Labour MP Bill Esterson says it’s wrong that hedge funds who have shorted construction and shopping sector companies [such as Odey] would “cash in” from a no-deal Brexit, at the expense of constituents across the country.

A weary-sounding Simon Clarke repeats that the government wants to leave the EU with a deal. The only reason there’s a risk of a no-deal is that the opposition are undermining these efforts, he claims.

That’s the end of the urgent question on short-selling.

Labour MP Kerry McCarthy says the government can’t just sweep away its links to hedge funds, and also calls for an inquiry.

We are doing what we’re doing because it’s right to leave the European Union on 31 October, as we promised, Simon Clarke replies. Suggestions to the contrary are not just wrong, they’re offensive.

Labour MP Liz McInnes quotes Frances Coppola’s concerns (in the Guardian today) about the conflict of interest created by Boris Johnson’s links to hedge funds.

Does the PM have the moral courage to cope with this pressure?

Simon Clarke says he does, and also quotes Coppola’s blog in Forbes about the ‘mythical bets’ on a no-deal Brexit.

On the issue of nefarious hedge funds, minister Simon Clarke says opposition deputy chief whip in the House of Lords said last year that short selling is not necessarily the evil practice the popular press claim. It has a role.

SNP MP Alan Brown also calls for an investigation, pointing out that hedge funds made £350m overnight by betting against the pound in 2016.

There is a clear conflict of interest, so why can’t we have an inquiry?

Simon Clarke says MPs should back the government’s efforts to get a goodBrexit deal, rather than risking a no-deal Brexit.

Labour MP Matt Western has crunched the numbers, though - he says Odey Asset Management made £300m shorting sterling in 2016, while the auto industry spent £350m on protecting themselves from a no-deal Brexit.

Q: How large are the short positions against the pound?

Simon Clarke refuses to comment, and then accuses MPs of trying to smear the government with “wild speculation”.

Labour MP Jack Dromey reminds ministers that chocolate maker Cadbury was taken over a decade ago, because hedge funds built up a 30% stake in the company and wanted a profit.

Isn’t there a conflict of interest when you take money from people who profit from selling Britain short?

Minister Simon Clarke says the shorting of UK companies is regulated.

The SNP’s David Linden asks the government to publish details of all calls with Crispin Odey (hedge fund magnate and backer of Boris Johnson and Brexit).

Clarke says the government won’t comment on meetings with individuals [reminder, Odey told us today that he’s only spoken to Johnson once since he became PM]

Labour MP Cat Smith reminds the House that hedge funds also took big bets against the pound in 2016 (and made huge profits when the Leave side won).

Is regulation of hedge funds adequate?

Clarke says the Treasury keeps this issue under review.

SNP MP Hannah Bardell calls for an independent investigation into Boris Johnson’s relationship with speculators, who she calls ‘short-changers of society’.

Minister Simon Clarke doesn’t address this issue, but instead says MPs should respect democracy and deliver Brexit.

Q: Isn’t it ironic to see George Soros, who made millions on Black Wednesday, is now backing the ‘continuity remain’ side?

Clarke sticks to his line that the government doesn’t comment on individuals’ actions,

The idea that there are only vested interests on one side of this issue can be contested, he adds.

Q: What work has the government done on the impact of a no-deal Brexit on the housing market?

Clarke says he isn’t aware of any specific work here (which appears to alarm some MPs).

Independent Group for Change MP Chris Leslie cites a recent stress test by the Office for Budge Responsibility which predicted an-deal Brexit would sent the pound tumbling, and create a year-long recession.

Is this a price worth paying?

It’s a good reason to vote for a Brexit deal, Simon Clarke replies.

Conservative MP Craig Mackinlay says Simon Clarke is doing “sterling work” (a pun which ought to get a yellow card from the Speaker).

He invites the minister to talk about Labour’s threat to the economy.

Clarke claims that Labour’s “trillions” of spending promises would crush the economy and cost jobs (which is somewhat ironic, as chancellor Sajid Javid is announcing some hefty spending plans in Manchester any moment).

Labour MP Tracy Brabin tells the House of Commons that she watched The Big Short over the weekend (based on Michael Lewis’s excellent investigation into the sub-prime crisis).

Isn’t it a question of morality that investors shouldn’t profit from a no-deal Brexit?

Clarke says he doesn’t take his economics lessons from Hollywood [which is a shame, as Lewis’s work is excellent, both the film and the book].

Michael Tomlinson, Conservative MP, says the real threat to the UK economy is John McDonnell becoming chancellor.

Unsurprisingly, minister Simon Clarke happily supports this view (which the DUP’s Sammy Wilson then repeats).

