Issue 192: 2019 03 07: Lens on the Week

7 March 2019

Lens on the Week

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UK

NOT SO FRANK: Mrs May’s comment on Monday that there is no direct link between the fall in police numbers for England and Wales by 20,000 since 2010 and the growth in violent crime such as stabbing was described as “delusional” by the Police Federation.  Mrs May’s spokeswoman subsequently qualified her response by saying that it was a complex area and that it was necessary to give the police the resources they needed but her initial statement looked like an attempt to keep blame away from the government at the price of muddying the debate in an area where the Government should be taking the lead.  There is a predictable split in the cabinet too, with Home Secretary Sajid Javid calling for more funding and Philip Hammond, the Chancellor of the Exchequer, resisting that.  Boris, always ready for a bit of mischief, writes in the press that the reduction in Stop and Search when May was Home Secretary was a grave mistake.

And through the clouds, a shaft of light from Cressida Dick, Metropolitan Police Commissioner.

“I agree that there is some link between violent crime on the streets obviously and police numbers, of course there is.”

That at least is plainly right so there needs to be an honest debate about how much is needed, the extent to which recent increases in police funding will fill the gap, what more is required and how and whether it can be afforded.  Surely Mrs May with her experience at the Home Office can give us a lead?

BREXIT: A vote to postpone Brexit?  Politicians seem to be addicted to resolving in favour of things which are technically outside their power.  Still, although any postponement of the 29 March leaving date requires the agreement of the other 27 members, it seems that Mr Tusk may be able to deliver this.  Will it really help?  That depends on how the time is used.  Another referendum, perhaps?

More interesting is the suggestion that the transitional period be lengthened to give more time for a comprehensive trade agreement.  This all fits with the Government’s belief that in practice we will not be trapped into permanent membership of the market by the backstop and should be seen as a possible supplement to the comfort the EU will be providing on Monday.  By the time next week’s Shaw Sheet goes to press we should know whether the package is good enough to win parliamentary approval.

Mark Carney, Governor of the Bank, has reduced his estimate of the damage that would be caused by a “no-deal” Brexit. Previous estimates indicated that after three years the reduction caused by no-deal would be between 4.75% and 7.75%.  The new figure is between 2% and 3.5% less.  The change is down to measures the UK will put in place to mitigate the damage, including a general reduction of UK tariffs.  All well and good, but why wasn’t the UK’s likely response taken into account in the original figures and what assumptions are being made as to the ability of business to work round practical problems?  It rather shakes one’s faith in figures.

International

KASHOGGI: An Al Jazeera documentary suggested that the Saudi Arabian hit squad disposed of the body of murdered journalist Jamal Khashoggi in a tandoori oven built for the purpose of burning his remains in the garden of the residence of Saudi’s consul-general in Istanbul.

It claims that the big outdoor oven was built just before Kashoggi’s visit to the Saudi consulate; that it was built to specifications from the consul-general about its size, depth and top temperature; that it burnt for three days after the journalist’s disappearance: that a large amount of meat was cooked in the oven as a cover for the cremation; and that traces of his blood were found in the consul-general’s office in the consulate in spite of an attempt to cover them up with fresh paint.  Saudi authorities refused to allow Turkish investigators into either the consulate or the consul-general’s residence for two weeks after the disappearance.  The consul-general left Istanbul the day before they were allowed in.

This week, La Scala opera in Milan was criticised by Italian politicians for accepting €15 million in sponsorship from Saudi Arabia.  Its chief executive argued that cultural contact with art which has its roots in Western democracy will help to liberalise the Arab world, but his critics fear that he who pays the piper will call the tune and perhaps censor the libretto and even write the songs.  There’s certainly little chance of a new opera “The Tragic Death of Adnan Kashoggi” being created or staged.  But “Kashoggi, Enemy of the People”, well…

KASHMIR: Pakistan’s leader Imran Khan is navigating his way through the current Kashmir crisis in a statesman-like manner, much to the relief of those who suspect or fear that his government is just window-dressing for Pakistan’s military.  He declared “All wars are miscalculated, and no one knows where they lead to.  I ask India; with the weapons you have and the weapons we have, can we really afford a miscalculation?  If this escalates, it will no longer be in my control or in Modi’s.”  He then released the captured Indian pilot without conditions and in a unilateral attempt to de-escalate the situation.  A truce was agreed.  Later in the week he ordered a crackdown on the militant Islamist group whose suicide attack on Indian forces (killing forty) in Indian Kashmir started this current crisis.  At least forty members of Jaish-e-Mohammad were detained for questioning.

