THURSDAY 3 AUGUST 2023 NATIONAL NEWSPAPER OF THE YEAR UK £3.50; Republic of Ireland €3.

90

The risks of Mexico’s creeping militarisation Motoring to the next political battleground
BIG READ, PAGE 19 ROBERT SHRIMSLEY, PAGE 21

Trump team seeks to derail ‘absurd’ Briefing

i BAE books record orders
on back of war in Ukraine
Britain’s biggest defence company

push for speedy trial before election has lifted its annual profit forecast
as the Ukraine war helped to drive
first-half new orders to a record
£21.1bn.— PAGE 10; LEX, PAGE 22

i NHS enlists private help

3 Charges over fallout from 2020 vote 3 Capitol riot ‘fuelled by lies’ 3 Ex-president leads Republican race Private providers will be given a
bigger role in running and funding
NHS diagnostic centres as
STEFF CHÁVEZ — CHICAGO ministers enlist companies to help
STEFANIA PALMA — WASHINGTON clear record waiting lists. — PAGE 2

Donald Trump’s legal team has pushed
back against US prosecutors’ drive for a
“speedy trial” over the historic charges
that the former president conspired to
subvert the 2020 election.
In comments that signalled Trump’s
desire to delay proceedings — possibly
until after next year’s presidential con-
test — John Lauro, one of his lawyers,
rejected any suggestion of taking the
case to court in a matter of months.
“The Biden justice department has
had three years to investigate this. To
take president Trump to trial in 90 days,
of course, is absurd,” Lauro said yester-
day, a day after Trump was indicted on
four criminal charges related to efforts
to overturn the 2020 election result.
“Right now [prosecutors] want to go
to trial so that instead of debating the
issues against Joe Biden, president
Trump is sitting in a courtroom — how is
that justice?” Lauro said on NBC’s Today,
in reference to a possible repeat Biden-
Trump presidential contest next year.
“We’re entitled to understand what
the charges are [and] do our own inves-
tigation,” he added.
The Department of Justice said that it
would respond in court.
Special counsel Jack Smith laid out
charges against Trump on Tuesday that
included “conspiring to defraud the US,
conspiring to disenfranchise voters and
conspiring and attempting to obstruct
an official proceeding”.
The January 6 2021 assault on the US
Congress, he said, was “fuelled by lies”
from Trump over the 2020 result, add-
ing that the DoJ would seek “a speedy
trial so that our evidence can be tested
in court”.
Smith’s language co-opted a defend-
ant’s right to a speedy trial, which under
federal statute must begin within 70
days of an indictment, although pro-
ceedings are often postponed for vari-
ous reasons.
Referring to the indictment, Trump
said in a post on his Truth Social net-
work yesterday that he had “never had
so much support on anything before”.
He attacked the “unprecedented indict-
ment of a former (highly successful!)
president and the leading candidate, by
far, in both Republican party and the
2024 general election”.
The case is seen as one of the most
serious legal challenges faced by Trump.
It is the second set of charges brought
Reports & 3 Uncharted legal territory page 6
3 Trump sees gains page 6
analysis 3 FT View page 20
3 Gideon Rachman page 21
by Smith, who was appointed by attor-
ney-general Merrick Garland to oversee
probes involving the former president.
In addition to separate federal crimi-
nal charges over the handling of classi-
fied documents, Trump is facing state
charges over alleged hush-money pay-
ments to porn star Stormy Daniels in the
run-up to the 2016 election.
Trump, who remains far ahead of his
rivals in the race for the Republican
presidential nomination, has sought to
delay other legal proceedings until after
the 2024 election. He has petitioned for
the classified-documents case to be
delayed until after the poll. Judge Aileen
i Meta faces content heat
Facebook’s owner has been
accused in a scathing report of
“neglecting” a program designed
to remove misinformation and
harmful content online.— PAGE 7
i Airbus joins space race
The European aviation group is to
form a joint venture with US start-
up Voyager in the race to build a
replacement for the International
Space Station.— PAGE 8
i Europe IPOs slump
The number of groups listing in
Europe has hit the lowest level
since the global financial crisis, as
an economic slowdown and the
pull of US listings bite.— PAGE 11
i GAM implores investors
The Swiss investment house has
again moved to ease fears over
the takeover offer from British
asset manager Liontrust that it
says is key to its survival.— PAGE 8
Datawatch
Barbie bounce
Highest grossing box office weekend,
US and Canada ($mn)
Marvel Star Wars Other Disney
Sony Barbie Oppenheimer
Cannon has set the start for May 2024, a Donald Trump Other 400
date between those sought by the DoJ on the campaign 350
300
and Trump’s legal team. The trial over trail. Over being 250
alleged payments to Daniels is slated to charged, he says 200
start in March 2024. he ‘never had so 150
According to the indictment, six co- much support 100
conspirators joined Trump’s “criminal on anything’ 50
Sue Ogrocki/AP 0
efforts” to overturn the results of the 2017 18 19 20 21 22 23
2020 polls. The unnamed individuals Source: Box Office Mojo
include attorneys, a DoJ official and a The opening weekend of ‘Barbie’ and
political consultant. ‘Oppenheimer’ reached fourth in the list
A further legal hurdle looms in Geor- of all-time box office records. This
gia, where a special grand jury is investi- represents the first time that head-to-
gating alleged interference by Trump in head movie releases have both grossed
more than $80mn on debut.
the 2020 vote. Any charges are expected
to be brought forward this summer.

Ministers cite inflation in fifth delay to

Tech dreams breaking up
amid slow rollout of fast 5G
Although Britain was one of the first
countries to launch 5G commercially, it
is now falling behind, dimming hopes
for a network capable of nurturing the
next Silicon Valley. Disruption caused
by the ban on kit from China’s Huawei
and poor investment by mobile phone
operators are to blame, analysts say.
One report put the UK 39th among 56
developed countries for 5G availability,
while another said its download speed
was 21st out of 25 advanced markets.
Risk to ambitions i PAGE 3
post-Brexit border checks on EU food
GEORGE PARKER AND PETER FOSTER
Post-Brexit border controls on animal
and plant products from the EU are set
to be delayed by ministers again, amid
fears that extra bureaucracy on
imported goods will fuel inflation.
The government is set to announce a
further postponement to the import
regime, which was set to start in Octo-
ber, so as not to add to price pressures
and to give companies and ports more
time to implement the rules.
The move comes as Bank of England
policymakers meet today to consider
more action on tackling high inflation.
There have been several delays to the
post-Brexit regime for goods entering
the UK. In contrast, British exports to
the EU are already subject to full checks.
Ministers announced as recently as
April that a “border target operating
model” would start to be rolled out from
October 31, with a full regime in force by
the following October.
But government insiders told the
Financial Times that while details of the
plan would be published “very soon”, its
implementation would be pushed back.
“The driving force behind this is the
need to bear down on inflation: that’s
why there will be a delay,” said one per-
son briefed on the plan. “There will be
additional costs at the border.”
Others said that businesses had to be
given sufficient time to adapt. “The
effort that business has made won’t be
put to waste,” said one official. “This will
happen but there will be a delay.”
A new timetable has not been signed
off but the start is expected to slip into
next year. The government said that
ministers were considering feedback
from “stakeholders” to ensure they had
enough time to prepare, adding that the
model “will be published shortly”.
In a briefing document last April the
government insisted — in bold text — on
its “firm intention” to press ahead with
the first phase of border controls in Oct-
ober this year after four separate delays.
Its original starting date was July 2021.
The food industry had warned that
plans to charge a flat-rate inspection fee
of up to £43 on each consignment of
food coming from the EU would drive
up prices, with the government estimat-
ing total extra costs of £420mn a year.
Shane Brennan, head of lobby group
the Cold Chain Federation, said delaying
beyond October was the “right thing to
do”, given inflationary pressures.
But Nick von Westenholz, at the Nat-
ional Farmers Union, said another delay
would exasperate many farmers facing
barriers to their exports to the EU.

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2 ★
Health diagnostics
NHS gives private companies larger role
Independently run centres
for checks and scans aim
to cut treatment backlog
SARAH NEVILLE AND LUCY FISHER
Private companies will be given a bigger
role in running and funding diagnostic
centres for the NHS as the government
seeks to enlist independent providers to
help clear record waiting lists for treat-
ment.
The decision to expand the role of the
private sector in centres that provide a
range of checks and scans is expected to
be announced tomorrow alongside pub-
lication of the final report of an “elective
recovery task force”. When Prime Min-
Risk register
Drone attacks,
AI and Russia
head list of
main threats
LUCY FISHER — WHITEHALL EDITOR
Artificial intelligence, drone attacks on
critical infrastructure and the prospect
of future disruption to energy supplies
by a hostile Russian regime are among
the key threats to the UK identified in a
government risk assessment.
The vulnerabilities were among 89
threats listed in the Cabinet Office’s
national risk register published today,
which included several publicly
acknowledged for the first time.
One of those making its first appear-
ance in the register, last published in
2020, was the threat Russia posed to gas
supplies to western Europe, after the
Kremlin triggered an energy crisis by its
full-scale invasion of Ukraine last year.
Another risk previously not listed was
the vulnerability of undersea telecom-
munications cables and the damage an
attack on them would cause, although
military chiefs have publicly warned of
the dangers in the past.
The “declassification” of information
about these risks follows a wider shift
towards transparency, including a more
open approach to divulging intelligence
on cyber attacks, in order to bolster the
UK’s resilience. “This is the most com-
prehensive risk assessment we’ve ever
published so that government and our
partners can put robust plans in place
and be ready for anything,” said deputy
prime minister Oliver Dowden.
The register lists artificial intelligence
as a distinct “chronic threat” for the first
time, saying it could cause an increase in
harmful mis- and disinformation and “if
handled improperly, reduce economic
competitiveness”.
Climate change, antimicrobial resist-
ance and serious organised crime were
identified as the other chronic threats.
The most severe threats defined as
having a “catastrophic” impact, include
a future pandemic, which was given a
“highly unlikely” rating of 5-25 per cent.
Other “catastrophic” events, includ-
ing large-scale chemical, biological,
radiological and nuclear attacks and the
failure of the national electricity trans-
mission system, were given a “remote”
1-5 per cent chance of happening.
Opinion page 21
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rights reserved.
ister Rishi Sunak established the task
force last December the government
said its recommendations would “help
unlock spare capacity in the independ-
ent sector to bust the Covid-19 backlogs
and reduce waiting times”.
The government has pledged to estab-
lished a total of 160 community diag-
nostic centres (CDCs) by March 2025
and so far there are 108, some run by the
NHS and some run in partnership with
private providers. Only a handful of
fully privately operated centres have
opened so far.
A principal benefit of an independ-
ently-run model is that the CDCs’ assets
are treated as “off balance sheet” and
are outside the health department’s
budget for buildings and equipment.
Big switch
Viewers turn
to digital TV
On the box: younger viewers like
to use apps for on-demand videos
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The NHS has a severe shortage of capital
with a maintenance backlog estimated
at more than £10bn.
CDCs are seen by both the govern-
ment and NHS leaders as one of their
more successful recent initiatives, and
are equally popular with the public and
health professionals. The first centres
were established in July 2021, to miti-
gate long treatment backlogs caused by
the Covid pandemic.
In June, the health department said
CDCs had carried out more than 4mn
checks, tests and scans for patients
across the country, “cutting waiting lists
and giving patients quicker access to
care”.
In February, Sunak visited a CDC in
Oldham, Greater Manchester, which
The proportion of people watching
traditional broadcast TV each week fell
by a record amount last year, and even
loyal older audiences are switching
more readily to digital services,
according to the media watchdog.
Weekly audience reach of broadcast
TV fell to 79 per cent in 2022 from
83 per cent in 2021, Ofcom said in its
2023 media nations report today.
That was down from 88 per cent in
2019, before the Covid-19 pandemic, in
an acceleration of the longer-term shift
away from “linear” TV viewing, where
people watch scheduled programmes
live on traditional channels.
The average time viewers spent
watching linear TV each day fell to
2 hours 38 minutes in 2022, more than
a tenth down on 2021, when viewing
was partly boosted by Covid curbs.
Average daily viewing among older
people, which had been stable before
the pandemic, fell at its fastest rate.
“Core” audiences aged over 65 fell
10 per cent year on year, down 6 per
cent on pre-pandemic levels.
More people, including older
viewers, are watching programmes via
General election
Lib Dems target south-west in push to gain more seats
ANNA GROSS
The Liberal Democrat party is stepping
up campaigning in more than a dozen
seats, predominantly in the south of
England, following recent by-election
wins as it starts to broaden its ambitions
ahead of the general election expected
next year.
Dave McCobb, the director of field
campaigns, presented a paper to mem-
bers on Tuesday night that identified
areas where support was growing, giv-
ing the party a good chance of pushing
out Conservatives at the next election.
Most of these constituencies are in the
party’s former heartland in the south-
west of England, including Taunton
Deane and West Dorset, as well as in
Surrey in the south-east and Stratford-
upon-Avon in the West Midlands.
“Many of these are seats that two
years ago would not have featured any-
where in a map of where we could beat
the Conservatives,” said a person
briefed on the meeting with McCobb.
“Some of them we wouldn’t even have
thought about a few months ago.”
The party, which received £1.3mn in
was developed in partnership with
Alliance Medical, which specialises in
medical imaging. The company has pro-
vided a range of diagnostic equipment
including a positron emission tomogra-
phy and computed tomography
(PET-CT) scanner, the first available to
patients in the area.
Alliance Medical is one of the biggest
private providers partnering with the
NHS in running CDCs. The other, diag-
nostics specialist InHealth Group, has
been working with the health service for
three decades.
Sunak said CDCs such as Oldham
were “making a major difference in cut-
ting waiting lists”, one of the “five priori-
ties” he has set for the government as he
prepares for a general election expected
digital streaming services rather than
solely broadcast TV. But even taking
account of this shift, the average time
spent watching TV and video content
across all devices in 2022 was four
hours 28 minutes per person per day,
about 12 per cent lower than in 2021.
Claire Enders of Enders Analysis, the
media research company, pointed to
the growing popularity of the YouTube
video platform and TikTok social
network among younger audiences,
with less interest across age groups in
news in particular compared with
during the pandemic.
It was also significant to see a
“massive long-term drop in shows”
that regularly attracted several million
viewers, she said. Analysts at Enders
expect viewing of linear broadcasting
to fall from two-thirds to less than half
of video viewing by 2028 as streaming
services such as Netflix advance.
Most watched TV programmes last
year were England’s quarterfinal
against France in the Fifa World Cup,
the platinum jubilee celebrations and
the Queen’s funeral. But the number of
programmes pulling in more than 4mn
donations in the first quarter of the year,
is targeting donors to build a war chest
for the south-west, which officials hope
will lead to a much better national per-
formance than in recent years.
The Lib Dems have suffered three
consecutive disappointments at general
elections since 2015, when they had just
eight MPs elected and were wiped out in
the south-west. They secured 11 seats
nationally in 2019, including holding the
one south-west seat they had regained
two years earlier.
The Lib Dems, which hope to over-
take the Scottish National party to
regain their position as the third-largest
party in the House of Commons, had
more than a dozen MPs in the south-
west of England at the 2005 election,
their most successful in modern history
when they won 62 seats in total.
“We’re looking to see how far we can
take back our former heartland,” Daisy
Cooper, deputy leader of the Lib Dems,
said, adding that it would be “foolhardy
to rule out the opportunity of looking at
other seats in the area” after securing a
big victory in the Somerton and Frome
by-election earlier this month and an
next year. Yesterday, the prime minister
acknowledged that NHS waiting lists in
England had increased since he took
office last October, but he blamed a
wave of industrial action in the health
service for the backlog, which he
acknowledged had risen to about 7.9mn
for routine hospital treatment.
“We were actually making progress,
we eliminated the number of two-year
waiters . . . we practically eliminated
the number of people waiting one and a
half years and we were making progress
on bringing the overall numbers down,”
he told LBC radio.
He added that strikes were the “sim-
ple” reason that waiting lists were rising,
adding “it’s not because we’re not
putting more money in”.
viewers has halved since 2014,
suggesting a big drop in “national
TV moments” around climactic
parts of soap operas, for example, as
well as lower audiences for evening
TV news bulletins.
With only 48 programmes
averaging more than 4mn TV
viewers on streaming platforms in
2022, Ofcom said its report
illustrated “just how fragmented the
viewing landscape has become”.
Two-thirds of households were
using a subscription streaming
service in the first quarter of 2023,
down from a peak of 68 per cent in
the first quarter of last year,
suggesting take-up has plateaued.
Younger viewers rely more on
digital apps for on-demand short-
form videos, rather than scheduling
time for TV programmes.
For the first time, 16- to 24-year-
olds watched less broadcast TV on
average than children aged four-15,
prioritising time on apps. The report
said teenage TikTok users spent
more than an hour a day on the
social network. Daniel Thomas
even larger, shock win in Tiverton and
Honiton in Devon last year.
Party leader Sir Ed Davey has pri-
vately urged activists to avoid height-
ened expectations following the two by-
election wins and focus its limited
resources on seats where it really stands
a chance of unseating the Conservatives.
The spectre still looms large of former
leader Jo Swinson’s claim that the Lib
Dems could win hundreds of seats in the
2019 election, before losing her own on
the night.
The party’s reputation was badly
Frome victory: Ed Davey and new
MP Sarah Dyke celebrate last month
Thursday 3 August 2023
Resolution framework
Green light
for regime
to manage
failure of big
insurers
IAN SMITH AND LAURA NOONAN
Ministers are pressing ahead with plans
to create a resolution regime to deal
with the failure of big insurance com-
panies, saying the “swift and decisive”
action to rescue Silicon Valley Bank’s
UK arm in March underlined the
importance of such arrangements.
The government said yesterday it would
legislate “when parliamentary time
allows” to give the Bank of England pow-
ers and flexibility to manage the demise
of a large insurer, mirroring the resolu-
tion regime for banks set up in 2009.
Following a public consultation on the
government’s plans, the Treasury said
the regime would provide the central
bank with “powers to take prompt
action to stabilise and manage an
insurer that is failing or likely to fail,
subject to appropriate safeguards”.
“In the banking sector, the swift and
decisive resolution of Silicon Valley
Bank UK . . . demonstrated how the
UK’s resolution framework enhances
UK financial stability,” it added.
HSBC bought the UK arm of the failed
Industry is still haunted by
the failure of Equitable
Life, which came close to
collapse two decades ago
technology focused lender in March for
a symbolic £1 after last-minute talks led
by Rishi Sunak and the BoE. The central
bank is reviewing its resolution regime
for smaller banks after the collapse of
California-based Silicon Valley Bank.
The Treasury said the proposed
regime would seek to preserve continu-
ity of cover for policyholders, avoid the
“significant value destruction” for the
sector of an insolvency process, and
support public confidence in insurers.
The Association of British Insurers
welcomed how the government’s plans
“focus on ensuring a level-playing field”
for insurers. The industry is still haun-
ted by the failure of Equitable Life,
which came close to collapse two decad-
es ago, with policyholders losing billions
of pounds and the government paying
more than £1bn in compensation.
Like the EU’s arrangements, which
were announced two years ago, the UK
plans allow for the writedown of cus-
tomer benefits, among other liabilities.
Such proposals have been controversial
with consumer groups.
But both the EU regime and the UK
plans include a “no creditor worse off”
safeguard, meaning that no customer
should be worse off than they would be
had the insurer become insolvent.
The UK plans also provide top-up
payments for customers protected by
the Financial Services Compensation
Scheme, which provides redress when
insurers fail in certain circumstances.
The Treasury said the public consul-
tation, issued in January, had received
“near unanimous support” from
respondents that the regime should
align with international standards.
The government said Lloyd’s of Lon-
don, the global insurance market place,
would not be under the regime, as “risks
Lloyd’s might pose as a systemic mar-
ketplace . . . ” are mitigated by alterna-
tive resolution arrangements.
damaged in the rural Brexit-voting con-
stituencies in the south-west in recent
elections because of its pro-EU stance,
but it has started to make inroads more
recently, presenting itself as the corner-
stone of an anti-Tory coalition.
In the Somerton and Frome by-elec-
tion, the party secured a majority of just
over 19,000. There are 15 Conservative
MPs in the south-west defending a
smaller majority, including Chelten-
ham, St Ives and Wells.
The Lib Dems are relying on a tacit
agreement with Labour that neither
party will fight too hard in seats that the
other is likely to win. Among the Lib
Dems’ top 30 target seats only one, Shef-
field Hallam in northern England, has
Labour as the main opposition.
“Whenever the Lib Dems have under-
performed it’s because they’ve spread
themselves too thin,” said Andrew Rus-
sell, professor of politics at Liverpool
university, noting that the party needed
volunteers as well as money to target
seats effectively.
He pointed out that a sensible strat-
egy for the party was to select discrete
areas and “precision-bomb” them.
Thursday 3 August 2023
Slow rollout of
5G seen as risk
to advanced
tech ambitions
Low investment and ban on Huawei kit blamed
for mediocre ranking among developed markets
ERI SUGIURA, DANIEL THOMAS
AND ALAN SMITH
The UK is in danger of becoming an also-
ran in the global race to roll out high-
speed fifth-generation mobile networks
capable of supporting government
efforts to create the next Silicon Valley,
say analysts and industry executives.
Despite being one of the first coun-
tries to start implementing 5G commer-
cially in 2019, the UK is now falling
behind because of limited investment
by mobile phone operators and disrup-
tion caused by the government’s ban on
kit from Huawei, the Chinese telecoms
equipment maker.
Ofcom, the telecoms regulator, said in
May that 5G mobile coverage from at
least one operator was available at
82 per cent of places where people live
and work, but the figure falls to 22 per
cent for areas covered by all providers.
5G availability, expressed as the per-
centage of time a mobile phone user is
connected to dedicated networks rather
than other wireless technologies, stands
at 10.1 per cent, placing the UK 39th
among 56 advanced and developing
markets, according to a report pub-
lished in June by OpenSignal, a research
company.
The UK’s 5G download speed ranked
it 21st out of 25 developed markets,
behind France, Germany and the Neth-
erlands, Ookla, a company that analyses
mobile networks, said a report in Febru-
ary. The result comes despite the UK
having the largest 5G-capable smart-
phone sales in Europe.
“The promise of true 5G is yet to be
realised,” said Paolo Pescatore, an ana-
lyst at PP Foresight, a research business.
“There’s been a lot of hype around 5G
with telcos having invested bil-
lions . . . and rolling out networks.
Arguably, the UK has lost its place to be
a 5G leader.”
“We were early adopters of 5G but
now we are falling behind,” said Andrea
Dona, Vodafone UK’s chief network
officer, adding that Britain had failed to
grasp the initiative despite past mis-
takes with the slow rollout of previous
wireless technologies.
The protracted expansion comes
despite evidence of clear economic ben-
efits and the government’s goal of hav-
ing high-speed mobile networks. 5G
could be worth as much as £173bn to the
economy over the next decade in im-
provements to productivity and the
development of connected cities, driv-
erless vehicles and other technologies,
according to Assembly Research, a tele-
coms consultancy.
5G can enable the systems in driver-
less cars to receive information and, for
example, ensure that they respond
within a fraction of a second to unex-
pected actions by pedestrians. 5G can
also help cities better manage energy
supply and become more sustainable.
The government said last year it had
met its 2027 goal to deliver a basic 5G
★ FINANCIAL TIMES
NATIONAL
Hold the line: signal that uses dedicated masts and
Londoners and radio spectrum but relies on 4G net-
visitors to the works for most of the population. Minis-
capital make ters have also set a target for all popu-
calls at Trafalgar lated areas to be covered by 5G net-
Square. Analysts works by 2030.
say users will Chancellor Jeremy Hunt used his
have to wait for Autumn Statement to highlight the
the full benefits importance of 5G, as he also stressed his
of 5G — Richard Baker/
In Pictures/Getty Images
priority of nurturing economic growth
through innovation.
“I want to combine our technology
and science brilliance with our formida-
ble financial services to turn Britain into
the world’s next Silicon Valley,” he said.
But Sylwia Kechiche, an analyst at
Ookla, said: “5G in the UK is in the lower
performance category, and the risk of
the UK falling behind can translate into
slower economic growth.”
Industry executives highlight the
Boris Johnson government’s move in
2020 to strip Huawei out of nascent 5G
networks on national security concerns
as a reason for the slow rollout.
“That absolutely put the brakes on
deployment for the operators,” said
Matthew Howett, chief executive of
Assembly Research.
There is also little sign of a public cla-
mour for 5G. One in six mobile users felt
the power of 5G had been overhyped,
and less than half said they had seen
noticeable speed or reliability improve-
ments since upgrading their device, a
survey in October last year by Uswitch,
the price comparison service, found.
The benefit of 5G is varied even within
the UK. The download speed uplift by
switching from 4G to 5G was marginal in
London compared with other cities,
according to a study by OpenSignal
released in March.
“The core concern from consumers in
terms of overhype is that disconnect
between what had been promised in
terms of revolutionary experiences and
what we’re actually able to do on our
devices,” Uswitch said.
Mobile operators said the investment
numbers for 5G did not add up yet. UK
operators will spend about £9bn by
2030 on 5G rollout, falling short of the
estimated £34bn needed to offer serv-
ices that rely on such networks, such as
driverless cars, the Digital Connectivity
Forum, an industry advisory group, said
in a report in September last year.
Vodafone and Three, which want to
merge their UK mobile operations, have
3
‘5G in the warned there will be even slower invest-
ment in 5G if competition authorities
UK is in the block their proposed deal. The merger
lower would reduce the number of UK net-
work operators from four to three: the
performance combined entity, plus EE and O2.
category, Which?, the consumer group, has voiced
concern that this could reduce choice
and the risk for consumers and raise prices.
of the UK Vodafone and Three have promised to
invest £11bn in the UK over 10 years to
falling create one of Europe’s most advanced
behind can 5G networks.
translate “This merger is all about the quality of
infrastructure in the UK,” said Robert
into slower Finnegan, chief executive of Three UK.
economic However, Pescatore challenged the
argument that the fate of the 5G rollout
growth’ was determined by the merger, saying
that operators were already years
behind schedule with proving the value
of high-speed networks.
Many industry figures said 5G had
been designed with future business uses
in mind. “Everybody in the industry in
this country is waiting for the right killer
application that’s going to help us get a
return on our investment,” said Jeanie
York, chief technology officer at Virgin
Media O2.
4 ★ FINANCIAL TIMES Thursday 3 August 2023

