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Jan 22, 2019

Business Today: Davos 2019 – Financial risks and climate dangers loom over global elite

Davos 2019: Global elite urged to stop demonising refugees - live updates
Larry Elliott


Angel Gurria, secretary general of the OECD, says the chances of a no-deal Brexit are getting bigger every day. Speaking in Davos he said Brexit was a “systemic” issue, with far-reaching consequences.

Bloomberg (@business)
The chance of a no-deal Brexit "is getting bigger every day," OECD's secretary general says https://t.co/3rj7uHLbSq #wef19 pic.twitter.com/bYOFIYB8UD
January 22, 2019
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Updated

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Reskilling workers will cost US $29bn

The World Economic Forum has some bad news for the US government -- reskilling its workforce to thrive in the new technological age will cost $34bn. And Washington will have to pick up most of the bill.
WEF has calculated that it will only be profitable for companies to reskill around 25% of the nearly 15 million workers who will be forced out of the jobs market by automation in the next decade.
The burden of the rest must be picked up by the state.
Here’s the key points from WEF’s survey:
  • New study on the US labour market finds that 86% of the $34 billion total cost for reskilling nearly 1.4 million “stranded workers” displaced by the Fourth Industrial Revolution and other factors over the next decade will likely fall on the government
  • The private sector could profitably reskill 25% of all workers, a figure rising to 45% if businesses collaborate
  • World Economic Forum partner companies have pledged to reskill or upskill 17 million workers globally, surpassing a 2018 target to reach 10 million workers by 2020

World Economic Forum (@wef)
Who should pay for the reskilling revolution?
Our new report looks at the cost of retraining workers displaced by the Fourth Industrial Revolution: https://t.co/LQInBnNhbs @zahidi #wef19 #skills pic.twitter.com/fb66n61Ysb
January 22, 2019

UK employment hits another record high

The latest wages and jobs report also showed another record high for UK employment.
The number of people in work rose by 141,000 in the three months to November to 32.53m, easily beating economists’ forecasts of 85,000.
An employment rate of 75.8% is the highest since comparable records began in 1971. The unemployment rate meanwhile dipped unexpectedly to 4% from 4.1%.
Here is the official take on the data from David Freeman at the ONS:

The number of people working grew again, with the share of the population in work now the highest on record. Meanwhile, the share of the workforce looking for work and unable to find it remains at its lowest for over 40 years, helped by a record number of job vacancies.
Wage growth continues to outpace inflation, which fell back slightly in the latest month.
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UBS chairman calls for Brexit 'compromises'

The head of Swiss banking giant UBS is cautiously optimistic that the Brexit crisis will be resolved, but wants to see more compromises...

Kalyeena Makortoff (@kalyeena)
The panel quickly shifts to Brexit, with Axel Weber reiterating some cautious optimism. He says closer involvement from British Parliament gives some reassurances but ultimately we need more "compromises on the table" pic.twitter.com/upz9kajIVM
January 22, 2019

Right-wingers blast Davos crony capitalism (!)

The free-market Institute for Economic Affairs think tank does not usually side with the anti-globalisation movement but on one thing they do agree: Davos is a bit of a racket.
Philip Booth, an IEA fellow, said the annual January shindig was the perfect environment for “crony capitalism” to flourish.

“Industry is shaped by the dispersed decisions of seven billion consumers and tens of millions of businesses. It is not - or should not - be shaped by politicians. Yet Davos remains a huge magnet for politicians to work alongside leaders of the largest businesses and other vested interests to devise yet more regulations, interventions and barriers to entry that will undermine competition, by making it even harder for small businesses to operate in their markets.
“The gathering perpetuates the myth that economic welfare is promoted by “experts”. Next year, our government officials should sit the conference out, and leave Davos to the skiers.”

China: don't panic about our slowdown

One of China’s top financial regulators has told Davos that the country’s economy is indeed slowing (as IHS’s Nariman Behravesh just warned us) , but it’s not a disaster.

