16 January


16 January

Good morning,

The fallout from the collapse of Carillion continues to dominate the headlines today.

It is testament to the severity of the situation that a meeting of the government’s Cobra emergency committee was convened last night – a move more commonly deployed during times of heightened security threats.

According to The Times, an open-ended government commitment to protect Carillion’s public sector contracts will cost the taxpayer hundreds of millions, although the government is hoping that much of this will be recouped as it will be first in line to benefit from the liquidation of company assets.

And, although the salaries of employees working on 450 public sector contracts have been guaranteed, those working on private sector contracts – which made up 62% of Carillion’s work in the UK – face a 48 hour wait to see if other companies will take over the contracts.

There are also fears about a potential domino effect which could jeopardise the futures of thousands of Carillion sub-contractors. The Telegraph reports that 30,000 firms are collectively owed £1 billion in unpaid bills from Carillion – putting thousands more jobs and pensions at risk.

Serious questions will continue to be asked by the media, opposition MPs and trade unions. Why did the government continue to award contracts to Carillion when it was known that it was facing difficulties? What will be the total cost to the taxpayer? Why did the company increase its dividend payment in the face of such a large pension deficit?

This story is set to rumble on.


Two people have been arrested in California on charges of torture and child endangerment after police found 13 people, aged between two and 29, allegedly held captive at their home. The victims are believed to be siblings and some were “shackled to their beds with chains and padlocks”. Authorities had been alerted by one of the victims who managed to escape on Sunday and all 13 are now being treated in local hospitals.

The EU plans to insist on the free movement of people throughout any transition period and the inclusion of people moving to the UK before the end of 2020 as part of Brexit negotiations, according to a paper on Michel Barnier’s demands which was leaked to The Guardian. Also included in the document is an EU demand that the UK need permission to recreate external trade agreements and the continuation of the common fisheries policy. Meanwhile, Norway has privately warned that if the EU grants the UK an overly generous “special” trade deal, it may be forced to rip up its own deal with the bloc and negotiate a new settlement.

Simone Biles, the four-time Olympic gymnastics champion, has said that she was sexually abused by former USA gymnastics team doctor Larry Nassar. Biles made the accusation in a tweet and is the latest US gymnast to speak out against Nassar, who was jailed for 60 years in December 2017 for possession of child abuse images. He is also awaiting sentencing after admitting to assaulting seven female gymnasts.

Business & Economy

Iceland has stated its intention to make its own-brand products plastic free within five years – the first retailer in the world to do so. The supermarket says it has worked with environmental charities and supermarkets to develop fully recyclable paper and pulp alternatives across 1,000 product lines. Although Iceland has a market share of just two per cent, it is hoped that shoppers buy into the concept after a survey found that 91% would be more likely to encourage friends and family to shop there if they pursued a plastic free future.

Whirlpool’s response to the defect affecting more than five million fire-risk tumble dryers has been described as “woeful” by the Business, Energy and Industrial Strategy Committee. The dryers in question were sold over an 11-year period and are believed to have led to 750 fires, although the fault was only discovered in 2015. It is thought that more than one million potentially dangerous dryers are still being used in people’s homes.


What happened yesterday?
The FTSE 100 was down 9.50, or 0.12%, to 7,769.14, whilst the FTSE 250 fell 26.58. or 0.13%.

Carillion’s collapse caused movement in both directions. Balfour Beatty and Galliford Try – both constituents of the FTSE 250 – lost 3.25% and 7.28% respectively on the back of news that they will now have to pick up Carillion’s share of the bill for the Aberdeen ring road.

Meanwhile, Serco gained 7.39%, Kier Group was up 3.51%, and Interserve climbed 2.04% as investors looked at who might benefit when Carillion’s work is redistributed.

GKN was up 4.14% on the back of weekend speculation about whether Melrose will improve its indicative offer and if other bidders will enter the fray. Carlyle is amongst the private equity firms reported to be considering an approach, while there is also speculation that SAIC Motor, Triumph Group and Spirit Aerosystems may be interested in taking divisions.

