Financial Times UK - August 08, 2022 (08-08-2022)

22 Pages·2022·26.785 MB·English

NATIONAL NEWSPAPER OF THE YEAR
MONDAY 8 AUGUST 2022 UK£3.30ChannelIslands£3.40;RepublicofIreland€3.70
Scale shift Space constraints Coddling won’t help
Big Tech’s core business model is Ominous signs for those who bet Life lessons for 20-something
weakening big on warehouses employees
—RANA FOROOHAR, PAGE 21 —BIG READ, PAGE 19 —PILITA CLARK, PAGE 22
Gaza attack
Briefing
Fresh fighting
iWest’salarmrisesonTurkey-Russiaties
leaves 31 dead
Governmentshavebecomeincreasinglyalarmedat
theclosertiesbetweenthenations’leaders,raising
ariskofretaliationagainstAnkaraifithelpsRussia
avoidsanctions.—PAGE4;OLEGUSTENKO,PAGE21
APalestinianmansalvagesbelongings
fromtherubbleofhishomeafteritwas iNextpayrollrevampsparkstaxprobe
hitbyanIsraeliairstrikeinGazaCity Thefashionretailerhassaiditisbeinginvestigated
yesterday. byHMRCafterthebotchedrolloutofanewsystem
Inthemostseriousflare-upinhostili- ledtothousandsofemployeesreceivingincorrect
tiesformorethanayear,Israeliforces payments,somebelowtheminimumwage.
—PAGE10
bombedsitesintheGazaStripwhile
IslamicJihadmilitantsfiredhundreds iReviewintoNationalGridgasstakesale
ofrocketsintoIsrael.Gaza’shealthmin- Thegovernmenthassaiditwill
istrysaid31Palestinianshadbeenkilled reviewundertheNational
sincefightingbeganonFriday. SecurityandInvestmentAct
The renewed conflict has sparked the£4bnsaleof60percentof
concernsthatHamas,whichhasrunthe thebusinesstoagroupledby
GazaStripsince2007andhasgreater Australia’sMacquarie.—PAGE2
militarycapabilitiesthanIslamicJihad,
couldenterthefighting. iTuckerurgesmoveonshadowbanking
IsraelandHamashavefoughtfour FormerBankofEnglanddeputygovernorSirPaul
warsinthepast15years. Tuckerhassaidregulatorshavefailedtotackle
Crisisworsenspage6 risksandshoulddevelopacomprehensivepolicy
MahmudHams/AFP/GettyImages insteadofwaitingforglobalagreement.—PAGE2
Tory frontrunner Truss faces iUSoilgroupsdefycalltoboostoutput
Thebiggestproducershavesaidtheywillusetheir
bumperprofitsforsharebuybacksanddividends,
pushingbackagainstpresidentJoeBiden’scallfor
greaterinvestmenttoincreasesupply.—PAGE7
pressure over cost of living plan
iJapantoldtoseizeinflationopportunity
GoushiKataoka,anaggressivereflationistwholeft
theBoJlastmonthforapostatPwCConsulting,has
urgedthecountrytoseize“aonce-in-a-lifetime”
opportunitytoendthewarondeflation.—PAGE5
iEliLillysaysabortionbanwillhitjobs
3 Tax cuts pledge questioned 3 ‘Financial time-bomb’ set for October 3 Sunak in energy vow
Thedrugmakerhassaiditwilldivertemployment
outsideitshomestateofIndianafollowingthe
Republican-controlledlegislature’sdecisiontopass
GEORGEPARKER—POLITICALEDITOR “ThewayIwoulddothingsisinaCon- energy price cap, possibly topping further”thanthe£1,200hehadalready anearlytotalbanonabortion.—PAGE9
servativewayofloweringthetaxbur- £4,000,isappliedinOctober. earmarkedforvulnerablehouseholds
LizTruss,theToryleadershipfavourite, den,notgivingouthandouts.” Theformerchancellor’steamalsosay aschancelloronceitwasclearhowhigh
isunderpressuretopromisemorehelp HerallyPennyMordaunttoldSky thatthecutinNIrateswouldnothelp domestic fuel bills would rise. The Datawatch
forpoorhouseholdsfacingacrushing NewsyesterdaythatTruss’scomments thepoorest,andmostofthebenefits formerchancellorhaspromisedtocut
costoflivingcrisisthisautumn,after had been “misinterpreted” and that wouldaccruetohigherearners.“Her anaverageof£160offbillsbytemporar-
Midtermconcerns
expressingherpreferencefortaxcuts Trusswouldlookatarangeofmeasures taxcutwon’ttouchthesidesformost LizTrusshas ilyscrappingVAT. Inflationtopsthe
over“handouts”. to help poor households, alongside familieswhowillneedthemosthelp,” promisedthat GordonBrown,formerLabourprime Veryimportantissues(%ofUSadults) listofUSvoters’
BothTruss,foreignsecretary,andher planstoreversea£13bnnationalinsur- saidoneSunakally. shewillconsider minister,saidBorisJohnsonshouldcon- concernsas
rivalRishiSunak,theformerchancel- anceincrease.“She’snotruledoutall Sunak’steamsaidapersonworking further veneameetingwithTrussandSunakto Inflation November’s
lor,havebeenurgedtoexplainhowthey futurehelp,”shesaid. fulltimeonthenationalminimumwage measuresto deliver an emergency Budget and midtermelections
Gunviolence loom.Butafterthe
would help households through the Trusssaidshewouldscrapthe1.25 wouldsave£59ayear,whileapersonon makethings warnedofthe“financialtime-bomb”
SupremeCourt’s
worstincomesqueezeinmorethan60 percentage point NI rate rise, intro- medianearningsof£26,000wouldsave easierfor facingfamilies.
Healthcarecosts overturningofthe
yearsanda“financialtime-bomb”that duced by Sunak, in an emergency £170.Apersonearning£100,000would struggling TorstenBell,directoroftheResolu-
legalprotection
isprimedtodetonateintheautumn. BudgetexpectedinSeptember. savemorethan£1,000.OliverDowden, households tionFoundationthink-tank,said:“Cuts Abortionaccess
forabortion,
ButTruss,thefrontrunnertobethe But Sunak’s allies claimed that it formercabinetministerandaSunak toincometaxeswillmakelittleorno Federalbudget 55percentsay
nextprimeminister,isunderthemost wouldtakeseveralmonthstoimple- supporter, said Truss’s tax cuts were differencetolowerincomehouseholds.” deficit theissuewillbe
pressure after telling the Financial mentthetechnicalmeasuresneededto “notfittodealwiththescaleofthechal- Civilservicejobsaxedpage2 0 20 40 60 80 ‘veryimportant’at
Timeslastweekthatshewould“lookat makethechange,leavingmanyhouse- lengethatwearefacing”. Charitiesplaygreaterrolepage3 Source:KFF(July172022) theballotbox
whatmorecanbedone”butadding: holdsfacingacashcrunchwhenanew Meanwhile,Sunaksaidhewould“go TimPittpage21
UK’s government investment fund
largely backed ‘zombie businesses’
CHRISCOOK MinutesfromaBBBauditcommittee vertibleloan—debtthatthegovern-
meetinginFebruary2022includeda ment may convert into equity when
TheUKgovernment’sCovid-19venture
warningfromMistry,anexperienced companies next raise private invest-
capital portfolio has been mostly
early-stageinvestorwithseveralnon- ment. The February 2022 minutes
investedintowhatonedirectorover-
executivepositions,thattheportfolio recordoneofficial’swarningthat“the
seeingitcalled“zombiebusinesses”,
Charitieswarnofbecoming was“likely”tohave“asignificanttailof probabilityofdefault[forcompanies
leavingitwith“asignificanttailofdor-
backstopsforthestate dormant companies and it would be yettoconvert]wouldincrease...aswe
mantcompanies”,accordingtodocu-
helpful if this could be signalled in cameclosertothefirstmaturityinJune
mentsseenbytheFinancialTimes.
InBritain’smostdeprivedareas,local advancetomanageexpectations”. 2023”.
charitiesofferingfoodandsupportare TheFutureFund,a£1.1bnportfolioset TheBBBassumedinMarch2021that TheBBBminuteswerereleasedunder
beingswampedbyrisingdemand. upbythen-chancellorRishiSunakand theprobabilityofdefaultbythecompa- aFreedomofInformationActrequest.
Charityexpertswarnthatrelyingon managed by the state-owned British nies that received Future Fund debt Mistrydidnotrespondtoarequestfor
thevoluntarysectortopickupthe BusinessBank,investedin1,190compa- fromthegovernmentwas54percent, comment.AspokespersonfortheBBB
piecesofthecostoflivingcrisisrisks niesduringthecoronaviruspandemic. itsminutesshow.Thescheme,which said:“Duetotheearly-stagenatureof
entrenchinginequalityacrosstheUK. MinutesofaBBBauditcommittee was open to applications from May venturecapitalinvestments,write-offs
Theheadofoneindustrybodysaid meetinginJune2021,seenbytheFT, 2020toJanuary2021,matchedfunding are relatively high, with financial
thesectorwasincreasingly‘backfilling’ revealthatDharmashMistry,anon-ex- ofupto£5mnraisedbycompaniesfrom returnsdrivenbyanumberofhigh-
forthestatewhilesufferingitsown ecutivedirector,saidthat“mostofthe third-partyinvestorsiftheymetcertain performingoutliercompanies.”
financialheadwindsasaresultof companiesinthe[FutureFund]portfo- conditions. The government did no Itwas“encouragingthatathirdof
risingcosts. liohad...limitedchanceofgrowthtoa commercialduediligence,butreliedon FutureFundcompanieshavenowgone
SocialsafetynetiPAGE3 sufficientscaleforsuccess”andwould thejudgmentofco-investors. ontoraisefurtherprivate-sectorcapi-
thereforebecome“zombiebusinesses”. Theschemeofferedathree-yearcon- tal”,thespokespersonadded.
World Markets
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AUGUST 8 2022 Section:FrontBack Time: 7/8/2022 - 20:02 User: simon.roberts Page Name: 1FRONT, Part,Page,Edition: LON, 1, 1
2 ★ FINANCIAL TIMES Monday8August2022
NATIONAL
Government employees Energy security
Services to suffer from Whitehall cull
National Grid
gas deal to be
reviewed by
PM’splantoaxe91,000 levels“withoutharming”frontlineserv- servantssaidthatithadbecomeclear jobsoutsideLondon,”addedtheinsider. suchasrecruiting20,000policeofficers. ministers
jobswillhitworkonthe ices, but government insiders said a thatJohnsonhadmadehisannounce- Although estimates were not final- TheUK’sdeparturefromtheEUhas
reviewbyhisformerchiefofstaff,Steve ment—itwasgreetedwithenthusiasm ised,anotherWhitehallinsidersaida requiredtheexpansionoftheDepart-
frontline,claiminsiders Barclay,hadfoundotherwise. ontherightwingoftheConservative figureof£2bnhadbeendiscussedasa mentofInternationalTradetonegoti-
TheyaddedthattheBarclayreview party—withoutfullythinkingthrough workingassumptiononthecostofcom- ate trade deals, while Britain’s post-
hadledtheTreasuryto“gocold”on theimplications.“Youcanonlydeliver pulsoryredundancypayments. Brexit immigration regime has TOMWILSON
PETERFOSTERANDGEORGEPARKER
Johnson’splansafterthefullupfront 91,000 cuts by actual cuts to major The government employs 475,000 increaseddemandsonborderstaff.
Thegovernmentistoreviewa£4.2bn
Governmentplanstoaxeupto91,000 cost and impact on public services frontlineservices,”addedtheinsider. civil servants, compared with a low TheCabinetOfficesaid:“Aspeople
foreigntakeoverofakeypartofthe
civil servants over three years will emerged. But foreign secretary Liz “There’s no way you can get to that pointof384,000in2016.Thebiggest acrossthecountryarefacinghugeliving
country’sgasinfrastructureamidris-
requiredeepcutstopublicservicesand Truss,thefrontrunnertoreplaceJohn- numberthroughefficiencysavingsor growthinofficialshascomeattheMin- costs, the public rightly expect their
ingconcernsaboutenergysecurity.
costatleast£1bninredundancypay- soninSeptemberasToryleaderand reductionsinHQstaff.” istryofJustice,theHomeOfficeandthe governmenttoleadbyexampleandto
ments,accordingtoaWhitehallreview. primeminister,isbackingproposalsto Onegovernmentinsidersaidthepro- DepartmentofWorkandPensions. berunasefficientlyaspossible.” The sale of a 60 per cent stake in
BorisJohnsoninMayunveiledplans cutcivilservicecosts,andhasvowedto posalstoaxe91,000civilservantswould The demands on Whitehall have Itaddeditwastooearlytospeculate NationalGrid’sgastransmissionbusi-
forthenear20percentreductionin wage“awaronWhitehallwaste”. involve“seriouscuts”tostaffatHM increased in recent years, partly on how the reductions in headcount nesstoaninternationalconsortiumled
headcount,andinJunesaidhecould One Whitehall insider who has Revenue&Customs,theBorderForce becauseofthecoronaviruspandemic wouldbemade. byAustralia’sMacquarie,theworld’s
“prune”backthecivilserviceto2016 workedontheplanstocut91,000civil andprisons.“Andyoucouldn’tprotect butalsoowingtogovernmentpolicies Opinionpage15 largestinfrastructureinvestor,istobe
reviewedundertheNationalSecurity
andInvestmentAct.
TheinterventioncomesasRussia’s
Infrastructure. Environment
invasionofUkraineandsoaringfuel
priceshavefocusedattentiononwho
Climate change adaptation a ‘national priority’ controls energy infrastructure and
sourcesofsupply.
TheNSIAct,whichcameintoforceat
thestartoftheyear,expandedthegov-
ernment’spowertoscrutiniseforeign
purchasesofcompaniesin17sensitive
areasoftheeconomy,includingenergy,
Policymakersurgedtogive
defence,transport,datainfrastructure
andcommunications.
greaterattentiontothethreat
The National Grid, which manages
posedbyextremeheat the national electricity transmission
networkintheUK,saidthereviewproc-
esshadbeenexpected.Initsannual
CAMILLAHODGSON report,theFTSE100companysaidthe
ANDPHILIPGEORGIADIS saleofitsgastransmissionbusinesswas
ThewildfiresthatbrokeoutacrossLon- subjectto“certainantitrustandregula-
doninJulydestroyed14homesinthe toryconditions”andwasexpectedto
easternboroughofBarkingandDagen- closeinthesecondhalfofthisyear.
ham, where authorities evacuated ThedealmeanstheMacquarie-led
about200people. consortiumwilltakeover7,660kmof
Byeveningonthedayofthefires, pipestransportinggastoheathomes
mostresidentshadreturnedhome,but andpowerindustryacrossBritain.The
somehadnowheretogobackto.“Alot consortiumsaidthedealwassubjectto
of[residents]didn’thaveinsurance,” a“rangeofcompetitionandregulatory
saidDarrenRodwell,leaderofBarking approvals”, including a review under
andDagenhamcouncil. theNSIAct.“Weareworkingwiththe
Theunprecedentedheatwavethathit relevant bodies to progress these
theUKlastmonthsenttemperatures approvals,”itsaid.
above40Cforthefirsttimeonrecord, Macquarie is already a significant
unleashed blazes across the country, investorintheUK,havingspentabout
andbroughttrainstoastandstill. £50bnonBritishutilityinfrastructure
It was “quite extraordinary”, said overthepast15years.