Kalyeena Makortoff (@kalyeena)
Fears over China first on the docket on the Davos global financial risk panel. But the vice-chair of China Securities Regulatory Commission stresses “we should not overreact.” “China is slowing down but it’s not going to be a disaster”
January 22, 2019
Kalyeena Makortoff (@kalyeena)
He points out that the top-down approach in China has helped the country take swift action to make sure financial risk doesn't spread. It's part of how China has "avoided financial crises over the last 40 years" which is almost unheard of in the developed world
January 22, 2019

UK pay grows at fastest rate in a decade

In the UK, figures just published show that pay grew at its fastest rate since 2008 at the end of last year, handing some good news to cash-strapped consumers.
Pay (including bonuses) grew by 3.4% between September to November, compared with the same period in 2017 according to the ONS. It was the fastest rate since May to July 2008, before the global financial crisis had unleashed the worst of its effects. Economists had predicted growth of 3.3%, unchanged from the previous three months.
That meant a real terms pay increase - when adjusted for inflation - of 1.2%.
When bonuses were stripped out, regular pay increased by 3.3%, the highest since September to November 2008, equating to real terms pay rise of 1.1%.
The decent wage data has sent the pound above the $1.29 mark.

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IHS: One more shock could trigger a recession

Larry Elliott
Nariman Behravesh, the chief economist of IHS Global Insight warns that global growth is slowing around the world.
“This year the chances of a recession are around one in three but next year I see it as 50-50”, he tells us, on the sidelines of the World Economic Forum.
“For 2021 there is the same risk. Growth will be slow enough that it wouldn’t take much of a shock to push it into recession.”
Behravesh added that an intensification of the trade war might be the trigger for a global recession, but the most likely cause would be a policy mistake.Looking at the world’s three biggest economies, he said the US had been boosted temporarily by Donald Trump’s tax cuts, the euro zone was again growing only slowly and the authorities in China were trying to stimulate activity.
“I am worried about China. It is surprising how fragile it is starting to look. All of a sudden the juggernaut is starting to look wobbly.”
Behravesh said he expected a Brexit deal because “a hard Brexit would be horrible both for the UK and the EU. The backlash from business in the UK against a hard Brexit is pretty strong, but the EU is also starting to get worried despite what it says.”

Mohammed Hassan Mohamud Photograph: WEF
You can read more details of Mohammed Hassan Mohamud’s remarkable journey from two decades in a refugee camp to Davos here.
Here’s a flavour:At 28, Mohammed is the youngest Zonal Chairman at Kakuma, which was established in 1992 after the arrival of the ‘Lost Boys of Sudan’. These were about 20,000 children, mostly boys, who were separated from their families during conflict, trekking enormous distances to find refuge.
Conditions in the camp, both mental and physical, are tough:We have adequate water. And obviously, it’s not enough, but it’s there. Like one tap. Our homes are made of iron sheets. We also have some services, access to medical facilities and the World Food Programme provides rations once a month.
“But what I deal with is mainly psychological. People go crazy sometimes. Often, when outside people meet refugees, they only look at the physical suffering and the physical need. ‘This person is injured, this person is hungry or homeless’, and that’s solved by donating food or giving shelter.
“But 5, 10, 15 years down the line, the needs change. It’s not about hunger now - it’s more than that. It’s about finding a home. It’s about identity. And that’s what causes problems. And that’s what I deal with myself also.

Philipp Hildebrand, vice chairman of BlackRock (the world’s largest fund manager) warns there could be a “violent” market reaction to a no-deal Brexit.
He told Bloomberg TV in Davos:If we’re realistic we have to say there is little chance of the deal going through in its current form.
So there is no Brexit on the one hand which could take various forms - the most modest one would be a delay initially - or a hard Brexit. A hard Brexit would be a dramatic event which I believe today is under-appreciated by the market.
When we look at this we have to say that it’s now either no Brexit or hard Brexit and that is something we should pay attention to because were that to happen, you can be sure that the market would react violently, perhaps at the last minute.
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Davos co-chair: Help refugees, don't be frightened

One of the co-chairs at this year’s Annual Meeting is being Mohammed Hassan Mohamud - a 28-year old refugee.
Mohammed has spent the last 20 years confined to Kenya’s Kakuma camp. He has no passport, no official date of birth and has never been anywhere outside the semi-arid climate of Sub-Saharan Africa - until this week, when WEF have brought him to Davos.
He’s a powerful speaker - telling delegates to drop their distrust of refugees and help.
Mohammed says:
I don’t know what you’re afraid of. Refugees are real people.
He explains that there are 185,000 refugees from 10 nationalities - he’s kept awake at night worrying if he, and his brothers and sisters, will ever get out of the camp.We are just like other people. We have aspirations, we have dreams and we have needs.
It surprises me that money and capital moves around the moves in seconds, but it takes a refugee decades - or in the case of my mother, she never got out. Waiting for 25 year for a change to call somewhere home.
Refugee camps are not ethical - putting people in faraway places and pretending they don’t exist is not ethical, nor sustainable, and not conducive for human growth.
Updated

1,500 private jets expected


A jet carrying participants to the World Economic Forum (WEF) in Davos taxis at the military airport in Duebendorf, Switzerland,.

