Tuesday 22 Nov. 2016
22 Nov. 2016
EU Leaders Blast U.K.'s State of Brexit Preparedness Talking Points By Jonathan Stearns European Union policy makers intensified their criticism of Prime Minister Theresa Trump Backs Farage as U.S. May's plans to leave the bloc, saying that the U.K. appeared clueless about the Ambassador: U.S. President–elect implications of Brexit. Donald Trump suggested Britain The pound sank to an intraday low after Slovak Prime Minister Robert Fico said it’s should appoint the longtime UKIP not clear that the U.K. knows what it wants and European MP Manfred Weber leader Nigel Farage, as ambassador demanded May’s government produce “clear proposals” as it prepares to trigger Brexit to Washington, earning a rebuff from negotiations by the end of March. Weber made the comments after meeting U.K. Brexit the British government that the Secretary David Davis today. incumbent will “be there for years.” “In my meeting with David Davis I unfortunately received no new insight into how the “Many people would like to see Nigel British government pictures Brexit,” Weber, an ally of German Chancellor Angela Merkel Farage represent Great Britain as who leads the EU parliament’s Christian Democrats, told reporters in Strasbourg, their ambassador to the United France. “There is no idea what Brexit really means.” States,” Trump tweeted today. “He The comments highlight frustration in continental Europe with May’s efforts to follow would do a great job!" The current through on the results of a June referendum in which 52 percent of British voters opted ambassador is Kim Darroch. for the unprecedented step of quitting the EU. The vote was called by May’s predecessor, David Cameron, who had campaigned for Britain to remain in the bloc that Brits' Outlook Worsens: U.K. the country joined 43 years ago. consumers’ view of the economy’s Davis signalled at the Strasbourg meeting that the U.K. wants to retain access to the long-term prospects have European single market, according to Weber, who repeated the stance of the rest of the deteriorated since the country voted 28-nation bloc that such a privilege requires accepting the EU’s tenet on the free in June to leave the European Union. movement of people. IHS Markit’s index of economic “The economic dimension is clear for Great Britain,” Weber said. “They have a strong optimism over the next 10 years interest to keep a kind of a relationship to the single market.” dropped to minus 18.4 percent in “The government’s position hasn’t changed on this,” May’s spokesman, Greg Swift, November from minus 11.1 percent told reporters in London following Weber’s briefing. “We are very clear that what we in August and minus 3.5 percent in want is a trading relationship that allows U.K. companies to trade with and within the July, it said today. The survey asks single market and lets European businesses do the same.” people whether the U.K.’s prospects have gotten better, worse, or stayed the same as a result of the Brexit U.K. Millionaire Ranks Shrink 15% on Brexit: Report vote. “The latest survey highlights how Brexit is expected to carry a higher than previously-thought cost in economic terms,” said Markit Chief Economist Chris Williamson Hammond Risks Ire of Brexit Campaigners: Chancellor of the Exchequer Philip Hammond’s reputation for caution helped propel him to what he says is his dream job. Now it risks backfiring. As he prepares to outline his fiscal plans tomorrow for the first time since taking office in July, Hammond is under attack from those who campaigned most ardently for Britain The number of dollar millionaires in the U.K. slumped 15 percent as the country’s vote to leave to leave the EU. "A lot of people are the European Union rattled the pound and the stock market, according to a report by Credit increasingly dissatisfied with Suisse Group. Household wealth in the U.K. declined by $1.5 trillion (£1.2 trillion), or 10 percent, Hammond’s negative tone," said in the 12 months through June 2016, as “a direct consequence” of the Brexit vote, the Swiss Patrick Minford of Cardiff Business bank said in its annual global wealth report published today. School, a former adviser to Margaret — Giles Broom Thatcher and one of the few economists to campaign for Brexit. Politics London 22 November 2016 2
Politics
U.K. to Soften Trump Opposition to Iran Nuclear Deal Around Westminster By Thomas Penny Foreign Secretary Boris Johnson NHS Faces 'Endemic' Problems: said he’ll seek to work with the Britain’s NHS is facing “endemic” administration of U.S. President- problems that threaten to cripple the elect Donald Trump to “make a institution after it posted its largest- success” of the 2015 deal to ever deficit, according to the stop Iran from being able to government’s spending watchdog. develop nuclear weapons. The NHS shortfall more than tripled Trump criticised the deal to £1.85 billion in the financial year during his election campaign through March from £574 million a and has chosen opponents of year earlier, the National Audit Office the agreement to fill senior said in a report published today. positions in his White House Source: Chris Ratcliffe/Bloomberg Hammond to Fund Broadband: team, leading to uncertainty Foreign Secretary Boris Johnson Chancellor of the Exchequer Philip about its future. In a speech on Hammond will pledge £1 billion to 21 March, he said both that he would scrap the deal and strictly enforce it. improve Britain’s broadband “The government remains committed to the nuclear deal in Iran and we look forward infrastructure, part of a program of to working with the new administration in the United States to make it a success,” investment to boost productivity. The Johnson told lawmakers in the House of Commons in London today. “We in this plan, under which 2 million more country, in this government, do think there’s merit in the deal,” he said. “We should be households could get access to full- positive about our engagement and keep it on the road.” fibre broadband, will be confirmed in Britain has reopened its embassy in Tehran and is developing its relations, Johnson tomorrow's Autumn Statement, the said, adding