Reuters News - UK-Russia standoff deepens as Moscow cuts UK diplomats

by Andrew Osborn
MOSCOW (Reuters) - Moscow has told Britain it must cut just over 50 more of its diplomatic and technical staff in Russia in a worsening standoff over the poisoning of a Russian former spy and his daughter in England, the Russian Foreign Ministry said on Saturday.

Separately, Moscow also demanded an official explanation for the search of a Russian passenger plane in London, saying it could reserve the right to act similarly against British airlines in Russia. Britain said the search was routine.

More than 100 Russian diplomats have been expelled by various countries, including 23 from Britain itself, to punish the Kremlin over the March 4 attack on Sergei Skripal and his daughter Yulia in the historic English city of Salisbury.

London says Moscow was responsible for poisoning the Skripals in the first known use of a military-grade nerve agent on European soil since World War Two. Russia flatly denies that and has cast the allegations as part of an elaborate Western plot to sabotage East-West relations and isolate Moscow.

Russia had already retaliated in kind by ejecting 23 British diplomats. On Friday, the Foreign Ministry summoned British Ambassador Laurie Bristow and told him London had one month to further cut its diplomatic contingent in Russia to the same size as the Russian mission in Britain. It also expelled 59 diplomats from 23 other countries for backing Britain.

A spokeswoman for Britain’s Foreign Office called the Russian move regrettable, and said it was considering the implications of the measures. It did not say how many diplomatic staff in Russia would be affected, while the British Embassy in Moscow says it does not make staff numbers public.

Russian Foreign Ministry spokeswoman Maria Zakharova told Reuters the demand meant Britain would have to cut “a little over 50” more of its diplomatic and technical staff in Russia on top of the 23 diplomats who have already gone home.

“We asked for parity. The Brits have 50 diplomats more than the Russians,” Zakharova said on Saturday.

Asked if that meant London would now have to cut exactly 50 diplomatic and technical staff, she said: “A little over 50.”

The Russian Foreign Ministry later published a list of 14 questions its London embassy sent Britain’s Foreign Office about the case on Saturday. It included queries about why Russia had not been granted the right to provide the Skripals with consular assistance following the incident and about France’s role in the investigation.

Russia’s Ministry of Transport meanwhile demanded Britain explain why the Aeroflot (AFLT.MM) passenger plane was searched at Heathrow airport on Friday, in what the Russian Embassy in London called a “blatant provocation”.

“After the search was over, the British officers refused to provide any written document that would specify the reasons for their actions, their legal foundation and their outcome,” the embassy said, concluding that the action was “connected with the hostile policy” of the British government towards Russia.

Britain disagreed.

“It is routine for (Britain’s border agency) to search aircraft to protect the UK from organized crime and from those who attempt to bring harmful substances like drugs or firearms into the country,” Security Minister Ben Wallace said in a written statement.

“Once these checks were carried out, the plane was allowed to carry on with its onward journey.”

Britain’s Foreign Office also said on Saturday it was considering allowing visits under consular access terms to Yulia Skripal, who is recovering in hospital against all expectations and is no longer in critical condition.

Russia’s embassy said that it had contacted Viktoria Skripal, Yulia’s cousin. “Upon receiving confirmation that Yulia Skripal’s condition is getting better and she is able to communicate, she said she would like to go to London and to visit her cousin,” the embassy said.

The BBC reported on Friday that Yulia was “conscious and talking,” a factor which may influence the investigation of how she and her father were poisoned.

Britain must decide how to make the cuts to its Russian diplomatic team and may be forced to lay off some Russian support staff as well as sending home fully-fledged diplomats.

Russia ordered the closure of another British consulate, in St Petersburg, earlier this month in its first retaliatory step.

The poisoning on British territory has united much of the West in taking action against what it regards as the hostile policies of President Vladimir Putin. This includes the United States under President Donald Trump, who Putin had hoped would improve ties.

Additional reporting by Elisabeth O'Leary in Edinburgh and Gabrielle Tétrault-Farber in Moscow; Editing by Catherine Evans and Stephen Powell

Our Standards:The Thomson Reuters Trust Principles

BBC News - Brexit: UK hopes to roll over 40 EU trade deals, says Liam Fox

The UK hopes to have 40 trade arrangements with 70 countries in place by the end of the Brexit transition period in 2020, the international trade secretary has said.

