Watson’s Weekly 11-07-2020

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.


  • The EU cut GDP growth forecasts (Wednesday) versus what they said in May, setting the scene for the forthcoming meeting with European leaders to discuss the €750bn bailout. The “Frugal Four” (Austria, Denmark, Netherlands and Sweden) continue to dig their heels in. They want the money to be distributed in loans whereas everyone else is being pushing for grants
  • Tensions between India and China continue to run high. The $3bn Indian delivery start-up Zomato has been unable to access $100m in funding from Ant Financial (Monday) because it is being held up for approval by the Indian government. There’s a lot of bad feeling between the neighbouring countries following a clash between soldiers on the Himalayan border recently and there’s a lot of tit-for-tat going on, of which this is undoubtedly a part. The cold hard truth of the matter, though, is that over 60% of India’s unicorns (private companies with a valuation of over $1bn) are funded by cash-rich Chinese tech companies, such as Tencent and Alibaba, and venture capital funds. It is my opinion that the current spat is a short-term issue because, put bluntly, India needs China’s cash and Chinese companies need India’s growth
  • The other big event this week was UK chancellor Rishi Sunak’s unveiling of economic stimulus measures (Thursday) which included things like cutting VAT from 20% to 5% for the hospitality sector, a £2bn fund to finance jobs for young people, £1bn for job centres and the raising of the stamp duty threshold to £500,000. He obviously came in for criticism from those who didn’t feel the love (completely understandable) but he’s never going to get it completely right. We’ll just have to see whether these measures are enough to encourage consumers to spend, avoid the worst of youth unemployment and stimulate the property market!


  • Household savings rates continue to rise, but central banks have to work out why they are saving (Monday). They have to ascertain whether households are building up funds, really want to spend but have just been unable to (“involuntary saving”) or whether they are saving to build up funds for future “rainy days” (“precautionary saving”). If it turns out to be the former, then money will hit the high street but if it is the latter, there will be a problem because people won’t spend and inflation will crater. In reality it’s probably a mix of both – but judging this correctly will be key to getting any stimulus right. In the UK at the moment, unofficial figures say that consumer spending is down (Friday), but official releases won’t be out for a while yet
  • Buy-now-pay-later specialist Klarna has launched a campaign to caution against people buying what they don’t want (Thursday)! Potential users of its service will be encouraged to ask themselves “Do I love it? Will I use it? Is it worth it?” before buying. Given that the company boasts that its services increase sales by 20% I think it is amazing to hear them embarking on this campaign. It is just my opinion, but I do wonder whether they are actually very concerned about mass potential defaults and are using this campaign to mitigate future potential problems
  • In RETAIL, footfall on the UK high street has increased (Tuesday) – which is pretty obvious considering that the shops have just opened – but the nightmare for high street players continues. Pret announced cuts of 30 stores and 1,000 jobs (Tuesday) while Boots and John Lewis cut jobs and outlets (Friday). This is in addition to the 40,000 retailing jobs already lost so far this year 😱
  • The other major retail story this week was of Boohoo, which has been riding high recently. A Sunday Times reporter infiltrated a Leicester factory that was thought to be one of Boohoo’s suppliers and found that workers were being paid way less than the minimum wage. To cut a long story short, Boohoo’s share price fell by a third as investors panicked, the company implemented a number of measures and the share price traded up by 27% the day after a call was held to calm investors (Friday). Will other purveyors of cheap fashion get caught up in this as investigations unearth new information?


  • The EU is embarking on a push on content, competition and taxes on Big Tech companies (Monday), which has been expected. It’ll be interesting to see what this brings and whether it will become a template for other countries and regions
  • So far, Facebook, Twitter, Google, Zoom and LinkedIn (owned by Microsoft) are considering what to do about their presence in Hong Kong (Thursday) given the implementation of China’s new security law. This will be a delicate balancing act because if they get it wrong, China will no doubt implement some painful retaliatory measures


  • There have been a lot of knock-on effects with the advent of lockdown. PC sales have increased as more people work from home (Friday), TfL is suffering because everyone’s afraid of going on the Underground (Friday) and people are avoiding buses and trains – not great for a company like FirstGroup (Thursday). Conversely, Halfords is benefiting from more people getting on their bikes (Wednesday)


  • Watson’s Yearly updates: watch this space!


My favourite “AND FINALLY…” stories of this week were Pizza Hut unveils bizarre ‘Pie Tops’ shoes that let you order takeaway at the tap of a foot (The Mirror, Chris Baynes), which I know is old but it’s just great 😂 – and the heart-warming moment in Three-year-old besties reunite after months apart in lockdown and it’s adorable (The Mirror, Paige Holland). How brilliant is this?!