Issue 162: 2018 07 12: Lens on the Week

12 July 2018

Lens on the Week

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BREXIT:  Those who like books about the war in the Atlantic will remember the Q ships which were sent out to decoy German U boats.  Disguised as defenceless cargo boats they looked like sitting ducks to the submarine commander who would surface to sink them with gunfire.  Then suddenly the white ensign would appear at the top of the mast, the dilapidated boards would fall away to reveal heavy guns and the submarine would be blown out of the water.  Mrs May seems to have used the same trick.  She has let Davis and Johnson lead the negotiations with the EU, knowing that they would fail and that their failure would alarm both MPs and public.  She has played it indecisive to give them their head, kicking the more contentious issues down the road.  Now she has nailed her colours to the mast of remaining in the Customs Union until a dual tariff system can be made to work and has told the cabinet to back her or go.  Davis and Johnson have gone and will presumably try to mount a leadership challenge.  So will it go anywhere?

The answer to that must depend on public opinion.  If Mrs May’s move meets with public approval and encouragement from the EU, it is unlikely that a challenge will materialise.  Who would want to be seen as a wrecker of a plan vital to the national interest?  If of course the proposals are badly received then chaos will ensue.

Mrs May has clearly planned her move carefully and must have made her assessments.  Obvious questions are whether she gave the Brexiteers long enough to discredit themselves and what dispositions she has made in the background.  Did the Government encourage Airbus and Rolls Royce to spell out their hard Brexit concerns?  Was the strategy discussed with Mr Barnier?  If a deal is done on these terms will some Labour MPs support it, maintaining the Government’s majority?  Who knows?

Thursday’s white paper should spell out the proposed arrangements in detail.  Meanwhile no points for those commentators who say that the EU will not accept it.  Of course they won’t.  They will refuse and there will be proposals, bluff and counter-proposals until the eleventh hour.  That is how negotiations work.

NOVICHOK:  Since the Romans sowed the fields of Carthage with salt there has always been something particularly nasty about polluting land.  That is why the poisonings of two British citizens who were unconnected with the Skripals is so sinister.  We may not approve of Russian agents being assassinated here but making Salisbury dangerous for visitors is damage in a different league.  We all know that there is no cooperation between Britain and Russia at the moment but, if the original attacks were from rogue elements rather than the Russian government itself, one can only hope that the spooks are liaising behind the scenes.


EMERGENCY: In Thailand, all 12 schoolboys and their soccer coach were rescued from the flooded cave in which they had been trapped for 17 days.  Sadly, one of the Thai navy divers involved in the rescue attempt died from his exertions just before the evacuation began.  Elsewhere in Thailand, at least 37 people died when a storm sank a tourist boat off the island of Phuket.  In Japan, exceptionally heavy rain has caused floods and landsides which have devastated large parts of the country.  122 have died and dozens are missing.  In Turkey, at least ten people were killed and more than 70 injured when a train derailed near the Greek border, caused by a bridge collapsing after heavy rain created a landslide.

THE BIGGER THEY COME: Najib Razak, the former prime minister of Malaysia, is to stand trial, charged under anti-corruption laws and with criminal breaches of trust.  The charges relate to a long-running investigation into allegations of corruption at a state investment fund involving billions of dollars. The allegations of scandal are considered to be a factor in his defeat in elections two months ago.  In Pakistan, the ousted prime minister Nawaz Sharif was convicted in absentia of corruption, and sentenced to ten years in jail. He said that he will return to Pakistan from London to face justice.  There are elections due in two weeks time – a victory for his PMLN party might favourably affect his situation.  The former president of Pakistan, Asif Ali Zardari, has been called to appear before a corruption investigation and forbidden from leaving the country.  Mr Zardari is the widower of Benazir Bhutto and is standing as a candidate for the PPP party in the elections.

KEEP THE MILITARY ON-SIDE: President Maduro of Venezuela ordered big rises (by as much as ten times) in military salaries this week.  Last week he promoted 16,900 soldiers.  It is thought that he is eager to retain the support of the army, following reports of an attempted military coup last month, allegedly aimed at storming the presidential palace, arresting the president and putting him on trial.  It was apparently thwarted by Cuban intelligence agents.  In Turkey, President Erdogan’s first presidential decree following his inauguration was to appoint General Yasar Guller (previously the commander of the land forces) as chief of the general staff.  Before the recent changes in the constitution, the army made its own appointments; but under the new presidential system, the president now has that power.  The army has always been seen as the guardian of Kemal Ataturk’s secular modern state, and as such has been opposed to the re-introduction of religion into politics on which much of Erdogan’s authority rests.


ALSO RISES:  You can’t keep an advertising man down.  Sir Martin Sorrell, defenestrated earlier this year from WPP, the ad agency which he founded more than 30 years ago, is back on the acquisition track.  The reasons for Sorrell’s sudden departure are unclear (many think that they know but no confirmation of any version has been forthcoming) but when he left, after many years as the most highly paid businessman in the quoted sector, he took potential share bonuses of around £20m with him, and did not sign a non-compete cause.  He almost immediately set up a new agency vehicle, S4 Capital, with backing from some long-standing friends and investors, and has apparently been hiring some key talents to set up a new agency.  “A peanut,” Sir Martin described it, as compared to WPP, one of the largest agencies in the world, listed both on Nasdaq and in the FTSE100, saying that he was no threat to his old employer.  Well, maybe; S4 Capital has just agreed to buy the Dutch advertising company MediaMonks after a close-fought battle with – guess who? – WPP, and also Accenture and Inflexion.  MediaMonks is a rising star in the advertising world with a lot of creative talent on-board, and a desirable client list including Google and Lego.  It is rumoured that S4 Capital is paying over £275m to clinch the deal.

WPP is not happy; they suggest that Sir Martin was aware of the potential deal before he left WPP and that he should have steered clear.  Sir Martin is unlikely to be impressed by such claims – he plays to win and has pointed out that there were several other bidders so the sale was hardly a secret.  No doubt mi’ learned friends are opening new files though…

AND FURTHER RISES: The continuing troubles of high street retailers are causing increasingly desperate pleas to the government to do something.  Top of many retailers lists are some relief from property rates (property taxes, levied on the basis of the rental value of the building, payable by the business operator rather than the owner of the property, for our overseas readers) which have been rising almost as fast as profits have been falling.  Rates are calculated as a proportion of the current market rent of the relevant premises, but to make the whole rather bizarre system capable of economic operation the level payable is only adjusted every ten to fifteen years.  That has been especially hard on retailers as the last revaluation happened to coincide with a historic high in both rental levels and many shop operators profitability.  Not untypically, the rates are a third of the rent payable – for which the retailer gets practically nothing – even emptying the bins usually is an extra charge.  Since then the system of upward-only rent reviews and rapidly declining profits has created a disastrous squeeze.

Of course online retailers pay comparatively modest rent and rates for their monster warehouses in industrial areas, and often very little tax by being owned outside the UK.  Enter the Chancellor of the Exchequer, who has said that he hears the cries of pain and is looking at the problem with a view to “levelling the playing field”.  However, the high street, knowing how attached Phil is to taxable income, fears he is finding ways of taxing the digital players, and not so much reducing the bills of those in brick and glass.  Last year he did create a relief fund of £300m to help out smaller retailers – a peanut, you might say, considering the business rate generates £25bn a year


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