Monday 11/09/23

  1. In BUSINESS TRENDS NEWS, Beko warns of the China threat, PwC tries to cut conflict of interest and UK firms look vulnerable
  2. In CONSUMER & RETAILER NEWS, consumers face rents that could rise four times as fast as buying, Waitrose makes price cuts and we look at the potential for discounters
  3. In TECH NEWS, the iPhone15 launch approaches and news publishers look set to be transformed by AI
  4. In MISCELLANEOUS NEWS, we look at the future of China and how a rubbish dump transformed into the UK’s third biggest solar farm
  5. AND FINALLY, I bring you a fun-looking game…

1

BUSINESS TRENDS NEWS

So Beko gets twitchy about China, PwC treads carefully in the US and UK firms get nervous…

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Beko owner warns on risk of China dumping goods as domestic demand slows (Financial Times, Adam Samson) shows that the chief exec of Arçelik ( I guess you have to say that quite carefully 🤣) is getting concerned about a potential influx of cheap Chinese electrical home appliances because of a weakened domestic market. Arçelik owns brands including Beko, Grundig, Blomberg and Singer in various regions and it is in the throes of buying a majority stake in Whirlpool’s European household appliances business. * SO WHAT? * Consumer purchasing power continues to deteriorate in many countries and so they’ll either not buy appliances or those who do will be tempted by cheaper prices. Chinese flooding of the market with cheap stuff has happened for years (the current worries remind me of when China flooded the market with cheap steel, which killed prices for everyone else) but it is particularly prevalent when they’ve produced too much and/or the domestic market is too weak. That said, Beko could do well from consumers “trading down” from premium brands. I don’t think this is just an electrical appliances thing – just look at what’s happening with cars at the moment!

Then in PwC to curtail consulting work for US audit clients to reduce conflict risk (Financial Times, Stephen Foley and Michael O’Dwyer) we see that the Big Four accountant looks like it’s making

a big song and dance about cutting tens of millions of dollars of consulting work revenue by telling clients that it will stop offering some advisory services although they are allowed to do so under US accounting rules. It is doing this ostensibly as part of a wider overhaul of its audit business. * SO WHAT? * This all sounds lovely enough, but when there’s easy money to be made all sorts of work-arounds seem to pop up. PwC’s moves sounds like virtue signalling to me because if they truly wanted to separate the businesses they’d do it properly (in the way that EY had attempted to do, but failed) rather than SAY that they are taking all the right steps to ensure propriety. Audit seems to me to be the perfect cross-selling opportunity for considerably more juicy consultancy work because you have to work very closely with the client and you (potentially) get to know them – warts and all. As a client, it is surely easier to just bung them some consultancy work as well as you won’t have to go through the hassle of briefing someone else all over again. This is surely why other accountancy firms just aren’t keen on the separation of business – because it’s so darn lucrative! If anything, I think they should have separation forced on them by law and have done with it – but I doubt that’ll happen!

UK firms ‘slow output and rein in hiring as borrowing costs rise’ (The Guardian, Phillip Inman) cites a survey by accountancy firm BDO which showed that a small uptick in manufacturing in August failed to arrest a slide in broader UK private sector economic activity while UK SMEs not ready for ‘avalanche’ of Brexit 2.0 rules and taxes (Financial Times, Peter Foster) cites a British Chambers of Commerce (BCC) survey which shows that over 80% of UK SMEs were not aware of reporting requirements that will kick in next month or other obligations relating to a new VAT regime that will come into force in January 2025. The BCC is pushing for the government to get businesses ready for what is being referred to as “Brexit 2.0”, the ongoing divergence of EU and UK regulations and taxes. One interesting thing here is that changes to the EU VAT rules will require businesses that provide services – even if this is electronically – to pay the tax where the customer is. * SO WHAT? * Clearly, this needs to be sorted out as a matter of urgency – and I’m sure the government will be keen to do so as soon as possible given that next year is election year. Massive confusion and sudden bills will not be a good look at a time where the economy could do with all the help it can get!

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!

2

CONSUMER & RETAILER NEWS

Rents look likely to skyrocket, Waitrose cuts prices and we look at the prospects for the German discounters…

Hard times for the consumer look likely to continue in Rents forecast to rise four times as fast as house prices (Daily Telegraph, Matt Oliver) shows that rents will increase by 25% in the space of four years, according to forecasts by Hamptons estate agents. If this comes to pass, it will outstrip house price rises by far! * SO WHAT? * Not only will “higher-for-longer” interest rates hit landlords (prompting them to either jack up rents or just sell out because they get sick of paying higher mortgages), long-term supply shortages will keep squeezing rents higher. If their calculations are correct, average rent by the end of 2026 could be almost £1,600 a month versus their projections of a 5.5% rise in house prices over the same period. Rents are already increasing at their sharpest annual rate since 2016. The tough times continue…

Meanwhile, in retail news, Waitrose follows Ocado price cuts (Daily Telegraph, Matt Oliver) shows that the posh supermarket has decided to cut the cuts of 250 items from Wednesday as part of an ongoing effort to keep their customers happy in straitened times and stop them from “defecting” to cheaper retailers. The UK supermarket price wars continue…

