Closing post
Time for a recap.
We’ve been tracking reaction to and expanding on details from the High Pay Centre’s CEO pay report, which showed that the average CEO from a FTSE 100 company received a 16% pay rise last year. That is equal to around £500,000, and took average salaries to around £3.9m.
That is while average workers were squeezed by cost of living pressures and struggled to gain inflation-busting pay rises like those secured by top bosses.
The Green Party said the figures should revive a debate about instituting a 10:1 pay ratio, that would restrict top boss’ pay to 10 times the level of the lowest paid worker.
Meanwhile, the High Pay Centre raised concerns over the lack of transparency around pay for other high paid workers outside of CEO roles.
In other news:
Microsoft submitted a new takeover proposal to acquire Activision Blizzard in hopes of clearing competition rules in the UK.
UK chancellor Jeremy Hunt played down the prospect of pre-election tax cuts despite new figures from the ONS showing that the public finances are in less bad shape than the government’s spending watchdog forecast in the spring budget.
And fresh data showed that UK manufacturing output fell in the three months to August at the fastest rate in nearly three years.
That’s all from us today. We’ll be back bright and early at 8am on Wednesday -KM
Tech excitement pushes Nasdaq higher as US markets open for trading
US markets are open for trading.
While the Dow is struggling to gain ground, the tech-focused Nasdaq is charging ahead in anticipation of Nvidia results as well as next month’s Arm IPO:
Dow is up marginally by 0.03% at 34,474 points
Nasdaq is up 0.69% at 13,591 points
S&P 500 is up 0.39% at 4,417 points
The Financial Times (£) has taken a deep-dive into the Arm IPO prospectus and flagged concerns regarding Arm’s exposure to China.
Arm has warned investors that it was “particularly susceptible” to economic and political risks due the concentration of revenue derived from China, and that these risks could be amplified by tensions between China and western governments in the US and UK, particularly around trade and security.
The FT cites one anonymous institutional investor, who has yet to decide whether to participate in the IPO. They said that the issues with China undercut arguments that Arm would have similar successes as US chipmaker Nvidia, which is now worth $1tn (£784bn) amid a surge in demand for AI products:
They are asking the market to buy what they admit are some pretty big China risks but at Nvidia multiples, and that will take some effort.
However, the prospectus also explained that neither Arm, nor SoftBank, were in control of Arm’s China operations:
Despite our significant reliance on Arm China through our commercial relationship with them, both as a source of revenue and as a conduit to the important [Chinese] market, Arm China operates independently of us.
But the article suggests that distancing itself from the China arm helps separate the UK group from some thorny issues in the country, including a spat with its ousted CEO Allen Wu.
Updated
Green party revives calls for 10:1 pay ratio after CEO remuneration data
The Green party is trying to revive calls for a 10:1 pay ratio rule, saying it would help rein in “obscene levels of pay” at a time when the cost of living crisis is taking its toll on regular workers.
The move would restrict top salary growth, ensuring that the highest paid workers receive no more than 10 times the amount of the lowest paid staff members.
The party says it would address ballooning inequality and curb further wealth accumulation by the richest 1%, who are responsible for 15% of global carbon emissions.
Co-leader of the Green Party, Adrian Ramsay, said:
The UK’s leading fat cat bosses are raking in obscene levels of pay while many of their workers struggle to make ends meet in a cost of living crisis.
That’s why the Green Party is repeating a call for a 10:1 pay ratio, mandated by law, to ensure that the highest paid individuals in an organisation receive no more than ten times the amount of the lowest paid.
Such a policy would drive an uplift in wages for the lowest paid workers while addressing rampant and ever-widening inequality.
We also know it is the wealthiest that are having a hugely disproportionate impact on the climate crisis. The world’s richest 1% are responsible for 15% of carbon emissions, nearly twice as much as the poorest 50% .
It is clear that a 10:1 pay ratio would help create a fairer and greener country.
Updated
Full story: UK factory output tumbles to lowest level in nearly three years
UK factory output has fallen sharply over the summer to its lowest level in nearly three years in the latest sign that interest rate increases by the Bank of England are slowing the economy, our economics editor Larry Elliott reports.
