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October 2023 Monthly

There are four large
macro forces shape the investment and business climate here at the start of the
last quarter of the year. First, the US economic outperformance…



There are four large macro forces shape the investment and business climate here at the start of the last quarter of the year. First, the US economic outperformance has been stark. This has helped underpin US rates and bolsters the dollar. The divergence is likely to narrow in coming months as US growth slows rather than stronger growth prospects in other high-income countries. Second, Beijing has taken numerous measures, which although stopping well shy of the fiscal bazooka (like in 2008) many critics advocate, the cumulative effect boosts the chances that the 5% growth objective is achieved. 

Third, OPEC+, and especially Saudi Arabia, are committed to keeping world oil supplies tight. This has driven the price of oil above $90 a barrel. In the first instance, it will elevate headline measures of inflation and measures of nominal retail sales. However, for most countries, it will act as a headwind for growth. In last month's forecast update, the OECD noted that Europe is more vulnerable than the US from surging oil prices, as it lifted its US growth forecast (to 2.2% this year and 1.3% next from 1.6% and 1.0%, respectively), while reducing its forecast for the eurozone to 0.6% and 1.1% (from 0.9% and 1.5%, respectively). 

Fourth, the post-Covid monetary tightening cycle is ending, though there may still be scope for some G10 countries to raise rates in Q4 23 or even Q1 24. Still, investors typically respond to what is perceived to the last hike differently than the first move in the cycle. Speculation is shifting toward the timing of the first cut. Several emerging market countries, especially in South America have already begun an easing cycle, as has Poland. Over the past 30 years, the Federal Reserve, for example, delivered the first rate cut, on average, of about 10.5 months after the last hike. The range has been five to 18 months. Currently, the derivatives market is anticipating something around the average. That dovetails with around when the market expected the European Central Bank to cut rates, which is in early Q3 24.

Japan is an outlier. It is the only country that still has a negative policy rate (-0.10%). Also, the Bank of Japan’s balance sheet continues to expand, while other major central banks are allowing the previously bought assets to roll-off the balance sheets. The upper-band of the 10-year bond yield has been doubled twice over the past year to 1.00%. It finished Q3 at it high a little above 0.75%. Bank of Japan Governor Ueda seemed to have suggested rates could be hiked late this year, but then appeared to soften the rhetoric after the recent policy meeting. Some observers think that Yield Curve Control will be abandoned before the central bank exits from the negative policy rate. Still, the swaps market seems to be pricing in a small rate hike at the end of Q1 24. 

Politics is never far from the surface, though perhaps the widespread practice of import-substitution industrial policies make the invisible hand more visible. The polls warns that the Labour government could be replaced by a center-right government in New Zealand. Switzerland holds the first part of its federal elections in October and the second part in December. Poland's national election may have the most far-reaching implications. The Law and Justice Party is seeking a mandate for its third consecutive government. When Russia first invaded Ukraine, Poland absorbed nearly seven million Ukrainian refugees. An estimated 1.5 mln remain in Poland, but the focus has shifted to keeping Ukrainian grain out and this has strained the bilateral relationship.

Moreover, and some link the upcoming election in late October to Warsaw's stance toward Ukraine. The government said last month that it would not send new weapons to Ukraine. This is somewhat bombastic, as Poland's contribution was rarely about its weapons transfers and more about it being a conduit for other countries to get their weapons into Ukraine. Warsaw indicated this would continue. Still, between, the dispute over Ukrainian agriculture goods (Poland is not the only EU country to maintain a ban) and the push back in the US among (some) Republican against the administration's proposal, from Moscow's (and maybe Beijing's) perspective, the coalition may fray. At the same time, overcoming an earlier reluctance, the US will send long-range army tactical missile systems. They will expand the Kyiv's firing zone. The takeaway is that the war is likely to persist and could broaden in the period ahead. By early next year, Ukrainian pilots would have completed their training for the F-16 fighter jets the NATO members, including the US, are providing. 

