Closing summary
Bitcoin has jumped through $60,000, rising 7.5% today, as the cryptocurrency stages its biggest monthly rally since late 2020.
The surge to $60,900 means it is pushing closer to its all-time high of more than $68,000 in November 2021 – which was followed by a spectacular crash in 2022.
The world’s best-known cryptocurrency has been buoyed by flows into new US spot bitcoin exchange traded products (ETFs that track the value of the cryptocurrency), which have driven its price up by around 40% in February.
Our other main stories today:
Thames Water has been lobbying the government and regulators to let it increase bills by 40%, pay lower fines for breaches and keep paying out dividends as part of efforts to avert a taxpayer bailout, according to a report.
The UK’s largest water company was trying to strike a deal with the watchdog Ofwat that would give it permission to charge customers more to avoid having to be taken over by court-appointed special administrators, the Financial Times reported.
Thank you for reading. We’ll be back tomorrow. Take care! – JK
Bitcoin surges through $60,000
Bitcoin has gone through $60,000, rising 6.2% today, as the cryptocurrency stages its biggest monthly rally since late 2020.
The world’s best-known cryptocurrency has been buoyed by flows into new US spot bitcoin exchange traded products (ETFs that track the value of the cryptocurrency), which have driven its price up by around 40% in February.
Traders have piled into bitcoin ahead of April’s halving event, a process designed to slow the release of the cryptocurrency.
Our financial editor Nils Pratley wrote last month:
Cue a fresh whoosh of demand, we are told, from US institutions and private punters who will be able to hitch themselves to the bitcoin wagon without having to go to the bother of opening a digital wallet or dealing with a crypto trading platform. The word “watershed” has been used widely to describe the moment. Giant investment names such as BlackRock will be offering these new ETFs. Ease of access and mainstream respectability have arrived as a package.
Updated
US GDP revised slightly lower
The US economy grew at a slightly lower rate than previously thought in the final three months of last year.
GDP rose at an annual rate of 3.2%, the Bureau of Economic Analysis said in its second estimate. This was revised down from 3.3%. The bureau explained:
The update primarily reflected a downward revision to private inventory investment that was partly offset by upward revisions to state and local government spending and consumer spending.
Panmure Gordon analyst Abid Hussain has looked at the takeover approach to Direct Line from the Belgian insurer Ageas.
Management has rejected a 233p per share offer for the group. We think the balance sheet issues have already largely been fixed following the recent disposal of the commercial business. It must now undertake the slow and hard work of fixing processes or its culture or both to react faster to inflation and other threats. The new CEO arrives at the end of the week to do just that. In the meantime, Ageas will need to revise its offer with a higher price or larger cash component or both to convince the Direct Line board and shareholders.
Taylor Wimpey boss: 'Sometimes we don't get it right'
I’ve spoken to Taylor Wimpey boss Jennie Daly about the company’s results and the regulator’s report on the housebuilding sector, and its new investigation into eight housebuilders after it found evidence they may be sharing commercially sensitive information that could affect the price of homes, in a breach of competition law.
She reiterated that the company would fully cooperate with the Competition and Markets Authority, and said the investigation was likely to last until at least the end of the year.
In its report on Monday, the CMA voiced “fundamental concerns” over the housebuilding market, pointing to the complex planning system and the limitations of speculative private development as the key reasons for the too few homes being built.
Daly said:
We were very pleased with the conclusions and many of the recommendations of the market study. It will help bust some of the myths around land banking and delaying bringing development forward. It does point very strongly to the dysfunctional planning system that we have, the problems that we’re encountering around lack of predictability and the complexity of the process.
The watchdog was also critical of the quality of homes built by some developers, and that homebuyers spent weeks or months to try and get them fixed. Daly said:
We were early adopters all new homes, code and the new homes ombudsman back in 2022, and we’ve been doing a lot of work around quality.
We’ve been working hard to improve our customer service and our engagement with customers… and for many, many years, we’ve been working on improving build quality, and we’ve led the industry in the measures of build quality for many years, which I’m very proud of, and we’re not done yet and we’ll continuously improve that.
Sometimes we don’t get it right, and it’s our responsibility then to properly and positively engage with our customers to ensure that that we are correcting any issues at all.
