The Man Is Back In Town!                                              08 November 2024

To quieten the doomsayers in Dubai, the real estate market had a booming month, with October transactions totalling over 20k, (20.46k), for the first time ever, and 13% higher on the month, which itself was a record month. The recent trend of off-plan and under-construction properties continued and again accounted for the majority of sales at 73%, with the usual drivers including reduced interest rates, a surge in new projects, more people choosing to buy rather than rent, and a surging influx which has already seen an additional 142k people in the first ten months to 3.797 million. Property Monitor’s October report posted those residential transactions comprised nearly 95% of sales, totalling over 19.4k deals. The highest-priced transaction in the month was a villa at Jumeirah Bay, sold for US$ 48 million, whilst a villa at Eome, in Palm Jumeirah’s western crescent, topped the off-plan sales price, at US$ 46 million. The three top developers for off-plan sales were Emaar Properties, Damac Properties and Sobha.

The property boom continued into October, with records posted on the number of monthly transactions and also their value – with a 71% annual jump to 20.7k, and by 56% to US$ US$ 16.76 billion. Research carried out by Property Finder shows people’s preference:

Apartments                             – studios, 1 B/R and 2 B/R    (14%, 32% and 36%)

Desired Locations              – Dubai Marina, Downtown Dubai, Jumeirah Village Circle,   Business Bay, and Palm Jumeirah

      Furnished/Unfurnished    –  65% and 34%

      Tenancy Preferences        – studios, 1 B/R and 2 B/R    (23%, 35% and 32%)

Tenancy Locations                       – Dubai Marina, Downtown Dubai, Business Bay, and Jumeirah Village Circle and Jumeirah Lake Towers

Villas/townhouses                – 3 B/R and 4 B/R                  (38% and 49%)

Desired Locations            – Dubai Hills Estate, Al Furjan, Palm Jumeirah, Dubai Land and        Mohammed Bin Rashid City

      Furnished/Unfurnished    –  53% and 46%

      Tenancy Preferences        – 3 B/R and 4 B/R                  (41% and 38%)

Tenancy  Locations           – Jumeirah, Dubai Hills Estate, Damac Hills 2, Al Barsha and Umm Suqeim

The split between the existing and ready markets show that the former posted a record 27.5% hike in transactions, to 7.14k, valued at US$ 9.18 billion, (surpassing the previous record peak in July, by 11%), and the latter saw a 109% surge in the number of transactions to 13.53k, with the value 102.4% higher on the year at US$ 7.55 billion.

Recent surveys, such as Knight Frank’s Wealth Report, show that the majority of HNWIs not only consider the actual state and stature of a building, but are also taking more interest in environmental and sustainability factors crucial when making their final decision where to live. Other studies, from the likes of Sotheby’s International Realty and Christie’s International Real Estate, back up similar findings. Furthermore, the Global Sustainable Investment Review has highlighted the rise in investments in sustainable real estate funds by HNWIs – a major change from the previous mantra of wealth creation. Their preference for sustainable communities, over conventional luxury properties, reflects a growing awareness of how individual choices impact the environment. A good local example is the Al Barari development – one of the first to integrate high-end living with green spaces, renewable energy, and a holistic approach to health and well-being. Such properties, built on the principles of sustainability and resilience, are likely to retain and even increase their value, as environmental regulations tighten and consumer preferences evolve. Moreover, the addition of organic farms, wellness centres, open spaces, nature walks, play areas etc, in sustainable communities, also add to the quality of life. Will the isolated luxury, often associated with gated mansions and high-rise penthouses, soon become a thing of the past?

With Driven Properties investing US$ 138 million to acquire Emaar Square Building 3, in Downtown Dubai, the location posted its biggest property deal of the year. The building, spanning 379k sq ft, provides premium office spaces and is already home to several prominent businesses. Hadi Hamra, managing partner at Driven Properties noted that “relocating the company’s headquarters to Emaar Square 3 not only signifies growth but also reinforces Driven Properties’ reputation as a trusted and influential player in Dubai’s competitive real estate market.” This latest acquisition adds to their current portfolio which includes the Sea Mirror Villa on Jumeriah Bay Island and Rixos Financial Center Road Dubai Residences.

Octa Properties aims to add fourteen new branded projects under management in Dubai, valued at US$ 2.45 billion, by the end of H1 2025. The real estate development management company indicated that it had collaborated with top-tier brands, like Missoni, Hilton, Elie Saab, W, and Franck Muller, in the region, offering developer management services. It also launched its new branded interior design and branded marketing communications vertical – House of Octa. The company currently has 4.6k pipeline units, over one hundred employees, and works with over 1.6k brokerage firms. According to Savills, Dubai accounts for 12% of the global supply of branded residences, with the wider EMEA region accounting for nearly 30%.

Dubai-based Deyaar Development has launched its first residential project in Abu Dhabi – RIVAGE – located on Al Reem Island. This is with a strategic partnership between Deyaar and Arady Properties PSC. The project will comprise 1, 2, and 3-bedroom luxury residences, opulent duplexes, bespoke Sky Villas and Sky Palaces. Completion is slated for Q4 2027.

