Petrol and Diesel Cars Face Extinction

After being preceded by numerous leaks, the Government has finally announced that it is bringing forward the date when sales of new petrol and diesel powered cars are banned to 2030 (see Reference 1 for details). The only exception is that sales of hybrid vehicles will be permitted until 2035. In practice such vehicles will go the same way as the dinosaurs, facing extinction in a few years’ time.

That will not stop such vehicles already purchased from being used after those dates but they may be discouraged in other ways of course (such as by the ULEZ in London).

This is what Allistair Heath (who described himself as “a convert” to electric cars) said in the Daily Telegraph: “The green agenda has triumphed, in the sense that cultural, political, educational and corporate elites, in the US, UK and every European country, are all in favour of decarbonisation. Opponents have been routed, with almost no chance of a way back”. He’s definitely right in that regard. There has been no cost/benefit analysis of these proposals or rational justification given. It’s all about cutting air pollution and saving the planet regardless of the negative consequences of these moves.

To start with the Government is spending £1.8 billion to support the charging infrastructure and other measures required by electrification of all vehicles. That will come out of your taxes. This is far from a trivial matter. In London and other major UK cities one big problem is that many households do not have off-street parking so there will need to be kerbside charging points installed in many streets.

The car industry, one of the major UK exporters, will have to adapt to only producing electric vehicles and much faster than they expected. They may be able to cope with that but will it damage their export capability? Nobody seems to have looked at that issue. The Government says it will create 40,000 extra jobs by 2030, particularly in our manufacturing heartlands of the North East and across the Midlands, but that seems to be very unlikely to be the case. These will not be new jobs surely, just replacing existing ones.

This is what Lord Lawson, former Chancellor of the Exchequer, had to say about the new “Green revolution”: “If the Government were trying to damage the economy, they couldn’t be doing it better. Moreover, the job creation mantra is economically illiterate. A programme to erect statues of Boris in every town and village in the land would also ‘create jobs’ but that doesn’t make it a sensible thing to do.”

Does the public demand cuts in air pollution? It was interesting to read some of the response to a recent survey of Lewisham residents where 13% said they suffered from medical conditions as a result of air pollution in their local street. Some of them might be suffering from more pollution because of the closed roads in Lewisham though where a Low Traffic Neighbourhood has been installed and it’s worth pointing out that the majority of air pollution in the borough comes from other sources than transport. In reality diesel and petrol cars contribute only 12% and 6% respectively of all emissions in London and they are falling rapidly.

But a survey by London Councils reported that “The vast majority of Londoners (82%) are concerned about climate change with half of concerned respondents going further saying they are very concerned (40%). Over half of respondents (52%) feel their day-to-day life in London had been impacted by climate change”. Many years of scaremongering over climate change has clearly brainwashed the general public into believing it’s a major threat to their life. The metropolitan elites who can afford to buy electric vehicles (which currently cost a lot more than diesel/petrol ones) can salve their consciences by buying electric vehicles despite the fact that they will have minimal impact on overall levels of air pollution while UK emissions from all sources contribute only 1% to global CO2 emissions and hence cannot have any significant impact.

Will the public accept the ban on the sale of new diesel/electric vehicles and cope with it? Based on public opinion, they are likely to accept it and in reality, with a few exceptions they should be able to cope.

By 2035, electric vehicles are likely to be cheaper and also have longer range, and older vehicles will still be able to be used. If charging points are much more common as they should be in a few years, that will lessen the problems. But there are two problem areas:

Those vehicle owners with no off-street parking might find charging their vehicles problematic. And those who wish to own motorhomes or tow caravans will find electric vehicles have very short ranges.

In summary, the Government’s announcement will impose major costs on people, and on the economy while having little real impact in reality on air pollution or global warming. However, the encouragement of electric vehicles does make sense in some ways but that is already being done by taxation, by subsidies and by measures such as zero emission streets in problem areas in London.

Putting a sharp deadline on sales of some vehicles, particularly hybrid ones in 2035, just seems somewhat irrational when the dangers of air pollution have been grossly exaggerated and there will be significant problems in making the change for some people. More attention needs to be paid to other sources of air pollution and one of the major factors that has caused increases in that is the growth of the population, an issue few politicians seem to want to tackle. Air pollution directly relates to population numbers and density and London is a good example of the negative consequences of allowing unlimited population growth.

Reference 1: DfT Announcement:

Roger Lawson (Twitter:  )

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Dividend Cut at Elecosoft, Dignity Trading and Public Transport Problems

Many investors are suffering from dividend cuts by companies. The latest one in my portfolio is Elecosoft (ELCO), a company that produces software for the construction sector. In their announcement of the full year results this morning they indicated revenue and earnings were much as forecast to December, and cash flow was good enough to put them in a net cash position.

Normally these results would not have caused any concerns that the dividend would be reduced or cancelled, but not this year. Even though they only previously paid small dividends and half the “cost” as a scrip dividend, this year’s final dividend has been cancelled. This is what the company had to say:

“Proposed Dividend: Elecosoft’s strong trading performance and cash generation in 2019, and, ironically, the strong start to trading in 2020, would normally have warranted the payment of an increased final dividend. However, having regard to the uncertainties created by the Coronavirus situation and the need to conserve our cash resources, the Board has decided to not recommend a final dividend”.

