Watson’s Weekly 02-10-2021

This is an amalgamation of the “best bits” of the daily weekday newsletter/blog woven together to form a concise and coherent view on the things that matter in the commercial and economic news of the week. 

THE DAY IN BRACKETS REFERS TO THE EDITION WHERE THE STORY APPEARED IN WATSON’S DAILY. Clicking on the day will take you to the appropriate edition of Watson’s Daily.



  • In Europe, Scholz’s SPD won the German election by a whisker (Monday) but it looks now like there is going to be a three-party coalition, which is likely to make putting through difficult legislation a real challenge given the different agenda of each party.
  • In the UKthe government took over Southeastern (Wednesday) due to finding a £25m hole in the accounts. It’s the latest railway line to get renationalised. In ENERGY, three more UK energy suppliers went bust (Thursday) and Ofgem braced itself for the possible collapse of Teneo (Friday) because wholesale gas prices keep rising (Wednesday), which gives US LNG exporters hope (Tuesday) because it looks like Europe is going to be a very lucrative market while Serica benefits right now (Wednesday) because it’s more exposed to spot prices than its rivals. It’s not just us that’s suffering either – China has coal shortages (Thursday) and all of this makes nukes more compelling (Tuesday) as part of an overall energy strategy to generate consistently reliable amounts of power (Europe as a whole is now suffering from the poor performance of renewables), which could boost Rolls-Royce with their SMRS as the government is thinking of putting more money in (Monday). Mind you, the UK is keen to get unentangled from China on nukes (Thursday), which I imagine is not going to go down well and will be used in any kind of trade negotiations with the country.


  • There are still problems in the US – two of the country’s busiest port complexes, the port of Los Angeles and Long Beach, are only able to run at 60-70% capacity because of the ongoing shortage of workers (Monday). Other major ports in Europe and Asia operate 24-hours per day but it seems that the shipping lines, lorry drivers, port workers, warehouse operators and others are just blaming each other for not being able to come to an understanding and get on with it
  • In China – the government’s efforts to limit energy consumption and cut carbon emissions is leading to power outages in many of its manufacturing hubs. Some manufacturers have been told to shut down factories and/or limit working hours and the rising price of coal is adding to the problem. This led to the economy’s first official contraction in manufacturing activity since the beginning of the coronavirus outbreak (Friday) as power shortages made already-tricky conditions worse. However, Beijing says blackouts will not be tolerated as power shortages hit factories (Friday) says that the government has warned state-backed energy firms that power outages should be avoided at any cost this winter. I am presuming that this is going to be bad news for everyone else as “at any cost” will probably mean that energy costs (particularly coal) will see a resulting price spike as companies try to comply with the order.


  • Shapps’ longer hours plan hasn’t worked (Monday) but businesses say that UK visa changes aren’t enough (Monday), fuel deliveries are prioritised (Thursday), some are saying that fuel prices may be higher for longer (Wednesday) and there are increasing fears that the crisis will damage health services and industry (Tuesday). The military is going to start delivering petrol to UK garages from Monday, but given that we are only talking 100 drivers here, you do think that this is probably more of a PR thing to stop people from going out panic buying. Still, it’s a move in the right direction because, let’s face it, there was always enough petrol – just the perception that there wasn’t enough.
  • All of this is making EVs more attractive (Wednesday), Ford announced an increased commitment to EVs (Tuesday, Wednesday), Polestar unveiled a SPAC deal (Tuesday) but Evergrande’s EV division cancels its listing (Tuesday) shows that even the positive vibe surrounding EVs can’t help the troubled company. It was interesting to see that more money is being poured into solid state battery development (Wednesday) which could reduce the amount of EV fires as solid state batteries are much more stable than existing lithium ion batteries. Meanwhile, Cazoo announced strong sales (Wednesday) while the SMMT’s latest figures show that chip shortages continue to hit production (Thursday).


  • The walls continue to close in on Evergrande (Monday) as at least two local governments are stepping in to put presale revenues into state-controlled custodial accounts so that “homebuyers’ interest can be protected and project construction continued”. Also, Evergrande has managed to raise a chunk of change by selling part of its 20% stake in Shengjing Bank (Thursday) to Shenyang Shengjing Finance Investment Group, the state-owned investment group. Shengjing Bank is “demanding” that money from the sale is used to settle liabilities it is owed. It’s still not out of the woods yet, though Evergrande it missed another interest payment on Wednesday (Friday) – its second in the period of a week – adding fuel to fears that it will default. At the moment, it appears that Beijing is not minded to bail the company out, but then it has to balance this against the potential damage that could be caused to domestic investors and home owners. The drama continues…


Consumers are facing increased challenges…

  • House prices are continuing to rise (Friday) as the latest figures from Nationwide say that the value of the average home continues to go up (although at a slower rate than before)
  • Gas bills set to rise further under green energy surcharge plan (Friday) shows that ministers are thinking about phasing in a green energy surcharge to household bills over a period of up to ten years. Clearly, the timing of the debate over this proposal is quite controversial given the backdrop we’ve got at the moment. Gas is currently taxed at a lower rate than electricity despite generation of the latter being “cleaner”.
  • Furlough ended this week (Thursday) and some parts of the country with big exposure to one industry or company are expected to suffer particularly acutely e.g. Crawley (Gatwick), Slough (Heathrow) and Luton likely to be particularly badly affected. As things stand, Luton already has the country’s fourth highest proportion of its population on jobseekers’ help and could rise to #1.
  • UK consumers will be seeing higher food prices (Wednesday), as food prices increased in September for the first time in six months thanks to rising logistics costs, commodity prices, staff shortages and Brexit admin,
  • In consumer trends elsewhere, Chinese pet care spend is expected to rise (Wednesday) according to Goldman Sachs report as younger people and the elderly are spending more on their pets than other demographics and DIY spending is continuing in the US (Wednesday).

…and as for the retailers themselves…

  • River Island is now seeing profits above pre-Covid levels (Monday)
  • Although Next did pretty well in its latest results, its chief exec said that shortage in staff/logistics/supply chain issues could dent Christmas (Thursday)
  • Boohoo spend a lot of money to mitigate damage on its tarnished image (Monday) and its profits took a big hit due to big acquisitions and higher costs (Friday), which the market took badly. Still, I think there’s upside going into the end of the year given it’s party season and that maybe it’ll give people reason to buy (maybe there will be more informal departmental nights out this year).
  • SSP is showing signs of recovery (Thursday) as the company that owns Ritazza and Upper Crust, reported better revenues in the latest quarter as airports and railway stations gradually return to normal. The company itself sounds cautiously optimistic about the future
  • In SUPERMARKETS, Aldi announced UK expansion plans (Tuesday), Morrisons heads for auction on Sunday (Thursday) and it also announced a new venture with Deliveroo called “Hop” (Friday), which provides rapid grocery delivery in the right catchment areas.


  • Facebook outlined a future beyond mobile phones (Monday) and it also suspended work on Instagram Kids (Tuesday)
  • Mastercard announced that it was going to do BNPL (Wednesday)
  • In IPOs, there was a real contrast between the massive jump seen on Oxford Nanopore’s market debut (Friday) and the rather more staid performance of Peel Hunt (Thursday).


  • Watson’s Yearly updates: These will be left until the next edition of Watson’s Yearly that will be published shortly