India dismissed much of this as cosmetic, and repeated its complaint that Pakistan is still at fault for allegedly harbouring numerous militant groups which are hostile to India.  In the meantime, the returned pilot, wing commander Abhinandan Varthaman, has been given a hero’s welcome home, after his coolness and courtesy under questioning in Pakistan impressed the nation.  A Bollywood film about his adventures is already being planned, and his distinctive moustaches have set a trend which is being copied in barbers’ shops across the country.

NORTH KOREA: The summit between President Trump of the USA and Kim Jong-un broke down with no agreement and no joint statement.  It seems that North Korea’s insistence that sanctions should be lifted before or during but not after de-nuclearisation resulted in an impasse.

Financial

OILING THE GEARS:  Rotork, which makes specialist engineering applications, mainly for the oil and gas industry, had a good year, with revenues up 11% and pre-tax profit, recovering from a poor previous year, by an impressive 54%, to £121m.  But the CEO, Kevin Hostetler, was downbeat in his commentary on results and prospects, pointing to the possible effect of the growing world tariff wars on the business – that is likely to have a four-fold cost increase in the current year, to £2m, and the trend will only be upwards, if the political climate does not change.  Mr Hostetler’s other concern, and perhaps more immediate, is the continuing volatile state of the oil and gas business; the recovery since the bottom was reached in 2016 has faltered, although at the moment there seems reasonable stability at around US65 a barrel.  The problem for companies such as Roturk is that engineering requires a long term view of price prospects – and that is not a feature of modern energy markets. The market seems to agree with the CEO’s gloom, although he tempered it by noting the more stable market this year (so far); the share price fell 4% after his statement and the results.

NEW CAR NEWS:  Tesla may still be having problems getting production up to forecast levels, and there is growing grumbling about quality of its cars and back up service, but that is not going to stop Tesla chief executive, Elon Musk, from announcing another new model. Latest is an SUV, the Model Y (following on from Model X).  In fact it is more Model 3 than Model X, using many components from Model 3, in a higher and slightly larger vehicle.  The formal announcement is next week, and the car will be available (hopefully) next year.  Some customers have waited 3 years for their Model 3’s…

OLD CAR NEWS: Aston Martin may for over a century have been making cars that every school boy, man-about-town, (and woman-about-town, of course), and spy dreamed of owning, the epitome of style and engineering, but its finances have not been so elegant.  The company has been rescued several times, changed owners, swallowed investment capital, and often (usually, a cynic would say) lost money; but is still around, making those dream cars.  Last October it was floated on the London Stock Exchange, but not hugely successfully – the share price dropped a third within a few weeks.  Now it has revealed a loss of £68m – due to the £136m cost of going public.  Not quite what its investment bankers intended.

MIKE ASHLEY CORNER:  We can’t leave this week’s Business stories without a mention of the ever-growing retail empire of Mike Ashley, boss and major shareholder of Sports Direct.  Or not ever-growing, currently.  Mr Ashley did not get HMV in his clutches, nor Patisserie Valerie, and Debenhams continues to escape his looming shadow.  Now yet another target has escaped the retail entrepreneur – Findel, the quoted owner of Studio and Ace. Those brands are rapidly growing on-line retailers of clothing, greetings cards, and various homewear and gift lines – including some Sports Direct items.  Sports Direct was already its largest shareholder but recently bought another big slug of shares, taking it to 37%, meaning it has to make an offer for the whole business.  Mr Ashley duly did so, at £140m, which might not seem unreasonable, but was not enough for the Findel board, who rejected it.  Or indeed to the market, which on Tuesday was valuing the company at £150m.  Mr Ashley, given the size of his existing stake, may well be back soon.

 

 

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