REPORT
By Gökhan Kurtaran
London letter, week beginning Dec. 12

 

-Brexit court verdict, new investments and rising food prices

 

Supreme Court judges are split over their historic Article 50 ruling, and look set to decide by a majority of seven to four to give Parliament a vote on when Britain leaves the European Union, government sources say, according to Christopher Hope, chief political correspondent from The Telegraph daily newspaper.

When the decision of the court comes, which is expected in January, markets will focus on the Parliament’s decision. In the long run, early elections might be still a possibility as Prime Minister Theresa May is often criticized for not being elected by a single party member or MP’s. However, she has reiterated that there will be no election until 2020.

Last week, the decision of two global companies – U.S. media giant 21st Century Fox to make a takeover bid for Sky, the U.K.-based satellite broadcaster valued at £18.5 billion, last week must have surprised many.

The proposed offer is worth £10.75 a share in cash, a premium of 36 percent on the closing price on Dec. 8. Sky shares ended 26.6 percent higher at 999.8p in London following the announcement. Rupert Murdoch controls 21st Century Fox, and already owns a 39.1 percent stake in Sky.

Moreover, McDonald's is to move its non-U.S. tax base from Luxembourg to the U.K. The new holding company will pay U.K. tax on the royalties the firm receives outside the U.S., according to the company’s press statement. Even though the company said it had chosen the U.K. due to the "significant number of staff" it has in London, the decision might well be connected with the search for tax avoidance advantages in the long run. 

The European Commission is currently formally investigating the Luxembourg tax affairs of McDonalds in Luxembourg. Last year Commissioner Margrethe Vestager, in charge of competition policy, stated: "A tax ruling that agrees to McDonald's paying no tax on their European royalties either in Luxembourg or in the U.S. has to be looked at very carefully under EU state aid rules. The purpose of double taxation treaties between countries is to avoid double taxation – not to justify double non-taxation."

PM May's official spokeswoman said, "We welcome continued investment from companies around the world into the U.K., particularly where that's securing growth and increasing jobs."

 

Food prices

The U.K. faces higher food prices without continued access to EU workers, 30 food and drink associations have recently warned.

In a letter published in the Guardian newspaper, they argue that EU workers play an important role in the supply chain and some are already starting to leave. They called on the government to offer "unambiguous reassurance" about their right to remain.

The Home Office said in response it was "harnessing the industry's knowledge" and "ensuring their voice was heard."

On the other hand, rising food prices have helped drive inflation to its highest level for more than two years, figures are set to show this week.

Economists expect annual consumer price inflation to be up from 0.9 percent in October to 1.2 percent in November -- the biggest jump since October 2014. The Office for National Statistics will publish the data on Tuesday.

A sharp fall of the pound since the EU referendum has pushed up the cost of imported goods, and oil prices have also increased in recent months.

12 Dec,2016

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