Good Morning,

Quite a bit from the UK over the weekend, starting with Boris ruining most people’s weekends by telling them to get back to work! The PM has urged those that are able to return to work to do so, but in typical Boris fashion has left it vague enough for people to be a little confused as to what this means and whether getting public transport is now a viable option for the masses. In London it appears that his message has been taken up, as the roads into central this morning were busier than they’ve ever been at 6:30! With the extra people on the streets it will be interesting to see who’s wearing facemasks; something Boris “thinks we need to be stricter in insisting” people do, but has fallen short on making it mandatory just yet.

Michael Gove has insisted that the government was on schedule to meet the border requirements that we’ll have come January 1st, if there’s not a deal. The £700m spend the government is making on increased border capacity at mainland ports is going to mean constructing much more infrastructure inland of the ports, where there is space to build, as well as recruiting 500 new staff and having a major IT overhaul, which should give us ‘the world’s most effective border’. The big fly in the ointment is that border checks are going to be phased in over the first 6 months of us being outside of the EU – which sounds like granting smugglers a six month amnesty whilst we get our act together – additionally it’s still not clear whether we’ll have access to the Schengen database, which is a vital resource to UK law enforcement, but would go if we don’t get a deal done.
Northern Ireland’s infrastructure and border processes are still being worked out, which isn’t all that encouraging given we’re just 171 days away from exit.

The Telegraph is also reporting that Rishi Sunak will be putting our new found freedoms to good use and will create up to ten new “freeports”. The trading areas would effectively be outside of the UK’s customs territory and therefore have a host of tax benefits. Interestingly, these freeports are going to be towns or cities within the UK and would benefit from their own tax, rates and planning regimes – in a bid to make good on their manifesto promises, we wouldn’t be surprised to see these predominantly in the North of England, as they’d probably go a long way to ‘levelling up’ various areas. We’re not likely to hear more about this until the budget in the autumn, but it will certainly be eagerly anticipated.

In Europe: The German government stands ready to take more stakes in ailing businesses, with their economy minster saying that “probably a few dozen” will follow the Lufthansa route. The government certainly isn’t doing anything for free and the terms they took with Lufthansa were far from commercial in the eyes of the airline, but if it’s that or insolvency, is there a choice?
Also from Germany, their states are looking to raise around €95bn to cushion the falls in revenues that they are experiencing. The autonomy that states have allow them to raise funds independently of the federal government and they’re going to be adding to a debt pile of around €600bn euros.

France have seen their exports hit with another 25% tariff by the US, as a retaliation to their digital services tax. The tariff will cover a range of products but won’t start until 2021. The two countries had planned to hold off on taxing each other whilst negotiations were underway over a broader trade/tax arrangement, but since those talks have collapsed France has pursued the tech tax and other countries are following suit, seeing it as a very viable way to raise much needed revenues. Our limited view on the matter is that the US should allow these taxes, which invariably will be funded by raising advertising costs, which in turn companies will end up paying, as otherwise they risk the EU’s competition commission taking a closer look at the balance of value that the European consumer gets from these tech services – at the moment Europe gets all of the downside of big tech, without the revenue upside to balance things out – and the last person they want on the case is Margethe Vestager with an axe to grind.

Over in the US, Covid cases continue to rise and the market continues to turn a blind eye. Over the weekend Florida has seen a record rise in cases, 15,000 in just 24 hours – and amazingly Disney World is reopening in the state over the next two weeks! The news of rising cases hasn’t put off markets though and they continue to climb higher, which begs the question ‘what’s it going to take for them to sit up and take notice?’. Some were saying that Trump wearing a mask for the first time in public can be seen as a good thing, as it means he’s taking it more seriously, but the reality is that he was visiting a military hospital and even he must have a sense of the heightened risk that presents.

This week is quite light on the data front, which has got us wondering whether no data coming out better than forecast will force investors to take stock of the world they find themselves sat within and take a more balanced approach to the risks they’re taking? That’s an unlikely scenario and we’re sure they’re going to be trying to squeeze even more juice from the markets before they call it a day!

Be well

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