EU in cloud cuckoo land
MiCroSoFT boss Brad Smith’s blistering attack on Britain after the independent Competition and Markets authority blocked its £55bn deal with Call of Duty gaming giant activision is hard to forgive.
The brash american will be elated that his persuasive powers have been more successful in Brussels where he was more confident of approval.
The European Commission’s decision to roll over is a significant win for Microsoft and its target. in the recent past, the Eu has been no friend of big tech, levying huge fines on apple and imposing regulation such as GDpr. The Eu’s 27 members, notably France, have waged all-out war on big tech tax avoidance in Europe. it may have been easier for Microsoft to convince the Eu that the deal would be less harmful to the Eu-27 because it has less skin in the game.
The uK is among the global leaders in creating video games and also has the artificial intelligence (ai) know-how, through companies such as DeepMind (owned by alphabet), to take gaming to the next stage.
Microsoft prevailed in Brussels with a pledge that activision games would be available to all comers for streaming on cloud platforms minimising the competitive threat. as attractive a proposition as this appears, it ignores the nascent power that Microsoft wields through its dominant operating systems. it is interesting to note that the proposed takeover by uS chipmaker nvidia of Cambridge-based arm was all but blocked by the uS Federal Trade Commission. it had concerns that arm’s open access to its advanced semi- conductor designs might not have been shared fairly.
as the uK knows to its cost, promises made to regulators and governments in the fog of takeover fever are rarely robust enough to withstand forces brought to bear by dominant players. The Eu decision is a blow against free markets and creativity.
Vanishing act
CruDE oil has been in retreat for nearly a month, with benchmark Brent trading at close to $75 a barrel.
at these levels, oil is trading at preukraine levels which ought to be good for motorists and inflation prospects.
it is less helpful for Keir Starmer and Labour, which is choosing to build much of its fiscal policy around the idea that there is a wellspring of cash to be drawn down from windfall taxes on big oil.
Shadow Chancellor rachel reeves estimates there is a potential £13bn to be harvested if the ‘fossil fuel investment loophole’ were to be closed and the levy backdated. That would act as a disincentive to trust uK plc.
reeves says revenues would be used to subsidise energy bills. Starmer has already earmarked a chunk of its funding for freezing council tax bills.
all that sounds great but shows naivety and ignores Treasury tax conventions.
Energy prices swing wildly and so do the windfalls. They are here today and gone tomorrow, as we are seeing with prices at their lowest levels since 2021.
Moreover, uK governments do not generally tax retrospectively. The concept of a fossil fuel investment loophole is curious. Yes, Bp, Centrica and global players are allowed to write off some of the costs of north Sea oil exploration and drilling. in an age when the West has been hostage to russia as an energy supplier, and real incomes have been swamped by higher energy and food prices, encouraging fossil fuel exploration as an insurance policy against the next time russia and Saudi arabia cut up rough is to be encouraged. Labour’s loophole is actually a free market incentive.
if Starmer and reeves are really serious about making the uK the fastest-growing economy in the G7, discouraging investment and imposing backdated taxes will obliterate the ambition.
Smoking gun
BriTiSh american Tobacco (BaT) acted with impressive speed in disposing of one chief executive and appointing another. Brazilian Tadeu Marroco takes charge in the wake of BaT’s run-in with the uS authorities for sanctions-busting in north Korea.
Marroco’s job will be to cash in on the sales gains BaT is making through vape and e-cigarettes in the american market. The group has fallen foul of uK ethical investment rules for decades but remains a reliable FTSE 100 dividend stalwart. as it pivots to more acceptable products, it would be a loss if it were to shift its share quote to new York after a century in London.