Monday 20/07/20

  1. In MACROECONOMIC NEWS, the EU summit proves to be tricky and Network Rail could be in the driving seat
  2. In HIGH STREET AND CONSUMER GOODS NEWS, Ted Baker announces job cuts, Ask and Zizzi get sold and Levi Strauss warns of more retail strife
  3. In WORKING-FROM-HOME NEWS, cloud businesses and Zoom continue to benefit
  4. In INDIVIDUAL COMPANY NEWS, car makers accelerate their electric plans and TikTok stops talks on a London HQ
  5. AND FINALLY, I bring you a calming life hack and a beautiful aquarium…



So the EU summit isn’t going well and Network Rail could get more responsibility…

EU leaders struggle to break summit logjam over virus recovery fund (Financial Times, Sam Fleming, Mehreen Khan and Jim Brunsden) shows that things aren’t going well at the moment in the big meeting going on at the moment between Europe’s leaders who are trying to come to an agreement on bailout terms for a big coronavirus bailout package. All the kerfuffle is due to a small group of richer countries (the “frugal four” – Austria, Denmark, the Netherlands and Sweden) wanting to issue the money in the form of loans versus everyone else who wants to issue it in the form of grants. Interestingly, the “frugal four” have actually softened their previous stance of saying that none of the money should be distributed in grants – they have opened the door, but still want more loans. This has not gone down well. Global stocks fall as EU recovery fund talks stall (Financial Times, Hudson Lockett) reflects market reaction to the impasse, although the prospect of the expiration of unemployment benefits for Americans due at the end of this month was another potential negative for investors to consider. The drama continues…

Network Rail could be handed control of railways (The Times, Robert Lea) highlights a possibility currently being considered by the Department for Transport (DfT) – that Network Rail could take charge of running the railways in England. Network Rail overseas the track and signalling infrastructure and has been part of the state since 2012 when it was nationalised. Private companies who operate regional franchises are likely to object strongly to having the state looking over their shoulder. * SO WHAT? * The train industry has taken a massive hit during lockdown as the normal flow of passengers has fallen dramatically. Train operators are currently thought to be running 85% of their services but with passenger numbers only at 20% of normal levels. This has pushed a lot of train operators close to the brink of collapse. It’ll be interesting to see how this one pans out because I guess that, in many ways, current circumstances offer a unique opportunity to make a massive overhaul of the whole thing. Whether that opportunity is taken, of course, is another matter! However, I think that the coronavirus outbreak has led to a massive rethink in working practices and COULD have a profound effect on passenger numbers in future as flexible working becomes more established. 



Ted Baker announces cuts, Ask and Zizzi are scooped up and Levi Strauss warns of more gloom to come…

Ted Baker to cut 500 jobs as pandemic losses add to financial woe (The Guardian, Rupert Jones) shows that troubled retailer Ted Baker is going to axe about 25% of its UK workforce as it continues to struggle with current market conditions. Around 200 of the 500 are to go at HQ, but the rest will be from its shops and store concessions. * SO WHAT? * Ted Baker has had a disastrous few years – particularly since its founder, Ray Kelvin, stepped down following allegations of inappropriate behaviour towards staff. Since then, his top management team has been cleared out due to the discovery of a MASSIVE accounting error and Toscafund, the hedge fund, has overtaken him to become the company’s biggest shareholder. A turnaround plan was launched last month, but it’s too early to see any returns from that yet. Investors had seen Ted Baker in the past as a one-man band – that man being Ray Kelvin – and always had a concern over what would happen if he left. Those worries have proved to be well founded…

In Ask and Zizzi sold with further job losses for restaurant sector (Financial Times, Kaye Wiggins and Alice Hancock) we see that the restaurant chains have been sold in a £70m prepack administration deal to TowerBrook Capital Partners. The two brands were part of Azzuri, which itself was owned by Bridgepoint. By the way, if you are interested

in who owns who and who sold who you MUST read this article. There is a superb chart in there that lays it all out. Information like this is VERY hard to come by in one place like this! Anyway, new owners TowerBrook are expected to close 75 outlets and cut 1,200 jobs. * SO WHAT? * The casual dining sector’s demise has already been ongoing for the last few years, but the coronavirus has accelerated its downfall. Private equity firms piled into the sector (they invested £4.5bn between 2011 and 2019, according to Refinitiv) over the years and powered a massive proliferation of outlets. This has come back to haunt them in the last couple of years and now they face the difficult decision of whether to open them with vastly reduced customer numbers, to leave them closed or to get out now while they can (and while Sunak’s recent VAT cuts are providing a short-term boost). The tough times continue. IMO, this could lead to the opening of more independent restaurants in the high street as vacancies increase and government initiatives encourage small businesses (this hasn’t happened overtly yet, but it tends to happen in an economic downturn to get people back to being economically active).

