Hard talk at City banquet

TRAdITIOnALLy, the Mansion House dinner was an occasion for great monetary statements in the same way that Budgets provide fiscal direction. Tonight’s, a debut for Chancellor Philip Hammond, will focus on Britain’s Brexit future.

Coming as it does after an indecisive election and days before Brexit negotiations begin, Hammond will reassure investors that European funding for big British infrastructure projects, such as tram works in Manchester, will not be placed in jeopardy when the UK leaves the EU. He will also say the Government has it own plans to ensure continuity of funding.

Lobby speculation suggests we can expect a revitalised Chancellor to use the moment to lay out his personal vision for Brexit with Hammond arguing within government for an outcome that keeps us in something akin to the Customs Union.

The governor of the Bank of England is almost a veteran of this very City event.

As a result of Gordon Brown’s objections, white tie may have been replaced by black tie, but it is one of the few occasions where the Old Lady and her former masters at the Treasury come together.

Carney is unafraid to give the central banker view on events as we saw during the Scottish referendum when he laid out the difficulties of monetary unions and, during the referendum campaign, when he was negative on the likely economic impacts.

In tonight’s speech there is an expectation that Carney will revert to some of his traditional themes about the distortions caused to the global economy by imbalances. In the past he has been critical of the eurozone for its failure to adopt more generous fiscal transfers despite Germany running big trade surpluses.

He has complained that Europe’s leaders do not see fiscal policy as part of the monetary union.

It would be very surprising if the governor were not to use the occasion to promote his preferred Brexit settlement of a reciprocal agreement on trade in services, and the financial activity in particular, between Britain and its European neighbours. This is particularly relevant after Brussels threatened to strip the City of euro-denominated derivatives clearing by imposing its own regulatory regime on the process.

The Bank is thought to be highly sceptical about all of this, given that most of the rulemaking governing clearing emanates from London (as the dominant marketplace) and as there is no precedent for clearing only being done in the country where the currency originates.

After all, we don’t hear Washington and Wall Street complaining that on any normal day London clears trillions of dollars.

Activist tactics

AKzO nobel demonstrated that even a shareholder as robust as Elliott Advisors can be seen off the field of battle with sufficient willpower.

now it is Anglo-Australian mining group BHP under siege. Elliott is deploying all the modern tools in its battle including a social media site called ‘Fixing BHP’ which miraculously comes up second in a search for the miner on Google.

It is always possible to build a statistical case against the target companies by choosing a time span of under-performance which makes the target look bad and ignores other factors which make a good firm.

Shareholder returns are one such measure and on this scale Elliott looks to have BHP bang to rights on both short and long-term performance. Is it right then for Elliott to demand a shake-up of the board?

The language it uses against the BHP directors is insulting – describing the board as ‘entrenched’ and responsible for ‘disastrous acquisitions’.

Elliott feels able to launch attacks but is quick to make complaints when its own ruthless behaviour comes under fire.

At a moment when economic nationalism and scepticism about mega-mergers makes it difficult for M&A to take place activist investors perform an important role in keeping management alert. But, as we saw in Poundland and SAB Miller, the real goal of Elliott is to make a quick profit.

Elliott may adopt a holier-than-thou stance but has little interest in the longterm future of the enterprise and the broader range of stakeholder interests.

G7 optimism

ARE you feeling negative about global economic prospects?

Then it is worth reading a note from Capital Economics which says the Group of Seven advanced countries have posted positive growth in each of the last three years.

If this were to continue to 2019 it would be only the third time since 1870 that there has been such a sustained period of expansion.

Tally-ho!