Yesterday’s specially convened Business, Energy and Industrial Strategy Committee hearing

By Suzanne Evans, Director, Political Insight

Yesterday’s specially convened Business, Energy and Industrial Strategy Committee hearing:

• “We have to prepare for longer-term high (energy) prices,” Business Secretary Kwasi Kwarteng told the committee, suggesting that information about help for consumers and support for the market could be announced in the October Budget. Questioned about comments he made to the BBC on Tuesday that the government was considering lending money to bigger gas firms to help them take on stranded customers, he was unable to say how many firms he thought would go out of business. "It's not unusual for suppliers to go out of the market. I think what is different this time is that dramatic change in the costs that those suppliers are facing,” he said. “We do expect more (suppliers) not to be able to face the circumstances we're in, but it's genuinely hard to say more than that, partly because that means predicting what may happen to the gas price." Kwarteng said 55 companies currently exist in the sector and it is unlikely that all of them will be bailed out by the government. "I do not think it's the right thing for taxpayers' money to be injected into companies that have been badly run," he said. He also warned, however, that he didn't want to go back to a "cosy oligopoly" where the market was uncompetitive.
• Ofgem CEO Jonathan Brearley said the energy industry was facing a "different kind of change" in the market and was having a "significant impact" on the sector, with smaller suppliers being put out of business. "It's far above what we had forecast," he said, referring to the 250% increase in wholesale gas prices this year because of low gas reserves, strong commodity and carbon prices, heightened global demand, and low wind output. A "large number" of customers would be affected by price hikes, upwards of hundreds of thousands of people, he said, but could not give a more precise figure. He stressed however that the UK has a resilient and reliable electricity supply, and it was unlikely to run out completely. In a wry moment during the hearing, Brearley, who was appearing before the committee via video link, went ‘dark’ as the lights in his office went out, but he insisted this was only because they were on a movement sensitive system designed to save energy.
• Emma Pinchbeck, CEO of Energy UK told the committee her trade group was seeing record breaking numbers of customers calling concerned about the increase in prices.

 
Ofgem announced yesterday that Avro Energy and Green Supply Limitedhave ceased trading. The demise of these two small energy suppliers brings to six the number which have folded in recent weeks because of a surge in wholesale gas prices. Avro supplies gas and electricity to around 580,000 domestic customers, and Green to some 255,000 domestic customers, plus a small number of non-domestic customers. Together they represent a share of 2.9% of domestic customers in the market – Avro Energy 2% and Green Supplier Limited 0.9% - Ofgem said. Under Ofgem’s safety net, domestic customers will continue to receive their energy supply and any outstanding credit balances will be protected. The energy regulator said customers should take a meter reading today and wait until they are contacted by their new supplier, which will be chosen and appointed by Ofgem.
 
The International Trade Committee (ITC) has said the UK governmentneeds to improve on its plan to “level up” foreign investment across the country. Inward foreign direct investment (FDI) - where overseas investors acquire ownership of, or a controlling stake of at least 10% in, British businesses - is still too dominant in London and the South East, the committee said, calling for moves to “maximise the benefits for all parts of the UK.” As well as enhancing business turnover, the creation of jobs, and exports, inward investment brings other indirect benefits such as employment, skills, technology, and managerial practices, the ITC said. Angus Brendan MacNeil, ITC chair, said: “If the government is serious about its levelling-up agenda, it needs to show it has a plan to maximise the benefits of inward investment in all parts of the UK.” Last year, the government launched a new Office for Investment (OfI) within the Department for International Trade (DIT), to “support the landing of high value investment opportunities into the UK,” appointing as minister for investment Lord (Gerry) Grimstone, the former chairman of both Standard Life and Barclays Bank plc. to lead its work on an unpaid basis.
 
