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Tuesday
22 Nov. 2016
22 Nov. 2016
EU Leaders Blast U.K.'s State of Brexit Preparedness By Jonathan Stearns European Union policy makers intensified their criticism of Prime Minister Theresa May's plans to leave the bloc, saying that the U.K. appeared clueless about the implications of Brexit.
The pound sank to an intraday low after Slovak Prime Minister Robert Fico said it’s not clear that the U.K. knows what it wants and European MP Manfred Weber demanded May’s government produce “clear proposals” as it prepares to trigger Brexit negotiations by the end of March. Weber made the comments after meeting U.K. Brexit Secretary David Davis today.
“In my meeting with David Davis I unfortunately received no new insight into how the British government pictures Brexit,” Weber, an ally of German Chancellor Angela Merkel who leads the EU parliament’s Christian Democrats, told reporters in Strasbourg, France. “There is no idea what Brexit really means.”
The comments highlight frustration in continental Europe with May’s efforts to follow through on the results of a June referendum in which 52 percent of British voters opted 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 the country joined 43 years ago.
Davis signalled at the Strasbourg meeting that the U.K. wants to retain access to the European single market, according to Weber, who repeated the stance of the rest of the 28-nation bloc that such a privilege requires accepting the EU’s tenet on the free movement of people.
“The economic dimension is clear for Great Britain,” Weber said. “They have a strong interest to keep a kind of a relationship to the single market.”
“The government’s position hasn’t changed on this,” May’s spokesman, Greg Swift, told reporters in London following Weber’s briefing. “We are very clear that what we want is a trading relationship that allows U.K. companies to trade with and within the single market and lets European businesses do the same.”
U.K. Millionaire Ranks Shrink 15% on Brexit: Report
Talking Points
Trump Backs Farage as U.S. Ambassador: U.S. President–elect Donald Trump suggested Britain should appoint the longtime UKIP leader Nigel Farage, as ambassador to Washington, earning a rebuff from the British government that the incumbent will “be there for years.” “Many people would like to see Nigel Farage represent Great Britain as their ambassador to the United States,” Trump tweeted today. “He would do a great job!" The current ambassador is Kim Darroch.
Brits' Outlook Worsens: U.K. consumers’ view of the economy’s long-term prospects have deteriorated since the country voted in June to leave the European Union. IHS Markit’s index of economic optimism over the next 10 years dropped to minus 18.4 percent in November from minus 11.1 percent in August and minus 3.5 percent in July, it said today. The survey asks people whether the U.K.’s prospects have gotten better, worse, or stayed the same as a result of the Brexit 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 to leave the EU. "A lot of people are increasingly dissatisfied with Hammond’s negative tone," said Patrick Minford of Cardiff Business School, a former adviser to Margaret Thatcher and one of the few economists to campaign for Brexit.
Politics
The number of dollar millionaires in the U.K. slumped 15 percent as the country’s vote to leave the European Union rattled the pound and the stock market, according to a report by Credit Suisse Group. Household wealth in the U.K. declined by $1.5 trillion (£1.2 trillion), or 10 percent, in the 12 months through June 2016, as “a direct consequence” of the Brexit vote, the Swiss bank said in its annual global wealth report published today.
— Giles Broom
London 2 22 November 2016
Politics
U.K. to Soften Trump Opposition to Iran Nuclear DealBy Thomas Penny Foreign Secretary Boris Johnson said he’ll seek to work with the administration of U.S. President-elect Donald Trump to “make a success” of the 2015 deal to stop Iran from being able to develop nuclear weapons.
Trump criticised the deal during his election campaign and has chosen opponents of the agreement to fill senior positions in his White House team, leading to uncertainty about its future. In a speech on 21 March, he said both that he would scrap the deal and strictly enforce it.
“The government remains committed to the nuclear deal in Iran and we look forward to working with the new administration in the United States to make it a success,” Johnson told lawmakers in the House of Commons in London today. “We in this country, in this government, do think there’s merit in the deal,” he said. “We should be positive about our engagement and keep it on the road.”
Britain has reopened its embassy in Tehran and is developing its relations, Johnson said, adding that Vodafone Group and Lotus Cars have reached trade agreements in Iran since the accord, which set limits on nuclear development in return for relief from economic sanctions.
Brexit Won’t Benefit Many Who Voted for It: World BankBy Andra TimuBritish voters who opted to leave the European Union because of concern globalization is killing jobs at home won’t benefit from Brexit, a World Bank economist said.
