TUESDAY 11 JULY 2023
90
Could humanity cope with an age of leisure?
SARAH O’CONNOR, PAGE 23
Heads of state
Biden salutes
‘solid’ UK ties
US president Joe Biden, centre left, and
King Charles, right, inspect the guard of
honour during a welcome ceremony at
Windsor Castle yesterday.
Biden earlier met prime minister
Rishi Sunak in the garden of Downing
Street, where he called the UK-US rela-
tionship “rock solid”, before heading on
to a Nato summit in Lithuania.
However, the US president’s decision
to send cluster bombs to Kyiv is at odds
with Britain’s opposition to their use and
the UK government said that Sunak, at a
meeting in London, had “discouraged”
their deployment. Despite Britain being
a signatory to a convention banning
cluster weapons, UK officials said talks
on the issue were amicable. Both leaders
stressed a common determination to
carry on arming Ukraine in its war
against Russia. The UK and US are the
two biggest donors to Kyiv’s military.
Talks with Sunak page 2
Bailey and Hunt urge wage restraint
in joint pledge to conquer inflation
3 Mansion House vow to City 3 BoE boss hails economy’s resilience 3 Chancellor launches reforms
GEORGE PARKER, VALENTINA ROMEI,
EMMA DUNKLEY AND JOSEPHINE CUMBO
Andrew Bailey and Jeremy Hunt joined
forces yesterday to call for wage
restraint, as they told a City of London
audience that high pay settlements were
hitting the fight against inflation.
The Bank of England governor said at
the annual Mansion House dinner that
the “unexpected resilience” of Britain’s
economy had exacerbated wage and
demand pressures, contributing to
“sticky” high inflation.
Meanwhile, the chancellor said at the
same event that he and Bailey would do
“what is necessary for as long as neces-
sary to tackle inflation” and return it to
the central bank’s 2 per cent target.
Hunt added: “That means taking
responsible decisions on public
3D printing consolidation
faces layers of intrigue
The dust has settled after the 3D
printing revolution and now the sector
is beset by merger machinations that
could see the top four players whittled
down to just two. Stratasys, Desktop
Metal, Nano Dimension and 3D
Systems make the software-controlled
kit that builds up products layer by
layer. Barriers to the technology have
sparked a fall in their valuations since
2021 and now their pursuit of tie-ups is
plagued by intrigue and litigation.
Hype wears off i PAGE 11
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NATIONAL NEWSPAPER OF THE YEAR
finances, including public sector pay,
because more borrowing is itself infla-
tionary.”
Prime minister Rishi Sunak must
decide with Hunt this month whether to
back pay rises of about 6 per cent for
public sector workers — the average
expected to be recommended by inde-
pendent review bodies for 2023-24.
Hunt told the Financial Times last
week that any such pay awards could
“
Hunt has proposed
pragmatic steps
but Britain needs a
bolder strategy.
Unfortunately, that
may now have to
wait for the next
FT View, Page 22 government
Countries store record gold purchases
at home after freeze on Russian assets
ARJUN NEIL ALIM AND HARRY DEMPSEY
A growing number of countries are
bringing their physical gold reserves
back home to avoid Russia-style sanc-
tions on their foreign assets as they
increase purchases of the precious
metal as a hedge against high inflation.
Central banks globally made record
purchases of gold in 2022 and into the
first quarter of this year as they hunted
for safe havens, according to a survey of
sovereign investors by asset manager
Invesco. China and Turkey accounted
for almost one-fifth of these purchases.
Concerned by the decision by the US
and others to freeze Russian assets, cen-
tral banks opted to buy physical gold
rather than derivatives or exchange
traded funds that track gold’s price.
They also preferred to hold it in their
own country as global tensions
STOCK MARKETS
not be funded by more government bor-
rowing, suggesting that savings would
have to be found from existing White-
hall budgets. “We will not resolve these
public sector pay disputes with any
measures that are inflationary,” he said.
Bailey told City figures that the econ-
omy had shown unexpected resilience
in the face of inflationary shocks
unleashed by the Covid-19 pandemic
and Russia’s invasion of Ukraine, noting
that the unemployment rate stands at
3.8 per cent.
He said nobody wanted to “see unem-
ployment higher or growth weaker” but
added: “Both price and wage increases
at current levels are not consistent with
the inflation target.”
Consumer price inflation stands at
8.7 per cent, with annual private sector
increased. Invesco’s survey found that
68 per cent of central banks held part of
their gold reserves domestically, up
from 50 per cent in 2020. In five years,
that figure is expected to rise to 74 per
cent, the survey showed.
“Up until this year, central banks were
willing to buy or sell gold through ETFs
and gold swaps,” said Rod Ringrow,
Invesco’s head of official institutions.
He added that the shift to hold gold
domestically rather than overseas was
in part a “reaction to the freezing of the
Bank of Russia’s reserves”.
After Moscow began its invasion of
Ukraine, the EU, US and other G7 coun-
tries imposed sanctions on Russia’s cen-
tral bank and prevented it from access-
ing $300bn in reserves held abroad. The
EU is now considering diverting the
interest from these holdings to Ukraine.
According to the survey of 57 central
World Markets
CURRENCIES
Farage row highlights fate of the unbanked
HELEN THOMAS, PAGE 12
wage growth increasing to 7.6 per cent in
the three months to April. Markets
expect the BoE to raise interest rates
beyond the current level of 5 per cent.
Bailey said he expected headline
inflation to “fall markedly over the rest
of the year” because of lower energy
prices. “Food prices should fall, too, as
lower commodity prices feed through to
prices in the shops.”
The chancellor’s tough line on infla-
tion was intended to address short-term
problems facing the economy, but he
also set out a series of “Mansion House
reforms” to improve long-term growth.
These include changes to regulations to
persuade pension funds to put more of
their money into “productive assets”,
such as early-stage companies.
Hunt hailed a voluntary compact by
banks and 85 sovereign wealth funds
managing some $21tn in assets, many
sovereign investors were “concerned”
by the precedent set by the confiscation
of Russian assets, with 96 per cent say-
ing further investment in gold was
driven by its status as a safe haven.
“We increased the exposure eight to
10 years ago and had it held in London,
using it for swaps and to enhance
yields,” one central banker from a west-
ern country told Invesco.
“But we’ve now transferred our gold
reserves back to our own country to
keep it safe — its role now is to be a safe-
haven asset.”
Other countries that have made big
gold purchases include Singapore, India
and central banks in the Middle East.
Although a powerful gold rally started
last November, prices have fallen back
to $1,926 per troy ounce in recent weeks.
GOVERNMENT BONDS
UK £3.50; Republic of Ireland €3.
Ben Stansall/AFP
leading companies to put 5 per cent of
their assets in defined contribution pen-
sion schemes into unlisted businesses,
potentially unlocking up to £50bn of
investment for high-growth companies
by 2030. He also outlined proposals to
overhaul stock market listing rules to
make the City a more attractive venue.
The package was generally welcomed.
But Matthew Beesley, chief executive of
Jupiter Asset Management, said: “As
active managers our job is to funnel cap-
ital to parts of the market that we
believe are inefficiently priced. At times
that will include growth assets and pri-
vate assets, and at times it might not.”
He added that a lack of growth capital
was overshadowed by “the lack of sta-
bility in the UK over the last 10 years”.
Mansion House reforms page 3
Briefing
i Homeowners rush to
refinance before rates rise
Brokers have reported a rush to
rearrange loans as borrowers who
were waiting for the cost of debt
to ease now lock in deals amid
fears of further increases.— PAGE 2
i Erdoğan stirs Nato debate
The Turkish president has tied
Ankara’s approval of Sweden’s
Nato membership to his country’s
long-stalled efforts to enter the
EU, which began in 1987.— PAGE 4
i BBC allegations ‘rubbish’
A lawyer representing a person at
the heart of allegations about a
presenter paying a teenager for
explicit images has written to the
BBC to dismiss the claims.— PAGE 3
i Thames Water falls short
The troubled utility has secured
investors’ conditional agreement
to inject £750mn of equity but
missed its goal of £1bn of urgent
funding.— PAGE 12; LEX, PAGE 24
i EasyJet cans 1,700 flights
The low-cost airline has cancelled
summer flights, mostly from
Gatwick, blaming “challenging
conditions” caused by air traffic
control issues in Europe.— PAGE 8
i US to toughen bank rules
The Fed has unveiled regulatory
changes for lenders with $100bn
in assets in a bid to shore up a
system rattled by the failure of
regional banks this year.— PAGE 8
Datawatch
Pump it up
Revenue per person, 2021 (€)
Drinking water Waste water
Denmark
Germany
Norway
Sweden
UK
Finland
France
Spain Europe
average
Portugal
0 100 200 300 400
Domestic and industrial use, excl. VAT
Source: EurEau
Denmark tops the European table for
revenue raised per person from water
services: €388 in 2021 compared with the
average of €188. The troubled UK market
ranks fifth, raising revenue that is 35 per
cent higher than the continent average
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Property loans
Homeowners in rush to remortgage
Higher interest rate fears
drive up value of deals
secured in May and June
AKILA QUINIO — LONDON
Homeowners are racing to refinance
their mortgages as borrowers who had
been waiting for the cost of debt to ease
lock in deals amid fears interest rates
will rise further, according to brokers.
The value of new remortgages written
by Knight Frank Finance jumped 41 per
cent over May and June compared with
the previous two-month period, the
broker said.
Pollution fears
Council rejects Lip service Farmers prepare livestock for Yorkshire show
London City
Airport bid for
more flights
PHILIP GEORGIADIS
Plans for a big expansion of London
City Airport have been blocked by the
airport’s local authority over concerns
about noise pollution and other envi-
ronmental impacts from extra flights.
Newham Council yesterday rejected the
airport’s bid to raise annual passenger
numbers from 6.5mn to 9mn by extend-
ing its operating hours to include more
weekend and early-morning flights.
The airport, popular among business
travellers because of its proximity to the
City of London and Canary Wharf finan-
cial districts, has long operated under
strict hours because of its location in a
densely populated part of east London.
It had sought to ease these restrictions
to help meet the demand for air travel,
which has bounced back since the Cov-
id-19 pandemic. The airport had offered
local residents a “commitment” that
only new and comparatively quiet air-
craft would be allowed to operate during
the extended operating hours.
“Newham council has declared a cli-
mate emergency and is working to sup-
port residents to live happy, healthy and
well,” the council said.
The airport said it was “disappointed”
with the decision and was “actively con-
sidering . . . next steps”. It said: “We
firmly believe in our proposals, which
are carefully balanced and make best
use of our infrastructure.”
The Planning Inspectorate has over-
turned local decisions blocking airport
expansions at London Stansted and
Bristol in recent years.
Airports are racing to win permission
to expand their operations. Last week,
London Gatwick submitted proposals to
increase its passenger capacity by 60
per cent, while Heathrow, the UK’s busi-
est airport, is still considering whether
to go ahead with its expansion project.
The UK’s eight biggest airports have
plans to fly almost 150mn more passen-
gers a year, a rise of more than 60 per
cent, by Financial Times calculations.
Environmental campaigners have
questioned how expansion of the avia-
tion sector is compatible with the UK’s
goal of reaching net zero carbon emis-
sions by 2050.
EasyJet flight cuts page 8
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Customers’ remortgage requests at
Moneybox Home-buying, an online
mortgage service provider, rose to rep-
resent 17 per cent of its mortgage-
related applications in June, above a
monthly average of 11 per cent.
“There’s been a real shift in borrower
behaviour over this last month,” said
Simon Gammon, founder and managing
partner at Knight Frank Finance. “It’s
changed to: ‘Oh my goodness, I’ve got to
get one of these deals before they go
even though I don’t like the rate.’”
The jump in remortgaging deals
comes as mortgage rates have risen
sharply in recent weeks, putting
pressure on many UK homeowners
Farmer Tracy Seven kisses a Beef Shorthorn as she prepares her cattle for the Great Yorkshire Show in Harrogate, which opens to the public today — Danny Lawson/PA Wire
Diplomacy
Biden hails UK-US relations in talks with Sunak
GEORGE PARKER
Joe Biden yesterday described the
UK-US relationship as “rock solid” at
talks in Downing Street with Rishi
Sunak, in spite of differences emerging
ahead of this week’s Nato summit.
The US president’s decision to send clus-
ter munitions to Kyiv is at odds with
Britain’s opposition to their use, and
Number 10 said the UK prime minister
had “discouraged” their deployment
during talks in London.
Downing Street said Britain, as a sig-
natory to a convention banning cluster
weapons, was obliged to “discourage”
their use by non-signatories, but pri-
vately British officials said talks on the
issue were amicable.
Meanwhile, the US and Germany are
under intense pressure from other allies
to show greater support for Ukraine’s
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FINANCIAL TIMES
NATIONAL
against a backdrop of high inflation.
The average cost of a five-year fixed-
rate mortgage hit 6 per cent last week
for the first time since November after
former prime minister Liz Truss’s
“mini” Budget unleashed turmoil on
financial markets, according to data
provider Moneyfacts.
Successive interest rate rises by the
Bank of England in an effort to curb
inflation had quelled expectations that
mortgage rates would fall continuously
throughout this year, said analysts.
With investors pricing in interest
rates hitting 6.5 per cent by next March,
their highest level since 1998, many
mortgage-holders are choosing to lock
eventual membership of Nato. Wash-
ington and Berlin have backed a form of
words for the summit’s concluding
statement that does not fully endorse a
“pathway” to membership, let alone
invite Kyiv to join once the war is over —
as demanded by Ukraine’s staunchest
supporters in eastern Europe.
No 10 said Sunak believed Ukraine’s
“rightful place is in Nato” and it was
working with allies to create a “path-
way” while recognising Kyiv could not
accede while it was at war with Russia.
But it insisted there was no difference
in approach to the issue between the US
and UK. Referring to reports of a split, a
spokesperson for Sunak said: “I don’t
believe that’s accurate.”
During his meeting in the Downing
Street garden with Sunak, Biden said he
“couldn’t be meeting with a closer friend
and greater ally”.
Education
Labour challenged on value of ending private school tax perks
JIM PICKARD
Labour’s plan to end the tax breaks
enjoyed by private schools is unlikely
to cause an exodus of pupils from the
sector, but will probably raise less
money than the party has predicted,
according to an influential think-tank.
The Institute for Fiscal Studies said in a
report today that as few as 3 per cent of
privately educated pupils would move
to state schools if a Labour government
axed the sector’s tax perks, well below a
forecast of at least 17 per cent in a study
commissioned by the lobby group for
independent schools.
Sir Keir Starmer, the Labour leader,
has vowed to add value added tax at
20 per cent to school fees for the first
time if he wins the general election
expected next year, as part of a pledge to
break the “class ceiling”.
His government would also remove
the 80 per cent discount on business
rates in England and Wales that can be
claimed by private schools. They edu-
cate an estimated 614,449 pupils, or
about 6 per cent of the UK total, and
take in fee income of about £10.2bn a
year.
in remortgaging deals at a fixed rate in
case borrowing costs climb further.
Nicholas Mendes, manager at mort-
gage broker John Charcol, said “a signifi-
cant number of people” had chosen to
hold off remortgaging at the end of last
year in the hope that rates would drop
back closer to 3 per cent.
“The advice was to switch to a fixed
rate when rates were going down,” he
said. “Now the idea of rates being 6 to 7
per cent is making people go ‘That’s
higher than what I expected.’ We’ve seen
the same people go back and say: ‘I can’t
afford that if that’s the case.’”
Fears that lenders would withdraw
mortgage products had also fuelled the
Both leaders stressed a common
determination to carry on arming
Ukraine in its war against Russia; the
UK and US are the two biggest donors to
Kyiv’s military operations.
Biden arrived at Stansted airport near
London on Sunday night and met both
Sunak and King Charles during his short
visit before heading to the Nato summit
in Vilnius, Lithuania, later yesterday.
British officials privately admitted
that Biden’s main reason for stopping
over was to meet the King at Windsor
Castle, affording a photo opportunity
traditionally beloved of US presidents.
Biden did not attend the coronation —
US presidents do not usually go to such
events — but discussed climate change
with the monarch over tea. He was
greeted by the band of the Welsh
Guards.
Biden’s visit came little more than a
Labour has said the measures would
raise £1.6bn and help fund policies such
as hiring 6,500 new teachers in the state
sector.
However, the IFS predicted that the
measures would provide the public
finances with a net gain of between
£1.3bn and £1.5bn, as the state would
have to cope with higher spending on a
small minority of pupils moving from
independent to state schools.
The think-tank said that even if the
VAT reform caused a drop in demand
for private education, it would not affect
additional tax revenue as parents who
Step change: Labour party and IFS
differ on amount plan would save
recent remortgaging wave, said ana-
lysts.
Last September, a number of lenders
removed some of their offerings from
the market, with many temporarily
stopping new lending to avoid being
overwhelmed by demand.
Lenders have not repeated that
wholesale withdrawal from mortgages
but have increased prices in recent
months to keep up with rising interest
rates and to avoid a surge in applications
from prospective homebuyers.
HSBC, Lloyds and TSB were among
those that increased the rates on some
fixed-term mortgage products yester-
day.
month after Sunak met him at the
White House and marked their fifth
meeting in five months. “We covered
most of the ground we needed to cover
in Washington,” said one UK official.
Sunak and Biden also briefly dis-
cussed the Northern Ireland peace proc-
ess after Brexit and the recent agree-
ment to reform post-Brexit trading
rules for the region, the so-called Wind-
sor framework.
Britain and the US are generally
aligned on foreign policy and recently
concluded the Aukus defence pact with
Australia in a push to counter China’s
growing military might.
Last week, Karine Jean-Pierre, White
House press secretary, brushed off criti-
cism that Biden had not attended King
Charles’s coronation in May.
“He had a call with the King and con-
gratulated him,” she said.
had earmarked money for school fees
would spend it on other goods and serv-
ices.
But it predicted that state schools
would need extra funding of between
£100mn to £300mn a year in the
medium to long term because of a fall in
private school attendance of 3-7 per
cent. This reduction would not be
immediate, it noted, since most parents
would not want their children to change
school midway through their education.
The IFS forecast of 3-7 per cent is far
below a 2018 estimate by Baines Cutler,
an advisory firm, which predicted an
outflow of between 17 and 25 per cent in
a report commissioned by the Inde-
pendent Schools Council
Julie Robinson, ISC chief executive,
said it believed the IFS was underesti-
mating how many private school stu-
dents would enter the state sector.
“Even an over-optimistic estimate,
which this most certainly is, leaves
Labour significantly short of funding
the education policies they claim a tax
on parents would pay for,” she said,
pointing out that the IFS calculations on
pupil movement were “uncertain and
based on limited evidence”.
Tuesday 11 July 2023
Consumer outlay
Summer lift in
spending fails
to exceed pace
of inflation
VALENTINA ROMEI
Warm weather boosted consumer
spending on clothing, in pubs and at
outdoor retailers last month but over-
all retail sales growth remained below
the pace of inflation, according to data
published today.
The value of retail sales rose at an
annual rate of 4.9 per cent in June, a
stronger reading than the average of
4.6 per cent in the three months to June
and more than the 12-month average of
4 per cent, figures from the British
Retail Consortium, the trade body, and
KPMG, the advisory firm, showed.
These growth rates were, however,
lower than the rate of price increases,
which stands at 8.7 per cent, indicating
that sales fell in volume terms.
Helen Dickinson, BRC chief execu-
tive, said that although “consumer con-
fidence remains fragile”, last month’s
“hot weather prompted purchases of
summer essentials”, such as swimwear.
“Outdoor games, garden furniture and
barbecue food were boosted as families
came together to celebrate Father’s
Day,” she added.
The BRC and KPMG data chimes with
separate figures released today by pay-
ments company Barclays, which moni-
tors almost half of UK credit and debit
card transactions.
They showed that consumer card
spending grew at an annual rate of
5.4 per cent in June, compared with
3.6 per cent in May.
Esme Harwood, a director at Bar-
clays, said Britons had in June got “into
the swing of summer, bringing a wel-
come boost to several sun-starved
categories”. She pointed out that pubs
and bars benefited from more people
visiting beer gardens, while spending
jumped at butchers and garden
centres thanks to the “arrival of barbe-
cue season”.
Harwood added that even clothing
retailers, which have struggled since the
onset of the cost of living crisis, had
returned to growth as consumers took
advantage of hotter weather to refresh
their wardrobes.
Barclays said spending on clothing
increased by an annual rate of 4 per cent
in June, the highest growth in almost a
year, while the pharmacy, health and
beauty sector received its biggest boost
since January, with spending up 6.8 per
cent.
Spending at pubs, bars and clubs,
meanwhile, rose 8.4 per cent, the largest
increase since the start of this year.
However, both data sets showed the
annual rate of growth in retail sales con-
tinued to lag behind the rate of inflation,
a trend seen since mid-2021 when head-
line price rises began to surge. This indi-
cates that consumers are paying more
but getting less for their money.
Economists and markets expect the
Bank of England to raise interest rates
from a 15-year high of 5 per cent now to
6.5 per cent by February next year in a
continued push to reduce stubbornly
high inflation.
Will Hobbs, chief investment officer
at Barclays UK Wealth Management,
said the UK remained “in a precarious
spot” because of high inflation and ris-
ing borrowing costs.
“Difficult quarters lie ahead as the
surge in interest rates continues to put
pressure on household cash flows,” he
said.
But Bridget Phillipson, shadow educa-
tion secretary, said today’s study proved
Labour’s claim that removing private
schools’ tax exemptions would have lit-
tle effect on pupil numbers.
“This analysis reinforces the fact that
all of Labour’s policies are fully costed
and fully funded, because we take fiscal
responsibility seriously,” she went on to
add.
The IFS said the extra funding for
state schools could in theory be lower
because the number of pupils in Eng-
land is forecast to drop by 700,000 by
2030, freeing space for former private
schools students at no extra cost.
Tom Richmond, founder of EDSK, an
education think-tank, warned that
there were limits to modelling future
decisions by hundreds of thousands of
parents.
“Some independent schools will be
able to partly absorb a sharp increase in
costs whereas others may have to
increase fees by 10-15 per cent,” he sug-
gested.
Factors such as location, endowment
and age range would influence how the
proposed reforms would go on to affect
private schools, Richmond added.
Tuesday 11 July 2023 ★ FINANCIAL TIMES 3

NATIONAL

‘Mansion House reforms’ seek to steer Media

pension funds into private companies
Hunt aims to boost economy by unlocking £50bn of investment and urging smaller schemes to consolidate
MICHAEL O’DWYER AND
JOSEPHINE CUMBO
Chancellor Jeremy Hunt’s “Mansion
House reforms” will attempt to boost
the economy by channelling pensions
savings towards potentially higher
growth, illiquid assets and pushing
smaller funds to consolidate in the hope
this will make them more efficient.
The following are the main areas of
change:
Channelling defined contribution
pensions into private companies
The flagship element of Hunt’s initiative
is a “compact” signed by nine of the UK’s
largest pension providers to commit 5
per cent of their so-called default funds
for defined contribution pension savers
to unlisted equities by 2030.
Defined contribution pension funds,
where retirement payments are based
on investment returns, invest only 0.5
per cent of their estimated £500bn of
assets in unlisted UK companies — lim-
iting the pool of funds available to pri-
vate companies, including start-ups.
The government believes this deal,
which covers funds where investors do
not specify where they want their
money invested, could unlock up to
£50bn of investment in high-growth
companies by 2030 if all such UK pen-
sion schemes follow suit. But there
would be no requirement for the money
to be invested in UK companies.
Peter Harrison, chief executive of
FTSE 100 asset manager Schroders,
welcomed the reforms overall, saying:
“We need to get to a position where we
ensure that people save for the long
term and take adequate risk, rather
than the consumer protection culture.”
Hendrik du Toit, chief executive of
asset manager Ninety One, said the
package represented “quite a brave
effort” but added that the government
had failed to encourage “the billionaires
of this world to be here and to back peo-
ple here”. He said: “We have spent a dec-
ade pushing out those people who have
more risk appetite and it will be hard to
build the ecosystem without them.”
The number of companies listed on
the London Stock Exchange has plum-
meted as part of a long-term trend of
“de-equitisation” while valuations lag
those in the US, where Apple’s market
value has eclipsed the entire FTSE 100.
Overhauling local government
schemes
The chancellor wants to redirect the
pools of cash held in dozens of local gov-
ernment pension schemes to boost the
economy. He is setting town hall pen-
sion schemes a target to double existing
investments in private equity to 10 per
cent, which the government believes
could amount to £25bn by 2030.
Hunt will also set a March 2025 dead-
line for dozens of local authority pen-
sion funds to pool their assets so they
can benefit from economies of scale.
Local government pension schemes
are funded through contributions from
local authority workers and employers,
with pension savers and taxpayers shar-
ing the risk if investment returns are not
as expected.
“The chancellor believes scale and
Lawyer says
BBC presenter
explicit photos
claim ‘rubbish’
DANIEL THOMAS, OLIVER BARNES,
CHRIS COOK AND JIM PICKARD
A lawyer representing a young person
at the centre of allegations about a sen-
ior BBC presenter paying a teenager for
sexually explicit images has written to
the corporation to deny the claims,
which have thrown the public broad-
caster into crisis.
BBC News reported yesterday evening
that the corporation had received a let-
ter from the lawyer representing the
young person, who is now 20, saying the
allegations made by their mother to The
Sun newspaper were “rubbish”.
The reports follow a meeting between
London’s Metropolitan Police and BBC
bosses earlier yesterday, after which the
Met concluded that further inquiries
were needed before it decides whether
to launch a criminal investigation into
the presenter, who has not been named.
Detectives from the Met’s specialist
crime command unit said after the
meeting that there was “no investiga-
tion at this time”.
In a statement, the Met said detec-
tives were “assessing the information
discussed at the meeting and further
inquiries are taking place to establish
whether there is evidence of a criminal
offence being committed”.
The BBC informed the police on Fri-
day, the day after being approached by
The Sun ahead of a series of articles
alleging the presenter had paid tens of
thousands of pounds to a teenager, who
was 17 at the time of the first payment,
British pension schemes shift from UK equities London Stock Exchange listings fall for sexual images.
Headline asset allocation (%) UK-listed initial public offerings* The newspaper said the family com-
Global average UK 2021 detail plained to the BBC over the presenter’s
100 Unlisted UK 300 behaviour in May but that he remained
Other equities (1.5%) on air until the mother contacted The
Other Other 250 Sun last week. The presenter was sus-
80
Cash pended on Sunday.
Bonds Property 200
Bonds But the letter from the young person’s
60 Non-UK
equities 56% 150 lawyer details how they sent a strenuous
denial to The Sun newspaper on Friday
40 100 evening via WhatsApp before it pub-
Equities 50 lished the story, saying there were was
20 21% “no truth to it”, according to BBC News.
UK equities 0 The lawyer added: “For the avoidance
0 6%
1995 2000 2005 2010 2015 2020 of doubt, nothing inappropriate or
1997 2021 1997 2021
Source: New Financial Source: Dealogic *2023 is year to date
unlawful has taken place between our
client and the BBC personality and the
allegations reported in The Sun newspa-
Capital push: active management bring better when the employer fails. A call for evi- ‘We have EU’s Mifid II rules, which barred stock- per are rubbish.”
the City of returns,” said Quentin Marshall, chair of dence is seeking views on whether it brokers from providing research for free The newspaper said it had reported
London has the £1.6bn Royal Borough of Kensington should take on schemes that have not spent a by “bundling” it with share trading serv- about “two very concerned parents”
generally and Chelsea pension fund, the UK’s best failed, with the expanded fund investing decade ices for which clients pay a commission. who made a complaint to the BBC.
welcomed the funded local authority plan. “We in areas that stimulate the economy. Given that the EU was scaling back the “Their complaint was not acted upon by
plan to direct haven’t seen the evidence to support PPF chief executive Oliver Morley pushing out Mifid II restrictions, Hunt did not have the BBC. We have seen evidence that
pension savings this belief but share his objective to welcomed the proposals for the fund but people who much choice but to loosen the rules or supports their concerns. It’s now for the
into unlisted improve pension outcomes.” the Association of Consulting Actuaries the UK would be less competitive, said BBC to properly investigate.”
equities
Expanded role for pension lifeboat
said expanding its role “would be have more one market participant. Downing Street said yesterday the
Jason Alden/Bloomberg
fraught with practical, moral hazard risk appetite Jonathan Herbst, partner at law firm allegations were “concerning” but that
The government is to consider propos- and systemic risk considerations”. Norton Rose Fulbright, said the chal- the prime minister had full confidence
als to pool defined benefit, or final sal- As part of its package, the govern- and it will lenge would be to make changes without in the broadcaster’s director-general.
ary, pension funds to harness the bene- ment will also push ahead with its be hard to “losing sight of the conflicts concerns The BBC boss, Tim Davie, will face
fits of scale. There are more than 5,000 planned “super funds” regime, where which led to them in the first place”. fresh scrutiny over his handling of the
defined benefit, or final salary, style private sector consolidators take on build the Kent also proposed the creation of a latest scandal to hit the broadcaster
plans in the UK, which are sponsored by underfunded schemes with the aim of ecosystem platform to commission company when it publishes its annual report
companies. The majority of DB pension eradicating the shortfall. research for use by investors but did not today.
plans, with combined assets of more
Rolling back EU Mifid II rules
without say who should fund it. Senior BBC executives warned that
than £1.4tn, are invested in government them’ Hunt will also press on with a wider allegations of this sort of are particularly
bonds rather than shares. Hunt backed new recommendations overhaul of capital markets rules, damaging for the broadcaster, which is
The government believes the invest- aimed at boosting the amount of invest- including plans to simplify the prospec- under constant political and public
ment potential of these funds could be ment research on UK listed companies, tus documents that listed companies scrutiny. In 2012, it emerged that the
unleashed by expanding the role of the particularly small and mid-cap groups. must publish when raising money. late Jimmy Savile, who had been a BBC
Pension Protection Fund, which cur- The changes proposed by City lawyer Additional reporting by Harriet Agnew and star for decades, had been a serial sexual
rently only takes on a company scheme Rachel Kent would partly roll back the Emma Dunkley abuser and rapist.

