those in employment who will be paying the higher NI rates.

The key question is what else could the Chancellor have done to raise taxes? The alternatives are probably no better.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

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Standard Life UK Smaller Companies Proposes Name Change – Vote Against It!

The Standard Life UK Smaller Companies Trust (SLS) is proposing to change its name. The managers are currently Aberdeen Standard Fund Managers Limited but the name “Standard Life” has been sold to Phoenix Group so a change of name is not unreasonable.

Of course this is the kind of problem that arises when a trust is named after the fund manager. It also causes problems if the board of directors of the trust decides to change the manager which is not a rare event. Much better to choose a unique name which is not associated with the manager and which makes a good trade mark.

Investment trusts should not appear to be poodles of the fund manager which using the manager’s name gives the impression is the case.

What is the proposed new name? It’s “abrdn UK Smaller Companies Growth Trust Plc” (and no that’s not a typo – just the modern idiot fashion to decapitalise names). The word “abrdn” is the new name for the Aberdeen Group.

I recommend shareholders vote against this proposal and ask the directors to come up with a better name that they alone own, as I shall be doing. As an exercise in rebranding the proposed new name is not a good choice however one looks at it.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

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Why the Germans Do it Better

One of my summer reading books was “Why the Germans Do it Better” by John Kampfner. The book is somewhat mistitled because much of it is taken up with the history of political developments in Germany since the Second World War. That is interesting but it does also cover why Germany has been so successful in developing its economy since it was destroyed in the war years.

This is a short extract from the book: “On the eve of the currency reform and lifting of price controls [by Ludwig Erhard], industrial production was about half of its level in 1936. By the end of 1948 it had risen to 80 per cent. In 1958, industrial production was four times higher it had been just one decade earlier. By 1968, barely two decades after the end of the war that had left the country in ruins, West Germany’s economy was larger than that of the UK. The trend continued remorselessly. In 2003, it became the largest exporter to Eastern Europe. In 2005, it surpassed the US as the leading source of machinery imports into India. It is the largest exporter of vehicles to China. Most impressively, in 2003, Germany overtook the US to become the biggest total exporter of goods in the world”.

Why do we in the UK import so many German cars and other products. Just looking around my own house we have a Siemens refrigerator, a Bosch kettle, dishwasher and washing machine, an AEG cooker and I just bought a Braun electric razor. Like many readers no doubt, all of our domestic appliances are German apart from a Japanese bread maker.

The UK used to be a leading industrial manufacturer and although our car industry is not as moribund as it used to be, it is still only below tenth in the world for vehicle production while Germany is fourth.

Why has the UK become deindustrialised and in practice become primarily a service economy? Education is part of the problem but as Mr Kampfner makes clear, it is also an issue of how we organise our companies. Comparative productivity shows we have fallen well behind with GDP per capita now only 85% of Germany’s.

In Germany there seems to be a stronger consensus between management and employees with employee representatives on the supervisory boards. The culture of companies is different in essence.

Mr Kampfner’s book highlights many of the differences and points to how the UK should rethink some of its educational and corporate structures if we are improve our productivity. It’s well worth reading for that alone.

But it is also a good primer on political developments in Germany, written by someone who knows both Germany and the UK well.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

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Polar Capital Technology Trust AGM and Board Apprentices

I attended the Polar Capital Technology Trust (PCT) Annual General Meeting via the Lumi AGM platform today. This was an exemplary example of how to run a “hybrid” AGM with 8 attendees on-line and 4 shareholders physically present. Questions came from both sources, voting was on-line and there were no technical hitches.

The low attendance was probably because we are in the holiday season I would guess. But it proved a useful meeting anyway with a good presentation from fund manager Ben Rogoff. He is always worth listening to and his video presentation should be available on-line, or you can read the Annual Report of the company where he covers technology trends and there is also a supplement on “Hybrid Work” that covers the WFH impact. If you want to keep up with technology trends, Ben’s annual reports are essential reading.

PCT increased the NAV per share by 45% last year but the share price discount has recently widened so the company has been buying back shares – it’s now on a discount of 7.3%. Technology shares have gone out of favour, or some profit taking has happened.

In response to a question about his own holding in the company, Ben said he had been buying shares recently. So have I as I still think technology shares are good value for the long-term.

