Theresa May’s ministerial reshuffle has so far kept Brexit off the front pages of the newspapers for a whole two days, but normal service resumes this morning. The headlines could once again make uncomfortable reading for those in government as they prepare to start negotiations with the EU over what a future trade deal will look like.
The Financial Times this morning reports that companies that rely on UK operating licences have been warned by EU regulators in a “be prepared” memo that they risk suffering a regulatory shut out in the event of a no-deal Brexit. Issuing the note to 15 industries including airlines, hauliers and drugmakers, it warns that operating licences will automatically lapse on the day the UK leaves the single market and companies will be required to create EU entities in order to maintain access.
The letters, which were sent just before Christmas and as the UK government was close to striking a Brexit divorce deal, has angered David Davis, with the Brexit secretary asserting that the ploy could pose a threat to existing contracts or trigger an exodus of British companies to Europe in the event that no deal is agreed. In response, the European Commission has expressed surprise at the UK government’s surprise that they were "preparing for a scenario announced by the UK government itself."
Davis will likely have to be in a more conciliatory mood when he touches down in Germany with Chancellor Philip Hammond later today, as the pair aim to woo German business leaders to play their part in helping them forge a Brexit deal to secure the future of Britain’s financial services.
They hope their charm offensive will pave the way for a bespoke deal that will help the City of London but if reports this morning are correct, they have some work to do to overcome German opposition to the plan, most notably Angela Merkel. It is suggested the German chancellor will oppose a British plan for so-called “managed divergence” from the EU, arguing that it is yet another example of Theresa May’s government trying to “have its cake and eat it”.
Despite much speculation, there wasn’t a No Deal Brexit minister amongst the appointments in the reshuffle. With opposition mounting against the UK’s plans and the clock ticking on the deadline to reach a deal, the prime minister might be having second thoughts about that decision already.
At least 13 people are dead and 163 people have been taken to hospital amid "waist-deep" mudslides in Southern California, where heavy rains triggered flooding. The flooding and mudslides, affecting areas scorched by wildfires last month, have shut down more than 30 miles of the main coastal road.
Donald Trump’s administration is set to loosen restrictions on the use of nuclear weapons and develop a new low-yield nuclear warhead for US Trident missiles, according to a former official who has seen the most recent draft of a policy review. The nuclear posture review (NPR), the first in eight years, is expected to be published after Donald Trump’s State of the Union speech at the end of this month.
Senior Labour figures have said that the party will announce by the spring that it wants to stay indefinitely in an adapted version of the European customs union. The position, yet to be agreed by the party, would signal a significant break from the government’s policy. (£)
BUSINESS AND ECONOMY
The British Chambers of Commerce has said that skill shortages will restrain economic activity this year unless the issue is addressed. The business lobby group has identified labour and skills shortages as the two biggest challenges for companies this year, and said the widening skills gap is one the biggest barriers to growth. (£)
Donald Trump will be the first sitting US president since Bill Clinton to attend the World Economic Forum in Davos. Trump will use his appearance to pitch his nationalist agenda to the global elite when he attends the event in the Swiss Alps later this month. (£)
Apple has been forced to pay an additional £136m tax bill in the UK following “an extensive audit” by HM Revenue & Customs in the latest crackdown affecting the US tech giant. (£)
What happened yesterday?
The FTSE 100 continued its New Year rally yesterday, rebounding to a new record high. The blue-chip index ended the day at 7,731.02, beating the previous high set on Friday of 7,724.20. The record was reached thanks to gains by mining companies and retailers, with Morrison’s, Sainsbury’s, Next and Marks and Spencer posting results that beat expectations.
US tax reform beneficiaries also had a good day yesterday. British American Tobacco closed up 0.7% after saying changes to the US corporate tax rate will benefit its 2018 earnings per share by 6.0%. Other FTSE 100 firms set to gain from US tax reform ended higher, with Ferguson closing up 2.4%, Ashtead Group ending up 1.5%, and CRH closing up 0.6%.
Big Yellow Group
UK Economic Announcements
(09:30) Balance of Trade
(09:30) Manufacturing Production
International Economic Announcements
(12:00) MBA Mortgage Applications (US)
(13:30) Import and Export Price Indices (US)
(15:00) Wholesales Inventories (US)
(15:30) Crude Oil Inventories (US)
COLUMNS OF NOTE
In the Financial Times, Martin Wolf writes that the world economy is currently improving despite the world’s “depressing politics”. He asks if this unusual divergence is likely to continue into 2018, or whether one will cause a dramatic change in the other. Wolf concludes that he hopes “the economy cures the politics”, rather than the politics ruining the economy. (£)
Writing in The Times, Daniel Finkelstein says that the decision to appoint 13 Conservative Party vice-chairmen cannot revive the Conservatives’ fortunes. Finkelstein, a former director of the Conservative Research Department, says voters will be unimpressed with the volume of the appointments to party headquarters when they instead want key issues like housing tackled. (£)
DID YOU KNOW?
Scotland’s national animal is the unicorn. The mythical creature has been associated with the country as far back as the 12th century when it featured on an early rendition of a royal Scottish coat of arms by William I. During the 15th and 16th centuries, gold coins were embossed with the unicorn.
House of Commons
Cabinet Office and Chancellor of the Duchy of Lancaster (including Topical Questions)
Prime Minister’s Question Time
House of Lords
Operation of the “break glass clause” in the supply of agency nurses to hospital trusts from off-framework agencies - Lord Clark of Windermere
Impact of investments in local roads on traffic congestion and productivity in local areas - Baroness Neville-Rolfe
Ensuring that Russia respects the territorial integrity of Georgia and withdraws its troops from Georgian soil - Lord Harries of Pentregarth
Data Protection Bill [HL] – Report stage (day 3) – Lord Ashton of Hyde
Justice and the Law Officers
Culture, Tourism and External Affairs
Scottish Government Debate: Glasgow 2018 European Championships
House of Commons
International Trade (including Topical Questions)
Women and Equalities (including Topical Questions)
Business questions to the Leader of the House - Andrea Leadsom
House of Lords
UK’s decision to withdraw from the London Fisheries Convention of 1962 - Lord Hannay of Chiswick
Impact of additional funding to the NHS to prepare for winter - Baroness Thornton
Ensuring UK food safety standards are not undermined by the import of poorer quality food produced to lower animal welfare standards from the US - Baroness Jones of Whitchurch
Performance of the UK’s major housebuilders - Lord Best
First Minister's Questions
Scottish Government Debate: Developing the Young Workforce - Publication of the third annual report