16 May 2019
Lens on the Week
BREXIT: The Chairman of the 1922 committee, Sir Graham Brady, together with other leading Conservatives has written to Mrs May urging her not to buy a compromise with Labour by reneging on her promise to leave the customs union. Unless she decides to ignore them, and all of them have voted for her deal in the past, that will put the kibosh on any agreement with Labour.
Labour, meanwhile, is split on whether it would support a further referendum. Sir Keir Starmer says “yes”: Jeremy Corbyn says “no”. The Withdrawal bill comes back to the House for a further vote on 4 June. By then both parties will have had a chance to consider the EU election results.
What a mess! For the Shaw Sheet’s sheets prediction as to what will happen see comment article.
JULIAN ASSANGE: The Swedish authorities have revived their investigations into allegations of rape by Julian Assange, apparently with a view to extradition proceedings. This would put them in competition with the US which is expected to request extradition next month. Mr Assange is currently serving a 50 week sentence in the UK for refusing to surrender to bail.
IRAN PRISONER: Aras Amiri, an employee of the British Council and an Iranian citizen has been sentenced to 10 years in jail on charges of spying for the UK. The case is reminiscent of that of Ms Zaghari-Ratcliffe and the concern is that both women are in effect hostages to be used in the debate over sanctions. They are understood to be being held in the same prison.
MINIMUM WAGE: Mr Corbyn has said that if elected Labour would set a minimum wage at £10 per hour. That compares with the current minimum of £8.21 for persons over 25. The difference is greater, however, for those under 18 where the minimum wage is currently £4.35 an hour and for workers between the ages of 18 and 25. Current levels follow the recommendations of the Low Pay Commission and there have been warnings from Paul Johnson of the Institute of Fiscal Studies and business leaders that pushing up the rate for teenagers might result in them becoming less employable.
DAIMLER: The German car group Daimler is hoping to make all its passenger cars CO2 free by 2039. By 2030 it hopes that more than half its sales will be of hybrids or electric vehicles and it has corresponding proposals to clean up its factories and plants. That puts it about 10 years ahead of Volkswagen in terms of environmental ambitions and other groups can be expected to get their bids in soon. No doubt this is driven by concern for the environment but the competition over emissions levels is also about sales to a more conservation oriented public.
STRAIT OF HORMUZ: Four oil tankers were attacked in the Strait of Hormuz, sustaining holes in their hulls. The Strait is of great strategic importance to global oil supply. No one has claimed responsibility, but accusing fingers have been pointed at Iran. The attacks come at a time of increasing tension in the region, as friction grows between Iran and its rival Saudi Arabia (which has had to close down pipelines which have come under drone attack from Iran’s Houthi allies in Yemen) and Saudi’s allies Israel and the USA (last week the Pentagon sent the USS Arlington amphibious assault ship and a Patriot missile battery to join the USS Abraham Lincoln carrier and a bomber task force in the Gulf).
SOUTH AFRICA: Following what is becoming a familiar pattern around the globe, election results saw centrist parties losing ground to more extreme parties. The African National Congress emerged down 18 seats in parliament; the radical left Economic Freedom Fighters are up 18 seats. The main opposition party the Democratic Alliance is down 6 seats; the hard right Freedom Front Plus is up 6 seats. The Economic Freedom Fighters are led by the populist Julius Malema, who was expelled from the ANC by Jacob Zuma five years ago; he advocates the expropriation of land, without compensation, and the nationalisation of big businesses. The Freedom Front Plus party seeks a Boer homeland for the country’s white Afrikaans-speakers; it opposes land expropriation without compensation and promotes privatisation of national industries and the relaxation of gun laws. The ANC retained a majority, with 230 of parliament’s 400 seats, but President Ramaphosa has a tough job ahead of him in tackling the country’s corruption and economic woes.
TERROR AND SOCIAL MEDIA: The G7 countries are meeting in Paris this week to discuss the options to remove extremist content from the internet. Prime minister Jacinda Adern of New Zealand, keen to see a co-ordinated plan put into place globally in the wake of the Christ Church terrorist attacks, will meet representatives from Twitter, Microsoft, Facebook and Google.
FALLING MARKETS: So here we go again. On Monday the Dow suffered its biggest fall since January 3 and the FTSE and the Nikkei followed suit. The reason? The Brexit chaos? No, of course not; movements on this scale were caused, as always, by the burgeoning trade war between the US and China. Last Friday the US raised tariffs on various Chinese imports to 25%. On Monday China responded in kind, its increases to run from June 1. How much damage is all this doing? According to trackers the likelihood of the Federal Reserve cutting its base rate in July, a classic response to a decline in economic activity, has risen from 17.4% to 24.9%.
STEEL: Just two weeks after securing a bridging loan from government to pay its EU carbon bill, British Steel is back with the begging bowl. This time it is £75 million needed to deal with Brexit related costs including a reduction in its European order book and pressures resulting from the low level of sterling. This loan is different from the £120 million bridging finance because that merely covered cash flow and will be repaid whereas the additional £75 million would be longer term finance to keep the firm trading. Some 20,000 jobs are said to be at stake. Nationalisation or some form of buyout may be on the cards.
FORD: Ford UK is to reduce its UK office staff by 550 with the cuts falling on the Dunton research and development site. That is in addition to the 1000 jobs from the overall workforce and mirrors reductions elsewhere in the car industry. Honda are to leave Swindon in 2021 of the cost of 3,500 jobs. Ford is also cutting 5,000 jobs in Germany, its main European manufacturing base.