The UK will likely hold a general election late next year, but there are two byelections in October that portend insight into the mood of voters. One is for a district what the Tories held, but previously by a Johnson Tory not from the Sunak-wing. The question is whether the Tories, who are trailing well behind Labour in the national polls, are still fighting. More important for Labour's fortunes may be by election in Scotland. The election is for seat a lawmaker whose constituency recalled him for violating Covid lockdown rules. To solidify its rejuvenation, Labour needs to rebuild its Scottish presence. Germany's Bavaria holds its election, and the CSU has a firm grip, and it will most likely return with its junior partner, the Free-Voters of Bavaria, a local center-right party. The center-left national government is unpopular and in the previous Bavarian election, the SPD drew less than 10% of the vote, coming in fifth place. It may slip further, while the right AfD could see its fortunes increase (10.2% in 2018).

Perhaps the most notable developments suggestive of the important changes coming to the global capital markets was JP Morgan's announcement that as of next June, it will include India in its emerging market bond index. It is among the benchmarks asset managers use. Other benchmark providers are likely to follow suit, even if with a lag. JP Morgan's announcement will build liquidity and could improve access, making it more tempting and attractive for others. At first, Indian bonds will have a maximum of 10% weighting in the index, and some asset managers will begin accumulating a position before next June. JP Morgan's decision is seen boosting capital inflows by $25-$40 bln. One of the implications is the as India is incorporated into the global capital markets, the liquidity in the assets and currency improves.

India occupies a unique space on the geopolitical chessboard. As in the non-aligned movement during the first cold war, India is seeking its own course. It is a member of the Quad, the security-sharing effort (with the US, Japan, and Australia), and it has agreed to give US navy access to port of call and repair privileges. At the same time, it is a big buyer of Russian oil and gas (and appears to have recycled it back to Europe) and buys munitions from Russia. Initially after the sanctions on Russia, Moscow accepted rupee but the limits of what it could do with India's currency given the capital controls made it refuse. Recent reports there was an agreement to pay in UAE dirham, which is pegged to the dollar. Reports suggest India may be developing a financial instrument that could appeal to Russian investors. India and China not only have a disputed border, but the sheer scale and proximity, coupled with ambition, makes them “natural” rivals. According to some accounts, Russia and China are blocking India's (and Brazil's) bid to join the UN Security Council.

India holds national elections early next year. The ban on the export of most types of rice appears to be inspired by politics more than economics. Reports indicate there are more than sufficient rice stocks, but the restrictions ensure lower domestic prices. India accounted for about 40% of world's traded rice and as a result of its actions, the price of rice, the staple of around half the world's population, has surged to 15-year highs. India is also caught up in a dispute with Canada, which claims to have credible evidence that Indian security killed a Sikh leader (and Canadian citizen) in British Columbia a few months ago. New Delhi has stopped granting visas to Canadians and have requested that Ottawa reduce its diplomatic presence in India. 
The Bannockburn World Currency Index (BWCI), a GDP-weighted basket of the currencies of the largest dozen economies (EMU is counted as a single economy) has anticipated the greater role for India. Using World Bank GDP figures, the Indian rupee's weighting rose to 4.3% (from 3.8%) to move ahead of the UK into fifth place (behind the US, China, EMU, and Japan). Making some conservative assumptions, India's economy could surpass Germany's in a couple of years. 

BWCI fell for the second consecutive month, bringing to almost the multiyear low set last November. The weakness of the index reflects the fact that component currencies fell against the dollar in September. Sterling and the Japanese yen were the weakest components of the basket, losing about 3.8% and 2.6%, respectively. The euro followed closely, falling by about 2.5%. 

Among the emerging market members, the Indian rupee was the strongest, with a 0.3%. The Chinese yuan was close second. Despite the numerous formal and informal efforts by Chinese officials, the yuan fell by about 0.55%. The Mexican peso and South Korean won were the weakest among the emerging market members of the index, falling by 2.1% and 2.0%, respectively.

