Top Civil Servant Warns Varadkar that the €3bn Broadband Cost is not Value for Money

An astonishing row is now emerging at the heart of government. Robert Watt, Department of Public Expenditure and Reform’s secretary general has explicitly told Taoiseach Leo Varadkar and Pascal Donohue, the Minister for Finance, that they should forthwith abandon plans to install high-speed broadband to every home in the country and in the urban centres.

Robert Watt is one of the senior-most civil servants and has categorically warned cabinet ministers that the planned €3bn National Broadband Plan does not represent value for taxpayers’ money.

Reports indicate that Mr. Watt, who is in the running for the next governor of the Central bank, was vehemently opposed to the proposed plan. He firmly believes the €3bn price cannot be justified. Following several closed-door meetings, Mr. Watt is said to have told the Taoiseach and the Finance Minister that spending that kind of money on rolling out fibre optic cables to every home in the country would not pay off in the long run.

A government source said  that Robert’s job was to give the unpopular view and the kind of advice that the politicians mostly did not want to hear. “Sometimes it makes him unpopular but it is his job to give this advice,” said the government source.

From all indications, Mr Varadkar and Mr. Donohoe look set to completely ignore this advice. They are hellbent on becoming the first government in the world to roll out high-speed broadband across the country.

Mr. Donohoe said that he and his officials have already engaged thoroughly on this plan for a couple of months. The Finance Minister has refused to address some of the concerns raised by one of the most senior civil servants in his own department, especially after the cost significantly shot up from €500m to €3bn.

Ministers and Opposition TDs already have major concerns with the project and Mr. Watt’s warning is likely to set off all kinds of alarms among them. It is believed that Cabinet will likely discuss the National Broadband plan next week. Ministers will be asked to sign off on the proposed plan for high-speed online connectivity across the country and for areas not currently served by commercial operators.

Once Cabinet reaches an agreement, a consortium led by American businessman Frank McCourt will be commissioned with rolling out the first-of-its-kind broadband project.

However, Cabinet ministers will likely raise concerns with Taoiseach, the Minister for Finance, and the Minister for Communications Mr. Richard Burton. In the aftermath of the National Children’s Hospital project controversy, a number of ministers are already apprehensive about sinking billions of euros into another state capital project.

Others raised concerns that the taxpayer is being asked to pay billions of euros for a massive infrastructure project that the state will ultimately not own. The Cabinet will focus on the value for money in bringing high-speed broadband many rural parts of the country.

According to sources close to the plan, bringing the broadband to about 443,000 homes may be real effective but the costs would dramatically increase for the other 100,000 remaining homes. Therefore, some of the more unreachable homes would have to fitted with domestic broadband receivers which would then connect to local transmitter outposts.

Meanwhile, Brendan Howlin, the former Public Expenditure and Reform Minister, accused Fine Gael of “abandoning all spending controls” and completely ignoring official advice. The Labour Party leader pointed out that the Government’s ambitious plan to bring high speed broadband to 543,000 homes and businesses would place a €5,500 burden on every property.

“The Government needs to publish far more information to clarify the numbers involved, and to confirm its assumptions about the average cost to connect homes to the broadband network,” Mr Howlin said.

Howlin further commented that Taoiseach was “weighing the short-term political benefit of winning seats at the local election over the long-term financial stability of our country.” He implored voters not to be fooled by Fine Gael and that it was “outrageous” to compel taxpayers to pay for a big project that the state would not eventually own.

Describing the Government’s handling of the proposed project, Fianna Fail’s communication spokesperson said it was “a monumental failure of the procurement process” that the state was pumping billions of euros into the plan yet it will not even own the infrastructure once it is in place.

The terms of the current contract stipulate that Mr. McCourt’s consortium will build, operate, service and manage the nation’s biggest broadband network for a period of 25 years, after which the state will have the option to purchase the infrastructure.

Former Minister for Communications Denis Naughten was forced to resign after his alleged contacts with Mr. McCourt. He had attacked Taoiseach at the time, and said that the decision to sack him had more to do with “opinion polls rather than telecom poles,” and “more about optics than fibre optics.”

