Wednesday 19/02/25

So, following high-level talks yesterday in Riyadh, Donald Trump signals Ukraine should hold elections as part of Russia peace deal (Financial Times, Steff Chavez and Christopher Miller) highlights Trump cosying up to Putin and criticising Ukrainian president Zelenskyy for his handling of the war. Zelenskyy’s term in office expired last year but Kyiv has said it can only hold elections when the fighting stops. US and Russia agree to ‘lay the groundwork’ for ending Ukraine war (Financial Times, Felicia Schwartz, Max Seddon, Polina Ivanova and Christopher Miller) highlighted the likely reality of territory discussions and security guarantees and a move towards the normalisation of bilateral relations between the US and Russia. * SO WHAT? * Holding an election during a war is clearly nigh on impossible given security issues around polling stations and the fact that millions of Ukrainians have been displaced – and Putin and Trump know this. Trump’s clearly turning the screws and essentially doing Putin’s job for him! I find it incredible how Trump is OK with side-lining the very countries that have the most at stake in this war. In what world is this actually acceptable?? Ours, apparently…

In Donald Trump considers 25% tariff on imported cars (Financial Times, Myles McCormick) we see the president’s latest attack on trade as he’s now banging on about slapping big tariffs on cars, pharmaceutical products and semiconductors. He added that 25% was the starting point and that it would go higher later in the year to give companies “a little bit of a chance” to relocate to the US. Final details on the automotive tariffs are expected on April 2nd. His reshaping of relations with trading partners continues…

The emerging winners in Asia amid the trade wars (Financial Times, Trinh Nguyen) is an interesting article that takes a look at which countries could potentially gain from all this tariff reshuffling. Vietnam, Malaysia and Singapore have all benefitted from the major increase in

foreign direct investment over the last twenty years and evolved as a result (Vietnam in manufacturing, Malaysia in high-tech and Singapore in financial services as just a few examples). India has also made a lot of progress in the IT industry although manufacturing has been left behind in relative growth terms. * SO WHAT? * The shock to global trade is going to change the whole landscape and Asian countries outside China look like they may have a great deal to gain. I thought I’d include this story because it’s a bit different to all the newsflow on countries that are going to lose out!

In the UK, it looks like the chancellor is doing a bit of “DOGE-ing” (you’ve seen it here first – I’ve invented a new verb 👍) in Rachel Reeves to order audit of UK’s 130 regulators in bid to cut red tape (Financial Times, George Parker, Ortenca Aliaj and Jim Pickard) which says that the chancellor is going to tell cabinet ministers to do an audit of all of our regulators with a view to scrapping some and making all of them prioritise growth. * SO WHAT? * This sounds good, but it seems that there are no obvious targets or deadlines as far as I can see. If that’s going to be the case then you would have thought that the chances of this actually doing much are pretty remote. Reeves’s threat just doesn’t carry as much weight as America’s Terrible Twosome 🤣.

European gas faces déjà vu all over again (Financial Times, Lex) highlights the current sorry state of Europe’s natural gas stores. Europe is currently running low on gas and although it has been jolted into developing its own LNG capabilities on a more sustainable basis since Russia invaded Ukraine, the current energy mix is such that Russian gas supplies will still be very tempting in the event of the end of hostilities. If this is the case, then there is a chance that we could all be lulled into that false sense of security that we were in before the invasion, meaning that we could fall back into that same situation…

How European defence companies can rise to the challenge (Financial Times, Lex) takes a look at how European defence companies could benefit longer-term from countries increasing their defence spending. US threats of withdrawing support in various regions around the world, along with the perceived rising dangers from Russia and China, have prompted countries to increase their spending. * SO WHAT? * At the moment, different countries require different specs for weapons and ammo and this fragmentation is costing the EU between €25bn and €100bn a year (that is a hilariously wild prediction from the EC – did they use a dart board to come up with that 🎯?!?). Although it’s unlikely that all the countries in the bloc will adopt the same specs, it is definitely possible for this to happen in clusters. If they harmonised on, say, rifle specs manufacturers could be more efficient with their capacity and get economies of scale that would increase margin, boost volumes by being able to offer lower prices – or both! Joint investment across different countries could also benefit supply chains and lower costs.

Back home, UK productivity growth remains weak, ONS figures show (The Times, Jack Barnett) cites the latest numbers from the ONS which show that just three out of eighteen industries in the UK private sector economy have seen productivity gains in the last quarter (in transport, mining and administration services). Unfortunately, they don’t really contribute all that much to overall GDP, so this isn’t great. Insolvencies surge to 16-year high as bosses give up ahead of tax raid (Daily Telegraph, Melissa Lawford) feeds into the gloom as the latest figures from the Insolvency Service show that insolvencies have hit a new high as more businesses went bust last month than in any January since the financial crisis. Restaurants staring into the abyss as Reeves’s £25bn tax raid looms (Daily Telegraph, Tim Wallace and Daniel Woolfson) highlights fears in the hospitality industry ahead of April but then UK pay growth rises 6% despite job loss warnings after Reeves’s budget (The Guardian, Richard Partington and Phillip Inman) cites data from the ONS which shows that annual growth for total average weekly earnings rose in the three months to the end of December while unemployment remained unchanged at 4.4%. * SO WHAT? * Although many employers are undoubtedly going to be hit hard by the changes (not to mention the employees!), I do wonder whether the gloom is still part of the reality adjustment to Reeves’s Budget – after all, it was only announced a few months ago and hasn’t yet come into force. I think that for some businesses that were already on the edge, the hike in employment costs will be the thing that tips them over the edge (and I think that this is particularly true in areas like retail and hospitality who are more exposed) while many others are

just trying to batten down the hatches. It seems to me that everyone is expecting a prolonged decline but I think it’s too early to tell for sure. Big opportunities may present themselves to companies that are in a reasonable financial position…

