Issue 178: 2018 11 15: Lens on the Week

15 November 2018

Lens on the Week

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BREXIT: The deal announced yesterday between the Government and the EU regarding Brexit was being denounced by the various political factions before they had had a chance to read it.  At the moment the draft is only available to members of the Cabinet so we will have to wait for press summaries of the 500 page text.  Then we will see how good it is.  As the reality has to be that it is more or less the best deal available, whingeing from those who would like to have their cake and eat it may not go down particularly well.

There are only two alternatives to running with the deal.  The first is to try to change course by way of a second referendum.  (See comment attached).  That may attract some hard-core Remainers, but will hardly be favoured by Brexiteers.  The other is to exit without a deal, attractive to the nuttier Brexiteers but anathema to Remainers.  It is up to Mrs May to exploit the rift which divides those who are opposed to her.

UNESCO: International development secretary Penny Mordaunt has suggested that Britain withdraw from UNESCO, thus saving of £11.1 million a year.  Her proposals, which seem ill-timed bearing in mind that the US has just taken a similar step and that Britain would not want to be seen to be in a state of general withdrawal, is opposed by the Prime Minister, the Foreign Office and Michael Gove.  Presumably it was just designed to increase her profile.

BUDGET AND BETTING: A group of Conservative MPs is proposing to amend the Finance Bill to bring forward the reduction in the maximum stake at Online Fixed Odds Betting Terminals to £2 from October to April.  In fact April was initially proposed but the date was put back after lobbying on the basis that the change would involve job losses.  Currently the Government is standing firm but, in view of the strength of feeling and the damage done by the terminals, it seems unlikely that it will maintain its position.

STATISTICS: The latest ONS figures show wages exceeding inflation over the last eight months, resulting in a slight increase in living standards.  Real wages, however, remain at below 2008 levels.  Although the number of people in employment has also risen slightly, the unemployment rate has edged up from 4% to 4.1%.  Productivity figures were poor with a reduction of 0.4% over the last quarter in output per hour.  No doubt they reflect a nervousness about new investment while the Brexit uncertainty continues.

VAPING: Research at University College London indicates that fears that vaping will normalise and thus increase smoking have not been realised.  Apparently smokers who spent time with vapers tend to turn to e-cigarettes themselves.  The study did not deal with the effect on non-smokers of associating with vapers but clearly that is research which should be done.  If it turns out that vaping  is harmless, it is hard to see why it should be discouraged, even if that upsets those people who just like banning things.


USA: Inferno came to Paradiso this week with scenes from hell worthy of Dante.  The worst wildfires in the history of California swept through large parts of the state, leaving at least 50 dead and over 200 missing.  The town of Paradise in the north was destroyed.  In the south, homes and film sets near Los Angeles and mansions in Malibu were burnt to the ground.  The seasonal Santa Ana winds blowing off the western deserts and the Sierra Nevada mountains reached hurricane force and fanned and spread the flames to an unprecedented ferocity after a five year drought.  Thousands of firefighters are tackling the apocalyptic conflagrations; almost 10,000 buildings have been razed; a quarter of a million people have been displaced; numerous vineyards have been destroyed.

President Trump initially tried to blame the disaster on the state’s forest management.  In fact, only 3% of California’s forests is under the control of the state or local government, whereas almost 60% is under the control of Mr Trump’s federal government.  At the last election, California – the USA’s most populous and wealthy state – voted overwhelmingly for the Democrats.

1918-2018: President Trump, President Putin and Chancellor Merkel joined President Macron in France to mark the centenary of the end of World War I.  Only the UK was under-represented among the major countries which took part in the war; the prime minister sent her deputy David Lidington.  The world leaders walked the length of the Champs Élysées to pay their respects to the unknown soldier buried in the tomb beneath the Arc de Triomphe in Paris.

Mr Macron hosted a World Peace Conference following the ceremony, and warned the world against the rising dangers of nationalism.  Although he failed to give credit to the EU for this rise (resurgent nationalism in Europe being an inevitable reaction to the relentless and top-down supra-nationalist drive of Brussels), he did repeat his call for the creation of an EU army.  Chancellor Merkel has always cold-shouldered such calls, as Germany would have to pay the majority of the costs of such a force, and her electorate would be unlikely to approve of paying even more of the EU’s bills.  This time, however, she supported his proposals, possibly because she no longer has to consider her electorate as her retirement from politics is now pending.

YEMEN: Fighting intensified as next month’s ceasefire talks approach.  Troops of the Saudi-led coalition are fighting their way into the rebel-held port of Hodeidah, which they have been trying to take for the last few months.  The port is of crucial strategic importance; most of the international aid to this devastated country passes through it.  Yemen is currently the world’s biggest humanitarian disaster, and the disaster is set to get even worse as the government-backed coalition rushes to make gains before a truce is imposed.


INTERSERVE, ANOTHER CARILLION? A share price fall of over 20% this week, and 90% in a year (to a 30 year low), indicates a company in trouble. The construction and facilities management company Interserve reportedly needs to raise £500m to keep going and the prospects of raising this amount has generated comparisons to Carillion, a company that went bankrupt in January.  Like Carillion, Interserve services some key government contracts and employs a lot of people (25,000 here, 75,000 globally). The company has argued that it is on track to deliver its current strategy, but the story will reopen the debate over the provision of public services by private companies.

FROM HIGH STREET TO LOW STREET: The UK’s largest valuer of property, CBRE, has said that the yield on good quality shops has risen from 4% to 4.5%.  This is equivalent to revaluing Britain’s high street property down by around £20 billion and follows news from the retail landlord, Intu, that its properties fell in value by 3% last month alone. It seems unlikely that the process is over given the likelihood of further tenant failure, yet many commercial property funds, which typically hold a lot of retail property, have yet to announce any adjustment to net asset values.

ONE BAD APPLE: Shares in tech giant Apple took a hit on the back of trading updates from its suppliers which were taken as indication of disappointing demand for the iphone Xr.  Lumentum, the provider of facial recognition technology to Apple, cut its profit forecast, triggering a 33% fall in its share price.  Apple shares fell by 5% to their lowest point since July and the markets remain concerned that the so-called FAANGs stocks (Facebook, Amazon, Apple, Netflix and Google), for so long the drivers of the US market bull run, are still in the midst of a significant correction.

ONE GOOD APPLE: Apple has joined up with the UN’s International Organisation for Migration to help human trafficking victims get jobs, currently behind the scenes. The company has won the Stop Slavery Award, although it is its suppliers rather than Apple itself who employ the trafficking victims. The project may in time be extended to include front-of-house retail staff in Apple stores.  Critics have questioned the validity of the award, arguing that some of Apple’s suppliers in China use forced labour.


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