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Scooped by
Graham Watson
onto Microeconomics: IB Economics March 21, 2022 3:00 AM
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The Swedish retail giant is slowly adapting to one of the world's most complex furniture markets.
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Firm prosecuted after unapproved material in tanks led to flakes and powder entering drinking water of 1.3m people
Graham Watson's insight:
OFWAT's clearly busy at the moment with the news that Anglian Water have been hit with a record fine for contaminating the water supplied to 1.3m customers.
The £1.42m fine though is a relative 'drop in the ocean' when compared to the company's 2023 turnover: £1.5 billion.
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Editorial: Ministers must resist pressure to relax environmental standards in the rush for new housing
Graham Watson's insight:
Today's Guardian editorial notes the government's ambitious housing targets and argues that the government should not compromise on housing quality or its environmental commitments. They say that solar panels and heat pumps should be fitted as standard and that constructions companies' profits shouldn't dictate in this regard.
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The couriers hope to expand their business by combining their "complimentary" services.
Graham Watson's insight:
Another proposed merger has been flagged today - with couriers Evri and DHL proposing to merge and expand their business. The combined firm would be handling more than a billion parcels and a billion letters. This would bring it close to the parcel volumes of the Royal Mail.
Of course, the move is being sold as offering "greater choice" and "cost-competitive solutions", but then again, it would, wouldn't it. It will be interesting to see how the competition authorities react to the prospective increase in concentration in the sector and its implications for consumer interests.
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Assessment of leading dairy and coffee shop chains reveals failure to set out methane reduction targets
Graham Watson's insight:
Are global dairy companies serious about tackling climate change? Certainly a report by Changing Markets suggest that many of them pay lip service to the idea of reducing methane emissions but very few of them have concrete targets and even then there are questions about accountability. Greenwashing, anyone?
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Tunisian company BIOHEAT says it is transforming the country's olive waste into an eco-friendly and efficient energy source, and that it is catching on with business owners.
Graham Watson's insight:
This Reuters clip shows how an innovative Tunisian firm, Futura, is using olive waste to replace fossil fuels. Founder of the company Yasir Khifi estimates that 1 kg of olive waste can replace 4kg of wood, and in combustion it also reduces carbon emissions by 30% too.
Tunisia is a major olive oil producer, and reusing the waste in a variety of diverse forms, not least in heating pizza ovens.
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The president promises sweeping price cuts "almost immediately", but experts say these are unlikely.
Graham Watson's insight:
This BBC article suggests that President Trump's attempts to intervene and limit US drug prices is less straightforward than it might appear. Experts can't see the US government negotiating sizeable reductions in drug prices in the immediate term.
Of course, whether any meaningful action is taken will depend upon the President's attention span above all, but industry insiders think that lower drug prices could also have implications for the level of research in the sector, and ultimately negligible effect on price.
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Exclusive: Campaigners call for energy profits levy to be made permanent to enable ‘just transition’ from fossil fuels
Graham Watson's insight:
Campaign group, Oil Change International (OCI ), want the government to commit to making the energy profits levy a permanent feature of the tax environment and use hypothecate the tax to foster speed the green transition away from fossil fuels.
Even now, fossil fuel producers are in receipt of £17.5bn a year in UK government assistance, according to the campaign group Global Justice Now (GJN), although I wonder if any of you might be able to make an economically valid defence of this position.
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Researchers call on UK government to close advertising ‘loopholes’ that are ‘driving excess calorie intake’
Graham Watson's insight:
This Guardian piece highlights the apparent impact of fast food advertising on children's eating habits, suggesting that the advs increase the consumption of fatty foods.
However, I'm going to play the sceptic here and suggest that the study doesn't strike me as massively rigorous, or terribly comprehensive; the sample size is small and I'd be interested in looking at the methodology to see how they've controlled the experiment for all other factors too.
