Charlotte Street Partners

DAILY BRIEFING

DAILY BRIEFING

The not-so-new "new deal"

Written by Scarlett Regan, reseacher
Edited by Sabina Kadic-Mackenzie, associate partner
1 July 2020

Good morning,

Yesterday, from the English market town of Dudley, prime minister Boris Johnson swapped his Downing Street background for an industrial themed one, complete with hard hats and hi-vis vests, as he outlined a “new deal”.

He spoke of “bouncing forwards” and “backwards” ­(and perhaps over the Irish sea). We were hearing the announcement of the new ‘Build Back Better’ UK coronavirus recovery campaign.

Many were left asking though, how much of this is actually new? Although Boris has snaffled Roosevelt’s “new deal” phrase, his 2020 version is not nearly as far-reaching as its 1933 namesake. Boris’s “deal” is equivalent to 0.2% of GDP, unlike Roosevelt’s, which represented 40% of the US 1929 GDP.

Amidst the hyperbole, there were some announcements. He said that the government wants to continue to “level up”, that infrastructure projects in England would be “accelerated”, and that there would be investment in new academy schools, green buses and new broadband. No new money was allocated for hospital maintenance, bridge repairs and home building.

The facts are clear, and they are sobering. Yesterday, the Office for National Statistics (ONS) revealed that in the first quarter of this year, the UK economy shrank by 2.2%: the joint largest fall since 1979.The government is due to end the furlough scheme in October ­– a scheme that is currently paying the wages of 9.3 million people – but no aspect of the so-called “new deal” addresses these jobs post-October.

For there to be any hope of recovering from this momentous crisis, we need huge amounts of new money to be pumped into our economy and perhaps just as importantly we need a wave of reform, innovation and collaboration across government, businesses and the third sector that isn’t driven by money but by leadership. All eyes on Chancellor Rishi Sunak now, who is due to announce a package of strategic tax cuts and spending on 8 July.

News

Doctors say that the government must provide vital data more quickly to local authorities to help them deal with Covid-19 spikes in their areas. This comes as it has taken some time to get testing data to officials in Leicester, the first city to experience a local lockdown after a rise in cases. Government transparency and openness is crucial, doctors from the British Medical Association have stressed.

More than 100 UK company chiefs and business groups have written to Boris Johnson warning that it would be “hugely damaging” to the economy if Britain leaves the EU without a deal. The letter highlights that a no-deal would result in higher unemployment and lower living standards. It also stresses that while managing coronavirus planning, businesses have little to no capacity to prepare for a no-deal scenario now. This comes as negotiators for the EU and UK meet in Brussels this week for more talks. (£)

Protesters in Hong Kong plan to take to the streets today after China passed a new security law last night that gives it sweeping powers over Hong Kong. The legislation delivers on Beijing’s threat to criminalise acts of secession, subversion, terrorism and collusion with foreign forces. Those deemed guilty of “severe” offences can be jailed for between ten years and life under the new law. (£)

Business and economy

Aerospace giant Airbus says it plans to cut 15,000 jobs as it deals with the effects of the crisis. It will cut 1,700 of these job in the UK, with thousands more on the continent. The firm said the cuts would only fall on the commercial aircraft division at its two sites at Broughton (Flintshire) and Filton (Bristol). The Unite union said it expected 1,116 manufacturing jobs and 611 office-based jobs to be cut.

About 600 workers will lose their jobs after shirtmaker TM Lewin announced it will close all 66 of its UK shops. It will be taking all of its business online to help cut costs. This comes weeks after a private equity firm Torque Brands, a subsidiary of Stonebridge Private Equity, bought the brand, with plans to restructure it.

One of Britain’s biggest housebuilders, Redrow, has announced plans to leave London, due to increasing numbers of buyers seeking larger homes with access to outdoor spaces. It will instead focus on the regions and its heritage product: traditional homes outside the capital city. According to Rightmove, searches for homes with gardens rose by 84 per cent for renters and 42 per cent for buyers in May, compared with May 2019.

