London Plan Published

I mainly comment on financial matters, but if you live or work in London you should pay attention to the “London Plan” that Mayor Sadiq Khan has recently published. Indeed if you live in other large conurbations you might wish to review it also because the policies he is promoting might spread elsewhere.

What’s the London Plan? It’s a document that sets the “spatial development” strategy for London over the next few years and has legal implications for planning developments, housing construction, transport infrastructure, and many other aspects of our lives.

The Mayor makes it plain that London needs to cope with the rapidly expanding population and business activity. The population of London might reach 10.5 million by 2041 he says (currently 8.8 million). That means a lot more houses have to be built (66,000 per annum he says) and support for more workplaces.

In addition it has major implications for transport infrastructure while at the same time he wants to clean up London’s air. He wants to make London a “zero carbon” city by 2050, although no doubt he will be long gone by then. As part of this he aims to reduce “car dependency” (an emotive and inaccurate phrase disparaging people who have made a rational or personal choice about how they travel when you don’t see this said about those who rely on cycles for their daily travel needs).

Why has the population of London grown so rapidly in recent years and continues to do so? Page 12 of the Plan explains why. It says 40 per cent of Londoners were born outside the UK, and the city is now home to 1 million EU citizens, no doubt attracted by the vibrant London economy. This has put a major strain on housing, transport, social services and other infrastructure (incidentally an unbelievable 1.2 million Londoners are apparently “disabled”).

This state of affairs has come about because of national policies on immigration with no effective policies to distribute that more widely across the country compounded no doubt by a desire by some politicians to improve their chances of being elected.

Specifically looking at transport, the Mayor’s target is for 80% of all journeys to be made by walking, cycling and public transport (that of course includes the 14% of Londoners who are disabled!). It’s currently 64%. This is going to mean an aggressive set of policies to reduce car use – hence the campaign against the Mayor’s Transport Strategy which supports the London Plan run by the Alliance of British Drivers – see http://www.freedomfordrivers.org/against-mts.htm

The Mayor highlights the health inequalities in London, with deprived areas of London having reduced life expectancies (as much as 15 years for men and 19 years for women) surely an astonishing statistic. What is the reason for this? Poor housing conditions are certainly one, but lack of daily activity is allegedly another so the Mayor wants us all to be walking and cycling.

The Mayor does have plans to improve public transport including proposals for Crossrail 2 and extension of the Bakerloo line but these proposals will do relatively little to soak up the increased demand, and with no proposals of significance to improve the road network, hence no doubt the need to encourage us all to walk or cycle.

The Mayor’s plans to support the need for more housing include targets for every London borough (for example over 2,000 new homes every year in Barnet, Brent, Ealing, Greenwich, Hounslow, Newham, Southwark, and Tower Hamlets). This includes high concentration developments in locations with good public transport access levels (PTALs), particularly inner London boroughs. Outer London boroughs might see a relaxation of planning regulations to allow more “in-fill” developments including building on back gardens as the Conservatives promptly complained about. There will be more encouragement for smaller builders, more efficient building techniques and “proactive” intervention in London’s land market (more “compulsory purchase” perhaps).

One aspect of transport infrastructure that the London Plan covers is that of parking provision for new housing, office or shop developments. It wants most developments to be “car free” (i.e. no parking provision), particularly those with high PTAL levels. The details of what this means in practice are not clear, but it looks like the intention is to reduce parking provision substantially, thus resulting in more on-street parking and obstruction.

The Mayor concludes his near 500-page tome on the subject of the “Funding Gap”. By this he means the gap between the public sector funding required to support London’s growth (and his plans) and the money currently committed. In other words, he wants more money, including a bigger share of taxation collected from Londoners. For example, he repeats his call for control of Vehicle Excise Duty (VED) which any right-thinking person should surely oppose. Yes the Mayor wants more money and more power. Unfortunately the establishment of directly elected Mayors such as Mr Khan has resulted in empire building of the worst kind. They are effectively dictators within their realms with no effective democratic constraints on their policies and negligible public accountability.