Mr. Naughten said that the introduction of high-speed broadband ought to be treated with the same importance as the rural electrification program almost 100 years ago.

The Bank of England Seems to Have a Woman Problem

A quick glance at the nine-strong Monetary Policy Committee, the body that guides the UK’s economy, and you can already begin to see the problem.

This is the body that influences important aspects of the economy, such as the interest rates, through their monthly votes, yet they look nothing like many of the people they represent and whose lives they greatly influence.

Current governor Mark Carney is the 120th governor in what has been a continuous line of white men who have led the Bank. While women easily make up half of the UK’s population, they are grossly under-represented. They make up a paltry one ninth of the Monetary Policy Committee. There’s also not a single black, Asian or minority ethnic group (BAME) member in the committee.

Therefore, it is quite clear that the Bank seems to have a diversity issue. The Public Accounts Committee (PAC) said last month that the Bank was still a long way way off its diversity targets for the coming year and that there was “little evidence the gap was closing quickly enough.”

In January, the Bank appointed two women to its financial policy committee, Banking Standards Board Chair Dame Colette Bowe and Virgin Money boss Dame Jayne-Anne Gadhia. The Bank’s search for a new governor kicked off earlier this week and many hope that it could herald the start of a new era with a woman at its helm for the first time in history.

Joanna Place, the Bank’s chief operating officer, spoke of the Bank’s efforts in diversity. “In terms of diversity and inclusion, we have done a lot more than just gender and ethnicity. We have a number of staff networks. We have inclusive events. We have a wellbeing policy. We have done a cognitive diversity survey. We have started to look at social mobility,” she said.

Labour MP Rachel Reeves, who also chairs the business select committee and who was an economist at the Bank before turning to politics, also commented on the issue and said that it was time the Bank took action. “We’ve had two women prime ministers and yet have had no women chancellors or Bank governors,” she said. The former economist also added that the Bank needed to do more to train and promote talented women within the organization.

“The sad truth is that the Bank has not done enough to recruit, train and promote talented women. More needs to be done to bring forward a generation of women economists who can be considered for the top job,” she further added.

Self-Reproduction

However, others do not share the view that the problem ultimately lies with the Bank. Wendy Carlin, a professor of economics at the University College London, points out that the real issue is with the economics profession itself and not the Bank of England.

“If you google economists,” she says, “you’ll get a great number of pictures of economists in suits holding up a financial chart. Those impressions are self-reproducing. If people only see men in suits then they don’t think it’s for them.” She further made the point that women make up just over a third of the total undergraduate economics students in the UK.

According to the professor, these statistics repeat themselves in other parts of the world like the US and Australia. She is currently leading an international project dubbed the CORE project which seeks to change the way economics is taught and thereby, broaden its appeal.

Prof Carlin added that “We’re being much clearer that economics is about addressing the problems we face. Yes, it’s about financial stability but it’s also about inequality, the environmental future and work,” But she also cautions that work at this academic level will take quite some time to filter through to the real world. She said “It’s crucial to widen the pool [of job candidates] as far as possible, but you’ve got to get people into the pool in the first place and that’s what we’re working on,”

Dr. Margaret Heffernan, an author and former chief executive of five different businesses made the point recently that the lack of women in the sector has become something of a self-fulfilling prophecy and that since the profession is predominantly male, it tends to “promote and nurture male students.”

But Dr. Hefferman also said “Economics can be very excluding of women, sometimes unintentionally and sometimes intentionally. People with privilege don’t happily give it up.”

A recent survey conducted by the American Economic Association of more than 9,200 economists suggested that there are deep-rooted issues as well. Nearly a third of female economists polled said that they had felt discriminated in one way or the other as compared to 12% of their male counterparts. Women, the study suggests, felt that they were treated especially unfairly.