Savills’ Q3 2024 Dubai Office Market report noted that specific locations, like Business Bay and Downtown, experienced annualised hikes of 44% and 36 % during the quarter. In H1, Dubai welcomed some 24k new companies – equating to a 5% annualised growth. Little surprise to see the likes of DIFC, Downtown, and Business Bay now having occupancy rates of between 95% and 97%. It estimated that new projects – such as DIFC Square and Immersive Tower – are set to add over ten million sq ft of premium office space by 2028. There is no doubt that Dubai is fast becoming one of the top global business hubs and this can only see the sector burgeoning for the rest of the decade and beyond, as new business registrations rise markedly and existing entities expand.

Emirates H1 profit hit a new record of US$ 2.64 billion (before the newly implemented corporate tax) – 2.0% higher on the year; its profit after tax was US$ 2.37 billion. Revenue – including other operating income – was up 4.5%, on the year, to US$ 16.95 billion, attributable to consistently strong travel and air cargo demand across markets. The Emirates Group announced its best-ever half-year financial performance, with posting a profit of US$2.53 billion) after corporate tax. The Group posted a pre-tax H1 profit before tax of US$ 2.83 billion, with a marginally lower EBITDA of US$ 5.56 billion, driven by Group revenue being 5.2% higher on the year, at US$ 9.29 billion. By 30 September 2024, the Group’s cash position was at US$ 11.91 billion, compared to US$ 12.83 billion in 31 March 2024. The Group also paid US$ 545 million in dividends to its owner, as declared at the end of its 2023-24 financial year. Sheikh Ahmed bin Saeed, Chairman and Chief Executive of Emirates Airline and Group, noted that “we expect customer demand to remain strong for the rest of 2024-25, and we look forward to increasing our capacity to grow revenues as new aircraft join the Emirates fleet and new facilities come online at dnata.”

Some events during H1 included:

• increased scheduled flights to eight cities – Amsterdam, Cebu, Clark, Luanda, Lyon, Madrid, Manila and Singapore
• restarted daily services to Phnom Penh, via Singapore
• launched daily services to Bogotá, via Miami
• opened a new route to Madagascar via the Seychelles
• took its passenger and cargo network to one hundred and forty-eight airports in eighty countries
• entered into new agreements with seven codeshare, interline, and intermodal partners – AirPeace, Avianca, BLADE, ITA Airways, Iceland Air, SNCF Railway, and Viva Aerobus
• Emirates SkyCargo transported 1.198 million tonnes – up 16% on the year
• Emirates SkyCargo added capacity – one new Boeing 777 freighter and two additional wet-leased Boeing 747Fs. Emirates placed orders for ten additional Boeing 777 freighters to support its growth

This week, Sheikh Mansoor bin Mohammed bin Rashid opened the tenth edition of Gulfood Manufacturing, the world’s leading annual meeting, covering the entire food manufacturing ecosystem. Located at the Dubai World Trade Centre, the three-day event took place alongside Gulfhost, the MENA region’s premier hospitality and foodservice equipment event. Both Gulfood Manufacturing and Gulfhost provided an unparalleled opportunity for almost 3k global F&B manufacturing and foodservice brands to showcase their latest products and solutions to a global audience.

The UAE has signed its latest Comprehensive Economic Partnership Agreement with Australia, which will open new avenues for economic cooperation for both countries; this comes after talks concluded in September. As with the other CEPAs, already signed, the agreement features a tariff reduction and elimination of up to 96% across customs tariff lines.

Once ratified, the deal will be Australia’s first trade agreement with a country in the MENA region and represents an important addition to the UAE’s CEPA programme. The deal is expected to propel bilateral non-oil trade to over US$ 15 billion by the year 2032 – a more-than threefold increase on the US$ 4.23 billion recorded last year. Bilateral non-oil trade reached US$ 2.3 billion in H1 2024, an increase of 10.1% on the year. Furthermore, there are more than three hundred Australian businesses operating in the UAE in sectors such as construction, financial services, agriculture, and education. In addition to the CEPA, six further agreements were signed including an Agreement to Promote and Protect Investments between the UAE and Australia, and five Investment Cooperation memoranda of understanding to facilitate and promote two-way investment in sectors of national priority including Green/Renewable Energy, Infrastructure/Development, Data Centres/Artificial Intelligence Projects, Minerals/Mining, and Food/Agriculture.

October’s S&P Global UAE PMI was at its fastest, at 54.1, pace since April, with many firms having raised output in response to higher sales volumes, healthy work pipelines and robust client numbers; the index had nudged 0.3 higher from September’s return of 53.8. However, disappointing news came with the growth of new orders softening to its lowest since February 2023, which contributed to both weaker job creation and a renewed drop in selling charges. However, business sentiment headed in the right direction picking up from the previous month’s eighteen-month low, with many respondents indicating that they expect further growth in the coming months, as the rate of input cost inflation dipped to its lowest since April. There was also a marked expansion, last month, in activity levels, whilst there was an increase in intakes of new work. Input purchasing growth remained sharp however, particularly as businesses faced further efforts to overturn the recent trend of backlog accumulation. A slower rise in backlogs was down to a stronger improvement in supplier delivery times. Further good news saw non-oil firms posting the softest increase in overall input costs, (for both wages and purchase prices), for six months.