Even though the BWCI has approached last year's lows, most of the components have not.  The Australian dollar and Indian rupee have come the closest.  And sterling (3.9% weighting), the Canadian dollar (2.7%), the Brazilian real (2.4%) and the Mexican peso (1.8%) have risen against the US dollar this year.  Combined, they account for almost 11% of the BWCI.  The Russian ruble has a small weighting (2.8%), but it is off nearly 24% this year and the yen, with a 5.3% weight in the index, is off more than 12% year to date.  The drag on the index of the two are almost the same.  Still, BWCI may be near an important low if our assessment of the gathering headwinds on the US is fair. 
U.S. Dollar: Through its updated Summary of Economic Projections the Federal Reserve offered a full-throated endorsement of a soft-landing for the US economy. Surely, the US economy has proven more resilient than Fed and market economists expected, helped by a significantly higher federal deficit and a robust labor market and an increase in real wages. However, significant headwinds are accumulating, and this warns of the risk of a dramatic slowdown in Q4. The weak link remains the financial sector. Deposits are still leaving banks and credit conditions are tightening. The Fed's balance sheet unwind continues (average $117 bln over the past six months since the March bank stress flare up), which is extinguishing reserves. Bank share prices are falling and are near three-month lows. The UAW strike may continue to broaden. Initially, a shutdown could last a couple of weeks and some reports from Washington see the October 13 pay day for US troops. In addition to the disruption for the millions of households that depend on federal government services, and the important work done by regulators, the economic data due out that is supposed to inform the Fed's decisions will be interrupted in a partial shutdown. The rule of thumb estimate is that a government shutdown costs about 0.2 percentage points of GDP a week and most of it is recouped when the government re-opens. Moody's, the last of the three main rating agencies that still grants the US AAA status, notes that a government closure would be negative credit implications. In addition, student loan servicing will resume for the first time in three years, and this is seen squeezing consumption, which already looks set to slow. Tightness in the labor market is easing. Higher oil and gasoline prices are also a headwind for consumers, even if the US is a net exporter of energy and businesses have long-term contracts. The Fed funds futures strip implies three rate cuts next year, while the FOMC's median forecast envisions two. The market has all but given up ideas of a November hike (less than a 20% chance). The Dollar Index rallied for eleven consecutive weeks into the end of Q3. This is the longest advance since 2014, driven chiefly by the stark divergence. We look for the divergence to moderate due to the slowing of the US economy rather than better economic news from Europe and Japan and expect this to cap the greenback after an incredible two-and-a-half month run.

Euro: The euro's decline since the mid-July peak near $1.1275 extended to within a few hundredths of a cent of the year's low set in January near $1.0485. While this partly reflects the broad strength of the US dollar, the news stream from Europe is poor. The economy remains weak, near stagnant, and there is no stimulus to be found. The swaps market sees the September rate hike as the last in the cycle and has the first cut fully discounted in Q3 24. Although the central bank meets on October 26, the focus will shift to fiscal policy in the coming weeks as the 2024 budgets need to be submitted to the EU. The Stability and Growth Pact fiscal targets were suspended during Covid and extended since Russia's invasion of Ukraine. They are intended to be restored in 2024, though given the near recessionary conditions in many members, some flexibility may be shown. Last year's natural gas shock has given way to an oil shock this year, compounded by the euro's weakness. At last month's meeting, the ECB shaved this year's growth projection to 0.7% from 0.9% and next year to 1.0% from 1.5%. It tweaked its inflation forecast to 5.6% this year and 3.2% next from 5.4% and 3.0%, respectively. The euro has fallen for 11 consecutive weeks through the end of September. It is the longest decline since 1996. It is extremely oversold, and the catalyst for a recovery may not be good news from the eurozone but negative news from the US. That said, the next important chart area is near $1.04. A correction could carry the single currency back toward $1.0660-$1.0700 without necessarily improving the outlook. For that the euro may need to resurface above $1.0770-$1.0800.

(As of September 29, indicative closing prices, previous in parentheses)
Spot: $1.0575 ($1.0780) Median Bloomberg One-month forecast: $1.0650 ($1.0840) One-month forward: $1.0585 ($1.0800)   One-month implied vol: 6.8% (6.8% 


Japanese Yen:  The market has been on "intervention watch" since early September when the dollar surpassed JPY146, where officials had intervened last year. The rhetoric and word cues deployed that have signaled intervention in the past. However, what contributed to the success last October's intervention (and the failure in September) was in timing the operations to pick a top in US Treasury yields. However, with the increase in supply, the resilience of the US economy, and higher oil prices, the US 10-year yield rose more than 45 bp last month to the highest level in 16 years. The implication is that when there is a reasonable chance that US yields have peaked, the risk of intervention increases. Given the market positioning, intervention could knock the dollar down by around five years. Although the Bank of Japan meets at the end of October, the focus in the month ahead will shift to fiscal policy. The government is drafting a supplemental budget, which could be JPY15-20 trillion (~$100-$135 bln). In addition to extending subsidies for energy, the government is talking about tax cuts to encourage wage increases and investment in strategic areas, like semiconductors. Even though a cabinet reshuffle in September failed to lift popular approval for government, Prime Minister Kishida is believed to be considering a dissolution of the Diet to hold elections either late this year or early next year, the tax cut proposal may be a central plank in a gambit to shore up support. Contrary to conventional wisdom, despite rising domestic market rates, Japanese investors stepped up their buying of foreign bonds in the eight weeks since the bond adjustment at the end of July. They purchased about JPY5 trillion of foreign bonds compared with JPY700 bln in the previous eight weeks. Japanese investors have bought a modest amount of foreign stocks over the period JPY440 bln. Foreign investors have dumped Japanese bonds and stocks (~JPY8.7 trillion) in the same period.

