Acronym-Mystic

A former non-executive director of Manchester United FC has just completed a thought-provoking series of four programmes for BBC Radio 4 and also the round of media interviews it seems is incumbent upon any ‘celebrity’ personality presenter.

The series was entitled ‘MINT: The next economic giants’. While music hipsters of the early part of this century might recall a programme on BBC 6 Music called ‘Mint’ – the credentials of the Radio 4 programme presenter could not be more different than those of DJ host Marc Riley, although both hail from Manchester.

As well as an ex-non-exec of a football club, presenter Jim O’Neill is a former chairman of Goldman Sachs Asset Management and very much the moment’s ‘go-to’ economist who says he sees his discipline as a social science.

MINT is an acronym which stands for Mexico, Indonesia, Nigeria and Turkey. These are the economies Jim O’Neill identifies as the next set of developing and emerging economies to which the global investment community is looking now to reap benefits in the future.

MINT is the new BRIC (Brazil, Russia, India, China) for long term investment bets, according to Jim O’Neil. While denying in an interview that he was the originator of the term BRIC, O’ Neill appeared happy to be credited with popularising its usage three years.

So popular in fact that anybody with even a passing interest in international business and investment can identify the BRICs. The very popularity is the spur which is moving the focus of global investors on to the MINTs.

In one of the radio interviews, O’Neill confessed that his focus might have been MIST and not MINT as South Korea was in the running too. Whether MINT or MIST, two of many reasons for identifying such countries were demographics and young governments with emerging democratic mandates. In the case of Mexico, a very young government with an administration led by President Enrique Peña Nieto who is just 47 years old.

Demography is on the side of developing and emerging economies in a way it isn’t for those more established. Investments always have to look to the future and there’s nothing more encouraging for a country’s future than a demographic bulge of young people poised to aspire, produce and consume.

A young population is advantageous for growth. Older societies, where pensioners increasingly outnumber the young and need to be supported by that dwindling number of young, prove burdensome to economic growth.

From an economist’s point of view, an active policy of immigration is something to look to when demographics are against growth. But the fly in the ointment for countries facing this demographic conundrum is, as Jim O’Neill pointed out, the fact that they live by the political cycle.

While the investment community thinks globally and acts for the long term, politicians think as far as their democratic tenure permits and, in the main, are guided by the populist policies of their times.

Jim O’Neill is nearly 57 years old but he talks with a speech inflection common among young people and which has been identified as ‘uptalk’. Apparently, uptalk is not appreciated by (older) senior managers as it indicates a reluctance to commit to what one has just said and infers a question and, thereby, uncertainty in the speaker.

Jim O’Neill sounded certain. Demographics are against the senior managers.

Will Mooney MRICS
Partner
Commercial, Cambridge

EU changes it's renewable energy targets

Last week the EU announced that it was going to change its renewable energy targets although at the time of writing the significance of this is as yet unclear.

 

At present the target is to cut emissions measured against those produced in 1990 by 20 % by 2020 and for 20% of energy consumption to come from renewable sources by that date. This policy has certainly had a major impact on the British countryside with wind turbines and solar PV “farms” springing up all over the place.

 

These projects have been driven by subsidies and it these subsidies which have been blamed by major electricity supply companies for pushing up our energy prices and this subject has clearly become a “hot political potato”.

 

But, if we believe climate change is important, there is little doubt that significant financial incentives will be required over a long period to encourage the huge investment which is required to shift our energy supply chain away from fossil fuel based technologies to low or zero greenhouse gas emitting sources of energy.

 

It is believed the EU’s change in policy will still involve setting targets on the reduction in greenhouse gas emissions but countries will be given freedom on how to achieve these targets. This will cause concern in some quarters because the viability of many renewable energy projects is dependent upon the receipt of subsidies and provided there is confidence that the subsidies will continue then so too will investment.

 

It is believed the new target will be a 40% reduction in 1990 greenhouse gas emissions by 2030 but each country can choose how to achieve this, whether that be through investing in renewables, nuclear or perhaps by burning gas rather than coal for instance. As you can see this could result in a shift in emphasis away from renewable energy technologies if the government so wishes. This could have a effect farmers and landowners, many of whom have looked at renewable energy projects as a significant additional source of income.

 

It is too early to tell what impact if any the recent EU announcement will have on our domestic energy policy but a lack of certainty going forward is a concern highlighted by Jonathan Scurlock, NFU chief advisor on renewable energy and climate change. He said, “The failure to send a clear message to the renewable energy supply chain makes some investors nervous.” He went on to comment that the government showed a “lack of enthusiasm” for renewables while showing encouragement of fracking.

 

Clearly fracking is yet another whole subject which could have an impact on our countryside on which we do not have space to comment here but on which there will no doubt be many more column inches written in the coming years.

 

Carter Jonas’ energy team can provide advice and comment on any Renewable Energy proposals and for any queries in the South West please contact Thomas Ireland in their Wells office on 01749 683386.  