In Dubai, there was a slowdown with the PMI, still in positive territory, but 0.9 lower at 53.2. New business intakes rose at the softest rate since the beginning of 2022, attributable to tougher market conditions and increased numbers of competitors. Although the pace of employment growth also ticked down, output growth accelerated slightly to a five-month high. Dubai non-oil firms posted a drop in average selling prices for the first time since April, linked to strong competition. It was noted that firms were still seeing a long pipeline of work backlogs and ongoing contracts, so much so that even if sales momentum slows further, the non-oil economy can continue to grow, albeit at a slower pace.

Earlier in the week – and in line with directives from Sheikh Ahmed bin Mohammed bin Rashid, the Chairman of Dubai Media Council – its MD, Mona Al Marri, met with TikTok’s CEO, Shou Zi Chew. The aims of the meeting were to strengthen Dubai’s position as a global hub for media innovation, and to explore new partnership opportunities, focused on media advancement and knowledge exchange. The meeting highlighted Dubai’s commitment to fostering the growth of new media platforms that can positively impact communities. These initiatives aim to position Dubai as a global leader and an ideal place to live, work, and visit.

In the latest study, where people dream of moving, travelling or exploring, released by Numbeo, ranks the UAE as seventh in the world’s top countries behind the US (5.31%), the UK, Canada, Spain, Germany and Italy. The UAE came in with 2.56% of searches, ahead of Australia, France, Switzerland and the Netherlands. There is no doubt that the country has recovered so well post-pandemic and has become a safe haven for those looking to invest in stable and growing markets and for professionals searching for a greener, safer and more lucrative environment. The Dubai government has made no secret of its intention to make the emirate the best place, in the world, to live and work for residents. Meanwhile, for UAE residents, the dream destinations to relocate and explore are the UK followed by Canada, the US, India, and Australia.

In their latest World Economic Outlook, the IMF posted that “for the GCC, continuing to diversify revenue sources and implement tax reforms (through the introduction and expansion of value-added, personal income, and corporate income taxes) remain key priorities.” It also noted “notably, after adopting or committing to adopt a value-added tax, some GCC countries are now in the process of introducing a corporate income tax, in part amid the implementation of the global minimum corporate income tax. In addition, Oman is in the final legislative stages of adopting a personal income tax on high-income earners.” 5% VAT and 9% Corporate Tax were introduced in the UAE in 2018 and 2023; Oman has proposed to levy income tax on the rich. It is obvious that the introduction of tax has given the UAE a tax base to increase its revenue stream that could provide the funds needed to meet social and developmental needs. The IMF added that “in the case of UAE, the country has an almost fully automated revenue administration with one of the best systems of tax collection, tax refund and so on.”

For the first time in history, the total capital and reserves of banks operating in the country topped half a trillion dirhams; the Central Bank posted that this figure, for July, was actually US$ 136.95 billion, 10.5% higher on the year and by 2.7% YTD. Although this balance does not include loans, (secondary deposits), they do include the current year’s profits. National banks accounted for about 86.3% of the total capital and reserves of banks operating in the country, 10.4% higher on the year at US$ 118.17 billion; foreign banks accounted for the remaining 13.7%, with a value of US$ 18.77 billion. The report noted that investments of banks operating in the country posted a record US$ 188.34 billion, up 19.3%, at the end of last July. Bonds held until maturity accounted for the largest share of banks’ investments, at around 48.3%, 0.5% higher, at US$ 90.98 billion. The share of banks’ investments in “debt bonds” amounted to about 41.9% of total investments, reaching US$ 78.88 billion at the end of last July – 3.5% higher on the month and 15.8% on an annual basis. Bank investments in stocks came in 36.0% higher on the year and 1.8% on the month, at US$ 4.63 billion; other bank investments amounted to US$ 13.84 billion – a 1.7% monthly decrease but an annual 1.0% increase.

The Dubai Financial Services Authority has fined Vedas International Marketing Management US$ 100k for unauthorised and deceptive Financial Promotions related to the Multibank Group. It was alleged that Vedas Marketing directed the promotions to individuals located in the Dubai International Financial Centre. It had also engaged in misleading and deceptive conduct by representing that certain entities in the Multibank Group were regulated by the DFSA, when in fact, none of the promoted entities were. The DFSA made no allegations against the Multibank Group itself in the Decision Notice. In June 2024, Vedas challenged the conclusions in the DFSA’s Decision Notice by referring it to the Financial Markets Tribunal which directed that the reference should be struck out due to Vedas Marketing’s failure to pay the required filing fee for the referral.

