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20 Oct 22. UK: Resignation Of Prime Minister.
EVENT
Prime Minister Liz Truss announced her resignation earlier on 20 October, less than two months after she was appointed to the role. Her resignation comes amid significant turmoil within the Conservative Party. On 19 October, Truss threatened disciplinary measures against Conservative MPs who did not support her plan to greenlight shale gas fracking.
SIGNIFICANCE
- In September, Kwasi Kwarteng, the former Chancellor of the Exchequer, unveiled a ‘mini-budget’ which involved the biggest tax cuts for nearly 50 years. However, financial markets reacted negatively to the unfunded mini-budget, and the British pound fell to a 37-year low against the US dollar. This prompted the Bank of England (BoE) to launch emergency measures to prevent the economy from slipping even further; Truss’ government then made a U-turn on the mini-budget. Nevertheless, continued political disputes within the Conservative Party culminated in the fracking dispute on 19 October, after which Chief Whip Wendy Morton and her deputy tended their resignations.
- Truss will remain in her position until a new prime minister is elected. Opposition leader Sir Keir Starmer reaffirmed calls for an early general election, arguing that the Conservative Party no longer has a mandate to govern.
- Divisions within the Conservative Party will continue to drive government stability risks, with Truss’ premiership deepening many internal divides. Indeed, the incoming prime minister will face significant challenges in terms of uniting the Conservative Party, whose members are nonetheless likely to do everything in their power to avoid a general election which they may lose.
- Markets have reacted positively to Truss’ resignation, causing the pound to rise against the dollar. Furthermore, the FTSE 100 index rose as government borrowing rates decreased, with the 30-year gilt yield falling to 3.8 percent, extending its recovery from post-mini-budget highs of nearly 5 percent. However, policy risks will remain elevated for businesses in the UK given the level of uncertainty surrounding the formation of the new government. Chancellor of the Exchequer Jeremy Hunt’s economic U-turns are likely to continue in a bid to avoid further market volatility and instability.
FORECAST
The Conservative Party will seek to replace Truss quickly in a bid to restore stability. In her resignation speech, Truss stated that her successor would be elected in a new leadership contest. Sir Graham Brady of the 1922 Committee confirmed that the party aims to elect a new leader by 28 October. It remains unclear how the party plans to proceed with the contest, though the main contenders are likely to be Penny Mordaunt and Rishi Sunak. It is widely anticipated that MPs will vote for a centrist candidate advocating fiscal discipline in order to restore the party’s economic credibility. Amid considerable policy and regulatory uncertainty over the past month, the next leader will almost certainly look to bring forward a mini-budget to establish clear and predictable policy for businesses and voters alike.
Irrespective of the outcome of the election, the Conservative Party is deeply divided and the next leader will likely struggle to maintain party unity. There are also growing concerns surrounding the electoral mandate, with many of the policies pledged by the former government under Boris Johnson now dashed. Labour MPs are already calling for a snap general election; such calls are highly likely to continue in the coming weeks and throughout the leadership contest. A positive market reaction to the next leader and their cabinet would help dampen this pressure. Nevertheless, if the new leader fails to calm the markets and turmoil continues within the Conservative Party, it is possible that a snap general election will be called. The party will try hard to avoid this scenario, especially as the Labour Party enjoys a significant lead in the polls.
In the short term, there is an elevated risk of demonstrations. Influential Labour Party members have called for protests unless the Conservatives call a snap general election. Likely locations of potential protests in the coming days include Trafalgar Square and outside Westminster in the capital London, as well as highly frequented public areas in other key urban centres. (Source: Sibylline)
20 Oct 22. HMS Enterprise boldly goes into Arctic on scientific mission. Survey ship HMS Enterprise ventured closer to the North Pole than any other Royal Navy vessel in 2022, sailing within 1,000 miles of the top of the world.
The Devonport-based ship headed into the Arctic to update charts and scientific understanding of waters increasingly patrolled by Royal Navy warships to maintain freedom of navigation of the High North.
After receiving specific training for the mission – which saw crew facing water and air temperatures just above freezing, even at the beginning of autumn – Enterprise made for the Barents Sea off the northern coast of Norway.
Passing 66.56 degrees North crew painted the bull ring on the bow – known as a ‘blue nose’ – a traditional seafaring ceremony to designate a ship has sailed inside the Arctic
Using an array of equipment including single and multi-beam echo sounders, towed sensors and remotely operated bodies to gather hydrographic and oceanographic data, which will benefit scientists, fellow seafarers and Royal Navy operations.