An interesting aspect of PCT is that they do have a “board apprentice”. The person appointed is not a formal director but attends all board meetings as an observer. This enables them to learn how boards operate and otherwise gain an education. There is an organisation who can provide candidates for such roles – see https://www.boardapprentice.com/

As I said in a previous blog post, there are better ways to increase diversity than imposing quotas for females or other categories on the board. Education is the key. Appointing board apprentices is certainly a better way of improving diversity which I wholeheartedly support.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

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The Population Issue and Historic Evacuations

Roman Withdrawal from Britain – From Cassell’s History of England

My previous blog post on the IPPC report on climate change generated a number of comments. Here’s a good one in the past from Sir David Attenborough that is very relevant: “All our environmental problems become easier to solve with fewer people, and harder – and ultimately impossible – to solve with ever more people”. That’s certainly an area where Governments could take a stronger lead.

While the stock market is relatively quiet, it’s a good time to ponder the subject of evacuations as is currently happening in Afghanistan. Was it necessary and what might happen in due course are the key questions?

Evacuations after military withdrawals are quite common in history. Britain suffered such an event in the years 405-410 when the Roman Empire withdrew the legions to fight off attacks on the continent. The Emperor Honorius finally told the Britons to “look to their own defences” in 410 which marked the effective end of Roman rule. After 400 years of Roman administration and cultural dominance in Britain it rapidly disappeared. All we have left now are a few straight roads.

The USA gave the same exhortation in Viet Nam after a failed attempt at establishing a western style democracy in the South to thwart Communist expansion. Militarily the war in Viet Nam was a disaster with much gold and lives lost to ultimately no purpose. The regime they established was a puppet one ridden by corruption and without widespread popular support. Despite heroic efforts by the US military, support from the US public eventually withered away. Joe Biden is old enough to remember that failure of US policy when the war was continued for far to long. It is hardly surprising that both he and Donald Trump were keen to withdraw from Afghanistan as soon as possible. Viet Nam is now a peaceful and commercially vibrant country.

Britain faced the same problems in Afghanistan in the 19th century when we invaded twice to thwart suspected Russian influence. The first Afghan war was a military disaster and after the second we rapidly withdrew having learned our lesson. In the 1980s Russia invaded the country but after 10 years withdrew after effectively suffering military defeat. The history of Afghanistan and the reasons why it is so difficult for foreign armies to gain control was well covered in a TV documentary by Rory Stewart in 2012 under the title “The Great Game” – it was rebroadcast this week and acted as a good reminder why military success in the country is always a mirage.

Ultimately the US and UK’s efforts in Afghanistan followed the same problems as in Viet Nam. The regime they established was corrupt and only kept afloat by oodles of money while the western culture they attempted to establish was not accepted by most of the population. Afghanis looked on western armies as invaders of the wrong religion. This was never going to work.

Ultimately, and when otherwise facing a military situation that could not be won, withdrawal was clearly the best solution after the original reason for the US invasion was forgotten after 20 years of war (originally intended to stop terrorism promoted by al-Qaeda).      

Could the withdrawal have been better handled? That is debateable. It is clear that all the “hangers-on” to the US, UK and other foreign forces might want to depart but with tens if not hundreds of thousands of such people this was hardly very practical. A date was set of the end of this month and Joe Biden does not wish to stretch it out. They claim to have already evacuated 70,000 refugees. There was sufficient time given to remove military forces and the Taliban have promised an amnesty for others. It is clear that Afghanistan faces a very difficult time in the next few years both socially and economically as Viet Nam did. But extending the withdrawal by a few weeks or months will surely not help much while militarily it makes no sense. Kabul airport cannot be defended easily if the Taliban choose to block a time extension. The West should concentrate on coming to an accommodation with the new rulers and helping them to develop the country, not attacking them for perceived undemocratic failings.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

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Mining Companies, Takeovers and a Journal of the Coronavirus Year

The usual stock market gyrations are taking place in August and this year it seems to be the turn of big mining stocks. Rio Tinto (RIO) is down 20% since its recent peak in May and Anglo American (AAL) fell sharply after it recently went ex-dividend. BHP Group (BHP) is also down but not by as much as might be expected after it announced that it was intending to unify its corporate structure and this will mean it will no longer be a FTSE-100 stock so some tracker funds will have to sell it. The downward move was probably limited because this company is dual listed in the UK and Australia and there was a discount in the UK versus the A$ price which will be eliminated.  

The reasons given in the media for declines in mining stocks are numerous – some profit taking after a long rise, worries about Covid infections rising, US stimulus measures being cut back, a slow-down in economic growth in China and several other reasons. All of this is probably just “noise” that can be discarded as financial news tends to be thin during the summer so media tend to invent stories.

