Published: 20 June 2023
By Suzanne Evans, Director, Political Insight
The Government’s short-term borrowing costs hit a 15-year high yesterday as the yield on two-year gilts rose above 5% for the first time since the global financial crisis in 2008. At one stage, they were as high as 5.085%, compared with a yield of just over 3% four months ago and zero in early 2021.
The Government is set for battle with the House of Lords (HoL) and more than 60 organisations - including the National Grid and the Church of England – over plans to rip up amendments the second chamber made to the Energy Bill, the BBC reports. In April, the Lords voted through an amendment banning any new coal mines from opening, a ban Ministers are now seeking to remove from the Bill, along with changes the Lords’ made to enable small community energy projects to sell electricity directly to local homes. Green MP Caroline Lucas called the decision "reckless" and said the amendments should be reinstated "immediately". The HoL amendment was passed by a majority of just three, with 197 peers voting in favour of the motion, and 194 against.
The UK yesterday implemented a preferential trading scheme with 65 poor and developing countries with a combined population of 3.3 billion people, over half of whom are in Africa. The Developing Countries Trading Scheme (DCTS) removes or reduces tariffs and simplifies trading rules, the Department of Trade and Business said in a statement. It replaces similar arrangements in place when Britain was a member of the European Union, but is “more generous," the Department said. Launching the scheme in Ethiopia's capital Addis Ababa yesterday, Nigel Huddleston, Minister for International Trade, said the DCTS will save UK businesses over £770m annually through cut or removed tariffs on over £9bn worth of imports, and “create opportunities for businesses around the world, supporting livelihoods, creating jobs and diversifying local and international supply chains".
Reuters says Ethiopia hopes the scheme will revive its export sector which suffered a setback after the USA suspended the Horn of Africa country from its African Growth and Opportunity Act trade arrangement over alleged human rights abuses.
Post-Brexit rules forcing European automakers to source more electric vehicle components from Britain or the EU could cost them up to €4.3bn (£3.67bn) in tariffs and cut EU production by up to 480,000 units, according to The European Automobile Manufacturers' Association (ACEA). Under the EU-UK post-Brexit trade deal, electric vehicles will need to have 45% EU or UK content from 2024, with a 50-60% requirement for their battery cells and packs, or face British or EU import tariffs of 10%. The ACEA is therefore calling on the EU to agree a three-year postponement of the rules with the UK, arguing that time is needed to build up Europe's battery capacity, and to review its rules of origin. It said its members expected only 10% of electric vehicles to comply with the new rules in 2024, making EU producers likely to lose out to competitors from China and other countries. However, Reuters notes that Stefan Fuehring, a European Commission official overseeing the post-Brexit EU-UK trade agreement, told a conference last week that EU rules of origin were "fit for purpose" and that the bloc was not considering changing them.
Grocery inflation eased slightly for the third month in a row in June. Data from market researcher Kantar says annual grocery inflation was 16.5% in the four weeks to 11th June, down from 17.2% in May. However, food price inflation is still the sixth-highest monthly figure of the past 15 years. Kantar also found the proportion of products sold for £1, the single most popular price for a grocery item, had almost halved in a year from 9% to 5%.
Clergy in the Church of England (CofE) have asked for a pay rise, the first such formal demand in the denomination’s nearly 500-year history. Trade union Unite, which represents more than 2,000 clergy and lay officers in the CofE want a 9.5% increase in the clergy stipend from April 2024. "The Church of England has billions in the bank and can fully afford to pay its clergy the modest increase in their stipend they are seeking," Unite general secretary Sharon Graham said, pointing to the £10.3bn investment fund listed in the 2022 Annual Report of the Church Commissioners.
Canada’s Alpha Auto Group is set to take over leading UK car dealer Lookers for £465.4m in cash, a 120p per share deal that is 35% above its closing share price of 88.7p on Friday. Lookers is recommending shareholders vote in favour of the deal, which its chairman says will “protect stakeholder interests” while “supporting our customers, operations, communities’ and staff”.
Pharma giant AstraZeneca is reportedly considering hiving off its China business into a separate legal entity which will be listed in Hong Kong, to both protect the company against mounting geopolitical tensions and insulate it politically from any moves by China to crack down on foreign companies. The idea would also offer a separate source of capital, the Financial Times says, citing three people familiar with the proposal, which they say has been "on the table for a few years". They added another benefit of a separate listing would reassure investors in the remaining FTSE 100 company that they had less exposure to China-related risk. An unnamed senior Asia-based banker also told the FT that “every multinational with a strong China business" seems to be considered a similar move. "Even if it's just the option to give you flexibility in the future, it's worth thinking about," they said. AstraZeneca has not commented on the report.
