Why an absence of A-listers at Davos is not just deep trouble for the World Economic Forum, but for globalisation too

Published

2 years ago

January 16, 2023

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Davos, the World Economic Forum (WEF) and its founder, Klaus Schwab, have become more famous than ever before in the past couple of years – albeit not for the reasons they might have wanted.

As COVID-19 spread and the world battled the pandemic, Mr Schwab and the WEF, not to mention regular delegates such as Bill Gates, became the subject of a suite of outlandish conspiracy tales, most of which came back to the premise that they were hell-bent on world domination.

Leaving aside the lurid detail of these stories, they seem to have missed the most important point of all, far from becoming more powerful than ever before, Davos is failing.

Before we go any further it’s worth pointing out that pinning down what Davos “is” is surprisingly tricky.

At its core, it is a four-day-long meeting of businesspeople, politicians, academics, campaigners and, yes, celebrities, up the mountain in a Swiss ski resort.

There are speeches from world leaders, forums where people talk about the big issues of the day, from poverty to climate change to inequality and countless meetings and parties outside the official World Economic Forum cordons.

Bankers come here to meet potential clients and do deals in hotel suites, politicians have quiet bilateral meetings with their peers and with businesspeople.

But there are two overarching reasons why Davos matters. The first is: convening power.

It stands and falls on whether it can persuade enough influential people to come here, so that the other influential people can rub shoulders with them.

The second is something deeper: most of the delegates here benefit from a world where capital and trade move freely from one part of the world to another. This place is not the explanation for the globalisation of the past few decades, but it has certainly thrived in that world.

And on both of these fronts, things are not looking good for Davos.

There are plenty of A-list delegates coming to the forum this year, from German Chancellor Olaf Scholz to US climate envoy John Kerry, not to mention the business mainstays like JP Morgan chief executive Jamie Dimon and, of course, Bill Gates.

But the guestlist this time around looks considerably less heavyweight than usual.

There is no US president, no UK prime minister and even Emmanuel Macron is giving the meeting the cold shoulder – little wonder given these nations, and so many others, are battling a cost of living crisis back home.

The end of globalisation itself?

But more important still is the fact that the very world Davos thrived in is disintegrating.

There is a war in mainland Europe. Indeed, some have described the conflict in Ukraine as simply the earliest movements in a world war.

Relations between China and the West are at a new low point. Countries around the globe are re-engineering their supply chains, and the era of untrammelled globalisation seems to be ending.

Davos has been written off many times before (possibly including by yours truly) yet it has managed each time to defy such prognostications.

A lot of people thought Donald Trump‘s election would spell disaster for the forum, yet he attended it more than once, and was here at the last winter meeting back in early 2020.

Yet there are two other reasons, on top of the two above, why Davos is facing its biggest threat yet.

COVID’s blow to face-to-face events

The first is the pandemic that erupted shortly after that last winter meeting, which has undoubtedly dealt a blow to face-to-face events such as these.

Davos may be leagues bigger and more influential than most corporate jamborees, but at its core that’s ultimately what this event is, and thanks to Zoom and remote working the corporate jamboree sector is trapped in a deep recession of its own.

The other issue comes back to something Klaus Schwab, the forum’s founder, has often talked about before: the stakeholder economy.

This idea, his brainchild from decades ago, is that businesses do not exist in isolation: they are at a nexus of various different groups, from shareholders to customers to employees and, for that matter, the state and society in which they operate.

The idea was that by engaging more sensibly with each of these parties the stakeholders could all get along. The Forum’s official motto is “Committed to Improving the State of the World” but it might have done better to borrow the old BT slogan: “It’s good to talk”.

Yet in the face of the cost of living crisis, these lines of communication seem to have frayed, or possibly snapped altogether.

There has been more industrial action in recent months than at any time in recent decades.

Dialogue seems to be failing.

On pretty much every front, then, Davos seems to be in deep trouble.

Far from gaining power in the past few years, it is under greater threat than ever before.

