Monday 09/10/23

1. In BIG PICTURE NEWS, we consider events in Israel and their impact while Poland pushes for Germany’s manufacturing crown
2. In HIGH STREET NEWS, Metro Bank survives, Waitrose is in talks with Amazon, the UK high street evolves, pubs suffer but there’s good news for Caprice Holdings
3. In EMPLOYMENT NEWS, US law firms push for return to office and the four day working week loses steam, as does hiring
4. In MISCELLANEOUS NEWS, Google backs a driverless start-up and Big Tobacco considers the impact of Sunak’s actions
5. AND FINALLY, I bring you some push-up inspo…

So there’s tragedy in Israel, oil looks likely to spike and Poland vies with Germany…

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The day that stunned Israel: attacks shake faith in intelligence services (Financial Times, James Shotter and Andrew England) chronicles the events that stunned Israel early on Saturday morning. Basically, there was a multi-faceted attack from the Gaza Strip and hundreds of Hamas fighters stormed Israel by land, air and sea. It caught the normally super-vigilant Israeli military forces completely by surprise and some have described it as being the being the biggest intelligence failure since the Yom Kippur war in 1973 when Egypt and Syria launched a surprise co-ordinated attack from the north and south. Israel death toll from Hamas attack exceeds 700 (Financial Times, James Shotter and John Reed) says that 700 Israelis died and a further 2,100 were wounded in addition to 413 Palestinian deaths and 2,300 wounded. It was suggested that this latest attack is worse than Yom Kippur because of the involvement of citizens – Yom Kippur involved soldiers – as Hamas is believed to be holding over 100 Israelis, including women and children, hostage. Israel has responded by launching a massive bombardment of Gaza and hit targets in Lebanon yesterday. The US has offered help and the UN secretary-general António Guterres condemned the attack. There is a real danger that Lebanese militant movement Hizbollah could enter the

fray while Iran has expressed its support for the Palestinian Islamist group Hamas. Hizbollah is much more dangerous as it has access to more sophisticated weapons than Hamas. Audacious Hamas attack is a pivotal moment for Israel (Financial Times, Andrew England) contends that this is a massive nightmare for Benjamin Netanyahu’s far-right government that was voted into office on promises that it would be tougher on security. It’s possible that Israel could now conduct a full land offensive on Gaza. * SO WHAT? * This is a huge shock for Israel and all eyes will be on the response. As far as “commercial” impact of this goes, Markets brace for an oil price jump after Hamas attacks on Israel (Daily Telegraph, Melissa Lawford) shows that an oil price hike looks likely as the conflict could disrupt oil exports from Iran (who supported Hamas) but there could well be more uncertainty to come as delicate relations between the US, Saudi Arabia and Iran are now put in jeopardy – which will further stoke tensions in the region. I also wonder whether this will make the US’s support of Ukraine even more precarious than it is already proving to be with possible pressure on the president to perhaps provide more for Israel and less for Ukraine? One final sobering thought: the number of casualties thus far outnumbers the number of casualties in the entirety of the Yom Kippur war…

Elsewhere, How Poland is vying to steal Germany’s place as Europe’s industrial heart (Daily Telegraph, Matt Oliver) shows that Warsaw is making ground with Berlin as it benefits from the current near-shoring trend of Western companies bringing supply chains back from Asia (and particularly China). Over the last ten years, Poland’s output per person has skyrocketed by 85%, according to OECD figures, versus 46% for Germany and the 55% average across the EU over the same time period. Germany’s manufacturing output has fallen as a percentage of its GDP over the last decade while Poland’s has actually grown! It is thought that this has been powered, at least in part, by cheap land and lower wages. One observer reckoned that Poland could be the only country in Europe – or possibly even worldwide – that has seen industrial production not only exceed pre-pandemic levels but also return to its pre-pandemic growth trend! It is interesting to note that while automotive production represents about 10% of Poland’s manufacturing output there has been a concerted push to make higher value items and the results of these efforts have borne fruit – earlier this year, Intel announced a $4.6bn factory near Wroclaw earlier this year and the government is trying to get investment from TSMC, which is trying to diversify production away from China given the geopolitical tensions. In addition to this, Poland has done extremely well in securing investment in battery gigafactories and it is now the world’s second biggest battery manufacturer having leapfrogged the US! * SO WHAT? * All these efforts are coming together but it looks like the momentum will be at least maintained as Poland continues to invest in energy independence (it generates 70% of its electricity by burning coal but is investing in renewables and nuclear power plants) and reap the benefits of a massive investment in infrastructure between 2011 and 2021.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Metro Bank gets saved, Waitrose talks to Amazon, the UK high street evolves, pubs suffer but Caprice Holdings holds up…

