Closing post
Time to wrap up… here are today’s main stories:
European stock markets have ended the day slightly higher.
The UK’s FTSE 100 finished 10 points higher at 7929 points, up 0.13%, while Germany’s DAX gained 0.6%.
Jerome Powell may have soothed investors nerves, by insisting that the Federal Reserve hadn’t already decided to make a large hike in interest rates (see 4.15pm post).
Michael Hewson of CMC Markets says:
It was looking set to be a rather mixed day for markets in Europe, although we have seen a move into positive territory during the afternoon session on the back of Fed chairman Powell’s clarification on what the Fed is likely to do on rates in two weeks’ time.
In a manner of a parent soothing an errant child Powell merely restated that the Federal Reserve remains data-dependent and that nothing has been decided when it comes to whether we get 25bps or 50bps.
As an exercise in stating the obvious, the comments appear to have helped push markets to their highs of the day, bringing about a modest rebound into the close, however, markets still appear very much rangebound, with no clear direction, with the DAX outperforming.
Pfizer's Rienow appointed president of Association of the British Pharmaceutical Industry
Susan Rienow, the pharma giant Pfizer’s UK chief, has been appointed president of the Association of the British Pharmaceutical Industry (ABPI), my colleague Julia Kollewe reports.
She is currently ABPI vice president and will formally take up her role as president in May. Her appointment comes on International Women’s Day.
Rienow. who led Pfizer UK’s vaccines business during the Covid-19 pandemic, says:
“I’m delighted to be taking up the role of ABPI President at such a huge moment of opportunity for both the UK and our industry.
The government has set out a bold ambition to be a science superpower, and with a new Department for Science, Innovation and Technology, I believe that the industry and government can drive this agenda together to deliver long term economic growth.”
Congratulations to our UK Managing Director and Country President, Susan Rienow, for being appointed as the next President of the @ABPI_UK, where she will be helping to shape the direction of our industry into the future. https://t.co/JRI0AgZcgt
— Pfizer UK (@Pfizer_UK) March 8, 2023
The pharma industry is trying to negotiate a new deal with the UK government. This year, drugmakers will have to pay back almost £3.3bn in sales revenue, up from £600m in 2021 and £1.8bn in 2022 under the voluntary pricing agreement.
The ABPI says the 26.5% rebate is unsustainable and has proposed an alternative, a fixed rebate rate of 6.88% across all eligible NHS medicine sales to be paid by the industry. This would deliver more than £1bn a year to the NHS – around £300m more than the average delivered under the old scheme before 2023.
Here is our recent profile of Rienow:
Powell: No call made yet on size of March rate rise
America’s top central banker is back at Congress for a second day of testimony, a day after rocking markets by warning that higher interest rates may be needed.
Federal Reserve chair Jerome Powell told the House Financial Services Committee that officials have not yet made a call on the size of the rate increase they might vote through in March.
Powell explained that “We have not made any decision about the March meeting, we are not going to do that until we see the additional data” that arrives before the meeting on March 21-22.
He insisted that the Fed was not on a “pre-set path”.
But, Powell’s hint yesterday that larger interest rate rises may be needed reignited speculation that the Fed could lift borrowing costs by half a percent this month.
Large interest rate increases could slow the economy, and drive up unemployment:
Updated
The City watchdog and local police have raided several sites in east London suspected of housing illegal ATMs distributing cryptocurrencies, as part of a widening crackdown on the sector.
The joint operation between the Financial Conduct Authority (FCA) and Metropolitan police came just weeks after similar raids in Leeds. Those are believed to be the first to target crypto distribution in the UK, including machines that allow customers to buy or convert traditional currencies into cryptoassets such as bitcoin.
The FCA said it would review evidence it had collected during those operations and would “consider taking further action where necessary”.
More here:
Chancellor of the Exchequer Jeremy Hunt is reportedly weighing up proposals to spend £800m on a new supercomputer.
Bloomberg has learned that PM Rishi Sunak’s flagship Department for Science, Innovation and Technology has submitted plans to Downing Street for the project, which could use boost to the domestic tech industry by using UK-developed systems and chips.
However, the Treasury may be wary of the bill….
…as Bloomberg’s Alex Wickham explains:
The proposal is designed to be a focal point in Sunak’s stated ambition for Britain to “cement our place as a global science and technology superpower by 2030,” a goal the prime minister emphasized when publishing a science and technology framework on Monday.
However, in a sign that Sunak’s ambitions may collide with reality on how much UK government money is available to spend on such projects, the Treasury has yet to sign off on funding even though Hunt is set to unveil the UK’s annual budget next week, people familiar said.
