7 December


7 December

Good morning,

The National is known for its imaginative front pages, with their use of photoshop often provoking a groan. But I’ll admit that their front page today is amusing (although it doesn’t quite beat yesterday’s effort from the Cambridge News). Below a blank space, the Scottish independence supporting paper invites readers to help the UK government by writing or drawing what they think the impact of Brexit will be, and then tweeting a picture.

Now, of course, the publicity benefits of Twitter being filled with pictures of its front page are clear for The National. But the premise is more serious.

David Davis’ revelation before the the Brexit Select Committee yesterday that the government has not conducted impact assessments on the implications of leaving the EU for different sectors of the EU economy was startling.

This is despite Davis saying on several occasions that the government has carried out significant analysis in this area.

The issue, it appears, is one of language. The term ‘impact assessment’ is a specific Whitehall one - a formal piece of work carried out using pre-prepared forms and terminology that accompanies a bill when it is presented to parliament. Of course, at this stage, Brexit is neither a bill nor a white paper. Oliver Wright provides a useful explanation of the terminology in The Times, saying “MPs have fallen for a classic Whitehall trap right out of Yes Minister”.

One area where some homework probably would have helped is on the issue of the Irish border. Theresa May has been warned that she has 48 hours to come up with a solution, or negotiations will not be able to move on to phase two at next week’s summit of European leaders.


An analysis of gender pay gap data by the Financial Times has shown that one in 20 UK companies which have submitted data to the government have reported numbers that are “statistically improbable and therefore almost certainly inaccurate”. Fifteen companies from a range of sectors and all with more than 250 employees stated that they had zero average gender pay gap as measured by both the mean and median. However, this has been described as “highly anomalous” for companies of this size as the two statistics measure different things.
As expected, President Trump has formally recognised Jerusalem as the capital of Israel. Speaking from the White House, Trump stated that he was delivering on a campaign promise, and that he had made his decision as it was “in the best interests of the United States of America and the pursuit of peace between Israel and the Palestinians”. The move has sparked anger in the Arab world, with Palestinian President Mahmoud Abbas responding by saying the US could no longer be a peace broker.
Australia’s parliament has passed a cross-party bill allowing two people to marry regardless of gender after a national postal survey gave unstoppable momentum to reform. Just four MPs voted against the bill in the House of Representatives and Australia becomes the 24th country to legislate for equal marriage. Same-sex couples hoping to marry in Australia will have to wait until the new year, whilst thousands of marriages registered in countries that already allowed equal marriage will be recognised automatically.
The spat between the Treasury and Ministry of Defence shows no sign of abating after Philip Hammond questioned Gavin Williamson’s understanding of the military. Appearing before MPs, the chancellor said: “I expect that once he has had a chance to understand the situation in the Ministry of Defence, and to get his head around the defence budget, the new defence secretary will be wanting to come and talk to me and he will find no one more sympathetic to the challenges of defence than me.”

Business and Economy

Bill Winters, chief executive of Standard Chartered, has told the BBC that he was “preparing for the worst” with regards to Brexit. The bank is currently turning its Frankfurt office into a subsidiary – a move which requires additional capital, licences and staff, and which Winters described as “inconvenient and expensive”. He also criticised restrictions on student visas, saying this was affecting the ability to attract the best talent.
The IMF has warned that China could be the epicentre of the next global financial crisis due its growing levels of debt. In a health check of the country’s financial system, the IMF praised President Xi Jinping for his commitment to financial security but said that reforms had not gone far enough, with debt growing amid a slowdown in productivity.
The Children’s Investment Fund (TCI) has received a setback in its bid to remove the chairman of the London Stock Exchange Group. Institutional Shareholder Services (ISS), which is seen as influential amongst fund managers, told its clients that there wasn’t a “sufficiently convincing case” for Donald Brydon’s immediate removal. The vote instigated by TCI chairman Sir Christopher Hohn will take place in two weeks.
An assessment by the Organisation of Economic Co-operation and Development (OECD) has found that up to 100,000 “zombie companies” – defined as being more than 10 years old and having “persistent problems meeting their interest payments” –  are holding back the economy by soaking up the capital that could be used by successful businesses. This is one of the reasons for the UK’s weak productivity growth, the OECD said.