Liam Fox told BBC Radio 4's Today programme he hoped to "roll over" the arrangements from the EU agreements.

He said all those countries had been spoken to and had agreed they would like that outcome.

The UK is set to stick with current EU trade deals during the transition.

The UK is due to leave the EU on 29 March, 2019, with the proposed transition period - during which most of the current trade arrangements would continue - set to last until 31 December, 2020.

According to the proposals the UK and the EU have been negotiating, the idea is that the UK can negotiate its own future trade deals with other countries during the transition period, but only on the basis that they do not come into force until 1 January, 2021.

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Mr Fox said that the number of trade deals ready to go at the end of the transition period would depend on negotiations.

But he said: "We will have arrangements that we will be able to roll over from the European Union's agreements, we hope to have around 40 of those. We hope we will have all of those in place by the time we go."

"There are about 70 countries and 40 agreements. We hope all of those ones will be ready because they are extensions of what we have at the moment.

"Of course we require the agreement of the countries involved. We have spoken to all 70 countries involved. They have all given agreement that they'd like to see that in place."

'Least risk to the UK'

He said that he wanted the UK to take advantage of "being able to negotiate beyond the European Union's borders".

"We've got 14 working groups in place with 21 countries at the present time I'd hope to make as much progress as possible because we need to have a confident and optimistic agenda for Britain's future," he said.

He said trade talks have begun with Australia, New Zealand and the US.

Mr Fox refused to rule out a transition period continuing beyond the end of 2020, but said it was "not likely to happen".

"I wouldn't like to see that, nor would I support an extension," he said.

He was asked about warnings by prominent Tory backbencher Jacob Rees-Mogg that Britain would be a "vassal state" during the transition period.

"I absolutely wouldn't share those words and I would say that what we are doing is carrying out the will of the people to leave the European Union, which we shouldn't question, we must accept, but we are doing it in a way that is providing the least risk to the United Kingdom," Mr Fox said.

Reuters News - Britain will deliver Brexit despite funding allegations - May

LONDON (Reuters) - Prime Minister Theresa May said on Wednesday her government would deliver on Britain’s vote to leave the European Union, after the referendum result was questioned by some critics who say funding rules were broken by Brexit campaigners.

“If there are those who are trying to suggest that the government should be rejecting the result of the referendum as a result of these sort of claims, I say to them very clearly ... the referendum was held, the vote was taken, the people gave their view and we will be delivering on it,” May told parliament.

BBC News - Trump trade war: China tells US it will defend national interests

President Trump has announced plans to impose tariffs on up to $60bn of Chinese products

China warned the US it will defend its interests on trade, Chinese state media says, after US President Donald Trump backed tariffs on Chinese goods.

The comments came in a phone call between China's vice-premier Liu He and US Treasury Secretary Steven Mnuchin.

Mr Trump has announced plans to impose tariffs on up to $60bn (£42.5bn) of Chinese goods, accusing China of intellectual property theft.

The move has rattled markets and stoked fears of a trade war.

Mr Liu, who is Chinese President Xi Jinping's top economic adviser, told Mr Mnuchin that Beijing was "ready to defend its national interests" but hoped that "both sides will remain rational and work together," China's official Xinhua news agency reported.

During the telephone conversation, which is thought to be the highest-level contact between the two governments since Mr Trump announced the tariffs on Thursday, Mr Liu also accused the US of violating international trade rules following its investigation into Chinese intellectual property practices.

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Amid the tensions on trade, World Trade Organization Director General Roberto Azevêdo has warned that new trade barriers would "jeopardise the global economy".

Mr Trump, however, has said that the US move to raise tariffs against China was already beginning to get results.

"Many other countries are now negotiating fair trade deals with us," the president said on Friday.

Following Mr Trump's move, China said it was planning to retaliate with its own set of proposed tariffs worth $3bn, including tariffs on groceries and aluminium scrap.

Beijing has warned the US that it is "not afraid of a trade war", but has said that it hopes to avoid one through continued dialogue.