More here: Sunak Is Gearing Up to Spend £800 Million on UK Supercomputer
It’s not clear how powerful this new supercomputer might be. Back in 2006, the UK government commited £52m to build Hector, the High-End Computing Terascale Resource.
Hector could carry out 100 trillion calculations a second, and was used by scientists to simulate climate change and atomic structures, for example.
Today, the fastest comuter is the Frontier, funded by the US Department of Energy, which can carry out more than 1 quintillion calculations (or a million trillions) in one second.
US job openings dip to 10.8m
There are still more than 10 million unfilled job vacancies in the US, new figures show.
The closely watched JOLTS report, just released, shows that the number of job openings decreased to 10.8 million on the last business day of January.
That’s a drop of 410,000 during the month, down from over 11 million at the end of December, but still extremely high by historic standards.
January JOLTS job openings at 10.82M vs. 10.55M est. & 11.23M in prior month (rev up from 11.01M) pic.twitter.com/A5cUy9AKPR
— Liz Ann Sonders (@LizAnnSonders) March 8, 2023
The US department of labour reports that the largest decreases in job openings in January were in construction (-240,000), accommodation and food services (-204,000), and finance and insurance (-100,000).
The number of job openings increased in transportation, warehousing, and utilities (+94,000) and in nondurable goods manufacturing (+50,000).
Directionally, today's #JOLTS report is consistent with a cooling labor market.
— Julia Pollak (@juliaonjobs) March 8, 2023
- Job openings declined slightly to a still sky-high 10.8 million
- Quits declined slightly to 3.9 million
- Layoffs increased to 1.7 million
- Hires remained strong at 6.4 million
US investigates Tesla for steering wheels that can fall off
U.S. auto safety regulators have opened an investigation into Tesla’s Model Y SUV after getting two complaints that the steering wheels can come off while being driven, Associated Press report.
The National Highway Traffic Safety Administration says the probe covers an estimated 120,000 vehicles from the 2023 model year.
The agency says in both cases the Model Ys were delivered to customers with a missing bolt that holds the wheel to the steering column. A friction fit held the steering wheels on, but they separated when force was exerted while the SUVs were being driven.
The agency says in documents posted on its website Wednesday that both incidents happened while the SUVs had low mileage on them.
Messages were left seeking comment from Tesla, which has disbanded its media relations department.
In one complaint filed with NHTSA, an owner said he was driving with his family on Route 1 in Woodbridge, New Jersey, when the steering wheel suddenly came off on Jan. 29, five days after the vehicle was purchased. The owner wrote that there were no cars behind him, and he was able to pull toward the road divider. There were no injuries.
US investigates Tesla for steering wheels that can fall off while driving (from @AP) @tkrisher @NHTSAgov @ntsb https://t.co/Xhs3OdNQOM
— Joan Lowy (@joan_lowy) March 8, 2023
RMT to hold referendum on Network Rail offer
The RMT union has said members will vote in a referendum over the next 12 days on the revised pay offer from Network Rail, in a move that could signal the end to the most damaging rail strikes, my colleague Gwyn Topham reports.
The union last night called off a 24-hour strike at Network Rail planned for next Thursday 16 March, which would have included thousands of signallers, critical for allowing the railway to run.
Four 24-hour strikes by RMT members at 14 train operators are still scheduled, but in most parts of Britain the action will have far less impact than a Network Rail strike.
RMT general secretary Mick Lynch said:
“Network Rail have made a new and improved offer and now our members will decide whether to accept it.
“We will continue our campaign for a negotiated settlement on all aspects of the railway dispute.”
Network Rail bosses have been confident that a referendum on the new offer will swing in favour of acceptance, after a substantial minority voted to accept a similar deal in a ballot before Christmas.
BREAKING: RMT to hold referendum on Network Rail offer.https://t.co/FhZzY995RC
— Sky News (@SkyNews) March 8, 2023
📺 Sky 501, Virgin 602, Freeview 233 and YouTube pic.twitter.com/lv51lJoM3y
The union said it would not make a recommendation, after last time asking members to reject the offer. Voting in the referendum will start tomorrow 9 March, until midday on 20 March.
Although the overall headline pay increase, of 5% backdated to January 2022 and 4% from January 2023, has not changed, some revisions and more work explaining the pros and cons of new contracts was expected to bring sections of the workforce on board.
The RMT said the offer would raise overall earnings by over 15% for more than half the members, at the lower end of the pay scale, including increased backpay.
The deal is likely to still prove divisive, with many staff apparently angry at the lack of progress on pay, while others appear unwilling to continue strikes.
Train operators have urged the union to now put their offer to its members.
A Rail Delivery Group spokesperson welcomed the news of the RMT referendum, but added:
“Train operating staff will rightly be asking why their union continues to deny them the opportunity to have their say on our equivalent offer.
