20 July 2018

Adam Shaw

20 July 2018

Good morning, 

Brexit may be the all-consuming political issue facing the UK at the moment. However, it shouldn’t be forgotten that, away from Westminster, people’s lives carry on more or less as normal. For now, anyway.
 
Which is why the publication yesterday of figures showing higher levels of recorded crime, particularly violent crime, in England and Wales should be of considerable concern to Theresa May. Not just because the rises have largely been attributed to falling police numbers, which May presided over during her six years as home secretary, but also because crime has always been one of the more salient issues for voters, along with the economy, education and health.
 
“Tough on crime, tough on the causes of crime,” was one of the mantras that helped propel Tony Blair to power in 1997.
 
“Prison works,” declared Michael Howard in 1993.
 
Except, is prison working? Not currently, according to David Gauke, the justice secretary. It should be a tool for “changing the lives” of criminals, rather than “punishment” or “retribution” Gauke has said in an interview with The Telegraph, highlighting that 60% of those handed short sentences go on to reoffend when they are released.
 
It’s a sharp pivot compared with the more traditional approach adopted by his Tory predecessors. Remember Chris Grayling’s book ban?
 
The Scottish government is extending the presumption against short sentences from three to 12 months, and figures from Norway suggest that rehabilitation does indeed produce better results, so it is encouraging that the UK government is starting to consider different approaches.
 
However, it’s worth noting that Gauke has not held any one position for more than 18 months since he was promoted to the cabinet. And, if he does manage to hold onto the justice portfolio, will he be able to convince his party that a new approach is the best route? Particularly with Brexit continuing to be by far the dominant issue?

News 

President Trump has invited President Putin to visit Washington in the autumn and discussions about arrangements are already underway. The development is the latest indication that Trump is doubling down on his Russian rapprochement strategy. It comes despite widespread criticism surrounding the Helsinki summit between the two leaders and a warning from Kirstjen Nielsen, the US homeland security secretary, that every US state should be prepared for attempts by Russia to interfere in November’s midterm elections.
 
Theresa May will demand that the EU “evolve their position” on Brexit in a speech in Belfast today and warn that MPs will veto the bloc’s proposed solution for the Irish border. Brussels has proposed that, in the event a deal cannot be reached, in order to prevent a hard Irish border, Northern Ireland would effectively remain in the EU single market and customs union. However, the government is opposed to anything that threatens the constitutional integrity of the UK.
 
Pressure is mounting on Julian Smith and Brandon Lewis to resign from their roles as chief whip and Conservative Party chairman, following allegations of underhand tactics during Tuesday’s crunch Commons Brexit vote. Smith reportedly told Lewis to participate in the vote, despite the fact he was part of a “pairing” agreement with Liberal Democrat MP Jo Swinson. Pairing is a key parliamentary convention by which an MP who cannot vote is paired with one from the opposite side, who agrees not to participate, so as not to affect the outcome of the vote.

 

Business & Economy 

Comcast is likely to become the new owner of Sky, according to the BBC. If and when confirmed, this would make Comcast the world’s biggest pay TV network and would mean that 21st Century Fox, owned by Rupert Murdoch, has failed in its bid to take full control of Sky. In addition, it is thought that Murdoch’s 39% stake in Sky could also be sold to Comcast, ending Murdoch’s long association with Sky News.
 
In the latest blow to the High Street, Poundworld is to close its remaining 190 stores by 10 August, resulting in the loss of 2,339 jobs. The discount retailer, which was founded in 1974, went into administration in June after struggling with tough competition from its rivals and being hit by the fall in the value of the pound following the result of the EU referendum. In total, the collapse of the chain, which operated 335 outlets, will lead to 5,100 redundancies.
 
On a similarly unfortunate note, Gaucho has gone into administration. As a result, the chain’s 22 Cau restaurants have closed immediately with the loss of 540 jobs. Deloitte, which is acting as the administrator, has said the 16 Gaucho restaurants will remain open as a buyer is sought for that part of the business. Matt Smith, joint administrator at Deloitte, highlighted that Gaucho is trading well and has strong customer loyalty.

Markets 

What happened yesterday?

Most major global stock markets ended the day down yesterday on the back of renewed concerns over the US-China trade dispute. This was due to comments from Larry Kudlow, director of the US National Economic Council, who said that discussions aimed at resolving tensions had stalled.
 
The S&P 500 fell 0.4% to 2,804.49, the Dow Jones Industrial Average was down 0.53% to 25,064.50, and the Nasdaq dropped 0.37% to 7,852.30.
 
However, the FTSE 100 bucked the trend, climbing 0.1% to 7,683.97. Unilever led the way, rising 3.03% after reporting a 2.7% increase in revenues in its half-year results. This was below the group’s 3-5% growth target; however, chief executive Paul Polman said that goal would be met for the full year.
 
Anglo American was the worst performer on the main index, shedding 4.08% despite reporting a 6% year-on-year increase in output in the second quarter. However, this figure excluded its Minas-Rio mine in Brazil where production has been suspended since March following two pipeline leaks. The site is not expected to re-open until the fourth quarter, costing the company $300 - $400 million in EBITDA.
 
On the currency markets, the pound was down 0.49% against the euro at €1.1174 but up 0.02% against the dollar at $1.3014.

Interims
Acacia Mining, Beazley, Kcell Joint Stock Co GDR (Reg S), Schlumberger Ltd.
 
Trading Announcements
KCOM Group, Record
 
AGMs
Homeserve, KCOM Group, Tata Steel Ltd GDR (Reg S)

UK Economic Announcements
(09:30) Public Sector Finances
 
International Economic Announcements
(07:00) Producer Price Index (GER)
(09:00) Current Account (EU)

 

Columns of Note 

In The Times, Ed Conway looks ahead to the next financial crash and warns that the UK could be hit harder than most. He highlights that the ending of capital controls between the world’s developed economies in 1961 means that, despite increasing levels of nationalism, the financial system which dictates boom or bust – the financial plumbing – has never been more global, and “no individual country can be safe unless the world as a whole is safe”. Conway points out that the world’s biggest debt bubble is now found in China, with the UK exposed by its $600 billion worth of banking links with Hong Kong and China – three times more than the next most exposed country.
 
Writing in The Telegraph, Fraser Nelson outlines how the Conservative Party could yet agree a united approach to Brexit. Nelson contends that, whilst Theresa May very much wants her Chequers plan to work, the Brexiteers see it as a trap set for Michel Barnier. If he takes the bait and rejects the plan out of hand, May has casus belli to begin preparing in earnest for a no deal Brexit. At the last minute, May could then tell the EU that she will accept something similar to the deals currently in place with Canada, South Korea and Switzerland, with the sense of urgency bringing the Tories together. Nelson concludes it may be unthinkable, but that “we are living in an era where once-unthinkable political events are happening all the time”.

Did you know?

Dr. Seuss’ publisher, Bennett Cerf, once made a bet with Seuss that he could not write an entire book without using more than 50 different words. The result wasGreen Eggs and Ham. 

Parliament highlights
 
House of Commons
 
No business scheduled
 
House of Lords
 
Legislation
 
Civil Partnership Act 2004 (Amendment) (Sibling Couples) Bill [HL] - Second reading - Lord Lexden
Children Act 1989 (Amendment) (Female Genital Mutilation) Bill [HL] - Second reading - Lord Berkeley of Knighton
European Union (Information, etc.) Bill [HL] - Second reading - Lord Dykes
 
Scottish Parliament
 
In recess until 3 September