The monthly snapshot of manufacturing from the CBI showed production at its weakest since the economy was emerging from its first Covid lockdown in 2020.
The employers’ organisation said its members had been surprised by a slowdown in activity over the three months to August in which twice as many firms said output was falling (37%) rather than rising (18%).
Amid evidence of widespread problems for industry, the CBI said production fell in 15 of 17 subsectors in the latest three months, with marked drops in motor vehicles and transport equipment; mechanical engineering; paper, printing and media; and chemicals.
A survey of 277 manufacturers revealed that domestic and export order books were seen as below normal but price pressures continued to ease.
The CBI said the balance of firms expecting to raise selling prices over the coming months was at its lowest since February 2021.
Read more here:
Stock prices have broadly climbed throughout morning, lifting major indices across Europe:
FTSE 100 is up 0.69% at 7,307 points
FTSE 250 is up 0.87% at 18,054 points
Germany’s XETRA DAX is up 1.15% at 15,783 points
France’s CAC 40 is up 1.2% at 7,285 points
Italy’s FTSE MIB is up 1.18% at 28,315 points
Meanwhile, Wall Street is expected to open higher when US stocks start trading at 2:30pm BST:
Dow futures are up 0.3% at 34,630
S&P 500 futures are up 0.56% at 4,437 points
Nasdaq futures are up 0.77% at 15,100 points
The High Pay Centre, which produced the pay report, says that pay transparency at the largest UK companies is still “highly opaque and inconsistent”.
CEO pay tends to attracted the most headlines, but they are not the only high-earning employees. And while companies do consistently report on the pay of other executives, these disclosures only tend to cover two, and very rarely more than three or four more people.
Indeed, at many UK banks (which I tend to cover when I’m not liveblogging -KM), there are often a few individuals earnings far more than the top boss. But even when that figure is disclosed, they are unnamed and left anonymous.
Illustrating that point, the High Pay Centre’s report shows that a total of £1.33bn was spent on the pay packages of 570 executives across the FTSE 350 last year.
The median total spend by FTSE 100 companies on executives was £6.39m, while the median total spend by FTSE 250 companies was £2.95m.
Updated
UK factory output falls at fastest since September 2020: CBI
Some bad news from the UK’s construction sector.
Fresh data shows that manufacturing output fell in the three months to August at the fastest rate in nearly three years.
A survey by the Confederation of British Industry (CBI) found that the difference between the number of factories reporting a rise in output versus those experiencing a fall dropped to a balance of -19 from +3 in July. That is the lowest since September 2020.
The CBI said 15 out of the 17 manufacturing sub-sectors suffered a drop in output, thought the car industry and mechanical engineering were the worst performers.
However, expectations around price rises fell to its lowest level since February 2021, suggesting inflationary pressure has started to ease.
CBI economist Martin Sartorius said:
With output volumes contracting at their fastest pace since the Covid-19 pandemic, and order books deteriorating, this survey makes for gloomy reading.
However, easing price pressures will bring some relief to many manufacturing firms and the broader economy.
The British chip designer Arm has started the process of listing its shares on New York’s Nasdaq, in one of the biggest flotations of recent years after the London Stock Exchange lost out, my colleague Jasper Jolly writes.
The company, owned by Japanese investor SoftBank, registered to list its shares late on Monday night, after months of waiting amid tricky conditions for stock market floats.
The listing will return Arm to stock markets after seven years under SoftBank and its leader, Masayoshi Son, who took the chip designer private in 2016 in a £24bn deal. An internal SoftBank transaction this month valued Arm at $64bn (£50bn), according to reports.
Arm, based in Cambridge, is one of the UK’s rare big tech champions. Founded in 1990, it has played a key role in the mobile computing revolution, with its designs used for semiconductor chips in Apple’s iPhones and laptops, Samsung’s phones and a host of other devices ranging from electric and driverless cars to drones. Its chip designs have been used in more than 250bn devices.
While the company has remained rooted in the UK, the New York listing comes after a failed effort by the British government, led by Rishi Sunak, to persuade it and other tech companies to list shares in London.