“Instead of inflicting more lost pay on its members and disruption to our passengers, we are calling on the union to call off their strikes and meet us for urgent talks to resolve this dispute.”
RMT members at train companies are due to go on strike on 16, 18 and 30 March and 1 April.
Updated
Government and industry figures are expressing optimism over a breakthrough to end the RMT’s long-running national rail strikes, after the union called off some of its industrial action last night.
The RMT’s decision to put a revised pay offer from Network Rail to members surprised some senior industry executives, the Financial Times reports.
One senior minister has told the FT that the union’s shift could signal an end to months of on-off strikes that started last summer, especially as inflation is forecast to fall from its highest level in decades this year.
The minister argued:
“It’s one thing to be making these big pay claims when inflation is in double digits, but experts now think it will fall to 5 per cent in the summer, then 3 per cent by the autumn and if that happens then you’d expect less public sympathy for the unions’ position.
“The union leaders know that which is why I think there will be pressure to settle soon.”
Updated
This morning’s news that GDP growth in the eurozone was revised down from 0.1% to 0% in the fourth quarter of 2022 is a concern, warns Bert Colijn, senior eurozone economist at ING.
Colijn says:
Poor household consumption and investment data show that underlying developments are weaker than expected, adding concern about eurozone economic performance.
US private payrolls beat forecasts in February
Just in: US companies hired more staff than expected last month, according to data from payrolls operator ADP.
ADP has reported that US private employers added 242,000 jobs in February, up from the 106,000 which it recorded in January.
Economist had expected a smaller rise, to around 200,000 new jobs.
ADP reports that job gains were solid last month, while wage growth remained elevated – up 7.2% over the year. Good for workers, but not what the Federal Reserve wants to hear….
Nela Richardson, ADP’s chief economist, says:
We’re seeing robust hiring, which is good for the economy and workers, but pay growth remains quite elevated. The modest slowdown in pay increases, on its own, is unlikely to drive down inflation rapidly in the near-term.
Leisure and hospitality led job growth with 83,000 additions. Financial activities added 62,000 while manufacturing showed a 43,000 gain.
This could be a sign that the official US jobs report, due on Friday, will be stronger than expected.
Although, that Non-Farm Payroll often doesn’t match up with ADP’s payroll work. In January, for example, the NFP smashed forecasts with over half a million new jobs, while ADP had only reported 106,000.
ADP employment report smashes past expectations (forecast was 205,000).
— Bill (@wabuffo) March 8, 2023
ADP was notably pessimistic last month when NFP went over 500k too.
We'll see what claims tomorrow & NFP on Friday say -- but Federal real-time employment taxes are saying labor mkt is still hot. pic.twitter.com/pw7tNDbY8m
Darktrace warns of rise in AI-enhanced scams since ChatGPT release
The cybersecurity firm Darktrace has warned that since the release of ChatGPT it has seen an increase in criminals using artificial intelligence to create more sophisticated scams to con employees and hack into businesses.
The Cambridge-based company, which reported a 92% drop in operating profits in the half year to the end of December, said AI was further enabling “hacktivist” cyber-attacks using ransomware to extort money from businesses.
The company said it had seen the emergence of more convincing and complex scams by hackers since the launch of the hugely popular Microsoft-backed AI tool ChatGPT last November.
“Darktrace has found that while the number of email attacks across its own customer base remained steady since ChatGPT’s release, those that rely on tricking victims into clicking malicious links have declined while linguistic complexity, including text volume, punctuation and sentence length among others, have increased,” the company said.
“This indicates that cybercriminals may be redirecting their focus to crafting more sophisticated social engineering scams that exploit user trust.”
However, Darktrace said that the phenomenon had not yet resulted in a new wave of cybercriminals emerging, merely changing the tactics of the existing cohort.
More here:
Ericsson CEO's pay cut by 18% amid scandals
Ericsson chief executive officer Borje Ekholm received an 18% pay cut in 2022, after a string of corruption scandals at the Swedish telecommunications company.
Ericsson’s annual report, released today, shows that Ekholm’s total remuneration dropped to 53.18m Swedish krona for 2022 (£4.18m), down from 64.96m SEK (£5.1m) in 2021.
Although Ekholm’s fixed pay rose, his variable pay dropped due to the fall in Ericsson’s share price last year.
Concerns over Ericsson’s corporate governance weighed heavily on investor sentiment in 2022, a year in which confidential documents revealed how Ericsson was alleged to have helped pay bribes to the Islamic State terrorist group, to keep selling its services after the militants seized control of large parts of Iraq.