Direct Line shares rocket as Ageas mulls £3.1bn bid
Shares in the UK insurer Direct Line rocketed after the Belgian insurer Ageas confirmed that it was considering making a takeover offer for the company.
Direct Line shares jumped nearly 26% to 205.41p, valuing the company at £2.7bn, while fellow UK insurer Admiral rose 2.1%. Shares in Ageas fell 2.2% in Brussels.
Ageas said that Direct Line shareholders would receive 100p in cash for each Direct Line share, and one newly issued Ageas share for every 25.24 Direct Line shares. This would value each Direct Line share at 233p, and the company at £3.1bn, Ageas said.
It said the deal would
lead to the creation of a strong personal lines franchise in the UK with key positions in Ageas’ preferred business lines of household and motor.
Earlier today, Bloomberg reported that Direct Line had rejected an approach from Ageas.
Direct Line was Royal Bank of Scotland’s insurance arm, and floated on the stock market in 2012. (The selloff was demanded by the EU in return for the £45bn taxpayer bailout of RBS.) The former boss Aviva’s UK & Ireland general insurance arm, Adam Winslow, joins Direct Line as chief executive on Friday, replacing Penny James.
Direct Line has struggled in recent years. James stood down in January 2023 after the company ditched its final dividend, as a big increase in weather-related claims caused a loss in underwriting. Last September, it said it would pay £30m to customers who were charged more than they should have been to renew car and home insurance policies. Its half-year loss widened to £76.3m at the time. The firm has been run by Jon Greenwood as acting CEO.
Ageas, headquartered in Brussels, is one of Europe’s largest insurers and operates in Europe and Asia, with 44,000 staff and annual inflows of more than €17bn in 2023.
Updated
Reckitt Benckiser shares fall 11% as sales slide
Shares in Reckitt Benckiser have fallen sharply, making it the second-biggest loser on the FTSE 100 behind the wealth manager St James’s Place, after the consumer giant reported sliding sales.
Reckitt, which owns well-known brands including Nurofen, Durex condoms and Dettol disinfectant, said purchases of cold and flu remedied as well as infant formula had fallen, contributing to a drop of 1.2% in like-for-like sales in the three months to December. Profit before tax fell by 22% to £2.4m.
The business was also hit by an investigation into its Middle East business. “Following investigation, we concluded a small group of employees had acted inappropriately and we are taking necessary disciplinary action,” the group said.
The year before, Reckitt had benefited from a shortage of infant formula in the US. Sales at its nutrition business fell 14.3% year-on-year in the fourth quarter.
Reckitt had to recall some batches of Nutramigen stage 1 and stage 2 hypoallergenic formula powders in January because of the possible presence of Cronobacter sakazakii bacteria that can cause illness.
The Reckitt share price dropped 11.4%. Chief executive Kris Licht described the fourth-quarter performance as “unsatisfactory”, but added:
We look to 2024 and beyond with confidence. We target another year of mid-single-digit growth in health and hygiene, driven by a more balanced contribution from price, mix and volume. We expect nutrition to return to growth late in the year.
Analysts at RBC Capital Markets said:
We had feared that the results wouldn’t be great, but we certainly hadn’t anticipated the reporting anomaly that in our view means that Reckitt’s results were really grim rather than just poor.
Bitcoin jumps to near $60,000 in biggest monthly rally since late 2020
Bitcoin has jumped for a fifth day and is trading at close to $60,000, and is on track for its biggest monthly rally since late 2020.
The world’s best-known cryptocurrency has been buoyed by flows into new US spot bitcoin exchange traded products, which have driven its price up nearly 40% February. It has gained 4.5% today.
Ben Laidler, global markets strategist at retail investment platform eToro, said:
Bitcoin is being driven by the support of consistent inflows into the new spot ETFs and outlook for April’s halving event and June’s Fed interest rate cuts.
Traders have piled into bitcoin ahead of April’s halving event, a process designed to slow the release of the cryptocurrency.
The value of all the bitcoin in circulation has topped $2 trillion this month for the first time in two years, according to the crypto platform CoinGecko, while the price of the token itself has doubled in just four months.
