8 February 2019

Scott Reid

8 February 2019

Good morning,

Mark Zuckerberg is having a tough old time of late.
I mean, only two years ago he was spotted patting cows in Iowa in perhaps the most poorly-disguised early presidential election bid of the century and now he’s fighting a rear-guard defence for Facebook.
The social network has become a byword for data manipulation and misinformation. Gone are the days of believing Facebook just wants us to connect with friends and that the biggest danger we’ll face are endless FarmVille invites.
This morning, we read that Germany will impose new limits on how Facebook collects user data between its sites and apps after the government claimed it had abused its market dominance. And in the UK, political pressure yesterday forced its subsidiary photo-sharing app, Instagram, to vow to remove all images of self-harm from its platform following accusations that they had influenced the death of 14-year old, Molly Russel in 2017.
Internal murmurings also suggest something is afoot. On Wednesday, Facebook quietly announced that two of its top comms execs – Caryn Marooney, vice-president of communications, and Debbie Front, vice-president of international and policy communications – were to depart.
Meanwhile in Asia, Facebook is said to be preparing to label all political ads in India ahead of this year’s general election, and in Myanmar it has attracted criticism from human rights groups after banning four ethnic armed separatist groups from its site.
The combined impression is that Facebook has been late to listen to its critics in government and is suffering as a result.
As in all industries, the solution can only ever be more transparent cooperation with government - on data issues as much as paying a fair share of tax. Fail to do that and you simply look like you’re up to something. The consumer will eventually stop playing ball, or FarmVille in this case.


Theresa May has promised the EU she can get her Withdrawal Agreement through parliament if a legally-binding time limitation is introduced to the Irish backstop. Although EU leaders ruled out the offer when the prime minister met with them in Brussels yesterday, sources suggest they were optimistic that a new offer by Jeremy Corbyn would lend Labour’s support to the deal if it included a new customs union, parity of workers’ rights and participation in EU agencies and funding programmes.
A body recovered from the wrecked of a crashed plane found in the English Channel has been identified as that of Cardiff City player Emiliano Sala. The discovery was made on Wednesday and was confirmed by Dorset Police late last night. His pilot, David Ibbotson, remains missing.
France has recalled its ambassador to Italy after the Italian government held talks with the leaders of the gilet jaune movement. Italian Deputy Prime Minister Luigi Di Maio  met protesters near Paris on Tuesday despite warnings from the French government not to interfere in domestic politics. Posting a photo of the meeting on Twitter, Di Maio wrote that “the wind of change has crossed the Alps.”

Business & Economy

The Bank of England has suggested that there is a one in four chance that the UK economy could fall into recession in 2019. Unveiling its latest forecasts for UK economic growth yesterday, the Bank revised down the forecast for 2019 to 1.2% and 1.5% in 2020 – the slowest forecasted growth since 2009. The Monetary Policy Committee also voted unanimously to maintain interest rates at 0.75%.
Edinburgh may become the first UK city to introduce a “tourist tax” after local councillors voted 43-15 in favour of the proposal. Under the scheme, visitors would face an additional £2-a-night charge for every room during the first seven days of their visit across all accommodation excluding campsites. MSPs will now have to pass enabling legislation for the tax to be enforced from 2020.
Flybe may be wound up if shareholders do not back a sale to a consortium led by Virgin Atlantic and Stobart Air. The airline’s board agreed the £2.2 million sale to Connect Airways group last month, but the deal now requires investor approval at a meeting scheduled for 4 March according a company statement.


What happened yesterday?

The FTSE followed a downturn across global markets following worrying growth reports by the Bank of England and European Commission. By close of play, the top-flight FTSE 100 was down 1.1% to 7,093.58 points. The Bank in particular, suggested UK growth would be just 1.2% during 2019 (down from 1.7%) and 1.5% in 2020 – marking the slowest growth since the recession in 2009.
The latest housing data from Halifax also showed house price growth slowing to 0.8% year-on-year in January, down from 1.3% in December, and missing expectations for a 1.5% increase. House prices were down 2.9% in January, with EY ITEM club warning that a no-dea Brexit could lead to an overall fall of 5% in 2019.
Corporates on the slide were tour operator TUI (down 19.38%), who tanked after blaming an earnings cut on better weather, and ad giant WPP (down 8.38%), who reported weaker-than-expected fourth-quarter organic revenues. Oil firm Petrofac made a dent in the wider sector after one of its former executives pleaded guilty to 11 counts of bribery as part of an ongoing investigation by the Serious Fraud Office. Shares in online grocery retailer Ocado (down 9.77%) continued to plunge as a major fire at its warehouse in Hampshire continued to burn.
On the upside, catering company Compass (up 3.66%) rallied as it reported 6.9% growth in organic revenues in the final quarter of 2018 driven by new business wins, and a new UK defence contract. Smith & Nephew (up 5.715) joined it at the top of the day’s gainers having reported a seven per cent jump in trading profit to $1.1 billion alongside the launch of a new strategy.
Sterling made a late rally, climbing 0.3% on the dollar at $1.30 and 0.4% on the euro at €1.14.

Trading Announcements         

UK Economic Announcements
(09.30) GDP (Preliminary)

Intl. Economic Announcements
(07.00) Balance of Trade (GER)
(07.00) Current Account (GER)
(13.30) Wholesales Inventories (US)
(15.00) U. of Michigan Confidence (Prelim) (US)

Columns of Note

In The Spectator, Ross Clark writes that the automative industry’s challenge lies in waking up to innovation rather than the disruption of Brexit. He argues that the likes of Nissan are facing trouble only because they have allowed the industry disruptors to bypass them in terms of electronic cars, low-emissions, ride-sharing, driverless technology, and urban adaptability. Innovation will trump scale in the longer war between carmakers, Clark predicts.
Alan Cochrane writes in The Telegraph that Brexit may yet lead to the break-up of the UK. He casts doubt on current polling, suggesting that a sea change is underway in Scottish society, driven by confusion, mixed messages and general chaos at Westminster. He spots intelligent thinking on the reasons why Scots rejected independence in 2014, which hasn’t been reciprocated by unionists, and which may yet be saved by a new coalition of liberal Tories, Lib Dems and Blairites.

Did you know?

The mouth of the river Amazon is almost as wide as the entire length of the river Thames.

Parliamentary highlights

House of Commons
Private Members’ Bills – Various

House of Lords
No business scheduled
Scottish Parliament
No business scheduled