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Mongolia’s mission to tackle corruption Big Tech rivals play catch-up on AI

BIG READ, PAGE 23 RICHARD WATERS, PAGE 8

Power surge Briefing

British Gas £969mn
i Record July temperatures

profits soar
fuel ‘global boiling’ alarm
The planet is facing a new era of
“global boiling”, the UN’s head has
warned, as forecasts showed that
British Gas’s first-half profits have July is expected to be the hottest
surged nearly 10-fold to almost £1bn, month ever recorded.— PAGE 6
threatening to reignite anger at the
energy sector’s large gains while house- i UK rejects EU overtures
holds have struggled to pay soaring bills. Britain has declined an EU offer of
Shares in its parent Centrica, which formal collaboration on global
have climbed 330 per cent since April issues despite warming relations
2020, rose another 5 per cent yesterday since the breakthrough on trading
as the London-listed company said that in Northern Ireland.— PAGE 2
it would boost shareholder returns via
higher dividends and buybacks. British Gas i Shell and Total profits hit
Just over half of the £969mn increase
in adjusted operating profits at the UK’s
First-half earnings* Profits at Shell and Total shrank
in the second quarter on lower oil
largest household energy supplier was and gas prices as the impact on
due to recovering costs incurred when it energy markets of Russia’s war in
was not able to pass on the full surge in
wholesale prices during the fuel crisis.
£181mn £172mn Ukraine waned.— PAGE 8

The upswing in British Gas’s profits £98mn i ECB rates at 22-year high
was mirrored by other suppliers yester- £78mn The ECB has raised rates back to
day, including Scottish Power, which their record level of 3.75 per cent,
posted profits of £567mn against an 2019 2020 2021 2022 2023 the highest since 2001, as it
£87mn loss the previous year. * Adjusted operating profits Source: company Image: Centrica’s Rough gas storage facility signalled that EU borrowing costs
10-fold profit rise page 14 may have peaked.— PAGE 4

i St James’s Place stock falls

Flavel resigns as Coutts chief after

News that the UK’s largest wealth
manager is to cut fees on a range
of investment products helped
trigger its steepest share loss in
seven years.— PAGE 15; LEX, PAGE 26

accepting blame for Farage furore

i Barclays underwhelms
Underwhelming second-quarter
earnings and lower trading and
M&A revenues at the investment
division triggered a 5.3 per cent
fall in the bank’s shares.— PAGE 14

3 Service fell ‘below bank’s high standards’ 3 Interim boss backs exit 3 Chair triggers internal inquiry Datawatch
SIDDHARTH VENKATARAMAKRISHNAN Farage’s revelation prompted a furi- licly stated views that were at odds with gested that Coutts’s decision had been bility for the dossier de-banking me for Britain heats up
ous political backlash and this week cost our position as an inclusive organisa- solely commercial. my political views lies with him”. Maximum UK-wide temperatures (C)
Coutts chief executive Peter Flavel has NatWest chief executive Dame Alison tion,” the memo read. NatWest chair Howard Davies also He also said that he had written to Fla- 18.5C* = average daily maximum
temperature in July and August
become the latest finance head to roll Rose her job after she admitted to inac- It also stated that Farage used “ext- announced an internal investigation vel twice before going public earlier in
over Nigel Farage’s bank account furore, curately briefing a BBC journalist on reme, hateful and emotive language . . . into Coutts’s handling of Farage’s acc- July, without receiving an acknowledg- Jul 19 2022
saying he bore “ultimate” responsibility why Farage’s account was closed. At best he is seen as xenophobic and ount, calling it “unsatisfactory, with ment from the chief executive. Coutts Jul 18 2022
for his bank’s treatment of the former A 40-page dossier prepared by pandering to racists”. It said the bank serious consequences for the bank”. declined to comment on that point. Jul 25 2019
Jul 19 2006
UK Independence party leader. Coutts’s wealth reputational risk com- had to be in a position to act quickly if he The departure of the Coutts head Farage also said he had told Coutts Aug 2 1990
The private bank and NatWest, its mittee and obtained by Farage was made “public comments that created an came with the “mutual consent” of Paul that, having been rejected by other Aug 9 2003
owner, have been engulfed in crisis since scathing in its criticism of his worldview. increased reputational risk”. Thwaite, marking his first big decision banks, he would have to come to “your Jul 3 1976
Farage revealed last week that Coutts “Continuing to bank NF was [not] A person with knowledge of the bank on his first day in the job as Rose’s branch on [redacted] the final date, Jul 2 1976
20 22 24 26 28 30 32
had closed his account in part because of compatible with Coutts given his pub- said that Flavel was not on the reputa- interim successor as NatWest chief with [sic] a security truck to collect Source: Met Office *Average for 1961-1990
his political views. tional risk committee himself but as executive. The bank is due to report its [redacted] approx in cash.”
“In the handling of Mr Farage’s case head of the bank would have made the half-year results today. Flavel joined Coutts as chief executive This time last year Britain hit a record
we have fallen below the bank’s high ‘As CEO of Coutts it is decision to close Farage’s account. Thwaite said that Mohammad Kamal in March 2016 after leading JPMorgan’s average maximum daily temperature of
31.5C, beating the previous 31.1C high
standards of personal service,” Flavel
said yesterday. “As CEO of Coutts it is
right that I bear ultimate In a statement made on Tuesday
evening, a few hours before her depar-
Syed, head of asset management, would
become interim chief executive at
private wealth business in Asia-Pacific
region. Since taking over he had tried to set the day before. Temperatures in some
right that I bear ultimate responsibility responsibility for this’ ture, Rose said she had not received the Coutts pending required approvals. modernise the image of the institution places passed 40C for the first time. June
this year was the warmest since 1884.
for this, which is why I am stepping Peter Flavel memo herself when she had spoken to Following the news of Flavel’s depar- formerly known as the “Queen’s bank”.
down.” the journalist and inaccurately sug- ture, Farage said the “ultimate responsi- Philip Augar page 25

Gucci’s owner buys 30% stake in Italian

fashion house Valentino from Qataris
ADRIENNE KLASA The deal comes as Kering is struggling in the past 12 months, giving it a market
to boost growth that has lagged behind value of €66.7bn. LVMH shares have
Gucci-owner Kering has agreed to buy
French rivals LVMH and Hermès. The risen 26.8 per cent over the same period,
30 per cent of Valentino from Qatar’s
Paris-based group last week announced leading to a capitalisation of €435bn.
Mayhoola, as part of a deal that will
that the chief executive of Gucci, its flag- Mayhoola, an investment vehicle
link two of the fashion world’s most
Lobbying registrar hits at ship brand, would step down. backed by Qatar’s emir, bought the
famous brands and give the French
No 10’s rejection of reforms Last month Kering bought high-end Roman fashion house from private
luxury group the option to take full
perfumer Creed for €3.5bn, paying equity firm Permira in 2012, for about
control of its Italian rival by 2028.
The lobbying regulator’s head has 23 times earnings before interest, taxes, €700mn. It also bought French family-
criticised the government’s rejection of The €1.7bn all-cash purchase is “part of depreciation and amortisation for the owned fashion house Balmain in 2016.
reforms that would raise transparency a broader strategic partnership” company, according to people with “From day one in discussions with
around how ministers are influenced between Kering and Mayhoola, which knowledge of the deal. Mayhoola, we said . . . that we would
by private interests. The criticisms by could lead to Mayhoola becoming a Founded in 1960 in Rome, Valentino broaden [the collaboration] to look at
Harry Rich, tasked with ensuring that shareholder in Kering, the French group operates 211 stores worldwide and gen- other opportunities,” Pinault said.
lobbyists disclose their clients, are a said yesterday. Kering, which will be erated revenues of €1.4bn and ebitda of Kering yesterday reported first-half
sign that the prime minister’s reforms, represented on Valentino’s board, has €350mn last year. results, with Gucci missing expectations
announced this month, are unlikely to an option to buy 100 per cent of the Ital- Bernstein analyst Luca Solca said that and expanding sales by 1 per cent on a
change substantively the current lax ian brand within five years. the agreement looked “promising” for comparable basis. Gucci makes up half
approach to regulating lobbying. ‘It’s a “I am very pleased with this first step Kering, which “has an established of Kering’s revenues. Total sales grew
missed opportunity,’ Rich lamented. in our collaboration with Mayhoola to record managing and developing fash- 2 per cent to €10.1bn, while operating
Failure to close gaps i PAGE 3 develop Valentino,” François-Henri Pin- ion brands”. profit fell 3 per cent to €2.7bn compared
ault, Kering’s chief executive, said. Kering shares have fallen 3.4 per cent with the previous year.

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2 ★ FINANCIAL TIMES Friday 28 July 2023

NATIONAL

Post-Brexit Europe High Court

Routine use of
UK rejects EU offer for deeper partnership hotels for
Hopes dashed of closer ties London, according to two people with
knowledge of the talks.
attends quarterly European Council
summit meetings, leaving no regular
the European Commission, which
polices the TCA, is more sceptical than
mission vice-president Maroš Šefčovič
this month said the EU believed the G7
child refugees
as idea of formal talks
with Brussels is rebuffed
A senior EU official said the British
side had “given the EU the brush-off”.
ministerial forum to discuss strategic
matters, such as defence, international
Michel. It has been clear the deal will not
necessarily translate into concessions in
was the best forum for such discussions.
A commission official confirmed that
ruled illegal
One UK official confirmed the proposal trade and the regulation of emerging other areas and has decided that creat- the idea of a strategic dialogue had been
PETER FOSTER AND GEORGE PARKER had been made but swiftly turned down. technologies. The relationship between ing a separate UK-EU dialogue is “not in raised, but underlined that the TCA had ANNA GROSS
LONDON “We haven’t proposed a dialogue and we the sides is managed via the EU-UK its interest”, a senior EU official added. a comprehensive governance structure
ANDY BOUNDS — BRUSSELS The policy of “routinely” housing
won’t be proposing one,” they added, Trade and Co-operation Agreement, The remaining areas of contention that allowed all policy areas to be dis-
unaccompanied child asylum seekers
The UK has declined an EU offer of for- citing domestic political concerns in the which focuses on trade. include the terms of the UK’s associa- cussed bilaterally, including AI.
in hotels is unlawful, the High Court
mal collaboration on global issues Conservative party about being seen to The idea for a deeper EU-UK strategic tion with the €95.5bn Horizon science “Discussing issues related to our eco-
ruled yesterday, in a fresh blow to Rishi
despite warming relations between the move too close to Brussels. partnership, conceived under former programme, a UK request to delay the nomic partnership is always welcome.
Sunak’s plans to curb immigration.
two sides since the diplomatic break- But a second EU official said the idea prime minister Theresa May, was imposition of tariffs on some electric That is why we have a comprehensive
through on post-Brexit trading arrange- remained on the table. “It is time to turn dropped by her successor, Boris John- vehicles moving between the UK and governance structure in the TCA,” the Mr Justice Martin Chamberlain said in a
ments in Northern Ireland. the page and look ahead,” they said, son, when he came to power in 2019. EU, and more favourable value added commission said. “The EU has commit- judgment that the practice, introduced
The idea for regular formal meetings adding there were regular talks with Relations between London and Brus- tax terms for UK exporters. ted to using this to its full potential.” in 2021, had become unlawful because
— possibly including a bilateral summit other non-EU countries, such as China, sels have warmed since Rishi Sunak bro- Sunak has also asked Brussels to team The government said: “We have no it was no longer being used only for
with the 27 member states — was floated Japan and Turkey. “We are doing this kered the Windsor framework deal to up on the creation of rules to govern plans for a dialogue outside the TCA to “very short periods in true emergency
last month by European Council presi- with China, why not do it with the UK?” smooth post-Brexit trade arrangements artificial intelligence ahead of an AI discuss UK-EU bilateral trade issues.” situations”.
dent Charles Michel but was rejected by Since leaving the EU, the UK no longer for Northern Ireland in February, but summit in London in the autumn. Com- Adam Tooze page 25 “It cannot be used systematically or
routinely in circumstances where it is
intended, or functions in practice, as a
substitute for local authority care,” he
Net zero targets said, voicing concern about the policy’s
impact on some children’s safety.

Tories back The ruling is a further setback to

Sunak’s goal of pushing through conten-
tious reforms to the immigration sys-
subsidy for tem as part of a pledge to “stop the
boats” carrying migrants across the

low-carbon Channel from France. According to offi-

cial figures, a record of more than
45,000 arrived in 2022.
aviation fuel The cornerstone of the reforms is the
Illegal Migration Act, which became law
this month after the government saw off
a series of proposed amendments by the
PHILIP GEORGIADIS, SYLVIA PFEIFER, House of Lords. The legislation gives
CAMILLA HODGSON AND JIM PICKARD ministers the right to send migrants
Tory backbench MPs are leading calls arriving via small boats to Rwanda to
for the government to subsidise manu- seek asylum there, although the Court
facturers of low-carbon aviation fuel to of Appeal in June ruled that the proposal
help the industry cut emissions. was unlawful because the African
nation could not be considered safe.
More than 60 parliamentarians, most of At the time, Sunak said he “funda-
them Tories, have signed an amend- mentally” disagreed with the court rul-
ment to the energy bill calling on minis- ing and that the government would seek
ters to introduce financial support for permission to appeal against the deci-
domestic production of so-called sus- sion at the Supreme Court.
tainable aviation fuels, or SAFs. Unaccompanied child asylum seekers
These fuels form the basis of the avia- were first moved into hotels in 2021 by
tion industry’s pledge to reach net zero the government after Kent county coun-
emissions by 2050, given the huge tech- cil said it was no longer willing to accept
nological challenges in developing statutory responsibility for children.
hydrogen or electric powered airliners. Chamberlain ruled that the council
The amendment to the energy bill, was “acting unlawfully” and “in breach
tabled by former Conservative trans- of its duties” by failing to house and look
port secretary Chris Grayling, calls on after children arriving in the area. He
the government to step in to create a found that because the council’s policy
“price stability mechanism” to incentiv- of transferring children to hotels was
ise companies to produce SAFs. This
would mean the state agreeing to under-
write a price for the fuel, in the way it
Migrant crew Top supermarkets and seafood
businesses are in talks to launch a pilot
scheme in north-east Scotland to
The “worker-driven social
responsibility” pilot would ensure
minimum standards around wages,
He added the group was in “active
discussions” with representatives
from the Scottish fishing sector and
agreed by the home secretary, “the
unlawfulness is attributable to her as
much as to Kent”.
does for nuclear and offshore wind.
Industry executives believe such a Industry pilot ensure fair employment conditions for
migrant crew on UK fishing vessels,
rest and grievance procedures. It is
being devised in consultation with
worker welfare groups “to
understand the role we may play”.
Noting that some of the children put
in hotels were unaccounted for, Cham-
system is critical to building production
of the fuels at scale and bringing down
the huge cost difference with conven-
aims to tackle according to those close to discussions.
Participants include Tesco, Asda,
Morrisons and Whitby Seafoods, which
workers and participating suppliers
would be audited by an independent
council, though the details have not yet
Jessica Sparks, assistant professor
at the Friedman School at Tufts
University, Massachusetts, who is
berlain said there was “evidence that
some have been persuaded to join gangs
seeking to exploit them for criminal
tional jet fuel.
John Holland-Kaye, chief executive of welfare on belong to the Seafood Ethics Action
(Sea) Alliance. The alliance is
been finalised.
“Some of the criticism of ‘transit
helping design and implement the
pilot, said it was important not to
purposes”.
Patricia Durr, chief executive of Every
Heathrow airport, said a price stability
mechanism would be “hugely impor-
tant” in encouraging banks to provide
fishing boats overseeing discussions on behalf of its
members that together represent
95 per cent of the UK seafood market.
visas’ currently is that people can
choose as and what they pay workers
because they’re not bound by UK law,”
rush the process and to ensure it
was “truly worker-driven”. She said
the scheme’s independent standards
Child Protected Against Trafficking, the
charity that brought the case, said the
ruling “powerfully reaffirms” that chil-
the “cash flow” to new fuel producers. The move to improve the welfare of said Mike Park, head of the Scottish council must be “rooted in the local dren should not be treated “differently
SAFs are made from materials rang- migrant workers follows strong White Fish Producers Association. context . . . to ensure workers trust because of their immigration status”.
ing from used cooking oil and fats to criticism of the seafood industry for its “Within this scheme we would want to it and are going to use it”. The pilot The Home Office said “the unsustain-
household waste and non-food crops. dependence on low-paid workers from make it so that losing your place [in the is being developed in consultation able rise” in Channel crossings meant it
They can reduce overall carbon emis- countries such as Ghana, the programme] is an economic problem.” with the US-based Fair Food had had “no option but to accommodate
sions by up to 80 per cent compared Philippines and Sri Lanka. The pilot is set to launch in north- Program, a worker-driven initiative young people in hotels on a temporary
with conventional jet fuel, according to Many migrants are employed east Scotland in partnership with the that protects the rights of migrant basis”, adding: “In light of today’s judg-
industry calculations. through an immigration loophole that association, the largest fish producer workers in Florida tomato fields. ment, we will continue to work with
Environmentalists, however, are leaves them unprotected by UK group in Europe. The International Park said he hoped the “nuts and Kent county council and local authori-
sceptical. John Gummer, also known as employment law because the boats on Transport Workers’ Federation, a bolts” of the programme could be ties across the UK to ensure suitable
Lord Deben and a former chair of inde- which they work operate in global trade union collective, is agreed by the end of 2023, with a local authority placements are provided
pendent advisory body the Climate international waters. Lawyers argue advising the project as a stakeholder. view to launching it next year. If for unaccompanied children, in line
Change Committee, has questioned the the system facilitates modern slavery. “The Sea Alliance and its member successful, the scheme could be with their duties.”
faith placed in “unproven” SAFs. “We The government is facing a judicial companies are encouraged by the replicated across the UK. Kent county council said it had long
have to think about the distinction review over the transit so-called visa development of a pilot project within Philanthropic organisations argued that “other local authorities
between technological breakthrough Troubled waters: an immigration system underpinning this form of the Scottish fishing sector, driven by Humanity United and Freedom must accept their fair share of these vul-
and actually delivering,” he said. loophole leaves many migrant employment, which was the subject of the methodology of ‘worker-driven Fund are providing initial funding to nerable children and the Home Office
The government said its SAFs pro- fishers unprotected by UK a Financial Times investigation last social responsibility’,” said Andy the scheme, before it transitions to a must be prepared to use its powers to
gramme was already “one of the most employment law — Denis Charlet/AFP/Getty month. Hickman, head of the Sea Alliance. self-funded model. Antonia Cundy force recalcitrant local authorities to
comprehensive in the world”. participate in the scheme”.

Camps outcry

Pressure builds to bring home British nationals held in Syria

MAKE A WISE LUCY FISHER — WHITEHALL EDITOR children remained in the two camps, lost an appeal against the decision. responsible for the wellbeing, detention
INVESTMENT Ministers are under growing pressure
while the US has estimated that about The government says it assesses the and prosecution of detainees, as well as
2,000 Isis fighters from countries other case of each Briton on an individual for detention and camp facilities.
Subscribe today at to bring home British nationals sus-
than Syria and Iraq are detained in the basis, examining a range of factors Al-Hol and Roj are in an area overseen
ft.com/subscribetoday pected of links to Isis, the Islamist ter-
region. including domestic national security by a Kurdish-led administration but
rorist group, and detained in camps
The terrorist group once controlled implications. Britain is providing humanitarian
in Syria, as their families launch a
swaths of territory across the two coun- In a letter last week, also seen by the assistance in camps in the region,
campaign and Washington urges
tries but has in recent years shrunk FT, Ahmad told Bring British Families Ahmad said.
FINANCIAL TIMES Reproduction of the contents of this newspaper in their repatriation.
drastically, with many members leaving Home that ministers were committed to The UK last year brought home the
Bracken House, 1 Friday Street, London EC4M 9BT. any manner is not permitted without the publisher’s
prior consent. In a letter sent last month and seen by and surrendering to authorities. repatriating unaccompanied children first adult female national from the
Published by: The Financial Times Limited, the Financial Times, a group calling Last month Antony Blinken, US sec- and orphans “where feasible and sub- region since the fall of the caliphate,
Bracken House, 1 Friday Street, ‘Financial Times’ and ‘FT’ are registered trade marks itself Bring British Families Home urged retary of state, said it was “critical” that ject to national security concerns”. having demonstrated a reluctance to
London EC4M 9BT. of The Financial Times Limited.
Tel: 020 7873 3000
Lord Tariq Ahmad, Foreign Office min- countries repatriated foreign terrorist However, he said the country had no repatriate people, in contrast with its
Editor: Roula Khalaf The Financial Times and its journalism are subject to ister, to step up efforts to help their rela- fighters and their family members from consular presence in Syria and that allies.
a self-regulation regime under the FT Editorial Code tives return and “not abandon” them. Syria and Iraq. Not doing so “risks the authorities in north-east Syria were According to data collected by Rights
Subscriptions and Customer Service of Practice: www.ft.com/editorialcode The group’s members alleged that possibility that they could again take up and Security International, a London
Tel 0800 028 1407; subscriptions@ft.com;
www.ft.com/subscribenow Reprints their relatives — some of whom, they arms and attempt to restore Isis’s so- charity, France has repatriated 56
Are available of any FT article with your company claimed, had been groomed online and called caliphate”, he warned. women and 167 children. Germany 26
Advertising logo or contact details inserted if required (minimum trafficked to Syria as teenagers — were The exact number of Britons still in women and 76 children and the Nether-
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letters.editor@ft.com One-off copyright licences for reproduction of FT detained in “dangerous” conditions and Reprieve, a human rights charity, has Katherine Cornett, Reprieve’s head of
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The group also voiced concern that 38 children are stuck there. said it was “shameful that the govern-
Printed by alternatively, email syndication@ft.com relatives’ children, many of whom it The most high-profile is Shamima ment is seeking to wash its hands” of
Newsprinters (Broxbourne) Limited, Hertfordshire, said had been born of forced marriage Begum, who in 2015 travelled from Lon- people who had been born and raised in
Newsprinters (Knowsley) Limited, Merseyside, Newspapers support recycling and sexual assault, were languishing in don to Syria to join Isis at the age of 15. Britain but were stranded in Syria, not
Newsprinters (Eurocentral) Glasgow, and Irish Times, The recycled paper content of UK newspapers in
Dublin, Ireland 2018 was 69.2% the al-Hol and Roj camps in the coun- Like many Britons who went to territory least by stripping them of their citizen-
try’s north-east. held by the Islamist group during its ship.
© Copyright The Financial Times Limited 2023. All In November, Kurdish officials said caliphate, she has been stripped of UK Shamima Begum: left to join Isis in The government did not respond to
rights reserved.
more than 10,000 foreign women and citizenship. In February 2023, Begum Syria when she was 15 years old requests for comment.
Friday 28 July 2023 ★ FINANCIAL TIMES 3

NATIONAL

Watchdog hits
at failure to
close gaps in
lobbying rules
Registrar accuses ministers of rejecting
reforms that would increase transparency
KADHIM SHUBBER AND LUCY FISHER tration and constitutional affairs com-
mittee, which is due to resume an
The head of the lobbying watchdog inquiry into lobbying and influence in
has criticised the government for politics in the autumn.
rejecting reforms that would increase Wragg expressed regret at ministers’
transparency around how ministers and refusal to strengthen the roles of two
their advisers are influenced by private ethics watchdogs, the chair of the advi-
interests. sory committee on business appoint-
Harry Rich, the registrar of consult- ments and the commissioner for public Spad watch: senior civil servants took after leaving most senior civil servants trigger a ‘All we lobbying on behalf of which client, but
ant lobbyists, who is tasked with ensur- appointments. Harry Rich, the office and would make ministers more requirement for third-party lobbyists to we don’t know who is being lobbied,”
ing that lobbyists disclose their clients, The Cabinet Office this month registrar of accountable for who they appointed to register with Rich’s office. know on said Rich. The omissions made it diffi-
said the government’s recent transpar- released its response to parliamentary consultant senior public sector roles. Rich, who was appointed registrar of the register cult to cross-check the register with dis-
ency proposals failed to address signifi- and other official reports into the Green- lobbyists, says The Cabinet Office also said the gov- consultant lobbyists in 2018 and reap- closures elsewhere, he added.
cant gaps in the disclosure regime. sill Capital scandal, which involved special advisers ernment would improve departmental pointed in 2022, said special advisers is who is The Cabinet Office said such informa-
“It’s a missed opportunity,” Rich told former prime minister David Cameron are critical to disclosures of “diarised” external meet- were a key part of how private interests lobbying on tion would change the nature of the reg-
the Financial Times, referring to the lobbying ministers for the now-col- influence efforts ings and phone calls, for example by sought to influence government. ister and was already in departmental
government’s rejection of ideas such as lapsed finance company founded by Lex Charlie Bibby/FT
requiring more detailed descriptions of “I’ve done a bit of lobbying in my behalf of disclosures.
requiring lobbyists to disclose who they Greensill. what was discussed. time . . . You always start by talking to which It added that it was planning to
had lobbied and expanding the rules to The reports recommended sweeping But Sunak’s government rejected the special adviser,” he said. “If one require lobbyists to disclose the topic on
cover contacts with political aides. changes to the rules concerning lobby- other recommendations, such as that wants transparency in policymaking, client, but which they lobbied.
These would not require new laws and ing and the so-called revolving door of “informal” lobbying be included in you need to be able to know which spe- we don’t Another big gap in the disclosure
could be introduced by ministers ministers and senior officials taking departmental disclosures and that polit- cial advisers have been influenced by regime is an exemption for lobbyists
through secondary legislation, he lucrative private sector jobs after leav- ical aides to ministers, known as special which clients.” know who who are not value added tax-registered,
added. ing their positions. advisers, be included in the disclosure The lobbying register was set up in is being which is voluntary for any persons or
“I’m puzzled as to why the govern- “We have made changes to strengthen regime. 2015 but exemptions mean it captures companies making less than £85,000 of
ment won’t initiate that secondary legis- the system and support our commit- “The government does not believe only some of the activity in Westmin- lobbied’ revenue in a year.
lation,” Rich said. He called ministers’ ment to integrity, accountability and that transparency obligations should ster. For example, only lobbyists work- Rich’s office has in recent years
position “disappointing”. transparency,” the Cabinet Office said. include letters, WhatsApps, impromptu ing for third parties, rather than those cleared a number of MPs of failing to
The criticisms levelled by Rich, a gov- It added that the government had phone calls or emails, which do not directly employed by companies, must register as lobbyists because of this
ernment appointee, are a sign that the “carefully considered” the recommen- alone evidence a substantive lobbying register. loophole — though it is unclear if the
reforms announced by Rishi Sunak this dations the Cabinet Office had received engagement,” the Cabinet Office said. It The register lists the clients for whom MPs would have also been cleared on
month are likely to do little to substan- in response to the Greensill scandal. added that special advisers “cannot such lobbyists contacted senior govern- other grounds. Changing the VAT
tively change the lax approach to regu- “We keep these arrangements under authorise public expenditure nor exer- ment officials in the preceding quarter exemption would require parliament to
lating lobbying. constant review,” it added. cise any statutory powers”. but it does not identify the officials, the pass primary legislation.
Rich’s comments echo those of Wil- The reforms agreed by the govern- Special advisers are also excluded department in which they work or the “It’s a really unhelpful gap,” said Rich.
liam Wragg, the Conservative head of ment would tighten the rules pertaining from the disclosure regime for lobbyists. dates of the contacts. “You can do quite a lot of lobbying for
the House of Commons public adminis- to the private sector jobs ministers and Only contact with ministers and the “All we know on the register is who is [£85,000].”
4 ★ FINANCIAL TIMES Friday 28 July 2023