As regards the BHP move, where I hold the stock, I do not oppose the simplification. It will still be listed in the UK but as a FTSE-250 stock. However the one-off costs of US$500 million to do the unification seems to be unreasonably high. I hope we see a good justification for the move when it comes to a vote. But it has been suggested that one motivation is a more relaxed corporate governance environment in Australia. As I have pointed out in previous blog posts, excessive regulation in the UK is providing an incentive to list elsewhere or not list at all.

Other market news is a recent spate of takeovers in my portfolio such as at Avast (AVST) and Ultra Electronics (ULE). The Avast proposal is not at a great premium but I have only held it for a short while so I will not oppose. It’s a good opportunity to simplify my portfolio which still has too many holdings in it.

As regards Ultra this is another short-term holding and the agreed offer price is at a very good premium so I will support. The Government has required the competition watchdog to assess ‘national security issues’ over the sale but the share price barely moved after that announcement so it seems the market expects this will not thwart the deal. With UK and US defence companies now so intertwined it would seem pointless to object.

On a more personal note, in March 2020 I started a diary because the coming year seemed likely to be a momentous one. With the Covid epidemic spiralling out of control and our departure from the EU (Brexit) having happened but no free trade agreement yet in place which was forecast to be a disaster by some people, it looked likely to be an interesting year economically and politically. And so it turned out to be.

My life in the period has been somewhat mundane as meetings have been cancelled and travel much restricted. But I thought it might of some interest to my offspring in due course. My father wrote a diary covering the years before, during and after the Second World War which proved to be fascinating reading when it came to light over 50 years later even though he was in a “reserved” occupation and the nearest he ever got to fighting was in the Home Guard.

I have now finished my diary as I consider the epidemic to be substantially over and Brexit has turned out to have minimal consequences on our daily lives. But some aspects of our lives have changed. My diary has been printed under the title “A Journal of the Coronavirus Year” and is comparable to “A Journal of the Plague Year” by Daniel Defoe published in 1722.

I have published other books in the past – the most recent one via Amazon which is relatively simple to do. But I only wanted a few hard copies for my family so I used a company called BookPrintingUK (https://www.bookprintinguk.com/ ). This I found to be a very good low-cost service which I can recommend it you have a similar need. It is easy to use and they can include colour photographs.  Photograph of completed volume of 400 pages is above.

The current book contains both personal information and commentary on the financial world – the latter often taken from my blog. Is it worth turning it into a publication that the general public, or at least the investment community, might find of interest? Let me know if you think that would attract any demand. As a history of the epidemic and other events from March 2020 to June 2021 and how life has changed in that period it may be of some interest to historians.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

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IPCC Report – The Implications for Investors

The Intergovernmental Panel on Climate Change (IPCC) have published a report that predicts in stark terms both the historic and predicted changes to the earth’s climate from human activities. This is what they say in the accompanying press release: “Scientists are observing changes in the Earth’s climate in every region and across the whole climate system, according to the latest Intergovernmental Panel on Climate Change (IPCC) Report, released today. Many of the changes observed in the climate are unprecedented in thousands, if not hundreds of thousands of years, and some of the changes already set in motion—such as continued sea level rise—are irreversible over hundreds to thousands of years”.

However they also say that “strong and sustained reductions in emissions of carbon dioxide (CO2) and other greenhouse gases would limit climate change. While benefits for air quality would come quickly, it could take 20-30 years to see global temperatures stabilize”.

Although there are a few people who do not accept the scientific consensus in the IPCC report, Governments are likely to accept the findings and implement policies accordingly. This is already happening with the UK being at the forefront of measures to reduce carbon emissions which are seen as the main cause of global warming. With the UK Government’s “net zero by 2050” policy we are already seeing major impacts and the imposition of enormous costs on many aspects of our life. All of this is reinforced by media coverage of floods and wild fires that are typically blamed on climate change.

Many such reports are anecdotal in nature – they may simply be random events that occur for non-specific reasons, while reporting of such events is now more common in the modern connected world. But the IPCC report does say “It is virtually certain that hot extremes (including heatwaves) have become more frequent and more intense across most land regions since the 1950s, while cold extremes (including cold waves) have become less frequent and less severe, with high confidence that human-induced climate change is the main driver of these changes”. They also say that heavy precipitation events have increased since the 1950s over most land areas and it is likely that human-induced climate change is the cause. It has also contributed to increases in agricultural and ecological droughts.

