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The prospect of Jonathan Reynolds extracting a big deal for Britain from the White House fills one with sadness.
The only decisive words to come from the underwhelming business secretary so far are to suggest that Czech sphinx Daniel Kretinsky, whose wealth derives largely from a gas pipeline with the Kremlin, is a “legitimate business” person.
Reynolds went on to cheerfully declare that the £3.6bn bid for the Royal Mail owner could go ahead because he had “received legally binding commitments” from Kretinsky to secure the long-term future. Promises made in the heat of acquisitions are easily undone by changing economic conditions.
Kretinsky’s debt-fuelled bid for Royal Mail, largely financed by foreign banks, will leave the postal service with £5bn of high-interest rate loans on its books. The deal will leave the National Postal Service fully exposed to market conditions at a time when bond yields around the world are elevated. That will make a mockery of promises to invest and keep the workforce intact.
The debt-fueled disaster at ASDA and the ongoing crisis at Thames Water provide ample evidence of how quickly highly leveraged deals implode.
Reynolds is making a colossal mistake by ignoring the financing of the deal.
Political Apparatchik: Despite maintaining the grandiose title of Secretary of State for Business and Trade, there is nothing on Reynolds’ CV to suggest serious business experience
Despite having the grandiose title of Secretary of State for Business and Trade, there is nothing on the Reynolds’ CV to suggest serious business experience. He is a political aparchik who should not be around complex work so critical to the job’s growth mission.
In a BBC interview in Davos, Reynolds confidently claimed that Britain should be spared President Trump’s tariff assault because the country does not have a deficit in its goods trade with the United States.
“I think we have an argument to commit to,” Reynolds says. He is strictly correct. In the four quarters to the end of June 2024, according to data from its own department, the UK sold £60.4 billion of goods to the United States and imported £57.9 billion. That could be considered a rounding error compared to the huge deficits the United States runs with China, Japan and Germany.
What the UK has, which could catch the attention of the Trump team, is a large surplus in professional and financial services. These fall outside traditional merchandise trade agreements. But to think that these invisible surpluses could be ignored, in any attempt by the UK to wean itself off physical fares, is the crack.
Reynolds should consider who he will face in Washington. US Treasury Secretary Scott Bessent, who supports tariffs, is a financial colossus. He already has one incident of Britain’s economic vulnerability as a notch under his belt. Bessent acted for his then boss George Soros in the speculation against Sterling in 1992. The United Kingdom was expelled from the exchange rate mechanism (precursor to the eurozone) and the Bank of England’s foreign exchange reserves were depleted.
Jamieson Greer, who is in line to be the US trade representative and the point of contention, was the architect of the tariffs last time. Switches, like those favored by Trump, would trample Reynolds underfoot. Britain’s last best hope, when it comes to tariffs, is Trump himself. His Scottish heritage, through his mother and love of golf, means Scotland has a place in his heart. Trump places great value on personal relationships. Unfortunately, there is no one in the cabinet, or in the case of the Scottish government, who could be seen as a suitable disruption.
In the past, Trump has not done Edinburgh Favors. He took a stand against Scotch whiskey in his first White House term when a 25 percent barrier was erected.
Reynolds will need more political skills and financial acumen than seen so far if he is to thwart the roadblocks.
Registering
Among the British companies that could be affected by the tariffs is UK luxury fashion group Burberry.
Under the leadership of Chief Executive Joshua Schulman, who has refocused on classic trench coats, scarves and cashmere, there were green shoots of recovery in the third quarter with the US particularly strong during the holiday season. Enough progress, one hopes, to spit out last year’s threat of a low-hanging fruit overseas takeover.
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