Reuters News - Trump threatens to veto spending bill, raising government shutdown risk

by Richard Cowen and Steve Cowan

WASHINGTON (Reuters) - U.S. President Donald Trump made a surprising threat to veto Congress’ newly passed $1.3 trillion spending bill, a move that raised the specter of a possible government shutdown ahead of a midnight Friday deadline to keep federal agencies open.

In a tweet on Friday morning Trump said he was displeased about immigration issues in the bill, even though the White House had given assurances on Thursday that he would sign it. Lawmakers in the Senate and House of Representatives, which both are dominated by Trump’s fellow Republicans, had left Washington after passing the measure.

“I am considering a VETO of the Omnibus Spending Bill based on the fact that the 800,000 plus DACA recipients have been totally abandoned by the Democrats (not even mentioned in Bill) and the BORDER WALL, which is desperately needed for our National Defense, is not fully funded,” Trump wrote.

Trump has sought to make good on his campaign promise to build a wall along the U.S.-Mexico border and the bill includes $1.6 billion for six month’s of work on the project, although he had sought $25 billion for it. In a tweet on Thursday he had seemed not to have a problem with partial funding because “the rest will be forthcoming.”

Trump also has been at odds with Democrats in Congress over the fate of Dreamer immigrants - those brought to the United States illegally when they were children.

At the White House, many aides were caught by surprise by the veto threat and were scrambling for answers. There was no immediate explanation for what prompted the threat other than Trump’s frequent complaints that he felt Democrats were unwilling to move his way on immigration issues.

Trump appeared to have tweeted from the White House residence, as there is no Marine guard posted outside the door of the West Wing, which is what happens when the president is in the West Wing.

A White House official would say only that “it’s the president’s tweet” and could not answer further questions. Trump is scheduled to leave later in the day for a weekend at his private resort in Palm Beach, Florida.

There was no immediate comment from Republican leaders in Congress.

THREAT OR BLUFF?

As the six-month spending deal was coming together, there were reports Trump had balked at the deal and had to be persuaded by Republican Speaker Paul Ryan to support it.

Only minutes before Trump’s threat, Ryan had tweeted: “Our men and women in uniform have earned a pay raise. That’s why yesterday, we voted to provide the biggest pay raise for our troops in 8 years.”

Conservatives and deficit hawks in Trump’s party had panned the bill because of its spending increases. Some cheered his threat to veto it.

“Please do, Mr. President,” Republican Senator Bob Corker said on Twitter. “I am just down the street and will bring you a pen. The spending levels without any offsets are grotesque, throwing all of our children under the bus.”

Democratic lawmakers said Trump created his own crisis by canceling the Deferred Action for Childhood Arrivals (DACA) program that gives work permits to certain young immigrants and protects them from deportation. The decision is currently tied up in court cases.

Trump had agreed to extend the program if Congress agreed to sweeping changes in immigration laws and provided $25 billion to build the wall and increase border security. Democrats rejected the plan.

“NOW you care about the Dreamers Mr. President?” Democratic Representative Jan Schakowsky said on Twitter. “Six months after throwing their lives into chaos? Is this a cruel joke?”

In a hastily arranged news conference on Thursday, Trump’s budget director and top legislative aide insisted he would sign the bill and tried to cast the $1.6 billion in funding for border security as a downpayment on Trump’s wall pledge.

“It does a lot of what we wanted - not everything we wanted - but a lot of what we wanted on immigration,” White House budget director Mick Mulvaney told reporters.

Reporting by Richard Cowan and Steve Holland; additional reporting by Roberta Rampton, Susan Heavey and Patricia Zengerle; Editing by Bill Trott

Our Standards:The Thomson Reuters Trust Principles.

BBC News - Next admits toughest trading period 'for 25 years'

Annual profits at Next have fallen 8% after what the retailer described as its most challenging year for 25 years.

The company said pre-tax profits dropped to £726.1m in the 12 months to January, marking the second year in a row that profit has declined.

Next said that sales of full-priced products at its stores tumbled in contrast to online demand.

It blamed "a weak clothing market" as well as "self-inflicted product ranging errors and omissions".

Full priced sales at its shops fell by 7% but rose by 11.2% online. Total revenue for the year fell by 0.5% to £4.1bn.