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Environment Agency recommends rationing water as UK sees driest start to spring in 69 years
Graham Watson's insight:
D&S, agriculture and food prices. The low levels of rain this spring - the driest spring for 69 years - are likely to impact food production, and, consequently, food prices. You heard it here first!
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Emissions from abandoned coalmines, oil and gas wells globally are larger than any single country except China, the US and Russia
Graham Watson's insight:
An interesting environmental aside, this Guardian article highlights the fact that abandoned infrastructure is a major methane polluter - larger in fact than all bar the 3 largest polluters (China, US, Russia).
Unsurprisingly, it's abandoned fossil fuel infrastructure is the most polluting form of abandoned infrastructure.
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A cocoa-growing area in southeastern Nigeria is seeing an influx of new entrants into the sector, known as 'cocoa boys,' who are being drawn by rising cocoa prices.
Graham Watson's insight:
Lovely Reuters clip showing how prices allocate resources, with the rising price of cocoa attracting entrepreneurs into the sector. These new cocoa farmers, known as "cocoa boys" have left other jobs to become farmers in response to the higher price of cocoa. You might think about how this reallocates resources in both labour and product markets.
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The deal is the latest example of a UK-listed company being taken over by a US rival.
Graham Watson's insight:
It's happening: Doordash has agreed a £2.9bn takeover of Deliveroo, consolidating the sector and creating a larger rival for Just Eat and Uber Eats. The deal values Deliveroo at 180p a share, well below the IPO price of 390p, and there are also concerns about another firm being taken over by a US company.
Will Shu, Deliveroo's CEO is recommending the deal to shareholders, not least because he will trouser over £172m, but because the new entity"will have the scale to invest in product, technology and the overall consumer value proposition."
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Such a takeover would be one of biggest deals ever in oil and gas industry
Graham Watson's insight:
Wow! This would genuinely be a mega-merger, if Shell decided to bid for BP, prompted by the latter's falling share price. The combined company would be likely to have a value around £200bn, and considerable market power in many markets. |
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New rules mean Ofwat could step in to prevent under-performing water companies paying any bonuses.
Graham Watson's insight:
I wasn't aware that my 'scoops' are now influencing policymaking - however, the Environment Minister is considering permitting the regulator to intervene and prevent water companies paying their executives bonuses if they under-perform.
And as for the notion of a retention bonus? Thames Water really have been plumbing the depths this week, no pun intended...
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Exclusive: Firm close to insolvency says using £3bn loan to pay ‘substantial’ bonuses is vital to retain senior managers
Graham Watson's insight:
Sometimes the behaviour of certain individuals beggars belief. This is one of those occasion; well-remunerated executives feel justified in claiming 'substantial' bonuses when their company is on the point of going bankrupt.
The firm claims that this would help 'retain senior managers'. Perhaps you might consider that your previous senior managers have been a significant part of the problem.
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Britain's competition watchdog wants to review a £3.7bn deal that would see Aviva takeover Direct Line.
Graham Watson's insight:
The Competition and Markets Authority are going to review the £3.7bn Aviva takeover of Direct Line, because they are worried about the effect on competition in the insurance sector, and thus price and consumer welfare. If approved the merger would give the firm a more than 20% market share in a sector characterised by consumer inertia.
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Adrian Montague also said some bosses in line for payouts of ‘50% of salary, very substantial bonuses’
Graham Watson's insight:
More on Thames Water's appearance before the Environment Select Committee - not only does cashflow look like a real issue but, surprise, surprise, it seems that a number of executives are on for sizeable bonuses of “50% of salary, very substantial bonuses”, with the CEO potentially going to be given a bonus of up to 156% of salary.
And yet, there he is ask for clemency from the regulator. Shameful.
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Water firm boss tells MPs company's survival depends on special treatment from the industry regulator.
Graham Watson's insight:
Absolutely pathetic. For the CEO of a water company even to ask this is, frankly, embarrassing, shows little awareness of the fundamental nature of running a business - and contempt for the regulator, and the company's customers.
