Chaos (and some Off to Lunch news)
Downing Street + corporate subscriptions + AO World
To those of you expecting a piece on Nadhim Zahawi and what he might be like as chancellor, I’m sorry. Does anyone expect him to be chancellor for long? Does anyone expect he will be able to imprint his own vision on the role rather than Boris Johnson’s? This newsletter focuses on what really matters in the long-term. Anyway, things are moving fast in Downing Street since the resignation of Sajid Javid and Rishi Sunak on Tuesday night. By the time you read this someone else will probably have resigned (it’s 16 resignations as I write this) or sent a letter of no-confidence to the 1922 committee. Javid and Sunak’s resignation took everyone by surprise and what happens next is also uncertain. Here are some quick thoughts on where we are and what it means for businesses:
This is your regular reminder that chaos and uncertainty in British politics should be the base-case assumption for businesses right now. The strongest businesses and best business leaders already know this. We last covered this in Off to Lunch when Johnson faced a no-confidence vote last month. By the way, thanks to Getty Images for the chaotic scene in the photo above. In case you were wondering, it is a stock image, not Dilyn the dog in 10 Downing Street…
The structure of the British political system means that getting rid of a prime minister is actually difficult if they refuse to resign. History also backs this up…
Rishi Sunak’s resignation letter didn’t refer to the Chris Pincher scandal. Instead, Sunak explained that there were political divisions between himself and the prime minister. “In preparation for our proposed joint speech on the economy next week, it has become clear to me that our approaches are fundamentally too different.” As a reminder, Sunak set out his vision for the economy back in February. It was, in short, an economy driven by business investment. Crucially, Sunak also said it is unclear whether cutting the headline rate of corporation tax has an impact on business investment and instead the UK’s future tax policy needs to be “targeted and strategic”. It is fair to assume, therefore, that one of the clashes between him and Johnson was whether to go ahead with a planned rise in corporation tax from 19 per cent to 26 per cent next year. I covered Sunak’s speech in more detail here.
We can expect Zahawi’s economic policy to be more focused on the short-term than Sunak’s, a consequence of the nature of his appointment and Johnson’s influence as he fights for his political future. Tax cuts for businesses and households are on the agenda and the postponing of that corporation tax rise just became more likely. Tax cuts can boost inflation by putting more money into people’s pockets, so the government faces a tricky balancing act…
John Glen’s resignation as economic secretary to the Treasury is significant. He was at the centre of plans to reform the insurance industry through an overhaul of Solvency II rules and at the centre of attempts to make the City more attractive by loosening listing rules.
Expect more coverage of Zahawi’s business interests in the coming days…
If the PM is seriously thinking of appointing Nadhim Zahawi as Chancellor he should first get Zahawi to clear up the questions in this film I made for @mailplus and first raised in the Sunday Times on 28 Nov 1999, and talk to businessman Kevin Higgs.ZAHAWI DENIES FORGERY. Vaccine minister Nadhim Zahawi finally denies a 1999 newspaper claim that he admitted forging 2 signatures on fake copyright licence agreement. https://t.co/xHUQ9nVoux
Michael Crick @MichaelLCrickFor more background on Zahawi, read this 2021 piece from Politico.
Zahawi has been giving TV interviews today, just hours after being appointed chancellor. How can he possibly be across the Treasury brief? Anyway, for what it’s worth, on inflation he told Sky News: “The important thing is to get inflation under control, be fiscally responsible.” On corporation tax, he said the UK should be "as competitive as we can be whilst maintaining fiscal discipline", adding: “There’s nothing off the table.”
This colour piece from The Times on Javid and Sunak’s resignation and what happened last night is well worth your time. You can read it here.
Corporate subscriptions and other updates…
Off to Lunch is just 11 weeks old and I have been blown away by the interest and support from you, the readers. There are exciting plans for the coming weeks and I am looking forward to sharing that content with you. This includes our podcast, events, and of course the newsletter itself. I am delighted to give a couple of updates today…
Due to demand, I am introducing corporate subscriptions. There are packages for small, medium and large businesses. This will offer access to Off to Lunch’s paid-for content as well as access to our forthcoming events. If you are interested in a corporate subscription then please contact me at graham@offtolunch.com. As a reminder, our forthcoming roundtable events include discussions on ten key cities across the UK as well as a London event early next year which will cover the first year of Off to Lunch and what I have learned from travelling around the country.