The ship spent two months collecting information, pausing to cast a wreath into Arctic waters in tribute to all those sailors who ran the Nazi gauntlet and braved horrendous conditions to deliver supplies to the Soviet Union on convoy runs between 1941 and 1945.
Following a short stop in the Norwegian city of Tromsø to change crew and take on supplies, sailors tackled various adventurous activities: mountain climbing, running all 15 miles around the island on which the port sits, and even braving taking a dip in the Arctic waters.
Enterprise resumed her data-gathering operation first in the Norwegian Sea, then in the Denmark Strait (between Greenland and Iceland).
“Although these waters are challenging due to the environment, they are a haven for marine life, including orcas, sperm whales and puffins,” said Sub Lieutenant Sophie Savage.
“After spending so much time in near constant daylight, the Northern Lights scattered across the sky were a welcome treat for the watch keepers.”
The last act in the Denmark Strait was to hold a service of remembrance over the wreck of the battle-cruiser HMS Hood. Her loss in May 1941 at the hands of Hitler’s flagship Bismarck cost more than 1,400 lives and sent shockwaves through the contemporary Royal Navy.
Enterprise conducted another crew change in Reykjavik which allowed those remaining with the ship to explore Iceland’s unique natural sights which no-one will quickly forget, then headed for Aberdeen where she hosted a number of visitors and VIPs from the maritime world/North Sea industries.
Commander Malcolm McCallum, the survey ship’s Commanding Officer, said of Enterprise’s Arctic mission: “The whole operation has demonstrated that the Royal Navy retains the ability to sustain operations in the strategically important region of the High North.” (Source: https://www.gov.uk/)
20 Oct 22. Conservative Party – Busy Writing Its Own Obituary? What follows is probably the shortest ‘Commentary’ in the twenty-nine years that I have so far been writing them. The title is chosen with caution – my choice being limited to the above or using the words ‘In Memorium’. One can only reassert authority if you have been given authority in the first place and have authority to reassert. Unelected by the people as she is, Conservative Party MP’s have probably already decided that Liz Truss has no authority to reassert. That many lack the honesty and decency of publicly saying exactly that will inevitably come back to haunt them when the next General Election occurs and that day cannot come a moment too soon. In the meantime, whether by calling a General Election or simply doing the decent thing and resigning, I have little choice now but to say that the sooner she is gone the better. Events in the House of Commons last evening in respect of the ‘Fracking vote were an absolute disgrace. Limb by limb, the Conservative Party is not only tearing the government apart but appears hell bent on destroying itself. I get that many would prefer the next move to be a General Election but even the most die-hard Tories recognise that Turkeys don’t vote for Christmas. But I also fear that such is the bitterness that has emerged within the Party and that even if by going down the alternative route – that of maybe bringing in Rishi Sunak as leader in an attempt to buy time and heal some of the wounds – would not in my view be sufficient to dampen down flames now so apparent within either the party or electorate. The words from backbench Tory MP of 17 years, Charles Walker said it all. Calling it a pitiful reflection of the Tory Party – a shambles, a disgrace and utterly appalling, Walker spoke words of truth that I believe even the most hardened Tory would find it hard to disagree. Saying ‘I have had enough of talentless people putting a tick in the right box not because it is in the national interest but because it is in their own personal interest to achieve ministerial position’ may well turn out to be the most telling words that not only lead to the fall of the current government but of the Tory Party as we have known it. I had this morning intended writing on the speech delivered by Chief of the Defence Staff, Admiral Sir Tony Radakin – the ‘Lord Mayor of London Defence and Security Lecture’ but such is the anger I personally feel in regard of the talentless people running government in the UK and I dare say, that are not that dissimilar to those in the Labour Party that we now see pluming their feathers as the now natural government in waiting, that I have decided to delay venting my feelings on some aspects of what Admiral Radakin said in his lecture yesterday until tomorrow or Monday. (Source: Howard Wheeldon, FRAeS, Wheeldon Strategic Advisory Ltd.)