MikeKendon,climatescientistatthe In2017,itacquiredhalfoftheUK’s
MetOffice,addingthatitwas“notgoing eight local gas distribution networks
tobethelasttime”ithappened. fromNationalGridfor£5.4bn,inacon-
Climatechangewillmeanwetterwin- sortiumofinvestorsthatincludedthe
ters and hotter summers in the UK, Qatari and Chinese sovereign wealth
resultinginmorefrequentandintense funds.NationalGridhasbeenseekingto
weather events, including heatwaves shift its business from fossil fuels
andfloods. Losthomes: EnvironmentalconsultancyParity Thecostsofsuchaninitiativewould Nineofthe ruptedduringtherecentheatwave,as towardslower-carbonpower.Lastyear,
Thisyear,manypartsofthecountry propertiesin Projectshasestimatedthatretrofitting be enormous, and even that ignores ownerNetworkRailwasforcedtoclose itboughtWesternPowerDistribution,
top10
haveexperiencedsomeofthelowest Dagenhamstand alldomesticpropertiesinLondonalone similar schemes for non-residential linesforsafetyreasons. theUK’slargestelectricitydistribution
rainfallonrecordwithlastmonththe badlydamaged wouldcost£98bn. buildings,whicharelikelytobemore hottestUK TransportforLondonhasalsohigh- business,for£7.8bnfromPPL.
driest July in England since 1935, afterfiresbroke Heat-proofing the country would complextoretrofit. lighted the risks associated with Agovernmentofficialsaidthereview
dayson
according to provisional Met Office outduringthe “require huge investment”, said Bob Hospitals, for example, need to extremeheatforthefunctioningofthe wasstandardprocedureforaforeign
data. Some water companies in the heatwavelast Ward, from the Grantham Research remainoperationalwhileworkisbeing recordhave capital’stransportsystem.Lastyear,it takeoverofthissizeintheenergysector.
southhavealreadyimposedhosepipe month Institute on Climate Change and the done,whichpresentsa“hugelogistical warnedthatalackoffundingwould In a statement, the Department for
occurred
bans, and environment secretary W8Media/SplashNews Environment. “I don’t think govern- challenge”,saidStuartBowman,devel- “undercut”itsabilitytoprepare“fora Business,EnergyandIndustrialStrat-
George Eustice called on others to mentortheprivatesectorhasquite opmentdirectoratBreatheEnergy,an since1990, changingclimate”. egysaidthegovernmenthadthepower
implementurgentrestrictions. prepared itself,” he added, saying engineeringcompanythathasworked Ward said infrastructure operators to“monitorandinterveneinacquisi-
according
But while British policymakers thatadaptingneeded“tobeanational onseveralNHSretrofits. hadnotbuiltheatresilienceintoinvest- tionswherenecessary”.
rampedupplansandcommittedbil- priority”. But with the changes in summer totheMet mentplans.“Thecountryhasjustnot Ministershave30workingdaysto
lionsinfundingtocombatfloodingin Inahighlycriticalreportlastyear,the weatherincreasinglyapparent—nineof cometotermswiththehugebutun- considertheMacquariedeal,although
Office
2020followingaseriesofstormsthat ClimateChangeCommitteewarnedthat thetop10hottestUKdaysonrecord avoidablecostofadapting,”headded. thatcanbeextendedbyuptoanother
damaged properties, the threat of governmentplanningforadaptingto haveoccurredsince1990,accordingto Wildfires present another growing 45.TheSundayTelegraphfirstreported
extremeheathasreceivedlessatten- climatechangehadfailed“tokeeppace the Met Office — the government risk.Thewaythefiresmovedintourban thatthedealwasunderreview.
tion. withtheeffectsofawarmingplanet”. insisteditwastaking“robustaction”to areasduringJuly’sheatwavewassome- TheUKgovernmentdoesnotrou-
Whenitcomestohotweather“what Thecommitteefoundthatproperties prepareforclimatechange,andhada thingnewfortheUK,duetoacombina- tinelyinformthepublicwhenitchooses
wearereallygoodatisforecastingand continued“tobebuiltwithoutresilience “cross-government adaptation pro- tion of the high temperatures, low toreviewatransactionundertheact.
warning”,saidNigelArnell,professorof toheat”,andhighlighteda“substantial gramme which considers climate humidity, windy conditions, and dry ButinMay,businesssecretaryKwasi
climatesystemscienceattheUniversity gapinaddressingoverheatinginexist- impacts on all policy areas”. For vegetation. Kwartengsaidthegovernmentwould
ofReading.ButbuildingsintheUKcope inghomesandhealthandcarefacili- instance,ministersapprovedbuilding Thefirerisktourbanareascouldbe reviewthetakeoverofNewportWafer
badlyinhottemperatures“becauseour ties”. regulationsinJunedesignedtoprevent mitigated in part by behavioural Fab,amanufacturerofsiliconwafers
builtenvironmenthasn’tbeendesigned Lastmonth,theHouseofCommons overheating,thoughtheyonlyapplyto changes — keeping gardens clear of usedinsemiconductors,bytheDutch
tocopewith[them]”,headded. business,energyandindustrialstrategy newresidentialbuildingsinEngland. overgrownvegetation,forexample.But subsidiary of Chinese company
Adaptingtoclimatechangeisataskso committee said it was “urgent and Future-proofinginfrastructure,such CaraLabuschagne,senioranalystatthe Wingtech.
vastandamorphousthateventheCli- essential”thatministerslauncha“fully astrainlines,alsopresentsahugechal- ClimateChangeCommittee,saidthatto Thegovernmentwasduetomakea
mateChangeCommittee,whichadvises funded,nationalcampaigntoinsulate lenge.Partsoftherailnetwork,which dealwithallthechallengesrequired“a decisionontheacquisitionofNewport
thegovernment,hasbeenunabletoput people’shomes”,tokeepthemwarmin was designed to withstand tempera- visionforawell-adaptedUK”. WaferFabbyNexperiainJuly,butthen
anoverallfigureonthecost. winterandcoolinsummer. turesofupto35C,wereseverelydis- Reinsurerspage8 extendedthereview.
Regulation
Former BoE deputy urges swift action on shadow banking
MAKE A WISE
LAURANOONAN failedtoagreeacomprehensiveglobal “Continuingtorelyontargetingspe- ingtobe“safe”tohaveliquidityinsur-
INVESTMENT
framework. cific things won’t work,” he told the ancewiththeBoEsoastomakeitpossi-
Britishfinancialregulatorshavefailed
TuckertoldtheFinancialTimesthe FinancialTimes.“Itmeanswaitinguntil bletopay100percentoftheirshort-
to tackle risks outside traditional
Subscribetodayat UKandothercountries’failuretoprop- somespecificactivity...isobviouslya termobligationsimmediately.
banking and should now develop a
ft.com/subscribetoday erly tackle risks in shadow banking threattostability,butbythenthatpart Thosebusinessesthatdidnothave
comprehensiveUKpolicyinsteadof
couldcomebacktohauntthem.“[It oftheindustryhasthelobbyingpower, theinsurancewouldnotbeabletomar-
waiting for an international agree-
leadsto]increasedfragility,”hesaid, especiallyinWashingtonDC,toslowor ket their products as safe, and the
ment,accordingtoaformerBankof
describinghowlightlyregulatedbond stopapolicyinitiative.” investmentscouldnotbeaccountedfor
FINANCIALTIMES Englanddeputygovernor.
Reproductionofthecontentsofthisnewspaperin fundsandcryptocurrenciesthatmarket TuckermadethecasefortheUKto as“safe”onthefinancialstatementsof
BrackenHouse,1FridayStreet,LondonEC4M9BT. anymannerisnotpermittedwithoutthepublisher’s SirPaulTuckeraccusedtheBoEofinad- themselves as “safe” places to put haveabroadpolicythatwouldcompel companiesthatboughtthem.
priorconsent.
equate regulation of the so-called moneycouldunraveliftherewasacrisis companiesbehindinvestmentsclaim- Tuckersaidglobalregulatorsshould
Publishedby:TheFinancialTimesLimited,
BrackenHouse,1FridayStreet, ‘FinancialTimes’and‘FT’areregisteredtrademarks shadow banking sector at a private ofconfidenceintheirvalue. havebegunactingdecisivelyonshadow
LondonEC4M9BT. ofTheFinancialTimesLimited. eventlastmonth,whichwasattended MakingthecasefortheUKtopush bankingaboutfiveyearsago,whenit
Tel:[phone]
bygovernorAndrewBaileyandsomeof aheadwithcomprehensiveregulationof wasclearthathugeamountsofnewly
Editor:RoulaKhalaf TheFinancialTimesanditsjournalismaresubjectto
aself-regulationregimeundertheFTEditorialCode hispredecessors.Tucker’sslidesfrom shadowbanking,Tuckeradded:“Airing printedcentralbankmoneywasfuel-
SubscriptionsandCustomerService ofPractice:www.ft.com/editorialcode theeventhostedbytheBoEhavesince the possibility of single jurisdictions lingthesector’sgrowth.
Tel[phone];[email protected];
beenpublishedonline. movingontheirownobviouslyisnot HewasalsocriticaloftheBoEFinan-
www.ft.com/subscribenow Reprints
Shadow banking involves a broad comfortable...But what if another cialPolicyCommittee,setupduringhis
AreavailableofanyFTarticlewithyourcompany
Advertising logoorcontactdetailsinsertedifrequired(minimum rangeofentitiesthatdobanking-type decadepasseswithoutageneralpolicy, timeatthecentralbanktomonitorrisks
Tel:[phone];[email protected] order100copies). activity,andincludesbondfunds,pri- andthensomemassivepartofshadow tothefinancialsystem,fornotspeaking
Letterstotheeditor
vatelendersandcompaniesinvolvedin bankingunravels?” outenoughonshadowbanking.
[email protected] One-offcopyrightlicencesforreproductionofFT
Executiveappointments articlesarealsoavailable. cryptocurrencies. InareferencetotheRussianinvasion AspokespersonfortheBoEsaid“sig-
Tel:[phone];www.exec-appointments.com The Bank for International Settle- ofUkraine,Tuckersaidthestakes“are nificantprogress”hadbeenmadeon
Forbothservicesphone02078734816,or
ments—theglobalumbrellabodyfor highgivencurrentgeopoliticaldiscord”, monitoringnon-banks,intheUKand
Printedby alternatively,[email protected]
Newsprinters(Broxbourne)Limited,Hertfordshire, centralbanks—inDecemberwarnedof andthewestcouldill-affordanothercri- internationally.
Newsprinters(Knowsley)Limited,Merseyside, Newspaperssupportrecycling theneedtomoretightlyregulatethe sis.TuckerurgedattendeesattheBoE “Giventheglobalnatureofthesector,
Newsprinters(Eurocentral)Glasgow,andIrishTimes, TherecycledpapercontentofUKnewspapersin shadow banking sector, which now eventtoditchthecentralbank’scurrent to bring about effective reform this
Dublin,Ireland 2018was69.2%
accountsfornearlyhalfofallfinancial policyofregulatingspecificrisksassoci- work and subsequent policy action
©CopyrightTheFinancialTimesLimited2022.All assets. ated with shadow banking as issues PaulTucker:saysBoEshouldact shouldbeco-ordinatedacrossjurisdic-
rightsreserved. However,somecountrieshavesofar becomepressing. nowratherthanwaitforcrises tions,”addedthespokesperson.
Monday8August2022 ★ FINANCIAL TIMES 3
NATIONAL
Charities play greater role in social safety net
Experts warn bigger reliance on voluntary sector for social provision risks entrenching inequality, as poorer areas are least-well supported
PETERFOSTER—ISLEOFSHEPPEY £200mnNationalLottery-fundediniti-
ativecalledBigLocal.
TheIsleofSheppeyontheThamesestu- InKirkby,themoneyfundedNorth-
aryisrankedamongthemostdeprived woodTogether,acommunityproject
areasofBritainand,likemillionsofpeo- thathassupportedeverythingfroma
plelivingonlowincomes,itsresidents “pop-up”second-handclothesshopto
aregrapplingwiththerisingcostoffood fooddrop-insandcookingclasses.
andfuel.Allarebracedforevenharder LisaCover,communitydevelopment
timesthiswinter. manager,saidthepandemichadhitthe
Inapubcarparkontheislandearly poorestfamilieshardestbecausemany
onemorninglastweek,asmallgroupof reliedonthegreyeconomyorpart-time
localsstoodclutchingshoppingbags, jobsthatwerenotcoveredbygovern-
awaitingthearrivaloftheSheppeySup- mentjobsupportschemes.
portBus,amobilecommunitysuper- Thegroup’sfooddrop-in,whichis
marketthatofferssurplusfoodandfree supportedbydonationsfromthelocal
fruitandvegetablesfora£3.50-a-week MorrisonsandLiverpoolFootballClub,
subscription. isopenallday.And,unlikesomelocal
“It’sabitofalifesaver,”said66-year- governmentservices,itcomeswithno
oldDavidFuller,wholivesonamonthly stringsattached.“Westartedtogetalot
pension of less than £1,000. “Every- of discreet inquiries, saying ‘Do you
thinghasgoneup—food,gas,electric havetobeonbenefitstocome?’andwe
bills—butpayhasstayedthesame. explain,‘No,justcomeondown’,”said
Three years ago I didn’t need some- Cover.“It’softenworkingpeopleyousee
wherelikethis,butnowIdo.” nowthataren’tcoping.”
Itisanincreasinglyfamiliartaleas A group of Northwood Together
foodbankusageshootsupacrossthe boardmembers,whoareallfromthe
UK;butthesponsors’logosontheside area,saidtheBigLocalschemehadbeen
ofthedouble-deckerSheppeySupport invaluableforfamiliesontheedgeof
Bus tell a less well-understood story destitutionwhoarenowdreadingthe
abouthowthecharitableandvoluntary Commercialincomefromthepublichas Strugglingcommunitiesattract Surginginflationmeansbenefitsfor comingwinter,withaverageannualfuel
sectorisnowanintegralpartoftheUK’s becomeincreasinglyimportanttocharities lesscharityfunding workingfamiliesandtheunemployedare billspredictedtoexceed£4,000early
socialsafetynet. areatlowestlevelinmorethanadecade nextyear.
Sourcesofcharityincome, Combinedgrantfundingperheadin225
Afteradecadeofausteritythatsaw AllyMiddleton,boardchair,saidgov-
localgovernmentfundscutbyathirdin financialyearending(100=2007/08) Commercial 'leftbehindareas'*ofEngland,2021(£) Realvalueofbenefits(100=April2010) ernmentsupportofupto£1,200forthe
income
realtermsandthevalueofmanywel- 150 £12.23averageforEngland poorestfamilieswiththeirenergybills
110
farebenefitsfallingtoa“historiclow” Public Statepension “won’tfeellikeittouchesthesides”for
donations
accordingtotheJosephRowntreeFoun- 125 Pensioncredit householdsthatwerealreadyindebt.
