Monday 06/07/20

  1. In BIG PICTURE” NEWS, central banks have a savings problem, US Big Tech faces EU scrutiny and the UK plans a Huawei phase-out
  2. In NEWS ON “WINNERS” & LOSERS, online car dealership Cazoo grows and the outbreak electrifies possibilities while the retail sector and management consultants suffer
  3. In INDIVIDUAL COMPANY NEWS, India’s Zomato feels the pinch and Hitachi unveils diesel train electrification plans
  4. AND FINALLY, I bring you an attack of the mutant potatoes…



So central banks face a delicate conundrum, Big Tech faces EU focus and the UK plans to phase out Huawei from 5G…

You will be aware that I referred, last week, to high levels of savings in UK households (and the latest European data showed the same thing). Well Soaring savings rates pose policy dilemma for world’s central bankers (Financial Times, Chris Giles and Martin Arnold) highlights a delicate balancing act that central banks will want to get right. Lockdown has forced households to save (a phenomenon also referred to as “involuntary saving”) and the bankers have to decide whether this money represents pent-up spending potential or whether households are putting money away for a “rainy day” (aka “precautionary saving”). * SO WHAT? * If it is the former, too much central bank stimulus will result in over-spending and rising inflation – but if it is the latter, sluggish expenditure could slow recovery and lead to rising unemployment. In reality, it’s probably a bit of both at the moment, but central bankers will be debating which of these forces is more dominant so they can implement the appropriate level of stimulatory measures. The need to get this right will become ever more pressing as lockdowns continue to lift.

We all knew that this was going to happen anyway, but Tech giants to face EU legal push on content, competition, taxes (Wall Street Journal, Valentina Pop and Sam Schechner) shows that Margrethe Vestager, chief of the EU’s digital policy and antitrust body, is putting flesh on the bones of the plan to restrict Big Tech’s anticompetitive behaviour, make them pay more taxes and force them to do more to filter out illegal content. It sounds like there’s going to be a shed-load of legislation to cover these areas and the tech companies themselves say that they are keen to work with her (yeah, right!). It’ll be interesting to see how effective the legislation is and whether it will be taken as a sort of template for other countries/regions, which is what happened with General Data Protection Regulation (GDPR) following its introduction in 2018.

Then in UK expected to phase Huawei out of 5G networks (Financial Times, George Parker, Helen Warrell and Nic Fildes) we see that BoJo is due to unveil plans later on this month on how he will be phasing Huawei out of the UK’s 5G phone networks following the conclusions of the most recent official security inquiry (and the American threats of sanctions 😜). * SO WHAT? * If there is a ban and all Huawei equipment is stripped out of 5G networks, the likes of Nokia, Eriksson, NEC and Samsung are likely to benefit greatly as more trusted partners, but Britain’s 5G efforts to reach “gigabit speeds” by 2025 will be delayed as a result.



Cazoo and electrification benefit from lockdown while retailers and management consultants face hurdles…

Online car dealer enters the start-up fast lane (Daily Telegraph, Hannah Boland) shows that Alex Chesterman, founder of both LoveFilm and Zoopla, has seen his online-only used car site Cazoo achieve an implied valuation of £1bn after attracting additional funding whilst under lockdown. Chesterman says that eight million used cars are sold per year versus two million new cars. Cazoo specialises in selling used cars online and then delivers them to people’s houses. * SO WHAT? * It seems to me that the only way Cazoo is different to sites like, say, Autotrader, is that you get your car delivered to you at the end of the process. Most people do tons of research online and then go to dealerships to buy secondhand cars but the coronavirus outbreak has meant that more people have had to go through the process in a completely “hands-off” manner. Although this will probably mean that more people will be happier to go through the whole process online than would have been the case before, I don’t see Cazoo being different enough to displace others. Also, although they may argue that the secondhand car market generally benefits from an economic downturn (people are less willing to splash out on new cars), I have said previously that the rise of PCP financing for cars means that a LOT of new cars are going to be hitting the secondhand market if people just hand them back and so although demand MAY go up, I think supply will go up as well. Still, Chesterton has a lot of money behind him and managed to grow Zoopla into the second largest property site in the UK after launching just after the financial crisis – so he has form in operating successfully in less-than-ideal economic

circumstances! Mind you, as they say, past performance does not guarantee future results…