People who complain that employment opportunities dried up as manufacturing positions moved overseas won’t gain from curbs on the number of EU citizens allowed into the U.K., Hans Timmer said in an interview in Bucharest. A lack of ideas on how to assist these voters creates the risk they’ll adopt more extreme views in the future, he said.
“The changes that are in the making at the moment will not help these people,” he said today. “They haven’t lost their jobs because of immigration — or otherwise these jobs will still be there — but because of technology and globalisation, which the U.K. will still continue because they still want to be a part of the global trading system.”
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 next year. While that stance will probably result in reduced access for Britain to the bloc's single market, U.K. officials say the country will be better positioned to seal more lucrative trade deals elsewhere.
Timmer cautioned against the growing popularity of the idea that quitting the EU is a remedy to the issues many of the continent’s voters are enduring.
“One of the solutions that one can see now, and not only in England but in other parts of the EU as well, is retreating from the EU thinking that the problems are trade, immigration or having your decisions influenced by Brussels, and that everything will be better if you can give your country back to the people,” he said. “That’s the wrong solution and it will enormously backfire.”
NHS Faces 'Endemic' Problems:Britain’s NHS is facing “endemic” problems that threaten to cripple the institution after it posted its largest-ever deficit, according to the government’s spending watchdog. The NHS shortfall more than tripled to £1.85 billion in the financial year through March from £574 million a year earlier, the National Audit Office said in a report published today.
Hammond to Fund Broadband: Chancellor of the Exchequer Philip Hammond will pledge £1 billion to improve Britain’s broadband infrastructure, part of a program of investment to boost productivity. The plan, under which 2 million more households could get access to full-fibre broadband, will be confirmed in tomorrow's Autumn Statement, the Treasury said in an e-mailed statement.
Lufthansa Pilots to Strike:Deutsche Lufthansa will cancel almost 900 flights tomorrow, disrupting travel for 100,000 people, as its pilots walk out in a bid to pressure Chief Executive Officer Carsten Spohr into accepting their pay demands. The strike will hit short- and long-haul services operated by Lufthansa’s main brand, with the 876 flights scrapped amounting to about 40 percent of the usual schedule.
Trump to Abandon Trade Deal: President-elect Donald Trump vowed to start the U.S. withdrawal from the Trans-Pacific Partnership, institute a five-year ban on federal officials lobbying after leaving government, and cancel “job-killing” regulations on energy production within his first 100 days in office. Trump detailed executive actions he can take “on 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.”
Around Westminster
Around the World
Business
Source: Chris Ratcliffe/Bloomberg
Foreign Secretary Boris Johnson
London 3 22 November 2016
Business
London’s Wounded Fintech Scene Has An Unlikely HeroBy John Detrixhe Brexit may have wounded London’s reputation as a leading hub for financial-technology companies, but now an unlikely hero is helping to protect its edge: the U.K. regulator, the Financial Conduct Authority.
Take SETL, a startup that seeks to harness blockchain technology. The London-based firm says it became the first to use the digital ledger, which is the same architecture bitcoin uses, to process a retail transaction using fiat, government-issued currency. The company’s chief executive officer says the regulator helped it sprint ahead.
“London is a financial centre for fintech, and regulators get enormous credit for that,” said Peter Randall, CEO at SETL. The company raised $39.5 million (£31.8 million) from angel investors after Britain voted to leave the European Union, according to trade group Innovate Finance.
Randall said piloting his product would have taken considerably longer without the U.K.’s so-called sandbox, which is an experimental space for entrepreneurs where some regulations are waived.
Since 2010, the U.K. government has been trying to encourage new types of finance as traditional banking struggled to recover from the financial crisis. For the sandbox programme’s first run, the FCA picked 24 firms out of 69 applications.
London needs every advantage it can get. It’s no secret cities like Frankfurt and Amsterdam see June’s referendum as an opportunity to cement their own financial hub status.
Adding to London’s woes, venture capitalists have been shy to invest in its fintech sector in the months since the referendum. Funding dropped 26 percent to $532 million 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 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
Government Sells Shares in Lloyds: The U.K. Treasury sold further shares in Lloyds Banking Group, cutting the government’s stake in the British lender below 8 percent. The latest sale raised the total amount recovered to £17 billion of the £20.3 billion that was injected into the British bank during the financial crisis, the Treasury said in a statement today. The government seeks to cut its remaining stake in Lloyds in an “orderly and measured way,” according to the statement.
IBM Adds 4 Data Centres in U.K.: IBM is tripling the number of data centers it has in the U.K., bolstering one of the businesses it’s counting on for growth and giving the British economy a vote of confidence after the country elected to leave the EU. IBM currently operates two U.K. data centres.