Updated
FTSE reshuffle: easyJet to join top flight
The latest reshuffle of the FTSE will happen after 5pm today, and could see EasyJet join the blue-chip FTSE 100 index. Endeavour Mining, which owns and runs gold mines in Côte d’Ivoire, Burkina Faso and Senegal, is expected to be relegated from the top flight.
Susannah Streeter, head of money and markets, Hargreaves Lansdown, said:
While recovering pre-pandemic form is still proving highly elusive, easyJet’s continued progress has cheered investors, with shares up 9% year to date. The ‘revenge travel’ trend is still proving strong, with people still determined to see more of the world again after being cooped up at home during the Covid crisis.
Consumers still appear to be ring-fencing chunks of disposal income to spend on airfares, seat upgrades and treats on board, with the desire to travel higher up wish-lists than home purchases like furniture and TVs. The company has shown particular prowess at selling extras to customers on flights, and that helped first quarter revenue jump 22%, with losses narrowing again. It’s also managed to largely ride out the turbulence caused by flight disruptions in the Middle East with summer bookings building well.
With signs that the UK economy may dip only briefly into a mild recession and interest rate cuts eyed on the horizon there are hopes that travellers will stay confident and keep bookings brisk.
Turning to Endeavour Mining, she said:
Endeavour Mining which has operations in West Africa is about to drop out of the big league after the company was left reeling from the abrupt departure of CEO Sébastien de Montessus. He was fired for serious misconduct in January for making an irregular payment instruction for $5.9m, in relation to an asset disposal.
Although he was replaced by deputy chair Ian Cockerill pretty swiftly, confidence has still been shaken in the gold miner, which operates in West Africa. Shares have fallen almost 30% year to date. It hasn’t helped that costs came in higher than expected at the last count, even though the company met output targets.
The HS2 contractor Kier Group is set to be promoted from the FTSE Small Cap index to the FTSE-250, while Tullow Oil, an oil and gas explorer founded in Tullow in Ireland, but headquartered in London, is likely to be ejected from the FTSE-250 as operational problems persist. Its shares have fallen 35% so far this year, pushing it into the relegation zone. Streeter said:
Enthusiasm has risen for construction company Kier Group as it unveiled a robust order book and showed strength in dealing with supply chain challenges and inflationary costs. It’s staging a turnaround, and now appears back on track after a highly difficult period when it appeared to be on the brink of bankruptcy and was hit hard by the pandemic. Winning HS2 contracts saved the company from collapse and now its restructuring plan is bearing considerable fruit with balance sheet rebuilding underway. it is considered to be well placed to continue to benefit from UK government infrastructure spending.
Tullow Oil has been affected by operational and financial challenges over recent years and here had been hopes that prospects were looking up with rising production at its Jubilee field, offshore Ghana, with five wells expected to come on stream in 2024. However, it’s been beset by further difficulties after it was forced to stop work on its Kenyan oil fields and its trucking operations due to security issues, adding to fresh investor caution about its resilience.
Cat Hobbs, director of the public ownership campaign group We Own It, said about Thames Water – which is lobbying the government to let it increase bills by 40%, pay dividends to shareholders and face lower fines, as it tries to avoid a financial failure:
It’s never been more obvious that water privatisation has failed.
It beggars belief that Thames Water, a company that has paid billions out in dividends while underinvesting in infrastructure, neglecting their duty to prevent sewage spills, and racking up eye-watering debts, is asking for even more freedom from the regulator.
As Thames Water circles the drain, the public are wising up to the failed experiment of water privatisation. Seven in 10 of us want water to be in public ownership. Almost nowhere else in the world runs water the way we do. It’s time to bring water into public ownership with no bailout at the public’s expense.
Updated
HMRC struggling to cope as customer service levels hit ‘all-time low’
Customer service levels at HM Revenue and Customs have sunk to an “all-time low”, parliament’s spending watchdog has said.
Users regularly encounter long call-waiting times as the tax department apparently struggles to cope with demand, a report by the cross-party public accounts committee (PAC) has found.
As demands on HMRC grow, the authority has not been given the resources needed to staff its phone lines, the report said.
In 2022-23, 62% of callers waited more than 10 minutes to speak to an adviser – up from 46% the previous year.
On average, it took a little more than 16 minutes for someone to answer the phone – up from a little more than 12 minutes in 2021–22.