INTERNATIONAL

Eurozone Yevgeny Prigozhin

ECB returns rates to 2001 high and signals peak Wagner chief
in surprise
Investors bet increase The widely expected move, the ECB’s
ninth consecutive rate rise, came a day
ready to bring tightening to an end. The
US currency was bolstered by a stronger
But the central bank altered that lan-
guage yesterday, saying instead that it
year and a further slowdown is expected
when July data is published on Monday.
appearance
will be the last as inflation
falls faster than expected
after the US Federal Reserve raised rates
by the same amount.
than expected figure for gross domestic
product yesterday, showing that the
would ensure interest rates “will be set
at sufficiently restrictive levels for as
The ECB repeated its warning that
inflation was still expected to remain
at Russia’s
MARTIN ARNOLD — FRANKFURT
GEORGE STEER — LONDON
Yet despite Fed chair Jay Powell’s
insistence that there could be more
tightening ahead, investors are betting
world’s largest economy expanded by
an annualised rate of 2.4 per cent in the
second quarter.
long as necessary”. The eurozone infla-
tion rate stands at 5.5 per cent, almost
three times that level.
“too high for too long”.
To reduce the interest it pays banks,
the ECB said it would cut the rate it pays
Africa summit
that these increases will be the central In eurozone government debt mar- ECB president Christine Lagarde on the reserves lenders are required to
The European Central Bank has raised banks’ last, as inflation falls faster than kets, the yield on the interest rate- acknowledged the new wording, saying hold at central banks in the region. MAX SEDDON — RIGA
ANDRES SCHIPANI — NAIROBI
interest rates back to their record high, expected on both sides of the Atlantic. sensitive two-year German bond fell that it was not “irrelevant” and that pol- Rate setters said that this would
as it signalled that eurozone borrowing “We reiterate our call that in the base 0.05 percentage points to 3.22 per cent, icymakers had “an open mind as to improve the transmission of its policy Yevgeny Prigozhin, founder of the
costs may have peaked. case, the ECB — like the Fed — is done while the 10-year yield was steady at what the decisions will be in September rates to money markets. Wagner paramilitary group, has
The ECB’s decision yesterday to raise raising rates, though there is certainly 2.47 per cent. Yields fall as prices rise. and subsequent meetings”. But Carsten Brzeski, an economist at appeared during a Russia-Africa sum-
its benchmark deposit rate by a quarter- still a material risk of a further hike,” Last month the ECB said in its policy “There is a possibility of a hike, there Dutch bank ING, said it risked “reduc- mit in St Petersburg, despite agreeing
percentage point to 3.75 per cent said Krishna Guha of Evercore ISI. statement that it would ensure rates is a possibility of a pause,” she added, ing the appetite to pass on ECB rates to to go into exile following his failed
matches a high last reached in 2001, The euro dropped 0.8 per cent to were brought to levels that were “suffi- saying the vote would depend on the depositors”. mutiny last month.
when it was trying to boost the value of $1.099 following the ECB’s decision, as ciently restrictive” to bring inflation economic data. Eurozone inflation has US growth accelerates page 6
the newly launched euro. the central bank indicated it might be down to rate setters’ 2 per cent target. dropped from a peak of 10.6 per cent last Corporate fundraising buoyant page 15 The warlord’s continued presence in
Russia suggests that Prigozhin remains
an important part of the Kremlin estab-
lishment, with Vladimir Putin reluctant
Counteroffensive. Russian defences or unable to exclude him.
Prigozhin was photographed shaking

Ukraine switches to artillery in Bakhmut push

hands with Freddy Mapouka, chief of
protocol for Central African Republic
president Faustin-Archange Touadéra,
who attended the summit.
Dmitry Syty, one of Wagner’s most
visible figures in CAR, posted the pic-
ture on Facebook with the message: “Mr
Kyiv changes tactics after Ambassador shared with me the first
heavy losses in early stages of photos of the Russia-Africa Summit. We
see familiar faces,” with a smiling emoji.
operation to repel invaders Syty, director of a Russian cultural
centre in the CAR capital, Bangui, has
been hit with sanctions by the US, EU
CHRISTOPHER MILLER — BAKHMUT
and, a week ago, the UK, as one of sev-
The losses from Ukraine’s counteroffen- eral Russian nationals active in CAR
sive were heavy and early. Pushing into with links to Prigozhin.
the sprawling southern fields this sum- Fontanka, a local news outlet, said the
mer, Kyiv lost almost a fifth of Nato kit photo was taken in a hotel in St Peters-
provided for the operation, according to burg owned by Prigozhin’s family, which
Ukrainian and western officials. it said had been booked out for all three
Kyiv’s military response across much days of the summit.
of the front line is now becoming clear: News outlets that were part of Prig-
to change tactics. The shift in fighting ozhin’s media empire, whose ultimate
doctrine applied in recent weeks, fate, like that of Wagner’s, remains
according to Ukrainian commanders, unclear, claimed Prigozhin also met offi-
appears to be achieving some hard- cials from Mali as well as Niger, where a
fought but tangible results on the battle- coup attempt that began on Wednesday
field, at a more tolerable cost. threatened to remove its pro-western
Rather than dart across Russian president, Mohamed Bazoum.
minefields aiming to punch through Prigozhin agreed to relocate to Bela-
enemy lines with Nato armour, Ukrain- rus last month after its president, Alex-
ian forces have moved their focus to ander Lukashenko, brokered an elev-
pounding Russian defensive positions enth-hour deal to end the group’s rebel-
with heavy artillery fire. lion against the Russian army, which
Artillery gunners operating multiple- Prigozhin has accused of mismanaging
launch rocket systems (MLRS) and the war effort. But he has spent a lot of
howitzers, some loaded with US-sup- time since in Russia and even met Putin
plied cluster munitions, aim to clear New strategy: Viktor’s artillery unit provided cover- ‘We prepare the prospects of a breakthrough are bet- rescue operations after being halted by at a roundtable in the Kremlin. Prig-
pathways for small teams of sappers and Ukrainian ing fire for infantry that pushed into the ter there than along the southern front minefields, anti-tank rockets and Rus- ozhin said last week that Wagner would
infantry units. These troops then try to soldiers reload northern and southern flanks of Bakh- the ground line. It would also hit Russian morale. sian Ka-52 helicopters. Sultan, recover- “gather our strength and head off to
advance methodically on foot, moving their artillery mut, the bombed-out eastern city that conditions Russian forces did not have time ing from a concussion from a mine blast, Africa” after leaving for exile in Belarus.
forward one narrow tree line at a time in as they fire was captured by Russia’s army in May around Bakhmut after capturing the complained his special forces unit was His rebellion had called into question
select spots along the 1,000km front shells towards after a gruelling 10-month fight. so our city in late May to erect the fortifications now being forced to fight “like regular whether Wagner could continue fight-
line. Bakhmut at Ukraine claimed further advances on troops suffer laid down in southern Ukraine. There, a infantry” to fill a void left by brigades ing as mercenaries for Moscow-friendly
“We strike the enemy, then our infan- the weekend Tuesday and Wednesday. deep network of minefields, “dragon’s that took heavy losses early on. governments in countries such as CAR
try advances,” said Viktor, a battery Diego Herrera Carcedo/
Anadolu Agency/
Recapturing Bakhmut is an objective minimal teeth” obstacles, anti-tank ditches and “We should be four to eight guys doing and Mali. Russia has assured CAR that
commander in a Ukrainian artillery Getty Images for Ukraine, even if the destroyed city losses’ trenches have kept Ukrainian troops at reconnaissance and operations behind Wagner will “continue their activity in
unit operating US M777 howitzers, of that was once home to 70,000 is of little bay. Kyiv has acknowledged slow enemy lines. But we are being told, ‘You the necessary and required numbers”.
the new strategy between attacks. “We strategic value. Commanders believe progress while stressing the counterof- have to fight like everyone else now’,” he Wagner, a once-secret organisation
prepare the conditions on the ground so fensive is far from finished. Many west- said. That has meant advancing meth- essentially directed by Russia’s military
that our troops suffer minimal losses.” ern-trained and equipped brigades are odically over open fields where Russian intelligence, has been an important part
The painstaking strategy has raised Artillery strikes raise hopes of breakthrough in Kyiv’s yet to be sent into battle. drones easily spot them. Luckily, [our] of the Kremlin’s power projection in
questions in western capitals about counteroffensive Some reserves have already been qui- artillery “covered our arses”, he said. Africa, sending mercenaries to fight in
.RQRWRS

whether Ukraine will be able to main- Russian-claimed control 100 km etly committed in the south, according “We liberate 1-2 sq km of our territory some countries and political spin-doc-
tain it for long, or produce the kind of Assessed Russian to Sultan, a commander in the 78th Reg- every day,” Colonel Vlad Voloshyn, a tors to work in several others.
breakthrough that would bring Moscow advance Kyiv iment, a special forces unit, and other military press officer, said on a visit to a CAR has been the major showcase for
Kharkiv
to the negotiating table. There are con- Regions annexed by soldiers who spoke near the front line in unit operating Soviet-era BM-21 Grad Wagner’s efforts on the continent.
Russia* KHARKIV
cerns about how quickly Ukraine is ex- LUHANSK the southern region of Zaporizhzhia. multiple-launch rocket systems near Touadéra owes his survival to the Wag-
pending its dwindling supply of artillery
Under Russian control UKRAINE Two soldiers in early operations said Soledar, north of Bakhmut. ner fighters who arrived in 2018 to
Ukrainian-claimed Dnipro
shells, and about the time it will grant counteroffensive DONETSK
'RQHWVN
uhansk they faced stiffer resistance than expec- Some Russian officers have lamented instruct his army and helped thwart an
Russia to dig in and train fresh forces. City under Russian control ted from the Russians, resulting in the Ukraine success in the area and the ina- attempted rebellion two years later.
But in the short term, the tactic has Nuclear power plant ZAPORIZHZHIA
losses of US Bradley fighting vehicles bility of their own troops to respond to CAR has since become a vehicle for Rus-
reduced Ukrainian losses. Casualties and western engineering equipment. the artillery fire in kind. “The enemy’s sia’s African ambitions, according to
Odesa
and the number of prized western battle Updated 11:30am GMT Jul 25. Ukrainian KHERSON They also said many “inexperienced” [artillery] crews do not change posi- western diplomats in Bangui.
tanks and infantry fighting vehicles lost counteroffensives before May 1 2023 are
not shown Sea of Azov RUSSIA troops were “unprepared” for the com- tions for hours, working with impunity Touadéra has called a vote this week-
in battle are down compared with the * These regions and Crimea are not plex assault despite receiving training. on our front line, and we are not able to end to override a constitutional bar on
recognised by the international community, CRIMEA UKRAINE
first two weeks of the counteroffensive, Crimea was annexed by Russia in 2014 Black Sea Kerch The troops described “chaos” in the suppress them,” wrote Alexander Khod- running for a third term, a move sup-
while Ukraine has made small but Source: Institute for the Study of War, AEI’s early days of the operation: friendly fire akovsky, a Russian commander in ported by Moscow, said former senior
steady gains. Critical Threats Project, FT research and attacks that quickly evolved into Donetsk region, on Telegram. members of the constitutional court.

Cost of living

Turkish central bank predicts inflation will soar close to 60%

ADAM SAMSON — ANKARA imbalances in Turkey’s economy, That meant that in addition to inter- bank would be “completely independ-
including very high imports of con- est rate increases, the central bank ent” from government pressure and
Turkey’s new central bank chief has
sumer goods that have driven a record would seek to cool overheating demand that its decisions would be “purely
vowed to continue taking “gradual and
current account deficit in the first five by taking steps to slow bank lending. driven by the science”.
decisive” steps to slow price growth,
months of 2023. The central bank already this week cut Erdoğan, a diehard opponent of high
even as she acknowledged inflation was
Many independent economists have the monthly limit on commercial loan borrowing costs, has hitherto exerted
set to soar to almost 60 per cent by the
said policymakers must do more to fight growth as part of what it called its “selec- strong control over monetary policy by
year’s end.
inflation, which registered 38.2 per cent tive credit tightening” strategy. insisting on interest rate cuts. He dis-
Hafize Gaye Erkan said inflation would in June after peaking last October at “Data is very valuable,” Erkan, who is missed Naci Agbal, a former finance
reach 58 per cent by December, com- above 85 per cent. a specialist in developing mathematical minister, as central bank governor in
pared with a previous forecast of just Significant increases in petrol taxes risk-management models, said as she 2021 after sharp increases in interest
over 22 per cent. and value added taxes on goods and underscored how the central bank rates.
Speaking yesterday at her first signifi- services, made recently as part of a would rely on quantitative analysis in its Erkan responded to economists’
cant press briefing since she was tightening in fiscal policy, are likely to decision-making. doubts about how much latitude she
appointed in June, Erkan said that the add to inflationary pressures, econo- Erkan also insisted that the central would have in raising rates by saying:
MAKE A WISE INVESTMENT lira’s tumble this year, sharply rising mists say. “You have to take very careful steps
food prices and big rises in the mini- The sharp increase in the central [and act with] precision.”
mum wage would fuel price growth. bank’s inflation forecast will be inter- Tim Ash, an emerging markets
Choose the Financial Times subscription for you The central bank has more than preted as a positive signal to investors, strategist at BlueBay Asset Manage-
• React to trusted global news everywhere you doubled interest rates in the past two who had expressed concern ahead of ment, said that the “message is clearly
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with FTWeekend President Recep Tayyip Erdoğan in Erkan, a former Wall Street banker just does not think that [finance minis-
recent years that have set off an eco- who was appointed governor after ter Mehmet] Şimşek and Erkan have a
Subscribe today at ft.com/subscribetoday
nomic crisis. Erdoğan’s re-election as president in mandate to do whatever it takes to fight
Erkan indicated in her remarks that May, said that the central bank would inflation, at least not when it comes to
massive stimulus measures this year, take a “holistic” approach to monetary Hafize Gaye Erkan: says central bank policy rates, and that Erdoğan is still the
ahead of May’s election, had led to big policy. will be ‘completely independent’ rate setter.”
Friday 28 July 2023 ★ FINANCIAL TIMES 5
6 ★ FINANCIAL TIMES Friday 28 July 2023

INTERNATIONAL
GLOBAL INSIGHT
Rising temperatures
SUMMIT

Hot July presages era of ‘global boiling’ Alan

Beattie
UN warning comes after with the month now “extremely likely” Guterres. “The level of fossil fuel profits ‘Climate a 98 per cent likelihood that “at least”
to be the hottest ever, it said. and climate inaction is unacceptable.” one of the next five years would be the

Brics nations run the

experts caution weather is The hottest single day ever recorded A temporary breach of the 1.5C change is warmest ever. It has previously pre-
becoming more extreme was July 6, while the global mean tem- threshold is not a breach of the Paris here. It is dicted a 66 per cent chance that the

risk of looking like

perature temporarily exceeded 1.5C Agreement, which commits countries to annual global mean temperature would
CAMILLA HODGSON AND above pre-industrial levels during the strive to limit long-term warming to terrifying. temporarily rise above 1.5C in “at least”
CHRIS CAMPBELL first and third week of the month, the 1.5C above pre-industrial levels, defined And it is one year by 2027. The WMO noted that

The world faces a new era of “global

boiling”, the head of the UN has warned,
group said.
The global average sea surface tem-
perature had also been “well above pre-
as the 1850-1900 period. Temperatures
have risen at least 1.1C on that basis, the
UN Intergovernmental Panel on Cli-
just the
extreme weather impacts were increas-
ing in Asia, which was the world’s “most
disaster-prone region”.
a fan club for Beijing
beginning’

T
as forecasts showed that July is expected viously observed values for the time of mate Change has found. Large areas of Europe, the US and
to be the hottest month ever recorded. the year” since May, said Copernicus. It is not the first time that the global António Asia are roasting this summer, with
“The era of global warming has Copernicus director Carlo Buon- mean temperature has temporarily Guterres records broken in places including Xin- here cannot be many international summits
ended; the era of global boiling has tempo said it was “more probable than crossed the 1.5C threshold for a month, jiang in China, which hit 52.2C, and where a head of government stays away for
arrived,” António Guterres, UN secre- not” that the next few months would however, with instances occurring in Rome in Italy, which hit 41.8C. In the US, fear of being arrested for war crimes, but the
tary-general, said yesterday. also break temperature records for the previous years including 2016 and Phoenix has suffered 26 consecutive Brics grouping has managed it.
The global average temperature this time of year, adding that the hottest 21 2020, according to Copernicus. days of more than 43.3C, a record. The Vladimir Putin will skip next month’s meet-
month has at times been about 1.5C days recorded had all occurred in July. Scientists say that extreme weather simultaneous heatwaves fuelled by a ing of Brazil, Russia, India, China and South Africa in
higher than it was before human-in- “All this is entirely consistent with events such as floods and heatwaves will specific jet stream pattern have sparked Johannesburg because the hosts, as a signatory to the
duced warming set in, according to the predictions and repeated warnings. The become more frequent and intense with wildfires in Greece and led to heat-re- International Criminal Court, would have to detain him
EU’s Copernicus Climate Change Serv- only surprise is the speed of the change. every fraction of a degree of warming. lated fatalities in other countries. under a warrant for Russia’s activities in Ukraine.
ice. The first three weeks of July were Climate change is here. It is terrifying. The World Meteorological Organisa- Camilla Palladino page 14 It is unlikely he will miss much policy substance. Apart
the warmest such stretch on record, And it is just the beginning,” said tion yesterday confirmed its forecast of John Burn-Murdoch page 24 from a lot of defiant rhetoric against the rich world, one of
the main themes will be barely hidden tension around the
role of China.
Brics nations look seriously lopsided. Invented by Gold-
South America. Decarbonisation man Sachs economists in 2001 as a marketing tool, the
grouping became a political entity when the four countries
(South Africa joined later) held their first summit in 2009.

Brazil aims high with green transition drive Dan Ciuriak, a former deputy chief economist at Can-
ada’s trade department and now a senior fellow at the Cen-
tre for International Governance Innovation think-tank,
notes that only a fortuitous confluence of events in the late
1990s and 2000s made the group look vaguely equal, even
in aspiration.
Initiative envisages marriage While China’s low-cost manufacturing was benefiting
of environmental goals from Deng Xiaoping’s economic reforms, Russia and Brazil
were emerging from economic chaos (Russia after the fall
and economic development of communism, Brazil from its stabilisation of the cur-
rency after 1994) to ride the commodities boom of the
2000s. India had a burst of growth after the economic lib-
BRYAN HARRIS — SÃO PAULO
eralisation that followed a balance of payments crisis in
Brazil is to launch a green transition 1990-91. South Africa was
plan requiring hundreds of billions of boosted by the end of
dollars in public and private invest- apartheid in 1994.
China’s support
ments that officials hope will become But during the 2000s for other Brics
the signature policy of President Luiz and 2010s only China
Inácio Lula da Silva’s third term. m a n a g e d t o m ove
members is
The package, to be unveiled in August towards rich-world status not exactly
or September, would encompass about by adopting technological
100 initiatives including carbon trad- advances to become a
unconditional
ing, the bioeconomy and infrastructure knowledge-based econ-
adaptation across six policy areas, said omy. The others remained stuck in low-growth models
officials co-ordinating the plan. dependent on commodities, their policy apparatus ham-
“The idea is to have the most ambi- pered by political dysfunction and corruption.
tious plan to decarbonise an economy in The Chinese economy now rivals that of the US — it is
the world, at least among developing larger in purchasing power parity terms — and its size and
countries,” said a senior official. income fund a belligerent foreign and military policy.
Word of the package comes as Brazil The idea of a new Brics currency, mooted in particular
appears to have slowed the rampant by Brazilian president Luiz Inácio Lula da Silva, is essen-
deforestation of the Amazon during the tially fantasy: the renminbi is the only one of the five inter-
previous administration of Jair Bol- national currencies with any significant overseas role. The
sonaro, the far-right president. Official Tree battle: Among the first initiatives will be leg- ucts and industries based on the diver- The government estimates the pack- Brics nations’ New Development Bank has so far extended
data suggests destruction of the rainfor- under Luiz islation for the creation of a regulated sity of Brazil’s biomes. Such bioecon- age will be worth hundreds of billions of $32.8bn in loans, while China has lent about $1tn bilater-
est was more than 33 per cent lower in Inácio Lula da carbon market, which will be sent to omy initiatives have long been champi- dollars over the next decade. But it says ally. Its Belt and Road Initiative not only builds infrastruc-
the first six months of this year than the Silva, seen with Congress in the coming months. oned by environmentalists. Pedro the bulk of that will come from partner- ture but also aims at trade and political alignment.
same period last year. indigenous “We’re very confident that it’s not Côrtes, professor at São Paulo univer- ships with the private sector and private Nor is China’s support for other Brics members exactly
Brazil is the latest country to launch a women last year, going to be very tough to approve it in sity’s energy and environment institute, investment. In the areas that require unconditional. Even leaving aside its longstanding military
bold programme to green its economy. the rampant Congress because the sector that is most said: “Brazil needs to adopt a proactive public money, “we are working on mak- rivalry with India, China has given Putin diplomatic cover
US president Joe Biden’s Inflation deforestation directly affected — industry — is sup- stance that associates environmental ing tweaks in existing funds, so that it for Ukraine, but is in effect charging for it by buying Rus-
Reduction Act pledges hundreds of bil- of the Amazon, porting the carbon market,” said an offi- preservation with economic develop- will fit in our budget. We don’t want to sian oil below market price. Geopolitically, China also
lions of dollars in subsidies and tax below, has cial at the finance ministry. ment. For example, biotechnology break our fiscal rules,” one official said. unbalances the club. It is in an economic, technological and
breaks to encourage companies to slowed The plan envisages the redeployment could use national flora for the develop- Sérgio Margulis, chief economist of strategic rivalry with the US, while other Brics members are
Christophe Gateau/picture-
develop green technology and create alliance/dpa/AP; Ueslei
of federal funds for research and devel- ment of pharmaceutical products.” Convergência pelo Brasil, a business trying to stay on good terms with Brussels and Washington.
jobs. The EU is also relaxing state aid Marcelino/Reuters opment to focus on green technologies It is a reality acknowledged by offi- roundtable, said the package was China mooted the idea of expanding Brics last year but
rules to unlock more government and the expansion of technical educa- cials, who admit that the elimination of “timely” but warned many initiatives other existing members including Brazil seemed distinctly
spending on the green transition. tion in relevant areas, such as biotech- illegal deforestation and gold mining in were likely to face political obstacles. reluctant. If nations enter who are beholden to China
Some activists are cautious about nology in the rainforest or renewable the Amazon requires new opportunities “It is a difficult political moment with through ties of debt or investment, Brics will look ever less
Lula’s environmental commitment at a energy in the sunny, gusty north-east. in the impoverished region. The finance a behind-the-times Congress and an like a steering group for the emerging world and more like
time when Petrobras, the state-control- It will target the development of prod- ministry official said: “We have to put agricultural sector that is thriving but a fan club for an aspiring hegemon.
led energy group, is increasing oil and together economic opportunities also very conservative in relation to the If the Brics remain a pressure group united by resent-
gas production, but many investors because otherwise it won’t be sustaina- environment,” he said. ment against overweening US power through sanctions or
have lauded the change in attitude. ble in the medium and long run.” But Rafael Dubeux, an adviser at the military intervention, they can be cohesive, if not particu-
“We are already seeing specific oppor- With more than 90 per cent of its elec- finance ministry, is optimistic the larly constructive. If the group tries to run the show itself,
tunities tied to the environment receive tricity generated by clean energy, nota- agenda would succeed, saying it was not its disparate economic prospects and strategic interests will
more international investment,” said bly hydropower, officials want Brazil to only pro-environment but pro-develop- become a powerful centrifugal force. As Ciuriak points out,
Daniel Rummery of Brunel Partners, develop as a hub for green technologies, ment. if you have a collection of emerging markets whose ambi-
which advises foreign investors. “More such as renewable hydrogen. “We’re still a poor country . . . and we tion is to become advanced economies and only the largest
significant is how it changes the mood The official said: “Our challenge is to do have to make it politically feasible to one is really on track, you do not have a cohesive club.
music internationally that Brazil is no have more stages of the value chain pro- show to the population that it’s also It is now established wisdom to say the Brics grouping
longer an environmental pariah.” duced in Brazil. We want to export the going to bring opportunities in terms of has come a long way since it first got together as a political
Lula officials hope the package will technologies necessary to produce well-paid jobs and productivity unit. Certainl its rhetoric and ambition has. The disjointed
continue beyond his presidency, with a renewable hydrogen and [other] tech- increases,” he said. and unbalanced reality has a lot further to go.
view to fulfilling international commit- nologies for the decarbonisation of our “The merger of these two objectives is
ments to climate neutrality by 2050. economy.” very central to the plan.” alan.beattie@ft.com

