House of Commons
In recess until 1 September
Trading the future
Written by Juan Palenzuela, associate
Edited by Iain Gibson, associate partner
29 July 2020
It seemed impossible less than a year ago, but the UK’s exit from the European Union and its ensuing trade negotiations with other nations have faded into the background in recent months, as a result of the pandemic. However, despite this decreased visibility, they are by no means less important to the country’s future.
Talks for a deal with the US began in March. Two rounds have already concluded and a third is currently underway, via video conference. At this stage, there is little optimism we will see an end product anytime soon.
Last week, the FT quoted a British official involved in the negotiations, questioning the possibility of concluding a deal this year. America’s trade representative Robert Lighthizer has also downplayed the idea several times. For an agreement that was supposed to be reached this month, that is a pity.
In essence, the disputes that made a straightforward trade deal impossible have not yet been resolved. For its part, the United States imposed retaliatory tariffs on EU exports in February, including some from Britain, after a dispute over aircraft subsidies. The UK has repeatedly demanded that those tariffs should be removed to show goodwill, but nothing has changed so far.
In addition, there are reports that America wants its firms to get access to Britain’s NHS, and also to its food sector without having to change standards. Both of these options have been rejected publicly and on repeated occasions, which limits the scope for an agreement. Then, of course, there’s a pandemic, which has not only affected trade but also the talks themselves.
This current stalemate could change with the election of Joe Biden to the US presidency in November. But with so much uncertainty right now, it’s far from clear what would happen next, or if it would benefit the UK in any meaningful way.
The UK signed a deal for the supply of nearly 60 million doses of a potential coronavirus vaccine that is currently being developed by Sanofi and GlaxoSmithKline (GSK). Although the financial terms of the agreement were not disclosed, the Department for Business, Energy & Industrial Strategy expects that vaccinations would take place as early as the first half of next year.
Yesterday, Twitter temporarily suspended Donald Trump Jr from tweeting for violating its rules on misinformation. This came after he tweeted a video of politically-affiliated doctors promoting the use of hydroxychloroquine to treat coronavirus. According to the WTO, there is currently no proof that hydroxychloroquine or any other drug can cure or prevent Covid-19.
Business and economy
TransferWise, the international transfers fintech startup, reached a valuation of $5bn after early investors and employees sold $319m of equity in the company. The company’s valuation has jumped 40% with respect to a similar transaction last year, showing how the business has benefited from the pandemic, despite a forecasted 20% drop in global remittances this year.
The European Central Bank extended yesterday a recommendation to eurozone banks not to pay dividends until the end of the year. The ECB also will allow these banks to continue using their capital and liquidity buffers for longer, to help them cope with the crisis.
Aston Martin reported first-half figures earlier today, showing that it more than quadrupled its operating loss. Total retail sales also fell sharply, 41% in the six months to June, to £1.77bn, from £3bn in the same period last year. Just 1,770 cars were sold over the period.
Columns of note
The Financial Times’ editorial board opines that the US-China trade war is becoming ideological. This is not only bad for global trade, but it also provides some worrying prospects.
The pandemic has shown that access to the internet is a human right, argues Mukhtar Karim on CityAM. He goes on to say that the internet is clearly now more than a tool for distraction, it has become a fundamental element of our lives and needs to be regarded as such.
What happened yesterday?
Equity markets around the world finished with mixed results amid plans for a $1trn stimulus package in the US on one hand, and fears of a second wave of infections on the other.
At the close, the Dow Jones Industrial Average was down 0.77% at 26,379.28, while the S&P 500 was 0.65% softer at 3,218.44 and the Nasdaq Composite saw out the session 1.27% weaker at 10,402.09.
In Europe, the Stoxx 600 was ahead 0.42% to 367.68, alongside a 0.03% dip on the German Dax to 12,835.27, although the Spanish Ibex 35 managed to rebound by 1.06% to 7,246.40.
In London, the FTSE 100 ended the session up 0.4% at 6,129.26, and the FTSE 250 was ahead 0.7% at 17,278.23.
On company announcements, Amazon announced that it is pressing ahead with the wider UK rollout of its online grocery service by the end of the year in a move to capitalise on the growth in online food deliveries during the pandemic. Orders on Amazon Fresh are to be offered for free for Amazon Prime members, whilst all of the ‘Big Four’ UK supermarkets currently charge for deliveries.
What’s happening today?
Smith & Nephew
UK economic announcements
(00:01) BRC Shop Price Index
(09:30) Mortgage Approvals
(09:30) M4 Money Supply
(09:30) Consumer Credit
Int. economic announcements
(07:00) Import Price Index (GER)
(12:00) MBA Mortgage Applications (US)
(15:00) Pending Homes Sales (US)
(15:30) Crude Oil Inventories (US)
In France, it’s against the law for grocery stores to throw away food. It must either be composted or donated to charity.
House of Commons
In recess until 1 September
House of Lords
Private Notice Question
Trade agreements between the UK and the EU – Baroness Hayter of Kentish Town
UK Internal Market: White Paper – Lord Callanan
Liaison Committee report ‘New special inquiry committees 2020–21’ – Lord McFall of Alcluith
Sentencing Bill [HL] (Consolidation Bill) – Committee stage – Lord Keen of Elie
Orders and regulations
In recess until 10 August (with the exception of 30 July and 6 August 2020, on which dates business may be programmed by the bureau)