17 July 2018

Scott Reid

17 July 2018

Good morning

Following a near-defeat for the government over its Brexit bill last night, this morning’s papers are ablaze with talk of a government on the brink of the collapse and fresh elections just around the corner. Same old, same old. 
But beyond the Westminster bubble, it’s worth remembering that this stuff actually cuts through. The Times Business pages leads this morning with news that the John Laing Infrastructure Fund will likely sell itself to unlisted rivals Dalmore Capital and Equitix Investment Management in a £1.45 billion takeover, reportedly in response to the proposed plans of any new Labour government to renationalise privatised public assets. A bruising day in parliament for the Conservatives may have just kicked that forward planning up a gear. (£)
The move by one of Britain’s largest quoted infrastructure funds, which currently operates  an estimated £1.2 billion of investments including the Ministry of Defence’s Whitehall headquarters and the M40 toll road, has certainly turned heads.  Shares in the company rose by nearly a fifth on the FTSE 250 yesterday, closing at an all-time high of 139½p per share.
The collapse of Carillion and continued woes at Capita are unnerving for any company operating UK infrastructure, no matter how little construction or operating risk they undertake. That this deal is seen as a direct response to sector worries about opposition party policy is significant, not least as an indictment of the current government’s electoral prospects.
The offer goes to show that there are still those who believe in the value of PFIs. Shadow chancellor John McDonnell’s plans to renationalise the initiatives may offer a quick fix to a public rightly disgruntled with tales of corporate mismanagement. But if the sector’s current set-up was broken beyond repair, surely the well of private finance would have dried up long ago?
Back in the realm of politics, the decision by John Laing Infrastructure Fund to sell may end up demonstrating an inspired piece of foresight. With no sure sign that the government that make it to the parliamentary recess intact, Labour could well be on their case before long.


A legislative amendment to the government’s Brexit plan has passed by 305 votes to 302 in the House of Commons. The government last night accepted four amendments tabled by the Brexiteer European Research Group, which would keep the UK outside of the formal structures of the European single market and customs union. The move is thought to have undermined the prime minister’s relations with Remain-supporting Conservative MPs, who have now threatened to vote for “off-the-shelf” models of UK membership of the EEC and CU in order to avoid a ‘no deal’ scenario. (£)
Donald Trump has refused to condemn Russian state interference in the 2016 US election identified by US intelligence services, citing “zero collusion”. Speaking following a joint US-Russia summit in Helsinki yesterday, President Trump said his country’s relationship with Russia had “changed as of about four hours ago”, and harshly criticised a FBI investigation into suspected meddling by special counsel Robert Mueller as a “disaster for our country”. 
The hard-right nationalist and anti-immigrant Sweden Democrats have surged into a poll lead ahead of the Swedish general election to be held on September 9. The party’s leader, Jimmie Akesson, has sought to appeal to a wider cross section of voters by criticising Sweden’s liberal asylum and migration policies and has promised a referendum on EU membership if elected. A poll on Monday put the party at 25.6% ahead of the governing Social Democrats on 21.2%. (£)


Business & Economy 

Shares in Netflix have fallen by more than 14% in after-hours trade on Monday following the report of stagnating subscriber numbers. The streaming service said it added 5.2 million subscribers in the three months to the end of June which, although equivalent to the same period last year, is less than forecasted growth of 6.2 million. Analysts have highlighted increasing competition from companies including Apple, YouTube and Amazon, which have started to invest heavily in their online streaming services.
Goldman Sachs is expected to name David Soloman as its next chief executive in a shorter confirmation process than previously expected. Mr Soloman is currently president at the Wall Street investment bank, and has long been considered favourite to succeed current chief exec Lloyd Blankfein, who has indicated he will step down by the end of the year after 12 years at the helm. (£)
The proposed purchasing alliance between Tesco and Carrefour is to be investigated by the French antitrust authorities before it can be passed. Tesco announced the proposed partnership two weeks ago, which although in the short-term should reduce costs between the two supermarkets’ supply chains, some analysts have suggested could signal a precursor to Tesco’s eventual merger with Carrefour. (£)


What happened yesterday?
Weaker oil prices weighed on the energy sector yesterday, leading to overall falls in London stocks. By close of trading on Monday, the FTSE 100 was down by 61 points or 0.8% to 7,600.45 points.
In corporate stocks, oil giants BP (down 2.33%) and Shell (down 1.97%) both faltered as the price of Brent crude slid more than 4 per cent  to $72.22 a barrel and West Texas Intermediate also fell by 3.8% to $68.41. Stocks in BHP Billiton were also among the day’s biggest losers, down 2.48%.
Elsewhere, the downbeat mood on the markets was compounded by warnings from the IMF that current trade tariff threats by the US and its trading partners risked lowering global growth by 0.5% by 2020, resulting in around $430 billion in lost GDP worldwide. 
Financial stocks were an exception to the gloom, however, boosted by much better-than-expected second-quarter results from Deutsche Bank. (£) Germany’s biggest lender surprised analysts by posting expectations of a €400 million profit, more than doubling previous estimates of €159 million. On the FTSE, both Barclays (up 0.97%) and Standard Chartered (up 0.64%) were boosted by the news.
On the currency markets, the pound reported a fall of 0.2% against the euro at €1.13, but about broke even against the dollar, up 0.04% at $1.32.