From next week, paid subscriptions will also include the Sunday press review. I have enjoyed writing this for you all over the last few weeks and thanks for the feedback on it – it is clear you have found it useful and I look forward to developing it further with you all. This Sunday’s edition will be the last sent out to free subscribers, with future editions sent to paying subscribers only. You can sign-up for a paid subscription below to continue receiving the Sunday press review as well as access to Friday’s newsletter. As a reminder, a subscription to Off to Lunch is £6-a-month (or £50-a-year) – which is less than one pint of beer!
One last thing, our podcast will launch in September, when people are back from their summer break. Business Studies will take a second look at big business stories from the past. Did these stories really happen the way we remember them? What can we learn from them today? The weekly episodes will cover success stories, failures, deals and trends, speaking to people at the heart of the story and those who covered it. Interviews for the podcast are happening at the moment and I can’t wait to share the episodes with you. I have had some great suggestions from subscribers about stories they would like to see covered, some of which will be featured. If there are stories you would like the podcast to look at, please get in touch.
You should also read this
After The Sunday Times reported that suppliers to AO World had their credit insurance cover cut, shares in the online electrical retailer fell 18 per cent on Monday and 16 per cent on Tuesday. As we said on Sunday, suppliers having their insurance cover cut like this is usually a sign that a retailer is finding life tough and the move can cause cash-flow issues. Today, Bolton-based AO is raising £40 million by issuing new shares worth 43p each (AO World shares were worth 68p on Monday morning and more than 430p in January 2021). John Roberts, the chief executive and founder of AO World, says the placing is “a sensible piece of financial house-keeping given the short-term macroeconomic uncertainty” and provides “the necessary foundation from which to go after the significant long-term growth opportunities that we see for AO in the UK”. Roberts goes on to say he is “hugely optimistic about the future of our business”. Time will tell whether that optimism is well-placed. For those interested, here is the full AO statement (AO World)
Boohoo, the online clothing retailer, has an interesting new shareholder – US billionaire Ken Griffin has taken a 5 per cent stake through his hedge fund Citadel. For a profile of Griffin, read this from the FT. Griffin has a penchant for buying luxury property in New York and London, which you read about in The Times here.
It’s a busy day for Amazon. The company is launching a tie-up with Just Eat Takeaway to offer food delivery in the US for Prime members (it has a similar deal with the UK with Deliveroo). More importantly for UK businesses and consumers, Amazon has agreed a deal with the EU to share more data with third-party sellers using its website to sell products. The Competition and Markets Authority has also announced an investigation into Amazon Marketplace today (FT)
It’s the Allen & Co Sun Valley conference this week. This is also known as the summer camp for billionaires, where a collection of the world’s most influential business leaders gather in Idaho to discuss, well, we don’t quite know what because of the secrecy around the event. Here is a look at who is going and what to look out for (Vanity Fair)
6.7 million adults in the UK – about one in ten – have bought or still own crypto assets according to new research from HMRC. This is way more than previously thought (The Times)
The public will vote on where the new headquarters of the organisation overseeing the UK rail network should be. Birmingham, Crewe, Derby, Doncaster, Newcastle-upon-Tyne and York are on the shortlist to be the home of Great British Railways (BBC)
And finally…
I have recommended The Rest is History podcast before in Off to Lunch, but want to again, because the latest episodes are so good. The podcast has just completed a four-part look at the American civil war. I recommend listening to all the episodes, but particularly the latest one, in which Tom Holland, Dominic Sandbrook and Professor Adam Smith from Oxford discuss the legacy of the civil war and agree that the political debate in the US right now is as toxic as it was in the lead-up to the war in 1861, which is pretty disturbing to hear. A link to the podcast is below…
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Thanks
Graham