Announced in September 2017, the FT Big Read today addresses the proposed merger of Siemens and Alstom’s rail businesses in Europe, which, if approved by the European Commission, would create the world’s second largest train maker accounting for nine per cent of the global market. Considering the merger would only be beaten by China’s CRC which caters to some 1.4 billion people and amounts to 12% market share, it is a wonder that the Siemens-Alstom story has gone relatively unnoticed.
The threat of the deal being derailed (*ahem*), however, is very much real. The FT notes that the Commission is institutionally suspicious, “if not allergic”, to the ‘we-need-scale’ arguments of Siemens-Alstoms’s national champions. That those champions include figures no less than Germany’s Chancellor Merkel and the French finance minister, Bruno Le Maire, seems not to have made too much difference.
The contrast with the success of the UK rail industry - or lack of - couldn’t be starker. Catching up with an episode of one of my preferred podcasts this week – the excellent policy insight show Reasons to be Cheerful hosted by former Labour leader Ed Miliband and radio man Geoff Lloyd- I was struck by the fact that 70% of UK rail routes are now run by operators owned by foreign states. Given that the East Coast Main line was re-nationalised last month after the government refused to bail out its current operators, Stagecoach and Virgin, I figure that perhaps a healthy dose of government support in the form of longer-term strategic investment, as has been the case in France and Germany, could be just what is needed.
The UK example shows that the European Commission could do worse than now lend its support to a merger which will set up domestic European companies to compete on a global stage. International ambitions might seem a long way off for British rail companies right now, but without thought-out government support to address structural flaws in the first instance, they ain’t going anywhere fast.
The government is to relax immigration rules for non-E doctors and nurses working in the NHS, according to plans set to be revealed on Friday. The measure will exclude NHS workers from a cap on the number of Tier 2 visas, which was introduced by Theresa May when she was home secretary and is currently limited to a maximum of 20,700 non-EU skilled workers entering the UK a year. On Tuesday, it was reported that 2,360 visa applications by doctors from outside the EEA had been denied in the five-month period since January.
Jeremy Corbyn suffered the biggest rebellion of his leadership yesterday as 90 Labour MPs defied the party whip in a vote on the Withdrawal Bill. Despite instructions to abstain from a Lords amendment to the bill which would have kept “full access” for the UK in the European single market post-Brexit, 75 backbenches supported the motion and 15 voted to leave. Laura Smith resigned as a shadow Cabinet Office minister, whilst five parliamentary aides also quit.
US Secretary of State Mike Pompeo has claimed North Korea can be pushed into a “major” nuclear disarmament by January 2021. Dispatched to Seoul yesterday reportedly to calm fears in South Korea on the proposed peace deal between the US and North Korea, Pompeo said disarmament could be achieved within “two and half years”. He also warned that the US would resume military exercises on the peninsula if it appeared that Jim Jong-un had stopped negotiating in good faith.
Business & Economy
US cable giant Comcast has offered a $65 billion bid for 21stCentury Fox’s entertainment divisions, paving the way for a bidding war with rival Disney. The bid by Comcast, which values Fox’s assets at $35 per share is 19% higher than that offered by Disney at $52 billion. In the UK, the two companies are currently vying to take over Sky plc, the owner of Sky News.
The chief executive of Renault, Carlos Ghosn, has hinted that he may step down as leader of the carmaker before his term ends in 2022. In an interview with the Financial Times, Ghosn said that he did not expect to see out “four more years” at Renault. Ghosn has acted as CEO since 2005 and also serves as chairman of Nissan and Mitsubishi Motors, building the so-called “Alliance” into the second-largest car retailer worldwide.
The US Federal Reserve has voted to raise interest rates by 0.25%to a benchmark rate of 1.75%-2% - its highest level since 2008. Jerome “Jay” Powell spoke on his first outing as the new chair of the Reserve since being appointed in February, citing GDP growth and a buoyant labor market as reasons for the increase. A majority of Fed officials now also forecast two more rate rises this year, one more than previously predicted.
What happened yesterday?
Stocks remained relatively stable on the London markets yesterday as investors held back ahead of the US central bank’s monetary policy announcement yesterday evening. The FTSE 100 ended down just 0.10 points at 7,703.71, with the pound also little changed against the dollar at $1.34. The pound faltered against the euro, however, trading down 0.3% at €1.14 as investors wait for another monetary policy announcement by the ECB on Thursday.
