Charlotte Street Partners

DAILY BRIEFING

DAILY BRIEFING

Shipping hits a perfect storm

Written by Katie Stanton, associate partner
Edited by Sabina Kadić-Mackenzie, partner
10 December 2020

Good morning,

Fishing around in the murky backwaters of the internet yesterday for a secret Santa gift equal parts joyful, triumphant and passive-aggressive, it dawned on me that something was not quite right.
 
Clutching my crisp ten-pound-note in one hand, I scrolled in dismay with the other. Much of the Christmas wares – your choccy reindeers, novelty drinking vessels, personalised Marmites – were unavailable.
 
But how could this be, the one time of the year I need to get my hands on a pink spider catcher or an edible phallus? I scoured the internet for answers.
 
It turns out, there’s a very serious reason: a global shipping crisis. Essentially, shipping schedules were so badly disrupted during the early stages of the pandemic, and then again when different economies reopened (and reclosed, and reopened) at different times, that firms fell behind picking up empty containers at European ports and taking them back to Asia. A recent surge in demand has exacerbated the problem, causing congestion at British ports.
 
Meanwhile, a shortage of containers in Chinese ports means large shipping firms have been forced to tell importers that no more bookings can be made for ships sailing from Asia until the last week of December. And, of course, our old friend Brexit has also been at play, with some businesses stockpiling goods before the end of the transition period. 
 
As a result, carriers are now adding congestion charges for imports to Felixstowe and Southampton. In fact, this week two major cargo shipping companies, Maersk and MSC, said they were swapping Felixstowe port for Liverpool in order to “provide stability” to their transatlantic trade services.
 
It’s a perfect storm. Together, these problems coalesce to force shipping costs through the roof. And undoubtedly, these costs will be passed on to the consumer.
 
I cannot even begin to tackle what this means for the future of global trade, only to say that some flexibility and intervention from the UK government is probably required now to increase capacity at our ports. Looking ahead, price increases for imports are only likely to accelerate the deglobalisation of our supply chains.
 
In other, simpler words: people are going to shop local. Here’s hoping my nearest delicatessen is well versed in the chocolate-anatomy crossover…

News

Boris Johnson’s dinner with Ursula von der Leyen, president of the EU Commission, ended without agreement yesterday. The two sides have given themselves four more days to agree a deal and have warned that “very large gaps” remain. It is as yet unclear if these differences can be bridged before the “firm decision” on Sunday. You can read more on the issues that still divide the UK and the EU in this useful summary from The Times. (£)
 
President-elect Joe Biden’s son Hunter has said his tax affairs are under federal investigation by prosecutors in Delaware. Hunter Biden said he took the case “very seriously” but was confident an “objective review” would show he had handled his affairs “legally and appropriately”. 
 
SpaceX has performed the first major flight test of its Starship spacecraft, reaching a height of 12.5km before crash landing in a huge fireball explosion. Prior to the test, chief executive Elon Musk had predicted there was only a one in three chance of the launch and landing succeeding.

Business and economy

Asda will close on Boxing Day this year as part of a thank you to staff who have worked throughout the coronavirus pandemic. The supermarket chain follows retailers including Marks & Spencer, Pets at Home and The Entertainer.
 
The Treasury has launched a review into VAT and the sharing economy amid concerns that growth in platform apps could cost as much as £20bn in lost tax revenue as activity shifts online. Hotels, taxi firms and other companies charge 20% VAT to customers, but online marketplaces such as Uber pay nothing because the individual providers fall below the VAT threshold of £85,000 of turnover. (£)
 
Food delivery firm Doordash started trading on the New York stock exchange yesterday, reaching a market value of $60bn with shares closing at $189.51 – 86% above the price of their initial public offering. The business has flourished during the pandemic, but has drawn backlash from restaurant groups, who say its commission rates are too high. The news is just the latest sign of frenzied demand among public investors for high-growth technology firms. Airbnb is due to start trading on the Nasdaq today. (£)
 
The US Federal Trade Commission and nearly every US state have sued Facebook today, saying that it broke antitrust law and should potentially be dismantled. The complaint from a coalition of 46 states, Washington DC and Guam also asked for Facebook’s acquisitions of Instagram and Whatsapp to be deemed illegal. They claim that the social media giant’s “actions to entrench and maintain its monopoly deny consumers the benefits of competition.”