Labour’s Hilary Benn asks the minister to confirm that the government’s own economic analysis shows that a no-deal Brexit would have the worst impact on growth, jobs and businesses. And why will he contemplate such a scenario?

Simon Clarke says the government believes on delivering on the 2016 referendum result.

Conservative MP Maria Caulfield says the best way to prevent speculators profiting from a no-deal Brexit is to vote for a withdrawal agreement.

Simon Clarke agrees.

Labour MP Helen Goodman asks about Crispin Odey’s shorting of housebuilders (Berkeley Group) and shopping centres (INTU) (as I wrote yesterday).

Won’t this mean he “makes a packet” after a no-deal Brexit, when we can’t build homes and shops will close?

Minister Simon Clarke refuses to comment on the actions of individuals, and won’t take a position on the issue of short-selling.

Former Liberal Democrat leader Vince Cable asks if the government is happy for sterling to fall to any level?

Clarke says the government doesn’t set a fixed price for sterling - it’s important to allow currencies to move, and he’s certain that the pound can find the appropriate level under any circumstances.

Amber Rudd, former home secretary, says that Labour’s economic plans are creating uncertainty and concern in the markets.

But the SNP’s Alison Thewliss raises the conflict of issue question, saying Johnson has received hundreds of thousands of pounds from hedge funds.

Minister Simon Clarke says the government wants a good deal, and urges MPs to back it.

Simon Clarke (who is exchequer secretary to the Treasury) hits back.

The only people generating uncertainty in parliament are the opposition, he insists.

It is they who are selling this country short.

Clarke says the government wants to get a good Brexit deal, and hopes to get a breakthrough at the EU council next month. That is not helped when the opposition remove our negotiating leverage, he claims (a reference to the Benn bill that rules out no deal).

He then quotes Frances Coppola’s article in Forbes, describing the short-selling claims as “Yet another tin-foil hat conspiracy theory”.

We do not accept there is any threat of a conflict of interest, Clarke insists, accusing McDonnell of making a “speculative attempt” to throw mud around.

McDonnell is trying to propagate myth, smear, and stoke tensions in the House of Commons, he claims.

Shadow chancellor John McDonnell is asking his question, on ‘short positions against the pound’ now.

Cabinet minister Simon Clarke is responding.

He says the government can’t comment on specific market moves, but it accepts the market-based price of sterling. Investors are entitled to hedge currencies.

The UK supports efforts to create a single code to regulate the foreign exchange markets, he said, adding that that UK is leaving the EU on 31st October.

Financial commentator and author Frances Coppola has dismissed the claim that hedge funds are planning to profit from a hard Brexit as “mythical”.

She’s dug into some of Johnson’s hedge fund backers, and concluded that they’re shorting struggling UK companies for a variety of reasons, not just Brexit.

Here’s her conclusion:

In short, there is no evidence that the hedge funds that have backed Johnson’s election campaign have “millions of pounds” of speculative bets on no-deal Brexit. They have millions of pounds of speculative bets on U.K. companies, yes, but that is simply business as usual. So this is yet another a tin-foil-hat conspiracy theory. But no doubt it will continue to run.

Already, the opposition Labour party has called for an inquiry into Johnson’s “conflict of interest.”

She also makes a very important point - -even if there’s nothing untoward, Johnson has a clear conflict of interests, if his financial backers would lose money from (say) a softer Brexit.

It is fair to say that financial backing from companies that hope to profit from a no-deal Brexit, even though there is no evidence that they have has yet placed significant bets to that effect, places Johnson under some psychological pressure to deliver what they want even at the expense of the best interests of the country.

But if he is any good as a Prime Minister, he will resist this. And if he isn’t, then he shouldn’t be in the job.

The full piece is here, and worth a read.

There’s no dispute that investors globally have been betting against the pound since the EU referendum.

The US Commodity Futures Trading Commission keeps a record of net positions for speculative trades on sterling, on the New York and Chicago futures markets.

This is a good measure of the situation globally, and shows that pound shorting hit a two-year high in August, as Johnson insisted that Brexit would happen on 31 October, deal or no deal....

Labour have asked chancellor Sajid Javid to respond to the concerns about City speculators shorting the pound.

One problem, he’s in Manchester, preparing to give a keynote speech on future tax and spending plans to the Conservative Party conference

Hopefully another minister is available...

Nick Macpherson, former permanent secretary to the Treasury, backed Philip Hammond yesterday.

Macpherson said the former chancellor was right to question the political connections of some of the hedge funds with a financial interest in no deal, warning:

“They are shorting the pound and the country, with the British people the main loser.”

I’m sure Labour will want to quote this when their urgent question is heard.....