Economic output West Africa

US growth accelerates 2.4% despite rate rises Niger army backs coup to avoid ‘bloodbath’
NICHOLAS MEGAW — NEW YORK growth and spend, albeit with more cau- tion to the Fed’s 2 per cent target. Fed DAVID PILLING — AFRICA EDITOR with Bazoum, who is still believed to be endorsement of the coup would appear
tion than in the past.” chair Jay Powell said his “base case is that trapped in the basement of his resi- to end those hopes.
Economic growth in the US was Niger’s army has come out in support
The data comes a day after the US cen- we will be able to achieve inflation mov- dence, said Omar Tchiani, the head of “The situation is still fluid but the
stronger than expected in the second of this week’s coup in a move it said was
tral bank raised its benchmark interest ing back down to our target without the the presidential guard, had threatened window is narrowing,” said Peter Pham,
quarter of 2023, as activity proved intended to prevent “a bloodbath”
rate to the highest level in 22 years as kind of really significant downturn that to kill the president and his family if the a former US government envoy to the
resilient in the face of the Federal between different military factions and
part of its effort to tame inflation. results in high levels of job losses”. army “fired a shot” against his men. Sahel region. “The momentum has
Reserve’s campaign of aggressive inter- to protect the life of the ousted presi-
The consumer price index in the US Eric Winograd, senior economist at The coup in the west African country swung to the putschists.”
est rate rises. dent and his family.
has fallen from a peak of more than AllianceBernstein, said: “To me the began earlier on Wednesday when Tchi- Demonstrators, some chanting pro-
The world’s largest economy grew 9 per cent in June 2022 to 3 per cent last most important signal out of [yester- General Abdou Sidikou Issa, the chief of ani moved against the pro-western military slogans and a few brandishing
2.4 per cent on an annualised basis day’s data] is that households continue staff, said the army had decided to Russian flags, came out on the streets of
between April and June, according to to consume . . . And I don’t think we endorse the coup against President the capital, Niamey, yesterday. The pre-
preliminary figures released by the Jay Powell: should expect the consumer to weaken Mohamed Bazoum “to avoid a deadly
‘The situation is fluid but vious evening, pro-democracy protest-
aims to move
commerce department yesterday. inflation nearer until the labour market does.” confrontation between the various the window is narrowing. ers had been dispersed when the presi-
That marked an acceleration from a Outlook upgrades and upbeat com- forces and a consequent potential dential guard fired shots in the air.
2 per cent growth rate in the first quar-
to target without
a significant mentary from several US companies bloodbath threatening the security of
The momentum has Pham said ousting Bazoum put at risk
ter and was well above the 1.8 per cent downturn this week have also painted a picture of the population”. swung to the putschists’ the entire US and French strategy for
predicted by economists. a resilient domestic consumer. His statement yesterday marked a fighting a jihadi threat across the Sahel,
Consumer spending growth slowed month, while the unemployment rate McDonald’s chief executive Chris sharp reversal of an earlier position in Bazoum and confined him to his home. a strip of semi-desert that runs beneath
after an unusually strong start to the remains close to record lows and con- Kempczinski said yesterday that the which the army had sworn allegiance to Bazoum sought to rally support for a the Sahara where affiliates of Isis and al-
year but the reduction was more than sumer confidence has improved. fast-food chain had not observed a “dra- Bazoum, who was democratically fightback, insisting in a Twitter post yes- Qaeda have made significant gains.
offset by strong business investment. The combination of recent data has matic” change in the US consumer. elected in 2021. That changed after a terday that “hard-won achievements After military coups in Mali and
“We’re seeing some encouraging signs raised hopes that the central bank will “Sentiment is actually improving a little group of special forces led by Colonel will be safeguarded”. Burkina Faso, where the jihadis are
of resilience, especially when you look achieve the rare feat of a “soft landing” — bit but we’re certainly still far off of Amadou Abdramane, went on televi- A second person who spoke to the most entrenched, the US and Europe,
at private sector demand,” Gregory bringing inflation under control without where we were back in 2019,” he said. sion late on Wednesday to declare that president on Wednesday said Bazoum led by former colonial power France,
Daco, EY Parthenon chief economist, significant economic damage. But others The S&P 500 was up 0.7 per cent in they were taking over and suspending still harboured hopes that the army had bet heavily on Niger as their centre
said. “Whether it’s consumers or busi- are concerned that the economy’s resil- morning trading while the Nasdaq Com- the constitution. would come to his rescue and force the of operations to halt the spreading
nesses, there’s still a desire to drive ience will make it harder to bring infla- posite advanced 1.2 per cent. One person who has been in contact presidential guard to stand down. Issa’s insurgency, said Pham.
Friday 28 July 2023 ★ FINANCIAL TIMES 7

INTERNATIONAL

India edges out rivals to dominate cricket

Developments in the south Asian game have brought unparalleled riches but pose potential threat to international fixtures
BENJAMIN PARKIN — NEW DELHI superstar Shah Rukh Khan’s Kolkata
Knight Riders and tycoon Mukesh
For many fans, the Ashes series between Ambani’s Mumbai Indians have bought
England and Australia has been the pin- franchises in new Twenty20 leagues
nacle of cricket. Since the 19th century, from South Africa and the Caribbean to
the two traditional powerhouses have the United Arab Emirates. The first sea-
faced off in multiway Test matches, gru- son of Major League Cricket, a US T20
elling contests of skill that have entered tournament, started this month.
into cricket lore. People familiar with the talks said IPL
Yet the buzz around this summer’s teams were pushing to overhaul rules to
Ashes disguises that the pulse of global allow them to contract players year
cricket has decisively moved elsewhere. round, moving them from league to
Some 4,000 miles to the east, India is league in an international club model.
quickly eclipsing England and Australia Players such as England’s Jason Roy and
as the ultimate power in global cricket, Andre Russell of the West Indies have
revolutionising the game in ways early already forgone international contracts
proponents in London or Melbourne to play for global IPL franchises, a trend
could never have imagined. fans fear will ultimately lead to fewer
Since it launched the wildly successful stars being available at international
Indian Premier League tournament in tournaments, including the Ashes.
2008, India has brought unparalleled “We try to have a core group of players
riches to the sport. Its teams now attract who can be involved in all the franchi-
the world’s best players and have ses,” one team owner said. This would
bought up international franchises. become “a caravan model”, moving
Governing body the Board of Control from one tournament to another.
for Cricket in India dominates global Critics said this would undermine
decision-making and takes a larger international fixtures, cricket’s tradi-
share of global revenues than England tional mainstay. A recent financial
and Australia combined. India is even report by the England and Wales Cricket
influencing how the game is played, Board identified the “growth of global
with test teams such as England increas- franchise leagues” as a big risk, with
ingly adopting crowd-pleasing, aggres- long-form international Test matches
sive playing akin to the IPL’s short, fast- ceding ground to the T20 leagues.
paced Twenty20 format. Bowled over: useful tool at a time when he is project- A financial between 2024 and 2027, a board mem- said India’s ever larger share of riches Mike Fordham, a former chief execu-
“India’s influence in global cricket Chennai Super ing India as a rising power. Many of the ber said. That compares with about 6 risked depriving teams such as the West tive of IPL team Rajasthan Royals, said
cannot be overstated,” said Arun Dhu- Kings fans event’s key matches, including the final, report by per cent each for England and Australia. Indies, an erstwhile on-field force in the game was “some way away” from
mal, the IPL’s chair and a former BCCI celebrate their will be in his political base of Ahmeda- the England Advocates disclosed this was a fair re- decline, of funds to keep the sport alive. such a model, but the pressure would
executive. “The IPL has been a game- team’s win bad at the Narendra Modi Stadium, the flection of the money India was bringing “India deserves to have the dominan- build as “the money increases and the
changer, not only for Indian cricket but against Gujarat world’s largest cricket ground. and Wales into the game, with countries enjoying ce because of the . . . commercial stand- influence of these teams increases”.
also for world cricket, in terms of the Titans at the IPL But some see India’s growing domi- Cricket higher overall revenues even if their ing of Indian cricket, but that doesn’t Even so, he pointed out: “A sport like
traction it’s generated with fans across Twenty20 final nance as a threat to the game, as the share of the pie had shrunk. Media mean at any cost,” Thilanga Sumath- rugby would probably kill to have a
the globe, in terms of the financial band- in Chennai on country exerts more control over the Board rights for the 2023-27 IPL games were ipala, a former president of Sri Lanka’s financial behemoth like India as its
width . . . It has been phenomenal.” May 30 rules, finances and politics of cricket. identified sold for an unprecedented $6bn, mak- cricket board, said. “Economically aff- main source of revenue.”
R Satish Babu/AFP/Getty
This is partly arithmetic. With 1.4bn Images
The BCCI, which is run by loyalists of ing the league the second-most valuable ected cricket-playing nations are help- Ironically, India has not kept up its off-
people, India has a larger population Modi’s Bharatiya Janata party, can dis- the ‘growth on a per game basis after the US NFL. less unless the ICC puts its foot down.” field dominance on the pitch. While the
than every other established cricket play this power bluntly. Last year it said of global “When you see where that value is Dhumal argued India sustained the men’s team is among the best in the
nation put together. Yet it is also a prod- it would refuse to travel to arch-rival created, I think it’s understandable,” game in many of these countries, with world, it has not won an ICC tournament
uct of the IPL, whose powerful cocktail Pakistan for the Asia Cup, forcing the franchise Richard Gould, chief executive of the matches against it helping generate luc- since 2013 and was beaten by Australia
of shorter, made-for-TV matches and tournament to be rescheduled, with leagues’ as a England and Wales Cricket Board, said rative television audiences. “BCCI is in the final of the World Test Champion-
star appeal has proved irresistible for many matches now in Sri Lanka. on a podcast last month. “Without very happy to share that revenue with ship last month.
players and fans around the world. “India has become like a global crick- big risk them, we wouldn’t have the kind of rev- the other emerging countries,” he said. “The IPL has increased the depth of
“It’s the first time cricket has been eting superpower,” said Imran Khan, enues that are coming into the game.” India’s biggest impact is arguably set talent,” Fordham said. “They’re cer-
brought into an area where it’s on a par Pakistan’s former World Cup-winning Yet many smaller cricketing nations to be felt at the club level. Flush with tainly due a major win.”
with the NFL, basketball and football,” cricket captain and prime minister. “It’s fear they will struggle to survive. Some cash, Indian teams such as Bollywood Additional reporting: Sam Agini, London
said Reece Topley, an England interna- the power of finances which they have,
tional whose IPL debut was with the and I think through that they’re wield-
Royal Challengers Bangalore this year. ing a disproportionate amount of power
“All I’ve ever wanted was to play cricket in the cricketing world.”
and for it to be how a 10-year-old imag- India’s clout is only growing, with glo-
ines what playing professional sport is.” bal governing body, the International
India will enjoy a homecoming of Cricket Council, this month agreeing a
sorts this year when it hosts the men’s revenue-sharing deal that will cement
World Cup in October for the first time the country’s financial dominance. The
in more than a decade. For Prime Minis- BCCI will take nearly 40 per cent, about
ter Narendra Modi, cricket has proved a $230mn a year, of the ICC’s earnings

Obituary stepsisters. Her childhood, marred by

her parents’ separation, was turbulent.
She recalled being beaten by her
nor recorded for her second album I Do
Not Want What I Haven’t Got, she felt hol-
low. “I couldn’t understand why any-
Irish singer and mother, locked in her room with no food
and even being put in the passenger seat
body liked my songs or why anybody
clapped or thought they were good,” she

activist with of a car while her mother deliberately

smashed into an oncoming car. When
she was young, she would knock on
wrote. “I really had no self-esteem when
it came to songs or anything else.”
The award-winning artist’s papal pro-
mesmerising neighbours’ doors asking if she could be
their child.
test was preceded by her refusal in 1990
to allow the US national anthem to be

voice Angry and “not a nice person” during

her teenage years, O’Connor wrote that
she was “addicted to stealing”, even sell-
played before a show. Both decisions
provoked a public outcry. She was
booed and jeered at a Madison Square
ing flowers to her neighbours that she Garden tribute to Dylan weeks after rip-
had pilfered from their gardens. ping up the Pope’s photograph, and pro-
Sinéad O’Connor She was sent to An Grianán Training testers crushed her recordings with a
Pop star Centre, “what is politely called a reha- steamroller.
1966-2023 bilitation centre for girls with behav- “A lot of people say or think that tear-
ioural problems”, at 13, but left two ing up the Pope’s photo derailed my
years later to go to boarding school. The career . . . I feel that having a No1
poetry of WB Yeats inspired her to write record derailed my career and my tear-
songs and aged 16, she left education to ing the photo put me back on the right
pursue music. track,” she recalled in her memoir.
An advert in Ireland’s music maga- Even posthumously, her career is set
Sinéad O’Connor never wanted to be a zine, Hot Press, led to a stint with the to continue. A longtime friend, DJ BP
pop star. A waif-like warrior with a mes- group, Ton Ton Macoute, a move to Eng- Fallon, told RTÉ on Wednesday, hours
merising voice, the shaven-headed Irish land at 18, months after her mother died after the news of her death broke, that a
singer, who has died aged 56, wanted to in a car crash, and a record deal. “fantastic” new album by O’Connor is
be like Bob Dylan: “Not just an enter- O’Connor said that at 19 she shaved “waiting to come out”.
tainer, but an activist.” her head to defy the record label’s desire Fans loved the artist’s integrity, as evi-
The image of her ripping up a photo of for a more feminine look. Soon after, she denced by the tributes that have poured
Pope John Paul II on US television show gave birth to the first of her four chil- in from all corners of the globe. Irish
Saturday Night Live in 1992 embodied dren and her acclaimed first album, The president Michael D Higgins praised her
her refusal to compromise her beliefs, Lion and the Cobra, was released. “authenticity” and “fearless commit-
and endeared her to a nation stifled by But even after the runaway success of ment to the important issues she
religious repression. “Nothing Compares 2 U”, which O’Con- brought to public attention, no matter
The act was a protest at the sexual how uncomfortable those truths may
abuse of children by the Catholic have been”.
Church in Ireland, by a self-confessed Live performances and her children
“troubled soul” who suffered violence were O’Connor’s enduring passions. One
and neglect at home and was sent as a of her last tweets, on July 17, recalled her
teenage tearaway to a Catholic institu- son, Shane, who died by suicide last year
tion that ran an infamous Magdalene aged 17. “Been living as undead night
laundry for so-called fallen women. creature since,” she wrote.
“Everyone wants a pop star, see? But The singer had long battled mental
I’m a protest singer. I just had stuff to get health problems, attempting suicide on
off my chest,” O’Connor wrote in her her 33rd birthday and suffering, in her
2021 memoir, Rememberings. words, “a total breakdown” in 2015.
Ireland was stunned when the news Besides child abuse in the church, the
broke of the singer’s death. A radio pro- singer spoke up for the rights of women
gramme on national broadcaster RTÉ and immigrants. A deeply spiritual per-
shortly after the announcement felt like son who explored Rastafarianism, she
a wake, as songs from her 10 albums converted to Islam in 2018 and changed
ranged from the cover of Prince’s “Noth- her name to Shuhada’ Sadaqat. “I hope
ing Compares 2 U” that launched her as that if there’s a heaven, I qualify,” she
a star, to her own material, traditional ‘A lot of people say tearing wrote in her memoir.
Irish ballads and reggae. up the Pope’s photo Higgins spoke for many when he
Born in an affluent suburb south of ended his own tribute to O’Connor:
Dublin on December 8 1966, O’Connor derailed my career . . . “May her spirit find the peace she
was the third of four children; her father sought in so many different ways.”
later had another son and she had three
having a No1 derailed it’ Jude Webber
8 ★ FINANCIAL TIMES Friday 28 July 2023

Pain in Spain Siemens Energy’s turbine travails deal latest setback to wind sector hit by rising costs and competition y PAGE 11

Shell and Total Beauty spots L’Oréal on the lookout for further
acquisitions after $2.5bn Aesop deal, chief says
CAA censures
Wizz Air over
profits shrink handling of
compensation
after fall in oil PHILIP GEORGIADIS
TRANSPORT CORRESPONDENT

The UK’s aviation regulator has repri-

and gas prices manded Wizz Air over “unacceptable”

handling of customer compensation
claims for delayed or cancelled flights,
ordering the airline to revamp the way
that it deals with complaints.

3 Majors’ quarterly earnings down by half

The Civil Aviation Authority said it had
told the low-cost Hungarian carrier to

3 Shares hold steady despite sharp drop

review a swath of compensation claims
involving UK flights made since March
last year. Any Wizz passengers who have
made a claim in the past six years can
TOM WILSON — ENERGY CORRESPONDENT Sawan, who took the top job in January. also ask to have their cases reopened.
A Shell lifer and former head of the The regulator cannot fine airlines,
Profits at Shell and TotalEnergies group’s oil, gas and renewables busi- and has long called for tougher powers.
shrank in the second quarter on lower nesses, Sawan has pledged to focus on Yet the enforcement action yesterday
gas and oil prices as the impact of Rus- performance to close a market valua- was unprecedented, marking the first
sia’s war in Ukraine on energy markets tion discount to US rivals. time it has made such an order for a car-
wanes. Last month he laid out a plan for Shell rier to review all complaints.
Shell reported adjusted earnings of to cut costs, boost shareholder payouts Paul Smith, joint-interim chief execu-
$5.1bn in the second quarter, missing and devote a higher proportion of tive of the CAA, said the regulator found
analysts’ estimates of $5.6bn — less than spending to oil and gas. a “really unacceptable handling of
half the record $11.5bn it reported last Shell will continue to invest in clean claims” for compensation and a “failure
year at the height of the energy crisis energy but will work with more partners to pay customers what they are owed”.
and in line with the $5.5bn in the same in areas such as renewable power gener- Wizz was caught up in the disruption
period in 2021. ation, leaving it to focus on energy trad- that hit airlines and airport last summer
Total said adjusted net income ing and supplying low carbon products when staff shortages led to cancellations
dropped to $5bn, down 49 per cent com- to its customers, Sawan said yesterday. and delays across the industry.
pared with the same period last year. The strategy could involve Shell sell- Handling of the disruption has snow-
Shares of the two groups held rela- ing part of its existing power portfolio to balled into a significant reputational
tively steady yesterday despite the fall- outside investors. “We are going into the problem for Wizz, which was named
market and looking for those partners “the UK’s worst airline” by consumer
who can hold hands with us as we try to group Which? this year.
The decline signalled that unlock the renewable generation to Soap show: luxury skin care products from the Australian company Aesop, which has been acquired by L’Oréal The problems identified by the CAA
18 months of bumper access green electrons that feed into centred on the requirement to provide
that integrated power value chain that ADRIENNE KLASA — PARIS have driven prices up for a small driven by the consumer division, its alternative flights as well as care and
profits for the industry we think we can actually create value number of prime acquisition targets. biggest by sales thanks to booming assistance such as covering hotel costs.
French cosmetics group L’Oréal is
may be drawing to a close out of,” Sawan said. “The energy transi-
still on the lookout for deals, hot off
Paris-based luxury group Kering in demand for make-up. The CAA had already raised “signifi-
tion is going to require unprecedented June purchased perfumer Creed for Operating profits increased 13.7 per cant concerns” with Wizz in December
the back of its biggest acquisition
ing profits, with Shell down 1.4 per cent partnerships to take place.” €3.5bn or about 23 times earnings cent to €4.26bn following two consec- over complaints and delays in paying
after it agreed to pay $2.5bn for lux-
and Total up 0.9 per cent. The sharp Shell said yesterday that it had before interests, tax, depreciation and utive years of post-Covid 19 rebound. compensation. A “large number” of
ury skincare company Aesop.
drop in earnings signalled that 18 reduced its capital spending plans to amortisation, according to people Growth in Europe, L’Oréal’s biggest county court judgments against Wizz
months of bumper profits for the indus- $23bn to $26bn for 2023, down from Chief executive Nicolas Hieronimus with knowledge of the terms of the market, and North America pro- were also found to have been unpaid.
try may be drawing to a close. previous guidance of $23bn to $27bn. said the world’s largest beauty group deal. Analysts estimate high end gressed in the mid-teens. The post- The airline has repeatedly apologised
Prices for liquefied natural gas, for It increased its quarterly dividend by had firepower left after buying the beauty deals currently fetch a pur- lockdown recovery in China is under for its handling of the disruption last
example, averaged $10/mmbtu in the 15 per cent to $0.33 a share and slowed Australian maker of $40 soaps in chase price of up to 25 times ebitda. way although sales have not yet summer and said it has invested £90mn
second quarter, Total said, down from the pace of planned share buybacks to April, pointing out that only three of Hieronimus, who became CEO in reached pre-pandemic levels. After to improve the resilience of its UK oper-
an average of more than $50/mmbtu in $3bn in the third quarter and $2.5bn in the company’s 36 global brands had 2021, insisted L’Oréal would maintain contracting in the first quarter, they ations, such as increasing staffing levels.
August last year. the fourth quarter. been created in house. financial discipline: “When there’s an grew at 7 per cent in the second. Marion Geoffroy, managing director
The biggest decline in Shell’s profits Like most rivals, Shell has used record “We have cash and L’Oréal has opportunity, we look at it [but] we are “The rebound in China has been a at Wizz Air UK, said the airline faced
came in LNG, with earnings in the profits from the past 18 months for a always made acquisitions,” very disciplined in how much we are bit slower than expected . . . I guess it “unprecedented operating challenges”
group’s integrated gas division almost massive share repurchasing scheme. It Hieronimus said in an interview yes- willing to pay,” he said. takes a while to come out of three last year and had “learned” from the
halving to $2.5bn, from $4.9bn in the distributed $26bn to shareholders last terday ahead of the release of the com- He added that he was pleased with years of lockdowns,” Hieronimus experience. “Flights were too often late
first quarter of the year. Lower prices year including $18bn in share buybacks. pany’s first-half results. “Being able to the performance of recent acquisi- said. L’Oréal’s luxury division drove or cancelled, disruption management
and weaker trading profits owing to Total increased its interim dividend spot brands that have both dimen- tions including a deal for dermatologi- most of the rebound in China, growing overwhelmed our internal and external
“seasonality and fewer optimisation by 7.25 per cent to €0.74 a share and sions — have stood the test of time a lit- cal skin brand CeraVe, which became “in the high teens” in the second quar- resources, and claims took too long to
opportunities” had weighed on perform- committed to $2bn in share buybacks in tle bit and still have growth potential so popular in the US in recent years it ter, he said. But the lag in the group’s process and pay,” she said.
ance after a strong first quarter, it said. the third quarter. around the world — remains some- has often run out of stock. biggest market for luxury sales The airline engaged with the regulator
The quarterly results are the second ExxonMobil is expected to publish thing we really keep our eyes on.” First half sales were up 13 per cent resulted in slower sales growth com- and committed to introduce changes to
under Shell’s chief executive Wael earnings today and BP next week. Cosmetics groups including L’Oréal on a like for like basis to €28.5bn, pared with other divisions. its policies, the CAA said.

Legal Notices
Big Tech takes off in race to give generative AI a central place
ant. This week’s earnings calls at Micro- including offering its customers access
INSIDE BUSINESS soft, Alphabet and Meta were beset by to a wider range of LLMs from other
questions about when generative AI companies.
TECHNOLOGY enhancements will feed through into The 3.9bn people who use a Meta app
higher revenue (and how much AI-pow- at least once a month, meanwhile, make
Richard ered services might cost to build and
run).
up a huge potential audience. Chief
executive Mark Zuckerberg this week
Waters Microsoft’s decision last week to slap a
$30-a-month premium on the AI fea-
gave a hint of what to expect: a range of
AI-powered assistants, agents and ava-
tures it plans to add to its productivity tars will soon populate the company’s

I
apps has been the most confident asser- services, he suggested, helping users
tion yet about the coming generative AI produce better content and increasing
s artificial intelligence best seen as a wave. their interaction with chatbots.
business accelerant — something But if large language models become a To support such ambitions, Meta has
that brings new, “smart” features to core technology on which many future produced a family of open-source lan-
existing products and provides a lift tech products and services depend, it guage models called Llama. Amazon is
to tech companies’ revenues? suggests control of a cutting-edge LLM developing its own models, called Titan,
Or is it a disruptive new platform, will be a prerequisite for entry into and Bloomberg reported last week that
with the potential to change the balance tech’s big leagues. Microsoft, through its Apple has also joined the race.
of power in the tech industry? close tie to OpenAI, and Google are the Zuckerberg told Meta’s investors this
That question has been hanging in the furthest ahead in developing this tech- week that he didn’t believe there would
air ever since ChatGPT burst on to the nology. Can others be “one single AI that people interact
scene. Generative AI — the type that can match them as Earnings calls at Microsoft, with”, and that creators and others
compose an essay for homework or pro- they race to build would prefer different tools for different
duce a picture on command — promises ever-larger AI Alphabet and Meta were purposes. AWS boss Adam Selipsky
to bring a valuable dimension to many models — and what beset by questions about made the same point in an interview

Imagine your advert here software products. How much more

useful would the application you are
using be if it could anticipate your next
will it mean if they
can’t? when generative AI
Apple, Amazon additions will lift revenue
with the FT. There won’t be “one model
to rule them all”, he predicted.
It is too early to judge the outcome. In
need and produce a creative suggestion? and Meta have the early days of internet search it was
By offering a whole new way of inter- tended to look at machine learning as an also widely believed that a number of
acting with computers, however, the important ingredient in their products, rival services would compete, with spe-
technology could also become a plat- but still only an ingredient — something cialised search engines filling different
Business for Sale, Business Opportunities, Business Services, form in its own right. Many applications to improve a recommendations system niches in the market. Instead, a single,
Business Wanted, Legal Notices, Company Notices, Public Notices, Floating Rates Notes, already plug into OpenAI’s large lan- or provide analytical tools to advertis- general-purpose search service ended
Shareholder Messages, Property For Sale, Tender Notices
.........................................................................................................................................................................................................................................................................
guage models, drawing on them to add ers. They are now hurrying to give AI a up dominating. OpenAI’s bet on build-
Classified Business Advertising AI features. Historically, tech platforms more central place in their operations. ing ever-larger language models is that
Tel: +44 20 7873 4000 | Email: advertising@ft.com such as this have tended to be very con- Amazon Web Services seems to have the same will be true of AI.
centrated — whether that involves the been caught flat-footed by Microsoft, its If Wall Street’s optimistic predictions
software behind laptop computers closest rival in cloud computing, when it prove right, it won’t be long before the
Notice to Advertisers (Windows or MacOS), smartphones comes to running generative AI serv- first fruits of the generative AI boom
Calls to the Financial Times Advertising Department may be monitored. (iPhone or Android) or browsers ices. It’s still early days, but Microsoft start to show up in tech companies’
Acceptance of any advertisement for publication will be subject to the then current terms and conditions of insertion (Chrome or Safari). How many of the predicted that AI would add more than earnings reports. The ultimate impact
of advertisements in FT publications. so-called AI “foundation models” will 2 percentage points of growth to its on the tech industry will take far longer
A copy of the terms and conditions of insertion of advertisements in FT publications can be obtained from
the market support? cloud business this quarter. AWS is now to become clear.
+44 (0)20 7873 3000, or viewed at www.FT.com/advertising Investors, for now, are very much moving fast to catch up — this week it
focused on the idea of AI as an acceler- announced a flurry of developments, richard.waters@ft.com
Friday 28 July 2023 ★ FINANCIAL TIMES 9
10 ★ FINANCIAL TIMES Friday 28 July 2023