Then in Holiday firms reporting surge in demand for long-haul breaks (The Guardian, Rupert Jones) we see that holiday companies are reporting rising demand for more far-flung destinations. Kuoni said yesterday that demand for long-haul bookings for the year ahead were 14% higher than they were at this time last year while Thomas Cook reported a 10% year-on-year uptick. The most popular destinations included the Maldives, Thailand, Antigua, Vietnam and South Africa. * SO WHAT? * This is quite interesting given what Tui said last week. I guess we’ll just have to continue to monitor what holiday companies are seeing, but it seems to me that the picture for leisure travel continues to be quite rosy given decent performances from airlines and hotels groups thus far.

Talking of which, IHG set to return $1bn to shareholders this year (The Times, Jessica Newman) shows that the group which owns brands including Holiday Inn and Crowne Plaza said that it wants to accelerate growth by buying another brand (it just bought Ruby) and return a slug of cash to shareholders. * SO WHAT? * This is impressive stuff and shouts confidence. It is amazing to think that it will have returned the equivalent of almost 6% of its market cap at the start of the year to shareholders via buybacks.

Meanwhile, First-time buyers’ chances of owning a home an even more distant dream (The Times, Tom Howard) cites some rather depressing findings from Skipton Group which suggest that just 11.5% of those trying to buy their first home in their local area are able to do so under their own steam and without the Bank of Mum and Dad (BOMAD). The report found that the four least affordable places for first-time buyers were all in Wales, but this was more due to “very low” average incomes rather than house prices. Perhaps unsurprisingly, in the City of London, just 3.2% of first-timers could afford to buy without borrowing from BOMAD – and this was because of higher property prices. * SO WHAT? * At the moment, it looks like already-stretched affordability is going to get worse as a property-buying frenzy is expected to intensify as we head towards the stamp duty deadline.

Tencent changes the messaging on its AI strategy (Financial Times, Lex) highlights the Chinese tech giant’s change in direction as it announced this week that its social media and messaging app Weixin, the domestic version of WeChat, will use AI-powered search from DeepSeek. * SO WHAT? * This is important because it shows that Tencent is electing to use a third-party’s model over its own. Using DeepSeek’s capability will really improve its offering quickly. What it will give up in terms of full in-house control will be more than made up for by its increased flexibility – and in today’s fast-moving market this is likely to be key.

Talking of AI models, Elon Musk’s startup rolls out new Grok-3 chatbot as AI competition intensifies (The Guardian) shows that xAI just launched the latest version of its chatbot – Grok-3. It is being rolled out to Premium+ subscribers of X. xAI is also launching a new subscription tier, called SuperGrok, for users on its mobile app and on the Grok.com website. This chatbot can generate texts and images without a lot of the restrictions seen on other platforms.

Meanwhile, Former OpenAI technology chief Mira Murati launches rival start-up (Financial Times, Cristina Criddle) shows that OpenAI’s former CTO has launched a start-up called Thinking Machines Lab which aims to make “AI systems more widely understood, customisable and generally capable”. Sounds good, but perhaps less eye-catching than Grok-3!

Then in OpenAI seeks new powers to fend off hostile takeover from Elon Musk (Financial Times, George Hammond, Cristina Criddle and John Foley) we see that OpenAI is looking at changing its shareholder structure to fend off unsolicited takeover bids. One idea being floated at the moment is giving the non-profit’s board exaggerated voting power to ensure that it keeps control of the restructured company, giving it the ability to over-rule other investors. This is relatively common practice, particularly among tech companies, so is a real possibility. Negotiations continue…

In a quick scoot around some of today’s other interesting stories, Northvolt to sell industrial battery unit to Scania (Financial Times, Patricia Nilsson, Maxine Kelly and Kana Inagaki) shows that the troubled EV battery maker has agreed to sell its industrial battery unit to Swedish truckmaker Scania. This business supplies batteries to the mining, agriculture and construction equipment industries. This just goes to show how far the once-promising Northvolt has fallen.

Back home, Thames Water wins court backing for £3bn debt package (The Guardian, Jasper Jolly) shows that the troubled utility company Thames Water has managed to get access to an

emergency debt package that should give it a few months of breathing room and Why is Thames Water getting £3bn and will it save it from collapse? (The Guardian, Jasper Jolly) explains why it needs the money (it said that it would run out of cash on 24th March if left to fend for itself) and what might happen next. While it takes money from the pot to keep going over the next few months, it will have to find new investors that will help it cut its debt pile and allow it to carry out proper maintenance. This potentially kicks the can down the road but nationalisation is not an impossibility.

So you’re in a foreign country, looking for a good value place to stay and then stumble on something unusual. Well, at least that’s what this guy is presumably going to say by way of explanation of “mistakenly” staying at a Japanese love hotel 🤣…this is hilarious. BTW, if you’re going to Japan don’t worry – there is zero chance that you’ll book into one of these by mistake!