Union warning Labour shortages

Migrant careworkers facing ‘shocking abuse’
DELPHINE STRAUSS
Migrants recruited to work in the UK
care sector are being charged upfront
fees of up to £15,000 and asked to
repay inflated “relocation costs” if they
seek to move jobs, according to Unison.
The union has warned social care minis-
ter Helen Whately of a “significant rise”
in the number of migrant care workers
approaching Unison for help after what
it termed “shocking abuse” by employ-
ers. It argues that problems are systemic
and require government intervention.
The cases Unison has encountered
suggest migrants often pay fees running
into thousands of pounds to the recruit-
ers in their home countries who find
them work; a practice illegal in Britain.
This means many arrive with debts,
making them vulnerable to exploitation
as they cannot complain about poor
working conditions, underpayment or
accommodation for fear of being de-
ported before they have earned enough.
It is not the first time this problem has
been reported, but Unison said it was
now seeing new cases on a weekly basis.
Some employers also ask workers to
repay “relocation costs” if they seek to
change job.
Although repayment clauses in con-
tracts are not illegal, they are being
“badly misused”, Unison said, with
charges levied for air fares that migrants
have paid, training they have not
received or Home Office fees employers
would usually be expected to cover.
“The government must stop unscru-
pulous care employers from luring over-
seas workers under false pretences, only
to then exploit and harass them,” said
Christina McAnea, Unison’s general sec-
retary.
‘The government must stop
unscrupulous employers
from luring overseas workers
under false pretences’
Unison’s findings will inflame a de-
bate over the extent to which the UK
should look overseas to meet labour
shortages in low-paid sectors that strug-
gle to recruit from the domestic work-
force. Until recently, only senior care
workers were eligible to come to the UK
on a skilled-worker visa. The govern-
ment added lower-paid positions in
early 2022 to a list of “shortage occupa-
tions” for which salary and skill require-
ments are relaxed, as the sector was fac-
ing an acute staffing crisis.
Since this change, overseas recruit-
ment of care workers has soared, with
some 58,000 coming in the year to
March 2023, many of them from India
and Nigeria.
A group of rightwing MPs known as
the New Conservatives called last week
for the government to close this visa
route as part of a 12-point plan to lower
record levels of immigration.
Unison, however, contends that “the
only real solution . . . Is to properly fund
the social care sector”, where both
migrant and UK-born staff often work
for low pay and on insecure terms.
The problems care workers have
reported are very similar to those
encountered by migrants who came to
work on UK farms last year through a
short-term visa scheme for seasonal
agricultural workers.
Campaigners for migrants’ rights
have meanwhile called for reforms of
low-skilled visa routes, saying the way
they are structured makes it very diffi-
cult for workers to speak out if they are
being mistreated.
The Department of Health and Social
Care said: “No staff should face any kind
of abuse, especially when raising con-
cerns with their employer.”
The department added that all
employers had to follow the code of
practice to ensure staff were recruited
ethically and respected. Witnesses or
victims of malpractice could contact
regulator the Care Quality Commission.
Employers urged to hire more prison leavers
DELPHINE STRAUSS
Ministers are pressing employers to
train and hire ex-offenders in a drive to
help prison leavers plug labour short-
ages and move into stable work when
they complete their sentences.
Damian Hinds, prisons minister, said
the Unlocking campaign was a “golden
opportunity” for companies to fill
vacancies and support prison leavers,
while helping to cut rates of reoffending.
Similar campaigns run by the prison
service’s New Futures Network, which
connects prisons with employers, have
contributed to a sharp improvement in
the proportion of ex-offenders who find
work within six months of their release.
This has risen from 14 per cent in April
2021 — a figure that would have been
depressed by the effects of Covid-19
lockdowns — to more than 30 per cent in
March of 2023.
But Helen Berresford, director of
external engagement at the charity
Nacro, which supports people in the
criminal justice system, said that while
outreach to employers had led to real
improvement, there were still “huge
challenges” in prisons that were failing
to provide opportunities to work or
learn on-site.
A report by the chief inspector of pris-
ons, published last week, found that far
too many facilities were failing to offer
inmates education, training or work,
instead leaving them “languishing in
their cells”.
In category C prisons especially —
those designated for training and reset-
tlement — the inspectors had found
“empty workshops, overgrown farms
and gardens, broken greenhouses and
demotivated and disillusioned prison-
ers either locked in their cells or aim-
lessly stuck on the wing”.
Employers who have hired prisoners
to work on day release through the
Unlocking initiative say they have been
impressed by their motivation and
work ethic and have found them trust-
worthy. But there are still big barriers —
in particular, on housing — preventing
ex-offenders taking stable work.
Campaigners say the prison system
falls short in education and training
O’Neill & Brennan, a supplier of
labour and logistics solutions to the con-
struction sector, has hired 180 prisoners
over the past two years to work on day
release at sites around the country.
Barry Mitchell, logistics operations
director at the company, said it would be
happy to offer many of them full-time
work when they left prison, and help
them move into supervisory roles or
train in specialisms.
“They’re really hard-working and
reliable . . . They all want to change
their life,” Mitchell said.
But the company has found many of
its recruits unable to take up a perma-
nent job after their release because they
cannot find housing in the right area —
to the point where one ex-offender
ended up living with his project man-
ager for six months until he could find
his feet.
However, with the people trained or
hired through the Unlocking scheme
numbering only in the hundreds, the
programme is unlikely to make any
appreciable difference to the UK’s
labour shortages.
The prison service said it was “invest-
ing unprecedented amounts in educa-
tion, employment and other support”
while creating a new education service
within prisons to help offenders gain
skills.
4 ★
Netherlands
Dutch PM to quit politics after coalition falls
Rutte says he will not run
again after plan to toughen
asylum policy is rejected
ANDY BOUNDS AND SAM FLEMING
BRUSSELS
Dutch prime minister Mark Rutte has
said he will leave politics after his coali-
tion government collapsed because of a
split over immigration.
Rutte, the EU’s second-longest serv-
ing leader after Hungary’s Viktor
Orbán, told parliament yesterday he
would quit after his four-party coalition
fell apart last week.
Rutte, who has been in power since
2010, said he would not run for another
term in the coming elections.
His liberal VVD is the largest party in
the Dutch parliament and he has led
Ireland
Broadcaster RTÉ replaces top managers over secret payments
JUDE WEBBER — DUBLIN
The new boss of national Irish broad-
caster RTÉ has overhauled the com-
pany’s management saying he was
“appalled” at a scandal sparked by rev-
elations over secret payments to its star
presenter that have rocked public faith
in the service.
On his first day as director-general
Kevin Bakhurst stood down the execu-
tive board in charge of the day-to-day
running of the almost century-old
broadcaster and replaced it with an
interim team, half of whom are new to
such management roles.
“The culture in RTÉ needs change,
from top to bottom,” said Bakhurst in a
morning email to staff in which he
vowed to “draw a line under this shame-
ful period . . . and to start rebuilding
trust in public service broadcasting”.
Bakhurst also promised a new culture
of transparency over the pay of senior
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four coalitions. His fall came after he
tried to introduce a tougher immigra-
tion policy following a rise in the
number of asylum seekers in the Neth-
erlands. It led to reception centres
becoming overwhelmed, with a baby
dying in one case last year.
A lack of housing in the country of
18mn people had added to pressure on
the government to cut arrival numbers.
The VVD wanted to reduce the
number of asylum seekers who could
bring their families to the Netherlands.
Only those in personal danger, for rea-
sons such as their political views or sex-
ual orientation, would be allowed to do
so.
D66, a more progressive liberal party,
and the Christian Union, a centrist
party, rejected the plan.
Dubbed “Teflon Mark” by the Dutch
media for his ability to survive crises,
managers and top presenters, a register
of contractor interests and to appoint an
external corporate governance official
after the worst scandal in the broad-
caster’s history erupted last month.
It prompted Leo Varadkar, the taoi-
seach, to demand change and promise a
review of the €160 annual television
licence fee, which supplies slightly more
than half of the broadcaster’s funding.
The scandal began when it emerged
that Ryan Tubridy, a longstanding pre-
senter of flagship chat programme The
Late Late Show and a radio slot, had
received hundreds of thousands of
euros in undisclosed, hidden payments.
Some were funnelled through a spe-
cial advertising account, which was also
used for lavish spending on restaurants,
concerts and even €5,000 on flip-flops
for client events. RTÉ is also reliant on
advertising and sponsorship.
The saga has become a national soap
opera, gripping Ireland as embarrassing
FINANCIAL TIMES
INTERNATIONAL
Rutte decided to depart this time, even
though he had managed to overcome
several difficult moments in the past.
Just this year, a critical report into his
handling of earthquakes caused by gas
exploration in the giant Groningen field
showed that thousands of homes and
‘I do this with mixed
feelings, with emotions.
I love the team dearly.
But it feels good’
other buildings had been damaged. The
Hague is paying out billions of euros in
compensation and to shore up homes.
Rutte’s previous government col-
lapsed after running a welfare pro-
gramme that denied child benefits to
parents from a minority background,
details have dribbled out in a series of
parliamentary hearings in which execu-
tives squirmed as they were grilled for
hours. They included a €2.2mn loss on
an RTÉ Christmas musical flop and
exposure of a web of celebrity product
endorsements by the its stars.
‘The culture in RTÉ
needs to change . . .
to draw a line under
this shameful period’
Bakhurst, a former senior BBC man-
ager, told RTÉ radio news that he shared
staff anger and embarrassment and had
been “appalled” and “shocked” to find
out what had been going on. “This will
never happen again,” he said, promising
full accountability and transparency.
RTÉ, which began broadcasting on
radio in 1926 and on TV in 1960, also has
Personal information
EU-US data-sharing deal to begin despite risk of challenges
JAVIER ESPINOZA — BRUSSELS
The EU said a new transatlantic data-
sharing agreement would come into
force yesterday in a move designed to
reassure thousands of companies over
the transfer of personal information
between Europe and the US, even as the
measures face legal challenges.
The European Commission said a recent
executive order issued by US president
Joe Biden that imposed new obligations
on the transfer of data between the
regions provided adequate privacy pro-
tections to European citizens.
Commission officials said its decision
meant global companies could move
data safely according to the new regime,
which included requirements on the
responsible handling and deletion of
personal information.
The European Court of Justice struck
down the previous EU-US data-sharing
deal, known as the privacy shield, in
2020, saying the agreement did not limit
access to data by US authorities in ways
that were “equivalent” to EU laws, such
as Europe’s General Data Protection
Regulation.
The same court had previously
based on an algorithm that projected
they were more likely to be fraudsters.
As a result, hundreds of children were
taken from their parents and the debt
with which families were suddenly sad-
dled pushed some adults into suicide.
Rutte’s decision to go may have been
his last political calculation. Following
the collapse of the coalition on Friday,
he was facing a vote of no confidence in
parliament that he was likely to lose,
said Sarah de Lange, professor of poli-
tics at the University of Amsterdam.
“He did this to protect his reputation,”
she said, in reference to his decision to
quit politics altogether.
“The opposition parties were willing
to support the motion, and it would
have been an individual vote with the
risk of some D66 MPs supporting as well
and toppling him,” de Lange added.
Farid Azarkan, leader of Denk, a
a governing board, which remains in
place. Its chair, Siún Ní Raghallaigh, told
a parliamentary committee at the end of
June that €345,000 in hidden payments
to Tubridy over several years had been
an act “designed to deceive”. The gov-
ernment has appointed a forensic audi-
tor to examine RTÉ’s accounts.
The revelations have highlighted a
lack of transparency and an absence of
communication between managers and
the governing board. Some legislators
dubbed the use of the so-called barter
advertising account for hidden pay-
ments a “slush fund”.
Bakhurst vowed to eradicate the
“siloed and at times secretive decision-
making” culture at RTÉ. “As custodians
of public money, our financial integrity
must be on a par with our editorial
integrity,” he said.
A number of presenters’ extra roles as
brand ambassadors have also come to
light after it emerged that RTÉ guaran-
annulled a similar data transfer
arrangement, known as safe harbour, in
2000.
The US has sought to resurrect trans-
atlantic data-sharing arrangements as
thousands of organisations, including
technology companies, banks, law firms
and carmakers, have relied on the pri-
vacy shield to move data easily between
the two regions.
Biden’s executive order included new
Safety vow: EU officials say US law protects consumers — Ludovic Marin/AFP/Getty Images
party that campaigns for minority
rights, said it was “the right decision at
the wrong time”.
Rutte, 56, said he took the decision on
Sunday morning without pressure from
his party. “I do this with mixed feelings,
with emotions,” he said. “I love the team
dearly. But it feels good.”
He will stay as caretaker prime minis-
ter along with his cabinet until elections,
which are likely to be held in November.
He said he did not know what he would
do next but ruled out a top job in the EU.
Rutte has been taking a morning off
each week to teach social studies at a
school in The Hague. “Maybe I’ll do that
for a few days,” he said.
Asylum applications in the Nether-
lands increased by a third last year to
more than 46,000, and the government
has forecast they could rise to a record
70,000 this year.
Departing:
Dutch prime
minister Mark
Rutte in The
Hague
yesterday. He is
leaving politics
after leading
four coalition
governments
since 2010
Remko de Waal/ANP/
AFP via Getty Images
teed some payments to Tubridy relating
to his contract with carmaker Renault.
Station morale was further under-
mined by the news that Tubridy was
promised there would be no cut to his
pay at a time when reductions were
sought from other staff. There were
details of lavish client spending, includ-
ing the €4,200 membership of a private
London club, while RTÉ’s London corre-
spondent had to file from café toilets
after the station closed its office.
Tubridy, who stepped down from The
Late Late Show last month, is not accused
of wrongdoing but has been taken off
the air indefinitely.
He and his agent, Noel Kelly, who also
represents other RTÉ stars, were due to
address parliamentary committees
today. The agency did not immediately
respond to comment.
In a sign of public interest in the scan-
dal, several pubs in Dublin are prepar-
ing to screen the hearings.
privacy guarantees, including the
requirement to delete personal data
when it was no longer needed, protec-
tions when such information was
shared with third parties, and the possi-
bility for EU citizens to seek damages if
their personal data was mishandled.
Officials said the EU carried out its own
assessment and unilaterally decided the
latest US concessions were legally sound
and provided enough safeguards.
Tuesday 11 July 2023
Military alliance
Erdoğan links
Sweden’s bid
to join Nato
with Turkey’s
EU accession
ADAM SAMSON — ANKARA
HENRY FOY AND JOHN PAUL RATHBONE
VILNIUS
Turkish president Recep Tayyip
Erdoğan has tied Ankara’s approval of
Sweden’s Nato membership to his
country’s efforts to enter the EU, in a
fresh blow to Stockholm’s attempt to
join the military alliance.
Erdoğan’s move to link Sweden’s Nato
prospects to Turkey’s long-stalled EU
bid came as alliance leaders assembled
for a summit in Lithuania that also has
to contend with fractures over Ukraine’s
own membership hopes.
“I call out to those who have kept Tur-
key waiting at the EU door for more
than 50 years — pave the way for Turkey
and we will pave the way for Sweden,”
Erdoğan said yesterday.
Nato and EU officials responded that
Sweden had met earlier demands from
Ankara and that its membership was
critical to bolstering Europe’s defences
in response to Russia’s war against
Ukraine. Jens Stoltenberg, Nato secre-
tary-general, insisted Stockholm had
already met the conditions to join the
31-member alliance, while adding that
he backed Ankara’s bid to join the EU.
“It’s still possible to have a positive
decision on Sweden in Vilnius,” he said.
Olaf Scholz, Germany’s chancellor,
said the issues of Sweden’s Nato mem-
bership and Turkey’s EU hopes were
“not related”, in comments echoed by
the European Commission.
Such exchanges highlighted the divi-
sions at a summit alliance leaders had
hoped would project unity over the
Ukraine war. The US and Germany have
also been at odds with other Nato coun-
tries over speeding Kyiv’s membership.
Erdoğan subsequently met Stolten-
berg and Ulf Kristersson, Swedish prime
minister, ahead of the start of the sum-
mit today, in an effort to break the
impasse over Stockholm’s membership
hopes.
Washington and European capitals
have been pressing Ankara to approve
Sweden’s Nato bid after the Nordic
country broke with generations of neu-
trality following Russia’s full-scale inva-
sion of Ukraine last year.
Sweden has made several concessions
in an attempt to woo Ankara, including
the passage of a new anti-terrorism law.
But Erdoğan has insisted on further
measures, including curbs on public
protests by supporters of the Kurdistan
Workers’ party, which is classified as a
terrorist organisation by the EU, US and
UK, as well as by Turkey.
“Erdoğan is upping the ante,” said an
EU official who declined to be named.
“It’s a bit over the top.”
Nato requires all existing members to
ratify applicants in order for them to
join the western alliance. The only other
holdout on Sweden’s application is Hun-
gary, but analysts say Budapest was
likely to follow Ankara’s lead.
Turkey launched its bid to join the
European Economic Community in
1987 and was declared eligible for
potential EU membership 12 years later.
But relations have deteriorated as
Erdoğan slid towards autocracy. The
European parliament voted in 2019 to
suspend Turkey’s EU accession talks.
FT Big Read page 21
Gideon Rachman page 23
“I have worked tirelessly with my US
counterparts to address the concerns
identified by the Court of Justice and
ensure that technological advances do
not come at the cost of Europeans’
trust,” said Didier Reynders, the EU’s
commissioner for justice.
“But, as close like-minded partners,
the EU and the US could find solutions
based on their shared values that are
both lawful and workable in their
respective systems.”
Activists have said the agreement is
flawed, with Max Schrems, the privacy
campaigner who previously challenged
data-sharing agreements between the
US and the EU, among those to threaten
legal action against the new framework.
“They say the definition of insanity is
doing the same thing over and over
again and expecting a different result,”
said Schrems. “Just like privacy shield,
the latest deal is not based on material
changes but by political interests.”
Implementation of the new EU-US
transfer regime will be subject to peri-
odic reviews to ensure it is effective. The
first review is set to take place within
one year of the adequacy decision’s
entry into force.
Tuesday 11 July 2023 ★ FINANCIAL TIMES 5
6 ★ FINANCIAL TIMES Tuesday 11 July 2023

INTERNATIONAL

Consumer spending Wagner chief

China economy teeters on brink of deflation Putin met

Prigozhin in
Latest sign of weakness
expected to spur push for
government stimulus
JOE LEAHY — BEIJING
GREG MCMILLAN — HONG KONG
China’s economy nearly sank into defla-
tion in June, adding to calls for Beijing to
launch a stronger stimulus package to
lift its post-Covid recovery.
The consumer price index was flat
year on year and declined 0.2 per cent
on the previous month, while factory
gate prices fell at the fastest pace since
2016 as demand for consumer and man-
ufactured products softened.
Analysts expected the figures to lead
China’s central bank, the People’s Bank
of China, to reduce interest rates again,
adding to a round of cuts last month that
many believe Beijing will have to sup-
plement with fiscal stimulus policies.
“China is still growing, the question is
whether it will hit its target,” said Heron
Lim at Moody’s Analytics. “In terms of
that recovery, it is still there, but the
concern is it’s slowing down.”
China is targeting gross domestic
product growth of 5 per cent this year as
the economy shrugs off Covid-19 con-
trols, but the recovery is proving fragile,
with property prices and exports falling.
Consumption is still growing, but
there are concerns the government will
Ukraine war. Mediation
have to do more to sustain the recovery
as global economic growth slows, reduc-
ing demand for China’s exports.
Beijing is also trying to cool tensions
with the US, which many blame for a
lack of investor confidence in China fol-
lowing tit-for-tat sanctions. US Treasury
secretary Janet Yellen during a visit to
Beijing at the weekend reassured her
hosts, including China’s Premier Li
Qiang, that the US was not seeking full-
scale economic decoupling.
The fall in CPI missed analysts’ expec-
tations in a Reuters poll of a 0.2 per cent
rise, and the producer price index
declined 5.4 per cent on the same period
a year ago, accelerating from a drop of
4.6 per cent in May and faster than the
5 per cent fall forecast by a Reuters poll.
Goldman Sachs analysts said the
decline was partly due to weaker com-
modity prices and continued price cuts
due to China’s mid-year “618” online
shopping festival.
Food inflation rose in June partly
because of higher prices for vegetables,
which increased 10.8 per cent year on
year on a decline of 1.7 per cent in May.
But pork prices were low due to weak
demand, falling 7.2 per cent year on year
in June.
“The ultra-low inflation reading lends
support to our view that the PBoC is
likely to implement two more rounds of
policy rate cuts,” Nomura economists
wrote in a research note, adding that the
central bank might also seek to release
more liquidity into the system by fur-
Kremlin only
ther reducing the reserve requirement
ratio, which requires banks to retain a
days after
certain level of funds as a prudential
measure.
Lim said few were expecting a
failed mutiny
“bazooka” stimulus. “Despite the fact
the economy is quite near deflation, it COURTNEY WEAVER — BERLIN
doesn’t look like the PBoC is looking at
Russian President Vladimir Putin met
monetary stimulus of the kind the US
Yevgeny Prigozhin and other Wagner
Fed or European Central Bank would.”
commanders a few days after their
The weakening performance comes
aborted mutiny, the Kremlin revealed
as Chinese economists are urging Bei-
yesterday.
jing to shift from its traditional form of
stimulus; investing in big infrastructure Dmitry Peskov, the president’s spokes-
projects; to targeting consumers. man, said Putin invited at least 35 peo-
Additional reporting by Sun Yu in Beijing ple, including Prigozhin and the battal-
ion commanders from the private mili-
tary group, to the Kremlin on June 29.
The meeting lasted nearly three hours.
The revelation is another turn in the
Kremlin’s handling of Prigozhin and his
Wagner group after their failed revolt on

African leaders tell Putin to show ‘desire for peace’
Senegal president presses
Moscow for humanitarian
‘progress’ ahead of summit
AANU ADEOYE — DAKAR
African leaders have told Vladimir
Putin to “show his desire to move for-
ward [with peace]” before they convene
in St Petersburg for a Russia-Africa sum-
mit at the end of this month, according
to Senegal’s president Macky Sall.
The demand was delivered to the Rus-
sian president during a six-nation peace
mission to Kyiv and Moscow in June, Sall
said in an interview with the Financial
Times. Sall was joined on the trip by his
counterparts from South Africa, Zam-
bia and representatives from Uganda,
Egypt, Republic of Congo and the Afri-
can Union.
“Before the next Russia-Africa sum-
mit, he [Putin] must do some actions to
show his desire to move forward [with
peace] even in a humanitarian way,” Sall
told the FT in the presidential palace in
Dakar, the Senegalese capital.
He said further exchanges of prison-
ers of war and the return to Ukraine of
children taken by Russian occupiers
“can be a very good signal”, adding:
“That’s why we continue to use the Rus-
sia-Africa summit to see how we can
move forward on the negotiations we
tried to implement between Russia and
Ukraine.”
Asked if Putin had shown any inclina-
tion to pursue peace, Sall said: “During
this summit maybe we can have another
meeting and have some progress. That’s
what we hope.”
African leaders have been stepping up
efforts to mediate between Kyiv and
Moscow with no end in sight to Russia’s
war on Ukraine. African countries have
been hit by soaring inflation caused by
elevated food and energy prices as a
result of the war. They are among the
biggest importers of grain and fertiliser
from Ukraine and Russia.
Although there are no western sanc-
tions against Russian food and fertiliser
exports, customers have complained
about banks’ reluctance to process
transactions.
“We are facing the consequences of
this war,” Sall said. “We have big prob-
lems with our food security and agricul-
ture. We buy fertilisers from Russia and
today with the sanctions, there are diffi-
culties paying for these goods.
“That’s why we’re talking to both par-
Peace call: ties. We know it’s very complicated but
African we think it was positively received.
dignitaries, Ukraine has said Russia must leave its
including Macky occupied territory before they can nego-
Sall of Senegal, tiate and we understand that.”
third left, visit a Sall was speaking in his first interview
mass grave site with an English-language media outlet
in Bucha, since announcing last week that he
Ukraine, last would not run for what would have been
month a contentious third term. There had
Valentyn Ogirenko /Reuters
been speculation for months over
whether he would contest the presiden-
tial election in February. Senegal’s con-
stitution limits presidents to two terms.
But Sall’s allies had argued that a 2016
amendment shortening term lengths
from seven to five years would have
allowed him to run for a second five-
year stint since his first seven years from
2012 to 2019 would not count.
Sall insisted he had the right to run
again as one term of seven years and
another of five “makes no sense”. He
claimed the constitutional court had
been “clear” since 2016 that his first
term of seven years would not bar him
from another run since that was under a
different law.
But he said that, despite many Sen-
egalese urging him to run again, he had
promised in a 2018 book Le Sénégal au
cœur that this would be his final term.
“Keeping one’s word is very impor-
tant since the constitution gives me the
right to serve a second five-year term.
But since I’ve already said that I won’t do
it, I believe that keeping my word is
essential,” he said.
Critics say Sall should have announced
he was stepping down sooner. Seventy-
nine per cent of Senegalese citizens sup-
port a two-term limit, according to poll-
ster Afrobarometer. Sall says if he had
announced earlier, he would have
become a “lame duck” president.
At least 23 people were killed in pro-
tests last month after opposition leader
Ousmane Sonko was convicted of “cor-
rupting youth” following a trial on rape
and death threat charges. A beauty par-
lour worker alleged Sonko had
assaulted her.
Sonko’s candidacy is in doubt as the
law in Senegal bars convicts from politi-
cal office. Sonko and his supporters
have accused the government of weap-
onising the justice system to prevent
him from contesting the election.
Sall refused to be drawn on Sonko’s
political future, saying only the consti-
‘We are tutional court could decide presidential
candidates. But at a time of democratic
facing the backsliding in west Africa and with the
consequences Sahel region south of the Sahara under
threat from Islamist terrorism and
of this war. extremist groups, Senegal needed to
We have big focus on protecting its democracy, he
said.
problems “We have very big problems in west
with our food Africa,” he added. “But we have to focus.
We also need to regulate democracy.
security and How we can put away the coups d’etat
agriculture’ and non-constitutional attempts to take
power. It’s not only the military.
“There are people who know that they
cannot get to power. So they use the
youths and put them on the streets and
strike and burn and create chaos. Many
people think this is the way to get power
by revolution. It is the same as a coup
d’etat. It is even worse.”
Asked if he was accusing Sonko of
using popular unrest to seize power, Sall
said: “I’m talking about no one. I’m talk-
ing about principles. I’m on another
level. What we want is for Senegal to
continue to develop under democracy
and the rule of law.”
See FT Big Read and Gideon Rachman
Opinion
June 23-24. While Putin had initially
branded the warlord “a traitor”, he later
dropped all charges and allowed him to
leave Russia for Belarus in a deal bro-
kered by the country’s president, Alex-
ander Lukashenko.
The admission of Putin’s meeting with
Wagner leaders — 10 days after the
Kremlin said it took place — marked yet
another signal that Russia was in no
hurry to dole out harsh punishments to
Prigozhin and instead has been eager to
keep the warlord and other command-
ers from the mercenary group on side.
Last week, it emerged that Prigozhin
had apparently been travelling freely
across Russia, according to flight track-
ing of his private jet between Moscow
and St Petersburg, with local news out-
lets reporting sightings of Prigozhin in
various Russian locations.
In his description of the meeting
between the president and Prigozhin,
Peskov suggested a civil discussion took
place, with both sides giving their ver-
sion of recent events, rather than Putin
giving the Wagner leader a severe repri-
mand over the failed revolt.
“The details of the meeting are
unknown. But the . . . president gave
his assessment of the battalion in terms
of the special military operation [in
Ukraine] and also gave his assessment
for the events of June 24,” Peskov said.
He added: “Putin listened to the
explanations of the commanders and
suggested further options for employ-
ment and their use in combat. The com-
manders themselves put forward their
version of what happened.”
Peskov also restated the Kremlin’s
narrative that Prigozhin’s and the other
commanders’ criticism had been
directed not at Putin himself but at the
conduct of the war by the army leader-
ship. “They emphasised that they are
strong supporters and soldiers of the
head of government and supreme com-
mander [Putin] and said they’re ready
to fight for the motherland,” he said.
Prigozhin was a former caterer who
served a prison sentence for robbery
during the fall of the Soviet Union. His
relationship with Putin dates back to St
Petersburg in the 1990s when Putin
began visiting Prigozhin’s restaurant.
Prigozhin served as a kind of a fixer
for Putin and built a catering company
and private military group with exten-
sive government contracts — ties that
also make the relationship harder to
untangle.
While the Kremlin has provided little
information about the depth of the two
men’s relationship, Lukashenko sug-
gested last week that Putin might have
more empathy for Prigozhin than his
initial public statements about the
uprising had let on.

