Robert Preston
Robert Preston
Thapelo Moloantoa
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Thapelo Moloantoa

Journalist at Finbuzz.com
Highly experienced Digital Content Journalist who is one of our ‘foot soldiers’ in the hustle and bustle of the world’s financial capital, London.

Armed with a rich profile in Content Management, Thapelo has lived and worked as editor and journalist between London, Johannesburg and Cape Town since 2002. His entrepreneurial drive saw him establish a digital content start-up in London, FullCircle Circle Online, which he sold in 2013.

Thapelo attained his Bachelor of Social Sciences (BSosci) at the University of Cape Town, where he studied International Relations and Industrial Sociology. He continued his studies at the University of British Columbia (UBC), in Vancouver, Canada.

Thapelo’s vast digital content experience is supplemented by further studies at the University of Westminster Business School, where he recently attained a Certificate in Digital Marketing (Institute of Digital Marketing).

He enjoys playing and watching football (Arsenal fan who lives 10 minutes from the Emirates Stadium), reading up on the latest in Fintech and also keenly follows trends in international politics and socio-economics.
Thapelo Moloantoa
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Brexit, high levels of government indebtedness in China, and the future of the Eurozone came under scrutiny when ITV Political Editor Robert Preston provided his views on a range of topics at the recent Financial Services Expo in London.

Finbuzz.com was on the spot at the event hosted in the heart of the City, London’s investment and financial district.

Preston said that recovery from earlier episodes of economic downturn was faster than the recovery from the 2008 credit crunch.

“This in part explains why there is such a large segment of society that remains dissolutioned with the economic system and with the political establishment. They are not better off than they thought they would be at this stage,” he said.

Preston believes that “even before Brexit we were expecting the sustainable growth rate to be significantly slower i.e. 25% slower than before the crash.”

The recovery mainly emanated from household spending and services – the tills started ringing again.

“We are an economy that is massively dependent on consumption.  Two-thirds of our GP comes from consumption,” he elaborated.

On a positive note, “service sector is now more than 10% bigger than before the 2008 crash – we are 80% dependent on services, which has risen from a 70% level before the crash.”

The UK has a massive deficit in goods

When it comes to exports, Preston said that the UK has a massive deficit in goods. “If we cannot get attain free and easy access to our biggest market for those important service industries it will do considerable damage to our prospects.

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“That’s one of the reasons you are constantly hearing people talk about this famous passport for financial services – if we do not have friction-less access then that means that our economic prospects will be damaged.”

Preston said that he is surprised at how little attention is being paid to the degree to which the UK pays its way in the world, “the gap between the money we make i.e. our exports to the rest of the world plus dividends from overseas investments and what we pay out for goods and services plus what we pay out to business people and investors who own ‘stuff’ here has grown to a record since the mid 1950’s.

“It is currently about 7% of GDP. If we had a current account of that sort, and a fixed exchange rate of the 1960’s we’d be in a mega economic crisis. We cope with it for two reasons. Firstly it’s because we have a floating exchange rate. Secondly because we have an open policy in terms of selling our assets,” he continued.

“We are making it up on the capital account by selling and borrowing. You can’t sustain that type of deficit forever. And it would be a serious issue for us if international investors did not perceive a serious economic recovery and if they feared that we would be bumping with deficits and low growth.

“The good news is that the deficit is coming down, we just don’t know the pace at which it is coming down.”

On why Brexit was, is, and will be a challenge

The anchor of the popular ‘Preston on Sunday’ show on ITV outlined a number of reasons explaining why Brexit posed a major challenge to the UK economy.

“Firstly the EU is overwhelmingly our biggest market,  40-45% of our trade is within the single market.

“We have had, since the time of Margaret Thatcher a government policy of wooing Multinational Companies (MNCs) to our shores from where they could also get access to the single market.

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He cited that “research shows that we are more dependent on MNCs a lot more than many others in the EU economy precisely because we actively went out to lure them here with the attraction of them having access to the single market.

“Now there is great uncertainty about what kind of relationships those MNCs will have with the single market because of this complete u-turn in policy. Will they invest on a lower  scale than they did before? Only time will tell.”

The former BBC Economics Editor told the gathering that it is not yet clear as to what the impact of Brexit will be on the rest of the EU.

“There are some who believe that this will promote fixed structural change in the EU.”

Brexit and the City

Preston expressed concern about the way in which the City seemed relaxed about the uncertainties brought about by Brexit.

“They are relaxed because they probably believe that whenever we are hit with any kind of bump in the road, the Bank of England will take corrective action, i.e.cut interest rates, borrow money to the banks, purchase new assets.

Preston said that it’s fine as a short-term pain killer but “it is not a long term way to run an economy because eventually if the world sees you as generating growth through cutting the cost of money they then eventually lose confidence in the value of your currency and therefore the integrity of Sterling.

I have enormous confidence in the resilience, the imagination and the creativity of the British people.

“We need to have an industrial policy and fiscal policy that generates greater growth.”

In drawing a conclusion to his views on Brexit, the former stockbroker drew a positive outlook going forward.

“Whatever side we were on, I do think there is no going back. We are where we are. I have enormous confidence in the resilience, the imagination and the creativity of the British people. I am confident that out of this we will end up as well off as we are, maybe not as well off as we would’ve been. The majority of people are determined to be optimistic.”

China has been this big driver of so many things in the world

The debt issue is a massively worrying one for China. Moving on to the global stage, Preston said that there are other uncertainties in the global political economy – with a significant amount of it emanating from China.

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“China has been this big driver of so many things in the world. In many ways a force for good. Particularly if you look in terms of what’s been happening with hundreds of millions of Chinese people moving from living literally below the breadline to a reasonable standard of life.”

However, the France-educated analyst cautioned that the days of a China boom are now over. “It is on a declining trend. I think China is the new Japan, what I mean by that is that Japan had a major debt and asset bubble in the mid-1980s, and when that bubble got pricked they suffered from economic stagnation a massive scale.”

“After we stopped buying things from them around 2007-2008 they’ve moved towards the investment and debt-driven model for growth. Debt in China forms 30% of GDP, very similar to the indebtedness of a much more mature economy such as the US.”

 Robert Preston and Thapelo Moloantoa (Finbuzz)

Robert Preston and Thapelo Moloantoa (Finbuzz)

“Debt has risen by 90% from 2007/09 – again very similar to the indebtedness of a much more mature economy the US. This is too high for the level of maturity of an economy such as China’s.

“Investment as a share of GDP has peaked at 50%. What the Chinese government spends in terms of roads, public facilities, schools, hospitals, state-owned enterprises is just astonishing, it is incomparable to any other country. When you lend and invest at that scale you know that a ton of the debt associated with this is never going to be paid back.”

The Chinese are sustaining growth by lending faster than GDP, so the indebtedness is still growing. “Their inability and unwillingness to recognise that this is not the model to fuel growth means that they will be caught napping when the crisis comes,” warned Preston.

The Eurozone is a million miles from being fixed

“The simple thing to say about it is that it was never going to be sustainable unless there was a proper fiscal and political union. We are nowhere near Germany being prepared to willingly bail out France, Portugal or Spain,” said the former Independent on Sunday Editor.

“One has to be uncertain about the survival of the Eurozone until such time that we reach a situation where we have something close to a federation or a European superstate.”

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