His argument is that if fines levied by OFWAT are too high, then the company won't attract the necessary investment and will go out of business. Shame on the executives responsible for running the company over the last 20 years, and well-rewarded for doing so.
I suspect the regulator will not be captured to this degree. The moral hazard issues involved are staggering and that is why Chris Weston's behaviour verges on the contemptible.
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Health policy experts support the ‘most favored nation’ plan but doubt it will withstand likely legal challenges
Graham Watson's insight:
This is an interesting move - President Trump has signed an Executive Order to force pharmaceutical companies in the United States to match the lowest price for the drug abroad. His instinct is that the big pharma companies have been able to price gouge in the US at the expense of US consumers and he wants this to end.
He argues that under the present system, US consumers are effectively subsidizing research and development of drugs for the whole world and he wants this to stop. The distribution argument is actually quite compelling on first sight: the President claimed: “Even though the United States is home to only 4% of the world’s population, pharmaceutical companies make more than two-thirds of their profits in America,”
That said, a mastery of Maths isn't his strong point.
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T&Cs show limitations to the promises of 12 free seat reservations, insurance and monthly access to a sale
Graham Watson's insight:
Ryanair has joined Wizz Airlines and EasyJet Plus in offering a subscription-based model for its customers. For £79 per month, Ryanair are offering 12 free seat reservations, but Which? are of the view that the terms and conditions attached mean that this might not be the bargain that it seems.
For the airlines, such models are interesting in that they represent a new revenue stream and guarantee cash flow, and this sort of pricing is now much more common across a range of sectors, something noted in Diane Coyle's excellent "The Measure of Progress". However, as ever 'caveat emptor' applies.
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Ofgem review showed more than 34,000 customers were erroneously billed more for standing charges
Graham Watson's insight:
The regulator has intervened to force 10 energy companies to pay compensation for overcharging, with firms billed more than they should have been for standing charges. The net result of this was that they contravened the existing price controls.
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Ørsted cancels fourth stage of Hornsea project off Yorkshire coast, which was expected to include 180 giant turbines
Graham Watson's insight:
The push to transition to renewable energy may also hve stalled with the news that Danish firm Ørsted have shelved plans to build a fourth stage of their Hornsea project in the North Sea because of fears about rising costs.
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Move prompted by looming retirement crisis would help ensure consistent, reliable services
Graham Watson's insight:
Another labour market shortage, with a potential shortage of train drivers meaning that the government is going to lower the average age at which people can train to be a driver to 18, in the hope of increasing the supply of workers. The majority of cancellations stem from driver shortages.
At a more advanced level, D&S factors in the sector help explain why train drivers have recently been on strike.
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Associated British Foods’ sale of Allied Bakeries would bring together two of the UK’s biggest breadmakers
Graham Watson's insight:
More merger activity hoves into view with iconic British brands Hovis and Kingsmill contemplating joining forces. Associated British Foods (ABF), which owns the Kingsmill parent Allied Bakeries and Hovis’s private equity owner, Endless, a discussing a potential sale of the bakeries arm. The argument is that both are struggling and that this would generate "cost efficiencies" - i.e. economies of scale.
The immediate issue is that this is likely to attract the attention of the competition authorities. It would see the 2nd and 3rd largest players in the sector merging and push current market leader, Warburtons, into second place.
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Professionals call for a fundamental transition including controlling flight numbers
Graham Watson's insight:
Not much economic theory, more of a rallying cry, with a campaign group - Call Aviation to Action - alarmed that the aviation sector isn't doing enough to tackle carbon emissions, and in doing so is missing the opportunity to initiate radical change |
More Business Management than Economics, but this is a brilliant article about how Ikea has adapted its business model for the Indian market, both in terms of cost but also in terms of products sold, and as a result started to gain a foothold in one of the world's largest, and most diverse economies.