The US Department of Justice has accused Ericsson of using third-party agents and consultants to make bribe payments to government officials and to manage “off-the-books slush funds” in Djibouti, China, Vietnam, Indonesia, and Kuwait.
The company agreed a Deferred Prosecution Agreement (DPA) in 2019. But last week, Ericsson agreed to pay a $206m penalty to US authorities for breaching this DPA, by failing to disclose evidence. It also pleaded guilty to engaging in a long-running scheme to violate the Foreign Corrupt Practices Act (FCPA) by paying bribes, falsifying books and records.
Updated
Russia lashes out at the WTO for ‘illegal’ trade curbs
Russia’s ambassador to the World Trade Organization is accusing Europe, the US and others of “blatantly” disregarding international trade rules.
During a WTO general council meeting in Geneva this week, Dmitry Lyakishev bemoaned the coalition’s “illegal and unjustified” restrictions on Russia, according to a copy of his speech obtained by Bloomberg.
Lyakishev added that the crackdown has caused…
“enormous and irreparable damage to the global economy by provoking and aggravating global economic, energy and food crises.”
More here:
Fiscal data yesterday showed that Russia’s budget deficit jumped in the first two months of the year to $34bn (£29bn). Government spending was pushed up by the Ukraine war, while energy revenues fell following the imposition of a price cap by the EU and the G7.
Updated
Sky News: BMW close to finalising £500m plan to secure Mini production in Britain
BMW, the German car manufacturer, is close to finalising plans to invest hundreds of millions of pounds into its Oxford plant, Sky News are reporting.
This would secure future production of the iconic Mini in Britain, at the Cowley car plant.
Sky News reports that BMW hopes to announce its decision later in the spring, with one industry insider saying on Wednesday that it was expected to be unveiled in several weeks’ time.
If confirmed, the investment package - which is thought to be worth close to £500m - would deliver a major boost to Britain’s car industry.
Exclusive: BMW, the German car manufacturer, is close to finalising plans to invest close to £500m at its Mini plant at Cowley, Oxfordshire, guaranteeing future production there of the iconic vehicles. The funding will include £75m of government money. https://t.co/kbTcZTscdA
— Mark Kleinman (@MarkKleinmanSky) March 8, 2023
One source confirmed that roughly £75m of the funding would be from the government’s Automotive Transformation Fund, having been signed off by the chancellor, Jeremy Hunt.
More here: BMW revs up £500m plan to secure Mini production in Britain
Martin Lewis backs ‘social tariff’ that could cut energy bills by up to £1,500
Charities and the consumer champion Martin Lewis have ramped up pressure on the government to implement a “social tariff” for energy, which new research estimates could save 12m households on the lowest incomes up to £1,500.
Citizens Advice and Lewis have backed a push to introduce a special tariff for those struggling to pay gas and electricity bills by next year, while energy suppliers have said they are “ready” to work up the proposals.
The energy crisis, exacerbated by the war in Ukraine, has sharply increased household costs, leading to calls for a revamp of gas and electricity billing. The prepayment meter scandal has added further urgency to the push for support for struggling households.
The government and regulator Ofgem are examining how a social tariff, designed to protect low-income households from energy price increases, could be constructed and funded.
A major report by Citizens Advice and the thinktanks Public First and the Social Market Foundation said a tariff could be constructed that identifies consumers with high energy use relative to their household income, using a combination of data from HMRC and energy suppliers.
The authors argue such a tariff should extend beyond just consumers on means-tested benefits. It could be paid through a lump-sum government cash payment taken directly off bills based on a set formula, they said.
More here:
The Office for National Statistics have released a new report on the impact of strikes on the UK economy since last June.
It shows that December saw the highest recorded monthly total of strike days since November 2011, although the total was much lower than in the 1970s and 1980s.
It also shows that:
In total, 2.472 million working days were lost between June and December 2022; of these, over three-quarters (79%) came from workers in transport, storage, information and communication.
There was evidence that rail strikes led to displacement of card spending towards buses and taxis as consumers changed their behaviour to mitigate the impact of strikes; in store transactions at Pret A Manger stores located in stations fell on most strike days.
Nearly 1 in 5 people reported having their travel plans disrupted by rail strikes that occurred in December 2022 and early January 2023, however fewer than 1 in 10 of those disrupted were unable to work.
Over half of parents reported that they would be affected if schools closed because of strikes, with 31% saying they would have to work fewer hours and 28% saying that they would not be able to work.
The ONS has also released an interactive map today showing how monthly mortgage repayments costs have risen across the country, as interest rates have increased. It’s online here.