that Vodafone Group and Lotus Cars have reached trade agreements in Treasury said in an e-mailed Iran since the accord, which set limits on nuclear development in return for relief from statement. economic sanctions. Around the World Brexit Won’t Benefit Many Who Voted for It: World Bank Lufthansa Pilots to Strike: By Andra Timu Deutsche Lufthansa will cancel British voters who opted to leave the European Union because of concern globalization almost 900 flights tomorrow, is killing jobs at home won’t benefit from Brexit, a World Bank economist said. disrupting travel for 100,000 people, People who complain that employment opportunities dried up as manufacturing as its pilots walk out in a bid to positions moved overseas won’t gain from curbs on the number of EU citizens allowed pressure Chief Executive Officer into the U.K., Hans Timmer said in an interview in Bucharest. A lack of ideas on how to Carsten Spohr into accepting their assist these voters creates the risk they’ll adopt more extreme views in the future, he pay demands. The strike will hit said. short- and long-haul services “The changes that are in the making at the moment will not help these people,” he operated by Lufthansa’s main brand, said today. “They haven’t lost their jobs because of immigration — or otherwise these with the 876 flights scrapped jobs will still be there — but because of technology and globalisation, which the U.K. will amounting to about 40 percent of the still continue because they still want to be a part of the global trading system.” usual schedule. Control over immigration has emerged as a key demand for British Prime Minister Theresa May’s government as the U.K. prepares to begin formal talks to leave the EU Trump to Abandon Trade Deal: next year. While that stance will probably result in reduced access for Britain to the President-elect Donald Trump vowed bloc's single market, U.K. officials say the country will be better positioned to seal more to start the U.S. withdrawal from the lucrative trade deals elsewhere. Trans-Pacific Partnership, institute a Timmer cautioned against the growing popularity of the idea that quitting the EU is a five-year ban on federal officials remedy to the issues many of the continent’s voters are enduring. lobbying after leaving government, “One of the solutions that one can see now, and not only in England but in other parts and cancel “job-killing” regulations on of the EU as well, is retreating from the EU thinking that the problems are trade, energy production within his first 100 immigration or having your decisions influenced by Brussels, and that everything will be days in office. Trump detailed better if you can give your country back to the people,” he said. “That’s the wrong executive actions he can take “on solution and it will enormously backfire.” day one” — as soon as he is sworn in as president in January — in a video released yesterday. He included a proposal that “for every one new regulation, two old regulations must be eliminated.”
Business London 22 November 2016 3
Business
London’s Wounded Fintech Scene Has An Unlikely Hero Around the City By John Detrixhe Brexit may have wounded London’s reputation as a leading hub for financial-technology Government Sells Shares in companies, but now an unlikely hero is helping to protect its edge: the U.K. regulator, Lloyds: The U.K. Treasury sold the Financial Conduct Authority. further shares in Lloyds Banking Take SETL, a startup that seeks to harness blockchain technology. The London- Group, cutting the government’s based firm says it became the first to use the digital ledger, which is the same stake in the British lender below 8 architecture bitcoin uses, to process a retail transaction using fiat, government-issued percent. The latest sale raised the currency. The company’s chief executive officer says the regulator helped it sprint total amount recovered to £17 billion ahead. of the £20.3 billion that was injected “London is a financial centre for fintech, and regulators get enormous credit for that,” into the British bank during the said Peter Randall, CEO at SETL. The company raised $39.5 million (£31.8 million) financial crisis, the Treasury said in a from angel investors after Britain voted to leave the European Union, according to trade statement today. The government group Innovate Finance. seeks to cut its remaining stake in Randall said piloting his product would have taken considerably longer without Lloyds in an “orderly and measured the U.K.’s so-called sandbox, which is an experimental space for entrepreneurs where way,” according to the statement. some regulations are waived. IBM Adds 4 Data Centres in U.K.: Since 2010, the U.K. government has been trying to encourage new types of finance IBM is tripling the number of data as traditional banking struggled to recover from the financial crisis. For the sandbox centers it has in the U.K., bolstering programme’s first run, the FCA picked 24 firms out of 69 applications. one of the businesses it’s counting on London needs every advantage it can get. It’s no secret cities like Frankfurt and for growth and giving the British Amsterdam see June’s referendum as an opportunity to cement their own financial hub economy a vote of confidence after status. the country elected to leave the EU. Adding to London’s woes, venture capitalists have been shy to invest in its fintech IBM currently operates two U.K. data sector in the months since the referendum. Funding dropped 26 percent to $532 million centres. in the third quarter from a year earlier, according to Innovate Finance. That’s where the regulator’s plan comes in. While most regulators are mainly known Markets for shutting down risky ventures or doling out fines, lawyers and entrepreneurs say the FCA is much more likely to try to help an enterprise get off the ground. “I’ve heard clients who have gone to the regulator to talk about their new startups and found the next thing is the FCA saying, ‘That’s interesting, can we talk to you and see you?”’ said Emily Reid, a partner at law firm Hogan Lovells. “They’re not passively waiting for people to go and see them. They’re quite active.”
