24 January 2019
Lens on the Week
UK
TIME FOR REALITY: We have always thought that Brexit would remain uncertain to the last possible second and we weren’t wrong about that. Now, though, the participants are waking from their slumbers as the courtiers did when the prince kissed Sleeping Beauty. For a start, there are the Southern Irish, whose insistence that there be no physical border at all, rather than merely that border checks should be kept non intrusive, did so much to weaken the May deal. No doubt they thought they were being clever at the time and strengthening the EU’s negotiating position (did the EU encourage them a little? we wonder) but now the EU has made it clear that in the event of no deal it will need a fully operating border to protect its customs union. “No, no, that is against the Good Friday agreement” they cry as they realise what they have done. If it comes to no deal those cries will be lost in the wind.
Then there are the Brexiteers, whose opposition to the May deal has kept in play the idea of a second referendum, and the Remainers, whose reluctance to compromise could end in the no-deal which they regard as the worst outcome. Both must be waking to nightmares as the law of unexpected consequences raise its grisly head.
Unfortunately the spectre has yet to produce realism, with Labour’s demand that the Government rule out a no deal exit and the Irish requiring assurances that there will be no border. Neither demand means anything because it is not within the Government’s power to do a deal unilaterally. If you doubt that go to Winchester where Canute is buried. If you listen hard enough you will hear the sounds of mocking laughter.
CHAOS IN THE COURTS: 75,000 judges and lawyers locked out of the secure email system last week; many connections still down; trials adjourned; problems with the probation service. The cause? The introduction of a £280 million new IT system, of course. We are getting use to the chaos caused by upgrading systems. Remember the railway re-timetabling last summer and the introduction of the universal credit which has misfired so badly? Why can’t we do things the way they did them in earlier days when the introduction of new technology worked seamlessly, the age of the Titanic and the R101?
A BIT EARLY: System failures seem to be rife too at the offices of HMRC where taxpayers have been receiving penalty notices for not having filed their returns by 31 January. Perhaps the officials have taken to reading the tea leaves and can predict who will be late and who will not. Perhaps the Government is hard up for cash and hopes that many people will not trouble to contest a penalty of only £100. It’s hard to tell, but the way in which the self assessment website makes it difficult to spot what you actually owe makes you wonder if HMRC are hoping to up the take from interest and penalties this year.
DRONES: With airports world wide beginning to panic about the threat from drones, the EU is to introduce a registration system under which drones weighing over 250gm would have to transmit registration numbers, position and place of take off, from next year. Ireland already runs a registration system.
International
PROTEST AND DEMONSTRATION: Violent protests, angry demonstrations and potential revolutions broke out in various quarters of the world this week.
In Zimbabwe, angry protests against the government for its tripling of fuel prices (deja vu, Mr President?) were met with extreme violence by the security forces. Human rights groups have reported retaliatory murders, rapes, beatings, kidnappings and torture visited upon demonstrators and non-demonstrators by soldiers, policemen and militiamen going door to door through whole neighbourhoods. President Mnangagwa hurried home to Harare from Davos and tried to shift the blame onto rogue elements in the security forces, but many sceptical commentators say that the Crocodile is merely reverting to type.
In Venezuela, a rebellion by national guardsmen was quickly put down, but not before they could call for support from the general populace via social media. Days later protests and demonstrations against President Maduro broke out across the country. Food, water and electricity are in short supply; inflation is running at 1.7 million percent; millions of Venezuelans have fled to neighbouring countries. Juan Guaido, the leader of the National Assembly (the democratically-elected parliament which has been side-lined by Maduro’s dictatorial tactics) announced that he is ready to assume the presidency if supported by civilians and armed forces alike.
In Greece, more than 200,000 people protested against the government’s negotiated agreement allowing the Republic of North Macedonia to keep the word Macedonia in its name, in spite of a Greek province having been called Macedonia since before the time of its famous leader Alexander the Great. Such sensitivity is understandable in a nation which has been stripped of all except its sense of national identity and its cultural pride by the last ten years of punishing austerity.
