Charlotte Street Partners



The state of trade

Written by Javier Maquieira, senior associate
Edited by Adam Shaw, associate partner
25 June 2020

Good morning,

The state of global trade wasn’t looking very promising before the coronavirus pandemic, but as the health and economic crises ensue, trade relations are showing signs of further deterioration.
As the institution tasked with maintaining a rules-based trade system, the World Trade Organisation (WTO) – which is currently looking for a new leader – has been caught in the middle of ongoing disputes between the three global powers dominating trade today: the United States, China, and the European Union.
China and the US have consistently failed to calm trade frictions between each other since President Trump first accused Beijing of unfair trading practices and intellectual property theft, leading to the imposition of tariffs worth hundreds of billions of dollars on goods traded between the two countries. That all started in 2018, but Trump’s accusations now also include China’s alleged mishandling of the initial spread of the coronavirus and its tightening grip on Hong Kong’s autonomy.
On Monday night, US trade adviser Peter Navarro suggested during an interview with Fox News that a trade deal between the two countries was “over”, only to be contradicted by President Trump on Twitter shortly after: “The China trade deal is fully intact. Hopefully they will continue to live up to the terms of the agreement!”
While confusion looms across the Pacific Ocean, transatlantic trade tensions seem to have broadened in the last couple of weeks, too. Adding to the retaliatory duties imposed last year by the US on EU imports such as pork, single-malt whisky, biscuits, cheese, and other dairy products after a dispute on EU subsidies for Airbus, Washington is reportedly considering new tariffson $3.1bn of exports from the UK, Germany, Spain, and France.
Trump’s threat of retaliatory measures against European nations comes after his decision last week to pull out of talks for a new global tax framework for big tech companies, through which European governments hope to raise revenue following the collapse of public finances caused by the Covid-19 pandemic. Retaliation is therefore likely to infuriate European leaders, who have accused tech companies of profiting from the European market while making minimal contributions to their economies.
Amid all the chaos, Britain’s position in global trade isn’t getting any easier. Brexit negotiations are entering an especially sensitive phase, while Boris Johnson’s government is under increasing pressure to agree one of the fastest trade deals in history with Japan after Tokyo gave the UK a timetable of only six weeks to do so or face disruption.
Arguably, undermining the oldest and most important economic nexus we have among economies will come at a great cost. Without a fair and rules-based trade system for all, a global response to the pandemic through the creation, distribution and access to a vaccine will be an increasingly difficult mission.


The Scottish government announced yesterday that people in Scotland can meet up with two other households indoors from 10 July, while pubs and restaurants will be allowed to re-open from 15 July. Further measures include the lifting of the five-mile travel limit from 3 July and the re-opening of hairdressers and barbers from 15 July. First minister Nicola Sturgeon has emphasised that the changes could be reversed if there is a fresh outbreak.
The UK housing secretary, Robert Jenrick, is under increasing pressure to resign following the release of documents regarding his approval of a £1bn property development involving Conservative donor Richard Desmond. Text messages and emails included in the documents revealed that the decision, which went against the local council and the government’s planning inspectorate, was expedited to allow Desmond to avoid paying a £45 million community charge to the local council.
The three most populous US states – California, Texas and Florida – have reported record daily increases in new coronavirus cases. Nationally, 34,270 new cases were reported on Tuesday and some US political and business leaders have put the brakes on the gradual reopening across the country as a result.

Business and economy

Royal Mail is to make 2,000 redundancies as part of a restructuring effortdesigned to save £130m in costs, following a 25% slump in profit before tax. The company is also seeking to cut spending by £300m over the next two years to address the impact of Covid-19 on its operations. The plans come after the sudden departure of Rico Back as chief executive in May.
Swissport plans to halve its workforce in the UK as the ground handling firm struggles with the effects of the coronavirus crisis on air travel companies. The firm, which is consulting on cutting up to 4,556 jobs across Britain, operates at some of the airports worst hit by the crisis, such as Heathrow and Gatwick.
Qantas is set to cut more than 20% of its staff as the Australian airline faces the impact of the Covid-19 pandemic on the industry. The company expects around 6,000 of its 29,000 employees to be made redundant, with another 15,000 temporarily laid off, particularly those involved in international operations.
The International Monetary Fund has forecast the economic impact of the coronavirus pandemic will be “more negative than anticipated”, with recovery now expected to be slower. The organisation expects global growth for next year to be 5.4%, down from a previous estimate of 5.8%, and suggests the impact of the economic downturn on low-income households will be “particularly acute”.

