Charlotte Street Partners

DAILY BRIEFING

DAILY BRIEFING

Big Bang 2.0

Written by Ralitsa Bobcheva,  associate 
Edited by David Gaffney, partner
14 January 2021

Good morning,

 In the 1980s, an agreement between the London Stock Exchange and the Thatcher government marked the beginning of a financial revolution in the City of London, shaping it into the financial powerhouse that we know today.

The impacts of the so-called ‘Big Bang’ agreement were colossal. In one fell swoop, numerous significant changes to the structure of financial markets transformed the city from a 20th century capital into a global centre of expertise and a magnet for international banks.

Today, in the wake of Brexit, the City’s story continues to capture the imagination of those who believe it will retain its leading role as a key financial centre in the decades to come. Chief among those believers – outwardly, at least – is the chancellor Rishi Sunak, who is already forecasting the next ‘Big Bang’ for the City of London.

It comes after mounting criticism of the new trade deal’s lack of provisions for the UK financial industry sector on the grounds that it grants only limited access to EU markets. The detail of any agreement has been put off until another day, to be dealt with in separate discussions, with a preliminary deadline in March 2021.

Even if the outcome gives UK-based firms fuller access to the EU market, their position is precarious as the EU’s equivalence regulations can be withdrawn at a month’s notice. This uncertainty could advance exodus of key players from the City which began in 2016 and saw banking giants such as JPMorgan and Goldman Sachs shift significant amount of assets from London to the EU.

We must also factor-in the effects of the current pandemic, and the long-term implications of increased home working for places like Canary Wharf, which a year ago had 100,000 people busying themselves in its many shiny towers – and up to 40,000 additional daily visitors – but is a ghost town currently, with around five per cent of that number working there today.

If and when London explodes in a Big Bang 2.0, it will be up against decades of EU efforts to boost its own financial centres, some of which will undoubtedly challenge the City’s future role as the continent’s financial capital.  

News

US president Donald Trump has been charged with impeachment for inciting a violent riot at the US Capitol a week ago. After a day-long debate in the House of Representatives, 232 members voted in favour of the action (with 197 against), including 10 Republicans supporting Trump’s unprecedented second impeachment.

The UK prime minister, Boris Johnson, has shared concerns about a new coronavirus variant that is believed to have emerged in Brazil. He assured people that the UK is taking steps to protect itself from the variant, with the government Covid committee meeting on Thursday to discuss the possibility of stopping flights from Brazil.

According to a study led by Public Health England, most people who have had Covid-19 are protected from being infected again for at least five months. The study also found that past infection gave people 83% protection from reinfection, compared with those who had never had the virus. They warn, however, that people should follow the stay-at-home rules – whether or not they have had the virus – as a minority do catch it again and can infect others.

Pre-departure Covid-19 testing will now come into force for travellers to the UK from 0400 GMT on Monday, three days later than initially planned. The rules had been due to come into force on Friday, but the government said people needed time “to prepare”. Under the rules, those arriving in the UK will have to take a test up to 72 hours before leaving the country they are in.

Business and economy

The chief executive of consumer goods group Unilever, Alan Jope, has said that his employees will never return to the office five days a week and that the company would use a “hybrid mode” of working between homes and offices. Unilever joins several other large companies, among them Twitter and Morgan Stanley, which intend to retain some of the new ways of working forced upon them by the Covid-19 pandemic.

England’s high streets could lose up to 400,000 retail jobs as a result of the increase in remote working and online shopping after the Covid-19 pandemic, according to new research by accountancy firm KPMG. Affluent towns in the south are most at risk of declines in retail employment as a share of local economic activity, according to the study.

The housing market boom in England and Wales lost momentum in December as protection measures were tightened across both nations and the end of the stamp duty holiday drew closer, according to the Royal Institution of Chartered Surveyors’ monthly survey. Sales, new inquiries and house price expectations all weakened at the end of last year as the UK faced a surge in Covid-19 infections, the survey found. (£)

Columns of note

In the Financial Times, Michael Peel and Laura Pitel cast light on the increasingly complex relationship between the EU and its south-eastern neighbour Turkey. Mutual economic attractions and regional upheaval may have deepened the ties between the two powers in recent years, but growing tensions leave question marks over the future relationship between Ankara and Brussels, the editors argue. (£)

Primark ranks among the few clothing retailers which, despite not having an online store, have weathered the impacts of the pandemic remarkably well so far. Amidst fraught debates about whether the company should finally embrace digital, Michael Sugden argues in City A.M. that to thrive in the future, businesses like Primark will need to eschew conventional wisdom.

