Monday 10/06/19

1. In INDUSTRY NEWS, Big Tech could be about to get a tax surprise and UK high street visits hit new lows
2. In NEWS ON CARS, makers continue to target China and we see the knock-on effects of our shrinking car industry
3. In INDIVIDUAL COMPANY NEWS, United Technologies and Raytheon plan a mega tie-up and BT aims to join Britbox
4. In OTHER NEWS, I bring you the joys of office chair racing. For more details, read on…

So Big Tech could be in line for some Big Tax and UK high street visits drop…

Digital giants face tax setback after G20 agreement (Financial Times, Robin Harding) highlights an agreement by G20 finance ministers to speed-up plans to revamp cross-border corporate tax. They will aim to agree on new rules “by 2020” that will hit digital businesses that operate across borders and currently use that to book their sales in the lowest tax jurisdiction. UK chancellor Philip Hammond remarked that “Global tax rules should still aim to tax businesses based on where they create value, not just on where they make sales. We need to ensure the reformed international tax system continues to reward countries for creative attractive business environments”. * SO WHAT? * The US is obviously resistant to this because of the size of its digital giants and I presume countries like Ireland will also object because they benefit hugely from being a low-tax country for corporates. The Devil will be in the detail with such an agreement and I would expect the US and the

FAANGs will do as much as they can to resist given how hard this could hit them financially. My money would be on a token effort that will increase taxes a bit, but not by as much as they should because of the sheer power of these American companies.

The UK retail sector has been in the wars for a while now and High street visits hit six-year low as Brexit uncertainty deters shoppers (The Guardian, Zoe Wood) cites the British Retail Consortium’s (BRC) monthly footfall data for May which shows that store visits hit a six-year low due to cooler weather and Brexit uncertainty. The BRC’s chief exec, Helen Dickinson, observed that “The UK experienced the worst footfall figures in six years, with declines in every region, and across high streets, retail parks and shopping centres. This reflects our recent sales data, which showed the largest drop in retail sales on record”. * SO WHAT? * If you combine these findings with last week’s BRC data on consumer spending – which showed the steepest fall in almost 25 years – you have yourself a very bleak picture. Philip Green’s Arcadia Group is going to be having its postponed meeting with creditors this Wednesday. If THAT doesn’t go well, the high streets could look even bleaker than they are doing now… 

Auto makers continue their China efforts, but their withdrawal from the UK is going to have knock-on effects…

Auto makers raise bets in China despite market slowdown (Wall Street Journal, William Boston) shows that although car sales have been slowing down in the world’s biggest car market, foreign automakers still see it as a key market – especially for the development of electric vehicles (EVs). China’s government is putting its full weight behind the development of EVs by continuing to offer big tax incentives to consumers that make them very price competitive as well as forcing manufacturers to fill an EV quota. * SO WHAT? * China is keen to be at the forefront of electric vehicle manufacturing and technology and it would be madness for non-Chinese manufacturers to ignore this. I guess that the thinking goes that if they develop and thrive in a market that could well see quicker mass adoption of EVs versus other developed markets, their China sales

would be healthy – but they could also use the tech know-how they’ve developed in China to other markets, which could be even more lucrative.

Ford closure takes car job losses to 10,000 (Daily Telegraph, Alan Tovey) looks at the effects that recent developments for car manufacturers in the UK could have on their related supply chains. The Society for Motor Manufacturers and Traders (SMMT) has just released a report which estimates that for every job lost at a car manufacturer, five are lost in the related supply chain. Given that up to 10,000 jobs are under threat in the UK car industry at the moment (Ford closing its Bridgend factory, Honda axing its Swindon plant, JLR cutting roles worldwide and Nissan deciding to abandon plans to build the X-Trail in Sunderland and stop producing Infiniti vehicles), this implies that another 50,000 are at risk. UK car manufacturing hit its peak in 2016 and 80% of the vehicles manufactured here were for export. * SO WHAT? * I think it’s safe to say that those “glory days” are gone, Brexit or no-Brexit. I also believe that leaving the EU has hastened a demise that was going to happen anyway given trends in ownership, purchasing and technology. It’s sad, but it’s not just the UK that’s suffering.

United Technologies and Raytheon mull a mega-merger and BT wants to be part of Britbox…

United Technologies strikes deal to merge with Raytheon (Wall Street Journal, Cara Lombardo and Doug Cameron) heralds what could be a humungous deal to make a combined aerospace and defence company, to be called Raytheon Technologies, worth a whopping great $100bn. This deal would make it the world’s second biggest such company behind Boeing and its product suite would range from engines and seats for jetliners and F-35 jets to Patriot missile launchers and space suits. * SO WHAT? * This deal would be part of a wave of consolidation among aerospace and defence companies as the Pentagon is increasing pressure on contractors to cut costs and invest more in new technologies. Interestingly, the combo is unlikely to face too much

antitrust resistance because the companies don’t compete against each other in most of their markets.

There’s continued action in the world of streaming as BT wants to join the party with Netflix rival (The Times, Elizabeth Burden) shows that BT is in talks with ITV to invest millions in Britbox, the subscription service that is to be launched by ITV and the BBC. Britbox is likely to cost £5 per month and both ITV and the BBC are expected to start withdrawing their old shows from Netflix and Amazon going into launch. * SO WHAT? * This looks like it could be pretty good for all parties as the Beeb and ITV get a nice slug of investment and, on the other side, it could also be good for BT who could become a “super-aggregator” of entertainment via its set-top box. No doubt more details will surface when discussions are more advanced. This sounds fair enough for now, but my concerns remain that all this subscription malarkey will ultimately lead to subscription fatigue as subscribing to all these services won’t be that much different from your old cable/satellite costs in the end.

And finally, in other news…

I thought I’d leave you today with something we’ve all had a go at unofficially: Blood, sweat but no tears: Japan’s office chair racing (Reuters, https://tinyurl.com/y4eqjawx). This looks great, don’t you think??