In addition, speculation of further cost-cutting at its investment bank and Investec turning positive boosted Barclays which rose 0.53%.

On the currency markets, the pound was up 0.03% against the dollar at $1.38 and flat against the euro at €1.12.

K3 Capital Group, NCC Group, 1pm

Trading Announcements
Ashmore Group, Dunelm Group, Greggs, The Gym Group, JD Sports Fashion, Ophir Energy, Premier Foods

Baring Emerging Europe, Polo Resources Ltd. (DI)

Plus500 Ltd (DI)

Tavistock Investments

UK Economic Announcements
(09:30) Consumer Price Index
(09:30) Producer Price Index
(09:30) Retail Price Index

International Economic Announcements
(07:00) Consumer Price Index (GER)
(07:00) Wholesale Price Index (GER)

Columns of Note

Writing in The Telegraph, Tom Harris says that Jeremy Corbyn is right that the UK cannot remain in the European single market, but for political rather than legal reasons. He asserts that, if this scenario came to pass, very little would change; freedom of movement would carry on, taxpayers’ money would still go to Brussels, the European Court of Justice would still have oversight of our laws, and we would not be able to agree our own trade deals. The only difference would be that we would have no say in the formation of the regulations.

In The Times, Rachel Sylvester explores the options to properly fund social care – “a condition lottery” – as the population ages and budgets are cut. The bottom line, she argues, is that the Treasury will have to find more money, with the only fair solution being a social care levy “to pool the risk between as great a number of people as possible so that everybody loses something but nobody loses everything”.

Did you know?

During World War II, British scientists devised a plan to blow up German armament factories using “rat bombs”. Dead rats were stuffed with explosives for Allied spies to leave near boiler rooms. The idea was that workers would throw the dead vermin into the furnaces, triggering explosions. However, the first batch of rat bombs was intercepted in 1942 and the plan was never attempted again.

Parliamentary highlights


House of Commons

Oral Questions: HM Treasury – including Topical Questions

Ten Minute Rule Motion: British Indian Ocean Territory (Citizenship) – Henry Smith

Legislation: European Union (Withdrawal) Bill – remaining stages (Day 1)

House of Lords

Oral Questions

Encouraging women to stand for political and public office - Baroness Gale
Effect on women in the workplace of the UK leaving the EU - Baroness Crawley
Helping those displaced by fighting in Syria and the actions of Daesh - Baroness Hodgson of Abinger
Performance of rail franchises run by Govia Thameslink Railway - Baroness Randerson


Report from the Select Committee on Charities 'Stronger charities for a stronger society' - Baroness Pitkeathley
Report from the European Union Committee 'Brexit: deal or no deal' - Lord Jay of Ewelme

Scottish Parliament

Topical Questions

Stage 1 Debate: Stage 1: Civil Litigation (Expenses and Group Proceedings (Scotland) Bill

Scottish Government Debate: Scotland's International Policy Framework and Priorities for 2018

Financial Resolution: Civil Litigation (Expenses and Group Proceedings) (Scotland) Bill


House of Commons

Oral Questions: International Development – including Topical Questions

Prime Minister’s Question Time

Ten Minute Rule Motion: Private Landlords (Registration)

Legislation: European Union (Withdrawal) Bill – remaining stages (Day 2)

House of Lords

Oral Questions

Warning from the US Federal Aviation Administration that British aviation manufacturers may have to pay the US to export their products after Brexit - Lord Chidgey
Providing support for migrants and refugees in hotspots in the Greek islands over the winter - Baroness Massey of Darwen
Trade talks from April 2019 with countries having existing trade agreements registered with the EU - Lord Dykes


Data Protection Bill [HL] – Third reading – Lord Ashton of Hyde
Sanctions and Anti-Money Laundering Bill [HL] - Report stage (day 2) - Lord Ahmad of Wimbledon

Scottish Parliament

Portfolio Questions: Education and Skills

Scottish Labour Party Debate: Public Services