Gateley (Holdings)      
NCC Group
Amino Technologies
Arbuthnot Banking Group
Etalon Group GDR (Reg S)
Hydrogen Group
Trading Announcements
City of London Investment Group
Galliford Try
Hydrogen Group
Royal Mail
Scapa Group    
SSP Group
TalkTalk Telecom Group

British Land Company
Brown (N.) Group
Dairy Crest Group
GoldStone Resources Ltd
HICL Infrastructure Company Ltd
Perpetual Income & Growth Inv Trust
UK Economic Announcements
(09.30) Claimant Count Rate
Int. Economic Announcements
(14.15) Capacity Utilisation (US)
(14.15) Industrial Production (US)


Columns of Note

Patrick Hosking comments in the Times that the latest attempts by the Financial Reporting Council to reform its corporate governance code may amount to little. Hosking suggests incremental tweaking has allowed British business chiefs to believe their companies are better run than thirty years ago, but that the problems of exorbitant pay and company collapses in the case of Carillion or BHS are still endemic. (£)
Gideon Rachman comments in the FT that beyond the chaos of the American president’s political appearances, Trump’s thinking is starting to resemble a carefully thought-out governing approach. Rachman suggests this can be captured in four broad principles: putting economics first; articulating policy via nations, not institutions; emphasising culture, not values; and reasserting spheres of influence. (£)

Did you know?

Each year more copies of the IKEA catalogue are printed than are copies of the Bible. The catalogue has been in print since 1951, and takes up nearly 70% of the firm’s marketing budget each year.

Parliamentary highlights 

House of Commons
Oral questions
Business, Energy and Industrial Strategy (including Topical Questions)
Ten Minute Rule Motion
Anti-Loitering Devices (Regulation) - Giles Watling
Trade Bill - Remaining Stages
Ways and Means Resolution on the Parking (Code of Practice) Bill
Access to the drug Orkambi in NHS England - Mr Ivan Lewis
House of Lords
Baroness Bull
Oral questions
Developments in Nigeria including violence by the Fulani herdsmen and Boko Haram - Baroness Cox
UN Human Rights Office of the High Commissioner’s first report on human rights in Kashmir - Lord Ahmed
Inquiry into the implementation of the new railway timetables - Lord Bradshaw
Ensuring the case of Nazanin Zaghari-Ratcliffe will continue to be prioritised following the change in Foreign Secretary - Baroness Afshar
Home Education (Duty of Local Authorities) Bill [HL] - Report Stage - Lord Soley
Registration of Marriage Bill [HL] - Report Stage - The Lord Bishop of St Albans
Parental Bereavement (Leave and Pay) Bill - Committee stage - Lord Knight of Weymouth
Ivory Bill - Second Reading - Lord Gardiner of Kimble
Scottish Parliament
In recess until September 5, 2018.
House of Commons
Oral questions
Prime Minister's Question Time
Ten Minute Rule Motion
Access to Welfare (Terminal Illness Definition) - Mrs Madeleine Moon
Consideration of Lords amendments
Domestic Gas and Electricity (Tariff Cap) Bill
General debate
The Future Relationship between the United Kingdom and the European Union
Road restructuring in Oxfordshire - Robert Courts
House of Lords
Oral questions
Current uses, and potential future uses, of distributed ledger technologies across Whitehall - Lord Holmes of Richmond
Increasing knowledge of work skills, careers and jobs amongst primary school children - Baroness Garden of Frognal
Ensuring the Cross Country rail franchise, when re-let, continues to provide regular services to stations north of Newcastle. - Lord Beith
Treatment and conditions of prisoners in England and Wales - Lord Ramsbotham
Creditworthiness Assessment Bill [HL] - Third Reading - Lord Bird
Supply and Appropriation (Main Estimates) Bill (Supply Bill) – Second reading and remaining stages - Lord Bates
Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill – Third Reading - Lord Bourne of Aberystwyth
Northern Ireland Budget (No. 2) Bill (Money Bill) – Second reading and remaining stages - Lord Duncan of Springbank
Domestic Gas and Electricity (Tariff Cap) Bill - Consideration of Commons amendments - Lord Henley
Addressing the incidence of obesity - Lord McColl of Dulwich