INTERNATIONAL

Single market strains Weapon supplies

EU subsidies rise for war and green reform
Companies hit by Ukraine
conflict and net zero push
gain billions from Brussels
IAN JOHNSTON AND JAVIER ESPINOZA
BRUSSELS
The European Commission has
approved €733bn in state support since
March 2022 for businesses affected by
the war in Ukraine and the green transi-
tion, an amount superseded in recent
years only by subsidies approved during
the Covid-19 pandemic.
Germany accounts for almost half of
total EU state aid funding approved
under a temporary crisis scheme intro-
duced in 2022 to shield economies from
the war in Ukraine and to support green
investments, according to commission
figures seen by the Financial Times. A
total of €90bn of the approved funding
was granted in 2022.
The subsidies are lower than the
record state support granted of almost
€900bn, out of more than €3tn in
approved Covid spending, in 2021. But
EU diplomats in smaller countries have
criticised the trend of continually relax-
ing state aid rules in emergencies, which
they say favours bigger economies that
can afford to offer such support to their
businesses.
“We are unhappy about it because we
see that the conditions for doing busi-
ness are widening again between mem-
ber states,” said one senior diplomat. “It
is due to exceptional circumstances, but
that excuse is beginning to be a bit too
Italy. Negative growth
easy to bring to the table.” Another dip-
lomat said the commission was resort-
ing to emergency measures too easily.
“They make up all these excuses to keep
relaxing rules,” they said.
The increase comes ahead of a review
‘We are unhappy because
we see conditions for
doing business are
widening again’
of the EU single market by former Ital-
ian prime minister Enrico Letta, which
is due to be completed in March next
year. While he would not “prejudge” the
findings of his report, Letta told the FT
he was “worried by the increase of state
aid that we are going through currently
because state aid is a fragmentation of
the single market”.
EU state aid expenditure has jumped
in recent years from €98.2bn in 2015 to
€334.54bn in 2021.
The commission has the power to
recover aid spent unlawfully if it consid-
ers it incompatible with the single mar-
ket. There was one such case in 2022,
compared with 19 in 2015.
Margrethe Vestager, the commis-
sioner in charge of EU competition pol-
icy, first relaxed state aid rules in 2020
to help sectors such as airlines and hos-
pitality hit by lockdowns during the
pandemic. A further so-called tempo-
rary crisis framework was adopted in
March 2022 to allow member states to
help companies affected by the war in
Ukraine and compensate those hit by
higher energy costs.
Vestager has since expanded and
extended the policy to the end of 2025 to
support investments towards the green
transition, approving 270 national
measures so far under the scheme.
France is the second-largest user of the
scheme, accounting for 23 per cent of
approved projects, followed by Italy
with 8 per cent.
Other EU legislation to support the
production of semiconductors, ammu-
nition and critical raw materials will
also facilitate more direct investment
from member states in their industries.
“Each instrument in itself has reasons
to be more flexible, but if you add it up,
the cumulative effect, it’s probably
going a bit too far,” a diplomat added.
Russia arms
self-defence
forces near
border with
Ukraine
ANASTASIA STOGNEI — RIGA
COURTNEY WEAVER — BERLIN
Local authorities in Russia have begun
distributing anti-drone guns and off-
road vehicles to civilian forces in the
south-west of the country for the first
time since the Ukraine war began.
Tass, the Russian state news agency,
reported yesterday that territorial self-
defence forces in the Belgorod region
that borders Ukraine had received the
weaponry, which also included
machineguns.
“These are necessary measures
against the attacks from the Ukrainian
territory,” Kremlin spokesman Dmitry
Peskov told reporters. He added that the

Stalling recovery takes wind out of Meloni’s sails
Weak data and decision to end
poverty relief scheme put
pressure on prime minister
AMY KAZMIN — LONDON
Giorgia Meloni was exulting just last
week that IMF forecasts showed Italy
growing faster than Germany and
France this year — proof, she said, of the
“effectiveness” of her rightwing coali-
tion government’s economic policies.
But Italy’s prime minister received a
rude shock on Monday after data
showed the post-coronavirus pandemic
economic rebound lost far more steam
than was expected.
Italy’s economy shrank by 0.3 per
cent in the second quarter of 2023, far
worse than the zero growth forecast by
most analysts. The eurozone as a whole
registered a 0.3 per cent expansion.
The reading highlighted the chal-
lenges facing Meloni’s government,
which has been campaigning on high
consumer prices as it strives to keep
growth on track and put Italy’s heavy
debts on a more sustainable footing.
“This is a nasty surprise for Meloni,”
said Francesco Galietti, founder of Pol-
icy Sonar, a political risk consultancy in
Rome. “She was focusing so much on
inflation she probably did not expect
growth to lose steam so quickly.”
Meloni’s coalition is already facing a
growing political backlash as it starts to
phase out the “citizen’s income” poverty
relief scheme that the populist Five Star
Movement launched in 2019.
Rome has decided to impose stricter
eligibility criteria amid employers’ com-
plaints that the programme, which last
year benefited an estimated 1.7mn
households, discouraged people from
taking up jobs and created artificial
labour shortages.
In recent days about 160,000 people
whom the government considers
able-bodied and potentially employ-
able received text messages that
their benefits were being cut, lead-
ing to protests in Naples and else-
where.
Opposition parties say the
growth figure raises serious ques-
tions about Italy’s economic direc-
tion. “These are the results of the bla-
tant inability of this government to
manage economic processes and
Out of pocket: encourage investment,” said Ubaldo
Italians with Pagano, a lawmaker from the opposi-
signs reading tion Democratic party.
‘end the war on The finance ministry blamed the con-
the poor’ protest traction on global factors, including the
in Rome. Below, European Central Bank’s repeated
Giorgia Meloni interest rate rises.
Simona Granati/Corbis/Getty Filippo Taddei, senior European
economist at Goldman Sachs, said the
disappointing growth figures were part
of a malaise affecting European manu-
facturing, also affecting Germany and
Austria, amid weak global demand.
“[The Italian figure] was a downside
surprise and below our expectations
but the data is clearly saying that
manufacturing is facing extended
weakness,” Taddei said.
It also reflects conditions spe-
cific to Italy, particularly the Mel-
oni government’s decision to put
the brakes on its “Superbonus”
scheme. The programme, which
had offered Italians a 110 per cent
tax credit for energy efficiency-en-
hancing home improvements,
fuelled a frenzied post-pandemic
construction boom as people made
costly home improvements at public
expense.
Rome announced big changes to the
scheme in February. Italian construc-
tion activity in May was down 3.8 per
cent from first-quarter levels. “It was
fiscally prudent for the Meloni govern-
ment to curb the Superbonus last Febru-
ary,” Taddei said. “The transition is not
easy but it was well received by market
participants and understandably so.”
Angelica Donati, president of the
youth wing of the national builders’
association, said the Superbonus had
revved up gross domestic product
growth and “it was impossible for the
fact that it was essentially stopped cold
in its tracks not to have a negative reper-
cussion on the economy”.
At the same time, investments backed
by Italy’s €191.5bn EU-funded Covid
recovery scheme have progressed far
more slowly than expected. Analysts
still expect the economy to regain
momentum, enabling Italy to reach the
finance ministry’s 1 per cent GDP
‘She was growth target for 2023. Construction
may remain weak, said Taddei, but
focusing so manufacturers’ performance would
much on “pick up”.
However, there were no signs of
inflation improvement at the start of the third
she quarter. S&P Global’s monthly survey of
purchasing managers found “output
probably and new orders both fell at historically
did not steep rates” in July, and estimated pro-
duction had fallen the most since the
expect pandemic hit more than three years ago.
growth to “Slowing global demand, restrictive
credit conditions and the impact of
lose steam tightening monetary policy will con-
so quickly’ tinue to play a role in such [manufactur-
ing sector] weakness,” said Loredana
Maria Federico, an economist at
UniCredit, though she was confident
tourism would help growth rebound.
Lorenzo Codogno, a former senior
Treasury official, expected households
to spend more as inflation fell. “There is
so much stimulus in the pipeline,” he
added.
Additional reporting by Martin Arnold in
Frankfurt and Giuliana Ricozzi in Rome
Kremlin did not fear that the weapons
could fall “into the wrong hands”.
“All control mechanisms must be
carefully implemented. There is no
doubt about that,” Peskov said.
The decision to arm the self-defence
forces marks a new step in Russia’s rela-
tionship with private militias, less than
two months after Wagner mercenary
boss Yevgeny Prigozhin used his own
private army in an attempted coup.
Local leaders in the regions that bor-
der Ukraine have called on Moscow to
ease rules that restrict civilian forces,
many of which have sprung up since the
war began, from holding arms. How-
ever, officially a ban on citizens’ right to
bear arms for reasons other than hunt-
ing remains in place.
Since Russia’s invasion of Ukraine, the
Belgorod and Kursk regions have been
regularly shelled and stormed by pro-
Kyiv sabotage groups and have felt the
consequences of President Vladimir
Putin’s war in a way most of the rest of
the country has not.
Locals began forming their own self-
defence groups late last year, according
to Belgorod’s governor, Vyacheslav
Gladkov, who said that by May at least
3,000 people had joined their ranks.
In April, Andrei Turchak, a Russian
senator who chairs a working group in
the Russian parliament on questions
related to Russia’s military operation,
told Putin that lawmakers proposed to
“eliminate” the ban on arming the
groups. In July, Turchak claimed the
issue was “partly solved,” without men-
tioning any details.
A video on local Telegram channels
from what appears to be a training base
shows a group of young men dressed in
khaki approaching a table with weapons
and leaving their signatures on an A4
piece of paper in exchange for Saiga
semi-automatic rifles.
In the neighbouring Kursk region, the
voluntary people’s guard received a
batch of weapons containing 300 pieces
of military equipment, its governor,
Roman Starovoit, wrote on his Telegram
channel yesterday, adding contact
details for those who wanted to join.
The decision to distribute weapons to
civilians comes after Russian state rep-
resentatives and outlets criticised Kyiv
for taking similar steps in Ukraine last
year.
“The distribution of weapons is not
the end. What comes next? Will prison-
ers be released from jail so that it just
ends in a big massacre?” Maria Zakha-
rova, spokeswoman for the Russian
foreign ministry, said on Russian state
TV in February 2022.

Islamic republic

Iranian leaders lean on businesses to enforce hijab regime

NAJMEH BOZORGMEHR — TEHRAN
The photograph of a group of young
workers posing as they bid farewell to a
colleague at Iran’s biggest online
retailer could have been taken at a
company anywhere in the world.
But in the Islamic republic, the picture,
which included women not covering
their heads with the compulsory hijab,
had dramatic consequences. Days after
it went on social media, the authorities
dispatched workers to Digikala’s head-
quarters in Tehran to seal the building
and temporarily close the office.
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said a businessman whose shop recently
faced closure on the same issue.
For months after anti-regime protests
last year, the authorities largely turned a
blind eye to the growing number of
women discarding head coverings in
defiance of the Islamic dress codes. But
in recent weeks the regime has stepped
up efforts to curb the trend, with busi-
nesses finding themselves the target.
Over the weekend, the authorities
shut the Tehran office of online insurer
Azki after a photo of female employees
without the hijab went on social media.
Some analysts say the moves are sym-
bolic; an apparent effort to appease con-
servatives that temporarily hinders a
company’s operations. Digikala dec-
lined to comment but had said its online
business was operating as usual.
Others view the moves as another
indictment of the myriad struggles
faced by businesses and the regime’s
resistance to easing social restrictions.
Siamak Ghassemi, a consultant, said
the move against Digikala was another
damaging blow to business. “Shall we
extend the [hijab] issue to businesses,
even if temporary?” he wrote on Insta-
gram. “Can anyone be hopeful of the
future when this happens?”
Saeed Laylaz, an Iranian analyst, said
the authorities seemed to believe such
muscle-flexing would help curb any
new social unrest ahead of the first anni-
versary of the death in police custody of
Mahsa Amini, which triggered last
year’s protests.
“For the Islamic republic, the hijab is
more a security issue than a cultural or
ideological issue,” said Laylaz. “If the
political establishment passes through
the anniversary in September . . . with
no major unrest, the regime will not face
any big security challenge for months to
come.”
‘The designs encouraged
the use of drugs and
alcohol or carried
satanic images’
Amini, 22, died last September after
being arrested by Iran’s morality police,
who accused her of not dressing appro-
priately. In response, tens of thousands
of women took to the streets in one of
the most widespread and sustained anti-
regime protests in decades.
The hijab became a central theme of
the protests, with women taking off and
burning veils to express their defiance.
The unrest dissipated earlier in the
year, and the morality police were with-
drawn in an apparent concession to ease
social tension. But last month, the
regime announced patrols to halt the
anti-hijab trend would resume.
Davoud Moazami Goudarz, Tehran’s
cyber police chief, said last month that
12 people had been arrested for selling
“insulting and unconventional dresses”
online. He said four clothes makers in
Tehran’s traditional grand bazaar had
been sealed off. “The designs encour-
aged the use of drugs and alcohol or car-
ried satanic images,” Goudarz said.
Mohammad Khatami, Iran’s former
reformist president, said on Sunday that
the compulsory hijab had turned into a
“crisis” for the establishment and
warned that such “inefficient” and
“destructive” policies would not work.
A businesswoman whose shop was
recently closed temporarily hinted at
the dilemma companies face. She
pointed out that she could not stop
female customers entering her premises
without the hijab or convince authori-
ties that temporary closures damaged
the business environment.
“We really feel stuck,” she said.
Thursday 3 August 2023
Africa bloc puts
reputation on
line with Niger
coup response
Rare threat of military action viewed as
‘make or break moment’ for Ecowas
AANU ADEOYE — LAGOS
The west African leaders at an emer-
gency summit last weekend amid the
unfolding coup in Niger weighed their
options on how to respond.
Condemn the plotters, impose sanc-
tions, recall ambassadors and suspend
the country from their Economic Com-
munity of West African States? All were
on the table. Yet the Ecowas communi-
qué went much further.
If the demand that the coup leaders
cede power was “not met within one
week, we will take all measures neces-
sary to restore constitutional order”, it
warned on Sunday. “Such measures
may include the use of force.”
A community mostly concerned with
free movement of goods and people
does not usually issue such military
threats. But having faced criticism for its
failure to take a strong line with previ-
ous west African putsches, Ecowas, now
led by heavyweight Nigeria, was eyeing
a different approach, analysts claimed.
“After tough tactics confronting the
‘Ecowas is now reverting
to the principle of
taking a really tough
approach’
Mali junta didn’t work, Ecowas played it
softly with Burkina Faso and Guinea
after the coups there and that was no
more effective and those juntas were
able to become entrenched,” said Paul
Melly, a Sahel expert at the Chatham
House think-tank.
“Ecowas is now reverting to the prin-
ciple of a really tough approach with a
difference that Nigeria’s new president
is a much more vocally proactive figure
on this issue,” he said, referring to Bola
Tinubu, who became Ecowas chair in
July after becoming Nigeria’s president.
Afolabi Adekaiyaoja, an analyst at the
Centre for Democracy and Develop-
ment think-tank, said the coup was a
“make or break moment for Ecowas and
its ability to restrict unconstitutional
transfers of power. Tinubu needs to be
seen as the man who brought back
democracy in Niger. It would augur well
if Nigeria is seen as the strong authority
in the region.”
A senior member of Tinubu’s party
said the new Nigerian president had the
chance to revive the muscular foreign
policy he said had been lacking since
former president Olusegun Obasanjo
left office in 2007.
The coup in Niger last week toppled
the democratically elected, pro-western
president Mohamed Bazoum and
installed a military junta led by Omar
Tchiani, who ran the presidential guard.
Bazoum, who allowed US and French
Ukraine
Russia drone strike on grain
silos stokes food supply fears
CHRISTOPHER MILLER — KYIV
WILLIAM LANGLEY — HONG KONG
Russia attacked targets across Ukraine
with drones before sunrise yesterday,
hitting a critical river port facility and a
grain silo in the southern Odesa region
and raising further concerns over glo-
bal food supplies.
Ukraine’s air defence forces “worked
nonstop for almost three hours” to pro-
tect the Odesa region, the country’s
Operational Command South wrote on
Telegram. The region’s governor, Oleh
Kiper, said fires had broken out at the
port and emergency workers were rush-
ing to put them out.
Videos and photos posted by Odesa
authorities and local media showed
flames and extensive damage to the port
of Izmail, which lies on the Danube river
across from Romania, a Nato member
and EU country.
“Russian terrorists again attacked
ports, grain and global food security.
The world must respond,” Ukraine pres-
ident Volodymyr Zelenskyy said. There
were no casualties, he said, but the
drones caused “significant damage”.
Ukraine’s air force had earlier said
Iranian-supplied Shahed drones were
seen heading towards Izmail, which,
★ FINANCIAL TIMES 5
INTERNATIONAL
forces to use Niger as bases from which
to conduct anti-terror operations across
the region, is under house arrest.
There are divisions in west Africa over
how to handle Niger despite the strong
Ecowas declaration. Burkina Faso and
Mali, suspended members whose lead-
ers came to power via coups, said they
would consider military action in Niger
a “declaration of war” while the junta in
Guinea called the sanctions on Niger
“illegitimate and inhumane”.
Yet Nigeria wields outsized influence
among the west African bloc. It accounts
for 63 per cent of its economic output, Hardline reaction: Nigeria president Bola Tinubu, second right front, with Ecowas members in Abuja on Sunday — Chinedu Asadu/AP
according to the Ecowas Bank for
Investment and Development, more
than the other 14 nations combined.
It also has the largest army in the
region, with 223,000 soldiers and US,
Chinese and German-made fighter jets.
A Niger intervention would heavily rely
on Abuja’s involvement.
Western powers and other African
countries such as Algeria have con-
demned the Niger coup, but none has
said if it backs military intervention.
One analyst said former colonial
power France would not oppose an Eco-
was intervention, while being extremely
wary of direct action. “France won’t
want to be even suspected of being
involved,” said the analyst. Paris on Sun-
day welcomed the Ecowas declaration
and called for the “return to the consti-
tutional order in Niger” under Bazoum.
Diplomacy remains Ecowas’s first
choice to mediate, according to officials.
Ecowas defence chiefs began a two-day
meeting in the Nigerian capital, Abuja,
yesterday as a delegation from the
regional bloc travelled to Niamey to
mediate. This week, Chad president
Mahamat Idriss Déby Itno, met the
putschists and held talks with Bazoum.
But Déby makes for an awkward
interlocutor, since he is essentially a
coup leader who took over power when
his father died.
But Ecowas might have backed itself
into a corner by putting a short timeline
before threatening military options. Yet
such a threat has worked before, nota-
bly by convincing long-serving Gam-
bian dictator Yahya Jammeh to go into
exile in 2017 after he initially refused to
cede power following an election loss.
Others point out that Niger is differ-
ent. Ulf Laessing, director of the Sahel
programme at the Konrad Adenauer
Foundation, questioned the support for
the deposed regime in the military.
Another analyst in Niger said of any
possible intervention: “If there’s any-
thing that would destroy popular sup-
port for Bazoum, it would be that.”
Further, the junta’s Colonel Amadou
Abdramane warned: “We remind Eco-
was, or any other adventurer, of our det-
ermination to defend our homeland.”
See Lex
along with the nearby port of Reni, has
become more important after attacks
on the Black Sea and Sea of Azov ports.
Russia has targeted ports in the Odesa
region since backing out of the UN-
brokered Black Sea Initiative, which
allowed Ukraine to export its grain.
“When civilian ports are targeted, when
terrorists deliberately destroy even ele-
vators, this is a threat to everyone on all
continents,” Zelenskyy said yesterday.
“Russia can and must be stopped.”
More than 10 drones targeting Kyiv
were downed, according to the military.
The Russian attack on Ukraine’s capital
followed drone attacks on Moscow on
Sunday and Tuesday. Kyiv did not take
responsibility, in line with its policy of
neither confirming nor denying strikes
on Russian territory. But the Kremlin
blamed Ukraine for the attacks, which
targeted a skyscraper housing several
government ministries.
The impact of Russia’s latest assault
on Ukrainian port and grain facilities
was clear on global markets. Wheat
traded in Chicago jumped 4 per cent
yesterday amid heightened concerns
over global food supplies. Maize prices
climbed more than 2 per cent, while
soyabean oil prices rose 0.3 per cent.
See Lex
6 ★
Trump prosecutor enters uncharted
legal territory with election charges
Smith appears to have obtained new evidence about 2020 vote but case is not cut and dried
STEFANIA PALMA — WASHINGTON
JOE MILLER — NEW YORK
With his second criminal case against
Donald Trump, Jack Smith has taken his
biggest swing yet. In doing so, the prose-
cutor appointed to handle investiga-
tions into the former US president is
entering uncharted legal territory.
The scope of the charges brought by
Smith’s team could not be broader, in
effect alleging an all-out assault on the
peaceful transition of power that is a
bedrock of US democracy.
That might make it the most serious
legal threat yet for Trump, a frontrun-
ner for the 2024 Republican presiden-
tial nomination already under indict-
ment in two other criminal cases. But
unlike the other case Smith’s team has
brought, over the mishandling of classi-
fied documents at the former presi-
dent’s Mar-a-Lago estate in Florida, it is
not necessarily cut and dried.
Among other allegations, Trump is
accused of perpetrating a conspiracy to
threaten individual rights, based on law
adopted in 1870 to thwart Ku Klux Klan
attempts to intimidate voters. He has
also been charged with conspiracy to
defraud the US, a count normally
reserved for financial malfeasance.
“This is going to be a much more
legally complicated case [for prosecu-
tors] than the Mar-a-Lago one,” said
Joseph Moreno, a former national secu-
rity prosecutor at the Department of
Justice who cited a “very unusual set of
facts” and a “novel application of cer-
tain broad laws”.
Much of the indictment builds on the
work of a bipartisan congressional
committee that heard hours of live testi-
mony and read hundreds of pages of evi-
dence about the events between the
presidential vote in November 2020
and January 6 2021, when Trump sup-
porters stormed the US Capitol.
However, Smith’s team also appears
to have obtained new evidence during
the grand jury investigation that culmi-
nated in Tuesday’s charges. This
included contemporaneous notes taken
by the then vice-president Mike Pence
from a meeting on January 4, during
which Trump allegedly made claims of
election fraud such as “bottom line —
[we] won every state by 100,000s of
votes”.
Shortly after the indictment was
unsealed, Trump lawyer John Lauro fol-
lowed a familiar script for the former
president’s defenders, claiming “politi-
cal speech now has been criminalised”
by President Joe Biden’s administration.
“I would like them to try to prove
beyond a reasonable doubt that Donald
Trump believed these allegations [of
election fraud] were false,” he added.
To some legal experts, building a
more challenging case appeared delib-
erate. “The indictment reflects a con-
scious choice to bring the more difficult
charges . . . [They] really go to the heart
of why it is justified to bring a prosecu-
tion against the former president,” said
Aziz Huq, professor at the University of
Chicago Law School.
Temidayo Aganga-Williams, a former
federal prosecutor, said prosecutors
could have considered bringing even
more charges, such as seditious conspir-
acy or incitement of an insurrection,
which some Democratic activists hoped
might have led to Trump being con-
stitutionally barred from standing
for office.
Instead, Smith’s team had
“gone for an indictment that
is thorough and precise”,
added Aganga-Williams,
who served as senior
investigative counsel for
India violence
New Delhi business hub hit by sectarian riots Singapore PM defends governance after scandals
JOHN REED AND JYOTSNA SINGH
NEW DELHI
Indian authorities moved to restore
order after deadly sectarian violence
this week reached the outskirts of New
Delhi’s premier business hub, forcing
businesses to put staff on alert and rais-
ing fears of further unrest ahead of
national elections next year.
Gurugram, located west of Delhi in
India’s Haryana state, is one of the capi-
tal’s biggest satellite cities and houses
offices for leading domestic and foreign
companies including Google, Meta and
Hyundai. Nicknamed “Millennium
City”, the area, previously named Gur-
gaon, is also home to some of the coun-
try’s priciest apartments and villas.
Violence broke out on Monday in
Nuh, a small city south of Gurugram,
where a Hindu religious procession
passed through a Muslim-dominated
Investigation: the House committee investigating the
Jack Smith talks January 6 attack.
to the media on Although the 45-page indictment
Tuesday after contains detailed accounts of Trump
the Department and his team’s alleged attempts to over-
of Justice’s turn election results in multiple states
indictment of including Arizona and Georgia, just 11
Donald Trump, pages are devoted to the events that
below took place on January 6. “I think what
Michael Reynolds/EPA/
Shutterstock
they’re trying to get at is that President
Trump’s crime here began on election
night, and it did not begin on January 6,”
said Aganga-Williams.
Ex-president sees gains from indictments
Trump is casting himself as
victim of political persecution
by corrupt judicial system
JAMES POLITI AND LAUREN FEDOR
WASHINGTON
Even as criminal proceedings against
him pile up, consuming his bid for a new
term as president next year, Donald
Trump is betting he can use them to his
political benefit, at least in the race for
the Republican nomination.
Trump has placed his defence against
federal and state prosecutors at the
heart of his campaign ever since he
became the first former president to
face criminal charges
at any level this
year.
He has repeat-
edly cast himself as a
victim of political
persecution by a cor-
rupt judicial system
taking orders from the
Biden administration,
most recently on Tuesday
when his campaign said
the latest indictment was
reminiscent of Nazi Ger-
many or the Soviet
neighbourhood. Clashes spread to
nearby districts, including Gurugram,
where a mob set fire to a mosque and,
according to local media, killed its dep-
uty imam.
Rioters also torched shops in a mostly
Muslim working-class part of the city.
Manohar Lal Khattar, chief minister of
Haryana, said yesterday that six people,
including two police officers, had been
killed.
“Bombay is the financial centre, but
as far as many Indian corporates go,
Gurgaon is the centre,” said Shumita
Deveshwar, chief India economist at
GlobalData TS Lombard, who lives and
works in the city. “To see communal vio-
lence happening in an area that’s 15 to
30 minutes away from the business dis-
trict is disconcerting.”
Authorities imposed a temporary
internet blackout and curfew in parts of
Haryana on Monday and arrested more
FINANCIAL TIMES
INTERNATIONAL
Smith’s team detailed the events ‘What
alleged to have occurred in Georgia at
great length, including Trump’s instruc- they’re
tion to the Georgia secretary of state, trying to get
Brad Raffensperger, and his counsel to
“find” 11,780 votes, threatening crimi- at is that
nal prosecution if they failed to comply. Trump’s
Those same events are the subject of a
second grand jury investigation taking crime began
place in Fulton County, Georgia, where a on election
charging decision is expected.
Despite extensive evidence produced
night, not
by the House committee and grand jury, January 6’
Campaign. Court troubles
Union. Trump has also used the indict- match-up against President Joe Biden,
ments to raise cash for his campaign and Trump is trailing by less than 1 percent-
pay for legal fees, including for his age point, according to the Realclearpol-
defence against state-level charges that itics.com polling average.
he falsified business documents, “They thought they were going to
brought by Manhattan district attorney indict him with Jack Smith, and he was
Alvin Bragg, and federal charges going to blow up. Or they thought [with]
brought in Florida by special counsel the Alvin Bragg indictment . . . every-
Jack Smith that he mishandled classi- thing was going to blow up,” said Jim
fied documents. McLaughlin, Trump’s pollster. “That
On Tuesday evening, Trump’s website didn’t happen. In a lot of ways, it back-
was quickly updated with a request for fired.”
more money to keep fighting attempts to The crimes allegedly committed by
“destroy our movement with YET Trump in previous indictments were
ANOTHER sham indictment”. already serious but Tuesday’s allega-
As the legal challenges have mounted, tions added a layer of legal and political
Trump’s base of support within the peril for him. He was accused of
Republican party has given him the attempting to strike at the heart of US
benefit of the doubt, remaining largely democracy in his effort to stop the certi-
loyal to him despite the seriousness of fication of the 2020 election result.
his alleged crimes. Trump’s legal troubles connected to
“Every time Trump has legal trouble, the election result may also be com-
his numbers seem to go up,” said Frank pounded by state-level charges
Luntz, the veteran Republican pollster. expected later this month in Georgia
“The truth is, he’s running a masterful over his effort to change the outcome of
campaign using dislike and distrust of the presidential contest there.
the government and his critics to propel But even so, leading Republican
him forward.” rivals, including DeSantis, have contin-
Trump still has a commanding lead in ued to shy away from criticising Trump
national polls of Republican 2024 vot- for his conduct after his election defeat,
ers, far eclipsing the backing for Florida and responded only in general terms to
governor Ron DeSantis, his closest rival. the latest indictment. Other contenders
And in a hypothetical general election for the nomination, however, such as
City-state
than 100 people, and by yesterday after- MERCEDES RUEHL — SINGAPORE
noon the clashes appeared to have sub-
Singapore’s prime minister has
sided. Some companies advised staff to
defended its reputation for clean gov-
stay at home and shops remained shut.
ernance after a corruption investiga-
Control Risks, a consultancy, said
tion and an “inappropriate” parlia-
businesses could experience disruption
mentary relationship tarnished the
from internet shutdowns and curfews.
city-state’s image just as it prepares for
“Company employees are the ones argu-
a leadership transition.
ably most exposed to personal safety
risks, particularly on their commutes, Lee Hsien Loong addressed Singapore’s
and could be targeted based on their vis- episodes of rare political drama in par-
ible identification with a particular liament yesterday after they made
community,” it said. international headlines.
“Some companies have therefore In the most serious case, transport
asked employees to work at home.” minister S Iswaran was arrested last
Google declined to comment. Meta month as part of a high-profile corrup-
did not immediately respond to a tion investigation that also ensnared bil-
request for comment. lionaire Ong Beng Seng. Both men, who
Communal tensions have been esca- were key figures in Singapore’s success-
lating before national elections next ful pitch to be part of the Formula One
year in which Prime Minister Narendra circuit, have been released on bail.
Modi’s Hindu nationalist Bharatiya Neither Ong nor Iswaran have com-
Janata party is seeking a third term. mented publicly on their arrests. Hotel
prosecuting January 6-related cases has
not always been easy.
Meanwhile, prosecutors must show
Trump knew his claims he had won the
election were false, which could be hard
to prove, Moreno said.
“It is not that the prosecutors have to
show a reasonable person knew that
they lost . . . they have to show the
defendant knew, and Donald Trump is a
strange guy.”
See The FT View
Gideon Rachman see Opinion
Mike Pence and Chris Christie, have
been more critical.
But while Trump has not suffered
much politically from the criminal
indictments, they could still strain his
candidacy, especially if he faces trials in
several jurisdictions next year.
He has had to devote a growing
amount of time and energy to his own
legal defence while spending millions of
dollars of funds that could otherwise be
used to promote his candidacy.
Florida Republican strategist Ford
O’Connell said: “Publicly [the other
2024 candidates] are out there defend-
ing him. Privately they have their fin-
gers crossed hoping that it forces him to
collapse and they get to sweep in.”
Such hopes have repeatedly been mis-
placed. But many Democrats believe
Trump’s legal problems will alienate
independent and swing voters in a gen-
eral election, after they rejected his pre-
ferred candidates in November’s mid-
term elections. They see Tuesday’s
indictment as overdue accountability
for his attempt to overturn the election.
“Our founders made clear that, in the
United States of America, no one is
above the law — not even the former
president of the United States,” said
Nancy Pelosi, the former House
Speaker, after Tuesday’s indictment.
Properties Limited, of which Ong is
managing director, said in July he had
not been charged with any offence and
was giving the Corrupt Practices Investi-
gation Bureau details on his dealings
with the minister.
In another high-profile case, the
Speaker of Singapore’s parliament and a
fellow member of the ruling People’s
Action party quit last month after reve-
lations that they had had an affair.
“With the investigation into minister
Iswaran and the resignations of the
house Speaker and an MP, the PAP has
taken a hit,” Lee said.
Asked about the independence of the
anti-corruption bureau, which sought
the premier’s permission before launch-
ing its probe into Iswaran, Lee said the
body had to report to somebody. “It
can’t report to God,” he pointed out.
Lee in May asked the bureau to con-
duct a review after questions were asked
Thursday 3 August 2023
Congress
White House
seeks Taiwan
arms funding
via budget
for Ukraine
DEMETRI SEVASTOPULO AND
FELICIA SCHWARTZ — WASHINGTON
The White House will ask Congress to
fund arms for Taiwan as part of a sup-
plemental budget request for Ukraine,
in an effort to speed up the supply of
weapons to the country amid the rising
threat from China.
The Office of Management and Budget
will include funding for Taiwan in the
request as part of an effort to accelerate
the provision of weapons, according to
two people familiar with the plan.
If passed by Congress, Taiwan would
get arms through a US taxpayer-funded
system known as “foreign military
financing” for the first time. The White
House is expected to submit the request
this month.
The request comes on the heels of a
White House announcement that the
US would supply Taiwan with $345mn
in weapons from stockpiles for the
first time, under a system known as
“presidential drawdown authority”
(PDA) that has been used to send weap-
ons to Ukraine.
The decision to include Taiwan fund-
ing in the supplemental budget and use
PDA to supply weapons underscores a
rising urgency to help Taipei. Critics of
the current Taiwan strategy have urged
Washington to supply weapons more
quickly as China increases military
activity around the country.
“This would be a monumental step
that signals how far the US government
‘The supplemental budget
vote will be the first test
of support for Kyiv
in the current Congress’
is now willing to go to accelerate deter-
rence across the Taiwan Strait,” said
Eric Sayers, managing director at Bea-
con Global Strategies, a Washington
consultancy.
“For decades we have chosen to only
sell Taiwan military equipment but
now . . . we are seeing both the tools of
drawdown authority and foreign mili-
tary financing be deployed, just as they
have been so successful in Ukraine,”
Sayers added.
According to the US-Taiwan Business
Council, a pro-Taiwan lobby group, Tai-
pei is still awaiting delivery of $23bn
worth of weapon sales, including har-
poon missiles and surveillance drones,
that were approved by successive US
administrations. Some sales were
announced more than five years ago.
US military commanders have fre-
quently expressed frustration with the
slow transfer of weapons to Taiwan to
enhance its security.
The White House declined to com-
ment or reveal details about how much
money would be requested for Taiwan.
The eventual congressional vote on
the supplemental budget — which will
focus predominantly on new military
assistance for Ukraine — will be the first
test of support for Kyiv in the current
Congress.
A group of right-leaning House
Republicans recently sought and failed
to use the annual defence bill to restrict
US support for Ukraine, a sign that even
a small group of lawmakers could
imperil or delay future assistance.
Packaging support for Taiwan, which
has very strong bipartisan support in
Congress, into the Ukraine budget may
help the administration and pro-Kyiv
Republicans win over members who
might otherwise be opposed.
in parliament and on social media about
the government’s renting of colonial-era
homes to two of his cabinet ministers.
For Singapore, which has traded on its
reputation as a clean, stable place to do
business, the episodes are rare public
examples of alleged corruption and
unsavoury behaviour within the PAP.
The ruling party has governed uninter-
rupted since independence in 1965 and
Singapore’s politicians are among the
world’s most highly paid to deter graft.
The scandals also come as Lee, son of
the founder of modern Singapore, Lee
Kuan Yew, prepares to hand over power
to his deputy, Lawrence Wong, in what
will be only the fourth change of leader-
ship in its history. Lee, who has not said
when he will step down, said: “The way
we have handled these incidents shows
how seriously the PAP takes our respon-
sibility of governing Singapore, and
being accountable.”
Thursday 3 August 2023 ★ FINANCIAL TIMES 7