Purchasing the avg detached UK property over 25ys at a 75% loan-to-value in Dec 2022 would have resulted in a monthly mortgage repayment of £2,041 (up by 60.7% on Dec 2021). For terraced houses, £1,063 (up by 59.6%). For flats & maisonettes, £1,028 (up by 54.6%) @ONS pic.twitter.com/cZoOYh1pcB
— Emma Fildes (@emmafildes) March 8, 2023
Updated
The International Air Transport Association (IATA) has announced that the recovery in air travel demand is continuing in 2023, after China relaxed Covid restrictions.
Statistics for January show that total traffic in January 2023 (measured in revenue passenger kilometers or RPKs) rose 67.0% compared to January 2022.
Globally, traffic is now at 84.2% of January 2019 levels.
Domestic traffic for January 2023 rose 32.7% year-on-year, which IATA says was helped by the lifting of the zero-COVID policy in China. Total January 2023 domestic traffic was at 97.4% of the January 2019 level.
International traffic climbed 104.0% versus January 2022, led by carriers in the Asia-Pacific region, but was 77% of January 2019 levels.
Willie Walsh, IATA’s Director General says air travel demand got off to “a very healthy start in 2023”.
Walsh adds:
The rapid removal of COVID-19 restrictions for Chinese domestic and international travel bodes well for the continued strong industry recovery from the pandemic throughout the year.
And, importantly, we have not seen the many economic and geopolitical uncertainties of the day dampening demand for travel.
The eurozone economy flatlined in the fourth quarter of last year, new downgraded data shows.
Statistics body Eurostat has downgraded its estimate for eurozone GDP in October-December 2022, to show that the economy stagnated – matching the UK’s performance.
Previously, euro area GDP was thought to have risen slighly, by 0.1%.
Euro area #GDP stable in Q4 2022, +1.8% compared with Q4 2021 https://t.co/WU3ixiehgp pic.twitter.com/Unyvw0dwLI
— EU_Eurostat (@EU_Eurostat) March 8, 2023
This follows downward revisions of growth in Germany and Ireland. Irish GDP growth in Q4 2022 was revised sharply lower, from +3.5% to 0.3% last week.
🇪🇺 Euro area Q4 real GDP growth revised from +0.11% to -0.03% QoQ. https://t.co/9tqDGcUm3B
— Frederik Ducrozet (@fwred) March 8, 2023
Greece (+1.4%) recorded the highest increase of GDP compared to the previous quarter, followed by Malta (+1.2%) and Cyprus (+1.1%).
The highest decreases in the EU were seen in Poland (-2.4%), Estonia (-1.6%) and Finland (-0.6%).
Bank of England's Swati Dhingra calls for interest rates to be held steady
Bank of England policymaker Swati Dhingra has called for UK interest rates to be kept on hold, warning that another increase in borrowing costs could damage the economy.
Speaking at the Resolution Foundation this morning, Dr Dhingra argues that there is little sign that the inflation shock from higher energy and imported good prices is becoming embedded in wages and margins.
She says:
Even after a year and a half of above-target inflation, there is little evidence for such cost-push inflation beyond what might be expected following an unprecedented terms of trade shock. Consumption remains weak and many of the tightening effects of monetary policy are yet to fully take hold.
Dhingra, a member of the Bank’s Monetary Policy Committee, opposed last month’s increase in interest rates from 3.5% to 4%, but she and fellow dove Silvana Tenreyro were outvoted by the other seven members.
The Bank is next scheduled to set interest rates on 23 March.
She fears that the Bank could “overtighten” policy. Increased borrowing costs could hurt the supply capacity of the UK at a time when the economy is weak, and households are struggling with high energy and housing costs, she says.
Instead, Dhingra argues, it would be ‘prudent’ to leave interest rates on hold (although, as flagged at 9.51am, the markets expect another rise to 4.25%).
She explains that raising borrowing costs too high risks driving inflation below the Bank’s 2% target in the future:
Recent research indicates the persistent scarring effects of deep contractions associated with monetary policy tightening and energy market disruptions, indicating the harmful consequences of overtightening.
Such an approach would increase the downside risks of missing the inflation target in the medium term. In my view, a prudent strategy would hold policy steady amidst growing signs external price pressures are easing, and be prepared to respond to developments in price evolution.
This would avoid overtightening and return the economy sustainably to our 2% inflation target in the medium-term.
Dhingra’s comments are a reminder of the split on the Monetary Policy Committee. Yesterday, the hawkish Catherine Mann said she was worried that UK companies could be exploiting the cost of living crisis to push through inflation-busting price increases.
Updated
Another Bank of England rate hike fully priced in
Investors have fully priced in that the Bank of England will raise UK interest rate by a quarter of one percent at its meeting later this month.
This following yesterday’s hints that the US Federal Reserve will raise borrowing costs higher than previously expected.
