BlackRock CEO Larry Fink Says Firm Had Invested $24 Million in FTX

 

(qlmbusinessnews.com via coindesk.com — Wed, 30th Nov 2022) London, Uk – –

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BlackRock CEO Larry Fink specified that the asset management giant had invested $24 million in FTX before its collapse, according to Reuters. Fink was speaking at the New York Times Dealbook conference on Wednesday.

Fink also said it looked like there were misbehaviors in FTX, but would not speculate on whether BlackRock and venture capital firm Sequoia, which had invested $213.5 million in FTX and has since marked that amount down to zero, had been misled by FTX, Reuters reported.

FTX owes its top 50 creditors more than $3 billion and has an estimated 1 million creditors in total.

By Nelson Wang

Binance.US to Bid for Crypto Lender Voyager, CZ Confirms

(qlmbusinessnews.com via coindesk.com — Thur, 24th Nov 2022) London, Uk – –

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CoinDesk reported last week that Binance.US would be preparing a bid for the bankrupt lending platform

Binance CEO Changpeng “CZ” Zhao has confirmed that the exchange's U.S. wing will be making a fresh bid for crypto lender Voyager now that the defunct FTX is unable to follow through with acquiring it.


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CoinDesk reported last week that Binance.US would be preparing a bid for the bankrupt lending platform, which Zhao confirmed in an interview with Bloomberg on Thursday.

“Binance.US will make another bid for Voyager now, given FTX is no longer able to follow through on that commitment,” he said.

Following Voyager's bankruptcy, FTX emerged as the front runner to acquire the lender, with Binance's bid said to be held back by concerns that it would represent a national security concern for the U.S. government.


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“I think the U.S. national security concerns were rumors spread by FTX to try and push us out of the bid,” Zhao said. “There was never any concerns about us participating in the bid.”

Binance has been dogged by claims that it is a Chinese company, given it is the country of Zhao's birth, though he grew up in Canada. “I am a Canadian citizen, period,” he wrote in a blog post in September.

By Jamie Crawley

 

Bank of England says better regulations needed after FTX collapse

Better regulations are needed to protect the financial system after the collapse of the FTX cryptocurrency exchange, a senior Bank of England official has said.

Digital currencies are still too small to pose a threat but that will soon change, said Sir Jon Cunliffe.

FTX filed for bankruptcy last week and owes its largest creditors almost $3.1bn (£2.6bn).

Thousands of its users are also waiting to get their money back.


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Sir Jon, who is deputy governor for financial stability at the Bank, also said the recent volatility in the value of cryptocurrencies posed a threat.

The value of Bitcoin, the world's largest digital currency, has dived by almost 70% in the last year.

He said the crypto world was, at present, not “large enough or interconnected enough with mainstream finance to threaten the stability of the financial system”.

But he said its links with mainstream finance were developing rapidly.

“We should not wait until it is large and connected to develop the regulatory frameworks necessary to prevent a crypto shock that could have a much greater destabilising impact.

“The experience in other areas of digitalisation has demonstrated the difficulty of retrofitting regulation on new technologies and new business models after they have reached systemic scale,” he told an audience at a Warwick Business School event.

It comes as the UK is set to approve laws in the Financial Services and Markets Bill, which is currently in Parliament. The bill will introduce regulation for stable coins – a cryptoasset backed by an asset such as a currency – and the marketing of cryptoassets.

In his speech, Sir Jon noted that the UK's financial regulator, the Financial Conduct Authority, had been warning for several weeks before FTX's collapse that “this firm may be providing financial services or products in the UK without our authorisation… you are unlikely to get your money back if things go wrong”.

FTX did not have a licence to operate in the UK, but its implosion has caused shockwaves around the world.

The company's filings have revealed that more than one million people and businesses could be owed money following its collapse.

Analysis: Joe Tidy

Before FTX collapsed, its then-CEO Sam Bankman-Fried took every chance he could to describe his firm as “the most regulated” in the industry.

It's true that FTX had collected dozens of permissions to operate in many countries and to offer many different crypto services.

But clearly, in the end, those certificates were useless at protecting customers and investors.

Every time there is a major crisis in crypto the cries for regulation grow, but it's the type of regulation that matters.

The chief concerns for authorities seem to be about protecting customers from crypto firms going bust and ensuring that they don't run off with people's money.

But as ever with cryptocurrency there is a tension between safety and freedom.

Regulating crypto firms to ensure they are safe and responsible entities would bring them a step closer to the traditional financial system – a huge no-no for crypto believers.

But whatever the true believers want, the FTX chaos may well be the point of no return.

On Saturday, FTX said it had launched a review of its global assets and was preparing for the sale or reorganisation of some businesses.

Last week, new FTX chief executive John Ray hit out at the way the failed crypto exchange was run, saying he had never “seen such a complete failure of corporate controls”.

