25th November 2019

Written by Iain Gibson, Associate Partner

Edited by Laura Hamilton, Managing Partner

Good morning,

What do Primark, Next and Marks & Spencer have in common? Well, besides the fact they are all retail giants, they all stock a wide array of clothing and they are all British to some degree, although Primark would point to its Irish origins. So actually, they have quite a lot in common. Bear with me. Now there is one more similarity: these three are amongst those sitting out ‘Black Friday’. Alongside other trans-Atlantic imports that we didn’t have when I was growing up – did anyone under the age of 30 ever go to a high school prom? – Black Friday, where stores offer large discounts on the day after Thanksgiving, has crept its way east. It is generally accepted that Amazon and WalMart/ASDA introduced the UK market to this jamboree, around a decade or so ago. This year it officially takes place on 29 November. The event might sound like a low-grade horror film, and indeed the origin of the phrase is negative, yet for years in the US it reaped rewards for both the supplier who needed to empty shelves before stocking up again for Christmas, and the consumer who is always on the hunt for a deal. Now, however, the changing nature of the way we shop has also changed the potency of Black Friday. We can buy anything anytime with three swipes on a phone, we don’t need to take advantage of a day off to go and raid stores. Black Friday is no longer limited to one day, it lasts at least a week or even more for some retailers, who need to maximise sales to keep margins strong, at a time of year when they are expected to be at their most profitable. Rather than a spontaneous markdown of goods, it is an event that most now plan for months in advance. In its short time on these shores, Black Friday has managed to become both bigger, in terms of visibility, and smaller, regarding returns for the seller. UK data from 2018 suggested exactly this trend – an increase in the volume of transactions, but over 10 percent less spent in total than 12 months’ prior. Consumers are becoming more demanding and putting pressure on retailers to provide even better deals. The forecast for 2019 is mixed, with the slowdown in economic growth and continued Brexit uncertainty suggesting trouble ahead. On the other hand, because Black Friday falls at the end of this working week, when most people have been paid for the month, that might lead to a small upswing as we seek out Christmas bargains. Some early predictions have included a 2.2% rise on last year, to spending of £4.3 billion. Black Friday was successful because it grew organically, creating itself to meet a specific market need at a specific point in time. In the UK at least, the next couple of years will reveal to us whether or not that time has passed.

News

Pro-democracy campaigners in Hong Kong have won a landslide victory in district council elections, winning nearly 400 of the 452 seats up for grabs. Four years ago they took around 100. On that occasion the turnout was 47%, whereas in 2019 a record 71% of the populace voted. The district councils have little power, although Hong Kong chief executive Carrie Lam has been forced to declare she will listen to the results “with an open mind”. US Navy Secretary Richard Spencer has been fired, following President Trump’s controversial intervention in the case of Navy SEAL Edward Gallagher. President Trump intervened on Twitter to say that Mr Gallagher – who was convicted of posing for pictures with the corpse of an ISIS fighter – would not be stripped of his SEAL status. Mr Spencer, who is believed to have actually been sympathetic to such a view, then said this was not an official order and he required it in writing. President Trump posted on Twitter late last night that Mr Spencer had been relieved of his post. The latest YouGov general election poll, published in The Sunday Times this weekend, put the Conservatives on 42%, Labour on 30%, the Liberal Democrats on 16% and the Brexit Party down to just 3%, all pointing to a Conservative majority in parliament. In Scotland, a Panelbase poll suggested that the SNP would win 41 seats (up six), the Conservatives 12 (down one), the Lib Dems five (up one) and Labour one (down six).

Business and economy

The National Grid and SSE have moved ownership of their UK operations overseas, as a safeguard against plans from an incoming Labour Government to nationalise them. The former opened offshore holding companies in Hong Kong and Luxembourg, with the latter doing likewise in Switzerland. Saudi Aramco has further scaled back its IPO, with reports today that the oil behemoth is now targeting sovereign wealth funds, following a lack of interest from some potential corporate buyers. The company’s investor roadshow, now limited to the Gulf region, is currently in Dubai, pitching to institutional investors such as the powerful ICD. Novartis, the Swiss multinational pharmaceutical firm, has agreed to buy The Medicines Company for an equity value of around $6.8 billion, which rises to $9.7 billion when outstanding stock options and convertible debt are also included. Of particular interest to Novartis is The Medicines Company’s experimental cholesterol treatment, for which it had planned to submit an application in the US before the end of the year.

Markets

The week ahead

US markets rallied slightly at the end of last week, with both the S&P 500 and the Nasdaq Composite up slightly, after several days of concern about the viability of an interim US-China trade deal. On this side of the Atlantic, similar sentiment abounded and the FTSE closed on Friday with an increase of 1.2% on the day before. The Thanksgiving holiday in America, plus the aforementioned Black Friday, mean that markets might be quieter this coming week, with most corporations having already reported their Q3 earnings. We will see GDP statistics from the US and Sweden, as well as some key sentiment indicators from Germany. In terms of third quarter figures, British American Tobacco and Compass Group will report in London. From a global perspective, eyes will be on India this Friday, with analysts predicting poor numbers for what was one of the world’s fastest growing economies until recently. Job numbers are expected to be down and other performance data is unlikely to impress. Finally, it could be a key week for African central banks, with a number reporting and Kenya in particular expected to announce more monetary policy easing.

What's happening today?

Finals

Cerillion

Interims

Cake Box D4t4 Solutions Sirius RE Sysgroup Thruvision Group

Trading Announcements

Andralas Energy & Power JPEL Private Equity OPG Power

PRS REIT TR European Growth Trust

UK economic Announcements

(09:30) BBA Mortgage Lending Figures (11:00) CBI Disruptive Trades Surveys

Columns of note

Writing in The Financial Times, Robert Shrimsley compares the Conservatives’ 2019 election manifesto with the one from 2017. He notes that this time around, the party is playing an entirely defensive game, offering a slimmed down document with few surprises. This is in contrast to two years ago, when Theresa May, confident of victory, sought approval for a number of contentious policies, including the one on social care which began to unravel as soon as it was announced. The writer suggests that the only “hostage to fortune” in the manifesto is the promise not to extend the implementation period to secure a Brexit deal beyond the end of 2020, although the risk here will only come after a victory had taken place. (£) In The Times, Clare Foges writes against the legalisation of cannabis, an idea that is undoubtedly gathering support in the UK and which has won the backing of the Liberal Democrats in the general election campaign. Ms Foges disagrees with the claim that cannabis does not cause harm and highlights the increasing number of A&E admissions for psychosis as a case to the contrary. She concludes: “I don’t suggest the status quo is satisfactory; only that legalising the drug would make it considerably worse. Liberals might have chosen the legalisation of cannabis as their next great crusade but encouraging more people to try this dangerous drug would be no liberation at all.” (£)

Did you know?

According to CNN, the quietest room in the world can be found at Microsoft’s headquarters in Redmond, Washington state. The lab room measures background noise of -20.35 dBA, which is 20 decibels below the threshold of human hearing.

Parliamentary highlights

TODAY House of Commons No business scheduled. House of Lords No business scheduled. Scottish Parliament No business scheduled. TOMORROW

House of Commons No business scheduled. House of Lords No business scheduled. Scottish Parliament Topical questions (if selected) Parliamentary Bureau Motions Scottish Government Debate: Scotland as a Science Nation