Peripheral vision Luxshare has emerged as a competitor to Foxconn, earning Apple’s mandate for making headsets y PAGE 9

Meta’s moderation comes under fire China lines up

3 Rights group’s report scathing 3 Claims of under-resourcing 3 Facebook parent plans reforms
HANNAH MURPHY — SAN FRANCISCO
Facebook parent Meta has been accused
of “neglecting” an initiative designed to
remove harmful content and misinfor-
mation online, in an escalating dispute
about how the tech giant works with
human rights groups to moderate its
platforms.
Researchers at the media non-profit
group Internews released a scathing
report yesterday into the social media’s
company’s Trusted Partner Program —
a longstanding initiative whereby 645
global human rights and civil society
groups are able to report damaging
material such as hate speech or threats
to activists and journalists.
Internews argued that recent lay-offs
at the company left the initiative
High-margin
extras help lift
“under-resourced and understaffed,”
leading to “operational failures”. “This
lack of resourcing undermines a critical
programme focused on user safety and
platform integrity,” said Rafiq Cope-
land, platform accountability adviser at
Internews and the report’s author. “It is
our hope that this programme and oth-
ers like it can be reinvigorated. People’s
lives depend on it.”
Meta has undergone a significant
restructuring in recent months, includ-
ing a flattening of the management
structure and job cuts affecting about
20,000 staff, against a backdrop of
tough macroeconomic conditions and
increased demands from investors.
Dubbed the “year of efficiency”, the
cuts have raised fears that content mod-
eration in particular could be endan-
gered as financial resources have
focused on areas such as new artificial
intelligence products, for example.
Among other criticisms, Internews
found that response times to the report-
‘It is our hope that this
programme and others
like it can be reinvigorated.
People’s lives depend on it’
ing of dangerous content or actions were
“erratic” and could take months, apart
from in cases related to war in Ukraine,
which were prioritised. In another sign
of a deepening rift with partners,
Internews said Meta first agreed to col-
laborate on its investigation when pro-
posed in 2021, before later declining to
take part in 2022 without explanation.
Meta disputed the characterisation of
many claims in the report but said it was
“working to develop new methods of
sharing information about the overall
impact and performance” of the pro-
gramme. It acknowledged “the need for
clear reporting guidelines and tracking
mechanisms for Trusted Partner
reports,” and was “developing standard
reporting templates, tailored for differ-
ent harmful content types . . . to further
facilitate reporting from partners”.
The critical report into Meta included
surveys and interviews with 24 trusted
partners, who described difficulties
with Meta’s reporting mechanism, a
lack of consultation with experts on its
policies and a lack of transparency.
tougher curbs
on children’s
internet usage
Meta has previously come under fire
from human rights groups for failing to
sufficiently police its platforms in areas RYAN MCMORROW AND NIAN LIU
BEIJING
of conflict, such as Myanmar. QIANER LIU — HONG KONG
The social media giant has also faced
allegations that it has failed to be trans- Beijing has unveiled a system to limit
parent and glosses over its failings — an minors’ device usage and control
accusation even made by its own inde- content the young can consume online,
pendent oversight board, a “Supreme in a move that poses a fresh challenge
Court”-style body set up to rule on sen- to already tightly policed technology
sitive content issues. businesses.
Meta, which received about 1,000
reports a month from trusted partners, The proposed rules from the Cyber-
had told Internews that more than 50 space Administration of China require
people work on the programme across device makers, operating systems,
its content and policy teams. But the apps and app stores to build a function
non-profit said Meta was “arguably called “minor mode” that will set time
deliberately obfuscating” by not mak- limits and curfews on usage as well as
ing clear what percentage of staff time create an age-based classification sys-
was devoted to the programme. tem for content.
Devices with minor mode turned on
would, for instance, be mostly unusable
from 10pm until 6am, according to the
proposed guidelines. Minors would also
be hit with pop-ups reminding them to
rest after 30 minutes of usage.
The system envisioned by Chinese
authorities would allow certain smart-

Ferrari outlook phone functions to continue during cur-

few hours, such as emergency calls, edu-
cational apps or other functions
approved by parents. Phones in minor
Ferrari upgraded its profit forecast after mode would sync with apps so that they
a “stunning” increase in buyers adding would also function in minor mode,
expensive features to their supercars according to the CAC’s proposal.
boosted quarterly earnings by a third. The moves come two years after the
Even though car sales fell 2 per cent to state restricted minors to three hours a
3,392 between April and June compared week playing online games. Media
with a year earlier, revenues rose 14 per referred to gaming at the time as “spirit-
cent to €1.5bn and pre-tax profit ual opium”.
climbed a third to €334mn. CAC gave tech groups until Septem-
The Italian group now expects to ber 2 to submit feedback on the propos-
make €1.51bn-€1.54bn of adjusted als but did not provide a timeline for
profit this year, up from earlier guidance when the rules would be implemented.
of €1.45bn-€1.5bn, with its revenues Hong Kong-traded shares in Tencent
forecast raised from €5.7bn to €5.8bn. dropped 3 per cent. Bilibili fell 7 per cent
At the heart of the upgrade is the ris- and Kuaishou declined 3.5 per cent.
ing trend for supercar buyers to spend “Previous measures may not have
large sums personalising their models. achieved the expected results, so they
Custom paint jobs, brightly coloured made more detailed and thorough regu-
brake callipers, and even paying for Fer- lations,” said Li Chengdong, head of the
rari’s crest to be emblazoned on the side Haitun think-tank. “But it is still hard to
of their car are among the most popular execute. Kids are too clever now.”
features for the car brand, all of which The rules push content providers
carry high margins. such as ByteDance and Tencent to cre-
One trend is for buyers to replace nor- ate a separate and limited pool of videos
mal parts of the car, such as body panels, and games available to anyone under 18
with carbon fibre. This is much more using a device in minor mode.
expensive, but allows owners’ cars to Content should “promote the core
stand out even against other Ferraris. values of socialism” and the “traditional
Chief executive Benedetto Vigna said: culture of China” to “cultivate minors’
“The decision to revise the guidance affection for their country and good
upwards was supported in particular by moral character”, the CAC said.
stunning results in personalisations.” Additional reporting by Gloria Li in Hong
Peter Campbell Kong
Ferrari

Contracts & Tenders

Dealmakers bear brunt of UK and EU divide on regulation
after antitrust regulators in the US suf-
INSIDE BUSINESS fered a setback in the courts. And in an
unusual move, the UK competition
EUROPE watchdog has reopened its consultation
on Microsoft-Activision, which could
lead to a reversal of its decision to block
Javier the deal.
But even if the CMA climbs down, the
Espinoza move signalled its willingness to diverge
from the views of officials in Brussels. In
ish regulator would open an in-depth
probe into Amazon’s $1.7bn proposed
acquisition of iRobot, the company best
known for its Roomba robot vacuum
cleaner. The CMA cleared it and the EU
was the one to open an in-depth investi-
gation instead.
To add to dealmakers’ nightmares,
the CMA is arming itself with powers to
scrutinise tech mergers even if the tar-

E
xecutives looking to do multi-
national deals should brace
themselves for more blows
from regulators amid intensi-
fying uncertainty over
whether transactions will be cleared.
The Brexit vote has been the catalyst
for a new world order in merger scru-
tiny, with the UK now more empowered
to influence the fate of global multi-
billion-dollar transactions.
Before the UK voted to leave the EU,
large corporations mainly had to worry
about EU antitrust decisions. But after
Brexit, the one-stop-shop principle —
where cases referred to Brussels took
precedence over reviews in individual
EU countries — ceased to apply to the
UK. So dealmakers now have to pay
more attention to the British antitrust
watchdog, the Competition and Mar-
kets Authority.
The CMA caused shockwaves this
year with the announcement that it was
blocking Microsoft’s $75bn purchase of
gaming group Activision Blizzard, a deal
regulators in Brussels happily cleared
with concessions that appeased their
competition concerns. The companies
threw a tantrum, with an accusation
from Microsoft’s Brad Smith that the
country was in effect shooting itself in
the foot by “discouraging technology
innovation and investment” in the UK.
The deal may end up being cleared
March last year, the UK also vetoed the
$5bn tie-up between Cargotec and
Konecranes even though Brussels
cleared it. This led to the deal being
abandoned.
The British antitrust watchdog is
putting an end to deals in other ways
too. Decisions by the CMA to review or
veto a deal led to the abandonment of
three times as many transactions com-
pared with rulings from the EU regula-
tor from 2018 and
2020, according to ‘Getting deals through has
Linklaters. The
trend is accelerat- become much messier
ing, with the law since Brexit and recent
firm reporting
nearly 70 per cent deals like the Microsoft
o f d e a l s t h a t one illustrate that clearly’
become subject to
in-depth probes either being aban-
doned or killed in the last three years.
The issue is not just that the CMA is
killing deals to which Brussels is giving
its blessing. In addition, dealmakers feel
uncertain on which way the British reg-
ulator will go. Take Facebook’s acquisi-
tion of customer relations management
provider Kustomer. The CMA took the
view that the deal did not present a
threat to competition and quickly
cleared it while Brussels opened it to
extra scrutiny although it eventually
cleared it.
More recently — and following the
CMA decision to block Microsoft —
investors were concerned that the Brit-
get company has very few sales in the
UK, via a newly formed digital markets
unit.
“Getting deals through has become
much messier since Brexit, and recent
deals like the Microsoft one illustrate
that very clearly,” says a seasoned EU
Imagine your advert here
official in Brussels. “The British are usu-
ally more pragmatic but they have gone
off track recently.”
To be sure, London and Brussels are
aligned on mergers. Both the EU and the
UK see competition concerns in Adobe’s
$20bn bid for cloud-based design tools
maker Figma — with both regulators
eventually heading towards in-depth
probes. Both sides cleared S&P Global’s
€39bn acquisition of IHS Markit with
conditions. And they were also aligned
on Broadcom’s $69bn acquisition of
VMware: the EU has cleared the deal
with conditions while the CMA has
given its provisional approval.
Still, investors and dealmakers are
becoming concerned about their ability
to read the tea leaves and worry about
immediate dealmaking activity being
subdued.
“The CMA is now often at odds with
the EU and it is becoming more arbi-
trary in its rulings on mergers,” said an
investor at a large hedge fund. “With the Business for Sale, Business Opportunities, Business Services,
UK’s newly found powers to kill deals, Business Wanted, Legal Notices, Company Notices, Public Notices, Floating Rates Notes,
there are going to be fewer deals, at least Shareholder Messages, Property For Sale, Tender Notices
.........................................................................................................................................................................................................................................................................
in the short term.” Classified Business Advertising
Tel: +44 20 7873 4000 | Email: advertising@ft.com
javier.espinoza@ft.com
8 ★ FINANCIAL TIMES Thursday 3 August 2023

COMPANIES & MARKETS

Financials Aerospace & defence

GAM in last-ditch plea to shareholders
Liontrust takeover offer
is essential to its survival,
Swiss asset manager says
SALLY HICKEY
GAM has made a fresh attempt to
assuage shareholder concerns over its
takeover offer from UK asset manager
Liontrust that it says is essential to its
survival.
On the eve of its results announce-
ment today, in which it is expected to
confirm a SFr23mn ($26mn) loss in the
first half, the Swiss investment house
laid out its responses to a group of share-
holders balking at Liontrust’s offer, reit-
erating that the deal is essential “to con-
tinue as a going concern”.
The move is the latest effort by GAM
to convince any doubters to accept Lion-
trust’s offer, which is facing a mounting
challenge from activist investors known
as Newgame.
Time is running out before Liontrust’s
twice-extended deadline tomorrow to
seal the deal it outlined in May. Barring a
last-minute delay to GAM’s scheduled
results, today could give the 40-year-old
investment house a final opportunity to
push the deal over the line.
“Newgame’s proposals ignore busi-
ness realities and do not provide a credi-
ble path forward,” GAM’s board said last
week. “They do not provide the
Transport. Blame game
required immediate funding and mate-
rially underestimate the scale of fund-
ing needed to restructure the business
and to support it as a going concern.
Liontrust is the only viable option.”
Portfolio managers at GAM have also
voiced support for the deal, while Lion-
trust’s chief executive John Ions has
warned the clock is at “one minute to
midnight” for GAM’s future.
GAM has struggled to recover from its
involvement in the Greensill scandal, an
episode that led to the ejection of one of
its star managers, a fine of £9.1mn over
conflicts of interest and a 96 per cent
collapse in its share price.
The May proposal by London-listed
Liontrust, which has snapped up seven
smaller asset managers in 11 years, was
swiftly recommended by GAM’s board
as well as its fund managers.
As part of the offer, Liontrust
extended a £17.8mn loan to GAM, half of
which has already been paid, in an
arrangement that will be terminated at
the end of the year if the deal has not
been completed.
It is offering 0.06 of its own shares for
each share in GAM, which now trades at
SFr0.53, and last week it extended the
deadline for its tender offer for GAM’s
shares to tomorrow.
Liontrust and GAM face resistance
from activist investors led by French tel-
ecoms billionaire Xavier Niel, who say
they own 9.6 per cent of GAM’s shares.
They say the proposal undervalues the
company and have launched their own
offer for 17.5 per cent of it at SFr0.55 per
share.
Albert Saporta, director of Newgame,
which also involves wealth manage-
ment company Bruellan, told the Finan-
cial Times: “It is presumptuous and
arrogant for Liontrust’s management to
think only it can create value for share-
holders . . . the deal is obviously not
very popular.”
It has described the proposed deal as
“lopsided”, given GAM shareholders
would own 12.6 per cent of the com-
bined entity, despite contributing
around 40 per cent of the assets under
management.
Airbus joins
Voyager in
push to build
space station
replacement
PEGGY HOLLINGER
Airbus is forming a joint venture with
US start-up Voyager in the race to build
a replacement for the International
Space Station, which is set for decom-
missioning by the end of the decade.
In the deal announced yesterday Airbus
will replace US defence company Lock-
heed Martin as Voyager’s main indus-
trial partner on its Starlab project.
Starlab is one of the frontrunners in a
race overseen by Nasa to develop com-
mercial alternatives to the ISS, which
was launched 23 years ago and orbits
420km above Earth.
The ISS is an international collabora-