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk

Property Investors Return With Confidence

The year has been heralded as one in which investor confidence in property will return in earnest. Rural property peers have pointed to the ‘froth’ skimming off premium agricultural land values this year as property-minded investors return with more confidence to the more obvious residential and commercial sectors for the first time post-credit crunch.

But, in the commercial sector, it’s by no means the wholesale return of investor confidence in any commercial property opportunity and the smartest money is always ahead of the game in the smartest of locations.

Last summer, Cambridge greeted the news that Tesco Pension fund is backing developer Brookgate’s 65,000 sq ft Grade A building which is at the heart of the cb1 scheme. But this five storey building was already pre-let and pre-let in Cambridge is always going to be a sure-bet.

In places like Cambridge, where there are limited opportunities in a smattering of its remaining key strategic locations, funders have been prepared to invest on very specific terms for the past three years. The terms usually involve pre-let agreements, more often than not with blue-chip companies and with certainty of long term leases.

Given the limited and ever diminishing supply of commercial sites with viable opportunities in Cambridge, those which exist are big ticket items and so it’s the cream of the funders who are attracted here.

With forecasts that the development pipeline will be reduced by more than 25 per cent by the end of this year, there’s concern about future opportunities for commercial property investments.

Investors like to look ahead and stay ahead but it’s getting more and more difficult to point to the next tranche of Cambridge sites looking for funding. Land which is supposed to see the city through to 2030 is already coming in to the calculations and commercial allocation.

With so much current building activity in Cambridge, it’s difficult to convince a lay audience that there’s a paucity of sites in supply on the near horizon but it’s one we will have to face – and soon.

The year 2014 is going to be a big one for those with development and property interests here.

This year sees Cambridge City Council and South Cambridgeshire District Council’s Local Plans firming up with the identification of residential and commercial site allocations to take the area through the next couple of decades.

At the end of this month and in the early days of February, we welcome in the Chinese Year of the Horse. People born in years of the horse are believed to be active and energetic and, work wise, they refuse to give in to failure but, add the astrologers, ‘their endeavour cannot last indefinitely’.

In a twelve year zodiac cycle, the next year of the horse in 2026 - property investment funds are already backing Cambridge sites that are four years in front of that horse.

Will Mooney MRICS
Partner
Commercial, Cambridge

World Commodity Markets Are Strong

With farming becoming ever more reliant on world markets, farmers will be interested to learn that several organisations have reported that world commodity markets are strong and are expected to remain so for some years to come.

First, the United Nations Food and Agriculture Organisation (FAO) has recently published its latest monthly Food Price Index which showed that overall 2013 produced the third highest figure on record, almost equal to 2012 but about approaching 9% off the previous highest figure for 2011. The index is a measure of the monthly change in international prices of a basket of five food commodities, being cereals, sugar, oil, meat and dairy.

However, the total figure hides the fact that there was significant variation in the performance of the various commodities with dairy and meat reaching all time highs for the year while cereals were down by about 7% on the value for 2012 and oils index reached a four year low. These figures have been reflected in the fortunes of our farmers at home where dairy farmers in particular have seen milk prices rise sharply in the last year.

The second piece of encouraging news comes from the EU, where the Commission has published its annual report which attempts to model commodity prices in the medium term – in this instance over the next ten years. Such predictions have to be taken with a pinch of salt in that they are produced by computer generated models but even so the expectation is that commodity prices will remain firm.

But, it has to be remembered high prices do not always translate in to high profits and farmers must ensure they keep a careful eye on costs in particular because letting costs run away will eat in to profits. Further, there will always be price volatility and taking advantage of the highs and not getting caught out by the lows in commodity markets will be important. This is particularly relevant for arable farmers where crops can be stored and sold at different times of the year or even sold on “futures” markets while dairy farmers for example have to take whatever price is on offer at that time because liquid milk is perishable and cannot be stored.

Thus, compared to the lows of the late 1990s and early 2000s it seems farmers can look forward to the next few years with optimism but as we have seen in recent years, many external factors such as the weather can have a significant effect on an individual farmer’s fortunes. Therefore although the future looks reasonably bright no one can complacent and as ever it will the best run businesses which will thrive.

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk

Put energy into improvements now

The Energy Act 2011 states that from April 2018 (at the latest), it will be illegal to rent out residential or business premises that do not reach a minimum standard of energy efficiency.

Although it’s not yet clear, the Government seems to be indicating that the lowest acceptable energy rating on an Energy Performance Certificate should be Band E. Landlords who have F and G rated buildings (and possibly some in Band E) will need to actively attend to improving their energy efficiency.

There are circumstances where no EPC is needed, for instance when a building is listed (this applies if it shows up on a search of the English Heritage database or the Welsh equivalent list at CADW) or where certain facilities are shared between tenants.

Guidance from the Department of Communities and Local Government can be downloaded at here.

It makes sense to improve efficiency sooner rather than later, when all the procrastinators will be in the same frenzy and improvement firms may well be cashing in by raising charges.

