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Under The Radar – 21 January

This week, we discuss:

  1. A race to the bottom on the high street

  2. All hail the long weekend

  3. Macron strokes the Bear

A race to the bottom on the high street

What Happened? Associated British Foods (ABF), the owner of high street fashion chain Primark, is reportedly planning to cut 400 of its staff due to increases in the cost of energy, logistics and commodities. Primark does not have an online operation, which explains why its sales have plummeted during a two-year cycle of lockdowns and restrictions.

What does it mean?

There are two key takeaways from this. First, brick & mortar stores must at least partially digitalise to remain competitive. Second, the cost-of-living crisis hurts businesses as well as it does workers. The data also proves that the pandemic has prompted irrevocable change on consumer behaviour, with Primark’s like-for-like sales still 10 per cent lower in the sixteen weeks to January 8 compared to pre-pandemic levels. However, ABF’s finance chief has said that Primark will not increase its prices, despite rivals like M&S and Next already planning a hike of up to 6% by the end of this year. Primark clearly sees an opportunity to attract increasingly cash-strapped consumers by inflation proofing their already bargain priced clothes range. ABF also own grocery and agricultural businesses, which, according to analysts, have acted like a safety net of sorts for the company. With continuous supply chain disruptions, it has been difficult to predict which commodities will become more difficult to buy and sell, but a diverse portfolio has helped AB Foods weather the storm. This year, as the pandemic slows down and daily life hopefully normalises, retail is expected to make a comeback. However, it remains to be seen whether Primark’s strategy of cutting jobs and freezing prices will be enough to make its operations profitable in an increasingly digital marketplace.

All hail the long weekend

What happened? A six-month trial of a four-day working week has begun in the UK, which will see staff at 30 (lucky) firms work four-day weeks on the same salary. What does it mean?

Jeremy Corbyn eat your heart out. Oft-discussed but dismissed by most as nothing more than a pipe dream, the four-day working week has taken a step closer to reality with a new trial organised by the not-for-profit ‘4 Day Week Global’. Lockdowns and working from home orders have fuelled calls for a ‘four-dayer’, with employees increasingly valuing a better work-life balance and the chance to work flexible hours. Participating companies and organisations will trial the revamped working week with no loss in pay for employees based on the principle of the 100:80:100 model, where staff work at 100% productivity for 80% of the time, but still receiving 100% pay. Numerous studies have shown that moving to a four-day week actually boosts productivity and staff wellbeing. In 2019, Microsoft trialled a four-day week in their Japan offices with productivity levels shooting up by 40%. In the UK, camera company ‘Canon’ are probably the best-known firm to already have adopted some level of four-day working. During the trial, researchers will work with organisations to measure the impact on productivity, as well as the wellbeing of staff, and the impact on other factors such as gender equality. With women historically taking on the majority of the housework, flexible working has helped get more women into the workforce. According to data from the Resolution Foundation, female participation rates have increased by 0.4% since the pandemic hit. In an era of “new normals” could the four-day week be the next? Trafalgar’s ears are perked…

Macron strokes the Bear

What happened?

French President Emmanuel Macron has called for the EU to negotiate directly with Russia, subverting the US and NATO in the face of escalating tensions over Ukraine.

What does it mean? In news that will be ‘muzyka’ to Putin’s ears, a disconnect between Western leaders has emerged over the most effective way to deal with Russia’s increasing hostility with Ukraine. Macron has floated the idea of the EU forging a ‘security pact’ with the Eastern superpower but this will surely anger Biden & Co. who have been urging unity in the face of the Russian bear.

In a speech to the European Parliament, Macron called for the EU to “conduct their own dialogue” with Russia rather than back the diplomatic pursuits of the US and NATO. Macron’s attempts to muscle in are true to form as he continues to strengthen his grip on the unofficial position of Europe’s leader, recently vacated by Angela Merkel.

This division amongst the Western powers pre-empts US Secretary of State Antony Blinken’s planned meeting with his Russian opposite Sergei Lavrov in Geneva this Friday. Blinken had been calling for ‘unity’ amongst the West.

Despite Western fractures, it has been reported the Putin regime wants to deal with the US directly. Inwardly the EU has struggled to agree on the level of Russian aggression that should trigger EU sanctions. This should come as no surprise considering the varying degrees of Russia’s economic influence felt throughout the European community.

Putin has long seen NATO expansionism as a threat to Russia’s national security so should Ukraine’s bid to join the alliance be accepted, the Russian premier’s aggressive form of ‘self-defence’ will likely escalate.

This Week’s Must Reads

  1. “Why Boris Johnson’s No.10 is so dysfunctional” by Harry Lambert for The New Statesman

  2. “Business leaders have to play a better political role” by Martin Wolf for The Financial Times

  3. “After Biden’s first year, the US economy is surprisingly healthy. His prospects are not” by Adam Tooze for The Guardian

  4. “Newest intake of MPs are turning against Boris Johnson” by Mhari Aurora for The Times

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