Air traffic control staffing crisis frustrates carriers
Sector recovery threatened as
shortages lead to sharp rise in
delays and reduced schedules
PHILIP GEORGIADIS — LONDON
CLAIRE BUSHEY — CHICAGO
Staffing shortages at air traffic control
have delayed passengers in Europe this
summer and forced US airlines to cut
flights, sparking an industry blame
game on both sides of the Atlantic.
The shortages, combined with air-
space closures in Europe, have fuelled a
37 per cent increase in delayed flights on
the continent over the past year, accord-
ing to air traffic manager Eurocontrol.
Air traffic control staffing and capac-
ity issues were responsible for about
half the delays in July, during the peak
travel period, Eurocontrol added.
Across the Atlantic, the US Federal
Aviation Administration asked airlines
in March to cut back flying in New
York’s crowded airspace due to air traf-
fic control staffing shortages, while
United chief executive Scott Kirby criti-
cised air traffic control for disruption at
the airline’s New York hub.
A report in June found widespread
staffing shortages, with controllers at
some facilities working mandatory
overtime and six-day weeks to manage
the shortfall.
The problems have threatened to
dent the airline industry’s recovery
from the pandemic.
Carriers including British Airways
owner IAG and Air France-KLM have
reported booming profits off the back of
high ticket prices and strong demand
for transatlantic travel. But air traffic
control staffing shortages are costing
airlines millions in forgone ticket sales
and increased operational expenses.
Last year in Europe, delays cost carriers
more than €800mn, according to Euro-
control figures.
While the scale of the problem is
smaller than in 2022, when staff short-
ages afflicted the whole industry, the
combination of increasingly congested
airspace and lengthy training for air
traffic controllers means the problem is
unlikely to be resolved quickly.
Delta chief Ed Bastian and his coun-
terpart at easyJet Johan Lundgren are
among airline executives on both sides
of the Atlantic who have voiced frustra-
tion at traffic control problems.
“We needed a good recruiting and hir-
ing plan coming out of the pandemic,”
Bastian said. “The airlines had it. I’m not
sure the air traffic control system did.”
The Ukraine war has compounded
tion, funded by national space agencies
from the US, EU, Canada, Japan and
Russia. It has hosted 258 astronauts and
cosmonauts from 20 countries.
Nasa has allocated $550mn to four
consortiums in the first phase of the
competition, which will examine each
spacecraft design and business case.
The US agency has insisted that they be
commercially viable.
Other contenders include Jeff Bezos’s
Blue Origin in a consortium offering an
“ecosystem” of services for industry,
research and tourism.
A third, Axiom Space, is bidding to
expand a module it has attached to the
ISS into a vehicle hosting activities from
Nasa has allocated about
$550mn to four
consortiums in the first
phase of the competition
research to tourism. US defence and
space group Northrop Grumman wants
to build a platform for training and sci-
ence projects.
Airbus’s entry into the race will ease
European concern over access to a space
habitat once the ISS is retired. It might
also damp criticism of the use of Euro-
pean taxpayer funds to pay US groups
for access to commercial space stations.
Jean-Marc Nasr, head of space sys-
A Delta A330 the issue. The closure of a fifth of ment, said Frédéric Deleau, executive ‘We still the inspector-general’s report. A work- tems at Airbus, said yesterday that the
takes off from Europe’s skies has compressed tens of vice-president for Europe at the Inter- force plan the FAA submitted to Con- partnership “aligns the interests of both
Schiphol. The thousands of flights a day into a smaller national Federation of Air Traffic Con- have these gress in May said there were 10,600 fully ourselves and Voyager and our respec-
ATC shortfall, sliver of airspace. trollers’ Associations. challenges certified air traffic controllers and 3,100 tive space agencies”.
and closure of a Gatwick, a hub for easyJet, was a sore In the US, both airlines and the gov- trainees in the year to October 2022. Airbus declined to disclose whether it
fifth of Europe’s spot last week when scores of flights ernment-funded FAA have been reluc- that really sit In an attempt to catch up, the FAA is would invest financially in a project that
skies after the were cancelled. Labour unrest has made tant to make the investments in the outside the planning to hire 1,500 controllers this is expected to cost several billion dol-
outbreak of the things worse for travellers in some staffing and technology needed to man- year and another 1,800 in 2024. But the lars, and where there remains uncer-
Ukraine war, places. French air traffic controllers age an increasingly crowded airspace, control of National Air Traffic Controllers Associ- tainty over the final demand for com-
have caused a have staged walkouts, while Eurocon- said industry analyst Seth Miller of avia- airlines and ation union disagrees with the agency mercial services. The joint venture will
37% rise in trol has warned of a possible strike at its tion website PaxEx. Aero. on how many controllers are required. be US-led, said Mike Schoellhorn, chief
delays across the Brussels HQ over the next six months. Lundgren said that while his industry airports’ A working group that includes the executive of Airbus Defence and Space.
continent over Europe has a shortfall of between 700 was “better prepared” than last year, union said the FAA needs about 14,600 Nasa is expected to choose at least two
the past year and 1,000 air traffic controllers. This “we still have these challenges that
Johan Lundgren, fully certified controllers — about 2,600 designs by 2025. The prize is an anchor
Nicolas Economou/ easyJet boss
NurPhoto/Getty
was largely due to lay-offs and recruit- really sit outside the control of airlines more than the agency’s target level. contract from the US space agency,
ment freezes during the pandemic, and airports”. Natca president Rich Santa cited the which spends roughly $400mn a year
coming after decades of under-invest- Training an air traffic controller takes “flawed staffing model” of the FAA. on research on the ISS, according to Voy-
two to three years, noted Deleau, who “The status quo is no longer sustaina- ager chair Dylan Taylor.
US air traffic controller numbers warned that retirement would put staff- ble,” he said. Analysts estimate the operating costs
ing under further strain. Bastian said the US should make it a of a commercial space station are likely
Fully certified personnel, change since 2012 (%)
In the US, weather has caused 70 per “national priority” to invest in aviation to top $1bn a year, meaning the rivals
0 cent of the delays, according to data infrastructure more broadly. The FAA would have to find other customers.
0 from the FAA. Staffing has been respon- and air traffic controllers were “hard- Some experts question whether there
sible for less than 3 per cent of delays working, but they’re undermanned and will be sufficient commercial demand to
this year, down from 12 per cent for the underinvested in. There’s no short-cut sustain privately funded stations.
-5 same period last year. solution to this.” A report published in 2017 by the
Still, 20 out of the 26 busiest air traffic Miller said airlines “have long tried to Washington-based Science and Tech-
control centres and towers in the US force too many flights and too many nology Policy Institute concluded that
-10 employ 85 per cent or less of their tar- planes through the eye of the needle” of only under the most optimistic cost and
geted staffing level, according to a air traffic control. “Who is at fault on revenue scenarios could the stations be
report released in June by the inspector- any given day at any given time will commercially viable without sustained
general’s office of the Department of move, but everybody is part of the space agency support.
-15 Transportation. blame. It’s not a surprise that we find Since then, the report’s author, Keith
2012 13 14 15 16 17 18 19 20 21 22 The number of fully certified control- ourselves here.” Crane, has concluded that “private sec-
Fiscal years lers in the country dipped 9 per cent Additional reporting by Kristo Mikkonen tor demand for goods and services from
Source: US Department of Transportation
between 2012 and 2022, according to in London space has not really materialised”.

Utilities

Uniper plans €8bn green overhaul and net zero by 2040 after Berlin bailout
LAURA PITEL — DÜSSELDORF
Nationalised German gas importer
Uniper has vowed to learn from its dis-
astrous over-reliance on Russian gas as
it unveiled an €8bn green overhaul
aimed at putting it on a path to envi-
ronmental and financial stability.
Chief executive Michael Lewis drew a
line under its previous dependence on
Gazprom, which led to a government
bailout as the company racked up
€19bn in losses after Vladimir Putin cut
gas supplies last year.
“Were we too reliant on Russian gas?
It turned out yes,” Lewis said. “It is
important to have diversity. There’s no
question about that. And that’s one
thing the crisis has brought home to us
loud and clear.”
The company now imports a mixture
of pipeline gas and LNG from suppliers
in the Netherlands, the US, Norway,
Australia and Azerbaijan. After Putin’s
full-scale invasion of Ukraine, Uniper
became an ill-fated symbol of the over-
reliance of Europe’s largest economy on
Moscow, with the nation importing
more than half of its gas from Russia.
As well as being pushed to the brink of
collapse by Putin’s decision to cut gas
supplies, Uniper lost control of its Rus-
sian subsidiary Unipro, which the
Kremlin expropriated in April, in the
first in a wave of seizures of western
assets.
Lewis, who was previously chief exec-
utive of the utility Eon UK, promised to
generate a “good return on investment”
for the German government.
Berlin injected €13.5bn in equity for a
99 per cent stake and granted the com-
pany €6bn in loans, in one of the biggest
bailouts in German history.
Uniper enjoyed what it called “excep-
tionally” good results in the first half of
2023, with earnings before interest and
taxes of €3.7bn, compared with a
€757mn loss in the same period last
year, thanks to favourable gas market
conditions and a successful hedging
strategy.
The company stressed that the record
performance was unlikely to be
repeated. But German government offi-
cials say their ultimate aim is to make a
profit on the investment, akin to the
€760mn gain it made last year on its res-
cue of Lufthansa during the coronavirus
pandemic.
Lewis said he was “confident” the
company could achieve that goal thanks
to an €8bn plan to make the fossil fuel
group greener.
The German government, which is
required under EU state-aid rules to
reduce its stake in Uniper to 25 per cent
by 2028, is expected to set out a strategy
for exiting the company by the end of
the year.
Uniper, which operates power sta-
tions in Germany, the UK, Sweden and
the Netherlands, on Tuesday brought
forward its target date for carbon neu-
trality from 2050 to 2040.
It pledged to exit coal-fired power
generation in 2029, eight years earlier
than planned, as well as decarbonising
other existing assets and building
new ones.
Lewis said he saw an opportunity for
Michael Lewis: CEO leads €8bn plan
to make the fossil fuel group greener
Uniper to provide a missing piece to the
energy transition by generating “flexi-
ble green power” as a back-up to wind
and solar.
As well as developing 1GW of hydro-
gen electrolysis capacity by 2030, it
plans to import environmentally
friendly fuels such as green hydrogen
and biomethane.
The plans have been met with scepti-
cism from environmental campaigners,
who oppose the government’s plan to
use gas as a “bridging” fuel towards car-
bon neutrality, which Berlin has set
itself to achieve by 2045.
Sonja Meister, an energy campaigner
at German NGO Urgewald, described
the strategy as “a step in the right direc-
tion” by a company that had long been
an environmental laggard.
But she questioned its plans
to continue to rely heavily on natural
gas, and said that more detail was
needed on how it would meet its targets.
Analysts were circumspect about the
CEO’s claim that environmental and
financial performance would go hand in
hand.
“There’s reason to be cautious,” said
Ingo Becker, head of utilities sector
research at Kepler Cheuvreux. “The
returns on such investments are
unknown, and you will not get proper
state support schemes for every euro
you invest, so clearly there is some
entrepreneurial risk.”
Lewis said the company — as well as
Germany and Europe more broadly —
was undergoing a “transition” rather
than a “revolution”.
Uniper was planning legal action
against Moscow for the expropriation of
its Russian subsidiary, he said, while
admitting that the chances of recover-
ing any of the lost value were slim. But it
was “our duty to do everything we can to
make sure that we try to get some com-
pensation”.
Thursday 3 August 2023 ★ FINANCIAL TIMES 9

COMPANIES & MARKETS

Apple supplier Luxshare takes on Foxconn

Chinese contract manufacturer wins favour with US group as sole assembler of its Vision Pro mixed-reality headset
QIANER LIU — HONG KONG
When Apple unveiled its Vision Pro
mixed-reality headset to the world’s
media in June, few were aware of the
significant role played by a little-known
contract manufacturer in China in cre-
ating the revolutionary device.
Shenzhen-based Luxshare Precision
Industry has won favour and increasing
business with the iPhone maker in part
by being prepared to test “crazy” ideas
in its factories, according to an Apple
supply chain employee.
It is the sole assembler of the Vision
Pro and has been seeing it through the
initial manufacturing problems of
integrating its complex electronics and
the setbacks of too-frequent flaws in a
crucial component — its micro-OLED
displays.
Apple has been forced to scale down
production expectations for next year,
with two people close to Apple and Lux-
share saying it was preparing to make
fewer than 400,000 units in 2024.
Still, the company and its chief have
come a long way to be now manufactur-
ing the “most complex consumer device
anyone has ever made”, according to
analysts, and taking on Taiwan’s Fox-
conn, the world’s biggest contract elec-
tronics manufacturer.
When Foxconn started out in China
with the opening of a new factory in
Shenzhen in 1988, 21-year-old Grace
Wang was one of the first migrant work-
ers to be employed on its production
lines. Wang displayed enough ingenuity
and skills to earn a quick promotion to
manager, as her employer began a dec-
ades-long dominance over the making
of tech gadgets.
Thirty-five years on, the factory girl is
now chair of her own contract electron-
ics maker, after co-founding and build-
ing Luxshare to be Foxconn’s most seri-
ous challenger.
Working its way up from being a sub-
contractor supplying connectors in
1999, Luxshare grew to become a public
company, listing in the southern city of
Shenzhen in 2010 and selling directly to
Apple from 2011. Revenues have surged
from Rmb2.5bn ($350mn) in 2011 to
Rmb214bn last year.
Wang has been instrumental in its
rise, say those who have worked with
her. “She’s the hero behind Luxshare,
learning a lot from Foxconn about fac-
tory management and business expan-
sion,” said one longtime employee who
did not wish to be named.
“She is like a big sister or a mum in
day-to-day management — attentive
and strong.”
While Foxconn is best known as the
maker of the iPhone, Luxshare has also
been steadily expanding its business
with Apple, becoming an important
partner and alternative supplier of serv-
ices. While revenues and profits remain
far below Foxconn’s level, its high-
growth profile led to its market capitali-
sation overtaking its rival’s at one point
in early 2021.
Apple’s high opinion of its capabilities
can be measured by the level of diffi-
culty in the assignments awarded —
from setting up factories outside China
as geopolitical tensions increase to pro-
ducing higher-end phones.
Luxshare first produced simple con-
nectors for the iPhone and MacBook
Luxshare has won a deal to assemble Apple’s headset and is set to break the stranglehold of Taiwan’s Foxconn on making the iPhone Pro — Josh Edelson/AFP via Getty Images
The rivals
2022
Revenue ($bn)
200
150
100
50
0 0
Luxshare Foxconn
Source: company reports
laptop through one of its acquisitions,
before extending production to critical
components in other Apple products,
including AirPods, Apple Watch, and
the iPhone.
In 2022, Luxshare generated more
than 70 per cent of its revenues from
Apple, compared with a proportion of
Luxshare’s rapid rise has
been helped by Apple
chief executive Tim Cook’s
enthusiasm for the group
less than 50 per cent at Foxconn,
according to annual reports and ana-
lysts’ interpretations.
Apple’s strict requirements for its
suppliers tend to boost their credentials
with other clients. Luxshare was
crowned “gold supplier” by Huawei in
2018.
Industry experts say Luxshare’s rapid
rise has been helped by Apple chief
executive Tim Cook’s enthusiasm for
the Chinese company, whose facilities
Net income ($bn)
5 40
4 30
3 Wang will be the one pushing the
2 prove itself as a supplier that can con-
1 reliability.
Luxshare Foxconn
he has visited. It has also benefited
from being selected to help Apple’s
efforts to diversify its supply chain
beyond China.
Analyst Tony Zhang from CLSA said
this represented a challenge, with the
need to adapt from centralised produc-
tion to decentralised management of
factories worldwide and to train local
workers in different territories.
One such market is India, where Lux-
share established an office in 2019 and
bought two well-established production
plants in Chennai from the former
mobile-phone maker Nokia, and
Motorola. It has also applied for permis-
sion to build a factory in India with a
domestic partner, according to people
close to the company and Indian gov-
ernment officials.
But it has been cautious on expansion,
with Wang hinting at an event in Febru-
ary that the supply chain in India was
not mature enough. Eddie Han, an ana-
lyst at Isaiah Research, says strained
relations between China and India may
also be limiting Luxshare’s business
development.
The company said in May it would
“only invest [in India] with sufficient
guarantees” for the business environ-
ment.
Instead, Vietnam has emerged as a
better bet, with a similar culture to
China and smoother transportation
links. Wang said in February that Viet-
nam was “the best option” for manufac-
turing relocation.
The company has been building
plants there since 2016 and has already
started to migrate Apple production
work. Luxshare’s management team
said in April that the Vietnam plants
were focused on making mature prod-
ucts, while the more challenging tasks,
such as mobile phones and new product
assembly, were still being carried out in
China.
Next for Luxshare is the iPhone 15
series, which will begin production in
China in August ahead of its official
launch event. The company has
received a record share of Apple orders
to assemble the new version of the
smartphone, according to two people
close to Apple and Luxshare. It will also
assemble premium models for the first
time, breaking Foxconn’s stranglehold
on producing the iPhone Pro series, the
Financial Times has reported.
Luxshare’s ability to produce enough
qualified handsets “quickly and effi-
ciently” will determine its success in
gaining a larger share of smartphone
production, said Ivan Lam, a senior ana-
lyst at Counterpoint.
Offering lower prices and greater flex-
Revenue growth (%) Net income growth (%) ibility has made the company an attrac-
tive option for Apple, which is consider-
30 ing giving it an even more significant
role in producing the iPhone 16 series,
dependent on performance in deliver-
20 ing the 15, the two people said.
20 company to maintain its standards and
10
10 tinue to rival Foxconn on quality and
“One must be a handsome bird in
0 0
order to fly with the phoenix,” she has
Luxshare Foxconn Luxshare Foxconn
often said of the relationship with
Apple, citing an old Chinese proverb.

Travel & leisure

Tax threat to India’s fantasy sports sector

BENJAMIN PARKIN — NEW DELHI
Indian authorities plan to introduce a
new online gaming tax despite a fierce
backlash from companies and inves-
tors who warn it will kill the fast-grow-
ing multibillion-dollar industry for
fantasy sports and other real-money
games.
The country’s Goods and Services Tax
Council, a federal body that sets India’s
indirect taxes, met yesterday to finalise
the 28 per cent levy on online gaming
that would be hundreds of per cent
higher than the current tax rate, accord-
ing to industry estimates.
The council said the tax would proba-
bly go into effect in October and be
reviewed after six months.
The new levy would mostly affect
real-money games where users earn
cash prizes in games such as fantasy
cricket or online rummy. The sector has
been operating in a regulatory grey area
and has attracted the interest of venture
capitalists.
While gambling is mostly illegal in
India, real-money games groups have
won court cases deeming them “games
of skill” as distinct from betting. But
their surge in popularity has alarmed
authorities, who fear a rise in addiction.
Companies collect commissions on
the stakes placed by punters and, under
current practice, pay 18 per cent tax on
those commissions. Under the proposed
change, the stake itself would be subject
to a 28 per cent tax, as well as a commis-
sion, representing a huge disincentive
for gamers.
Roland Landers, chief executive of
industry group the All India Gaming
Federation, predicts companies would
suffer a big hit. “The larger ones may
scrape through but the mid to smaller
players would be finding it extremely
difficult — in fact, they would be on the
verge of shutting down,” he said.
Saumya Singh Rathore, co-founder of
WinZo, which aggregates various real-
money games, said the tax risked killing
the platform. “We are certain that 85 per
cent of these games would stand unvia-
ble, making WinZo as a platform also
unviable,” she said.
India’s gaming market has grown rap-
India’s new levy would mostly affect
games such as fantasy cricket
idly in recent years thanks to the spread
of smartphones and low data prices. A
report by Lumikai, a gaming-focused
fund, estimated that the total size of the
market was $2.6bn in the year ending in
March 2022.
Real-money gaming companies take
up most of the market. They include
some of the country’s largest start-ups,
such as the Indian cricket team’s shirt
sponsor Dream11. Annual investment
in online gaming rose from $2.3mn in
2013 to a peak of nearly $400mn in
2021, according to data provider
Tracxn.
Finance minister Nirmala Sithara-
man described the 28 per cent tax,
which also applies to horseracing and
casinos that are only allowed in a hand-
ful of states, as a “moral” issue.
“Should the tax on casinos be less
than the tax on food products?” she said
at a GST Council meeting last month. “A
moral question was discussed. We
shouldn’t shut down the industry, but
that doesn’t mean that we should give
them more incentives than essential
goods.”
Some restaurants and food services
are taxed at 18 per cent, the same rate as
online gaming before the latest pro-
posal.
Investors in the sector recently wrote
to Prime Minister Narendra Modi, ask-
ing for the tax to be reconsidered.
10
Millions are mobilising to build US black wealth
Simon
Mundy
When Lyneir Richardson’s investment
group sealed the acquisition of a Balti-
more shopping centre last year, with the
aim of developing a hub for local black
entrepreneurs and consumers, a section
of the legal covenants attached to the
property gave him pause.
“At no time,” said the covenants on
the land applied since a sale in 1945,
should any part “be occupied by any
Negro or person of Negro extraction”.
An exception, it conceded, would be for
black servants of white occupants.
While the Supreme Court has since
ruled that racially restrictive covenants
cannot be enforced, they remain
attached to thousands of title deeds
across the US.
Richardson’s lawyers have had the
language expunged from the Baltimore
Aerospace & defence
Surge in orders
bolsters BAE’s
annual outlook
War in Ukraine and rising
tensions boost country’s
biggest weapons maker
SYLVIA PFEIFER
BAE Systems has lifted its annual profit
forecast as the war in Ukraine helped
drive orders to records at Britain’s big-
gest defence company.
The company said yesterday that it
had won a record £21.1bn of new orders
in the first six months of the year,
underpinned by new orders for existing
programmes, including submarines and
fighter aircraft. Its order backlog also hit
a record at £66.2bn.
The FTSE 100 group, which builds
everything from Eurofighter Typhoon
jets to nuclear submarines and combat
vehicles as well as making ammunition
for the British military, forecast that its
earnings per share would grow between
10 per cent and 12 per cent this year,
double its previous prediction.
Shares in BAE have surged 70 per cent
since the start of last year, making the
company the second-best performer in
the blue-chip FTSE 100 index after
energy supplier Centrica. The stock
gained 6.4 per cent yesterday.
“Defence and security is moving up
national agendas,” said Charles Wood-
burn, BAE chief executive, adding the
company was building momentum and
he expected to see a “material step-up in
the growth rate in the coming years”.
The role that defence companies have
played in arming Ukrainian forces has
sparked a debate over whether the sec-
tor should still be shunned by investors
on environmental, social and govern-
ance grounds.
The war had gone some way to easing
concerns over the sector but more
work needed to be done, according to
Woodburn. “There were elements of the
London market in particular that were
Pharmaceuticals
Haleon sees strong demand after price rises
MADELEINE SPEED
Haleon reported better than expected
sales as consumers stocked up on prod-
ucts such as Sensodyne toothpaste and
Panadol painkillers at higher prices
despite the cost of living crisis.
The company, which was spun off from
pharmaceutical group GSK a year ago,
reported a 10.4 per cent rise in like-for-
like revenue to £5.7bn in the six months
to June, beating analysts’ expectations
of an increase of 8.2 per cent.
Three-quarters of the company’s rev-
enue growth was a result of price rises,
but consumers also bought products
such as Advil and Voltarol in greater vol-
umes despite the higher prices.
Haleon raised its expectations for rev-
enue growth in 2023 from a range of
4-6 per cent to 7-8 per cent. The com-
pany said 55 per cent of its products
gained or maintained market share.
Chief executive Brian McNamara said
he had confidence in Haleon’s resilience
despite “a challenging environment
given further pressure on consumer
spending and global geopolitical and
plot’s covenants. Tackling wider racial
disparities in the US real estate market,
with its legacy of systematic dis -
crimination, is proving more difficult.
But it’s a problem in which some
black-led investment companies,
including Richardson’s Chicago TREND,
are starting to make a dent. Property
ownership was at the heart of the
extended boom in middle-class living
standards that began under president
Franklin Roosevelt, which established
the Federal Housing Administration to
insure home mortgages, and the Home
Owners’ Loan Corporation to refinance
them. But it was a boom from which
most black households were shut out.
Both the FHA and HOLC became
notorious for “redlining”; excluding
from their operations supposedly high-
risk urban zones, which happened to
map closely to majority-black areas.
Even if a black family had the means
to move to a mostly white area, and was
willing to risk being hounded from their
home by a racist mob, they could not
count on government support. The
shying away from defence . . . our
involvement in the nuclear deterrent
meant that a number of our traditional
shareholders in London were putting us
on the wrong side of the debate,” he said.
The pendulum was “swinging into a
more balanced position but it still has
some way to go”.
In the first half of the year, the group’s
orders included a £1.8bn contract from
the Czech Republic for 246 CV90 infan-
try fighting vehicles. Its MBDA weapons
business secured a contract from Poland
to supply launchers and missiles.
BAE has started to see orders come
through following Russia’s invasion of
Ukraine, Woodburn said, citing a
£280mn award from the UK to increase
production of key munitions being
donated to Ukraine. Progress has also
been made on a plan for BAE to set up a
base in Ukraine to produce and repair
weapons such as tanks and artillery.
The first step would be around “open-
ing an office and then working with a
local partner”, said Woodburn.
Follow-on contracts with Saudi Ara-
bia for continued support of its
Typhoon aircraft and an order from the
UK for further work on the next-genera-
tion nuclear deterrent also buoyed its
first-half order book.
Sales in the first half climbed 11 per
cent to £12bn, BAE said, while its under-
lying earnings before interest and tax
were up 10 per cent to £1.3bn. The
group’s free cash flow increased almost
tenfold to £1.1bn. For the full year, BAE
said it now expected to generate more
than £1.8bn in free cash flow, about
£600mn higher than previously fore-
cast. BAE also announced another
three-year share buyback programme
worth £1.5bn.
The company will be one of the main
beneficiaries of the Aukus submarine
programme announced by the UK, Aus-
tralia and the US earlier this year.
See Lex
macroeconomic uncertainties”. Sales
volume increases accounted for 2.9 per
cent of growth, bucking the trend for
falling sales as shoppers trade down to
cheaper and private-label products.
Manufacturers of consumer health
products have been more resilient to
trading down than other consumer cat-
egories during the cost of living crisis.
‘We have very little
private-label dynamics
in Europe [but] we are
looking out for any signs’
Haleon’s rival Kenvue reported better
than expected profits last month in its
first announcement since it was spun off
from Johnson & Johnson this year.
“Together with pet food, consumer
health is the only category that shows no
cyclicality and almost no down-trading
during economic turmoil,” Bernstein
analysts wrote in a note on the sector.
“Cash flows don’t get more boring and
resilient than this.”
★ FINANCIAL TIMES
COMPANIES & MARKETS
FHA’s manual for its underwriters
explicitly encouraged restrictive cove-
nants, including “prohibition of the
occupancy of properties except by the
race for which they are intended”.
The legacy of these policies remains
conspicuous, with many low-income
households still in effect excluded from
the conventional mortgage market,
where lenders have little interest in low-
value properties, says John Green, man-
aging principal of real estate investment
firm Blackstar Stability.
Instead, many families — dispropor-
tionately black — have resorted to
broadly unregulated “contracts for
deed”. Financed by the seller, often at
inflated valuations and interest rates,
these instruments transfer ownership
to the occupier only when the final
instalment of the loan is paid.
In the meantime, the occupier is
responsible for all maintenance. If the
occupier misses a payment, they can be
swiftly evicted, and if they want to move
before the loan is repaid in full, they
must forfeit every dollar paid to date.
Bleak house
Profit down
29% at Taylor
Wimpey
Speaking to analysts yesterday,
McNamara said: “To date we are not
seeing [down-trading]. We have very
little private-label dynamics in Europe.
Obviously these are unprecedented
times so we are looking out for any
signs.”
Haleon’s respiratory health division
was the best performing, with like-for-
like sales up 22 per cent thanks to a
strong cold and flu season in the first
three months of the year and growth in
China after lockdowns ended.
Painkiller sales were also given a
boost by China’s reopening, up 12.9 per
cent compared with the year
before. However, vitamins, minerals
and supplements sales were flat, partic-
ularly in the immunity category “as con-
sumers became less concerned about
Covid-19”, the company said.
Haleon has recently shed jobs as part
of a £300mn cost-cutting drive over the
next three years.
The drugmaker also announced yes-
terday that it had sold Lamisil athlete’s
foot cream to Swedish company Karo
Healthcare for £235mn.
“The best judgment we have is that
these are paid off one in five times,”
Green told me. “It’s an instrument that’s
designed to fail.”
Green’s business aims to offer these
families fresh options through a new
fund that held its final close last month
with $100mn of investment from a mix
of foundations, family offices and faith-
Racial disparities in real
estate are a legacy of some
of the ugliest elements of
the country’s history
based organisations. Blackstar is using
this money to buy CFD-encumbered
properties and convert the contracts
into conventional mortgages.
With government scrutiny of this
“predatory” market increasing, Green
says, many CFD lenders are willing to
sell the properties at steep discounts.
This enables Blackstar to sell the houses
on to the occupying families with mort-
One of Britain’s biggest housebuilders
said the share of its first-time buyers
taking on more than 36-year mortgages
had more than tripled, as affordability
issues in the housing market took its
first-half profits down by 29 per cent.
Taylor Wimpey said yesterday that
27 per cent of its first-time buyers had
taken mortgage terms of more than 36
years in the first half of the year,
compared with just 7 per cent in 2021.
The proportion of other buyers
taking out mortgages of more than 30
years rose to 42 per cent, from 28 per
cent in 2021.
“As affordability has become more
stretched, we have seen mortgage
duration increase,” said chief executive
Jennie Daly, adding that the end of the
government’s help-to-buy scheme this
year was a contributing factor.
Soaring borrowing costs as a result of
Technology
HMRC pursues Uber in widening tax dispute
EMMA AGYEMANG
The tax authority is pursuing Uber, the
ride-hailing app, in a widening dispute
over VAT.
The company said that HM Revenue &
Customs had “disputed the amount and
manner” with which it had applied VAT
to its UK mobility business.
As a result, the tax authority assessed
that the company owed an additional
£386mn ($491mn) in taxes, Uber said
in its half-year results published on
Tuesday.
Uber plans to appeal against the deci-
sion at the UK tax tribunal.
However, last month it paid the
£386mn to HMRC, which will be
refunded should it win its appeal.
The development comes after Uber
agreed a settlement with HMRC last
year that saw it pay £615mn to the tax
office after it lost a case at the UK
Supreme Court in 2021 over the VAT
treatment of its drivers.
Uber had argued that it was exempt
from VAT because its drivers were self-
employed contractors. However, the
gages that reduce their monthly pay-
ments (by about 30 per cent on aver-
age), while still generating a return for
its investors.
The real estate market is central to the
US’s yawning racial wealth gap. In 2021,
the National Association of Realtors
estimated that just 44 per cent of black
households owned their home, com-
pared with 72.7 per cent of white ones.
After decades of surging property val-
ues, median white household wealth
stood at $187,300 in 2019, according to
the latest data from the US Census
Bureau, against just $14,100 for black
households.
The racial disparities in the US prop-
erty market are a grim legacy of some of
the ugliest elements of the country’s his-
tory, but even so, this is an area where
smart, targeted financial investment
like this could begin to have a powerful
impact.
A version of this article first appeared in the
Moral Money newsletter, available on
FT.com
rising interest rates have piled
pressure on the housing sector, with
UK house prices recording their
biggest annual drop in 14 years in
July, according to data from
Nationwide on Tuesday.
A record 19 per cent of first-time
buyers took out mortgages of at
least 35 years in March, according
to trade body UK Finance, up from
9 per cent a year earlier.
Taylor Wimpey posted £237.7mn
in pre-tax profit in its first half, a
28.9 per cent fall year on year. It
completed 5,120 homes in the six
months to June 30, down from 6,922
in the same period last year.
But it expects to build between
10,000 and 10,500 homes for the
full year, at the upper range of its
previous guidance. Akila Quinio
See Lex
Jason Alden/Bloomberg
Supreme Court ruled that its drivers
should be considered workers.
The latest tax dispute centres on
changes the San Francisco-based com-
pany has made to its business model
since March 2022 following the
Supreme Court ruling.
HMRC has challenged Uber’s use of
rules designed to simplify VAT for
tour operators, called the Tour Opera-
tors Margin Scheme. These rules are
also used by minicabs and other ride-
hailing apps.
Uber is arguing that all private hire
The tax authority has assessed
that an extra £386mn is owed
Thursday 3 August 2023
Airlines
Investors in
Wizz approve
extra time for
unlocking of
chief’s bonus
LEKE OSO ALABI
Investors in Wizz Air approved plans to
give the company’s boss an additional
two years to unlock a bonus of
£100mn, despite sizeable opposition at
the low-cost carrier’s annual meeting.
Almost 30 per cent of the airline’s free-
floating shares was cast against a resolu-
tion to give József Váradi until 2028 to
obtain the one-off award if Wizz Air’s
share price hits £120.
Shares closed down less than 1 per
cent at £23.62 yesterday.
The amendment was approved with
74 per cent of the eligible votes support-
ing the resolution.
Wizz Air said its board believed
that Váradi was “central to delivering
[the airline’s] recovery in the coming
years” and the changes to remuneration
plans were “in the best interests of the
company, its shareholders and other
stakeholders”.
However, the proposal had encoun-
tered significant opposition from proxy
advisers before the general meeting in
Switzerland.
Institutional Shareholder Services
said the plan was “not fully in line with
UK good practice”, while Pirc said the
plans were “highly excessive” and “not
considered to be acceptable”.
Pirc argued that a share price was
“often outside the control of individual
directors and is often more affected by
larger market changes”.
Just under two-thirds of the votes at
Wizz’s annual meeting in 2021 were cast
in favour of the bonus scheme, with
The board deemed
boss Váradi ‘central to
delivering recovery
in the coming years’
about a third against, despite criticism
from shareholder advisory groups.
This was because the vote was open
only to a small proportion of investors
after the airline was forced to water
down the voting rights of shareholders
from outside the European Economic
Area, in order to comply with EU
rules around airline ownership after
Brexit.
Wizz Air’s largest shareholder is US
private equity firm Indigo Partners,
which focuses on air transport and owns
24 per cent of the company. Indigo’s
founder William Franke has been chair
of Wizz Air for almost two decades.
The carrier has grown rapidly over
the past five years, becoming one of the
most significant companies in European
aviation thanks to cheap fares made
possible by an ultra low-cost business
model.
The airline was one of the first carriers
to recover to its pre-pandemic share
price in late 2020, as investors backed
its aggressive expansion plan. Its shares
have halved since Russia’s full-scale
invasion of Ukraine last year.
Wizz Air’s move follows that of Rya-
nair, which extended and adjusted the
comparable package for its chief execu-
tive, Michael O’Leary, last year.
Andrew Lobbenberg, analyst at Bar-
clays, said Wizz Air’s move had the logic
of following its lead rival, but Ryanair
had also “included an increase to the
target profit level required to
trigger it”.
operators in the UK are eligible to pay
VAT on the profit margin of a trip rather
than its full cost, as HMRC contends,
according to people familiar with the
situation.
Uber said: “Urgent clarity is needed
for the whole industry in order to pro-
tect drivers and passengers.”
HMRC said: “We have a strong record
on large business tax compliance and
actively challenge them on tax due.”
Dan Neidle, former head of tax at law
firm Clifford Chance and founder of
think-tank Tax Policy Associates, said it
was “hard to say” which party would
ultimately win the dispute.
He said the dispute could take a dec-
ade to resolve, with appeals and counter
appeals likely.
No date for a court hearing has been
announced.
Last week, Uber won a case at the UK
High Court over how VAT is applied by
private taxi operators and ride-hailing
firms in the UK outside London.
The case had been brought to level the
playing field with competitors following
Uber’s Supreme Court loss in 2021.
Thursday 3 August 2023 ★ FINANCIAL TIMES 11