Spot: JPY149.35 (JPY146.20Median Bloomberg One-month forecast: JPY146.85 (JPY144.10) One-month forward: JPY148.55 (JPY144.50) One-month implied vol: 8.7% (9.0%) 
British Pound: Sterling was the weakest of the G10 currencies, losing almost 3.7% against the US dollar in September (~six cents) before stabilizing at the end of the month. That is the largest decline since the sterling crisis last September and August that saw the pound fall to record low near $1.0350. The softer than expected August CPI (September 20) and the Bank of England's decision to stand pat at the MPC meeting the following day, did sterling no favor. Though by that time, sterling was already fraying support around $1.2400, and by the end of September, it was trading at six-month lows near $1.2100. Initially, risk on the downside risk extends toward $1.20, though the $1.2075 area corresponds to a technical retracement target. Beyond that, the next target may be closer to $1.1750. On the upside, sterling needs to resurface above $1.2350-$1.2400 to lift the technical tone. The BOE cut its forecast for Q3 growth to 0.1% from 0.4% it projected in August. Also, the central bank announced that over the next 12 months starting in October, it will reduce its balance sheet from GBP100 bln to GBP658 bln. In the previous 12 months, it reduced its holdings by GBP80 bln. The central bank meets next on November 2. The swaps market has slightly less than a 50% chance of a hike discounted and around a 70% chance of a hike before the end of the year, making the employment and inflation reports on October 18-19 especially important.

Spot: $1.2200 ($1.2850) Median Bloomberg One-month forecast: $1.2305 ($1.2620) One-month forward:  $1.2205 ($1.2590) One-month implied vol: 7.6% (7.6%) 

Canadian Dollar: 

The US dollar extended its rally against the Canadian dollar that began in mid-July into September, reaching almost CAD1.3700. While the broader dollar gains continued against the euro, yen, sterling, and the Chinese yuan, its gains against the Canadian dollar were halved (~CAD1.3380). 

The 0.2% contraction in Q2 overstated the weakness of the Canadian economy and a stronger performance appears to be unfolding in Q3. This, coupled with disappointing CPI, have spurred a shift in market expectations toward a Bank of Canada rate hike in Q4. However, a disappointing July GDP report (flat) helped lift the greenback to CAD1.3565 at the end of September saw the market reduce the chances of a hike in Q4. The market may have to re-test the CAD1.3600-50 area. In the swaps market, the implied odds of a hike at the October 25 meeting doubled in September to around 45% but fell back to about 30% in response to the July GDP report.  The market priced in an almost 80% chance of a quarter-point boost in Q4 but pulled back to around 60% at the end of the month. It was about a 20% chance at the start of September. Ahead of this month's central bank meeting, StatsCan will report September CPI figures on October 17, and the market will be particularly sensitive to the underlying core rates, which rose more than expected in August. 

Spot: CAD1.3575 

(CAD 1.3590) Median Bloomberg One-month forecast: CAD1.3 515 (CAD1.3510) One-month forward: CAD1.3580 (CAD1.3570) One-month implied vol: 5.8% (5.5%) 


Australian Dollar: The Australian dollar fell to a marginal new low for the year in September. The low slightly above $0.6330. The next target is the $0.6270-$0.6300 area. The futures market sees practically no chance of a hike by the Reserve Bank of Australia at the October 3 meeting. The market is not convinced the RBA is done, though, and is discounted about a 50% change of a hike in Q4, and around an 80% probability of a hike in Q1 24. The US pays about 110 bp more that Australia to borrow for two years and this is historically a large premium. When the Australian dollar was trading near $0.6900 in mid-July, the Australia's 10-year yield as nearly 30 bp above the US Treasury yield. It finished September at a 20 bp discount. The still uninspiring performance of the Chinese economy, and weakness in many industrial metals and wheat prices may also have weighed on sentiment. Speculators in the IMM futures have amassed a record large, short Australian dollar position. A close above $0.6500, which the Aussie has not done since August 10, would suggest a bottom of some importance was likely recorded.