Mr Ray, who replaced the company's founder Sam Bankman-Fried, criticised what he called a “complete absence of trustworthy financial information”.

Mr Bankman-Fried was one of the crypto world's most high-profile personalities, with the 30-year-old becoming a billionaire in 2021.

His FTX crypto exchange grew to be the second largest in the world, with $10bn-$15bn traded a day.

It spent millions on advertising, including during the Superbowl, and last year it acquired the naming rights for the Miami Heat NBA team's arena.

Mr Bankman-Fried also projected an unconventional approach to business, tweeting pictures of himself sleeping on a beanbag next to his desk in the office.

Digital pound

Despite the ructions in the crypto world caused by FTX's collapse, Sir Jon said the need for a UK digital currency was still being considered by the Bank of England.


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He said the work on a digital pound was driven by “the reducing role of cash, and more generally in the increasing digitalisation of daily life”.

Sir Jon said the Bank planned to issue a consultative report around the end of the year setting out the possible next steps.

 

Lidl profits quadruple as UK shoppers look for bargains

(qlmbusinessnews.com via theguardian.com – – Thur, 17th Nov 2022) London, Uk – –

Discount grocer bounces back from Covid disruption as profits in Great Britain soared 319% from last year

Lidl has said it took £58m in additional sales from traditional supermarkets in the past month, as shoppers look for ways to save money, after quadrupling profits in a bounce back from Covid disruption.

The German-owned discount grocer, said its British sales rose 1.5% to £7.8bn in the year to the end of February but pretax profits soared 319% to £41.1m as the group trimmed costs as measures to control the Covid-19 virus eased. The company also saw a surge in non-retail income, such as selling advertising and renting out property and recycling.


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The company, which operates 935 stores across England, Scotland and Wales and employs more than 28,000 people, said the profit increase had come despite a £50m rise in pay for hourly-paid staff and £653m spent on 50 new stores and other assets including distribution centres in Luton, Bedfordshire, and Belvedere in south-east London.

The group plans to open 50 stores in the year to February, including 15 before Christmas, further ramping up competition with its bigger rivals, most of which are not opening many new stores.

Ryan McDonnell, the chief executive of Lidl GB, said the company was serving 770,000 more customers a week than last year. “We are a brand with our tails up and heading into Christmas on the march,” he said. “This is our time.”

He said shoppers werestocking up on mainstay Christmas items with sales of party food up by 21% and panettone up 8% on last year, indicating they were buying slightly earlier than usual and also trading up to the budget chain’s higher priced options. The company said it had also sold a higher proportion of British meat, poultry, eggs and pork than other supermarkets.

Lidl’s rise in sales and profits comes as British shoppers increasingly head to discount supermarkets in an attempt to keep food bills down as grocery price inflation reaches its highest level in a decade.

Speaking before the chancellor’s autumn statement on Thursday, McDonnell said he hoped Jeremy Hunt would be “pro consumer” and offer support for those struggling with a cost of living crisis that meant “less money in household budgets”.

He would not say by how much Lidl had increased prices but admitted the retailer was “not immune” to cost inflation and some of that had been passed on.


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McDonnell added it was “hard to predict” how inflation would progress as there were different rates of cost increase depending on the product type but said Lidl was focused on “forensically comparing baskets and trollies against the competition and always making sure we are the best value.”

During the past year, Lidl has overtaken the Co-op to become the UK’s sixth-largest supermarket chain, while the rival discounter Aldi leapfrogged Morrisons to take fourth place. Sales have risen at both discounters by more than 20%, according to the data from the market analyst Kantar, much faster than at traditional supermarkets.

By Sarah Butler

 

Kris Marszalek moves to reassure customers confidence in Crypto.com

(qlmbusinessnews.com via news.sky.com– Mon, 14th Nov 2022) London, Uk – –

Boss Kris Marszalek moves to reassure customers that the crypto.com exchange is sound and takes no risks as a crisis of confidence remains evident across the sector.

The boss of cryptocurrency exchange Crypto.com has hit out at “naysayers” questioning its financial health as the market jitters after the collapse of rival exchange FTX.


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Kris Marszalek, chief executive of Singapore-based crypto.com, insisted it had a robust balance sheet and took no risks after investors took to Twitter over the weekend to question a transfer of $400m of ether tokens to another exchange.

He used a “ask me anything” discussion via YouTube to address the speculation over the 21 October transfer, which the Wall Street Journal reported had sparked a series of withdrawals, saying the tokens had been recovered.

“At no point were the funds at risk of being sent somewhere they could not be retrieved. It had nothing to do with any of the craziness from FTX,” he told the 7,000-strong audience.

Mr Marszalek first moved to reassure them that the exchange was on a sound footing.

He promised an audited proof of reserves report to be published within weeks, adding that crypto.com did not engage in any “irresponsible lending products”.