Next's chief executive, Lord Wolfson, said that "in many ways 2017 was the most challenging year we have faced for 25 years".

He said that while it had been uncomfortable, "it has also prompted us to take a fresh look at almost everything we do" including the structure of its shop portfolio and the "in-store experience".

'Quite lazy'

Experts on the retail sector say mid-priced retailers like Next are in a tough spot.

"The middle market is suffering and there isn't a way back home," Kate Hardcastle, from consultancy Insight with Passion, told the BBC.

"I think retail generally in this market place has been quite lazy," she said.

Shoppers have moved towards retailers that are cheaper, or are quicker to respond to fashion trends, according to Ms Hardcastle.

"So you've seen the rise of Primark on the discount side, Asos and Zara on the more fashion-orientated side and a consumer very much influenced by Instagram and social media.

"It's just too much of a turnaround, too much of a challenge for these quite heavyweight retailers who have expected to trade the way that they always have," Ms Hardcastle said.

Image copyrightGETTY IMAGES

Image captionComing to a Next near you? The retailer plans to roll out concessions this year

The latest retail data from the Office for National Statistics showed a rise in sales at supermarkets in February, but falling trade at non-food stores as consumers choose to spend their money on essential items.

A number of retailers and casual dining outlets have failed or face having to radically restructure their businesses.

Both Toys R Us and Maplin have fallen into administration. Fashion chain New Look this week secured an agreement with its creditors to close 60 UK stores and cut 1,000 jobs.

In the restaurant sector, Jamie's Italian, burger chain Byron and Prezzo are closing outlets and laying off staff.

Next said that it planned to roll out more concessions across its store after trying out a number of new services at its shop in Manchester's Arndale Centre.

These include; a florist, a prosecco bar, a restaurant, a children's activity centre, a café, a card and stationery shop, a barber and "shortly a car showroom".

It said that it was in talks to add a spa operator and bridalwear concession to the store and said it expected these steps would add £800,000 worth of income to the shop.

Next also said it was in discussions to add other services to its stores including travel, branded footwear and cosmetics.

"In the year ahead we currently plan to open 98 concessions across our store portfolio and expect to generate annualised income of around £5m from these concessions."

High Street v Online

Despite the fall in profit, the figure was in line with guidance Next provided in its Christmas trading update and its share price was up 7% at £49.53 by midday.

Over the year, profit from Next's shops fell by 24% to £268.7m. Sales fell 7.9% to £2.1bn in what the retailer said was "a particularly difficult year" for its stores.

However, online profits rose by 7.4% to £461.2m, with revenue up 9.2% at £1.8bn.

Neil Wilson, senior market analyst at ETX Capital, said: "The shift in the sales performance from retail to online begs the question as to when Next will look to shift its operations away from stores and focus more on maximising its online divisional strength."

BBC News - UK growth forecast raised by British Chambers of Commerce

The British Chambers of Commerce (BCC) has raised its UK growth forecast, but warns it will be among the worst performing G7 economies until 2020.

The BCC has raised its GDP forecast for 2018 from 1.1% to 1.4% and in 2019 from 1.3% to 1.5%. Its first forecast for 2020 is for 1.6% growth.

The hike is driven by slightly stronger than expected consumer spending.

And it says the UK's export performance is expected to remain robust on the back of strong global growth.

But it says with imports also likely to continue to grow, the contribution of net trade to the UK's GDP growth over the near term is to be limited, "particularly with little evidence of a sterling boost to the UK's overall net trade position".

And despite the upgrades, UK GDP growth is set to remain well below the historical average throughout the forecast period.

Skills shortages

"While many individual businesses are doing well, the inescapable conclusion from our forecast is that the UK economy as a whole should be performing better than it is, given robust and sustained global growth," said Dr Adam Marshall, Director General of the British Chambers of Commerce.

"Although strong global conditions have given the UK a bit of a boost through higher export demand in recent months, we have serious concerns about the potential for further growth here at home when the performance of key trading partners slows.

"Sustained skills and labour shortages are also a real issue, with businesses reporting significant difficulties recruiting and retaining the people they need.

"Political uncertainty aside, the biggest brake on higher UK growth is a lack of concerted action to 'fix the fundamentals' here at home, with government attention distracted by Brexit."

