Issue 152: 2018 05 03: Lens on the Week

3 May 2018

Lens on the Week


CUSTOMS UNION: The vexed topic of the Customs Union continues to dominate the Brexit debate.  On the table for Wednesday’s cabinet was the Customs Partnership, an arrangement under which Britain would collect tariffs on imports at the EU rate and then refund the difference between those rates and the UK’s rates where the goods are consumed here.  This is Mrs May’s preferred option but the three Brexiteers (Davis, Johnson and Gove) are all against it as keeping us too close to the EU.  More to the point, however, it would be complicated to operate and fails the “Keep it simple stupid” test.  We will see, but it doesn’t sound like a flyer.

The second option is a customs border between the UK and the EU.  This would be the obvious solution if it was not for Ireland where the absence of border controls is a term of the Good Friday agreement.  Much work is being done on how the border can be made virtual rather than real by allowing businesses to account for duties rather than have them collected at the frontier.  Although there would have to be some physical checks they would be much lighter than those we will end up with.  All sides would no doubt be working up the detail of this if the EU and Ireland had not decided to milk the issue by insisting that the text of the Good Friday agreement was inviolable.

These two options are being discussed in cabinet but it is in the nature of the negotiations that parliament and the EU will have a say too.  The latter does not like either option, preferring the idea of keeping Northern Ireland within the Customs Union and thus splitting the British economy.  What a good jape.

The other possibility is that it all becomes too difficult and that we stay in the Customs Union, thus losing any prospect of setting our own tariffs.  That could be hard to sell to the public who would begin to wonder what Brexit had been about.  As Mr Barnier said last week, the UK is not likely to change its mind.

TAX HAVENS: An amendment sponsored by Margaret Hodge and Andrew Mitchell, and reluctantly accepted by the Government, will force tax havens over which the UK has jurisdiction to introduce registers of beneficial ownership before 2020.  In practice this will give those tax havens a choice.  Either they introduce registration, in which case they will presumably lose business from those who conceal wealth, or they abandon their links with the UK.  Which will depend on their assessment of the extent to which secrecy of beneficial ownership is fundamental to their economies.


ON TOW: The world’s first floating nuclear power station has been built in Russia.  It will be towed by tugs 3000 miles along Russia’s northern coast from Murmansk, where it is being tested, to the Arctic port of Pevek, where its two 35-megawatt nuclear reactors powering steam turbines will provide energy to remote industries and dwellings.  Greenpeace’s nuclear expert has described it as a “hazardous venture”, a “nuclear Titanic” which would be “particularly vulnerable to tsunamis and cyclones”, and a “shockingly obvious threat to a fragile environment already under enormous pressure”.

At the other end of the globe, a salvage expert is planning to tow a massive iceberg from the Antarctic to Cape Town.  The city is about to run out of water, and a 70,000 tonne iceberg would provide 135 million litres of water a day for a year.  The 1400 nautical mile journey across the Southern Ocean from Antarctica to South Africa would take 3 months.

I know, I know, the Arctic is as far away from the Antarctic as possible without actually leaving the planet, but doesn’t mention of a nuclear Titanic and a giant iceberg in the same week make you feel just a little bit uneasy?

JOURNALISTS TARGETED: A double suicide bombing in Kabul, Afghanistan, killed 26 people, including 9 journalists.  The second bomber deliberately targeted journalists and emergency personnel responding to the first blast, by posing as a journalist himself.  Elsewhere in Afghanistan a BBC reporter was killed.

In Turkey, 14 journalists have been given prison sentences of up to seven years, having been convicted of aiding terrorist organisations.  They worked for Cumhuriyet, a secularist opposition newspaper. Amnesty International called the sentences “politically motivated” and a “shocking affront to press freedom”.  More than 150 journalists are in prison and 180 media organisations have been closed down since the 2016 coup attempt.  Scores of other journalists are awaiting trial on similar charges.

In recent months, a journalist in Malta and a journalist in Slovakia have both been murdered while investigating allegations of corruption in government.

TO BOLDLY GO: China’s National Space Administration announced that it hopes to land men on the Moon within 20 years, and build a solar-powered research station there.  The moon station would then be a springboard for putting men on Mars.

China has sent a number of robotic probes to the moon in recent years.  One is planned later this year to explore the dark side of the moon, and another planned for next year will bring samples of moon soil back to Earth.  The plan to build a manned station on the moon appears to replace a plan announced last year to build a robotic station on the moon.


SHELF WARS:  One of the best kept secrets of retailing has been the talks between J. Sainsbury and ASDA, which culminated at the weekend in the announcement of an intended merger of the two supermarket giants.  If this happens it will make them the largest food and household goods retailer in the UK, with more than 30% of the market – Tesco, the current number one, has about 22%.  There is a natural fit between ASDA,  based in Leeds, north and Midlands focused and  lacking local high street outlets, and Sainsbury with lots of them and much stronger in the south.  Sainsbury is quoted on the London Stock Exchange.  ASDA is owned by Walmart, the largest retailer in the USA.  That was to be Walmart’s way into becoming the dominant retailer in the UK, but somehow it did not work, and the merger signals the end of the intention to make it in the UK as an independent.  Walmart will own about 40% of the merged business – which gives the Walton family, founders and effective controller of Walmart about 20% of the new retail force.  (The Sainsbury family has no significant stake in the eponymous business now).

But there is one fly in the Eccles cakes – what the Competition and Merger Authority will say to the emergence of such a behemoth in food retailing.  The CMA is not the force it was, and certainly raised no objections of any moment to the Tesco/Booker merger (but that was a retailer buying a wholesaler).  There is more concern over this merging of retailers not just for the effect on the consumer, who it might be argued can always go elsewhere at a local level, but for the effect on many suppliers, who will be faced with two supermarkets controlling more than half of purchasing.  At the very least, observers think that the new group will be required to sell a large slug of its outlets, especially in areas where there are no other significant operators.

COUNTER WARS:  The troubles of TSB over its flawed new computer system have refocused attention on the steady erosion of branch networks of all major high street banks.  The banks began serious pruning when they had successfully rolled out on-line banking services in the early part of this century, but the sheer scale of the retreat – and the problems of the old, the less technically able, and small businesses handling cash and cheques – brought about an outcry that slowed the closure programmes up, coincident with the banking crash of 2008.  Since then the banks, their regulator and the Bank of England have worked together to try to ensure that closures are avoided in situations where that would leave localities without any physical branches – so the last bank standing has to stay standing in effect.

But the problem is, though bankers, as unpopular as they have ever been only mutter it, that whilst everybody wants a local branch of their bank, very few people now actually use them.  The number of transactions across counters continues to fall and their biggest role is to service cash machines in the outer walls.

RBS (which trades as Nat West in many locations), still largely tax payer owned after its bailout, announced last year that it would close a quarter of its remaining branches – 259.  Figuring maybe that it cannot get any more unpopular, it now says it will close an extra 160.  The group had over 2,300 ten years ago and will have around 900 after those closures.  Although customers and unions are expressing outrage, it is intended that the target branches will be gone by the year end.  Empty your piggy bank whilst you can.

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