Recruitment firm Saphire Partners is carrying out the search for the new governor. The fact that it is run by five female partners and has described itself as “advocates for women in business” does bring a glimmer of hope that the next governor of the Bank of England could be a woman.

Cork and Shannon Passengers to be Bussed to Dublin after Boeing 737 MAX 8 Grounding

Passengers in Cork and Shannon are now likely to be deprived of their direct Norwegian Airlines routes to the US for nearly the entire summer season because of the recent grounding of the Boeing MAX 8 aircraft fleet.

Ryanair, which had placed an order of 135 next-generation Boeing aircraft in its MAX 200 version, said that it may now be unable to introduce the planes into its fleet before late August.

The Irish airline had scheduled to bring in five 737-MAX 200s, which are the modified versions of the MAX 8, by around June. A further 50 planes were scheduled for delivery before the beginning of the 2020 season.

However, Ryanair insists that its schedules will be largely unaffected by this recent grounding and that it has a network that is fully catered for by its fleet of 400 Boeing 737-800 series planes.

Deirdre Clune, Ireland South MEP, pointed out that while all the requisite safety measures had to be implemented for the passengers’ well-being, airlines such as Norwegian ought to do everything in their power to restore their crucial US routes from Shannon and Cork.

Thanks to a replacement aircraft, Norwegian has maintained its direct US flights from Dublin. However, passengers booked fly to the US from Cork and Shannon have been offered a bus service to Dublin for their onward flights or the option of a full refund.

Ms Clune said that she was supportive of the measures taken by the airline which were necessary to ensure the safety of passengers. “However, passengers travelling on transatlantic flights from Cork and Shannon airports must be taken care of while the flights are not in operation from these airports,” she said. “I think that these flights are very important for Cork airport in particular and I hope to see them back to their regular schedule once all the safety checks have been completed,” Ms. Clune concluded.

The Cork Airport is one of the fastest expanding European airports at the moment and is well on course for a growth of more than 8% in 2019 alone. Passenger numbers went up by 10% in February alone.

The entire fleet of the Boeing 737 MAX was ground all over the world following a fatal crash in Ethiopia in which all 157 people on board died. The plane crashed just 10 minutes after take-off. Michael Ryan, a father of two and an Irish national also died in the tragedy. He was 39 years old and an engineer with the UN food programme.

The tragedy was the second fatal accident in five months involving the brand new jet. Another Boeing 737 MAX 8 had crashed into the sea off the Indonesian coast just before Christmas. After it emerged that an anti-stall system may have been linked with both the tragedies, the global fleet was grounded for safety concerns.

Boeing has since developed a software upgrade for the aircraft’s anti-stall system that was involved. However, a regulatory briefing note has indicated that the aircraft will likely not be cleared to resume services worldwide until August.

An international committee, the Joint Authorities Technical Review Committee, will commence a joint examination of the Boeing 737 MAX update by 29th April, 2019. The committee, which includes the European EASA and the American FAA, will also include aviation authorities from Canada, Brazil, China, United Arab Emirates, Japan, Singapore and NASA.

As it has now emerged, the evaluation of the Boeing 737 MAX 8 software upgrades may take up to 90 days which means that even if everything goes according to plans, the aircraft may not be cleared for resumption of services until August at the earliest.

The grounding of the 737 MAX fleet has already cost the American manufacturer an estimated $1 billion. Norwegian has also bore the brunt of the grounding as one of the most affected airlines in the world. 18 of its planes were taken out of service.

In a letter to Ms. Clune, Bjorrn Kjos, Norwegian boss, said that the airline had made every effort to minimize the disruption involved. “This development at no notice has resulted in the need for an urgent, major overhaul of planned aircraft deployment,” he said.

He further indicated that the airline had taken measures to minimize disruptions, including the substitution of the larger Boeing 787 Dreamliner on some services, wet-leasing of alternative aircraft, and securing extended-range ETOPS approval for alternative aircraft. All these, he said, would maintain services and coach transportation to and from where the airline’s alternative flights operate from.