COMPANIES & MARKETS

Banks Technology

Meta says bet

BNP faces sanctions over messaging lapses on AI and rejig
Resolutions lined up with compliance with requirements to keep sanctions were imposed, paying a total restructuring costs, profits would have model that is helping it ride out some of have paid off as
US regulators as quarterly
results beat expectations
records linked to the “use of unap-
proved electronic messaging platforms
for business communications”.
of $45mn to the SEC and CFTC this year.
Goldman Sachs, Morgan Stanley and
Barclays agreed collectively to pay more
risen from a year earlier.
BNP’s share price rose 3 per cent yes-
terday.
the highs and lows of historically ele-
vated rate rises.
In the second quarter, BNP benefited
revenues climb
BNP, which reported forecast-beating than $1.8bn in fines last year. Operating expenses were up 1.6 per from underlying momentum across
SARAH WHITE second-quarter results yesterday, also BNP said in its filing yesterday that its cent from a year earlier, less than ana- businesses, including in its Arval car HANNAH MURPHY — SAN FRANCISCO
disclosed a €125mn charge linked to “proposed resolutions” had yet to be lysts had expected, while its cost of risk leasing unit and in its European busi-
Meta shares rose yesterday after it
BNP Paribas is the latest bank to face US unspecified litigation. It declined to con- finalised. fell just over 9 per cent to €689mn, nesses including in Italy.
reported its first double-digit revenue
regulatory sanctions over its record- firm whether it was linked to the mes- The bank beat profit forecasts in the reflecting a low level of provisions set Like its Wall Street peers, the French
growth since 2021, as chief executive
keeping of electronic messages used by saging probes, which shook the banking quarter as charges on bad loans fell and aside on souring loans. bank had a mixed quarter in its corpo-
Mark Zuckerberg said the company’s
staff to discuss business matters, follow- industry after investigations began to it kept a tight leash on costs, countering RBC analyst Anke Reingen said that rate and investment bank, which posted
costly bet on artificial intelligence was
ing fines across Wall Street. emerge last year. a mixed performance in its investment against a backdrop of high inflation in a 2.3 per cent fall in revenues. But BNP
showing signs of paying off.
The eurozone’s biggest bank by mar- Lenders have since cracked down on bank as earnings from debt trading fell. the eurozone, a “beat on better cost con- did well in bond issuance, sustaining a
ket value said yesterday that it had unauthorised use of encrypted messag- It posted a near 5 per cent drop in net trol is rare and reassuring”. much stronger performance in what it The rebound comes as Zuckerberg has
reached “proposed resolutions” with ing services such as WhatsApp and Sig- profit from a year earlier to €2.8bn, Under chief executive Jean-Laurent calls its global banking unit. sought to revive Meta from a period of
the enforcement divisions of the Securi- nal, while some bankers have been dis- while revenue was down 1.5 per cent to Bonnafé, BNP has sought to position BNP’s return on tangible equity sluggish growth, wider macroeconomic
ties and Exchange Commission and the missed. HSBC fired a trader last year for €11.4bn, though it still beat analysts’ itself as Europe’s go-to corporate and reached 13.6 per cent in the second woes and investor concern over the
Commodity Futures Trading Commis- using messaging services inappropri- expectations on both counts. It said that investment bank, outside dominant US quarter, hitting its longer-term goal of metaverse. Like many of its Big Tech
sion, which had been investigating its ately. It was among the banks on which without charges linked to litigation and rivals. It has vaunted a diversified above 12 per cent to 2025. peers, Meta has seized on wider market
enthusiasm about emerging AI technol-
ogy to invest in the space.
Zuckerberg has also led a significant
Technology restructuring in recent months, includ-
ing a flattening of the management

Brussels structure and lay-offs affecting about

20,000 staff, in what he has dubbed the
“year of efficiency”.
investigates “It’s really good to see the decisions
and investments we made start to play

Microsoft’s out,” he told investors and analysts after

the company reported second-quarter
earnings late on Wednesday.
bundling of Analysts peppered Zuckerberg with
questions on the company’s bets on AI,

software particularly generative AI, technology

that can create text, images and code.
He said that investments in using AI
to improve the personalisation of user
JAVIER ESPINOZA — BRUSSELS feeds and its recommendation systems
were “clearly paying off”.
EU regulators have opened a formal
Meta was now focused on building AI
investigation into claims that Microsoft
agents, or chatbots, to help businesses
is unfairly bundling its Teams video
as well as creators engage with users,
conferencing app with its popular
Zuckerberg added, as well as using gen-
Office software as Brussels intensifies
erative AI to boost the effectiveness of
its scrutiny of technology groups.
advertising and improve productivity
The European Commission, the execu- internally. This month, Meta released a
tive body of the EU, said yesterday that commercial version of a large language
it feared Microsoft “may be abusing and model Llama 2, upon which the com-
defending” its market dominance in pany’s chatbots will be built, in a bid to
productivity software “by restricting compete with rivals OpenAI, Google and
competition”. Microsoft.
It was concerned that the US tech But Zuckerberg added that how
business may grant Teams “distribution quickly potential new AI products
advantages by not giving customers the might scale was “one of the big
choice” over access to the product, the unknowns for the business”, saying it
statement said.
The move is the first such probe
against Microsoft in more than a decade
Stargazing Linda Yaccarino, Twitter chief
executive, went to Hollywood this
week to woo talent agencies and
celebrity or influencer, the person said.
The meeting, headed by talent veteran
Jeffrey “Jake” Jacobs on the CAA side,
audio session in May that was beset
by glitches.
More broadly, Twitter’s sudden
was “one of the things that we’re debat-
ing heavily when thinking through the
amount of AI capex to bring online”.
and comes after rivals said that the
group’s concessions to stop tying in
Twitter seeks entertainers days after Elon Musk
announced the app’s sudden
ended with the agency telling Twitter
that they would come back to them
rebrand to X has surprised
advertisers, many of which have left
It also remains unclear how AI will
translate into a meaningful source of
Teams with its Office 365 software in
Europe were insufficient for fair compe-
tition, according to multiple people with
the X factor rebranding to X.
Yaccarino met agents at Creative
Artists Agency and United Talent
with ideas, the person said.
Twitter, CAA, UTA and Disney all
declined to comment.
the platform over Musk’s leadership
style, decision to loosen content
moderation, and drastic cost-cutting
revenue for the company, given it has
released some technology, such as
Llama 2, open source — meaning devel-
direct knowledge of Brussels’ thinking.
The investigation could lead to formal
in Hollywood Agency in Los Angeles, pitching her
vision for X in an attempt to bring stars
By courting big names, Twitter hopes
it can sell more advertising and
since he bought it for $44bn in
October.
opers can see the source code and build
upon it themselves.
charges against Microsoft as early as the and influencers from cooking to music facilitate sponsorship and brand deals With Twitter’s revenues down by Zuckerberg said that he intended to
autumn, according to two people with and sport to the social media platform, between advertisers and creators. One about 50 per cent since Musk took make “deals” with the largest compa-
direct knowledge of the matter. The according to people familiar with the former senior staffer said Yaccarino, over, mending those relationships — nies with public cloud offerings such as
Financial Times first reported that the matter. She also held meetings with known for her deep relationships in the and building new ones in the Microsoft or Amazon or Google that
EU was poised to open a formal probe Disney, one person said. media industry, had been engaging entertainment business — has fallen might use its technology at scale.
into the matter last week. The Hollywood trip comes days after with celebrities since her first week as to Yaccarino. Meta said it expected revenue in the
“We respect the European Commis- Musk announced an overhaul of the chief executive. She has experience in In a tweet responding to news of current quarter to be in the range of
sion’s work on this case and take our Twitter brand, changing its name and the space, including as global chair of the rebrand, she presented the $32bn-$34.5bn, well above analysts’
own responsibilities very seriously,” logo to “X” and abandoning the bird UK-headquartered talent agency YMU broad vision for the platform: “X is expectations of a rise to $31.1bn, in a
Microsoft said. “We will continue to co- logo that has been associated with the since February. the future state of unlimited sign that the digital advertising slump
operate with the commission and platform for more than a decade. Yaccarino posted a photograph of interactivity — centred in audio, that has weighed on its growth for the
remain committed to finding solutions While cast as part of his plan to expand herself with Paris Hilton, signalling a video, messaging, payments/ past 18 months is easing.
that will address its concerns.” further into areas such as video, audio possible partnership between the banking — creating a global Revenues in the second quarter rose
The European Commission said yes- and even payments, the unexpected celebrity and the platform. Former Fox marketplace for ideas, goods, 11 per cent to $32bn, topping analysts’
terday: “We have not received any com- move prompted concern among News anchor Tucker Carlson already services, and opportunities.” expectations of an increase to $31.03bn.
mitment by Microsoft that would analysts that Musk was impulsively has a show on Twitter. Nevertheless, some advertisers Meta shares rose 6.8 per cent in after-
resolve our concerns. It is too early to wiping out years, and billions of Earlier this month, Twitter launched and talent agencies said they hours trading. Net income in the second
discuss a remedy to potential abuse.” dollars, of brand equity. a creator advertising revenue share remained unimpressed with the quarter increased 16 per cent to $7.8bn,
The EU has stepped up its actions One person who attended the initiative, giving influencers meeting shake-up, saying Musk quickly compared with consensus expectations
against Silicon Valley giants in recent meeting with CAA said that Yaccarino, certain criteria the chance to cash in undid any of the goodwill that of a rise to $7.4bn.
years. Margrethe Vestager, the bloc’s the former advertising head at directly from the platform. Yaccarino created. One advertising Meanwhile, costs rose 10 per cent to
executive vice-president in charge of NBCUniversal, told agents to “dream But attempts to support features executive said the sudden unveiling $22.6bn, partly because of legal
competition and digital policy, last up what they would want and X will try beyond the text-based of X “feels like nonsense”, adding: expenses of $1.9bn and restructuring
month threatened to break up Google. to build it”. She urged those present to communications for which Twitter is “Let’s see how [Yaccarino] can charges of $780mn. In May, Meta was
The investigation into Microsoft Talent spotting: Twitter chief consider ways they might have a known have not always been smooth, handle this.” hit with a €1.2bn fine by the EU for pri-
comes three years after Slack, now executive Linda Yaccarino with “mutually beneficial monetary especially since Musk has slashed its Another said: “I don’t get the vacy violations. Meta expects higher
owned by Salesforce, filed a complaint Paris Hilton during her trip to partnership”, the person said. workforce. Prior to Yaccarino starting, point of the acquisition at all and infrastructure-related and operating
with the EU. The workplace messaging Hollywood in the social media One format suggested by Twitter was Florida governor Ron DeSantis wonder how much patience his costs in 2024, as it continues to plough
app accused Microsoft of using its domi- platform’s attempt to attract stars getting brands to sponsor an event on announced his entry into the 2024 investors have left.” Hannah Murphy investment into data centres and serv-
nance to crush competitors by tying and influencers — Linda Yaccarino/Twitter Spaces, Twitter’s audio feature, with a presidential race via a Twitter Spaces and Christopher Grimes ers supporting AI and the metaverse.
Teams to its Office 365 tools. See Lex

Food & beverage Automobiles

Nestlé expects prices to ease in second half VW cuts delivery forecast after China sales fall
MADELEINE SPEED close to the fastest pace in more than remained “limited” despite the rising PATRICIA NILSSON market share in the battery segment. However, it has struggled to gain
three decades. cost to customers. Analysts at Deutsche Bank said the share in the electric market; the equiva-
Nestlé has said price rises will start to Volkswagen has cut its global delivery
Speaking to analysts yesterday, chief Reckitt Benckiser and Unilever this investment suggested that the company lent figure for the rapidly growing bat-
ease in the second half, as the KitKat forecast for the year as sales drop in
executive Mark Schneider said price week reported lower volumes in “has partially admitted defeat with tery vehicle segment is 4 per cent.
maker raised sales forecasts on better China, its biggest market.
rises would slow in the second half. Europe, where consumers are battling regard to its current EV products” in Blume, who has tried to restructure
than expected performance in the six
“It’s safe to say pricing won’t reach the the cost of living crisis. Despite strong sales in the first half, the China, relying on its relationship with the group since taking over last year,
months to the end of June.
same levels as [the first half], but it’s The Swiss business said that lower second-largest carmaker has been Xpeng to revive sales. said the company had to “fulfil the
The biggest food company reported a clear that in the overall macro [infla- volumes were also driven by actions it forced to lower its delivery ambitions VW chief executive Oliver Blume, expectations of our Chinese customers”.
dip in sales volumes in interim results took last year to shed some underper- because of weakness in the country. aware of the need to raise the company’s The “initial stage” of the carmaker’s
yesterday, in a sign that customers were forming products and varieties in its Finance boss Arno Antlitz said a 1 per game in China, said yesterday that VW’s relationship with Xpeng will focus on
resisting rising food and drink prices.
Consumer goods groups portfolio. cent drop in Chinese car deliveries in the next capital markets day would be held jointly developing two VW-branded
Nestlé posted a drop in real internal have reported falling It warned in April that the measures first half had forced the group to lower in Beijing next April and focus on the electric vehicles, one of which is
growth — a proxy for sales volumes — of could have a “net negative impact” for its delivery target for 2023. company’s strategy in the country after planned to hit Chinese roads in 2026.
0.8 per cent in its first half, having raised
volumes and in some cases the first half, and “a slightly positive “We have a mixed picture on deliver- a poll of analysts and investors showed VW’s investment in Xpeng comes
prices to cope with higher production have lost market share impact” for the full year 2023. ies in the first half,” he said, stressing its biggest market to be a concern. with an “observer” role on the Chinese
costs and hived off underperforming However, Nestlé said that organic that the revision was based on China, as The group, which other than its VW company’s board.
brands. tionary] environment, higher prices sales during the period rose 8.7 per cent, growth in Europe and North America brand includes companies such as Por- Separately yesterday, Renault
The fall was bigger than the 0.6 per would still be needed.” beating analyst consensus of 8.1 per had been strong. sche and Audi, was one of the first west- announced that higher prices, new
cent forecast by analysts and followed a Consumer goods companies have cent. The improvement was led by dou- The forecast of about 9mn deliveries ern companies to enter the Chinese models, and the fruits of cost-cutting
0.5 per cent dip in the first quarter. reported falling volumes and in some ble-digit growth in its Purina petcare in 2023 compared with its original aim market in the late 1970s and has estab- had pushed its profits to records in the
The maker of Smarties and Nescafé cases have lost market share, suggesting range, infant nutrition and confection- of about 9.5mn comes a day after its lished itself as one of the country’s mar- first half.
raised prices 9.5 per cent in the first six that shoppers are balking at consistent ery, with strong sales of KitKat. announcement of a $700mn investment ket leaders. Mercedes-Benz, which has moved to a
months of the year, down only slightly price increases. Nestlé expects full-year organic sales and 5 per cent stake in Chinese electric Its share in the country for combus- strategy of selling more premium cars,
on a 9.8 per cent increase in the first Nestlé said yesterday, however, that growth in a range of 7-8 per cent, up car group Xpeng. tion engine vehicles is 19 per cent, on Wednesday raised its full-year guid-
three months of the year, which was consumer “demand elasticity” had from a range of 6-8 per cent. The move was aimed at boosting according to Deutsche. ance.
Friday 28 July 2023 ★ FINANCIAL TIMES 11

COMPANIES & MARKETS

Siemens Energy buffeted by Spanish unit woes

Technical problems at Gamesa turbine venture are revealed to be far worse than feared and a fix is set to prove costly
RACHEL MILLARD — LONDON said Akash Gupta, analyst at JPMorgan.
LAURA PITEL — BERLIN
“Some of the quality and design issues in
As Siemens Energy took full control of the industry now are the result of that.”
its Spanish wind turbine joint venture That is changing, with General Elec-
last month, it said it was seeing the “first tric moving to greater standardisation
moves in the right direction” at a divi- and wind farm developers starting to
sion that had suffered a string of profit gain higher offtake prices. “There has
warnings. been a correction in the market,” said
But within two weeks it revealed that Tim Evans, partner at Copenhagen
quality issues at Siemens Gamesa were Infrastructure.
far worse than feared and could cost Deirdre Cooper, head of sustainable
€1bn to fix, sending shares in the com- equities at Ninety-One, said Siemens
pany down 30 per cent. Gamesa’s problems might turn out to be
“You can imagine what the state of my “helpful in the long run” by prompting a
mood is,” said Siemens Energy chief focus on quality. “We have had such
executive Christian Bruch as he pulled price competition. This will be support-
the group’s profit guidance for 2023, ive of pricing going forward.”
describing the problems as “more For now, Siemens Energy will need to
severe than I thought possible”. focus on containing the damage. Shares
It is the latest setback for a company in the company, which is due to update
and a sector hit for the past few years by investors on August 7, remain more
rising costs, fierce competition and than 30 per cent below their price
costly technical problems that have led before the problems were announced.
to heavy losses despite surging demand “We have a handful of failures, and
for clean energy. now I have to derive from that an indica-
“I think the industry has driven in tion of what to expect over the next 20
certain parts themselves to a business years,” Eickholt said as he revealed the
model which needs to be reworked,” problems in June. “That’s what makes it
Bruch said. “That has started.” Blades at Siemens Gamesa’s manufacturing facility in Le Havre, France. The flaws are said to be related to the operator’s flagship 5.X turbine — Nathan Laine/Bloomberg so fraught.”
Siemens Energy has released few
details about the turbine flaws other lems at one of the largest turbine suppli-
than that they involved bearings and ers have cast a cloud across the industry
rotor blades and could affect up to 30 at a time when wind farm developers
per cent of the models in question. are scrambling to meet demand.
But people familiar with the matter The 5.X platform accounted for 74 per
said the problems were related to the cent of Siemens Gamesa’s 1GW onshore
group’s flagship 5.X turbine, along with wind order intake in the first quarter of
its predecessor, the 4.X, which entered 2023, according to its May accounts.
the market between 2017 and 2019. “It’s very embarrassing for Siemens
Released in 2019, the 5.Xs are Sie- Gamesa,” said one European wind
mens Gamesa’s biggest turbines, with industry insider. “I’ve heard from sev-
eral projects that are a bit in the [lurch]
now . . . Financials are getting strained
€1 bn 30 % by the situation. This is bad for the
Potential cost Decline in share energy transition.”
of addressing price since the Iberdrola, one of the largest wind
the turbine problems were developers, has bought 11 of the 5.X tur-
quality issues revealed bines for a project in Spain and has been
assured by Siemens Gamesa that any
rotor blades spanning up to 170 metres problems will be resolved ahead of
and a generation capacity of 5.8 mega- installation, according to a memo to
watts, enough to meet electricity needs investors seen by the Financial Times. It
of roughly 5,000 households each. had not noticed any technical problems
Siemens Gamesa has sold about 15GW on its fleet so far, the memo said.
of the two platforms combined, accord- Copenhagen Infrastructure Partners,
ing to people with knowledge of the an investor with 120 gigawatts of renew-
matter, implying that customers have able energy, including several wind
bought more than 2,000 units. projects said it was “working proac-
An internal committee is carrying out tively with Siemens to understand any
a review, with its focus expected to potential impacts on our development
include suppliers, including in China. portfolio”, although it does not have any
Bruch has spoken of an “urgent require- affected products in its current fleet.
ment to fix the corporate culture” at Sie- Swedish wind developer Eolus said it
mens Gamesa, formed in 2017 in a had not noticed any “serious qualitative
merger of Siemens’ wind unit and issues so far” with Siemens Gamesa
Spain’s Gamesa. products, which were being delivered as
“Too much has been swept under the normal. It was confident the company
carpet,” he said in June. He and Siemens would “retain its focus on quality” as
Gamesa chief executive Jochen Eickholt one of the “most respected suppliers”.
are under pressure, although people Brazil’s Essentia Energy and Sweden’s
familiar with the matter said the pair Rabbalshede Kraft, both of which were
enjoyed the trust of the supervisory announced in December 2020 as buyers
board at Siemens Energy, which is 25 of the 5.X turbines, did not return
per cent owned by Siemens. The prob- requests for comment.
A UK wind developer raised concerns
Siemens Energy that the move would push up turbine
prices at a time when developers say
Share price (€)
they are being squeezed by low fixed-
25 price electricity sales agreements and
windfall taxes. “The difficulty is that the
problems will limit competition,” it said.
“If they have to redevelop components
20
or revisit designs, this could cause
delays. Competitors will take advantage
of this but prices will go up.”
15 Rivals have suffered quality prob-
lems, with the industry scrambling to
produce bigger turbines at low prices
despite rising costs.
10 “Turbine prices fell sharply in 2017,
Jan 2022 2023 Jul which was then followed by the industry
introducing new technology and turn-
Source: Refinitiv
ing to emerging markets for suppliers,”

Financials

Lenders cut mortgage rates in

response to falling inflation
SIDDHARTH VENKATARAMAKRISHNAN housing market triggered by the surge
in mortgage rates. “They’re all chasing a
Three of the largest lenders and several
more limited demand, which will entice
smaller companies have announced
them to be competitive with rates they
cuts to mortgage rates in response to
offer,” said Aneisha Beveridge, head of
data last week that showed a bigger
research at Hamptons International.
than expected drop in June inflation.
Both Lloyds and Barclays said that
Nationwide, Barclays and TSB yester- competition was squeezing the margins
day followed the lead of HSBC, which on on mortgages.
Wednesday became the first big mort- Nationwide, the second-largest
gage provider to cut the cost of its prod- lender, said it would reduce fixed rates
ucts following the inflation data. by up to 0.35 per cent today, while
Last week’s inflation figure prompted tracker products would come down as
market expectations to shift to a Bank of much as 0.2 per cent. Barclays, the fifth-
England base rate rise of a quarter- biggest lender, is reducing rates by 0.15
point, rather than a half-point, at its percentage points, while TSB, the 10th-
meeting next week. “What’s opened the largest mortgage provider, announced
door to these improvements is the bet- that it was reducing the rates on two-
ter than expected inflation figures,” said year fixed products by as much as 0.55
David Hollingworth, director at broker per cent.
L&C Mortgages. Some smaller lenders also cut mort-
Beyond the improved inflation pic- gage rates yesterday, including Founda-
ture, analysts said the reduction in the tion Home Loans and Skipton Building
cost of home loans reflected a slowing Society.
12 ★ FINANCIAL TIMES Friday 28 July 2023
Friday 28 July 2023 ★ FINANCIAL TIMES 13
14 ★ FINANCIAL TIMES Friday 28 July 2023

UK COMPANIES

Energy price zones can help ease ‘climate fatigue’ Banks

Barclays stock
With customers facing a cost of living gas-fired power plants need to be would, at least in theory, push new gen- capital to reflect volatile revenues — fur-
softens after
Camilla squeeze from higher mortgages and
food inflation, that puts politicians in a
switched on to keep the lights going in
London.
erators and consumers to make intelli-
gent siting decisions”.
ther reducing the benefit of LMP.
This may well be true. But one needn’t tepid earnings
Palladino tight spot. Indeed, in the wake of last
week’s by-elections, Tory grandees are
The system depends on National Grid
to keep it in sync. The Electricity System
Wind farms might move closer to
demand. Data centres might pick Scot-
necessarily up sticks to reap the benefit
of price signals. LMP, coupled with
for quarter
pressing Prime Minister Rishi Sunak to Operator pays wind farms not to pro- land for its cheap electricity. This would smart meters and half-hourly prices,
drop costly climate targets in hopes of duce. It also pays gas-fired plants in the reduce the required investment in the would give consumers, particularly

C
garnering more votes. south to kick in. The cost of all of these network, cut curtailments and support those in the expensive south, a good
One solution would be to make the balancing and dispatching activities is the political levelling-up agenda. incentive to use energy more wisely. STEPHEN MORRIS — BANKING EDITOR
ostly, complex projects that energy transition less of a cumbersome lumped together and spread on every- Of course, there are other factors at They could cut their bills by switching
Barclays shares fell after it posted
require collective action are beast. The government’s Review of Elec- one’s bills. As the transition progresses, on their washing machines and charging
underwhelming second-quarter earn-
a hard sell. The energy tran- tricity Market Arrangements provides that cost is expected to balloon because their electric vehicles when the electric-
sition is one of these. UK vot- an opportunity to do so. A key proposal of the huge grid investment needed and
The problem with the ity price is low. That would also cut the
ings, in which its retail business warned
that profit margins were compressing,
ers are showing signs of “cli- in the review is to move from a single the inevitable lag. UK’s national electricity need to invest in the network.
while trading and dealmaking revenue
mate fatigue”. Policymakers should national electricity price to so-called Locational pricing would split the UK Perhaps the most important benefit of
respond by finding ways to lower the locational marginal pricing. Under LMP, into zones that reflect grid constraints.
price is that it is a introducing price signals is the one that
plunged at the investment bank.
overall cost of the transition — and by the price would vary by zone, depend- Each would have its own price, set by convenient fiction is hardest to quantify. LMP might The lender announced that profit rose
giving consumers ways to cut their own ing on the specific cost of producing and the marginal cost of electricity in the deliver solutions and technologies that 17 per cent at the UK consumer division,
bills. delivering electricity in the area. area. At times of freely flowing power, play, too. As Monzani explains, “the we have not yet thought of at all. That, which reflected “tailwinds from higher
It isn’t hard to see why net zero may The problem with the UK’s national prices in different zones would con- location of offshore wind farms is cur- after all, is what markets tend to do bet- rates”.
be falling out of favour. The country’s electricity price is that it is a convenient verge. But when Scotland produces rently directed by central seabed leasing ter than planned economies. This pro- A day earlier, the Fed raised its rate to
drive to decarbonise its energy system fiction. It assumes electricity can always more wind power than it can use or send and networks planning, so their reloca- found rethink carries risk, of course. the highest in 22 years, while in June the
has delivered cleaner electricity. But it be transported from wherever it is gen- south, prices there would fall to a level tion is likely to be constrained in the But so does a centrally planned pathway Bank of England set its benchmark at 5
has also loaded up energy bills. About erated to wherever it is needed. In real- that makes generation uneconomic. short term”. Critics therefore fear that to net zero. As growing climate fatigue per cent after a 13th consecutive rise.
40 per cent of the typical bill goes ity, grid constraints mean some of the “The value of energy is increasingly we may end up building a hugely com- reminds us, a successful transition Analysts flagged a forecast that Bar-
to cover policy and network costs, cheap renewable power generated in specific to time and place”, says Dan plex system, with little to show for it in depends on keeping customers onside. clays’s net interest margin would nar-
which are piled willy-nilly on everyone’s Scotland goes to waste for lack of acces- Monzani of Aurora, an energy consul- terms of response. On top of that, new row from 3.2 per cent to 3.15 per cent
shoulders. sible demand. Meanwhile, expensive tancy. “Pricing which reflects this value wind farms would need to pay more for camilla.palladino@ft.com and that its UK deposits fell 2 per cent in
the quarter.
Finance director Anna Cross said it
reflected “customers acting rationally
Energy and proactively” to higher rates by pay-
ing down debt and moving money into

Stronger margins
more lucrative savings products. It is
another indication that the rates wind-
fall may be abating.
A day earlier, Lloyds said its profits
were similarly hit by increased competi-

give British Gas tion for mortgages and savings. Lenders

are under political pressure to pass on
more of rate rise benefits to clients.