A new survey of investors has found the majority lack of faith in the government’s abilities. Foreign exchange platform HYCM surveyed 1,479 UK investors with more than 20,000 invested and some 60% of that number do not think Prime Minister Boris Johnson and the government have handled the pandemic competently. Around 59% also lack faith in the government’s ability to tackle record levels of public debt. Just under half (48%) believe Chancellor Rishi Sunak is the right person to be chancellor, although this figure increases to 70% among those with portfolios worth in excess of £1m. Only 43% said they had faith generally in the government’s economic policy, which could influence the assets or markets they target for trades, and 49% said they are concerned about the potential of acute economic austerity over the coming years due to the fallout from the pandemic. The UK economy is at a critical juncture as the country emerges from the COVID-19 pandemic, post-Brexit stresses are borne out, and the furlough scheme comes to an end, Yahoo Finance UK says. HYCM chief currency analyst Giles Coghlan noted the UK’s debt to GDP ratio has almost doubled since the 1970s and is well above the European average. "Investors will be mindful that the UK now owes more money than it prints," he said.
 
Think tank the Institute for Public Policy Research (IPPR)has called on the government inject an additional £47bn into the economy this year to help boost the UK and lift employment numbers. Their call to learn from "Bidenomics" suggests an approach akin to US president Joe Biden's stimulus package to make companies compete for workers rather than workers competing for jobs, says Yahoo Finance UK. Measures suggested by the IPPR include a one-off windfall tax on firms that made “excessive” pandemic profits, a citizens’ wealth fund that invests in strategic sectors and a stimulus to deliver full employment form part of IPPR’s agenda for structural reform of the UK’s economy. Merely boosting the current "structurally flawed" economy that channels rewards to a privileged few is not enough, the report said, arguing that problems of deep unfairness within the economy have worsened during the pandemic. “The UK suffers from concentrations and imbalances of power that are both a cause of some of our economy’s problems, and a barrier to solving them," said Carys Roberts, IPPR executive director.
 
More than £4m on average was stolen by fraudsters every day in the UK during the first half of the year, according to UK Finance. The crime surged 30% compared with the first six months of last year, and the banking trade body said teenage criminals buying fraud kits online were among the con-artists. In total, £754m was stolen through fraud in the first half of the year. Within this total, so-called authorised push payment (APP) fraud - when victims think they are paying a genuine organisation - rose by 71% to £355m.
 
The London Stock Exchange has announced plans to shut down its loss-making derivatives exchange, CurveGlobal Markets, just five years after the platform was launched. Backed by a consortium of banks including Barclays, Citigroup and Goldman Sachs, as well as the Chicago Board Options Exchange, the platform was launched to compete with the likes of Deutsche Boerse and Intercontinental Exchange Inc. but it never really took off, required additional funding from its investors, and last year recorded a £4m loss. It will stop trading at the end of January next year.
 
The National Farmers' Union has called for an emergency visa to allow firms to recruit from outside the UK, to combat labour shortages.
 
Christmas trees are the latest item said to be under threat from UK supply chain woes, labour shortages, and Brexit red tape. According to The British Christmas Tree Growers Association between 8 and 10 million real Christmas trees are sold in the UK each year, with between 1 and 3 million imported from other European countries. “Our main grower supplies the market with 100,000 Christmas trees each year and employs between 50 and 70 workers during the peak of the season," said Mark Rofe, owner of ChristmasTrees.co.uk. "In previous years they were reliant on foresters, mostly from Eastern Europe…but since the Brexit transition they just aren’t able to come over to work now.” Operating and manufacturing costs have also increased, with labour costing 10% more, fertiliser for the trees up 100%, pallets to transport the trees up 50%, labels and netting both up 15%, and transport costing between 20% and 60% more. "We’ve spoken to our UK growers and they are all facing the same challenges," said Rofe. “They are seeing an increase in demand for their product, especially from clients who would usually import their trees from Europe, but are keen to avoid any red-tape that could increase costs or cause delays for what is of course a highly seasonal and time-sensitive business.”
 
The British pharma spun out of Oxford University in 1995 which teamed up with AstraZeneca to produce a covid vaccine, said yesterday that revenue soared 139% over the first half of 2021 because of the joint venture. Oxford Biomedica also announced a £50m investment from vaccine developer Serum Institute of India in exchange for shares worth 3.9%. For Serum, the deal is the second in as many weeks, following its planned purchase of a 15% stake in Indian drugmaker Biocon's biologics unit. A FTSE 250 company, Oxford Biomedica’s shares soared on the news, ending the day some 10% up.
 