20 Oct 22. Norway cracks down on drone flights after arrest of seven Russians. Prime minister warns foreign intelligence agencies not to fly devices over critical infrastructure Bergen airport was shut down on Wednesday following reports of drones in the area. Norway’s prime minister has warned his country will take action against foreign intelligence agencies that fly drones over its critical infrastructure, including oil rigs and airports, after the arrest of seven Russians in possession of the aerial vehicles. Oslo and other western capitals are on high alert after the sabotage of the Nord Stream gas pipelines between Denmark and Sweden last month and numerous sightings of drones near oil and gas facilities, power plants and other critical infrastructure. Norway’s intelligence service said on Wednesday that it would take over the investigation of the increasing number of recent incidents involving drones. The announcement came on the same day the airport in Bergen, the country’s second-largest city, was shut down following reports of drones in the area. It was also disclosed that Norwegian police on Monday arrested a 47-year-old dual Russian-British citizen, Andrei Yakunin, in the city of Hammerfest accused of flying a drone over the Arctic archipelago of Svalbard. The arrest came only days after six Russians were taken into custody in three separate incidents in Norway involving drones and unauthorised photographs of sensitive locations. “It is not acceptable for foreign intelligence to fly drones over Norwegian airports. Russians are not allowed to fly drones in Norway,” prime minister Jonas Gahr Støre said on Wednesday. Norway has replaced Russia as the biggest gas supplier to Europe after Moscow’s full-scale invasion of Ukraine in February altered the continent’s geopolitics and energy supplies. Several Norwegian experts have warned that the wealthy Nordic country has been naive about the threat to critical infrastructure, such as gas pipelines, after a number of recent incidents, including the cutting of an internet cable to Svalbard, located more than 500km north of the mainland. The warnings have been heightened since explosions last month beneath the Baltic Sea off Denmark damaged the Nord Stream 1 and 2 pipelines meant to carry gas between Russia and Germany. (Source: FT.com)
19 Oct 22. Austria plans to invest in GBAD, personal equipment, and mobility. Austrian Ministry of Defence planners are seeking parliamentary approval of a 10-year state defence financing act to give more predictability in planning and avoid future governments from cancelling projects, Janes learnt during a briefing at the ministry on 13 October. This will increase defence spending to EUR5.25bn (USD5.16bn) by 2027 for a total of EUR16 bn over the four years until then, as announced by the ministry on 6 October. In addition, the planners are seeking a political commitment to increase funding of the Bundesheer’s budget by another EUR16.6bn until 2032. The latter would be spent only on materiel and arms procurement and would not be part of the running annual budget. The planners envisage three areas for this increased investment: EUR6bn in mobility (light vehicles, engineers, special forces, and air mobility); EUR7bn for ‘protection and effect’ (various weapon systems, including ground-based air defence (GBAD) and unmanned aerial vehicles), and EUR3bn for ‘self-sufficiency and sustainability’ (including command, control, communications, and computers; electronic warfare (EW); and cyber). (Source: Janes)
19 Oct 22. Unions Back Increased Defence Spending. GMB motion on defence investment and new nuclear submarine programme carried by the TUC. Unions have backed increased defence spending in a ‘victory for common sense’, says GMB. A motion proposed by GMB Union, which included a commitment to a new Trident nuclear sub programme, was passed by TUC Congress today [Wednesday]. Defence manufacturing directly employs more the 90,000 people in the UK, Congress heard, while 2 m manufacturing jobs have been lost in the past thirty years. Nigel Warn, former Davenport dockyard worker told TUC Congress that ‘murderous dictators are on the march and full-scale industrial war is being fought in Europe again’. Gary Smith, GMB General Secretary, said: “It’s time for politicians to get serious about defence manufacturing and our national security. Defence jobs and skills are at vital for communities like Barrow-in- Furness, Plymouth, Fife, Glasgow and Derby. The UK is now too dependent on US for our defence needs. With the strength of the dollar, it means in real terms defence budgets are being are eroded. We need clear long-term commitments to spending on defence manufacturing in the UK, supporting jobs, apprenticeships and local economies We are pleased that TUC has backed common sense today – the decision to carry GMB’s motion sends a clear message that the labour movement is on defence workers’ side.”
19 Oct 22. Dutch government to spend billions on military procurement. The Dutch government will invest up to 3.5bn euros ($3.44bn) in military procurement, the defence ministry said, in a policy turnaround in the wake of Russia’s invasion of Ukraine. After years of declining spending, the Dutch military will purchase between 2023 and 2026 a rocket artillery system and 10 howitzer cannons for up to 1 bn euros. The Netherlands will also purchase a mobile air defence system for up to 2.5bn euros, Junior Defence Minister Christophe van der Maat wrote in a letter to parliament.
“The war on the European continent underlines the need to be able to act in all parts of the spectrum of violence,” he said.
The Netherlands has not had rocket artillery since 2004, when cuts in the defence budget led to the sale of the system to Finland.
