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Russia's finance ministry said this morning that it had approved a temporary procedure for repaying foreign…

   News / 14 Mar 2022

Published: 14 March 2022
Location: London, UK

By Suzanne Evans, Director, Political Insight


Russia's finance ministry said this morning that it had approved a temporary procedure for repaying foreign currency debt but warned that payments would be made in roubles if sanctions prevent banks from honouring debts in the currency of issue. Reuters says that Western sanctions over events in Ukraine have cut Russia off from key parts of global financial markets, triggering its worst economic crisis since the 1991 fall of the Soviet Union. Russia is due to pay $117 million (£89.73m) on two of its dollar-denominated bonds on Wednesday and if payments are not possible, the finance ministry said it would make Eurobond repayments in roubles, which is tantamount to a default as the rouble has dived to record lows in recent weeks.
 
Chancellor Rishi Sunak warned on Friday that Russia’s invasion of Ukraine was creating “significant uncertainty” for the UK economy, despite GDP now being 0.8% above its pre-pandemic peak according to the latest figures from the Office for National Statistics (ONS). “We have provided unprecedented support throughout the pandemic, which has put our economy in a strong position to deal with current cost of living challenges,” Sunak said. “We are continuing to help people where we can, including through over £20bn of support this financial year and next. We know that Russia’s invasion of Ukraine is creating significant economic uncertainty and we will continue to monitor its impact on the UK, but it is vital that we stand with the people of Ukraine to uphold our shared values of freedom and democracy and ensure Putin fails”.
 
Transport Secretary Grant Shapps is vowing to “cripple Russia’s aviation and shipping sectors” and “go after the oligarchs that support Putin” by seizing their private jets and yachts. He said: “If they dock their super yachts in the UK, we’ll seize them. If they land their private jets here, we’ll impound them.” Meanwhile, Vladimir Putin’s decision to close Russian airspace is backfiring on the country’s economy, the Telegraph says, as it means a $1.7bn (£1.3bn) loss to the Kremlin, the amount it made in 2019 from charging airlines to use its airspace – more than any other country. Last week, the UK government impounded a private jet suspected to be owned by Eugene Shvidler, a friend of Roman Abramovich.
 
A consortium representing more than 45 large businesses is due to meet with the refugees’ minister Richard Harrington this morning about a plan to make it easier for those driven out by Russia's invasion of Ukraine to come to the UK and work for them. Marks & Spencer, Tesco, Vodafone, Morrisons, Asos, Lush and recruitment giant Robert Walters are among those saying they have 10,000 jobs available for refugees, and Kate Nicholls, chief executive of UK Hospitality, said she has been “inundated with offers of help and support” from hotels with spare rooms and restaurants looking to provide food parcels. Emma Sinclair, the chief executive of Enterprise Alumni who is leading the initiative, says the aim of the project is to help "tens of thousands" of refugees not only get jobs in the UK, but to help them find accommodation, and gain language skills, she says.  UK householders who take in a refugee will be offered £350 a month, Michael Gove, the Housing and Communities Secretary, said yesterday, and now there is growing support from business groups for employers to be offered tax breaks or red tape exemptions if they hire refugees.
 
Uniqlo owner Fast Retailing Co and Japan Tobacco Inc have u-turned on their plans to continue doing business with Russia and will now suspend some operations in the country. The two companies were notable stand outs among major brands for their original stance. Last week, Tadashi Yanai, the founder of Fast Retailing, told Japanese media that the company would continue operating its 50 stores in Russia because "clothing is a necessity of life". But on Thursday Fast Retailing said: "While continuing our Uniqlo business in Russia, it has become clear to us that we can no longer proceed due to a number of difficulties." Japan Tobacco, which controls about one-third of Russia's tobacco market through brands including Winston and Camel, said its subsidiary there would suspend investment, marketing activities and a planned launch of a heated tobacco product. "The challenges of operating in Russia at this time are unprecedented," the company said in a statement.
 
Russian miner Evraz has seen 10 of its directors step down from the company since its largest shareholder, Roman Abramovich, was hit with sanctions. The resignations, which happened with immediate effect, left only chief executive Aleksey Ivanov remaining on the board., Yahoo Finance UK says. Those quitting include Sir Michael Peat, a former private secretary to Prince Charles, Evraz chairman Alexander Abramov, ex-Ford executive Stephen Odell, oligarch Eugene Shvidler, and Chelsea FC director Eugene Tenenbaum. The government said Abramovich had destabilised Ukraine through his “effective control” of Evraz, which may have supplied steel to the Russian military to build tanks. However, Evraz has insisted the oligarch did not have control of the company because he held less than 50% of shares (he has a stake of around 29%) and had no right to appoint or remove a majority of the board. The company also said it only supplied long steel to the infrastructure and construction sectors, meaning it did not believe it would be subject to sanctions. “Evraz is deeply concerned and saddened by the Ukraine-Russia conflict and hopes that a peaceful resolution will be found soon,” the company said in a statement.
 