A jet carrying participants to the World Economic Forum (WEF) in Davos taxis at the military airport in Duebendorf, Switzerland,. Photograph: Walter Bieri/EPA
Davos attendees may be worried about climate change, but many are still choosing to arrive by private jet.
Industry group Air Charter Service reckons there could be as many as 1,500 private jet flights over the week as delegates fly in for WEF.
Andy Christie, Private Jets Director at ACS, explains:Davos doesn’t have its own airfield and, whilst we have several clients who fly into the town by helicopter, the four main airfields that private jet users attending the forum use are Zürich, Dübendorf, St. Gallen-Altenrhein and St. Moritz.
“Working with WingX, we looked at private jet activity at those airports over the six days of each WEF week since 2013 – from one day before the event to one day after. Last year was the busiest year for private jets so far, showing an 11% increase on 2017, with more than 1,300 aircraft movements. If we see a similar increase this year, we could be looking at almost 1,500 aircraft movements over the six days.
Some delegates will then further undermine the fight against climate change by taking a private limo from the airport into Davos, shunning the option of a bus or train (which are impressively reliable).

Roland Rudd is in Davos and has been speaking about Brexit. The veteran PR man says the UK would “feel the pinch” very soon if the UK leaves the EU without a deal and that the rest of the world is “amazed we’re having this conversation”.

Bloomberg (@business)
CEOs are "genuinely flabbergasted" that a no-deal Brexit could be a possibility, PR veteran Roland Rudd says https://t.co/3rj7uHLbSq #wef19 pic.twitter.com/JtwsGkH7Mx
January 22, 2019
AM

An early Davos mystery.....

Kalyeena Makortoff (@kalyeena)
Swift changover of panel sessions in the Davos conference centre. Next panel briefly advertised Goldman boss David Solomon, but he's no longer listed. They even wheeled out a chair and name display for him but organisers have since whisked it away
January 22, 2019

Davos Man and Woman are discussing the impact of strategic changes on their businesses.
And after the raw greed and avarice that led to the financial crisis, it’s refreshing to hear a bank boss argue in favour of financial regulation:

Kalyeena Makortoff (@kalyeena)
Bank of America boss Brian Moynihan says a lack of banking regulation would inevitably lead to a loss of people's cash. "It's the same reason you have a speed limit on a highway" pic.twitter.com/4LRIZJWiJL
January 22, 2019
Google’s finance chief, Ruth Porat, is arguing that businesses need to win users’ trust - and you only do that by doing the right thing in the first place.

Kalyeena Makortoff (@kalyeena)
Google’s CFO Ruth Porat says the tech giant is supportive of data and tax rules like GDPR and the OECD’s broad tax initiative. She says Google wants users to “trust” that the firm is “doing what we should” #Davos
January 22, 2019

Union chief: We need wealth transfer, not warm words

Larry Elliott
We just caught up with Christy Hoffman, the general secretary of the UNI global union, which represents 20 million service sector workers - from cleaners to Hollywood film directors - in 150 countries.
She said her message to the executives gathered in Davos was the need for a new social contract to revive collective bargaining, manage the change brought about by new technology and spread the benefits of growth more widely.“Workers think globalisation for the elite, that Davos is for the elite. Where does that leave our global institutions and global trade. If we want a globalised economy it can’t just be for corporations.”
Hoffman said she was shocked by the Oxfam report showing 26 billionaires owned the same wealth as half the world’s population.
There was a lot of talk at Davos about the need to deal with growing inequality but not a lot of action.
Hoffman says:“There is no sense of sacrifice. There needs to be a transfer of wealth from one set of pockets to another.”
Updated

European markets fall in early trading

Global growth fears appear to be weighing on investor minds this morning, with European markets down in early trading following falls in Asia.
The International Monetary Fund cut global growth forecasts on Monday, warning that a sharper slowdown in China and a no-deal Brexit are the biggest risks in 2019.

