3 July 2018

Lyle Hill

3 July 2018

Good Morning, 

Surprising few, the embattled German Chancellor, Angela Merkel, leader for the past 13 years, turns out to be quite adept at gritty political negotiations.

Late last night, it was announced that after further intense discussions, she had struck a compromise deal with the leader of the CSU and her interior minister, Horst Seehofer over immigration policy. 

The disagreement over policy had threatened to put Merkel's three month old government at risk of collapse and destroy a 70 year old alliance between Merkel's CDU and its Bavarian sister party the CSU. The issue had led many commentators to believe that Merkel is on the brink, and if this problem did not topple her then something else in the near future would.

But as we saw in her coalition negotiations, Merkel is not willing to go without a fight. The agreement reached will see the creation of transit centres on the German-Austrian border for any asylum seekers who have been registered in other EU countries. From there, these asylum seekers could be sent back to the countries responsible for them.

On Sunday, Seehofer had offered to resign from his position as CSU leader and interior minister, prompting fears of an internal power struggle in his party that could see it move further to the right in an attempt to stave off the Alternative for Germany party.

Seehofer's hardline stance had been seen by many as evidence that the CSU is worried about the threat from the hard-right party, as polls show the party winning only 34% of the vote in Bavaria, down from 48% in the last regional vote.

While this recent crisis over immigration seems to have been averted, and Merkel has kept her government afloat, if polling continues to show a decline in the fortunes of the CDU and the CSU, it may well rear its head again in the near future.


Theresa May's compromise Brexit customs plan, designed to bring together her Cabinet, only led to more Tory infighting yesterday. Both wings of the party have criticised the proposal, forcing May and her team to arrange face-to-face talks with senior ministers in order to convince them of the new plan. Number 10 only has until Friday, when the Cabinet is due to meet at Chequers, to convince sceptics of the merits of her deal.

Twelve Thai boys and their football coach, trapped in a cave network for nine days, have been found alive. However, the group will either need to learn how to dive or face a four month wait inside the cave for flood water to recede, allowing them to escape. The Army posted a video of the group last night and plans to bring further supplies, whilst also hoping to install telephone lines to make contact easier.

According to a report in The Guardian, the Government is considering raising fuel and alcohol duty for the first time in eight years, netting billions for the Treasury to help pay for increased spending on the NHS and other departments that are under strain, whilst continuing to reduce the deficit. However, the move could anger backbenchers who are worried about the rise in the cost of living that would accompany any policy.

Business & Economy 

Following significant investments in data analysis and collection from the Office of National Statistics, from next week Britain will become the world's first advanced economy to release GDP data on a monthly rather than quarterly basis. The figures released on the 10th July are expected to show a recovery in GDP growth for the three months to May.

Higher business rates, which increased 3% in April, are hitting high street retailers.Along with poor UK consumer confidence, the popularity of online shopping and higher wage bills for staff, the higher rates have come as online stores received a tax break. The average tax bill for department stores has risen 26.6% in 2018 compared to 2016.

The US Chamber of Commerce, America's largest business group, has called for President Trump to reverse his trade tariff policy. The group is set to launch a campaign against the tariffs and believes if the policy leads to a full blown trade war it puts 2.6 million US jobs at risk, as the size of retaliatory tariffs reaches $75 billion.


What happened yesterday?

There was a steep drop on the FTSE 100 yesterday to start the week. The main index closed down 1.17% or 89.08 points to 7,547.85. However, unusually, this was accompanied by a drop in sterling, which dropped 0.5% agains the US dollar to $1.31358.

The big news in the retail sector yesterday was Tesco's strategic alliance with France's largest supermarket chain Carrefour to combine their buying power to secure lower prices for consumers. The relationship will initially last three years and will cover global suppliers, the joint purchasing of own brand products and goods not for resale.

However, the market didn't react as positively as many would have expected. Tesco shares slipped 0.23% on the announcement. So did shares in Tesco's supplier base;, McBride was down 2%, Bakkavor and Hilton Food were down 0.8%, Unilever fell 0.7% and Cranswick also fell 0.5%. 

In another counter-intuitive share price drop, AstraZeneca fell despite its announcement that rapid regulatory approval had been achieved for two of its important cancer drugs in Japan. It closed down 1.35%.


Solid State
Harwood Wealth Management Group
St Modwen Properties
Big Sofa Technologies Group
Prospex Oil and Gas

UK Economic Announcements
(09:30) PMI Construction
International Economic Announcements
(10:00) Retail Sales (EU)
(11:00) Producer Price Index (EU)
(15:00) Factory Orders (US)
(20:30) Auto Sales (US)


Columns of Note 

Ed Vuliammy, writing in the Guardian, takes a look at the election in Mexico, and argues that the way to end the country's problem with drugs is not to give amnesty to traffickers, as is being suggested by the new president.

Rachel Sylvester, writing in The Times, tackles the Conservative Party infighting, which she suggests is turning politics in the UK into a farce. She believes that when the country needs grown ups, instead it has been left with a Cabinet of petulant children.

Did you know? 

Jimmy Carter, the 39th President of the United States, was the first to be born in a hospital. He was born at Wise Clinic in Plains, Georgia, on October 1st 1924.

Parliamentary Highlights 

House of Commons
Oral Questions
HM Treasury (including Topical Questions)
Ten Minute Rule Motion
Pets (Theft) – Ross Thomson
Estimates Day
4th allotted day - The spending of the Department for Education - Mel Stride
4th allotted day - The spending of Her Majesty's Treasury on grants to the devolved institutions - Mel Stride
Main Estimates 2018-19 - Mel Stride
House of Lords
Oral Questions
How many social homes for rent the Government estimate will be built under the affordable housing programme - Baroness Thornhill
Increases in customer water bills and levels of remuneration paid to water company executives - Baroness Jones of Whitchurch
Replacing the House of Lords with an elected second chamber - Baroness Jones of Moulsecoomb
Ensuring provision for women in the prison system is properly funded - Baroness Burt of Solihull
Refugees (Family Reunion) Bill [HL] - Third reading - Baroness Hamwee
Report from the Select Committee on Political Polling and Digital Media 'The politics of polling' - Lord Lipsey
Report from the European Union Committee 'Brexit: reciprocal healthcare' - Lord Jay of Ewelme

Scottish Parliament
In recess until 3 September


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

Prime Minister's Question Time

Presentation of Bill

Rail Passenger (Compensation) - Bim Afolami

Proceedings on the Supply and Appropriation (Main Estimates) Bill - 2nd and 3rd readings
Ivory Bill - remaining stages

House of Lords
Oral Questions
Commissioning an independent review of the Brexit negotiations after March 2019 - Lord Strasburger
Impact on financial exclusion of (1) bank branch closures, and (2) moves to restrict the use of cash as a means of payment - Baroness Tyler of Enfield
Outcomes of the Western Balkans Summit in London in July - Lord Wallace of Tankerness
Supporting high street retailers and strengthening town centre economies -Baroness Pinnock

Haulage Permits and Trailer Registration Bill [HL] - Consideration of Commons amendments - Baroness Sugg
Domestic Gas and Electricity (Tariff Cap) Bill - Third reading - Lord Henley
Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill - Report stage - Lord Bourne of Aberystwyth

Scottish Parliament
In recess until 3 September