13 September 2018

Scott Reid

13 September 2018

Good morning,

“We have something of an obsession with anniversaries in this country.”

As high-profile celebrations remind us this year, 2018 marks 100 years since the close of the First World War, the advent of women’s right to vote and the creation of the RAF. 

 But this comment referred to a less auspicious anniversary.  It was made by RBS chairman, Sir Howard Davies, last night as he spoke to an audience assembled at King’s College London to hear his views on the financial crisis ten years on. As you may have noticed from the nation’s opinion columns of late, the good thing for us punters is that this anniversary in particular is the gift that keeps on giving. The collapse of Northern Rock (February 17); Lehman Brothers (September 15); RBS (October 12) - take your pick. We have a whole year of insight ahead of us.

The underlying theme of this 'celebration' is whether it could happen again? Sir Howard thinks that we’re in a better place than we were. We have a better regulated financial system, stronger capital reserves, and stronger political support for regulators.

But he cautioned that we are also different than we were. Fintech is a 24-hour digital banking presence, and the industry as a whole is running on close-to-zero public trust. What time traveller from the pre-2007 heyday could say they recognise the banking industry of 2018?

And perhaps therein lies the problem of anniversaries. If we spend too much of our time poring over the lessons of the past, we will fail to recognise that the next crisis, like the industry, will be an altogether different beast.

Speaking to the BBC today, the former prime minister Gordon Brown suggests we’re getting the basics wrong. Better regulation is necessary of course, but when you consider that the usual tools of fighting financial crisis – rock-bottom interest rates, quantitative easing etc. – are already in place, where do you go next? He suggests the saviour in 2007-08 was the international community’s will to cooperate; a lack of it today sees the crisis already on our doorstep and must be remedied if history isn’t to repeat itself.

News

The cabinet will today meet for an extraordinary three-hour session to discuss the government’s plans for a “no deal” Brexit as it releases the latest tranche of its preparation papers. According to the documents which follow 24 issued last month, any UK national whose passport has less than six months to run faces being turned away at EU borders. The papers also revealed significant disruption to the UK’s energy, aerospace and telecommunication markets should no agreement be struck. Brexit secretary Dominic Raab has also warned that the UK would not be obliged to pay a proposed £40 billion financial settlement to the EU in a no-deal scenario.

European Commission president Jean-Claude Juncker has announced the creation of a 10,000-strong EU border force in a bid to fend off the rise of populism. Speaking at his last State of the Union address in Brussels yesterday, Juncker warned against “ugly nationalism” and suggested the UK would not be allowed to “pick and choose” in Brexit negotiations, which threatened to undermine the integrity of the single market. His successor will be voted on following elections to the European Parliament in May 2019.

A threat to global oil supplies triggered by a looming hurricane in the southern US has led oil prices near to a four-year high. The price of brent crude rose to more than $80 a barrel on Wednesday on fears that the storm would affect the Colonial Pipeline. Hurricane Florence is predicted to make landfall in North and South Carolina on Friday, where President Trump has issued a warning to residents. (£)

As the former Scottish poet laureate, Liz Lochhead put it, “our favourite pastime is nostalgia.” But as Sir Howard and Brown rightly point out, where banking is concerned, the time has come to look forward.

Business & Economy

RBS could use up to £4 billion of surplus capital to pay-out an extraordinary one-off dividend payment to shareholders. According to comments shared by chairman Sir Howard Davies with The Times, whilst his preferred choice was to use the surplus to buy-back government shares in RBS, the dividend option remained on the table “if shareholders wanted it”. (£)

The John Lewis Partnership has reported a 99% slump in half-year profits to £1.2 million. Group chairman Sir Charlie Mayfield said the partnership was facing "challenging times" amid "the most promotional market in a decade", with full-year profits expected to be "significantly lower" than last year. 

Sports Direct has issued a statement clarifying that it does not intend to make a takeover offer for Debenhams following a chaotic AGM at the sports retailer yesterday. Confusion arose following comments allegedly made by Simon Bentley, the outgoing senior independent director at Sports Direct, that the board had discussed the possibility of combining Debenhams with the newly-acquired House of Fraser department stores chain. (£)

EY has rejected calls for the Big Four auditors to be broken up, suggesting that the current set-up serves the market’s needs. Global chief executive of EY, Mark Weinberger, said yesterday that a concentration of talent allowed the auditors to draw on expertise from across its business in order to conduct higher-quality audits for multinational clients, where smaller peers would not be able to compete. EY today reports record global revenues of $35 billion. (£)

Markets

What happened yesterday?

Despite a headline profit warning at energy giant SSE sinking values early in the day, the FTSE 100 ended yesterday in the black, up 0.55% or 39.82 points at 7,313.36.
 
