The Daily Telegraph - 07.08.2019

The Daily Telegraph Wednesday 7 August 2019 ** 31

The dark horses in the race to replace Carney

T

he Bank of England needs
a governor to take over in
January when Mark
Carney departs.
Recruitment for his
successor began in April
but the Chancellor has changed since
then. As Carney’s appointment proved,
the Chancellor is key to the process. In
2012 the then-Bank of Canada governor
ruled himself out of the running.
Yet just three months later George
Osborne, chancellor at the time,
persuaded Carney to ditch Ottawa five
years into a seven-year term. The
change of government suggests the
race to succeed Carney is wide open.
Who are some of the dark horses that
could appear up the inside rail?

Boris’s ally

Governors are operationally
independent from politicians, and

there are fears that leaders are piling

pressure on central banks to support

their political goals. But that does not

mean the Chancellor or Prime

Minister could not pick an economist

who shares a similar world view.

This makes Gerard Lyons, a former

adviser to Boris Johnson from his time

as London mayor, a contender.

Once chief economist of Standard

Chartered, the UK-based bank focused

on emerging markets, he is an expert

on the global economy. That could be

helpful at a time of increasing

geopolitical tension and with the US-

China trade war hotting up. As a

Brexiteer, he would avoid some of the

criticism that has come Carney’s way

but would need to win over the mainly

Remain-supporting City.

“We should be positive about

Britain’s longer-term outlook, despite

present uncertainty,” he wrote in The

Sunday Telegraph. “For maximum

success after Brexit, it is not just our

affinity with the EU that is important

but both our domestic agenda and

how we position ourselves globally.”

This suggests Lyons realises Brexit

is not the only big shift taking place.

Technologies such as artificial

intelligence are reshaping industries.

Climate change demands major

investment programmes. Lyons wants

the UK to play a role in those trends.

The Atlanticist

Mark Carney was the first non-British

Governor of the Bank of England. As

the UK shifts its focus from the EU to

the wider world, that precedent may

be worth following.

Kevin Warsh certainly brings

international connections, and in

particular, strong links to the

American establishment.

A former governor of America’s

Federal Reserve (similar to being a

member of the Bank’s Monetary Policy

Committee), he also served as an

adviser to presidents George W Bush

and Donald Trump. Warsh helped

guide the US banking system through

the financial crisis, which is another

useful feather in his cap.

Sir Jon Cunliffe, the deputy

governor, has close

ties to Brussels,

meaning he and

Warsh could

be quite a

team on the global stage. Expect his

cause to be backed by internationalists

who want to UK to have the best

relations with its key trading partners.

Sceptics of quantitative easing and

its distributional effects will be

pleased to hear Warsh has been keen

to roll back money printing and raise

interest rates in periods of economic

stability and growth.

He also has a focus on the “real

economy” of households and

businesses rather than the financial

markets, as well as an interest in

setting policy from first principles,

including an awareness of the

limitations of policymakers’ ability.

For instance, he worries that official

data on prices are not always precise,

which means central banks should not

believe they can fine-tune economies

through minor tweaks to policies.

The big thinker

Andy Haldane, the Bank’s chief

economist, has made a name for

himself as a very big

thinker. His studies

range far beyond

interest rates, into

inequality, regional diversity,

technological change, the nature of

work and the structure of businesses.

If Johnson wants more ideas to

restructure parts of the economy,

boost productivity and supercharge

growth, Haldane might be the person

to opt for. Dominic Cummings, one of

Johnson’s key advisers, is thought to

be a fan of Haldane’s unconventional,

fearless and cerebral approach.

That also applies to scotching

Labour’s plans for the Bank of

England. The opposition party wants

officials to be responsible for boosting

productivity by 3pc per year. But

Haldane has shot down the idea.

Instead he sees the Bank’s job in this

case as identifying problems for the

economy, a role in which he has

backed the Government’s initiatives.

He will not be a pushover, though.

Just last month he told the

Government that the Bank of England

could not always ride to the

rescue with rate cuts every time the

economy gets into trouble. “A decade

ago, central banks were the only game

in town and monetary medicine was

the right prescription,” he said.

“The game has changed and so too

might the policy prescription needed

in dealing with any downturn.”

The Whitehall insider

The Treasury is not averse to

appointing its own. Deputy governors

Ben Broadbent, Sir Dave Ramsden and

Sir Jon Cunliffe all formerly worked in

Whitehall. They could be joined by Sir

John Kingman, a Treasury mandarin

until 2016 and now the chairman of

Legal and General.

Given the Bank’s widening remit

and increasing focus on asset

management, plus longer-term

concerns including the savings crisis

and the ageing population, Sir John

has useful private sector experience.

Last year he reviewed the regulation

of audit, recommending the Financial

Reporting Council be replaced with a

new body – the Audit, Reporting and

Governance Authority – with a new

mandate, indicating he is not afraid to

shake things up when he detects weak

oversight and regulation.

He is plugged into the cutting edge

of science and technology, and has had

responsibilities for areas of Brexit

planning – a crucial area for the Bank.