However, in December there were reports of some callers facing waits of up to an hour to get through, with some people saying they ended up being cut off before their call was even answered.
The tax office is trying to cope by weaning service users off speaking to a real person on the phone in favour of having them make do with YouTube videos and chatbots, the report found.
Virgin Media O2 clients hit with 8.8% price rises or crippling exit fees
Virgin Media O2 customers are facing a “lose-lose choice” between the highest mid-contract broadband and mobile price rises, or crippling exit fees running into hundreds of pounds, the consumer group Which? has warned.
Virgin Media and O2, which merged in 2021, are scheduled to go ahead with price rises of up to 8.8% this April – the latest retail prices index figure of 4.9%, plus an extra 3.9%.
These increases, which come on top of 17% rises a year ago, are the highest increases in percentage terms out of any of the large broadband or mobile firms this year.
Virgin broadband customers will typically see their bills rise by just above £39 a year from April, according to Which?. Customers who do not want to be hit with this price rise face exit fees of as much as £404 if they were to leave their contract 12 months early, it said.
Cash-strapped London council starts crowdfunding to pay for green upgrades
Deep cuts to government funding have led a council in south London to ask its residents to invest their own money, for a financial return, to build cycle hangars, LED street lighting and green upgrades at schools and leisure centres.
Amid a financial crisis hitting town halls across England, councillors in Southwark have resorted to a crowdfunding scheme to raise £6m over the next six years to help fund climate-friendly projects.
In a creative response to the double challenge of financial constraints and maintaining investment required to tackle the climate emergency, the scheme plans to raise £1m for the coming financial year with the offer of a 4.6% return for investors.
An overwhelming majority of English local authorities are planning deep cuts to services and maximum possible council tax rises to remain financially solvent, despite an extra £600m cash injection from the government.
Shell must clean up pollution before it leaves Niger delta, report says
The oil firm Shell cannot be allowed to withdraw from the Niger delta before it takes responsibility for its toxic legacy of pollution and the safe decommissioning of abandoned oil infrastructure, a report says.
Shell plc is preparing to divest from the delta but a report warns that it must remain until it has cleaned up its legacy of pollution.
The report, by the Centre for Research on Multinational Corporations (Somo), says historical pollution remains a serious issue in the area and accuses Shell of trying to avoid responsibility despite the billions of dollars it has earned from the oil.
The allegations come as the Labour MP Clive Lewis said in the House of Commons that the departure of Shell, a British company, from the delta raised serious concerns that its environmental responsibilities and obligations could be evaded.
Here is our full story on Halfords:
St James's Place takes client refund provision, cuts dividend, shares slump
The wealth manager St James’s Place is the biggest faller on the FTSE 100 index this morning, with its shares slumping almost 32%, after it took a £426m provision for potential client refunds and slashed its dividend.
The firm said it has experienced a “marked increase” in clients registering complaints about the service they have received in the past.
Mark FitzPatrick, the chief executive, said:
We recognise that this is a disappointing outcome for everyone…
We switched off ongoing servicing charges for 2% of clients where there was a lack of evidence that ongoing servicing was provided in this period.
The provision pushed the firm to a loss after tax of £9.9m, compared with a £407m profit in 2022.
St James’s is a well-known name, and offers clients services ranging from wealth management to retirement planning. However, it has struggled in the past year. In October, it bowed to pressure from regulators and announced a revamp of its fees, regarded as opaque and expensive, including scrapping penalties for customers pulling their money within a certain period.
Simplifying the fee structure will be completed by the second half of next year, and it will make it “much easier to compare investment performance across the industry on a like-for-like basis”.
The new fee structure will have an impact on profits, FitzPatrick warned, and prompted the company to reduce payouts to shareholders. It slashed its final dividend to 8p a share from 37.19p. This means investors will get a total payout of 23.83p, less than half of the previous year. In the next three years, annual dividends will be set at 18p per share, plus share buybacks. The CEO said:
A combination of the provision we have established and an expected decrease in the level of profit growth in the next few years as we transition to our new charging structure, reduces our ability to invest for long term growth in our business over the next few years.
Updated
Thames Water, which serves more than 15m households, has amassed a debt pile of £14bn, and been fined repeatedly over sewage dumping.
