ALEX BRUMMER: Kemi’s tricky Israel trade deal

Kemi Badenoch is a brave soul pushing ahead with a far-reaching trade and services deal with Israel amid the country’s current political turmoil.

The movement to the far right in Jerusalem has unleashed a wave of brutal violence in the West Bank.

Equally important, Prime Minister Benjamin Netanyahu’s attempt to take political control of Israel’s independent judiciary has sparked backlash both within Israel, with technology companies taking the reins, and in the diaspora.

When I was in Israel less than a year ago, a senior British diplomat told me that there had been a shift in British-Israeli relations.

British diplomacy in Israel was about settlements and the two-state solution. The pendulum has swung in the direction of trade relations, start-up financing in technology and telecoms and gambling platforms.

If Business and Trade Secretary Badenoch is successful, there could be a new kind of trade deal encompassing digital, health, innovation and financial services.

Whether such a deal is politically possible is difficult to say. In the New York Times, former New York mayor Michael Bloomberg, founder of the eponymous financial trading service, warned that after two decades of supporting Israel and its people, including building medical facilities, he feared it would be a “disaster in courting’.

Bloomberg is outraged by votes in the Knesset that could undermine democracy by flouting Supreme Court decisions on press freedom, support for minorities and voting rights.

He says economic damage is already being done with the shekel, Israel’s robust currency, under attack. And he notes that some finance and tech groups are pulling back from new financing, adding, “I don’t blame them.”

The current judicial deadlock has led to the resignation of the highly independent Bank of Israel, which in recent decades has attracted a wealthy vein of governors directly from the IMF and World Bank, including Stanley Fischer, Jacob A Frenkel and Michael Bruno.

Trade between Israel and Britain is significant, at around £5 billion a year, and British companies have a clear presence. Engineers responsible for London’s Elizabeth line provide advice on Tel Aviv’s rapid transit system. And Badenoch believes there are other important infrastructure contracts to be fulfilled.

Britain thinks it can help deregulate telecoms and other industries.

And Israel has the technology for digital revolution in the NHS. None of this will happen any time soon if Netanyahu’s latest administration succeeds in undermining judicial and press freedom.

Metal fatigue

As if the city didn’t have enough trouble with the exodus of listed companies to greener pastures abroad, the London Metal Exchange (LME) is in deep water.

The events that pushed the price of nickel to $100,000 a ton after the Russian invasion of Ukraine have left scars.

The involvement of Chinese investors in a scandal at LME, owned by the Hong Kong Stock Exchange, raised questions at the time.

The LME crisis, which has a legacy dating back to 1877, is regarded by the Bank of England as one of the greatest tests of city regulation since the 2008 financial crisis.

The LME has a mixed history, including the attempt to repair the copper market in the 1990s. But it is the first UK exchange to face a full enforcement investigation by the Financial Conduct Authority.

The nickel contract has gained global significance due to the use of the metal in electric vehicle drive units. The wild swings in the market are a huge problem for global users, including auto giants.

Chaos over the LME contract is letting competitors into the space as London-based Global Commodities Holdings develops a physical contract.

This can be converted into an index that can be traded on the Chicago Mercantile Exchange (CME).

Another own goal for the Square Mile.

Double espresso

Coffee shops were all the rage in the 17th century and the London Stock Exchange and Lloyd’s of London have their origins in deals struck in the narrow streets of the city.

They are ubiquitous in the digital age, with coffee shops from Krakow in Poland to Austin, Texas brimming with techies.

So it’s no surprise that instead of selling its UK outlets, Starbucks is doubling down with a £30 million investment in 100 digitally-driven stores. Finally someone shows confidence in British technology.