Tuesday 26/11/24

LAST CHANCE TO REGISTER for tonight’s Commercial Awareness Workshop with Let’s Chat Law starting at 7pm! I’ll be covering commercial awareness basics, how to use it in applications and interviews and a walk-through of how to prepare for assessment centres etc. Click HERE to go and hopefully see you there!

In Donald Trump says he will hit China, Canada and Mexico with new tariffs (Financial Times, Aime Williams) we see that Trump is threatening to slap tariffs of 25% on all imports from Canada and Mexico and an additional 10% tariff on the existing levies on Chinese goods and Dollar rises after Donald Trump vows to impose new tariffs (Financial Times, Arjun Neil Alim) highlights the immediate impact as this would imply that prices will rise, meaning inflation will rise – and that will necessitate higher-for-longer interest rates, which prompts investors to buy the dollar. Chinese stocks rose slightly on the news because the tariffs weren’t as high as had been expected. Trump tariff on China could lower global inflation, says UK economist (The Guardian, Richard Partington) is an interesting take on the potential repercussions on Trump’s tariff bonanza as Swati Dhingra, an external member of the Bank of England’s Monetary Policy Committee, reckons that Chinese exporters might lower prices when trading with the rest of the world in order to maintain volumes. This could mean that inflation will fall. Why a trade war with Trump threatens China’s ruin (Daily Telegraph, Melissa Lawford) observes that the 25% tariffs Trump imposed on Chinese imports in his first term were painful but that higher ones (he did talk of 60% tariffs) would definitely be painful, particularly as the US is China’s biggest trading partner. A lot of smaller exporters would go out of business, pushing up China’s unemployment rate – and there could be a serious impact on China’s GDP. This will come at a time when China’s economy is in a bit of a rut. * SO WHAT? * At the end of the day, it seems to me that this is all posturing at the current time, an initial salvo to get the negotiation juices going with other countries and sow some panic. That being said, I don’t think Trump is going to be in a conciliatory mood given that a) he has a strong mandate b) he doesn’t have to be and c) he will want to stick to the promises he made on the election trail. I would add to the above, however, that all of this is going to be bad news for the rest of the world’s manufacturers because Chinese product will have to go somewhere if it doesn’t go to the US – and so not only are European exports potentially going to get hammered by the new US tax regime, we’re also going to contend with Chinese dumping cheap product that they can’t sell to the US over here. Great for consumer and inflation, but it could potentially put further pressure on manufacturing and other industries.

Meanwhile, Mexico Gets Cold Feet Over New Chinese EV Plant After Trump Win (Wall Street Journal, Santiago Perez and Raffaele Huang) shows that Mexico is like a rabbit getting caught in Trump’s headlights as it doesn’t want to offend the incoming president on the one hand, but on the other Chinese EV maker BYD is on the verge of breaking ground on a factory in the country. * SO WHAT? * Mexican officials are now concerned that letting the Chinese EV giant build a plant in Mexico will send the wrong message to a belligerent Trump who will no doubt portray this move as Mexico becoming the backdoor for Chinese companies to sell in America. Oooh. This is a

tricky one. I guess, at the end of the day, that BYD could just sell to Mexico and the Latam market (which is what it has said it would do anyway).

Back in the UK, New UK non-dom concession ‘accelerates’ wealthy people’s exit plans (Financial Times, Emma Agyemang) shows that the abolition of the non-dom regime and subsequent concessions is pushing many wealthy people to leave the UK over the coming months. * SO WHAT? * At the moment, people have to live outside the UK for 3-10 years (depending on how long they’ve lived in the UK) before they are exempt from UK inheritance tax (IHT) of 40% of their assets. However, if they emigrate in the current tax year, they will cut their exposure to UK IHT on their worldwide possessions to three years maximum. I guess if you’re mobile and not that attached to the UK, why wouldn’t you leave??

‘We had no alternative’: Reeves defends her budget to the CBI (The Guardian, Heather Stewart) underlines Reeves’s commitment to her unpopular (to businesses at least!) Budget as she told attendees at the CBI annual conference in Westminster yesterday that no-one had offered better solutions. Mind you, she did say that “I do not plan to have another budget like this. I have wiped the slate clean”. Still, I suspect that there will be a lot of scepticism about this statement – and it could well come back to haunt her in the coming years!