Dubai Islamic Bank posted a nine-month pre-tax profit of US$ 1.64 billion, 23% higher on the year, with group net profit 13.0% higher at US$ 1.48 billion, driven by a 16.8% hike in total income reaching US$ 4.63 billion; net operating revenues grew 6.3% to US$ 2.48 billion. In Q3, DIB’s pre-tax profit was 32.1% higher at US$ 622 million, as impairment charges fell 62.4% to US$ 144 million. From the balance sheet, there were increases across the board:

• Net financing and sukuk investments             up 7.0%          to US$ 77.95 billion
• The bank’s balance sheet                               up 4.7%          to US$ 89.65 billion
• Customer deposits                                          up 6.7%            to US$ 654.8 billion

Tecom Group posted record Q3 financials, with both revenue and net profit surging – by 12.0% to US$ 166 million, and by 20% to US$ 93 million; over the first nine months, the figures were up by 10% to US$ 463 million, and by 23% to US$ 257 million. According to its CEO, Abdulla Belhoul, the main drivers behind these impressive returns have been “high occupancy rates across our diversified portfolio of premium commercial, industrial, and land lease assets;” its current occupancy rate is 94%. So far in 2024, it has invested US$ 545 million, including a land bank of 13.9 million sq ft for industrial leasing at Dubai Industrial City and two operational Grade-A office buildings, as well as the launch of the Innovation Hub Phase 3 in Dubai Internet City.

Dubai Taxi Company posted a 13.0% annual hike, to US$ 436 million, in revenue during the first nine months of 2024, driven by positive performances across all its segments, that has been helped by Dubai’s positive macroeconomic environment, increased tourism and population growth. Net profit declined by 7.0%, to US$ 67 million, attributable to the introduction of corporate tax in the UAE and increased interest costs. Profit before tax and interest costs increased 19% year-on-year to US$ 87 million. There was a 20% year-on-year increase in earnings for interest, taxes, depreciation and amortisation, (with a 27% margin), to US$ 118 million. DTC’s taxi segment increased 12% on the year to US$ 379 million, attributable to an increased number of trips and average trip length, The company expanded its operating fleet by 8.5% to 5.66k at the end of September. Last month, a further 0.3k vehicles has been added and rolled out. The Company’s taxis and limousines completed thirty-six million trips – a 5% year-on-year rise during the period. Driven by demand and an increase in supply of vehicles. DTC’s bus segment posted a robust 27.0% growth during the period, with new service contracts secured and seventy-seven vehicles added to its fleet bus revenue.

Today, the DFM announced the completion of three major transactions involving Al Ansari Financial Services and Ajman Bank, totalling US$ 10.5 million involving thirty-five million shares. The first major transaction involved 29.1 million Al Ansari shares, valued at US$ 7.8 million, executed at a price of US$ 0.264 per share in a single trade, and the other involving  5.95 million Ajman Bank shares, valued at US$ 2.771 million, executed at a price of US$ 0.466 per share in two separate trades. It seems that these large direct transactions are executed outside the regular order book and do not impact the closing price of the respective shares, the price index, or the highest and lowest prices recorded during the trading session and over the past fifty-two weeks.

By last Sunday, Dubai had maintained its position as the GCC’s top performing equity market in October – for the fifth consecutive month – gaining 1.9% to close the month on 4,591 points; it was 13.1% higher YTD. Four out of the eight sectors posted growth during the month, with real estate the driving sector, growing 1.7%, with a little help from large-weighted Emaar Development (6.3%) and Deyaar Development (4.0%).  However, Taaleem was the stand-out October performer, gaining 11.3%. Over the month, National International Holding topped with a gain of 117.3%, followed by Dubai Insurance and Emirates Refreshment Company with gains of 31.8% and 25.1%, respectively. On the flip side, Takaful Emarat Insurance topped with a decline of 53.6%, followed by Emirates Investment Bank and Al Mazaya Holding Company, with declines of 16.7% and 13.5%, respectively.

The DFM opened the week, on Monday 04 November, two hundred and fifteen points (5.0%) higher the previous four weeks, gained a further 18 points (0.4%), to close the trading week on 4,639 points by Friday 08 November 2024. Emaar Properties, US$ 0.12 higher the previous fortnight, shed US$ 0.01, closing on US$ 2.40 by the end of the week. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.68, US$ 5.27, US$ 1.71 and US$ 0.34 and closed on US$ 0.69, US$ 5.23, US$ 1.73 and US$ 0.34. On 08 November, trading was at three hundred and fifty-one million shares, with a value of US$ 151 million, compared to one hundred and twelve million shares, with a value of US$ 75 million, on 01 November.  

By Friday, 08 November 2024, Brent, US$ 2.66 lower (3.5%) the previous week, gained US$ 0.52 (0.7%) to close on US$ 73.30. Gold, US$ 7 (0.3%) lower the previous week, shed US$ 53 (2.0%) to end the week’s trading at US$ 2,693 on 08 November 2024. 

Iran has approved a plan to increase oil production by 250k bpd, with the oil ministry announcing, “Iran’s Economic Council has approved a decision to finance an urgent oil production increase plan using resources from the National Development Fund of Iran.” Iran is a member of OPEC and is responsible for 3.2 million bpd – about 3.0% of the global output.

