London’s push to control the British Virgin Islands

This is an audio transcript of the FT News Briefing podcast episode: London’s push to control the British Virgin Islands

Marc Filippino
Good morning from the Financial Times. Today is Friday, May 6th, and this is your FT News Briefing.

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The Nasdaq nosedived on Thursday. It had its steepest drop since 2020. We’ll look at the potential reality for American women if their right to abortion is repealed.

John Burn-Murdock
Although the anti-choice campaigners like to present abortion as this incredibly dangerous procedure, the actual process of giving birth is about 60 times more likely to result in the death of a mother than the process of getting an abortion.

Marc Filippino
And we’ll talk about the debate in the British Virgin Islands over giving the UK more control of its former colony. I’m Marc Filippino and here’s the news you need to start your day.

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US stock prices plunged on Thursday, a day after the Federal Reserve raised rates a half a percentage point. Tech stocks took the brunt of the beating. The Nasdaq Composite lost about 5 per cent of its value. The broader S&P 500 lost more than three and a half per cent. One trader described yesterday’s sell-off as a capitulation trade, adding that with more monetary tightening down the pike, there’s no reason to buy the dip in equities.

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The Bank of England also raised interest rates a quarter of a point when it met yesterday. The moves aimed at fighting inflation fuelled by high energy prices. Now, the BOE has raised rates recently before this, but this time, while tightening monetary policy, the BOE also warned the UK economy will slide into a recession. The FT’s economics editor Chris Giles explains why this was a bit of a surprise.

Chris Giles
If a central bank puts out a forecast like this with a recession coming, well, then quite often they say, oh, look, we’re in a recession, is, the obvious question people would ask is, why don’t you do something about it? Isn’t your job to smooth the economic cycle? And therefore we don’t want inflation falling too much and recessions generally bring inflation right down. But in these circumstances, inflation is so high they’re basically saying we do need a recession and we are in fact going to intensify the pain on British households because it needs to be reasonably severe enough to get 10 per cent inflation out of the system. So the forecast for inflation is that it will go up to 10 per cent by the end of the year, which is a level not seen in the UK for 40 years or so.

Marc Filippino
The Bank of England’s bleak economic forecast, it hit the British currency, didn’t it, Chris?

Chris Giles
It certainly impacted the strength of Sterling. So Sterling fell basically 2 per cent in the day just because the UK numbers looked so horrible. And I think it’s going to just make people cautious that, you know, these high energy prices around western economies are going to cause a lot of pain in the year ahead. And that’s going to make it quite hard to have both growth and low inflation. But the UK will not be the only country in these, facing these difficult times.

Marc Filippino
Chris Giles is the FT’s economics editor.

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Residents in the British Virgin Islands are reeling right now. Their premier was arrested in Miami last week on drug trafficking and money laundering charges. And in the wake of the leader’s arrest, the UK proposed reimposing direct rule on the BVI, which is now known for corruption. To find out more I have the FT’s Michael Stott with me. He’s in the British Virgin Islands right now. Hey, Michael.

Michael Stott
Hello, Marc.

Marc Filippino
So before we get into it, Michael, let’s back up and do a little bit of explaining. The BVI, it has this kind of hybrid rule, right? A governor appointed by London handles defence, security and policing, but locally elected officials handle other matters. Now, under direct rule, London would have control over broader domestic affairs. Why does London want to do that?

Michael Stott
They stress very much their obligations to the islanders that they do have. I mean, the islanders are British subjects, they’re British citizens. And so the British government feels a responsibility to them. And I think the concern is if they don’t take direct rule and they leave this in the hands of the local administration, it is essentially the same people who would be coming up in the new government, as were in the old, many of them at least. And so the concern is, is that really going to address the problem or is that just sort of reshuffling the deckchairs?

Marc Filippino
So London says the islands are ungovernable and it wants to fix things. But, you know, Michael, the optics of London going in and trying to take more power, I’m not going to lie, it feels like a very colonial thing to do, right?

