28 May 2019

Scott Reid

28 May 2019

Good morning,

Joseph Chamberlain, the Liberal MP and giant of UK politics is credited with the quote: “In politics, there is no use in looking beyond the next fortnight.”
These days we might well shorten that outlook to one bank holiday weekend, because as dawn broke on a gloomy Tuesday in Edinburgh, I was struck by the feeling that the political dynamic of the UK and Europe has changed in several important ways since writing this briefing just last Friday.
In the interest of brevity, let’s recap. Following a week of voting, European parliamentary election results yielded a better prognosis for pro-EU and governing parties than many expected and, for now, the breakneck pace of a populist surge on the continent seems to have slowed. In Austria, Sebastian Kurz’s government has collapsed over a corruption scandal. And back at home, Scotland’s first minister has suggested that the second half of 2020 would be the “right time” for a second Scottish independence referendum. The fact that the resignation of a prime minister only four days ago is all but absent from the morning’s papers is telling. Things move quickly around here.
That is to say nothing of the fact that almost every Tory MP you’ve ever heard of (and others you haven’t) seems to be in the running to succeed Theresa May. With Boris Johnson, Andrea Leadsom, Jeremy Hunt, Sajid Javid, Michael Gove and others having stated their intentions, and a rather more cryptic tweet thread by Jesse Norman on the need to return to conservative principles (it’s worth a read), I think we’re somewhere in the region of 10 pledged candidates.
The results of the EU election hang over this contest like a very dark cloud. Fresh from the party’s drubbing, securing only nine per cent of the public vote (which is, by the way, the Tories’ worst electoral performance in history), and four MEPs compared with the 29 of Nigel Farage’s Brexit Party, many Tory leadership contestants are in a race to prove they are more Brexity than the next man or woman and prepared to support no deal if it comes to it.
So far, so simple. But of course the parliamentary arithmetic hasn’t changed, and still means that any no-deal supporting PM is highly likely to lose a confidence vote and prompt a general election, which as Thursday’s poll highlighted, might not be in the Tories’ interest. Labour’s equally poor showing means Jeremy Corbyn could be a whisker away from supporting a second referendum. And as the stark contrasts of the UK electoral map now show, Scotland and large parts of England and Wales who voted for the Lib Dems, SNP, Greens or Plaid Cymru are safe Remain territory (just don’t mention Change UK).
The new politic is all about the pace of change and it’s a pace you feel that even Joseph Chamberlain could barely comprehend.


Israel is facing the likelihood of another general election following parliamentary deadlock to form a government in the wake of an initial poll on April 9. A deadline for incumbent prime minister Binyamin Netanyahu to form a working majority passes at midnight tomorrow with conflict having arisen over a law allowing government to conscript religious students. In an effort to pre-empt the opposition parties forming a government, Netanyahu has moved a vote on dissolving the Knesset, which would see fresh elections within three months.
China increased its subsidies to domestic companies to $22 billion last year as it sought to mitigate the impact of US tariffs. The data revealed by financial database Wind is likely to aggravate US negotiators as talks between Washington and Beijing resume this week, with criticism centred on suggestions that Chinese state support is leading to overcapacity. (£)

Business & Economy

Fiat Chrysler has proposed a 50% merger with Renault to create a car manufacturing “world leader” worth up to €33 billion. A statement from Fiat Chrysler said the new company would produce 8.7 million vehicles annually, and would be able to save $5 billion by pooling research and purchasing power. According to Sky News, the companies have been progressing merger talks for weeks, with Renault’s board due to meet this week to agree a strategy.
The founder of Cobra Beer, Lord Bilimoria, is being lined up as the next president of the Confederation of British Industry (CBI), Sky News reports. An announcement is expected later this week on the potential successor to Tesco chairman, John Allan, whose two-year presidency ends next summer. If confirmed, the appointment would be seen to be a political choice for the CBI, given Lord Bilimoria’s outspoken support for a second EU referendum.
Aviva is preparing to split its UK insurance businesses in an announcement expected next week, the Financial Times reports. Aviva’s incoming chief executive Maurice Tullocj begins in post on June 6 when he will update investors on his strategy to “re-energise” the company, with one of those options being to separate Aviva’s life insurance business from its other divisions, reversing a 2017 decision to merge its main groups. (£)


The week ahead
Bank holidays in both the US and UK afforded both a quieter diary for corporate announcements at the start of the week, and time to digest the latest political developments. While Europe picked over the spoils of Sunday’s European parliament election results, President Trump continued his visit to Japan, meeting the country’s new emperor and holding trade talks. Back on home shores, Vice President Pence will hold talks with Canada’s prime minister Justin Trudeau on accelerating the ratification process for the new US, Canada and Mecio Trade agreement (USMCA).
Central banks in Kenya, Ghana, Hungary, Canada and South Korea will meet to set their latest interest rates this week. None are expected to make any changes, but there is the possibility Sri Lanka will cut interest rates on Friday.
In corporate news, several trading updates from US retailers, most notably, Costco, are expected to underline the strength of the US economy. On Wednesday and Thursday, watch out for names including Abercrombie & Fitch, Canada Goose, Calvin Klein parent KVH and Gap.
Rounding off the week will be closely-watched PMI data from China. As Sino-American trade relations worsen, expect global markets to react badly on Friday if the data shows a slowing of growth.

Altitude Group
Amigo Holdings
Kainos Group
Trading Announcements
Oxford Biodynamics
Bonhill Group
Comptoir Group
Eddie Stobart Logistics
Gulf Marine Services
IP Group          
Matomy Media Group Limited (DI)
Smart Metering Systems
Triple Point Social Housing Reit
Yolo Leisure and Technology

UK Economic Announcements
(09.30) BBA Mortgage Lending Figures
Intl. Economic Announcements
(07:00) GFK Consumer Confidence (GER)
(07:00) Import Price Index (GER)
(09:00) M3 Money Supply (EU)
(10:00) Business Climate Indicator (EU)
(10:00) Consumer Confidence (EU)
(10:00) Economic Sentiment Indicator (EU)
(10:00) Industrial Confidence (EU)
(10:00) Services Confidence (EU)
(15:00) Consumer Confidence (US)

Columns of Note

Ian King writes in The Times on a growing apathy among corporate leaders for roles in publicly-listed companies. Faced with excessive bureaucracy and so-called “box ticking exercises”, King observes that many are choosing private equity paths which allow them to get on with the business of actually running a company. For UK plc, King suggests this should be cause for concern. (£)
In the Financial Times, Gideon Rachman suggests the main takeaway from the EU elections is the decline in support for Europe’s centre-right and centre-left parties. He predicts this will undermine the structures and decision behaviours of the EU institutions, adding to a climate of uncertainty and inertia in a time of economic and political crises. (£)

Did you know?

When chili peppers were first introduced to Japan, people did not eat them.  Instead, they would put the peppers in their socks to keep their toes warm.

Parliamentary highlights

House of Commons
In recess until Tuesday 4 June 2019
House of Lords
In recess until Tuesday 4 June 2019
Scottish Parliament
Topical Questions (if selected)
Stage 1 Debate
Children (Equal Protection from Assault) (Scotland) Bill
Committee Announcements
Members’ Business
SAMH Report on Universal Credit and Mental Health – Mary Fee
Scottish Parliament
Portfolio Questions
Scottish Labour Party Debate
Members’ Business
Expanding Scotland’s Railways – Mark Ruskell