Yesterday, and as widely expected, the BoE cut interest rates to 4.75% from 5.0%, but there is every chance that rates will not drop as quickly, as formerly thought, but could even go in the other direction if – and when – inflation creeps higher after last week’s heavy spending Budget. Last week’s Budget included plans to borrow an additional US$ 36.23 billion a year, as well as US$ 51.78 billion in tax-raising measures. The independent OBR and the BoE set out that as a result of Labour’s choices in the Budget last week inflation will be higher. This will be aided and abetted by the triple whammy of more public borrowing, a rise to 15% for employers’ national insurance and a higher national living wage. Even the BoE governor cautioned that rates were likely to “continue to fall gradually from here”, but they could not be cut “too quickly or by too much”. The consensus seems to be rates to dip to 3.5% by early 2026.

Later in the day, the US central bank reduced interest rates for the second time in a row – and only the second time in four years – with a 0.25% cut to 4.50%. US inflation fell to 2.4%, not far off the Fed’s 2% target, whilst the weakest jobs report of the Biden administration was posted in September. Unlike the BoE, the Fed is tasked with both maintaining price stability and maximum US employment and commented that the US economic activity has continued to expand at a solid pace and labour market conditions have generally eased.

Speaking at the opening ceremony of the fortieth edition of ADIPEC, the UAE Minister of Industry and Advanced Technology, Dr Sultan Ahmed Al Jaber says the energy sector needs an annual investment of US$ 1.5 trillion to meet the increasing energy requirements driven by AI. Within two years, it is expected that AI will utilise 4% of global energy – equating to the same amount of electricity use by all of Japan.  The minister also warned that no single source of energy is going to be enough to cater for this demand, noting that “wind and solar will expand seven times. LNG will grow by 65%. Oil will continue to be used for fuel and as a building block for many essential products. And as the world becomes increasingly urban, demand for electricity will double.” In January, the International Energy Agency estimated that, added together, data centres, cryptocurrency, and AI used almost 2% of global energy demand in 2022, and that demand for these uses could double by 2026.

The International Air Transport Association posted creditworthy September global air cargo figures continuing strong annual growth in demand which, when measured in cargo tonne-kilometres, rose by an annual 9.4%; this was the fourteenth consecutive month of growth. Capacity – measured in available cargo tonne-kilometres (ACTKs) – increased by an annual 6.4%; this was mainly attributable to the growth in international belly capacity, which rose 10.3% – which has posted double digit growth for the past forty-one months extending the trend of double-digit annual capacity growth to 41 consecutive months. Yields were also seen to be improving, up 11.7% in 2023 – and 50% above 2019 levels.

As part of their investigation, that started in November 2022, into tax fraud, a tie-up between French and Dutch authorities have raided Netflix offices in Paris and Amsterdam, the headquarters of the company’s operations in Europe and the MEA. The streaming giant has yet to comment on the raids, but insists it complies with tax laws wherever it operates. The French investigation is being carried out by the National Financial Prosecutor’s office, a special unit used for investigations into high-profile white-collar crime. The French investigation relates to suspicions of “covering up serious tax fraud and off-the-books work”; it is also under investigation for tax filings for three years to 2021. Last year, French media outlet La Lettre reported that until 2021, Netflix in France minimised its tax payments by declaring its turnover generated in France to the Netherlands; its annual declared turnovers in France in 2020 and 2021 were US$ 51.3 million and US$ 1.30 billion. The report also confirmed that the investigation was looking into whether Netflix continued to attempt to minimise its profits after 2021.

After striking for seven weeks, thirty thousand Boeing workers finally got what they wanted – a 38% pay rise, over the next four years, and a one-off US$ 12k bonus. The embattled plane maker is hoping that this finally draws a line in the sand and some sort of normalcy returns, after years of mishaps, mostly self-inflicted. Its current financial woes have been exacerbated by the strike, which has cost US$ 10.0 billion, whilst last month posted Q3 losses of US$ 4.0 billion. Last week, it launched a share sale to raise US$ 20.0 billion. Boeing’s chief executive, Kelly Ortberg, commented that “there is much work ahead to return to the excellence that made Boeing an iconic company.” She is spot on!

Having to cut costs in the face of declining sales, mainly in China, (with growing competition from local manufacturers), and the US – where inflation and high interest rates have hit sales of new vehicles – Nissan has announced 9k global retrenchments, as it reduces global production by up to 20%; it also cut its 2024 profit forecasts by 70%. (The carmaker employs more than 6k at its manufacturing plant in Sunderland and last year announced a US$ 2.6 billion plan to build three electric car models there). Its chief executive Makoto Uchida commented that “Nissan will restructure its business to become leaner and more resilient.” On the news today, shares on the Tokyo market ware trading 6.0% lower.

