What does HSBC think today about the new security law in Hong Kong, the one it publicly backed last month without seeing the wording and that is now described by the UK prime minister as “a clear and serious breach” of China’s treaty obligations?
And how does the bank feel about the implementation of the powers on the first day – more than 370 arrests? Does the board still think Beijing is committed to the principle of “one country, two systems”? That was the basis on which it offered support.
HSBC’s response on Wednesday was a deafening “no comment”, a position that looks impossible to maintain for long. David Cumming of Aviva Investors was right last month when said that “if companies make political statements, they must accept the corporate responsibilities that follow”.
Specifically, he told HSBC and Standard Chartered, which also did as Beijing clearly instructed, that they would be expected “to confirm that they will also speak out publicly if there are any future abuses of democratic freedoms connected to this law”.
Apologists for HSBC’s craven stance argued the bank had little real choice. It makes most of its profits from Hong Kong and, if Beijing wants “a show of fealty”, as US secretary of state Mike Pompeo put it mockingly, it can’t refuse without commercial consequences. In any case, sermons from Washington sound hypocritical if the former US national security adviser John Bolton’s account of President Trump fawning over Xi Jinping is correct.
That’s all true, of course, but the implementation of the new security law, in a more draconian form than feared, raises the stakes. HSBC chose to speak out in support of Beijing last month, and cannot now expect to return to its old habit of apolitical silence. Rival bankers whisper that they’ll be amazed if HSBC is still listed and regulated in London five years from now. If that analysis is wrong, HSBC’s chairman, Mark Tucker, is free to say why.
Sales boom for Sainsbury’s is promising, if not profitable
The most hackneyed phrase in retailing is “sales are vanity, profits are sanity”. Sainsbury’s illustrates the point: the pandemic has delivered the biggest boom in sales in decades, yet the whirl of activity is expected to deliver no extra profit this year.
Indeed, Sainsbury’s can only say that full-year underlying pre-tax profits are likely to be unchanged from last year’s £586m because the business rates freebie from government will cover most of the additional Covid-19 operating costs of £500m-ish.
A temporary sales lift, though, still offers glimpses of long-term opportunities. The rise of online grocery shopping – 17% of sales versus 7% a year ago at Sainsbury’s – is the surest way for the old brigade to halt the leakage of custom to store-only discounters Aldi and Lidl. Online sales aren’t as profitable as getting the customers to pick the goods themselves; on the other hand, bigger volumes ought to yield a few efficiencies in the delivery network.
Then there’s Argos, where the integration of so many stores into the Sainsbury’s estate now looks strategically brilliant. If Argos can increase sales by 10% while 573 standalone stores were shut, why not fold even more of the operation into the supermarkets and save a few quid on rent?
That all lies ahead for the new chief executive, Simon Roberts, who was in non-committal mode on his first outing. But possibilities are opening up.
Plans to limit Facebook and Google duopoly are long overdue
A “Digital Markets Unit” – the Competition and Markets Authority’s big idea for how to police the territory of Google and Facebook – sounds an excellent proposal. It is perfectly obvious that a virtual duopoly exists in the digital advertising market. And it’s equally clear that the scope for competition is limited by business models that lock out rivals.
Some of the CMA’s suggested remedies would bring howls of outrage from the digital duo if they ever got close to being enacted. Giving Facebook users the right to opt out of personalised advertising would be a game-changer. So believe it when you see it.
For now, though, the government is merely being asked to approve a regulatory regime capable of pursuing such issues. That part should be easy. Two enormous companies control 80% of a digital advertising market worth £14bn in the UK. In any other industry, a competition inquiry would have happened years ago.