Metro Bank seals £925m rescue deal (The Times, Ben Martin) highlights the saving of Metro Bank (for now at least!) as it managed to sort a funding deal last night that will be painful for investors and lumber the bank for expensive borrowing costs. Colombian billionaire Jaime Gilinski will take control of the troubled bank, via his vehicle Spaldy Investments, whilst diluting the stakes of current shareholders by embarking on a £150m equity raising as part of the rescue. It’s not ideal for everyone, but at least Metro lives to fight another day.

Meanwhile, Waitrose seeks Amazon tie-up to deliver a rise in online sales (The Times, Emily Gosden) shows that groceries from Waitrose could be available on Amazon if talks proceed to an agreeable conclusion. This would give it a new sales channel three years after it ditched its tie-up with Ocado (which is now partnered with M&S) and be similar to the partnership between Amazon and Iceland, which was launched last month. * SO WHAT? * This sounds like a decent development for Waitrose, which quite frankly could do with some help at the moment as it continues to lose market share. OK, so there is a risk that this could cannibalise its own online sales efforts, but you never know it could actually work! From the Amazon side, I wonder whether this is an admission of its relative failure in groceries as its “proprietary” efforts in this space (purchase of Whole Foods back in 2017 and then initiatives like Amazon Go and Amazon Fresh) have not really moved the needle. It offers goods from Morrisons the Co-Op as well as, now, Iceland.

How the UK’s dying high streets are being given new life by pop-up shops and galleries (The Guardian, Sian Norris) is a really interesting article which talks about the current state of the high street that has had to evolve quickly from the game-changing impact of Covid to something now that has more independent retailers, local makers and community action groups. The number of pop-ups has shot up by 18% over the past year! * SO WHAT? * I really like the sound of this because I believe that a better mix of independent and chain shops makes for a more interesting high street that more people want to visit. It seems to me that the pandemic heralded the end of the heavily-indebted mediocre chain and is forcing those that survive to provide a compelling

experience. That said, I can imagine that landlords will slide back into their old ways when the economy recovers as they will no doubt want to raise rents again – and those rents may be out of reach of the independents. Still, let’s hope that those responsible for our high streets have learned a lesson from the shock of Covid and pay attention to what they need to provide in order to keep visitors and shoppers coming back for more!

In leisure news, ‘It’s soul-destroying to have one customer on a Saturday’: Is the party over for the UK’s pubs and clubs? (The Guardian, James Tapper) highlights the difficulties faced by pubs and restaurants as they try to keep going by cutting business hours. Recent surveys have shown varying degrees of this with Brita Professional’s survey showing that 61% of the 500 hospitality businesses they asked had cut opening hours while another business confidence survey of 114 operators said that 41% were cutting down on hours or days due to costs and/or staffing problems. * SO WHAT? * I thought it was particularly fascinating to see how business have changed with more WFH. Apparently, because more people tend to be in on a Wednesday and Thursday, they have become the busiest for town centres whereas suburban areas have proved to be more equally busy across the week. Meanwhile, late-night businesses and those targeting a younger clientele have found things the hardest, particularly with a growing proportion of them electing to be alcohol-free! Costs have also skyrocketed and businesses (particularly pubs!) who just sell drinks are finding it extremely difficult to eek out margins and while those who serve food have fared better, raw ingredient prices have risen to ridiculous levels in some cases – one publican identified boxes of cod seeing a price rise from £50 to £90 overnight whilst a lamb shank dinner which cost £15.30 in 2019 would now have to be £28.80 to maintain the same profit margin! Things could get even worse if Jeremy Hunt takes away rate relief for hospitality in the upcoming autumn statement…