I don’t normally like to challenge the wisdom of management, who may know more than me about the trading position of the company and future revenue, but this does look at first glance to be excessively cautious. That is particularly so bearing in mind they could have paid it as a scrip dividend if they wished to conserve cash. ShareSoc has published some comments and written to the FRC, FCA and BEIS on the problem of dividend cuts suggesting they should issue some guidance. That seems to be a sensible suggestion because at present we don’t know whether this is just management panicking or being simply prudent.

One company that should surely be benefiting from the coronavirus epidemic is funeral provider Dignity (DTY) – I do not hold the shares. More deaths surely mean more business for them. But in their trading update today they show that it is not that simple. The company says the following:

“The absolute number of deaths increased by approximately one per cent to 161,000 from 159,000 in the comparative period last year. Sadly, since the end of the quarter, the UK has witnessed in excess of 20,000 deaths in a single week, the highest since the beginning of 2000. The number of possible incremental deaths as a result of COVID-19 is a matter of substantial speculation. Should 2020 witness a large number of incremental deaths, beyond the 600,000 originally anticipated by the Office for National Statistics, then it is possible that 2021 and 2022 could experience a lower number of deaths than in 2019. The Group will not speculate on the most likely outcome”.

In addition there is the problem that as many people cannot attend funerals, some funerals are being postponed or executors are opting for lower cost funeral packages. Dignity was already suffering from aggressive price competition which had prompted a strategic review before the latest crisis arose.

The company had previously decided to suspend dividend payments. Like Elecosoft they apparently are simply unable to forecast the likely impact of the epidemic on their business. So no guidance for 2020 is being provided.

On Saturday the 9th May Grant Shapps, Transport Secretary, said that only 10% of former public transport capacity will be available in some locations if social distancing is to be maintained. It seems likely that will be so for many months even if people are permitted to go back to work. This will clearly cause major problems in London where almost all commuters use public transport such as trains, the underground and buses.

After the Prime Minister spoke on the 10th May, Mr Shapps issued this tweet: “Speaking this evening the PM was clear – if you’re going back to work in a job that cannot be done from home, please avoid public transport if possible. Go by car, or even better, cycle or walk. To help, we’ve announced more than £2bn in the biggest ever boost to cycling and walking”.

An example of how problematic London transport has become is a report in the Times that says Transport for London (TfL) has asked the Government for £2 billion. To quote: “TfL is down to its last £1bn, which is being burnt at a rate of £21m a day — leaving it less than two months from emptying its coffers and illustrating the intense pressure on local authority finances”. The article suggests the Government will attach some strings to any funding.

Mr Shapps was clearly right to point out the public transport capacity problem, but his apparent remedy to get everyone walking and cycling makes little sense. It is a typical view of politicians who can afford to live in central London. But for the vast majority of London commuters who travel many miles to get to work, it’s simply impractical even if they are keen cyclists.

Mr Shapps also justified his proposals by saying the epidemic is a great health opportunity to encourage active travel with the objective to double cycling by 2025. He also proposes to implement at least one “zero emission” city, and argues that one of the few positives will be improved air quality. He actually said there are “more than 20,000 extra deaths a year attributed to NO2 emissions”.

This figure is nonsense. It repeats the past allegation of 40,000 deaths from air pollution in the UK which has been shown to be simply wrong and a corruption of statistical evidence. In reality, there may be a few months shortening of life expectancy from all air pollution sources, a lot of which cannot be removed such as natural sources. But the figure is essentially uncertain and it is clear there are no deaths directly attributable to pollution. To specifically indicate NO2, which mainly comes from transport, as being the problem is also wrong when the Government advisory body COMEAP could not even agree that NO2 contributed to the negative impact on health of air pollution from particulates.

Mr Shapps clearly knows little about air pollution and its impact on health but is using his ignorance to put a positive spin on his actions in response to the transport crisis.

Just to show how there is no direct correlation between traffic levels and air pollution, this is what the London Air Quality Network (LAQN) recently reported: “Levels of the pollutant nitrogen dioxide (NO2) has reduced significantly during lockdown, research from King’s College London has found. Concentrations of NO2 have lowered as much as 55% due to less road traffic. However, levels of PM10 and PM2.5 were higher after lockdown than at any other time in 2020, due to easterly winds and pollutants from northern Europe”. The reduction in NO2 is perhaps not surprising when measurements by the LAQN are often taken at the roadside so will be heavily influenced by adjacent traffic. But as particulates (PM10 and PM2.5) are of much greater health concern you can see that Mr Shapps’ spin on the air pollution issue is somewhat misleading. Other UK cities have also shown no direct correlation between traffic reduction from the epidemic and air pollution – at least to date.

The air pollution problem is much more complex than can be solved by encouraging walking and cycling alone.

Roger Lawson (Twitter: )

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