COMPANIES & MARKETS

Fixed income. White House outrage Equities

European
US debt downgrade greeted with IPOs slump to
lowest level
political anger and trading calm since 2009
NIKOU ASGARI

The number of companies listing in

Europe has slumped to the lowest level
since the global financial crisis, under-
lining the dire state of the region’s IPO
market amid an economic slowdown
and the attraction of listing in the US.
Just 34 companies publicly listed in
Europe in the first half of this year, the
lowest number since 2009 when the
aftermath of the global financial crisis
sent a chill through markets.
Companies raised just €2.4bn in
Europe in the first half of 2023 through
IPOs, also the lowest total in 14 years,
according to figures from the Associa-
tion for Financial Markets in Europe.
The capital raised marks a 42 per cent
fall compared with the same period last
year.
European equity markets are strug-
gling to attract companies to list this
year as rising interest rates and record
high inflation force many businesses to
shelve plans to go public.
Others, such as UK chipmaker Arm,
have been enticed by the larger pool of
capital available in the US and chosen to
list in New York instead of domestically.
“There is a recurring theme of some
European companies preferring to list
abroad because there’s better liquidity
in the US,” said Julio Suarez, director of
research at AFME. “Structurally, US

Treasuries move modestly
after Fitch knocks rating down
one notch to double A plus
KATE DUGUID — NEW YORK
JAMES POLITI — WASHINGTON
The reaction to Fitch Ratings’ down-
grade of the US’s pristine debt rating
played out on a split screen yesterday:
outrage from the White House and calm
in the market for Treasury bonds
assessed by the agency.
Fitch late on Tuesday lowered the US
long-term rating one rung from triple A
to double A plus, citing its growing debt
burden and an “erosion of governance,”
including on fiscal matters.
The action came two months after the
country narrowly averted default amid
political wrangling over the federal bor-
rowing limit.
The Biden administration reacted
with anger, sending out a release citing
pundits calling the decision “off-base,”
“absurd” and “widely & correctly ridi-
culed”.
Karine Jean-Pierre, the White House
press secretary, said: “It defies reality to
downgrade the United States at a
moment when President Biden has
delivered the strongest recovery of any
major economy in the world.”
The White House appeared to fear
that the downgrade gave Republicans a
new opening to accuse Biden’s officials
of mishandling America’s public
finances.
Democrats had hoped that the budget
deal struck with Republican speaker
Kevin McCarthy to avoid a debt default
in June had put those criticisms to rest.
The action by Fitch came after S&P
similarly downgraded US debt to double
The interest burden of the
US has ballooned as the Fed
has raised interest rates
Federal interest payments ($bn)
1,000
800
600
400
200
0 of developed market economic research
2005 10 15 20 23
Sources: Bureau of Economic Analysis; FRED
A plus in 2011, following a debt ceiling
showdown when Democrat Barack
Obama was president.
Fitch raised a red flag over “a steady
deterioration in standards of govern-
ance over the last 20 years” — even with
the latest deal to suspend the debt limit
until January 2025.
Fitch also expects the general govern-
ment deficit to rise to 6.3 per cent of
gross domestic product in 2023, up from
3.7 per cent in 2022.
Adding to the US debt burden were
interest payments, which skyrocketed
as the US Federal Reserve dramatically
lifted interest rates to the highest level
in 22 years.
The Treasury department yesterday
announced that the US would have to
borrow more in the coming months.
US Treasuries, which constitute the
biggest bond market in the world, are
widely held because they are under-
stood to be extraordinarily safe.
Nearly every central bank globally is a
major holder of Treasuries and the
bonds underpin valuations across asset
classes. A lower credit rating means
Fitch believes there is a greater risk of a
US default.
The exceptional role that Treasury
bonds play in global markets, however,
is unlikely to change because of Fitch’s
decision.
Investors, by and large, will not be
forced to sell their US debt holdings due
to the downgrade and the country’s cost
of borrowing is not expected to go up.
“I think it is completely and totally
irrelevant,” said Eric Winograd, director
at AllianceBernstein, the asset manager.
“I have been trying to come up with a
reason why investors would care about
this and I have not been able to. The
probability of the US defaulting is
exactly the same today as it was yester-
day.”
The decision by Fitch is also unlikely
to force investors to swap out Treasuries
for other triple A rated debt in their
portfolios.
“We do not believe there are any
meaningful holders of Treasury securi-
ties who will be forced to sell due to a
downgrade,” Goldman Sachs said in a
note. “Because Treasury securities are
such an important asset class, most
investment mandates and regulatory
regimes refer to them specifically,
rather than triple A rated government
debt.”
Goldman also noted that S&P’s US
downgrade in 2011 ultimately had little
effect on markets.
“No one buys Treasuries because of
the rating,” said Peter Tchir, head of
macro strategy at Academy Securities.
“US Treasuries are often mandated
directly or included with other govern-
ment backed debt in mandates. The
downgrade by Fitch is a non-event for
yields.”
Stroll on: Treasury markets reacted modestly
US Treasury to the Fitch decision and the US plan to
department increase borrowing unveiled yesterday.
plans to increase Benchmark 10-year Treasury yields
borrowing were rose by 0.07 percentage points to 4.07
unveiled per cent, the highest in a month, accord-
yesterday but ing to Refinitiv. The S&P 500 stock
received only a index was 1 per cent lower by midday in
low-key reaction New York yesterday.
from markets Fitch, which had warned of a possible
Chip Somodevilla/Getty
US downgrade in May, announced its
decision on the same afternoon that
former President Donald Trump was
indicted on charges related to efforts to
overturn the 2020 election that handed
the White House to Joe Biden.
Richard Francis, a senior Fitch direc-
tor, told Reuters that the agency also
considered the attack on the Capitol on
January 6, 2021 in its decision.
Officials in Washington appeared to
give Fitch’s rating change more weight
than many investors.
Janet Yellen, Biden’s Treasury secre-
tary, lambasted it as “arbitrary and
based on outdated data”.
Jason Smith, the Republican chair of
the powerful House ways and means
committee, said Biden had “pushed
‘I have been America’s credit rating off the ledge”,
even though US fiscal problems have
trying to been a product of policies adopted by
come up both parties.
“Now families and small businesses
with a already dealing with soaring interest
reason why rates and lost wages from Biden’s infla-
tion crisis will also have to face the con-
investors sequences of a reduced confidence in
would care America’s sovereign debt,” Smith said.
Jean-Pierre pointed to “extremism”
about this by Republicans, “from cheerleading
and I have default, to undermining governance
and democracy, to seeking to extend
not been deficit-busting tax giveaways for the
able to’ wealthy and corporations”.
‘There’s better liquidity in
the US. Structurally, US
capital markets are more
attractive to risk capital’
capital markets are more attractive to
risk capital,” he said, adding that Europe
is struggling with a “structural lack of
competitiveness”.
The US listings market has faced a far
milder slowdown this year with 75 com-
panies floating in the first half and rais-
ing $11.5bn, the lowest volume and
value since 2015, according to Dealogic
data.
Romanian electricity producer Hid-
roelectrica raised €1.6bn on the Bucha-
rest stock exchange in July, making it
Europe’s biggest stock market listing so
far this year.
London’s biggest IPO is fintech firm
CAB Payments, which raised £300mn
last month.
Europe’s moribund listings market
has provoked a response from policy-
makers. The UK is planning a series of
reforms, which include pushing the
pensions industry to channel funds
towards high-growth companies, in a
bid to arrest the dwindling number of
companies listing on the London Stock
Exchange.
EU officials are also trying to simplify
the process of listing in the bloc as well
as improving investment research so
small and midsized firms can be more
Our global visible to potential investors.
team gives you “I think it’s getting to the point now,
market-moving both in Europe and the UK, people are
news and views, realising it’s more urgent than it had
24 hours a day been in order for these jurisdictions to
ft.com/markets keep up,” said Gary Simmons, managing
director at AFME.

Food & beverage Financials

Molson Coors capitalises on backlash Carlyle pledges to be ‘super-disciplined’

against Bud Light with record sales
STEFF CHÁVEZ — CHICAGO
Brewer Molson Coors has capitalised
on the upheaval in the US domestic
beer market, reporting record quar-
terly sales and upgrading its full-year
outlook following the controversy that
has engulfed rival brand Bud Light.
The Chicago-based group reported its
best quarterly sales since Canada’s Mol-
son merged with US brewer Coors in
2005, with sales volumes rising in its
home market for the first time in a year.
Sales of Bud Light, which is made by
AB InBev and had long been the top-
selling beer in the US, tumbled for sev-
eral consecutive weeks after a promo-
tional collaboration with transgender
TikTok personality and actress Dylan
Mulvaney in April prompted a conserv-
ative backlash. The controversy caused
AB InBev to end the partnership and
place two executives on leave.
That has allowed other brewers to
soak up market share. Modelo, which is
sold in the US by Constellation Brands,
dethroned Bud Light in May as the
country’s best-selling beer. Weeks later,
Constellation reported record first-
quarter sales.
Molson Coors said that a year ago, Bud
Light was a bigger label in the US than
Coors Light and Miller Lite combined,
but that dynamic has been upended.
“Coors Light and Miller Lite, com-
bined, were 50 per cent bigger than Bud
Light by total industry dollars and 30
per cent bigger than Modelo Especial” in
the second quarter, Molson Coors chief
executive Gavin Hattersley told analysts
on Tuesday. The group said its premium
beers in the US had performed well.
“Beer drinkers are incredibly loyal,”
Bud Light sales tumbled for several
weeks after a conservative backlash
Hattersley said. There had been “some
pretty seismic shifts across the industry
. . . so what really matters here for us is
that more consumers are reaching for
our beers versus our competitors’”.
Even higher prices around the
national holidays of Memorial day and
July 4 did not turn US consumers off
Molson Coors’ drinks. Chief financial
officer Tracey Joubert said prices would
increase again in the autumn.
The brewer said brand volumes in the
US, its primary market, rose 8.7 per
cent, marking the first rise in several
quarters, and helped offset weakness in
central and eastern Europe markets.
The changing landscape in the US
contrasts with some of the trends
reported by Heineken, the world’s
second-largest brewer, which earlier
this week conceded the “cumulative
effect of pricing actions” caused sales
volumes to contract in its latest quarter.
“We didn’t plan on our largest com-
petitor’s largest brand declining volume
by nearly 30 per cent during the quar-
ter,” Hattersley said. The impact of AB
InBev’s Bud Light hangover will be laid
bare today when it reports second-
quarter results.
on costs during dealmaking slowdown
ANTOINE GARA — NEW YORK
Carlyle Group’s profits fell last quarter
as the buyout group failed to benefit
from a rebound in markets and strug-
gled to drum up interest in a new flag-
ship fund, underlining the challenge
facing new chief executive Harvey
Schwartz.
A former executive at Goldman Sachs,
Schwartz took the reins at Carlyle in
February and has pledged to revive
profits at the Wall Street institution dur-
ing a testing period for the private
equity industry.
Schwartz yesterday laid out five areas
of focus, including growing the group’s
insurance and underwriting business
lines and cutting costs to improve mar-
gins that have lagged behind peers such
as Blackstone and Apollo Global.
“[We’re] basically doing a line-by-line
review going through the business and
making sure we’re super-disciplined
about expense,” he told analysts.
While Schwartz’s comments give
investors new insight into his priorities
after a six-month review of Carlyle’s
operations that included meeting
150 investors, he was reluctant to pro-
vide definitive financial targets or
strategic goals, something analysts
expect he will have to do by the end of
the year.
Carlyle shares fell about 9 per cent in
early Wall Street trading yesterday.
The company said its second-quarter
distributable earnings — a metric that
analysts favour as a proxy for the
group’s cash flows — dropped to
The buyout group’s
quarterly distributable
earnings fell to $388mn,
down 26% year on year
$388mn, a 26 per cent fall from the same
period a year earlier. The results were
better than analysts expected.
A prolonged slowdown in dealmaking
curbed Carlyle’s ability to exit invest-
ments profitably and secure valuable
performance fees, something it warned
would continue to the year-end. Deal-
making remained subdued in the quar-
ter despite a rebound in markets that
has propelled the S&P 500 up by almost
a fifth this year.
Carlyle secured $7.1bn in new money
from investors, a slight increase from
the first quarter. Investors committed
just $300mn to its new flagship US buy-
out fund in the period, putting the total
raised at about $16bn and short of the
$22bn target set by Schwartz’s predeces-
sor, Kewsong Lee.
The firm has already warned share-
holders that most of its new buyout
funds will be smaller as investors scale
back exposure to private assets, as rising
interest rates radically reshape condi-
tions for the industry.
Carlyle is expected to begin raising
new buyout funds in Europe and Asia,
which could help its growth this year.
Schwartz has begun to overhaul Car-
lyle’s leadership and recently named
dealmaker John Redett chief financial
officer and Lúcia Soares chief informa-
tion officer.
Despite the challenges, Schwartz said
yesterday he was optimistic that the
broader economic and financial back-
drop was improving.
“While the economic backdrop
remains complex and investor senti-
ment remains mixed, the peak of the
inflation cycle may have passed.”
12 ★ FINANCIAL TIMES Thursday 3 August 2023

COMPANIES & MARKETS

Banking’s national The day in the markets

champions across What you need to know
the globe dominate 3 Global stocks drop sharply following
US debt downgrade
European stocks fall after US credit rating downgrade
3 Treasuries shrug off Fitch move to Indices rebased

Rupak Ghose strip Washington of triple A rating

3 London equities weaker on eve of BoE
rates decision Dax
8

Markets Insight Global stock markets suffered a heavy

sell-off yesterday after Fitch Ratings
6

A
merican banks have rallied
hard in the past month,
driven by a healthy earn-
ings season and a rebound
in investor confidence in
the economy and the financial sector.
After the sector turmoil over the col-
lapse of Silicon Valley Bank, it is very
much a case of crisis averted. European
bank share prices have been more
muted over the past month but are up
25 per cent over the past 12 months.
JPMorgan Chase now stands head and
shoulders above all global peers in mar-
ket value. Three other mega-caps —
Bank of America, Wells Fargo and Mor-
gan Stanley — are among the largest 10
banks in the world by market value.
But, looking a bit deeper, the past few
years of deglobalisation have been char-
acterised by the strength of national
champions across the world.
Only just over a third of the largest
100 banks in the world by market capi-
talisation are US or European.
Unsurprisingly, given the size of its
economy, Chinese banks remain near
the top of the list. But this phenomenon
is not one of a narrow set of countries —
with national champions from Canada,
Australia, Japan, the Middle East, Bra-
zil, India, Singapore and Indonesia
among the most valuable in the world.
India’s HDFC Bank, which recently
merged with Housing Development
Financing Corporation, has a market
capitalisation of about $150bn, putting
it in the top-10 biggest banks by that
measure. That is not far off the $167bn
capitalisation of Europe’s largest bank,
HSBC (which is hardly a traditional
western bank).
India’s second-largest bank, ICICI, is
now more valuable than the eurozone’s
largest bank, BNP Paribas. Likewise,
unexpectedly downgraded Washington’s 4
top-tier sovereign debt rating while US
Indonesia’s Bank Central Asia and Saudi tralia and Canada have benefited from Treasuries largely shrugged off the
Arabia’s largest bank, Al Rajhi, have consistently delivering strong returns decision. 2
market capitalisations only a little less on equity based on more traditional Wall Street’s benchmark S&P 500
than BNP. Here are some reasons why bread-and-butter banking, sometimes declined 1.2 per cent by midday in New
we are seeing these geographical trends. in near oligopolistic market conditions York, on track for its biggest daily drop in 0
First, a superior earnings mix. Inves- with deep moats. more than three months, while the tech-
Stoxx Europe 600
tors value recurring and less volatile National champions in fast-growing focused Nasdaq Composite gave up 1.9
revenues. We have seen this recently economies such as India or Indonesia per cent. -2
with the valuation spread that has are seen as plays on the emerging bank- The moves came after Fitch cut the US
emerged between Morgan Stanley and ing requirements of a middle class in credit rating from triple A to double A
Goldman Sachs. wealth management, increasing pene- plus after markets closed on Tuesday, -4
National champions tend to have less tration of banking into more informal citing a mounting government debt Feb 2023 Aug
exposure to more volatile trading and areas of the economy and the growth of burden and the debt ceiling stand-off two Source: Refinitiv
investment banking revenues than the local corporate sector. months ago that brought the world’s
most European and US banks. The rela- In the US and Europe, regulatory largest economy close to a default.
tive merits of traditional banking may pressures have been increasing. Ever The Wall Street sell-off echoed across strategy for BlackRock’s iShares arm in Treasuries rally, which came as markets
since the 2008 crisis, bankers have been the Atlantic where the Stoxx Europe 600 Europe, the Middle East and Africa, said shrugged off concerns over the US credit
in the line of fire of politicians in a way index closed 1.5 per cent lower while the the downgrade had added to the recent rating downgrade.
Only just over a third of that they have not in other countries. CAC 40 in Paris shed 1.3 per cent and pressure on stocks. Investors said the muted reaction of
the largest 100 banks in The recent regional banking crisis is Frankfurt’s Xetra Dax lost 1.4 per cent. “We already had a soft tone in equities Treasuries reflected the fact that funds
likely to preclude any easing of these London’s FTSE 100 was down 1.5 per yesterday afternoon, prior to the were unlikely to be forced to sell US debt
the world by market cap pressures. cent, a day before the Bank of England downgrade, which was anchored in some as a result of the downgrade.
are US or European At the same time, competition from was expected to increase its benchmark of the weakness in earnings releases” as Meanwhile, Fitch’s announcement
“non-bank” parties has also been fierce, bank rate to 5.25 per cent. well as the latest economic data, he said. helped fuel a global equity sell-off.
whether it be private equity firms In Asia, China’s benchmark CSI 300 Yields on 10-year Treasuries added 7 “We think the latest downgrade does
look very different if the rises in interest expanding aggressively in lending or index of Shanghai and Shenzhen stocks basis points to 4.12 per cent, their highest not reflect any new fiscal information and
rates over the past 18 months lead to a electronic market makers such as lost 0.7 per cent while Hong Kong’s Hang level in nine months, after the US should only have a limited market
credit default spike with big loan losses. Citadel that have challenged banks in Seng index dropped 2.5 per cent and government announced plans to boost impact,” said Mark Haefele, chief
But longer-term trends are positive. trading or money market funds in the Tokyo’s Topix shed 1.5 per cent. issuance of long-term debt this quarter. investment officer of UBS Global Wealth
Second, relative profitability. A bank, US that compete with bank deposits. Karim Chedid, head of investment The rise in yields reversed an earlier Management. Daria Mosolova
of course, can be more valuable simply This is not unique to the US and
because it has a larger balance sheet. Europe — with tech giants Tencent and
But market capitalisations reflect the Alipay having made significant inroads Markets update
current and future earnings power of into the banking world in China in
the banks. European banks are known recent years.
for their large balance sheets but lower But, in general, it is less of a negative
profit margins and returns have driven force outside the US and Europe. All the US Eurozone Japan UK China Brazil
down valuations based on the “book” noise around fintech has done little to Stocks S&P 500 Eurofirst 300 Nikkei 225 FTSE100 Shanghai Comp Bovespa
value of their equity in the past decade. erode shareholder confidence in these Level 4515.19 1822.35 32707.69 7561.63 3261.69 120248.39
The higher valuation of JPMorgan national champions. Steadily, they have % change on day -1.34 -1.34 -2.30 -1.36 -0.89 -0.82
reflects the superior return on equity of gained market values larger than most Currency $ index (DXY) $ per € Yen per $ $ per £ Rmb per $ Real per $
the bank through the cycle versus its US US and European banks. Level 102.358 1.093 143.380 1.269 7.181 4.817
and European competitors. % change on day 0.054 -0.455 0.073 -0.549 0.208 0.887
Similarly, local market leaders in Rupak Ghose is an adviser to fintech Govt. bonds 10-year Treasury 10-year Bund 10-year JGB 10-year Gilt 10-year bond 10-year bond
countries such as India, Indonesia, Aus- companies and a former financial analyst Yield 4.101 2.530 0.623 4.484 2.695 10.450
Basis point change on day 5.470 -2.300 3.380 1.400 -0.300 -7.000
World index, Commods FTSE All-World Oil - Brent Oil - WTI Gold Silver Metals (LMEX)
Level 456.24 82.96 79.23 1947.20 24.52 3846.70
% change on day -1.60 -2.30 -2.63 -1.19 0.66 0.01
Yesterday's close apart from: Currencies = 16:00 GMT; S&P, Bovespa, All World, Oil = 17:00 GMT; Gold, Silver = London pm fix. Bond data supplied by Tullett Prebon.