The IPCC report is effectively a call for action and that will no doubt be reinforced by the upcoming COP26 summit in Glasgow in November where politicians will be promoting their virtuous visions no doubt. Whether they turn into actions remains to be seen – the past experience suggests they may only turn into token gestures. Economic decisions often thwart the best policies.

What happens if we don’t cut CO2, and methane and other carbon emissions? The IPCC report gives a number of scenarios based on scientific models of differing levels of emissions. Under the high and very high GHG emissions scenarios, global warming of 2°C (relative to 1850– 1900) would be exceeded during the 21st century. Global warming of 2°C would be extremely likely to be exceeded in the intermediate scenario and under the very low and low GHG emissions scenarios, global warming of 2°C is unlikely to be exceeded.

That might seem to be good news, but because of the time lag of the impact of changes in emissions, under the high emissions scenario their best estimate is of a temperature rise of 2.4 °C by 2041-2060 and 4.4 °C by 2081-2100. The latter would be disastrous for many parts of the world with increases in the intensity and frequency of hot extremes (heatwaves and heavy precipitation). The Arctic might become ice free in summer under all the scenarios and sea levels will rise “for centuries to millennia due to continuing deep ocean warming and ice sheet melt”. This could mean a rise of 2 to 3 metres in sea levels if warming is limited to 1.5 °C or 19 to 22 metres with 5 °C of warming!

With so many of the world’s cities on seaboards you can see that flood defences may be totally inadequate to cope with such rises and incapable of being built to resist them. Investments in City of London property would be one casualty. The current Thames flood barrier may be overwhelmed in future years even if GHG emissions stop growing.

The changes will likely affect the Northern Hemisphere more than the Southern, and there is some good news. For example, the reports says that the growing season has lengthened by two days per decade since the 1950s in the Northern Hemisphere. Farming might extend further north and unproductive land brought into use, but droughts might also remove a lot of marginal land from farming activity. These impacts will be greatly affected by the increase in GRH emissions.

Who can really affect the emissions? Only the big emitters such as the USA, China and Russia can have much impact. The UK produces less than 2% of world emissions.

Does the decarbonisation of transport, particularly in the UK, help at all? In reality not. For example, converting users to electric cars is likely to have minimal impact because the energy requirement and associated CO2 emissions to construct the batteries and make the steel for the car bodies offsets most of the likely benefit. The cost of building a network of charging points and enhancing the electric grid to cope will also be high. Investing in electric car makers or buying electric cars is not going to save the planet.

Is it worth considering investing in disaster insurers, although there are now few such listed vehicles? Munich Re produced a good report on this area which you can read here: https://www.munichre.com/en/risks/natural-disasters-losses-are-trending-upwards.html . An interesting point they make is that less than half of all losses are insured and it is even less in developing countries. It is very clear that poorer countries in less developed markets are those that are going to suffer from more extreme weather events and rising sea levels.

The big problem which the IPCC report does not cover is that GRH emissions are directly related to the size of the human population and their activities. Particularly what they consume, where they live and how they earn an income.  

Unless there is a concerted effort to halt the growth in population and to restrict urbanisation, I doubt that the growth in GRH emissions will be halted. More population means more farming to feed the people and that is a big contributor to methane emissions which is a significant GRH factor (this is highlighted in the latest IPCC report). Similarly construction of homes and offices is a big contributor. Nobody has yet figured out how to produce cement without generating carbon. Hence the suggestion that we should revert to constructing houses out of wood. Investing in growing trees for timber might be one interesting investment approach to look at. But that is a 20+ years project and it can take 50 years to grow to harvestable size for timber, or longer in northern latitudes.

In conclusion, it’s worth reading the IPCC report (see link below) and pondering how you think the Government should deal with these issues. Please don’t fall into the trap of encouraging your local council to declare a “climate change emergency” as some have already done. Their initiatives such as closing roads to restrict traffic and persuading everyone to cycle will have no impact whatsoever. Gesture politics is what we do not need.

Even the UK Government alone will have no impact unless they can persuade other major countries to take suitable steps. But will they is the key question?  If they don’t all we can do is to try to mitigate the impacts by weather proofing our properties and the transport network while purchasing air conditioning to cope with the heatwaves.

I am sure some readers of this article will consider that I am being too defeatist and that we can all contribute to reducing the problem by eating less meat, looking at the food miles of what we consume, cutting out long holiday flights, changing your central heating boiler, reducing investments in oil/gas/coal producers and other peripheral affectations. But only Governments can really tackle the problem which we should all encourage them to do.

IPCC Sixth Assessment Report: https://www.ipcc.ch/assessment-report/ar6/

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

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