Privately-owned TriArtisan Capital Advisors, TGI Fridays, the American casual dining chain, has finally filed for Chapter 11 bankruptcy protection, following months of financial problems, and after a deal with UK-based Hostmore collapsed. In the bankruptcy filing, it listed both assets and liabilities in the range of US$ 100 million to US$ 500 million. TGI Fridays, owner and operator of thirty-nine domestic “Thank God it’s Friday!” restaurants, confirmed that they were still operational, adding that it had secured a financing commitment to support operations. Rohit Manocha, executive chairman of TGI Fridays, confirmed that “the primary driver of our financial challenges resulted from Covid-19 and our capital structure”, and “this restructuring will allow our go-forward restaurants to proceed with an optimised corporate infrastructure that enables them to reach their full potential.”  Following a decision by the UK restaurant operator not to buy TGI Fridays, and after it was removed as the manager of TGIF Funding, which owns the right to collect royalties from the restaurant chain franchise, Hostmore’s share value tanked 90% on the news, and then, last month, announced its intention to enter administration, overwhelmed by debt. It has been confirmed that normal operations will continue in all of the franchise locations both in the U.S. and internationally. TGI Fridays Franchisor, which owns the brand and intellectual property, has franchised TGI Fridays to fifty-six franchisees in forty-one countries. The restaurant operator said those stores are independently owned and are not part of the Chapter 11 process.

With Harland & Wolff desperate for a rescue deal, reports indicate that Spanish shipbuilder Navantia is in urgent talks, with the UK government, to negotiate more favourable terms for a deal to build three Fleet Solid Support ships (FSS) for the Royal Navy. In September, H&W collapsed into administration after the Starmer administration rejected their plea for taxpayer support. It seems that the Spanish company has been drip-feeding H&W, on a week-by-week basis, since the company’s filing for administration. If the deal were to go through Navantia would acquire all four of H&W’s shipyards in Belfast; Appledore in Devon Arnish on the Isle of Lewis; and Methil in Fife.

It is not too often that you seethe Competition and Markets Authority saying that a merger has “the potential to be pro-competitive for the UK mobile sector”, but now it has, with a reference to a potential US$ 19.47 billion merger of Vodafone and Three. It seems that the merger between two of the UK’s biggest mobile networks could get the green light – reliant on their commitments to invest in the country’s infrastructure. The competition watchdog also noted that it had “the potential to be pro-competitive for the UK mobile sector”, although earlier it had warned that the twenty-seven million users of mobile phone users could end up with more expensive bills if the merger went ahead. However, plans are in place to protect consumer pricing and boost network investment. To get the CMA’s seal of approval, both telecoms must commit to freezing certain tariffs and data plans for at least three years to protect customers from short-term price rises in the early years of the network plan. If the networks want the merger to go ahead, the watchdog requires Vodafone and Three to:

• deliver a joint network plan to set out network upgrades and improvements over eight years
• commit to keeping certain existing tariff costs and data plans for at least three years to protect customers from price hikes
• commit to pre-agreed prices and contract terms so Mobile Virtual Network Operators (MVNOs) – mobile providers that do not own the networks they operate on – can obtain competitive wholesale deals

Pension trustees at NatWest Group have come to a deal, (thought to be the UK’s biggest-ever deal to outsource pension payments to a specialist insurance company), with Rothesay to outsource pension payments. It is reported that after fifteen years in partial taxpayer ownership, the bank is divesting roughly U$ 14.13 billion of its corporate pension scheme to Rothesay, the England cricket team’s Test match sponsor. Its group retirement scheme has about US$ 43.17 billion in assets, while it had roughly 190k members at the end of September.

The latest deal was disclosed – without reference to Rothesay – in NatWest’s third-quarter results statement published last month but has not been publicly reported.

Over the summer, Warren Buffett and Berkshire Hathaway divested 25% of their Apple portfolio, noting that it had sold, in Q3, about one hundred million of his previous four hundred million shareholding. However, it still retains being Apple’s largest investor at US$ 69.9 billion. Over the period it sold US$ 36.1 billion worth of stock – and only acquired US$ 1.5 billion worth of shares. Over the previous seven quarters, it had been a net seller of stocks. Furthermore, the firm also conducted no stock buybacks for the first time since Q2 2018, and did not repurchase stock in the first three weeks of October. The message to the average punter is that if Warren Buffet is selling, then he must have concerns that the market may be on the turn – or he thinks that some stocks have become too expensive – otherwise he would not be holding on to a record US$ 325.2 billion in cash; another reason is a possible change in CGT. interestingly, the nonagenarian has made no major acquisitions of whole companies for his US$ 975 billion company since 2016.

There are reports that KKR, one of the world’s largest investment firms, which has more than US$ 550 billion of assets under management, is in discussions in talks with embattled Thames Water to save the utility from possible liquidation and nationalisation. It seems that the US global investment firm, which currently owns 25% of Northumberland Water, is considering participation in a US$ 3.88 billion share sale as part of a recapitalisation plan to save the utility, that is saddled with US$ 24.55 billion of debts. Other interested parties include Carlyle and Castle Water, the latter of which is controlled by Graham Edwards, the Conservative Party treasurer, and Global Infrastructure Partners, which is owned by BlackRock, Brookfield and Isquared. The share sale process is being run in parallel to an attempt to raise up to US$ 3.88 billion in debt financing from hedge funds and other investors.