Spot: $0.6435 

($0.6455) Median Bloomberg One-month forecast: $0.6490 ($0.6495) One-month forward $0.6445 ($0.6465)    One-month implied vol 9.8% (10.2%) 


Mexican Peso:  The peso was unable to fully recover from the sell-off that followed the official decision in late August to wind down the currency hedging facility. The market’s reaction seemed outsized compared with immediate volume it entails (~$7.5 bln) and may have been related to market positioning. Speculators in the IMM futures appear to have reduced their net long peso position for the third consecutive month in September, off by nearly a third over the run. The dollar briefly traded below MXN17.00 before the late September FOMC meeting. But the higher-for-longer message and risk-off mood helped lift greenback to four-month highs a little below MXN17.82. It approached the 200-day moving average, which it has not traded above in a year (~MXN17.85). While the price action needs to be respected, the forces that have underpinned the peso still are intact. The carry trade rate differential) remains attractive. Here, we note that Chile and Brazil have delivered two cuts in their new easing cycle and more rate reductions are expected in Q4. As recently, as June, Chile and Mexico overnight rates were at 11.25%. Now, Chile's overnight rate is at 9.50% and Mexico's remains at 11.25%. The market has pushed its rate cut expectations for Banxico well into next year. Meanwhile, the strong worker remittances more than covers Mexico's trade imbalance, while the near-shoring and friend-shoring memes, underscored by the USMCA agreement, draw foreign direct investment.

Spot: MXN17.42 (MXN17.09) Median Bloomberg One-Month forecast MXN17.39 (MXN17.1750) One-month forward MXN17.52 (MXN17.18) One-month implied vol 12.2% (11.4%)

Chinese YuanChinese officials seemed to get more serious about supporting the economy in recent weeks. While stopping short of large-scale fiscal steps, the numerous measures, and the exercise of soft power to encourage desired behavior seems to have begun yielding constructive results. Similarly, officials have managed to limit the yuan's descent to a little more than 0.5% in September, less than most other currencies. A squeeze in liquidity in the offshore market was arranged and reserve requirements for currency deposits were adjusted. Orders to buy more than $25 mln came under closer official scrutiny. Banks were discouraged from selling the yuan in proprietary trading. The central bank's daily fix has consistently in favor of the yuan. At the same time, interest rates and bank reserves were cut, extending the policy divergence with the US. Judging from some portfolio flow reports, it does not appear that foreign investors have been persuaded to return to Chinese stocks or bonds. There is scope for additional adjustment of China's monetary policy before the end of the year, even if not in October. The Golden Week holidays will shut mainland markets the first week in October. Barring a new setback, the groundwork for a Biden-Xi meeting in November at the APEC gathering, appears to be falling into place.

Spot: CNY7.2980 

(CNY7.2665) Median Bloomberg One-month forecast CNY7.2800 (CNY7.2225) One-month forward CNY7.1960 (CNY7.2075) One-month implied vol 5.2% (6.4%) 

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Ancient Egypt had far more venomous snakes than the country today, according to our new study of a scroll

Ancient texts are still teaching us new things about the prevalence of wildlife.

How much can the written records of ancient civilisations tell us about the animals they lived alongside? Our latest research, based on the venomous snakes described in an ancient Egyptian papyrus, suggests more than you might think. A much more diverse range of snakes than we’d imagined lived in the land of the pharaohs – which also explains why these Egyptian authors were so preoccupied with treating snakebites!

Like cave paintings, texts from early in recorded history often describe wild animals the writers knew. They can provide some remarkable details, but identifying the species involved can still be hard. For instance, the ancient Egyptian document called the Brooklyn Papyrus, dating back to around 660-330BC but likely a copy of a much older document, lists different kinds of snake known at the time, the effects of their bites, and their treatment.

As well as the symptoms of the bite, the papyrus also describes the deity associated with the snake, or whose intervention might save the patient. The bite of the “great snake of Apophis” (a god who took the form of a snake), for example, was described as causing rapid death. Readers were also warned that this snake had not the usual two fangs but four, still a rare feature for a snake today.

