Charlotte Street Partners

DAILY BRIEFING

DAILY BRIEFING

Singapore-on-Thames?

Written by Li-Ann Chin, associate 
Edited by Kevin Pringle, partner
29 January 2021

Good morning,

In 2017, the “Singapore-on-Thames” model was coined by former chancellor Philip Hammond, in a thinly veiled warning to European Union leaders that if a favourable Brexit trade deal could not be agreed on, London would shed its European-style social and economic model, cutting taxes to remain “competitively engaged”. And it has been in currency in the years since.
 
As someone who grew up across the causeway from Singapore, this analogy has always baffled me. Granted, Singapore is evidence that a lean state and low taxes can attract foreign investment and help build a modern society. Its economy is widely regarded as free, innovative, dynamic and business-friendly. However, there is much more to Singapore than that.
 
Singapore’s transformation from a relatively poor peninsula to global financial hub has not been coincidental. Rather than prospering by way of a small-government laissez-faire economy, all of its major domestic industries, from banking to telecommunications, are dominated by companies in which the state is the controlling shareholder. Singapore’s economic growth has been meticulously planned by its ruling party, which has commanded the nation’s politics since its independence in 1965.
 
Having gained notoriety for being a rule-bound nanny state, much of Singaporean society is tightly controlled by its authoritarian government. Media freedom is restricted, and laws are often used to crack down on people who criticise authority. What Singapore has achieved as a city-state with no natural resources is deeply admirable. But in exchange for an economically successful country, citizens have had to accept curbs on their civil liberties.
 
A British dream of emulating Singapore to becoming a low-tax, low-cost and lightly regulated haven ignores how illiberal the Singaporean government has been in shaping its economy. In many ways, the UK could not be more different from Singapore if it tried.

News

The Novavax coronavirus vaccine is the first to reveal in phase three clinical trials that it is 89.3% effective against the new South African virus variant found in the UK. Sixty million doses of the jab have been secured by the UK government and the doses are expected to be delivered in the second half of the year, if approved by the Medicines and Healthcare Products Regulatory Agency (MHRA).
 
An independent vaccine commission advising the German government announced yesterday that AstraZeneca’s Covid vaccine should only be rolled out to people under the age of 65, citing “insufficient data” over its efficacy for older people. The European Medicines Agency is expected to decide today whether to approve the vaccine for use across the EU.
 
Speaking at the Advertising Association’s Reset conference, Kate Nicholls, chief executive of UK Hospitality, cautioned that plans to roll out a total ban on junk food advertising could hamper the hospitality industry’s recovery from the pandemic, stating that any new laws would deal a fresh blow to beleaguered pubs, restaurants and bars.

Business and economy

Despite a strong rebound in the fourth quarter of last year, the US economy contracted 3.5% in 2020, measured year over year – the first decline since the financial crisis and the largest since 1946. Robust corporate and residential investment amid waning consumer spending have led analysts to forecast a continued recovery in 2021 from the effects of the pandemic. (£)

In unveiling the Scottish budget for 2021/22 yesterday, finance secretary Kate Forbes revealed that no changes will be made to Scottish income tax rates and resources will fund a council tax freeze, in a move to support households and families during the pandemic. An additional £800 million of funding was also set aside for the health portfolio, which has now risen to £16 billion.
 
Robinhood, the online brokerage at the centre of wild trading in equities this week, has raised more than $1 billion from its existing investors and tapped credit lines from banks, including JP Morgan, Goldman Sachs, Morgan Stanley, Barclays and Wells Fargo, to shore up its financial position after a turbulent four days.

Columns of note

For the last few days, amateur investors from Reddit subforum have caused a ruckus in pumping the price of GameStop to dizzying heights, pushing established, billion-dollar hedge funds to the brink in an orgy of ‘meme stocks’ and ‘loss porn’. Despite the regulatory backlash that has now ensued, Benedict Spence warns in The Telegraph that this set of events has opened a new populist front that the establishment can’t stop.
 
Despite being held captive in a cell in Moscow’s Matrosskaya Tishina, Alexei Navalny has still somehow managed to release a sensational YouTube video, shape the national debate and ignite mass protests in 125 cities across Russia. Writing in the Financial Times, John Thornhill highlights the power that digital platforms can wield in mobilising public dissent.

Cartoon source: The New Yorker

Markets

What happened yesterday?

London stocks finished in a mixed state on Thursday, as worries about the Covid-19 pandemic and the vaccine rollout dented sentiment.
 
The FTSE 100 ended the session down 0.63% at 6,526.15, while the FTSE 250 was 0.44% firmer at 20,368.25. Wall Street indexes gained momentum, with Dow Jones and Nasdaq up by 0.99% and 0.50% respectively.
 
Sterling was in the green, last gaining 0.27% on the dollar to trade at $1.3724, and advancing 0.19% against the euro to €1.1322.
 
In company news:
 
Prudential shares slid 7.83% after the insurer announced plans to separate its US business through a demerger. Drinks company Diageo rallied 3.15% after it was able to continue its policy of annual increases in its dividend, as it reported first-half operating profit down 8.3%. Tate & Lyle was also on the rise, advancing 4.06% after it hailed a “strong” third-quarter performance, with volume growth in each business and group revenue up eight per cent compared to the same period a year ago.

What’s happening today?

Finals
Bbva Ord

Interims
Real Good Food

Trading announcements
Evraz
Paragon Group

UK economic announcements
(07:00) Nationwide House Price Index

Int. economic announcements
(07:00) Import Price Index (GER)
(08:55) Unemployment Rate (GER)
(09:00) M3 Money Supply (EU)
(10:00) GDP (Preliminary) (EU)
(13:30) Personal Income (US)
(13:30) Personal Spending (US)
(13:30) Personal Consumption Expenditures (US)
(14:45) Chicago PMI (US)
(15:00) U. of Michigan Confidence (US)

Source: Financial Times

did you know

Singapore is one of the only three surviving city-states in the world. The other two are Monaco and the Vatican.

Parliamentary highlights

House of Commons

No business scheduled

House of Lords 

No business scheduled

Scottish Parliament 

No business scheduled

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