The overnight index swap market indicates that a 25 basis point increase in Bank Rate, from 4% to 4.25%, is a 97% chance.
Another large, 50bp hike, is seen as a 3% possibility.
Before Fed chair Jerome Powell’s comments, a 25bp hike was seen as a roughly 90% chance, with investors seeing a snall chance that the BoE would hold rates.
This tweet, from Reuters’ Andy Bruce, shows how a quarter-point increase has become increasingly likely:
Bank of England rate hike on March 23 now fully priced into markets following Fed Chair Powell's comments overnight. 👇
— Andy Bruce (@BruceReuters) March 8, 2023
Even a small chance of a 50 bps hike opening up. pic.twitter.com/AB7Vz2oqxG
The London stock market is lower this morning, after fears over rising interest rates ripple through the City.
The FTSE 100 index of blue-chip shares is down 17 points or 0.22% at 7902 points, while the pan-European Stoxx 600 index is down 0.26%.
Shares are under pressure after America’s top central banker predicted yesterday that US interest rates are likely to head higher than central bank policymakers had expected, in the fight against inflation.
The US S&P 500 index fell 1.5% after Fed chair Jerome Powell’s comments, but may recover some lost ground today.
Russ Mould, investment director at AJ Bell, says:
Hawkish comments yesterday from Federal Reserve chairman Jay Powell made it perfectly clear that US interest rates would keep going up, potentially faster and harder than markets had previously priced in.
“The reaction was understandable – markets pulled back, the dollar jumped, and investors took a moment to digest the new landscape.
“In the grand scheme of things, a 1.5% pullback in the S&P 500 index was not disastrous. Interestingly, pre-market indicative prices show the main US indices moving higher on Wednesday, implying that we are not going to see another period of chaos.
Back in the train industry, the Rail Delivery Group is urging the RMT union to put its pay offer to union members who work at train operating companies.
Speaking after the RMT halted strike action on Network Rail (which owns and runs the rail infrastructure) last night, the Rail Delivery Group says that an “equivalent” offer has been made to the RMT for staff employed at train companies – but not put to members.
It wants Britain’s biggest rail union to call off next week’s strikes at train companies too.
A Rail Delivery Group spokesperson said:
“The RMT leadership’s decision to put Network Rail’s deal to its membership is a welcome development, but train operating staff will rightly be asking why their union continues to deny them the opportunity to have their say on our equivalent offer.
“Instead of inflicting more lost pay on its members and disruption to our passengers, we are calling on the union to call off their strikes and meet us for urgent talks to resolve this dispute.”
The RMT union must now ballot members in rail companies on offer ⬇️https://t.co/POjgPvaBvI
— Rail Delivery Group (@RailDeliveryGrp) March 8, 2023
Updated
UK watchdog fines PwC £5.6m for failings in Babcock audits
PricewaterhouseCoopers has been hit with a £5.6m fine by the UK’s audit watchdog over serious failures for its work auditing defence group Babcock over two years.
The Financial Reporting Council said this morning there were “serious breaches” during PwC’s audits of Babcock’s accounts for the 2017 and 2018 financial years.
Breaches were identified in respect of every area of audit investigated, the FRA says, including not translating a contract written in French.
This included “repeated failures” to challenge management and obtain sufficient appropriate evidence, which showed “a general reluctance” to challenge management.
There was also a failure to follow basic audit requirements, which the FRC says was evidence of a lack of competence, care or diligence.
For example, the FRC says:
There was no evidence that the audit team had, whether in FY2018 or before, obtained and read a 30-year Public Private Partnership contract with FY2018 revenue of c.£77m and lifetime revenue of £3bn, and one contract - with an initial value of c.€640m - was written in French, but the audit team neither possessed French language skills nor obtained a translation of the contract.
This has cost PwC a £7.5m fine, cut to £5.625m due to a 25% reduction after “admissions and early disposal”.
Two former PwC audit partners have also been fined and given a severe reprimand.
Nicholas Campbell Lambert, who led the Babcock audit, was fined £150,000, while Heather Ancient, who headed the audit of a Babcock subsidiary, has been ordered to pay £48,750.
Claudia Mortimore, Deputy Executive Counsel at the FRC, says the Babcock audits fell “far short” of the standards expected of statutory auditors.
Of particular concern is the lack of scepticism applied and the failures to follow some basic audit requirements. This robust package of sanctions seeks to deter future breaches and encourage improvement by the firm, in circumstances where PwC has now been sanctioned four times since 2019.
UK labour market cools as pay growth slows
Permanent job placements at UK companies has fallen for the fifth month in a row, a new survey has found.
Pay growth has also weakened, the latest data from the Recruitment and Employment Confederation and KPMG has found.
