13 December 2018

Scott Reid

13 December 2018

Good morning,

It is an odd quirk of British politics that even when you think you’ve won, somehow you end up the loser.
Such was the case for Theresa May last night, who despite securing 200 votes of confidence in her leadership against 117 and immunity from another challenge for another year, is only facing renewed pressure to step down. By any other measure, just under two-thirds support would be a “resounding” mandate (see Scotland’s 62:38 vote to Remain in the EU, for example). And yet the overwhelming message in the morning papers is that May won the battle, but as yet may lose the war.
After all, the significance of this vote was not so much its end result, but that it happened at all. May’s opponents were given a chance to air their strength, which is certainly enough to sink her Brexit deal; ultimately, the greater prize. The poison may already be in the blood.
During a dramatic day in Westminster, the prime minister made an impassioned plea to her parliamentary colleagues that it was not the time for a divisive leadership contest. And showing that the numbers might have been closer than No 10 would have liked, May made a commitment (though not quite a promise) to stand down before the next election due in 2022.
As Max Hastings points out in his Times commentary this morning, the precedent of Margaret Thatcher’s downfall is too close for comfort. “It was plain that her authority was draining away ... There was a mounting climate of fear, especially among Tory MPs in vulnerable constituencies, that the party faced certain defeat at the next general election under her leadership.” Hastings wrote those words in 1990 on the eve of Thatcher’s resignation, but they held just as true yesterday.
The prime minister, meanwhile, has no time for navel gazing. To make good on her mandate, and in hope that she can translate some of those votes into support for her withdrawal deal in parliament, May today heads for Brussels to show she is going nowhere in a bid to extract further concessions on the Irish backstop.

Here’s hoping the leaders of the EU27 don’t know their history of Tory leadership contests.


The Scottish Government has revealed its draft budget for 2019-20, implying a widening tax gap between higher earners in Scotland and elsewhere in the UK. Speaking at Holyrood yesterday, finance secretary Derek Mackay announced that the thresholds for starter and basic income tax rates would be raised, but that the higher rate – increased to £50,000 in England and Wales at the last UK budget – would be frozen. Key spending commitments were announced in health and education.
Donald Trump’s lawyer, Michael Cohen, has been sentenced to three years in prison for crimes including tax evasion, lying to a financial institution and Congress, and breaking campaign finance laws. Speaking in a New York federal court yesterday, Cohen suggested the sentencing was a moment of “freedom” and insisted it had been his job to hide Trump’s “dirty deeds”. Cohen had reportedly hoped that his co-operation with the Mueller investigation into Russian election meddling would afford him some leniency.
China has detained a second Canadian citizen in retaliation for the arrest of Huwawei CFO Meng Wangzhou last week. Michael Spavor, a prominent expert on North Korea, was due to fly from Dalian in north-east China to Seoul on Monday but never arrived, according to sources. On Monday, Michael Kovrig, a senior policy researcher, was detained by authorities in Beijing. Wangzhou was released on bail on Monday, but faces extradition to the US for charges of breaching sanctions against Iran. (£)

Business & Economy

Revolut has secured a license to launch banking services across Europe, the fintech unicorn announces today. The announcement comes a year after an application is thought to have been made to the European Central Bank and will allow Revolut to introduce current account and consumer lending operation. The company is still seeking a full UK banking license.
Sky News reports that Legal & General is planning to put its general insurance division up for sale. If progressed, the sale of Britain’s sixth-largest general insurer would be administered by Fenchurch Advisory Partners, three years after a previous attempt was abandoned. The move would reportedly boost L&G’s consolidations plans in the UK market, and could generate a sale price above £300m.
The UK outsourcer, Amey, is expected to be sold in the new year according to its owners, Ferrovial. The Spanish infrastructure group is reportedly in talks with PAI Partners and Greybull Capital, although a figure for the sale - which Ferrovial bought in 2003 for £81 million - has not been disclosed. The move is likely to be seen as signs of growing pressure on the outsourcing sector in the UK. (£)


What happened yesterday?