It also expects to leak more water than previously thought, after its ageing pipes were overwhelmed by a deluge of rainfall. Britain’s largest water company has told regulators it now expects to leak 585m litres a day this financial year, up from a previous forecast of 550m litres a day.
Last week, the Department for Environment, Food and Rural Affairs (Defra) updated 30-year-old legislation on the special administration regime, which would allow existing shareholders to retain a stake in the company and make it less likely that failing water companies could be fully renationalised.
Here is our take on the FT story:
In December, the parent company of Thames Water, Kemble Water Holdings, was told by auditors that it could run out of cash by April if shareholders did not inject more funds into the company.
The company has raised £500m and says shareholders would inject more than £3bn more – but this would be dependent on Thames Water getting what it wants from the regulator.
A crucial part of this is getting permission to issue dividends to services its debt. However, new rules introduced by the government last year can take enforcement action against water companies issuing dividends if they are performing badly against financial and environmental targets.
Thames Water has said investors will not take any money out of the business until the turnaround is completed but the rules do not distinguish between internal and external dividends.
Last week, the chair of the environment, food and rural affairs select committee, Sir Robert Goodwill, wrote to the Ofwat chief executive David Black to urge him to ensure water companies clean up their act before bills rise.
The committee recommended that any forward programme “must clearly set out how Ofwat will balance its need to regulate with protecting the financial viability of the water companies”.
Stating that many Ofwat investigations into malpractice in the water sector take several years to complete, undermining public trust in the sector, Goodwill also urged the regulator to give details as to how it will complete investigations in a more timely manner.
With regard to household water bills, the letter emphasised the importance of the effects on consumers of proposals to raise water bills in order to finance the essential investment in new infrastructure. The committee noted that this investment has for many years been “neglected in favour of profit and dividends to shareholders”.
Goodwill wrote that
an increase in bills will produce a justifiable perception of unfairness from consumers who are being asked to shoulder the burden of improvements by companies who have consistently and publicly failed on delivering their core obligations.
Updated
Returning to our main story, Thames Water, the Liberal Democrat Treasury Spokesperson and MP for Richmond Park, Sarah Olney, said:
This week the government told me they won’t make their contingency plan in the event of Thames Water’s collapse public.
This is a cover up.
Customers and taxpayers deserve to know what ministers plan to do if this disastrous situation happens.
Halfords blames weather and bike promotions for profit drop
The bike and car parts retailer Halfords has warned of a sharp fall in profits, blaming “unusually mild and very wet weather” for lower footfall, and reduced sales of winter tyres and car cleaning products.
It said the cycling market has become more challenging and competitive, with more promotions, and more customers buying on credit, leading to weaker profit margins.
Its shared were hammered after the profit warning, plummeting nearly 24%.
Halfords now expects profits before tax to fall to £35m to £40m, a downgrade of at least 17%, for the year to the end of March. It assumes the market will stay tough for the rest of its fourth quarter, including the peak Easter cycling period in March. In January, the firm had estimated profits of between £48m and £53m.
Here is our full story on Tata’s new £4bn gigafactory in Bridgend, which will bring about 4,000 jobs to the region.
Taylor Wimpey to build fewer houses this year
Taylor Wimpey, one of Britain’s biggest housebuilders, said it will build fewer homes this year as the housing market remains fairly weak, as it posted a 49% slump in annual profits.
The company said the market stabilised at the start of this year as mortgage rates eased, but a delay in the first interest rate cut and concerns over the economy have tempered hopes of a quick recovery.
Jennie Daly, the chief executive, said:
It is still early in the year and the macroeconomic backdrop remains uncertain, however it is encouraging to see some signs of improvement in the market, with reduced mortgage rates positively impacting affordability and customer confidence.
Revenues fell 20.5% to £3.5bn last year, while profit before tax and one-off items almost halved to £473.8m.
Taylor Wimpey completed 10,848 homes last year, versus 14,154 in 2022. Average selling prices on private homes rose 5.1 to £370,000. It expects to build between 9,500 and 10,000 homes this year.
The firm said it welcomed the Competition and Market Authority’s final report, published on Monday, from its housebuilding market study “with its focus on improving the planning system, adoption of amenities and outcomes for house buyers”. Taylor Wimpey said it would “cooperate fully” with the regulator’s new investigation.