Here are the scores so far across Europe:
  • FTSE 100: -0.2% at 6,959
  • Gemany’s DAX: -0.5% at 11,080
  • France’s CAC: -0.4% at 4,846
  • Italy’s FTSE MIB: -0.5% at 19,542
  • Spain’s IBEX: -0.5% at 9,011
  • Europe’s STOXX 600: -0.4% at 355
Adair Turner, chairman of the Institute for New Economic Thinking, has been speaking to Bloomberg in Davos about the impact of a China slowdown:

Bloomberg (@business)
China's "significant" slowdown is the biggest global business worry just now, according to Adair Turner of the Institute for New Economic Thinking https://t.co/3rj7uHLbSq #wef19 pic.twitter.com/FKyvv02xcV
January 22, 2019
AM

Disappointingly, this year’s Davos is missing several key world leaders.
Donald Trump pulled out earlier this month, to focus on the US government shutdown.
Ditto Theresa May, to focus on the Brexit talks.
Emmanuel Macron is also staying at home, to focus on the anger of the Yellow Vest protests.
And on Sunday, Zimbabwean President Emmerson Mnangagwa abandoned plans to pitch for more investment - as public unrest at home builds.
We’ll still get Bolsonaro, Japan’s Shinzo Abe, and Germany’s Angela Merkel.
But as one Davos insider put it, the world leaders facing the biggest crises are staying at home.

Introduction: Financial risks and climate change


‘Globalization 4.0: Shaping a Global Architecture in the Age of the Fourth Industrial Revolution’

Photograph: Anadolu Agency/Getty Images
Good morning from Davos, where the first day of the World Economic Forum’s annual meeting is underway.
It’s a balmy minus 14 degrees this morning as top politicians, business leaders, advisers, rising ‘young global leaders’ and campaigners begin this annual gathering of the so-called global elite.
Delegates should still have a stern warning from Sir David Attenborough ringing in their ears. Last night, the 92-year old broadcasting legend (the oldest, and perhaps most-loved attendee) declared that humans needed to urgently use their expert problem-solving skills to address the climate crisis, before catastrophe strikes.
This official title of this year’s event is ‘Globalization 4.0: Shaping a Global Architecture in the Age of the Fourth Industrial Revolution’.
WEF hopes to make progress in tackling inequality, helping the losers from the last few decades of globalisation (but how quaffing champagne at exclusive parties in a Swiss ski resort achieves this is still unclear).
After months of market turbulence, trade war tensions and signs that China is slowing down, the business chiefs who have made the trek to Davos this week are certainly nervous. Last night, PwC’s annual healthcheck showed a worrying rise in pessimism.
There’ll be a big focus on the global economy today, with sessions on financial risk - and a satellite appearance by US secretary of state Mike Pompeo.
Attenborough will also be appearing at a couple of sessions - one with Prince William, who will also be promoting mental health issues this week.
The big ticket event, though, could be a speech by Brazil’s new populist president Jair Bolsonaro. He’ll be pitching his right-wing, free market policies to the investors at Davos.

Here’s a flavour of what’s on the agenda:

  • 8.45am GMT/9.45am Davos time: Are we ready for the next financial shock? USB chairman Axel Weber, Fang Xinghai, Vice-Chairman, China Securities Regulatory Commission, Ray Dalio of Bridgewater and Jin Keyu of the London School of Economics will give their views on this vital topic
  • 9am GMT/10am Davos time: IMF chief economist Gita Gopinath and economist Adam Tooze will discuss how to rethink globalisation
  • 12.30pm GMT/ 1.30pm Davos: Press Conference: The Humanitarian Crises That Will Shape 2019
  • 1.15pm GMT / 2.15pm Davos: A Conversation with Sir David Attenborough and HRH The Duke of Cambridge
  • 2.30pm GMT/3.30pm Davos: Special Address by Jair Bolsonaro, President of Brazil
  • 3pm GMT/4pm Davos: Special Session with Michael Pompeo, Secretary of State of the United States
  • 4pm GMT/5pm Davos: Sir David Attenborough, former US vice-president Al Gore and New Zealand PM Jacinda Ardern will discuss how to save our planet (the title of Attenborough’s new Netflix series)

Updated

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