Thursday 03/07/25

Donald Trump’s tax bill on the brink as House rebels hold up passage (Financial Times, Lauren Fedor, Myles McCormick and James Politi) highlights a late rebellion in the House of Representatives from critics in his own party. Trump met with dissenters and said that he believed the bill would all go through but it’s still unclear as to whether these people have changed their mind. Given the narrow majority in the House, Republicans can only afford to lose three votes. Trump said, in capital letters no less, in a Truth Social post yesterday that “IF PASSED, AMERICA WILL HAVE AN ECONOMIC RENAISSANCE LIKE NEVER BEFORE”.

Then in Donald Trump announces 20% tariff in trade agreement with Vietnam (The Times, Robert Miller) we see that the president struck a trade agreement with Vietnam whereby the country will be slapped with a minimum 20% tariff whilst also giving more access to American products with zero tariffs. * SO WHAT? * Initially, US companies with a big footprint in Vietnam – including Nike – saw share prices rise but then they fell off when he added more details. 20% is more than expected but at least it’s not the 46% it could have been…prices of shoes and clothing exported from Vietnam to the US are likely to rise as a result of this if the terms of the agreement are confirmed.

Meanwhile, EU blocks Britain’s attempts to join pan-European trading bloc (Financial Times, Peter Foster and Andy Bounds) shows that Brussels is digging its heels in with regard to not letting the UK join the Pan-Euro-Mediterranean (PEM) convention. The PEM is an agreement between the EU and 20 other countries in Africa and the Middle East and the UK’s entry has been supported by various trade groups, including the British Chambers of Commerce because they think it could help goods exporters. However, joining this would involve rewriting the terms of the existing post-Brexit EU-UK trade deal, so it’s a no go at least for now…

Starmer moves to bolster Reeves after tearful Commons episode fuels bonds slump (Financial Times, George Parker, David Sheppard, Ian Smith and Jim Pickard) shows that Starmer eventually backed up his chancellor by reiterating that she will stay in her position for “a very long time to come” after a nervy performance in the Commons following the welfare bill disaster. Badenoch went for the jugular in a heated exchange and Starmer initially refused to say how long Reeves would remain in her role. * SO WHAT? * Investors got nervy because the prospect of a new chancellor would mean more uncertainty at a very tricky time but Starmer’s eventual show of solidarity calmed things down once more. He said that her shaky performance was down to personal reasons and was nothing to do with anything political.

Talking of the welfare bill, Where does the welfare bill climbdown leave UK public finances? (The Guardian, Heather Stewart) says that now the bill that was supposed to save £5bn has been torpedoed and the winter fuel allowance has been restored, Reeves is going to have to find £6.25bn from somewhere – and everyone reckons that’s going to be from higher taxes. Which UK taxes are expected to rise in the autumn Budget? (Financial Times, Sam Fleming and George Parker) suggests that she could extend the freeze on personal tax thresholds beyond 2028, which the IFS reckons could raise £9.2bn; she could raise corporation tax by a percentage point, which could raise £4bn in 2028-29; and the left of the party says she should introduce a “wealth tax”, but no-one knows what that would look like. * SO WHAT? * I personally think that Reeves has to come up with a plan quickly and get the measures out there otherwise everyone’s just going to keep guessing and a cloud of uncertainty will hang over businesses and individuals alike.

Business confidence remains weak after rise in national insurance (The Times, James Hurley) cites the latest BCC quarterly survey which shows that business confidence hasn’t yet recovered from the April tax and wage rises. Less than half of the respondents expect their sales to grow over the next 12 months. * SO WHAT? * The government’s U-turns are going to mean tax rises for all, so concerns about what those tax rises might be is going to be a cloud over everyone until we get more clarity on it.

Further to murmurings I mentioned yesterday, Investors fret over talk of AstraZeneca US move (Financial Times, Hannah Kuchler, Emma Dunkley, Ian Smith and George Parker) highlights concerns by investors that if AstraZeneca’s CEO’s threat to ditch London for New York comes to fruition, it would be bad not just for the entire UK market – it could be a major blow for the UK economy. It is seen as being a successful and innovative pharmaceutical company and if it leaves, it will make it much more likely for others to follow suit. Those who support the move will say that the company may get a better valuation and that it would be easier to increase pay for top execs. * SO WHAT? * I wonder whether this is just a move by AstraZeneca’s CEO to get better treatment from the government, with which it is currently negotiating on drug prices. Pharma companies have said that the UK needs to spend more on medicines or investment will suffer. I think that the government needs to take this seriously even if it’s just a negotiation tactic – because businesses are already feeling pretty uncertain at the moment and the LSE is really suffering what is turning out to be a serious exodus.

Contrary to what we’ve been seeing and hearing from pubs and alcoholic beverage companies with increasing frequency over the last year or two, Gen Z acquires taste for drinking as cost of living pressures ease (Financial Times, Madeleine Speed) cites a survey by IWSR, a market researcher for the global beverage industry, which found that 73% of Gen Z repondents out of the 26,000 people across the 15 biggest alcoholic drinks market surveyed had consumed alcohol in the last six months versus 66% two years ago. This represented the biggest increase of any generation as overall alcohol consumption is moderating over all generations. * SO WHAT? * One of the key conclusions to be drawn from this is that lower alcohol consumption among younger people is ACTUALLY being driven by the cost of living crisis and it does NOT represent a

fundamental evolution in societal habits! That being said, the drinks industry is still facing a global downturn in the amount of alcohol being consumed and everyone is wondering whether this phenomenon is structural (i.e. something fundamental that signifies a longer term shift) or cyclical (i.e. something that is a bit of a phase and will ultimately pass). The share price of companies including Diageo, Pernod Ricard and Heineken have all been hit by the assumption that this change in behaviour is structural. Such companies have tried to tempt drinkers into consuming higher quality drinks and/or by investing in low or no-alcoholic beverages. If this survey is a true reflection of society, then there’s hope yet for the industry. However, they do need to adapt to lower volumes they’re experiencing at the moment though – and that involves a lot of cost-cutting.