Improving Sino-US relations and signs that Theresa May was likely to secure victory in a vote of no-confidence led both the pound and London-listed shares to close higher on Wednesday. By close of trading, the FTSE 100 was up 1.08% at 6,880.19 points, while the pound was 1.17% higher on the dollar at $1.26 and 0.87% up on the at €1.11. The more domestically-oriented FTSE 250 also added an impressive 1.90% and endured the most dramatic of the day’s movements.
The strong session followed a good day in Asian markets, with optimism underpinned by reports that Chin has agreed to cut tariffs on US cars from 40% to 15%.
In corporate news, the day’s headline mover was J Sainsbury’s (down 7.22%) amid growing concerns that its £12 billion merger with Asda could be dismissed by regulators. Yesterday the supermarkets resorted to legal action, attempting to extend the investigation period by 11 days, which sent shares into a spin.
Aerospace manufacturer Rolls-Royce (up 4.51%) rallied after saying it still planned to implement contingency plans for a no-deal Brexit after the UK government pulled its vote on the withdrawal agreement. The group also confirmed its 2018 full year forecasts in the upper half of its full year guidance range.
On the FTSE250, clothes retailer Superdry (down 32.92%) was in free fall following a profits warning, blaming unseasonably warm weather as it posted a 49% drop in underlying interim pre-tax profits. Dixons Carphone (down 5.96%) also fell after posting a £440 million loss in the first half.
Also on the 250, hard landscaping products manufacturer Marshalls (up 10.17%) racked up strong gains on news that it had acquired brick manufacturer Edenhall for up to £17.2 million. Marshalls also expects profits to exceed full-year expectations thanks to better second-half revenue growth.

IntegraFin Holding
TUI AG Reg Shs (DI)
Purplebricks Group
Sports Direct International
Tungsten Corporation
Trading Announcements         
Associated British Foods
Ocado Group
PZ Cussons
Serco Group

Annual Report
TUI AG Reg Shs (DI)

Aberdeen Latin American Income Fund Ltd      
Amur Minerals Corporation NPV          
Bacanora Lithium
Chelverton Growth Trust         
Fidelity Asian Values
Henderson Far East Income Ltd.
JPMorgan Japanese Inv Trust    
Maestrano Group
Nanoco Group

Intl. Economic Announcements
(07:00) Consumer Price Index (GER)
(12:45) ECB Interest Rate (EU)
(13:30) Continuing Claims (US)
(13:30) Import and Export Price Indices (US)
(13:30) Initial Jobless Claims (US)

Columns of Note

Jim Armitage explains in the Evening Standard why the British political crisis is failing to send the markets into a spin. Most obviously, he points out, stock and currency markets have been factoring in political risk to the British investment scene for the last two years, meaning the leeway in fluctuations is now much smaller. But May’s expected victory also strengthens the chance of a soft Brexit or a second referendum to remain in the EU, where Armitage suggests opinion among investors really lies.
In The Times, Daniel Finkelstein comments that although the vote of no-confidence changes nothing, it may provide benefits to Theresa May. Finkelstein notes that it could allow her to brow beat her cabinet into supporting her deal, and press on with ensuring her deal is the only option on the table after every other option – Norway, a second referendum, a confidence vote etc. – has been defeated. (£)

Did you know?

Because of its use in Holy Communion, the Vatican has the highest per capita wine consumption of any country.

Parliamentary highlights


House of Commons
Oral questions
Digital, Culture, Media and Sport (including Topical Questions)

Attorney General

Business Statement
Business Questions to the Leader of the House - Andrea Leadsom

General debate
Public Health Model to reduce youth violence - Mrs Theresa May

Rural post offices - Derek Thomas

House of Lords
Oral questions
Repealing the exemptions from the requirement for wheeled goods vehicles to be fitted with sideguards - Baroness Gardner of Parkes

Discussions between the BBC and Public Health England regarding a joint strategic plan on childhood obesity - Lord Brooke of Alverthorpe

Report by the National Institute of Economic and Social Research, 'Brexit and the Health & Social Care Workforce in the UK' - Baroness Wheeler

Revised Government estimates of the cost and timetable for completing HS2 - Lord West of Spithead

Short debate
The role of the government's 'Strategy for Disability Inclusive Development' towards meeting the UK’s commitments given at the Global Disability Summit - Baroness Anelay of St Johns

Establishment of a UK-wide Constitutional Convention to address issues of democratic accountability and devolution, especially in England - Lord Foulkes of Cumnock

Challenges facing young people - Baroness Armstrong of Hill Top

Scottish Parliament
General Questions

First Minister’s Questions

Members’ Business
St Andrews’ GP Out-of-hours Facility – Willie Rennie

Ministerial Statement
The UK Withdrawal from the European Union (Legal Continuity) (Scotland) Bill – Reference by the Attorney General and the Advocate General for Scotland to the UK Supreme Court

Scottish Government Debate
Demonstrating leadership in human rights

Final Stage
Pow of Inchaffray Drainage Commission (Scotland) Bill


House of Commons
No business scheduled.

House of Lords
Role of reconciliation in British foreign, defence and international development policy – The Lord Archbishop of Canterbury

Scottish Parliament
No business scheduled.