Published: 09 June 2023
By Suzanne Evans, Director, Political Insight
The Government has backtracked somewhat on its Energy Profits Levy (EPL), the so-called ‘windfall tax’ which currently levies 35% on profits made by North Sea oil and gas producers. The policy to increase the levy, hiking it from 25% to appease complaints that energy companies were making excessive profits, backfired when producers warned the increased tax burden made business unviable. Some pulled out of new projects and shifted investment away from domestic waters. The Treasury has now announced the levy will not apply if oil and gas prices fall below 20-year historic averages for a period of six months. It has also unveiled the Energy Security Investment Mechanism (ESIM), which establishes a price floor at $71.40 per barrel and 54p per therm, at which point the windfall tax falls away completely, meaning overall taxes on the industry - which supports 215,000 jobs in the UK and provides half the country’s oil and gas needs - drop from 75% to 40%. However, it has also been announced that the EPL will remain in place until March 2028, which is likely to be longer than any 'windfall' from the current energy crisis.
Prime Minister Rishi Sunak and US President Joe Biden yesterday agreed a new Atlantic Declaration for greater cooperation on pressing economic challenges in areas such as clean energy, critical minerals and artificial intelligence. The joint declaration described the partnership as the "first of its kind" and is intended to strengthen supply chains, develop technologies of the future, and encourage investment by both countries in each other's industries.
Harriet Baldwin, chair of the Treasury Select Committee has told the nation’s biggest banks to “up their game and encourage saving,” adding that “the measly easy access rates on offer” have led the cross-party committee of MPs to conclude “that loyal customers are being squeezed to bolster bank profit margins”. A report from the Committee highlighted low rates on offer by Nationwide, TSB, Virgin Money and Santander ranging from just 0.25% to 1.25%, despite the Bank of England’s base rate standing at 4.5% currently. These accounts make up a quarter of personal current accounts in the UK, according to the Financial Conduct Authority (FCA), while BoE shows around 60% of total household deposits are held in instant access accounts.
London has taken the top spot for global tech investment over the past decade according to data from London & Partners, easily beating rivals like New York and San Francisco in the number of tech initiatives attracting foreign capital, with 1,752 separate projects securing funding since 2014.
Meanwhile, a report from the House of Commons’ Public Accounts Committee says the Government is not doing enough to encourage foreign investment into areas outside London and the South East. An economic bias remains “baked into” the system, the MPs said, while accusing the newly formed Department for Business and Trade (DBT) of “flying blind” on how its work impacts and supports investment by failing to distinguish separate nations and regions within the UK, meaning money will not necessarily end up where it can make the most difference; and by not surveying investors who decide against financial backing to establish why.
The eurozone economy fell into a technical recession in the first three months of 2023, the latest data from statistics agency Eurostat shows. GDP for the 20-country bloc fell by 0.1% in the first quarter compared with the final quarter of 2022, when GDP also slipped by 0.1%, revised from a previous reading of zero. Two successive quarters of contraction are commonly described as a technical recession.
The pandemic-era online shopping boom appears to be over: digital sales have fallen by 3.3% in May to their lowest levels since before lockdowns. Accountancy firm BDO blames the cost-of-living crisis for consumers cutting down on the number of goods they buy from digital retailers such as Asos and Amazon.
The Government has blocked Royal Mail's plans to end Saturday letter deliveries. Business minister Kevin Hollinrake confirmed the move in a letter to parliament's cross-party Business select Committee. Royal Mail, which is owned by FTSE 250 company International Distributions Services, has argued its business is unsustainable and large rises in the cost of a first class stamp will be needed unless it is allowed to drop its six-day-a-week delivery obligation. However, Hollinrake said: “The ability to send and receive letters and parcels is important both socially and economically. This is particularly true for consumers who might be more vulnerable". Ofcom has estimated that cutting Saturday letter deliveries would save Royal Mail, which has lost around £1bn in revenue this year, up to £225m annually.
The Competition and Markets Authority (CMA) said yesterday that the proposed €1.7bn acquisition of French firm Thales' ground transportation business by Japan’s Hitachi Rail could lead to a "substantial lessening in competition" in the supply of digital mainline and urban signalling rail systems. The primary customer for mainline signalling systems in the UK is Network Rail, while TfL oversees the country's largest urban rail system, Sharecast News reports. As both Network Rail and TfL are expected to upgrade their systems in the coming years, and there is already a "very small number" of suppliers available, the CMA has provisionally found that “there would be fewer credible bidders remaining for digital mainline signalling tenders, which could raise costs for Network Rail and negatively impact the digitalisation of the UK's rail network," should the merger go ahead. The CMA will now consult on its provisional findings and seek proposals from Thales and Hitachi on how its concerns could be addressed, if the merger is not to be blocked.
HSBC has temporarily withdrawn mortgage deals for new borrowers. The bank said it would remove all its "new business" residential and buy-to-let products yesterday, "to ensure that we can stay within our operational capacity and meet our customer service commitments". It said deals will be available again on Monday, in all likelihood at higher interest rates.
FTSE 100 firm CRH is to switch its primary listing to the New York Stock Exchange on 25th September after 95% of shareholders backed the proposal. CEO Albert Manifold said the move would allow Dublin-based CRH - the world's largest building materials specialist - to benefit from large US government spending programmes. Around 75% of CRH's core earnings were generated in the US last year. CRH, which moved its primary listing to London from Dublin over ten years ago, will now de-list from Dublin and move from a premium to a standard listing on the London Stock Exchange.
Canada's Brookfield Asset Management has just said it has reached an agreement to buy London-listed payments provider Network International for a cash offer of £2.2bn.
Capita is selling five software businesses to strengthen its balance sheet. The FTSE 250 Government outsourcer hopes to receive cash proceeds of £44m on completion of the deal. Capital predicts a £15m hit from a cyberattack which saw personal information leaked onto the dark web in March.
Mitie has posted record full-year revenue boosted by contract wins, renewals, acquisitions and inflationary contract re-pricing which “more than offset contracts that were not renewed and the prior year benefit from short-term Covid work". In the 12 months to the end of March, revenue at the FTSE 250 facilities management company rose to a record £4.05bn from £4bn a year earlier, while operating profit grew to £117m from £72m.
Sustainable bus maker Wrightbus has secured a £50m Government loan to export electric and hydrogen-powered buses to new markets including Germany and North America, and boost exports to Singapore and Hong Kong.
London’s oldest office provider Argyll has seen “unprecedented” levels of office occupancy in the last six months, defying concerns that homeworking trends during covid lockdowns had led to permanent change. Speaking to City A.M. Argyll CEO John Drover said that rates of occupancy had reached 90%, with the firm seeing a 26% uptick in clients. “The last time we were at this sort of occupancy level was the dot com boom,” he said.
Google is reportedly cracking down on its hybrid-working policy, saying it will begin tracking staff office attendance and employees’ frequency in the office in performance reviews. Google’s Chief People Officer, Fiona Cicconi, is said by CNBC to have written an email to employees on Wednesday, noting that there is “just no substitute for coming together in person”.
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