Talking of which, Day of the discounter: when will the UK reach peak Aldi and Lidl (Financial Times, Laura Onita) speculates as to how long Aldi and Lidl can keep expanding. Triumphs for the two include Aldi leap-frogging Morrisons last year to become the UK’s fourth biggest supermarket and Lidl last week opening its biggest ever warehouse in Luton. Aldi’s new store in Woking that opened last Thursday (its 1,000th UK shop!) had over 300 people queuing up outside! The two now have a combined 17.9% share of the UK’s grocery market after twenty years of growth. There is speculation now that we could be reaching saturation point as they have one proposition that they do very well – quality value. Some say that their market share will stick at around 20%, but some of the supermarkets reckon it’ll be more like 25-30%. * SO WHAT? * FWIW, I think that there is still plenty of growth to be had and that although more affluent shoppers are expected to trade back up again once the austerity tide has passed, I’m actually not so sure about that. I, for one, think that Lidl FRESH croissants are superior to pretty much any chain coffee shop you are likely to come across, for instance, and there are a number of products that are just better than the other supermarkets. I think that shoppers will still go to the German discounters, but maybe their average basket sizes (i.e. what they buy on each shop – NOT the actual sizes of the baskets!) will get smaller as they do the rest of their shop at another supermarket. I do not think we have yet reached peak Aldi or Lidl!

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!

3

TECH NEWS

Apple’s new toy is almost out and news publishers look set to suffer from AI…

This is the week when all eyes will be on Apple and expectations about its new phone but Apple braces for backlash after caving to EU demands (Daily Telegraph, Matthew Field) shows that although excitement will be building about its new gadgetry ahead of its announcement tomorrow, there will be an inevitable consumer groan as the company has to switch from its Lightning charger (introduced in 2012!) to USB-C for its new array of iPhones. Brussels forced the move to a universal charging standard for all tech companies in a bid to reduce the estimated 11,000 tonnes of e-waste generated by chargers and help customers reduce the number of chargers they have to buy. The new charging standard will kick in from next year. China troubles could upset Apple’s cart as it prepares to launch the iPhone 15 (The Guardian, Samuel Gibbs) highlights the tricky backdrop against which this launch will be made as Apple is looking increasingly vulnerable to being a political football as sanctions continue to fly between Beijing and Washington. China currently accounts for around 20% of Apple’s annual revenues.

Then in News publishers ‘face a tsunami of job cuts as AI empowers Big Tech’ (The Times, Jack Barnett) we see that the the chief exec of News Corp believes that AI will amplify Big Tech’s power in news distribution making it that much more urgent for publishers to come to an agreement with AI companies. This will ensure that more people will have access to quality information and those that generate the content will get fairly treated. Fears continue that the loss of 57% of newsroom jobs in the US between 2008 and 2020 (using US Bureau of Labor Statistics) will just accelerate from here. It is argued that “insight” could disappear as a result. * SO WHAT? * This is clearly a major problem for everyone because I’d argue that AI is only as good as the information that it has access to. If a compromise isn’t found soon, I think that fewer people will want to follow a career in journalism and those that are in it will continue to lose their jobs. It is a tragic situation but I think is one that can be managed IF the stakeholders can take a long term view of where things are going. Proper quality does not come for free IMO.

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!

4

MISCELLANEOUS NEWS

We look at whether we’ve reached peak China and marvel at a rubbish dump transformation…

In a quick scoot around some of today’s other interesting stories, Have we reached peak China? How the booming middle class hit a brick wall (The Guardian, Amy Hawkins) is a discussion on where China is currently with the expected expansion of its middle class. Back in 1990, almost 70% of China’s population were living in extreme poverty, according to data from the World Bank – but that has now virtually gone to zero. Pew Research Centre Statistics’ data shows that those in the middle income bracket in China grew from 3.1% of the population in 2000 to just over 50% in 2018, a remarkable achievement – and this is predicted to grow further as Xi Jinping is now pushing a “common prosperity” agenda. * SO WHAT? * Goldman Sachs continues to expect China’s economy to overtake America’s by 2035. Sceptics, however, say that it will never reach number one and its economy is near to peaking. Time will tell, but although growth appears to be slowing right now, I would

have thought that this is a bump in the longer road, although that won’t be of much comfort to young people who are facing high levels of unemployment at the moment.

Elsewhere, Former rubbish dump in Essex becomes UK’s third largest solar farm (The Guardian, Jillian Ambrose) highlights an impressive transformation as the Ockendon solar farm in Essex, now the UK’s third biggest solar farm, now boasts 100,000 solar modules on 70 hectares of land that was previously a landfill site! Owner Veolia reckons that the solar array will generate enough clean electricity to power around 15,000 homes! * SO WHAT? * Landfill sites could be a decent shout for solar farms but one of the main problems facing potential developments is connection to the National Grid which has a 10-15 year application backlog. As for the existing ones, let’s hope that enough sun shines and that they can hang on to as much of the electricity as possible for when those rainy days inevitably come…

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!

5

...AND FINALLY...

…in other news…

This looks like a fun game, don’t you think? I guess the key here is how quickly you can complete the task!

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Some of today’s market, commodity & currency moves (as at hrs 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 **
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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