10-fold profit rise ‘The miss on income and

guidance is unhelpful . . .
It won’t help the broader
margin debate’
Result threatens to renew ish Gas, saying: “To be sustainable and
to be stable, you’ve got to make a profit. “We expect Barclays shares to soften
ire of consumers as other This is really important.” slightly today,” said Numis analyst
suppliers also see big gains Adjusted operating profits at British Jonathan Pierce. “The miss on income
Gas surged to £969mn in the first six and UK guidance is unhelpful . . . It
RACHEL MILLARD months of this year, up from £98mn in won’t help the broader margin debate.”
the first half of 2022. Overall, Centrica The quarter was disappointing at the
Centrica reported an almost 10-fold reported an adjusted operating profit of investment bank. Revenue fell 22 per
surge in first-half profits at British Gas, £2.1bn in the half-year, up from £1.3bn cent to £3.2bn, with fixed-income and
the UK’s largest household energy sup- in 2022. equity trading reporting steep double-
plier, threatening to reignite consumer The upswing in Centrica’s profits was digit declines as volatility subsided.
anger at the sector’s profits at a time of mirrored in the results of other house- Advisory and capital markets fees fell
high household bills. hold energy suppliers yesterday as they 15 per cent to £472mn, blamed on
Earnings at British Gas, which has also recovered costs and enjoyed higher “lower client activity” and a dearth of
about 7.5mn customers, were boosted margins on gas and electricity. deals.
by higher margins on gas and electricity Scottish Power, which has 4.6mn UK Citi analyst Andrew Coombs said all
sold to consumers, the company said customers, posted profit of £567mn, three divisions of the investment bank
yesterday as it set out plans to increase compared with an £87mn loss in the had “weaker revenues than US
its dividend and extend a share buyback same period the previous year. EDF’s peers . . . We expect the revenue miss
plan. UK business, which includes power and lower NIM guidance to be met with
plants, reported that profits more than disappointment”.
doubled to €2.3bn. Shares in Barclays closed down 5.3 per
‘To be sustainable and to Ofgem said the first-half figures for cent yesterday.
be stable, you’ve got to the industry were a “one-off” and “we Second-quarter group net profit rose
expect profit levels to fall back signifi- 24 per cent to £1.3bn on £1.1bn the
make a profit’ cantly moving forward”. same period last year, beating analysts’
Chris O’Shea, Centrica chief Amanda Solloway, minister for expectations of £1.2bn.

Just over half of the £969mn increase

in adjusted operating profits was due to
energy consumers and affordability,
said: “The government will always
ensure that the energy market is work-
March on US ITV is positioning itself to take
advantage of the Hollywood writers’
strike by supplying more of its
by Hollywood writers if US
broadcasters need to fill schedules
with programmes later this year.
But the year-on-year comparison was
flattered by £1.3bn in litigation and con-
duct charges taken in 2022 versus only
Ofgem, Britain’s energy regulator, allow-
ing the group to recover costs incurred
ing for consumers to protect them from
sky-high bills.”
ITV primed programmes to the US to fill emptying
schedules, if the impasse with the
ITV Studios boss Julian Bellamy said
it had a television catalogue of more
£33mn this year, largely related to a
trading error that led to the bank
when it was not able to pass on the full
surge in wholesale prices during the
energy crisis.
Unions reiterated calls for the govern-
ment to take more drastic measures to
tackle high household bills. Sharon Gra-
to fill writers’ studios continues into the autumn.
The group warned that advertising
revenues had fallen more than a tenth
than 90,000 hours “so we’re in a
good position to take advantage of
any opportunities”. However, ITV’s
improperly selling $17.7bn of structured
financial products.
When this impact was stripped out,
The jump in Centrica’s earnings
comes as some companies in the
ham, general secretary of the union
Unite, one of the biggest backers of the
strike vacuum in the past six months as companies
reined in marketing spending, sending
US scripted TV production business
could also be hit by the strikes.
profit fell 6 per cent.
Group revenue fell 6 per cent to
broader energy sector are facing an end Labour party, called for suppliers to be pre-tax profits sharply lower. Bellamy said: “If the strike goes into £6.3bn, missing analysts’ estimates of
to a bumper run of profits triggered by nationalised to “protect businesses and Dame Carolyn McCall, chief the autumn, it will potentially start £6.5bn. Barclays took fewer provisions
Russia’s full-scale invasion of Ukraine. households”. executive, said yesterday that the impacting production.” for bad loans than analysts had forecast.
Shares in Centrica, up 330 per cent O’Shea said Centrica would spend an media group was going through the ITV said total external revenue The bank announced a share buyback
since April 2020, climbed 5 per cent yes- extra £50mn on helping vulnerable cus- “worst advertising recession we’ve seen fell 2 per cent for the first six of £750mn, adding to the £500mn com-
terday as the London-listed company tomers, taking its total to £100mn since since the global financial crisis”. months of 2023 to £1.6bn, with pleted in the first half.
said it would pay an interim dividend of the start of 2022. But the 11 per cent fall in total ad growth in its studio production Chief executive C.S. Venkatakrishnan
1.33p a share, up 33 per cent from the Centrica said it planned to invest revenues for the first six months of the business offsetting the 11 per cent addressed the NatWest scandal, saying:
same period last year. It will also extend £600mn to £800mn a year between year was partly offset by the growth in decline in total ad revenue for the “We welcome the process by the Treas-
its share buyback programme by a fur- now and 2028, including on gas-fired its studio production business, behind first six months. Pre-tax profits fell ury to standardise behaviour among
ther £450mn. power plants, batteries and renewable programmes such as Love Island. to £45mn, from £219mn in the first banks . . . We feel strongly people
Centrica’s chief executive Chris electricity production such as solar ITV could benefit from strikes held half of 2022. Daniel Thomas shouldn’t be excluded on the basis of
O’Shea defended the high profits at Brit- plants. their personal or political beliefs.”

Retail Property

Frasers buoyed by demand from under-30s Higher rents lift Foxtons as buyers retreat
LAURA ONITA — RETAIL CORRESPONDENT USC and Evans Cycles as well as luxury The chief executive has continued to AKILA QUINIO “The continued growth in the imbal- “We are first and foremost a letting
department store chain Flannels, snap up shares in other companies, with ance between supply and demand is at agency,” he said. “That has made us so
Frasers has posted a jump in annual Buoyant lettings activity in London’s
expects profits to rise between 5 per recent holdings including electrical the highest levels we have ever seen,” much more resilient to these economic
profits as younger shoppers continue tight rental market boosted earnings at
cent and 15 per cent up to £550mn this retailers Currys and AO World and Foxtons said. “This continues to drive cycles.”
to spend despite the cost of living London-based estate agency Foxtons,
financial year. online fashion groups Boohoo and Asos. rents and is making it more difficult for Foxtons has hired lettings negotiators
squeeze. offsetting a slowdown in house sales in
It posted a 15 per cent increase in rev- He said of the spree: “We acquired renters to find affordable accommoda- since the start of the year, he added,
the first half of the year.
Chief executive Michael Murray — also enue to £5.5bn for the 53 weeks to April Jack Wills, which is a significant brand tion in London.” while the agency was “in detailed dis-
founder Mike Ashley’s son-in-law — 30, while adjusted profit before tax rose now within our portfolio. We acquired Foxtons posted pre-tax profits of Foxtons has in the past year sought to cussions” to acquire “a strong pipeline
attributed the performance largely to 40 per cent to £478mn, with a chunk of the whole premium division through £6.1mn in the six months to the end of of [lettings] businesses of varying sizes
Generations Z and Alpha. House of Fraser and Flannels. And June, up from £4.3mn a year earlier. and varying locations” in and around
Consumers below the age of 30, which we’ve grown that significantly over the Lettings revenue rose 26 per cent in the Hot property: the London.
make up a large proportion of the
‘They’re obsessed with last five or six years. So it really is in our same period, offsetting a 19 per cent
agency expects
The group said it had received fewer
‘little change’ in
group’s shoppers, often saved up for the social media, obsessed DNA to invest and potentially acquire drop in sales revenue caused by higher the imbalance buyer inquiries in July because of the
latest product releases to stay “socially businesses.” mortgage costs. between supply rising cost of borrowing. Mortgage rates,
relevant”, which had helped boost sales,
with brands, obsessed Murray said that although “we’re past The agency, which has more than and demand which had been climbing in recent
he said yesterday. with their social status’ the worst” of inflation, “it’s definitely 27,000 tenancies, said yesterday it months, soared after the Bank of Eng-
Murray, who has led an “elevation” not gone away and it’s not going away”, expected “little change” to the “supply increase its activity in the rental mar- land raised its benchmark interest rate
strategy at Frasers since he took the the profits coming from property deals. and the company was focused on keep- and demand imbalance” that had ket, which it sees as more resilient to to 5 per cent in June.
helm a year ago, said: “They’re obsessed Group gross margin decreased to 42.6 ing costs as low as possible. driven up rent in London, but expected economic downturns than sales. Let- Foxtons said that while it expected a
with social media, they’re obsessed with per cent from 43.5 per cent. Richard Chamberlain, an analyst at the pace of rent rises to cool in the sec- tings made up 70 per cent of the estate rise in third-quarter house sales, infla-
brands, they’re obsessed with their Under Murray, the company has been RBC Capital Markets, said Sports Direct ond half of the year. agent’s revenue in the first half of the tion and high borrowing costs would
social status and they really want to be strengthening relationships with brands should benefit from consumers becom- Intense competition for a reduced year, compared with 61 per cent in 2022. continue to hit transactions throughout
associated with the best product.” such as Nike, which has contributed to ing more price conscious in a downturn, pool of London homes has accelerated Chief executive Guy Gittins said the the year. The group’s board announced
The retailer, which was formerly its “record performance”. Ashley owns “however, as a fairly low-margin dis- as interest rates have risen, while soar- recurring revenues from lettings helped a half-year dividend of 0.2p a share.
known as Sports Direct International 72 per cent of the retailer, which started counter, Frasers is relatively exposed to ing borrowing costs have hit demand boost the company’s revenue despite Foxtons shares closed up 3.4 per cent
and which also owns House of Fraser, life as a store in Maidenhead in 1982. cost pressures on its business”. from buyers and sellers. the challenging sales market. yesterday.
Friday 28 July 2023 ★ FINANCIAL TIMES 15

COMPANIES & MARKETS

Fixed income. Benign environment Equities

Wall St banks
Corporate fundraising buoyant face prospect
of tougher
despite impact of US rate rises requirements
on capital
COLBY SMITH — WASHINGTON
STEPHEN GANDEL — NEW YORK

US bank regulators have advanced

plans to impose more arduous capital
requirements on the country’s large
lenders, which could require the six big-
gest institutions to put aside an addi-
tional tens of billions of dollars collec-
tively for potential losses.
Shares of big banks initially rallied
yesterday following the news but then
pared their gains after some industry
groups said the regulations would be
more costly than watchdogs suggest.
The one exception was Citigroup,
which was up 2 per cent.
Analysts at Morgan Stanley had esti-
mated this week that Citi would need
more than four years to comply with the
new regulations without making any
major changes — or about twice as long
as many of its rivals.
Regulators said they would give banks
until the beginning of 2028, or nearly
four and a half years, to fully comply
with the rules and predicted that would
give lenders “sufficient time to adjust to
the changes while minimising any
potential adverse impact”.
The new rules, which were proposed
by the US Federal Reserve, Office of the
Looser financial conditions Higher calling: “Higher interest rates generally take Comptroller of the Currency and the
US financial conditions are at Junk bond spreads have time to work [their] way through the
the US Federal
neutralise influence of Federal their loosest since March 2022 narrowed this year Reserve has economy and through corporate bal-
Chicago Fed National Financial Option-adjusted spread over US
raised interest ance sheets”, Chang added. “Given how
‘[It] would improve the
Reserve’s policy tightening Conditions index Treasuries (percentage points)
rates from near- much refinancing activity has occurred resilience of the banking
0.4 6.0 zero in March over the past several years in the high-
HARRIET CLARFELT, KATE DUGUID AND 0.2 5.5 last year to more yield market, it will take more time for
system by modifying
NICHOLAS MEGAW — NEW YORK
0 5.0 than 5 per cent maturities and refinancing to become a capital requirements’
Rising stock prices and falling bond with a further larger issue.”
yields have made it so much easier for -0.2 4.5 0.25 percentage Equity markets have risen on the back Federal Deposit Insurance Corporation,
US companies to raise funds that much -0.4 4.0 point rise on of enthusiasm for Big Tech stocks tied to would apply to banks with more than
of the impact of the Federal Reserve’s -0.6 3.5 Wednesday the growth of artificial intelligence. $100bn in assets and mark regulators’
Nathan Howard/Bloomberg
interest rate rises has been neutralised, The S&P 500 has climbed almost 20 most comprehensive effort in more than
according to investors and several -0.8 3.0 per cent year to date, making it easier a decade to fortify the financial system.
closely watched measures. 2020 21 22 23 2022 23 for companies to raise cash through In general, the new rules would set an
The degree to which the environment Sources: Federal Reserve Bank of Chicago; Ice Data Services ICE BofA High Yield index share sales. industry standard for measuring the
has improved in recent weeks is Fundraising through US initial public risk of lending and other activities —
reflected in the National Financial Con- Conditions Index dropped, approaching last year and July 26 to approximately offerings is up 104 per cent year on year, something banks have previously been
ditions Index, compiled by the Chicago the low it hit in mid-July, which marked 3.9 percentage points. according to Dealogic data, while fol- allowed to do for themselves.
Fed, touching its lowest point in 16 the loosest conditions in a year. Investors said the tightening of low-on sales by listed companies and The uniform standards are more con-
months. This is because the looser conditions spreads this year had been fuelled partly their shareholders are up 65 per cent. servative than how individual banks
But looser financial conditions run reflect a view among investors that the by a shrinking junk bond market — with Economic growth data published yes- have typically measured their risk,
counter to the Fed’s goal of slowing the Fed has effectively finished raising relatively low new issuance and several terday provided further signs of the effectively forcing them to hold more
economy to bring inflation under con- interest rates since its main focus is upgrades to “investment grade” terri- encouraging environment for busi- capital in case of losses.
trol and make it more likely it will have bringing down inflation — which has tory helping to anchor prices at artifi- nesses with a sharp increase in business “The proposal would improve the
to keep interest rates higher for longer. fallen sharply in recent months. cially high levels. Higher overall credit investment driving the stronger than resilience of the US banking system by
“The reality is that financial condi- “I would say that conditions right now quality and waning fears about a reces- expected increase in gross domestic modifying capital requirements for
tions have loosened — we have [effec- are loosening, probably to the chagrin of sion have also buoyed valuations. product. large banking organisations to better
tively] unwound roughly 450 basis the Fed,” commented Andy Brenner, Noting the narrowing of credit Markets will closely scrutinise next reflect their risks and apply more trans-
points of rate hikes,” said Sonal Desai, head of international fixed income at spreads and the broader loosening of Monday’s Senior Loan Officer Opinion parent and consistent requirements,”
chief investment officer for Franklin Natalliance Securities. “But as long as conditions, Brenner said: “People are Survey on Bank Lending Practices after the regulators said.
Templeton Fixed Income. the Fed gets better inflation numbers, coming off the sidelines.” the last quarterly report by the Fed The plans would spare smaller insti-
“Financial conditions are enough to they’re going to care less and less.” He added: “In some respects, banks found that banks expected to tighten tutions such as community banks but
take us back to March of last year,” Desai But they also reflect dynamics in are tightening their lending standards. lending standards over the rest of 2023. capture larger regional lenders that pre-
added. “As the market comes around to stock and corporate bond markets that But private credit has come to the res- ‘As long as Fed chair Jay Powell acknowledged viously were not subject to more strin-
the belief that we are not going to have a have bolstered sentiment: enthusiasm cue. If you need money, you can get it — the potential risks from easing condi- gent requirements on capital.
recession, that implies that demand will about artificial intelligence has driven one way or the other . . . It might be a
the Fed tions after the latest interest rate rise on The regulators said the new rules
remain strong [and] that implies that US stocks into bull market territory this little more expensive but money is gets better Wednesday, telling journalists that, “if would make banks less prone to the
we will not have any need to cut interest year and a shortage of new deals in the available.” financial conditions get looser, we types of financial distress that hit in
rates.” junk bond market has driven investors However, Mike Chang, a high-yield
inflation [may] need to do more”. 2008 and, to some degree, the recent
The more benign fundraising envi- into the few that have been on offer. portfolio manager at Vanguard, said numbers, But he added that he was confident Our global turmoil this spring, which resulted in
ronment comes as the Fed has jacked up The premium that low-rated compa- financial conditions had not loosened interest rates were affecting economic team gives you three of the four largest failures of feder-
interest rates from near-zero in March nies have to pay to borrow is now across the board.
they’re activity and inflation. “What tends to market-moving ally insured banks in US history.
last year to more than 5 per cent with a around its lowest since April 2022 with “The market is still discriminating going to happen is financial conditions get in and news and views, The regulatory overhaul also aims to
further 0.25 percentage point rise on the gap between junk bond yields and between stronger and weaker issuers out of alignment with what we’re doing 24 hours a day bring the US into compliance with inter-
Wednesday. Following the Fed’s latest Treasuries narrowing by roughly 0.9 and many weaker issuers still don’t have
care less [but] ultimately, over time, we get ft.com/markets national standards — the so-called Basel
hike, Goldman Sachs’ daily US Financial percentage points between the end of access to capital markets,” he said. and less’ where we need to go.” III endgame reforms.

Equities Commodities

St James’s Place shares slide on lower Big mining groups warn of weaker
inflows and plan to cut customer fees price outlook for natural resources
SALLY HICKEY are acting in customers’ best interests. 0.5 per cent annually to cover the cost of HARRY DEMPSEY AND LESLIE HOOK half core earnings of just over 40 per the west and accelerating supply for sev-
St James’s Place chief executive their adviser. cent to $5.1bn. eral metals.”
St James’s Place is to lower fees on a Some of the world’s largest mining
Andrew Croft said the rules had been They are also charged an initial prod- This occurred off the back of a 19 per But they saw enough of a shift point in
broad range of investment products, companies have become increasingly
the “catalyst” for it to implement the fee uct fee of 1.5 per cent and an additional cent drop in the price of its commodities China’s rhetoric to merit upgrading the
denting its forecast profits and pessimistic about a sustained rally in
changes. “We have looked at every part 1 per cent on an annual basis as a prod- and inflationary cost pressures. bank’s six-month copper price forecast
prompting the steepest decline in the global commodity prices this year after
of our business through the consumer uct management charge. It is the latter On Monday, Beijing vowed to boost by 3 per cent to $9,500 per tonne com-
FTSE 100 company’s share price in an insipid recovery in China led to a
duty lens and where changes needed to fee that is being lowered to 0.85 per cent. consumer spending and revive the pared with $8,600 per tonne at present.
seven years. slump in first-half earnings.
be made we have made them,” he said. Net inflows in the six months to the economy but fell short of announcing Mining companies have been touting
The UK’s largest wealth manager said St James’s Place charges fees for the end of June fell 38 per cent year on year Duncan Wanblad, chief executive of stimulus measures that would help a prospective boost to prices from green
alongside interim results yesterday that advice it gives as well as the products it to £3.4bn. Croft said a tough economic Anglo American, said yesterday that an policies around the world since building
changes to its fee structure — driven by provides. Clients are charged an initial environment “naturally” had an impact “enormous amount of economic pres- wind farms, transmission grids and
regulatory changes — would reduce its advice fee of 4.5 per cent of their invest- on clients’ capacity to invest. sure” was making it hard to wager that
‘Will China continue to fuel electric cars requires a lot of metals.
net income by £12mn in the second half ment value and pay an additional Despite the slowdown in inflows, total sustained gains in the prices of its key demand? No, it won’t be as Simon Morris, head of base metals at
of the year. closing funds under management nev- commodities such as iron ore, copper CRU Group, a business intelligence
Annual product management fees for ertheless rose 6 per cent in six months to and steelmaking coal would take place
strong a demand story as company, said a lift to demand from the
long-term clients of the firm who hold a new high of £157.5bn. by the end of the year. it has been for 20 years’ clean energy transition looked unlikely
bond and pension investments are to be Analysts were more positive on the “We’ve been a little bit surprised at to materialise as quickly as hoped, while
reduced from 1 per cent to 0.85 per cent long-term outlook for St James’s Place, how slow the opening of China has manufacturing rebound, prompting a China is unlikely to compensate given a
from next week, the company said. which has a “market-leading” client been,” he said, adding that the world’s shortlived bounce in metal prices. shift in its economic model.
About 65,000 clients of St James’s Place retention rate of 95.6 per cent, accord- largest metals-consuming nation was Citigroup analyst Wenyu Yao said “Will China continue to fuel demand
stand to benefit. ing to David McCann, an analyst at still suffering from “Covid overhangs” China’s politburo meeting set a “positive as it has done? No . . . China won’t be as
Shares in St James’s Place were down Numis. that had sapped demand. tone” yet it was not the sort of “bazooka- strong a demand story as it has been for
16 per cent yesterday. Analysts said a The company produced a pre-tax In reference to when commodity style” stimulus required to push up Chi- 20 years,” he said. “There’s a lot of
bigger than expected decline in client profit of £385mn in the period com- prices would bottom out and rally, he nese demand for metals in the second hyperbole around the energy transi-
inflows also contributed to the sell-off. pared with a loss of £296mn in the same added that “it’s more likely to be early half of the year. tion.”
The fee changes come ahead of the period a year ago. next year than later this year quite hon- Goldman Sachs analysts said: “The Rio Tinto, the largest producer of iron
looming introduction of the Financial The board declared an interim divi- estly”. industrial metals complex has been ore, which is used to make steel, said on
Conduct Authority’s so-called con- dend of 15.83p a share, an increase of His comments came after the FTSE caught for much of this year between Wednesday that its main commodities
sumer duty, which will require financial The wealth manager is the UK’s 1.5 per cent. 100 miner cut dividends by more than disappointing growth momentum in were trading below their 2010 average
services companies to demonstrate they largest, with a network of offices See Lex half to $700mn following a fall in first- China, a manufacturing slowdown in prices during the first half of this year.
16 ★ FINANCIAL TIMES Friday 28 July 2023

COMPANIES & MARKETS

Income inequality The day in the markets

means US debt will What you need to know
continue to increase 3 Global stocks rally as ECB joins Fed in
European stocks rise to highest level since Ukraine invasion
lifting rates
Stoxx Europe 600 index
3 Traders sense monetary tightening

Michael Pettis policies nearing end of cycle

3 Dollar attracts buyers but US
Treasuries offloaded
500

Markets Insight
480
Global stocks rallied yesterday as traders
sensed the global cycle of monetary

W
policy tightening was nearing its end 460
after the European Central Bank followed
hile much of the debate decline and in response businesses will American stocks, bonds, factories and the US Federal Reserve in lifting interest
about limiting US gov- cut back on production and fire work- real estate. rates by a quarter of a percentage point. 440
ernment debt assumes ers. To prevent this happening, Wash- These net inflows push up the value of Wall Street’s benchmark S&P 500
that rising debt is a con- ington typically does one of two things. the dollar and make US manufacturing added 0.5 per cent by midday in New
sequence of profligacy First, the US Federal Reserve can less competitive, so rather than run York and the tech-heavy Nasdaq 420
on the part of Washington policymak- implement policies that encourage trade surpluses to manage excess sav- Composite gained 1.2 per cent after data
ers, the problem is in fact structural. household borrowing to fund additional ings, the weak demand created by showed the US economy grew more
Americans are forced to choose consumption. In that case, the reduc- income inequality is exacerbated as strongly than expected in the second 400
between rising debt and higher unem- tion in the income share of ordinary America runs the trade deficits needed quarter of 2023.
ployment largely because of the level of Americans is balanced by an increase in to absorb excess foreign production. European stocks also climbed,
income inequality — exacerbated by their borrowing so the same level of con- To stop unemployment rising, either extending early gains after the ECB’s 380
their large trade deficit — that has sumption can be maintained. the Fed must encourage even more widely anticipated decision to increase 2021 2022 2023
sharply reduced the demand for US Second, Washington can itself borrow household debt or Washington must the benchmark deposit rate by 0.25 Source: Refinitiv
businesses and manufacturers. and use the proceeds to replace the run even larger fiscal deficits. percentage points to 3.75 per cent
The rise in US income inequality is the demand lost by the reduction in house- The mistake lawmakers make is to yesterday.
key driver of debt. Because the wealthy hold consumption. Borrowing is effec- assume that rising debt in the US is the The pan-regional Stoxx Europe 600 “We are confident that she won’t do the one more rate rise this year, boosting the
save a much larger part of their income consequence of irresponsible behaviour rose 1.4 per cent, closing at its highest same for September today but we think US Dollar index by 0.8 per cent, which
than do workers or the middle class and on the part of American households and level since Russia invaded Ukraine in she will keep her cards close to the body.” measures the US currency against a
use a much smaller part for consump- The choice is not between the government. In fact, it is a structural February 2022, while the CAC 40 in Paris In a similar move a day earlier, the Fed basket of six peers.
tion, rising income inequality reduces more debt and less debt problem, and the choice Americans face was up 2.2 per cent and Frankfurt’s Xetra lifted its benchmark federal funds rate by The euro, which had earlier been up 0.4
overall consumption and forces up sav- is not between more debt and less debt Dax advanced 1.7 per cent. 0.25 percentage points to a target range per cent against the dollar, gave up all its
ings by effectively transferring income but between more debt but rather between more debt and more The ECB has increased rates nine times of between 5.25 and 5.5 per cent. gains to slip 0.8 per cent lower to $1.1.
from high consumers (ordinary Ameri- and more unemployment unemployment. in the space of one year in efforts to Traders are now pricing in an almost 80 Yields on benchmark 10-year
cans) to high savers (the wealthy). As long as Americans are willing to tackle raging eurozone inflation and did per cent probability that US policymakers Treasuries gained 9 basis points to 3.94
If the higher savings funded higher accept high levels of income inequality not rule out the possibility of rates rising will keep rates steady at their next per cent while those on two-year bonds,
investment by US businesses, this would tively the opposite of saving and, by and large trade deficits, this is the trade- further in September. meeting in September, according to data which are particularly sensitive to short-
be a good thing for the economy. Lower increasing the fiscal deficit, the US can off the US must continue to suffer. “Last month, [ECB president Christine] compiled by Refinitiv and based on term interest rate expectations, rose by
consumption would be balanced by undo the adverse consequences of rising To get debt under control without Lagarde all but pre-committed to today’s interest rate derivatives prices. the same amount to 4.92 per cent as the
higher investment, with total demand savings among the wealthy. raising unemployment, Americans hike,” said Claus Vistesen, chief eurozone The better than expected US growth debt was sold. Daria Mosolova and
remaining the same in the short term There is a third option for many econ- must eliminate downward pressure on economist at Pantheon Macroeconomics. figures marginally pushed up the odds of Hudson Lockett
and rising in the longer term as more omies. If a country’s savings rise faster demand by reversing several decades of
investment caused growth to accelerate. than its investment — or if demand policies that favour income inequality
But must more savings lead to higher declines relative to production — it can or that allow foreigners to dump their Markets update
investment? This belief is at the heart of export the excess production in the excess savings and excess production
supply-side economics but, while it was form of a trade surplus. into the US.
true many decades ago when business But the US cannot do this. Because of That is why for all the excited
investment was mainly constrained by its open and well-governed financial debate, debt ceilings won’t limit the rise US Eurozone Japan UK China Brazil
scarce savings and the high cost of capi- markets, the rest of the world prefers to in US debt. They just allow Congress to Stocks S&P 500 Eurofirst 300 Nikkei 225 FTSE100 Shanghai Comp Bovespa
tal, it is no longer true today — when it is offload its excess savings there so the US pretend that it is doing something Level 4587.19 1865.60 32891.16 7692.76 3216.67 121232.20
constrained mainly by weak demand. is a net importer, not a net exporter, of meaningful about America’s surging % change on day 0.45 1.42 0.68 0.21 -0.20 -1.08
Business investment has not risen in savings. debt burden. Currency $ index (DXY) $ per € Yen per $ $ per £ Rmb per $ Real per $
line with the savings of the wealthy. This This will happen as long as foreign Level 100.945 1.099 141.255 1.285 7.141 4.731
creates a problem for the economy. If central banks, businesses, oligarchs and Michael Pettis is a finance professor at % change on day 0.057 -0.633 0.620 -0.542 -0.131 -0.019
lower consumption is not balanced by owners of financial assets can employ Peking University and a senior associate at Govt. bonds 10-year Treasury 10-year Bund 10-year JGB 10-year Gilt 10-year bond 10-year bond
higher investment, total demand must their surpluses in unfettered access to the Carnegie China Center Yield 3.949 2.469 0.436 4.380 2.684 10.534
Basis point change on day 7.460 -1.100 -0.710 3.200 -1.000 1.600
World index, Commods FTSE All-World Oil - Brent Oil - WTI Gold Silver Metals (LMEX)
Level 464.83 83.98 80.01 1966.30 24.67 3818.90
% change on day 0.47 1.28 1.56 0.39 0.47 -1.04
Yesterday's close apart from: Currencies = 16:00 GMT; S&P, Bovespa, All World, Oil = 17:00 GMT; Gold, Silver = London pm fix. Bond data supplied by Tullett Prebon.