Retail bankruptcies ‘tip of the iceberg’, says Levi Strauss boss (Financial Times, Alistair Gray) highlights a warning from the chief executive of Levi Strauss only two days after two of its competitors in denim, Lucky Brand and the US division of G-Star Raw, filed for Chapter 11 protection. Although its second quarter was the weakest in at least twenty years, its balance sheet is actually in better condition than many of its peers – it has $1.5bn sitting around in cash – which may mean that it can shop around for “bargains”.



Cloud businesses and Zoom continue to benefit from lockdown…

Cloud business reaps rewards of the work-from-home revolution (Financial Times, Richard Waters) takes a look at how working practices around the world have changed under lockdown, what with the massive rise in videoconferencing, online shopping and gaming. The cloud computing services that provide the backbone to these businesses have been growing over the last twenty years or so but, as Microsoft’s chief exec Satya Nadella said in April, the pandemic has already resulted in “two years’ worth of digital transformation in two months”. * SO WHAT? * Companies such as Amazon Web Services and Oracle are among those to have been able to provide much-needed additional capacity to help companies do what they do and many have said that demand has been brought forward as clients accelerate moves to cloud-based

systems. Although some demand will fall as people return to work, lockdown will have ingrained online habits enough to continue the ongoing migration to the cloud.

Zoom-mania key to using tech to boost productivity (Daily Telegraph, Tom Rees) says that the government wants to continue to surf the wave of “Zoom-mania” by introducing new policies that will help to accelerate the adoption of tech to solve Britain’s productivity problems. Officials are currently discussing ways to stimulate companies’ sluggish digital adoption rates by introducing new grants, tax incentives and education. Apparently a third of SMEs have very low levels of digitisation, according to findings by the Entrepreneurs Network – and it is believed that their productivity could be boosted in a meaningful way by the adoption of cloud computing and web-based accounting, among other things. * SO WHAT? * I’m sure there will still be a certain amount of inherent scepticism, but incentives from the government in the wake of this outbreak will surely help to convince laggards to catch up on the tech front! I have to say, if they don’t do it now they probably never will!



Car makers continue to electrify and TikTok London HQ talks stop…

Auto makers charge ahead with electric vehicle plans (Wall Street Journal, Ben Foldy) shows that the likes of General Motors and Volkswagen are seeing increased pressure to deliver on their electric vehicle plans as massive share price rises in the likes of Tesla and the lesser-known Nikola (named after the same scientist and specialist in electric trucks) show that investors are betting heavily on electric dreams. GM said last week that it is developing 20 new electric models by 2023 (including a new electric Hummer!?!), Ford will start selling its electric Mustang SUV and Jeep will be a plug-in hybrid version of its Wrangler. * SO WHAT? * It’s interesting to see how the momentum continues to build for electric vehicles, but

there is still a while to go as, for instance, VW is currently having problems with the release of its ID.3 that is now being delayed from its intended European summer launch to September at the earliest. This has been due to coronavirus-related production problems as well as software glitches. I haven’t got any data on this, but I would have thought that the demand for home chargers and related parts and materials will also be increasing over time.

TikTok halts talks on London HQ amid UK-China tensions (The Guardian, Phillip Inman) highlights a tricky situation as TikTok’s parent ByteDance has halted talks to build a non-China business HQ in the UK. Relations between China and the UK have been deteriorating of late and the recent ban on Huawei by the UK government has been cited as a reason for the suspension, with 3,000 future jobs hanging in the balance. This will no doubt be a useful bargaining chip for ByteDance as it will probably seek more concessions to put an HQ in London…



…in other news…

I thought I’d leave you today with a life hack for people who keep on wondering whether they’ve left the gas on when they leave the house in Expert explains why you should always take photos of your appliances before going out (The Mirror, Courtney Pochin) and then the strangely beautiful sights you can see in Tokyo aquarium’s reopening showcases a revamped, ethereally beautiful jellyfish chamber (SoraNews24, Katy Kelly).

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Some of today’s market, commodity & currency moves (as at 0750hrs 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 **
6,290 (+0.63%)26,672 (-0.23%)3,225 (+0.28%)10,503 (+0.28%)12,920 (+0.35%)5,069 (-0.31%)22,681 (-0.35%)3,314 (+3.11%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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