Economic indicators released yesterday revealed a mixed bag. ONS figures showed that year-on-year consumer price inflation remained at 2.4% in May, with increases seen in the cost of fuel and travel fares, and lower prices for games, energy, food and drink, and furniture. Analysts now point to the stable rate of inflation, offset by faltering GDP and wages growth, to suggest that an interest rate hike by the Bank of England is unlikely to be seen before late 2018 or early 2019.
In corporate news, shares in Just Eat (down 4.71%) tumbled after rival Deliveroo said it will allow restaurants to use their own riders for orders made through its takeaway food app, increasing its available outlets by 50%.
Leading the day’s risers was miner Glencore (up 3.75%) after saying that it’s Katanga Mining subsidiary has settled a legal dispute with its state-owned venture partner in the DRC that threatened dissolution of the company. In the FTSE 250, TalkTalk (up 5.27%) also jumped after Merrill Lynch reported a positive outlook for the broadband provider, suggesting earnings growth through 2020 to reverse four years of downgrades.
Seneca Global Income & Growth Trust
Syncona Limited NPV
Brown (N.) Group
UK Economic Announcements
(09.30) Retail Sales
Himalayan Fund NV
Middlefield Canadian Income PCC
Morrison (Wm) Supermarkets
Plaza Centers NV
Steppe Cement Ltd
Walcom Group (DI)
Int. 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)
(13:30) Retail Sales (US)
(15:00) Business Inventories (US)
Columns of Note
The former editor of the Daily Record and author of “the Vow”, Murray Foote, writes a column for the Times Scotland stating that he is now in favour of Scottish independence. Citing a “democratic abomination” at Westminster over treatment of the devolved nations in the passage of the Withdrawal Bill, Foote argues that independence is a coming-of-age for a politics in Scotland that was kickstarted by the ‘Yes-Yes’ campaign for devolution in the 1990s and led by the late Donald Dewar.
Katherine Griffiths comments in yesterday’s Timesthat the time may be right to appoint a female as the Governor of the BoE. Griffiths points out that a lack of positive discrimination has resulted in little to no women appearing on shortlists for executive roles in the City, despite an ample pool of talent. She adds that the recruitment process should not be overly-stringent by introducing a female-only shortlist, but that female candidates perform disproportionately better when there is a 50-50 ratio.
Did you know?
Scientists in New Zealand are breeding less flatulent sheep in order to curb the country's greenhouse gas emissions. Researchers near Christchurch, New Zealand, have bred a type of climate-friendly sheep that produce about 10% less methane than standard breeds. Livestock emissions are currently the biggest contributor to New Zealand’s total greenhouse gas emissions.
House of Commons
Exiting the European Union (including Topical Questions)
Business Questions to the Leader of the House – Andrea Leadsom
Select Committee Statement
Ninth Report of the Foreign Affairs Committee, FCO’s preparations for the 2018 World Cup, HC 1011
Debate on a Motion on the 70thAnniversary of the Arrival of HMT Empire Windrush at Tilbury Docks – Helen hayes
Sound Reading system and improving literacy – Anneliese Dodds
House of Lords
Private rental sector and increasing housing supply - Baroness Wilcox
Cross-departmental responses to incidents within the UK territorial seas and exclusive economic zone - Lord West of Spithead
Sustaining the UK's standalone capacity to manufacture helicopters as part of a modernising defence programme - Lord Ashdown of Norton-sub-Hamdon
The SOS Méditerrannée ship, the Aquarius, and associated rescue operations in the Mediterranean Sea - Lord McConnell of Glenscorrodale
Impact of the Government's "hostile environment" approach towards illegal immigration on those with residency and employment rights - Lord Bassam of Brighton
150th anniversary of the first Trade Union Congress and the contribution made by trade unions to industrial, social and political reform in the UK and internationally - Baroness Prosser
First Minister’s Questions
Impact of Mossmorran Flaring – Alex Rowley
Scottish Parliamentary Corporate Body Questions
Human Trafficking – First Annual Progress Report
Update on the work of the National Council of Rural Advisers
Standards Procedures and Public Appointments Committee Debate
Sexual harassment and inappropriate conduct inquiry
House of Commons
House of Lords
No business scheduled
No business scheduled