In summary, it is not clear that the building of lots of new homes (which of course will emit more pollutants, particularly during constructions, more than offsetting any reduction from restraining car use), of a fairly low standard in dense conurbations, is going to improve the quality of life for Londoners. It is undoubtedly the case that more new homes are needed in London but building new homes without complementary improvements to the transport infrastructure, which has consistently lagged behind the growth in London’s population, does not make much sense.

As is already seen in the statistics, older London residents are moving out and being replaced by immigrants. Some readers might wish to consider doing the same given the outlook for the quality of life in London. Simply reacting to the population growth in London without trying to constrain it, or divert it elsewhere, is surely a mistake.

You can submit your comments on the London Plan to the public consultation by going here: https://www.london.gov.uk/what-we-do/planning/london-plan/new-london-plan/comment-draft-london-plan . Please be sure to do so. 

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

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National Grid, Johnston Press, Crown Place VCT, Lloyds Bank, LoopUp and Brexit

I had a busy day yesterday, but let me first comment on the news today. National Grid (NG.) published their half year results this morning. They reported “Adjusted operating profit, excluding timing up 4%….” but statutory earnings per share were down by 12%. What exactly does “adjusted for timing” mean? I have no idea because the announcement does not explain it in any sensible way. For example, it says under “UK Timing”: “Revenues will be impacted by timing of recoveries including impacts from prior years”. Why are these revenues not being booked in the relevant period? Why are they not being recognised as revenues in the period concerned? Looks like a simple “fudge” to me as “adjustments” to reported figures in accounts often are. Many analysts seem to have a negative view of the stock, and I am coming to the same conclusion. I sold some of my holding in the company this morning.

I have previously mentioned the requisition of an EGM at Johnston Press (JPR), but the company has rejected this on the basis that it is “not valid”. It seems this is because the shareholder who requested it holds their shares in a nominee account (i.e. are not on the register). Yet another example of the obstruction caused by the use of nominee accounts. Changes to the law in this area are required to fully enfranchise all shareholders. See the ShareSoc Shareholder Rights campaign for more information: https://www.sharesoc.org/campaigns/shareholder-rights-campaign/

Yesterday morning I attended the AGM of Crown Place VCT, managed by Albion Capital. No excitement there. Just a competently managed VCT and a well run AGM with a presentation from one of their investee companies (PayAsUGym) who have developed an innovative business selling gym sessions. Crown Place made a total return of !4% last year and currently provide a tax free dividend yield of 6.9% which is covered twice by earnings. The expense ratio is 2.4% which is certainly better than many of the VCTs I hold. Previously this company had a strong focus on “asset-based” investments but they are now restricted by the new rules for VCTs so they are moving into more “exciting” fields. There are also concerns about further rule changes or removal of tax reliefs in the budget next Wednesday. Investors in tax incentivised vehicles seem to be getting nervous.

After lunch with representatives of AGMInfo, I filled an hour or so before the ShareSoc AGM by dropping into the Lloyds Bank legal action nearby which I have mentioned in previous blog posts. On the witness stand was former CEO of Lloyds TSB Eric Daniels being cross examined by the littigants QC. He gave a confident performance and was clearly well prepared. He said he was “bitterly disappointed” over the need to raise £7 billion in capital and was also disappointed that they would end up more highly capitalised than other banks. It was clear from his other comments that there was a certain momentum to go through with the deal (the acquisition of HBOS) and that they did not revisit the benefits of the transaction at every turn (e.g. as more information came out of the due diligence work for example).

He disclosed that in a conversation with the FSA there were real concerns that they could lose the vote of shareholders. This could be because there were views that HBOS could remain independent, although the Government had already indicated that it was promptly going to be nationalised if no rescue deal could be done; and because Lloyds TSB shareholders might vote against it.

The case continues. Lloyds Bank and the former directors continue to say that the claims have no merit of course.

It was then onto the ShareSoc AGM. Again no great excitement there. Mention was made of a possible merger with UKSA and as a former director of both I spoke in favour of that. Spreading the fixed costs over two organisations of a similar size makes a lot of sense. It should never have been necessary to set up a rival organisation to UKSA, but interesting to note that ShareSoc has more members now so my efforts in recent years were not in vain.