Main equity markets

S&P 500 index Eurofirst 300 index FTSE 100 index
4640 1880 7840

7680
4480 1840
7520
4320 1800 7360

| | | | | | | |
4160 | | | | | | | | | | | | | | | | | | | |
1760 | | | | | | | | | | | | | | | | | | | | 7200 | | | | | | | | | | | |

May 2023 Jul May 2023 Jul May 2023 Jul

Biggest movers
% US Eurozone UK
Align Technology 16.30 Asml Holding 5.25 Centrica 7.54
Textron 11.48 Heidelbergcement 5.12 Relx 4.68
Ups

Royal Caribbean 10.70 Reed Elsevier 5.03 Informa 4.08

Lam Research 10.41 Saint Gobain 4.94 Airtel Africa 3.56
Seagate Technology Holdings 7.31 Alstom 4.67 Burberry 3.02
%
Chipotle Mexican Grill -9.45 Jeronimo Martins -6.25 St. James's Place -16.03
Southwest Airlines Co -9.16 Deutsche Bank -2.86 Sse -5.87
Downs

Ebay -8.53 Grifols -2.76 Barclays -5.28

Willis Towers Watson -8.42 Airbus -1.89 Endeavour Mining -3.63
Edwards Lifesciences -8.19 Commerzbank -1.50 Bt -2.06
Prices taken at 17:00 GMT Based on the constituents of the FTSE Eurofirst 300 Eurozone
All data provided by Morningstar unless otherwise noted.

Wall Street Europe London

Facebook and Instagram owner Meta Record major Universal Music rose after British Gas owner Centrica topped the
rallied off the back of an 11 per cent jump delivering second-quarter results that FTSE 100 index after boosting its interim
in second-quarter revenue to £32bn, were “comfortably ahead of expectations dividend by 33 per cent and reporting a
topping the $31.1bn Wall Street had at pretty much every level”, said Citi. 55 per cent year-on-year jump in adjusted
expected. Core profits of €590mn were up 16.4 operating profit to £2.08bn in the quarter.
Bank of America, which tuned in to the per cent year on year, helped by an 8.2 Heading the FTSE 250 index was car
earnings call, noted that time spent per cent rise in recorded music revenue. dealership Inchcape, which forecast
across Meta apps had also increased 7 Top sellers King & Prince, Morgan adjusted pre-tax profits towards the top
per cent, “primarily driven by artificial Wallen and Taylor Swift supported a 2.9 end of a consensus range of £470mn to
intelligence improvements”. per cent rise in streaming revenue £506mn for the full year.
Forecast-beating profits lifted alongside “strong CD sales in Japan and Jefferies said the update reflected
Comcast, the media and broadband improvements in vinyl sales”, it said. Inchcape’s strategy of “leveraging its
group, which posted quarterly earnings of Better than expected results sent Italy’s geographic footprint”, enabling it to
$1.13 per share — more than 16 per cent Moncler rallying. “penetrate more territories”.
ahead of analyst estimates. The fashion group, known for its puffer Inchcape was joined by Jupiter Fund
Peacock, its streaming service that jackets, posted a half-year operating Management in the top half of the mid-
began in 2020, added 2mn subscribers profit of €217.8mn — 5 per cent ahead of cap index, which reported a 56 per cent
from the previous quarter to reach 24mn, analyst expectations. year-on-year jump in underlying pre-tax
nearly doubling year on year. This came as first-half group revenues profit of £46.4mn for the half year.
Near the bottom of the S&P 500 index surpassed the €1bn mark “for the first Assets under management expanded 2
was online marketplace eBay, which time in our history”, said Remo Ruffini, per cent to £51.4bn by the end June,
forecast earnings for this quarter of $0.96 chief executive. helped “by another strong performance
to $1.01 per share, missing analysts’ French outsourcer Teleperformance in the institutional channel”, said chief
estimate of $1.02. dived after cutting its full-year outlook, executive Matthew Beesley.
Entertainment group Imax, known for forecasting like-for-like growth At the bottom of the FTSE 250 was
its immersive movie screens, rallied (excluding the impact of Covid support Mobico, formerly National Express, which
after reporting earnings of 26 cents per contracts) of 6 to 8 per cent, down from 8 reported first-half adjusted pre-tax profit
share in the second quarter, eclipsing the to 10 per cent stated in April. of £25.4mn — well below Liberum’s
16 cents expected. An earnings miss pushed Finland’s £65.5mn estimate.
Richard Gelfond, chief executive, added Neste down sharply, with the oil refiner Russ Mould, investment director at AJ
that Christopher Nolan’s biopic, and biofuel producer posting core profits Bell, said the transport company had
Oppenheimer, had lifted “the company to of €784mn in the second quarter, more “been hit by the withdrawal of Covid-
one of its best weekends of all time at the than 9 per cent below analyst estimates. related support and a big increase in
global box office”. Ray Douglas Ray Douglas costs — notably on wages”. Ray Douglas
Friday 28 July 2023 ★ FINANCIAL TIMES 17

MARKET DATA

WORLD MARKETS AT A GLANCE FT.COM/MARKETSDATA

Change during previous day’s trading (%)
S&P 500 Nasdaq Composite Dow Jones Ind FTSE 100 FTSE Eurofirst 300 Nikkei Hang Seng FTSE All World $ $ per € $ per £ ¥ per $ £ per € Oil Brent $ Sep Gold $

-0.633% -0.542%
No change
0.45% 0.93% 0.08% 0.21% 1.42% 0.68% 1.41% 0.47% 0.620% 0.98% 0.39%
Stock Market movements over last 30 days, with the FTSE All-World in the same currency as a comparison
AMERICAS EUROPE ASIA
Jun 28 - - Index All World Jun 28 - Jul 27 Index All World Jun 28 - Jul 27 Index All World Jun 28 - Jul 27 Index All World Jun 28 - Jul 27 Index All World Jun 28 - Jul 27 Index All World

S&P 500 New York S&P/TSX COMP Toronto FTSE 100 London Xetra Dax Frankfurt Nikkei 225 Tokyo Kospi Seoul
4,587.19 20,568.59 7,692.76 16,385.28 2,603.81
7,500.49 32,891.16
15,949.00 32,538.33 2,564.19
4,376.86 19,733.09
Day 0.45% Month 4.75% Year 13.98% Day 0.10% Month 4.29% Year 6.88% Day 0.21% Month 3.23% Year 4.82% Day 1.70% Month 1.84% Year NaN% Day 0.68% Month 0.67% Year 19.03% Day 0.44% Month 0.84% Year 7.91%

Nasdaq Composite New York IPC Mexico City FTSE Eurofirst 300 Europe Ibex 35 Madrid Hang Seng Hong Kong FTSE Straits Times Singapore
14,258.55
1,865.60 9,694.70 19,639.11 3,337.42
54,480.63 9,481.30 19,172.05
1,809.03 3,205.35
13,555.67 53,460.06
Day 0.93% Month 5.18% Year 18.50% Day 0.46% Month 1.49% Year 16.84% Day 1.42% Month 3.86% Year 10.74% Day 0.98% Month 4.54% Year 20.14% Day 1.41% Month 4.55% Year -6.01% Day 0.98% Month 4.56% Year 4.48%

Dow Jones Industrial New York Bovespa São Paulo CAC 40 Paris FTSE MIB Milan Shanghai Composite Shanghai BSE Sensex Mumbai
35,547.32 121,490.24 29,597.81
7,461.37 66,266.82
33,926.74 7,286.32 3,216.67
116,681.32 27,637.46 3,189.38 62,970.00
Day 0.08% Month 4.77% Year 10.40% Day -1.08% Month 3.14% Year 19.50% Day 2.05% Month 3.91% Year 20.19% Day 2.13% Month 8.64% Year 39.88% Day -0.20% Month 2.10% Year -1.85% Day -0.66% Month 5.47% Year 20.17%

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For more information on dividend payments visit www.ft.com/marketsdata For a full explanation of all the other symbols please refer to London Share Service notes.
18 ★ FINANCIAL TIMES Friday 28 July 2023

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22 ★ FINANCIAL TIMES Friday 28 July 2023

ARTS

Horror possessed of a superior intelligence

This week’s new film Left: Sophie Wilde in ‘Talk to Me’.
Below left: ‘The Beanie Bubble’ tells
releases reviewed by the story of a 1990s toy craze
Jonathan Romney

S
ome time ago, people started Leisurely comedy Everybody Loves
applying the term “elevated Jeanne is the sort of polished, intelligent
horror” to a certain strain of confection that French cinema turns
chiller. It meant films that had out in high quantity — elegantly con-
loftier aspirations than sim- ceived, sparkily acted, yet a little under-
ply freezing your marrow, ones that had baked in a way that leaves you going,
complex contemporary themes, or sty- “Euhhh . . . c’est tout?” Debut filmmaker
listically veered closer to art-house than Céline Devaux is a live-action director
charnel house. Examples included and an animator, and here she merges
Hereditary, Us and the extraordinary the two forms in the story of a hapless
Australian film The Babadook, which heroine fleeing personal calamity.
addressed childhood fears and the ago- Blanche Gardin plays Jeanne, riding
nies of lone parenting. high as the creator of a revolutionary
Twin brothers Danny and Michael eco-project until her brainchild sinks
Philippou got their start as crew mem- ignominiously in an incongruous pas-
bers on The Babadook. You suspect that, sage of ocean-going slapstick. Crushed,
like many genre fans who consider the she leaves France for Lisbon, where she
tag spuriously snobbish, they have little grew up, and en route meets a bump-
time for “elevated horror”; that’s cer- tious ex-schoolmate, the presentable
tainly what you’d guess from their but motormouthed Jean (Laurent
YouTube channel RackaRacka, which Lafitte). Once in Lisbon, Jeanne checks
exults in gonzo gross-out farce. Yet their in with an unreliable ex (Nuno Lopes)
feature debut Talk to Me suggests that and tries to shake off the ghost of her
they can be as serious as anyone — mother, who is guilt-tripping her from
though not straight-faced. The film beyond the grave. She’s played, in the
could almost be a routine American- merest cameo of a cameo, by Marthe
style scarer about teenagers messing Keller, who was the Garbo-like diva in
with the dead, except that it does the job Billy Wilder’s 1978 Fedora.
with so much more verve. The stylistic twist is that Jeanne is also
The setting is suburban Adelaide, haunted, and taunted, by her naysaying
where teenager Mia (Sophie Wilde) is
mourning her mother’s death, but hop- Talk to Me exposure to the Beyond gets a horrifying
ing for distraction while hanging out Danny & Michael Philippou demonstration when one youth suffers
‘Talk to Me’ has its share
with best friend Jade (Alexandra AAAAE a self-destructively bad trip with no end of jump scares and
Jensen). As it happens, a local craze is an in sight.
occult game of dare involving a plaster The Beanie Bubble Talk to Me has its share of jump scares mouldering revenants.
hand that supposedly contains the sev-
ered remnant of a psychic. It is said that
Kristin Gore & Damian Kulash
AAAEE
and mouldering revenants. But it has
subtler touches too: the game’s varied
But it has subtler
if you grasp the hand and say “Talk to and unpredictable effects; themes such touches too
me”, weird things happen, notably an Everybody Loves Jeanne as loneliness and the contagious nature
intense rush of otherworldly possession. Céline Devaux of desperation. There are witty contem- inner self — a cartoon creature oddly
Scripted by Danny Philippou and Bill AAAEE porary touches: when something hor- resembling a roughly sketched half-
Hinzman, the film cleverly frames the rific suddenly happens in the opening cucumber. This apparition has its
ritual as something like surreptitious My Name Is Alfred party scene, the first thought of every- moments, but introduces an archness to
teen experimentation with a novelty Hitchcock one present is to whip out their phones a film otherwise made of sharper stuff —
drug, cautious novices egged on by older Mark Cousins and film it. a pity because, in the more abstract,
members of the circle. That there might AAAAE There’s also a distinctive Australian decorative passages of Devaux’s anima-
be a recommended minimum age for flavour: the mixed Oceanic make-up of tion, there’s real style at work.
Jeanne’s ace card is Gardin, an
increasingly visible comic fixture in
the cast, Antipodean rap on the sound- Michael Douglas’s Gordon Gekko if he French cinema. Her flustered energy
track, even the macabre but poignant had believed that missing lunch was makes Jeanne more quizzically acerbic
appearance of a kangaroo. Cinematog- for wimps. than the self-deprecating Bridget
rapher Aaron McLisky uses suburban A breezy feminist demolition of self- Jones-y flustered femme we think we’re
claustrophobia effectively, with even made-man mythology, The Beanie Bub- in for. In its last stretch, alas, the film
daylight scenes ominously overcast, an ble is marred by clunky ironic retrospec- goes nowhere — although Lisbon in the
extra layer of Shining-like dread coming tion, based on showing its characters quiet season is the nicest kind of
from a balefully textured sound design. unschooled in the internet or excited nowhere to be.
The young ensemble cast crackle with about this new thing called “ePort? On Mubi now
energy, with spiky adult support from eBay!”. The toys’ selling point was that
Australian cinema stalwart (and some- they were “understuffed” to make them Documentary essayist Mark Cousins
time Lord of the Rings player) Miranda adorably floppy, but no one could call could legitimately have trademarked
Otto. Joe Bird is show-stealingly fearless the film understuffed: it is dense with the term “indefatigable” by now, and
as Jade’s younger brother, while Sophie incident and highly intricate. here’s the latest of his highly personal
Wilde’s Mia is a very appealing mix of The story is told in the first person, accounts of cinema history. Previously,
impetuous, intrepid and deeply vulner- alternating the women’s accounts, with Cousins has given us takes on Sergei
able, her presence carrying us through a time scheme that zigzags between the Eisenstein, Orson Welles and indeed the
to a snappily executed, bracingly dark 1980s and ’90s, craftily working towards entire phenomenon of cinema (his
pay-off. Talk to Me may not be elevated the three narratives’ intersection. In monumental The Story of Film); now it’s
as such, but it’s certainly lifted a good other words, while the film has the can- the turn of the Leytonstone-born mas-
few notches above the ghoulish norm. dy-coloured pop-culture appeal of Bar- ter of suspense in My Name Is Alfred
In cinemas now bie, it displays the structural complexity Hitchcock. You might think that Hitch-
of Oppenheimer — a useful consideration cock’s art had been thoroughly covered
Where once lumbered the earnest Hol- if you still can’t get tickets for either. in documentary — in recent years alone
lywood docudrama, there now flour- On Apple TV+ now we’ve had Kent Jones’s Hitchcock/Truf-
ishes a fleeter beast — the flip fictional- faut and Alexandre O Philippe’s 78/52,
ised exposé. It’s a painless, sugar-coated about the Psycho stabbing scene.
approach to complex topics, and equally But Cousins offers a novelty, a film
effective — some would argue, equally “written and voiced by Alfred Hitch-
superficial — whether it tackles eco- cock”, as the credits cheekily announce.
nomics (The Big Short), politics (Vice) or Not quite: the premise is that Hitch is
true crime (American Hustle). Now The giving a wry masterclass on his art,
Beanie Bubble examines the shenani- voiced by impersonator Alistair
gans behind a singular phenomenon in McGowan, who offers a fairly uncanny
recent US commerce: a line of pocket- approximation (despite the faintest
sized soft toys that in the late 1990s overtone of Michael Caine with ill-
became as avidly sought after as tulips fitting dentures).
in 17th-century Holland. Built ingeniously around six themes
Directed by Kristin Gore, who — escape, desire, loneliness to name
scripted, and Damian Kulash, The three — the film can’t be faulted on com-
Beanie Bubble recounts the bizarre trad- prehensiveness. Crammed with clips, it
ing boom in Beanie Babies, the plush has all the classics, but also the less dis-
animals made by the Ty toy company. cussed greats, plus an extract from the
Based on Zac Bissonnette’s book The documentary German Concentration
Great Beanie Baby Bubble: Mass Delusion Camps Factual Survey (“Sometimes,”
and the Dark Side of Cute, the film sug- says Hitchcock ruefully, “you have to
gests that the craze was a classic exam- see with your own eyes.”). While sea-
ple of American something-for-nothing soned Hitchockians may find nothing
fever — it ends by making comparisons radically new here, this is an insightful,
with cryptocurrencies and NFTs. entertaining study with a light touch.
While company founder Ty Warner In UK cinemas now
(Zach Galifianakis) was the public face
of the business — and, the film contends,
a neurotically clueless self-promoter —
the film is really about three women and
their role in the Babies’ success.
Renamed for this account, the women
are Robbie (Elizabeth Banks), who
becomes Warner’s domestic and busi-
ness partner; later fiancée Sheila (Suc-
cession’s Sarah Snook), whose young
daughters help inspire the toys; and
Maya (Geraldine Viswanathan), a
college-age employee who becomes the
company’s under-appreciated and
underpaid marketing genius.
The female leads are terrifically zest-
ful and nuanced, with Viswanathan
especially striking as the clued-up
young powerhouse behind the toys’ suc-
cess. The broad comic content comes
from Galifianakis as a needy, narcissistic
man-boy with big glasses, slicked coif Top: documentary ‘My Name is Alfred Hitchcock’ is a study of the director.
and luxuriant bulk, a look that suggests Above: Laurent Lafitte and Blanche Gardin in ‘Everybody Loves Jeanne’
Friday 28 July 2023 ★ FINANCIAL TIMES 23

FT BIG READ. MINING

The Asian country is making sweeping reforms in the hope of setting off a years-long resources boom.
Its push for western investment also holds the promise of a buffer against Beijing and Moscow.
By Edward White

T
hirteen-hundred metres To address this, the European Bank
beneath the vast Gobi for Reconstruction and Development,
Desert, the heat, dust and with backing from Australia, has helped
a sense of claustrophobia establish a national geoscience database
are unshakeable after a for Mongolia. However, that database
rapid trip down a mine shaft in a freight needs to be filled with new geological
elevator known as “the cage”. surveys. Local industry leaders are
Yet Ganbat Tuvshinbat, a local min- quietly lobbying Oyun-Erdene’s admin-
ing engineer, grins broadly. “This is the istration to spend about $200mn to pay
warmest place in Mongolia,” he says of a for the modern surveys, which they
country where the average temperature believe are needed to reduce risk and
is below zero. “Here you can experience attract private-sector explorers.
summer all year round.” Clark, of the Australian Space Agency
Tuvshinbat and his employer Rio who also sits on the Rio board, says
Tinto, the Anglo-Australian multi- Mongolia must ensure its mining-
national, have reason to smile. Towards focused officials are properly resourced,
the end of this decade, the company adding that agencies responsible for
plans to produce about half a million controlling exploration and mining
tonnes of copper from the Oyu Tolgoi permits should be considered a “vital”
mine each year, enough of the metal national capability.
to help build 6mn electric vehicles. Mongolia’s potential has been likened
When the underground mine is fully to South Korea’s evolution into a tech-
operational, it will be the fourth biggest nology manufacturing powerhouse.
copper project in the world — a boon Dominic Barton, the chair of Rio Tinto,
for the Mongolian government, which notes that in the 1970s South Korea had
holds a 34 per cent stake. “very little energy supply . . . no indus-
Despite setbacks and delays, Oyu Tol- trial market whatsoever, and very little
goi — already the biggest foreign invest- access to capital”. Barton, a former sen-
ment in the Asian country’s history — is ior McKinsey executive and Canadian
emblematic of what the Mongolian Peo- diplomat in China, argues: “There is
ple’s party government sees as its path every reason and more to believe Mon-
to prosperity. Luvsannamsrain Oyun- golia can go through the same transfor-
Erdene, Mongolia’s Harvard-educated, mational change in the next 30 years.”
reformist prime minister, wants west-
ern mining groups to tap the country’s Squeezed by superpowers
vast deposits of copper, uranium and Yet as Mongolia reaches out to the west
other critical minerals essential to the to boost growth, it must also avoid
world’s fight against climate change. flaring rising geopolitical tensions.
Much is at stake for the country of This careful navigation was apparent
3.4mn people which only emerged from on June 27, when Oyun-Erdene met
single-party socialist control in the Xi Jinping, China’s president, in Beijing.
1990s. If Oyun-Erdene is successful, His visit resulted in agreements to triple
the developing country will enjoy a the capacity of an increased number of
years-long resources boom. The govern- China-Mongolia border crossings and
negotiations over access to the port at
500 km Tianjin, south-east of the Chinese
RUSSIA capital. On the same day, Jose Fernan-
dez, the US under secretary of state for
the environment, signed a memoran-
dum of understanding with Mongolia to
Ulaanbaatar
jointly work on securing a supply chain
MONGOLIA for critical minerals.
Oyu Tolgoi mine The simultaneous deals with the US
and China highlighted the Mongolian
Beijing leader’s pragmatic approach, diplomats
CHINA
Tianjin say. This strategy has also included
©Mapcreator.io | OSM.org abstaining from voting on UN resolu-
tions on Ukraine.
ment hopes to more than triple gross Leif-Eric Easley, a professor of inter-