‘Tuna bonds’ East Asia

Mozambique ex-finance minister faces trial
JOSEPH COTTERILL — JOHANNESBURG
South Africa will this week hand
Mozambique’s former finance minister
to the US, where he faces trial over the
$2bn “tuna bonds” scandal, reigniting
one of Africa’s biggest corruption cases.
Manuel Chang lost a battle against
extradition in May, almost five years
after he was arrested in Johannesburg
on US fraud charges related to the loot-
ing of hundreds of millions of dollars
from loans that he approved for issu-
ance in 2013.
The loans for maritime projects,
which included a state tuna fishing fleet,
devastated Mozambique’s economy and
led directly to the southern African
nation defaulting on its sovereign debt,
amid allegations of bribery, conceal-
ment and the embezzlement of an esti-
mated at least $500mn.
The fallout led to a $475mn fine for
Credit Suisse, the arranger of the debt,
and litigation in London, in which the
Mozambican state has sought to cancel
the debts but also declined to detail
what President Filipe Nyusi knew of the
loans as defence minister at the time.
Chang’s extradition to the US, which
opens the way for the most important
foreign trial of the long-running saga,
could embarrass Nyusi’s governing
Frelimo party, which unsuccessfully
sought to have him taken back to
Mozambique.
“We are extraditing him to the US. He
was arrested in South Africa and will be
‘We hope Chang will
speak, tell us who gave
the orders and where
the missing funds are’
handed over this week,” South Africa’s
police said, after the country’s highest
court threw out Mozambique’s appeal
against Chang’s extradition.
A Gulfstream jet registered to the US
Department of Justice landed at a pri-
vate airport near Johannesburg on Sun-
day, according to flight-tracking web-
sites.
“The fact that Chang is being extra-
dited to America sends a strong message
to the elites who have undermined the
development of Mozambique,” said
Adriano Nuvunga, chair of the Fórum
de Monitoria do Orçamento, a budget
watchdog that fought the Mozambican
bid to halt the extradition.
“We hope Chang will speak, tell us
who gave the orders and where the miss-
ing funds are. Almost half a billion dol-
lars is unaccounted for,” he added.
Chang has always denied wrongdoing
and his US lawyers have said they will
seek to dismiss the case in New York
because it has taken too long to come to
trial.
In 2019, a previous US trial in the
scandal ended in the acquittal on
charges of fraud and money laundering
of a salesman of boats acquired through
the loans.
Three former Credit Suisse bankers
had earlier pleaded guilty for arranging
kickbacks on the debt issue.
After 2016, when the tuna bond col-
lapsed, the fraud cost the country $11bn
or the equivalent of its entire gross
domestic product that year, Mozam-
bique’s Centre for Public Integrity and
the Norwegian Chr Michelsen Institute
have estimated.
North Korea threatens to down US spy planes
CHRISTIAN DAVIES — SEOUL
North Korea has threatened to shoot
down US spy planes it accuses of violat-
ing its airspace as South Korea’s presi-
dent prepares to urge Nato countries to
demonstrate their willingness to deter
nuclear aggression from Pyongyang.
Accusing the US of conducting “hostile
espionage activities” by flying military
reconnaissance planes off the eastern
and western coasts of the Korean penin-
sula, an unnamed North Korean
defence ministry official said
Pyongyang was ready to respond to
Washington’s “reckless acts”.
“There is no guarantee that such a
shocking accident as the downing of a
US Air Force strategic reconnaissance
plane will not happen,” the official said,
according to North Korea’s state news
agency yesterday.
The warning comes as Yoon Suk Yeol,
South Korea’s conservative president,
departs for Europe to attend this week’s
summit of Nato leaders in Lithuania.
“Now is the time to clearly demon-
strate that the international commu-
nity’s determination to deter North
Korea’s nuclear weapons programme is
stronger than North Korea’s desire to
develop nuclear weapons,” Yoon told AP
yesterday.
In April, Yoon and US president Joe
Biden announced a new bilateral
nuclear consultative group to give Seoul
more insight and input into US defence
planning. Washington also pledged
more deployments of nuclear-capable
bombers and other strategic assets on
temporary missions to South Korea.
The deployments will include the first
visit of a US nuclear ballistic submarine
Yoon Suk Yeol: call for action to
deter Pyongyang nuclear ambitions
to South Korea since the early 1950s, an
announcement to which Pyongyang
responded with outrage.
The North Korean defence official
yesterday accused the US of engaging in
“the most undisguised nuclear black-
mail” with its planned submarine
deployment. “Now we are exercising the
utmost patience and restraint but there
is a limit to all things and we are now tee-
tering on the critical point when the US
must be concerned,” the official said.
The US embassy in Seoul did not
immediately respond to a request for
comment.
In 1969, North Korea shot down a US
navy reconnaissance plane over the Sea
of Japan as part of a programme to mon-
itor communications among the Soviet
bloc. The incident, which killed 31
American service personnel, is still cele-
brated by North Korean state media.
This week, Yoon will attend his sec-
ond Nato summit after he and the lead-
ers of Japan, Australia and New Zealand
were invited to the summit in Madrid
last year. At that summit, the alliance
formally defined China as “a challenge”
in its strategy for the next decade.
Tuesday 11 July 2023
US elite colleges
race to navigate
legal challenges
over admissions
Court ruling and complaint about ‘legacy’
students put Ivy League under pressure
ANDREW JACK — NEW YORK
In the days since the US Supreme Court
ruled against affirmative action in
higher education, Adam Nguyen of Ivy
Link has been emailing warnings to the
Asian clients he advises on US elite col-
lege admissions.
“There’s a perception now that it’s
easier for them to get in,” he said. “They
still have to distinguish themselves on
subjective measures. I don’t want my
clients to be lulled into complacency.”
America’s highest court last month
ruled that it was unconstitutional for
Harvard and the University of North
Carolina (UNC) to use race as a basis for
admissions. The decision was cheered
by some who claimed that such action
discriminated against Asian students.
One anonymous New York high
school teacher said many of his bright-
est pupils had been rejected by the top
institutions because of their ethnicity.
“The real victims are hard-working
Asian working-class kids. Everything
goes against them,” he said.
But others fear the ruling will reduce
access to top universities by African
American, Latino and other under-rep-
resented minorities. They argue that
there are more avenues for white and
wealthy applicants than those from
more disadvantaged backgrounds.
America’s most competitive universi-
ties are scrambling to respond to this
and two other big developments that
have questioned their admissions poli-
cies. Less than a week after the Supreme
Court judgment, a complaint was filed
with the US education department over
the preference given by elite colleges to
“legacy” students whose families have
previously attended or donated. Com-
pounding it is a separate Supreme Court
judgment overturning President Joe
Biden’s proposed student debt forgive-
ness programme.
The universities have been cautious
in responding while hinting at how they
will continue to apply discretion. All
eight Ivy League colleges, and others
that supported Harvard and UNC’s
defence, have stressed they will respect
the law while seeking to maintain diver-
sity in their intakes via other means.
On Friday, Kevin Guskiewicz, chan-
cellor of UNC, said: “We will comply
with the court’s ruling that an appli-
cant’s lived racial experience cannot be
credited as ‘race for race’s sake’, but
instead . . . may illuminate an individ-
ual’s character and contributions.”
Vassar College, in an online discussion
with students, staff and alumni last
week, pledged that “we will not be
daunted in our mission to bring together
diverse communities of learning”.
Christina Paxson, president of Brown,
said it “is and will remain firmly com-
mitted to advancing the diversity” of the
university while convening “a thorough
legal review” of the affirmative action
decision over the summer.
At Cornell, one academic said he
expected the ruling to dominate the
“midsummer check-in” of senior staff,
adding: “The overall sense I get on cam-
pus is a general confidence that we will
be able to meet this challenge.”
★ FINANCIAL TIMES
INTERNATIONAL
Harvard pupils Yale is hosting a discussion on the rul- communities traditionally less repre-
back affirmative ing in its law school in September and, sented, and using proxies for race such
action. The mirroring its peer Princeton, aims to set as socio-economic background. It also
University of up an Office of Educational Opportunity offers tuition waivers for those from
North Carolina, to support students from less privileged low-income families.
below, is also in backgrounds to reduce the risk of drop- While most elite colleges already offer
a quandary ping out. Like other institutions, it is discounts to those with financial need,
Scott Eisen/Getty Images,
Hannah Schoenbaum/AP
exploring outreach programmes to and Biden has pledged to reintroduce
encourage applications from students in student loan forgiveness proposals,
some suggest the Supreme Court’s judg-
ment may discourage lower-income
applicants because of the intimidating
cost of elite colleges. Further, college
consultants warn that applications will
become still more opaque and complex.
Barbara Coward, founder of MBA
360° Admissions, said: “The affirma-
tive action decision has introduced
more anxiety into the application proc-
ess. Notably for Indians: should they use
their English name rather than their
given name on their application?”
Nguyen said his message to black and
latino clients was “we can’t rely on
affirmative action to give you a boost. I
advise them to find other subjective,
contextual measures. When it comes
7
‘The time to complete application, we’ll find
ways to introduce race.”
affirmative The shift from the use of test scores by
action universities to “holistic admission”
based on broader contextual factors,
decision has such as ability to overcome obstacles,
introduced has added to the competition. He said he
would not necessarily dissuade Asians
more from pursuing passions such as violin,
anxiety but “you need be to very accomplished”,
and many would be better to focus on
into the intellectual pursuits and stated inter-
application ests in more unusual subjects.
He also predicted that pressure would
process’ grow against legacy admissions, notably
with a less favourable view of excellence
in elite, expensive sports such as fenc-
ing, skiing and sailing.
A shift from wealthy potential donors
would certainly be less elitist, yet Allen
Koh, founder of Cardinal Education, an
admissions consultancy, said: “There’s
been a lot of money waiting to see how
universities will react. I’ve been in con-
versations where hundreds of millions
of dollars in donations have been with-
held and are in a state of limbo.”
8 ★ FINANCIAL TIMES Tuesday 11 July 2023

Safe space Investors were sold €175bn of covered bonds in the six months to June, topping the previous high in 2011 y PAGE 13

Failures spark Grapes of wrath Pitt accused of looting lucrative

French vineyard he co-owned with ex-wife Jolie
EasyJet axes
1,700 flights
tougher rules and blames air
traffic control
on capital for PHILIP GEORGIADIS
TRANSPORT CORRESPONDENT

EasyJet has cancelled 1,700 flights

big US banks scheduled for this summer, blaming

3 Plans laid out for shoring up system
3 Fed’s Barr puts accent on ‘resilience’
COLBY SMITH — WASHINGTON
JOSHUA FRANKLIN — MINNEAPOLIS
The US has announced tougher capital
rules for a broad range of lenders in a bid
to shore up a system rattled by the fail-
ure of several regional banks this year.
Michael Barr, vice-chair for supervi-
sion at the Federal Reserve, yesterday
unveiled regulatory changes for institu-
tions with $100bn or more in assets,
proposing stiffer standards that will
require banks to stow away additional
capital for use to absorb any losses.
“The comprehensive set of proposals
that I have described here today would
significantly strengthen our financial
system and prepare it for emerging and
Opponents say further
requirements will lead
to higher borrowing
costs and fewer loans
unanticipated risks, such as those that
manifested themselves in the banking
system earlier this year,” he said at an
event hosted by the Bipartisan Policy
Center in Washington.
The proposals come months after
three of the four largest failures of feder-
ally insured banks in US history — Sili-
con Valley Bank, Signature Bank and
First Republic — sparked fears about the
resilience of regional lenders.
All three banks had more than
$100bn in assets but were below the
$250bn threshold for more stringent
requirements.
The rules will require banks with
more than $100bn in assets to report the
effect of losses on their assets on their
capital levels, which, Barr said, would
“improve the transparency of regula-
tory capital ratios, since it would better
reflect banking organisations’ actual
loss-absorbing capacity”.
SVB had been exempt from that rule
owing to its size, and the sudden losses
that it took when it sold assets spooked
investors and depositors.
“In an obvious way, the failures of SVB
and other banks this spring were a
warning that banks need to be more
resilient, and need more of what is the
foundation of that resilience, which is
capital,” Barr said.
He said that the changes would
increase capital requirements across the
US banking industry but “would princi-
pally raise capital requirements for the
largest, most complex banks”.
The proposed new banking rules will
come in two forms: the implementation
of new international standards — the so-
called Basel III endgame reforms — and
a holistic review of capital rules that
Barr had announced last year.
US bank executives have been nerv-
ously awaiting the proposals for
months. Morgan Stanley chief executive
James Gorman said last month that the
floated numbers around the Basel rules
would be “ugly” for the industry but
that the proposals might be amended
during the consultation.
Bank stocks were little changed yes-
terday; many of the proposals had been
anticipated and will be phased.
Barr said the proposed rules would
require banks to hold an extra $2 of cap-
ital for every $100 of risk-weighted
assets. He said most banks had enough
capital to meet the rules and estimated
that those that did not make enough in
profits could within two years be com-
pliant while still paying out dividends.
The Financial Services Forum, a
lobby group for banks including JPMor-
gan Chase, Bank of America and Gold-
man Sachs, said that further capital
requirements would lead to higher bor-
rowing costs and fewer loans for con-
sumers and businesses.
“We call on regulators to consider
these implications carefully,” FSF chief
executive Kevin Fromer said.
Happier times: actors Angelina Jolie and Brad Pitt attend a film premiere in 2015 — Jason LaVeris/FilmMagic
JOE MILLER — NEW YORK
Brad Pitt “looted” the Château
Miraval vineyard that he co-owned
with ex-wife Angelina Jolie in Pro-
vence, spending millions of dollars
on swimming pool renovations and a
recording studio, lawyers suing the
actor have claimed.
Nouvel, a company through which
Jolie owned a stake in the French win-
ery, said in a filing to a court in Califor-
nia yesterday that it was owed more
than $350mn by Pitt and his partners.
The company alleged that Pitt
“engaged in increasingly outrageous
actions to retain control” of Château
Miraval, while allegedly “stripping
[the rosé producer] of its assets”.
The allegations that Pitt acted like a
“petulant child” while engaging in a
“blatant money grab” are the latest
salvo in a bitter legal feud between the
Hollywood stars, who filed for divorce
in acrimonious circumstances in
2016, with Jolie accusing Pitt of a
drunken attack on her and the cou-
ple’s children while on a private flight
to the US.
The 59-year-old has denied the
assault allegations and, in previous
court filings, accused Jolie of attempt-
ing to damage his reputation by sell-
ing her share of Miraval “behind Pitt’s
back” to Russian-born billionaire Yuri
Shefler’s Stoli Group, for $64mn.
The depth of the domestic dispute
has been laid bare in the lawsuits over
the vineyard, which the couple
bought for €25mn in 2008. The rosé
brand they established at the estate
with the help of Rhône winemaker
Marc Perrin became a bestseller, gen-
erating more than €15mn in profits in
2022, according to the filings.
Since the divorce, Pitt has “master-
minded a so far successful plan to
seize de facto control of Château
Miraval”, Nouvel’s lawyers claimed
yesterday, alleging that he had frozen
Stoli out of running the company by
refusing to appoint neutral directors
to the board of the Luxembourg entity
through which the vineyard operates.
Neither Pitt’s nor Perrin’s lawyers
responded to requests for comment.
Nouvel’s legal team alleged that Pitt
had “wasted the company’s assets,
spending millions on vanity projects,
including more than $1mn on swim-
ming pool renovations, building and
rebuilding a staircase four times and
spending millions to restore a record-
ing studio”.
Nouvel claimed that Pitt also
turned over half the value of Miraval’s
trademarks to Perrin, without the
permission of Jolie’s former holding
company, which is a joint owner.
They disputed that Pitt, who has
won Academy Awards as a producer
and actor, had been devoted to viticul-
ture. “Pitt is an actor, not a wine-
maker. He deals in illusions, not dirt
and grapes,” they wrote.
“challenging conditions” caused by air-
traffic control problems across Europe.
The low-cost airline said yesterday it
would cut 2 per cent of its programme
for July, August and September, with the
majority of cancellations affecting
flights at London’s Gatwick airport.
The closure of Ukrainian and Russian
airspace has become a significant source
of air-traffic control problems, causing
congestion elsewhere.
Only about 80 per cent of normal air-
space is available, at a time when air
travel has bounced back strongly from
the pandemic.
Eurocontrol, which manages the
region’s airspace, has warned of a “chal-
lenging” summer with traffic “over-
loads” in areas including London, Brus-
sels and Barcelona. French air-traffic
controllers have also staged a series of
walkouts, while staff at Eurocontrol
have warned of possible strike action
over the next six months.
“The whole industry is seeing chal-
lenging conditions this summer with
more constrained air space due to the
war in Ukraine resulting in unprece-
dented [air traffic control delays], as
well as further potential ATC strike
action,” easyJet said.
It said that the cancellations were not
caused by staff shortages and that it had
“more crew and pilots flying than ever
before”. Last year, the industry strug-
gled to cope with the volume of custom-
ers after many airlines made cuts during
the pandemic.
Several big airlines cut capacity last
summer to try to help operations run as
smoothly as possible. Meanwhile, air-
ports, including Gatwick and Heathrow,
imposed passenger caps because of
industry-wide staff shortages.
There have been fewer problems this
year. The rate of flight cancellations
from UK airports in the first half of the
year was its lowest since 2019, according
to aviation data company Cirium.
By cutting flights some time in
advance, easyJet hopes to inject resil-
ience into its operations and avoid last-
minute cancellations and delays.
It said the cancellations were focused
on high-frequency routes where passen-
gers could be shifted to alternative
flights, and that 95 per cent of customers
had already been rebooked.

KKR buyout of Circor shows modern dilemmas faced by boards

agreeing to pay the full purchase price
INSIDE BUSINESS upfront out of its own equity funds.
Second, KKR pointed out that Arcline
FINANCE owned a rival of Circor, Fairbanks Morse
Defense, which could frighten the sud-
Sujeet denly strict US competition authorities.
US boards have fiduciary duties to
Indap seek the best price for their sharehold-
ers. However, with enhanced closing
risk from either debt financing falling
much of the regulatory risk to its side.
Arcline committed to putting in $1.3bn
of its own equity against $500mn of
loans to come from Bank of Montreal
(BMO). Perhaps most controversially,
Circor agreed with KKR that such debt
financing presented some closing risk
even as the amount of proposed debt
was a relatively modest four times Cir-
cor’s annual cash flow.

B
ring cash and do not be afraid
to twist some arms. That
might be the takeaway from a
recent bid battle involving
KKR. In early June, the pri-
vate equity group appeared to have won
an auction for the US industrials com-
pany Circor, agreeing a total price of
$1.6bn.
But by the end of June, it had been
forced to raise its per share price two
more times to win the company, eventu-
ally increasing its initial bid of $49 a
share to $56. Another private equity
group, Arcline Investment Manage-
ment, had jumped into the fray and
forced its bigger rival to pay more.
Arcline’s final bid of $57 was actually
higher than KKR’s. Besides stumping up
more cash, KKR also embarked on an
intensive campaign to challenge the
quality of Arcline’s entry.
KKR public press releases as well pri-
vate entreaties to Circor, disclosed
recently in securities filings, offered
arguments that were supposed to reso-
nate at this unsettled moment in deal-
making.
First, even if Arcline was offering
more cash, the smaller fund would be
required to tap the choppy syndicated
loan markets to complete its bid. KKR
first had secured commitments from
direct lenders Ares Management and
Apollo Global. KKR then went further in
through or regulators blocking a deal,
boards could, at their discretion, value
certainty more than absolute dollars. As
such, KKR believed it did not need to go
dollar-for-dollar with Arcline, an
approach ultimately vindicated.
Heightened closing risk may, how-
ever, not by itself be totally persuasive.
Arcline made an initial topping bid of
$52.65 that the Circor board ruled was
likely to be good enough to be deemed a
“superior pro-
posal” to $49. In Even if Arcline was
the following days,
KKR would offer offering more cash, the
its all-equity back- smaller fund would be
stop provision as
well as a higher ter- required to tap the choppy
mination fee it syndicated loan markets
would owe Circor if
its deal collapsed for financing or anti-
trust reasons.
It also argued to Circor that the US
navy, Department of Defense and Con-
gress might scrutinise a combination of
with Arcline over the impact on the sup-
ply of valves for US submarines. It even
convinced Circor to speak to an ex-US
navy secretary who was a board mem-
ber at another KKR portfolio company,
who explained what he thought were
the risks of Arcline. Still, KKR raised its
bid to $51, enough to keep Circor from
accepting the $52.65 from Arcline.
Arcline was not finished. It raised its
bid to $57 and offered a “hell or high
water” antitrust provision that shifted
As Arcline pointed out, the financing
risk belonged to BMO. Like all modern
leveraged buyout financings, lenders
were legally bound to show up at closing
with the funds as the banks were being
paid high fees to shoulder the burden of
selling on the debt later to specialised
funds.
Still, the Circor board decided the gap
between $57 against KKR’s $51 was
enough to move towards Arcline. KKR
ultimately bumped to $56 along with a
so-called “ticking fee” of up to $1 paid to
Circor shareholders if the KKR deal had
not closed by year end.
The board bet this narrower gap was
“more than offset by the increased deal
certainty” KKR ostensibly provided
even as Arcline came back with its own,
ultimately rejected, $1.50 ticking fee to
begin in 2024. Arcline insisted that any
overlap between Fairbanks and Circor
was minimal and that the debt commit-
ment from BMO was airtight. Still, KKR
was forced to raise its bid to win.
If KKR and its bidding rival were neck
and neck, Arcline perhaps had little
chance. It would have to sway a board
that might be risk-averse, represented
by lawyers and bankers who were likely
to do far more business down the road
with a whale such as KKR rather than a
minnow such as Arcline. Shareholders
now get to vote on the KKR deal and
whether they want to twist any arms.
sujeet.indap@ft.com
Tuesday 11 July 2023 ★ FINANCIAL TIMES 9
10 ★ FINANCIAL TIMES Tuesday 11 July 2023

COMPANIES & MARKETS

Banks Travel & leisure

Wall Street faces surge in loan losses
Six largest lenders set to
report having written off
$5bn in second quarter
JOSHUA FRANKLIN AND
STEPHEN GANDEL — NEW YORK
The largest US banks are set to report
the biggest jump in loan losses since the
onset of the pandemic, as rising interest
rates pile pressure on borrowers.
The publication of second-quarter
results this week is likely to show that
banks have benefited from higher inter-
est rates to some degree, by boosting
lending and investment income.
However, after three years of rela-
tively low defaults, in part fuelled by
pandemic-era stimulus cash and other
government assistance, lenders are also
starting to see the negative effects of
higher interest rates and inflation on
borrowers.
The six largest banks — JPMorgan
Chase, Bank of America, Citigroup, Wells
Fargo, Goldman Sachs and Morgan
Stanley — are projected to have written
off a collective $5bn tied to defaulted
loans in the second quarter, according to
the average estimates of bank analysts,
as compiled by Bloomberg.
The six lenders will set aside an esti-
mated additional $7.6bn to cover loans
that might go bad, analysts estimate.
Both figures are nearly double what
Technology. Education
they were in the same quarter a year
ago. But they remain below the hits
big banks took at the beginning of
the pandemic when charge-offs and
Analysts say the benefits
of increased interest rates
are likely to outweigh the
negatives for most
provisions peaked at $6bn and $35bn
respectively.
Credit cards are the biggest source of
pain for a number of the banks. JPMor-
gan’s card loan charge-offs totalled
$1.1bn in the quarter, analysts estimate,
up from $600mn in the same period a
year ago. At BofA, credit card loans rep-
resent about a quarter of its charge-offs.
Commercial real estate loans are also
proving a drag on banks’ performance.
Property owners face reduced demand
for office space as remote and hybrid
work arrangements persist.
Wells Fargo, the biggest CRE lender
among the nation’s largest banks, told
investors this month that it added $1bn
to its loan loss provisions to cover poten-
tial losses tied to office buildings and
other poor-performing properties.
Investment banking is also likely to
hit earnings. Revenues in the banks’
Wall Street and corporate advisory busi-
nesses are expected to fall again this
quarter because of a dearth of dealmak-
ing activity that has dragged on for
longer than many executives had
expected.
Trading revenues, which soared in
recent years amid volatile financial
markets, are expected to slow.
Nonetheless, bank analysts say the
benefits of increased interest rates are
likely to outweigh the negatives for most
of the big banks. On average, analysts
expect the six largest US banks to report
that earnings per share rose 6 per cent
year on year.
JPMorgan, Citi and Wells Fargo report
earnings on Friday followed by BofA
and Morgan Stanley on July 18. Gold-
man reports on July 19.
Qatar fund
agrees deal for
5% holding in
Monumental
SARA GERMANO — NEW YORK
ANDREW ENGLAND — LONDON
The Qatar Investment Authority has
taken a stake in the owner of Washing-
ton’s professional basketball and
hockey teams, marking the first invest-
ment by a sovereign wealth fund in US
sport.
The fund is paying $200mn for a 5 per
cent stake in Monumental Sports Group
in a deal that values the owner of the
National Basketball Association’s Wash-
ington Wizards, the Women’s National
Basketball Association’s Washington
Mystics, and the National Hockey
League’s Washington Capitals at
$4.05bn, according to two people famil-
iar with the matter.