The listing is the second time that SoftBank has tried to cash in on its investment. In 2021, the tech-focused investor agreed a deal to sell Arm to the US chipmaker Nvidia for $40bn. However, that deal fell through last year after UK competition regulators objected.
Read more here:
Mortgage costs continue to fall: Rightmove data
Some (marginally) good news for prospective home buyers.
Rightmove has compared the interest rates and payments for average fixed mortgages. And while some rates are nearly double where they were a year ago, they continue to fall and are lower than they were last week.
The average 5-year fixed mortgage rate is now 5.79%, up from 3.89% a year ago, down from 5.86% last week
The average 2-year fixed mortgage rate is now 6.40%, up from 3.77% a year ago, down from 6.46% last week
The average monthly mortgage payment on a typical first-time buyer type property when taking out an average five-year fixed, 85% LTV mortgage, is now £1,204 per month, up from £992 per month a year ago but down from £1,226 last week
Rightmove’s mortgage expert Matt Smith said:
The positive direction for rates continues this week albeit a little more slowly, with five-year rates edging down slightly more than two-year equivalent products.
Swap rates are broadly flat week-on-week in response to a range of economic indicators published last week, but we should get more sense of any impact in the coming days.
We are likely to see a continued period of stability for home-movers at least for now, and while the market remains sensitive to any surprises, it appears that lenders will continue to price competitively where they can.
Updated
While our headline story has primarily focused on CEO pay across the FTSE 100, a look at the next 250 largest listed UK companies shows that some companies with smaller market values were still spending upwards of £10m on their top bosses.
The highest paid CEO in the FTSE 250 was Poppy Gustafsson at UK cybersecurity firm Darktrace, who was paid £11.95m.
That is 362 times the pay of the median UK full-time worker.
Overall, the median FTSE 250 CEO was paid £1.8m in 2022.
This is higher than in 2021, and represents a 3% increase on the median FTSE 250 CEO pay in that year, which stood at £1.7m.
Jeremy Hunt has played down the prospect of pre-election tax cuts despite news that the public finances are in less bad shape than the government’s spending watchdog forecast in the spring budget, our economics editor Larry Elliott writes.
Stronger tax receipts from an economy that has so far avoided recession meant the UK’s budget deficit stood at £4.3bn last month – the fifth highest for a July since modern records began in 1993 but £1.7bn below the estimate from the Office for Budget Responsibility.
In the first four months of the 2023-24 financial year, the government borrowed £56.6bn to cover the difference between its tax revenues and its spending. The running total was £13.7bn more than in the equivalent four-month period of 2022-23 but £11.3bn lower than the £68bn forecast by the OBR.
But with rising interest rates increasing the cost of servicing the government’s debt, Hunt appeared to rule out the sort of giveaway package demanded by some Conservative MPs.
The chancellor said:
As inflation slows, it’s vital that we don’t alter our course and continue to act responsibly with the public finances. Only by sticking to our plan will we halve inflation, grow the economy and reduce debt.
The Treasury thinks changes to growth, inflation and interest rates put pressure on the public finances and insists it will not be deterred from its focus to get debt – which now stands at just under £2.6tn – falling over the medium term.
Read more here:
As a result of the general increase in CEO pay this year, there are now a smaller number of CEOs being paid £0-4m, down from 62 in 2021, to 51 in 2022, the High Pay Centre report explains.
However, the number of CEOs paid over £4m has increased from 36 to 46.
In total, 57 companies increased their CEO pay in 2022, which is a drop from 2021 when 72 companies increased their CEO pay.
The three largest absolute increases were at BP (an increase of £5.6m), BAE Systems (£3.6m) and Centrica (£3.6m).
Gillian Wilmot, who has run pay committees at various listed and private companies, and is an experienced chair and non-executive director, has told the BBC Today programme that it’s important to put the High Pay Centre figures in context.
She said the companies highlighted were at “the very top bar”.
It’s a bit like comparing half a dozen premiership footballers with most people in sport... it gives a very false view of business.
However, she said there was a very “narrow talent pool” considered to be qualified for these top roles and suggested more needed to be done to expand recruitment.