The BCC says productivity is expected to improve marginally over its forecast period but will remain subdued, "hampered by deep rooted problems in the economy, including skills shortages and chronic underinvestment in the UK's infrastructure".

The business body says inflation is now expected to have peaked, and will begin easing in the near term as the impact of the post-EU referendum slide in sterling fades.

It also predicts that the next increase in UK official interest rates, to 0.75%, will occur in the second quarter of 2018, followed by another rise in the first quarter of 2019.

The BCC also expects UK public sector borrowing to be £13.4bn higher over the next three years than forecast at last week's Spring Statement by the Office for Budget Responsibility.

Reuters News - U.S. hints at shift on Russia with sanctions and condemnation

WASHINGTON (Reuters) - By imposing new sanctions on Russia and condemning a suspected Russian chemical attack in Britain, Washington has hinted at a tougher stance toward Moscow despite President Donald Trump’s stated desire for better ties.

The U.S. Treasury slapped sanctions on 19 Russian citizens and five entities for election meddling and cyber attacks in the most significant steps the United States has taken against Russia since Trump took office amid U.S. intelligence agency allegations that Moscow tried to help him win the 2016 election.

While the Treasury put off targeting oligarchs and officials close to Russian President Vladimir Putin, it said further sanctions were coming and for the first time blamed Moscow for cyber attacks stretching back at least two years that targeted the U.S. power grid, including nuclear facilities.

After initially equivocating about a chemical attack on a former Russian double agent in Salisbury, England, the White House joined a statement by the leaders of Britain, France and Germany in which they said they “abhor the attack” and blamed it on Moscow.

Moscow has denied any involvement in the poisoning.

Thursday’s actions have caused some Russia analysts to ask whether the administration is taking a more confrontational stance despite Trump’s repeated statements in the election campaign that he wanted a better relationship with Moscow, his praise for Putin and apparent reluctance to criticize the Russian leader.

“I think we have hit an inflection point in the current administration’s approach towards Russia,” said a diplomat who spoke on condition of anonymity. “There has been a shift in balance.”

The diplomat attributed the evolution partly to a clash between U.S.-backed and Russian-backed forces in the Syrian city of Deir al-Zor in February; Russia pounding Syria’s eastern Ghouta enclave of anti-government rebels with air strikes during the past month; and Putin showing a video on March 1 of a weapon appearing to hover over what looked like a map of Florida, home to Trump’s Mar-a-Lago resort.

“Those three things, taken together, have caused a shift in analysis in parts ... of the administration,” said the diplomat.

TRUMP EXASPERATED

While there was a sense at the White House that there has been a hardening of Trump’s view toward Russia, at least for now, it was unclear whether this represented a long-term shift.

A senior administration official said there was some feeling that the goodwill that Trump extended toward Russia when he took over has not been reciprocated and that the Russians do not want to have good relations with the United States.

This has exasperated Trump, who instructed his team to make sure the United States appeared to be in solidarity with Britain over the nerve agent attack.

Eugene Rumer, a former U.S. national intelligence officer for Russia, suggested Trump’s approach may ultimately be guided by Special Counsel Robert Mueller’s investigation into whether Russia meddled in the election campaign.

The Kremlin denies interfering. Mueller is also investigating any potential collusion between the Trump campaign and Moscow officials, something Trump denies.

“My hypothesis is ... the White House stance on Russia is going to be determined to a large extent by how much they think the investigation threatens their political position,” Rumer said.

Officials from multiple U.S. agencies discussed next steps at a meeting on Thursday, with one aim being to avoid personally attacking Putin and taking in-your-face steps that could prompt retaliation.

In announcing Thursday’s sanctions, U.S. officials made clear more would follow.

“This is just one of a series of ongoing actions that we’re taking to counter Russian aggression,” one U.S. official told reporters. “There will be more to come, and we’re going to continue to employ our resources to combat malicious Russian activity and respond to nefarious attacks.”

Sergei Skripal, 66, and his daughter Yulia, 33, were found unconscious on a bench outside a shopping center on March 4 after being exposed to what the British authorities have identified as a military-grade, Soviet-era Novichok nerve agent.