Silicon Valley investor Andreessen Horowitz (a16z) has led a $19m (£14.85m) funding injection into London-based AI firm Eleven Labs to help accelerate a new wave of “voice AI research,” the firm announced today. Eleven Labs uses AI tools to turn any form of text into speech with synthetic voices, cloned voices, and artificial voices. It said the fresh capital injection was led by a16z alongside US investors Nat Friedman and Daniel Gross, with support from venture firms Credo and Concept Ventures. The round valued Eleven Labs at $99m (£77.38m), City A.M. understands, and will now be channelled into developing “the most versatile and contextually-aware AI voices” ever created.
Activist shareholder The Boatman Capital has asked the Financial Conduct Authority to investigate whether social housing landlord Home REIT misled investors. The letter said Home REIT’s backers have been “badly burnt” by the company because of its “failure to provide complete and accurate information to the market”. Home REIT claimed it invested in high quality accommodation for vulnerable people, including the homeless and domestic abuse victims, when it made its debut on the market in 2020, but has been at the centre of scandal since November last year when investigative financial research group Viceroy Research published a report questioning its business model and exposing poor quality housing stock, tenant disputes, and considerable rental debts. Home REIT delayed its annual results, and has still not published them. Its shares were suspended from trading in January.
Mike Ashley's Frasers Group has taken an 8.9% stake in electricals retailer Currys, it has been revealed.
Online fashion retailer Boohoo is opposing the reappointment of three directors of Revolution Beauty Group, in which it has a 26.6% shareholding, and requesting a general meeting to make significant changes to the board composition. The FTSE AIM 100 listed Boohoo will vote against the reappointment of Bob Holt, Derek Zissman and Elizabeth Lake at the upcoming AGM, and says it wants to appoint Alistair McGeorge and Neil Catto as directors in their place, with McGeorge taking up the role of interim executive chairman, and Catto becoming CFO of Revolution Beauty. Boohoo has also requested that the current board refrained from appointing Rachel Maguire and Matthew Eatough as directors. “As Revolution Beauty transitions to its next phase, where the focus must switch to growth, Boohoo believes a senior leadership team with the right retail, e-commerce and consumer brands experience is required to deliver shareholder value," Boohoo said in a statement.
Meanwhile, Revolution Beauty Group said this morning it had sent a letter of claim to founder and former CEO Adam Minto in May, alleging he breached fiduciary and other duties, and that the company was looking to recover unquantified "material sums" in related costs. Revolution Beauty has set a deadline of 7th July for a response. Revolution Beauty's shares were suspended from trading on 1st September last year after auditors questioned its accounts and the company failed to publish its 2022 annual results. An independent investigation led to Minto’s resignation, and that of then Executive Chairman Tom Allsworth.
Susan Davy, the CEO of water company Pennon Group, has given up her £450,000 bonus because of outrage over the firm’s record of sewage dumping in rivers, meaning her pay has fallen by nearly two-thirds to £543,000, consisting of her base salary, benefits and pension. Last year, Davy was paid £1.53m.
British American Tobacco (BAT) unveiled significant changes to its management board yesterday following the appointment of Tadeu Marroco as its CEO on 15th May. The FTSE 100 tobacco giant said that from 1st July, Johan Vandermeulen and Kingsley Wheaton will assume the newly-created roles of chief operating officer and chief strategy and growth officer, reporting directly to Marroco. Additional roles have also been created in different geographic areas and in the digital, information, finance and marketing teams, and James Barrett is joining the management board as director of business development, focusing on strategy development, mergers and acquisitions, the wellbeing and stimulation portfolio, and 'Btomorrow Ventures', BAT's venturing unit. BAT said it was currently undertaking a comprehensive process to identify and appoint successors for the roles of finance director and director of talent, culture and inclusion, both of which would report directly to the chief executive.
Software firm Kainos said yesterday that CEO Brendan Mooney is stepping in September down after 22 years at the helm and 34 years at the company. He will be replaced by Russell Sloan, currently the digital services director of Kainos. Mooney will remain actively engaged with the FTSE 250 business until June 2024, to ensure an orderly transition.
The former UK chief of Klarna, Alex Marsh, has joined the board of the Treasury-backed Centre for Finance, Innovation and Technology (CFIT). Marsh, who stepped down from his role with Klarna last month after four and a half years, to pursue a ‘portfolio career,’ will join the CFIT board alongside Fintech Scotland chair Stephen Ingledew as its first non-executive directors. CFIT launched earlier this year with £5m in seed funding from the Government. The body was one of the recommendations of the Treasury-commissioned Kalifa Review of Britain’s fintech sector in 2020.
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