100
dation,charitiesareplayinganincreas- Sheerness,IsleofSheppey Sheaddedmanychildrenweregoing
Other
ingroleinhelpingpeopletomakeends 100 hungryatholidaytimeswithoutschool
Govtgrants
meet. 90 Unemployment dinners. She recalled one boy who
Govt
benefit(basicrate)*
Butthecharitabletop-upcomesonly 75 contracts Northwood,Knowsley attendedaneventand,aftereatinghis
inareas,suchasSheppey,thatarefortu- 80 Childbenefit hotdog,quietlycameupandaskedifhe
nateenoughtohaveavolunteernet- 50 2022:Impactofinflation couldtakesomethingforhisbrother
work.Toomanyothers,expertsinthe 2008 10 11 12 13 14 15 16 17 18 19 20 0 10 20 30 40 50 60 70 80 2010 14 16 18 20 22 whowasathome,andhungrytoo.
voluntarysectorwarn,arebeingleft *Wardsrankedintheworst10percentin *IncludesJobseekersAllowance,UniversalCredit(excludinguplift)and AsinSheppey,theteamofvolunteers
behindandtheoutlookisbleak,with Graphic:AlanSmith boththeOCSICommunityNeedsIndexand EmploymentandSupportAllowanceatbasicrates.Excludesthetemporary inNorthwoodarefullofenthusiasmfor
theBankofEnglandlastweekforecast- Sources:ProBonoEconomics;OCSI;JosephRowntreeFoundation IndexofMultipleDeprivation(IMD)2019 £20aweekuplifttoUniversalCreditfromMarch2020–October2021 whattheyhaveachieved,whilerecog-
ingaprotractedrecessionandtheworst nisingitismadenecessarybecauseofa
squeezeonlivingstandardsin60years. Welcomerelief: foundthatinthefirstquarterof2022, ‘Recentlya moreequalpartnership.“Weneeda grassrootsempowermentcanbefound wageandwelfaresystemthatleavestoo
TheSheppeySupportBuswasthecre- theSheppey 4.9mnfewerpeoplehaddonatedover newcivilcontractbetweengovernment inNorthwood,themostdeprivedpartof manypeople,includingsomeofthosein
regular
ation of the Oasis Charitable Trust, SupportBus the past 12 months, compared with andthevoluntarysector;onebuilton Kirkby,asatellitetownofLiverpool. work,fallingthroughthecracks.
whichrunsalocalacademyschool.The providesfood beforethepandemic. cameinand respectandtrustratherthanservitude,” Theareaisoneofthe150poorestparts “Itmayonlybeastickingplasterbut
trustpulledtogetheranetworkofback- forasmall But experts warn the more funda- headded. oftheUKthatwereselectedtoreceive atleastwe’restoppingpeoplebleeding
burstinto
ers to provide the service, including subscription. mentalissueaboutincreasedreliance LikeonSheppey,anotherexampleof £1mneachover10yearsaspartofa out,”saidMiddleton.
charitiessuchastheSalvationArmy Below, oncharitiesforsocialprovisionisthatit tearsand
andFeedingBritain,supermarketchain Northwood risks entrenching inequality because
tookouta
WmMorrisonfromtheprivatesector, Togetheroffers manyofthepoorestareasnationwide
andlocalparishandboroughcouncils. anumberof areleast-wellsupportedbycharities. hugegasbill
Lynne Clifton, the Salvation Army servicessuchas Parliamentary research looking at
for£2,000’
officeronSheppey,saidthebusalso cookingcourses England’s225most“leftbehind”neigh-
lookedtoprovidewraparoundservices, AnnaGordon/FT;Northwood bourhoodsfoundthatpeopleinthose
LynneClifton,
includingdebtcounselling,helpwith Together areas received, on average, £7.77 in
SalvationArmy
literacyandmentalhealthservices. nationalcharitablegrantfundingper
“Recently a regular came in and I head,wellbelowthenationalaverageof
couldtellshedidn’tlookherusualself,” £12.23.Halfreceivedlessthan£5.
shesaid.“Whenwehadawordsheburst “We know the charitable sector is
intotearsandtookoutahugegasbillfor much stronger in richer areas,” said
£2,000.Wewereabletohelpwithmeter LordGusO’Donnell,formercabinetsec-
reading and dealing with her energy retaryandchairofProBonoEconomics.
company.” “Inpoorerplacesthechancesofhaving
Everyone involved in the Sheppey communityhelpthroughthecharitable
SupportBusenthusiasticallylaudsits sectorismuchweaker,andtheamount
workhelpingfamiliesthatcannolonger ofgivingislower,soyou’reinavicious
cope, often after getting deeper into circle,reinforcinginequality,”
debtasaresultoftheCovid-19pan- Desforges is equally concerned.
demic.Butexpertswarnthatrelyingon “You’rerelyingonthosepeoplewhoare
the voluntary sector to pick up the already living difficult lives, so it’s
pieces risks overstretching it and almosttheoppositeoflevellingup,”she
entrenching deep-seated inequality said,referringtoBorisJohnson’sflag-
acrosstheUK. shippolicytoreduceregionalinequali-
MaddyDesforges,chiefexecutiveof ties.Theoutgoingprimeministerwas ‘Everything
theNationalAssociationforVoluntary driveninpartbyasharpshiftinthe
hasgoneup
andCommunityAction,whosemem- numberofseatswonbyhisConserva-
berssupportabout200,000localchari- tivepartyfromLabourinpoorpartsof —food,gas,
tiesandvoluntarygroupsnationwide, theUKatthe2019generalelection.
electricbills
saidthesectorwasincreasingly“back- Johnsonhassoughttocapitaliseon
filling”forthestate.“Thestateisrelying thecommunityspiritthatcametothe —butpay
onvolunteersinawayIdon’tthinkis foreduringthepandemic.Hecommis-
hasstayed
helpful,”sheadded.“So,ofcourse,dur- sionedareportfromConservativeMP
ingthe[Covid-19]pandemicvolunteers DannyKrugeronhowcharitiesmight thesame’
steppedinbutoneofmyworriesisthat helpwithlevellingup.
thestateisnowturningtovolunteersto But,astheUKawaitsanewprime DavidFuller
shoreupservices.” minister next month, there is broad
Thefirstchallengeofrelyingonchar- scepticisminthesectoraboutthegov-
itytofillgapsleftbythegovernmentis ernment’scommitmenttoreducingine-
thatthesamecostoflivingcrisisthatis qualities.
heapingdemandonthesectorisalso The government said it recognised
crampingitsabilitytoraisefunds.Char- theregionalinequalities,whichwaswhy
itiesarealsobuffetedbythesameeco- itwas“pressingfullsteam”aheadwith
nomicheadwindsasbusinesses:rising itslevelling-upagendawhileofferinga
energybills,tightlabourmarketsand £37bnpackageofemergencysupportto
inflationeatingawayattherealvalueof householdstotackleimmediatecostof
donations. livingissues.“Byinvestingintheareas
AnalysisbyProBonoEconomics,a thatneeditmost,improvingschools,
think-tank that supports charities, supportingregenerationandgenerating
showedthatevenbeforethecurrentcri- higher-paidjobs,wewillimprovethe
sis,thesectorwasbecomingincreas- livesofthepoorestinareasacrossthe
inglyreliantonpublicfundraisingasthe UK,”itadded.
valueofgovernmentcontractsfell. However,Krugersaidthenextprime
And the cost of living crunch is ministerurgentlyneededtotacklethe
already affecting donations, which issue more aggressively, perhaps by
totalled£10.7bnlastyear.Aregularsur- usingsomeofthealmost£1bnofdor-
vey by the Charities Aid Foundation mantassetsintheUKfinancialsystem
to endow a community wealth fund.
“Fixingthisisaboutmoneyandpower:
money for social infrastructure and
powerforlocalplaces,”headded.
WillTanner,directorofOnward,a
centre-rightthink-tankthathashelped
toshapethelevelling-upagenda,said
empoweringlocalvolunteerswascru-
cialbecausetheywereoftenbetterat
deliveringservicespeopleneededthan
centralorlocalgovernments.
Steve Chalke, founder of the Oasis
Trust,agreedbutsaidthegovernment
shouldrecognisethattopromotemore
collaborationssuchasthatonSheppey
itneededtoworkwithcharitiesina
4 ★ FINANCIAL TIMES Monday8August2022
IINNTTEERRNNAATTIIOONNAALL
Nuclear complex Co-operation pledge
Ukraine attack raises radiation leak fears
West’s alarm
mounts over
Turkey’s
KyivandMoscowdeflect attack. No radiation leaks were Rafael Mariano Grossi, director- delivertheindispensableassistanceand tiesaroundZaporizhzhia.”Headded:
blameformilitaryaction reported. But the mounting concern general of the International Atomic impartialassessmentthatisneeded.” “This is a serious and irresponsible growing ties
aboutthethreatcameasthesituationat EnergyAgency,saidonSaturdayhewas TheZaporizhzhiaplantisoneoffour breach of nuclear safety rules and
afterstoragefacilityhit Ukraine’sBlackSeaportshadappeared “extremely concerned by the shell- operating nuclear power stations in anotherexampleofRussia’sdisregard
with Russia
tobeeasing,withanotherconvoyofves- ing...whichunderlinestheveryreal Ukraine,inadditiontothedecommis- forinternationalnorms.”
selscarryingagriculturalexportsset- risk of a nuclear disaster that could sioned Chernobyl facility, site of the Theheightenedtensionaroundthe
ROMANOLEARCHYK—KYIV
tingsailyesterday. world’sworstnuclearaccidentin1986, nuclearplantcameasUkrainereported
ArtillerybarragesstruckEurope’slarg- Russia’sInterfaxnewsagencyyester- ‘Russiannuclearterror whenthecountrywasunderSovietrule. thatfourmorecommercialvesselscar-
est nuclear power station, located in dayquotedRussianoccupationforces Followingaphonecallyesterdaywith ryingUkrainiangrainforexporthad LAURAPITEL—ANKARA
requiresastronger
Russian-occupiedterritoryinsouthern whoaccusedUkraineofconductingthe European Council president Charles yesterdaysailedfromportsintheOdesa AMYKAZMIN—ROME
ALICEHANCOCK—BRUSSELS
Ukraine, at the weekend, sparking shellingandconfirmedthatalocation responsefromthe MicheltodiscussthesituationatZapor- region.
JAMESPOLITI—WASHINGTON
internationalfearsovertheriskofradi- nearthespentnuclearfuelstorehad izhzhia,UkrainepresidentVolodymyr Theyfollowthefirstfourshipments
ationleaks. been hit. But, in a statement, Ener- internationalcommunity’ Zelenskyysaid:“Russiannuclearterror ofUkrainiangrainthroughtheBlack Western capitals are increasingly
The shelling on Saturday damaged goatom said the Russians had fired requiresastrongerresponsefromthe SeathatsetofflastweekaspartofaUN alarmedatthedeepeningtiesbetween
radiationsensorsafterstrikingclosetoa rocketsattheplant. threatenpublichealthandtheenviron- internationalcommunity:sanctionson andTurkey-brokeredagreementaim- Turkey’s President Recep Tayyip
storagefacilityforspentfuelatZapor- Thedevelopmentfollowstwoshelling mentinUkraineandbeyond”. the Russian nuclear industry and ingtobreakRussia’smonths-longnaval ErdoğanandVladimirPutin,raising
izhzhia nuclear plant, Energoatom, incidentslatelastweekthatprompted Yesterday,hesaidinatweetthat“the nuclearfuel.” blockadeofUkrainiantrade. theriskofretaliationagainstAnkaraif
Ukraine’sstatenuclearpowerholding the UN’s nuclear safety watchdog to IAEA team must go to Zapor- JosepBorrell,theEU’sforeignpolicy AdditionalreportingbyMehulSrivastava ithelpsMoscowavoidsanctions.
company,saidyesterday. soundthealarmandcallforateamof izhzhia...Wecanputtogetherasafety, chief,saidinatweetonSaturday:“The inOdesa SixwesternofficialstoldtheFinancial
Eachsideblamedtheotherforthe independentexpertstogototheplant. security and safeguards mission and EUcondemnsRussia’smilitaryactivi- SeeOpinion Timestheywereconcernedaboutthe
pledgemadebytheTurkishandRus-
sianleaderstoexpandco-operationon
tradeandenergyonFriday.
Asia. Military exercises
AnEUofficialsaidtheblocwasmoni-
toringTurkish-Russianrelations“more
China-Taiwan tension threatens global trade and more closely”, while one senior
western official suggested countries
couldcallontheircompaniesandbanks
topulloutofTurkeyifErdoğanfollows
throughontheintentionsheoutlined
on Friday — a highly unusual threat
againstafellowNatomemberstate.
Blockadeoftheislandwould
ThreeEuropeanofficialssaidtheEU
haveahugeeffectonsupply hadnotyetheldanyofficialdiscussions
about possible repercussions; several
chainsandshippingactivity otherswarnedthatitwasunclearwhat
ErdoğanandPutinhadagreedandthat
a formal EU decision on sanctions
WILLIAMLANGLEY
against Turkey would be challenging
ANDCHANHO-HIM—HONGKONG
THOMASHALE—LONDON givendivisionsinsidethebloc.
China’smissilelaunchesintoTaiwan’s ButevenwithoutanEUagreement,
coastalwaterslastweekhaveunder- someindividualmemberstatescould
linedtheriskstoglobalsupplychains takeaction.“Forexample,theycould
fromanysustainedescalationoftension askforrestrictionsontradefinanceor
betweenBeijingandTaipei. ask the large financial companies to
Themilitaryexercisesinresponsetoa reducefinancetoTurkishcompanies,”
visitbyUSHouseSpeakerNancyPelosi oneofficialsaid.“Iwouldnotruleout
toTaiwanresembledarehearsalfora anynegativeactions[if]Turkeygetstoo
blockade of the export-dependent closetoRussia.”
island,overwhichBeijingclaimssover- The hints at potential retaliation
eignty,withsomecargoshipsforcedto against Turkey come after Ukraine
adjust course and airlines cancelling interceptedadocumentfromMoscow
flights. thatoutlineswaystohelpRussiaevade
Threeofthesixareasblockedofffor sanctions through Turkish banks,
theexercisesareinorneartheTaiwan accordingtoaUkrainianintelligence
Strait,thebodyofwaterbetweenthe officialandawesterndiplomat.
island and Chinese mainland that is Washington has warned repeatedly
only130kmwideatitsnarrowestpoint. thatitwillhitcountriesthathelpRussia
TheStraitistheprimaryshippingroute to evade sanctions with “secondary
betweenChinaandJapan,theworld’s sanctions”targetingviolationsbeyond
second and third-biggest economies, the US legal jurisdiction. US deputy
respectively,andEurope.Italsoserves TreasurysecretaryWallyAdeyemomet
asatradingroutefortechnologypower- TurkishofficialsandIstanbulbankers
houseSouthKorea,carryingmanufac- inJunetowarnthemnottobecomea
turedgoodsfromthefactoriesofAsiato conduitforillicitRussianmoney.
manyoftheworld’sconsumers. DeputyRussianprimeministerAlex-
“InanenvironmentwhereChinatries Straitahead: of the world and in global supply peionThursdayandFriday.Korean ‘Inthe alreadyannouncedthesuspensionof anderNovaksaidTurkeyhadagreedto
totakeamoreassertiveroleandtriesto touriststake chains,”HominLee,Asiamacrostrate- mediaalsoreportedthatAsianaAir- thousandsofagriculturalimportsfrom payforRussia’sgasinroubles,according
eventofa
blocktheStrait...it’llbehugelydis- photographson gistatLombardOdier,wroteinanote. linescancelleditsflightsbetweenSeoul theisland.“Intheeventofadisaster to Interfax. Putin and Erdoğan dis-
ruptive,”saidAnoopSingh,principal PingtanIsland, Halfoftheglobalcontainerfleetand andTaipei,whileHongKong’sCathay disasterI thatactuallyshutdownTaiwanfora cussedfurtherdevelopingbankingties
analystatshipbrokerBraemar.“Every- China,the 88percentoftheworld’slargestships Pacific said it was “monitoring the periodoftime,reallyIdon’tknowhow inroublesandlira,headded.
don’tknow
thingwillgetimpacted.” closestpointto bytonnagepassedthroughtheStrait developmentsveryclosely”. the global supply chain for the tech Erdoğantoldjournaliststherewere
China’smilitarydrillsintheStraitand Taiwanonthe thisyear,accordingtodatareportedby Any prolonged attempt to impede howthe industrycouldsurvive,”saidDanNyst- also“veryseriousdevelopments”onthe
the East China Sea last week, which mainland Bloomberg. internationalcommercefromTaiwan, edt,vice-presidentatTriOrientInvest- useofRussia’sMirpaymentcardsys-
global
weresignificantlybroaderinscopethan NgHanGuan/AP While live fire exercises are “an withseveralofthemainmilitaryexer- ments.“You’vegotatleast$3tn-$4tn tem,whichhesaidwouldhelpRussian
wargamesstagedduringthelastsuch extremelycommoneventatsea”,they ciseshappeningneartwooftheisland’s supply worthofworkthat’snotgoingtoget touristspayforshoppingandhotels.
