The funding from the bond was originally designed to be tied to spending on the National Health Service. But sources close to the issuer now suggest the use of proceeds in the Brexit-themed prospectus is more likely to be ear-marked for a new royal yacht and procuring blue-coloured passports.
A strategy for reaching investors for the bond has also proved controversial. Some senior figures at the issuer wanted to stick to familiar European lines. But others wanted to look further afield.
Liam Fox, secretary of state for international trade, originally claimed the UK would be able to find an extremely granular order book for the bond.
“This will be one of the easiest bonds to sell in human history,” Fox declared in 2017.
However, so far there have only been enquiries from investors in a handful of non-EU countries, including the Faroe Islands and Zimbabwe.
But one Zimbabwean portfolio manager was less than impressed: “Warring factions, protests on the streets of the capital, and a tired old leader who refuses to cede power — why would I invest in the UK?”
The Labour opposition said the Tory bond plans failed to meet its “six tests”, and instead called for a “jobs-first” Brexit bond. Labour also suggested the country should seek to attract investors from Russia and Venezuela.
But one investor from a Venezuelan hedge fund said: “The currency is dropping by the day. That puts me off investing in a sterling-denominated bond.” The investor also expressed concern about the state of the UK economy, pointing to fears of shortages of food and toilet roll and an over-dependence on tinned sardines in the event of a no-deal Brexit.
The timing of the bond has also caused division, after the UK failed to reach agreement with European banks over the terms of the syndication. Issuance is now expected on April 12, or May 22, or perhaps a long time after that, or not at all.
It may also feature a ‘revocation’ call date, which could be activated by the issuer. But an extension to the bond beyond its original maturity is entirely at the behest of investors.
“A Brexit bond means a Brexit bond, and we are going to deliver on it,” said one croaky-voiced source close to the issuer.
Some observers suggested the country should self-lead the deal now to sell some of the Gilts, before finding an arrangement with US and Singaporean banks later down the line.
“This botched Brexit bond is a prime example of the Lilliputian mentality of the pampered elites. It is a pig-eared failure of biblical proportions,” said a blond source.
The Brexit Bond Management Office could not be reached for comment on Monday, April 1.