With its fleet of new Boeing 737 MAX 8 aircraft, the Scandinavian airline had managed to offer cut-price transatlantic services from Dublin, Shannon and Cork to Boston and New York.

At the moment, Dublin’s airport services to US destinations such as Boston and New York are being facilitated by a new Boeing 787 Dreamliner.

Thomas Cook Hires a Turnaround Specialist as Potential Investors Show Interest

Potential buyers, including Fosun, a Chinese conglomerate, are circling Britain’s oldest package holiday operator. The company could be split up in a move that could lead to its high street stores and package deals being taken over by one of its main shareholders.

Thomas Cook has been struggling with a dip in demand for package holidays and cut-throat online competition. Potential bidders are now gearing up for either a partial or full takeover of the struggling company which has already announced that it is closing 21 high street stores and many more to come.

Expressions of interest in its Tours business began when it was first reported on Sky News that it was seeking to offload its airline business. But it has since announced a string of profit warnings, including an 80% drop in its share value. Fosun, a Chinese company which is also the largest Thomas Cook shareholder, is among a number of investors that have expressed interest in its business.

Thomas Cook has said that it is seeking to focus more into increasing investments in directly-owned hotels which are now more profitable. It will also evaluate all the options and consider all the bids. A source close to the company said that it is unsurprising that even rivals are making speculative approaches for other parts of the company’s business.

Fosun has a 17% stake in Thomas Cook and already runs a joint venture with the 178-year old firm back in China. Mr. Guo Guangchang, Fosun’s chairman, rose from rural poverty and is now one of China’s richest men.

While a bid from such a private investor with deep pockets could prove quite attractive for Thomas Cook after a troubled year, EU rules banning majority foreign ownership could get in the way of a lucrative deal. The rules could prevent Fosun from running the airline arm of the tour operator.

In May 2018, Thomas Cook’s shares traded above £1.40. But they have since dropped to 25.4p before the bank holiday which left its market value at £376m as compared to a net debt of £1.6bn. The tour operator is trying to tackle its huge debt pile and has taken up restricting specialists, Alix Partners, to work on its balance sheet and its cost reduction plans. The company was recently compelled to call for a meeting of its shareholders to support an extension of its debt limits which had been “inadvertently broken.”

However, analysts have already warned that the tour operator may have to ask its investors for more cash even though it has surpassed the period in which cash reserves are at their lowest for many of the highly seasonal tour operators.

And things are not looking too good for the entire holiday sector which is in the midst of a fierce price war. Thomas Cook’s biggest rival in Europe, Tui, has already issued profit warnings. Budget airline Easyjet has also issued a significantly downbeat outlook.

The online marketplace is also proving to be brutal for Thomas Cook. More holidaymakers are now opting for the internet rather than visiting high street branches. While 64% of Thomas Cook’s sales are through its website, this rising preference has mostly benefited online travel agencies.

The company announced the closure of 21 stores last month, including the loss of 321 jobs. As the company adjusts itself to the online spending revolution, analysts believe there will be many more closures across its 566-store network.

Thomas Cook is named after its founder who was a cabinet maker and who operated day trips from Leicester to Loughborough. The company has recently issued two profit warnings in two months towards the end of last year. In its most recent profit warning, the company blamed the “disappointing year” on the prolonged heatwave in the summer across Europe for killing consumers’ appetite for travel.

Some budget airlines have gone belly up in recent months. These include the British regional carrier Flybmi which collapsed in February, Iceland’s Wow Air which folded last month, and Indian Jet Airways which grounded all its flights this past week.

However, spinning off its airline arm could be an attractive source of cash for Thomas Cook. This is not the first time the tour operator has faced concerns about its survival. Similar doubts were raised back in 2012 when it was forced to dispose of hotels and part of its airline business. The company even carried out a rights issue in 2013 in what seemed like a desperate attempt to shore up its balances sheet.

Ireland Records Its Highest Start-up Figures in 13 Years Despite Brexit Uncertainty

Figures released by business information company CRIF Vision-Net show that the entrepreneurship spirit continues to flourish in Ireland despite Brexit uncertainty.