Around the City
Markets
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
Source: Bloomberg. Change since previous close.
London 4 22 November 2016
Commentary
London 5 22 November 2016
Commentary
Fund the Queen's Repairs. Don't Let Big Ben FallBy Mark Gilbert, Bloomberg ViewWhether you’re an ardent monarchist or a staunch republican, the government's decision to allocate £369 million to fund a 10-year refurbishment of Buckingham Palace should be welcomed. Unfortunately, the public's complicated relationship with both the Royal Family's finances and the nation's landmark buildings means there's a storm of protest instead. And that in turn leaves another of the country's iconic buildings in jeopardy.
The Palace of Westminster, home to Parliament in the House of Commons and the House of Lords, hasn't been properly maintained for decades. The neglect is such that the bill for a full renovation could surpass £4 billion; and the longer politicians flinch from signing off on the vital programme, the higher those costs are likely to rise. The committee has recommended that a so-called delivery authority be established with a view to getting the works underway early in the next decade.
But more than 121,000 people have signed a petition objecting to the use of public money to repair what is ostensibly the Queen's house, and calling on the Royal Family to pay for the repairs itself.
This conveniently ignores several truths. Buckingham Palace may well be assigned to the Royal family, but in truth it belongs to the nation, albeit under the stewardship of whoever happens to wear the crown at any given time. Moreover, while the money is coming from the Treasury (and therefore taxpayers) in the form of an increase in the sovereign grant paid annually, one of the biggest contributors to the Treasury's tax coffers is, yes, the Crown Estate.
As Tim Worstall, a fellow at the Adam Smith Institute in London, argued this week, the relationship between what the Royal Family ostensibly owns and how the income from those holdings is distributed and taxed is fiendishly complicated. But the narrow truth is that the Crown Estate, which belongs to the monarch, pays its profit to the Treasury. In the most recent accounts, that was worth more than £304 million; in the past decade, the estate has handed over £2.4 billion.
As Worstall says: "The important point to grasp is that Buckingham Palace does not belong to Mrs. E. Windsor, it belongs to the Monarch. The Crown Estate does not belong to Mrs. E. Windsor, it belongs to the Monarch. And the profits on one part of the Monarch’s estate are being used to pay for the upkeep of another part of the Monarch’s estate. That is, the Crown is already paying for these repairs to Buckingham Palace. Which is what makes demands that the Crown, or its estate, should pay for the repairs to Buckingham Palace so damn ignorant."
Unfortunately, the furor over one palace is likely to cast a shadow over a second much-needed renovation.
The Palace ofWestminster covers eight acres of ground,
contains more than1,100 rooms, 100 staircases and more
than three kilometres of passages over seven levels. It's a Unesco World Heritage site.
It's also a potential deathtrap. The non-partisan government committee that's been asked to investigate the state of the
building had this to say in September:"The Palace of Westminster faces an impending crisis which
we cannot responsibly ignore. There is a substantial and growing risk of either a single, catastrophic event, such as a major fire, or a succession of incremental failures in essential systems which would lead to Parliament no longer being able to occupy the Palace."
The buildings themselves are structurally solid, so for now Big Ben is safe. But the problem with antiquated electrical systems isn't the mild inconvenience of a flickering television screen; it's that ageing, vulcanised wires could catch fire.
Deloitte, a consultancy firm, has analysed three scenarios. If Parliament moves out of the palace entirely, the works would take six years to complete. A partial shift to temporary digs would extend that to 11 years, while a rolling refurbishment programme conducted without anyone leaving the buildings could take a staggering 32 years to finish.
The architecture and planning firm Gensler has proposed floating a temporary structure on the Thames at a cost of £160 million to house MPs while the Westminster building works are completed.
The problem for British politicians is that they're still tainted by the 2009 expenses scandal. So they're understandably reluctant to ask the public to upgrade their offices.
They shouldn't be. The Palace of Westminster is a national treasure — and also an architectural beacon of parliamentary democracy in a world that can use such symbols today. If a fire were to rampage through the building destroying the structure, bitter recriminations would soon fill the deafening silence left by the hushing of Big Ben.
This column does not necessarily reflect the opinion of the editorial board or
Bloomberg LP and its owners.
Bloomberg Briefs: LondonPaul Smith
Briefs Editor
Emma Ross-Thomas
Bloomberg News London
Bureau Chief
Rebecca Spong
London Brief Editor
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The Houses of Parliament