Domino’s Pizza chief quits amid

quarrel with angry franchisees

By Oliver Gill and Michael O’Dwyer

THE boss of Domino’s Pizza defiantly
stuck to lofty growth ambitions despite
announcing he will leave the company
amid continued poor relations with
franchisees.
David Wild, who has led the business
since 2014, told the board he plans to
retire from his role. His exit comes as
chairman Stephen Hemsley also pre-
pares to step down. Mr Wild said it was
“not beyond the bounds of possibility”
that a new chief executive and chair-
man could end up starting at the same
time.
The main way that the FTSE 250
company expands is by opening new
outlets. But such growth is dependent
upon relations with franchisees who
will be responsible for day-to-day store
operations.
Mr Wild has previously targeted
1,600 outlets in the UK and currently
has about 1,100. While Domino’s has
opened scores of stores in the past,
growth has flattened as  relations

with  franchisees have soured over the

past year. Nevertheless, the 62-year-

old said he was “very confident” such a

target could be achieved.

“We are actively involved in detailed

discussions and are giving these con-

siderable focus and attention,” he said

in a statement.

At the heart of Domino’s problems is

a desire by its franchisees to receive a

bigger and more consistent share of the

firm’s profits.

Mr Wild said: “Whilst dialogue is

continuing, new store openings are be-

ing delayed and some of our working

practices are being impacted. The situ-

ation is complex, and we expect resolu-

tion will take some time, likely into

2020. We are committed to working
      with our franchisees to agree sustaina-
      ble win-win solutions.”
      Domino’s said sales in the UK and
      Ireland rose 5.5pc to £596m in the first
      half of the year, but pre-tax profit tum-
      bled 26.9pc to £30.5m.
      The pizza company said that its in-
      ternational business remained “very
      challenging”, with sales down 3.4pc.
      “Trading visibility remains limited,”
      Mr Wild said.
      The Norwegian business was the
      worst performer, while losses widened
      in Sweden and Switzerland. The com-
      pany said the “weak macro-economic
      backdrop” hit profits in Iceland.
      Analysts at Peel Hunt said: “Slower
      expansion in the UK was well-flagged.
      However, the shortfall and uncertainty
      in International is new and we have re-
      duced our full-year group forecasts to
      reflect this. The shares are inexpensive
      in our view, but innovations are needed
      to rebuild like-for-like sales and fran-
      chisee profitability.”

1,600

The number of outlets David Wild believes

Domino’s can achieve in the UK. The

current total is about 500 short of that.

Tencent sounds out

buying 10pc of

Universal Music

Disney’s revenues hit by Fox

failings and streaming costs

By Olivia Rudgard in San Francisco

DISNEY fell short of expectations in its
latest financial results despite record-
breaking box office success.
The company is pouring money into
its new streaming service Disney+, set
to launch later this year, as it prepares
to challenge Netflix for a share of the
video on-demand market. Blockbuster

films including Avengers: Endgame,
Aladdin and Captain Marvel helped the
California-based entertainment giant
make a record $8bn (£6.58bn) at the
global box office so far this year, beat-
ing its own record of $7.61bn from 2016.
However, its third quarter revenue
of $20.25 billion was below analysts’
expectations of $21.47 billion, and earn-
ings per share were $1.35, compared to

the $1.75 that had been expected.

Shares fell 5pc in after-hours trading.

The missed targets are down to its

acquisition in March of 21st Century

Fox for $71bn, as well as assuming con-

trol of its streaming service Hulu.

The company also blamed the cost of

setting up its new streaming service,

due to launch in November, for a rise in

operating losses from $168m to $553m

in its direct-to-consumer and interna-

tional business.

Speaking to investors, chief execu-

tive Robert Iger said the Fox deal was a

“very difficult transition” and that it

would take up to two years before the

company would be able to have a posi-

tive impact on the studio’s output.

“One of the biggest issues that we

faced in this quarter in terms of earn-

ings was the Fox studio performance,

which was well below where it had

been, and well below where we

thought it would be when we made the

acquisition,” he said.

In particular, Fox’s latest X-Men of-

fering Dark Phoenix underperformed,

dampening the overall success of Dis-

ney films, even though Avengers: End-

game made almost $2.8bn.

By Chris Johnston

UNIVERSAL MUSIC has been valued at

about €30bn (£27.6bn) after a Chinese

tech giant revealed plans to buy a stake.

Vivendi, Vincent Bollore’s French

media conglomerate that owns the

world’s biggest recorded music com-

pany, said yesterday talks about selling

10pc to Tencent were at an early stage.

Tencent, the biggest global gaming

company and owner of Chinese mes-

saging and web portals,  will have the

option of buying another 10pc.

Universal’s roster includes Taylor

Swift, Elton John, Lady Gaga and the

Rolling Stones. It struck a deal with

Tencent for distribution and marketing

in China two years ago.

Vivendi said it and Tencent were

considering “areas of strategic com-

mercial co-operation”, which raised

questions among some analysts about

the scope of the talks.

Vivendi shares jumped as much as

9pc in Paris, while Tencent, which de-

clined to comment, slipped 1pc in Hong

Kong. Tencent Music Entertainment is

worth almost $23bn. Universal ac-

counts for 44pc of Vivendi revenue.

Robert Iger, the chief

executive of Disney,

said new acquisition

21st Century Fox

‘underperformed’,

affecting revenue

Business

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