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The great contradiction
Written by Katie Stanton, associate partner
Edited by Kevin Pringle, partner
13 November 2020
Confusion is a big theme for 2020 – and I have certainly spent considerable time resigned to fuzzy-headedness. Waves of horrible or jarring or delightful news crash in from every direction, one after the other while I lie in the wash and just let them come, gasping for occasional breath amid the spray.
But I was especially confused when last week the UK government unveiled – somewhat under the radar – a jazzy new website offering comprehensive guidance on how British digital and technology firms can collaborate with China to “navigate the country’s unique marketplace.” It also announced huge success from the third China International Expo, which saw the UK secure “more than £430m of commercial deals across a range of sectors.”
This all makes sense: China is the UK’s third-largest export market, not to mention the world’s second largest and fastest growing major economy. It is ripe with economic opportunity and cutting-edge technology. At the same time, the UK is facing challenges: the continuing Covid-19 pandemic and, of course, our future relationship with the EU on terms yet undetermined.
Meanwhile, coronavirus is under control in China and, at a time when other economies are still grappling with the impact of the pandemic, gross domestic product added 4.9% year-on-year in the third quarter and growth in exports jumped to their highest levels in more than a year and a half in October. The UK could do with a bit of that action and ministers are, understandably, rubbing their hands together at the prospect.
Of course, this love story has a tragic twist – and this is where it gets a bit foggy. While all this relationship building and deal-making rumbles on behind the scenes, the UK government is at the same time trumpeting its distaste for China in the public sphere.
You see, China is just not very good for our image, what with reports of widespread human rights abuses, the ‘recolonisation’ of Hong Kong, and fears around 5G. Shackling our cart to that horse is not the best move reputationally, even if it is an economic boon. So, instead, we hide our truest desires behind reams of public disgruntlement.
The foreign secretary, Dominic Raab, was in all the papers yesterday declaring that China’s ban on opposition legislators in Hong Kong constitutes a breach of legally binding international commitments. He championed his “calling out” of the violations and is now looking to “hold China to its obligations” along with our allies – in what is presumably a reference to sanctions, although of course without the commitment.
The government also announced new legislation this week that gives ministers sweeping powers to block overseas companies from buying UK businesses on national security grounds – a move essentially directed at Beijing. More than 115 British companies have been partly or wholly acquired by Chinese-owned companies in the past decade. This new law aims to put a stop to predatory practices.
This is all great – we are a liberal democracy, and it is crucial that we uphold our ethical values and protect our national security. But doesn’t the have-your-cake-and-eat-it approach seem a touch contradictory?
If we want to challenge China, we also have to walk the walk; all the virtue signalling is nothing if we can’t back it up with some tough decisions and concrete action behind the scenes.
Dominic Cummings is to leave his role as the prime minister’s chief adviser by the end of the year, according to a Downing Street source. The controversial aide will leave Number 10 after a bitter power struggle behind the scenes and the resignation of his close ally Lee Cain, the prime minister’s director of communications. The move is expected to trigger an exodus of Vote Leave veterans.
Meanwhile, the prime minister is planning to “reset his premiership” by ending culture wars, promoting the green agenda, and taking a less dogmatic approach to the Union. This new approach, backed by Boris Johnson’s fiancée, Carrie Symonds, is an attempt to soften the government’s image and rebuild relationships with MPs. (£)
Scotland has qualified for the European Championship – the first appearance for the men’s team in international finals since the 1998 World Cup – following a historic shootout victory over Serbia last night. David Marshall saved magnificently from Aleksandar Mitrovic for a 5-4 win on penalties, following a 1-1 draw after extra time.
A record 33,470 people tested positive for coronavirus yesterday in the UK government’s latest daily figure. It is the highest daily number reported in the UK, although testing capacity has increased greatly since the first wave of the pandemic. The new infections bring the total number of cases in the UK to more than 1.29m.
Business and economy
The number of job adverts posted has risen to levels not seen since before lockdown in March. According to the Recruitment and Employment Confederation (REC), there were 1.36m active UK job adverts in the first week of November. However, geographical disparities are clear, with north-west England and Wales leading the recovery, and London lagging behind.
Rishi Sunak has been warned that he risks a furious backlash from entrepreneurs if he acts upon proposals to reform capital gains tax in order to pay for the cost of the coronavirus pandemic. Business leaders said that plans to align the rates with higher income tax levels would stifle economic recovery and cause entrepreneurs to leave the UK in favour of nations with more palatable rules. (£)
Mohsin and Zuber Issa, the petrol pump tycoons who last month secured a £6.8bn deal to buy Asda, have raised hundreds of millions of pounds by selling a stake in their business EG Group. The cash injection will come from two Canadian pension funds and an Abu Dhabi sovereign investor, and is much-needed following the revelation that like-for-like sales slipped almost a fifth in the three months to September. (£)
Columns of note
Writing in the FT Magazine, Neil Munshi explores Belgium’s reckoning with its brutal history in Congo. Anti-racism protests erupted across the globe this summer following the killing of George Floyd in the US, and Belgian’s took the opportunity to examine their brutal colonial past and what systemic racism means for black citizens today. In particular, Munshi notes that few companies for whom colonisation brought immense wealth have ever atoned for their history, let alone paid reparations. It is time now to acknowledge and repay these great debts. (£)
Matthew Parris argues in this week’s Spectator that we will look back on how we treated our elderly in this year of Covid-19 and be ashamed. It seems there is neither determination nor effort to find a solution whereby the comfort of relatives can be afforded to those in the last stages of their lives, who may not understand what is happening, and may also be in considerable distress, despite us having surely amassed some experience in the handling of this virus by now. (£)
What happened yesterday?
Global stocks slid yesterday as concerns swelled around rising Covid-19 cases, taking the shine off the vaccine-inspired rally earlier in the week. The FTSE 100 closed 0.7% lower and the regional benchmark Stoxx Europe 600 lost 0.9%.
Meanwhile, sterling fell one per cent against the euro to €1.11 after data showed the UK’s economic recovery was slowing despite government support programmes. UK gross domestic product grew by a lower than expected 1.1% in September from the previous month, following a 2.1% monthly gain in August.
In company news:
Disney announced that the pandemic has wiped another $3.1bn from its operating profit during the third quarter, but that it has now attracted 73.7m subscribers to its Disney Plus streaming platform. Shares were more than five per cent higher in after-hours trade.
Chinese social and gaming giant Tencent reported surging revenue yesterday, playing down the growing threat of regulation.
The billionaire brothers behind B&M Bargains are in line for a £44m payout following a 122% increase in pre-tax profit for the six months to 26 September.
What’s happening today?
Int. economic announcements
(10:00) GDP (Preliminary) (EU)
(10:00) Balance of Trade (EU)
(13:30) Producer Price Index (US)
(15:00) U. of Michigan Confidence (Prelim) (US)
(16:00) Crude Oil Inventories (US)
A trilemma is a difficult choice with three possible options.
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