20 November 2018

Scott Reid

20 November 2018

Good morning,

All is not well in Silicon Valley.

Whilst not quite plumbing the depths of would-be Tory rebels wishing to oust the prime minister, it is clear that the tech giants are “at war”. 

It’s been brewing. Facebook chief exec Mark Zuckerberg reportedly briefed 50 of his senior team in June that he was to take a more active role in operations as the company needed to act more quickly to see off looming fights with the press, Congress and his own executives. According to reports in The Wall Street Journal and The New York Times, Zuckerberg has now also started a feud with his chief operating officer Sheryl Sandberg over her team’s handling of the Cambridge Analytica scandal.  Perhaps predictably, Zuckerberg says newspaper reports that the company knew about Russian electoral interference are “bullshit”. 

Apple is no happier a ship it seems, as today’s morning papers report on comments made by its boss, Tim Cook, that tighter scrutiny of the industry is now “inevitable”. Speaking in an interview with the website Axios broadcast on HBO, Cook said that the sector had gone beyond being able to regulate itself and suggested the “free market is not working”. For his honesty – and piled on top of wider anxiety over iPhone production orders - Cook was rewarded with a five per cent drop in Apple’s share price during yesterday’s trading on the Nasdaq. 

Cook’s musings on the power of the free market to correct itself, however, might be missing the point. I’d counter that government regulation is only a natural response to any mature, successful industry.

Despite arriving on our screens or in our pockets nearly twenty years ago, and dominating the investment scene ever since, the tech giants still see themselves as the ‘new kids on the block.’ I find it hard to think of another industry of its size that has enjoyed a free pass on regulation for as long. 

Writing in the Financial Times, John Thornhill suggests there is a “third way” between Silicon Valley libertarian non-regulation and China’s authoritarianism – government scrutiny, certainly, but only in return for investment in start-ups to boost competition. He cites President Macron’s comments to the Internet Governance Forum last week, and points out that the sector benefits from already having identified its problems. 

The challenge now, Thornhill concludes, is simply for sector leaders to swallow the medicine.


Northern Ireland’s Democratic Unionist Party withheld their support for the government in a key finance bill, indicating their parliamentary alliance with the Conservatives could be in doubt. Voting on a bill which if passed, would have urged the government to review the impact of increases to the personal tax allowance on child poverty, the DUP abstained on three occasions and voted with the opposition on a fourth. (£)

Meanwhile, the governments of France, the Netherlands and Spain are reported to be pushing for further concessions in the political declaration that will accompany the Brexit withdrawal agreement. France and the Netherlands are thought to be seeking further guarantees on fishing rights as part of the “level playing field”, whilst Spain has allegedly requested any consideration of its future relationship with Gibraltar be considered separately. EU chief negotiator Michel Barnier has since warned EU governments against “reopening” negotiation. (£)

The Times reports that foreign secretary Jeremy Hunt is understood to be seeking an agreement with Iran of £400 million in return for the release of British charity worker, Nazanin Zaghari-Ratcliffe. The payment refers to a debt owed by the UK to Iran over 40 years, with many diplomats believing the concession a necessary move. A similar deal was proposed by Boris Johnson whilst foreign secretary but was blocked in cabinet. (£)

Business & Economy

The chairman of Nissan, Carlos Ghosn, has been arrested over claims that he under-reported his income “over many years”. Sky News reports that the carmaker is on the verge of sacking Ghosn with his firing likely to be approved at a board meeting on Thursday. Japanese authorities were alerted yesterday after a whistleblower alleged that Ghosn had used company funds of up to £34.5 million for personal purposes.

The Treasury has agreed to publish its forecasts comparing the “costs and benefits” of the government’s proposed Brexit deal with the UK remaining the EU and a ‘no-deal’ scenario. Robert Jenrick, exchequer secretary to the Treasury, made the concession yesterday evening in a bid to avoid defeat in parliament on the finance bill. The forecasts will be released ahead of parliament’s ‘meaningful vote’ to accept or reject the withdrawal agreement.

Foster and Partners have released plans for a new skyscraper, dubbed ‘The Tulip’, which if built would become the City of London’s tallest building. If approved, the development will house eight floors of public attractions, including a bar, restaurants and a “classroom in the sky”. Work would be scheduled to begin in 2020, with completion estimated for 2025.


What happened yesterday?

The London market dipped at the start of the week, despite a warm reception for the prime minister’s Brexit proposals as she presented to business leaders at an annual CBI gathering. At close of play, the FTSE 100 was down 0.19% or 12.99 points to 7,000.89, whilst pound was 0.07 higher on the dollar at $1.28 and 0.19% lower against the euro at €1.12.

On the corporate front, housebuilders Barratt Developments (down 2.21%) and Persimmon (down 1.03%) both fell, although Berkeley Group ( up 0.15%) was able to recoup early losses, as the latest Rightmove survey showed that house prices fell by 1.7% on the month in November – down from a one per cent increase in October. A backdrop of seller anxiety over Brexit and a seasonal downturn made this the largest November drop since 2012, with the largest annual decline of 1.7% in average sale prices seen in London.