Cartoon source: The Times

Markets

What happened yesterday?

London stocks closed in negative territory on Wednesday amidst ongoing concerns about the Covid-19 crisis. The FTSE 100 closed the session down 0.13% at 6,745.52, and the FTSE 250 fell 0.47% at 20,616.31. Sterling was in a mixed state, last losing 0.33% against the dollar to $1.3619, but advancing 0.18% on the euro to trade at €1.1214.

In the US, the Dow Jones Industrial Average fell 0.03%, to 31,060.47, the S&P 500 climbed 0.23%, to 3,809.84 and the Nasdaq Composite added 0.43%, to 13,128.95. 

In company news:

Food delivery app Deliveroo has reportedly hired four investment banks to make preparations for to a float on the London Stock Exchange this year.

PayPal has become the first foreign operator with 100% control of an online payment platform in China, according to data from the National Enterprise Credit Information Publicity System.

What’s happening today?

Finals
Blue Prism
Safestore
Titon

Interims
Ilika Plc

Trading announcements

Ashmore
Dunelm
Hays
Network Intl
Tesco
Whitbread
Wood Group

AGMs
Cardiff Property

UK Economic Announcements
(00:01) RICS Housing Market Survey

Int. Economic Announcements
(13:30) Continuing Claims (US)
(13:30) Initial Jobless Claims (US)
(13:30) Import and Export Price Indices (US)

Source: Financial Times

did you know

Before 1980, any bank operating in the City of London had to have an office within a 10- minute walk of the Bank of England. This was because, in the event of a crisis, the governor of the Bank of England wanted to ensure the chief executive of every bank in the City could be in his office within half-an-hour.

Parliamentary highlights

House of Commons

Oral questions
International Trade (including Topical Questions)
 
Urgent question
To ask the Secretary of State for Environment, Food and Rural Affairs if he will make a statement on the consequences of the EU Trade and Cooperation Agreement as it applies to the fishing industry – Mr Alistair Carmichael
 
Business Statement
Business Questions to the Leader of the House – Mr Jacob Rees-Mogg
 
Ministerial statement
Parliamentary Under Secretary of State – Measures to tackle domestic abuse and hidden harms during lockdown – Victoria Atkins
 
Select Committee Statement 
Seventh Report from the International Development Committee, Progress on tackling the sexual exploitation and abuse of aid beneficiaries – Sarah Champion
 
Backbench Business
Long covid – Layla Moran, Andrew Gwynne, Dr Dan Poulter
 
Backbench Business
Effect of covid-19 on dental services – Fleur Anderson, Barry Gardiner
 
Adjournment
Vitamin D and covid-19 mitigation – Mr David Davis

House of Lords 

Oral questions
Various
 
Private Notice Question
Free school meals – Lord Watson of Invergowrie
 
Statement
Disruption of trade between Great Britain and Northern Ireland as a result of the Northern Ireland Protocol – Lord True
 
Statement
May 2021 elections – Lord True
 
Legislation
Medicines and Medical Devices Bill – report stage (day 2) – Lord Bethell

Scottish Parliament 

Parliamentary Bureau Motions
Ministerial Statement (Virtual): Managing Scotland’s Fisheries in the Future
Portfolio Questions (Virtual): Social Security and Older People; Finance; Environment, Climate Change and Land Reform
Members’ Business (Virtual)— S5M-23448 Linda Fabiani: Young Women Lead Report on How to Increase Employment Opportunities for BAME Women
Members’ Business (Virtual)— S5M-23613 Monica Lennon: Scotland’s Drug Deaths Crisis
Business Motions
Parliamentary Bureau Motions
Decision Time

 

Share this post

Share on facebook
Share on twitter
Share on linkedin
Share on email