Main equity markets

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

7680
4480 1840
7520
4320 1800 7360

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

Jun 2023 Aug Jun 2023 Aug Jun 2023 Aug

Biggest movers
% US Eurozone UK
Waters 7.64 Kerry Grp 2.41 Bae Systems 6.36
Aflac 6.49 Oci 2.13 Convatec 6.32
Ups

Cdw 6.33 Schneider Electric 0.96 Taylor Wimpey 2.85

Humana 6.32 Legrand 0.67 Smurfit Kappa 1.83
Bunge 4.96 Bollore 0.62 Relx 0.27
%
Generac Holdings -23.12 Telefonica -7.03 Ocado -5.61
Solaredge -18.70 Casino Guichard -3.86 Endeavour Mining -5.19
Downs

Paycom Software -18.66 Raiffeisen Bank Internat -3.30 Prudential -4.44

Johnson Controls Int -9.05 Swatch -3.06 Hargreaves Lansdown -3.83
Ceridian Hcm Holding -7.72 Ses -3.03 Anglo American -3.82
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

Coffee chain Starbucks rallied on German telecoms group 1&1 jumped on Heading the FTSE 100 index was defence
reporting a 12 per cent year-on-year rise news that it had signed an 18-year contractor BAE Systems, which reported
in net revenue to a record $9.2bn. national roaming partnership with UK half-year sales and operating profits that
Earnings grew 19 per cent to $1 per peer Vodafone. were 7 per cent ahead of analysts’
share for its fiscal third quarter — 5 per Under this deal, Vodafone would estimates.
cent ahead of Wall Street estimates. deliver 5G mobile coverage to 1&1’s In the wake of the war in Ukraine, the
In the top half of the benchmark S&P customers from the second half of 2024. company said it secured orders worth
500 index was health insurer Humana, 1&1’s rival, Telefónica Deutschland, and £21.1bn during the period, resulting in a
which posted earnings of $8.94 per share, its Spanish parent company, Telefónica, record backlog of £66.2bn.
12 cents per share above analyst fell sharply following the announcement. Joining BAE Systems in the top half of
estimates. Italian truckmaker Iveco rallied off the the blue-chip index was medical products
Humana warned earlier this year of back of a second-quarter operating profit maker ConvaTec, which raised it full-year
rising costs linked to non-urgent medical of €294mn, which blew past the €202mn guidance, forecasting organic revenue
procedures but this expense appeared to that analysts had expected. growth of between 6 and 7.5 per cent, up
have been less severe than feared. Gerrit Marx, chief executive, said the from a previous target of 5 to 6.5 per cent.
The update buoyed peers such as group had made “steady progress on Broker Numis said the performance
Molina, Elevance Health and Cigna. every metric”. had been “led by strong growth in
CVS Health climbed on news that the A steep slide in revenue weighed on advanced woundcare . . . and robust
pharmacy chain was reducing its online car dealership Auto1, which growth in infusion”. The interim dividend
overheads, with plans to cut about 5,000 reported a 22.8 per cent year-on-year fall was also raised 3 per cent to 1.769 cents.
non-customer-facing roles. in second-quarter sales of €1.3bn. Silver and gold miner Hochschild
Chief executive Karen Lynch reportedly The drop overshadowed better than surged on news that it had received an
told analysts during an earnings call that expected earnings, with the German environmental permit from regulators for
a $496mn restructuring charge recorded group reporting a loss of €14.8mn, way its Inmaculada operation in south-west
in the second quarter was linked to job narrower than the €23mn loss that RBC Peru.
cuts. Europe had forecast. Hochschild said the green light paved
A discounted share sale weighed on Spanish bank Unicaja sank following a the way for its flagship mine to generate
biopharma group Tarsus, which issued discounted share sale by one of its “significant additional value . . . over the
5.7mn shares at $17.50 each — more than largest investors. next two decades”.
4 per cent below Tuesday’s closing price. London hedge fund Oceanwood Biotech group Oxford BioDynamics
Proceeds from the sale were earmarked Capital Management placed a 7 per cent jumped on issuing more than 48mn
to fund Xdemvy, its drug to treat stake in the lender at €1 per share, which shares at 11p each — a 3.8 per cent
demodex blepharitis, an inflammatory was 5.7 per cent lower than Unicaja’s premium to its most recent closing price.
eye condition. Ray Douglas most recent closing price. Ray Douglas Ray Douglas
Thursday 3 August 2023 ★ FINANCIAL TIMES 13

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 $

-1.34% -2.31% -0.73% -1.36% -1.34% -2.30% -2.47% -1.60% -0.455% -0.549% -1.19%
0.073% 0.116% 0.76%
Stock Market movements over last 30 days, with the FTSE All-World in the same currency as a comparison
AMERICAS EUROPE ASIA
Jul 03 - - Index All World Jul 03 - Aug 02 Index All World Jul 03 - Aug 02 Index All World Jul 03 - Aug 02 Index All World Jul 03 - Aug 02 Index All World Jul 03 - Aug 02 Index All World

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

4,515.19 20,379.62 7,561.63 16,039.17 16,054.97 33,753.33 2,616.47

4,455.59 20,204.87 7,519.72 32,707.69 2,593.31

Day -1.34% Month 1.50% Year 10.41% Day -1.72% Month 0.14% Year 3.48% Day -1.36% Month 0.25% Year 1.90% Day -1.36% Month -1.18% Year NaN% Day -2.30% Month -1.42% Year 16.88% Day -1.90% Month 2.04% Year 6.70%

Nasdaq Composite New York IPC Mexico City FTSE Eurofirst 300 Europe Ibex 35 Madrid Hang Seng Hong Kong FTSE Straits Times Singapore

13,954.54 9,588.40 19,415.68 19,517.38 3,325.02

13,816.77 53,930.86 53,603.91 1,828.95 1,822.35 9,328.70 3,203.77
Day -2.31% Month 1.26% Year 13.06% Day -1.26% Month -0.07% Year 14.04% Day -1.34% Month -0.61% Year 6.13% Day -1.83% Month -2.76% Year 15.38% Day -2.47% Month 3.19% Year -3.21% Day -1.45% Month 3.45% Year 2.40%

Dow Jones Industrial New York Bovespa São Paulo CAC 40 Paris FTSE MIB Milan Shanghai Composite Shanghai BSE Sensex Mumbai
35,370.82
120,530.05 28,974.54
34,418.47 7,369.93 7,312.84 28,386.88 3,245.35 3,261.69 65,782.78
119,076.37 65,479.05

Day -0.73% Month 2.83% Year 9.21% Day -0.82% Month 1.82% Year 16.33% Day -1.26% Month -1.18% Year 13.61% Day -1.30% Month 2.63% Year 29.18% Day -0.89% Month 1.86% Year 0.05% Day -1.02% Month 1.61% Year 13.15%

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18
Between rock
and a hard place
THEATRE
Sarah
Hemming
O
ne of the many pleasures of
Dominic Cooke’s affection-
ate new staging of Rock
Follies is the costume
design by Kinnetia Isidore,
which runs the gamut of ’70s fashion,
from the cheesecloth smocks of a bunch
of earnest commune inhabitants to the
wild excesses of snarling, self-styled
rock god Stevie Streeter’s onstage garb
(Sebastien Torkia, channelling Alice
Cooper and Marc Bolan).
Cooke’s production offers more
than an exercise in nostalgia, however.
Rock Follies was a pioneering TV hit
in the mid-’70s (written by Howard
Schuman with music by Andy Mackay),
tracing the efforts of three women —
Dee, Q and Anna — to break into the
rock world by forming an all-female
group ironically called the Little Ladies.
A familiar sawdust-to-stardust narra-
tive comes spiked with the challenges
of holding on to integrity in a male-
dominated industry.
As in the screen version, this
stage musical (with a book by Chloë
Moss) sees each of the women battle
with domestic obstacles. Q supports a
hanger-on boyfriend by starring in
tacky adult movies; Anna is trapped in
an unfulfilling marriage; Dee faces the
opprobrium of her hippy commune-
dwelling friends. And once they venture
out on the road and into the recording
studios, they’re met with the wandering
hands, power politics and outsized egos
of the rock industry.
The action plays out against the roil-
ing unrest of the ’70s — strikes, protests,
demands for equality — which makes
for poignant viewing today. The whole
show is staged like a rock gig, with road-
ies darting on and off to move the heavy
trunks that make up Vicki Mortimer’s
set, while a fine band pump up the
energy from behind a mesh fence at the
back of the stage.
Like the characters, however, the pro-
duction hits some tricky potholes.
Cramming the entire narrative into one
evening means the plot is heavy on inci-
dent, light on detail and texture. Issues
fly by, characters are sketched in and
even the central trio don’t have as much
time invested on the richness of their
relationships with one another as the
story needs.
But what’s not in doubt is the
quality of the three performances or of
their voices. Zizi Strallen as Q, the
In ‘Rock Follies’, the
women are met with the
wandering hands, power
politics and outsized egos
of the music industry
peacemaker who finally speaks out,
Carly Bawden’s Anna, driven to addic-
tion by the strain of compromise, and
Angela Marie Hurst’s Dee, the reluctant
star, all deliver the songs superbly and
find real eloquence in their solos.
There’s lovely support from a great,
multitasking ensemble. It’s an exuber-
ant, uplifting evening, even if it doesn’t
quite hit the number-one slot.
To August 26, cft.org.uk
Something went wrong. That’s true of
the audacious heist on which the sum-
mer comedy The Crown Jewels is based.
Unfortunately it’s also true of the show.
On paper, it’s a decent idea: a cod-
Restoration comedy about the eccentric
★ FINANCIAL TIMES
ARTS
Top: from left, Zizi
Strallen, Angela Marie
Hurst and Carly Bawden in
‘Rock Follies’. Above: Al
Murray and Mel Giedroyc
in ‘The Crown Jewels’
Johan Persson; Hugo Glendinning
1671 attempt to steal the Crown Jewels
from the Tower of London, in which
Anglo-Irish conspirator Colonel Blood
and his hapless accomplices — having
flattened the crown with a mallet,
sawn the sceptre in half and stuffed the
orb down one man’s breeches — man-
aged to get as far as the Tower’s Iron
Gate before being arrested. That could
be comedy gold, especially in the
hands of seasoned writer Simon Nye
(Men Behaving Badly), director Sean
Foley, and well-known comic actors
including Al Murray, Mel Giedroyc and
Neil Morrissey.
In practice, it’s as flimsy as a cut-price
replica of the crown. There are a few
good gags but mostly the script limps
along, bedevilled by flaccid, smutty
jokes that surely wouldn’t make it past
the first draft of a self-respecting Resto-
ration comedy, while the plot meanders
in and out of focus. Even as farce the
production flounders, because there’s
never enough sense of jeopardy.
Aidan McArdle and Joe Thomas work
hard to wring laughs out of the volatile
Blood and his meek son Tom, while poor
old Morrissey, as fellow rebel Perrot, is
Movie music in focus at the Proms
CLASSICAL
BBC Proms
Royal Albert Hall, London
Richard Fairman
The cross-fertilisation of film, stage and
classical music has become mutually
beneficial over the years. For a neatly
balanced exposition of the various influ-
ences, Sunday’s BBC Proms concert
could hardly have done better — even
though it was never planned that way.
It was a shame that the first UK per-
formance of Mason Bates’s new Piano
Concerto had to be cancelled when Rus-
sian pianist Daniil Trifonov was unable
to secure a UK visa in time.
To take its place, in came music by
Erich Korngold, renowned as a Holly-
wood film composer after his enforced
move to the US in the 1930s and a link
between the other two composers on
the programme.
The concert opened with the suite
from Bernard Herrmann’s film score
for Vertigo, one of his finest collabora-
tions with Alfred Hitchcock. The film’s
fusion of music and images cannot be
replicated in the concert hall, but the
suite rises to a heady conclusion with
the “Scène d’amour”, sounding suitably
lush in this performance. Who knew
that the suite includes a part for
Hammond organ, performed here
on the Royal Albert Hall’s monster
Victorian instrument?
The lyricism and seductive sound of
Korngold’s Violin Concerto, written a
decade earlier, are cut from the same
cloth. Soloist Vadim Gluzman shaped
the melodies with an unfussy sweep and
showed nimble agility in the finale.
Like the other two composers,
left trying to spin humour out of being
roaring drunk or having pee spilled
down his leg.
Carrie Hope Fletcher brings sparkle
as both Charles II’s lusty mistress and
the jewel-keeper’s sullen daughter. She
also sings very well — she’s got a fabu-
lous voice — but quite why, when no one
else does, is a mystery. Everybody
shouts a lot, as if trying to inject energy
through volume.
The show fares best when Murray’s
monarch, possessed of lush costumes
(Michael Taylor), a towering wig and
an even huger sense of mischief, aban-
dons the story in favour of ad-libbing
and teasing the audience (“Next time
you come to court, don’t come dressed
as a swineherd,” he says to one man in
the stalls). Using his considerable expe-
rience as a stand-up comedian, he
brings a nice glint of unpredictability
to proceedings.
Adonis Siddique, as his much-
maligned footman, is also drolly funny.
Giedroyc, likewise, makes a visiting
French aristocrat a juicy comic turn by
Prokofiev wrote some important film
scores, notably for director Sergei Eisen-
stein, but it was one of his operas in
focus here. The Symphony No 3 uses
music from The Fiery Angel, creating
from it a demonic symphony laced with
black magic. This rather rough-and-
ready performance by the BBC Sym-
phony Orchestra, conducted by Gustavo
Gimeno, had pace and attack on its side,
aided by the thunderous acoustic of the
Royal Albert Hall. AAAEE
On the next night the BBC National
Orchestra of Wales and its principal con-
ductor Ryan Bancroft brought an Amer-
ican-themed programme. This time the
new work did happen: Nova Plexus, a
BBC commission from Derrick Skye,
was getting its premiere and proved a
lively Proms showpiece. Skye, who had
ambitions to be an astronaut as a child,
is said to have conceived “a sonic world
illuminated by the sun’s resplendent
elegance”, but what comes across is a
high-energy, rhythm-based piece. He is
Violinist Vadim Gluzman and conductor Gustavo Gimeno — Chris Christodoulou
Thursday 3 August 2023
Rock Follies
Chichester Festival Theatre, West Sussex
AAAEE
The Crown Jewels
Garrick Theatre, London
AAEEE
Word-Play
Royal Court Theatre, London
AAAEE
dint of a haughty air and eccentric
laugh. But these feel like gems in want of
a better setting.
To September 16, then tours
crownjewelsplay.com
Rabiah Hussain’s Word-Play is, aptly, a
play about words. Starting with a pan-
icked gathering in Downing Street, with
the press team frantically trying to
stage-manage a racially offensive gaffe
made by a PM who refuses to apologise
(“Look up synonyms for ‘sorry’”), it spi-
rals out to consider how words become
loaded, the way language can be used to
reveal or to conceal, to shape the agenda,
embed ideas and shift the discourse.
It’s a smart and deftly pitched piece,
switch-backing through multiple
quickfire scenarios. Scenes that start
out playful begin to morph as words
take on weight through repetition. In
one exchange, a new employee begins
to question the British Transport
Police’s safety slogan — “See it. Say it.
Sorted.” — querying the weight and
meaning of words such as “suspicious”
and “normal”. A radio show interviewee
has their language policed by an
“impartiality bleeper”.
The splintered structure is fun and
intriguing — like children, we have to
puzzle out the way this play’s language
works. But it does also stand in the way
of characterisation and plot develop-
ment, and feels a bit repetitive. The cast
(Issam Al Ghussain, Kosar Ali, Simon
Manyonda, Sirine Saba and Yusra War-
sama) are wonderful, however, nipping
nimbly from one character to another in
Nimmo Ismail’s production.
Fittingly, it’s a piece about insidious
prejudice without declaring itself as
such, building to a climax with a story
about a school incident. “Sticks and
stones may break my bones, words will
never hurt me,” runs the saying. Hus-
sain begs to differ.
To August 26, royalcourttheatre.com
Yusra Warsama
in Rabiah
Hussain’s drama
about language,
‘Word-Play’
Johan Persson
known for his interest in world music
and the influences here take in west
African drumming, Balinese gamelan,
Persian classical music, and more.
That gave the orchestra a good work-
out, so the players were probably glad
to move on to Copland’s understated
Clarinet Concerto. Soloist Annelien Van
Wauwe judged well how strongly to
project in this vast hall.
The main event was John Adams’s
imposing choral work Harmonium, set-
ting poems by John Donne and Emily
Dickinson. This was another perform-
ance with rough edges, though the BBC
National Chorus of Wales and Crouch
End Festival Chorus gave their all in the
Bacchic frenzy of Dickinson’s “Wild
Nights”. The minimalist Harmonium,
now on its fourth Prom performance,
dates back to 1980. How far music in
general, and Adams’s music in particu-
lar, have come since then. AAAEE
bbc.co.uk/proms
Thursday 3 August 2023
The influence of the armed forces has grown dramatically under López Obrador as he pushes
to deliver priority projects quickly. But critics say there is no accountability or transparency.
P
assengers arriving at Latin
America’s busiest airport are
now greeted by uniformed
marines, who direct them to
immigration, supervise cus-
toms checks and patrol the terminal.
This is the most visible element of
what amounts to a military takeover:
1,500 troops were deployed to Mexico
City’s Benito Juárez airport after popu-
list President Andrés Manuel López
Obrador drafted in a retired senior
naval officer to run the facility.
“There was corruption everywhere
. . . [so] the president said: ‘I need the
armed forces’,” says vice-admiral Carlos
Vázquez Tiscareño, the airport’s general
director since 2022, from his office over-
looking the runways.
The airport’s administration will soon
come under full military control, joining
a growing number of armed forces-run
assets in Mexico. To realise the presi-
dent’s vision of stamping out corruption
and running state-owned facilities effi-
ciently, the army and navy will manage
more than a dozen civilian airports, the
national customs agency, maritime
ports and two new train lines. There are
plans for an army-run passenger airline
to start operations in December, reviv-
ing the name of Mexicana de Aviación,
which went bust in 2010. Hotels and
nature reserves will follow.
Policing has also been militarised. A
113,000-strong National Guard force,
which replaced the federal police, was
moved under the defence ministry by
presidential decree in September 2022.
The Supreme Court ruled the move
unconstitutional, but the government is
yet to act on the decision.
For López Obrador, the military take-
over of Mexico City’s main airport has
yielded good results. “No suitcases are
being stolen, as they were before; smug-
gling is not allowed and, most impor-
tantly, those operations when drug traf-
fickers [temporarily] took control of the
airport . . . no longer happen” he said in
a June speech.
But as the economic and political
power of Mexico’s military grows, with
unelected military leaders overseeing
more than 350,000 full-time staff,
including national guards, and annual
revenues of tens of billions of dollars,
critics ask whether the president is cre-
ating a monster he and his successors
will not be able to control.
“The Mexican army was left
untrained, poorly equipped, corrupted,
neglected and sidelined for 80 years as a
deliberate state policy in order to avoid
any temptations of power,” says Jorge
Castañeda, an academic and foreign
minister from 2000-03 in the National
Action party (PAN) government.
“Now it’s the opposite. The army has
lots of money and it is learning how to
run customs, airports, trains and is
building hotels. The army has become
an entrepreneur. How do you put the
toothpaste back in the tube?”
Military discipline
Mexico’s modern army evolved from
the people’s militias that triumphed in
the 1910-20 revolution. Revolutionary
generals ran the country until handing
over to a civilian president in 1946 and
stepping down from politics.
Since then “the Mexican army has
been totally institutional and loyal”,
says Enrique Krauze, a Mexican histo-
rian. “There has never been any threat
of military coups, as there was in the rest
of Latin America.” Polls consistently flag
the popularity of the armed forces, who
are admired for assisting citizens after
natural disasters such as earthquakes
and floods.
Military budgets used to be modest.
When López Obrador took power in
2018, Mexico spent just 0.5 per cent of
gross domestic product on defence,
according to the World Bank, less than
half the regional average of 1.3 per cent.
A veteran leftwinger, López Obrador
had once been critical of the armed
forces, even going so far as saying in
2019 that he would like to abolish the
army. He changed his tune, however,
when he realised that the military could
help him cut through legal and budget-
ary obstacles and deliver his priority
projects quickly. He increased military
budgets and assigned the defence minis-
try, which oversees the army and air
force, and the navy ministry a wide
range of security, construction and
management tasks.
The military oversaw the $5.2bn con-
version of a former air force base on the
edge of the capital into a new civilian
airport, Felipe Ángeles, which it also
runs. It is also managing the construc-
tion of stretches of a $20bn tourist train
around the Yucatán peninsula, and will
run that and a newly revamped line con-
necting the Gulf of Mexico and the
Pacific. The army has been pressed into
service to help build 2,700 branches of
the state-run Banco de Bienestar, two
aqueducts and a new airport planned
for the Maya Riviera resort of Tulum.
“The army is the only part of the
★ FINANCIAL TIMES 19
FT BIG READ. LATIN AMERICA
By Michael Stott and Christine Murray
work trips in the Americas, in line with
military protocol, but had never been to
Italy and had not taken a holiday at all
in 20 years.
With the army’s role growing in over-
seeing large and potentially very lucra-
tive revenue-generating organisations
— the customs service alone collects
around 15 per cent of Mexico’s entire tax
revenues, for example — some local
journalists worry that the potential for
serious corruption in the military is sig-
nificant.
“Amlo has planted a poisoned seed
by empowering the military,” says Juan
Pardinas, editor of the newspaper
Reforma, which is critical of the govern-
ment.
A dangerous legacy
Corruption is not the only problem with
the military’s expanded role.
López Obrador’s six-year term is
already the deadliest in Mexico’s peace-
time history, with more than 155,000
murders and 43,000 disappearances
reported so far. As well as violence
wreaked by drug cartels, the armed
forces have been accused of contribut-
ing to the bloodshed and carrying out
serious human rights violations.
In June, 16 arrests were made after a
security camera captured a group of sol-
diers chasing suspected drug traffickers
close to the US border at Nuevo Laredo.
The footage shows the soldiers ramming
their vehicle, dragging five men from
the wreckage, lining them up against a
wall and later shooting them. After-
wards, one soldier could be seen placing
automatic weapons in the hands of the
dead suspects. Separately, four soldiers
were charged with murder this year
after allegedly shooting dead five
unarmed civilians returning home from
a disco in the same city.
A panel of international experts
investigating the disappearance and
suspected murder of 43 student protest-
ers in the state of Guerrero in 2014
wound up its investigation on July 25,
saying it had been repeatedly lied to and
misled by the military about its involve-
ment and, therefore, could not com-
plete its probe.
Despite the alleged corruption and
human rights scandals, and their grow-
The militarisation
ing role in public life, the US has avoided
public criticism of Mexico’s military. In
April, US ambassador to Mexico Ken
Salazar praised the “strong relation-
ship” between the armed forces of both
countries. Many observers in Mexico,
of Mexico however, are now worried about the
consequences of what López Obrador
has started.
In October 2024, the president, who
cannot seek a second term in office
under the Mexican constitution, will
President
Andrés Manuel
Mexican bureaucracy which is disci-
plined,” says Lorenzo Meyer, a professor
the government, referring to López
Obrador by his initials.
Manaut, an expert on the armed forces
at Mexico’s UNAM university. “The mil-
‘Today the hand over power to his successor. Opin-
ion polls indicate that whoever runs for
López Obrador at the Colegio de México and a friend of The army has used that relationship itary put him under pressure. They told military his Morena alliance will be the favourite
has handed the the president. “When you give the order to great effect. him: ‘The DEA makes things up, the to win. Even if the next president
armed forces to the army to finish an airport in a cer- DEA hates us.’ He believed all that.” has been wanted to, will he or she be able to put
Above the law?
some of Mexico’s
major public
tain period of time, it gets done.”
But critics argue that outsourcing to When US agents arrested General Sal-
The president has maintained his loy-
alty to the military in the face of other
empowered the military genie back in the bottle?
José Miguel Vivanco, adjunct fellow at
assets the military allows López Obrador to vador Cienfuegos at Los Angeles inter- challenges and has been unstinting in so much the Council on Foreign Relations and
FT montage/Shutterstock/ use national security as a pretext to national airport in October 2020 on his praise of Sandoval, his defence min- former Americas director of Human
Getty Images/EPA
avoid scrutiny of costs and contracts or charges of drug conspiracy and corrup- ister. López Obrador ended his speech
and has so Rights Watch, believes the militarisa-
to dodge environmental assessments. tion, the news dropped like a bombshell on army day, a civic holiday in February much tion of Mexico is the “main negative leg-
“In areas where a lot of business is across the border. celebrating the army being established, acy” of López Obrador and something
being done, there is no access to infor- Cienfuegos, Mexico’s defence minis- with a special thanks for Sandoval, sin- presence that will be hard to reverse.
mation for reasons of national security,” ter for six years until 2018, had overseen gling out “his dedication and honesty”. that it can “The military has been a very useful
The army says María Amparo Casar, president of
Mexicanos contra la Corrupción y la
the military’s fight against drug traffick-
ing and trained a generation of army
Others in Mexico, however, wonder
how true that is. In May, MCCI pub- exert
partner for Amlo, allowing him to
deliver results, protect his big projects
was left Impunidad (MCCI), an NGO that cam- leaders, making him the most high- lished documents showing that San-
control and project himself as an executive
paigns for official transparency. “Con- profile Mexican official ever arrested by doval had in 2020 bought a 407 square- president,” he says. “Today the military
untrained, tracts are assigned directly by the mili- the US for corruption. The following metre apartment in an exclusive Mexico over Amlo’ has been empowered so much and has
poorly tary, whereas the constitution stipulates
that all government purchases should
morning, López Obrador described the
arrest as “very regrettable”, calling it a
City suburb from the co-owner of an
army contractor, at a declared price of
so much presence that it can exert con-
trol over Amlo.”
equipped, be public tenders.” sign that “the main problem of Mexico is 9mn pesos ($536,000) — only a third of Senator Claudia Ruiz Massieu, for-
The armed forces now sit atop a pyra- corruption”. the value of comparable apartments merly of the opposition Institutional
corrupted mid of public bodies and enterprises Within days, however, the president’s nearby, the NGO said. Revolutionary Party (PRI), wants a
and generating more than $60bn a year in tone changed. He emphasised that The documents showed Sandoval public debate on the military’s role.
revenues from customs alone. Military the army as a whole remained above financed the purchase with a 100 per “The [military’s] expansion into other
sidelined chiefs have a regular role in López Obra- suspicion and that Mexico “was not a cent mortgage from the army bank over government and administrative tasks
for 80 years dor’s marathon daily news conferences,
appearing at least every fortnight to
US colony” in a bid to show voters that
he would stand up to their powerful
20 years at a fixed interest rate. Monthly
payments were set at 70 per cent of his
which ought to be handled by civilians,
and for which they are not prepared, is
deliberately report on projects under their control. neighbour. official salary of about $140,000 a year. generating a lot more risks and prob-
Behind the scenes, their influenceis Many have wondered what prompted Within two years, he repaid more than lems,” she argues.
to avoid any more significant. “The last person Amlo the shift. A person with knowledge of half the mortgage. In the meantime, López Obrador is
temptation sees before the morning news confer-
ence is the military,” says Carlos Loret
the events says that in the days that fol-
lowed Cienfuegos’s arrest, the current
Sandoval has denied impropriety,
saying the declared purchase price was
taking further steps to strengthen the
military’s position. His allies in Congress
of power’ de Mola, a leading columnist critical of defence minister General Luis Cresen- low because the apartment had not approved a constitutional reform last
cio Sandoval took the case file to the been fitted out, that he dealt with an October allowing the armed forces to
The unrelenting rise in Mexican military president “to show him that it was made independent estate agent throughout keep responsibility for public security
up by the DEA [US Drug Enforcement and that he has made repayments from until 2028 — a law opponents are chal-
spending Administration]”, which has long had a his income. There has been no official lenging as unconstitutional.
Bn pesos Approved Actual tense relationship with Mexico’s army. investigation. López Obrador’s support “The military are a fundamental pil-
Army spending Navy spending Mexico’s legislature passed a law has not wavered, telling reporters lar of the Mexican state,” López Obrador
severely restricting the operations of all probing the general’s purchase that said in a speech last November. “Despite
150 150 foreign law enforcement agents and “this is like an upside-down world in what our enemies claim, usually the
AMLO AMLO
takes takes removing their immunity. Local news which the corrupt question those who conservatives, the armed forces’
power power reports said the government had are honest”. Sandoval, he said, was increased participation in security tasks
stopped issuing visas to DEA agents. “incorruptible”. does not imply authoritarianism or mil-
100 100 The Trump administration quickly Sandoval has also been criticised after itarism . . . On the contrary, it has dem-
backed down. The charges were MCCI analysed a trove of leaked defence onstrated that society feels safer and
dropped, and the former general was ministry emails showing that his office more protected.”
returned to Mexico to face an investiga- had drawn up plans for his family to Sitting in his office at Mexico City
50 50 tion at home. In January 2021, Mexico take a 10-day trip to New York in airport, Vázquez Tiscareño concedes
cleared Cienfuegos of any wrongdoing. December 2021 accompanied by a posse there could be corruption risks in the
By 2022, the general, wearing full mil- of army aides, as well as a two-week visit military’s new projects but says that,
itary dress, joined guests of honour at to Italy, staying in luxury hotels in Ven- overall, the military is honest and would
0 0 the inauguration of the new Felipe ice and Florence. always obey the president’s orders. “The
2010 15 20 23 2010 15 20 23 Ángeles airport. He was back in the fold. The defence ministry pointed to com- armed forces didn’t ask to be here,” the
The Cienfuegos case was a key test of ments by Sandoval in May in which he vice-admiral says. “The president
Source: Mexico’s finance ministry
López Obrador, says Raúl Benítez said he had taken his family on official ordered it and here we are.”
20 ★ FINANCIAL TIMES Thursday 3 August 2023