An average of 71 companies were set up every day within the first three months of 2019 against an average insolvency rate of two per day.

Within the first quarter of 2019, a total of 6,413 companies were formed in Ireland. These are the best figures of Q1 in the last 13 years and a 14% increase on the previous record-breaking Q1 of 2018.

The biggest contributors to these figures were professional firms, which accounted for 1,448 new start-ups in the first three months of the year, a 22% increase from the same period last year. Social and professional services recorded an impressive 50% growth (949 new firms) over the same period in 2018.

However, the financial sector, which is the third largest sector, decreased by 1% to record 708 new start-ups as compared to 715 in Q1 of 2018 while the construction industry showed a modest 1% growth.

Releasing the figures, Christine Cullen, Managing Director of CRIF Vision-Net, said that “the buoyant entrepreneurial spirit in Ireland continues to weather the continued uncertainty across the water.” Cullen further commented that “the first quarter of 2019 has been the best in 13 years for start-ups in Ireland,” and that “industries including professional services and social and personal services saw significant growth.” Meanwhile, much-discussed sectors such as construction and finance have again shown strong growth numbers.

Ms. Cullen also observed that, other than the concerns over a slowdown in the global economy, Brexit remains the greatest challenge of 2019. It now sits at the top of all business agendas, in both big and small companies. And the concern is particularly acute for many of the companies that are susceptible to supply chain disruptions, costly tariffs and border checks on the horizon.

Therefore, it seems businesses are doing everything they need to do to prepare themselves for the unknown and the potentially messy post-Brexit period. Cullen pointed out that, “in the meantime, it is critical that the Irish Government continue to provide assistance to safeguard the economy from the worst effects of a No-Deal Brexit.”

Twelve counties made double-digit growth rates in the total number of start-ups in Quarter One, with Dublin recording the highest number of start-ups among all the counties. There were 3,089 start-ups established in the capital within the first quarter of the new year, which is close to half of all the start-ups in the entire country within the period.

Cork recorded the second highest number of start-ups with 690 new businesses being established in Q1 of 2019 – a 13% increase over the same period in 2018. Galway came in a distant third with 236 new start-ups – a 1.2% drop while Limerick was fourth with 210 new start-ups which was a 7.7% improvement on Q1 of 2018.

It is also worth noting that this growth in start-ups wasn’t confined to the counties with the highest urban populations. Louth recorded a 21% increase while Donegal had a 16.5% increase in the number of companies formed. Kerry was up by 7%, Wicklow was up by 14%, and Wexford saw a 38% increase in new company start-ups.

However, data from business and credit risk analyst CRIF Vision-net also shows that the rate of insolvencies in 2019 has remained relatively low as compared to the previous year. There was an almost 26% year-on-year drop in insolvencies in 2018 versus 2017. Quarter One of 2019 recorded 192 insolvencies as compared to 186 in the same period for 2018.

The wholesale and retail sectors were the most insolvent, with a total of 31 recorded insolvencies, which is a 34.8% increase on the Q1 figures for 2018. The professional services sector also had the same figures, 31 insolvencies, which was a 10.7% increase in the while the construction sector recorded 25 insolvencies – a 13.8% reduction.

Dublin was, unsurprisingly, the most insolvent county followed by Galway and Cork. Clare, Waterford, Carlow Mayo, Westmeath, Tipperary, Laois, and Kilkenny all recorded less than five insolvencies each in Q1 of 2019 as compared to Q1 of 2018.

Sara Constatini, CRIF’s Regional Director for the UK and Ireland, pointed out that the continued growth in the number of Irish start-ups in Q1 is very encouraging. She indicated that international data shows that Ireland is on course to outperform even some of Europe’s biggest economies, such as Germany, in 2019.

However, while the domestic economy is thriving, external challenges continue to cause several concerns. Other European economies are also feeling the cloud of uncertainty and the next couple of weeks will be crucial in determining the European market confidence in 2019 and beyond.