There will be fanfare aplenty from this Swiss town in the coming days: Ukraine, the state of globalisation, climate change – all of these issues will be discussed here by A-list panels.

But quietly, almost indiscernibly, this place is becoming less important as the world around it changes.

Business

Vodafone and Three merger could get green light, says UK’s competition watchdog

Published

4 hours ago

November 5, 2024

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Vodafone and Three merger could get green light, says UK's competition watchdog

A £15bn merger between two of the UK’s biggest mobile networks could get the green light – if they stick to their commitments to invest in the country’s infrastructure, the competition watchdog has said.

The Competition and Markets Authority (CMA) said the merger of Vodafone and Three had “the potential to be pro-competitive for the UK mobile sector”.

Announced last year, the proposed £15bn merger would bring 27 million customers together under a single provider.

The watchdog previously warned that tens of millions of mobile phone users could end up paying more if the merger went ahead.

However, the two groups recently set out plans to protect consumer pricing and boost network investment.

The CMA has now laid out a list of “remedies” required for the deal to go-ahead.

They include the networks committing to freezing certain tariffs and data plans for at least three years to protect customers from short-term price rises in the early years of the network plan.

Stuart McIntosh, chair of the inquiry group leading the investigation, said on Tuesday: “We believe this deal has the potential to be pro-competitive for the UK mobile sector if our concerns are addressed.

“Our provisional view is that binding commitments combined with short-term protections for consumers and wholesale providers would address our concerns while preserving the benefits of this merger.

“A legally binding network commitment would boost competition in the longer term and the additional measures would protect consumers and wholesale customers while the network upgrades are being rolled out.”

Today’s announcement is provisional, with a final decision due before 7 December. The inquiry group is inviting feedback on today’s announcement by 5pm on 12 November.

The CMA also published a list of potential solutions – which it called remedies – to issues it identified with the merger.

If the networks want the merger to go ahead, the watchdog requires Vodafone and Three to:

• Deliver a joint network plan to set out network upgrades and improvements over eight years;

• Commit to keeping certain existing tariff costs and data plans for at least three years to protect customers from price hikes;

• Commit to pre-agreed prices and contract terms so Mobile Virtual Network Operators (MVNOs) – mobile providers that do not own the networks they operate on – can obtain competitive wholesale deals.

Vodafone and Three are two of the biggest mobile firms in the UK, and their networks support a number of MVNOs including Asda Mobile, Lebara, Voxi, and Smarty.

Responding to the watchdog’s announcement, a spokesperson for Vodafone on behalf of the merger said: “The merger will be a catalyst for positive change.

“It will bring significant benefits to businesses and consumers throughout the UK, and it will bring advanced 5G to every school and hospital across the country.

“The merger is also closely aligned with the government’s mission to drive growth and to encourage more private investment in the UK.”

Earlier this year, Three’s chief executive hit out at the UK’s “abysmal” 5G speeds and availability as he urged regulators to approve the company’s merger with Vodafone.

Robert Finnegan noted his firm’s “cash flows have been negative since 2020 and our costs have almost doubled in five years, meaning investment in [the] network is unsustainable”.

“UK mobile networks rank an abysmal 22nd out of 25 in Europe on 5G speeds and availability, with the dysfunctional structure of the market denying us the ability to invest sustainably to fix this situation,” he added.

Business

Bosses rail at business secretary over ‘avalanche of costs’

Published

18 hours ago

November 4, 2024

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Bosses rail at business secretary over 'avalanche of costs'

Business leaders expressed frustration with ministers on Monday amid a growing budget backlash that bosses said would trigger an “avalanche of costs” and leave them with no choice but to slash investment and increase prices.

Sky News has learnt that bosses of large retail and hospitality companies and trade associations told Jonathan Reynolds, the business secretary, that last week’s budget risked damaging consumer confidence and exacerbating challenges facing the UK economy.

Among the dozens of companies represented on the call are said to have been Burger King UK, Fuller Smith & Turner, Greene King, Kingfisher and the supermarket chain Morrisons.