Byju’s is taught a hard lesson in business
Indian start-up’s financial
woes prompt backers to leave
board and auditor to resign
CHLOE CORNISH — MUMBAI
BENJAMIN PARKIN — NEW DELHI
JOSEPH COTTERILL — JOHANNESBURG
MERCEDES RUEHL — SINGAPORE
The eponymous founder of India’s lead-
ing online education provider has been
earning low marks from investors over
the past few weeks, as the affairs of what
was once the world’s most valuable
edtech descended into chaos.
In one week in June, Byju’s, at one
time valued at $22bn, suffered the resig-
nation of its auditor and three board
directors amid concerns about its
accounts, leading to a weekend crisis
call with investors. A person briefed on
the call said founder Byju Raveendran
said that the group had made mistakes
but had learnt from them. He added:
“Byju’s is not my work, it is my life.”
That life has been one of major highs
and lows over the past four years. The
Bengaluru-based company he founded
12 years ago had been a big winner as
pandemic lockdowns made online
learning services seem indispensable.
An adept fundraiser, Raveendran
rode an international investment wave
for Indian start-ups. He pulled in $2.5bn
during that period, using it to acquire
some 20 companies worldwide and
amassing 150mn students.
But as the world shook off the pan-
demic and central banks started to raise
interest rates last year, the easy money
began to dry up. Indian start-ups as a
whole attracted just $2.8bn in the first
quarter of 2023, down from $12bn the
previous year, according to data pro-
vider Tracxn.
As well as the financial drain of its
acquisition spree, Byju’s cash burn had
included millions of dollars spent on
marketing promotions such as sponsor-
ing the Indian cricket team. “Business
promotion expenses” for its 2020-21
year were Rs22.5bn ($295mn).
“The guy got himself into a liquidity
crunch thinking he could access money
whenever he wanted,” said a venture
capitalist familiar with the situation.
The problem with Byju’s, the investor
said, is “largely liquidity and horrible
PR”. Byju’s did not respond to a request
for comment on any liquidity issues.
That PR included allegations last year
of a toxic workplace culture and mis-
selling of its digital education products
to parents, which included pushy sales
tactics and misrepresenting the results
In recent years, Gulf states have
ploughed billions of dollars into sport,
from golf to tennis and football, partly to
develop domestic tourism and enter-
tainment sectors but also in search of
ers unhappy. Naspers’ investment arm returns as the industry benefits from
Prosus was one of the three investors explosive growth in the value of media
whose representatives quit Byju’s’ and broadcasting rights.
board. The others were venture capital
firm Sequoia India (now Peak XV) and
the Chan-Zuckerberg Initiative, Meta
‘MSE’s platform provides
founder Mark Zuckerberg’s philan- unique opportunities
thropic fund.
“The reality is that we’ve been think-
and scalability for growth
ing about this for a while,” said Naspers’ and partnerships’
van Dijk. “The amount of information
we got [from Byju’s] made it really diffi- The investment from QIA, which has
cult.” Prosus has said it had made an an estimated $450bn in assets, comes
accounting judgment last year that it less than a year after the NBA amended
“no longer exerts significant influence its bylaws to allow sovereign wealth
over the financial and operating poli- funds to invest in clubs.
cies” of Byju’s. Goel only started in May, Founded by former AOL chair Ted
filling a vacancy that had been open Leonsis, Monumental is also an assort-
since December 2021. ment of esports teams, local television
However, experts point out that and radio networks.
responsibility for financial reporting is “As one of the largest integrated
shared by a company’s board. sports and entertainment companies in
“In any company where there is a the country, MSE’s platform provides
delay in submission of accounts, the unique opportunities and scalability for
board has equal responsibility as man- growth and partnerships,” the QIA said
agement,” said Mohandas Pai, chair of yesterday.
Bengaluru-based Aarin Capital Partners Qatar, one of the biggest exporters
and one of Byju’s earliest investors. of liquefied natural gas and one
Industry experts and investors still of its richest nations in per capita terms,
expect Byju’s to survive its crisis. Con- has invested heavily in sport over the
cerns are “way overblown” said the ven- past two decades, culminating in
ture capitalist familiar with Byju’s, add- its hosting the football World Cup
ing that the group has a “significant last year.
Glory days: an from those products. The company also group, which invested in Byju’s in 2018. ‘[The business” and “some good assets”. The state has owned French football
employee works began firing thousands of employees, “That business is good and has legs.” However, the imbroglio has reduced club Paris Saint-Germain since 2011
on Byju’s which analysts said was an effort to save Even so, Byju’s did not publish founder] got what was once the world’s most valua- through its Qatar Sports Investments
learning app in money. Byju’s has denied the mis-selling audited accounts for the 2020-21 finan- himself into ble edtech start-up, with an implied fund.
Bengaluru in allegations and has said the job cuts cial year until September 2022, an 18- worth of $22bn, to a value of $8.4bn, People familiar with the Monumental
2017. The were, in part, a result of overlapping month wait, finally revealing some a liquidity according to Tracxn. deal said the QIA was taking a stake to
group’s implied roles as it integrated businesses it had $560mn in losses. Its auditor Deloitte crunch US fund manager BlackRock has writ- gain exposure to a company with a
valuation of acquired. had insisted Byju’s overhaul its account- ten down the value of its minority stake diverse range of assets.
$22bn has fallen Its core digital learning offering — live ing practices, including recognising rev- thinking he for an implied valuation of about $8bn, The QIA would not gain board repre-
to an estimated or recorded video lessons for school-age enues over time for its services. In its could access while Prosus has also reduced its assess- sentation as part of the transaction, one
$8.4bn — Dhiraj Singh/ children through an app — is still “an June letter resigning as auditor, Deloitte ment of its stake, suggesting a valuation of the people said.
Bloomberg
attractive business that’s performing an alleged that Byju’s had failed to provide money of about $5bn. Saudi Arabia’s Public Investment
important function in the Indian mar- financial data that would enable it to whenever Raveendran, one of India’s richest Fund led a consortium that bought Eng-
ket”, said Bob van Dijk, chief executive audit its 2021-22 business year. self-made tycoons, still has a fortune at lish football club Newcastle United in
of South Africa’s Naspers internet Byju’s has hired an affiliate of he wanted’ stake with roughly 25 per cent of Byju’s 2021, and last month announced a
accounting firm BDO to take over as equity in his hands. He had invested framework deal to combine commercial
Byju’s funding — and its surge amid auditor. New chief financial officer Ajay $900mn in Byju’s and its subsidiaries, interests with golf’s PGA Tour.
Goel told investors on the weekend call the person briefed on the investor call The PIF is in talks to invest in men’s
the pandemic that the 2021-22 audit would be com- said, partly through borrowing against professional tennis.
Cumulative $bn raised in investment rounds and debt pleted by September, and 2022-23 his shares.
issuance would be closed by end of the year. In a move that could shore up the
Start of pandemic
Nov 2021 6 Byju’s lenders in the US have also company financially, Byju’s has decided
Conventional cited a lack of timely reporting and pay- on a flotation next year for Aakash, the
debt issuance 5 ments in a Delaware lawsuit over its exam coaching institute it bought for
Jan 2020 4 $1.2bn term loan. They accuse it of hid- $1bn in 2021.
Tiger Global ing $500mn and argue Byju’s is in tech- Consultants say Byju’s backers need
Management 3 nical default on the loan, partly as it has to ask themselves why they were not
Sep 2016 Jul 2017 Dec 2018 failed to provide financial updates. posing enough questions in class.
2 Byju’s last month refused to make a “This company did not even have a
The Chan Tencent Naspers
Zuckerberg 1 $40mn interest payment while in dis- CFO,” said Shriram Subramanian, man-
Initiative pute and launched its own lawsuit in aging director of governance advisory
0 New York against its lenders, accusing firm InGovern. “As long as the ride was
2013 14 15 16 17 18 19 20 21 22 them of “bad-faith negotiating”. hunky dory and the valuations were Monumental owns the Washington
Source: Tracxn
Byju’s travails have left its early back- doing well, all the investors kept quiet.” Wizards NBA basketball team

Chemicals Banks

German groups build plants outside Europe
PATRICIA NILSSON — FRANKFURT
German chemical groups are investing
in modern plants and green technolo-
gies — but largely outside Europe, the
industry’s largest trade union has
warned.
“Investments in new plants and new
technologies . . . are flooding out of Ger-
many,” said Michael Vassiliadis, chair of
IG BCE, Germany’s union for the chemi-
cal and energy industries, and added the
trend had accelerated “since the prob-
lem with energy”.
The main benefactors, he said, were
China and the US, which were offering
companies “full packages” that on top of
tax incentives include access to green
energy and regulatory fast-tracking.
Competition for foreign direct invest-
ment is increasing for European coun-
tries. Germany last year suffered a
record deficit in corporate investments
as companies looked overseas, accord-
ing to the German Economic Institute,
which called the situation “alarming”.
Washington last year unveiled large
subsidies available for investments in
various green technologies under its
Inflation Reduction Act, which seeks to
attract foreign direct investment in key
sectors. China has likewise delved into
state coffers to bolster certain industries
— one of which remains chemicals,
Vassiliadis said.
Beijing, which is struggling with a pro-
tracted economic slowdown, is espe-
cially welcoming of foreign direct
investment in areas involving high tech-
nology, such as advanced manufactur-
ing, information technology, and scien-
tific research, as it seeks to move its
industry up the value chain.
Vassiliadis, who in his role as union
leader sits on the supervisory board of
BASF, said the German chemicals group
is a striking example of a company
investing in state of the art technology in
China.
The world’s largest chemical
company is currently building a €10bn
petrochemicals complex in Zhanjiang.
Modelled on the German group’s
headquarters in Ludwigshafen, it will be
equipped with “cutting-edge technolo-
gies” and the “highest . . . sustainability
standards”. The company has mean-
while warned that it will “permanently”
downsize its operations in Europe.
Vassiliadis said the investment was
possible through the support of Chinese
authorities, which met the company’s
request for large amounts of cheap,
green energy by building a wind farm
next to the site.
Christian Faitz, co-head of chemical
sector research at Kepler Cheuvreux,
said he did not believe any new plants
producing ammonia — which plays a
part in a net zero economy through its
role in hydrogen vehicles — would be
built in Europe. Meanwhile, BASF has
closed one of its two ammonia plants in
Ludwigshafen, citing high energy costs.
Additional reporting by Joe Leahy in Beijing
Deutsche lands Lufthansa credit card deal
OLAF STORBECK — FRANKFURT
Deutsche Bank has captured one of
Europe’s largest and most lucrative co-
branded credit card contracts, as Ger-
many’s biggest lender tries to make
good on its ambition to expand its pay-
ments business.
From 2025, Deutsche will run the Ger-
man credit card business of Lufthansa’s
frequent-flyer loyalty programme,
known as Miles & More. The deal is
expected to more than double the
bank’s annual volume of credit card
transactions.
In recent years, the lender has singled
out digital payments and cash manage-
ment as a high “strategic priority”.
Stable and low-risk with little regulatory
capital required, the business is
regarded by Deutsche as one that can
balance the more erratic and capital-in-
tensive investment banking and bond
trading operations.
Ole Matthiessen, Deutsche’s head of
cash management, said the deal, which
also involves Mastercard as the provider
of the technology and the network,
would see the number of credit cards it
issued rise by a quarter.
Industry experts estimate that Deut-
sche will make about €100mn in annual
revenue from the deal. The bank
declined to comment on the revenues
the agreement would bring, but the
importance of the deal was underlined
by the fact that chief executive Christian
Miles & More members are typically
affluent and frequent flyers
Sewing led the pitch for the contract.
Miles & More members are typically
affluent and frequent flyers, with 20 per
cent of them Deutsche clients. They
spent “five times more than the average
German credit card user”, said Johann-
Philipp Bruns, managing director at
Miles & More.
Miles & More charges credit card
users an annual fee of up to €138. In
return, customers collect one mile for
every €2 spent on the card — with the
issuing bank receiving a fraction of
every euro. Users can swap their miles
for Lufthansa flights or for products
ranging from wine to designer furniture.
Deutsche replaces the programme’s
longstanding partner, DKB, an online
retail bank owned by state-backed
lender BayernLB.
DKB, which also runs co-branded
credit cards on behalf of Porsche and
Hilton, stands to lose a significant share
of its €13bn in annual credit card trans-
action volume to Deutsche.
Tuesday 11 July 2023 ★ FINANCIAL TIMES 11

COMPANIES & MARKETS

Financials

3D printing sector embarks on push Icahn recasts

to remodel itself after hype wears off
Top operators caught up in acrimonious quest for tie-ups following losses and sliding valuations
SUJEET INDAP, ANTOINE GARA AND
ORTENCA ALIAJ — NEW YORK
3D printing promised to revolutionise
production of everything from toys to
biomedical implants through “additive
manufacturing”. Now the hype has
worn off and four leading manufactur-
ers are in the middle of merger dealings
that could cut them to two or three.
Stratasys, 3D Systems, Nano Dimen-
sion and Desktop Metal rode a wave of
investor interest in 3D printing, in
which machines controlled by software
build up products, layer by layer.
Among those buying their shares was an
exchange traded fund run by high-
profile tech stockpicker Cathie Wood’s
Ark Investment Management.
But their valuations have plummeted
since early 2021 as they confront stub-
born barriers to using the technology for
mass-production. Losing money and
struggling to raise cash, they are pursu-
ing tie-ups. The dealmaking stands out
for its corporate intrigue, with litigation
involving companies and their share-
holders now playing out in the courts.
“The 3D printing industry, currently
stagnating from talent churn and gov-
ernance issues, needs the shock that
only M&A can provide,” said Chris
Prucha, a tech entrepreneur who had
sold his company to Stratasys.
Stratasys agreed in May to pay
$700mn in its stock to purchase Desk-
top Metal, a company in which it had
invested venture capital a decade ago.
Desktop Metal’s stock has collapsed to
below $2 a share from a high of $31,
reached after it went public through a
deal with a blank-cheque company
backed by investors. They included HPS
Investment Partners and Chamath Pali-
hapitiya, a serial promoter of special
purpose acquisition companies.
But Stratasys is a takeover target
itself. 3D Systems has been seeking to
buy the US-Israeli company since 2021.
Last week 3D criticised Stratasys’s view
of Desktop as “unfounded and unrea-
sonable” while making its sixth cash-
and-stock offer for Stratasys. Stratasys
has not yet engaged with 3D on its latest
bids, calling them “opportunistic”.
Nano Dimension also wants control of
Stratasys: after announcing it had taken
a 12 per cent stake in the group a year
ago, it went on to launch an unsolicited
tender offer to buy all of Stratasys for
cash in March, later amended to say it
wants to reach just a majority stake.
Nano recorded less than $50mn in
revenue last year but boasts a cash bal-
ance of nearly $1bn — a sum exceeding
its market capitalisation — with which
to bolster its offer for Stratasys. The
company raised about $1.5bn in 2020
and 2021 equity offerings with help
from notable tech investors, such as
Wood. Her PRNT ETF swelled from less
than $40mn in assets under manage-
ment in June 2020 to more than $725mn
by February 2021, making it a big buyer
of most 3D printing stocks before even-
tually losing half its value.
The activist investor Donerail Group,
which has taken a 2 per cent stake in
Stratasys, has described the company’s
resistance to the 3D Systems and Nano
3D printers’ equity valuations down sharply
$bn
Stratasys
3D Systems
Nano Dimension
Desktop Metal
2021 22
Sources: S&P Global Market Intelligence; FT research
On the road: bids as “fiduciary negligence” and
Stratasys chief “unconscionable”.
Yoav Zeif in the Stratasys has undertaken a poison pill
company’s defence to thwart Nano’s campaign,
mobile prompting Nano to file a lawsuit in
showroom in Israel, which has jurisdiction over
Minnesota. The Stratasys’ corporate affairs.
US-Israeli Yoav Stern, Nano’s Israel-based chief
business is executive, has made a habit of taking
trying to thwart aim at both friends and adversaries in
takeover blunt, weekly YouTube videos.
attempts by But Stern has also been forced to play
rivals — Glen Stubbe/ defence. Activist investors, Murchin-
Minneapolis Star Tribune/
TNS
son, Anson Advisors and Boothbay
Fund Management, have sought to
replace his board and demanded Nano
return its $1bn cash hoard to sharehold-
ers rather than pursue Stratasys.
At a March special shareholder meet-
ing called by Murchinson, the fund said
fellow shareholders had overwhelm-
ingly voted to remove Stern and three
Consolidation efforts
Company value
8 Signed
Activist
shareholders
demanding
6 consideration
of bids
4 early trading yesterday after news of the
Unsolicited
cash-and-stock
buyout offer
2 ous terms. The lenders, comprising
3D Systems
$1.3bn
0
23
other directors from the Nano board.
The outcome of the vote is also being
challenged in an Israeli court, giving
Stratasys ammunition to push back
against Nano’s tender offer.
Nano has also sued its activist neme-
sis in a New York federal court, alleging
that they had filed false and misleading
regulatory disclosures and had sought
to manipulate Nano’s stock price.
3D, Nano, Murchinson, Anson and
Boothbay declined to comment, while
Stratasys and Desktop did not respond
to requests for comment.
Murchinson, in a letter this year,
accused Nano of “spending its time and
money acting like an activist hedge fund
and not focusing on 3D printing”.
Days later, Stern responded to
Murchinson on YouTube, saying that
Murchinson was not a long-term share-
holder. “I spend time running the com-
personal loan
after attack
by short seller
Hindenburg
ANTOINE GARA — NEW YORK
ORTENCA ALIAJ — LONDON
Carl Icahn has restructured a multi-
billion-dollar personal loan that he
took against shares in his investment
firm Icahn Enterprises, after a short
seller report about his debts caused the
stock price to slump.
Icahn Enterprises said yesterday that
the octogenarian billionaire had agreed
with five large banks to convert the mar-
gin debt into a three-year term loan. The
new terms require him to pledge virtu-
ally all his Icahn Enterprises stock as col-
lateral — 95 per cent, up from 60 per cent
of his stake now — and make a $500mn
principal payment before September 1.
The amendment underscores the
pressure Icahn has faced since Hinden-
burg Research published a report on his
borrowing in May. The short seller said
Icahn was vulnerable to margin calls
forcing him to pledge more shares or sell
stock if Icahn Enterprises’ share price
fell. The stock was down more than 50
per cent following the report.
Icahn owns about 85 per cent of Icahn
Enterprises, a conglomerate spanning
refining and car-parts businesses, which
also holds a portfolio of hedge fund-
The new terms require
Icahn to pledge virtually
all his Icahn Enterprises
stock as collateral
style investments that he manages.
The reworked loan will take out provi-
sions tied to the company’s share price,
all-stock replacing them with a commitment to
Stratasys acquisition Desktop Metal
pledge more collateral only if Icahn
$1.2bn $0.6bn Enterprises’ net asset value falls below a
pre-determined loan-to-value ratio. Its
shares rose more than 13 per cent in
Unsolicited cash
tender offer restructuring.
The amendment contains other oner-
Activist Bank of America, Bank of Montreal,
Nano Dimension shareholders
$0.8bn demanding Deutsche Bank, Morgan Stanley and
cash return M&T Bank, have also asked Icahn to
make $87.5mn in quarterly principal
payments beginning in September 2024
and to repay $2.5bn in final principal at
‘[The pany and doing these videos which is the end of the loan, in 2026.
three hours a week, so no, this company In addition to pledging 320mn Icahn
industry is] is not distracted,” he said. Enterprises shares, or more than 95 per
stagnating He said he would leave immediately if cent of his total shares outstanding, as
shareholders sacked him. “But until collateral, Icahn will also secure the bor-
from talent then, you are not getting the money”, he rowing with $2bn of investments that he
churn and added, indicating Nano would continue holds outside the conglomerate.
to pursue Stratasys and not return cash. Hindenburg’s report captivated the
governance He went on to warn critics: “You investment industry as a rare example
issues [and] didn’t get me to the point where I’m of one activist investor group going after
angry . . . you got me to a point where another. Hindenburg alleged that Icahn
needs the I’ve got nothing to lose. And that’s a dan- Enterprises was overvalued and holding
shock that gerous place to put a person.” assets at an inflated value on its balance
In their recent deal announcement, sheet, prompting Icahn to hit back and
only M&A Stratasys and Desktop Metal projected call the report “self-serving”.
can provide’ that the 3D printing market would He did admit to mistakes that had
amount to $100bn a decade from now. hurt his investment record in recent
But the four listed companies generate years, telling the Financial Times he
less than $2bn in revenue annually. should not have maintained his ill-fated
“Everyone is aligned on one thing: short bets during one of the longest bull
that consolidation should happen,” said market runs in history, which had cost
one banker involved in the drama. his group almost $9bn over six years.