U.K.'s Budget Deficit May Not Be as Big As Feared
Source: Bloomberg. Change since previous close.
The U.K. budget deficit narrowed by £5.6 billion in the first seven months of 2016-17, thanks to a surprise surge in corporation-tax receipts in October. If that trend is maintained in the remaining five months, borrowing for the fiscal year would be £66.4 billion, above the Office for Budget Responsibility’s March forecast of £55.5 billion, but well below the estimates of many independent economists. — Andrew Atkinson London 22 November 2016 4
Commentary London 22 November 2016 5
Commentary
Fund the Queen's Repairs. Don't Let Big Ben Fall By Mark Gilbert, Bloomberg View Unfortunately, the Whether you’re an ardent monarchist or a staunch republican, furor over one palace is the government's decision to allocate £369 million to fund a 10- likely to cast a shadow year refurbishment of Buckingham Palace should be welcomed. over a second much- Unfortunately, the public's complicated relationship with both the needed renovation. Royal Family's finances and the nation's landmark buildings The Palace of means there's a storm of protest instead. And that in turn leaves Westminster covers another of the country's iconic buildings in jeopardy. eight acres of ground, The Palace of Westminster, home to Parliament in the House contains more than of Commons and the House of Lords, hasn't been properly 1,100 rooms, 100 Source: Jason Alden/Bloomberg maintained for decades. The neglect is such that the bill for a full staircases and more The Houses of Parliament renovation could surpass £4 billion; and the longer politicians than three kilometres of flinch from signing off on the vital programme, the higher those passages over seven levels. It's a Unesco World Heritage site. costs are likely to rise. The committee has recommended that a It's also a potential deathtrap. The non-partisan government so-called delivery authority be established with a view to getting committee that's been asked to investigate the state of the the works underway early in the next decade. building had this to say in September: But more than 121,000 people have signed a petition objecting "The Palace of Westminster faces an impending crisis which to the use of public money to repair what is ostensibly the we cannot responsibly ignore. There is a substantial and Queen's house, and calling on the Royal Family to pay for the growing risk of either a single, catastrophic event, such as a repairs itself. major fire, or a succession of incremental failures in essential This conveniently ignores several truths. Buckingham Palace systems which would lead to Parliament no longer being able to may well be assigned to the Royal family, but in truth it belongs occupy the Palace." to the nation, albeit under the stewardship of whoever happens The buildings themselves are structurally solid, so for now Big to wear the crown at any given time. Moreover, while the money Ben is safe. But the problem with antiquated electrical systems is coming from the Treasury (and therefore taxpayers) in the isn't the mild inconvenience of a flickering television screen; it's form of an increase in the sovereign grant paid annually, one of that ageing, vulcanised wires could catch fire. the biggest contributors to the Treasury's tax coffers is, yes, the Deloitte, a consultancy firm, has analysed three scenarios. If Crown Estate. Parliament moves out of the palace entirely, the works would As Tim Worstall, a fellow at the Adam Smith Institute in take six years to complete. A partial shift to temporary digs London, argued this week, the relationship between what the would extend that to 11 years, while a rolling refurbishment Royal Family ostensibly owns and how the income from those programme conducted without anyone leaving the buildings holdings is distributed and taxed is fiendishly complicated. But could take a staggering 32 years to finish. the narrow truth is that the Crown Estate, which belongs to the The architecture and planning firm Gensler has proposed monarch, pays its profit to the Treasury. In the most recent floating a temporary structure on the Thames at a cost of £160 accounts, that was worth more than £304 million; in the past million to house MPs while the Westminster building works are decade, the estate has handed over £2.4 billion. completed. As Worstall says: "The important point to grasp is that The problem for British politicians is that they're still tainted by Buckingham Palace does not belong to Mrs. E. Windsor, it the 2009 expenses scandal. So they're understandably reluctant belongs to the Monarch. The Crown Estate does not belong to to ask the public to upgrade their offices. Mrs. E. Windsor, it belongs to the Monarch. And the profits on They shouldn't be. The Palace of Westminster is a national one part of the Monarch’s estate are being used to pay for the treasure — and also an architectural beacon of parliamentary upkeep of another part of the Monarch’s estate. That is, the democracy in a world that can use such symbols today. If a fire Crown is already paying for these repairs to Buckingham Palace. were to rampage through the building destroying the structure, Which is what makes demands that the Crown, or its estate, bitter recriminations would soon fill the deafening silence left by should pay for the repairs to Buckingham Palace so damn the hushing of Big Ben. ignorant." This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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