The REC/KPMG monthly permanent job placements index has dropped to 46.3 for February, down from 46.8 in January. Pay growth for permanent and temporary workers were the second-weakest in nearly two years.
The survey also found that companies are taking on more temporary staff, due to worries over the economic outlook.
Victoria Scholar, head of investment at interactive investor, tells us:
The figure highlights the cautiousness among businesses to hire permanent staff amid the macroeconomic headwinds of slowing growth, a softening consumer, rising interest rates, and inflated costs.
Many businesses are looking for ways to cut costs, particularly on labour given the tightness in the jobs market which makes hiring workers more expensive. Companies are relying more and more on temporary workers as a way to fulfil staffing needs without adding to their fixed labour costs.”
Wagamama-owner Restaurant Group to shut 35 sites after annual loss
Restaurant Group, the owner of Wagamama, Frankie & Benny’s and Chiquito, is planning to close around 35 of its outlets as it battles rising inflation and the cost of living crisis.
The company told shareholders that it plans to exit around 35 “potentially loss-making locations over the next two years”, including by selling freeholds and ending leases.
The move will cut its estate from 116 sites today to betwen 75 and 85 sites by 2024.
The news comes as Restaurant Group reports that losses widened last year. It made a statutory pre-tax loss of £86.8m for 2022, up from a £35.2m loss in 2021.
Total sales rose to £883m, from £636.6m, despite what the company calls a “challenging casual dining market”.
So far this year, like-for-like dining in sales at Wagamama are up 9%, but delivery and takeaway like-for-like sales are down 17% compared to a year ago.
This fall in deliveries and takeaways, from 2 January to 26 February 2023, is “in line with reduced demand across the delivery market”, the group says.
Restaurant Group has been under pressure from activist investor Oasis Management, which has been pushing for a shake-up of the struggling UK casual dining operator to boost profits and shareholder returns.
Restaurant Group CEO Andy Hornby says:
“We’ve delivered a strong operating performance for the year in a market which has continued to pose a number of headwinds for casual dining operators.
Current trading has been very encouraging to the great credit of our teams who continue to ensure our customers receive the best experience possible.
We have a clear plan to increase EBITDA margins over the next three years and deliver significant value for all our stakeholders.”
L&G chief blasts UK's low growth, low wage economy
The head of the UK’s largest investor has slammed the UK government for failing to encourage growth and investment.
Sir Nigel Wilson, chief executive of Legal & General, told Radio 4’s Today Programme that Britain is lagging far behind other countries in recognising the investment opportunities from the move to Net Zero.
L&G has £1.3trn of assets, and Wilson says that the company is keen to invest more in Britain, but government policy is not helping.
In a stinging rebuke to Westminster from the City, Wilson says:
“We’d like to invest a lot more here in the UK, but a combination of regulation and policy has made it very difficult to do that over the last 20, 30 years.”
Wilson pledges to keep investing in the UK, where he says L&G are “huge investors”, but insists that the government needs to take steps to encourage investment.
He says:
We have to recognise we’ve starved our economy of growth equity, and the consequence is we are a low growth, low productivity, low wage economy fraught by political infighting.
This has to change.
“We need the government to step up and put rules and policies in place that allow us to invest in the real economy in the UK.”
Wilon explains that there are “massive initiatives” in the US, Europe and China where governments have recognised that the transition to net zero is “a huge investment opportunity”.
“We’re simply lagging miles behind right now,” he warns, in a timely intervention ahead of Jeremy Hunt’s budget next week.
👀Oooft@landg_group’s CEO Sir Nigel Wilson ripping into UK economy:
— Paul McNamara (@PGMcNamara) March 8, 2023
“We have to recognise we’ve starved our economy of growth equity.
“The consequence of that is we’re a low growth low productivity low wage economy, fraught by political infighting.
“And this has to change.”
According to the Financial Times today, Hunt will use next week’s Budget to set out a new capital allowances regime for businesses. That would offset a sharp rise in corporation tax and the end of a £25bn “super-deduction” tax break for investment.
Updated
UK regulator tells Heathrow to cut passenger fees
Elsewhere in the travel sector, Heathrow Airport has been told to cut passenger charges levied on airlines, which could lead to lower tickets prices for customers.
The Civil Aviation Authority (CAA) has ruled that Britain’s biggest airport must cut its landing charges during the 2024-26 period.
The average maximum price per passenger must fall by around 20%, from £31.57 per passenger in 2023 to £25.43 per passenger in 2024, and remain around there until 2026.
This means the average charge per passenger will be £27.49, a 90p cut to the £28.39 previously outlined by the aviation regulator.