Automobiles Aerospace & defence

US sales of electric vehicles pass 4mn milestone Rheinmetall secures €1.9bn

CLAIRE BUSHEY — CHICAGO
US electric-vehicle sales are gathering
pace, hitting the 4mn mark at the end
of June, according to data and analysis
from consultancy Atlas Public Policy.
The sales are being driven by a combi-
nation of price cuts at Tesla and Ford
this year, tax credits of up to $7,500 for
consumers, and greater manufacturing
capacity, experts say.
“There’s no doubt that the pie for EVs
is getting bigger,” said Atlas founder
Nick Nigro. “More people that were buy-
ing combustion engines are buying
EVs . . . Tesla’s sales are growing, but
everybody’s sales are growing, and
that’s the sign of a strong market.”
It took nearly eight years to sell the
first 1mn battery-powered cars, trucks
and vans in the US, a milestone hit in
2018. The 2mn mark took roughly 32
months, and the third million took
about 15 months. The four millionth
sale occurred after 10 months.
Tesla, General Motors and Rivian
reported strong US sales and deliveries
for EVs during the second quarter, as
did BYD in China. EV sales declined
2 per cent at Ford in the second quarter
on a year earlier, but were up 12 per cent
in the first half of the year compared
with 2022.
Tesla makes up about 61 per cent of
the market, compared with just over 4
per cent for GM.
For now, electric cars and trucks
remain the province of early adopters,
with EVs comprising less than 10 per
cent of new vehicle sales. The sense that
they are mainstream exists only in
pockets such as California, where nearly
a quarter of new sales in the first three
months of the year were electric.
Some in the industry want to slow the
transition.
The Alliance for Automotive Innova-
tion, a group that includes big carmak-
ers, has said that stringent US emissions
standards proposed in April mark “a
significant movement of the country’s
electrification goalposts”.
The United Auto Workers has said
An R1S electric SUV is assembled at
Rivian’s facility in Irvine, California
that standards for EV adoption should
be set “to feasible levels”, tightening
“over a greater period of time”.
But rising sales mean more people are
likely to know someone who owns an
EV, said Jessica Caldwell, executive
director of insights at Edmunds, and as
“more vehicles hit the road . . . people
will feel more comfortable with them”.
Sales of electric models have enjoyed
a boost felt across the sector as the sup-
ply chain crisis has eased, so manufac-
turers are no longer struggling to obtain
parts. Newcomers such as Rivian are
improving output as they move past
production problems that dogged their
early days. The company built almost
14,000 trucks in the second quarter,
nearly 3,000 more than Wall Street
expected.
Tesla also said recently that it would
open its Supercharger network to own-
ers of cars and trucks made by Ford, GM
and Rivian. Anxiety over how far an EV
can travel on a charge is a persistent
worry for US drivers, given the limited
availability of fast public charging.
Tesla’s network of 12,000 Supercharg-
ers represents about 60 per cent of the
total fast chargers available there, said
Deutsche analyst Emmanuel Rosner.
Discounts at Tesla and Ford have con-
tributed to rising sales. Tesla delivered a
record 466,000 cars between April and
June after cutting prices in the US in Jan-
uary by up to $13,000 across models.
Ford then priced its Mustang Mach-E at
$46,000 to $64,000. Tesla lowered
prices again in March, decreasing the
Model S starting price 5 per cent to
about $90,000 and the cheapest Model
X by 9 per cent to about $100,000.
Tax credits have boosted EV sales, but
it is unclear by how much. The Inflation
Reduction Act grants consumers up to
$7,500 in tax credits. Consumers, Cald-
well noted, were interested “whenever
there is free money at play”.
But the list of vehicles that qualify for
the full tax credit is abridged based on
whether it is produced in North Amer-
ica and on the origin of the materials
used in the battery.
Only 10 of the 68 EV models for sale in
the US are eligible for the full credit.
Three of those models are Teslas, after
the law lifted the cap on receiving the
credit after a carmaker had sold more
than 200,000 EVs, a threshold Tesla
passed five years ago.
The tax credits were helping demand
for EVs, said Joe McCabe, chief execu-
tive at AutoForecast Solutions, but
“honestly, who’s it helping? Tesla”.
Carmakers were vying for customers
as the market developed, he said. “Not
everyone can win” and, it was “the Wild
West out there”.
contract for assault vehicles
PATRICIA NILSSON
Germany’s largest defence company
Rheinmetall has signed a €1.9bn deal
to supply up to 3,058 assault vehicles to
Germany and the Netherlands, the lat-
est significant order designed to boost
European military capabilities follow-
ing Russia’s invasion of Ukraine.
The Düsseldorf contractor said yester-
day that the first test models of the Cara-
cal — a vehicle that is light enough to be
airlifted and uses the chassis of
the Mercedes-Benz G-Class four-wheel
drive — were planned for early 2024.
Rheinmetall unveiled the vehicle last
year, calling it its “answer to the upcom-
ing requirements for airborne vehicles
in Germany and various armies world-
wide”. The money from Germany comes
from the country’s €100bn special mili-
tary fund set up by chancellor Olaf
Scholz last year, shortly after Vladimir
Putin launched his army on Kyiv.
Rheinmetall has been one of the main
beneficiaries of what Scholz has called
“Zeitenwende” — or turning point —
which Europe’s largest economy has
embarked on since the war in Ukraine.
Berlin is to use the €100bn fund to
revamp the Bundeswehr, after decades
of pacifist policies and intentional
under-investment in the wake of the
country’s role in the second world war.
Two weeks ago, the company
announced an order of 367 military
trucks from the Bundeswehr worth
€285mn, and in May it received “a low
double-digit million euro” figure from
the German government to supply
Ukraine with an additional 20 Marder
infantry fighting vehicles.
The company’s share price, which was
up almost 3 per cent in Frankfurt yes-
terday, has jumped by nearly a third in
the past year.
In a sign of greater military collabora-
tion between Nato allies, the company
last week announced it would build a
plant in Germany to start making parts
of the main body of Lockheed Martin’s
fighter jet the F-35A Lightning II, calling
it a “lighthouse project in German-
American armaments co-operation”.
Several of Europe’s largest defence
contractors, including Rheinmetall,
have been calling for more collaboration
within the industry as well as on the pro-
curement side to better supply Ukraine
and avert production bottlenecks.
Rheinmetall said the Caracal order
took place amid a “tense security situa-
tion [with] urgently needed capacities”.
BAE Systems’ £280mn order page 12
12
Farage furore highlights plight of unbanked millions
Helen
Thomas
I
n what can only be described as an
outrage, I have been cancelled by
Coutts. I assume this is down to my
unorthodox views and behaviour.
Yes, I believe that Selling Sunset is
excellent TV despite pressure from the
Succession-obsessed blob. Yes, I have
been known to eat refried beans straight
from the tin. Yes, I think swimming in
the sea is overrated. But so what? I’ll
stay on my towel, thanks. We must pro-
tect the freedom of beach.
In fairness, I never actually had an
account at what was known as “the
Queen’s bank”. But from a glance at its
website, it is obvious I have been mar-
ginalised. This can only be down to my
views and not my lack of the requisite
£3mn in savings, or £1mn in investment
and borrowings.
Utilities
Thames Water
secures £750mn
but misses goal
Group says £2.5bn more
will be needed by 2030 as
fundraising aim falls short
GILL PLIMMER
Thames Water has fallen short of its goal
of raising £1bn of urgent funding,
instead securing conditional agreement
from its shareholders to inject £750mn
of equity.
The troubled utility said yesterday
that its investors had agreed to provide
the £750mn by April 2025 if certain con-
ditions were met. These include a busi-
ness plan “that underpins a more
focused turnround” with targeted per-
formance improvements and “appro-
priate regulatory arrangements” — an
‘We are getting equity
when we need it and we
need less right now’
Cathryn Ross, co-chief executive
apparent reference to how much it is
allowed to raise customer bills by the
industry watchdog Ofwat.
News of the equity commitment
helped a £400mn bond issued by the
group’s holding company to pare back
some recent losses, as it rose 7.5p to
66.5p.
“We have the unanimous backing of
our shareholders,” Cathryn Ross, co-
chief executive, said in an interview
with the Financial Times, emphasising
that the company had £4.4bn of liquid-
ity. “We are getting equity when we need
it and we need less right now.”
But Thames Water, which provides
water and sewage services to 15mn cus-
tomers in and around London, also
warned it would need a further £2.5bn
from investors by 2030 to be “finan-
Warehouse space expansion projects face mounting protests
Residents voice concerns over
impact of developments on
living standards and traffic
OLIVER TELLING
A rebound in demand for warehousing
space after several quarters of declines
has been threatened by a rise in protests
against development projects from Mil-
ton Keynes to Merseyside.
Increased spending on online shop-
ping during lockdowns drove invest-
ment in storage space, but demand fell
as consumers cut spending amid the
cost of living crisis.
However, the ecommerce market is
expected to continue growing in the
long term, with estate agent Savills see-
ing a rise in inquiries.
Campaigns are raging against ware-
house projects in Milton Keynes and
towns from St Helens in Merseyside to
Towcester in Northamptonshire, where
At least I’m in good company. Nigel
Farage, former Brexit party leader, has
lost his account with Coutts and been
offered a bog-standard NatWest one (it
owns Coutts), after seemingly falling
below the financial criteria. Farage
thinks this, plus his rejection by other
banks, is because he is a “politically
exposed person” — and that he has been
blacklisted for his views.
Leaving aside the paranoia of the cul-
ture wars, there are some oddities about
the rules on PEPs. Money laundering
rules require banks to treat PEPs, con-
sidered to come with a greater risk of
bribery and corruption, with care.
European rules that became UK law
in 2017 were stricter than international
equivalents, requiring enhanced due
diligence for both foreign and domestic
PEPs. In other markets, it is usual for
domestic politicians to get a lighter
touch, with only the red-flagged sub-
jected to enhanced screening.
The Financial Conduct Authority
introduced guidance to encourage more
flexibility, and specifying only those in
“truly prominent positions” be treated
cially resilient” and to lower leverage
and reduce leaks.
Referring to the conditions accompa-
nying yesterday’s commitment by
investors, Ross said the group’s share-
holders wanted “a smaller number of
key metrics which we can share with
Ofwat”. She described the metrics as a
“work in progress,” adding: “We cannot
do everything all at once and we need to
prioritise.”
The company is being closely moni-
tored by the government, which is on
standby for a temporary nationalisation
in case it collapses. It had asked inves-
tors for £1.5bn last year but received
only £500mn by March.
The group has come under pressure
from rising interest rates, which have
increased financing costs on its £16bn
debt pile, as well as a need to raise infra-
structure spending following a public
outcry over sewage overflows and leaks.
Net financing costs climbed 24 per
cent in the 12 months to the end of
March, while the company has also been
hit by the rising price of energy, chemi-
cals and labour.
It was also hit with £35.7mn in fines
for pollution between 2017 and 2023,
according to the Environment Agency.
Fears about Thames Water’s finances
erupted last month after chief executive
Sarah Bentley abruptly quit just two
years into an eight-year restructuring
plan. Ross, a former head of Ofwat, was
subsequently appointed interim co-
chief along with Alastair Cochran.
To pay for the planned investment in
infrastructure, Thames Water is pro-
posing an increase in bills of 24 per cent
— or an average of £101.00 a year — for
the next regulatory period, which runs
from 2025 to 2030. As of April, the aver-
age household water bill in the UK was
£516 a year, having increased 11.6 per
cent in the preceding 12 months.
See Lex
DHL hopes to build a facility. The UK
has one of the largest ecommerce mar-
kets but is limited by its relatively small
size and green space protected by local
authorities, which decide on building
applications.
Property executives and ecommerce
companies argue that warehousing
closer to residential areas means shorter
journeys and lower emissions, as well as
more jobs. However, protesters are con-
cerned about the impact on their living
standards and the increased traffic.
“We’re not being Nimby-ish about
this,” said Wayne Evans, a retired con-
sultant who helped form the group
Stop3000Trucks in Milton Keynes.
They are opposing plans for nine stor-
age units and more than 90 HGV loading
bays to be built between the villages of
Cosgrove and Old Stratford, which they
claim could create up to 3,000 lorry
journeys through the area daily.
Frontier Estates, the developer, did
not respond to a request for comment.
The power of protests was underlined
★ FINANCIAL TIMES
UK COMPANIES
as PEPs. But some banks take a cautious
approach, sticking closely to the letter of
the law, especially given the stream of
large fines for lenders over poor anti-
money laundering controls.
Even the chancellor, Jeremy Hunt, is
not immune: he claims that online
bank Monzo refused to let him open an
account. The bank declined to
comment.
You can’t really blame the banks.
Under the senior managers regime,
someone must carry the can for what
one lender called an “incredibly delicate
judgment”. And the government has
done little to help, says one expert, by
providing, say, a list of domestic PEPs,
pushing higher standards in public life,
or allowing banks to rely on Companies
House information.
This increases the cost of running
checks — which means reluctance to
take on PEP accounts, a definition that
includes politicians’ family and close
associates. The banks are also legally
limited in what they can say when
rejecting PEP accounts.
Things could get worse. Financial
Heavy artillery
BAE Systems
seals £280mn
munitions deal
Ecommerce. Storage
earlier this year when a campaign
helped derail plans by Amazon to open a
large warehouse in the South Yorkshire
village of Scholes.
Almost 1,100 objected via the local
council’s consultation process, arguing
that the “monstrosity” would turn
much of the leafy area into an industrial
site, with delivery vehicles disturbing
residents into the night.
Dar Shivtiel and his group, which
services legislation passed last month
requires the regulator to review its guid-
ance but doesn’t change the underlying
law to make it consistent with interna-
tional standards.
Meanwhile, the economic crime bill
introduces a criminal corporate offence
for failure to prevent money launder-
ing, among other things.
The proportion of the
‘unbanked’ population
is 12 times higher in the
most deprived areas
A current account is pretty much an
essential service and there is increas-
ingly a sense that it shouldn’t be with-
drawn or denied without good reason.
Many of the UK’s 1.3mn expats living
in the EU had their UK accounts closed
after Brexit because lenders chose to
avoid the costs and hassle of finding a
way to operate in European markets.
Other groups struggle to access basic
banking services because of documen-
BAE Systems has secured a £280mn
order from the UK to boost production
of munitions as western governments
act to alleviate a shortage of firepower
that is hampering Ukraine’s fight
against Russia.
The deal, which could increase to
more than £400mn, will enable the
defence contractor to raise its output of
155mm artillery shells eightfold.
The 155mm ammunition is the
standard for Nato howitzers — long-
range artillery launchers — including
the US M777 and France’s Caesar, both
of which have been sent to Ukraine.
The sheer scale of demand for
ammunition and explosives from
Ukraine has depleted western
stockpiles and severely tested Europe’s
industrial production capacity.
Defence executives have warned that
spearheaded the campaign against the
development, raised more than £17,000
from supporters. They recruited two
traffic and landscape consultants before
facing off against two representatives of
Amazon at a council meeting in March.
Four out of seven councillors voted
against the project.
Amazon, which could appeal against
the decision, said that it was still “con-
sidering our options for this location”.
On the up:
continued
growth is
expected, with
Savills seeing
an increase
in inquiries
Simon Dawson/Bloomberg
tation requirements and banks’ reluc-
tance to take on accounts seen as higher
risk or higher cost.
There are still 1.2mn adults without a
bank account in the UK, who are more
likely to be young, from an ethnic
minority, unemployed or working in the
gig economy.
The proportion of the population that
is “unbanked” is 12 times higher in the
most deprived areas compared with the
least. Requiring the biggest lenders to
offer “basic bank accounts” has cer-
tainly helped.
There are 7mn of these no-frills
accounts, without any overdraft facility
and with sometimes limited access to
other products, such as savings. Banks
have a variable record on migrating
such customers on to mainstream
alternatives.
It all makes a bit of a mockery of the
idea that lenders are, as Farage claims,
acting as woke activists. But the barriers
to bank accounts do deserve attention,
no matter who in society is affected.
helen.thomas@ft.com
they need firm contracts from
governments to be able to invest the
significant sums needed to expand
production facilities.
Charles Woodburn, BAE chief
executive, said the investment
would enable the company to
“significantly ramp up production
and sustain vital sovereign
capability to deliver cutting-edge
munitions, whilst creating and
sustaining highly-skilled jobs”.
The contract builds on an existing
£2.4bn 15-year partnering
agreement between BAE and the
Ministry of Defence that took effect
in January this year.
It will enable BAE to ramp up
output of other munitions and
create more than 200 jobs. Sylvia
Pfeifer and Anna Gross
T. Narayan/ Bloomberg
Property industry and ecommerce
executives worry that protests are com-
plicating the lengthy process of obtain-
ing approval for warehousing projects.
David Sleath, chief executive of FTSE
100 warehouse owner Segro, said:
“Local people [will say] we don’t need
much [warehouse space]. But you’re not
building it for the local population.
You’re building it for the benefit of the
national infrastructure.”
He acknowledged that residents
should be consulted, but said that to
have a really productive economy and
an efficient supply chain, matters
needed to be planned nationally, at
least. “One of the issues with our plan-
ning process is that it’s all done locally,”
he said.
“The planning process in the UK is
extremely challenging to deliver logis-
tics space at scale,” said an executive at
Cushman & Wakefield, property con-
sultants, who said they had two projects
that were “deliverable” but had got
“stuck in the planning pipeline”.
Tuesday 11 July 2023
Transport
Jet lessors
fight to have
Russia claims
dealt with
in England
SYLVIA PFEIFER
Some of the world’s largest aircraft
owners, including AerCap and Carlyle
Aviation Partners, which are pursuing
claims in London against insurers for
planes stranded in Russia, are prepar-
ing to step up their fight against the
cases being heard in Moscow.
AerCap, the world’s largest aircraft les-
sor, and others believe they have valid
claims for the loss of their aircraft and
engines they have been unable to
recover from Russian airlines after the
full-scale invasion of Ukraine last year.
Although the western lessors termi-
nated the leases on the aircraft after
sanctions were imposed on Moscow, the
carriers have refused to hand over the
planes and are continuing to fly them.
More than 500 aircraft, worth an esti-
mated $10bn, were stuck in Russia at
the time sanctions were imposed. Les-
sors managed to retrieve some planes
but about 400 are still in the country
and the companies subsequently lodged
insurance claims last year.
A London High Court judge last week
ruled to combine claims for 10 lessors,
including AerCap, Carlyle, Avenue Capi-
tal and Merx Aviation, against several
insurers, including AIG, into one com-
bined hearing to be held in February
next year. The hearing will now deter-
mine the issue of jurisdiction.
Russian airlines that leased the air-
craft had insured them with domestic
companies that then reinsured the risk
with western insurers. Those insurers
have maintained that as the original
Carlyle Aviation said
insurers had been ‘in
breach of their contractual
obligations for months’
contracts were agreed under Russian
law, the cases should be heard in Mos-
cow. The lessors have argued that taking
their cases to Russia is impractical given
the continuing conflict with Ukraine.
In a written submission presented in
court, AerCap noted that challenges
around the jurisdiction would focus on
whether, “even if the exclusive Russian
jurisdiction clauses apply, the English
court should exercise its discretion to
allow the claims to proceed in England
in any event, on the basis that there is a
real risk that it will not be possible for
the parties to obtain a just determina-
tion [of the claims] in Russia”.
Carlyle Aviation Partners similarly
argued in its submission that “there are
strong reasons why the court should not
enforce those [jurisdiction] agree-
ments, namely that the claimants would
not receive a fair trial in Russia and/or
that it would be against public policy to
give effect to the alleged agreements”.
Carlyle Aviation said insurers had
been “in breach of their contractual
obligations for many months and have
failed to provide coverage for losses.
“To then insist the cases should be
heard in Moscow is not only completely
unworkable given the grave situation
that exists today, it is also a gross exploi-
tation of Russia’s invasion of Ukraine
and further avoids paying out on legiti-
mate claims.”
Insurers, including AIG and Lloyd’s of
London, declined to comment. AerCap
was unavailable for comment.
Kevin Mofid, head of logistics prop-
erty research at Savills, warned that
delays to developments could create “a
real problem with the availability of
land”.
The offer of jobs has failed to win over
many. Residents of Scholes were told
that Amazon’s warehouse would bring
up to 2,400 jobs within three years. But
Shivtiel said Amazon’s goal was to
“robotise” its operations and did not
expect jobs to remain for long.
In Milton Keynes, after the council
designated the area for development,
Evans said residents expected a busi-
ness estate with “quality jobs”. Now they
worried that warehouses would instead
offer employment to “temporary work-
ers on low-salary contracts”.
Evans said it was an uphill battle. He
acknowledged that the council was
under pressure to generate funds. “That
is the reality of the world: everybody
wants a toilet brush delivered rather
than getting off their arse and going to
the high street.”
Tuesday 11 July 2023
Banks lock in cheap funding
with record ultra-safe debt
Financial turmoil and the end
of central bank support spurs
€175bn covered bond issuance
GEORGE STEER AND JANE CROFT
Banks sold a record amount of ultra-
safe mortgage-backed debt in the first
half, rushing to lock in a cheap source of
funding during a turbulent period for
the sector with lenders facing growing
political pressure to offer chunkier rates
to depositors.
Investors were sold more than €175bn
of so-called covered bonds in the six
months to June, surpassing the previous
high in 2011, according to data from S&P
Global Ratings.
Covered bonds — a largely European
phenomenon but increasingly popular
with lenders in Australia and Canada —
are a form of usually triple A rated debt
not only backed by the bank that issues
them but also an underlying pool of
assets, typically mortgages on the
bank’s balance sheet.
That extra layer of protection makes
them a particularly inexpensive form of
borrowing and an extremely safe, if low-
yielding, asset for investors.
Advocates are fond of boasting that
not a single covered bond — which lies at
the opposite end of the risk spectrum to
racier additional tier 1 (AT1) bonds —
has defaulted since they were first
dreamt up in the court of Prussia’s
Frederick the Great more than 250
years ago.
Banks’ record covered bond issuance
this year came during the banking sec-
tor’s most tumultuous period since the
great financial crisis.
Rapid deposit outflows brought about
Financials
Francisco Partners to buy data services
group Macrobond for nearly €700mn
WILL LOUCH AND IVAN LEVINGSTON
Francisco Partners, the US private
equity firm, has agreed to buy financial
data provider Macrobond for almost
€700mn — the latest deal in a sector
that has attracted billions of dollars
from investors in recent years.
Francisco Partners is acquiring the busi-
ness from a rival private equity firm,
Nordic Capital, according to people
familiar with the matter.
The US-based firm overcame compe-
tition from other private equity groups
and strategic buyers.
Macrobond was founded in Sweden in
2008 and provides financial data and
technology services to more than 800
banks and asset managers, according to
its website.
Nordic Capital has made about six
times its money after first backing Mac-
robond in 2018, showing the returns on
offer to investors drawn to the typically
predictable subscription-based reve-
nues of financial data providers.
Over the past 18 months, financial
data providers Reorg and Leveraged
Commentary and Data have both also
traded hands in big money deals.
Fixed income. Turbulent times
Banks rush to issue covered
bonds
Global benchmark issuance in first
half of the year (€bn)
200
150
100
50
0 that figure by mid-June, partly financ-
2010 15 20 23
Source: S&P Global Ratings
the collapse of three midsized US banks
in March, weeks before the downfall of
Credit Suisse, whose AT1 bonds were
wiped out by Swiss regulators during
the lender’s emergency rescue.
“Covered bonds are a very dull
product but because they’re pretty safe,
they’re seen as a beacon of stability, a
funding tool for banks made for rainy
days,” said Joost Beaumont, an analyst
at ABN Amro. “We haven’t seen this
amount issued by this stage ever
before.”
The flurry of issuance has been
fuelled also by the winding down of
pandemic-era support from central
banks for debt markets and the banking
sector.
Some banks rushed to issue during
the tail-end of the European Central
Bank’s quantitative easing programme,
under which it has bought hundreds of
billions of euros of covered bonds over
the past decade, analysts said.
The central bank stopped purchasing
covered bonds in primary markets in
March, three months before it halted
Buyout group Permira took a major-
ity stake last August in Reorg, which val-
ued the distressed debt and bankruptcy
information provider at about $1.3bn.
That came months after data group
Morningstar acquired Leveraged Com-
mentary and Data, which reports on
debt financing transactions, from S&P
in a deal worth up to $650mn.
Nordic Capital bought Macrobond
with the aim of helping it to expand its
market position.
“We made significant investment into
the technology of the business as well as
Francisco is buying the data provider
from a rival private equity firm
★ FINANCIAL TIMES
COMPANIES & MARKETS
buying in secondary markets, in effect
removing a safety net for new issuance.
Banks are also keen to replace ultra-
cheap central bank funding.
The ECB’s exit from bond markets
coincided with a flurry of repayments of
funds distributed under its targeted
longer-term refinancing operation
(TLTRO), in which more than €2tn was
loaned to lenders at negative interest
rates during the pandemic.
Eurozone banks had repaid half of
ing the payments via covered bonds.
UK banks are thinking ahead to the
end of a Bank of England funding
scheme, which was launched in 2020 to
offer four-year funding at or very close
to the BoE’s benchmark interest rate.
The scheme was intended to help
banks and building societies that were
unable to reduce deposit rates much
further amid fears it could limit their
ability to lend.
One senior banker said they expected
more covered bond issuance to replace
funding as the scheme started to run
down.
“We are already seeing covered bond
issuance booming,” they said.
Another banker said that the increase
in covered bond issuance was the result
of “greater normalisation of interest
rates” as the glut of retail deposits that
flowed into UK banks during the pan-
demic started to run down and banks
looked to other sources of wholesale
funding.
Richard Barnes, a credit analyst at
S&P, said: “As retail deposits start to
reduce and banks start to look at [BoE
funding scheme] maturities, there may
be more pick-up in activity by banks in
the wholesale markets in areas such as
putting a strong focus on building its
unique data set and differentiating from
its competition,” said Emil Anderson, a
partner at Nordic Capital.
Nordic Capital also helped push the
company into new markets in Asia and
North America. Macrobond employs
230 people across six offices in Europe,
Asia and North America.
The private equity group is exiting its
investment at a time when the wider
buyout industry faces pressure to
return capital to the institutional funds
that back them.
The sale of Macrobond also marks a
rare sale of an asset between private
equity groups.
The volume of such deals has plunged
in Europe this year as tumultuous mar-
kets have made it more challenging to
value assets, while rising interest rates
have made financing deals more costly.
Stockholm-based Nordic Capital has
deployed €22bn across more than 130
investments since its founding in 1989,
including billions for technology and
payment companies. It has raised €9bn
for its most recent fund.
The Macrobond transaction is
expected to close by the end of August.
New path: covered bond issuance. Banks will look
the European at their funding early.”
Central Bank The gradual draining of liquidity from
stopped the financial system caused by the
purchasing reversal of central banks’ quantitative
easing programmes is likely to raise
covered bonds
in primary banks’ funding costs at a time when
markets in many stand accused of profiting at
March, amid a savers’ expense by being slow to pass
winding-down on interest rate rises to ordinary
of Covid support depositors.
Jochen Tack/IMAGO/Reuters
In Europe, just 20 per cent of the
increase in policy rates has been passed
on by banks to deposit holders, less than
in previous monetary tightening cycles,
according to S&P.
UK banks have, meanwhile, had
their net interest margins — the differ-
ence between the interest banks charge
on their loans and the rate they pay
on deposits — tick higher in recent
months, inviting a barrage of criticism
from regulators.
As UK banks come under pressure to
raise savings rates, the battle for retail
deposits will intensify and so banks may
look to other sources of wholesale funds
such as covered bonds.
Despite the bonds’ reputation for
safety, the state of the property assets
backing them has risen to the top of
investors’ list of concerns in recent
‘Covered months as higher interest rates have
begun to weigh on real estate valuations.
bonds are Trouble across the property sector “is
a very dull on investors’ radar”, said ABN Amro’s
Beaumont.
product But the “dynamic” nature of covered Our global
but they’re bonds’ pools of assets, which can be con- team gives you
stantly replenished as poor-performing market-moving
seen as a properties lose value, means “you’d news and views,
beacon of need to move to Armageddon-type sce- 24 hours a day
narios for something to really go ft.com/markets
stability’ wrong”.
Asset management
China managers cut fees on mutual fund
products after pressure from regulator
CHENG LENG — HONG KONG manager Schroders, and Zhong Ou
THOMAS HALE — SHANGHAI
Asset Management, now partly owned
Big money managers in China cut fees by US private equity group Warburg
on thousands of mutual fund products Pincus, all announced similar fee cuts in
yesterday in a swift reaction to a separate announcements.
government drive to reduce rates The move, expected for months,
across the country’s fast-evolving comes as Beijing pushes for more “peo-
financial services sector. ple-oriented” reforms alongside a year-
long “common prosperity” drive, in
Fund houses were responding to a which regulators are also seeking to
weekend statement from the China
Securities Regulatory Commission that
pledged to “guide the mutual fund
‘The risk premium applied
industry to start fee-charging reform in to a China business was
a steady and orderly manner, and sup-
port the industry to adjust funds’ fee
already on the rise over
ratios reasonably”. the past 18 months’
E Fund, the mainland’s largest mutual
fund house by size, said it had cut the limit executive pay at banks and at fund
management fees for its 74 equity- managers to reduce the wealth gap.
focused funds from 1.5 per cent of fund It also comes amid falling stock prices
assets to 1.2 per cent to “lower the in China, which has added to pressure in
wealth management cost of investors”. the industry. Most ordinary Chinese
Custodian fees charged on a separate retail investors are becoming more sen-
batch of 89 funds would be capped at 0.2 sitive to fee charges with share gains no
per cent of fund assets, it added. longer helping offset transaction costs.
China Asset Management, Bank of Foreign investment houses, including
Communications Schroder Fund Man- BlackRock, have rushed to exploit
agement, the joint venture between China’s nascent mutual fund industry
state bank BoCom and British asset but the new pressure on fees is expected
13
Equities
New York City
pension boss
shuns stocks
amid rising
interest rates
NICHOLAS MEGAW — NEW YORK
The head of one of the largest pension
schemes in the US says that it is plan-
ning to cut back investments in equity
markets in the latest sign that rising
interest rates have brought an end to the
“Tina” era that drove the past decade of
stock price gains.
Rock-bottom interest rates, first
introduced in response to the 2008
financial crisis and which reappeared
during the pandemic, created a mantra
among many investors that “There Is
No Alternative” to stocks.
Even traditionally cautious money
managers such as pension funds were
forced into riskier assets in search of
returns as bond yields tumbled.
Steven Meier, chief investment officer
for the $250bn New York City Retire-
ment System — Nycers — said that rising
rates “changes the dynamic in terms of
what you need to invest in — you really
don’t need to have as much equity expo-
sure now”.
Interest rate rises across the devel-
oped world have caused what Meier
described as a “dramatic repricing” in
fixed income markets. The yield on
what are in effect “risk-free” two-year
US Treasury notes has risen from a low
of 0.1 per cent in 2021 to 5.1 per cent this
‘My hope is we don’t go
back to zero-interest rate
policy because it provides
some level of disruption’
week while high-yield debt is paying an
average of 8.8 per cent, according to the
Ice BofA high-yield index.
“My hope is we don’t go back to zero-
interest rate policy any time soon if ever
because I think it does provide some
level of disruption in the marketplace,
and suboptimal decisions getting made
based on the fact there is free money in
the market,” Meier said in an interview
with the Financial Times. “I think the
repricing in fixed income has been
healthy.”
Nycers, which includes five separate
funds for different groups of city
employees, is reviewing its long-term
asset allocations.
Meier said that the final results would
vary across the funds but he expected to
see a reduction in the proportion of
assets invested in equities and an
increase in fixed income, high-yield
bonds and private assets including pri-
vate credit and infrastructure.
Nycers currently aims to invest about
65 per cent of its portfolio in public and
private equities.
At the end of 2022, about 31 per cent
of its funds — $73bn — were invested in
public fixed income, down from 35 per
cent at the end of 2018.
The change in approach echoes recent
statements from big money managers
such as BlackRock, which declared in its
mid-year review late last month that
“income is back” as the world enters a
new long-term regime of higher interest
rates and macroeconomic volatility.
to raise questions about their exposure
to government reforms.
“It was already the case that the risk
premium applied to a China business
was on the rise over the past 18
months,” said Peter Alexander, founder
of Shanghai-based fund consultancy
Z-Ben Advisors. “Now there’s down-
ward pressure on the expected returns
of running that business.”
China’s mutual funds generally
charge higher fees than developed mar-
ket peers. The average is 1.43 per cent of
fund assets, according to an estimate by
domestic brokerage Tianfeng Securities
compared with less than 1 per cent in
the US, according to Morningstar.
The industry collected a combined
Rmb144bn ($19.9bn) in management
fees in 2022, according to TX Invest-
ment Consulting.
The CSRC is set to go further with fee
reforms, said the state-owned Shanghai
Securities Journal, including rolling out
fund products with floating fees and
guiding for fee cuts in other products.
The regulator expected total fees to be
lowered by 26 per cent in equity-focused
funds by 2025, from 2022 levels, the
paper said.
14
Learn how to take
the temperature
of the trading herd
Howard Marks
Markets Insight
H
ow can an investor make
useful observations
regarding the status of the
markets? Most of the time,
markets are near the mid-
dle ground — perhaps a little high or a
little low but not so extreme as to permit
dependable conclusions.
Investors’ records of success with calls
in markets such as these are poor. Even
if they are right about asset prices being
out of line with fundamental valuations,
it’s very easy for something that’s a little
overpriced to go on to become demon-
strably more so — and then to turn into a
raging bubble and vice versa.
However, once in a while, markets go
so high or so low that the argument for
action is compelling and the probability
of being right is high. When markets are
at these extremes, the key to generating
superior future investment returns lies
in understanding what’s responsible for
the current conditions.
Everyone can study economics,
finance and accounting, and learn how
the markets are supposed to work.
But superior investment results come
from exploiting the differences between
how things are supposed to work and
how they actually do in the real world.
To do that, the essential inputs are not
economic data or financial statement
analysis. The key lies in understanding
prevailing investor psychology or what I
like to call “taking the temperature of
the market”. Here’s what I consider the
most essential components:
• Investors should learn to recognise
market patterns. Study market history
in order to better understand the impli-
cations of today’s events.
Ironically, investor psychology and
market cycles — which both seem
flighty and unpredictable in the short
★ FINANCIAL TIMES Tuesday 11 July 2023
COMPANIES & MARKETS
The day in the markets
What you need to know
3 Wall Street stocks steady after three
days of declines
Shares in big US banks fail to bounce back after March drop
3 Asian indices rise as Chinese inflation KBW Bank Index
figures boost odds of stimulus
3 Global benchmark Brent crude hit by
early losses before bouncing back
120
Wall Street equities steadied yesterday
after three successive sessions of
110
declines as traders assessed the state of
the US labour market and looked ahead 100
term — fluctuate in ways that have more tional investors take an extreme view of to fresh inflation numbers tomorrow that
for regular patterns when viewed over an asset’s future and, as a result, take the will heavily influence whether interest
the long term (though with highly varia- price to unjustified levels, the “easy rates climb higher in late July.
ble causality, timing and amplitude). money” is usually made by doing the The blue-chip S&P 500 flitted between 90
• Understand that cycles stem from opposite. gains and losses early in the day after a
excesses and corrections. I define cycles This is, however, very different from run of losses late last week and was down
not as a series of up and down move- simply diverging from the consensus all just 0.1 per cent midway through the 80
ments, each of which regularly precedes the time. Most of the time, the consen- session in New York.
the next, but rather as a series of events, sus is as close to right as most individu- The tech-heavy Nasdaq Composite fell
each of which causes the next. als can get. So to be successful at con- 0.2 per cent but the KBW Bank index rose
I think economies, investor psychol- trarianism, you have to understand (a) 0.4 per cent, even as US regulator Michael 70
ogy and markets eventually become too what the herd is doing, (b) why it’s Barr proposed tougher capital rules for Jul 2022 2023 Jul
positive or too negative, and afterward doing it, (c) what’s wrong with it, and the country’s biggest lenders. Source: Bloomberg
they eventually swing back towards (d) what should be done instead. Across the Atlantic, the region-wide
moderation (and then usually towards • Bear in mind that much of what Stoxx Europe 600 added 0.2 per cent,
excess in the opposite direction). happens in economies and markets Paris’s CAC 40 rose 0.4 per cent and Is this weak enough to keep the Fed on China’s consumer price index dropped
Thus, a strong movement in one doesn’t result from a mechanical proc- Frankfurt’s Xetra Dax gained 0.3 per cent, pause? Is it so weak compared with the 0.2 per cent month on month while
ess but from the to and fro of investors’ having dipped in early trade. London’s past strong months that we’re looking at factory gate prices fell at the fastest pace
emotion. Take note of the swings and FTSE 100 firmed 0.2 per cent. a soon-to-come recession?” in seven years as demand for consumer
Resist your own capitalise whenever possible. The US moves came after data on Investors’ attention will be focused on and manufactured products waned.
emotionality. Stand apart • Resist your own emotionality. Stand Friday from the Bureau of Labor Statistics headline US consumer price inflation data Big Asian markets closed in positive
apart from the crowd and its psychology showed the world’s largest economy tomorrow, which is expected to have territory on stimulus hopes, with Hong
from the crowd and its — don’t join in. added 209,000 jobs in June. slowed in June, easing pressure on the Kong’s Hang Seng index up 0.6 per cent
psychology — don’t join in • Be on the lookout for illogical propo- The employment report undershot central bank to resume raising rates at its and China’s CSI 300 index of Shanghai
sitions. When you come across a widely expectations for the first time in 15 July meeting. and Shenzhen stocks gaining 0.5 per
accepted proposition that doesn’t make months but left some traders “confused”, It was a very different story in China, cent.
direction is more likely to be followed by sense or one you find too good to be true said Mike Zigmont, head of trading and which unlike the US and Europe, is Prices for Brent crude oil, the
a correction in the opposite direction (or too bad to be true), take action. research at Harvest Volatility grappling with low inflation, with data international benchmark, fell in early
than by a trend that “grows to the sky”. How should investors think about Management. “Is this strong enough for yesterday showing the world’s second- trading before bouncing back to $78.50 a
• Watch for moments when most peo- market timing? I believe every investor the [US Federal Reserve] to keep hiking? biggest economy on the cusp of deflation. barrel. George Steer
ple are so optimistic that they think should operate most of the time in their
things can only get better, an expression normal risk posture — the balance
that usually serves to justify the danger- between aggressiveness and defensive- Markets update
ous view that “there’s no price too high”. ness that’s right for them.
Likewise, recognise when people are I believe investors should approach
so depressed that they conclude things making market calls with great humil-
can only get worse as this often means ity, diverging from their neutral US Eurozone Japan UK China Brazil
they think a sale at any price is a good assumptions about the future and their Stocks S&P 500 Eurofirst 300 Nikkei 225 FTSE100 Shanghai Comp Bovespa
sale. When the herd’s thinking is either normal positioning only when circum- Level 4398.29 1776.62 32189.73 7273.79 3203.70 118307.63
Pollyannish or apocalyptic, the odds stances leave them no other choice. % change on day -0.02 0.15 -0.61 0.23 0.22 0.75
increase that the current price level and Currency $ index (DXY) $ per € Yen per $ $ per £ Rmb per $ Real per $
direction are unsustainable. Howard Marks is co-founder and co-chair Level 102.486 1.098 141.685 1.282 7.234 4.874
• Remember that in extreme times, of Oaktree Capital Management and author % change on day 0.209 0.274 -0.359 0.000 -0.030 0.151
the secret to making money lies in con- of ‘Mastering the Market Cycle: Getting the Govt. bonds 10-year Treasury 10-year Bund 10-year JGB 10-year Gilt 10-year bond 10-year bond
trarianism, not conformity. When emo- Odds on Your Side’ Yield 4.013 2.636 0.468 4.695 2.707 10.367
Basis point change on day -2.790 0.200 3.630 0.000 0.100 -7.100
World index, Commods FTSE All-World Oil - Brent Oil - WTI Gold Silver Metals (LMEX)
Level 444.37 78.54 73.87 1922.30 22.72 3698.60
% change on day 0.09 0.09 0.01 0.71 -1.96 0.64
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
4480 1880 8000
4320 1840 7680
4160 1800 7360
| | | | | | | |
4000 | | | | | | | | | | | | | | | | | | | |
1760 | | | | | | | | | | | | | | | | | | | | 7040 | | | | | | | | | | | |
May 2023 Jul May 2023 Jul May 2023 Jul
Biggest movers
% US Eurozone UK
Ralph Lauren 5.36 Oci 3.14 Flutter Entertainment 3.20
Fortinet 4.78 Bayer 2.43 Ashtead 2.12
Ups
Wynn Resorts 4.42 Hugo Boss 1.77 Persimmon 1.91
Monolithic Power Systems 4.24 Commerzbank 1.75 Admiral 1.87
Mgm Resorts Int 3.91 Deutsche Bank 1.46 Int Consolidated Airlines S.a. 1.78
%
Fmc -11.92 Schindler -2.16 Ocado -1.76
Corteva -5.85 Rwe -1.69 National Grid -1.04
Downs
Amcor -2.87 Continental -1.67 Land Securities -0.98
Microsoft -2.46 E.on -1.15 Sainsbury (j) -0.96
Alphabet -2.46 Novo Nordisk -1.14 Rio Tinto -0.95
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
Electric vehicle maker Rivian was on Dutch holding company Beter Bed soared Law firm DWF surged after confirming
track to rally for a ninth consecutive after recommending a €168mn takeover that it was in talks about being taken
session, helped by last week’s bid from Benelux investment firm Torqx. over by Inflexion.
announcement of quarterly deliveries The bedroom furnishings group said it The buyout group proposed an offer
that topped analysts’ estimates. had reached a conditional agreement on totalling £1 a share, including a special
The Amazon-backed electric a €6.10 per share offer — more than dividend — a 53 per cent premium to
truckmaker has risen more than 80 per double its most recent closing price. Friday’s closing price.
cent since its close on June 26. Beter Bed’s three largest shareholders, Online property portal OnTheMarket
Retail investors have taken a keen together representing a 44.32 per cent slid after warning of “tougher trading
interest in the group with its shares stake, supported the deal. conditions” in the second half of the year,
among the top trending tickers on Germany’s Bayer rose, triggered by talk a development that “may have an impact
trading platform StockTwits. that its new chief executive, Bill on the group”.
Agricultural sciences company FMC fell Anderson, was considering spinning off OnTheMarket said cancellations of
sharply after trimming its guidance, its agrochemicals business. agent contracts had “been higher than
forecasting revenue of between $5.20bn This was sparked by an article expected” and anticipated “significantly
and $5.40bn for the full year, down from published by news service Platow Brief, fewer transactions this year than in the
the $6.08bn to $6.22bn stated in May. which did not cite sources. previous two years”, owing in part to
Mark Douglas, chief executive, said Jefferies said splitting the pharma and “volatility” in the mortgage market.
FMC “experienced unforeseen and crop unit of the conglomerate remained Near the top of the FTSE 250 mid-cap
unprecedented volume declines in three “the greatest single catalyst for the Bayer index was publisher Future, which said it
out of our four operating regions, as our investment case” — seeing that it traded planned to return more money to
channel partners rapidly reduced at a discount to peers. investors through buying up to £45mn-
inventory levels”. Swiss biopharma group Idorsia climbed worth of shares.
Better than expected results lifted on announcing that its insomnia Tanzania-focused helium explorer
Helen of Troy, the household and medication, Quviviq, had been added to Helium One Global jumped on
healthcare product maker. the performance drug list of US announcing that it had bought a rig
For its fiscal first quarter, it reported pharmacy chain CVS. “capable of drilling to depths in excess
adjusted diluted earnings of $1.94 per A slide in sales weighed on Norway’s of 2,000m”.
share, more than 20 per cent above Wall TGS as preliminary results from the Chair Ian Stalker said the acquisition
Street estimates. energy data and intelligence group would help ensure a “fast track appraisal
“Project Pegasus”, its efficiency and pointed to revenue of about $241mn for and development” of the company’s Tai
cost-reduction plan, was also on track to the second quarter, falling short of the prospect in the Rukwa Basin, allowing for
deliver its $20mn savings target by the $286mn that Fearnley Securities had a “more cost-effective and time-efficient”
fiscal 2024 year. Ray Douglas expected. Ray Douglas operation. Ray Douglas
Tuesday 11 July 2023 ★ FINANCIAL TIMES 15