What happened yesterday?

The FTSE 100 ended the day up 20.53 points, or 0.3%, at 7,348.03.
Whitbread, the owner of Premier Inn and Costa, jumped by 7.6% - it’s biggest surge in eight years – on the back of news that activist investor Sachem Head Capital Management holds 3.4% of voting rights. Barclays research was cited in the Financial Times, suggesting that the two most obvious routes for Sachem Head to pursue are a disposal of Costa and a sale and leaseback of assets. Although the market values Costa at just nine times earnings, recent deals in the coffee shop sector have seen such valuations in the high teens.
British American Tobacco gained 3.7% after reports in the Japanese media that the government would raise tax rates gradually in heat-not-burn (HnB) pipes. Imperial Brands, which does not currently have a HnB product on the market, also saw a bump, rising 1.7%.
Property developer Hammerson was amongst the fallers, shedding 6.2% after it made an all-share offer for highly indebted Intu Properties.
Meanwhile, on the FTSE 250, Intu Properties gained 13.6%, while recruitment agents Hays and PageGroup dropped 3.8% and 4.8% respectively due to Deutsche Bank downgrading their ratings to “sell” from “hold”.
On the currency markets, the pound fell 0.47% against the dollar to $1.3379 and was 0.22% weaker against the euro at €1.134, whilst the value of virtual currency bitcoin hit a fresh high of more than $12,000. This means that the total market value of bitcoin is approximately $213 billion – more than twice the market cap of Goldman Sachs.
Several financiers and economists have warned of the danger posed by bitcoin’s value, with Stephen Roach, a senior fellow at Yale University and formerly chief economist at Morgan Stanley describing it as a “toxic concept for investors” and a “dangerous speculative bubble”.

CareTech Holding

Clipper Logistics, Smith (DS)

Trading Announcements

Aeorema Communications, Fidelity Asian Values, Frontier IP Group, Foresight Solar & Infrastructure VCT, MJ Gleeson, Hemogenyx Pharmaceuticals, Henderson International Income Trust, Investment Company, Lok’n Store Group, Brighton Pier Group, Sanditon Investment Trust

UK Economic Announcements
(08:30) Halifax House Price Index

International Economic Announcements
(07:00) Industrial Production (GER)
(10:00) Gross domestic Product (EU)
(13:30) Continuing Claims (US)
(13:30) Initial Jobless Claims (US)
(19:00) Consumer Credit (US)

Columns of Interest

Writing in The Times, Iain Martin contends that Theresa May’s lack of ability in the areas of political management, wise questions, elementary curiosity and statecraft means she beats other contenders to the title of weakest prime minister in history. He calls for urgent change, stating that no potential alternative is perfect but that key figures need to agree on a replacement immediately and get on with it.

In the Financial Times Big Read, Jim Pickard and Sarah Gordon argue that, despite continuing suspicion, Labour’s backing for a softer Brexit means that business could learn to live with a hard-left Labour government led by Jeremy Corbyn.

Did you know?

According to one study, Christmas party hangovers cost the UK economy £541 million last year.

Parliament highlights


House of Commons

Oral Questions: Environment, Food and Rural Affairs (including Topical Questions)

Business Statement: Business Questions to the Leader of the House - Andrea Leadsom

Backbench Business

Debate on a motion on prison reform and safety - Robert Neill

UK fishing industry - Mrs Sheryll Murray

House of Lords

Oral Questions

Supporting councils to provide emergency housing to help those who have been made unintentionally homeless - Baroness Gardner of Parkes

Supporting the care sector and those receiving care, in the light of the change in guidance on the application of the national minimum wage to sleep-in shifts for care workers - Baroness Hollins

Number of youth orchestras in the UK - Baroness Bonham-Carter of Yarnbury

Government red lines in their negotiations with the EU over Brexit - Lord Robathan

Scottish Parliament

General Questions

First Minister’s Questions

Ministerial Statement: Improving Scotland's Air Quality - Putting in Place Scotland's Low Emission Zones

Scottish Government Debate: Sea Fisheries and End Year Negotiations


House of Commons

No business scheduled

House of Lords

Debate: Role of education in building a flourishing and skilled society - The Lord Archbishop of Canterbury

Scottish Parliament

No business scheduled