The ShareSoc AGM was followed by one of their company presentation seminars. Of interest to me (being current holders) were the two by LoopUp (LOOP) and Ideagen. I reported on Ideagen recently on coverage of their AGM so will only cover LoopUp herein. The presentation by their joint CEO Steve Flavell was slick but it was more a sales pitch for the product/service to customers than one to investors. The issue of them having two joint CEOs was raised in a question later.

The emphasis was on the simplicity of the service, so anyone could take it up easily and quickly. This is the major USP as there are lots of other conferencing products around. Most interesting was his explanation that they leapfrogged the “chasm” by ignoring the early adopters (who often like techy products) by aiming straight for the “mainstream majority”. His reference to “Crossing the Chasm” is from a book of that name by Geoffrey Moore which is essential reading for all sales/marketing executives in the software field, or investors in early stage technology companies likewise. Just had a chat with an Uber driver about this book – he has a degree in marketing – that’s the modern world for you. It will be a great shame if Sadiq Khan manages to put Uber out of business – might miss out on intelligent conversations with cab drivers. I read the book when it first came out back in the 1990s and Mr Flavell had read it also. I highly recommend the book. LoopUp is clearly a sales/marketing driven organisation but the technology is sophisticated enough to make it all look simple.

On the current valuation, the company has obviously a long way to go to grow into that valuation. Questions were raised about whether growth could be accelerated (revenue only up 39% in 2016m and 44% in the interims this year). But I expressed scepiticsm on attempts at a faster growth rate to Flavell after the meeting.

The Financial Times continue to publish anti-Brexit stories and editorial every day. My letter to the editor on the dubious bias, which they published, has obviously had no impact whatsoever. Tim Martin, CEO of JD Wetherspoon, had a lot to say about the subject of the impact of Brexit on food costs in his latest trading statement. He accused the media, and the Chairman of Sainsburys and that of Whitbread, and the head of the CBI, for completely distorting the facts. Rather than food prices rising after Brexit, he suggests they will fall. For his arguments see:

https://www.investegate.co.uk/wetherspoon–jd–plc–jdw-/rns/fy18-q1-trading-update/201711080700068513V/

My conclusion is quite simply that some foods might become more expensive, others might become cheaper, and home-produced products might also be cheaper; plus the Government might be able to save a lot of money on contributions to subsidising inefficient farmers. But that of course means that food buying habits might change as consumers react to price changes. Is that a bad thing? Readers can ponder that question.

Whether the Chairmen or CEOs of public companies should be making comments on essentially political issues, one way or the other, is also a question to consider. I suggest that might best be left to bloggers like me. Sainsburys and Whitbread (Costa, Premier Inns) might find they disaffect half their customers while having minimal impact on public opinion.

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

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Interest Rates and the Gig Economy

You probably don’t need to be told that interest rates are at their lowest for several centuries, if not in recorded history. The fact that the Bank of England is making noises about possibly raising base rate could just be a way to try and rein back inflation (a higher base rate, or prospect of it, causes the pound to rise and that makes imports cheaper – and import costs have been one of the factors in inflation rising). But unemployment is also at its lowest level for 40 years which usually indicates a booming economy and the prospect of higher inflation to come.

Inflation is now at 2.9% measured by the C.P.I., or 3.9% based on R.P.I. which a lot of us like to use instead. Now to me the really astonishing item of news last week was that the large City of London Investment Trust managed to borrow £50 million at a fixed rate of 2.94% for 32 years (I do hold some of their shares). That’s must be one of the best deals ever surely, and shows how investment trusts have the advantage of being able to gear up by borrowing money – and why not when interest rates are so low?

In reality, the lender is not even getting a real positive rate of interest at current inflation rates, and is also betting that it won’t get any worse for the next 32 years. Astonishing, and just shows how the world economy is awash with cash.

Another couple of interesting items of news last week were that Deliveroo lost £129 million in 2016 according to accounts filed at Companies House, on revenue of £129 million. In other words, for every pound paid by customers, they lost a pound. It’s raised $472 million from investors to achieve this wonderful business model (source: FT).

Deliveroo use “self-employed” bike couriers to deliver restaurant meals. Another exponent of this “gig-economy” model is Uber who received the bad news last week that Transport for London were terminating their license to operate in London. More information on that in this blog post I wrote for the ABD: https://abdlondon.wordpress.com/2017/09/23/uber-kicked-out-of-london/ . In there I praised the merits of the service and suggested people sign the petition against it (which is rapidly heading for a million signatures).