We need to broaden the talent pool. It’s very undiverse, very few women.
Ministers who are concerned about the impact that high wages are having on UK inflation, should curb pay for the top earners, the GMB union has said.
Commenting on the High Pay Centre’s FTSE 100 pay review this year, Gary Smith, GMB general secretary, said:
Throughout 2022, working people across the UK were desperately struggling with the cost of living crisis.
Meanwhile fat cat CEO pay sky rocketed to an average of almost £4million - more than 100 times that of the average worker. While workers in sectors across the board were forced onto picket lines to make ends meet, these top brass were trousering fortunes.
If ministers genuinely think high wages are going to cause spiralling inflation, they probably need to think about curbing pay at the top of the tree, rather than everyone else.
UK borrows £4.3bn, less than expected in July: ONS
Government net borrowing came in at £4.3bn last month, according to the Office for National Statistics.
The figure – which measures the difference between spending and income from taxes – is lower than the £5bn that economists had forecast.
It has raised speculation that chancellor Jeremy Hunt could cut taxes ahead of the 2024 election to give the Tory party a bit of a boost.
However, rising interest rates took their toll, pushing interest costs up £1.5bn and taking total interest payments to £7.7bn. That is the highest amount that the government has paid to cover interest bills since records began in April 1997.
Public sector net borrowing (excluding public sector banks) was £4.3 billion in July 2023, £3.4 less than in July last year.
— Office for National Statistics (ONS) (@ONS) August 22, 2023
It was the fifth-highest July borrowing since monthly records began in 1993.
➡️ https://t.co/lgjxhVRhlR pic.twitter.com/WpSIov2pPK
Overall, total net debt reached £2.6bn by the end of July, representing around 98.5% of GDP, which is 2 percentage points higher from a year earlier and is still holding at the highest levels since the 1960s.
Ruth Gregory, deputy chief UK economist at Capital Economics said the chancellor could be afforded less room to manoeuvre than the figures might suggest.
First, if we are right in expecting the economy to weaken later this year, tax receipts will probably disappoint. While the OBR’s forecasts are based on GDP growth of 0.2% and 2.1% in 2023/24 and 2024/25 respectively, we expect growth of just 0.1% and 0.8%.
Second, the increase in market rate expectations and rise in longer-dated gilt yields since March will probably add something like £18bn to the OBR’s forecast for debt interest spending by 2027/28.
As a result, we still think the chancellor will have little room to unveil large-scale permanent tax cuts and/or spending rises in the Autumn Statement without jeopardising his fiscal rules.
Updated
European stocks are broadly higher this morning, with investors boosting some tech shares ahead of an earnings update from US chipmaker Nvidia later this afternoon.
FTSE 100 +0.15%
FTSE 250 +0.54%
Germany’s XETRA DAX +0.65%
France’s CAC 40 +0.54%
Italy’s FTSE MIB +0.46%
Microsoft submits new Activision Blizzard deal to UK regulator
Microsoft has filed changes to its proposed takeover of the video game maker Activision Blizzard, in a bid to win over the UK competition watchdog which previously blocked the $69bn (£54bn) deal, my colleague Jasper Jolly writes.
The Competition and Markets Authority (CMA) on Tuesday said it would investigate the new proposals, under which Microsoft will not acquire cloud rights outside Europe for existing Activision desktop computer and console games, or for new games released by the developer during the next 15 years.
The move revives the US tech company’s hopes of completing the takeover of the owner of hit titles such as Call of Duty, World of Warcraft and Candy Crush after the CMA in April blocked it, citing concerns it could allow the company to dominate the nascent cloud gaming market.
However, the UK regulator had appeared increasingly isolated after its EU counterparts passed the deal and the US competition regulator lost a court request to block it.
The CMA said that, under the new deal presented to regulators, the rights to Activision’s games outside the European Economic Area will be divested to the rival developer Ubisoft prior to Microsoft’s acquisition.
Sarah Cardell, the CMA chief executive, said the deal did not yet have a “green light” to proceed and its goals had not changed.
The CMA has today confirmed that Microsoft’s acquisition of Activision, as originally proposed, cannot proceed.
