Issue 200: 2019 05 02: Lens on the Week

02 May 2019

Lens on the Week

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UK

ZERO EMISSIONS:  As a first dividend from the public concern reflected in the Extinction Rebellion protests, the Government is to reduce the target for 2050 emissions to zero.  That of course is the easy bit with ministers having different views as to how the reduction is to be achieved.  In reality the target is aspirational because we cannot know what the inputs to the figure will be in 30 years time.  How good will battery technology be?  Will gas be cleaner?  Will the overuse of antibiotics have decimated the population?  Nonetheless the tighter target emphasises the need for progress and hopefully that will have practical implications.

CAMBRIDGE UNIVERSITY:  The University of Cambridge is to run a two year enquiry to identify the extent to which it has benefitted from the slave trade and other forms of coerced labour and also to identify whether its academics have contributed to race based thinking.  It is likely to take two years and reparations have not been ruled out.  It is understood that the project is supported by the Vice Chancellor Stephen Toope who comes from Canada.

RAPE CHARGES:  Demands have been made for an end to the practice under which police and prosecutors routinely seek access to victims’ mobile phones when considering prosecution, which often causes considerable distress.  According to Ms Waxman, the victims commissioner for London, this even happens where the information has no relevance.  Max Hill, the Director of Public Prosecutions, says that digital devices would only be examined where that is “a reasonable line of enquiry” and the prime minister’s office has said that prosecutors, police and the privacy watchdog would work together to ensure that the right approach is taken.

ASSANGE:  Julian Assange has been sentenced to 50 weeks imprisonment at Southwark Crown Court for his failure to surrender to bail following the 2012 Supreme Court decision that he be sent to Sweden to answer charges for sexual offences.  A letter issued by him apologising to those he had disrespected made no mention of those who put up bail for him and forfeited their money.

HEATHROW:  The High Court has rejected legal challenges to the Government’s proposals for the expansion of Heathrow.  The judgement may yet be appealed but it is important to appreciate that it goes to the legality of the Government’s decision (ie were the right things considered? etc) rather than to its merits.  Those will be debated at next year’s public enquiry.

AMERICA:  President Trump and the First Lady will make a state visit to the UK in June.

HUAWEI:  The US has threatened to review security cooperation with the UK if it permits Huawei to participate in the roll out of 5G for fear that that will put the integrity of common information systems at risk, questioning whether the Government’s proposal to deal with any risk by restricting that participation to non core elements is really viable.  The problem is that Huawei have the most advanced technology and not using it could mean that our system was not as good as that in countries such as Germany which have not excluded them.

International

SPAIN:  Spain’s third general election in little more than four years resulted in gains for the Socialists and losses for the centre right Popular Party.  It was the worst ever result for the Popular Party, which had been in power until forced out by a no confidence vote last year; they won only 66 seats, down from 137.  It lost votes to new parties, the centre right Citizens (57 seats, up from 32) and the far right Vox (winning 24 seats, and giving the far right a presence in parliament for the first time since the death of Franco).  The governing Socialists increased their seats from 85 to 123, still too few to give them a majority in the 350-seat parliament.  Prime minister Pedro Sánchez would have to form a coalition not just with the far left Podemos (42 seats) but also with other parties such as Catalan and Basque separatists.  (It was the Catalan separatists, however, who triggered the election by refusing to support the government’s budget).  Mr Sanchez has said he might form a minority government, with his Socialists making alliances with other parties only on a case by case basis.  It’s more than ten years since elections gave a single party a majority in Spain.

VENEZUELA:  Juan Guaidó, recognized by most of Europe and the Americas as Venezuela’s interim president, took to the streets with a number of army officers who had defected from the Maduro regime and with opposition protestors, to call for the removal of Mr Maduro.  Security forces have clashed with the protestors, and the army has largely remained in barracks, ignoring Mr Guaidó’s pleas to come over to his side.  Mr Maduro has declared the uprising a failure, and it does look like Mr Guaido’s move has been premature, and that the necessary defections of high-ranking army officers which he was presumably expecting has not occurred.

JAPAN:  Emperor Akihito has abdicated; his son Naruhito has succeeded him.  No other emperor, in the more than 2500 year history of the institution, has abdicated.  When the 85 year old emperor declared that he wanted to stand down because of ill-health, a law had to be passed to allow it to happen.  He was the 125st emperor, reigning for 30 years.  His era was named ‘Enduring Peace’; he is a pacifist, in reaction to the disasters suffered by his country in World War II under his father Emperor Hirohito.

Financial

MINING DEEP:  Mining was once one of Britain’s greatest industries; now it is one of its rarest.  But one great mine is under construction, as we have reported from time to time, in the most unlikely surroundings of the North York Moors National Park.  The mine is for potash, an essential ingredient of agricultural fertiliser, and one which is rarely found.  A great seam runs under the North Sea from Yorkshire to Germany, and for years there has been a huge mine at Boulby, which now runs many miles out under the North Sea.  Sirius, a small mining company, publicly quoted in London, won permission for a rival mine not far from Boulby, subject to some pretty onerous conditions, including that the potash has to be taken to Teeside by pipeline, and that the mine head should look like a traditional set of farm buildings  (very large farm buildings).  Construction is underway, but Sirius has had an enterprising approach to raising the £3.8bn needed – it has been doing it as it goes along.  Now it is taking the final steps to regularise the financing.  It has JP Morgan employed for this purpose and they have put together a £2.5bn revolving credit, which can be drawn once the company has had a share rights issue to raise £400m (which JPM have underwritten) and a £655m bond issue which JPM will be selling later this year.  That covers a cost increase from original estimates of about £300m (chicken feed compared with certain railway lines) and should get the mine through to being fully operational.

BASKET HALF FULL:  It has not been a good winter for J Sainsbury.  The ambitious plan to merge it with ASDA, owned by Walmart, went very wrong when the Competition and Markets Authority determined, not altogether surprisingly, that this might distort the market, muttered about large scale sales of stores, and then blocked the deal.  Now the supermarket chain has revealed that sales were down in the first three months of 2019 – the only major supermarket to show a decline.  Analysts said that the aisles of the supermarkets were showing the strain, with less choice on the shelves and poor service from staff.

IT’S NOT ALL TALK:  Another major UK company under attack – BT this time.  Charles Dunstone, who owns TalkTalk, the mobile operator, has long called for an improvement in Britain’s broadband network and has now started to do something about it – by starting a company called FibreNation which aims to roll out the very latest generation of fibre based communications technology as a direct challenge to OpenReach, owned and controlled by BT and much criticised for slow expansion, lack of innovation, and poor service.  Dunstone aims to raise £1bn to kick FibreNation off, and sign up 3 million connections within a few years.  The business is also crucial to TalkTalk which is suffering from its reliance on BT copper based cables.  It already has a network in New York which has been a success, so hopes investors will come aboard for the UK start-up.

COMING SOON?  A property slump?  The last one was in 2008 and eleven years is an unusually long run in the highly cyclical commercial property world.  Grosvenor Estate, the UK’s largest private property company (owned by the Duke of Westminster and his family) saw profits modestly decline by about 10% last year, but the CEO, Mark Preston, warned that this could be an early herald of more difficult times ahead, with possible rising interest rates and slowing demand for space in most sectors, but especially retail.

 

 

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