crisisin1995and1996,wereonlysched- are usually restricted to less heavily mainports,wouldhurtglobaltrade. done,potentially.” Westernofficialsfeartheycouldalsobe
chainfor
uledtolastafewdays.Butanalystssaid traffickedareas,Braemar’sSinghsaid. Taiwanisacruciallinkinglobaltech- PaulTsui,managingdirectorofHong usedtohelpbypasssanctions.
the manoeuvres could initiate a sus- Headdedthat1mnbarrelsofcrudeoil nologysupplychains.TaiwanSemicon- thetech Kong-based logistics services group Turkeyisdeeplyintegratedintothe
tained period of heightened tension andoilproductsnormallypassthrough ductorManufacturingCoaccountsfor JanelGroup,whichservescompanies western financial system and brands
industry
acrosstheStrait. theStraitperday.“Thiswateristypi- 90percentoftheworld’scutting-edge suchasGeneralElectric,saidsomecli- fromCoca-ColatoBPhavelongstanding
BeijingclaimsPelosi’svisit,thefirst callyvery,verycongested.” chipcapacity,whiledownstreamelec- could entshadraisedconcernsaboutdisrup- andoftenhighlyprofitableoperations
byaSpeakertoTaiwanin25years,was Singhsaidheknewofatleasttwobig troniccontractmanufacturers,suchas tionstobusinessfromPelosi’svisitto inthecountry.Theseniorwesternoffi-
survive’
partofa“hollowingout”ofWashing- shipownersthathadaskedvesselsto ApplesupplierFoxconn,producecom- Taiwan.“IftensionsintheTaiwanStrait cialsuggestedgovernmentscouldask
ton’s“OneChina”policy,underwhich avoidtheStraitfollowingreportsoflive ponentsandassembleproductsfrom doescalate,costandtransittimeswould westerngroupsto“eitherpulloutof
theUSrecognisesBeijingasthesolegov- fireinthearea.“Mostothersarelikely smartphonestoserversforsomeofthe hikesignificantly[and]couldbeeven relationships in Turkey or to shrink
ernmentofChinaandacknowledges, tofollow[their]lead,”headded. world’sbiggestcompanies. worse than Covid disruptions,” said theirrelationshipswithTurkey”.But
butdoesnotaccept,itsclaimtothe Elsewhere in Asia-Pacific, Japanese Furthercross-Straitfalloutcouldbe Tsui. suchamovewouldprobablyfaceoppo-
island. shippinggroupNYKLineissuedawarn- devastatingforTaiwan’seconomy,with AdditionalreportingbyKathrinHillein sition.“Thereareverysignificanteco-
“ProlongedorregulardrillsintheTai- ing to avoid the Strait, while South 40percentofitsexportsgoingtoChina Taipei,SongJung-ainSeoul,EriSugiurain nomic interests that would probably
wanStraitcouldcreatesignificantdis- Korean carrier Korean Airlines can- andHongKong,accordingtofigures TokyoandMaiqiDinginBeijing fight hard against such negative
ruptionsinTaiwan’stradewiththerest celledallflightsbetweenSeoulandTai- from Capital Economics. China has LeoLewisseeLetterspage actions,”saidoneEuropeanofficial.
US politics
Democratic senator defends stance on private equity tax perk
AIMEWILLIAMS—WASHINGTON tivesinthiselectioncyclealone,repre- competitiveness”. The spokesperson sionbeganattractingheadlinesin2007,
CAITLINGILBERT—NEWYORK sentingabout10percentofherfund- added:“Atatimeofrecordinflation,ris- whenataxlawprofessorpointedoutin
WhenthecentristDemocraticsenator raising from individual donors. This inginterestratesandslowingeconomic anacademicjournalthata“quirk”inUS
KyrstenSinemagavethegreenlight includesindividualdonationstotalling growth,disincentivisinginvestmentsin taxlawallowedsomeoftherichestpeo-
thisweektomoveforwardwiththe $54,900 from executives at KKR, Arizona businesses would hurt Ari- pleto“paytaxontheirlabourincomeat
much slimmed-down version of her $35,000 from Carlyle, $27,300 from zona’seconomyandabilitytocreate alowrate”.
party’slong-awaitedclimateandtax Apollo, $24,500 from Crow Holdings jobs.” Democratsestimatedthattheirpro-
bill,hercolleaguessighedwithrelief. Capital and $23,300 from Riverside Sinema,whowieldsoutsizeinfluence posaltoclosethecarriedinterestloop-
Partners. inaSenatesplit50/50alongpartylines, hole would raise a relatively modest
However,Sinema’sassentcamewitha SinemaisnottheonlyDemocratto hasbeenafrequentobstacletoDemo- $14bninrevenue,butthetaxprovision
notableproviso:scrappingthepromise havereceivedfundsfromtheprivate crats’legislativeplans,refusingtoback isworthlargesumstothepersonalfor-
toendanotorioustaxloopholeallowing equityindustry.Executivesatgroups variouspastiterationsoftheBuildBack tunesofinvestmentexecutives.
privateequityandhedgefundmanag- includingBlackstone,KKRandLazard Betterbill,nowrenamedtheInflation Private equity executives at Black-
erstolowertheirtaxbills. havecollectivelydonated$1.28mnto ReductionAct. stonestoodtoreceivecloseto$500,000
MAKE A WISE INVESTMENT Atfirstsight,thedecisiontoinsiston NewYorksenatorChuckSchumer,the Theso-calledcarriedinterestprovi- incarriedinterest-basedpayasatthe
keepingaprovisionthatbenefitssome topDemocratintheSenate,represent- endoflastyear,assumingtheirinvest-
oftheUS’swealthiestpeopleseemsafar ingabout4.4percentofhisfundraising mentsweresoldattheiryear-end2021
cryfromtheconcernsofvotersinSin- fromindividualdonorsthiscycle. value,accordingtofilingsanalysedby
ChoosetheFinancialTimessubscriptionforyou ema’ssouth-westernhomestateofAri- AspokespersonforSchumersaidhe theFT.
zona.However,aFinancialTimesanal- was“alongtimechampionofclosingthe Whiletheproposaltoclosethecar-
• Reacttotrustedglobalnewseverywhereyou
ysisshowsthatthesenatorisabenefici- carried interest loophole”, adding he riedinterestprovisionispoliticallypop-
go,withft.comandFTapps
aryofsignificantcontributionsfromthe had“workeduntiltheveryendtotryto ularamongvoters,accordingtopolitical
• GettheiconicFTnewspaperdeliveredtoyour
privateequityindustrywhoselobbying keeptheprovisioninthelegislationand consultancyBeaconPolicyAdvisors,it
homeorofficefromMondaytoSaturday
• Enjoyouraward-winninglifestylejournalism machineandpoliticalinfluencehave willcontinuetoseekopportunitiesto isnotachargedenoughissuetochange
withFTWeekend grownincreasinglypowerfuloverthe eliminateit”. votingpatterns.
pasttwodecades. AspokespersonforSinemasaidshe “Carriedinterestistheepitomeoftax
Subscribetodayatft.com/subscribetoday
AccordingtoFederalElectionCom- hadbeen“clearandconsistentformore lobbying,”saidBenKoltun,directorof
mission filings, Sinema has received thanayearthatshewillonlysupport researchatBeacon.“Therearesome
morethan$500,000incampaigndona- taxreformsandrevenueoptionsthat KyrstenSinema:aimstosupport taxesthatalotofpeoplecarealittle
tionsfromprivateequitygroupexecu- supportArizona’seconomicgrowthand investmentsinArizonabusinesses about,butafewpeoplecarealotabout.”
Monday8August2022 ★ FINANCIAL TIMES 5
INTERNATIONAL
Putin’s spectre
‘[Italymust]
stepup
looms large effortsto
combat
interference
over Italy’s fromRussia
andother
autocracies
snap election inour
politics,in
oursociety’
MarioDraghi
Speculation grows over whether
Russia helped bring down Draghi
AMYKAZMIN—ROME Conte.Contewasagitatedbyarecent
partysplitandeagertoshoreuphiscre-
Facetime:
ItaliancabinetministerMaraCarfagna, dentialsasananti-establishmentrebel.
MatteoSalvini,
aformerMissItalycontestantandtele- SalviniandBerlusconiwereeyeing
leaderofItaly’s
visionpresenter,haslongbeenoneof pollsthatshowedthembothbleeding
rightwing
themostprominentfacesinSilvioBer- supporttoGiorgiaMeloni’sincreasingly
League,appears
lusconi’sForwardItalyparty. popularfar-rightBrothersofItaly,but
onTVshow
ButCarfagna,ministerforterritorial alsopoisedfordecisiveelectionvictory
‘PortaaPorta’
cohesion, has abandoned the former iftheyteamedupwithMeloni.
againstthe
mediatycoonoverhisroleinthecol- ButItaliananalystssaythatamidthe
backdropofa
lapseofMarioDraghi’sgovernment— domesticpoliticalcalculations,geopo-
pictureof
andhersuspicionthataforeignhand liticalfactorsloomed.“It’safactthat
VladimirPutin
wasbehindit.Defectingtothecentrist Draghiwastakendownbythethreepar-
MassimoDiVita/Mondadori
Actionparty,Carfagnasaidsheneeded ties that have the closest ties to the
Portfolio/GettyImages
“thecertaintyofbeinginapartywhere Kremlin,”NathalieTocci,directorofthe
noonewilldreamofplottingwithRus- Rome-basedInstituteofInternational
siaorwithChinatothedetrimentofthe Affairs,said.
currentgovernment”. After Russia’s invasion of Ukraine,
Herbeliefthatglobalgeopoliticslies DraghiturnedhisbackonItaly’stradi-
behind Italy’s political crisis is not tionallyclosetieswithMoscow.Hewas
uncommon.EversinceDraghi’sgovern- at the forefront of the EU’s tough
ment imploded last month, Italians responsetotheKremlin,pushingsanc-
havespeculatedoverwhetherRussian tionsagainstRussia’scentralbankand
president Vladimir Putin helped to championingUkraineasacandidatefor
scripttheprimeminister’soustingas EUmembership;astancethatdiscom-
paybackforhistoughstandoverthe fitedmembersofhisnationalunitygov-
invasionofUkraine. ernment.
Thetrioofpoliticiansthatpulledthe “Important politicians like Salvini
plugonDraghi—theanti-establishment andBerlusconiclearlyhavesentiments
FiveStarMovement’sGiuseppeConte, offriendshipandtieswithRussia,espe-
therightwingLeague’sMatteoSalvini ciallywithPutin’sRussia,”saidStefano
andBerlusconi—areknownfortheir Stefanini,Italy’sformerambassadorto
Nato.
‘It’safactthatDraghiwas InMay,Salviniannouncedplansfor
hisown“peacetrip”toMoscoworgan-
takendownbythethree
isedbytheRussianembassyinRome.
partiesthathavethe The trip was cancelled amid public
angerandanoutcryfromotherpartsof
closesttiestotheKremlin’
thegovernment.
ButlastweekLaStampa,aleading
historicallyfriendlyrelationswithPutin Italiandaily,reportedthattheLeague’s
andhisUnitedRussiaparty. discussionswithMoscowdidnotstop
Althoughanalystssayallthreelead- there.Inafront-pageexposé,itcited
ershadconvincingdomesticpolitical leakedintelligencedocumentsclaiming
rationalesfortheirdecisions,thathas thatRome-basedRussiandiplomatOleg
not quelled speculation that Moscow KostyukovaskedatopLeaguerepre-
colludedwithdisgruntledmembersof sentative in May whether the party
Draghi’scoalitiontotaketheprimemin- would withdraw ministers from
isterdown. Draghi’scabinet.
In his final speech to parliament “Whatisstrangeandweirdisthatin
beforehisresignation,Draghiwarned May,therewasnobody,noobserver,in
thatItalyhadto“stepupeffortstocom- ItalytalkingaboutthefalloftheDraghi
batinterferencefromRussiaandother cabinet,notsoquicklyatleast,”Jacobo
autocraciesinourpolitics,inoursoci- Iacoboni,whowrotetheexposé,toldthe
ety”,thoughhegavenodetails,nordid FinancialTimes.
he explicitly suggest a foreign plot Salvini has dismissed La Stampa’s
againsthim. reportas“fakenews”.Moscow,too,has
Yetthatideaisatthecentreofthe rejectedthereport.
campaignrhetoricforSeptember’ssnap “Thisisnottrue.Russiahasnothing
election.“Italianshavearighttoknowif todowithdomesticpolicyprocessesin
PutinisbehindDraghi’sfall,”thecentre- Italy,” Kremlin spokesman Dmitry
leftDemocraticparty(PD)wroteina Peskovsaid.
tweetlastmonth. ButvariousItalianrivalpartiesand
CarloCalenda,leaderofAction,which independentanalystshavecalledforthe
hopestowoo moderate centrist voters mattertobeinvestigated.
disillusioned withBelusconiandwary “I think this deserves a proper
ofthefarright,hascalledtheSeptember inquiry,”saidTocci.“Towhatextent
25poll“achoicebetweenanItalythatis weretheseministersencouragedbythe
oneofthegreatcountriesofEuropeor Kremlintovoteagainstthegovernment
anItalyalliedwith[Hungarianpresi- orhavetheirministersresign...There
dentViktor]OrbánandPutin”. isawarbeingfoughtagainstEurope,
Draghi,theformerEuropeanCentral andyouhaveanenemystatethatistry-
Bankchief,resignedonJuly21,afterthe ingtomeddleinyourdemocraticproc-
FiveStarMovement,theLeagueand ess.Whethertheyaresuccessfulornot,
ForwardItalywithdrewsupportforhis youshouldbeworried.”
leadershipamidacrisistriggeredby AdditionalreportingbyMaxSeddon
Monetary policy
Japan has ‘once-in-lifetime’
chance to end deflation war
KANAINAGAKI—TOKYO advancedeconomy.AfterJapan’seco-
nomicbubbleburstin1990,thecountry
Japanneedsaboldermonetaryandfis-
becamelockedintoaviciouscycleof
calstimulustoseize“aonce-in-a-life-
slow growth and stagnant or falling
timeopportunity”fromglobalinfla-
prices,leadingtoapersistentlackof
tionary pressures to end its war on
demand.
deflation,accordingtoaBankofJapan
“Japanisatanimportantcrossroads
boardmemberwhorecentlyleftthe
wherethetrendinpricescoulddramati-
centralbank.
callychangeifboththegovernmentand
TheBoJhascomeundermarketpres- theBankofJapantookboldmeasures”
sureinrecentmonthstoreassessits toexpandfiscalandmonetarystimulus,
ultra-easymonetarypolicyascentral Kataokasaidinhisfirstinterviewsince
banks globally race to raise interest leavingtheBoJ’sboard.“Thisisaonce-
ratestotameincreasingfoodandcom- in-a-lifetimeopportunityfortheBoJ.”
modityprices.WithJapaneseinterest When hedge funds piled up short
ratesstillatminus0.1percent,adiver- positions on Japanese government
genceinglobalyieldsearlierthisyear bondsinJune,theBoJwasforcedtosig-
senttheyentoa24-yearlowagainstthe nificantlyincreasebondpurchasesto
USdollar. enforceacapon10-yearbondyieldsat
But Goushi Kataoka, an aggressive closetozero,apolicycalledyieldcurve
reflationistwholefttheBoJboardlast control.Whilesomecriticshavecalled
monthandwasappointedPwCConsult- ontheBoJtowidentheyieldcurveto
ing’schiefeconomistinJapan,warned addressdistortionsinthefinancialsec-
thatanyattempttoweakenthecentral tor,Kataokasaidfixingthebondyieldat
bank’seffortstohitandsustainits2per zeroatatimewhenglobalratesareris-
centinflationtargetwouldhaveserious ingiscrucialinincreasingtheeasing
consequences for Asia’s largest impact.