The venomous snakes described in the Brooklyn Papyrus are diverse: 37 species are listed, of which the descriptions for 13 have been lost. Today, the area of ancient Egypt is home to far fewer species. This has led to much speculation among researchers as to which species are being described.

The four-fanged snake

For the great snake of Apophis, no reasonable contender currently lives within ancient Egypt’s borders. Like most of the venomous snakes that cause the majority of the world’s snakebite deaths, the vipers and cobras now found in Egypt have just two fangs, one in each upper jaw bone. In snakes, the jaw bones on the two sides are separated and move independently, unlike in mammals.

The nearest modern snake that often has four fangs is the boomslang (Disopholidus typus) from the sub-Saharan African savannas, now only found more than 400 miles (650km) south of present-day Egypt. Its venom can make the victim bleed from every orifice and cause a lethal brain haemorrhage. Could the snake of Apophis be an early, detailed description of a boomslang? And if so, how did the ancient Egyptians encounter a snake that now lives so far south of their borders?

Representation of Apep (Apophis) in Ancient Egyptian wall painting. Note resemblance to boomslang (above).

To find out, our masters student Elysha McBride used a statistical model called climate niche modelling to explore how the ranges of various African and Levantine (eastern Mediterranean) snakes have changed through time.

Niche modelling reconstructs the conditions in which a species lives, and identifies parts of the planet that offer similar conditions. Once the model has been taught to recognise places that are suitable today, we can add in maps of past climate conditions. It then produces a map showing all the places where that species might have been able to live in the past.

On the trail of ancient snakes

Our study shows the much more humid climates of early ancient Egypt would have supported many snakes that don’t live there today. We focused on ten species from the African tropics, the Maghreb region of north Africa and the Middle East that might match the papyrus’s descriptions. These include some of Africa’s most notorious venomous snakes such as the black mamba, puff adder and boomslang.

We found that nine of our ten species could probably once have lived in ancient Egypt. Many could have occupied the southern and southeastern parts of the country as it then was - modern northern Sudan and the Red Sea coast. Others might have lived in the fertile, vegetated Nile valley or along the northern coast. For instance, boomslangs might have lived along the Red Sea coast in places that 4,000 years ago would have been part of Egypt.

Similarly, one entry of the Brooklyn Papyrus describes a snake “patterned like a quail” that “hisses like a goldsmith’s bellows”. The puff adder (Bitis arietans) would fit this description, but currently lives only south of Khartoum in Sudan and in northern Eritrea. Again, our models suggest that this species’ range would once have extended much further north.

Read more: Wildlife wonders of Britain and Ireland before the industrial revolution – my research reveals all the biodiversity we've lost

Since the period we modelled, a lot has changed. Drying of the climate and desertification had set in about 4,200 years ago, but perhaps not uniformly. In the Nile valley and along the coast, for instance, farming and irrigation might have slowed the drying and allowed many species to persist into historical times. This implies that many more venomous snakes we only know from elsewhere might have been in Egypt at the time of the pharaohs.

Our study shows how enlightening it can be when we combine ancient texts with modern technology. Even a fanciful or imprecise ancient description can be highly informative. Modelling modern species’ ancient ranges can teach us a lot about how our ancestors’ ecosystems changed as a result of environmental change. We can use this information to understand the impact of their interactions with the wildlife around them.

Wolfgang Wüster receives funding from the Leverhulme Trust.

Isabelle Catherine Winder does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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Tornadoes in the UK are surprisingly common and no one knows why

Britain doesn’t have huge violent twisters like the US. But it does have lots of little tornadoes.

A small tornado recently passed through the town of Littlehampton on England’s south coast. Strong winds smashed windows, moved cars and left one person injured.

You might associate tornadoes with the plains of the central US, but they’re surprisingly common in the UK too – albeit smaller and weaker. In fact, my former PhD student Kelsey Mulder found that the UK has about 2.3 tornadoes per year per 10,000 square kilometres. That’s a higher density than the US, which as a whole has just 1.3 per 10,000 square km.

The numbers are higher for American states in “Tornado Alley” such as Oklahoma (3.6) or Kansas (11.2). Nonetheless, a random location in the UK is more likely to experience a tornado than a random location in the US.