AstraZeneca Plc meanwhile, has struck a deal with the firm behind Imperial College London's experimental Covid-19 vaccine to develop and sell drugs based on its self-amplifying RNA technology platform in other disease areas such as cancer and rare genetic diseases. Under the terms of the deal, VaxEquity, a startup founded by Imperial vaccinologist Robin Shattock, could receive up to $195 million (£142.66m) if certain milestones are met, in addition to royalties on approved drugs and equity investment from AstraZeneca and life sciences investor Morningside Ventures. Imperial’s technology works in a similar way to the messenger RNA (mRNA) vaccines made by Pfizer/BioNTech and Moderna, and is being retooled to produce a more consistent immune response with an eye on future coronavirus variants.
 
Activist hedge fund Bluebell Capital Partners has taken a stake worth some £10m in British pharma GlaxoSmithKline Plc (GSK), putting yet more pressure on CEO Emma Walmsley, whose leadership Elliott Investment Management has already consistently critiqued. Bluebell lost no time in calling on the Glaxo board to run a “thorough and robust process to identify the best (internal or external) candidate” to lead Glaxo after a spinoff of its consumer health division next year, according to a letter seen by Bloomberg News. GSK has struggled to develop blockbuster new treatments and has failed to create a Covid-19 shot despite being the world’s largest vaccine producer. Taking direct aim at Walmsley, Bluebell cited her performance during a recent investor presentation and her lack of pharma experience – the same criticism as made by Elliot. Walmsley worked at cosmetics company L’Oreal SA prior to joining GSK. London-based Bluebell recently participated in a campaign that led to an overhaul of yogurt maker Danone SA’s management.
 
Stagecoach, the country’s largest bus and coach operator, has revealed talks over a potential all-share takeover by rival National Express. Sky News said on Tuesday that the potential tie-up would result in cost savings and provide new growth opportunities as the pair recover from the huge hit to their businesses inflicted by covid-related travel restrictions. National Express is best-known for its UK coach services but the company also has operations in the US, Spain and Germany. The terms under discussion represented an 18% premium on the closing price of Stagecoach shares on Monday.
 
Vauxhall Motors is blaming the continued global computer chip shortage for a move putting more than 200 jobs at risk at its Luton factory – almost a third of the workplace. In a letter sent to workers, seen by the BBC, Vauxhall said it was consulting with its staff and unions over a temporary “reorganisation programme” reducing shifts from three to two, because of the “knock on effects” of the pandemic, and specifically a lack of semiconductors. The semiconductor industry makes computer chips essential in modern cars that can have hundreds of chips – with some electric vehicles requiring thousands – and the shortage has forced numerous auto-industry manufacturers to cut production. They are competing directly with the tech and consumer electronics sectors for supply.
 
The revived Mini Moke will be built entirely in Britain following new agreement with manufacturer Fablink. Initially, the Mini-based beach buggies were engineered in the UK before final assembly took place in France.
 
Turkish industrial conglomerate Ciner is set to build a new £350 million glass bottle manufacturing and recycling plant in Ebbw Vale. The investment is expected to create 600 jobs.
 
A new £300 million food manufacturing and distribution campus is set to be built in Derby. The 1.85 million sq ft SmartParc site, to be developed by SEGRO, is expected to create 5,000 jobs.
 
Netflix has secured the rights to the work of children's favourite Roald Dahl, author of Charlie and the Chocolate Factory, Matilda and the Big Friendly Giant. The US streaming giant said it was "joining forces" with the Roald Dahl Story Company, which manages the late author's estate, to create a "unique universe across animated and live action films and TV, publishing, games, immersive experience, live theatre, consumer products and more". Financial details of the deal were not disclosed.
 
China's heavily indebted Evergrande Group has eased fears it is facing imminent default after negotiating a deal with bondholders thought to be in the region of $36m. The firm borrowed heavily to build its property portfolio and owns more than 1,300 projects in more than 280 cities in China. It currently has debts of around $300bn. However, last year Beijing tightened rules controlling the number of properties real estate developers could own, forcing Evergrande to offload properties at major discounts to bolster cashflow. The firm also owns leading football team Guangzhou FC and has numerous other business interests including wealth management and food manufacturing. Its uncertain future has unsettled markets worldwide in recent days amid fears its collapse would have a significant impact on the wider Chinese economy.

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