Mr Reynolds is said to have acknowledged that Rachel Reeves‘s inaugural fiscal statement had “asked a lot” of British business, with James Murray, the financial secretary to the Treasury, understood to have described it as “a once-in-a-generation budget”, according to several people briefed on the call.

One insider said that Nick Mackenzie, the chief executive of Greene King, had highlighted that the increase in employers’ national insurance (NI) contributions would cause “a £20m shock” to the company, while Fullers is understood to have warned that it would be forced to halve annual investment from £60m to £30m as a result of increased cost pressures.

Rami Baitieh, the Morrisons chief executive, told Mr Reynolds that the budget had exacerbated “an avalanche of costs” for businesses next year, and asked what the government could do to mitigate them.

Sources added that the CBI, the employers’ group, said its impact would be “severe”, while the British Beer & Pub Association added that there was now a disincentive to invest and flagged “a tsunami” of higher costs.

The range of comments on the call with ministers underlines the scale of discontent in the private sector about Labour’s first budget for nearly 15 years.

Only a small number of interventions during the discussion are said to have been in support of measures announced last week, with the Federation of Small Businesses understood to have praised the doubling of the employment allowance, which would see many of the smallest employers having their NI bills cut by £2,000.

The Department for Business and Trade has been contacted for comment, while none of the companies contacted by Sky News would comment.

Business

Retail giants face food price hikes dilemma after budget

Published

23 hours ago

November 4, 2024

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Retail giants face food price hikes dilemma after budget

Two of Britain’s biggest food retailers will this week face pressure to publicly disclose whether they expect a fresh spike in prices next year as the industry grapples with huge tax hikes imposed in last week’s budget.

Sky News understands that Marks & Spencer (M&S), which will unveil half-year earnings on Wednesday, and J Sainsbury, which reports interim results the following day, are collectively facing an additional bill of close to £200m as a result of changes to employers’ national insurance contributions (NICs) announced by Rachel Reeves, the chancellor.

Industry sources said the pressure on pricing would be “intense” given the thin margins on which the big supermarkets already operate.

“Food price increases from next April are inevitable,” said one.

The warning comes a day after Ms Reeves told Sky News that “businesses will now have to make a choice, whether they will absorb that through efficiency and productivity gains, whether it will be through lower profits or perhaps through lower wage growth”.

Pointedly, she did not highlight the prospect of higher prices at the tills, with some retailers now weighing whether to explicitly blame the government for impending price increases – a move which will trigger renewed inflation in the UK economy.

The grocery industry is expected to be among the hardest-hit by the changes to employer NICs, particularly after the chancellor slashed the threshold at which businesses become liable for it to just £5,000.

Tens of thousands of people employed part-time in the sector earn between that sum and the current threshold of £9,100.

The first major retailer to report financial results since the budget will be Primark’s parent, Associated British Foods (ABF), on Tuesday.

Insiders downplayed the risks of price hikes from Primark given its track record of absorbing inflationary pressures without passing them on to consumers.

ABF’s additional employer NICs bill is expected to be in the region of £25m, according to one analyst.

Overall, the retail sector could end up paying billions of pounds of additional tax given the scale of its workforce.

Ms Reeves has vowed to raise £25bn extra annually from the changes to employer NICs.

In addition to that, the rise in the national living wage will add a further burden to the financial pressures facing the retail industry.

Prior to the budget, Stuart Machin, the M&S chief executive, urged the chancellor not to increase taxes on it, calling them “a short-term, easy fix”.

“When I hear about plans to increase national insurance, a tax with no link to profit which hits bigger employers like us and our smaller suppliers, I’m concerned.

“The chancellor was right in the past to call national insurance a tax on workers.”

Jonathan Reynolds, the business secretary, will hold talks with British business leaders later on Monday about the impact of the budget.

A number of executives will be given the opportunity to ask questions on a call in which more than 100 companies are expected to be represented, although one boss who is critical of many of the budget measures said they were likely to be prevented from voicing their concerns publicly on the call.

ABF, M&S and Sainsbury’s all declined to comment.