Monday 01/04/19

  1. In MACRO NEWS, Brexit rumbles on, the UK living wage increases and China’s factories crank up
  2. In RETAIL NEWS, business rates come under attack, new rules on FOBTs put bookies under threat and Superdry faces a crunch vote
  3. In INDIVIDUAL COMPANY NEWS, Lyft sets a precedent
  4. In OTHER NEWS, I bring you some April Fools’ Day shenanigans. For more details, read on…



So Theresa May is about to have another go, the living wage rises and China’s manufacturing shows some signs of life…

Theresa May weighs fourth vote on Brexit deal (Financial Times, Jim Pickard) highlights the latest in the Brexit farce with backbenchers holding another series of “indicative votes” today on alternative options to May’s Brexit plan. There’s some talk of a general election, but who knows what will happen?!  May is even thinking about bringing her deal back for the fourth time after being voted down three times already. If it is rejected yet again, the main options on the table are the UK asking for a longer delay, a no-deal or abandoning the whole Article 50 process altogether. When the indicative votes were held last week, the options that won the most support were a customs union with the EU and a second referendum on any deal.

Pay rise for nearly 2 million as UK living wage goes up by 4.9% (The Guardian, Simon Goodley) heralds some good news for some and marks 20 years of the introduction of the “national minimum wage” which was rebranded the “national living wage” from 2016.  This is often confused

with the “real living wage” which is calculated independently and is meant to reflect what people really need (it’s now £10.55 per in London and £9 elsewhere, versus the new “national living wage” at £8.21 per hour  – and less for people under 21). * SO WHAT? * This is generally good news for consumers and feeds into the idea of wages going up across the board in the UK. 

China back on a roll as factories crank up (The Times, Louisa Clarence-Smith) shows that factory activity in China increased for the first time in four months, according to China’s official purchasing managers’ index. Analysts had been expecting another contraction due to the ongoing trade war with the US but it would seem that the government’s big stimulus measures may be starting to have an impact. Growth also accelerated in the services sector, which is good news because it accounts for over half of China’s GDP. * SO WHAT? * This looks like good news but, as always, you have to take the “official” figures with a pinch of salt because there is always the prospect of authorities massaging figures. TBH, you always have to cross-check PMI figures with other economic indicators anyway (not just in China) because they are only surveys which measure sentiment rather than cold, hard sales figures.



Business rates continue to stir opinion, new limits on FOBTs threaten betting shops and Superdry gears up for a big vote…

Retailers want MPs to tackle ‘madness’ of shop levies (Daily Telegraph, Oliver Gill) highlights ongoing retailer concern about business rates and the current state of affairs. A new “multiplier” is to come into force today that will effectively raise business rates for UK retailers, putting further pressure on an already-embattled sector. Business rates generate around £30bn a year for the Treasury but retailers argue that a complete overhaul of the system is required in order to take account of the rise (and unfair advantage given to) digital retailers. Chief exec of the British Retail Consortium, Helen Dickinson, observed that “retail accounts for 5pc of the economy, yet pays 10pc of all business taxes and a staggering 25% of business rates. This is simply not sustainable; the raft of shop closures and job losses are testament to that”.

Talking of which, Online retailers set for business rate rise (Financial Times, Jonathan Eley) gives an idea of what e-tailers and retailers could expect in the future as the government is about to assess the higher rents paid by warehouses before the next revaluation takes place. Rents on commercial properties today will be used to set the rates from April 2021 onwards. The last revaluation was in 2017 and based on rents in April 2015. Etailers currently pay way less in business rates than their high street counterparts, but that is likely to change in 2021 when they are expected to pay much higher bills due to a sizeable hike in rents for the distribution centres that are so integral to their operations. On the other hand, many high street retailers (if they manage to survive until then) will see their bills falling. * SO WHAT? * Business rates have been just one of many contributors to the current feeling of malaise that many retailers are feeling. A rise in the minimum wage, shortages of staff, Brexit uncertainties and stubbornly high

rents have all kept overheads high at a time when they are desperately trying to adapt to changing customer behaviour. Business rates are definitely contributing to retailer difficulties, but they are by no means the only thing.

In other news on the high street, New limits on FOBT gambling machines could shut third of outlets (Financial Times, Alice Hancock and Camilla Hodgson) heralds the arrival of what we all knew was going to happen, but the maximum stake of Fixed Odds Betting Terminals will be reduced from £100 to £2 from today. The move had been flagged a while ago, with betting shops up in arms over this effective quashing of the machines that have been referred to as the “crack cocaine” of gambling. GVC, which owns Ladbrokes Coral, expects to close around 1,000 of 3,475 shops as a direct result of this crackdown and only last week William Hill asked landlords for rent cuts of up to 50% to keep their shops open. * SO WHAT? * FOBTs were introduced in 2001 and were hugely popular – so much so that in 2005 legislation was introduced to limit their number to four per shop. They have been the lifeblood of the UK gambling industry, but the introduction of the £2 limit is going to kill this once mighty revenue stream as government caved to pressure and brought forward the introduction of this limit to today from a proposed date in October. Many larger bookmakers have turned their attentions to online gambling and expansion in the US since the limits were announced, but this is obviously not a realistic option for smaller operators. Critics say that this will drive gamblers into more dangerous alternatives, but advocates say that this move has been long overdue. Still, this will mean more of these outlets shutting down leading to more gaps in our high streets.

Stakes are high as Superdry investors prepare to decide (The Times, Alex Ralph) brings our attention to the crunch vote set for tomorrow for troubled retailer Superdry as its disgruntled co-founder Julian Dunkerton makes his bid to return to the company and oust the current management. He needs to garner at least 50% of the vote in order to return and it seems that the outcome is finely balanced with heavyweight investors on either side of the divide. We’ll soon see what happens!



Lyft floated on the NASDAQ, paving the way for more to follow…

Lyft IPO sets the stage for Uber listing (Financial Times, Shannon Bond) looks at Lyft’s IPO on Friday and how it managed to power up by 8.7% on its first day of trading despite an opening price that was above previous guidance. I think that Len Sherman, a professor at Columbia Business School summed it up best when he said “No companies have ever raised and lost more money

faster at a higher valuation than Uber and Lyft”. It was the biggest IPO of 2019 so far and the biggest one since Snap in 2017. * SO WHAT? * This will set the stage nicely for Uber, which is expected to come to market with a valuation as high as $100bn that could make it the biggest ever IPO of an American company. There was a minor blip in the celebrations, though, as Lyft’s two-tier share structure likely to bar it from S&P500 (Daily Telegraph, Olivia Rudguard) means that it might see less buying action from index trackers. It doesn’t like the two-tier structure where one class of stock (held by the founders) will have 20 votes per share while the other (held by everyone else) will only get one per share.



And finally, in other news…

Given that it’s April 1st today, I thought I’d leave you with April Fools’ Day LIVE: Best pranks from around the world including poo emoji 50ps (The Mirror, Toby Meyjes