Published: 18 January 2024
By Suzanne Evans, Director, Political Insight
The FTSE 100 had around £30bn wiped off its value yesterday. It closed almost 1.5% lower at 7446. The drop was the worst since August, and came as a surprise jump in inflation weakened investor sentiment amid fears the Bank of England (BoE) will keep interest rates higher for longer. Housebuilders were among the biggest fallers on the blue chip index. CPI rose to 4% in December, according to the Office for National Statistics (ONS), up from 3.9% in November. The BoE has held rates at 5.25% for three months in a row and will meet again to decide rates on 1st February.
Speaking to The Telegraph at the World Economic Forum in Davos yesterday, Labour’s Shadow Chancellor Rachel Reeves pitched her party as one committed to economic growth and tax cuts. She said she would make sure that “success is celebrated” under a Labour government, and that lowering taxes on “working people” remains a priority, including those paying the highest 45p rate. Freezing income tax thresholds in the face of rising inflation, as the Conservative Government has done, “has affected people paying the top rate of tax and the basic rate of tax, and both of those groups of people are working hard, but getting less every month in their pay packets,” she told the newspaper. “My instinct is to have lower taxes,” she insisted. However, she stressed she thought it would be “irresponsible” to commit to tax cuts without pinpointing how they would be funded – she did not mention cutting spending to facilitate tax cuts – and vowed to stick to a plan to get debt falling. Asked if she agreed that she wanted lower taxes on workers “across the spectrum”, including those earning above £100,000, the shadow chancellor responded: “Yes”. Her comments drew condemnation from trade unions, who accused Labour of pandering to the super-rich. Sharon Graham, general secretary of Unite, said the “Davos event…already epitomises the problem of vast wealth not being distributed fairly or used to invest in the real economy,” adding: “Labour needs to be bolder if it is to deliver economic growth that ensures a brighter future for everyone and not just those at the top”.
Business Secretary Kemi Badenoch has written to Fujitsu CEO Takahito Tokita saying she would "value the opportunity to discuss Fujitsu's involvement in the Post Office Horizon scandal” as soon as possible, to discuss the potential compensation for victims, Sky News reported yesterday. Fujitsu's European boss Paul Patterson told MPs on Monday the company knew before 2010 that there were problems with the Horizon IT system it rolled out to Post Offices, and that the company had a “moral obligation” to compensate sub-postmasters for their unjust prosecutions.
Tata Steel is expected to confirm plans to shut down its two blast furnaces at the Port Talbot steelworks, various media outlets are reporting this morning. The Guardian has heard from three sources who say that Tata, which is owned by the Indian billionaire Ruia brothers, is likely to make the announcement during a crunch meeting with trade unions this lunchtime. A senior Westminster source also told the newspaper they believed ‘something bad’ was coming this week for the future of Port Talbot”. The job losses are on the table because Tata is committed to transitioning to ‘greener’ steelmaking to reduce carbon emissions, and has received Government support to build cleaner furnaces using renewable electricity rather than fossil fuels. However, The GMB Union and Community unions say this change could cost 3,000 jobs directly, plus hundreds more in the wider community, whereas plans they have put forward in conjunction with consultancy Syndex could save 2,000 jobs. These plans involve keeping at least one blast furnace open at Port Talbot until a new electric arc furnace is ready to come online, the BBC explains. However, Tata is expected to say it cannot afford these proposals. Port Talbot currently employs some 4,000 workers.
Formaplex, a Portsmouth-headquartered manufacturer which makes components for the automotive, aerospace, medical and defence sectors, has done into administration having had contracts with car manufacturers Aston Martin and Bentley terminated. Formaplex’s 500 staff were sent home on Tuesday. One insider told Sky News that other customers of the company, including Lotus and McLaren, were now being approached by administrators at Alvarez & Marsal to provide sufficient funding to enable it to continue trading through the insolvency process. "Every effort is being made to save the business and as many jobs as possible," the administrators said. An Aston Martin spokesperson said: "Aston Martin continually monitors the performance of its suppliers, including from a financial perspective, in order to protect the continued production of its vehicles”.
Sainsbury’s is closing its banking division in a “phased withdrawal” it confirmed this morning, following a strategic review concluding it would in future offer financial products provided by third parties, as it does with its insurance offering. Sainsbury’s Bank boss Jim Brown will step down from his role, to be replaced by former AIB exec Robert Mulhall. Sainsbury’s already sold its £400m-plus mortgage book last year to the Cooperative Bank.
Ryanair CEO Michael O’Leary has condemned Heathrow and Gatwick Airport’s plans to build third and second runways respectively using a stream of expletives, saying they are “f**** off the wall,” far too expensive, and “pie in the sky stuff”. “I don’t think it’s possible to fund another runway in Heathrow. I mean the cost, I think the last estimate of cost was like £15bn, it’s like f**** HS2 all over again,” O’Leary told City A.M., adding: “The concrete cost of a runway is about £250m quid, how the f**** did you get to 15bn?” It is “mad money,” he said. In yet more crude language, he claimed that Heathrow’s plans to divert the M25 into a tunnel to make space for a third strip would never work. “There is simply no way you’re going to move the M25, nor can you f**** tunnel under the M25,” he exclaimed. The “obvious place” for a new runway would be a “greenfield in Essex,” he argued, meaning London Stansted, Ryanair’s largest base. “If the Government was serious about infrastructure, and I’m not sure the current government is serious about anything, but if they were serious about infrastructure and making sensible infrastructure investments to serve London… the next runway should be in Stansted,” the Irish businessman maintained. Heathrow’s £14bn development has been in the pipeline for decades and has Government approval, but costs are rising with inflation and it has been described as a civil engineering nightmare, City AM explains. Lowering a section of the motorway would result in the demolition of some 750 homes, a primary school and an energy facility. The construction would also disrupt traffic on the stretch of the M25 between junctions 14 and 15, which is used by over 200,000 drivers each day.
The Telegraph says it has learnt that media mogul Rupert Murdoch is considering an attempt to buy back Sky News from Comcast, six years after he sold it to the US media group. Comcast has drastically written down the value of Sky and is obliged to keep funding the news channel until 2028, so may be keen to offload it, the newspaper says. However, there is no sign that Comcast is a willing seller, and Murdoch would also likely face significant regulatory hurdles if he attempted such a move. A spokesman denied News UK was exploring a bid.
FTSE 250 DIY, home and garden retailer Grafton has appointed Ian Tyler as its next chairman, with effect from 1st March, replacing Michael Roney, who is due to step down at the AGM in May. Tyler is currently non-executive director of Anglo American and Synthomer and chair of BMT Group, a privately owned design and technical consulting firm, and Affinity Water. He has previously chaired Amey, Vistry Group, AWE Management, Al Noor Hospitals Group and Cairn Energy. He is also a former non-executive director of BAE Systems, Cable & Wireless Communications, VT Group and Mediclinic International.
The former COO of Meta, Sheryl Sandberg, is leaving the company's board of directors. Sandberg, one of the most high-profile women in the tech industry, said that "this feels like the right time to step away" as Meta is "well-positioned for the future". She will serve as an informal advisor to the company going forward. Meta CEO Mark Zuckerberg thanked her for the "extraordinary contributions" to the company. Sandberg, 54, joined the firm from Google, when Meta was just a small start-up named Facebook.
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