Another U.S. official attributed the sharper edge to U.S. policy to increasingly brazen behavior by Russia in cyberspace and on the ground, culminating in the Salisbury attack.

This U.S. official, who spoke on condition of anonymity, also pointed to Russia’s refusal to restrain Syrian President Bashar al-Assad and the role of Russian “mercenaries” in Syria, now entering its eighth year of civil war.

The official said it was unclear if Trump himself saw Russia as an adversary but suggested Putin may have “overplayed his hand” by leaving Russian fingerprints on the hacking, the chemical attack, the deployment of ground-launched cruise missiles which the U.S. says violate an arms control treaty, and a March 1 speech on “invincible” Russian weaponry.

“If the president felt like Putin was one-upping him, not to mention stealing the limelight, then it wouldn’t be surprising that he would react,” the official said.

While more sanctions are expected, it was not clear if the Trump policy toward Russia was changing, especially given Trump’s unpredictability, said a third official, who is involved in talks on next steps.

“Tomorrow is another day,” the official said.

Additional reporting by Steve Holland and Warren Strobel; Writing by Arshad Mohammed; Editing by Grant McCool and Paul Tait

Our Standards:The Thomson Reuters Trust Principles

BBC News - Tax rises of £40bn 'needed by mid-2020s' to cut deficit

Annual tax rises of £40bn will be needed if the government wants to keep spending constant and balance its books by 2025, a think tank has warned.

The Institute for Fiscal Studies added that dismal productivity, earnings and GDP growth had become the "new normal".

Its forecast comes after the chancellor unveiled upgraded growth and borrowing forecasts in the Spring Statement on Tuesday.

Philip Hammond said the UK economy had reached a turning point.

Paul Johnson, director of the Institute for Fiscal Studies (IFS), said that "nothing much" had changed in the Spring Statement.

He said the UK was still suffering the hangover of the 2008 financial crisis and its growth outlook was "the worst in the G20".

He said the big problem facing the chancellor was how to balance growing demands for spending increases with his promise to eliminate the deficit by the mid-2020s.

Tax challenge

On the one hand, public services such as prisons and the NHS were struggling "in a way that they were not two or three years ago", Mr Johnson said.

On the other, the government is struggling to collect as much tax as it used to, after taking large numbers of people out of paying income tax.

"The chancellor has been unable to tackle the problems posed by the increasing numbers of self-employed and company owner managers, who pay less tax than similarly remunerated employees," Mr Johnson added.

"If high-paid jobs - and EU citizens, who are well represented among high earners in the UK - relocate elsewhere, the consequences for the Exchequer will be severe," he added.

Given the outlook, the IFS said tax rises of £30bn would be needed each year to retain public spending and balance the budget by the middle of the next decade - a Conservative Party pledge.

An extra £11bn would be required to cover social care, health and pension costs for the ageing population, the IFS said.

Higher growth?

In the Spring Statement, Mr Hammond said growth was now forecast to be 1.5% in 2018, up from 1.4% forecast by the Office for Budget Responsibility in November.

He also said debt was expected to fall as a share of GDP from 2018-19, the first drop in 17 years, and that inflation would return to 2% by the end of the year.

Image captionGrowth is now forecast to be 1.5% in 2018, up from 1.4% forecast by the Office for Budget Responsibility in November

However, Mr Johnson said the good news on borrowing would "largely wash out" over the next few years, while the structural deficit in 2019-20 would be almost unchanged.

He added that the UK economy was now 14% smaller than would have been expected, based on pre-crisis trends, while median earnings remained below their 2008 level.

"The reality of the economic and fiscal challenges facing us ought to be at the very top of the news agenda," Mr Johnson said.

"And I mean the reality, not the spin and bluster of politicians on all sides pretending there are easy solutions."

Commenting on the IFS's analysis, John McDonnell MP, Labour's shadow chancellor, said: "Despite the chancellor's spin yesterday, the IFS has revealed that there may be £30bn of new tax rises and spending cuts to come.

"Under the Tories, it won't be the richest who are hit by these tax rises and austerity cuts, but the poorest - largely families and children - who will bear the brunt of their heartless economic plans."

A Treasury spokesperson said: "Our balanced approach has reduced the deficit while also cutting taxes for over 30 million people and investing in our vital public services."