Shorting, in City jargon, can mean borrowing, and selling, shares in a company and hoping to buy them back cheaper in future.

It can also mean buying derivative contracts that pay out if the underlying asset declines in value.

But, as I tried to explain here last night, it’s a complicated issue. Hedge funds short stocks, and currencies, for lots of reasons. Some may hope to profit from a no-deal Brexit, but others may simply be trying to protect themselves and their clients.

Also (and here’s where it gets technical), hedge funds often short one company, and buy shares in another - expecting the latter will outperform.

That ‘long/short’ strategy is popular in the City, as you can profit regardless of wider market moves [as long as the shorted company performed worse than the company you bought shares in]

Reuters says that the Saudi authorities won’t be pleased by this downgrade:

The downgrade – which places Saudi Arabia one notch above the assessment of peer rating agency S&P Global – is a blow to the largest Arab economy just as it is gearing up for a potential international sale of U.S. dollar denominated Islamic bonds.

Economist Rupert Seggins has also kindly shown the UK’s place in the global growth league:

This is a good spot:

2017, of course, was the year in which Theresa May lost her majority. But it’s tricky to link long-term business investment decisions to general elections.

More likely, perhaps, that the shock of the 2016 EU referendum begins to show up a year later, as companies put plans on hold.

The ONS has also reported that the UK made a net contribution of £11bn to the European Union last year, as its share of the EU budget.

That works out at £211m per week, contra to what you may have read on the side of a bus.....

How does the UK’s performance in 2019 compare to other countries?

Well,as this chart shows, the UK was one of the faster-growing G7 companies in January-March, and the fastest-shrinking in April-June.

The ONS explains:

There has been a slowdown in the euro area in the latest quarter, largely reflecting the contraction in the German economy where GDP fell by 0.1%.

Having entered a technical recession in the second half of 2018, the Italian economy continues to perform in a subdued manner as there was no pickup in GDP in Quarter 2. French GDP maintained its quarterly rate of growth of 0.3%. Having increased by 0.8% in Quarter 1, US GDP growth slowed to 0.5% in the latest quarter.

The service sector was the only part of the UK economy to expand in the last quarter, by just 0.1%.

Production, construction and agriculture all contracted, according to today’s updated growth report:

The ONS says there’s evidence that stockpiling boosted growth in January-March, lifting GDP by a punchy 0.6%.

But, those stocks were then run down in the second quarter, when GDP shrank by 0.2%.

The ONS also points out that car factories were briefly shuttered in April:

Furthermore, it was also reported that a number of car manufacturers had brought forward their annual shutdowns to April as part of Brexit-related contingency planning.

Anxiety over the US-China trade war is keeping European stock markets subdued today.

The main indices are mostly down, a little, after it emerged that American investors could be curbed from investing in China. The White House is also considering blocking Chinese firms from listing on the New York stock exchange, according to insiders.

Beijing’s state media has hit back at these reports, criticising the US for trying to decouple from China.

The Global Times warned that such a decoupling wouldn’t be easy, and would have “significant repercussions for the Chinese and US economies, as well as their companies, in the future.”

China also pledged to take new steps to support its economy, ahead of a new round of trade negotiations next month.

UK businesses are also at risk from a Chinese hard landing.

Official data released today showed that China’s factory output continued to contract this month. This manufacturing PMI rose to 49.8, from 49.5 -- the fifth straight month of contraction but closer to the break-even 50 point mark.

Service sector companies are still growing, though:

Despite UK PLC’s obvious concerns, the government insists that Britain could handle a no-deal Brexit.

Chancellor Sajid Javid has been speaking this morning, ahead of his speech at the Conservative Party conference. He told the BBC that leaving the EU without a deal was possible (despite the Benn Bill ruling it out!).

Javid said:

It’s not our preferred outcome. We are working incredibly hard to get a deal by October 31.

But if we do not manage to do that, we do still need to leave the EU on that date - we cannot have any more dither and delay, and we will leave if we have to, without a deal, on October 31.

Javid also pledged there would be a “significant economic policy response’ if there was no deal -- but couldn’t say how much it would cost.

The CBI, which represents Britain’s bosses, has also lashed out the government over its handling of Brexit.

Over the weekend, it reported that private sector activity had shrunk in the last quarter, and will probably keep shrinking at a faster pace in the next few months.

Rain Newton-Smith, CBI chief economist, said:

“Decision-makers in boardrooms across the country have been watching politics this week with a heavy heart.

“Despite all the noise, what must not be forgotten is the importance of getting the UK economy back on track, by supporting investment and innovation which is the bedrock of productivity, and higher living standards.