Columns of note

Martin McCluskey calls on our leaders to “meaningfully engage” with the constitutional questions in The Times. For too long they have languished on the “too difficult” and “too dangerous” piles, but their intrinsic connection with the fate of our economy, our health service and our global standing, coupled with the UK’s withdrawal from the EU, mean wide-ranging constitutional reform is now long overdue. (£)
 
Writing in the New Yorker Sam Knight notes that Britain’s vaccine programme has brought with it a mix of joy and chauvinism. On Tuesday our timelines were inundated with triumphant pictures of the first Brits to be vaccinated against the coronavirus, sitting compliantly beneath the shadow of the nearest tearful politician eager to plant a ‘V Day’ flag on the matter and get a nice photo. But does Britain’s track record warrant such widespread backslapping amongst our political elites? The short answer, Knight argues, is no. (£)

Cartoon source: New Yorker

Markets

What happened yesterday?

Investors were nervous about political developments in the US and Europe yesterday, as uncertainty over the UK’s ability to secure a last-minute Brexit deal weakened sterling and difficulty in agreeing fiscal stimulus in the US knocked stock markets.
 
The pound sunk after nearing its strongest level earlier in the day, to be up just 0.1% against the dollar at $1.33.
 
The FTSE 100 closed up 0.08% at 6,564.29, while the FTSE 250 also ended 0.07% higher at 19,883.89.
 
In company news:
 
Rio Tinto has been ordered to fully rebuild ancient and sacred rock shelters it blew up in May and negotiate a restitution package with Aboriginal groups, an Australian parliamentary inquiry has said.
 
Lord Sedwill, the former cabinet secretary under Theresa May and Boris Johnson, is to join Rothschild & Co as a part-time adviser four months after leaving Whitehall.
 
McLaren is in talks to raise up to £500m in fresh equity that could pave the way to listing through a blank-cheque company.
 
The world’s largest asset manager has vowed to back more shareholder resolutions on climate and social issues at annual meetings. Blackrock has faced growing pressure over recent years to use its influence to change companies’ behaviour.

What’s happening today?

Finals
Character
Marstons
On The Beach
Rws Hldgs

Interims
Cohort
Dwf Group
Frasers Grp
Smith (DS)

AGMs
7digital
Aberdeen Lat
Amur Minerals
Asia Dragon
Bioventix
Ceres Power
Chelverton
Doric Nimrod
Falcon Oil
Lok N Store
Mj Hudson Grp
Petro Matad
Prs Reit
Softcat
Upland Resourve
Windar Photo
YouGov

Trading announcements
Ocado

UK economic announcements
(00:01) RICS Housing Market Survey
(07:00) Gross Domestic Product
(07:00) Index of Services
(07:00) Manufacturing Production
(07:00) Industrial Production
(07:00) Balance of Trade

Int. economic announcements
(13:30) Continuing Claims (US)
(13:30) Initial Jobless Claims (US)
(13:30) Consumer Price Index (US)

Source: Financial Times

did you know

Having a wide mouth makes people think you’ll be a great boss.

Parliamentary highlights

House of Commons

Oral questions
Digital, Culture, Media and Sport (including Topical Questions)
 
Attorney General
 
Urgent question
To ask the Minister for the Cabinet Office if he will make a statement on the progress of the negotiations on the UK’s future relationship with the EU and preparations for the end of the transition period – Rachel Reeves
 
Business statement
Business Questions to the Leader of the House – Mr Jacob Rees-Mogg
 
Ministerial statement
Publication of the findings of the Ockenden review – Ms Nadine Dorries
 
Consideration of Lords amendments
United Kingdom Internal Market Bill
 
General debate
The future of the high street
 
Adjournment
Encouragement of terrorism offences – Carla Lockhart

House of Lords 

Introductions
Lord Spencer of Alresford
 
Oral questions
Solution for war widows required to surrender that pension due to marriage or cohabitation – Baroness Crawley
 
Plans to participate and to promote the United Nations’ International Human Rights Day on Thursday 10 December – Baroness Anelay of St Johns
 
Target for carbon neutral homes by 2050 and improving energy efficiency standards for existing buildings – Baroness Thornhill
 
Administration of puberty-blocker drugs to children under the age of 16 – Lord Young of Norwood Green
 
Orders and regulations
Immigration and Social Security Co-ordination (EU Withdrawal) Act 2020 (Consequential, Saving, Transitional and Transitory Provisions) (EU Exit) Regulations 2020 – Baroness Williams of Trafford
 
Legislation
Covert Human Intelligence Sources (Criminal Conduct) Bill – committee stage (day 4) – Baroness Williams of Trafford
 
Statement
Withdrawal Agreement Update – Lord True

Scottish Parliament 

First minister’s questions
 
Portfolio questions
Transport, infrastructure and connectivity
 
Stage one debate
Scottish General Election (Coronavirus) Bill
 
Stage three proceedings
Forensic Medical Services (Victims of Sexual Offences) (Scotland) Bill
 
Financial resolution
Scottish General Election (Coronavirus) Bill

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