6 ★ FINANCIAL TIMES Monday8August2022
INTERNATIONAL
Pandemic Middle East
Lockdown traps Chinese tourists in resort
Israeli strike
kills second
Islamic Jihad
Tensofthousandscaught Saturday.Publictransportwassus- island,accordingtostatemedia.Itwas Covidoutbreakshaveparalysedcities ingcollapsed28percent,accordingto
inrestrictionsatcity pended,travellerswereremovedfrom notimmediatelyclearwhenthemeas- acrossthecountry. governmentstatistics. leader as Gaza
planes on the tarmac and motorists ureswouldbelifted. Sanya, the main destination in WhileattemptingtosuppressCovid
dubbedcountry’s‘Hawaii’ wereturnedroundfromcheckpointsat Avideocirculatedonsocialmediaofa Hainanprovince,isfamousforitsfive- insidethecountryvialockdowns,mass
crisis worsens
the exits of the beach town of 1mn, localofficialatSanyaairport,protected starbeachresortsandduty-freeluxury testingandotherrestrictions,Beijing
accordingtolocalnewsandsocialmedia byaringofpolice,usingamegaphoneto shopping.Hainanhaspreviouslybene- has also severely curtailed inbound
RYANMCMORROW—BEIJING
reports. tellthrongsofstrandedtravellersthat fitedfromBeijing’sCovidrestrictions, travelforbothcitizensandforeigners.
Chineseauthoritieshastilylockeddown China’s state broadcaster CCTV theywouldbebookedintohotelsfor whichpreventedwealthyChinesefrom Thenumberofflightsintothecountry
thesoutherncoastalcityofSanyaover reportedonFridaythattheoutbreak freeratherthanbeingallowedtoleave. holidayinginThailandorEuropeand each day has plunged from pre-pan- JAMESSHOTTER—JERUSALEM
the weekend, trapping tens of thou- wasattributabletotheinfectiousBA.5 “Wewanttogohome,gohome,go drivinghigh-endspendingathome. demiclevels,andtheaviationregulator
AnIsraeliairstrikehaskilledasenior
sandsofholidaymakersafterahighly Omicronsub-variant,whichhasdriven home,”thecrowdchanted,spurringthe ButtheSanyalockdownwillmarkthe hasintroducedpoliciestoautomatically
figureinthemilitantgroupPalestinian
infectiousOmicronstrainofcoronavi- thereintroductionofrestrictionsincit- officialtoflee. latestblowtoChina’stourismindustry suspend routes if a flight breaches a
IslamicJihad,amidthemostserious
ruswasdetectedintheprovinceknown iesacrossChinaandbecomethedomi- PresidentXiJinpinghasvowedtopri- andeffortstoboosttheailingeconomy thresholdofCovidcases.
flare-upinhostilitiesbetweenIsrael
as“China’sHawaii”. nantstraininwesterncountries. oritise eradicating coronavirus out- throughconsumerspending.Theecon- TheCivilAviationAdministrationof
andmilitantsintheGazaStripformore
Covid-19 cases in China’s Hainan Movementshavebeenrestrictedto breaks to protect China’s population omynarrowlymissedacontractionin China,theregulator,announcedaslight
thanayear.
provinceroserapidlyovertheweektoa emergencyservicesandvisitorswillbe over the economy. Since freeing the thesecondquarter. relaxationoftheautomaticsuspension
cumulative828,forcingauthoritiesto requiredtotakefivenucleicacidtests financialhubofShanghaifromatwo- Inthefirsthalfoftheyear,tourist policyyesterday. Overthepastthreedays,Israeliforces
abruptlyannouncealockdownearlyon withinsevendaysinordertoleavethe month lockdown in June, sporadic tripsfell22percent,whiletravelspend- AdditionalreportingbySunYuinBeijing haverepeatedlybombedsitesinGaza—
an impoverished stretch of land
hemmedinbetweenIsraelandEgypt
thatishometomorethan2mnPalestin-
Brazil. Presidential race
ians — while Islamic Jihad militants
have fired hundreds of rockets into
Bolsonaro hopes economy will be election boon Israel.
Accordingtothehealthministryin
Gaza,31Palestinians,includingsixchil-
drenandfourwomen,havebeenkilled
since the fighting began. No Israeli
deathshavebeenreported.
Israel said yesterday that among
Reboundingrowthwillhelp
thosekilledwasKhaledMansour,who
therightwingleaderbut commandedIslamicJihad’soperations
inthesouthofGazaandwastargetedby
inflationremainsstubborn anairstrikeonSaturday.Hiscounter-
partinnorthernGaza,Taysiral-Jabari,
waskilledbyanIsraelistrikeonFriday,
BRYANHARRIS—SÃOPAULO
triggeringthelatestroundoffighting.
MICHAELPOOLER—VITÓRIA
Theescalationisthesharpestsince
IsabeldaCosta,arestaurantmanagerin IsraelandHamas,themilitantgroup
SãoPaulo,isconflictedaboutthestateof thatrulesGaza,foughtan11-daywar
theBrazilianeconomy.Ononehand, lastyear.
shesayssheseesastrongbounceback Israel said it had launched the air
fromthecoronaviruspandemic,with raids in response to an “imminent
newbarsandbusinessespoppingup threat” from Islamic Jihad, following
acrossthecity. daysoftensionsparkedbythearrestof
Ontheother,shesays,soaringlevels anotherseniormemberofthegroupin
ofinflationhaveundercutanysense theoccupiedWestBanklastweek.
thatlifeisimprovingfortheaveragecit- IslamicJihad,anIran-backedgroup
izen.“Peoplearecomingback.Newbars foundedinthe1980s,respondedbyfir-
and restaurants are opening and the ingabarrageofrocketsintoIsrael.
publicisstartingtoconsumeagain.But Israel’s prime minister, Yair Lapid,
inflationisahugeproblem.Everything said yesterday that the military was
istooexpensive.” continuingstrikeson“terroristtargets
Asthecountrygearsupforelections andoperatives,andtothwartrocket-
inOctober,theeconomyisdominating launchingsquads”,adding:“Thisopera-
thenationaldebate.Insurveys,voters tionwillcontinueaslongasnecessary.”
have repeatedly ranked economic Gaza’s health ministry said that in
issues as the most important, above additiontothe31Palestiniandeaths,
crime and corruption, which figured “Israeliaggression”wasresponsiblefor
prominently in previous elections. injuriesto265people.
RightwingpresidentJairBolsonarowill AnIsraeliofficialsaid17militantshad
behopingthatrecenteconomicdata beenkilled.Israeliofficialsalsosaidthat
willboosthischances,sayanalysts. oneincident,inwhichchildrenwere
Drivenbyastrongreboundinthe Streetanger: youneedtohaveforabusiness,itends controversy,notablyhisperceivedmis- ‘The bylocalbanksandpredictedBrazil killedintheJebaliyarefugeecampin
servicessector,Brazil’seconomyisnow publicsector upbeingverydifficult.” handlingofthepandemic.Hisrejection wouldgrow2.1percentthisyear. northernGaza,wastheresultofarocket
economyin
forecasttogrow1.7percentthisyear,a workers, Bolsonarohasrecognisedtheimpor- rateis53percentamongvoters. “Of course [the banks] are wrong. launchedbyIslamicJihadmilitantsmis-
substantial improvement from as carryinga tanceofgivingcitizensaboost.Last ArmandoCastelar,aneconomistat 2022is Eithertheyarewrongortheyaremili- firingandfallingshortofitstarget.
recentlyasJanuary,whenprominent cut-outofJair month, his government passed a the Brazilian Institute of Economics, tantpolitically.Theyaretryingtoaffect Yesterday morning, Islamic Jihad
shapingup
bankspredictedarecession. Bolsonaro R$41bn ($7.7bn) spending package, saystheimprovingeconomyandspend- theelection,”GuedestoldtheFinancial fired rockets towards Jerusalem, but
Spurredbythefullreopeningfollow- depictedasfilm whichwillincreasemonthlycashpay- ing package will make “the election tobebetter Timeslastyear.“Itismorelikelythat theywereinterceptedtothewestofthe
ing Covid-19 restrictions, unemploy- character mentstoBrazil’spoorestby50percent moredisputedthanpollssuggest”. Brazilhassomegrowthandresilient citybyIsrael’sIronDomedefencesys-
thanfeared’
menthasfallenbelowdoubledigitsfor Edward toR$600untiltheendoftheyear,in “Theeconomyin2022isshapingup inflation[in2022]thanlowerinflation tem. Rockets fired towards Tel Aviv,
thefirsttimesinceJanuary2016,and Scissorhands, additiontocreatingfuelsubsidiesfor tobebetterthanfeared.Theunemploy- andnogrowth,”hesaidatthetime. Israel’sMediterraneanbusinesshub,on
servicessectoractivityhasreachedits protestin truckandtaxidrivers. mentrateisfallingsurprisinglyfastand CamilaAbdelmalack,aneconomist Saturdaywerealsointercepted.
highestlevelsince2015,accordingto Brasíliaagainst Butthepresidentstillfacesanuphill alotofthishastodowiththerecoveryof withVeedhaInvestimentos,pointedto AspokespersonforIsrael’smilitary
governmentdata. salarycuts battletowinre-election.Astudyfrom services,whichhasbeenthelastsector effectivegovernmenteffortstostimu- saidthat,asofyesterdaymorning,580
—Eraldo
Yet,at11.4percentannually,inflation Peres/AP Datafolhashowedhimtrailinghismain torecoverafterthepandemic,”hesaid. late growth — including allowing rocketshadbeenfiredatIsrael,adding
remainshigh.Despitelargelysuccessful rival,leftwingformerleaderLuizInácio Service sector activity — which employees to withdraw cash from a that97percentofthe450thathad
governmenteffortstotampdownthe LuladaSilva,by18percentagepoints. accountsformorethan60percentof mandatory redundancy fund — even reacheditsskieshadbeenintercepted.
costoffuelthroughtaxcuts,foodprices Otherpollsinrecentweeksshowedthe grossdomesticproduct—expandedby beforethespendingpackagepassed. ThefightinginGazahassparkedcon-
havealsocontinuedtorise,hurtingthe formerarmycaptainappearingtonar- 9.4percentthisyearuptoMay,fuelled ForPauloAlbertoSeibel,a58-year- cernsthatHamas,whichhasrunthe
tensofmillionsofpoorBrazilianswho rowthegaptolessthan10percentage byareboundintransport,tourismand oldbusinessmanwhorunsabooming GazaStripsince2007andhasgreater
struggletoputfoodonthetable.The points. restaurants,accordingtoofficialgov- brickfactoryintheinteriorofcoastal militarycapabilitiesthanIslamicJihad,
priceofcarrotsandpotatoeshasrisen “Itisafactthatacountrythatisdoing ernmentstatistics. stateEspíritoSanto,Bolsonarodeserves could enter the fighting. Israel and
about70percent,whilethatofmilkhas welleconomicallytendstore-electits Brazilalsoreceivedaboostfromhigh creditfortheimprovingeconomy. Hamashavefoughtfourwarsinthepast
increasedmorethan30percentinthe presidents.Therecenteconomicindica- commoditypricesasaresultofthewar “Theysaythatthecountryisn’tgrow- 15years.
past12months. torscanhelpBolsonaro,butit’shardto inUkraine,whiletighteningmonetary ing,”hesaid.“Well,wecan’tmanufac- As of yesterday Hamas had not
“There’saphenomenontoday,which say whether they will be enough to policy weighed less on growth than tureenough.”Despitebeingadiehard joined, although spokesman Hazem
ismorejobsbutlowerincome,withsal- changeenoughmindstogivehimavic- expected,Castelaradded. supporterofthepresident,however,he QasemissuedastatementsayingIsrael
ariescorrodedbyinflation,”saidSérgio tory,”saidFelipeNunes,founderofpoll- ThebrighteroutlookforLatinAmer- cannotignorethepinchfrominflation: was “deluded” in thinking it could
Vale,chiefeconomistatMBAssociados. sterQuaest. ica’s largest economy will vindicate “Ifdieselwasabitcheaper,thingswould “undermine the growing resistance
AccordingtodaCosta:“Whenyou Electedin2018asapopulistoutsider, financeministerPauloGuedes,wholast beevenbetterstill.” acrossPalestinebyassassinatingPales-
addingas,electricity,rent,everything Bolsonaro’sfirsttermwasmarkedby yeardismissedforecastsofarecession AdditionalreportingbyCarolinaIngizza tinianresistancecommanders”.
Africa
China role viewed as key battleground by rivals vying for Kenya presidency
ANDRESSCHIPANI—NAIROBI mademuchofthehighcostoftheeast up3percentofthecountry’sgross whichhaverisenfrom$4.1bnto$6.4bn couldbeconvertedsotheyhadlonger DespitethecampaignfocusonChina,
Africancountry’sborrowingfromBei- domesticproduct.Chinahasembarked overthepastfiveyears,accordingto repaymentperiodsandlowerinterest HannahRyder,chiefexecutiveofDevel-
Thetwomengoingheadtoheadto
jing,whichitisnowstrugglingtoserv- on a 20-year lending spree that has officialnumbers. ratestoreleasemoneyfornewdevelop- opmentReimagined,anAfrica-focused
becomeKenya’snextpresidentagree
ice.Theirfocushighlightsthecentral madeBeijingAfrica’slargestsourceof As prime minister, he negotiated mentprojects,hesuggested. consultancywithheadquartersinBei-
ononething:Chinaisattheheartof
roleChinahasoccupiedduringtheelec- developmentfinanceandabigfinancier dealswithChinaincludinga$3.8bnrail- Ruto,bycontrast,hasmadeclearthat jing,saidtherehadasyetbeennosigns
tomorrow’selection.
tioncampaign. of legacy infrastructure projects in waylinkingtheportofMombasawith heis“notlookingatnegotiatingany ofanti-ChinasentimentinKenya.
FordeputypresidentWilliamRutoitis Chineseworkersareanincreasingly KenyaundercurrentpresidentUhuru Nairobithathasbeencriticisedoverthe debt”,referringtoexistingborrowing. “Iwouldbesurprised,verysurprised,
thespreadofChinesenationalsincities, commonsightincitiesandalargepro- Kenyatta,whoisstandingdownafter alleged opaqueness of its financial Kenya’s total external public debt ifwhoeveriselecteddoesnotquickly
manyofwhomaretryingtoearnaliving portionofrepaymentsfordebtsracked servingtwotermsandisbackingOdinga terms.Odingasaidheintendedtorene- topped$36.7bn,or34.4percentofGDP, trytoengageChina,”saidRyder.
selling local street food dishes. And upoverthepastdecadeareowedtoChi- afterfallingoutwithRuto. gotiate loans with some creditors, attheendoflastyear,puttingthecoun- Opinionpollsputthecandidatesina
formerprimeministerRailaOdingahas neselenders.Totaldebtservicingeats SpeakingtotheFinancialTimes,Ruto includingChina,ifhewon.Someloans tryat“highriskofdistress”,according deadheat,andanalystsexpectarunoff
defendedhissharpcriticismofsome totheIMF.Chinaisamongthetoplend- followingtheelection.Towinoutright,a
Chinesearrivals,includingathreatto ersbuttrailsbehindmultilateralcredi- presidentialcandidatemustwin50per
LegalNotices
deportthosewhosetupsmallretail tors.AnAfrobarometerpollfromlate centplusonevotewhilesecuring25per
businessesorsellpopularstreetfood lastyearshowedthat87percentofKen- cent of the votes in the majority of
dishessuchasroastedmaize. yanrespondentsfelttheircountryhad Kenya’s47counties.
