The first thing to look for this week will be the reaction to the story of working conditions in the Amazon warehouse in Dunfermline – of people sleeping in tents by the side of the road so they can get to work on time. People will have their own views about this, and the revelations are troubling. But if you step back from the facts of the story itself, there is something to watch for. It will be whether there is any damage to Amazon’s business.
No-one needs to buy from Amazon. The experience of other US giant corporations in the UK that find themselves facing adverse publicity – for example, over tax – is to meet the challenge at least half way. There have been earlier stories about working practices in the company, but these seem to have had little or no impact on the business.
What will Amazon do? If there is damage, expect change. And if not … well, its policies will have been tacitly accepted by its customers.
This is part of a wider concern. The Labour MP, Frank Field, has just published a report on the conditions of Uber drivers, having interviewed 83 of them. The report, co-authored with his researcher Andrew Forsey, cites four aspects of working with Uber which it says “bear a close resemblance with what the Victorians would have called sweated labour”. These are the low pay, difficulty in finding enough work, lack of emergency support, and lack of freedom of when to work. Again, these criticisms are not new, and regulation will eventually catch up – as it did when the mini-cab industry grew up alongside the regulated taxi one. Meanwhile customers can take direct action by not using the service.
Secondly, there will be a huge story about the rise in US interest rates. The Federal Reserve will announce an increase of 0.25 per cent on Thursday. If it does not there will be an even bigger story, for the rise is completely expected by the markets. As always, though, the reaction will be as important as the actuality, in particular what happens to longer-term rates. If these rise sharply, this will feed through into other markets, including our own. Already some of the very cheap mortgage deals in the UK are being withdrawn. Whatever the Bank of England does, expect more expensive home loans.
There will also be a clutch of UK economic data this week that will help us see the impact, or not, of Brexit. Among these, there will be consumer price indices on Tuesday, labour market figures on Wednesday, and retail sales on Thursday. I expect there will be very little showing through yet from the Brexit vote, and that prices will remain contained, unemployment still falling and retail sales strong. But – a big but – if weakness is evident, that will be seen as a negative signal for the economy next year.
Fourth, there is the Italian banking system. There is an immediate issue as to how Monte dei Paschi di Siena will be propped up, for the European Central Bank last week refused to give more time for a rescue. So something has to be done this week. But behind this is the wider weakness of the whole banking system. The danger is that there will be some sort of systemic collapse akin to that of 2008.
Finally, I’m interested in a court case. No, not one to so with Brexit, but rather to do with Christine Lagarde, managing director of the IMF. She is on trial in France this week on charges of negligence, accused of failing to prevent a government payout to the businessman Bernard Tapie eight years ago. She was France’s Finance Minister at the time. She denies the charges, and some see them as political in nature. The verdict could come this week. If it goes against her that would be a blow to the IMF, for though it has nothing to do with her present job, the penalties could include a jail sentence, which would prevent her continuing there.
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