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 $

-0.02% -0.25% -0.61% -0.359% -0.83%

No change
0.38% 0.23% 0.15% 0.62% 0.09% 0.274% 0.234% 0.71%
Stock Market movements over last 30 days, with the FTSE All-World in the same currency as a comparison
AMERICAS EUROPE ASIA
Jun 11 - - Index All World Jun 11 - Jul 10 Index All World Jun 11 - Jul 10 Index All World Jun 11 - Jul 10 Index All World Jun 11 - Jul 10 Index All World Jun 11 - Jul 10 Index All World

S&P 500 New York S&P/TSX COMP Toronto FTSE 100 London Xetra Dax Frankfurt Nikkei 225 Tokyo Kospi Seoul

4,398.29 7,562.36 2,641.16

19,942.70 19,804.66 15,949.84
7,273.79 15,673.16
4,293.93 32,265.17 32,189.73 2,520.70
Day -0.02% Month 2.35% Year 12.83% Day -0.03% Month -0.34% Year 4.22% Day 0.23% Month -3.81% Year 1.09% Day 0.45% Month -2.94% Year NaN% Day -0.61% Month -0.10% Year 21.55% Day -0.24% Month -4.56% Year 7.24%

Nasdaq Composite New York IPC Mexico City FTSE Eurofirst 300 Europe Ibex 35 Madrid Hang Seng Hong Kong FTSE Straits Times Singapore
13,626.19
1,819.29 19,389.95
54,512.14 3,186.61
13,104.90 53,590.56 1,776.62 9,309.70 9,252.90 18,479.72 3,149.32
Day -0.25% Month 2.84% Year 17.19% Day -0.24% Month -1.35% Year 13.02% Day 0.15% Month -2.37% Year 8.20% Day 0.04% Month -0.61% Year 14.23% Day 0.62% Month -4.73% Year -14.97% Day 0.31% Month -1.25% Year 0.51%

Dow Jones Industrial New York Bovespa São Paulo CAC 40 Paris FTSE MIB Milan Shanghai Composite Shanghai BSE Sensex Mumbai
65,344.17
27,872.00
118,299.99 7,213.14 3,197.76 3,203.70
33,864.21 7,143.69 27,162.02 63,142.96
33,665.02 117,019.48
Day 0.38% Month -0.02% Year 8.08% Day 0.75% Month 1.10% Year 17.97% Day 0.45% Month -0.96% Year 18.41% Day 0.34% Month 2.61% Year 28.00% Day 0.22% Month -0.86% Year -4.54% Day 0.10% Month 4.43% Year 20.04%

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16 ★ FINANCIAL TIMES Tuesday 11 July 2023

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20
Nostalgic triumph nods to the future
POP
Blur
Wembley Stadium, London
aaaaa
Ludovic Hunter-Tilney
“The mind gets dirty as you get closer to
30” is an observation from Blur’s single
“End of a Century”. It dates from 1994,
Britpop’s breakthrough year. Anyone
turning 30 back then was born during
the British invasion in the 1960s. And if
that person’s mind really did get dirty as
their milestone approached, then
there’s a good chance that their progeny
will soon be 30 in turn.
You can’t escape genealogy when it
comes to Britpop. To sceptics, the patri-
otic resurgence of British guitar music
in the 1990s was a pale copy of the origi-
nal boosterism of the swinging Sixties.
To believers, it was a glorious resump-
tion of local traditions after US domi-
nance with grunge. Either way, the nos-
talgia at Wembley Stadium as Blur’s
reunion tour reached its apogee had a
double aspect. The past that was being
celebrated was itself nostalgic for
another age.
There was prolonged cheering as
Damon Albarn, Graham Coxon, Alex
James and Dave Rowntree took to the
stage. The foursome were Oasis’s rivals
as Britpop’s leaders, the art school-affili-
ated middle-class southerners to the
Gallagher brothers’ northern working-
class lads. Last active as a band in 2015
(bar a one-off appearance in 2019), they
were welcomed at Wembley as return-
ing heroes. Amid the elation, a note of
relief: the leg injury to Rowntree that
had caused the cancellation of a prior
tour date had evidently healed.
The drummer bashed away at his kick
drum with more vim than one might
expect from a solicitor and former
Labour councillor, his occupations dur-
ing Blur’s years of inactivity. Meanwhile,
bassist James lit a cigarette and propped
a drainpipe-trousered leg on a monitor,
a study in reactivated metropolitan
Blur’s Damon Albarn and Graham Coxon share the stage at Wembley Stadium — Getty Images
insouciance. Only his grizzled features
betrayed his curious post-Britpop
swerve into owning a cheese farm.
Next to him were Albarn and Coxon,
the creative dynamo at the heart of Blur.
Like many frontmen and lead guitarists,
their working relationship has been
close but prickly. The kiss that Albarn
planted on Coxon’s lips at the end of a
song, followed by a Carry On film “oo-er”
look at the audience, spoke of rap-
prochement. Like a comedy, Blur seem
to be moving towards a happy ending.
Or is it a fresh beginning? They
opened with a new song, “St Charles
Square”, from their forthcoming album
The Ballad of Darren, a surprise addition
to their discography. It was a bashing,
★ FINANCIAL TIMES
ARTS
clanging thing, like an old machine
starting up again. Then came a switch-
eroo deep back into the catalogue for
“There’s No Other Way”, their break-
through hit from 1991. This relic of the
pre-Britpop indie sub-genre that went
by the uninspiring name “baggy” was
given a souped-up overhaul for the vast
90,000-capacity space.
The staging was comparatively sim-
ple, without the usual catwalks and
pyrotechnics of stadium shows. The
sound was brash and chunky, as if push-
ing the songs to maximum capacity.
Coxon did much the same to his guitar,
windmilling it with Pete Townshend
star jumps and doing risky backwards
roly-polies during solos. There was a lot
of expertly marshalled feedback and
distortion in his playing, a tightrope
walk between control and chaos. The
solo that ripped furiously through the
music-hall jollity of “Country House”
drew an angry line under Britpop. The
all-out assault of “Song 2” showed where
Blur went next.
Albarn was a riot of impish energy,
wearing a broad grin like the Cheshire
Cat, but his presence growing stronger
as the show progressed. His voice has
lost mobility with age, but he flung him-
self into the hurly-burly of the songs.
Actor Phil Daniels emerged from a
stripy workman’s hut to reprise his
Cockney rant in “Parklife”. A lively
audience went wild for that one. “Girls &
Boys” sparked more mayhem in the
encore, an evergreen memento of the
days of Club 18-30 holidays. A decent
proportion of the pogo-ers were in the
lower threshold of that age group.
Albarn’s smacker for the guitarist
came on the second of the two nights at
Wembley. The first was a good show in a
sold-out venue; the second was a tri-
umph in a not quite full one. The band
seemed less self-conscious on the fol-
low-up evening, the singer in particular.
The catch in his voice at the end of
“Under the Westway” turned into a
full-on weeping jag, overwhelmed by
the occasion. A majestically blaring ver-
sion of gospel-rock anthem “Tender”,
sung with the massed ranks of the Lon-
don Community Gospel Choir, brought
matters to a head. Nostalgia was
replaced by something more alive, a
sense of momentousness. This was a
song for the ages, played by a band that
has withstood the test of time.
blur.co.uk
Pop deity shows her human side
POP
Lana Del Rey
Hyde Park, London
aaaaa
Siobhan Grogan
There was only one question on every-
one’s mind before Lana Del Rey took the
stage in Hyde Park on Sunday. When
would she show up? The American
singer-songwriter’s recent Glastonbury
set became the talk of the festival after
she arrived half an hour late, blamed
her hairdresser and was then cut off
before she could play her biggest hits,
leaving some fans in tears.
When she still hadn’t appeared 15
minutes after the scheduled start time
of this hugely anticipated London show,
the crowd began anxiously chanting her
name. Moments later came relief: Del
Rey appeared in a floor-length floral
gown, gold heels and jewels threaded
through her dark hair, a troupe of
female dancers gyrating around her. She
seemed a little nervous at first, smiling
tentatively halfway through a wild,
sprawling “A&W”, then noting, as if to
herself, “Damn, this is a big crowd.”
Few artists who are able to enthral a
throng of 60,000 people remain as mys-
terious as Del Rey. Nine albums in, the
Los Angeles-based singer still plays few
live shows, rarely gives interviews and is
as musically adventurous as ever, con-
fronting the American dream and its
seedier reality with her dramatic, sen-
suous storytelling. The material is as
beautiful as it can be uncomfortable —
Every note matters,
not a gesture is wasted
OP ERA
Wozzeck
Festival d’Aix-en-Provence
aaaaa
Shirley Apthorp
Soldiers dump a mound of rubbish
into Marie’s bare room. Her child
rummages frantically through it,
checking crumpled crisp packets
for any remaining morsels. There
are none. Marie collects the trash
carefully into a bag which she then
uses as a pillow.
Later, when the narcissistic
Tambourmajor has been and gone,
when Marie has examined the
sparkling earrings she won from
this transactional sex, the child
stands outside their door with a
new, full packet of crisps, and eats.
He, too, has won something.
This is just one of the hundreds
of tiny, heartbreaking details in
Simon McBurney’s brilliant new
Wozzeck for the Festival d’Aix-en-
Provence. Along with George Ben-
jamin’s pithy Picture a day like this,
it makes a fitting 75th anniversary
present for France’s biggest opera
festival, an institution which has
pushed boundaries as much as it
has maintained the status quo
since 1948. When current Aix
intendant Pierre Audi hired
McBurney to direct Alexander
Raskatov’s A Dog’s Heart in
Amsterdam 13 years ago, they cre-
ated something that was almost a
new genre; Audi remains one of
the only people for whom McBur-
ney is willing to invest the time it
takes to make opera.
This Wozzeck is direct, descrip-
tive and stupendously well
crafted. The stage is generally
bare, with three concentric revolv-
ing circles, sparingly used. Paul
Anderson’s lighting is dark yet
alive; Christina Cunningham’s cos-
tumes suggest the mid-20th cen-
tury, but only vaguely.
Leah Hausman, the choreogra-
pher, is credited with “collabora-
tion” on the stage direction and
you can see why. The chorus is
augmented with dancers, but it is
Crowd scenes are choreographed by Leah Hausman — Monika Rittershaus
and never compromised to meet
commercial expectations.
The Hyde Park show was just as reso-
lutely idiosyncratic. Del Rey sat at a
candlelit table puffing on a vape while
her hair was styled, hitched her skirt
almost to the waist to climb on to a gold
piano and then lay on the floor sur-
rounded by dancers for “Pretty When
You Cry”. It was a stylised, cinematic
performance that evoked a more glam-
orous age, Del Rey presiding over the
crowd like a deity.
Despite the size of the stage, her music
lost none of its brittle vulnerability.
“Bartender” was sparsely dreamy,
“Arcadia” gorgeously woozy, Del Rey’s
voice ringing out over piano backing.
Sepia-tinged footage of her flickered on
the big screen during “Ride”, clouds of
glitter billowed in “Ultraviolence”, and
she sailed high above the stage on a
Tuesday 11 July 2023
impossible to tell one from the
other; the entire evening is a kind
of dance, a fluid tangle of limbs for
the crowd scenes, set changes that
melt from one image to the next by
a kind of mystical alchemy. Not a
split-second, not a gesture is
wasted, and we move with clock-
work inexorability through the
harsh poverty, social cruelty and
casual sadism that drive Wozzeck
first to murder, then suicide.
Simon Rattle conducts the Lon-
don Symphony Orchestra in Alban
Berg’s score as if all of them were
born to do this; every note mat-
ters, every phrase is shaped with a
keen sense of both grotesquerie
Christian Gerhaher as Wozzeck,
with Malin Byström as Marie
and lyricism, and climaxes are
shattering. From the first
moment, you feel the screw turn.
Christian Gerhaher is Wozzeck.
Every syllable, every nuance is
there, infused with the weary mel-
ancholy of exhausted suffering.
Malin Byström is a stage animal, a
Marie who craves more from life
but knows herself doomed. Peter
Hoare’s horrid Hauptmann and
Brindley Sherratt’s sinister Doktor
are exquisite villains. McBurney
gives the Hauptmann a young son,
who wears a military uniform
like his father’s and apes his brutal
gestures; it is he, not Wozzeck’s
son, who sings the final “Hop,
hop!”, prodding the boy just as his
father prodded the man. The cycle
will continue.
To July 21, festival-aix.com
flower-decked swing for the ever-
brilliant “Video Games”. “I think this is
where I got cut off last time,” she noted
wryly before the sultry, insistent “Diet
Mountain Dew”: “Sorry about that.”
Though her blank-eyed aloofness has
long been part of Del Rey’s appeal, her
affection for the fans here was obvious.
She climbed down to a weeping front
row to take selfies and sign autographs
and beamed delightedly between songs,
visibly moved each time the crowd sang
her words back. By “Did You Know That
There’s a Tunnel Underneath Ocean
Blvd”, Del Rey declared that she didn’t
want the show to end, extending the
song into a glorious gospel improvisa-
tion. “It’s worth it,” she assured us as
time ticked on. “Even if you get the
power cut. It’s worth it.”
lanadelrey.com
Lana Del Rey
on stage in
Hyde Park
Matthew Baker/Getty Images
for ABA
Tuesday 11 July 2023
Kyiv was promised membership in the alliance 15 years ago, and President Zelenskyy wants
fresh commitments at this week’s summit. But Russia’s war is complicating things.
W
hen Ukrainian pres-
ident Volodymyr Zelen-
skyy strides into Nato’s
annual summit in Viln-
ius tomorrow, his coun-
try will have been fighting a full-
scale war of survival against Russia for
503 days.
As his battered troops continue to
fight off a relentless invasion, Zelenskyy
comes to the Lithuanian capital with
another strategic objective: to gain a
seat at Nato’s table.
To Zelenskyy and his government,
the US-led alliance represents long-
term peace and security. Article 5 of
Nato’s treaty is an ironclad mutual-
defence clause backed up by American,
British and French nuclear weapons.
But Kyiv’s objective goes beyond
defence. Through Nato membership,
Ukraine would receive an unambiguous
ticket into “the west”, a break from
centuries of subjugation by Moscow,
and the security required for its recon-
struction and economic revival.
Yet Ukraine poses a series of ques-
tions for Nato’s 31 members. Those
questions reach to the heart of the alli-
ance’s purpose, from how prepared its
members are to fight a war against Rus-
sia to whether Nato’s mutual-defence
clause is a security blanket to be thrown
around states.
“What I believe is that Ukraine will
become a member of this alliance and
that Ukraine’s rightful place is in Nato,”
the alliance’s secretary-general Jens
Stoltenberg tells the FT. “It’s for allies to
decide when the time is right.”
“Compared to 2008, Ukraine is much
closer to Nato now,” he adds, referring
to the year Ukraine’s potential member-
ship was officially announced without a
timeline. “That’s a factual thing.”
Stoltenberg, whose term as secretary-
general will be formally extended to
a tenth year this week, concedes there
are many proposals on the table but
remains “absolutely confident that we
will end on something that will unite the
allies and will send a clear message.”
The stakes could not be higher. Rus-
sia’s full-scale invasion of Ukraine has
killed hundreds of thousands of people
and forced more than 10mn Ukrainians
from their homes, in a stark demonstra-
tion of President Vladimir Putin’s will-
ingness to use force to achieve militar-
istic ambitions.
Now, after more than 17 months of
war, during which Nato allies have pro-
vided Ukraine with over $160bn in mili-
tary and financial support, western cap-
itals are grappling with a dilemma. Hav-
ing given Ukraine the means to stop
Russia’s conquest, are they now ready to
promise that if it were to happen again,
their troops would be fighting and dying
too? And if not, what might they be will-
ing to offer instead?
“The sole task here [in Vilnius], and
one that all allies agree on, is that we
left grey areas on the map 15 years ago
which Putin took advantage of, and now
we need to make sure there is no more
grey,” says one senior Nato diplomat. “It
is about making crystal clear where the
lines are.”
A fateful breakfast
It was over breakfast in Bucharest in
2008 that the seeds of Nato’s current
dilemma were sown.
At an early morning meeting on the
second day of the alliance’s summit
that year, then secretary-general Jaap de
Hoop Scheffer met with US president
George W Bush and his French and Ger-
man counterparts Nicolas Sarkozy and
Angela Merkel.
The outcome of that breakfast, and a
result of Merkel softening her opposi-
tion to Bush’s proposal to offer member-
ship to Ukraine and Georgia, was a state-
ment by the entire Nato alliance.
Both countries “will become mem-
bers of Nato”, it said, without providing
a timeline. That declaration, initially
hailed as a major achievement, has
since sunk into infamy.
Those like Germany and France who
opposed Ukraine’s membership — each
of whom had a veto, given Nato’s unani-
mous requirement for new members —
believed it put an indefinite pause on
the country’s ambitions.
But in Moscow, it was seen at the other
extreme: tantamount to Nato’s annex-
ation of both republics. That, Putin said
the next day, posed a “direct threat” to
Russia and broke what he understood to
be a pledge for Nato not to add members
from the ex-USSR.
Kyiv and Tbilisi found themselves
trapped between both positions:
exposed as future Nato members but
without any of the alliance protection
that comes with accession.
Four months later Putin’s tanks rolled
into northern Georgia. In 2014 his spe-
cial forces annexed Ukraine’s Crimean
peninsula. Nato, as Putin knew well,
refuses to accept new members with
“frozen conflict” on their territory.
Aside from condemnatory rhetoric,
Nato did little to punish Moscow. Putin
By Henry Foy, John Paul Rathbone and Felicia Schwartz
Nato’s dilemma on Ukraine
To Ukrainian leader Volodymyr
Zelenskyy and his government, the
US-led Nato alliance represents
long-term peace and security. The
alliance’s secretary-general Jens
Stoltenberg, centre, says ‘Ukraine’s
rightful place is in Nato’
FT montage/Reuters/Getty
‘The most dangerous
place for Russia’s
neighbours is to sit in
the waiting room of
Nato. And we did
exactly that 15 years
ago with Ukraine’
‘We left grey areas on
the map . . . which
Putin took advantage
of, and now we need to
make sure there is no
more grey’
Nato’s defence of its eastern flank
Locations of Nato forces and key headquarters
ICELAND
Nato members
Multinational
battlegroups
Missile NETHERLANDS
defence
BELGIUM
systems
UK
FRANCE
SLOVENIA
PORTUGAL SPAIN
Source: Nato
★ FINANCIAL TIMES
FT BIG READ. EUROPE
had called Nato’s bluff. “The most dan-
gerous place for Russia’s neighbouring
countries is to sit in the waiting room of
Nato,” says Margus Tsahkna, Estonia’s
foreign minister. “And we did exactly
that 15 years ago with Georgia and
Ukraine.”
It’s like arriving at triage in a hospital
emergency room, he adds: “You go in,
but you’re waiting and you’re not
labelled yet. Are you a green, yellow or
red patient? We must label [Ukraine].
We must start the process.”
Nato has a self-proclaimed “open
door” policy towards prospective new
members. Since 2008 it has not stood
still, accepting five new members in the
15 years that have passed. Last year, in
response to Russia’s invasion, Finland
and Sweden launched fast-tracked
applications to join the alliance. Finland
acceded in April; Sweden is hopeful of
becoming a member in the next few
months after Turkey lifts its veto.
Updating the language on Ukraine
agreed at Bucharest is Nato’s thorniest
task this week. While no member of
the alliance believes Kyiv can join while
at war, the discussions on whether to
advance its status, and how to convey
that, are intense and emotive.
“There’s this huge spectrum from
2008 language through to full member-
ship. As an alliance we have whipsawed
up and down that spectrum over the
past year of debate,” says a senior US
diplomat. “We’re pretty close to know-
ing where we will land as 31 [members],
and everyone agrees that unity is the
primary objective here.”
Few officials are willing to disclose
what language their government has
proposed or would accept, such is the
sensitivity over what will probably end
up as one sentence in summit conclu-
sions running into pages.
Those like the Americans and Ger-
mans, who are more strongly opposed
300 km
SWEDEN*
FINLAND
NORWAY
ESTONIA
LATVIA
RUS
LITHUANIA
BELARUS RUSSIA
POLAND
GERMANY
CZECH REP
SLOVAKIA U K R A I N E
HUNGARY
ROMANIA
CROATIA
BULGARIA
ITALY N MACEDONIA
GREECE
TURKEY
ALBANIA
* Invitee
to any sort of language that would imply
immediate Article 5 commitments,
want to make sure that Ukraine only
enters when it can make the necessary
reforms.
Biden said last month that he would
not fast-track Ukraine’s path to mem-
bership. “I’m not going to make it easier.
I think they’ve done everything relating
to demonstrating the ability to co-ordi-
nate militarily, but there’s a whole issue
of, ‘Is their system secure? Is it non-
corrupt? Does it meet all the standards
every other nation in Nato does?’ . . . It’s
not automatic.”
Others have shifted their prior posi-
tion. Emmanuel Macron, France’s presi-
dent, said in May that Ukraine should be
given a “path to Nato membership”.
The intervention from Macron, who
only four years ago voiced his belief that
Nato was “brain dead”, has been crucial
for those campaigning for more ambi-
tious language in Vilnius.
“Of course, the Ukrainians want to
see the word ‘invitation’ in there some-
where,” says one European official
involved in the negotiations. “But it
won’t be unqualified; instead, some
kind of words will be found that don’t
allow for it to be automatic.”
Having recognised that a member-
ship invitation would fail to meet US
and German approval, in a private
meeting of Nato foreign ministers in
May, Stoltenberg offered an alternative
sweetener. When the invitation is finally
presented to Ukraine, he suggested,
it should be shorn of the bureaucracy
that comes with the formal Membership
Action Plan most states go through to
join.
That should speed up the process,
Nato officials say. But it would not
cut corners on non-negotiable issues
including anti-corruption reforms, use
of modern, Nato-standard weaponry
interoperable with allies’ armies, and
structures to protect secret alliance
intelligence.
“If the Membership Action Plan is no
longer the path to Nato membership,
there can be no so-called shortcut,” the
European official adds. “Preconditions
must still be fulfilled.”
An ‘Israeli model’?
Ukraine has realistic expectations of
what will happen this week.
“Membership is not on the table and
it’s too late to change the agenda,” says
one Ukrainian adviser to his country’s
defence ministry.
“Turkey and Hungary have even
opposed Sweden’s accession to the
alliance. It’s not going to be possible
to achieve anything [on Ukraine],” the
adviser adds.
But Nato leaders want to avoid Zelen-
skyy leaving Vilnius empty-handed.
They have a plan: formalising security
commitments.
Nato stresses that proposed security
assurances are wholly separate from the
issue of alliance membership, to protect
the distinction of Article 5. But the real-
ity is they are generally regarded as a
stepping stone to accession.
Not least because the core countries
set to provide them — the so-called
Quad of the US, UK, France and Ger-
many — are four of Nato’s five biggest
military powers.
While the formal promises are not
yet agreed or stated publicly, officials
involved in the discussions tell the FT
that they will centre on codifying exist-
ing military supplies and making a clear
pledge that they will continue. Plus
there will be guarantees on the training
of Ukrainian troops, intelligence-shar-
ing and assistance with defence policy
reforms. There is also likely to be a mul-
tilateral declaration of some kind with
countries making individual pledges.
Nato will also elevate the existing
Ukraine-Nato commission to a council.
That gives Kyiv an equal seat at the table
with Nato members and allows it to call
meetings for “crisis consultations”. The
inaugural meeting will take place
tomorrow in Vilnius.
31 $160bn
Number of Amount of support
members in the Nato allies have
Nato alliance given to Ukraine
Proponents say that these measures
not only help to protect Ukraine in the
short-term, but both increase longer-
term security and better prepare the
country for Nato membership.
But sceptics, such as Estonia’s prime
minister Kaja Kallas, warn that they
“blur the picture” and distract from
Nato membership. Kallas likes to joke
that to a non-native English speaker,
“assurances”, “commitments” and
“guarantees” can pass for synonyms,
whereas only Article 5 can be relied
upon.
Ukraine is understandably wary of
paper promises. In 1994, it gave up its
arsenal of Soviet-era nuclear weapons,
then the third-largest in the world, in
return for security assurances from
Russia, the US and the UK. These
counted for nothing in 2014 and 2022.
Some officials have pitched the com-
mitments as an “Israeli model” akin to
the overt military support Washington
provides to the Jewish state.
The US currently commits to making
sure Israel has a “qualitative military
edge” in the Middle East and signs mem-
orandums of understanding every 10
years. Officials envision Ukraine could
have something similar, putting the
country’s defences on a suitable footing.
Ben Tallis, a senior research fellow
at the German Council on Foreign Rela-
tions, says that such commitments have
an additional benefit for the US. “The
US is still blocking [Ukraine’s member-
ship] and blocking for not wholly unfair
21
if still blinkered reasons: they want
Europeans to take more care of their
own defence and to not simply add
another European country that is
dependent on them,” says Tallis.
But some countries are nervous about
the potential cost of the commitments
at a time of rising inflationary and budg-
etary pressures.
“The more we talk about security
guarantees, or assurances, or commit-
ments, the more it becomes obvious
that this is really expensive,” says one
senior European official who speaks
regularly to Zelenskyy’s cabinet about
security issues.
The choice for Nato members, the
official adds, is “either the Israel model,
which is them [Ukraine] being able to
defend themselves, which is expensive
in terms of investment, or the Nato
model of us defending them if they need
it, which is expensive in terms of the
responsibility we take on.”
‘Too much hesitation’
Russia’s land forces may have taken a
beating in Ukraine, but its military
remains a potent force. And it is learn-
ing invaluable lessons about modern
war on Ukraine’s battlefields.
Ukraine’s most vocal supporters, par-
ticularly in eastern Europe, say this fear
should only compel Nato to move faster.
Only with Ukraine in Nato can Europe
sleep soundly, they argue.
“There’s too much hesitation, and so
much of that runs through Berlin,” says
Tallis. “What we are seeing is an inter-
esting historical forgetfulness, from
Germany in particular.
“They’re not realising the real cost of
European security. The short-term sav-
ings aren’t real if they come with long-
term insecurity,” says Tallis. “They need
to see this as an investment, not a cost.”
For Stoltenberg, the answer to the alli-
ance’s Vilnius dilemma on Ukraine may
come to define his tenure.
Having maintained Nato’s unity
through the war so far — and ensuring
allies provided the support that has
allowed Ukraine to fight back — he must
now find agreement on an issue that will
define what Ukraine, Europe and Nato’s
future security looks like.
One big thing that the war has
changed, according to Tsahkna, the
Estonian minister, is Ukraine’s place in
the western world. Before the invasion,
doubts remained about whether
Ukraine had fully shed its Soviet past —
whether it was still in Moscow’s orbit.
“Now, it’s clear for generations, the
Ukrainian nation has made their own
choice,” he says. “Our question is
whether we ask them to join. They are
sharing the same values . . . They
belong to us, to the west.
“They have decided,” he adds. “And I
think we also have to have the courage
to make historical decisions.”
Additional reporting by Laura Pitel in
Berlin
22 ★ FINANCIAL TIMES Tuesday 11 July 2023