The new mobile air defence system is intended to improve defence against threats from enemy helicopters, aircraft, drones and cruise missiles, Van der Maat said.
The Feb. 24 invasion, which Russia calls a “special military operation”, has raised security fears among other NATO countries. Poland is set to buy rocket artillery systems from South Korea.
The Dutch government said in June it would invest more in the military so that its defence budget would reach the NATO target of a minimum of 2% of GDP. In fulfillment of that, Dutch spending will be 2.03% in 2024 and 2.01% in 2025. (Source: glstrade.com/Reuters)
18 Oct 22. Germany: Chancellor Scholz extends operation of nuclear power plants till mid-April 2023, increasing energy security, policy certainty. On 17 October, Chancellor Olaf Scholz decreed that all three of the country’s nuclear power plants Isar 2, Neckarwestheim 2 and Emsland will continue to operate until 15 April 2023. The move imposes a compromise on Scholz’s Green and Free Democrat (FDP) coalition partners who are divided on extending operations at the plants, which were originally scheduled to close on 31 December. While the Greens had reluctantly accepted that two plants would have to operate in Q1 2023, the FDP wanted all three plants to stay online until 2024. Scholz’s decision has so far been broadly accepted by both parties. The measure will also help to bolster energy security as more electricity will be available in the winter without drawing on domestic gas storage. It also sends a positive sign to markets after months of uncertainty over the future of the plants. (Source: Sibylline)
18 Oct 22. UK seeks to block Chinese recruitment of British military pilots. The Ministry of Defence said on Tuesday it was taking steps to stop China trying to recruit serving and former British military pilots to train Chinese armed forces. The BBC reported on Tuesday that up to 30 former military pilots had gone to train members of China’s People’s Liberation Army.
“We are taking decisive steps to stop Chinese recruitment schemes attempting to headhunt serving and former UK Armed Forces pilots to train People’s Liberation Army personnel in the People’s Republic of China,” a Ministry of Defence spokesperson said in a statement.
The department said it was “reviewing the use of confidentiality contracts and non-disclosure agreements”, highlighted that all British military personnel were subject to secrecy laws, and said already-announced new legislation would also help address the situation. (Source: Reuters)
14 Oct 22. 15 European nations sign LoI to strengthen air and missile defence. The European Sky Shield Initiative will enable nations to jointly procure air defence equipment and missiles. Defence Ministers representing 14 Nato member states and Finland have signed a Letter of Intent (LoI) in Belgium to develop the European Sky Shield Initiative.
The multi-national initiative, led by Germany, is intended to strengthen Nato’s Integrated Air and Missile Defence.
Nato deputy secretary general Mircea Geoană said: “This commitment is even more crucial today, as we witness the ruthless and indiscriminate missile attacks by Russia in Ukraine, killing civilians and destroying critical infrastructure.
Given that the steel industry is responsible for about 8% of the world’s carbon dioxide (CO2) emissions, lowering the volumes of these emissions from manufacturing facilities is crucial for steelmakers as the global decarbonisation agenda continues to expand.
Companies acting now to enhance sustainability will benefit from environmental, social, and governance (ESG) indicators to gain a competitive edge and stay ahead of changing carbon legislation.
For decades, advances in technology and a move away from traditional blast furnaces (BFs) toward electric arc furnaces (EAFs) have greatly reduced energy use in steel…
“In this context, I strongly welcome Germany’s leadership in launching the European Sky Shield Initiative.
“The new assets, fully interoperable and seamlessly integrated within the Nato air and missile defence, would significantly enhance our ability to defend the alliance from all air and missile threats.”
Under the programme, the European nations will jointly procure air defence equipment and missiles to form a common air and missile defence system.
The countries will focus on procuring air defence systems providing very short, short, medium, and long range defence, as well as missile and anti-drone defence systems for immediate and medium term.
Signatories including the UK, Belgium, Bulgaria, Estonia, Hungary, Latvia, and the Netherlands will use interoperable off-the-shelf solutions to develop the defence system.
According to Nato, the multifaceted approach ‘offers a flexible and scalable way for nations to strengthen their deterrence and defence in an efficient and cost-effective way’.
Welcoming the initiative, Lithuanian National Defence Minister Arvydas Anušauskas said: “Becoming a part of the initiative allows the Lithuanian Armed Forces to plan joint procurements with the Armed Forces of Germany.
“Out of the available air defence systems package, the very short range/anti-drone defence systems is the most relevant component to the Lithuanian Armed Forces.” (Source: army-technology.com)
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