Cybersecurity firm Avast has withdrawn all its products from Russia and Belarus and suspended marketing and sales operations in those countries with immediate effect. The company said it had staff in both Russia and Ukraine and was "actively working to protect and sustain them as a priority". Ukraine, Russia and Belarus collectively contributed around 1.5% of Avast's annual revenue in 2021. Avast is also donating more than $800,000 (£613,570) to humanitarian organisations to address skills-based volunteering opportunities and help Ukrainian groups avoid cyber threats or recover from a cyberattack.
 
The Financial Conduct Authority (FCA) has ordered all bitcoin ATMs in the UK to shut down or face enforcement action and punishment. There are currently 81 bitcoin ATMs operating in the UK, controlled by at least eight providers, none of which are licensed by the FCA. The majority are located inside supermarkets and convenience stores. Unlike a normal ATM where people can draw money from their bank account, bitcoin ATMs allow customers to buy and exchange cryptocurrencies using cash. The FCA said it had concerns over the background checks conducted by the machines, especially over smaller deposit amounts. The FCA said: “Crypto ATMs offering cryptoasset exchange services in the UK must be registered with us and comply with UK money laundering regulations. None of the cryptoasset firms registered with us have been approved to offer crypto ATM services, meaning that any of them operating in the UK are doing so illegally and consumers should not be using them.” There are now close to 34,000 cryptocurrency ATMs available globally, most of them in the US, according to Yahoo Finance UK.
 
UK and EU antitrust authorities launched parallel probes into Google and Meta, formerly Facebook, on Friday, over a deal between the two for online display advertising services. The UK’s Competition and Markets Authority(CMA) and the European Commission are concerned that the “Jedi Blue” deal made in 2018 hampered competition in markets for online display advertising services, according to Yahoo Finance UK. Terms agreed by the companies were that Meta’s Audience Network would participate in Google’s Open Bidding programme. Andrea Coscelli, head of the CMA, said in a statement: “We’re concerned that Google may have teamed up with Meta to put obstacles in the way of competitors who provide important online display advertising services to publishers. If one company has as stranglehold over a certain area, it can make it hard for start-ups and smaller businesses to break into the market — and may ultimately reduce customer choice,” he added.
 
Online shoppers face enhanced identification checks when paying for purchases from today. The Strong Customer Authentication (SCA) requirements mean customers will be asked to prove their identity when making a purchase over £25 by confirming, for example, their password or passcode, mobile phone number, or by providing a fingerprint or facial ID. The new system is expected to lead to more card payments being declined, as the measure is designed to reduce the £376m lost to online fraud in 2020.
 
A senior official previously charged with vetting the Treasury's plans has told the BBC chancellor Rishi Sunak can afford to postpone April's tax rises. Sir Charlie Bean, who recently left the Office for Budget Responsibility, said the plan for an immediate rise may be political rather than economic. April's National Insurance rise will tax the average worker £250 a year and raise costs for firms which hire staff. Sunak says his priority is shrinking the deficit. But Bean said: "There is no problem in the UK borrowing several billion pounds for one extra year. What you can't run is sustained large deficits, but the pace at which you close a deficit is basically a political judgement". The hikes break a manifesto pledge and spell the highest tax burden since the 1950s.
 
Manufacturers are increasing their prices at record levels in the face of escalating inflationary pressures according to a survey of almost 300 firms by Make UK and business advisory firm BDO, which showed prices increased for the fourth successive quarter. The survey was completed before the invasion of Ukraine and the substantial increases in energy and raw material costs, which are likely to have pushed price increases even higher. Make UK is urged the Chancellor to use his forthcoming Spring Statement to delay the planned increase in National Insurance and examine other ways to ease business costs and boost investment.
 
The Federation of Small Businesses (FSB) also says Chancellor Rishi Sunak should use next week’s Spring Statement to avoid “damaging tax hikes” and “deliver a low tax, high investment, dynamic economy” now, rather than “later in the political cycle”.  The FSB National Chairman, Martin McTague, also called on Sunak to increase the Employment Allowance, which lets companies reduce their annual National Insurance liability, to £5,000, and to increase the rateable value ceiling for small business rates relief to £25,000, a move it said would take 200,000 small companies out of the business rates system. “The Chancellor cannot control the wholesale price of gas and oil, but he can control tax policy,” said McTague.
 