The FT View
Let the legal process play out against former US president
New charges against Trump
herald a battle for the future
of America’s political system
Few things are more perilous for democ-
racy than an effort to obstruct the
peaceful transfer of power after a legiti-
mate election. This is what Donald
Trump is now formally accused of.
Bringing the previous, lesser, charges
against him — of falsifying business
records and mishandling classified doc-
uments — was right and necessary to
show that even a former president is not
above the law. But this week’s indict-
ment is by far the most grave, since it
goes to the very heart of America’s sys-
tem of government. Bringing these
charges entails huge risks. The risks of
not doing so would have been greater.
The 45-page indictment alleges that
Trump, with six unnamed co-conspira-
tors, was involved in a scheme to make
ft.com/opinion false claims that the 2020 election was
rigged, then used those claims to
attempt to overturn the outcome. A trio
of conspiracies each targeted a “bed-
rock function” of the US government —
the process of “collecting, counting and
certifying the results” of the presiden-
tial election.
It does not accuse the ex-president of
inciting the January 6 2021 assault on
the Capitol by his supporters. But it says
Trump’s lies aimed to create an “intense
national atmosphere of mistrust and
anger” and erode faith in how the elec-
toral process was run. These were the
conditions in which such an attack
could take place.
There are multiple hazards in mount-
ing this case. The bar at trial is high. The
indictment concedes Trump had a First
Amendment right to criticise and voice
falsehoods about the election. Prosecu-
tors must prove he knew his statements
were false, and used them as part of a
criminal fraud.
The charges, moreover, may only
boost Trump’s support and fundraising
capacity. They threaten to stoke the
belief among his loyalist base that the
ex-president is himself the victim of a
plot to bar him from a political return.
Since a sizeable minority is convinced
by Trump’s “Big Lie”, the charges risk
setting Americans against Americans.
Senior Republicans ought to think
twice about further inflaming tensions
by continuing to accuse Democrats and
the White House of “weaponising” the
justice system. Though Trump has not
been found guilty by a court, they
should realise that endorsing a man who
is not only seen by many citizens as hav-
ing attempted to subvert an election but
is now charged with doing so could do
long-term damage to their party brand.
It is important, at the same time, that US
legal authorities are seen to be entirely
impartial in handling the process that is
rightly under way against Joe Biden’s
son Hunter Biden, though on much
lesser charges than those levelled at
Trump — which Republicans have
claimed is a cover-up.
Bringing these Not to bring the latest charges against
charges entails Trump for fear of the consequences
would have set a precedent that presi-
huge risks, but
dents can get away with trying to under-
the risks of not mine the electoral process. It would
doing so would have suggested that the judiciary may
have been not be able, or may simply choose not,
greater to hold the executive arm to account.
This would, in the end, have been worse
for the US political system.
In an ideal world, this newest indict-
ment would be prioritised, given its
gravity, over the previous two — and
would be guaranteed to come to trial
before next year’s election. In reality,
Trump’s team may succeed in delaying
it beyond the poll, opening the possibil-
ity that, if he won, the returning presi-
dent could appoint a more amenable
attorney-general to bury the case — or
even pardon himself. What is clear is
that the next year, even more than the
2020 election, will herald a battle for the
future of US democracy — one in which
not just the political system but the legal
system will now be involved.

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low in the age of podcasts Climate policies should not target those least able to cope
Ben Hickey The broader significance of the recent
Uxbridge and South Ruislip by-election
result is twofold. First, the
Conservative party succeeded in
mobilising a local issue in a
parliamentary contest even though the
national Labour party has no direct
control over the imminent expansion
by London’s Labour mayor, Sadiq
Khan, of the ultra-low emission zone
(Ulez) to cover the entire Greater
London Authority area.
The second lesson has far wider
importance, namely that many poorer
local residents, already struggling
economically after the pandemic and
amid the price inflation of the past 18
months, find the £12.50 daily charge
for non-compliant vehicles to be one
new tax too many. They rely on their
cars to get to work and for other
purposes and cannot afford to invest in
a newer vehicle, particularly since the
scrappage scheme for non-compliant
cars is inadequate.
It is vital to avoid knee-jerk
reactions, branding such voters as
ignoring or being unwilling to help
tackle poor air quality and climate
change. This might be true for some,
but certainly not all. Meanwhile, the
toll of extreme events continues, from
forest fires to floods and droughts, and
which are attributable at least partially
to human-induced climate change.
What is thus needed is forward-
looking political leadership in all
parties that grasps the nettle of
urgency in tackling climate change
substantively. Instead of sitting on the
fence, or starting to unpick policies in
crass attempts to win votes, they need
to explain the urgency and find
stronger incentives (like more
generous scrappage schemes) to
promote uptake of necessary policies.
A key element of “just transitions” to
sustainability and climate resilience is
ensuring that mitigation and
adaptation measures do not adversely
affect those least able to cope or afford
to change their behaviour. Locally
appropriate public policy interventions
are required in each case to bridge such
gaps and, in the words of the UN’s
Agenda 2030, “leave no one behind”.
David Simon
Professor of Development Geography,
Royal Holloway, University of London,
Egham, UK

war and peace, cruelty and hope, all of
Jemima it together is just sobering. Sobering.”
Fridman had already read out
Kelly adverts for five different podcast spon-
sors, and we were now eight minutes
into the podcast. “If I wasn’t already
Pension fund fees must Bank account closures China may exploit gap for
be reasonable and clear hurt in a cashless world affordable electric cars
Moira O’Neill has rightly pointed out The excellent article by Jim Pickard To follow on from your correspondent
the danger for pension holders of
money being invested in illiquid assets
and Stephen Morris regarding Nigel
Farage’s campaign for banking services
Lord Lea (“Electric car narrative is
getting too much PR spin”, Letters, July
(Opinion, July 14). resonates strongly with me, somewhat 26), it cannot escape anyone’s attention

R
ussell Brand has come a
long way since he sparred
with Jeremy Paxman on
Newsnight, agitating for a
socialist revolution that
would end the disparity between rich
and poor, saying capitalism was “100
per cent corrupt” and calling profit “a
filthy word”.
Ten years later and the multi-mil-
lionaire wellness-guru-cum-conspira-
cy-influencer is cosying up to Tucker
Carlson, calling Republican presiden-
tial candidate Ron DeSantis a “friend”
and flogging the flailing Florida gover-
nor’s new book to the 6.5mn “awaken-
ing wonders” who subscribe to his
YouTube channel. Brand also flogs
other products — from whichever
brand happens to have sponsored
the latest episode of his Stay Free with
Russell Brand podcast.
In his recent softball interview with
grateful it makes me truly grateful
to be alive, to be healthy, to have the
people I love in my life,” he continued.
“Anyway as part of that difficult
journey it’s nice to have little tokens
of home with me and AG1 is certainly
that.”
If you’re a regular podcast listener
you’ve probably already heard of AG1,
an all-in-one health supplement that
costs $99 for a month’s supply and
is made by Athletic Greens. The com-
pany is one of the biggest spenders
on podcast ads, spending more than
$2mn in June, according to research
firm Magellan AI.
Podcast advertising is big business.
In the US alone, revenues hit $1.8bn
in 2022, according to the Interactive
Advertising Bureau and are expected
to more than double to $4bn by 2025.
“Programmatic ads” that use algo-
rithms to target individuals and so are
different for each listener and pro-
vided by third parties have increased
There is another danger lurking in
the Mansion House speech. Referring
to the “value for money framework” to
be published the following day by the
DWP, the chancellor said that the
framework was “clarifying that
investment decisions should be made
on the basis of long-term returns and
not simply cost”.
The framework itself, at paragraphs
50-52, summarised the responses to
reporting investment returns “net or
gross” with the direction of travel
appearing to favour gross returns.
Charges are of fundamental
importance: a principle recognised by
parliament’s work and pensions
committee when it recommended a
cap of 0.75 per cent on annual costs to
be taken from workplace defined
contribution schemes.
The effect of charges could exceed
the 12 per cent increase in investment
value that HM Treasury predicts. If you
are a custodian of an individual’s
pension pot, there is both a moral and
commercial imperative to levy
transparent and reasonable fees.
Peter Nellist
Exeter, UK
to my surprise (“Nigel Farage, NatWest
and the fight over ‘woke’ capitalism”,
The Big Read, July 29).
I am a pensioner, having worked
(mainly overseas) for Barclays Bank
for 37 years. Now the bank, by applying
“limitations”, has informed me of its
intention to close my account for no
better reason than that I live outside
the UK. As your article states: “In an
increasingly cashless world, having a
bank account has become an essential
service.”
Although I live abroad, I still have
many sterling commitments in the UK.
This action by the bank causes much
distress for individuals such as myself
who have no possibility to open a new
sterling account in the UK.
I have invited the bank to reflect and
reverse this antisocial policy.
Hugh Malim
Silvaplana, Switzerland
that motor manufacturers are
attracting large taxpayer subsidies to
locate and turn out profitable, large,
heavy and environmentally
questionable SUVs.
With city runarounds at the other
end of the scale, there are limited
electric options for the mainstream
driver in the middle wanting the
practical and affordable vehicles that
are required to deliver significant
environmental and cost savings over
typical mileages, especially within a
standard three-year lease — what
Americans call compacts.
Public debate on this irony appears
strangely absent. Without policy tools
to address this, it will be left to Chinese
manufacturers to exploit the gap and
fully realise the benefits of electric
motoring.
David Cole
Essex, UK

