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In this week’s Commercial Awareness update we discuss the currency markets ahead of a Brexit announcement, economic inequality, pressure on Corbyn after Tristam Hunt’s resignation and advertising in Piccadilly Circus.
1. Pound falls further ahead of May announcement
The pound fell to its lowest level against the dollar since October amid reports PM Theresa May will outline plans for a ‘hard Brexit’ this week. The pound is currently trading at $1.20, which makes it 20% down since Britain voted to leave the EU back in June. May is expected to signal plans for Britain to leave the single market and regain control of their borders. The announcement is due on Tuesday and is likely to give the greatest insight into the government’s plan for Brexit. The full negotiating strategy is unlikely to be outlined, but the tone and language used will give a strong indication of the current thinking.
The PM has already said Article 50 would be triggered by the end of March, allowing Britain to start negotiating the post-Brexit deal. There has been some good news as the EU chief negotiator stated it was important for the remaining 27 EU countries to have easy access to the City and London’s financial institutions. This is the first time Michel Barnier has softened from his hardline approach, suggesting a ‘special’ relationship could be forged.
In America, President-elect Donald Trump has backed Britain’s decision to leave the EU and believes they are ‘doing great’. During his first UK interview - with former cabinet minister Michael Gove for the Times - Mr Trump has promised the USA and UK will do a quick trade deal. Barack Obama previously suggested Britain would be at the “back of the queue” when it came to a trade deal with the US, but this doesn’t appear to be the case with the new President, who starts on Friday. However, a deal cannot be done until Britain formally leaves the EU in 2019.
Questions to ask yourself… Should Theresa May outline her full strategy for Brexit to the public? Is too much of Britain’s economic power centred on London?
2. Eight billionaires 'as rich as half world's poor'
An Oxfam report has revealed the world's eight wealthiest individuals have a combined wealth equal to that of the poorest 3.6 billion people. The research into inequality found the gap between rich and poor was “far greater than feared”. However, Oxfam’s interpretation of the figures has been questioned, as well as their focus on the super-wealthy. Some suggest Oxfam should more focused on encouraging economic growth and eradicating poverty. The former is more likely to be achieved if they are “making sure the economic cake is getting bigger”, UK economist Gerard Lyons claims.
Labour leader Jeremy Corbyn has proposed a wage cap for the highest earners in the UK, including ‘fat cat’ CEOs and footballers. Corbyn has yet to outline his plan for the cap, but suggests it would be more than the £138,000 he currently earns. Findings from a recent research survey suggest a majority of the public would support this policy, with only 30% disagreeing with it in principle. However, experts suggest it would have disastrous consequences for the UK economy, without guaranteeing reduced levels of inequality. If wages were capped, the top talent is likely to move abroad to seek bigger wage packets – this would force big corporations to do the same to access the best talent for their business - therefore harming the UK economy.
Questions to ask yourself… Is wealth creation the best way to improve poverty levels around the world? Is Jeremy Corbyn’s suggested wage cap a workable policy?
3. Tesco and Morrison’s Christmas boost
British supermarkets Tesco and Morrisons enjoyed strong performances over the Christmas period, as the ‘Big Four’ continue to fight off competition from discounters Aldi and Lidl. Morrisons had their best figures for seven years in the 12-weeks to Christmas, with like-for-like sales increasing 2.9% compared to the previous year. It’s been a good period for supermarkets overall as sales increased by 1% in December. The big winners were Tesco, as they continue to show an increase in sales after recording a loss in 2015.
Discount supermarket Aldi reported record figures after a 15% increase in December sales. With inflation set to rise and continuing economic instability, more people could turn to the cheaper alternatives - Aldi and Lidl. Many predict the ‘big four’ could become the ‘big six’ by the end of the decade. Aldi aims to double the amount of stores it owns in the UK over the coming years, which is likely to further disrupt the dominance of the current ‘big four’. Asda has been effected most by the rise of the two discounters and struggled this Christmas, recording a 2.4% decline in like-for-like sales.
Questions to ask yourself… Will Aldi and Lidl continue growing their market share? How can Asda turn their fortunes around?
4. The Stoke Central by-election
Labour MP Tristam Hunt is quitting as an MP to take over as the head of the Victoria & Albert museum in London. Hunt will vacate his Stoke Central parliamentary seat and set up a by-election. The constituency is traditionally a Labour stronghold, but UKIP are ready to launch a major challenge. Stoke had one of the biggest leave votes in the UK during last years’ EU referendum and it’s thought new UKIP leader Paul Nuttall could stand for the seat they have a genuine chance of winning. In 2015, the Stoke Central constituency was notable for its low turnout - just 49.5% - which gives plenty of scope for Labour’s competitors to engage the disengaged voters.
Hunt refused to serve in Jeremy Corbyn’s shadow cabinet after the former was elected as Labour party leader in September 2015. He follows Jaime Reed in resigning from the party, and could open the door for more Labour MPs to follow. Corbyn is faced with a tricky by-election and a poor current showing in the polls. Anything other than a convincing victory for Labour in Stoke Central could spell trouble for Corbyn's leadership.
Questions to ask yourself… Should more be done to ensure MPs stay in office for their full term? Is the Labour Party in irreversible decline?
5. And finally…
This morning the iconic billboard lights at Piccadilly Circus were turned off for renovation work to begin. The lights have been on continuously since World War Two - only going off due to power cuts and special events. The six screens will be replaced with a one-screen display, which boasts one of the highest resolution LED displays for its size in the world. The work is scheduled to be completed in the autumn, and the new screen will show advertising as well as weather and news updates. About 100 million people pass through Piccadilly square every year, making it one of the most valuable advertising opportunities in central London.
Question to ask yourself… Is physical display advertising still relevant in the digital age?