The data isn’t perfect, however. Tornadoes cannot be observed by satellites and need to be close to weather radars, which can detect the rotation. Thus, most observations are made by humans who then have to report them to the relevant weather service. “Storm-chasers” follow most tornadoes on the American plains, but underreporting may be an issue elsewhere.

Most tornado research has focused on the US, where forecasting and early-warning systems are advanced. There is considerably less research on UK tornadoes. Over the past 12 years, my research group has tried to address this by shedding light on where and when UK tornadoes occur, what causes the storms that produce them and how we can better predict them.

England has three ‘tornado alleys’

Whereas many tornadoes in the US plains occur within a few weeks during the spring, UK tornadoes can occur throughout the year. The UK’s tornado alley is really three regions, most in southern England: an area south of a line between Reading and London with a maximum near Guildford, locations southwest of Ipswich and a line west and south of Birmingham.

These regions have probabilities of experiencing a tornado within a 100 square km area of somewhere between 3% and 6% per year, meaning they could see one as often as every 15 to 30 years.

Tornadoes between 1980 and 2012, mapped by Dr. Kelsey Mulder and the author. Monthly Weather Review, CC BY-SA

These tornadoes aren’t as violent as the more extreme ones in the US, but the damage can still be substantial. In July 2005, a large tornado in Birmingham caused £40 million in damages and injured 39. Fortunately, no one was killed. People have died in the past though, for example a strong tornado in South Wales in 1913 killed three.

Although the Birmingham tornado was the most damaging tornado on that day, two others were recorded across the British Isles. Indeed, around 70% of UK tornado days have at least two reports, and 13% produce three or more.

We refer to such days as tornado outbreaks, with the largest-ever UK tornado outbreak occurring on 23 November 1981, producing 104 tornado reports from Anglesey to Norwich.

What causes tornadoes

We still don’t know exactly why the UK has so many weak tornadoes. We do know that “supercells” – rotating thunderstorms tens of kilometres across – form the largest tornadoes in the US but occur less frequently in the UK. Instead, tornadoes in the UK tend to be formed from lines of storms along cold fronts.

Disc shaped storm with lightning.
The largest tornadoes are formed from supercell storms, like this one in Kansas. GSW Photography / shutterstock

Although millions of dollars have been spent researching supercell thunderstorms in the US, there is an increasing awareness that these linear storms also require investigation on both sides of the Atlantic. Our group has been trying to understand what causes some of these parent storms to begin to rotate and eventually spawn tornadoes.

So far, my former PhD student Ty Buckingham and I have been able to identify certain conditions where the wind direction changes abruptly. In such cases, an instability may develop where small perturbations grow into rotating vortices a kilometre or more across, regularly spaced along the front. Such vortices are thought to be the precursor for tornadoes.

Identifying the conditions for this so-called “horizontal shearing instability” should mean we can better predict when and where the parent storms that produce the tornadoes form. But understanding this instability is not the only answer. Other tornado-producing storms do not appear to be associated with this instability, so we still have more to learn.

The next step is understanding how the tornadoes themselves form. For that, we will need both fortuitous observations of such tornadoes forming close to Met Office radars and powerful computer programs that are able to model the atmosphere down to a scale of tens of meters.

Recent advances in computing and our collaborations with colleagues in engineering may yet reveal the secrets of UK tornadoes.

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David Schultz receives funding on this topic from the Natural Environment Research Council (UK) and has received funding from the Risk Prediction Initiative.

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How smaller businesses can become net-zero influencers and enablers

SMEs could help the UK maintain its position as a climate change champion and ensure a long-term future for all businesses, large or small




What if all of the UK’s 48,000 hairdressing salons and barbershops started sharing water and energy-saving advice with their clients, alongside a clipper cut or a wash and blow dry? Previous studies have demonstrated that hairdressers can shape customers’ environmental behaviour with guidance they can trust and that relates to their everyday lives.

And it’s not just hairdressers. Cafes and restaurants are also addressing food-related emissions with carbon labelling schemes and more sustainable menu choices.

Recruiting smaller businesses to support the drive for net zero makes a lot of sense. More than half of the UK’s business emissions are estimated to come from its 6 million small and medium-sized enterprises (SMEs – companies with less than 250 employees). As the authors of a recent OECD report argue, there’s “no net zero without SMEs”.

