Investment officeApril 22 2020

Unravelling Globalisation

2 mins read

StJohn Gardner

Chief Investment Officer

Chief Investment Officer, StJohn Gardner, offers commentary on ‘unravelling globalisation’, including views on the UK’s lack of PPE (personal protection equipment) for the country’s healthcare workers and looks ahead at potential further government protectionist involvement in the private sector.

Trump’s accession to Presidency marked the beginning of de-globalisation with impositions of tariffs on selected imports to protect U.S. firms from overseas price competition. Whilst the approach allows less efficient, and potentially more poorly run, businesses to survive, (which is not good for global investors seeking optimal returns), it nonetheless has the potential to create local jobs as well as providing an element of national self-sufficiency.

The current pandemic has put this later point further into the frame. It would appear that the UK may be slower than other nations in unwinding its lockdown measures because of a lack of PPE (personal protection equipment) for the country’s healthcare workers. It is all very well having a 4000 bed capacity at NHS Nightingale Excel London, but if the volunteer force of additional NHS staff do not have the equipment they need to do the job, that capacity is false news. Quite simply, the government can’t yet allow the number of patients requiring hospital beds to rise.

Whilst similar issues arise in many countries, it has exposed the UK’s weaknesses in looking after the British public in its hour of need due to the UK’s inability to supply essential items from within its own borders where external sources have dried up or been withdrawn. So, whilst there are many stories of cash rich sovereign wealth funds poised to buy up firms at post market correction discounts, (particularly in the healthcare, logistics and technology sectors), which in turn might assist share prices in these and other sectors to recover, they may meet greater resistance than previously. The likelihood is that the panels that govern such take-overs may now take a more stringent approach in protecting national interests from foreign control and ownership, and ensure, at least, that manufacturing production of potentially critical items take place within their own jurisdictions. Where existing facilities can’t be re-purposed (e.g. clothing manufacturing for NHS scrubs) we may see more forthright intervention from governments too, in sponsoring manufacturing facilities that represent current weak spots in the supply chain such as vaccine production in the UK.

The future looks to be one of further government protectionist involvement in the private sector creating playing-fields that are no longer level and tricky for free-markets based analysts to predict.