Issue 196: 2019 04 04: Lens on the Week

04 April 2019

Lens on the Week

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UK

DEADLOCK: Yet again the House of Commons has been unable to identify a form of Brexit which has majority support.  Closest came a proposal from Ken Clarke for a continuing customs union with the EU which, attracting support from Labour, only failed by three votes.  The trouble is that it prevents us entering into trade deals with other countries, removing the main advantage of leaving the EU.

Faced with deadlock in the Commons, the Prime Minister has offered talks with Labour in an attempt to find a joint proposal and Mr Corbyn has agreed to meet with her.  Her invitation though is a qualified one in that “any plan would have to agree the current withdrawal agreement” and so would only deal with the subsequent ongoing relationship.  Here again there is logjam.  For Labour to agree to that would involve some loss of face but acceptance by the government of the Clarke proposals could lead to angry Brexiteers arguing with some justice that the political establishment had robbed the referendum of its effect.  That would poison British politics for years to come.

Mrs May is going back to the EU to get an extension.  The only sensible answer is to get one long enough to permit a referendum and to push the decision back to the people.

FRAUD: According to The Sunday Times newspaper, HMRC officers were prevented from sharing with the security services information about multi-billion pound fraud carried on over many years because of alleged lack resources and concerns to protect the fraudsters’ privacy.  Although a number of those concerned in the fraud have been sent to prison, details are subject to disclosure restrictions while a number of the leaders are at liberty abroad.  However, it appears that some of the funds were used to finance al Qaeda.  Meg Hillier, Chairman of the Public Accounts Committee, has raised the issue with Sir Mark Sedwill, the cabinet secretary and national security adviser to the prime minister, and is considering the launch of an inquiry.

HUAWEI: The Huawei Cyber Security Evaluation Centre set up by GCHQ has concluded that there were significant concerning issues with Huawei software already in Britain and that the company had made no material progress in addressing problems identified.  The report jeopardises Huawei’s prospects of being involved in the rollout of 5G.

HEALTH: Research by Bournemouth University shows that in the 24 years to 2013-15 Britain cut deaths from heart disease by 63%.  The improvement, which is higher than that in comparable countries except for Australia, is due to restrictions on smoking and the improvement of care, and come against a background of lower health expenditure as a proportion of GDP, with 7.6% against 8.96%.

International

TURKEY: President Erdogan’s Justice and Development Party (AKP) lost control of the country’s biggest cities in local elections.  The opposition Republican People’s Party (CHP) won elections to city councils in the capital Ankara and in Istanbul, Turkey’s biggest (about a quarter of the country’s population lives there) and culturally and economically most important city.  The secularist CHP retained control of Izmir, Turkey’s third biggest city, and took control of other urban centres including Antalya and Mersin.  The Islamist AKP is challenging the result in Istanbul, which is the president’s hometown and has always been an AKP stronghold.

As a whole, the elections were a victory for President Erdogan and the AKP, gaining 51.63 per cent of the vote throughout the country (his support in rural areas is overwhelming) in coalition with a nationalist party, the MHP.  But the results in the cities must have been a shock to the president and will have serious implications for him and his party, ringing alarm bells in advance of general elections.  The urban results are all the more surprising and dramatic when the president’s crack-down on dissent, opposition and criticism in politics and society, and his control of the media, the military and the judiciary, are considered.

Turkey is suffering an economic crisis, with annual inflation at more than twenty per cent and the value of the currency plummeting (the lira has lost a third of its value in the last twelve months).

Although a member of Nato, Turkey has recently purchased the Russian S-400 missile defence system. The USA has said that the purchase jeopardises Turkey’s plans to buy a new fleet of the American F-35 fighter jet.  Turkey makes some parts of the fighter jet, but this week Washington announced that it will stop delivery of other parts.

SLOVAKIA: Slovakia has elected its first female president, Zuzana Caputova.  Ms Caputova, a lawyer, defeated a far-right candidate and the government’s candidate in spite of being a political beginner and representing a new party, the liberal and centrist Progressive Slovakia which is inspired by Emmanuel Macron’s La Republique en Marche.  It’s thought that she benefited from voters’ frustration with corruption in business and government and their anger over the murder of investigative journalist Jan Kuciak.

DISEASE: Cholera is spreading through Beira in Mozambique, following last month’s devastations by Cyclone Idai.  More than 1000 cases have been recorded, one person has died and 100 remain in hospital.  The World Health Organisation will begin a vaccination campaign this week.  The cyclone has left over 500 people dead and 100,000 homeless.

The number of ebola cases in the Democratic Republic of Congo is rising, in spite of efforts to contain the epidemic.  More than 1000 people have been infected in central Africa; 700 people have died.

POLAND: Roman Catholic priests in Koszalin cast “sacrilegious” books and artefacts into a fire, and recorded their iconoclasm on Facebook.  The flames consumed a Hello Kitty umbrella, a Hindu figurine and copies of the Harry Potter books.

Financial

SUPERCOUP: After weeks of very public rows and disputes, the extraordinary general meeting of fashionable clothing retailer Superdry plc occurred this week – with extraordinary results.  The business was founded by Julian Dunkerton and James Holder, who between them still own 28% of the shares.  They both left a year ago having, they said, become disillusioned with the direction of the company under its management team.  Outside the business they became increasingly vocal in attacks on the company’s product mix and performance.  This led to two profit warnings last year – which the incumbent board blamed on policies previously followed by Mr Dunkerton.  The share price fell some 70%, reducing the value of the company from around £1.8 billion to £500 million.  Mr Dunkerton with the support of Mr Holder called an EGM to force the chairman and the chief executive out and put Mr Dunkerton back in the driving seat.  Mr Dunkerton won just over half the votes – and the entire existing board then resigned.  The company is once again in Mr Dunkerton’s hands and he has the opportunity to prove he still has the golden touch to take Superdry back to the fashion leader amongst the young that it was only a few years ago.

SUPER UNDERPOWERED: That would be aviation engine supplier Rolls Royce, which has had a series of problems with quality issues over the last ten years, though it has always successfully overcome them.  That experience should stand it well with the latest little storm in a turbine – Roll’s 1000 TEN engines are fitted to the new Boeing 787 airliners but examinations of some of those with longer flying hours show that the turbine blades are wearing out much faster than anticipated.  Rolls has learnt to deal with such issues openly and quickly and immediately announced its findings and said it knows how to deal with the issue.  68 aircraft have the engines at the moment and RR had already made a large provision last year for repairing other engines in the same family, and they think no further financial provision will be required.  The market seemed to think that Rolls was on top of the problem and the share price barely moved on the announcement.

SUPERTULIP: No, this has not strayed from the gardening column.  The planning committee of the City of London has approved plans to build a Norman Foster designed tower next to the so-called Gherkin in the City of London.  The building will be 305 metres high but exceptionally narrow with viewing platforms on top.  Hence the nickname.  The developers are the Safra family who own the Gherkin.  It may not yet get built – it is likely to get called in by Mayor of London Sadiq Khan, and the conservationist groups who are appalled by its effect on views of historic London will be lobbying to stop it.  And it seems unlikely that such a thin high building could be economic at a time of pressure on office rents, so it may not yet pass the financing test.

SUPER-REGULATE: Thames Water, much criticised by its customers for poor service, leaks and ever increasing prices whilst paying large dividends, has finally had a bucket of water thrown over it by Ofwat, the regulator, who said the company is spending too much on non-essential items and has poor cost control, all at the expense of customers.  Although it will go ahead with price rise of 3% in the current year, after that the regulator wants prices to go down – not much, just over 1% by 2025, but at least a saving for customers post inflation.

 

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