01 February 2018
Lens on the week
UK
REFERENDUM: Perhaps it is a shortage of hard news which has driven the press to focus heavily on the “increased prospect of” a further referendum on EU membership being held when the terms of the Brexit deal emerge. You would think that we had all learnt our lesson from the first one but still some Remainers see this as a sensible way out. They should watch the law of unintended consequences before pressing this. Once we were committed to a further referendum, the EU, which would like to prevent Brexit it if it can, would inevitably harden its stance to make the leave option as ugly as possible. In effect the public would be faced with a choice of “Stay In” or a “Hard Brexit”. That would cause just the sort of resentment which would ensure a “Leave ” result , so we would end up with a no deal departure, not quite what the Remainers favour.
PRESIDENT’S CLUB: The scandal in Hollywood has been hogging headlines for some time (the “MeToo” and the “TimesUp” movements). In Westminster, there are allegations of inappropriate behaviour swirling around which have led some wags to call it “Pestminster”. Now there is the scandal surrounding the President’s Club and the charity dinner held there recently. It is difficult to know which of the activities, which are said to have taken place, should be subject to condemnation. Waitresses say that they were forced to wear mini dresses which were low cut, thereby revealing their cleavages. How could they be “forced” to wear such a uniform? When applying for the job, were they told what they would wear? If so, then they went ahead and accepted the work anyway. If they found out only when they arrived on the day, then, if they were appalled, they could have refused and walked out the door.
The serious complaints were that men groped the waitresses. In the light of the campaigns in Hollywood and in our own political establishment, it is astonishing that, if true, people do not realise that the culture/sentiment has changed.
There was a charity dinner years ago when Derek Randall (the eccentric former England Test cricketer) was the guest speaker. After the plates and dishes had been cleared away, the compere directed that all the waitresses should leave and the doors closed. The reason was that he knew that the speeches would contain strong language and “blue” jokes, and he thought it wrong for young girls to have to listen to such earthy material. How times have changed!
BLIGHTY : There is a café in London which is called “Blighty UK Café”. Recently it was targeted by students from the School of Oriental and African Studies who criticised it for celebrating the life and times of Winston Churchill who they said, was a racist. The owners of the café were told to apologise to the local community for their admiration of Churchill. The university’s student union stated its “solidarity” with the protesters. Of course, a factor ignored by the protesters was that, without Churchill, Nazi Germany would have won the war and many of them would not even be in the UK enjoying a good education and speaking English. Hitler and his henchmen would have seen to that. Perhaps it is more fun to demonstrate than to think.
International
KURDS GO IT ALONE (AGAIN): Last year, the Iraqi Kurdish Autonomous Region’s allies the USA and the UK tried to persuade it to delay its vote on independence, promising it support in the future if it first tried to negotiate with Baghdad about issues such as the Kurdish-held territory which was not part of the Kurds’ autonomous region before they liberated it from Isis. The Iraq Kurds’ president ignored them and went ahead with the vote, a decision which even their Kurdish comrades in Syria consider a mistake. The Kurds in Iraq now find themselves surrounded by enemies and without friends.
The Kurds in Syria, nevertheless, are now making similar mistakes. Last May the USA tried to broker a deal between the Syrian Kurds and Syrian rebels, aiming for the return of Arab territory (liberated by the Kurds from Isis) to the Syrian Arabs. The Kurds rejected the US plan, and turned their back on their American ally by inviting Russian military observers into Afrin, a clear snub to Washington.
But now Turkey has struck against them, in support of those Syrian Arab rebels, and Russia (co-operating with Turkey to stabilise the region) has turned away from the Kurds: those Russian military observers were tipped off before the Turkish offensive and pulled out of Afrin – a move which the Kurds consider to be a betrayal. The Syrian Kurds have been invited to Sochi for the Syrian National Dialogue Congress, peace talks organised by Russia and backed by Turkey and Iran, but they have pulled out in what is clearly intended to be a snub to Moscow.
This week, the USA has said that it would continue to support the Syrian Kurds in the struggle against Isis, but would not support them in the Syrian civil war. At the same time, the UK and other European countries have proved reluctant to support the Syrian Kurds in Syria’s internal conflicts, and have expressed a degree of sympathy with Turkey about this Nato ally’s problems with the PKK, the separatist Kurdish insurgent movement in Turkey which is a partner of the YPG, the Syrian Kurds.
The Syrian Kurds have not made the mistake of pushing for independence from Syria – they are sensibly aiming for some sort of autonomy within a federal Syria instead (after all, they are not among the rebels against Assad’s regime). But they will need friends and allies in the world outside Syria if they are to survive to achieve even this sensible goal. As it is, they have had to resort to calling on Assad to come to their aid against the invader Turkey and to defend his borders by their side. If the still-beleaguered regime is the only friend they can call on (and it’s unlikely that the Russians on whom that regime depends will be interested in helping them), then the Syrian Kurds are in very deep trouble indeed.
Financial
Carillion and on and on: Who comes first: shareholders, staff or pensioners? The Commons work and pensions committee have suggested that Carillion had been “wriggling out” of its pension obligations for the past decade. They used cash flow problems as an excuse for not increasing pension contributions in 2011 and 2013, yet paid £70 million in dividends in those periods and around 10 times that figure over 20 years. Culpability will be a big area of debate at the committee hearing, with many questions surrounding the behaviour of the directors, but also the Pensions Regulator, who did not step in at any stage, arguing that they try to balance the needs of pension schemes with the needs of an employer to invest on an ongoing business. The Financial Reporting Council, who it turns out investigated Carillion some 2 years ago but did nothing, will now conduct the largest ever investigation, into a UK company that collapsed owing over £1bn to its suppliers and banks and has a £587mn deficit in its pension scheme. 20,000 jobs at Carillion and many thousands more along it’s supply chains are at risk. The FRC, will have a lot of questions for Carillion’s accountants, KPMG, who have signed off on the company’s accounts since 2014, and the whole episode is prompting moves for a broader investigation regarding the dominance of the “big four” accountants who audit most UK companies.
And then GKN: Heard this one before? (i.e. Above). There have been questions regarding the pension deficit of GKN, who recently became the subject of the largest hostile takeover in the last 10 years; with US conglomerate Melrose (motto: “Buy, Improve, Sell”) bidding £7.4bn. While Melrose has offered to inject £150mn into GKN’s pension scheme to plug its deficit, there has been speculation that much more is needed. In an effort to refute rumours of a £1.1bn figure, GKN has told the stock exchange that it has an “actuarial deficit” of £400mn (although other measures still give a much higher number), but even this could discourage Melrose and also complicate GKN’s plans to demerge its automotive and aerospace businesses.
Spotify IPO not spotted: Spotify, a Swedish music streaming service that launched 10 years ago is ruffling the old guard of the City by attempting to cut the fees of floating its business by obtaining a “direct listing” on the NYSE. The business is valued at around $20 billion and services some 140 million users with a library of 30 million songs. Normally firms who use the conventional IPO route sell blocks of shares to investors prior to a float on the open market. Spotify’s approach would be to register its shares on the exchange and then let them trade feely when the market opens, which may be risky but would save millions in underwriting fees that it would have paid to bankers. They would still be paying their bankers some $30mn but this is about one third of the amount that Snap, a company worth less than half Spotify, paid in fees when it floated and only one fifth of the fees paid by Facebook. The worry for bankers is that others could adopt the approach – most notably Uber and Airbnb, who are expect to float in the next few years. A direct listing is regarded as a reasonable method for companies who are not looking to raise capital and can be particularly effective for employees who may be looking to sell shares.