Read more here:
The top paid FTSE 100 CEOs last year were:
AstraZeneca CEO Pascal Soriot: £15.3m
BAE Systems CEO Charles Woodburn: £10.7m
CRH CEO Albert Manifold: £10.4m
BP CEO Bernard Looney: £10m
Experian CEO Brian Cassin: £9.9m
Shell CEO Ben van Beurden: £9.7m
British American Tobacco CEO Jack Bowles: £9.6m
Anglo American CEOs Mark Cutifani/Ducan Wanblad: £9.5m
Endeavour Mining CEO Sebastien de Montessus: £9m
GSK CEO Emma Walmsley: £8.5m
The bosses of the UK’s 100 biggest listed companies collected an average £500,000 pay rise last year, while many of the millions of people working for them saw their pay growth fail to keep up with soaring inflation, our wealth correspondent Rupert Neate writes.
FTSE 100 chief executives received an average pay rise of 16% last year, taking their median pay to £3.9m, up from £3.4m in 2021, according to research by the High Pay Centre thinktank published on Tuesday.
Pascal Soriot, the CEO of the drug company AstraZeneca, was the highest paid last year, collecting £15.3m, up from £13.9m the previous year.
Charles Woodburn, the boss of the arms manufacturer BAE Systems, was the second highest paid, collecting £10.7m. In third place was Albert Manifold, the leader of the building supplies company CRH, who was paid £10.4m.
The bosses of the oil and gas companies BP and Shell were also among the top earners. The BP chief executive, Bernard Looney, was paid just over £10m, while Shell’s former CEO Ben van Beurden was paid £9.7m.
The median FTSE 100 CEO is now paid 118 times the median UK full-time worker, an increase from 108 times in 2021 and 79 times in 2020. The average salary for full-time UK workers is £33,000, according to Office for National Statistics figures.
Luke Hildyard, the director of the High Pay Centre, said:
At a time when so many households are struggling with living costs, an economic model that prioritises a half-a-million-pound pay rise for executives who are already multimillionaires is surely going wrong somewhere.
How major employers distribute the wealth that their workforce creates has a big impact on people’s living standards. We need to give workers more voice on company boards, strengthen trade union rights and enable low- and middle- income earners to get a fairer share in relation to those at the top.
Updated
Introduction: FTSE 100 CEOs snag 16% average pay rise, taking typical pay to £3.9m
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
There’s buzz this morning about new figures released from the High Pay Centre thinktank, which show that – on average - FTSE 100 CEOs took home an extra £500,000 last year.
The average 16% pay rise took typical salaries to £3.9m compared to £3.4m a year earlier. It marks the highest pay levels since 2017, when average CEO pay reached £3.97m, but later dipped during the Covid crisis.
New @HighPayCentre research out today - CEOs of Britain's biggest companies enjoyed a £500k payrise last year https://t.co/IBt0Wx6Sti
— Luke Hildyard (@lukehildyard) August 22, 2023
Median pay for FTSE 100 CEOs was £3.9m in 2022, up from £3.4m. FTSE 350 firms spent a total of £1.3bn on pay of 570 executives
That compares the £33,000 salary earned by the average worker, who has also been squeezed by rising prices during the cost of living crisis.
Regular pay growth, which excludes bonuses, reached 7.8% over the three months to June, but actually fell to 0.6% once inflation was taken into account. The UK’s rate of inflation recently eased to 6.8% in July, but peaked at 11.1% in October.
The new figures have raised fresh concerns about levels of inequality across the UK.
Paul Nowak, the general secretary of the Trades Union Congress, said:
While millions of families have seen their budgets shredded by the cost of living crisis, City directors have enjoyed bumper pay rises.
This is why workers must be given seats on company boards to inject some much-needed common sense and restraint. We need an economy that delivers better living standards for all – not just those at the top.
But under the Tories, Britain has become a land of gross extremes. As households across the country have struggled to put food on the table, sales of Porsches have hit record levels.
The agenda
11am BST: CBI’s UK industrial trends survey (Aug)
3pm BST: US existing home sales (July)
Updated