Will Mongolia’s crackdown

domestic product from $15bn last year national studies at Ewha Womans
to nearly $50bn by 2030 and halve University in Seoul, says that Mongolia’s
Mongolia’s poverty rate to 15 per cent. “best bet” to hedge against Moscow and
There is another goal, too. Investment Beijing is to attract investment. “The
from the west holds the promise of giv- key variable for Ulaanbaatar is credible
ing Ulaanbaatar a much-wanted buffer democratic leadership that signals to
against Beijing and Moscow. The land-
locked nation is highly dependent on its
only two neighbours: China accounts for
84 per cent of Mongolian exports, such
as copper and coal, and Russia provides
about 30 per cent of its imports, includ-
on graft unlock its riches? diplomatic partners and international
organisations the genuineness of
domestic reforms,” he says.
In Ulaanbaatar, there is a palpable
sense of urgency. Three years of trade
restrictions along the 4,630km border
ing all its petroleum products.
“Mongolia is still trying to safeguard
Mongolian
leader
reminder of the broken promises of
earlier mining booms.
for the appointment and dismissal
of judges, requirements for public
was taken as proof positive of renewed
interest in Mongolia’s resources.
‘The key with China during the pandemic
battered the already-fragile Mongolian
its democracy because we have a very Luvsannamsrain A month later, speaking in Ulaanbaa- information disclosure, and protection Underpinning their attention is a variable is economy. Then the Russian invasion of
difficult geographical and geopolitical Oyun-Erdene tar, Richard Buangan, the newly arrived for whistleblowers as well as changes to looming shortage of the resources Ukraine dashed any hopes of a strong
situation,” Oyun-Erdene tells the Finan- sees the US ambassador, was unsparing when he the governance of state-owned enter- needed for the world’s transition to credible recovery with headline inflation soaring
cial Times, urging foreign investors to
“pay close attention”.
country’s vast
deposits of
summed up Mongolia’s prospects:
“Capricious, non-transparent, unpre-
prises and controls over the financing of
political parties.
cleaner energy systems, including
electric vehicles, and the infrastructure
democratic to an average of 15 per cent last year.
The start of underground mining at
Oyun-Erdene is cognisant of the rare copper, uranium dictable and corrupt application of laws All of this shows Mongolia is “moving needed for wind and solar energy. leadership Oyu Tolgoi in March is expected to help
opportunity at hand. Climate commit- and other and regulations make Mongolia unat- in the right direction”, insists Nyambaa- The International Energy Agency says boost Mongolia’s economy to growth of
ments are fuelling a historic transition critical minerals tractive for investors and challenging tar. “The revelation of previously that over the past five years, the market
that signals 5.2 per cent this year, up from 4.7 per
to clean technologies, sparking an as a path to for importers and exporters.” hidden details, such as licensing proce- size for minerals vital to the energy to partners cent in 2022.
intense global race to secure access to prosperity In response to the criticism at home dures, land allocations and concessional transition has doubled to $320bn. Yet The World Bank has warned Mongo-
minerals. Locations once considered too FT montage/Bloomberg and abroad, and driven by a resolve to loans incited anger and frustration demand for critical minerals including that lia that fiscal discipline remains essen-
remote or too risky are now in play.
To win over investors, however, he
avoid taking on international finance
loans, Oyun-Erdene has prioritised
among citizens,” he says. “We have
come to the belief that the government
rare earth elements, lithium and cobalt
are expected to surge by as much as
domestic tial in the short term. In years to come,
however, sustainable growth and resil-
must convince them that the days of making Mongolia investable at the heart should reduce its involvement in 600 per cent over the coming decade. reforms are ience to future external shocks will
convoluted policymaking and deeply of his economic agenda. He has tapped numerous business sectors.” Demand for copper is forecast to double hinge on the results of the government’s
entrenched corruption are over. He his right-hand man, justice minister Oyun-Erdene’s plan also hinges on the to about 50mn tonnes annually by 2035 genuine’ reforms. “They need foreign invest-
also needs to counter criticism from Khishgee Nyambaatar, to spearhead an country’s ability to forge new connec- and, according to the IEA, annual ment,” says one foreign diplomat. “They
environmentalists and a discouraging aggressive anti-corruption campaign. tions to the outside world. At its closest investment in nuclear energy will also would prefer it was western.”
lack of modern geological data. Seventeen people have been extradited point, Mongolia is nearly 700km from have to triple to about $125bn over the Yet Oyu Tolgoi’s own chequered past
The prime minister has swiftly set to Mongolia to face investigation and the the ocean. The prime minister points coming five years. highlights the rocky road ahead. The
about cleaning house to present his government has asked Interpol to issue out that transporting goods by air is at Megan Clark, a minerals expert and copper deposit was considered one
country to the western mining industry red notices for a further 92 individuals. least 100 times more expensive than advisory board chair for the Australian of the world’s most exciting minerals
as a secure investment destination: Oyun-Erdene has also changed the by sea. Mongolia, he says, is working Space Agency, says Mongolia is discoveries in 2001, but its development
sweeping constitutional and judicial way politicians are elected. Constitu- to secure routes for its exports “extremely well placed” in terms of its has been marred by billions of dollars in
reforms, a crackdown on graft and an tional reforms have increased the through China. mineral endowment. She points to cost overruns, years of delays and, at
overhaul of the policies and regulations number of legislators from 76 to 126 and Amid concerns that tapping the strong copper, uranium and rare earths times, a toxic relationship between
governing the resources industry. “Our established a mixed-member propor- country’s mineral wealth will leave its potential as well as the possibility for Ulaanbaatar and Rio, especially under
main goal is to improve transparency,” tional system, with 78 constituent mem- finances exposed to commodity price “new niche industries” to emerge in Jean-Sébastien Jacques, the chief execu-
he says. “After that, we can discuss bers and the remaining elected from fluctuations, there is also a push to move high-tech materials processing. tive from 2016 to 2020.
investments from abroad and which party votes. The new system, which is higher up the value chain: from mining Supporters of nuclear energy are His replacement, Jakob Stausholm,
countries to co-operate with.” akin to those in Germany and New Zea- to processing and refining minerals, as equally bullish about the country’s has worked to smooth over tensions,
Oyun-Erdene is not the first Mongo- land, is intended to increase oversight of well as building solar and wind projects potential as a long-term supplier to the brokering a deal to write off debts of
lian leader to have this vision. The ques- the cabinet and provide greater civil in the Gobi to export power to China. nuclear power industry. Olivier Thou- $2.3bn owed by the Mongolian govern-
tion is: can he be the one to realise it? society representation. Oyun-Erdene, who is seeking re-elec- myre, a representative for the French ment. Rio took greater control over
New rules are also being established tion in 2024, must also keep the public group Orano, which is developing the operation from Canadian miner
Cleaning house onside. To that end, the government is Mongolia’s first uranium mine, says: Turquoise Hill.
Oyun-Erdene was halfway through his As Mongolia’s ... there is hope that drawing up plans for a sovereign wealth “I believe that it is a big source of diversi- Rio points out that for the past dec-
first term in office when he faced his big- fund to ensure resource revenues are fication for Mongolia.” ade, about 10 per cent of the Mongolian
gest test. In December 2022, he left the
economy emerges foreign investment channelled towards health, education In presentations to investors about government’s revenue has come from
state palace and stepped into sub-zero from the pandemic ... will help fuel it and economic growth. “We believe that the potential in Mongolia, Rio execu- Oyu Tolgoi. However, an acute point of
temperatures to face Mongolia’s biggest Annual GDP growth (%) FDI ($bn) as the revenue coming from the mining tives tout a “vast mineral wealth tension remains around the timing of a
protests since the country’s democratic 15 6 sector increases, then the people’s predominantly untouched by modern dividend payment from the project,
revolution three decades ago. support will also increase,” he adds. exploration and extraction methods”, which could still be years away and
The demonstration was sparked by 5 and that only 4 per cent of Mongolia’s depends, in part, on the price of copper.
the release of official records that con-
10 Critical minerals landmass — about the size of Alaska — is Most of the Oyu Tolgoi saga predated
4
firmed what many citizens gathered at While many say it is too soon to judge held under exploration licenses. Oyun-Erdene’s time in office, but
the capital’s Sükhbaatar Square already 5 3 the stickability of the prime minister’s In reality, mineral explorers coming the prime minister says the mine’s
knew: corruption was rife among the 2 reforms, there are signs that Oyun- to Mongolia are quick to discover reams problems have underscored the critical
country’s state-owned coal industry. 0 Erdene’s message is cutting through. of Soviet-era land surveys that targeted importance of transparency and
Billions of dollars had been stolen, 1 Hundreds of investors, miners and coal and gold but only at relatively accuracy when it comes to feasibility
including by members of parliament. diplomats joined in celebrations at shallow depths. So, while Mongolia is studies and financing plans: “We’ve
-5 0
The fury revealed not only the degree Mongolia’s annual Naadam festival on marketed as a rare greenfield opportu- learnt our lessons,” he says. Now,
2012 15 20 22 2012 15 20 22
of public alarm over endemic graft and July 10 at the lavish Shangri-La hotel in nity, the lack of exploration data is a Oyun-Erdene just needs western
Sources: Government of Mongolia; IMF
abuse of power — it was also a bitter downtown Ulaanbaatar. Their presence problem for the industry. investors to believe him.
24 ★ FINANCIAL TIMES Friday 28 July 2023

The FT View
Time to retire the ‘emerging markets’ label
changed vastly since the term became to be punctuated by rising protection- The breakneck a country or thematic basis could help
Clumping the developing popular. For instance, the breakneck ism and friend-shoring, is set to have growth of investors to unlock higher returns and
growth of China and India makes them more differentiated impacts. enable developing countries to obtain
world together obscures particular outliers when compared to This variation makes the EM moniker
China and India
more capital. For that, access to reliable
risks and opportunities fellow EMs. Recent shocks have also increasingly unfit for macroeconomic makes them country-level data will be important.
underscored the economic diversity and investment analysis. The broad- particular There have been numerous attempts
Humans have an innate desire to sort across EMs. On the policy front, central brush label can obscure risks and outliers to popularise other groupings. The Brics
and categorise the world around them. banks in emerging Europe and Latin opportunities. For instance, the rising nations — Brazil, Russia, India, China
The economist Antoine van Agtmael is America were particularly aggressive narrative around EMs’ economic resil- and South Africa — are perhaps the
no exception. In 1981 at the World Bank, in raising interest rates to get ahead of ience — with fewer than anticipated most famous. Then there are “emerging
he coined the phrase “emerging mar- inflation in the aftermath of the pan- debt defaults in the aftermath of the and growth leading economies”, or
kets” as a more aspirational alternative demic and the war in Ukraine. Mean- pandemic — risks playing down the Eagles. Few have proved useful, given
to the term “third world”. The label while, some EMs have prudently built pockets of vulnerability that still exist. large economic differences in terms of
has since become synonymous with a up foreign currency reserves and issued Turkey has a dearth of FX reserves, pri- trade, growth and financial openness.
hotchpotch of fast-growing nations con- more home currency debt making them vate sector debt servicing costs in Brazil Definitions also vary. Investment indi-
sidered to be riskier investment pros- less susceptible to crisis dynamics. and China are concerning, and Tunisia ces focus on market access metrics,
pects than “developed markets”. While Volatile commodity markets have and Pakistan are on the brink. while economic bodies prefer macr-
it may have been a successful rebrand, also distinguished net energy exporters Financial markets also still rely on the oeconomic thresholds.
for economists and investors the catch- from importers and those with critical EM-DM dichotomy or other regional The developing world does not fall
all term has become unhelpful. reserves. And tensions between the groupings. But investors will want expo- neatly into a single category. And, in a
Emerging markets, which account for west and China are having differing eco- sure to countries likely to benefit from global economy hit by multiple crises
the bulk of the world’s population, are nomic impacts too, depending on geog- new trends, including the scramble for and geopolitical upheaval, there are
not a homogeneous group. Rather, they raphy and diplomatic relations. Indeed, critical minerals and “China plus one” even greater upsides for economists
consist of dynamic and highly diverse though trade liberalisation since the supply chain strategies. Indeed, disaggre- and investors that can differentiate
countries at different stages of develop- 1990s helped most EMs to take off, the gating EM bonds, equities and alternative between them. Perhaps it is time to
ft.com/opinion ment — and their composition has next phase of globalisation, which looks assets, such as infrastructure projects, on retire the EM label altogether.

Opinion Data Points Email: letters.editor@ft.com

Letters Include daytime telephone number and full address

Corrections: corrections@ft.com
If you are not satisfied with the FT’s response to your complaint, you can appeal

Net zero must not to the FT Editorial Complaints Commissioner: complaints.commissioner@ft.com

become the new UK’s leading role in aviation emissions policy hit by Brexit
partisan divide Cait Hewitt and Henry Mance made
some interesting points about aviation
aviation climate change team when she
took up her Aviation Environment
AEF and other civil society groups.
Most notably, the UK was the leading
Organization’s committee on
environmental protection in 2004,
sustainability in their conversation Federation role 16 years ago. In my advocate for climate change mitigation known as CAEP 5 — a meeting which I
(The Henry Mance Interview, July 24), second post as a senior civil servant measures in the EU, along with the chaired, in a neutral capacity.
John Burn-Murdoch although her criticism of the planning
system is somewhat churlish given that
(2001-04), I was head of DfT’s aviation
environmental division, which was
Dutch, Swedes, Swiss (who were part of
the EU effort) and European
One of the inconveniences of the
UK’s exit from the EU is that it is now
the UK system appears designed to already a well-established unit in the Commission officials. The UK and EU harder to influence EU policy and no
make any new significant department. The division had separate fought long and hard against longer possible to play our previous
Britons are very supportive of green policies, with infrastructure as difficult and costly as teams working on aircraft noise, air opposition from pretty much every leading role in European efforts to
Conservatives often as green as the centre-left elsewhere possible — hence no new full-length quality impacts and climate change other corner of the globe, led by the US, shape global policy on aviation
runway in the London/south-east area mitigation, as well as support from and managed to make decent progress emissions reductions.
Net support for green policies in western nations, by party or candidate (% points) since the second world war. scientific, economist and legal on a range of environmental measures Graham Pendlebury CBE
A ban on the sale of new petrol and diesel cars after 2030 However, it is not true that the colleagues. We had regular and at the fifth triennial meeting of the (Former Senior Civil Servant, DfT)
UK AfD CDU Con Lab Department for Transport had no constructive discussions with the International Civil Aviation Surrey, UK
Germany SPD
US Rep Dem
France Le Pen Macron
−75 0 +75 Deterrence tactics drive Diversity initiatives will Technology can play key
A tax on flights linked to how frequently people fly
UK Con Lab
tensions in Taiwan Strait unlock start-ups’ potential role in motivating workers
Germany AfD CDU SPD Dealing effectively with the Chinese The article discussing tax relief for The article by Andrew Hill (“UK lags
US Rep Dem military’s escalation in the use of the UK’s regional start-ups (FT.com, behind G7 peers on productivity due to
France Le Pen Macron
“grey zone” tactics requires a clear July 24) is right to call for boosted ‘complacency’”, FT.com, July 18) raises
Tripling government investment in renewables understanding of the dynamics driving venture capital investments outside some well-founded questions about
Lab
UK Con it and the essential elements involved London. Yet, the article leaves diversity the state of productivity in the UK.
Germany AfD CDU SPD in countering it. Unfortunately, initiatives as a footnote, undermining However, the article fails to highlight
US Rep Dem
France Le Pen Macron Kathrin Hille’s and Demetri their crucial role in unlocking the full the potential of technology to engage
Sevastopulo’s analysis falls short on potential of the start-up landscape. workers and improve productivity.
Source: FT analysis of data from YouGov

I
both counts (The Big Read, July 24). The Treasury committee report Improving productivity requires
The US, China and, to some extent, sheds light on the concerning situation a comprehensive approach that goes
t’s not often these days that one new wind farm applications were sub- Taiwan are locked in an interactive, for women entrepreneurs in the UK. beyond adjustments made solely by
thinks of Britain as having advan- mitted each year, but that had plum- escalating dynamic marked by a Failing to invest in the potential and managers. It’s a complex issue without
tages over other developed coun- meted to single digits by 2016, and has myopic focus on military deterrence skills of half the population puts a quick-fix solutions. Information and
tries, and less often still that those not recovered. Similarly, after the over credible levels of reassurance. ceiling on the growth prospects of deskless workers have different
advantages stem from unity withdrawal of government support for China’s escalating military threats female founders, as well as holding motivations that require different
across a famously divided electorate, solar, new applications fell from 488 in against Taiwan are — to a great extent back the economy at large. engagement methods to improve
but for some time now support for the 2015 to just 10 two years later. — a reaction to what Beijing regards as The US and Chinese navies have been Start-ups that prioritise gender- productivity. For example, deskless
pursuit of net zero has been broader Despite solar and wind enjoying various US and Taiwanese efforts to more active in the Taiwan Strait balanced boards and inclusive workers are often motivated by
and deeper in the UK than any peer very strong public support at the time, establish the permanent separation of decision-making consistently a desire for greater autonomy,
country. And it’s not just flimsy sup- both were casualties of David Cam- the island from China. They are outperform their peers; success stories whereas information workers are
port for vague concepts, but for real eron’s desire to “get rid of all the green deterrence actions, which prompt Central banks should ease from the Nordics and eastern Europe more motivated by opportunities
policies, including those that would hit crap”. This bid to bring down house- further destabilising military and should serve as a beacon for what can for promotion.
people in their wallets or otherwise hold energy bills had the opposite diplomatic deterrence behaviour by fears over CBDC privacy be done in a truly diverse tech space. As Anthony Impey of Be the Business
impact their daily lives. effect, with the resulting poorly insu- Washington and Taipei, in an endless While Eswar Prasad is right to highlight We also, as VCs, need to do better in points out, businesses must delve into
The current implementation of Lon- lated homes and over-reliance on gas escalatory spiral. This dynamic is concern that retail central bank empowering women in our industry. behavioural science to understand
don’s ultra low emission zone has adding £9.8bn to UK energy bills over the key to understanding increasing digital currencies could be used for This means more women at general what motivates their workforce and
proved unpopular among many of the the past year. Today Rishi Sunak is tensions in the Taiwan Strait, not “surveillance purposes” (Opinion, partner level, and more women fully genuinely affects productivity. Armed
city’s drivers, but Britons are solidly in making the same mistake, only the a possible factor to be mentioned July 25), there are three key ways in included in leadership at funds. The with these insights, they can deploy
favour of the planned ban on the sale stakes are higher and the outcome in passing. which central banks can mitigate the recent European Women in VC report innovative technologies, from mobile
of new petrol and diesel cars from may well be worse for all involved, The authors make only a passing privacy risks associated with CBDCs. said female general partners controlled apps to digital signage to enhance
2030 — something that cannot be said starting with his party. reference to such possible motives. The First, central banks must maintain a less than 10 per cent of total assets employee engagement, tailored to each
for the publics of France, Germany or Thirty per cent of current Conserva- bulk of their article is spent defining design framework that upholds data under management in Europe — yet team or business section.
the US. More striking still, support for tive supporters say that if Sunak the features of China’s growing grey anonymity. Although CBDC would be a accounted for 15 per cent of GPs. Addressing the challenges of
this policy is higher among British waters down the net zero targets it zone threats and the calls for greater liability of the central bank, it doesn’t By incentivising funds to address complacency and poor productivity is
would put them off voting Tory at next levels of military deterrence by follow that the central bank would bias in their decision-making and among the UK’s most pressing issues. If
year’s election. The environment is (primarily Taiwan) observers. They have access to user data. Under an ensuring firms are evaluated on return the UK continues to fall down the list of
The public, including simply a much bigger issue for voters
in 2023 than it was in 2013, and former
should have framed China’s behaviour
in this fundamentally interactive
intermediated model, for example,
customers would hold accounts or
on investment and growth potential,
we can create a win-win scenario for
productive countries, this could have
significant knock-on effects in terms
Conservative voters, is Tory voters are disproportionately context from the start, not merely wallets managed by private providers, investors and founders alike. of foreign investment levels or the
fully behind ambitious more likely to say they’ll switch to allude to it as a possibility. with data protection in line with Ekaterina Almasque number of new start-ups being
Labour if they think the government is The authors fail to grasp that existing banking solutions or better. General Partner, OpenOcean, founded, ultimately making the
green growth not doing enough on climate. Being effective deterrence requires not only Second, central banks should London W1, UK country less innovative.
seen as lackadaisical on global warm- well-defined military capabilities and a examine novel technology solutions to It’s time to transcend traditional
Conservatives than even among the ing also risks exacerbating the party’s convincing willingness to use them, but allow CBDC users to enjoy as much Netanyahu is being held management methods and embrace
centre-left in France and Germany. problem with millennials. also credible signals of an intention to “cash-like” privacy as possible. The technology intelligently. By replacing
It’s a similar story with proposals to But, more important, making green avoid using those capabilities to public should have absolute confidence captive by extremists complacency with innovation,
tax frequent flyers, or to triple invest- policies into a wedge issue will apply a threaten the most vital interests of that their data is confidential. History demonstrates that you businesses can forge a path towards
ment in renewables. The British public brake just at the point when the UK’s your adversary, in this case Taiwan’s Technologies such as zero-knowledge should never compromise with or lasting productivity improvements.
overall is much more supportive energy transition is most in need of future unification with China. The proofs and secure enclaves can accommodate extremists because they Luke Hubbard
than those of other wealthy western thrust. The construction of a huge off- authors do mention that some analysts technically enforce privacy while are never satisfied. They will never give Chief Technical Officer
nations, and both Labour and Con- shore wind farm that could increase cite the need for (undefined) protecting system integrity. up their maximalist demands. Screencloud, Bangkok, Thailand
servative voters rank among the Britain’s electricity generation by assurances as a critical part of any Finally, the central bank must This is a lesson that Prime Minister
greenest of all major parties’ backers. three per cent has been put on pause. strategy to counter China. But this is first and foremost embrace its Benjamin Netanyahu has failed to Ireland has enjoyed free
This public support has been Britain had only 2.5 heat pump sales done at the very end of the piece, again responsibility to service citizens in its learn (“Knesset sets judicial reform in
reflected in policy. Britain’s govern- per 1,000 households last year, fewer only in passing. design of CBDC. It is not beholden to motion”, Report, July 25). He is being protection by Nato forces
ment was the first in the G7 to commit than all major European countries and No level of military deterrence, by shareholders but to us, the people. This held captive by ultrareligious and What Dónal Denham doesn’t mention
its net zero ambitions to law, and there far behind the target of 21 installations either side, will reverse the current is an opportunity for a best-in-class nationalist parties that provide the is that for too long successive Irish
were rapid rollouts of solar and wind, per 1,000 by 2028. Government- downward spiral over Taiwan absent solution that sets the standard for all seats in parliament needed for him to governments have been happy to enjoy
alongside the phasing out of coal. funded energy efficiency installations credible assurances that Washington payment offerings for years to come. form a coalition government. He has the protection of UK and Nato defence
Between stagnant wage growth and fell to a record low. remains committed to its “one China” The ability to hold cash and spend it clearly lost control of his government forces without making an equitable
flatlining productivity, the 2010s are Solving these problems takes green policy, and Beijing remains committed without authorisation is an important with extremists now in charge of contribution to the cost (“Irish
rightly considered a lost decade for ambition, but it will pay dividends for to the search for a peaceful resolution source of personal privacy, so it’s dictating government policy, as neutrality move creates UK
Britain, yet amid the gloom was an energy security, household budgets of the issue. entirely natural for people to be wary illustrated by the passage of the bill to conundrum”, Letters, July 24).
under-appreciated success: in 2015, economic growth — and the planet. It The gradual erosion of this original of new technologies digitising this type restrict the use of reasonableness in Admiral Lord West of Spithead
the UK installed as much renewable would be wrong to interpret a close by- understanding underlies the kinds of of money. Open collaboration between judiciary rulings by the Supreme Court. House of Lords,
capacity as any peer country, and up election result and a poorly designed dangerous behaviour we now see in the central banks, regulators and This bodes ill for Israeli democracy London SW1A, UK
until 2017 it decarbonised its economy policy as Britons cooling on net zero. Taiwan Strait. Reporters on the Taiwan technology providers across both the as the ultrareligious and nationalist
at a faster rate than any peer country. The British public — including Conserv- situation need to recognise this reality public and private sectors will be key in parties seek to impose their vision on
But the green boom fizzled out. ative voters — is fully behind ambi- more clearly and put it at the centre of fostering the necessary consumer trust Israeli society, which is diametrically Correction
First, in 2015 the Conservative govern- tious green growth. Confident parties their writing. to make this transition credible. opposed to a secular democratic state
ment in effect banned new onshore and leaders would channel those sen- Michael Swaine Jack Fletcher with checks on government power that c The boss of P&O Ferries was involved
wind farms when they sharply tight- timents, not undermine them. East Asia Senior Research Fellow, Head of Policy and Government Relations are supported by the opposition. in firing 800 crew over Zoom, not the
ened planning restrictions in England. Quincy Institute for Responsible for Digital Currencies, R3 Steven E Cerier boss of P&O Cruises as incorrectly
Between 2008 and 2014, at least 50 john.burn-murdoch@ft.com Statecraft, Olney, Maryland, US London EC2Y, UK Forest Hills, New York, US stated in an article on July 27.
Friday 28 July 2023 ★ FINANCIAL TIMES 25

Opinion
Europe should not relax this summer — challenges await Poland can
achieve its goals
POLITICS
Leyen’s surprisingly powerful European
Commission, the “EU fix” has consisted
risk. It is with good reason that diplo-
macy with Tunisia’s unappetising gov-
mate to the heart of the Europ ean
project. A lurch to the right in the 2024
gees. But another challenge is even more
decisive in defining Europe’s future. with a more
of forward-looking investment in digital ernment has shifted into high gear. Nor European elections would put von der Before 2022, Brussels, Paris and Ber-
Adam
Tooze
infrastructure and the green energy
transition. Faced with the pandemic,
is it coincidence that Germany and Italy
are pushing a hydrogen pipeline that
Leyen’s formula in question.
Vox’s failure in Spain has for now
lin all preferred to hold Ukraine at arms-
length. Putin’s aggression has robbed
open approach
t h i s f o r m u l a u n i t e d E u ro p e a ro u n d offers development prospects for north allayed fears of a nationalist populist them of that option. Ukraine’s EU acces-
common borrowing. It has since been A f r i c a . E x t e n d i n g t h e Nex t G e n e r a - surge. But their challenge dragged the sion is now squarely on the agenda. It is
adapte d to me et Vladimir Putin’s tionEU investment agenda to the wider entire agenda of Spanish politics to the arguably the most daunting challenge
aggression in Ukraine, the challenge of Me d i t e r r a n e a n w o u l d b e l o g i c a l . A right. And the same appears to be hap- t h e E U h a s e ve r f a c e d . T h e € 70 b n i n Grzegorz
t moments of stress, the EU America’s Inflation Reduction Act and rational long-term strategy would envi- pening with the CDU in Germany under civilian and military aid currently under Kołodko
i nvo ke s Je a n Mo n n e t ’s escalating tension with China. pressure from the AfD. As the centre- discussion are just the beginning. Esti-
maxim that Europe will be Paradoxically, the very success of this r i g h t i n t h e E u ro p e a n p a r l i a m e n t mates of the eventual spending required
forged in crisis and will be
the sum of the solutions
strategy leads conservatives to imagine
Europe’s future lies in returning to a
Ukraine’s accession is showed in their abortive effort to sabo-
tage the nature restoration law, von der
run to more than €400bn for a state that
is not yet a member of the bloc.
adopted to address those crises. That is normality defined by fiscal rules dating arguably the most Leyen’s own party cannot be counted on One can imagine stretching the Green wenty-seven years ago, on
comforting when you are in the thick of back to the early 1990s. This is wishful daunting problem to support the green agenda in the face D e a l i nve s t m e n t f o r m u l a e ve n ove r July 11 1996, as Poland’s
it. But when you emerge from the state thinking. It may be complacent to say of farmer protest. Ukraine. But that does no justice to the deputy prime minister and
of emergency, as Europe seems to be so, but a repeat of the eurozone crisis of the EU has faced After the po pollitical invesesttment of the fundamental political decision that will finance minister, I signed
doing this summer, it forces the ques- the 2010s is not Europe’s main worry pastt fi
pas fivve year
earss, a rig
rightw
htwinging lur
lurch ch tha
thatt b e ne ce ssary to accommo date a war- the ac t of acce ssion to the
tion: what crisis comes next and what right now. No doubt a big banking or sion a managed migration programme, stunted Europe’s green programme battered nation of 38mn as an EU mem- OECD. This paved the way for my coun-
will be the solution? public debt crisis would find Europe’s backed by large public investment. would be tantamount to an identity cri- ber. The first decision will come in Octo- try to join the EU less than eight years
Sometimes this questioning of fiscal and monetary architecture want- The chances of realising that kind of sis for the EU. A further escalation of ber on Ukraine’s progress towards later. Where does Poland stand now, as it
Europe’s future is a distraction. To think ing. The fiscal rules and the role of the pragmatic sustainable dev eveelopment xenophobia at the same moment — with accession negotiations. If we apply Mon- prepares to take over the EU ’s six-
a lw ays i n t e r m s o f c r i s i s — a s i n t h e European Stability Mechanism remain thinking depends on not crushing Italy’s Giorgia Meloni rather than von net’s maxim, it is the solutions found or month rotating pres esiidency in January
anglosphere’s endle ss scepticism contentious. But bond markets are calm Europe’s economy with arbitrary and der Leyen as the champion — is a very not to the Ukraine crisis that will define 2025? We held this prestigious position
t o w a r d s t h e e u ro — u n d e re s t i m a t e s and Europe weathered the US and Swiss decades-old fiscal rules. It also depends ugly prospect. the EU for the foreseeable future. for the first time in 2011, but left no last-
resilience. But, sometimes, it is pre- banking crises this year well. on preserving a political balance. It was In the ele c tion to the parliament in ing trace on the process of European
cisely the right question to ask. A n e s c a l a t i n g re f u g e e c r i s i s i n t h e the centrists’ political victory in 2019 2024, Europe’s voters will make an The writer is an FT contributing editor and integration. How will matters turn out
S i n c e 2 0 1 9 , u n d e r Ur s u l a vo n d e r Medit diter
erran
raneean is a big bigger
ger imm
immeedia diate
te that allowed Brussels to promote cli- important choice on climate and refu- writes the Chartbook newsletter next time?
With national elections due later this
year, we do not yet know who will be
governing Poland in 2025. But we do
Efi Chalikopoulou
know a great deal about the views of the
rightwing Law and Justice (PiS) party,

Fear and which at present holds power. President

Andrzej Duda believes that Nato’s east-
ern flank needs further strengthening,
so “more United States in Europe, more
European Union in the United States” is

loathing in
de sirable. Prime Minister Mateusz
Morawiecki likewise says that strength-
ening the transatlantic community “is
the most imp ortant task of our [EU]
presidency”. This approach does not
bode well.