In true Australian parlance, Prime Minister Anthony commented that “social media is doing harm to our kids and I’m calling time on it,” and “I’ve spoken to thousands of parents, grandparents, aunties and uncles. They, like me, are worried sick about the safety of our kids online.” He said the age limit would take effect a year after the law is passed, with platforms – including Facebook, Instagram, X, TikTok and possibly YouTube – using those twelve months to work on how to exclude Australian children under sixteen. There is no doubt other major powers will take great interest on how the government can actually ban children under the age of sixteen from social media. Albanese added that:

• platforms will be penalised for breaching the age limit, but underage children and their parents will not
• “the onus will be on social media platforms to demonstrate they are taking reasonable steps to prevent access. The onus won’t be on parents or young people”
• there will be no exemptions for children who have parental consent, or who already have accounts

In its latest report, (for the fiscal year ending 30 June 2023), The Australian Tax Office noted that 1.0% of companies did not pay a cent in tax for various reasons, including companies making an accounting loss or claiming tax offsets that reduced their tax bill to zero. It also noted – and named – 1.2k large companies that paid no tax. The ATO confirmed that, in the current tax year, it had issued one hundred and twenty-four companies tax assessments to the value of US$ 1.81 billion, with twenty-four, (19.4%) of those accounting for US$ 1.64 billion of that total. About US$ 1.46 billion, (80.4%), of the total was being disputed, by fourteen different taxpayers, and some of that money has been paid to the ATO under what’s known as a 50:50 arrangement.

The ATO’s tenth corporate tax transparency report, which covers 3,985 entities, (46.9% or 1,272 higher on the year), that lodged tax returns in 2022–23, found that while the amount of tax collected increased due to higher mining and oil and gas company profits, there were still 1,253 entities (31.4%) that did not pay tax. It is the first year that data for Australian-owned private entities, with total income between US$ 66 million, (AUD 100 million), to US$ 132 million, is being reported, which is why there is now close to 4k entities included in the report. Of that total, 2,732 (69%) entities actual paid tax, with the balance of 1,251 not paying for various reasons.

Of the 3,985 corporate entities covered:

• 1,646 are foreign-owned companies with an income of US$ 66 million, (AUD 100 million) or more
• 600 are Australian public entities with an income with US$ 66 million or more
• 699 are Australian-own resident private companies with an income of US$ 132 million or more
• 1,040 are Australian private entities with income between US$ 66 million and US$ 132 million

Of all the entities included in the report, their total taxable income was 11.3% higher at US$ 252 billion, and of that total, the ATO collected a 16.7% increase to US$ 65.0 billion, from 69% of entities that did paid tax. More than one hundred Australians earned more than US$ 660k, yet paid no tax in 2021–22. The mining sector paid more tax than all other sectors combined, paying more than five times than they did in 2014-15, as the “mining, energy and water” segment accounted for 55.9% (US$ 36.1 billion) of the total, 29.5% higher on the year. The other two sectors with high “contributions” were “wholesale, retail and services” and “banking finance and investment” with totals of US$ 12.6 billion and US$ 10.6 billion. The ATO also published a list of tax paid by all large corporations.

The ATO, along with a further one hundred and forty nations, has welcomed the Organisation for Economic Cooperation and Development’s “Global Minimum Tax” deal, to ensure companies globally pay a minimum effective rate of 15% on corporate profits: at the same time, it notes “it’s not going to solve Australia’s global profit shifting issues” – not helped that the Australian tax is double at 30%. It seems that the ATO is focussing on global profit shifting companies that “misprice” or “mischaracterise” during cross border dealings.

With Donald Trump’s presidential election victory, the financial world was hit by the treble whammy of US shares hitting record high, the greenback posting its biggest gain in eight years against pound sterling, to 1.289, and bitcoin topping record highs at US$ 75.4k, with Trump promising to make the US the “bitcoin and cryptocurrency capital of the world”. However, on the flip side, many analysts are looking at both inflation and interest rates nudging higher. On the news of his victory last Wednesday, markets and currencies around the world have shifted sharply following the US election news:

• The dollar was up by about 1.75% against a host of different currencies, including the pound, euro and the Japanese yen
• The major US stock indexes soared as trading opened, with banks performing particularly well
• The pound sank 1.41% against the US dollar to its lowest level since August
• The FTSE 100 index, comprising the largest companies listed in the UK, was up 0.1% on Wednesday afternoon
• The euro dived 2.24% against the US dollar to its lowest level since June
• In Japan, the benchmark Nikkei 225 stock index ended the session up by 2.6%, while Australia’s ASX 200 closed 0.8% higher
• In mainland China, the Shanghai Composite Index ended 0.1% lower, while Hong Kong’s Hang Seng was down by around 2.23%

With the election duly won, there is speculation that Donald Trump may want to change the head of the US central bank. When President, he had appointed Jerome Powell as chairman of the Federal Reserve in 2017, but soon fell out with him and the Fed. During his first term, Trump called bank officials “boneheads” on social media and reportedly consulted advisers about whether he could fire Mr Powell. Following the Fed meeting yesterday and in answer to a question, Powell said he would not step down if Trump asked and that it is “not permitted under law” for the White House to force him out. The independent agency’s future becomes uncertain under a second Donald Trump presidency. For example, he has promised interest rates would go down under his presidency, something he does not have power over while the Fed operates independently of government. Furthermore, US politicians tend to avoid comments about monetary policy to respect the Fed’s independence.