But the decarbonisation of smaller firms has only recently attracted serious attention from policymakers, through initiatives such as the UK Business Climate Hub. And while criticism of Rishi Sunak’s watering-down of net-zero policies has united environmental campaigners with some company bosses and investors, it may not be enough to keep SMEs and their emissions in the spotlight.

SMEs are important as energy consumers, and there is an increasing focus on the carbon they emit directly, or that is embedded in their products and services. However, as highlighted in a recent study I worked on with colleagues at Oxford and Sheffield Hallam universities, smaller businesses can also help cut emissions as behavioural “influencers” and “enablers” of change.

How SMEs can help meet net zero goals

Table explaining SME net zero roles: consumers, influencers, enablers.
Crisis and opportunity: transforming SME governance for net zero. S. Hampton, R. Blundel, W. Eadson, P. Northall and K. Sugar (2023) , CC BY-ND

SMEs could have a vital role as enablers by helping with the wider adoption of low-carbon technologies. The scope of this type of activity is vast. For example, leading-edge innovations like the Belfast Maritime Consortium’s high-speed, zero-emission passenger ferry (which is launching a pilot scheme in 2024) could help lots of commuters to cut their daily travel emissions.

In addition, many thousands of plumbers and electricians are already playing essential intermediary roles as advisors and installers of more established technologies, such as electric vehicle chargers and heat pumps.

Persistent challenges and hopeful signs

Businesses need to adopt low-carbon technologies and practices to improve productivity, remain competitive and attract staff. The scale and complexity of this challenge varies greatly between sectors. But all businesses could benefit from a more joined-up support framework to help them achieve their goals.

In fact, many smaller businesses are effectively flying in the dark. A recent study estimates that just 1% of SMEs in England are accessing net-zero business support. Our research on support arrangements for SME decarbonisation points to large variations in provision across the four UK nations and between different industry sectors.

Scotland has provided consistent support to SMEs over the last decade, for example, with expert energy audits and subsidised grants available. By contrast, smaller businesses in England have not had access to a national funding programme for building energy efficiency.

Similarly, while SMEs in industries such as food and hospitality are relatively well represented by trade associations that can provide more tailored net-zero advice, we have identified significant issues with access to business support in other sectors.

SMEs operating in large industrial supply chains, for example, often have to navigate an array of regulations and measures from different government departments that do not always appear to be speaking to one another. This generates cost and confusion for many smaller businesses as they struggle to find the right support.

Taking SMEs more seriously

The government’s net-zero review, chaired by Chris Skidmore MP and published in January 2023, was commissioned to identify a pathway to meet the UK’s net-zero target by 2050. It provided a clear set of policy actions designed to trigger an “ambition loop” in which government policy and private sector leadership reinforce each other to increase climate action even further.

But while Skidmore mentions SMEs, there are three key areas where more radical change is needed to help them make a real impact on the UK’s decarbonisation goals:

1. Information and signposting

The review proposed a “Help to Grow Green” campaign, offering information, resources and vouchers for SMEs to plan and invest in the net-zero transition. The UK government’s Department for Energy Security and Net Zero is piloting a new digital energy advice service to help SMEs navigate the maze of competing information sources. But to be really effective, tailored advice and meaningful support is crucial – a balance that’s difficult to achieve in practice.

2. Energy efficiency

Skidmore also called for SMEs to be included in tax reforms to accelerate uptake of energy-efficient technologies. Initiatives of this kind could also help drive improved SME productivity – a longstanding government goal. However, there are few signs of this kind of fiscal incentive in the pipeline right now, at least at a national level.

3. Carbon skills gap

The review highlighted skills gaps in many specialist areas, such as carbon auditing, as well as across sectors and places. A step-change in investment in further education colleges in particular is needed to expand the number of courses, apprenticeships, and knowledge-exchange initiatives. Again, this would help business productivity while also promoting net-zero targets.

The UK’s SME population can make a massive difference to the delivery of the country’s carbon targets, but it will require a more concerted effort. The government must take the lead, working with sector- and place-based organisations.

The agenda is already mapped out in some detail, but delivery is another matter. There is a lot to learn from existing best-practice examples across the four nations, and by expanding our understanding of SMEs and their multiple roles as net-zero consumers, influencers and enablers.

Richard K. Blundel has received funding from ESRC and UKERC.

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