SSE (down 8.28%) was the day’s biggest loser after warning that first-half profits are likely to have halved compared to last year due to higher costs and lower consumption. The group also warned against significantly lower profits at its Energy Services arm ahead of its spin off and merger with Npower. Utility suppliers Centrica (down 3.61%), Severn Trent (down 0.44%) and National Grid (0.63%) also ended in the red.
 
Momentum gained on the back of news that Washington is consulting with Beijing before any decision is taken on whether to hike trade tariffs any further causing a sharp rally in tobacco stocks. British American Tobacco (up 5.87%) and Imperial Brands (3.37%) topped the FTSE’s biggest gainers following the publication of a report by the US Food and Drug Administration that threatened to pull certain electronic cigarettes from the market if manufacturers did not address concerns around their increasingly high use by children.
 
On the currency markets, the pound was flat against the dollar at $1.30 and down 0.16% against the euro at £1.12.

Finals              
Ricardo 

Interims          
Amerisur Resources     
Faron Pharmaceuticals Oy (DI)  
Gresham House
GVC Holdings  
Morrison (Wm) Supermarkets
Oxford Biomedica        
Redt Energy
SafeCharge International Group Limited (DI)
Xeros Technology Group

UK Economic Announcements
(00.01) RICS Housing Market Survey
(12.00) BoE Interest Rate Decision

AGMs
Amiad Water Systems Ltd
Better Capital Pcc Ltd (2009)
Bahamas Petroleum Co
Colefax Group
City of London Group
Entertainment One Limited     
Flybe Group    
Picton Property Income Ltd
Worldwide Healthcare Trust
XPS Pensions Group

Intl. Economic Announcements
(08:00) Consumer Price Index (GER)
(12:45) ECB Interest Rate (EU)
(13:30) Consumer Price Index (US)

Columns of Note 

Dominic Hinde writes in Prospect magazine on the distorted narratives created by the English language press in reaction to the Swedish general election. Hinde argues that the rise of a far-right party is nothing new in Sweden, where a story of social democratic success has suffered from being viewed in essentialist terms. Although the centre has been pulled right, Hinde argues the real takeaway from Sunday’s election was a signal of the end of bloc politics in Sweden where the Swedish Democrats feature as just one party among many.

In The Times, Alistair Osborne welcomes the departure of Keith Hellawell as chairman of Sports Direct. He lists a catalogue of mishaps under Hellawell's stewardship, including the decision not to hire a permanent FD for three years and failing to spot that the company was breaking the law by failing to pay staff the minimum wage. Osborne says that Hellawell went out in style, divulging the market-sensitive information that consideration was given to combining House of Fraser with Debenhams, and applauds the fact his replacement, ex-Nike executive David Daly, might actually know something about the business. (£)

Did you know?

During Peter the Great's rule in Russia, men with beards had to carry a "beard token" with them to prove that they had properly paid the beard tax. Otherwise, police would shave them on the spot. 

Parliamentary Highlights

TODAY 

House of Commons

Oral questions

International Trade (including Topical Questions)

Women and Equalities (including Topical Questions)

 Business Statement

Business Questions to the Leader of the House – Andrea Leadsom 

General Debate

Proxy Voting 

Adjournment

Humanitarian situation in Burma – Catherine West

 

House of Lords

Royal Assent 

Oral questions

To ask HM Government what is the youngest age at which a child has been authorised to act as a covert human intelligence source under section 29 of the Regulation of Investigatory Powers Act 2000 - Baroness Jones of Moulsecoomb

 Impact of changes to arrangements for Certificates of Sponsorship, in particular those affecting artists visiting the UK for music festivals - Lord Clement-Jones

 Further to the announcement of the Housing Delivery Test, what measures will be taken to prevent developments which do not comply with local plans agreed at a local government level. - Baroness Thornhill 

Current major Russian military exercises, Vostok-2018 - Lord Lee of Trafford

 Debate

Part II of the Transparency in Lobbying, Non-Party Campaigning and Trade Union Administration Act 2014 and the effect it has had on third-party election campaigning - Lord Harries of Pentregarth

 The 40th anniversary of the first baby born using in vitro fertilisation - Baroness Deech

 Short debate

Reassuring the Jewish community over the impact of anti-Semitism in the UK - Lord Popat 

Changing the way formal international declarations of genocide or crimes against humanity are made - Lord Alton of Liverpool

 

Scottish Parliament

General Questions

First Minister’s Questions 

Members’ Business

East Kilbride Workers said “Nae Pasaran!”

 Scottish Government Debate

Celebrating Scotland’s Food and Drink Success Story

 

TOMMOROW

House of Commons

No business scheduled

House of Lords

No business scheduled

Scottish Parliament

No business scheduled