“That’smyposition,”hesaid,reaf- overborrowedfromBeijing. Astheelectionhasneared,candidates
firmingthecommentshemadeduringa Onlyrecently,Kenyattainaugurated havesoughttomakecleartheirdiffer-
campaigneventinNairobiinJunethat thecountry’sfirstpublic-privatepart- ences.WhiletheymayagreeonChina
“wehaveenoughaeroplanestodeport nershiproadproject,a$588mnhighway beingakeyissue,Odingasuggestedthat
thembacktowheretheycamefrom”. inNairobiwithpagoda-liketollbooths hewouldoptfordialogueoverdeport-
Hiscommentscomeatatimewhen thatwasdesigned,financedandbuilt ingworkersifhebecamethecountry’s
Kenyans are struggling to cope with usingChinesefunds. nextpresident.
inflationatafive-yearhighof8.3per Any change in Nairobi’s stance “IftheChineseofferbettertermsand
centinJuly. towardsBeijingwouldmarkashiftin alsobetterpricesforthegoodsandserv-
Odinga, who is making his fifth toneandpolicy,sayanalysts,making icesthatwewant,wewillcontinueto
attempt to be elected president, has Rallyingcry:WilliamRutoaddresses tomorrow’svoteoneofAfrica’smost dealwiththeChinese,”hesaid.“We
focused on Chinese loans to Kenya, supporterslastweekinThika importantelectionsthisyear. don’tseethatChinaisathreat.”
Monday8August2022 ★ FINANCIAL TIMES 7
Sanction enforcement The west faces a clear choice on fossil fuels: it must stop fuelling Putin’s war machine y
OLEG USTENKO, PAGE 21
US oil and gas
Merck says it
Fragmentation fears ECB injects billions of
obeys tax law
euros into the weaker bloc debt markets
producers
despite probe
by Senate
reject pleas to
JAMIESMYTH—NEWYORK
open the taps DrugmakerMerckhasdefendedthe
company’sapproachtotaxafteraUS
congressionalcommitteeaccuseditof
exploitingloopholestoavoidpaying
billions of dollars and blocking an
inquiryintoitspractices.
ChieffinancialofficerCarolineLitch-
3Operators defy Biden’s investment call fieldsaidthecompanyoperatedwith
thehighest“ethicsandintegrityinabso-
3Dividends and buybacks take priority lutelyeverythingwedo”andwascon-
tinuingtoco-operatewiththeSenate
financecommittee’sinvestigation.
MerckisoneofseveralUS-basedmul-
JUSTINJACOBS—HOUSTON backtoshareholdersratherthaninvest tinationalcompaniesthathavecome
innewproductionthatwouldhelptame under scrutiny from the committee,
America’slargestoilandgasproducers prices. EuropeanCentralBank:thebankhaspoured€17bnintoItalian,SpanishandGreekmarkets whichisinvestigatinghowBigPharma
—MichaelProbst/AP
arekeepingalidonsupply,defyingcalls Overthepastdecade,theUSshale usesacombinationofoffshoresubsidi-
fromtheBidenadministrationtolift industry became notorious for free- aries,taxexemptionsandlegalloop-
outputevenassoaringfuelpricesdriven wheelingspendingthatdeliveredrising ECB’sPEPPreinvestmentsfocusonsouthernEurope holestoslashtheirtaxbills.
by Russia’s war in Ukraine deliver output but inflicted heavy losses on In2021,thecompanypaidaneffec-
Netpurchases,JunetoJuly2022(€bn)
bumperprofits. shareholders and plunged companies tivetaxrateof11percent,almosthalf
Top shale oil and gas producers deepintodebt. -15 -10 -5 0 5 10 theUScorporatetaxrateof21percent.
includingConocoPhillips,PioneerNat- Theapproachnowbeingadoptedhas Germany Almosthalfofitssalesweregenerated
ural Resources and Devon Energy slowedthecountry’soilsupplygrowth intheUS,accordingtocompanyfilings.
Netherlands
unveiledsharprisesinsecond-quarter comparedwithrecentyearswhencom- “Fromataxperspective,weoperateand
profitsthismonthashighcrudeandgas moditypriceswereelevated.TheUSis France complywithnotonlythewordsoftax
pricesfilledtheindustry’scoffers. producingabout12.1mnbarrelsadayof lawbutthespiritoftaxlawineachand
Butexecutivessaytheyremainunder crude,accordingtotheEnergyInforma- Greece every country in which we operate,”
pressurefromWallStreettoreturnthe tionAdministration.Thatisupabout Litchfieldsaidinaninterview.
Spain
windfalltoinvestorsthroughdividends 800,000b/dfromayearago,butstillshy Litchfield’scommentsfollowblister-
andsharebuybacksratherthanspend- ofpre-pandemichighs. Italy ingcriticismofMercklastweekfrom
ing heavily to increase production. Thegrowthinoutputthisyearhas Democrat Ron Wyden, the Senate
primarilybeendrivenbyprivateopera- Selectedcountries financecommitteechair,whoaccused
Source:ECB
‘Unlessshareholderssay torsnotunderthesamekindofshare- thecompanyofstonewallingthecom-
holderpressuretocapinvestment. mittee’sinvestigationintothetaxpoli-
wedonotlikethesebig
OccidentalPetroleumsaysitisstill NIKOUASGARI meltdownasitpullsbackfromthe asmuchas2.4percentagepointsin ciesofUSpharmaceuticalcompanies.
dividends,Iseenoreason focusedonpayingdownmoreofthe accommodativemonetarypolicythat June,alevellastseenduringthemar- Merckhadtwicedeclinedtoprovide
TheEuropeanCentralBankisusing
debtittookontobuyAnadarkoPetro- hassupportedtheblocsincethedebt kettumultintheearlydaysofthe informationtothecommitteeandis
tochangeourstrategy’ itspandemic-erabond-buyingpro-
leumin2019andliftingitsdividend. crisisadecadeago. pandemicin2020. choosingtokeepsecrethowmuchofits
gramme to shield highly indebted
Fornow,itseesploughingmoneyinto ItcomesaftertheECBlastmonth Thespreadhassincenarrowedto profitsarereportedbyoffshoresubsidi-
eurozonecountriesfromtheeffects
“Unlesswehaveshareholdersthatcome its own shares as a better bet than raisedinterestratesforthefirsttime about2.1percentagepointsafterthe ariesfortaxpurposes,hesaid.
ofitsdecisiontounwindstimulus
inandsay:look,weabsolutelydonot expandingoutput.“Wedon’tfeelthe since2011aftermakingthedecision ECBcommitteditselftopushingback “Thereappearstobeasubstantialdis-
programmes in its bid to fight
likethesebigdividends;wedonotlike need to grow production,” said chief to conclude the PEPP programme, againstfragmentation.TheECBlast crepancybetweenwhereMerckgener-
inflation.
yoursharerepurchaseprogramme;we executiveVickiHollub.“Wefeellike and a longer-running bond-buying month said flexibility in deploying atesprescriptiondrugsalesandwhere
wantyoutogobacktoagrowthmodel,” one of the best values right now is Thecentralbankconcludednetpur- schemecalledtheassetpurchasepro- PEPP reinvestments would be the Merckbooksprofitsfromthosedrug
RickMuncrief,chiefexecutiveofDevon investmentinourownstock.” chases under its pandemic emer- gramme. “firstlineofdefence”initsattemptto salesfortaxpurposes,”headded.
Energy,oneofthebiggestshaleproduc- BillionaireinvestorWarrenBuffett’s gencypurchaseprogrammeinMarch, Sven Jari Stehn, chief European keepalidonso-calledspreads. Thecommitteeisinvestigatinghow
ers,toldanalysts.“Untilweseethat,I BerkshireHathawayhasbuiltanear- but is focusing reinvestments of economistatGoldmanSachs,saidthe Thecentralbankalsolastmonth Merck structures sales of its block-
seenoreasontochangeourstrategy.” 20percentstakeinOccidental,helping maturingbondsonthebloc’smore “extentoftheflexibilitythathasbeen putinplaceanewtransmissionpro- buster cancer drug Keytruda, which
Thatsentimentwasechoedbyother itssharepricetomorethandoubleover financiallyfragilemembers. utilised”inreinvestingproceedsof tectioninstrumentthatcanbeusedin reached$17.2bnlastyear,anincreaseof
shaleexecutivesinthelatestsignthatoil thepastyear. Between June and July, the ECB bondsthatwerepartofthePEPPpro- casePEPPreinvestmentsfailtokeep 19.5percentcomparedwith2020.Itis
companies and their shareholders The S&P oil and gas producers injected€17bnintoItalian,Spanish grammewas“somewhatmorethan spreadsundercontrol.Thetoolallows examining why all profits generated
remainunmovedbypoliticians’callsfor exchangetradedfundisdownabout andGreekmarkets,whileallowingits peoplehadexpected”. theECBtobuythebondsofanycoun- fromsaleofKeytruda—includingsales
moreoilandgassupplyafterRussia’s 26percentfromhighsinearlyJune,but portfolio of German, Dutch and ECB policymakers and investors tryitdeemsasfacingmarketpres- madetoAmericanbuyers—aretaxedin
invasion of Ukraine sent fuel prices remainsup25percentthisyear,making Frenchdebttofallby€18bn,accord- are worried that tighter monetary suresoutsidetheeconomicoutlook, jurisdictionsoutsidetheUS.
soaring.Energypriceshavedriveninfla- itastandoutinableakyearforthe ingtoFinancialTimescalculations policywillwidenthegulfbetweenthe atunlimitedscale. “SinceMerckholdstheintellectual
tionratesacrosstheUSandEuropeto broadermarket.Yetmanyoilexecu- basedonthecentralbank’sdata. region’sstrongestandweakestecono- InvestorshavebeenwatchingItal- propertyrightstoKeytrudaintheNeth-
levelsnotseenin40years. tivesclaimthatthedisruptioninsupply The reinvestments highlight the mies — so-called “fragmentation” ianspreadscautiouslytoseewhenthe erlands and manufactures the drug
US president Joe Biden and other stemming from Russia’s invasion of ECB’seagernesstokeepalidonbor- risk.Thesefearspushedwiderthedif- ECBmaystepin,withmanydeeming entirely in Ireland, Merck is able to
westernpoliticianshaveattackedtheoil Ukrainewillputafloorundercrude rowing costs for countries such as ferencebetweenItalianandbench- 2.5percentagepointsanimportant avoidbillionsofdollarsoftaxesonprof-
companies’decisiontofunnelprofits pricesevenaseconomicgrowthslows. Italy and prevent a eurozone debt markGerman10-yearbondyieldsto mark. itsfromsalesintheUS,”saidWyden.
Financials.Greenpolicy
Banks tout fossil fuel credentials after ESG backlash
climatechangeactiviststhattheyare giantApollosaidinaJuneletterthat comparedwith2021.Theworld’slarg-
Republican-ledstatesattack
notcomplacentabouttheenvironment. chiefexecutiveMarcRowan“haspub- estmoneymanagerarguedthatshare-
lenderstheyclaimhavegone InaJulylettertoWestVirginia’streas- liclystatedthatApollo-managedfunds holder proposals were becoming too
urer, Goldman said it had provided willcontinuetofinancefossilfuelcom- prescriptiveandthatRussia’sinvasion
toofarwithclimateagenda morethan$118.9bninfinancingtofossil panies”. Sumitomo Mitsui, one of ofUkrainehadchangeditscalculus.
fuelcompaniessince2016,and$17.8bn Japan’slargestbanks,toldthestateit Bankswillsoonfaceanothertestin
infinancinglastyearalone. hadfinanced$208mninUSoilandgas Florida.Lastmonth,thestate’sRepubli-
PATRICKTEMPLE-WEST
Inasimilarletter,JPMorgangeneral projects. can governor, Ron DeSantis, said he
ANDJOSHUAFRANKLIN—NEWYORK
counsel Stacey Friedman touted the The restrictions implemented by wouldproposelegislationnextyearto
Inrecentyears,WallStreetcompanies bank’s$42.6bncreditexposuretooil Republicansdonotyetposeasignifi- “protect[voters]fromtheESGmove-
havetriedtotalkuptheircommitment andgascompaniesasevidencethatit cantrevenueriskbutthatcouldchange ment”,whichheaccusedof“targeting
totheenvironmentandsocialjustice. didnotdiscriminateagainstfossilfuel iftheeffortstofreezebanksoutofstate disfavouredindividualsandindustries
Nowtheyaresingingadifferenttune. companies.Friedmanalsosaidthatin business become more widespread, toadvanceawokeideologicalagenda”.
Large US banks such as Goldman 2021thebankfinancedandfacilitated analystssaid. DeSantis,apossible2024presidential
SachsandJPMorganChaseareamonga $106bn for green objectives, such as “Fromanopticalstandpoint,it’snot contender,saidhewantedtobanthe
clutchofglobalfinancialservicesgroups renewableenergy. theheadlinesyouwant,”saidGerard agency that oversees the state’s pen-
thathavebeentoutingtheirbusiness “Thisdecisionisshortsightedanddis- Cassidy,analystatRBCCapitalMarkets. sionsfundsfromusingmoneymanag-
relationshipswithoilandgascompa- connectedfromthefacts.Ourbusiness “Thependulumhasswungsofarleftin erswhoconsiderESGfactors.Insteadit
nies.Theyaredoingsotoplacatepoliti- practicesarenotinconflictwiththis thelastfiveyears,particularlywiththe would be required to “only consider
ciansinRepublican-ledstateswhoare anti-freemarketlaw,”JPMorgansaidin sustainableenergy[and]ESGpolicies. maximisingthereturnoninvestment
penalisingthemfornotdoingenoughto astatement.GoldmanSachsdeclinedto Nowthependulumiscomingback.” onbehalfofFlorida’sretirees”.
supportthefossilfuelindustry. commentbeyonditsletter. The swinging of that pendulum is Thechallengewithsuchrestrictions
Sofar,theirentreatieshavefallenon TherestrictionsinWestVirginiafol- beingfelt,indifferingdegrees,across wasthattherewerenosettleddefini-
deaf ears. West Virginia last month lowstwoTexaslawsadoptedlastyear WallStreet.Lastmonth,BlackRocksaid tionsintheUSofESG,saidJoshuaLich-
banned five financial companies — thatprohibitfinancialgroupsbasedon itvotedforfewerenvironmentaland tenstein,apartneratlawfirmRopes&
BlackRock,JPMorgan,GoldmanSachs, theirgunpoliciesaswellastheirtreat- socialshareholderpetitionsthisyear Gray.“Ifyouarearealestatefund,you
MorganStanleyandWellsFargo—from mentofoilandgascompaniesforcli- can’tignoresealevelrisewhenbuying
bankingactivitiesinthestate. matechangepurposes. coastalbuildings.Itbecomesactuallyan
Riley Moore, West Virginia state The Texas laws require the state’s investorprudenceissue,”headded.
treasurer,accusedthemofhaving“poli- comptrollertoidentifycompaniesthat SomestateRepublicansinWestVir-
cies aimed at weakening our energy shouldbebannedanddemandsthey giniahavesaidtheyfearbanningglobal
industries”inastatewherecoalandfos- verifythattheydonotboycottfirearms, banks over their ESG commitments
silfueltaxesarethethird-largestsource ammunitionandenergycompanies. couldresultinhigherborrowingand
ofrevenue. Ahandfulofcompanies—including financingcosts.
TheWestVirginiamoveisthelatestin JPMorgan, Citigroup, Goldman and Economists in July estimated that
awaveofattacksonfinancialinstitu- BankofAmerica—withdrewfromthe Texasstateandlocalborrowerswould
tionsthatRepublicanlawmakersview Texasmunicipalbondmarketafterthe payanadditional$303mn-$532mnin
ashavinggonetoofarintheirsubscrip- legislationwentintoeffectinSeptember interest on the $32bn of municipal
tiontotheenvironmental,socialand 2021,accordingtoacademicresearch bondsthatwereissuedaftertheboycott
governance,orESG,agenda. publishedlastmonth.Citihassaidithad measureswereintroduced.