But one reason that it is so low cost is because like Deliveroo, Uber loses money in a big way at present. To quote from one report on its financials, “Uber is cheap because the company is heavily subsidising each trip” where it was suggested that Uber’s losses as a percentage of revenue were 129% in the last quarter of 2016. Like Deliveroo, revenue is rising rapidly though.

Do we mind if these companies lose money hand over fist? If they are fool enough to do so in the race to dominate a new market why not let them. But the long term viability of both when there are obviously lots of competitors providing similar services does raise doubts about these businesses, even if London Mayor Sadiq Khan relents over Uber’s license.

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

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A Vision in a Dream, After Coleridge

The following manuscript has recently come to light, perhaps written by an acolyte of poet Samuel Taylor Coleridge.

Roger Lawson

<A Fragment>

In London did Sadiq Khan

A stately Transport Strategy decree:

Where the Thames, the sacred river, ran

Through caverns measureless to man

   Down to a sunless sea.

So twice five miles of fertile ground

With walls and tower blocks girdled round;

And there were gardens bright with sinuous rills,

Where blossomed many a conker tree;

And here were roads ancient as the Romans,

Enfolding sunny spots of greenery.

But oh! that deep romantic chasm which slanted

Down among the City streets!

A savage place! As Mammon rampaged free

As e’er beneath a waning moon was haunted

By women wailing for West End shopping!

And from this chasm, with ceaseless turmoil seething,

As if this earth in fast thick pants were breathing,

A mighty fountain momently was forced:

Amid whose swift half-intermitted burst

Huge fragments vaulted like rebounding hail,

Or chaffy grain beneath the thresher’s flail:

And mid these dancing rocks at once and ever

It flung up momently the sacred river.

Fifty miles meandering with a mazy motion

Through East End industry and London’s suburbs,

Then reached the caverns measureless to man,

And sank in tumult to a polluted North Sea;

And ’mid this tumult Sadiq heard from far

Ancestral voices prophesying air pollution doom!

   The shadow of the dome of the GLA

   Located nigh the sacred river;

   Where was heard the mingled pleas

   From politicians left and right.

It was a miracle of rare device,

An un-costed Transport Strategy at the behest of Sadiq!

    A damsel with a dulcimer

   In a vision once I saw:

   It was an East European maid

   And on her dulcimer she played,

   Singing of Mount Street Mayfair.

   Could I revive within me

   Her symphony and song,

   To such a deep delight ’twould win me,

That with music loud and long,

I would build anew that dome,

Upon a new democratic model!

With freedom to ride the roads at will,

And all should cry, Beware the wrath of Khan!

His flashing eyes, his floating hair!

Weave a circle round him thrice,

And close your eyes with holy dread

For he on honey-dew hath fed,

And drunk the milk of Paradise.

<End>

The Alliance of British Drivers’ comments on Sadiq Khan’s London Transport Strategy are present here: http://www.freedomfordrivers.org/against-mts.htm . Please register your opposition.

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

You can “follow” this blog by clicking on the bottom right.

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First blog post

This blog is written by Roger W. Lawson and covers topical news and comment on investment (particularly stocks and shares), on corporate governance, on company management, on economics, on transport, on art, on events in London and on local and national politics. It will also cover anything else that I feel may be of general interest to my readers or where I have a burning desire to discuss a topic.

As some readers may know, I have been writing articles and blog posts on stock market investment for many years, more recently mainly for ShareSoc – an organisation for private investors. I will continue to do so as I support the objects of ShareSoc, therefore you may find similar blog posts on their web site as appear here.

This blog may cover a wider remit though in that I won’t shy away from controversial issues as much as a “responsible” national organisation has to do. In this case you are simply getting my personal opinions, but I will of course always try to get the facts straight to support any stance. If that offends some people then so be it. One cannot produce interesting and lively articles while pandering to the sensitivities of everyone in this world.

It will also cover some other areas of interest to me than stock market investment.

I hope you find it a good read.  Review what it says in the “About” section for more background information.

Roger Lawson