7 December 2018

Adam Shaw

7 December 2018

Good morning,

Ahead of Tuesday’s crucial Commons vote on the Brexit deal, all the talk has been about whether Theresa May has the numbers to get the current deal through parliament (spoiler: she hasn’t).
 
Estimates suggest that more than 400 MPs – including almost 100 from the prime minister’s own party – are expected to reject the deal, leaving her short by around 90 votes.
 
The man with the unenviable task of turning this around, which he himself understatedly describes as “an uphill challenge”, is chief whip Julian Smith. Although, in private, Smith is reported to have conceded that the government will lose the vote.
 
Whipping is usually considered the “dark art” of politics, by which party enforcers ensure – by hook or by crook – that their elected members vote the way they’re supposed to. This reputation is, of course, helped by political dramas like House of Cards and The West Wing.
 
Real life occupants of the office have gone to great lengths to maintain this ruthless image. For example, Gavin Williamson, Smith’s predecessor and now defence secretary, kept a tarantula in his office when he was chief whip, and once said: “I don’t very much believe in the stick, but it’s amazing what can be achieved with a sharpened carrot”.
 
In part, the mystery is sustained by the process being conducted behind closed doors. However, yesterday, we were offered a glimpse into this world by ITV’s Paul Brand, who spent a fortnight filming the behind-the-scenes operation to deliver the vote.
 
The footage made it abundantly clear just how big a battle the Tory whips have on their hands.
 
In one scene, Smith is filmed attempting to persuade notorious Brexiteer Philip Davies to support the government.
 
Smith: “Are you feeling any better about the deal on Tuesday? Have we got your support?”
 
Davies: “No.”
 
Smith: “Okay.”
 
Not quite Francis Underwood.
 
Cabinet ministers are reported to have confronted May during a crisis meeting in Downing Street last night, where they discussed their options, including the postponement of the vote. However, they are said to have been left frustrated by the prime minister’s refusal to commit to a clear path.
 
Just another sign of the most dysfunctional government in living memory? Well, you might very well think that; I couldn’t possibly comment.

News

O2 and Ericsson, a supplier to the mobile network operator, have issued a joint apology for disruption to data services which lasted all day yesterday. The problems, which began at 5.30am on Thursday, affected millions of O2 customers and had knock-on effects for services which rely on O2 infrastructure, including Sky Mobile, Tesco Mobile, Lyca Mobile and GiffGaff. The issue was attributed to faulty software and Ericsson president Börje Ekholm said "a complete and comprehensive root cause analysis" was in progress. Services have now been fully restored, according to a statement on O2’s website.
 
ITV has abandoned plans for a Brexit debate on Sunday night, meaning there is now little chance of a televised head-to-head encounter between Theresa May and Jeremy Corbyn ahead of next week’s vote in parliament. Despite two weeks of negotiations, Downing Street reportedly refused to sign up to the proposed head-to-head format. This follows the announcement that the BBC had withdrawn its bid to host a debate after the Labour leadership refused to participate if representatives of minor parties and proponents of a second referendum were included. Channel 4 had said it will push ahead with its plans to host “The Real Brexit Debate”, featuring other politicians.
 
Eight schools and colleges had more students offered places at Oxford and Cambridge in the last three years than three quarters of all other schools combined, according to an analysis of UCAS admissions data undertaken by the Sutton Trust. The Sutton Trust has not been able to disclose the eight schools and colleges referenced – a condition attached to obtaining the data – however, it is understood Eton, Westminster School and St Paul’s School all feature on the list.
 
Kevin Hart has stepped down as the host of the 91st Academy Awards just three days after he was announced as the host of the ceremony. This followed the emergence of social media posts in which he used homophobic slurs. In a tweet, the comedian said he had made the decision to step down because he did not want “to be a distraction on a night that should be celebrated by so many amazing talented artists” and apologised to the LGBTQ community.

Business & Economy 

Huawei has reportedly agreed to demands from UK security officials, and will address serious risks found in its equipment and software in order to avoid being shut out from future 5G telecoms networks. UK officials have repeatedly stressed that their concerns are based on technical shortcomings rather than the company’s Chinese origins, however, the arrest of Meng Wanzhou, a senior Huawei executive, has forced the UK to take a tougher stance.