Someofthelendersthathavebeen since resumed underwriting Texas “Weseemassiveincreaseinyieldsfor
targeted in West Virginia have munibonds. thesemostaffectedplacesinTexas,”
respondedbybrandishingtheirfinanc- Almost90globalgroupshavewritten saidDanielGarrett,aprofessoratthe
ingoffossilfuels,adiscordantvolte-face toTexastoemphasisethattheyinvestin RonDeSantis:Floridagovernorhas UniversityofPennsylvaniaandaco-
thatfollowsyearsoftryingtoconvince oilandgascompanies.Privateequity criticiseda‘wokeideologicalagenda’ authoroftheresearch.
8 ★ FINANCIAL TIMES Monday8August2022
COMPANIES & MARKETS
Climate, war and inflation rouse reinsurers
Covid and catastrophe claims eroded profits and now new threats are forcing price rises or a retreat from cover
IANSMITH catastrophe losses resulted in poor
INSURANCECORRESPONDENT underwritingresults,whichhavenow
Lifehasnotbeeneasyforreinsurersin contributedtoareductioninthesupply
thepastfewyears.Claimsfornatural of reinsurance capacity,” she added.
catastrophes and pandemic-related This,plusincreaseddemand,hasmade
losseshavewipedoutalargepartof iteasierforreinsurerstopushupprices,
theirprofits. Mowerysaid.
Butthelatestsetofglobalproblems: Asignthatthingsarechangingcame
thewarinUkraine,gallopinginflation in June, a busy time for renewals of
andtheever-increasingrisksofclimate propertycatastrophereinsurancepoli-
change,havejoltedthemintoaction.In ciesfocusedontheFloridamarket.A
someareas,theyareputtinguptheprice lack of capacity was one factor that
ofcover,inotherstheyareretreating drovethecostofreinsuranceup20-30
altogether. percentonaverage,saidTigerRisk.
“What looked like...a gradual BrokerAonsaidinareportonthe
change is increasingly looking like a reinsurance market in June and July
knee-jerkchange,”saidStephenCatlin, thatyearsof“above-average”natural
anindustryveteranandchiefexecutive catastropheclaimshadreducedrein-
ofinsurerConvex. surers’appetitefortakingcatastrophe
Reinsurersplayavitalroleintrade risk.
andtheglobaleconomy,offeringinsur- “ForthefirsttimesincetheUShurri-
ancetoinsurerstoreducetheriskthata canesof2004and2005,propertynatu-
bigclaimwillwipethemout.Thisback- ral catastrophe capacity contracted
stopagainstawholerangeoffinancial materially,andsomereinsurerswould
risks,whichisunderpinnedby$700bn notwritecertainrisks...atanyprice,”
incapital,givesinsurerstheconfidence itsaid.Thoseseekingreinsurancein
to provide cover to a much wider
market. ‘Nowforthefirsttime
Among the biggest reinsurance
[reinsuranceprices]are
groups are the four major European
players,MunichRe,SwissRe,Hannover goingupfasterthanthey
ReandScor,aswellastheLloyd’sof
areforinsurance’
LondonmarketandWarrenBuffett’s
BerkshireHathaway. Climaterisksrise:ablazeinSheffieldlastmonthasanunprecedentedheatwaveacrosstheUKsparkedwildfiresinnorthernEngland
—ChristopherFurlong/GettyImages
SwissRe’schiefexecutiveChristian
Mumenthalersaidthat“timid”price ClimateandCovidhavesqueezedthe PandemicrecoveryweakensforEuropean ationnowexpectbillionsofdollarsof speciality areas such as aviation and
risesinnaturalcatastrophereinsurance reinsurancesector reinsurers claimsfromtheownersofthehundreds marinealsohadtocontendwiththe
in recent years had now accelerated ofplanesleftstrandedbythewar. “mostchallengingrenewalinagenera-
Claimsandexpensesas%ofpremiums,above100% Shareprices(%change)
afterthreeyearsofhighercostsfrom Reinsurersreducingcapacitycancre- tion,reflectingthepotentialforlarge
isanunderwritingloss
losses. Stoxx600 HannoverRe Scor ate what is called a “hard market”, losses from the Russia-Ukraine con-
ForcontractsrenewinginJuly,Swiss MunichRe SwissRe wheredemandsubstantiallyoutstrips flict”,Aonadded.
110
Reimplementeda12percentrisein 40 supplyandpricessurge. JoeMonaghan,aseniorexecutivein
Underlying
premiumsacrossitspropertyandcasu- Someexecutivesaresayingthatthose itsreinsurancebrokingdivision,said
combinedratio
20
altybusiness,whichincludesnatural conditions are now present, citing the reinsurance sector “may be fast
100
catastrophecoverandothertypesof 0 recentexitsbysomereinsurersfromthe approachingatruehardmarket”.
insurance. natural catastrophe business. Big ThenextkeyrenewalseasononJanu-
“It’s very big, because it’s [across] 90 -20 Ukraine-relatedlossescouldpersuade ary1,knownas1/1,isbeingviewedasa
everything...Ican’trememberarise moreproviderstocuttheirexposure. litmus test of the market. A rush to
Combinedratio -40
likethat,”saidMumenthaler. Afteryearsofvolatilityandgrowing repriceinsuranceandreinsurancefor
Executivesattributethemarkettight- 80 -60 claims,NewYork-listedreinsurerAxis riskssuchaswarandpoliticalviolence
ening to robust demand, fuelled by 2013 15 20 21 2019 20 21 22 CapitaldeclaredinJuneitwasgetting isalreadyunderway,saidseveralindus-
inflationdrivingupthevalueofwhatis Underlyingcombinedratiosmoothsoutlossesfromnaturalcatastrophes outofthepropertyreinsurancebusi- tryexecutives.
beinginsured,andafallinsupplyafter Sources:Gallagher;Bloomberg ness,whichincludesnaturalcatastro- Whilesomereinsurersstepback,oth-
phecover.ChiefexecutiveAlbertBen- ersmayseektofillthegap.Atarecent
chimolsaidthe“significantandincrea- investorevent,MunichResaiditwas
investorpressurecausedsomereinsur- singeffectsofclimatechangeandthe prepared to take advantage of rising
erstopullback,inparticularfromthe challengesfacedbythecatastrophere- prices by writing more reinsurance
naturalcatastrophebusiness. insurancemarket”hadforceditshand. business,accordingtoapersonfamiliar
Therehasalsobeenreducedappetite, Amonthearlier,France’sScorsaidit withthediscussions.
theysay,frominstitutionalinvestorsto wasontracktoreduceitsexposureto Still,muchoftheindustrypredicts
takeonreinsurancerisksthroughinsur- natural catastrophes by 15 per cent, reinsurance cover will become more
ance-linked securities, partly after whileAxasaiditsreinsuranceunithad expensiveandhardertofind.
lossesonthesesortsofinvestmentsand cutitsnaturalcatastropheexposureby Going through the year, primary
partly because yields on bonds have 40percentatthestartoftheyear. insurerswill“realisetheyaregoingto
increased. Executives and brokers attribute havetorunmorerisk,buylessreinsur-
“Wethinkthe[reinsurance]market someofthesemovestoinvestorpres- anceanditisgoingtobemuchmore
isturning.Wearenowseeingmomen- sureonreinsurers.“Investorshavesaid expensive”,saidCatlin.“The[primary]
tum,”saidAkiHussain,chiefexecutive wedon’twantmorecatastropherisk,” marketwillbelookingatlifeverydiffer-
ofHiscox,oneofthebiggestinsurerson saidRodFox,co-founderofreinsurance entlyat1/1thanitdoestoday.”
theLondonmarket,whichhasitsown broker TigerRisk. “That has trickled Thenaturalconclusionwouldbethat
reinsuranceunit. down.” thecostofinsurance,whichhasalready
“Inthepastfiveyears[reinsurance] Manysee2022asaturningpoint.In beenrisingforyearsinsomemarkets,
priceshavelaggedandnowforthefirst recentyears,an“abundance”ofproper- hasstillfurthertoclimb.
timetheyaregoingupfasterthanthey tycatastrophereinsuranceoutstripped JérômeHaegeli,groupchiefecono-
areforinsurance.” demandandhelddownrates,saidLara mistatSwissRe’sresearchdepartment,
Anotherfactorinrisingpricestodayis Mowery,globalheadofdistributionat agreedthatrisingreinsurancepricesare
bigclaimsarisingfromRussia’sinvasion reinsurancebrokerGuyCarpenter. likelytobepassedon:“Iwouldexpecta
ofUkraine.Insurersinareassuchasavi- “Over the past five years elevated knock-oneffect.”
Financials
Sell-off pushes Berkshire to a $43.8bn loss
ERICPLATT—NEWYORK fromtheendofMarch,fallinglessthan lystsandinvestorsforsignsofthehealth
$1bnto$105.4bn.Whilenetincomeslid ofthebroaderUSeconomy,asitsbusi-
WarrenBuffett’sBerkshireHathaway
froma$5.5bnprofitattheyear’sstartto nessescutacrossmuchofthecountry’s
dramaticallyslowednewinvestmentin
a $43.8bn loss, operating income — industrialandfinancialheart.
thesecondquarteraftersettingablis-
whichexcludestheupsanddownsof Inflationarypressurescontinuedto
teringpaceatthestartoftheyear,as
Berkshire’sstockpositions—rose39per bite,althoughmanyofitsdivisionswere
theUSstockmarketsell-offpushedthe
centto$9.3bn.Thatincludeda$1.1bn able to pass along higher prices to
insurance-to-railroadconglomerateto
currency-relatedgainonitsnon-USdol- customers.
a$43.8bnloss.
lardebt. TheBNSFrailroad,whichBuffetthas
BerkshiresaidonSaturdaythedropin Berkshireisrequiredtoincludethe describedasoneofthe“fourgiants”
globalfinancialmarketshadweighed swings in the value of its stock and withinBerkshire,reporteda15percent
heavilyonitsstockportfolio,whichfell derivativesportfolioaspartofitsearn- increaseinrevenueasfuelsurchargesit
invalueto$328bn,from$391bnatthe ingseachquarter,anaccountingrule leviedonclientsoffsetadropinship-
endofMarch. thatBuffetthaswarnedcanmakethe ping volumes. Fuel costs for BNSF,
The$53bnbookedlossinthethree company’s earnings figures look whichhasmorethan32,500milesofrail
months to June far outweighed an “extremelymisleading”andvolatile. tracksacross28states,jumpedmore
upbeatquarterforitsbusinesses,which The loss amounted to $29,754 per than80percentyearonyear.
improvedtheirprofitability. classAshare.Itstandsincontrasttothe Insurance unit Geico recorded a
Thecompany’sfilingwithUSsecuri- $18,488pershareprofitthecompany $487mnpre-taxunderwritinglossin
tiesregulatorsshoweditspurchasesof reportedayearearlier. thequarter,upfromthethreemonths
newstocksdwindledtoabout$6.2bnin Berkshire’sresultsareparsedbyana- before.Thedivisionblamedthebigger
thequarter,downfromthe$51.1bnit lossonmuchhigherpricesfornewcars
spentbetweenJanuaryandMarch—a andautopartsthatitmustpaywhenits
spurtthatsurprisedBerkshireshare- clientsareinvolvedinaccidents.
holders.Berkshiresold$2.3bnofstocks InApril,Buffettsaidthecompanywas
inthelatestthree-monthperiod. seeingtheeffectsofinflationfirsthand,
Berkshire also spent $1bn buying warningthatit“swindlesalmostevery-
backitsownsharesinJune,acommonly body”.
usedtacticwhenBuffettandhisinvest- Berkshire’s housing businesses,
mentteamfindfewerappealingtargets includingmodularhomeunitClayton
inthemarket. Homes and home decor retailer
The91-year-oldinvestorsignalledat NebraskaFurnitureMart,offeredhints
the company’s annual meeting in abouthowconsumerswereresponding
Omaha, Nebraska, in April that the tohigherpricesandincreasedmortgage
spreeofmultibillion-dollarstockpur- rates. Furniture sales were relatively
chaseswaslikelytoslowastheyearpro- flat,withhigherpricescompensating
gressed,sayingtheatmosphereinthe forlowerorders.
company’s headquarters had become SharesofBerkshireHathaway’sclass
more“lethargic”. Acommonstockhavefallenabout2per
Berkshire’s mammoth cash and WarrenBuffett:atmosphereat centthisyear,outperformingthe13per
Treasuryholdingswerelittlechanged BerkshireHQmore‘lethargic’ centdropinthebenchmarkS&P500.
Monday8August2022 ★ FINANCIAL TIMES 9
COMPANIES & MARKETS
Market questions. Week ahead Pharmaceuticals
Eli Lilly warns
UK output set to fall as recession looms
Indiana will
lose jobs over
abortion curb
DidtheUKeconomyshrinkinthe
secondquarter?
TheUKeconomyisexpectedtocon-
tractmarginallyinthesecondquarter
asitheadsforarecessionofascalenot JAMIESMYTH—NEWYORK
seensincethe1990slaterthisyear.
EliLillysaiditwoulddivertemploy-
EconomistspolledbyReutersfore-
mentoutsideitshomestateofIndiana
castareportonFridaytoshowoutput
following the Republican-controlled
contracted0.2percentbetweenthefirst
legislature’sdecisiontopassanearly
andthesecondquarter.
totalbanonabortion.
Grossdomesticproductisforecastto
haveshrunkby1.3percentbetween “Weareconcernedthatthislawwill
MayandJune,affectedbytheplatinum hinderLilly’s—andIndiana’s—ability
jubileeextraday’sholidayandpartially toattractdiversescientific,engineering
reversingMay’sexpansion. andbusinesstalentfromaroundthe
Thisfollowsgrowthof0.8percentin world,”theUSdrugmakersaid.
the first quarter with the slowdown It added that it had expanded its
reflectingtheimpactofthehittohouse- employeehealthplantocoverinterstate
holds’ finances from surging energy travel for abortion and reproductive
prices.Lastweek,theBankofEngland services,butaddedthismightnotbe
downgradeditsUKeconomicforecast enough for some current and future
asitincreasedinterestratesbythelarg- staff.“Giventhisnewlaw,wewillbe
estmargininnearly30years. forcedtoplanformoreemployment
Aftersomegrowthinthethirdquar- growthoutsideourhomestate.”
ter, the bank said that the UK was TheIndianabillbansabortionfrom
projectedtoenterrecessionfromthe conceptionexceptincertaincasessuch
fourthquarterofthisyearandtocon- asrape,incestandseverehealthrisksto
tinuetocontractuntiltheendof2023. themother.Itwaspassedbythestate
Afterthat,growthwasexpectedtobe legislatureonFriday.Itisthefirstlegis-
“veryweakbyhistoricalstandards”,the lation passed into law since the US
BoEsaid. Slowdown: USheadlineinflationtoincrease0.2per Russiaagreedadealthatwouldallow ‘The[UK] forJuneissettobereleasedonFriday SupremeCourtoverturnedthe1973Roe
Thisisasignificantdownwardrevi- economists centmonthonmonthfromJunetoJuly, Ukrainetoexportitsgrainintoasupply- and will show the impact of soaring vsWaderulinginJune,althoughseveral
economyis
sionfromtheMay’sassessment,follow- predictUK whilecoreCPIisexpectedtorise0.5 constrainedmarket. energy prices and prolonged supply otherstatesalreadyhadtriggerlawsin
ing the new surge in gas prices that grossdomestic per cent. The report is due out on But heightened tensions between stillon chaindisruptiononindustrialoutput. place that implemented abortion
reflectedtheprotractedwarinUkraine productwill Wednesday. China and Taiwan could disrupt the TheMayfigurebeatanalysts’expecta- restrictionsimmediately.
tracktobe
andcutsingassupplytoEurope. haveshrunkby DerekHolt,headofcapitalmarkets island’s dominant semiconductor tions,withindustrialproductionrising Lillyemploysmorethan10,000peo-
“Thebigpicture,though,isthatthe 1.3percent economicsatScotiabank,seescoreCPI industryandsendripplesthroughthe smallerin 0.8 per cent on a month-on-month pleinIndianaandmorethan36,000
economyisstillontracktobesmallerin betweenMay asthefigurethatmaymoreclearlyshow globaleconomy. basis,butanalystsarenowexpectingit worldwide.ThedecisionbyoneofIndi-
2025thanit
2025thanitwasin2019,beforethepan- andJune howpersistentinflationisintheUS. “AdisruptiontoTaiwanwouldstrike toflatlineinJune. ana’slargestemployerstodivertinvest-
demic,”saidThomasPugh,economist MollyDarlington/Reuters HesaidtheUSmighthavealready at the heart of many manufactured wasin2019, “Activityintheeuroareaisdeterio- ment outside its home state under-
attheconsultancyRSMUK.“Themuch reachedpeakinflationintermsoffood durableandbig-ticketitemsandgrinda ratinginabroad-basedfashion,across scoresthechallengesfacedbyUSbusi-
beforethe
weakereconomyislikelytocreatemore andfuel,butexpectedpricegrowthfor lotofsupplychainstoabiggerhalt,” sectors and countries,” said Barclays nessesastheymanagehealthcareneeds
unemployment.”ValentinaRomei durablegoodsandsomeservicestocon- Holtsaid,withthecaveatthathedidnot pandemic’ analysts,whoexpectthebloctofallinto of staff while trying not to provoke
tinuerising. expectthatkindofdisruption. recessionbytheendoftheyear. reprisalsfromconservativepoliticians
IsUScoreCPIbeingoverlooked?