UK energy bills are set to jump at least 14 times faster than wages this year, according to new analysis by the Trades Union Congress (TUC), which says gas and electricity bills are set to increase by 54% when the price cap set by Ofgem is increased in April, while average weekly wages are set to rise by just 3.75% in 2022. The TUC estimates that record-high energy prices could wipe out the entire value of pay rises this year. Average wages are forecast to increase by around £1,000 a year in nominal terms, but the rise in the energy price cap in April of £693 will wipe out 70% of these gains. Another rise in October could wipe out any gains altogether: by then the energy price cap is expected to have risen by more than £1,500 for the year.
 
Heathrow airport has warned that the Ukraine war and surging fuel prices threaten the company’s recovery from the pandemic. On Friday it said there was now a “huge uncertainty” after Russia invaded Ukraine last month, adding to already lingering Covid concerns. Britain’s busiest airport, which has reported £3.8bn in losses over the past two years, revealed that it had not seen as many passengers return in February as it expected, with 2.8 million people travelling through the hub. This was just over half of pre-pandemic levels during the period, and 15% below its forecast total. Heathrow chief executive John Holland-Kaye said: “Aviation’s recovery remains overshadowed by war and COVID uncertainty”.
 
However, a bet by Virgin Atlantic that oil prices would rocket has paid off following Russia’s invasion of Ukraine. In a departure from previous years, Virgin locked in fuel prices for 2022 at $90 (£69) a barrel, saving the carrier tens of millions of pounds, The Telegraph reports. This means Virgin Atlantic will offer the same number of seats as 2019 this summer, in contrast with British Airways owner IAG, which expects its capacity to be 6% down. Virgin boss Shai Weiss is also understood to have told staff the airline has finally staved off the threat of bankruptcy. Sir Richard Branson explored a floating part of his airline on the London Stock Exchange and offered to mortgage his Caribbean island home in return for an emergency UK Government loan to keep his airline in business after the pandemic hit, but the government refused. He instead convinced creditors to defer debts and secured a £170m loan from hedge fund Davidson Kempner.
 
Bidders for Chelsea Football Club have been given extra time to bid for last season's Champions League winners after the government's decision to sanction owner Roman Abramovich and get actively involved in the sale threw an already-complex sale into disarray. Sky News says parties involved in the process being run by Raine, the New York-based merchant bank, were informed on Friday evening that they would now have until 18 March to submit indicative offers - three days after the original deadline – and that Chelsea had "coordinated with the Department for Digital, Culture, Media and Sport(DCMS) and UK Government Investments (UKGI) and will be moving forward with the sale process". Bidders were also told that the "successful closing of the sale of Chelsea FC will require a special licence to be approved by UKGI, approving both the source and use of funds". It also emerged on Friday that Chelsea had had its corporate bank accounts frozen by Barclays and that the club is engaged in a race against time to remain solvent.
 
Marks & Spencer is to put Early Learning Centre toy shops and Nobody’s Child fashion into some stores in a step-up of its strategy to sell external brands and increase its appeal to families. Early Learning Centre outlets, with activity tables for children as well as toys for sale, will go into 10 stores at the end of March, including at the Bluewater shopping centre in Kent, Longbridgein Birmingham, and Liverpool. Jaeger, the upmarket womenswear brand that M&S bought out of administration last year, will also be offered at several international stores.
 
Pearson shares surged around 24% on Friday after US asset manager Apollo Global Management confirmed it is in the preliminary stages of evaluating a possible cash offer for the educational publisher. "There can be no certainty that any offer will be made, nor as to the terms on which any such offer might be made," Apollo said. Under UK takeover rules, New York-based Apollo has until 1700 GMT on 8 April to either announce a firm intention to make an offer for the FTSE 100 company or walk away.
 
London-listed events company Hyve has agreed to buy US virtual events organiser Fintech Meetup for up to $55m (£41.8m). The consideration comprises an initial payment of $5m (£3.8m) and a contingent consideration of up to $50m (£38.0m) payable in 2024 and 2025.
 
Rio Tinto Group has offered to buy out Turquoise Hill Resources Ltd. for $2.7 billion (£2.07bn) in attempt to gain control of a giant copper mine it is developing in Mongolia. FTSE 100 listed Rio Tinto, the world’s second largest mining group, already owns 51% of Turquoise Hill.
 
The UK Space Agency is set to inject £2million into new space projects, including Rolls-Royce's plan to develop a power station in space which could power the generation of water, oxygen and fuels for solar exploration.
 
American-owned Cytiva has opened a new manufacturing plant in Cardiff as part of a wider £300 million investment with Pall Life Sciences into its UK operations. 250 jobs are expected to be created at the Welsh site.
 
Belgian-owned building materials manufacturer Etex has appointed contractors to build a new £140 million factory in Bristol - the largest single investment in the firm's 117-year history.


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