Michael Stott
It’s a very tough dilemma for the UK government, I think, Marc. On the one hand, this is a UK territory. The UK has a certain responsibility to the citizens in it. And the inquiry by a former appeal court judge did raise very serious red flags over the governance of the island. But on the other, as you rightly say, it looks rather colonialist. The East Caribbean states that are neighbours to the BVI issued a statement condemning the idea. The local elected politicians are very much against it. So there’s a genuine dilemma for the Foreign Office here over what to do. The minister responsible for overseas territories has just left the BVI. She was here all this week talking to islanders, getting their views. And the Foreign Office are keen to emphasise that they want to put the wishes of the islanders and the interests of the islanders above everything else.

Marc Filippino
Now, the British Virgin Islands are known as a tax haven. What would direct control from London mean for the country’s status as an offshore financial centre?

Michael Stott
Yes. They’re very concerned. So that the Commission of inquiry didn’t raise any red flags over the financial services industry. But the financial services industry has had plenty of red flags of its own, which were the ones raised by the Panama Papers and the other leaks of offshore documents, which showed that some of the 370,000 offshore companies that are registered here were used by shady individuals to conceal ill-gotten gains. Now, of course, that’s a minority of the industry, but it paints the whole industry. So they were already struggling with some reputational issues before. And the message they were trying to put forward was that the BVI cleaned up its act in terms of financial services, that it was well regulated, that it complied with all international rules. And so, of course, they’re very worried now that with the premier of the island detained on drug trafficking charges in Miami, that this is going to reflect badly on the island’s reputation as a financial centre, even though the two things are not directly linked.

Marc Filippino
Michael Stott is the FT’s Latin America editor. Thanks, Michael.

Michael Stott
Thank you, Marc.

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Marc Filippino
In the US earlier this week, a draft opinion by a US Supreme Court justice was leaked to the public. It revealed a plan to overturn the constitutional right to abortion that American women have had for the past 50 years. The FT’s chief data reporter, John Burn-Murdock, cites work by researchers at the University of California in San Francisco that show what will happen to women if they lose the choice to have an abortion.

John Burn-Murdock
They look specifically at women who sought an abortion, some of whom were granted the right to have an abortion, and others were denied based on being slightly too far into the pregnancy according to the laws of the state they were in. And what the researchers did here is they looked at that group. They followed them in the years after that decision was made. And across the board, they found that, particularly when it comes to socio-economic status, the impact of being denied an abortion is very significant. So those women who were denied an abortion ended up being much more likely to end up going further below the poverty line and ended up much more likely to end up without enough money to buy even basic necessities. They were also much more likely to end up with a poor maternal bond between them and the child who ended up being born as a result of that denied abortion. Mothers who were granted an abortion and later in the next couple of years went on to have a child out of choice. They didn’t see those impacts.

Marc Filippino
John also says that taking away the right to have an abortion will exacerbate America’s already high maternal mortality rate.

John Burn-Murdock
Although the anti-choice campaigners like to present abortion as this incredibly dangerous procedure, the actual process of giving birth is about 60 times more likely to result in the death of a mother than the process of getting an abortion. Now, of course, making that conscious choice to give birth to have a child is a beautiful thing. And I suspect they went into that process knowing there was a risk. The difference here is when someone is denied the opportunity to take control of their own destiny and their own health and to have an abortion, you’re essentially imposing upon them that 60-fold increase in losing their life as a result of going through the process of having a child.

Marc Filippino
John Burn-Murdoch is the FT’s chief data reporter.

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You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back next week for the latest business news. The FT News Briefing is produced by Fiona Symon and me, Marc Filippino. Our editor is Jess Smith. We had help this week from Joanna Gao, David da Silva, Peter Barber and Michael Lello. Our executive producer is Topher Forhecz. Cheryl Brumley is the FT’s global head of audio and our theme song is by Metaphor Music.

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