As the UK government continues to be on the back foot, Starmer to launch online ‘dashboard’ to let public track policy targets (Financial Times, Lucy Fisher and Anna Gross) highlights an interesting idea – that PM Starmer will launch a public dashboard next month that will let voters keep tabs on the government’s progress on a number of new pre-election targets. He wants to do this to improve “trust and transparency” of his administration. This sounds like a great idea – particularly if things are going well – but it could be a source of discomfort if things aren’t!

Elsewhere, Seven million Britons own crypto assets as bitcoin surges to $95,000 (The Times, Patrick Hosking) shows that seven million adults in the UK now own crypto assets, a significant increase from the five million that owned them in 2022. According to the latest survey from the FCA, the number of respondents holding between £1,000-£10,000 worth has increased from 20% to 36%, with the average holding valued at £1,842 versus £1,595 in 2022. The FCA said that those owning crypto tended to be male, younger, from a higher socioeconomic background and on higher earnings. * SO WHAT? * What is also interesting here is that a rising number of people are unaware that they have absolutely zero investor protection if anything goes wrong. TBH, I am of the view now that the fundamentals are all somewhat academic. You have two very prominent crypto fans coming into the White House and Trump in particular said he wants to make the US “the crypto capital of the planet”. Unless something REALLY dramatic goes wrong, I think that they will do their utmost to support crypto. The problem is that if something really does go wrong, it will be spectacular.

Macy’s delays results after employee hides $150m (The Times, Louisa Clarence-Smith) highlights quite the scandal as one of its employees’ dodgy actions has resulted in America’s biggest department store chain delaying its quarterly results. One of its employees hid up to an eye-watering $154m in expenses. Funnily enough, the employee (who was responsible for small package delivery expense accounting) no longer works at the company. Presumably they bought an island somewhere 🤣. What an absolute joke. That being said, it’s not actually likely to have that much of an effect on the bottom line – but it does make the management look incompetent.

Back home, Retailers warn inflation could hamper UK shoppers in run-up to Christmas (The Guardian, Sarah Butler) cites retailers as ramming home the message that Budget changes will raise costs and will be passed on to consumers, reversing the trend up till now of slowing price growth. The Centre for Economics and Business Research (CEBR) reckons that households will have to contend with “dampened spending power over the festive period” and that this will be particularly acute for lower income households.

However, there’s some good news for the German discounters in Reeves gives tax boost to Aldi and Lidl in battle with British supermarkets (Daily Telegraph, Hannah Boland) where it looks like they will benefit from the government’s overhaul of the business rates system. The Treasury is looking at charging a higher rate of tax to larger properties with a rateable value of £500,000 or more in order to finance a discount for smaller properties. * SO WHAT? * This will suit Aldi and Lidl very well considering their smaller store sizes versus their main rivals. The devil will be in the detail when this all comes into force but it will give the two supermarkets a really useful advantage over its rivals that it may be able to plough into keeping prices low.

Then in Kingfisher shares take hit after profits downgrade (The Times, Emma Taggart) we see that Kingfisher, which owns B&Q and Screwfix, downgraded its full-year forecasts blaming the new tax changes in the Budget. Unfortunately, it also reported a slowdown in trading over the latest quarter. While B&Q and its business in France have suffered, professionals-focused Screwfix actually had a decent Q3. * SO WHAT? * DIY retailers generally tend to do well when the housing market is doing well. This is because people often make home improvements when

they are going to move (because they want to maximise the amount they can sell their property for), when they actually move (they want to “put their stamp” on their new abode) and/or when prices are going crazy (because they can’t afford to move, so want to improve where they are). Kingfisher has some company-specific problems at the moment but if the housing market goes well then I would imagine that the prospects of the DIY retailers should improve!

Meanwhile, in leisure news, Starbucks has been outclassed by local rivals in China (Financial Times, Lex) just shows how tough competition has become in the Chinese market. Nowadays, about 20% of Starbucks’s outlets are in China and it’s still expanding whilst facing increasingly stiff competition from local heroes Luckin Coffee and Cotti. Things are getting so heated in the market that the company is considering the possibility of bringing in a local partner. * SO WHAT? * Compared to the local offering, Starbucks is expensive and relatively out of touch with local trends (like automation). If it doesn’t adapt to local tastes in such an important market, it could well get left behind!

