Commercial Awareness Update 5th December by Ben Triggs

1. Liberal Democrats surprise victory

Last week, Liberal Democrat candidate Sarah Olney won a surprise victory in the Richmond by-election, beating ex-Tory MP Zac Goldsmith by almost 2,000 votes. Goldsmith resigned from the Conservative Party after it was announced Heathrow was on course for a third runway and forced a by-election on the issue. However, the Liberal Democrats mobilised their supporters and turned the vote into a debate on the triggering of Article 50. During the EU Referendum, Richmond heavily supported the Remain camp and the Liberal Democrats' pro-EU stance during the by-election campaign was popular among constituents.

70% of voters in Richmond wanted to remain in the EU, but Zac Goldsmith was a vocal supporter of the Leave campaign. This is his second election defeat in 2016 after losing to Sadiq Khan in the London Mayoral election. It was also a bad day for the Labour Party whose candidate only polled 1,515 votes - down from 7,296 in 2015. 

Liberal Democrat leader Tim Farron claimed this was a rejection of Theresa May’s plan for a 'hard Brexit'. Sally Olney will take her place in the House of Commons as the Liberal Democrats' ninth MP, herself having joined politics and the party just 18 months ago.

Questions to ask yourself… Should this by-election be seen as the people rejecting a 'hard-Brexit'? What does this result say about the Labour Party’s current popularity?

2. Talk of a 'soft Brexit'

The value of the pound rose last week, as Brexit Minister David Davis admitted the Government may be willing to pay to maintain access to the EU single market after Brexit. He is the first member of May’s cabinet to openly discuss this, but Boris Johnson said this would only be a possibility at the right price. The pound reached its highest level in six weeks against both the dollar and euro, as the markets believed this announcement suggests the Government is more likely to pursue a 'soft Brexit'.

If Britain was able to do an economic deal with the EU after Brexit, it could bring more unity among the British public. There are hardline Brexiters who will believe this is a betrayal of the referendum result, but a deal to stay in the economic union could work for the majority of the public. The argument surrounding immigration and free movement of people dominated Vote Leave’s campaign and polls suggest around 70% of the population believe we should have more control of our borders. However, Vote Remain championed the economic arguments of staying in the EU and the single market. Marrying these two different stances was always going to be a difficult, but if the UK could have more control over their borders but also negotiate a deal to maintain access to the single market, it may keep both sides happy.

Questions to ask yourself… Should Britain pursue a deal to pay to stay in the single market? Should the EU be willing to do a deal with Britain on those grounds?

3. Euro falls after Renzi resignation 

The Italian Prime Minister Matteo Renzi resigned on Sunday evening after facing defeat in a constitutional referendum. The referendum proposed a broad range of changes including cuts to public spending, more streamline political processes and electoral reform – which would make it more difficult for extremist parties to gain power. It was believed a ‘Yes’ vote would provide political stability and help strengthen Italy's struggling banking system. However, it wasn't to be and the resounding ‘No’ vote casts huge uncertainty over Italian and EU politics, as well as having the potential to cause another banking crisis in Italy. 

Despite being about constitutional reform, much of the rhetoric before the vote centred on Italy’s EU membership and Eurozone. Renzi is a keen supporter of the EU, but many of the opposition parties are very sceptical. The populist Five Star Movement is gaining mass support and have promised a vote on EU membership if the party win the next election, currently scheduled for 2018. The ‘No’ vote is another major blow for the EU political elite and it has rocked the markets. The Euro is down against the pound and dollar, as speculators fear a crisis in Italy as well as an increased chance of EU disintegration. 

Questions to ask yourself… Is this another sign that the EU is destined to fail? What should the EU do to reform?

4. The cost of not sleeping well

A new study has revealed sleep deprivation costs the economy £40 billion each year due to lack of productivity. Research firm Rand Europe took data from 62,000 people and claimed the UK loses 200,000 working days a year due to lack of sleep, costing 1.86% of Gross Domestic Product (GDP). There are a range of health problems associated with lack of health, with those sleeping less than six hours a night 13% more likely to die young compared to those who get seven to nine hours. 

Question to ask yourself… Should employers do more to promote the importance of sleep? In demanding jobs, is a lack of sleep inevitable?

5. A big deal for oil 

The main news of the week was that OPEC members (a group of mainly Arab oil producing countries) agreed to cut their oil production. Less supply generally means a higher price - and that was borne out: the oil price jumped almost 15% last week. It’s now back near its highest level in more than a year. That’s good news for oil companies and oil-producing regions (including parts of America), but will also likely push overall prices higher for the rest of us (e.g. for petrol). Many analysts, however, remain sceptical that OPEC members will adhere to the deal - which means we’ll have to wait until next year to see if it’s truly effective.

6. Increasing competition

Ofcom, a regulatory arm of the British government, said that it would begin the process to formally separate BT, the telecom and internet services company, from Openreach, which is the BT subsidiary that owns and operates the UK’s main broadband network. It’s an example of how the Government will occasionally step in when they feel that a market is not competitive enough due to the dominance of one (or a small number) of companies. The idea is that a more competitive market would ensure prices remain fair for people and businesses that need internet services, a.k.a. everyone!