How lockdown is driving an electric future (The Guardian, Jillian Ambrose) is an interesting article that shows how lockdown is benefiting businesses like bike/bike repair shops (more people want to avoid public transport and are buying new/repairing old bikes), e-mobility firms like Lime (electric scooters) and making more people consider buying electric vehicles. Vehicle-charging firm Engenie says that there is a big uptick in retail parks installing charging points. The company installs rapid-chargers for no cost but asks for 50-50 split in charge-point revenues. * SO WHAT? * If businesses are being forced to change because of coronavirus, it makes sense for them to take long-term sustainability into account, but whether this ambition translates into actual change remains to be seen.

Meanwhile, the tough times continue for retail in 24,000 retail job losses are ‘tip of the iceberg’ (Daily Telegraph, Matthew Field) which sums up what’s happened thus far and says that there’s more misery to come when the furlough scheme ends next month and One in ten Pret stores may not survive (The Times, Dominic Walsh) shows that the company’s staff will this week get to know if they keep their jobs or not as management decides which stores to close. The situation for Pret is already dire and they have already said they can only pay 30% of rent, so this is unfortunately inevitable.

Elsewhere, Management consultants fear revenue fall of 10pc (Daily Telegraph, Michael O’Dwyer) shows that although management consultants have actually benefited from increased focus on public sector work and advising clients on crisis management, supply chain enhancements and digitisation, they think that growth in the next 12 months is going to be tough. Digital and tech consultants have brought in 19% of income and government contracts represent about 25% of the work for the sector.



Zomato feels the pinch and Hitachi talks electrification…

Zomato cut off from Chinese funding by India-China tensions (Financial Times, Mercedes Ruehl and Stephanie Findlay) shows that the $3bn Indian food delivery start-up has been cut off from $100m in funding from Ant Financial, the Chinese digital payment giant as it goes through the government’s approval process. * SO WHAT? * The Indian government is currently increasing efforts to block “opportunistic takeovers” and the process of approving foreign investment is part of this. The problem is that over 60% of India’s 30 unicorns (private companies that have a valuation of over $1bn) are funded either by big Chinese tech groups (like Tencent and Alibaba) or venture capital funds and the two countries have become so intertwined that

unravelling them could prove to be very tricky. OK, so sentiment is pretty hostile between India and China at the moment, but I suspect it will pass eventually as IMO India needs China’s cash and China needs India’s growth.

Hitachi flicks the switch for battery to replace diesel (The Times, Robert Lea) shows that Hitachi Rail UK, is currently seeking government go-ahead for the manufacture of hundreds of battery-powered electric trains to replace the UK’s diesel fleet. The company will be in partnership with Hyperdrive, the UK’s biggest independent battery maker. This sounds like great news for the environment, but the even-better news is that it can be retro-fitted onto some existing trains. * SO WHAT? * Some other manufacturers are looking at making hydrogen-powered trains, but Hitachi UK argues that battery-electric tech is ready-to-use right now and that it could immediately make a start on helping the government reach its target of having no diesel trains by 2040.



…in other news…

I thought I’d leave you today with one woman’s experience of lockdown in ‘Terrified’ woman returns home to find mutant potatoes have taken over flat (The Mirror, Luke Matthews This really is quite impressive 😱! Talking of which, I am reminded of this classic where comedian Rhod Gilbert recounts his potato-related experience HERE . He is brilliant! Just in case you are a bit squeamish about these things, he does use a few naughty words…

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Some of today’s market, commodity & currency moves (as at 0743hrs green is up, red is down). THIS IS INTENDED AS A ROUGH GUIDE ONLY!

FTSE 100 *Dow Jones *S&P 500 *Nasdaq*DAX *CAC-40 *Nikkei **Shanghai **
6,157 (-1.33%)10,20812,528 (-0.64%)5,007 (-0.84%)22,644 (+1.68%)3,333 (+5.71%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

(markets with an * are at yesterday’s close, ** are at today’s close)