Bakery chain at centre of gentrification row seeks £500m sale (Daily Telegraph, Hannah Boland) shows that posh bakery chain Gail’s has appointed advisers to find a buyer, potentially at a valuation of £500m. Current owners Risk Capital Partners and Bain Capital are seeking a partial or full sale of the business. * SO WHAT? * It would be pretty amazing if this price was achieved given that the business was valued at £200m when Bain bought a stake in 2021! Gail’s now has 130 bakeries across the UK, up from 74 in 2021. The sale comes at a time when the retailing and hospitality industry are facing higher costs thanks to the recent Budget…

In leisure news, Labour poised to announce £100m levy on gambling companies (The Guardian, Rob Davies) highlights another nail in the coffin for the gambling industry in the UK as the government looks likely to wave through the previous government’s proposal to force gambling firms to pay up for repair the damage caused by gambling, rather than just letting them pay whatever they like whenever they like. Under the proposals, casinos and bookmakers will have to pay £100m a year to finance research, education and the treatment of the consequences of gambling. The levy is due to come into force in April. This is going to hurt!

Apple faces ‘difficult’ process to launch its own AI in China (Financial Times, Ryan McMorrow, Michael Acton and Eleanor Olcott) highlights some tricky hurdles that Apple is facing in China at the moment with releasing its own AI models. Foreign companies are being warned that they will be faced with a “difficult and long process” to get approval from authorities unless they partner with local groups. The company wants to roll Apple Intelligence out to its devices sold in China. * SO WHAT? * It would indeed be impressive if Apple managed to crack this problem – but in the meantime, local rival Huawei has already integrated its own AI model into its latest devices.

Europe’s Mistral expands in Silicon Valley in hunt for AI staff (Financial Times, Cristina Criddle, George Hammond and Tim Bradshaw) shows that Mistral, which is now Europe’s most valuable AI start-up, is boosting its US expansion in an effort to compete with Silicon Valley rivals for AI employees. One of the three co-founders is also considering relocating from Paris to its new

office in Palo Alto, California. * SO WHAT? * This sounds like a good idea but it will be competing with others – including the Chinese – for talent!

Then in Telegram finances propped up by crypto gains as founder fights charges (Financial Times, Hannah Murphy and Robert Smith) we see that the detainment of messaging app Telegram’s CEO by French police has had no “material impact” on its operations thanks to the rising value of its crypto holdings! Its holdings were worth almost $400m at the end of last year, but they are now worth a whopping $1.3bn! * SO WHAT? * Telegram’s fortunes took a turn in August when founder Pavel Durov was detained in Paris over allegations that the company failed to address alleged criminality on the platform. Durov owns 100% of the company that only has 50 employees – so I guess that its fortunes depends pretty much entirely on him.

In a quick scoot around some of today’s other interesting stories, ‘Punching above its weight’: Professional services drive UK economic growth (Financial Times, Valentina Romei) cites FT analysis which shows that professional services have been a major driver of UK GDP this year as other parts of the economy face difficulties. The sector covers law, architecture, R&D, consultancy, market research and other areas  – and it grew by 3.9% in the recent quarter versus the final quarter of last year. To give you some perspective on this, this growth rate is triple that of the overall UK economy. Professional services now account for over 8% of the UK economy – dwarfing car production, construction and education. The area is now equal in size to the entire manufacturing sector!

Talking of pro services, BDO hands partners a big pay rise after a record year (The Times, Tom Howard) shows that the accountancy’s partners got a nice 12% pay rise after the UK’s fifth

biggest audit firm had a record year across all of its divisions. Even its consultancy division did well (against the general trend!) – and it managed to do all this whilst being heavily criticised by the Financial Reporting Council , the audit industry watchdog! It just goes to show that there must be a lot of work knocking around…

Then in Citigroup slashes promotions as it seeks to overhaul bank (Financial Times, Stephen Gandel) we see that Citigroup is cutting the number of year-end promotions quite dramatically in order to keep a lid on costs. Up to 2,000 Citi employees may get a rise from next month versus the usual number of 8,000. * SO WHAT? * Citi is attempting a turnaround and this sort of thing is just inevitable. The irony, though, is that the ones that are good will leave (particularly as M&A etc. should be pretty strong next year) and the ones that are less good will stay. Obviously they’ll try and keep the good ones by promoting them but there will certainly be some who go elsewhere.

Here are the three main rules of how to eat pizza – from an Italian!