“We’restillinthephasethatgetsa JarenKerr Germanmanufacturingordersfellin fortakingastandonabortion.
Headlineinflationcapturesthehighly reopeningeffectonthemorevolatile Juneastheeurozone’slargesteconomy The statement by Lilly follows the
Willeurozoneindustrial
visiblefoodandpetrolcategoriesthat high-contactserviceprices,wherepeo- grappledwithsupplychainissuesand company’sannouncementinMaythat
productionstall?
stingconsumerswhenpricessoar,but plearegettingoutandaboutinthesum- interruptions stemming from the itwouldinvest$2.1bnintwomanufac-
theUScoreconsumerpriceindex— merandtravellingmore,”hesaid. Theeurozoneissetforadecelerationin Ukrainewar.Analystsandeconomists turing plants in Indiana, which are
whichexcludesthosevolatilecategories Propertyandvehicleprices,forexam- economicactivityasrisinginterestrates broadlyexpecttheregiontoslipinto expectedtocreateupto500newLilly
—isexpectedtooutpacetheheadline ple,couldcontinuetoriseasfoodand andsurgingfoodandfuelpricescaused recession, as business and industrial rolesandanestimated1,500construc-
numberinJuly,andmaycontinuetodo fuelpricesreachedaplateau,especially by Russia’s war in Ukraine push the activitydeclinesandconsumerspend- tionjobs. LillytoldtheFinancialTimes
soinmonthstocome. afterOpec+lastweekagreedtoaslight regiontowardsrecession. ingslows,squeezedbythecostofliving itintendedtohonourits“currentcom-
EconomistspolledbyReutersexpect productionincreaseandUkraineand Eurozoneindustrialproductiondata andenergypricecrisis.NikouAsgari mitments”toIndiana.
10 ★ FINANCIAL TIMES Monday8August2022
COMPANIES & MARKETS
Technology Retail
Apple supplier battles over $4bn cash pile
Next faces
HMRC probe
into staff pay
Activistinvestoraccuses improve its governance and return andBankofEastAsia,andinJapanover about$4bnonTaiwan’sstockexchange ($1.43bn)andsaiditwouldmaintain
Taiwanesemanufacturer someofits$4.2bnofnetcashtoshare- Toshiba,haveraiseditsprofile. andisrunbythreebrothersoftheHung thatdividendlevelforthenextthree errors after
holders, according to people familiar GlobalinvestorappetiteforTaiwan family,whositonitsboard. years.About15percentofsharesinthe
oflowdividendpayouts withthediscussions. hasincreasedinrecentyears,withfor- In2020,Catchersoldtwounitsfrom Tainan-basedcompanyareownedby
IT switch
Argyle holds about 1 per cent of eigndirectinvestmentrising275per itsChinesedivisionthatsuppliedApple the Hung family, including its chair
Catcher’ssharesandisoneofanumber centtoa15-yearhighof$8bninthefirst withiPhonecasingsfor$1.43bntoa Allen Hung, and about 43 per cent
TABBYKINDER—HONGKONG
ofitsforeigninstitutionalshareholders, halfof2022owingtoitslargeindustrial smallercompetitor,LensTechnology, ownedbyforeigninstitutions.
AnApplesupplierbasedinTaiwanis alongsideFranklinTempleton,Singa- baseanditsstatusasagatewaytoChina. based in the mainland province of Catchersaiditwas“currentlyinthe
battlinganinternationalinvestorover pore’sGICandCathayLifeInsurance.It Buttheisland’stech-reliantstockmar- Hunan.Thedivestmentofoneofits stageofbusinesstransformation”. JONATHANELEY
itsmultibillion-dollarcashpileinacase had approached Catcher executives kethasbeenhitfollowingasell-offby mainrevenuegeneratorscameasChi- Itadded:“Thecashpositionwekeptis
FashionretailerNextisfacinganinves-
that signals increasing shareholder overitsconcernsinameetinginTai- globalfundsandfearsofaUSrecession. nesecompaniespitchedfornewoppor- mainly for investment opportunities.
tigationbytheUK’staxauthorityafter
activismintheterritory. wan,oneofthepeoplesaid. ArgylehasaccusedCatcher’smanage- tunitiestoaccessApple’scovetedsupply Wepayatleast50percentofearningsas
abotchedrolloutofanewpayrollsys-
CatcherTechnology,whichmanufac- Shareholderactivismhasgrownmore mentof“hoardingcash”andusingitto chainfollowingtheChina-UStradewar. cash dividends. The cash dividends
tem led to thousands of employees
tures electronic casings for Apple slowlyinAsiathanintheUSbecauseof support a “bloated” executive struc- Argylearguesthat,despitethedis- we’vepaideachyearoverthepastfive
receivingincorrectsalarypayments.
devicesmadeinChina,isbeingchal- the dominance of family-controlled ture, according to two people with posal,Catcherhaspaida“low”dividend years is literally equivalent to our
lengedbyHongKong-basedinvestment companies,butrecenthigh-profilebat- knowledgeofthesituation.Thecom- ofNT$10-NT$12pershareforthepast paid-incapital,essentiallyabovemar- Thecompany,whichthisweekliftedits
firm Argyle Street Management to tles,includinginHongKongoverHSBC pany has a market capitalisation of fiveyearsthathastotalledNT$42.95bn ketaverage.” full-yearprofitforecastafterstronger
than expected sales, replaced its in-
housepayrollsoftwarewithasystem
fromUSgroupOracleatthestartofthe
Support services. Labour relations
year.Thechangeresultedinanimmedi-
ate increase in underpayments and
Royal Mail clashes with union on break-up plans overpaymentsamongbothweeklyand
monthlypaidstaff.
HMRevenue&Customsislookingat
whetherNextpaidsomeofitsstaffless
thantheUK’sstatutoryminimumwage,
whichis£9.50anhourforthoseaged23
CWUsaysoverallprofits andover.TheerrorsfromNextcomeat
atimewhenUKinflationisrunningat
meanapayriseisaffordable, itshighestlevelin40years.
Nextconfirmedthataninvestigation
whilethegroupeyesasplit
byHMRCisunderwayandthatithas
beendeemeda“medium-risk”corpo-
rate taxpayer rather than a low-risk
LEKEOSOALABI
one.Theretailersaidithadsofarfound
JustadaybeforeRoyalMailrevealed noevidencethatstaffhadbeenpaidless
planslastmonthtodropitsgroupbrand thantheminimumwage.
andpotentiallysplitthebusiness,postal Thetaxauthoritycanimposepenal-
workersvotedtogoonstrike. tiesonabusinessofupto200percentof
Staff wanted industrial action over the arrears owed to workers who
pay,asinflationrocketedtoitshighest werepaidbelowtheminimumwage.
levelinfourdecades.RoyalMailsaidthe HMRCdeclinedtocomment.Several
followingdaythatitwasplanningto otherretailers,includingJohnLewis,
renamethegroupInternationalDistri- IcelandandArgos,havebeeninvesti-
butionsServicesandpossiblybreakup gatedoverbreachesofminimumwage
thecompany.
AttheheartoftheissueistheUK’s ‘Weacknowledgethe
lossmakingpostalbusiness,whichwill
frustration . . . colleagues
continuetobenamedRoyalMail.The
groupadmittedithadbecomeincreas- havefeltandreiterate
inglyreliantonitsprofitableoverseas
oursincereapologies’
operations, called GLS. Such is the
divideinfortunes,thegroupisnowcon-
sideringseparatingthebusinesses. laws,manyofwhichwereinadvertent.
ButtheplanshaverattledtheCom- Nextsaidthatinlightoftheproblems
municationWorkersUnion,whichrep- RoyalMail’s weareincreasinglybecomingfinan- logictocarvingoutGLSandrealising ‘Weareina echoofthestalematebetweenNetwork ithadintroducedaseparateITsystem
resentspostalstaff.Themountingten- postalworkers ciallyreliantonGLS. additionalvalueforshareholdersand Railandtransportunions. to cross-check Oracle’s output and
situation
sionunderscoresthebattlethecom- havevotedtogo “Parcelvolumeshavenowdeclined stakeholders”.“Youcanmakeacase “Whatwe’vesaidtotheCWUisthat reduceincorrectpayments,andthatin
panyfacesbetweenstrivingforefficien- onstrike fromthepeakswesawduringCovid,”he thatthesynergiesbetweenthosetwo nowwhere wearehappy...tomeetwiththemany thelatestpayrollroundthenumberof
cies to rejuvenate Royal Mail and ChrisRatcliffe/Bloomberg said,addingthatRoyalMailmadeamil- businessesarenotthatgreat.Theyhave time they wish to discuss pay and errorswas219outofaworkforceof
weneedto
keepingworkersonside. lionpoundsadayoflossesinthequar- differentfocuses,theinternationalbusi- change,butwe’vegottodiscusspayand 43,000.Theretaileracknowledgedthat
“ItispatheticthatRoyalMail,acom- ter.Theoverallgrouphaslostalmost nessisobviouslygrowingverystrongly changeour changeatthesametime,”hesaid.The theerrorshadcausedfinancialdifficul-
panywhichannounced[annual]profits halfitsvaluethisyear. andthedomesticbusinessismoreabout CWUisconductingaseparateballoting ties and distress to those who were
waysof
of £758mn mere weeks ago, is now Still, Jeavons insisted the company manageddecline,”headded. ofitsmembersforindustrialactionon underpaid and those whose salaries
pleadingpovertyandthreateningfrag- didnotnecessarilyhaveplanstosell. TheCWUhastakenadifferentstance. working’ termsandconditions. weretoppedupbystatebenefits.
mentationunlesstheygettheirway,” “We’rejustemphasising...thatifwe Theunionhascitedtheprofitinthelast Thompsonisadamantthatchangeis The Sunday Times, which first
theCWUsaid. can’t deliver progress and change in fiscalyearandthereturnof£400mnto neededintheUKbusinessandbelieves reportedtheinvestigation,citedNext
“Our members are committed to Royal Mail in the UK...these busi- shareholderswhenarguingforapay itcanturnacorner. employeeswhosaidtheywereunableto
growingRoyalMailasahigh-quality nessesprobablyarebetternottogether,” increase. “[The]surgeinparcelsandtestkits affordbusfarestogettowork,hadto
publicservice;theydeserveadecent hesaid. Despitetheunion’scriticism,Royal haveshownthatwecanbeprofitable,” borrowfromrelativestopaybills,orlost
payrise.” RobinByde,analystatZeusCapital, Maildescribeditsperformanceinthe hesaid.“Butweareinasituationnow benefits after being overpaid. “We
Therebrandisthesecondattemptby saidsplittingthebusinesseshadbeen UKduringthepandemicasa“lifeline”. whereweneedtochangeourwaysof acknowledgethefrustrationmanycol-
thegroupintwodecadestoditchthe discussed“prettymuchsinceIPO”. Itreported£8.6bninrevenuesinthe workingsowecanreallygetthebenefit leagueshavefeltandreiterateoursin-
traditionalmonikerforthelongstand- Bydesaidtherewassome“strategic yeartotheendofMarch,up12percent of the £900mn worth of investment cereapologies,”thecompanysaid.
ingservice,whichwasfoundedbyKing onthepreviousyear. we’vemade,sowecanwinandcompete Thefailingsareasevereembarrass-
HenryVIIIinthe1500s.TheRoyalMail Thecompanystandsbyitsdecisionin intheparcelsmarket.” mentforaretailergenerallyregardedas
RoyalMailstock
namewasbrieflyabandonedin2001in Novembertoreturn£400mntoshare- Jeavonssaidthecompanyhadbeen wellrunandonethathassuccessfully
favourofConsignia,whichwasswiftly Pence holders“notleastbecauseemployees unabletoadjustitscostbasefastenough navigatedthepandemicandthelonger-
ditched16monthslater. 600 representourfifth-largestshareholder inresponsetovolumedeclines,because termshiftfromstorestoecommerce.
AlthoughtheUKpostalservicefared group,sotheyhavealsoreceivedthese ofthefocusondiscussionswithtrade Theymayalsobeasymptomofitsrel-
wellduringthecoronaviruspandemic payments”. unions.“Wenowneedtogetonwiththe ative insularity. According to one
500
aspeoplereliedondeliveriesathome, “Two-thirdsofthedividendswhich change,”headded. formeremployee,Nexttendstoattract
the group’s recent quarterly results have been paid to shareholders over RoyalMailexpectstobreakevenin managersintheearlystagesoftheir
400
paintadifferentpicture. recentyearshavebeenfundedfromthe theUKthisyear,aslongasitcanmake careerswhooftenendupstayingthere
Profitinthethreemonthstotheend reported profits of the international progressonstrippingoutcosts. fordecades.Ithasalsotendedtoavoid
ofJunewasdrivenbyGLS,theAmster- 300 business, GLS,” the company said. OnearearipeforoverhaulisSunday usingthird-partysoftware.“Overthe
dam-basedparcelsortingsubsidiary,as “RoyalMailhasonlycontributedathird deliveries, said Thompson. “Around yearswehavewrittenalmostallofour
theUKpostalservicereportedanoper- 200 ofthedividendreturntoshareholders abouthalfofourSundaydeliveriesare majoroperationalsystemsapplications
atinglossof£92mn. anditscontributionwillbeevenlessthis donethroughtemporaryworkersand in-house,”thecompanysaidlastyear.
“Financiallyit’sataleoftwohalvesin 100 year,ifindeedthereisanythingatall.” we’recertainlygratefulfortheirhelp, “Itwouldbeasunthinkableforusto
our two businesses, Royal Mail and Royal Mail chief executive Simon butintermsofqualityandproductivity contractoutourcoreoperationalsys-
2020 21 22
GLS,”saidthegroup’schieffinancial Thompsonhasinsistedondiscussing it’snotasgoodaswhatwewouldget temsasitwouldbetocontractoutthe
officer,MickJeavons.“Itillustratesthat Source:S&PCapitalIQ payandconditionssimultaneously,an fromthecoreteam.” designingofourclothingranges.”