In Serbia, tens of thousands of demonstrators demanded the resignation of President Vucic, who is accused of gagging the media, restricting constitutional freedoms and stifling dissent and opposition. Protestors have brought Belgrade to a standstill every weekend for the last two months. Earlier in the week, President Putin was welcomed by a gathering of over 100,000 people when he arrived in Belgrade to visit President Vucic, though most of them were public sector workers who had allegedly been ordered to attend.
In the Democratic Republic of Congo, opposition leader Martin Fayulo called for protests and demonstrations after the constitutional court ruled against his claim that he won the recent elections in spite of victory being given to another candidate, Felix Tshisekedi. Most international observers believe that Mr Fayulo was indeed the victor; some commentators claim that Mr Tshisekedi is a stooge of the outgoing leader, Joseph Kabila. Even the African Union has voiced doubts about the result. The UN believes that 34 people have been killed and hundreds illegally detained in unrest since the election.
Financial
TROUBLE ON THE HIGH STREET:
NO END IN SIGHT: The woes of the high street continue to dominate the business pages. Latest to reveal trading troubles is Taveta, the group owned by Philp Green and his family, which owns many high street fashion brands, most famously Topshop and Burtons. Profits for the last year, to August 2018, were down 42%, from sales down across the group down 6%. Things have got worse since, with sales said to be down another 17%. This has prompted the shareholders and the management to call in Deloittes to examine the business and suggest drastic cost cutting measures. The most likely outcome will be a cut in staff – the group overall has 26,000 employees, in about 500 retail outlets. Most of those are leased and no doubt the group will, as many other retailers have done, try to persuade landlords to cut rents by significant amounts. If that fails – as it almost certainly will – the choice then may be some form of insolvency process, probably a Corporate Voluntary Arrangement, to enable the group to trade but buy time from creditors for a new structure. The problem then will be if the group pension funds are dramatically underfunded, the issue which caused so many problems after the Green sale of BHS and its subsequent insolvency.
ON THE OTHER SIDE OF THE STREET: It’s not just fashion that is struggling, so is entertainment, at least the old fashioned type. HMV, the music and dvd store, has entered insolvency for the second time in recent years although the administrators are keeping the group trading and its 2,000 staff in jobs whilst they try to find a buyer. The most likely is said to be Mike Ashley, who last week was said to be in serious contention for Debenhams department stores and last autumn bought the department store chain House of Fraser. Maybe he wants to diversify; he said recently that the trading figures for House of Fraser were “unbelievably bad”.
NOTHING IS SACRED: Having cake and eating it days may about to be over. The extraordinary events at Patisserie Valerie, the upmarket café chain beloved by those who like a spot of self indulgence, have come to a sorry end with more shocks than a Bombe Surprise. Last autumn the FTSE quoted company revealed major accounting irregularities, suspected to be fraudulent. The chairman, entrepreneur Luke Johnson, took control of the business, injecting a personal £10m as working capital, the Finance Director resigned (followed by other board members), and the police were called in. The group’s two banks agreed to continue to provide banking facilities, at least for a period until matters were sorted and new terms agreed. That period expired this week but Mr Johnson said that matters were worse than feared, with thousands of accounting irregularities, and Administrators in the shape of KPMG have now been appointed. It is now apparent that the bankers had no security – not even a charge over a tray of cream puffs – so the reason for their understanding is now clearer. But nothing else is.
JUST…GO: Just Eat, which brings ready meals to your door, hired a new chief executive, Peter Plumb, in autumn 2017 to try and get the struggling business back on the growth burner. He turned out not to be the man for the job. Although profits for last year should be around £173m, the board have asked him to go because he is not delivering the exciting strategy they were hoping for. Just Eat is now looking for a new top man.