The FT View
Hunt’s plan is pragmatic but not bold
Mansion House speech
makes small inroads into
UK’s broad growth problem
Britain’s annual Mansion House speech
is an opportunity for chancellors to set
out their ambitions for the UK economy.
Thanks to the chopping and changing of
Conservative cabinets, three Treasury
chiefs have had the chance to do so since
2019, leaving the country with numer-
ous visions — and no coherent strategy.
Chancellor Jeremy Hunt delivered
worthwhile, if not particularly vision-
ary, proposals to boost Britain’s pension
and capital markets in his speech yes-
terday — an area long in need of reform.
But Britain is still short of a joined-up
plan to overturn its low-growth malaise.
Trying to mobilise more long-term
capital for Britain’s growth is an admira-
ble goal. With over £2.5tn in assets, the
UK has the largest pension market in
ft.com/opinion Europe. Yet over the past 25 years UK
pension funds have reduced their allo-
cation to British equities from 53 per
cent to around 6 per cent; much less
goes to unlisted equities. Hunt’s “Man-
sion House Reforms” take some sensi-
ble steps towards unlocking more capi-
tal for these high-potential businesses.
A voluntary commitment covering
two-thirds of the UK’s defined contribu-
tion workplace market to invest at least
5 per cent of default funds to unlisted
equities by 2030 is promising. DC funds
deliver retirement incomes based on
individuals’ investments, while defined
benefit funds provide a set income. That
Hunt did not mandate investments in
UK firms, which would conflict with
fiduciary duties and also potentially
scare off international investors, is wel-
come. Broader proposals to consider
consolidation of the country’s frag-
mented DC and DB funds and to explore
alternative funding structures could
help incentivise inefficient funds to con-
sider higher yielding investments.
The chancellor’s ambition to turn
London into the “global capital for capi-
tal”, is also a positive signal for the City.
While it has retained its place as a global
financial hub post-Brexit, competition
is mounting from other global cities.
Plans to simplify companies’ prospec-
tuses will reduce some burdens of list-
ing. A potential dilution of the EU’s
Mifid II directive, which requires bro-
kers to charge a separate fee for
research, could also boost research cov-
erage on fast-growing enterprises.
At this stage, however, many of Hunt’s
reforms remain simply proposals —
with a series of consultations ahead of
potential policy measures in the
Autumn Statement. It is a shame the
country’s plans are still so incipient.
Encouraging pension funds to invest in
the UK economy and the London Stock
Exchange’s demise have been long-
standing problems.
The chancellor’s claim that his plans
could raise £75bn for high-growth busi-
nesses is also optimistic. There is no
guarantee the reforms will free up capi-
Policy tal that will be invested in Britain, since
uncertainty has a variety of other factors also hold back
investor interest in UK plc. Policy uncer-
been a major
tainty has been a major brake on busi-
brake on ness investment, and will continue to be
business so with an election looming next year.
investment, and Boosting growth of UK businesses will
will continue to also require investment in skills and
be so with an infrastructure, alongside a long-term
plan for tax reform.
election There is a limit to how much Britain’s
looming next pension market alone can deliver the
year economic growth the country needs.
Pension funds’ primary purpose is to
deliver for savers, and they are also a sig-
nificant buyer of the government’s debt.
Channelling pensions towards support-
ing Britain’s economic growth is not
straightforward. Hunt has proposed
pragmatic steps, given the constraints.
But Britain needs a much broader and
bolder economic strategy — which
would also help pension funds make the
case for investing in the country. Unfor-
tunately, that may now have to wait for
the next government.

Opinion Society
Letters
Email: letters.editor@ft.com
Include daytime telephone number and full address
Corrections: corrections@ft.com

When it comes to counting,

If you are not satisfied with the FT’s response to your complaint, you can appeal
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Britain is number one How water industry can stay private and work for the public
Ann Kiernan Helen Thomas rightly observes that
renationalisation is not the solution to
the financial problems afflicting water
companies in the UK (“Water has a
private equity, not a private ownership,
issue”, Opinion, FT.com, July 3).
However, she also concludes that
the present structure has failed.
Many companies in the water and
energy sectors have lacked the
financial resilience to weather recent
economic headwinds.
To be fair, the directors of these
companies are in a difficult situation.
They are required by the Companies
Act to prioritise the interests of their
shareholders. However, this often
conflicts with the understandable
demand of the public to invest in
high-quality public services
and infrastructure. Rather than engage
in a futile debate between public and
private ownership, it is perhaps time to
consider if private sector involvement
in the provision of public services could
be recalibrated — through a change to
the underlying governance structure.
Public services could be delivered
through private legal entities that are
required to maintain a balance
between the interests of their various
stakeholders, including shareholders,
staff and customers. This duty would
be embedded in the statutory legal
duties of their boards of directors.
Would such “public service
companies” be hamstrung in their
ability to attract private investment?
Not necessarily, as they would be fully
empowered to generate satisfactory
returns for shareholders. However,
their directors would have a fiduciary
duty to ensure shareholder returns
were not pursued at any cost (for
example, through excessive leverage or
dividend payments) and were balanced
against wider societal considerations.
Corporations whose underlying
purpose is better aligned with
achieving such a balance are more
likely to deliver the long-term
outcomes that both society and
investors deserve.
Roger Barker
Director of Policy and Governance,
Institute of Directors

women respectively. In France, which
Stephen like Germany, Japan and a host of other
OECD nations does not collect data
Bush about race and ethnicity, much more of
what we know is based on extrapola-
tion. The headlines are not good for this
NHS needs urgent reform, COP28 president must Silence on nuclear should
not a lengthy review incentivise climate action prompt Treasury reaction
There was much to agree with in your
frank leader on the state of the NHS
If Sultan al-Jaber wants to make
COP28 a success, the UAE should
Jim Ratcliffe is too generous
(“Ineos owner Jim Ratcliffe calls
at 75 (FT View, July 5). Far too many
patients are let down and denied the
back Raghuram Rajan’s proposal
for a global carbon incentive,
UK energy policy ‘crap’”, Report,
FT.com, July 6).
level of care they ought to expect. something the former Bank of England As you reported back in

T
he UK and France are
Europe’s closest relations.
They have economies of
similar sizes and shapes.
They have colonial pasts
of a similar hue and geographic
spread, though the British empire was
the larger. Given this, anyone inter-
ested in improving the lot of people in
one country would do well to study the
successes and mistakes in the other.
British policymakers have much to
learn from France, not least its
embrace of nuclear power, its first-class
healthcare system and its central role in
the EU. Given the UK’s biggest social
and economic problems, such compar-
isons are often a source of real and
deserved embarrassment. Indeed, one
reason why the British political class
leapt upon the recent unrest in France
is so they could talk about what some-
times feels like a vanishingly small
model: second-generation immigrants
in France have a 19 per cent lower
standard of living than those not
descended from recent immigrants.
These compare unfavourably to the
overall British statistics, which show a
relatively marginal difference between
the native population and the foreign-
born.
Of course, outcomes among immi-
grants are also a flawed measure with
which to consider a country’s minority
population given both the UK and
France have well-established non-
immigrant minority populations. But
we are forced to do so in part because
the French state collects no data on
minorities.
Some defenders argue that for
France, the problem isn’t the policy,
it’s the migrants. Put bluntly, they say,
the issue is that many are from Africa
and many are Muslims. But the type of
people coming to both countries since
1945 is not that different: a wide range
However, your call for an independent
review is misguided.
Apart from the few who use the crisis
to argue for charging patients, there is
little disagreement on what needs to
change. As your article states, the
NHS needs reform to focus more on
community care and prevention. It also
needs dragging out of the analogue age
and into the digital, to take advantage
of the revolution in medical technology
and life sciences. It needs to build
services around the patient, giving us
control over our health and care.
It doesn’t require a review to tell us
that. It requires a Labour government
to deliver it. Just as only Nixon could go
to China, only Labour can effectively
reform the NHS. The last Labour
government delivered the shortest
waiting times and highest patient
satisfaction in history, an inheritance
the Conservatives have reversed.
It will require a decade and a
collective effort, but we can turn this
around and renew the NHS so it is
there for us for the next 75 years.
There’s no time to wait.
Wes Streeting
Shadow Secretary of State for Health and
Social Care, London SW1A, UK
governor Mark Carney has described
as “the best solution from a pure
economic perspective” (“Time is
running out for the UAE to save its
COP28”, FT View, June 15).
Countries that emit above the
per capita world average CO₂ would
pay a levy based on excess carbon
consumption per capita. Countries
with below average emissions
would receive a payout based on the
difference between their per capita
emissions and the global average.
This would create powerful incentives
to invest in low-carbon countries and
cut carbon consumption. Since global
agreement is slow, a group of countries
such as the UAE, EU states and African
Union or Commonwealth members,
could pioneer the carbon levy and get
first-mover advantages.
Titus Alexander
Galashiels, Scottish Borders, UK
March: “Successive Conservative
governments have prevaricated over
a new nuclear build programme
for more than a decade. George
Osborne first announced a
competition for [small modular
reactors] more than eight years ago
when he was chancellor.”
Yet last week, National Grid’s
electricity system operator —
managers of what will become
virtually all our future energy
distribution system — conducted
a three-hour seminar on the 2050
net zero strategy without mentioning
nuclear at all.
The simple truth is that the
government has no coherent
energy policy and the Treasury is
responsible for that.
Tim Ambler
Senior Fellow, Adam Smith Institute,
London SW1P, UK