In employment trends, CEOs Start Saying the Quiet Part Out Loud: AI Will Wipe Out Jobs (Wall Street Journal, Chip Cutter and Haley Zimmerman) shows that CEOs are, with increasing frequency, saying that AI is unequivocally going to take jobs. Ford’s CEO Jim Farley said that “Artificial Intelligence is going to replace literally half of all white-collar workers in the US”, JP Morgan’s consumer and community business CEO said that she reckons operations headcount could fall by 10% in the coming years, Amazon’s CEO said that he expects the company’s overall corporate workforce to shrink and Anthropic’s CEO said in May that 50% of all entry-level jobs could vanish in the next five years – which could lead to the US unemployment rate hitting anywhere between 10% and 20%. Microsoft to cut 9,000 jobs as chatbots take over (Daily Telegraph, Matthew Field) says that 4% of Microsoft’s workforce is going to be cut, with the axe coming down on those in its Xbox division and King, its mobile games studio. CEO Satya Nadella recently said that up to 30% of the company’s code was now being written by AI bots. * SO WHAT? * This is obviously not a good thing to hear but unfortunately it is reality. While it may take some time before this REALLY kicks in across the board, I really think that it would be a good idea for people to give their futures proper consideration regarding how much of their jobs can be done by AI both now and in the future. If your job is likely to be eclipsed then making preparations early – to get more skills or to think about a completely different career path – would be a good idea rather than wait until the axe lands and THEN panic.

OpenAI signs $30bn data centre deal with Oracle (Financial Times, Cristina Criddle, Tabby Kinder and Rafe Uddin) heralds a massive deal that is one of the biggest cloud agreements ever signed for AI! This represents a major expansion of OpenAI’s “Stargate” data centre project, which it launched with SoftBank in January. Oracle is going to develop a number of data centres across the US to fulfil its Stargate obligations – the aim has been to invest up to $500bn in data centres in the US and around the world. Impressive!

Swedish AI start-up Lovable nears $2bn valuation (Financial Times, Tim Bradshaw and Ivan Levingston) highlights the success of the start-up that simplifies app programming at its latest fundraising round and provides another example of the increasing investor rush to “vibe-coding” companies. Loveable’s programming tool uses output of a number of different models including OpenAI, Anthropic and Google. It then adapts their code to create whatever app the user wants

to build. * SO WHAT? * It’s interesting to see the evolution of AI models into something more monetisable. I suspect that we’re going to see this trend continue…

Then in Bumble chief criticises staff for ‘freaking out’ over London job cuts (Financial Times, Kieran Smith and Costas Mourselas) we see the CEO being in less-than-supportive mood in the aftermath of her announcement of cutting around 30% of its global workforce. The axe is going to fall particularly heavily in London and Whitney Wolfe Herd said that “dating apps are feeling like a thing of the past”. She said that Bumble might collapse next year if drastic measures aren’t taken. 70% of Bumble’s staff are based in the UK. * SO WHAT? * Clearly this is very distressing for those affected in the UK but I guess that if deep cuts and strategy changes aren’t made then there may be no company left! 30% cuts are obviously better than 100% cuts!

In a quick scoot around some of today’s other interesting stories, Tesla sales go into reverse in fresh blow for Elon Musk (The Times, Louisa Clarence-Smith) cites the latest disappointing figures for Tesla as global vehicle deliveries dropped by 13.5% in Q2 and Tesla Is in Disarray. Musk Has Already Moved Beyond Caring About Cars. (Wall Street Journal, Becky Peterson and Sean McLain) suggests that Musk is beyond caring about cars as his attention appears to be shifting to self-driving taxis and humanoid robots. That being said, the reality is that almost 75% of Tesla’s $100bn in revenues over 2024 came from selling cars. It is sobering to think that the Cybertruck is the only new Tesla model in the last five years! * SO WHAT? * People have doubted Musk before and he has come through. If he really is shifting his focus then I would have thought that Tesla is going to be in limbo until we see real progress in the robotaxis and the robots.

In banks news, TSB gets its moment in the Spanish sun (Financial Times, Lex) remarks on TSB’s takeover, saying that the buyer Santander is really bolstering its credentials in the UK lending market by doing this and can probably squeeze some decent cost savings out of the deal as well, something which Santander takeover could lead to TSB branch closures across UK (The Times, Helen Cahill) considers as it suggests that 20% of the combined TSB and Santander branches could be shut down. It also says that the TSB name could disappear.

Then in An ‘Amazon of guns’? Welcome to the ‘parallel economy’ (Financial Times, Lex) we see that the incredibly aptly-named company GrabAGun is looking to do an IPO on the New York Stock Exchange in a few weeks’ time. It is described by some as the “Amazon of guns” as it is an online marketplace where you can buy – you’ve guess it – guns. You can even finance your purchase with something that they actually call “Shoot now, pay later”. Funnily enough, it’s going public by merging with a SPAC.

Back home, Greggs burnt by June heatwave as shares plunge (Daily Telegraph, Hannah Boland) shows that the baking giant has warned that the recent hot weather has killed sales of their pastries in its latest investor update. It said that this would impact its full year profits. The company’s share price has cratered by a whopping 40% in the last six months, so something clearly needs to be done here…

Who earns more? A rock star, a film star or the CEO of a multi-national? This will give you an idea of how much you could earn if you went down the CEO route 😱!