Columns of note

In the Financial Times, Gideon Rachman argues that the coronavirus pandemic could kill off populism. Donald Trump and Jair Bolsonaro, the two most prominent leaders in the western world, have both grossly failed to contain the coronavirus, Rachman says. Both are now paying a significant political price for their incompetence. He asks if populism might just be rejected by voters?

In The Times, Kenny Farquharson notes that closing the Scottish borders may be Nicola Sturgeon’s toughest dilemma yet. He says that tackling Covid-19 will become a game of “whack-a-mole”, and that border controls might need to be put in place to whack any outbreaks. But, Farquharson hints, this will inevitably be seen by some as a political gesture. Is it worth taking that risk?

Cartoon source: The Times

Markets

What happened yesterday? 

Wall Street stocks recorded the best quarter in more than two decades, awakened by central bank stimulus. But with the virus cases soaring in the US, research has found that lockdowns are either tightening or not being eased for 40 per cent of the US population, and there is debate as to whether this could halt the positive economic trajectory there.

Asia-Pacific markets were largely higher on Tuesday, with China’s CSI 300 up 1.3 per cent, and Hong Kong’s Hang Seng up 0.5 per cent.

Anglo-Dutch group Shell announced it would cut up to $22bn from the value of its assets, warning that the pandemic would deal a lasting blow to demand for energy products and the global economy. In London trading, its shares were down by 2 per cent.

What’s happening today?

Finals
Enteq Upstream
Hml Hldgs

Interims
React Group

AGMs
Arricano Real
Downing Strate.
Third Poi. $

UK economic announcements

(00:01) BRC Shop Price Index
(09:30) PMI Manufacturing

Int. economic announcements
(07:00) Retail Sales (GER)
(08:55) PMI Manufacturing (GER)
(08:55) Unemployment Rate (GER)
(09:00) PMI Manufacturing (EU)
(12:00) MBA Mortgage Applications (US)
(14:45) PMI Manufacturing (US)
(15:00) ISM Manufacturing (US)
(20:30) Auto Sales (US)

Source: Financial Times

did you know

Between 1982 and 2002, Donald Duck received so many write-in votes in Sweden that he was, theoretically, the country’s ninth most popular political organisation.

Parliamentary highlights

House of Commons

Oral questions

Scotland

Prime Minister’s Question Time

Ten Minute Rule Motion

Prime Minister (Nomination) and Cabinet (Appointment) – Pete Wishart

Motion

Appointment of the Chairman of the National Audit Office

Motion

Ways and Means Resolution relating to the Finance Bill

Legislation

Finance Bill: Remaining Stages (Day 1)

Adjournment

Effect of covid-19 on international language schools – Caroline Ansell

House of Lords 

Oral questions

Relaxing the social distancing rules in place to address the Covid-19 pandemic for the use of public transport – Lord Bradshaw

Oral questions

Assessing the report by the Henry Jackson Society ‘Breaking the China Supply Chain: How the ‘Five Eyes’ can Decouple from Strategic Dependency’, assessment of the supply of goods sources from China by UK industry and encouraging such goods to be sourced from the UK – Lord Blencathra

Oral questions

Impact of the Covid-19 pandemic on mental health – Lord Bradley

Legislation

Fisheries Bill [HL] – Third reading – Lord Gardiner of Kimble

Legislation

Prisoners (Disclosure of Information About Victims) Bill – Report stage – Lord Keen of Elie

Orders and regulations

Direct payments ceilings regulations 2020 – motion to approve – Lord Gardiner of Kimble

Orders and regulations

Direct payments to farmers (amendment) regulations 2020 – motion to approve – Lord Gardiner of Kimble

Scottish Parliament 

No meetings scheduled.

Share this post

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

Copyright© 2020 Charlotte Street Partners