Announcing the final decision, the CAA says:
This lower level of charges from 2024 recognises that passenger volumes are expected to return to pre-pandemic levels and should benefit passengers in terms of lower costs, while also allowing Heathrow Airport Limited to continue investing in the airport for the benefit of consumers and supporting the airport’s ability to finance its operations.
The cap on landing charges was £22 a customer in 2020, but was raised to more than £30 in January, as Heathrow struggled with the drop in passenger numbers due to the pandemic.
Today’s decision looks like a win for airlines, who have lobbied the regulator to lower the fees for landing at Heathrow.
Richard Moriarty, Chief Executive at the UK Civil Aviation Authority, says the regulator listened to both sides – who (predictably) had differing views about what was fair:
“Our priority in making this decision today is to ensure the travelling public can expect great value for money from using Heathrow in terms of having a consistently good quality of service, whilst paying no more than is needed for it.
“We have carefully considered the sharply differing views from Heathrow Airport Limited and the airlines about the future level of charges. Understandably, their respective shareholder interests lead the airport to argue for higher charges and the airlines to argue for lower charges.
Last month, Heathrow’s chief executive, John Holland-Kaye, claimed the regulator was “getting it wrong” on its pricing. He argued that airline customers such as British Airways “charge what they like” and make “huge profits” on high fares.
Today, a Heathrow spokesperson says the airport will “take some time to carefully consider our next steps.”
Heathrow 'considering next steps' as airlines secure victory on passenger charges https://t.co/ecgUmvaNOR
— Sky News (@SkyNews) March 8, 2023
Optimism as RMT suspends strike action at Network Rail
Good morning.
Hopes are growing of a breakthrough in Great Britain’s long-running rail dispute after the RMT union surprisingly called off all industrial action on Network Rail after receiving a new pay offer.
Last night, the RMT union cancelled a planned strike at Network Rail set for 16 March. The new offer will now be put to members in a vote.
An RMT spokesperson said last night that:
“The RMT national executive committee has taken the decision to suspend all industrial action on Network Rail following receipt of a new offer from the employer.
“Further updates will be given on all aspects of the national rail dispute in the coming days.”
Our transport correspondent Gwyn Topham reports that it is understood that the total headline pay increase has not changed, but some amendments have been made to the previous offer that totalled 9% over two years.
That previous offer had been rejected by the union’s national executive committee.
This doesn’t mean that the rail industrial dispute, which began last spring, is over.
As things stand, RMT members at 14 train operating companies are still set to take industrial action on 16 March but the effect on many services will be far smaller than from a combined strike with Network Rail. Further strikes at these train operating companies are also planned for 18 and 30th of March, and 1 April.
Hilary Ingham, senior lecturer at the Department of Economics at Lancaster University, says that that last night’s revised pay offer came ‘out of the blue’.
Ingham told Radio 5’s Wake up To Money:
It doesn’t mean that all future strike action has been called off.
So, it’s not actually over. But it does look like this might be the beginning of the end.
The breakthrough has been welcomed by Network Rail. Its chief executive, Andrew Haines, said:
“We are relieved for our people, passengers and freight customers that industrial action in Network Rail has now been suspended. We look forward to further information on plans for a referendum.”
Hopes are also growing of a breakthrough in the NHS industrial dispute this week, as talks between ministers and the NHS staff council begin today.
The Daily Mirror reports that there is optimism ministers can come up with a pay offer that unions are happy to take back to members by the end of three days of planned negotiations this week.
More here: NHS nursing pay deal ‘in sight’ with ministers ‘optimistic’ as talks begin with unions
Also coming up today
It’s International Women’s Day, which has prompted a warning that two-thirds of women with childcare responsibilities believe they have missed out on career progression as a direct result.
The warning, from business leaders at the British Chambers of Commerce (BCC), comes amid growing pressure on the government to boost support for parents.
The mood in the stock markets is nervous, after the chair of the US Federal Reserve, Jerome Powell, warned the Fed is prepared to return to bigger interest rate rises and has “has a long way to go” in its fight against inflation.
European Opening Calls:#FTSE 7900 -0.25%#DAX 15526 -0.22%#CAC 7328 -0.15%#AEX 751 -0.13%#MIB 27695 -0.24%#IBEX 9383 -0.30%#OMX 2242 -0.11%#SMI 11047 -0.16%#STOXX 4273 -0.15%#IGOpeningCall
— IGSquawk (@IGSquawk) March 8, 2023
The agenda
10am GMT: Latest estimate of eurozone growth in Q4 2022
Noon GMT: US weekly mortgage approvals
1.15pm GMT: ADP’s report of US private payrolls for February
3pm GMT: Federal Reserve chair Jerome Powell testifies to House Financial Services Committee
3pm GMT: JOLTS survey of US job vacancies
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