Furthermore, the “Make America Great Again” president will probably be quick off the mark to dramatically increase trade tariffs, especially on China, and also the eurozone and the UK economies. There is every chance that the UK would be dramatically impacted, with some economists forecasting that the country’s economic growth would slide from 1.2% to 0.4%.

One of the main throwbacks of last week’s UK budget was the Chancellor’s plans for increasing employer NI. Some of the amendments to NI had been trailed prior to last week’s announcement as Rachel Reeves not only raised the rate, by 8.7%, that companies had to pay from 13.8% to 15.0% but also lowered the threshold, by 45%, from US$ 11.8k to US$ 6.5k. Companies to pay NI at 15% on salaries above US$ 6.5k from April, up from 13.8% on salaries above US$ 11.8k. This is expected to raise an additional much needed US$ 32.44 billion a year for the exchequer – but at what cost? As last week’s blog noted:

“Although most employees may not notice an immediate change in their pay, larger businesses will be impacted as they contribute more to fund public services, which employers will have to recover either from employees (loss of job and pay reductions) or consumers (increased prices)”.

In one step, the Starmer administration managed not only to spook financial markets but also to give many business leaders sleepless nights as they digested the cost.  Rachel Reeves, the Chancellor, unnerved business leaders by saying she would raise an additional US$32.44 billion annually by hiking their national insurance contributions. Her lowering of the threshold, to just US$ 6.5k, will probably result in a wave of redundancies and even insolvencies across labour-intensive industries, including the retail and hospitality sectors, where part-time employees predominate. To make matters worse, the Office for Budget Responsibility, assuming that initially employers would absorb 40% of the increase in lower profits and the balance by a combination of lower wages and higher price, the increase in revenue would come in at a lower US$ 20.81 billion.

There are some who think that the budget will be the driver behind a further rise in inflation which had only dipped below the BoE 2.0% target. It seems that leading retailers could be hit by at least US$ 130 million after the employer NI contribution rose 1.2% to 15.0%. It seems the only option would be price rises as current margins are almost wafer thin. This despite the Chancellor commenting that “businesses will now have to make a choice, whether they will absorb that through efficiency and productivity gains, whether it will be through lower profits or perhaps through lower wage growth”. The grocery industry is expected to be among the hardest-hit by the changes to employer NICs, particularly after the chancellor slashed the threshold at which businesses become liable for it to just US$ 6.5k., from the current US$ 11.8k.

The honeymoon is well and truly over for the Labour administration, not helped by last week’s budget. Business Secretary, Jonathan Reynolds, called a private virtual meeting last Monday, with representatives of some leading retail and hospitality companies, including Burger King UK, Fuller Smith & Turner, Greene King, Kingfisher and the supermarket chain Morrisons. It is reported that the minister had acknowledged that Rachel Reeves inaugural fiscal statement had “asked a lot” of British business. Several attendees voiced their concern and the impact of employers’ national insurance (NI) contributions on their finances. They included the chief executive of Greene King, who highlighted that the increase in employers’ NI contributions would cause “a £20m (US$ 26 million) shock” to the company, while Fullers is understood to have warned that it would be forced to halve annual investment from US$ 78 million to US$ 39 million, as a result of increased cost pressures. On top of that, the Morrisons chief executive commented that the budget had exacerbated “an avalanche of costs” for businesses next year, and asked what the government could do to mitigate them. Sources also noted that the CBI, the employers’ group, said its impact would be “severe”, while the British Beer & Pub Association added that there was now a disincentive to invest and flagged “a tsunami” of higher costs.

Trump’s revival has given both the new Prime Minister, and his Foreign Secretary, something to think about. David Lammy is on record stating that “Donald Trump was a racist KKK and Nazi sympathiser” and described him “as a tyrant and a woman-hating, neo-Nazi sympathising sociopath” and a “tyrant in a toupee”. In a vain attempt to defend himself, the Foreign Secretary said his comments were “old news” and many politicians had said some “pretty ripe things” about Trump in the past. He added that “I think that what you say as a backbencher and what you do wearing the real duty of public office are two different things”. What a tosser!

In June 2018, he tweeted: “Humanity and dignity. Two words not understood by President Trump.” The following year, he said: “An endorsement from Donald Trump tells you everything you need to know about what is wrong with Boris Johnson’s politics.” Commenting on Joe Biden and Kamala Harris’ victory in the 2020 US election, Sir Keir said: “their victory is one for hope and unity over dishonesty and division”, and “It is a chance to reassert America’s place as a force for good on the world stage.” Records show that in 2016 Kier Starmer was not a fan of the US president even before he took the top job  in 2016 when he said, “We are united in condemning the comments of Donald Trump on issues such as Mexican immigrants, Muslims and women,” adding that comments made by Mr Trump were “absolutely repugnant,” and that “Of course I would not want to have Donald Trump round for dinner to express his views”.

This week we have seen both two-faced men putting on their new visages, now they realise the The Man Is Back In Town!