Meanwhile, in Restaurateur to the stars is in profit again (The Times, Emma Powell) we see that Caprice Holdings – which owns venues including Scott’s, Sexy Fish, The Ivy Collection, Annabel’s and Bill’s – has managed to return to profit for the first time since the pandemic. This is pretty impressive given the headwinds of rising labour, energy ingredient costs! You do wonder whether their exposure to higher-end venues has benefited them as the clientele are generally less exposed to the cost-of-living crisis.

Want to engage with myself and the team at Wats12on’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Four days in the office looks increasingly vulnerable…

In US law firms ask staff to spend more time in the office (Financial Times, Jane Croft and Suzi Ring) we see that more US law firms are asking staff to come in for four days a week as the recruitment market loses steam and dealmaking continues to prove sluggish as companies fret about the economic outlook. Legal recruiters are saying that three days in the office looks like turning to four days in the office – something that is happening at US firms such as Ropes & Gray, Weil Gotshal & Manges and Skadden, Arps, Slate, Meagher & Flom. It seems that hiring at partner level is still pretty hot but there has been a definite slowdown in associate level recruitment. Interestingly, it seems that some of the UK’s top firms are not quite as fervent on return-to-office, which will potentially help to differentiate them from their US competition.

That said, Working week: four days is flawed way for most (Financial Times, Lex) contends that the four-day working week

(working for four days a week for the same money as working five days a week) is particularly problematic for customer-facing businesses as it makes it harder to maintain weekly opening times without having to take on extra people. Overall, though, it seems to make life more complicated and as the business landscape continues to adjust post-Covid, it looks increasingly likely that the four day week will be a perk and not the default.

Then in Firms put hiring on back burner as confidence drains (The Times, Emily Gosden) we see that hiring activity has slowed to its lowest level since 2014 as companies worry about a potential recession, according to the latest figures from a BDO poll of polls, which include labour market data from the likes of the Bank of England, IHS Markit, the CBI and ONS. Meanwhile, on the other hand, another survey by the British Chambers of Commerce shows that 73% of firms say they are finding hiring staff problematic (although that is down from 82% in Q4 of 2022) – particularly in hospitality and manufacturing.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Google backs a driverless start-up and we look at the impact of Sunak’s intentions on Big Tobacco…

In a quick scoot around some of today’s other interesting stories, Google backs driverless car start-up (Daily Telegraph, James Titcomb) shows that the tech giant has taken a 3.5% stake in Oxa, an Oxford Uni spin-out that works on the “operating system” for driverless car fleets. It has already invested in an earlier fund-raising round. Google’s parent, Alphabet, is one of the world’s biggest investors in driverless cars, mainly via its Waymo business. This could get quite interesting if the two companies deepen the tie-up!

Then in Sunak’s health kick gives Big Tobacco a headache (The Times, Alex Ralph) we see a discussion on the effect of Sunak’s “assault” on smoking that he outlined at last week’s Conservative Party conference. The company most exposed to the ban that will effectively outlaw the sale of cigarettes to anyone born on or after January 1st 2009, is Imperial Brands which had a retail market share of about 45% in Britain via brands such as Player and Lambert & Butler. Japan Tobacco has the second biggest market share (via Benson & Hedges and Sterling) with British American Tobacco and Philip Morris International following behind. * SO WHAT? * As I’ve said before, I don’t expect this to have a major impact in the short-term as it will be a “slow burn” (sorry – I just couldn’t resist it). I guess it just means that tobacco companies will have to do more to diversify their businesses.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

…in other news…

Can you do push-ups/press-ups? Well this guy shows you some pretty good progressions to spice things up!