US education Poland doesn’t contribute to world

histor
his toryy, but the EU do

not con
confus
fusee the EU
doees. To make
most of the Polish presidency, we should
EU’’s resp spons
many of which are primarily economic
make th

onsibi
ibilit
litie
thee

iess,

in nature, with those of Nato, which is a

military alliance. In this era of growing
Hispanic families moved in — because of global confrontation, however, what we
SOCIETY their racism and a fear of crime and c a n d o i s m a ke a p o l i t i c a l a n d d i p l o -
falling house prices. matic eefffort ttoo een
nsure tth he E EUU aan
nd tth he
Gillian Instead, the reports suggested white
Tett parents were pulling their offspring out
of public schools in these suburbs
because of fears they would be outper-
The nation’s standing as a
formed by Asian-American children. liberal democracy with an
At the time, these politically sensitive independent judiciary has
nother week, another wave tales were downplayed by local officials;
of bitter controversy about Steve Rowley, a Californian school suffered damage since 2015
American education. Four superintendent, insisted that there was
weeks after the Supreme “relatively little” factual proof of such namely racism, crime and house prices h i g h - S E S d i s t r i c t s, b u t d o n o t b o o s t considering race in college admissions). larger Euro-Atlantic system competes
C o u r t s p a r ke d f u ro re b y flight . But this m moonth a ttrrio ooff econo- — do not se em to b e to blame. High most measures of tes estt scores for white Second, the saga also underscores peacefully with the Euro-Asian one. The
banning affirmative action in university mists — Leah Platt Boustan, Christine socio-economic status (SES) areas have students,” the authors note. “The learn- how the racial angst gripping American E U i s a n i n a l i e n a b l e p a r t o f b o t h sys -
admissions, the education department Cai and Tammy Tseng — published the low crime and high house prices. And ing of white students app ears unaf- universities starts at a young age, since tems, a point that has obvious geopoliti-
opened a civil rights investigation into first extensive, data-driven study of the while separate research by experimen- fected [by immigration] but the relative high school rankings shape admissions. cal implications.
Harvard University’s admission policy. issue. And this concludes that the tales tal psychologists suggests white families performance in the class for the average And that leads to a third point: it is During the eight years that PiS has
This followed allegations that a prefer- of “white flight” were indeed true. do sometimes see Asian-Americans as w h i t e s t u d e n t wo u l d f a l l w i t h A s i a n hellishly difficult to create a “fair” and held po pow wer, Poland’s standing as a lib-
e n c e f o r t h e re l a t i ve s o f a l u m n i a n d Most notably, after crunching popula- “a foreign cultural threat” in other US entry . . . raising parental concerns “diverse” educational system when eral democracy with independent insti-
donors discriminate s against black, tion, economic and school enrolment l o c a t i o n s, t h e e c o n o m i s t s s e e l i t t l e about competition.” smart parents are so adept at arbitrage. tutions, n nootably the jju udiciary, h haas ssu
uf-
Hispanic and Asian applicants. data in high so cio - e conomic status evidence of overt hostility in Cupertino. This is unlikely to elicit much Of course, in theory, everyone should f e re d d a m a g e . B u t t h e e c o n o m y h a s
Cue a wave of parental — and political Californian suburbs between 2000 and Instead, they point to education as a sympathy from the wider American be delighted by super-smart children of flourished. Gross domestic product per
— angst that will undoubtedly intensify 2016, they argue that the arrival of each p o s s i b l e re a s o n f o r t h e f l i g h t : w h i t e public, given that the “fleeing” families any race in their public schools. But head, at purchasing power parity, is 40
as the next round of university applica- new Asian student was correlated with parents wanted to use public schools in are probably fairly elite — and white p a re n t s c a n a l s o s e n s e t h a t f u t u re per cent higher than eight years ago. By
tions loom, along with the 2024 presi- the departure of 0.6 white pupils. When other districts, where their children kids already have better educational competition for elite jobs will get more, this measure Poland ranks 40th in the
dential election. adjusted for demographic factors, “on could come top of the class, and thus outcomes than Hispanic and African- not less, intense — not least because world, after Estonia and before Portugal.
But if you want another perspective average, the arrival of one Asian student have more chance of entering California American families in California. separate inequality research shows the Yet there are better measures of the
on the saga, it is worth looking at a tale in a suburban school district leads to the universities, which emphasise class But this pattern is striking for at least wage premium for so-called “abstract socio-economic situation. In terms of
that has quietly unfolded over years in a departure of 1.5 white students”. They order in admissions. three reasons. First, it shows how con- cognitive” job, compared with routine the Human Development Index, Poland
different setting: public high schools in note this “rate of white flight is some- “Asian arrivals lead to test score fusing and unhelpful the “minority” tag cognitive occupations, has risen from is ranke ked d 34th, between Gre reeece and
Silicon Valley districts such as Cuper- what lower but not too dissimilar from gains for the full student body in these is today, since it is not always synony- 1.5 to 1.9 times in the past 50 years. Saudi Arabia. The inequality-adjusted
tino, where Apple has its headquarters. flight from black/Hispanic populations mous with disadvantage; economic dif- In that sense, then, the fac t that HDI ranks Poland 28th, just behind the
A l m o s t t w o d e c a d e s a g o, re p o r t s documented in different settings”. ferentials are more important. Indeed, this pattern erupte d in the suburbs US and ahead of Israel.
emerged there about so-called “white
flight” or the departure of Caucasian
Of course, this pattern could have
multiple reasons, not least because of
It is hellishly difficult to Asian-American plaintiffs initially par-
ticipated in the lawsuit that culminated
around the Apple headquarters is all too
symbolic. It is a foretaste of the tensions
There is no unanimity as to what is the
overriding goal of economic activity and
families. But this was not the type of wider problems in America’s public create a ‘fair’ and ‘diverse’ in last month’s Supreme Court ruling, that will keep poisoning the politics of society. Both current income and accu-
exoodus seen in the early to mid-20th
ex s c h o o l sys t e m . B u t t h e f a c t o r s t h a t system when smart parents since they felt universities were dis- American education for a long time. mulated wealth are only means to an
century, when white families fled neigh- sparked “white flight” from African- criminating against them. (Sixty-four end of life satisfaction. Using the Happi-
bou
bo urhoodoodss after African-American or American and Hispanic incomers — are so adept at arbitrage p er cent of Asian Americans opp ose gillian.tett@ft.com ness Index as a measure re,, Poland has
moved up over the past eight years from
6 0 t h p o s i t i o n i n 2 0 1 2 -1 4 t o 3 9 t h i n
2020- 0-222. With this rating, we are behind
Panama and ahead of Nicaragua.

NatWest saga shows running a bank is more of a high-wire act than ever So where is Poland in this rapidly
c h a n g i n g wo r l d ? T h e a n s we r t o t h i s
que stion is imp ortant , but the most
important aspec t is that things do
improve over time. Doubtless the situa-
h o u r s b e t we e n t h a t e n d o r s e m e n t a n d banks into the spotlight, not just s e x o f f e n d e r Je f f re y E p s t e i n w h i l e a t Finding top bankers means fishing in a tion, in terms of happiness, would be
Philip her abrupt departure were the signals NatWest. Its great rival, Barclays, which JPMorgan. Just the year before, the small pond, while Rose’s public defenes- even better if not for the often nasty
Augar from Number 10 and 11 Downing Street unlike NatWest does not have UK plc as Barclays board had investigated that tration — some of which has been p o l i t i c a l a t m o s p h e re c a u s e d b y t h e
t h a t h e r a p o l o gy a n d t h e b o a r d ’s a shareholder, is on its fifth chief execu- relationship and expressed full confi- unnec ecesesssarily vindictive — may cause quarrel between the ruling coalition and
response were not enough. Off she went. t i ve s i n c e t h e c r i s i s a n d t w o o f t h e m dence in their chief executive. But the some potential chief executives to think aspiring opp osition. The Happine ss
It is part of a pattern. Since the finan- h av e b e e n f o r c e d t o l e av e a f t e r t h e regulators carried on with their own twice, despite the financial rewards. Index also takes into account trust in
cial crisis first broke, three out of the authorities intervened. In 2012, Bob inquiry, took a different view and Staley Meanwhile her nemesis, Farage, is government and the extent of corrup-
he financial crisis of 2008 four chief executives at NatWest and its Diamond became a scapegoat for left to fight his corner. calling for Davies and the entire board to tion in p olitics and busine ss. In this
turned banking into a prered decessor RBS have left suddenly the industry-wide Libor interest-rate That’s a lot of big banking beasts to go. Both board and chair do have some respect, the situation has deteriorated
highly political business, after political intervention. The first to r i g g i n g s c a n d a l. W h e n t h a t s c a n d a l have stood down after official interven- q u e s t i o n s t o a n s we r b u t w h o l e s a l e under the rule of PiS. Perceived levels of
guaranteeing the sustained go was Fred Goodwin in 2008. He had broke, Diamond waived his bo bonnus but t i o n f o l l ow i n g i n i t i a l b o a r d b a c k i n g . change is unrealistic and unwise at an corruption have increased since 2014.
i n t e re s t o f g ove r n m e n t s driven the bank on to the rocks with an A more vigorous regulator, the politici- institution that is at long last financially I believe the upcoming elections in
and their arm’s length bodies. Especially overambitious growth plan and hoped sation of banking and more media inter- s t a b l e . I t a l s o a s s u m e s t h a t t h ey c a n Poland will be the most important in
in the UK, where the now discredited
light-touch regulation was once an
to stastay
ay on as par partt of a rescu scuee pla
not surprisingly given the mess the bank
plan n. But Such public defenestrations est have changed the dynamic for senior
e xe c u t i v e s a n d b o a r d s. U n d e r a n y
be replaced easily, an assumption
that should not be taken for granted
Europe this year. Poland is now some-
times viewed as a flawed democracy,
article of faith, the authorities have was in, the government required his may cause some potential circumstances, banks are complex busi- givevenn t h a t t h ey a p p e a r t o b e s e r v i n g w h i c h i s n o t w h a t I ex p e c t e d w h e n I
s t e p p e d i n w h e n e ve r t h e y s u s p e c t resignation as part of the state bailout. chief executives to think nesse
ne ssess to run wit with h man
manyy int interl
erloockin
kingg governments as well as shareholders. signed our OECD accession more than a
weak governance. This turns running His successor Stephen Hester patiently parts and financial risk management It is an uns unsatiatisfa
sfacctor
toryy sit
situat
uationion but quarter of a century ago. Before the elec-
a bank into a high-wire act where the s t e e re d t h e b a n k o u t o f t ro u b l e b u t twice about the role always looks easier in hindsight. But the the industry has only itself to blame tions that brought PiS to power in 2015,
r i c h r e w a r d s f o r s e n i o r e xe c u t i v e s made a sudden exit after five years, additional dimension of heightene d following decades of mismanagement. things were better.
a re a c c o m p a n i e d b y t h e r i s k o f ve r y apparently at then chancellor George the Barclays board wanted to keep him reputation risk and intense political It will only get the authorities off its back When making our choices in 2023,
public humiliation. Osborne’s bidding. His successor, New in po
posst. The authorities
es,, in this case in scrutiny makes solving a Rubik’s Cube a if its governance becomes as muscular let’s not make a mistake. Openness and
That is the context for this week’s Zealander Ross McEwan, succes esssfully the form of Bank of England governor doddle by comparison. as the government on which it relies pro-Europeanness are the best way for
enforced resignation of NatWest’s chief lasted the course but then came Mervyn King, would have none of it and NatWest’s latest mishaps now leave it in times of crisis. And that is perhaps Poland to achieve its most important
executive, Dame Alison Rose, just hours Rose and NatWest’s third government- the board was forced to change its mind. looking for a new chief executive as well the intended message behind the goals. This is the way to a better future.
after the board left her in post, deliver- induced exit in just 15 years. The Olym- In 2021, Diamond’s successor but one, as a new chair after Sir Howard Davies recent interventions.
i n g o n ly a re b u ke ove r h e r h a n d l i n g pic Games come round nearly as often. Jes Staley, resigned after Barclays’ regu- let it be known this year that he planned The writer is economics professor at Koz-
of the banking affairs of politician It is becoming quite a habit. The polit- lators
lat ors rep
eport
orteed on the wa
wayay Stal
taleey had to step down in 2024 . That’s quite The writer is the author of several books on minski University in Warsaw and a former
Nigel Farage. What changed in the seven i c i s a t i o n o f b a n k i n g h a s b ro u g h t a l l characterised his relationship with the some task for the bank’s head hunters. the City and Wall Street finance minister of Poland.
26 ★ FINANCIAL TIMES Friday 28 July 2023

Meta: extravagant Quest

Spending on servers and network assets has jumped at the social media group. Meta has big plans for
artificial intelligence and virtual reality and is attracting more users to its family of apps. But the metaverse
generates big operating losses and little revenue. Forecasts predict losses will continue for years to come.

Metaverse operating losses dwarf revenues Meta's server assets

Twitter: @FTLex
Reality Labs division ($bn) Balance sheet value ($bn)
40
Revenue Operating income
10 30
St James’s Place: off with an earlier clampdown.
The new consumer duty is less 20 Private debt capital:
call of duty helpful to the group. Given the vague 5
10
coupon clipping
legislation, much depends on the FCA’s
St James’s Place has a deeply ingrained enforcement. Early interventions will 0 0 Legacy private equity firms have been
sales culture. One would expect set the tone for SJP and the industry. 2018 2019 2020 2021 2022 Q1 2023 smart to jump into corporate lending.
nothing less of a wealth manager whose User numbers are still growing Rivals are thin on the ground.
life president Mark Weinberg set up -5
Meta family of apps monthly active users (bn)
Traditional banks are too constrained
such high-pressure marketing
operations as Allied Dunbar.
Emerging market bonds: 4 by regulation, market conditions and
politics.
A “consumer duty” that goes live at the beautiful south -10 3 Groups with challenged models that
the end of this month is forcing the take on expensive debt may be good
2
business to shift ground. The obligation Emerging market central bankers have -15 bets too. With the US economy strong,
is perplexingly vague. “Outcomes” are shown up western counterparts. The 1 immediate distress is unlikely.
heavily emphasised. Federal Reserve raised rates to their This week, iRobot borrowed $200mn
Yesterday, SJP announced modest fee highest level in 22 years on Wednesday. -20 0 from Carlyle amid a liquidity crunch.
cuts. There will be more to come. The Fed chair Jay Powell’s peers to the 2019 2021 2023 2025 2027 2030 2020 2021 2022 2023 In the most recent quarter, iRobot
Financial Conduct Authority appears south acted faster, unpersuaded by the FT graphic Sources: Visible Alpha; S&P Capital IQ; company revenues fell nearly 50 per cent. The
unsympathetic to the argument that a idea inflation was transitory. group behind the Roomba vacuum
fuller advice service needs fuller fees. The Central Bank of Brazil lifted How does Meta’s “year of efficiency” computing power is a priority across Meta is not alone in spending cleaner had already drawn a portion of
The UK retail financial services target rates a year before the Fed. square with pouring ever more tech. But Meta’s spending stands out. heavily to build new areas of an existing credit line. New cash from
industry is subject to cost-down Inflation in the country appears to be money into a lossmaking project with Over the same period, fellow digital business. Alphabet reported a $3bn Carlyle functions as bridge financing
pressures. SJP nevertheless charges tamed and rate cuts are expected soon. limited public appeal? The latest advertising group Alphabet also raised operating loss for Google Cloud last until an Amazon buyout, now held up
5 per cent upfront on its typically brisk EM bond investors are taking note. metaverse-related quarterly its property and equipment assets but year. Still, this pales beside Meta’s in regulatory reviews, can save the day.
sales of individual savings accounts. Inflation may fall faster than EM operating loss takes the bill to almost only by about two-thirds. near $14bn operating loss in Reality In return for its lifeline, Carlyle is set
It would be premature to say that the central banks cut rates, generating $43bn. By the end of this year, it Chief executive Mark Zuckerberg Labs. Efforts to monetise VR, to earn a floating interest rate starting
consumer duty will clip the wings of steeper real yields on local debt. could near $50bn. steered clear of investment, the including offering a monthly at as much as 15 per cent. If the loan is
this golden goose. But a little Emerging market bonds have been The real total is even larger. It metaverse and AI during his call with subscription service, have been poor. repaid early — a real possibility if
lightweight plucking is under way the best-performing fixed income could include the $2bn cost of buying investors on Wednesday. New app VR lacks a compelling game or social Amazon can acquire the company —
SJP is cutting annual product investments so far this year. That was virtual reality company Oculus in Threads and short video product Reels draw. There is no timeline for Carlyle could be owed between 1.3 and
management fees on bonds and reflected in recent results from 2014. were his priorities. breaking even. Operating losses will 1.75 times its invested capital. Should
pensions by 15 basis points to 85bp for Ashmore. The specialist asset manager Meanwhile, Meta is ramping up This could be because rebounding increase “meaningfully”, said Meta. the Amazon deal not close, part of a
investments that are 10 or more years added $1.1bn to assets under spending on the data centres needed digital advertising means investor At the start of this year, Zuckerberg termination fee that Amazon pays will
old. About 65,000, or 7 per cent of management thanks to investment to power artificial intelligence attention is more focused on growth said he would save money by cutting be contractually sent to Carlyle to pay
clients will get an immediate benefit. performance in June. But net outflows applications. Net property and than spending. Almost half of the underperforming projects. Heavy down the loan.
The change will lower the margin on of $2.9bn more than offset the gains. equipment assets have more than world’s population uses one of Meta’s investment means AI and the Amazon has reduced its purchase
funds under management by 4 basis Dollar weakness is helping emerging doubled since 2019 to almost $88bn. products at least once a month. The metaverse are safe, for now. The price for iRobot commensurate with
points. Net income from client assets market bonds. Against a trade Meta spent half of that amount on share price slide of late 2022 is now all question is what return Meta will the new debt. That stings for
will fall £12mn, from estimates of weighted basket the reserve currency is servers and other assets. Increasing but forgotten. produce on all this invested capital. shareholders. But the chance to keep
£324mn, in the second half of this year now down 12 per cent since peaking the company afloat is worth it.
after the cap comes in next month. last September. Currencies such as the Similarly, the auto retailer Carvana
SJP expects to spend more heavily on Brazilian real, the Mexican and struck a balance sheet restructuring
customer communications. It needs to Colombian pesos, and the Polish zloty Ashmore shares have lagged behind It has not always looked so smart. of its group sales in this format whereas deal with bondholders led by Apollo
trade carefully. A press exposé in 2019 have all risen well against the dollar. the EM bonds they track. That creates Newcastle-based Sage initially SAP has just 79 per cent. Global a few weeks ago. This provides a
claimed that SJP rewarded top self- Spreads against US Treasuries are opportunity for bargain hunters. struggled to move customers to the Investors will pay up for the promise couple more years of runway, albeit
employed sales people with Montblanc now at their highest levels since 2000. cloud. When asked, many simply said of such recurring revenues. Sage’s with big concessions.
pens and diamond cufflinks. The best-performing currencies are they did not want to switch over. forward earnings multiple has risen For the likes of Apollo and Carlyle,
Analysts interpreted a 15 per cent
drop in the shares as a response to net
likely to have peaked with local rates
set to fall before any Fed cuts arrive.
Sage/SAP: German enterprise software group
SAP only realised how far it had fallen
from about 18 times five years ago to
30 times today. SAP’s has remained in
however, these financing deals are not
intended to be aggressive. They do not
new money inflows of £3.4bn in the Structural changes underpin economic Tyne lord behind after lockdowns had begun. A the low 20s. wish to take over the companies.
first half. That is about 15 per cent strength. Mexico is experiencing a profit warning in late 2020 forced SAP That reflects Sage’s ability to Simply clipping coupons and fees will
lower than expected. strong reshoring effect while Brazil is You can grow your business, or grow to accelerate its transition. That partly integrate its frequent acquisitions be worth double-digit returns without
They may be underplaying the pushing through the simplification of old with your customers. Sage, wisely, explains why its share price has trailed successfully. SAP did this less well much heavy lifting.
impact of negative secular change, as its tax system. decided on the former a few years ago. Sage’s 58 per cent climb since 2020. when it acquired companies to If either iRobot or Carvana do
the professionally bullish are prone to. Inflation in the South American The accounting and financial Sage has a different client base to its accelerate its cloud transition before struggle, it will be interesting to see
The shares now trade at 11 times country was 3.2 per cent year on year software group, which issued an upbeat German counterpart. Functionality the pandemic, believes Citi. whether these Masters of the Universe
forward earnings, compared with 24 in June, below the central bank target trading statement yesterday, is a and service matter most to Sage’s SME Miserabilists gripe that the UK’s tech seek sharply to enforce their rights
times in 2019. of 3.25 per cent. Target interest rates stalwart of the UK’s quoted tech sector. customers. Multinational corporations champion is a mature accounting or not.
SJP deserves credit for its strong remain at more than 13 per cent. It began shifting customers wholesale rely on SAP to help them cap software business rooted in the north-
shareholder returns. It was a standout Mexican inflation is also down to 5 per to the cloud before the pandemic. This overheads as well, says Numis. east, rather than some metropolitan Lex on the web
winner from the demise of cent year on year in June versus policy gave its small and medium-sized Sage was able to move to a artificial intelligence start-up. They For notes on today’s stories
independent financial advice in the rates of more than 11 per cent. Longer- enterprise clients an edge at a time subscription model earlier than SAP. should pipe down. Sage is doing nicely go to www.ft.com/lex
UK. Regulators accidentally killed this dated yields have begun to fall. when most workers remained at home. As a result, the former has 96 per cent and is unlikely to decamp to the US.

CROSSWORD
No 17,480 Set by PETO
       ACROSS

1 Shot during surrender (4,2)

4 Time to track back in great numbers
  (6)
8 Former pupil reflective, during summer,
 in Paris Match (7)
9 More cat hair mostly in that place (7)
  11 Lad with pliers repaired Earl’s shoe (10)
12 Fellow worker’s mother runs off (4)
13 Public display of anger witnessed on
the radio (5)
   14 Chum’s swallowing Labour leader’s
nonsense (8)
16 Organ grinder finally tucking into
assorted canapés (8)
    18 Bringer of good luck needing no
introduction in town (5)
20 Contents of file? Another list (4)
21 The largest part of ship filled with
   animals? Just the opposite (5,5)
23 Attendant largely opposed to showy
display (7)
24 Perhaps Joan of Arc’s horse gets home
  at last (7)
25 Screw former revolutionary on the way
back (6)
26 Argue about crime Morse essentially
  dismissed (6)

DOWN

1 Occasions for millions to stuff

JOTTER PAD restrictions (5)
2 Free from obligation with regard to
rental agreement (7)
3 Meddle with current rent-free
Solution 17,479 arrangement (9)
6 3 5 , 7 = % / $ 6 7 2 ) ) 5 Complain — not great at first in stir (5)
& 2 $ 2 / 0 2 6 Best to beat it? Heading north after
2 ) 7 ( 1 0 8 6 . ( 7 ( ( 5 work (7)
5 + ' ( 7 , * * 7 Was suspicious of fish-eating American
& / ( 0 ( 1 7 , 1 * 5 $ 7 ( animal getting upset (5,1,3)
+ 5 0 $ 1 + 7 10 Sooty to identify dangerous place (5,4)
( & + 2 , 0 , 7 $ 7 2 5 13 Draw from opening of spy story by
5 $ 2 + ( + ship’s officer (9)
0 $ & $ 5 2 2 1 * $ * $ 15 Support for old club starts to
7 $ 3 8 $ / 1
reinvigorate Everton (9)
$ 1 * 8 , 6 + * 2 / ' , 1 *
17 Politician dispatched by agreement (7)
5 ( 5 2 + / 7 (
19 Those colluding may be in them? (7)
21 Person avoiding company of fellow
' , 1 1 ( 5 6 ( 7 ) 2 < ( 5 You can now solve our crosswords beyond help has left for good (5)
, 8 1 ( 2 7 2 in the new FT crossword app at 22 Argument at home over sharing work
6 8 6 3 ( 1 6 ( & 5 $ 9 ( 1 ft.com/crosswordapp (3-2)*