Carrying out fresh assessments now, particularly where the EPC is Band E, and then factoring in the costs of upgrades where necessary, possibly spreading them over a period, will help limit the financial impact of carrying out the work. It may also be that as time goes on some energy efficiency grant funds’ availability diminishes through over-use or cuts in funding – at present some improvements may come within the scope of the Green Deal.

Your accountant may be able to advise on the best way to make use of capital allowances in addition to planning the effects on your cashflow. You should also bear these changes in mind if you are looking to expand your portfolio through buying more properties, some of which may have EPC assessments that are already several years old.


Lisa Simon, 
Partner
Head of Residential Lettings
T: 020 7518 3234
E: lisa.simon@carterjonas.co.uk

Memories of 2012 have come 'flooding' back

The memories of 2012 have unfortunately come flooding back (excuse the pun) to many in recent weeks and the Somerset Levels in particular seem to have taken the brunt in this area. The main road to Taunton is once again cut off and we see pictures of villagers being supplied with essential goods by boat.

 

No doubt the issue of dredging the main water courses more effectively will become a hot topic of conversation but it has to be remembered that winter flooding was a regular feature of farming on the levels in the past. The problem this time is that it has followed the devastating floods of 2012 which has left some farmers still recovering from the effects of those floods which started in April and continued on and off throughout the summer and beyond.

 

Such summer flooding is far more damaging than winter flooding because it occurs during the growing season, killing grass and other crops, preventing grazing and damaging soil structure when machinery or livestock cross waterlogged soils. This leads to short and long term impacts on the farmers affected. They not only lose summer grazing and fodder stocks which need to be replaced in order to maintain livestock numbers in the short term they also face the cost of re-establishing grass swards and sorting out the damage to the soil structure in the long term.

 

It is these latter issues which are most likely to cause some farmers particular problems now, in that the grass leys which were reseeded last year are still relatively immature and may not survive the winter flooding which older permanent pastures would probably survive relatively unscathed. The type of grass seed used will also be important in that some of the modern short term leys will struggle to survive periods of flooding whereas many of the old permanent pasture seed mixes are far more resistant to such conditions. However, such seed mixes are less productive and so farmers have to balance the risk flooding against the productivity of the grass.

 

So, although these floods will have been devastating for some I would suggest, provided they do not last too long, they will have done significantly less damage to farmland than was the case in 2012. But whether or not a farm has been flooded, the very wet conditions make looking after livestock in particular difficult. Out wintered stock need to be moved more regularly to prevent the land becoming poached, mud is everywhere hindering virtually everything you need to do, manure and slurry become difficult to handle in wet yards and rainwater fills the slurry lagoons threatening an overspill and yet it is difficult to spread the slurry on waterlogged land without causing soil damage and risking a pollution incident.

 

Thus, all in all wet weather just makes farming difficult and unpleasant work although most will be glad the rain did not come as snow – let’s just hope that is not what February has in store for us.

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk

Eliminating the silent killer - carbon monoxide

No human sense can detect it, yet very quickly it can overcome its victims with disastrous consequences. It kills 50 people in the UK every year.

Carbon monoxide detectors are now a legal requirement in Scottish lettings properties, where new boilers or gas appliances are installed, but not in England. It’s a curious situation where someone in Gretna is legally protected, yet their friend in Carlisle currently legally neglected!

The Government has just added enabling powers to the Energy Bill, during its passage in the Lords, to introduce a requirement for carbon monoxide and/or smoke alarms in private rented properties and a review is promised not only of whether smoke or CO2 alarms should be mandatory but also of minimum standards for private rented properties.

A Derby landlord was recently prosecuted after a tenant who had reconnected a condemned gas boiler was subsequently killed by the fumes it gave off. During tests after his death, so much carbon monoxide was present that four neighbouring properties had to be evacuated.

Gas appliances had not been tested subsequent to a test arranged by the agent who introduced the tenant. The agent was not contracted to manage the tenancy and no further tests were carried out.

Landlords are culpable if tenants die in their properties from a defect that could have been foreseen or prevented, such as carbon monoxide build-up.

Here at Carter Jonas, we have taken the decision to advise landlords to adopt best practice and install carbon monoxide alarms. New appliances should already go some way towards protecting tenants, often it’s older appliances that cause the problems. The only way to manage this risk is to eliminate it by use of alarms.

Combustion appliances fuelled by solid fuel, oil, or gas all have the potential to cause carbon monoxide poisoning if they are poorly installed or commissioned, inadequately maintained or incorrectly used. As of 1 October 2010 alarms have been mandatory for newly installed stoves but this does not extend to every potentially dangerous situation.

As part of our management service for landlords, we are recommending and arranging for carbon monoxide alarms to be fitted in their properties over the next few months to both protect the occupier and give our clients peace of mind.

Lisa Simon, 
Partner
Head of Residential Lettings
T: 020 7518 3234
E: lisa.simon@carterjonas.co.uk