These ads exploit the
trust established via a
‘parasocial’ relationship
between host and listener
DeSantis, Brand interrupted to plug a
particular brand of men’s underwear.
“It’s getting hot out there, and I don’t
know about you Ron, but I’m getting
pretty hot down there,” Brand said.
“Summertime is not an issue if you
wear Sheath underwear . . . There’s
something for everyone’s testicles
and penis.” He then proceeded to
give his followers a very special
20-per-cent-off code.
This is by no means the most egre-
gious recent example of this type of
advertising I have come across. Unlike
the conventional adverts made by
advertising agencies, these “host-
read” adverts are delivered by the pre-
senter of a given podcast or YouTube
channel, and so usually have a chatty,
improvisational feel to them. This
makes them particularly effective,
and also means that they are often
virtually indistinguishable from the
content they are inserted into.
At the beginning of a recent episode
of the Lex Fridman podcast, an in-
person interview with Tel-Aviv-based
thinker and writer Yuval Noah Harari,
the host talked solemnly about some
of his experiences during his trip. “I’ve
travelled to some very difficult areas
of the Middle East over the last two
days,” he said. “It’s been a real chal-
lenge — emotionally, psychologically,
physically, just all of it. The reality of
in recent years. But host-read ads are
still the most common: they made up
55 per cent of all podcast advertising in
2021, according to the IAB. They also
command higher rates, because they
are thought to lend trust and “authen-
ticity” to the advertising.
But like most things that get called
“authentic”, these ads are in fact just
the opposite: they exploit the trust
established via a “parasocial” — or
asymmetric — relationship between
the host and the listener.
And it is quite disconcerting to sud-
denly realise that the person you’ve
just been listening to speak with
authority and credibility — on, say, the
threat from China, or how to get over
your ex — is now using that very same
voice to try to convince you that being
able to find a therapist on an app is
a revolutionary development (I’m
talking to you, BetterHelp). So revolu-
tionary that you must immediately
download the app and use their
discount code.
When did we collectively decide to
accept this level of grift? We would
never allow such shameless shilling to
be buried in, say, a newspaper article.
The lines between genuine content
and commercial propaganda are being
blurred to such an extent that we can-
not properly distinguish between the
two. And this matters because it is part
a wider, and graver, societal problem:
the devaluing of truth.
We should see host-read ads for
what they really are: a shady and
deceptive bit of window dressing for
the dirty business of advertising. Let’s
get rid of them.
jemima.kelly@ft.com
F
O UTLO O K or the most part,” Irish
justice minister Helen
McEntee said after the US
I RELAND warned its tourists to take
care in the wake of a brutal
attack on an American visitor last
month, “Ireland as a country, and our
Attacks force cities, are safe.”
That was certainly my impression
Dublin to when I moved to Dublin from Mexico
City two years ago. Much of the city
felt rich and secure. Perhaps even a
confront its little smug.
Which is what made the recent
problems attack on Stephen Termini so shocking.
Three teenagers — the youngest aged
just 14 — have been charged with the
assault on July 19 that left the 57-year-
old Termini in a coma for several days.
It is too early to say whether he has
been blinded in one eye.
Less than a month earlier, a
Ukrainian actor in Dublin suffered
what the city’s Abbey Theatre called
an “unprovoked, random act of
mindless violence”. Oleksandr Hrekov
was slashed with a glass and bitten
near the theatre after passers-by tried
to steal his cigarettes following the
final show of a sellout run.
The attacks have forced Dublin to
hold up a mirror to itself and take a
long, hard look. The reflection shows
dilapidated inner-city areas with
drug crime thriving in the shadow of
graceful Georgian buildings, museums
and pubs that attract 6.6mn overseas
visitors to the city every year.
In the early years of the 20th
century, when Ireland was still ruled
by Jude Webber by London, the capital’s overflowing
tenements were the worst slums in the
UK and public drunkenness and
disorder were rife. Yet, according to
the National Archives of Ireland:
“Dublin was not regarded as
particularly crime-ridden. And it was
certainly not regarded as dangerous.”
But by the late 1970s and 1980s, the
birth of a lucrative heroin trade in
Dublin had changed things. Crime
reporter Veronica Guerin, who had
written exposés of Ireland’s criminal
bosses, was famously shot dead in a
mob-style hit in 1996 as she waited in
her car at a red light.
Two decades later, the drug lords
started killing each other on Dublin’s
streets, in a bloodbath accelerated by
a botched attempt to assassinate the
head of the powerful Kinahan cartel at
a hotel in 2016. That in turn triggered
a feud between the Kinahans, whose
exiled bosses are wanted by the US,
and the rival Hutch gang, which is
believed to have claimed 18 lives.
Today, some of Dublin’s streets, with
shuttered shops and rubbish on the
streets, look tawdry. And though by
global standards crime levels are far
from extreme, Ireland’s police force,
An Garda Síochána, reported a 10 per
cent increase in attacks on people
nationwide in the year to June 2023
from the same period in 2018-19. Police
numbers have fallen 4 per cent since
2020, and recruitment targets have
been missed for the past two years.
Dublin is home to 28 per cent of
Ireland’s 5.1mn population but has
just 3,719 police force members.
McEntee last week announced €10mn
to put more officers on streets in the
wake of the attacks on Termini and
Hrekov.
Taoiseach Leo Varadkar, leader of
Fine Gael, which prides itself on being
the party of law and order, tells me
that the government is establishing
“new community safety partnerships”
with street wardens, CCTV cameras
and better street lighting.
Still, as Mark Henry, a tourism
expert, notes in his book In Fact: An
Optimist’s Guide to Ireland at 100, “for
the past two decades our crime rate
has been on a consistent downward
trend . . . all the evidence points to its
ongoing decline”.
Tourists have continued to pile in.
According to a Dublin City Council
survey published in June, three-
quarters of visitors to the Irish capital
come for the pub scene, with history,
literary culture and music also key
draws. Only around a fifth thought the
city needed to be safer and cleaner to
attract more visitors.
For many, Dublin symbolises craic —
or fun — as evidenced by its popularity
as a stag and hen party destination.
But, “a brand is continually evolving,”
said Niall Corcoran, managing director
at CI Studio, an agency which has
previously worked on the Dublin Town
brand identity for city centre
businesses.
As these recent attacks have shown,
“[tourism] is hugely competitive.
People have choice, you’ve got to be
continually improving the product.”
jude.webber@ft.com
Thursday 3 August 2023
Trump and American democracy’s time of trial
global affairs
rs
Gideon
Rachman
he future of democracy in
America will turn on the tri-
als of Donald Trump — and
the p olitical turmoil that
will surround them.
The latest indictment of the former
p re s i d e n t — i n c o n n e c t i o n w i t h h i s
efforts to overturn the results of the
2020 presidential election — is the most
important case Trump faces. It goes to
the heart of the argument that he is a
threat to American political freedom.
Three principles fundamental to the
workings of any successful democracy
a re a t s t a ke . F i r s t , t h a t l e a d e r s a re
elected and that all sides will respect the
outcome of an ele c tion. Se cond, that
n o b o dy — n o t e ve n a p re s i d e n t — i s
above the law. Third, that the truth can
be established in a court of law and that
The myth of
the motorist
in politics
BRITAIN
Robert
Shrimsley
f an Englishman’s home is his castle
then the car is his steed. So deeply is
the motorist embedded in both the
national and political psyche that
p ivo t a l vo t i n g a rc h e t y p e s a re
described by their ride. Political strate-
gists have, over the years, fretted over
the affec tions of white van man,
Mondeo man and Galaxy man. Such is
the framing that a student of British pol-
itics might b e surprise d to learn that
women also drive. (Female voters get
epithets based on homes or shops:
Worcester and Waitrose woman).
There are 33mn cars in the UK. Eng-
l a n d a l o n e h a s 1 2 c a r s f o r e ve r y 1 0
households. Driving is seen as synony-
mous with freedom, encroachments on
it as an attack on basic rights. There is no
reaason to think the British are more
re
obse sse d with their cars than other
nations, certainly not more than Ameri-
cans. What is perhaps different, though,
i s t h e m o t o r i s t s’ p l a c e i n p o l i t i c a l
mythology. Drivers enjoy the power of
being equated with target voters. So
when Rishi Sunak declares himself a
p ro - c a r c o m b a t a n t i n t h e “ w a r o n
motorists”, it is easy to comprehend the
political excitement.
Few of these political stereotypes bear
Smart-toilet market will be a measure of China’s economic resilience
ASIA
Leo
Lewis
t is not often that G oldman Sachs
refers to the capricious, cleanliness-
obsessed Japanese kawayakami toi-
let gododss in its eqequuity res
eseearch. It is
rarer still that it cites the propitia-
tion of these deities while making the
investment case for a Chinese bathroom
fittings company.
But when it comes to pitching Shen-
zhen-listed stocks to nervous, any-
where-but-China global investors, these
a re u n d e n i a b ly t o u g h t i m e s : t o u g h
enough, clearly, to justify the construc-
tion of an elab orate chart comparing
“ t o i l e t c u l t u re a n d ke y p e n e t r a t i o n
drivers in China vs Japan and US”.
For proponents of the idea that vari-
ous parts of the world are ripe for vari-
o u s t y p e s o f Ja p a n i f i c a t i o n , t h i s i s
appealing stuff. The short version of
its verdict should command the respect
of all politicians and society at large.
Trump’s effort to fight back against
the indictment relies on a rejection of
that third principle — the idea that all
sides respect the impartiality of the law.
The former president portrays the case
against him as a political vendetta. In a
statement made just after the indic t-
ment was issued, the Trump campaign
compared the federal government’s
prosecution of him to “Nazi Germany in
the 1930s”.
The danger of this situation is height-
ened by the fact that Trump’s trial for
conspiracy to overturn the previous
presidential election is likely to take
place in the midst of the next one — in
which he remains the favourite to be the
Republican party nominee. Trump’s
strategy will be to turn the 2024 election
into a second, concurrent trial — this
time before the court of public opinion.
Indeed, it is likely that Trump will
face five or more separate sets of legal
proceedings over the coming year. A
trial for falsifying business records is set
to begin next March. A trial over the
mishandling of classified information is
serious psephological scrutiny. Mondeo
man was originally identified by Tony
Blair as Sierra man. But the Mondeo, an
affordable salo on, sup erse de d that
model and was also pleasingly allitera-
tive. In as far as the Mondeo represented
anything, it was an average aspirational
family whose support Labour needed
to reclaim. Later, Blair would move up
the income scale with Galaxy man, a
people- e-ccarrier he used himself.
Perhaps more coherent was white van
man, who represented an independent
tradesman. Initially a term of abuse for
inconsiderate drivers, it was adopted
by Rupert Murdoch’s Sun newspaper,
which ran a column de dicate d to this
working class hero’s views. Even though
these classifications are still too broad to
be truly useful, to politicians they repre-
sentt a se
sen sett of ele
elecctotora
rall
llyy in-
in-tun
tunee so
socia
ciall
values and voters.
Since the fuel duty protests which
destabilised the Blair government in
2000 — years before France’s gilets-
jaunes — petrol taxes have been the
most sensitive. That revolt’s leader was
lionise d by the me dia in ways that
would be unimaginable to trade union-
ists. Although it was led by hauliers
rather than car drivers, MPs have been
habitually nervous about raising the
duty ever since.
And the current claim of an anti-car
agenda does hold water. Major cities
have introduced congestion charges,
pedestrian zones and hostile road lay-
outs. Drivers sit in traffic queues staring
at wide and empty cycle lanes. Low traf-
f i c n e i g h b o u r h o o d s h av e d i s p l a c e d
the note is that Goldman believes smart
toilets — the sort of seat-heating, rear-
washin
was hingg , fun
fundam
dament
ent--dry
drying
ing marv
marvels
pioneered in Japan as a supposed exten-
sion of its kawayakami worship — are
poised for embrace by a toilet-friendly
Chine se culture. Toilets, the note
asser
ass erts
ts,, ar
aree vie
viewwed in Chi
China
na as a “saf
safe
fe
and comfortable space for me- e-ttime”.
While smart-toilet adoption in China
has, for the past decade, been led by
middle-aged, middle-class women, the
next phase is exp e c te d to draw in
you
yo unger buye yerrs. The beneficiaries,
argue the Goldman analysts, will be
cheaper, less sophisticated domestic
offerings from the likes of local sanitary-
ware giant Arro row
w Home rather than
pricey foreign ones from the likes of
Japan’s Toto — an echo of the trend in
numerous Chinese sectors.
China’s smart-toilet adoption levels,
pre
red
dicts Goldman, should rise from
4 per cent in 2022 to 11 per cent in 2026,
by which time the revenues of the wider
Chinese sanitaryware industry will be
worth $21bn a year. In Japan, it adds,
smart toilets enjoy an 80 per cent adop-
tion rate, while in the US, which Gold-
★ FINANCIAL TIMES
Opinion
set for May. A civil trial for busine ss
fraud is scheduled for October. And
G e o r g i a m ay s o o n f i l e a f u r t h e r c a s e
against Trump for his efforts to thwart
the 2020 vote in that state.
To his opponents, that Trump faces so
many charges is proof of his corruption.
For his supporters, the sheer number of
cases is simply proo ooff that he is the vic-
tim of a vast government conspiracy.
This latest indictment
goes to the heart of the
argument that he is a danger
to US political freedom
Much of the Republican party is
already arguing that the federal authori-
ties are covering up the alleged corrup-
tion of Hunter Biden, Joe Biden’s son —
which they claim implicates the presi-
dent himself. The campaign against the
Bidens is now only likely to intensify.
This latest indictment seems very
unlikely to shake Trump’s grip on the
Republican party. Recent polls have
drivers and their emissions on to
already clogged main roads. That advo-
cates have justifications for each policy
does not dispel the sense of a strategy to
inconvenience drivers out of their cars.
And road-pricing may be the next front
as EVs shrink fuel duty revenues.
Wha
Whatt eleelevat
vateed the iss issue
ue to nat nationionalal
politics was last month’s Uxbridge
by-election, where Tories credited their
success to campaigning against a
hefty tax on polluting vehicles being lev-
ied by London’s Labour mayor. While
t h e r e i s s o m e t h i n g i n t h i s, i t i s a l s o
a l m o s t c e r t a i n ly b e i n g ove r - i n t e r -
preted. Such issues are good for by-elec-
tion protest votes but rarely central to
national polls.
Yet the argument can be depicted as a
fightback against condescending urban-
It is a proxy for a wider
philosophical contest
between public policy goals
and individual liberty
man declares an “unfriendly toilet cul-
ture”, the rate is below 1 per cent. Adop-
tion rates in China will ultimately be
capped somewhere around 30 per cent,
t h e n o t e c a u t i o n s, g i v e n t h e a g e o f
China’s housing stock and the require-
ment of decent water pressure.
Goldman’s analysis reverberates
beyond its focus on smart-toilet growth
in the world’s second-biggest economy.
Given the fears swirling around the risks
Given the fears of extended
stagnation, it may seem an
odd moment to make a bull
case for fancy sanitaryware
of extended stagnation and balance-
s h e e t re c e s s i o n , i t m a y s e e m a n o d d
time to be making a bull case for fancy
toilets. But the product, in all its inti-
mate cultural and technological com-
plexity, stands as a proxy for a type of
middle - class, property-linked con-
sumer spending whose relevance to the
wider questions around the Chinese
shown the former president miles ahead
of all his declared challengers for the
nomination in 2024. Each successive
indictment seems to have strengthened
his support among Republican voters.
This situation presents his Republi-
can p olitical rivals with an acute
dilemma. Do they accept Trump’s nar-
rative that he is being persecuted — and
thus bolster his reputation as a martyr
w h o m u s t b e s u p p o r t e d ? O r d o t h ey
reject it — and antagonise the party’s
voters, whose support they need?
The comments of Ron DeSantis, the
nearest rival for the nomination, sug-
gest that he is supporting Trump’s nar-
rative. The Florida governor greeted the
late st indic tment by de crying the
“weaponisation of government”. He also
suggested that Washington, where the
trial will take place, is a “swamp” where
Trump cannot get a fair trial.
I f T r u m p d o e s w i n t h e Re p u b l i c a n
nomina
nom inatio
tion,
n, his par
party’
ty’ss dil
dilemm
emmaa will
only become more acute. They will have
to support a candidate who likens the
federal government to the Nazi regime.
This is a message that will go down well
in Moscow — but could be difficult to
ites with no feel for life in outer suburbs
and rural areas where there is limited
public transport. The Tories sense,
probably correctly, that support for
green policies weakens once people feel
costs and disruption. Even if, as likely,
h i s wo r d s a m o u n t t o l i t t l e , S u n a k i s
pitching to be the voice of painless mod-
eration against imaginary absolutists.
However, it is a strategy to shore up the
base rather than a plan for victory. It is
not enough to deflect voters from evict-
ing an exhausted government which has
presided over — and deepened — a cost
of living crisis. Today’s equivalents of
Mondeo, Galaxy and white van man
care about their cars but they care more
about the stalled economy.
The divide does illuminate a more
profound political issue though. Neither
Sunak’s defence of the motorist nor his
pushback on net zero measures is likely
to alter the course of the election. But
the car clash is a proxy for a wider philo-
s o p h i c a l c o n t e s t b e t w e e n c o l l e c t i ve
public p olic y goals and individual
freedoms.
The climate agenda will see citizens
economy has never felt stronger. China
needs the smart-toilet story to come
true, but it ne e ds it to happ en in the
rig
right
ht wa
way:
ay: the go
goood bit
bitss of Japa
apanif
nifica
ica--
tion, without the bad ones.
China’s current economic woes have
afforded space for the theory that the
problems of early 1990s Japan may be
repeated on a grander scale in China.
The com
combin
binati
ation
on of a cri
crisis
sis in Chi
China
na’’s
property sector, a dampening of entre-
preneurial animal spirits and a demand
shortfall that has taken the consumer
price index to the brink of deflation lend
a certain solidity to this line of thinking.
Zombie companies, lacklustre corpo-
rate spe
pennding and a chronic dec eclline in
pricing power weighed on Japan for dec-
ades. It is a spectre China should dread.
Yet many dismiss the comparison and
the idea that China’s problems are ines-
capable in the relatively short term.
Andy Rothman, an investment strategist
at Matthews Asia, regards it as a mistake
to underestimate the resilience of Chi-
nese consumers and entrepreneurs and
the pragmatism of policymakers.
Such optimism underpins the case for
smart-toilet adoption: urbanisation in
stomach for a party of super-patriots.
But while Trump’s legal pro rob blems
probably make him more likely to win
the nomination, they make him less
l i ke ly t o w i n t h e p re s i d e n c y i t s e l f .
R e c e n t o p i n i o n p o l l s h ave s h o w n
Trump neck-and-neck with Biden in a
g e n e r a l e l e c t i o n . B u t t h ey a l s o s h ow
growing reservations after the cases
against him — even among Republicans.
The sheer time and expense of simulta-
neously fighting an election and many
separate legal cases are also likely to
take a toll on Trump, who is 77 years old.
Even so, victory remains a possibility.
The flaws and misdemeanours the trials
will reveal have been known to voters
for many years — and yet Trump’s sup-
port has remained robust. Biden is now
80 years old and could suffer any man-
ner of mishap. And a third-party candi-
date could still enter the race.
If Trump wins the election in 2024, he
will hope that the power of the presi-
d e n c y w i l l f re e h i m o f t h e d a n g e r o f
future convictions. It is a stark choice —
the Oval Office or a prison cell.
gideon.rachman@ft.com
Ellie Foreman-Peck
equired to make individual sacrifices
for the greater good of hitting net zero
goals. Tory unease with it springs from
this, rather than mistrust of science.
They see a statist mindset and a back-
door to socialism. Some refer to envi-
ronmental ccaampaigners as ““w watermel-
ons”, green on the outside, red within.
After years of prioritising individual
rights, the political pendulum is swing-
ing back towards collective demands.
This goes beyond net zero to a funda-
mental diagnosis of the UK economy.
Blair’s think-tank, which has Keir
Starmer’s ear, has called for planning
powers to rush through decisions for
infrastructure, for centralised use of
personal data, and for a digital identity
for all citizens.
From planning to tax, AI to climate
change, the coming battle is over how
far people are ready to yield freedoms to
what Labour calls “the strategic state”.
This, not any overstated crusade against
cars, is the real political tussle of the
next decade. Buckle up.
robert.
t.sshrimsley@ ft.com
China is unfinished, furnishing expend-
i t u re a s a p e rc e n t a g e o f d i s p o s a b l e
income is still lower than in Japan, the
US and India, and the more desperate
property developers are to sell apart-
ments, the more they may try to entice
buyers by installing fancy toilets. Con-
sumer demand may be low, but middle-
class demand for a relatively inexpen-
sive “quality lifestyle” upgrade may
defy that. Japanese consumers bought
ever flashier toilets through 30 years of
stagnation. That’s a good Japanification.
T h e p ro b l e m , t h o u g h , i s i n h e re n t
in Goldman’s case for Arrow Home:
China’s younger generation and average
income families will buy domestically
p ro d u c e d s m a r t t o i l e t s p re c i s e ly
because they are not only cheap now but
w i l l p ro b a b ly b e c h e a p e r s t i l l i n t h e
future as the market expands. The price
of a lower-end smart toilet, according to
Goldman’s estimates, will drop 20 per
cent between now and 2026. Embed
those kind of deflating numbers in con-
sumer heads, and you have the wrong
kind of Japanification.
leo.lewis@ ft.com
21
UK armed forces
must adapt
radically to meet
future threats
Harlan
Ullman
s Britain a formidable military
p owe r t o d ay ? S a d ly, n o. Eve n
though the UK would only enter a
conflict with partners, its conven-
t i o n a l f o rc e s a re n o w c r i t i c a l ly
u n d e r p owe re d . I n d e e d , t h e t o t a l
n u m b e r o f a c t i ve d u t y p e r s o n n e l —
about 150,000 — is smaller than the US
Marine Corps.
Last month’s UK Defence Command
Paper, which sets out a strategy for
meeting current and future threats,
does not help. It offers no viable vision
or strategic plan to reverse this condi-
tion. The paper relies heavily on repeat-
i n g c o n c e p t s f ro m t h e U S N a t i o n a l
Deffense Strategy rather than setting a
De
course demanded by today’s realities.
More radical thinking is needed.
B en Wallace, Britain’s outgoing
defence secretary, has promised the
country will sp end at least £100bn a
year on its military by 2030; about dou-
ble what it spends today. But given infla-
tion, the purchasing power of this sum
will have withered in seven years’ time.
The Command Paper’s key weakness
is that it reverses ends and means. Its
f i r s t f o u r c h a p t e r s re l a t e t o p e o p l e ,
t e c h n o l o gy a n d h o w t h e M i n i s t r y o f
Defence will become a “campaigning
department”. The vision for transfor-
mation follows. But change should lead
the report, not the reverse. And change
is desperately needed given the chal-
l e n g e s p o s e d b y C h i n a , Ru s s i a a n d a
budget that is too small for supporting
the forces.
Like many military strategy docu-
ments, the paper is written in jargon
rather than substance. The concept of
Change is desperately
needed given the challenge
posed by Russia and China
and an inadequate budget
“integrated” deterrence, a slogan taken
directly from the US lexicon, is ill-de-
fined. The concepts of “campaigning
and global competition” are not put in
terms that can be made operational.
Back in 1971, I ended my tour in the
Royal Navy after two years serving as an
American exchange officer. The RN was
a for
formid
midabl
ablee for
force.
ce. It mus mustertereed ththrree
aircraft carriers, 81 destroyers and frig-
ates; 39 diesel and nuclear submarines;
and ab out 250 Phantom fighters and
Buccaneer strike aircraft.
Toda day
ay, that
that Na
Navy
avy has sh shrun
runk k to tw twoo
carriers; 18 destroy royeers and frigates;
two landing platform dock ships; six
nuclear attack and four Vanguard sub-
marines. By 2025, there should be 48
F-35B Lightning II fighter jets, although
t h i s p ro g r a m m e h a s b e e n b e s e t b y
delays. The army will be cut to 72,500,
with only 148 tanks.
When challenged by a parliamentary
select committee last month on whether
the army would ever be able to deploy
its warfighting third division, the chief
of the defence staff Admiral Sir Tony
Radakin hedged. “We recognise that we
need to strengthen that division,”
Radakin told MPs on the defence select
committee. “That is what is in existence
now, and we will strengthen it even fur-
ther.” Translated into plain English, the
third division is not ready for war. Even
Vladimir Putin’s invasion of Ukraine
does not appear to have provoked the
urgency this issue requires.
The British military’s ability to deter
conflict and defend the nation depends
on its ability to make any enemy attack
t o o c o s t ly t o c o n s i d e r i n t h e f i r s t
place. Even with a force of 150,000 that
is possible.
Disruption can be achieved by using
kinetic (firepower and manoeuvre) and
non-kinetic means (cyber, electronic
warfare re,, disinformation, deception
and misinformation) aime d at com-
mand aan nd ccoontrol aan nd d deecapitation of
enemy leadership. That also means
achieving rapidly deployable “expedi-
tionary” capability whether for Nato or
elsewhere.
This requires profound restructuring,
b u t t h e t e c h n o l o g i e s a r e av a i l a b l e .
Ukraine has shown how cheap civilian
kit such as drones and the use of civilian
satellites can be repurposed for potent
military use. Without change, more of
the same means less of the same — and
Britain’s military will cease to count
for much.
The writer is a former US naval officer
and senior adviser at the Atlantic Council
think-tank
22 ★ FINANCIAL TIMES Thursday 3 August 2023

Uranium: Niger counter

Global production of uranium is diversified. Kazakhstan is by far the largest producer. Low prices over the
past decade have reduced production, depleting stockpiles. The price of uranium has responded, rising to
$57 per pound. Companies such as Canada’s Cameco and London-listed Kazatomprom have benefited.

Twitter: @FTLex Uranium production by country Uranium prices are rising Stocks exposed to uranium
Pounds produced $ per lb Share prices (rebased in $ terms)
6,000 60 350

BAE Systems:
security spend
Seventeen months after Russia’s brutal
invasion of Ukraine, the war in Europe
appears a neat explanation for the
performance of BAE Systems, maker of
Typhoon aircraft and Dreadnought
submarines. But record first-half
results from Britain’s largest defence
company are in part the product of
longer-term plans.
Western government support of
Ukraine has increased contracts. Last
month it received a £280mn munitions
order from the UK government. But
this part of the business, while growing,
only accounts for a small proportion
of sales.
Big-ticket items, such as aircraft,
warships and submarines, are
responsible for a much bigger share of
BAE’s business. Air and Maritime
divisions made up over half of first-half
revenues. These involve multi-decade-
long programmes.
BAE’s results suggest that these
segments are gaining traction as global
anxiety rises. The biggest growth came
from Maritime, where sales increased
21 per cent on accelerated UK funding
for the Dreadnought programme. BAE
is now targeting full-year EPS growth of
10 to 12 per cent, about double its
previous target.
These upgrades are reflected in the
share price, up more than 70 per cent
since the start of 2022. That pales
beside the performance of European
defence stocks such as Germany’s
Rheinmetall, whose share price has
tripled. Sweden’s Saab has more than
doubled. However, at 11.6 times 2024
ebit, on a Barclays estimate, BAE
trades at a small premium to its
European peers. It remains at a 30 per
cent discount to US companies.
There is reason to expect further
growth from the company. New orders,
including one to provide Typhoons to
Saudi Arabia up to 2027, increased the
backlog to a record £66.2bn. As part of
the US, UK and Australia Aukus
security pact, BAE will help Australia
acquire its first nuclear-powered
submarines.
Amid strong cash flow, it has also
increased investment in R&D, up 11 per
cent in the first half of the year, and
expanded production capacity. That
bodes well for future sales. It has the
financial means to do so. Net debt is
well below forecast ebit. This means
BAE has the option to acquire smaller
rivals. It is reported to be casting its eye
over US group Ball Aerospace. Such
deals may help BAE narrow the
valuation gap with its US peers.
Arm:
debut preview
Fortunes have turned for chip designer
Arm. Last year, a glut of chips and
falling demand for electronics
presented a bleak outlook. Now,
interest in the chip sector is at a record
thanks to the boom in artificial
intelligence. The sooner the SoftBank-
owned company lists, the better chance
it has of a high valuation.
The need for more computing power,
and more chips, is growing as groups
bet on generative AI applications. This
has pushed chipmaker Nvidia to an
enterprise value above $1tn. For Arm,
an enterprise value to sales multiple in
line with Nvidia’s could mean a
valuation of $67bn.
But Nvidia chips are crucial to power
AI development and there are few
alternatives to its high-end products.
The same cannot be said for Arm. A
broader, average industry earnings
multiple would put Arm’s enterprise
value closer to $32bn. However,
Nvidia’s attempted acquisition and
possible role as anchor investor in an
initial public offering should lift this.
Arm’s main business model charges
chipmakers small fees — reported to be
about 2 per cent — for using its designs.
Its dominance in premium
smartphones means it is exposed to
weakness in that sector. Last month,
global smartphone sales fell for the
eighth consecutive month. Even when
global chip sales hit a record $550bn in
2021, Arm revenues were just a small
fraction of the total at $2.7bn.
Raising prices is difficult. China, one
of Arm’s biggest markets, has long been
developing RISC-V, an open-source
chip design architecture that would be
an alternative to Arm’s designs. Higher
fees might encourage clients to invest
more in developing substitutes.
Moreover, any hopes that Arm can
develop its own chips are fraught.
The move would put it in direct
competition with its chipmaking and
chip-designing customers. The AI-
driven demand for chip stocks could be
Other
Niger
Russia
Uzbekistan
(estimate)
Australia
Namibia
Canada
Kazakhstan
2013 14 16 18 20
Source: World Nuclear Association
For commodity investors, uranium
has long been a radioactive asset. The
price of the metal, which in its
enriched form is used to fuel nuclear
power plants, has languished since
the Fukushima disaster in 2011.
Political chaos in Niger, where the
military government has suspended
exports of uranium to France, should
spark a rethink.
The crisis will not cause immediate
shortfalls. Niger is a major supplier to
the EU, which buys a quarter of its
uranium from the west African
country. But globally its importance
pales in comparison to Kazakhstan,
by far the largest producer, Canada,
Namibia and Australia. On top of
that, the metal is widely stored.
In 2022, global stockpiles stood at
a once-in-a-decade moment for Arm’s
IPO. But it does not warrant the same
valuation as the leader in its sector.
Taylor Wimpey:
home grown
Sometimes, the absence of terrible
news is good enough. Housebuilder
Taylor Wimpey is guiding towards
operating profits of £440mn-£470mn
this year. At the midpoint this marks a
50 per cent decrease versus 2022. But it
is still better than expected.
The extent to which higher mortgage
rates will deter homes sales in Britain is
unclear. Recent survey data has been
mixed. Taylor Wimpey’s half-year
results offer hope that a sharp price
5,000
4,000
3,000
2,000
1,000
0 0
22 2019 20 21 22 23
Sources: UxC, TradeTech
about 3.8 times annual demand,
according to Alexander Pearce at BMO.
The main impact of instability in
Niger will be to highlight improving
fundamentals. The market is tight. Low
prices over the past decade reduced
production, which fell a quarter from
194mn pounds in 2013 to 145mn
pounds last year. Global demand
outstrips supply by some 50mn pounds
per year. This is depleting stockpiles.
The gap is set to grow. Climate
change is here and renewables cannot
substitute fossil fuels entirely. The
cloud of disapproval around nuclear
energy is dispersing. Some 8GW of new
capacity came online in 2022, said the
International Energy Agency. Reaching
net zero will require annual additions
of more than four times that by 2030.
crash is unlikely. Underlying interest
from customers remains “strong”, says
the company, which expects to build
10,000-10,500 homes this year. This is
at the upper end of previous guidance.
Customers still desperate to get on
the property ladder or upgrade their
homes are trying to get around higher
mortgage rates by taking out
longer-term loans. Supply chain
inflation, though running at an annual
rate of about 6 per cent, is also
moderating from 9-10 per cent at the
start of the year.
These signs of resilience lifted an
otherwise tough set of results.
Completions reduced 26 per cent to
5,120, weighing on operating profits.
Over the past four weeks, falling sales
helped to lift the cancellation rate from
19 per cent last year to 24 per cent.
50
300
Cameco
250
40
Kazatomprom
200
Yellow Cake
30 Sprott Physical
Uranium
150
20
100
10
50
Paladin
0 still founder or family led, to operate
2020 21 22 23
Source: Refinitiv
The net result should be to drive up
the price of uranium. At $57/lb, it has
risen 16 per cent in the year to date,
said S&P. That is still below the price
required to bring new production to
market, which BMO estimated at
$62.50/lb. There are already signs of
life in the sector. Australia’s Paladin
has announced plans to restart its
mine in Namibia. London-listed
Kazatomprom on Tuesday increased
2023 sales guidance by 13 per cent.
For investors who do not fancy
exposure to the complicated business
of extracting uranium, the likes of
Yellow Cake and Sprott’s Physical
Uranium Trust are worth a look.
These groups, which simply buy
and store the metal, are not a bad
way to play the fission mission.
There are still many variables
clouding the company’s outlook for
2024. On the plus side, a number of
lenders have been lowering the cost
of home loans, which could raise
buyer demand. But, outside of
macroeconomics, planning remains a
problem.
Despite the market turmoil, Taylor
Wimpey’s shares are up 2 per cent in
the year to date. Housebuilders have
proved good picks if investors buy near
the bottom of downturns. But Taylor
Wimpey trades on a forward price-
earnings multiple of more than 12
times, above peers such as Barratt
Developments, which trades on a
multiple of 8.5. Investors with the
stomach to ride out further short-term
housing market pain can find cheaper
real estate elsewhere in the sector.
Michael Klein:
English patient
Can US dealmaker Michael Klein
become the Warren Buffett of north-
west England? On Tuesday, Klein
invoked the Oracle of Omaha when
describing his $1.6bn deal for
Cheshire-based CorpAcq, via his latest
blank-cheque vehicle buyout.
CorpAcq has a portfolio of about 40
companies in England, which typically
have an annual ebitda of $25mn and
above. It allows the companies, mostly
largely autonomously and collects cash
flow to fund future deals and pay out a
modest dividend. The idea, as Buffett
perfected, is to own good companies
and take advantage of the twin effects
of patience and compound growth.
According to figures shared by Klein
and CorpAcq, these businesses
generate 15 per cent ebitda margins
and convert a majority of that into free
cash flow. But Buffett’s advantages are
not easily replicated. They include
cheap insurance funding, a sterling
reputation with sellers and uniquely
tolerant shareholders happy to eschew
dividends and buybacks.
CorpAcq is to be listed in New York,
where an equity holding company will
be a novelty. But the model exists in
Europe, where several “compounders”
have multibillion-dollar market caps.
CorpAcq’s $1.6bn enterprise value is
about 10 times ebitda, a discount to its
European listed peers.
Klein has also compared CorpAcq to
US “business development companies”,
a publicly listed type of non-bank
lender to portfolios of medium-sized
companies. Here the comparison to
Buffett falters. Buffett’s Berkshire
Hathaway, returns aside, has been as
shareholder-friendly as any company
in the US. BDCs have a more chequered
history, with high fees extracted by
private equity sponsors often coupled
with a pursuit of unprofitable growth.
Spac deals are not covered in glory
either. In recent years, their sponsors
have favoured their own interests. In
CorpAcq, Klein is asking investors to
trust his dealmaking instincts, not just
now but long into the future.
Lex on the web
For notes on today’s stories
go to www.ft.com/lex

CROSSWORD
No 17,485 Set by GOZO
        ACROSS

1 Sweet complexion (7,3,5)

9 Call me this in novel — not ‘Clint’ (7)
  10 Authorise battle cry (7)
11 Eastern criminals — one into jazz (5)
12 Pilot training device, as turmoil spreads
  (9)
13 Having a fever and rash? (3-6)
15 Company to knock back French wine and
soft drink (5)
   16 Set-back embracing navy birds (5)
18 Sir Roger criticises being put up — here?
(5,4)
   
20 Errands we organised for wayfarers (9)
23 Welshman and Scotsman clash over
nymph (5)
24 Puts back in the oven — but there’s a
    difficulty (7)
25 Incident is described in poem (7)
26 Not sausage, David, stewed — it’s bad
for you (15)
 

DOWN

 1 Celebrate 13 down — apt after a fashion

(5,3,4,3)
2 Disbeliever in hijack (7)
3 Ambassador’s speech for the Crown, say
(9)
JOTTER PAD 4 Shoulders, oddly, on feet (5)
5 Novel is made complicated for radio and
TV (4,5)
Solution 17,484 6 Some music — a rollicking seasonal song
7 & . & ( 5 $ 0 , & 6
(5)
0 2 1 $ / , 6 $ $ ( + 7 Able to extend terminal, one located in
6 9 1 7 7 8 7 7 8 7 city area (7)
0 8 6 , & ' 5 $ 0 $ + & 8 Worst Monday — same bad, erratic
& $ 2 5 7 5 , & . < driving (8,7)
7 + ( 5 ( ) 2 5 $ 1 , 14 Upset stomach on bad days drinking
7 + ( 7 $ . , 1 * cola (9)
$ , 7 5 6 * 15 Removing impurities from single can (9)
2 1 < 2 8 5 2 : 1 17 Cattle farms organised by small county
( ' ( + ( $ ' % ( , 7 (7)
( ; & 2 1 6 2 7 / 7 19 Gold coin tossed over Womble (7)
7 ) & 5 2 6 6 : 2 5 ' 6
21 Animal making dash, getting trapped
6 ( 1 2 5 $ 3 , : 2 You can now solve our crosswords ultimately (5)
1 5 / ( $ * / ( 2 : / in the new FT crossword app at 22 Fragrance of early stocks — one
6 7 $ 0 3 ( ' ( 1 5 1 ft.com/crosswordapp hundred in France (5)*