UK policymakers seem
better able to respond
to problems because
they have better data
number of areas in which the French
have something to learn from the Brit-
ish. The UK’s integration model and
approach to race relations does per-
form better than the French one. Some
of that may be about the benefits of a
multicultural model over a more coer-
cive form of secularism or differences
in the labour market.
But perhaps the most underrated
British strength is simply our ability to
count. In a country often defined by
poor management and inadequate cap-
ital investment, the Office for National
Statistics really is world-leading. This
highly effective organisation produces
reliable and consistently good data with
comparatively few limitations on what
it can ask about. As a result, British pol-
icymakers simply know a lot more
about the shape of their country and its
social and cultural problems. The bene-
fit goes far beyond race relations. It
helped the UK enjoy a rapid rollout of
the Covid-19 vaccine and a faster end to
lockdown. It also means that we can
say, with high certainty, that the chil-
dren of immigrants in the UK are more
likely to be in work than their parents,
with the exception of black Caribbean
and Indian men. Indeed, some groups,
like second generation Bangladeshi
men and second generation black Afri-
can women, have lower unemploy-
ment rates than white British men and
of migrants from former colonial pos-
sessions, working in all kinds of indus-
tries. Look at how African migrants to
the UK perform better than white
Britons across a range of measures or
the strong academic performances of
Britons from the Indian subcontinent.
It’s possible, I suppose, that Algerian
Muslims are just harder to integrate
than Bangladeshi ones or west Afri-
cans from the Gold Coast more able to
thrive abroad than west Africans from
the Côte d’Ivoire. But it doesn’t seem
all that likely.
It seems more likely that UK policy-
makers are better able to respond to
problems because they have better
data. For example, the school census
determines how much central gov-
ernment funding schools receive per
pupil who speaks English as a second
or third language. When you don’t
have data, policy debates inevitably
become driven by anecdote and sup-
position, as do the levers that govern-
ments reach for. It’s thus not surpris-
ing that the gap between outcomes in
France and the UK is significant: if
anything it’s more surprising that it is
not larger still.
Narayana Murthy, the Indian bil-
lionaire, is fond of the saying that “in
God we trust, but everyone else needs
to bring data to the table”. It’s a phrase
his son-in-law has reached for too. As
it happens, this son-in-law, the prime
minister Rishi Sunak, is himself good
anecdotal evidence of the success of
the British model. But the real secret
lies in the fact that the UK doesn’t
need to reach for anecdote to show its
approach to integration is working.
stephen.bush@ft.com
B
O UTLO O K aseball, America’s pastime,
has been passing altogether
too much of the nation’s
CH I CAGO time for years. Even life-
long fans like me had to
admit that too many games were long,
slow and boring. But now Major
Baseball League Baseball has stepped in with
sweeping rule changes aimed at
tries to beat attracting younger fans by speeding
up a sport geared too much to
boomers for comfort.
the clock to For decades, US baseball has been
slowing down just as US culture has
appeal to sped up. MLB says that by last year,
the average game took 3:04 hours, 35
minutes longer than when my home
younger fans team, the Detroit Tigers, won the
baseball World Series in 1968. With
my (long) boomer attention span, I
could tolerate low-scoring, low-
hitting, sometimes four-hour games —
but my Generation Z children would
not. They began to boycott baseball.
A February Ipsos poll found that
while 38 per cent of Americans in the
55-plus age group described
themselves as baseball fans, only 23
per cent of the 18-34 crowd did. That
most quintessentially American of all
sports needed a revamp to survive.
Enter this season’s new rule
changes, voted through by MLB’s
competition committee last
September — and so far they seem to
be working. The most obvious is the
“pitch clock”: pitchers must begin
delivery within 15 seconds if bases are
empty, 20 seconds with a man on base
and 30 seconds between batters.
by Patti Waldmeir Surveys show fans are glad that
pitchers can no longer indulge in
seemingly endless rituals involving
readjusting bits of their anatomy or
equipment with every pitch. Other
changes make it easier for players to
“steal” bases — taking those that they
are not entitled to — which MLB says
fans love above all other moves.
Alex, 20, watching last week’s
Chicago Cubs-Milwaukee Brewers
match, illustrates what the sport is up
against with young people. “This is my
first baseball game ever, and I’m dying
of boredom!” he complained as we
waited for play to resume after the
traditional “seventh-inning stretch”. “I
wanted to play games on my phone
but there isn’t even any WiFi.”
But the effects of the recent changes
have been dramatic. MLB says the
average length of a nine-inning game
so far this year is 2:38, the shortest
since 1984 and down from 3:05 at this
time last season. Attendance is up 7.7
per cent, with the average rising from
under 26,000 at this point last year to
nearly 28,000 now. Scoring is up (9.1
runs per game against 8.7 at this time
last year) and the stolen base success
rate is 79.3 per cent, the highest in
baseball history.
“And it’s the youngest fans who are
the most positive about the changes,”
Morgan Sword, MLB executive vice-
president for baseball operations told
me. MLB says its polling shows nearly
90 per cent of fans under 45 say they
are more likely to watch baseball now,
and the median age of ticket buyers is
six years younger than in 2019.
Lary Sorensen, who pitched for 10
years in the major leagues including
for both the Cubs and the Brewers,
tells me “we are such an instant
results society that people don’t want
to wait a full minute for something to
happen”. But, he says “it’s not so much
the length of the game as its pace” that
matters to fans. The recent Cubs-
Brewers game illustrated his point: it
only finished four minutes shy of the
three-hour mark, but with plenty of
scoring and an eighth-inning home
run that turned the tide, few of the
fans were complaining.
Fred Fieweger, 71, former
stockbroker and life-long fan, says
“the game has a much better flow
now,” and John, 44, shepherding three
young teens clutching baseball mitts
to the game, says “it makes you more
engaged because the plays are
happening a lot faster”.
Sorensen admits “baseball is a game
of the older generation” — he and I
went to the same high school and just
celebrated our 50th school reunion —
“but every generation has had to pass
it on to the next and I think we are
seeing that now”.
My seat neighbour at the Cub-
Brewers game, Todd, 36 — clutching
his one-year-old son, and surrounded
by four-year-olds on a birthday outing
— is sure the new rules will aid
baseball’s survival into their old age.
“The game is shorter and there is
more action,” he says. “That certainly
can’t hurt.”
The writer is a contributing columnist,
based in Chicago
Tuesday 11 July 2023
EMPLOYMENT
MENT
Sarah
nor
O’Connor
eople have dreamt for many
years abo bou ut a world without
wo r k. I n a n e ss ay i n 1 89 1,
Oscar Wilde imagined a
future where, “just as trees
grow while the country gentleman is
a s l e e p, s o w h i l e h u m a n i t y w i l l b e
amusing itself, or enjoying cultivated
leisure — which, and not labour, is the
aim of man — or making beautiful
things, or reading beautiful things, or
simpl
sim plyy con
contem
templa
platintingg the worlorld
d wit
withh
admiration and delight , machinery
will be doing all the necessary and
unpleasant work”.
This year, rapid developments in
artificial intelligence have reignited
que stions ab out whether machine s
m i g h t o n e d a y re p l a c e t h e n e e d f o r
human labour entirely. I am sceptical,
Why Nato
must evolve at
America’s pace
global affairs
rs
Gideon
Rachman
olding Nato together is
really critical,” says Joe
Biden. But the unity of
Nato’s 31 members will be
put to its biggest test since
the beginning of the Ukraine war, at
the organisation’s summit in Lithuania
this week.
The issue that threatens to divide the
alliance is Ukraine’s ambition to join it.
One camp, including Poland, the Baltic
states and Ukraine itself, wants to see
the country put on a fast track to Nato
membership. Another, led by the US
and supported by Germany, wants to
slow the process and to promote other
forms of security guarantee for Ukraine.
Skilful diplomats will probably find a
form of words that will paper over these
cracks. The final Nato communiqué is
likely to assert that Ukraine will join the
a l l i a n c e i n t h e f u t u r e b u t av o i d a n y
pledge to fast-track the process.
That, however, will not be the end of
the matter. Lying behind this argument
are fundamental differences about how
to end the Ukraine war and how to guar-
antee the peace once it does end.
The hardline camp believes that the
goal should b e complete vic tory for
Ukraine and humiliating defeat for
Nick
Clegg
n d e r ly i n g m u c h o f t h e
excitement — and trepida-
tion — about advances in
generative artificial intelli-
gence lurks a fundamental
question: who will control these technol-
ogies? The big tech companies that have
the vast computing power and data to
build new AI models or society at large?
This goes to the heart of a polic y
debate about whether companies
should keep their AI models in-house or
make them available more openly. As
the debate rumbles on, the case for
o p e n n e s s h a s g ro w n . T h i s i s i n p a r t
because of practicality — it’s not sustain-
able to keep foundational technology in
the hands of just a few large corp ora-
tions — and in part because of the record
of open sourcing.
It’s important to distinguish between
today’s AI models and potential future
It’s time to relearn the lost art of leisure
n o t l e a s t b e c a u s e w e h u m a n s h av e a
remarkable ability to make wo worrk for
o u r s e lve s. B u t l e t ’s s u p p o s e f o r a
moment that technological progress did
usher in an age of leisure. Would we
actually be able to cope with it?
When John Maynard Keynes specu-
lated about the “economic possibilities
for our grandchildren” in 1930, he
thought the end of work as we know it
might provoke a collectiv ivee “nervous
breakdown,” saying “I think with dread
of the readjustment of the habits and
instincts of the ordinary man, bred into
him for cou countl
ntleess gengenera
eratio
tions
ns,, whi
which ch
h e m a y b e a s ke d t o d i s c a r d w i t h i n a
few decades”.
Almost a century later, we don’t seem
much closer to being able to adjust to a
life of leisure. At least when Keynes was
writing, people were moving gradually
towards less work in their lives, with
steady reductions in weekly working
hours from one generation to the next.
But that trend ground to a halt in the
1990s: usual weekly hours for full-time
workers have averaged about 40 across
OECD countries since then.
In some sectors and countries, work-
Russia. They think that the only way to
secure peace is to break Russian power
and then to bring Ukraine into Nato.
They believe that Kyiv has already paid
a heavy price for excessive US and Ger-
man caution in the delivery of weapons
— a n d t h a t t h e A m e r i c a n s a re n o w
repeating this mistake by dragging their
feet over future Ukrainian membership
of the alliance.
The American and German govern-
ments are more cautious about both
war aims and securing the peace. One
senior G erman diplomat muse s that
behind Poland’s talk of the n neeed ffoor a
total defeat of Vladimir Putin is the
h o p e t h a t Ru s s i a m i g h t e ve n t u a l ly
break apart. That, he says, is an idea
that Berlin has no interest in.
The Americans are not saying that
Ukraine can never join Nato. But they
are applying the brakes by insisting that
ever
eryy te
techn
chnica
icall requi
quirrement
ement mus mustt be
fulfilled first. When the indignant hard-
liners cite the recent fast-tracking of
Finland into the alliance as a precedent,
the US response is that Finland, as an EU
member, fulfilled all the requirements
on anti-corruption measures, demo-
cratic governance and the like.
Behind the formal American objec-
tions lie s a concern that any commit-
ment to fast-track Ukraine into Nato
could prolong the war, and introduce
dangerous complications into a future
peace settlement. For example, would
Crimea be covered by a Nato security
gua
guarrant
anteee for Ukrain
Ukraine? e? Som
Somee US of off
ffi-
cials also worry that some allies would
actually like to see Nato drawn directly
Openness on AI is the way forward for tech
modelss. The mos
model mostt dysto stopiapian n war
warnin ningsgs
about AI are really about a technological
leap — or several leaps. There’s a world
of difference between the chatbot-style
applications of today’s large language
m o d e l s a n d t h e s u p e r s i z e d f ro n t i e r
models theoretically capable of sci-fi-
style superintelligence. But we’re still
in the fo foot
othil
hills
ls debati
debating ng the peri erilsls we
might find at the m moountaintop. IIff and
w h e n t h e s e a dv a n c e s b e c o m e m o re
plausible, they may necessitate a differ-
ent response. But there’s time for both
the technology and the guardrails to
develop.
Like all foundational technologies —
f ro m r a d i o t r a n s m i t t e r s t o i n t e r n e t
operating systems — there will be a mul-
titude of uses for AI models, some pre-
dictable and some not. And like every
technology, AI will be used for both good
and bad ends by both good and bad peo-
ple
ple.. The resp spons
onsee to tha thatt uncuncert
ertaain inty
ty
cannot simply rest on the hope that AI
models will be kept secret. That horse
has already bolted. Many large language
m o d e l s h ave a l re a dy b e e n o p e n
sourced, like Falcon-40B, MPT-30B and
dozens before them. And open innova-
★ FINANCIAL TIMES
Opinion
e r s a re s t i l l p u s h i n g f o r m o re l e i s u re
time. IG Metall, Germany’s big gest
industrial union, is considering arguing
for a four-day week for steel workers in
its upcoming collective bargaining proc-
ess this November. But others seem
more wedded to work than ever. A large
survey of workers in the US by the Pew
Research Center this year found that 46
per cent don’t even take all the paid
We should make a start
and stop waiting for a
fully automated future
that might never arrive
leave to which they’re entitled. The
most popular reasons cited by workers
were that they didn’t “feel the need”
for more time off, and that they worried
they might fall behind. Platforms such
as PTO Exchange have popped up to
a l l o w A m e r i c a n s t o e xc h a n g e t h e i r
unused leave for “other things of value”
such as re rettire
rem ment funds or student
loan repayments.
into the war wit
into with h Russ
ussia ia.. “If the
theyy wa
wan nt
that, they should say so openly,” says
o n e we l l - p l a c e d Wa s h i n g t o n i a n ,
“because that’s not our policy.”
Rather than push for Nato now, the
US is emphasising alternative forms of
security guarantee. The idea would be
to establish a unique military partner-
ship with Ukraine involving the transfer
of high-tech weaponry and intense mili-
tary-to-
o-m
military co-o o-op peration. The plan,
s ays o n e U S o f f i c i a l , i s t o c re a t e a
“defence - oriented force that would
present too hard a target for any future
Russian aggression”. Biden and others
have likened this to the US relationship
with Israel. Like the Israelis, the Ukrain-
ians would be a close American ally, fur-
nished with the most advanced military
equipment — including, controversially,
Rather than push for
membership now, the US
is emphasising alternative
forms of security guarantee
tion isn’t something to be feare redd. The
infrastructure of the internet runs on
ope
penn-source cod odee, as do web browsers
and many of the apps we use every day.
While we can’t eliminate the risks
around AI, we can mitigate them. Here
are four steps I believe tech companies
should take.
F i r s t , t h e y s h o u l d b e t r a n s p a re n t
about how their systems work. At Meta,
we hahavave recen centl
tlyy rele
elease
asedd 22 “syste stemm
While we can’t eliminate
the risks around
artificial intelligence,
we can mitigate them
cards” for Facebook and Instagram,
which giv ivee people insight into the AI
behind how content is ranked and rec-
ommende d in a way that do e s not
require deep technical knowledge.
Second, this openness should be
accompanied by collaboration across
indust
ind ustry
ry,
y, go
govvern
ernmen
mentt, aca
cadem
demia
ia and
civil society. Meta is a founding member
L e i s u r e t i m e , t o o, h a s f o r s o m e
become more performative and focused
on goals or achievements. Runs are not
just enjoy oyeed but timed and tracke
books are not just read but counted up
ked d;
and shared on social media. As Oliver
Burkeman writes in his book Four Thou-
sand Weeks, many people feel a sense of
“discomfort with anything that feels too
much like wasting time”. Hobbies are
faintly embarrassing, but “side-hustles”
are cool. He urges readers to spend more
time on “atelic activities” which have no
end goal, and are done purely for the
p l e a s u re o f d o i n g t h e m . I n s p i re d , I
signed up for a pottery class last year. I
t r i e d t o t e l l m ys e l f i t w a s c h a r a c t e r -
building that I was the worst in the class,
and that it didn’t matter that I wasn’t
actually making any usable pots. But in
the end, I gave up.
Eve n d o i n g n o t h i n g a t a l l i s n ow
marketed to the anxious or ambitious
as a roundabout way to be more produc-
tive. Alex Soojung-Kim Pang’s very good
book Rest has the subtitle “Why you
get more done when you work less.” A
meditation from business consultancy
ProNappers reassures listeners that
cluster munitions. But crucially, like
Israel, Ukraine would not, initially, be
covered by Nato’s Article V security
guarantee.
All this talk of alternativ ivee security
guarantees worries some of Ukraine’s
most ardent supporters in Nato. Last
week, Kaja Kallas, the Estonian prime
minister, put her frustration on the
record when she told the FT: “We need
practical, concrete steps on the path to
Nato membership. I have the feeling
that talking about security guarantees
actually blurs the picture . . . the only
se curity guarante e that really
works . . . iiss Nato membership.”
It is easy to sympathise with Kallas’s
view that ambiguity is dangerous and
that “grey zones are sources of conflict
and war”. Ukraine would certainly be
safer inside Nato and experience sug-
gests that Russia would be unlikely to
attack a country covered by Article V.
But the reality is the American view
will have to prevail. The US accounts for
roughly 70 per cent of the total defence
spending of all Nato countries. So Nato
p o l i c y w i l l u l t i m a t e ly b e d e c i d e d i n
of Partnership on AI , alongside Ama-
zon, Google, DeepMind, Microsoft, and
IBM. We are participating in its Frame-
work for Collective Action on Synthetic
Mediadia,, an imp
import
ortant
ant ste
step
p in ens
ensuri
uringng
guardrails are established around AI-
generated content.
Third, AI systems should be stress
tested. Ahead of releasing the next gen-
eration of Llama, our large language
model, Meta is undertaking “red team-
ing ”. This process, common in cyber
security, involves teams taking on the
role of adversaries to hunt for flaws and
unintended consequences. Meta will be
submitting our latest Llama models to
the DEFCON conference in Las Vegas
next month, where experts can further
analyse and stress test their capabilities.
A mistaken assumption is that releas-
i n g s o u rc e c o d e o r m o d e l we i g h t s
makes systems more vulnerable. On
the contrary, external develope perrs and
researchers can identify problems that
would take teams holed up inside com-
pany silos much longer. Researchers
testing Meta’s large language model,
BlenderBot 2, found it could be tricked
into remembering misinformation. As
“napping is a great use of your time”.
Is thi
thiss con
consta
stant
nt ne neeed to makmakee use of
every hour just human nature? Not nec-
essarily. In the days of cottage industry
in England, for example, contemporary
accounts suggest people worked hard,
but they didn’t work relentlessly and
they would trade income for leisure
w h e n t h e c i rc u m s t a n c e s a l l owe d .
“When the framework knitters or mak-
ers of silk stockings had a great price for
their work, they have been observed sel-
dom to work on Mondays and Tuesdays
but to sp end most of their time at the
alehouse or nine -pins,” huffed John
Houghton, a fellow of the Royal Society,
in 1681. “As for the shoemakers, they’ll
rather be hanged than not remember St
Crispin on Monday.”
Perhaps we should make a start on
relearning the lost arts of leisure now,
r a t h e r t h a n w a i t i n g f o r a f u l ly a u t o -
mated future that might never arrive.
As Pang writes: “rest has never been
something you do when you’ve finished
everything else. If you want rest, you
have to take it.”
sarah.oconnor@ft.com
a s h i n g t o n , n o t B r u s s e l s o r V i l n i u s.
There are also good political, as well as
financial, reasons for Nato to be guided
by America’s relative caution. The
Biden White House is likely to be the
m o s t U k r a i n e - a n d N a t o - f r i e n d ly
administration that the US can cur-
rently produce. The Republicans are the
party of Do Don nald Trump, not of the late
John McCain. Any move to fast-track
Ukraine into Nato could easily become
an issue in the US presidential election.
Senate rraatification ooff Ukrainian m meem-
bership would not be guaranteed.
B ehind the se p olitical fac ts lie s a
broader historical reality. Nato came
into b eing in 1949 in the aftermath of
the second world war and at the onset of
the cold war. The American statesmen
who created the alliance had an intellec-
tual and emotional commitment to the
defence of Europe that can no longer be
taken for granted in Washington. For all
their frustrations with the Biden admin-
istrat
ist ration
ion,, ha hawki
awkish sh Eur
Europ opeaneanss sho
should uld
remember that.
gideon.rachman@ft.com
a result, BlenderBot 3 was more resist-
ant to it.
Finally, companies should share
details of their work as it develops, be it
through academic papers and public
announcements, open discussion of the
benefits and risks or, if appropriate,
making the technology itself available
for research and product development.
Op enne ss isn’t altruism — Meta
believes it’s in its interest. It leads to bet-
ter products, faster innovation and a
flourishing market, which benefits us as
it does many others. And it doesn’t
m e a n e ve r y m o d e l c a n o r s h o u l d b e
open sourced. There’s a role for both
proprietary and open AI models.
But, ultimately, openness is the best
antidote to the fears surrounding AI. It
allows for collaboration, scrutiny and
iteration. And it gives businesses, start-
ups and researchers access to tools they
could never build themselves, backed
by computing power they can’t other-
wise access, opening up a world of social
and economic opportunities.
The writer is president of global affairs
at Meta
23
Human rights
framework
needs an
urgent upgrade
Christopher
Sabatini
h i s ye a r m a r k s t h e 7 5 t h
anniversary of the Univer-
sal D e claration of Human
Rights
Rights — cer certai
tainl
nlyy a cau
causese
for celebration. But now is
also a time to re-evaluate the interna-
tional human rights framework, which
is facing novel challenges. Our freedoms
are being weakened by populism and
technology, as well as an emerging coali-
tion of autocratic states. It’s time for an
upgrade.
Ratified by the UN General Assembly
in December 1948, the UDHR commit-
ted signatory states to protecting indi-
vidual freedoms and spawned interna-
tional and regional laws and bodies to
defend them. It also sparked a cultural
shift. The idea that states must protect
human dignity and individual liberty is
now embedded in popular discourse.
To d a y, h o w e ve r, a n i n c re a s i n g
number of non-democratic states are
gaining power while undermining the
c o n s e n s u s o n h u m a n r i g h t s. T h e s e
countries are building a rogues’ gallery
of allies aiming to tear down what they
perceive as an intrusive liberal interna-
tional regime.
Human rights-abusing regimes have
found one diplomatic and economic ally
in B eijing. China has allie d itself with
these partners in the UN Security Coun-
cil and the UN Human Rights Council,
forging coalitions to challenge not just
international scrutiny of the treatment
of its Uyghur population but also abuses
committed in Myanmar, Iran and Cuba
and others.
The intent is to muddy global consen-
sus on human rights. The China and
A rogues’ gallery of allies is
aiming to tear down what
they perceive as an
intrusive liberal regime
Russia-created Shanghai Cooperation
Organization, for example, has served
as a for
forum
um for memb
member sta state
tess, mos
mostltlyy
former Soviet republics in Central Asia,
to promote Beijing ’s security vision,
share repressive laws designed to curtail
political rights and field pro-govern-
ment “elections monitoring” missions.
In Latin America, the Community of
Latin American and Caribbean States
has reaffirmed “the inalienable right of
every State to choose its political, eco-
nomic, social and cultural system”.
Mean
eanwhi
while
le popu
opulis lists
ts of the lef
leftt and
right — including in the developed north
— are attempting to undermine confi-
dence in democratic processes. Right-
wing figures such as former president
Jair Bolsonaro of Brazil, former US pres-
ident Donald T Trrump, V Viiktor OOrrbán iin n
Hungary, and leftwing figures such as
Andrés Manuel López Obrador of Mex-
ico and Nicolás Maduro of Venezuela
have wittingly or unwittingly collabo bo--
rated by ignoring international human
rights commitments.
The first step in tackling this is to
restore the fraying commitment among
liberal democracies to the human rights
system. This must include voices from
the global south. It has been 30 years
since the World Conference on Human
Rights in Vienna, which resulted in the
creation of the Office of the UN High
Commissioner for Human Rights. This
body has highlighted the repression of
rights in countries as diverse as Cuba,
Iran, Myanmar and Syria.
In coming years, such an event and
platform would help re-engage the glo-
bal south in discussions. In exchange,
lib eral demo cracie s should lead the
charge for greater transparency and
accountability in b o die s such as the
United Nations Human Rights Council.
Ele c tion of memb ers to the se b o die s
should be contingent on states’ human
rights records and their compliance
with past decisions.
Finally, there is a need to understand
and address the relationship between
declining political support for the rights
of migrants and minoritie s and e co-
nomic insecurities. Preserving pro-hu-
man rights discourse and policy means
making the current system responsive
to the social and economic rights citi-
z e n s a re c u r re n t ly d e m a n d i n g f ro m
their national governments.
On this anniversary, we must consider
what needs to be done to save the UDHR
from po pottential irrelevance. This work
won’t be easy, but it is vital.
The writer is senior fellow for Latin Amer-
ica at Chatham House
24 ★ FINANCIAL TIMES Tuesday 11 July 2023

China tech/Ant: surviving not thriving

Rolling Beijing attacks on China’s tech companies have coincided with a global east/west trade spat. This has
hit share prices and earnings valuations across the sector. The outlook for Alibaba, which depends on
consumer confidence, has been clouded by China’s weakening economy.

The crackdown spread Then and now Alibaba depends on

Twitter: @FTLex
Thames Water:
the capitalist cistern
Debts are rising faster at Thames Water
than the water in its reservoirs. The UK
utility borrowed an extra £2.5bn in its
last financial year, taking the total pile
of borrowings to more than £16bn in
the year to March.
The business looks unsustainable
even after shareholders agreed to inject
an additional £750mn by 2025. The
funding commitment does, however,
postpone the need for any immediate
restructuring. It also gives time for
ministers to ensure that this will come
via a debt-for-equity swap rather than
any taxpayer-funded bailout.
Thames is a case study in some of the
worst aspects of private equity-style
financial engineering. At the core of the
company is a restrictive debt structure
created by former owner Macquarie.
Inflation is the blockage in the pipes.
This is driving up debts owing to index
linking, as well as raising operating
costs directly. Cathryn Ross, former
boss of industry-friendly regulator
Ofwat, is now in charge at Thames.
She has few options but to keep
kicking the can down the road.
Immediate cash needs appear
manageable. Thames has £4.4bn of
liquidity made up of £1.8bn of cash and
a further £2.6bn of undrawn debt
facilities. Thames’s credit rating is
crucial to the latter. After a downgrade
last year, the business’s debt sits on the
cusp of investment grade. Credit is
underpinned by a “whole business
securitisation” put in place in 2007.
This permits high leverage; 14 times
ebitda last year. Cash interest costs rose
only modestly last year to £400mn.
But non-cash charges from accrued
interest and indexation rose by a third
to almost £900mn. The index-linked
charge doubled.
The weighted average interest rate
on this debt rose to an eye-watering
13.4 per cent last year, from 8.1 per
cent. Crucially, Thames does not cover
these costs today: they are rolled into
the debt and repaid when due. Another
catch of the WBS are terms that require
full payment, including future interest,
in the event of refinancing.
Despite all this, Thames’s position
improved at an official level.
Regulatory gearing fell from 81 per
cent in 2022 to 77 per cent. That was
thanks to a bigger increase in the
regulatory capital value than for any
other water company. This rose 12.3
per cent to £18.9bn, compared with an
average of 11.5 per cent at the rest.
As financial, political and national
interests collide, every drop will count.
BT/Philip Jansen:
fibre viber
“Your call is important to us,” is one of
those phrases that becomes less
convincing the more often it is
repeated. BT Group boss Philip Jansen
has beefed up customer-service levels
accordingly. But his own call to the
stock market helpline still rings out
forlornly. The share price has dropped
38 per cent since he took over some
four years ago.
Jansen will leave next year. His
successor at the UK telecoms group will
not have it any easier. A new chief must
lift the shares without reducing
investment, while perhaps coping with
a Labour government in early 2025.
After successfully leading payments
group Worldpay, one wonders what
Jansen saw in BT. As a triple-play
provider of broadband, mobile and
video, it has needed heavy investment.
Shareholders wanted dividends, but
free cash flow collapsed almost two-
thirds to about £1bn and dividends per
share by 47 per cent.
Could Jansen have done better? Not
with Ofcom demanding a full fibre
rollout to homes and expansion of the
5G network.
Fibre now reaches nearly half of the
25mn homes scheduled by the end of
2026, while the UK has 65 per cent 5G
mobile coverage.
No triumphant exit was possible for
Jansen. BT’s big pension fund gets in
the way of a sale. Its deficit has
contracted to £3bn since a trustee
estimate of £4bn last summer, said
New Street’s James Ratzer.
A worst-case estimate of what BT
would owe pension scheme trustees in
a takeover would be about £12bn.
That acts as a poison pill for those
circling BT, including Franco-Israeli
billionaire Patrick Drahi, the largest
shareholder with 24.5 per cent.
Hopes of bolstering an enterprise
value to forward ebitda value,
wallowing near four-year lows at under
four times, have faded.
Even a business-friendly Labour
Stock prices (rebased)
Alibaba
JD.Com
Tencent
Nasdaq
State backlash triggered*
2018 20 21 22
*Alibaba founder Jack Ma publicly
criticises government
Source: S&P Global
Chinese tech stocks beat the broader
benchmark yesterday. That might
seem an odd reaction to the $984mn
fine China imposed on Ant, the
digital payments group.
However, investors hope that the
penalty — and official talks with tech
groups — signal that a three-year
regulatory crackdown is drawing to
an end. The rapprochement comes
much too late to put companies such
as Ant and Alibaba back on a path to
strong growth.
The Ant fine is one of the largest on
record for a China tech. The central
bank found that Ant violated laws in
areas including corporate governance
and consumer protection. It said that
most outstanding problems had been
rectified and it would now focus on
government would not want to see a
radical restructuring. Jansen’s
disconnection will be well timed.
Scope 3: underwriters
under pressure
To the uninitiated, debates on carbon
accounting resemble theological talks
on the number of angels that can dance
on the head of a pin.
Complex, internally coherent and
fascinating, but of limited practical
value. Witness, for instance, the latest
wrangle in the net zero finance world.
Should banks report only emissions
related to loans made to clients? Or
should they account for pollution on
funding they merely underwrite and
Forward earnings multiples
Jul 7 2023 Oct 23 2020
150
Alibaba
100
Baidu
50
JD.Com
NetEase
0
Tencent
-50
Nasdaq
-100
23 10 20 30 40
Source: S&P Global
“normalised supervision” of Ant.
Tellingly, China’s state planner held a
meeting with businesses including tech
group Baidu yesterday. The aim: to
reassure the private sector it will
support entrepreneurs to “grow and
thrive”. For ecommerce group Alibaba,
which holds a stake of a third in Ant,
that means it can revisit a plan to list
the payments subsidiary.
This would be a positive step, but no
cure-all for Alibaba. At its original
$315bn valuation in 2020, a listing for
Ant would have offset slowing growth
in the parent’s core ecommerce unit.
The impact is more muted at the
current valuation. Ant has proposed a
buyback of 7.6 per cent of its equity,
valuing the whole business at $78bn.
The timing of the buyback implies
sell on? Almost half of the financing
provided to the fossil-fuel industry by
the 60 largest banks from 2016 to 2021
was in the form of capital markets
facilitation, according to Banking on
Climate Chaos, a report compiled by
pressure groups.
Environmentalists hope that if banks
measure their indirect contribution to
global warming and set reduction
targets, it will tighten access to capital
for carbon-intensive industries. They
want banks to treat underwriting
similarly to straight loans.
Some banks think they should
account for a smaller percentage of a
client’s emissions than the face value of
the bond would imply, perhaps as low
as 17 or 33 per cent, when they do not
lend the money themselves.
So-called “Scope 3” emissions —
Chinese growth
China real GDP growth Alibaba sales
(annual % change) ($bn)
8 140
120
6
100
80
4 2023 have been large cruise lines, now
60
40
2 The likes of Carnival, Norwegian and
20
0 * * 0 followed. Holidaymakers appeared
2014 16 18 20 22 24
Fiscal years to Mar
*GDP growth estimate and consensus sales estimate
Sources: Refinitiv; IMF
that a listing would come, if at all,
much further down the line.
If officialdom had reassured the
market a year ago, the boost to
sentiment would have been more
positive. But investors still have high
hopes for Chinese equities, which
staged a rebound in the last quarter
of 2022. The mere sighting of Alibaba
founder Jack Ma in Europe, implying
state disapproval had dissipated, was
enough to give Alibaba stock a boost.
It has fallen more than a quarter
from its January peak. At 11 times
forward earnings, it trades at a small
fraction of global peers. Global capital
now sees Chinese regulatory risk as
unpredictable and severe. Weak
Chinese growth means there is less
these days to attract them back.
those associated with the activities of a
company’s suppliers and clients — are a
crucial issue for banks. They emit little
carbon themselves, but provide billions
in financings for companies that do.
Banks need to set Scope 3 targets.
Haggling over the precise carbon
weightings attributable to different
activities is unhelpful. After all, Scope 3
carbon accounting is already a
nebulous concept, with emissions along
a single value chain double or triple-
counted by those involved.
Banks’ main purpose of measuring
Scope 3 emissions is to provide a
baseline for reduction targets. If that is
from a high level so be it. Consistency,
over time, is most key. Banks should
account for all the emissions associated
with their underwriting activities.
This has the benefit of clarity.
Travel:
cruising for a bruising
Ships tend to make better speed by
jettisoning ballast, not adding to it. But
some of the best performing stocks of
freighted with debt from pandemic
shutdowns.
Royal Caribbean were in 2020 at risk of
running aground. A lacklustre recovery
reluctant to maroon themselves on
floating islands where new and old
pathogens can jostle for pre-eminence.
Yet the buffets, campy entertainment
and shuffleboard have proved as
irresistible as a siren’s song. The shares
of the trio of cruise operators have each
roughly doubled so far in 2023.
Carnival announced record revenue
in its most recent quarter. Customer
deposits of $7bn were at an all-time
high.
Cruise companies feature operating
leverage. Ships have heavy fixed costs
so each incremental passenger is highly
valuable. Hefty financial leverage
means that slight improvements in
operating performance create further
bounce.
But investors should worry about
cruise lines running out of steam.
Even after a huge rally, the stock
prices of cruise groups are well below
pre-pandemic levels. Much of that
difference can be explained in the
components of value.
At the end of 2019, Carnival had a
market value of equity of about $35bn.
Today that is now $24bn as the
company has issued dilutive stock.
More notably, its net debt balance has
exploded from $10bn to $30bn.
Carnival’s enterprise value today of
more than $50bn exceeds the figure
from the end of 2019 by about a tenth.
This is despite it projecting about $4bn
of 2023 ebitda, a fifth below the figure
it reported in 2019.
Wall Street has moved from worrying
about bankruptcy filings to showering
cruise ships with ticker tape from the
quayside. But given debt levels, these
businesses continue to sail through
dangerous waters.
Lex on the web
For notes on today’s stories
go to www.ft.com/lex

CROSSWORD
No 17,465 Set by JASON
        ACROSS

 1 Checks surrounding only son who sits

in the upper house (8)
  5 Address is a constant expense (6)
10 Restrict playing chicken (5)
11 Blackmailer who serves in court? (9)
12 A loud lecture’s to bore (9)
  13 Dance beat with oomph (5)
14 College grounds affected by American
(6)
15 You’re grabbed by by these seedy sorts
   (7)
18 Disregard old line on Spain (7)
 20 Miss clutching retro silk is kissed (6)
22 Emerge as a gent about head of
   Establishment (5)
24 Reform must include parent’s term for
 university? (4,5)
25 Dispenser of drinks in its natural
   habitat to draw on (9)
26 Zero interest for abstract illusions, say
(2,3)
27 Most dreadful senior thief-taker facing
  furlough (6)
28 Kind of sweater I knitted (2,2,4)

DOWN
 
1 Writer records muscle (6)
2 Gossip’s tantrum about English wine
(9)
3 Rumpole’s potty is unfit to be tried
JOTTER PAD (3,6,6)
4 Better gentleman on the radio to go
unheeded (7)
6 Material relief from true care with cot
Solution 17,464 being replaced (8,7)
$ 9 2 : $ / 0 2 ' ( 5 $ 7 ( 7 Possibly where canoe struggles? (5)
$ $ $ 8 ( ( 5 8 Fabulous racer, usually thought slow, to
, / / 7 , 0 ( ' & 2 % : ( % rise to being exchanged (8)
/ ( 3 ) 2 ( $ 9 Props from special teams who pull
' ( % 5 , 6 / 2 < $ / , 6 7 together (6)
< 6 + $ 6 8 16 What could be rated? Business without
+ ( $ 5 7 7 2 + ( $ 5 7 tariffs or the like (4,5)
) ( ' 3 ; ( 17 Novel copyright editor courted (8)
0 , ' ' / ( 7 ( 0 3 / ( 19 Sine qua non for unsure writer is an
1 $ 1 2 5 $
age on series (6)
' , 5 ( & 7 2 5 5 ( & $ 1 7
20 Painkillers which are not specified to
6 ; 5 $ 7 , ,
cover colour (7)
* + ( 7 7 2 * 5 8 ( 6 2 0 (
21 Twist formal document on high
You can now solve our crosswords explosive (6)
( 5 1 ( 1 ( 8
in the new FT crossword app at 23 Conclude Hell will exist without drama
$ ' 9 $ 1 & ( ' ( / ' ( 6 7 ft.com/crosswordapp (5)*