Keith Williams, the deputy chairman of the John Lewis Partnership and former British Airways chief executive, who is leading a year-long review of UK railways, has refused to rule out recommending nationalisation to the government. Williams’ review was established to suggest the most appropriate organisational and commercial frameworks for the rail network. His findings and recommendations are due to be published in a government white paper in the autumn of 2019, with “reform of the sector” scheduled to begin in 2020.

The chief executive of the Pension Protection Fund (PPF) Oliver Morley has written to Frank Field, chair of the Work and Pensions Select Committee, to highlight concerns that Johnston Press’ pre-pack administration agreement was rushed and attempts to secure a rescue deal were inadequate. The newly-formed company JPIMedia bought out the publisher of The Scotsman and The Yorkshire Post following a pre-pack deal with creditors in November. 

Markets

What happened yesterday?

Global stock markets tumbled yesterday after the arrest of Meng Wanzhou, chief financial officer and deputy chairwoman of Chinese telecoms giant Huawei, by Canadian authorities acting in response to a US extradition request. This was a major escalation in tensions and prompted renewed fears of a trade war between the world’s two largest economies.
 
In Asia, the Shanghai Composite Index fell 1.68% to 2,605.18, Hong Kong’s Han Seng dropped 1.82% to 1,610.60 and the Nikkei was down 1.91% to 21,501.62.
 
Europe followed suit, with the DAX down 3.48% to 10,810.98 and the CAC 40 shedding 3.32% to 4780.46.
 
Here in the UK, the FTSE 100 hit a two-year low in its biggest daily drop since the EU referendum. The index fell 3.15% to 6,704.05 – meaning 18 years of gains have been wiped out. In addition to trade tensions, the strength of Sterling also played a role, with investors cutting their bets on the likelihood of a no-deal Brexit.
 
Just three constituents made progress during the session. Randgold Resources was up 2.73%, Fresnillo climbed 1.08% and Severn Trent rose by 0.05%. Antofagasta led the losses, tumbling 7.07%.
 
The FTSE 250 did not fare much better, seeing a 2.83% fall.
 
Across the Atlantic, US stocks also nosedived but staged a late rally, cancelling out much of the day’s losses. The S&P 500 ended the session down just 0.15% and the Dow Jones Industrial Average fell 0.32%, whilst the Nasdaq managed climb 0.42%.
 
On the currency markets, the pound was up 0.11% against the euro at €1.1234 and gained 0.42% against the dollar at $1.2784.

Interims
Berkeley Group Holdings (The)
 
Trading announcements
James Halstead, S&U
 
AGMs
Associated British Foods, Akers Biosciences Inc., Conroy Gold & Natural Resources, Green Reit, Henderson International Income Trust, James Halstead, Karelian Diamond Resources, SimiGon Ltd. (DI), Zinc Media Group

UK Economic Announcements
(07:00) Halifax House Price Index
 
International Economic Announcements
(07:00) Industrial Production (GER)
(10:00) Gross Domestic Product (EU)
(13:30) Non-Farm Payrolls (US)
(13:30) Unemployment Rate (US)
(15:00) U. of Michigan Confidence (Prelim) (US)
(15:00) Wholesale Inventories (US)
(20:00) Consumer Credit (US)

Columns of Note

Writing in The Times, Ed Conway asserts that the devaluation of sterling since 2016 is not simply to do with Brexit, but rather the continuation of a decades long trend, pointing to the fact that sterling has lost more value since the 1960s than any other currency in the world. However, he argues that that once you adjust for lurches in 1976, 1992 and 2008 the UK’s situation is a lot less worrying. Conway goes on to highlight that decades spent as a global player means British investors hold trillions of pounds of assets overseas – “the family silver” – which can be cashed in over many years, and investors continue to put money into the UK, concluding that the pound should not be written off yet.
 
In The Telegraph, Fraser Nelson examines who might succeed Theresa May as Conservative Party leader and prime minister if – as expected – she suffers a record Commons defeat on Tuesday. He contends that there are obstacles in front of all the leading candidates, and acknowledges that the “winner tends to be the one with the least enemies” or “the last person standing when the shooting finally stops”. However, Nelson also states that it would be a brave to bet against May’s survival, particularly if the Tories cannot come to an agreement on what comes next.

Did you know?

In Spain, it is tradition to eat 12 grapes – one with each bell strike at midnight on 31 December – to bring in the new year. 

Parliamentary highlights

TODAY
 
House of Commons
 
No business scheduled
 
House of Lords
 
No business scheduled
 
Scottish Parliament
 
No business scheduled