All possible preparations have been made for the EU referendum, the banks keep telling us. Even the cash machines will be stuffed full, just in case an obscure continental lender chooses Friday to go bust and trigger unnecessary panic.
One assumes this confidence is well-founded. Presented with an opportunity on Tuesday to help themselves to some extra spare cash courtesy of the Bank of England, UK banks responded with a collective “thanks for the offer, but actually we’re fine”.
They took up just £370m in a special loan facility designed by Threadneedle Street to ensure the financial system is comfortably supplied over the referendum period. This was the second of three special auctions, and the third is next week. The first, conducted last week, saw demand for £2.6bn. As such, Tuesday’s result represented a mere trickle.
There are two possible interpretations. One is that the banks, scarred by their experiences in the post-Lehman turmoil of 2008, have done a belt-and-braces job this time. They are prepared for anything and are determined that liquidity will not be a problem even in the event of a strong vote for Brexit.
The other explanation is complacency. That would be alarming. It would mean the banks have been infected by the sudden outbreak of confidence that remain is heading for victory. They would rather assume the bookmakers have got their odds correct than pay a small penalty, in the form of posting collateral with the Bank, for the security of extra cash.
To repeat, there is no reason to doubt the banks’ confidence. They’ve had an age to prepare, after all. But one can imagine the postmortem in front of a future parliamentary inquiry if liquidity becomes a problem. Mark Carney would be able to report that he did everything. He offered the banks all the help they could require, to the point of catching flak about scaremongering to suit the government’s agenda. The bankers would be reduced to pleading, once again, that nobody could possibly have imagined that markets would run dry.
It probably won’t happen. Even if it did, it probably wouldn’t be as severe as 2008. But the banks had better have their calculations right this time.
A case of enlightened self-interest at Amazon?
Amazon has a new boss in the UK. And finally the company seems to have understood that it was heading towards yet another row over non-payment of tax.
On this occasion, the worry is not about corporation tax, or even Amazon directly. Rather, it’s about VAT and the explosion in the number of overseas traders, mostly from China, who use Amazon’s UK website and warehouses to sell goods to British consumers without charging VAT.
HMRC seemed to be asleep to the fraud until it realised that £1.5bn of lost tax revenue was a “very big issue”. It took some diligent reporting by this newspaper to provoke meaningful interest from MPs and the government.
Now Doug Gurr, Amazon’s new UK chief, may have realised that the company’s official stance – simply blame the Chinese traders and argue other people’s VAT scams are not its lookout – probably wasn’t sustainable indefinitely. As we reported on Tuesday, Amazon is quietly asking Chinese traders who use its website to provide a VAT number. This looks like an outbreak of enlightened self-interest on Amazon’s part.
Gurr should do more. There is a simple measure available to Amazon that would demonstrate good intentions and a willingness to make HMRC’s job easier. It could insist that overseas traders selling to UK customers display a VAT number on Amazon’s website, and it could delist those who refuse to comply. A public display of VAT registration would be more effective than a behind-the-scenes cleanup.
The effect on Amazon’s business would be minimal and adoption would follow the spirit of the relevant EU directive. Gurr should get on with it.
Trouble may be brewing in China for Costa chain
New-ish chief executive Alison Brittain hasn’t yet banished the Whitbread doubters. A £41 share price compares unfavourably to the £54 seen in spring 2015, when growth seemed strong and easy to achieve. The latest update, however, provides further evidence that Costa Coffee and Premier Inn in the UK require only fine tuning, rather than an overhaul.
In the market for overpriced coffee and pastries, Costa’s like-for-like sales were up 2.6% in the last quarter, a decent recovery from the previous period. Premier Inn is not enjoying the slower London hotel market, but business elsewhere in the UK seems firm.
Indeed, if there’s a reason to worry, it’s probably not on the home front. Look at China, billed as the next frontier for Costa. Tuesday’s update contained the obligatory expression of excitement about long-term opportunities, but then came news of a “tougher trading environment due to a weaker Chinese economy”.
Costa in China is meant to be young, fresh and exciting, a format immune to the economic weather. If it’s not true, don’t repeat others’ mistakes and get dragged in.
