Good Morning,

Here are this mornings headlines:

Pandora Papers
Another week, another data leak showing how tax avoidance practices are rife, globally.  The Pandora Papers leak is the largest yet, with twelve million documents made public from 14 offshore financial services companies. Despite the vast amount of data, the main UK-centric scandals are that of a Tory donor who is mixed up in what look like dodgy payments on behalf of a Swedish telecoms company and tony and Cherie Blair buying a London property by purchasing the offshore company that it was owned by and therefore not paying stamp duty to the tune of £300k. The papers show that, as well as the practice of buying and selling UK property through offshore companies being commonplace, a number of foreign politicians have used the process to buy millions of Pounds worth of homes in London and elsewhere in the world– most awkward timing for Czech PM Andrej Babis, who is now facing questions over why he used the practice to buy a $22m chateau in France, as the country goes to the polls this week and he’s standing for re-election. The Guardian probably has the most comprehensive breakdown of the story, as it was a co-investigation between them, BBC Panorama, Le Monde and the Washington Post that broke it.

Other news from the weekend was Boris Johnson’s woeful performance when he was interviewed by Andrew Marr. The PM looked as though he was running down the clock on the interview, with all the ums, ahs and general bluster, but managed to get across the point that the government wasn’t responsible for the issues that we’re facing (petrol crisis, empty shelves, labour shortages etc.) and also that he can’t promise that taxes won’t rise again, as much as he doesn’t want that to be the case. The overall theme of his message is that the problems we’re facing are really the growing pains of post-Brexit Britain, with a transition to a high paid, high skilled economy and that in the long run it will all be worth it. The knock-on for high pay is inevitably higher costs, as the end consumer is set to bare the brunt of increased labour and logistics prices, but Boris is now making it clear that wages will be the benchmark that his “levelling up” agenda is measured by – which is all well and good, but if inflation continues to outstrip wages, the net effect of higher incomes will still mean being worse off.


Rishi Sunak takes the stage at the Conservative Party Conference today. He won’t be doing too much in the way of big announcements, as the Autumn budget and spending review is set for the 27th of this month and he wouldn’t want too many spoilers. Instead the chancellor will focus on a £500m cheque he’s writing to expand existing plans to tackle unemployment and support job seekers. We’re yet to see what the impacts of the wind-up of furlough are, but any help in this direction will be welcomed. The money is set to be targeted across age ranges, with bolstering of the existing ‘Kickstarter’ scheme for young people, whilst apprenticeship incentives for businesses will be expanded and more money will be put behind the Job Finding Support service to help those who are no longer employed post-furlough. There aren’t yet figures for how many people will be in this position, but estimates were that a million people were still on the job retention scheme when it wound up last week, if half of those people were to become unemployed then this money feels like it won’t be enough to make a significant impact – but it’s something.


UK Supermarket Morrisons was ‘up for auction’ over the weekend; two US private equity firms have been bidding on the firm all summer, but it was CD&R who won out over Fortress, with a winning bid of around £7bn. The UK supermarket space is incredibly attractive for its cash generation, property portfolios and the weak Pound, which makes things all the cheaper. CD&R don’t intend to change much about the way Morrisons does business, but we’d expect them to recoup some of that money by selling and leasing back some of the properties, at the very least. The deal is yet to be accepted by shareholders, but given the share price is up by 60% since the start of all of this and the board are expected to recommend it go ahead, it looks like close to a done deal. The transaction has also shone a light on other would-be targets, with Sainsbury’s likely now attracting attention and even rumours that Tesco might be in the cross-hairs, though with a market cap of £19bn that would be quite the step up.

Another big acquisition looks set to move the market, this time in China: Earlier today trading in Evergrande shares were halted as it seems the stricken property developer has found an investor for its property services unit. Hopson, another Hong Kong listed property developer, is said to buy a 51% stake in the business unit for around $5bn which would give the company breathing room to be able to service its debts, though may not completely fix the problem. No doubt this transaction has been managed with the helping hand of the central government in China, but in doing so they may have managed to avert a crisis without direct state intervention, which they’ll be happy about. The question is whether $5bn is going to be enough, but time will tell.


China have drawn criticism from the US over the weekend, having flown almost 100 military aircraft into Taiwan’s air defence identification zone over the course of three days – this isn’t quite Taiwan’s air space, but is pretty close. The flights began on Friday, which is National Day in China, whilst on the 10th of this month Taiwan will celebrate the ‘Republic of China’ which is the remaining parts of China that weren’t overthrown by the Communist party. The flights also coincide with Taiwan welcoming a French delegation this week and sending their chief economic planner to Europe next month. The US have said they’re “very concerned by the People’s Republic of China’s provocative military action near Taiwan”.

Looking Ahead

This week is going to be busy all round: It’s week one of the month, so data flows abound, whilst we’ve also got the Conservative party conference running until Wednesday, with Boris having saved up the big announcements for his speech. This morning will be interesting, as Lord Frost will speak and is likely to tell the EU in that speech that he is considering triggering Article 16 unless there are significant changes to the Northern Ireland protocol – so consider that political can of worms to be back open. Sterling’s rollercoaster ride from last week looks to have slowed down a little since the market open.


Have a great week


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