Columns of note

Writing in the Financial Times, Simon Kuper looks at how towns and cities are likely to fare in a post-pandemic world. In this interview with Richard Florida, the urban theorist who coined the term “the creative class”, he suggests major cities such as New York and London will welcome younger populations than before, with more housing and fewer offices and shops, while small towns and long-term struggling cities will fail to gain momentum in the recession. (£)
Jenni Russell argues in The Times that the prevailing culture underrates the downsides of security and the inevitability and necessity of risk. With the coronavirus forcing us to recognise the impossibility of ensuring safety, Russell concludes that people in Britain and other countries will need all the facts to guide us if we are left to take our own risks in the future. (£)

Cartoon source: The Times


What happened yesterday?

London stocks closed in the red on Wednesday amid increasing concerns about a spike in new coronavirus cases in the US. The FTSE 100 ended the session down 3.11% at 6,123.69, while sterling was weaker both against the dollar by 0.75% at $1.2426 and versus the euro by 0.37% at €1.1031.
Across the Atlantic, the Dow Jones Industrial Average was down 2.72% at 25,445.94, while the S&P 500 was 2.59% weaker at 3,050.33 and the Nasdaq Composite saw out the session 2.19% softer at 9,909.17.
In company news:
Petrofac closed 14.86% lower after the oilfield services firm said its group order backlog fell 13% at the end of May as it warned of a significant impact on its engineering division from the Covid-19 pandemic.
Crest Nicholson was 18.18% weaker after the housebuilder reported a drop in half-year revenue and profit as a result of the coronavirus and said full-year profit was set to fall.
AG Barr was down 7.07% after announcing the termination of its sale and distribution contract with US energy drinks company Rockstar on Tuesday.

What’s happening today?

Dixons Carphone
First Property 
Xps Pensions

3i Group, Africa Opp., Anpario, Argo Blockchai., Atalaya Mining, Auctus Growth, Balfour Beatty, Barr (A.G.), Bh Macro Gbp, Biome Tech, Biopharma Cred., Capita, Cenkos Sec, Coro Energy, Global Inva, Gresham Renew 1, Gresham Renew 2, Helios Underw, Krm22 Plc, Lamprell, M&g Credit Inc., Marstons, Nahl Group, Nb Distressed, Next Fifteen, Nmcn, Pacific Assets, Pebble Beach, Premier Oil, Propty Franchis, Rtw Venture Fu., Savannah Resources Savills, Science Sprt, Scottish Mortgage, Serica, Sigma Capital, Sumo Group Plc, Tandem Group, Trainline, Westminster Group

UK economic announcements
(11:00) CBI Distributive Trades Surveys

Int. economic announcements
(07:00) GFK Consumer Confidence (GER)
(13:30) Initial Jobless Claims (US)
(13:30) Personal Consumption Expenditures (US)
(13:30) Wholesales Inventories (US)
(13:30) Continuing Claims (US)
(13:30) Durable Goods Orders (US)
(13:30) Gross Domestic Product (US)

Source: Financial Times

did you know

Eating an apple is just as effective at waking you up in the morning as drinking a cup of coffee. Apples contain no caffeine but have about 13 g of natural sugar instead. These sugars provoke a similar response to caffeine because vitamins from the apple are released slowly throughout the body, making you feel more awake.

Parliamentary highlights

House of Commons

Oral questions
Environment, Food and Rural Affairs (including Topical Questions)
Church Commissioners and House of Commons Commission and Parliamentary Works Sponsor Body and Public Accounts Commission and Speaker’s Committee on the Electoral Commission
Business statement
Business Questions to the Leader of the House – Mr Jacob Rees-Mogg
e-petition Debate
e-Petitions relating to the recognition and reward of health and social care workers
e-Petitions relating to support for UK industries in response to Covid-19
Government response to job losses at De La Rue site in Gateshead – Liz Twist


House of Lords 

Oral questions
Working with faith communities to address violence against women – The Lord Bishop of Gloucester
Reviewing the rules relating to online and television gambling advertising – Lord Kirkhope of Harrogate
Securing funding for the UK’s continued participation in the Erasmus+ programme – Baroness Coussins
Orders and regulations
Health Protection (Coronavirus, Restrictions) (England) (Amendment) (No. 3) Regulations 2020 – Lord Bethell
Health Protection (Coronavirus, Restrictions) (England) (Amendment) (No. 4) Regulations 2020 – Lord Bethell
National Minimum Wage (Offshore Employment) (Amendment) Order 2020 – Baroness Vere of Norbiton
Sentencing Bill [HL] – Second reading – Lord Keen of Elie


Scottish Parliament 

Portfolio Questions (Virtual)
Health and Sport; Communities and Local Government; Social Security and Older People


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