The CMA opened an investigation into eight housebuilders, including Taylor Wimpey, after it found evidence they may be sharing commercially sensitive information that could affect the price of homes, such as sales prices and details of incentives for buyers.
The report concluded that it had “fundamental concerns” over the housebuilding market, pointing to the complex planning system and the limitations of speculative private development as the key reasons for the too few homes being built.
The government set a target of building 300,000 homes a year by the mid-2020s in its 2019 manifesto but only 250,000 were built last year, with many in the sector warning that this is likely to shrink considerably this year.
The CMA found that profits of the 11 largest housebuilders were “generally higher than we would expect for a well-functioning market”. However, it also warned that any measures introduced to tackle profitability in the sector would reduce the number of homes being built and exacerbate supply problems.
The report was also critical of the quality of homes built by some developers.
Updated
Aston Martin 2023 loss shrinks due to higher prices
The luxury carmaker Aston Martin said its annual loss narrowed more than expected because it raised its prices to record levels.
It launched the DB12, an open-top model, last year, with prices starting at $248,086.
However, it has pushed back plans to launch its first battery-powered electric vehicle by a year to 2026.
The company reported an adjusted pre-tax loss of £171.8m for 2023, compared with £451m the year before. Analysts had forecast a loss of £209m. Aston Martin said it was on track to hit its longstanding target of a 40% gross profit margin this year.
Updated
In other corporate news, mobile phone giant Vodafone has confirmed it is in exclusive talks to sell its Italian business to Switzerland’s Swisscom in a deal worth €8bn (£6.8bn).
The company said:
Vodafone has engaged extensively with several parties to explore market consolidation in Italy and believes this potential transaction delivers the best combination of value creation, upfront cash proceeds and transaction certainty for Vodafone shareholders.
Introduction: Thames Water is lobbying for higher bills and lower fines to avoid bailout, report claims
Good morning, and welcome to our rolling of business, the financial markets, and the world economy.
Thames Water is lobbying the government and industry regulator Ofwat to let it increase household bills by 40% by 2030, pay dividends to shareholders and receive lower fines as it seeks to stave off a potential multibillion-pound taxpayer bailout, the Financial Times reported.
Britain’s largest water company is desperately trying to avoid being taken over under the government’s special administration regime.
Last week the government passed updated water insolvency legislation, suggesting the company could be moving closer to a collapse. Officials at the Department for the Environment, Food and Rural Affairs have drawn up contingency plans for the company’s failure, worried that about the consequences if the company collapsed, as it supplies water and sewage services to a quarter of England’s population. The FT said the secret plan to save the firm is called “Project Timber”.
Ministers hope that Ofwat will allow “regulatory easements” such as reduced fines to reduce the financial pressure on the company, the paper reported.
The current situation was described by one insider as “like a flooded room with only an inch of air at the top”. He added: “The shareholders would be irrational to put any equity in if they don’t win concessions.”
Europe’s largest electrical vehicle battery factory will be built in Bridgewater, Somerset, its Indian owner Tata Group has confirmed.
Construction is to begin immediately, and the factory is expected to start producing batteries in 2026. Tata decided to locate the 4bn facility, which is backed by £500m of government funding, at the 620-acre Gravity Smart Campus. It is the site of a former Royal Ordnance factory that made bombs during World War Two.
The factory will make batteries for Tata Motors and JLR, formerly Jaguar Land Rover, before later expanding to produce cells for commercial vehicles, two-wheelers and energy storage solutions.
Asian shares have lost ground ahead of a barrage of US data on GDP and inflation later. Japan’s Nikkei has slipped 0.08%, Hong Kong’s Hang Seng has lost 1.4% and the Shanghai Composite dropped 1.9%.
Financial markets are now expecting the first interest rate cut from the US Federal Reserve in June, rather than March as anticipated at the start of the year. Traders have pencilled in 77 basis points of cuts against pricing in 150 bps at the start of the year.
The Agenda
10am GMT: Eurozone consumer confidence final for February
1.30pm GMT: US GDP second estimate and PCE price index for Q4 (forecast: 3.3%)
3.30pm GMT: Bank of England policymaker Catherine Mann speech
Updated