The banking and retail sectors both rose after a bruising week, with standout gains from Lloyds Banking Group (up 2.44%) and Kingfisher (up 0.91%). On the FTSE 250, Babcock International (up 0.79%) was also on the up as it successfully quieted investor concerns over a rumoured write-down in its accounts. Sky News reported that Babcock’s helicopter business is due to report a £100 million hit, but the company suggested it does “not expect the net cash costs to be material”.

Compass Group
EI Group

AO World
Aveva Group
Accsys Technologies    
Bonmarche Holdings
Big Yellow Group         
CML Microsystems       
Scapa Group    
Solid State       
SRT Marine Systems
Telecom Plus 

Trading Announcements         
Polypipe Group
CAP-XX Limited
Jupiter US Smaller Companies  
Meikles Ltd.
Pan African Resources
SQN Asset Finance Income Fund Limited
Wilmcote Holdings NPV
UK Economic Announcements
(11:00) CBI Industrial Trends Surveys
Intl. Economic Announcements
(07:00) Producer Price Index (GER)
(13:30) Building Permits (US)
(13:30) Housing Starts (US)

Columns of Note

In the Financial Times, John Thornhill comments that Europe’s “third way” on internet regulation merits closer attention. Looking at President Macron’s comments to the Internet Governance Forum last week, Thornhill points out that Europe lacks any tech companies within the top 15 globally, having lost out to “first scalers”. He highlights that the sector looks to be moving its way, however - into already heavily-regulated areas such as healthcare and energy, and coinciding with governments’ data protection ‘agenda’. (£) 

Alex Massie comments in The Times that JK Rowling has emerged as the unlikely standard bearer of Western liberalism. Looking at the second film in the Fantastic Beasts and Where to Find Them series, Massie suggests Rowling is similar to other Scottish authors before her – including John Buchan – who have used their literature to cast comment on uncertain times. (£)

Did you know?

If the Earth were the size of a grain of sand, the sun would be an orange-sized object twenty feet away, Jupiter would be a pebble eighty-four feet in the other direction, and Neptune would be two football fields away.

Parliamentary highlights


House of Commons

Oral questions
Business, Energy and Industrial Strategy (including Topical Questions)

Ten Minute Rule Motion
Electric Vehicles (Standardised Recharging) - Bill Wiggin

Continuation of consideration in Committee of the Finance (No. 3) Bill - Day 2

Supporting British exports - Andrea Jenkyns

House of Lords
Oral questions
Introduction of a national register of convicted stalkers. - Baroness Gale

Food security post-Brexit in the event of no deal reached between the UK and the EU - Baroness Smith of Basildon

Roll-out of SMET2 smart meters. - Lord Lennie

Requests for safe passage, resettlement and granting of asylum to Asia Bibi and her family - Lord Alton of Liverpool

Civil Liability Bill [HL] - Consideration of Commons amendments - Lord Keen of Elie

Crime (Overseas Production Orders) Bill [HL] - Third reading - Baroness Williams of Trafford

Tenant Fees Bill - Committee stage (day 2) - Lord Bourne of Aberystwyth

Statement made by the Prime Minister in the House of Commons on Thursday 15 November relating to the EU exit negotiations - Lord Callanan

Scottish Parliament
Topical Questions (if selected)

Ministerial Statement
Implementation of Best Start Grant

Scottish Government Debate
Developing Scotland’s Digital Industries for our Economic Future

Members’ Business
Offshore Wind Week 2018 – Lewis Macdonald


House of Commons
Oral questions
International Development (including Topical Questions)

Prime Minister's Question Time

Ten Minute Rule Motion
Marriage and Civil Partnership (Consent) - Fabian Hamilton

Fisheries Bill - 2nd reading

Money Resolution
Fisheries Bill - Mel Stride

Potential effect of a VAT reduction on the tourism industry - Mr Alistair Carmichael

House of Lords
Oral questions
Sustainability of funding for women’s refugees. - Baroness Donaghy

Discussions with the Chambers of Commerce and Confederation of British Industry representatives about the economic effects of Brexit - Baroness Quin

Talks with the government of Saudi Arabia on human rights in that country - Lord Hoyle

Mental Capacity (Amendment) Bill [HL] - Report stage (day 1) - Lord O'Shaughnessy

Orders and regulations
Police, Fire and Crime Commissioner for North Yorkshire (Fire and Rescue Authority) Order 2018 – motion to regret - Baroness Pinnock

Draft Crime and Courts Act 2013 (Commencement No. 18) Order 2018 – motion to approve - Baroness Vere of Norbiton

Draft Crime and Courts Act 2013 (Commencement No. 18) Order 2018 – motion to regret - Lord Thomas of Gresford

Scottish Parliament
Portfolio Questions
Justice and the Law Officers

Stage 3 Proceedings: Scottish Crown Estate Bill

UK Legislation
Crime (Overseas Productions Orders) Bill
Offensive Weapons Bill

Members’ Business
Pancreatic Cancer Awareness – Clare Adamson