Commenting on the spectacular public collapse of FTX last week, with at least $1bn of client funds missing according to a Reuters news agency report, Mr Marszalek said: “This has set the industry back a good couple of years in the reputation that we have built.

“Trust was damaged, if not lost, and we need to focus on rebuilding trust.”

He said that crypto.com had about $10m exposure to the FTX collapse.

Crypto.com is among the top 10 exchanges by turnover globally but smaller than FTX and market leader Binance.

Bitcoin and ether were trading about 1% higher early on Monday at $16,650 and $1,226 respectively.


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Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “Although the immediate storm following the collapse of the huge exchange FTX, has subsided, the destruction left in its wake has been considerable and crypto speculators hit hard by these recent losses, will be licking some painful wounds.

“This is a painful reminder that the crypto wild west is still a fragile niche in the larger financial system, where money is being bet on highly speculative assets.

“In this opaque world, fraud is rife and although the clamour for greater regulation will mount, this whole debacle also comes with a sense of relief that the deep scepticism among regulators about crypto's stability has ringfenced larger more established financial institutions from contagion.”

 

FTX embattled cryptocurrency exchange giant collapses into bankruptcy

(qlmbusinessnews.com via bbc.co.uk – – Fri, 11th Nov 2022) London, Uk – –

Embattled cryptocurrency exchange FTX has filed for bankruptcy in the US, seeking court protection as it looks for a way to return money to users.

Former boss Sam Bankman-Fried has also stepped down as chief executive, the company said.

It is a massive turn of fortunes for the 30-year-old, who had headed the world's second largest crypto exchange.

In just over a week, his FTX empire has collapsed, shaking confidence in the already troubled crypto market.


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“I'm really sorry, again, that we ended up here. Hopefully things can find a way to recover,” Mr Bankman-Fried, nicknamed the ‘King of Crypto', wrote on Twitter on Friday.

“I was shocked to se

“I was shocked to see things unravel the way they did.”

Prior to the meltdown, Mr Bankman-Fried had been one of the stars of the crypto scene, drawing comparisons to investment magnate Warren Buffett, with a net worth estimated at more than $15bn (£12.8bn) as recently as Monday.

But rumours earlier this week that FTX and other firms owned by Mr Bankman-Fried were on shaky financial ground prompted a mass of customers to try to withdraw funds from FTX, an exchange used to buy and sell digital tokens.

Facing a cash crunch, Mr Bankman-Fried tried to organize a bailout but that failed, leaving FTX scrambling to raise billions of dollars and many customers unable to access their money.

By filing for Chapter 11 bankruptcy, the company can continue operating, while restructuring its debts under court supervision.

FTX said the goal was to “begin an orderly process to review and monetize assets for the benefit of all global stakeholders”.

“The FTX Group has valuable assets that can only be effectively administered in an organised, joint process,” said new chief executive John J Ray III, a lawyer who previously worked at a venture capital firm and has experience with high-profile bankruptcy cases.

In the filing, FTX estimated that it had between $10bn and $50bn in assets and liabilities and more than 100,000 creditors.

The proceeding involves FTX as well as Alameda Research, a trading firm founded by Mr Bankman-Fried, and roughly 130 affiliates, according to the statement FTX shared on Twitter.

Those include FTX's operations in the US, which Mr Bankman-Fried had said on Thursday were unaffected.

Mr Bankman-Fried said “this doesn't necessarily have to mean the end for the companies or their ability to provide value and funds to their customers chiefly, and can be consistent with other routes.

“Ultimately I'm optimistic that Mr. Ray and others can help provide whatever is best”.

For now, Thomas Culham, from Kingston, said he has been unable to withdraw the £2,000 he had put into FTX – a “big blow” as his funds in FTX were “decent chunk” of his investment portfolio.

“It's probably gone,” the 22-year-old said. “Maybe in a few years' time I might get some sort of recovery – they do have assets [and] they should be able to liquidate them.”

Pressure on other firms

Mr Bankman-Fried had enjoyed a high-profile in the crypto industry and beyond, frequently speaking on behalf of the sector before regulators.

He was a major donor to Democrats in the most recent US elections and had gone on an advertising blitz in the country, enlisting celebrities such as Tom Brady and Gisele Bundchen to convince the public that crypto was a worthy investment.

The troubles at his firms have hurt the rest of the crypto market, with currencies such as Bitcoin dropping 20% this week, and raised pressure on other companies to prove they have the financial strength to stay afloat.

Several companies in the sector had already collapsed or approached collapse earlier this year, after a sharp downturn in the value of digital assets. BlockFi, another crypto firm with ties to FTX, stopped clients from making withdrawals on Thursday because of the situation.

“FTX going down is not good for anyone in the industry. Do not view it as a win for us. User confidence is severely shaken,” wrote Changpeng Zhao, the chief executive of FTX's larger rival, Binance, which had said it might buy FTX this week only to walk away.

Regulators have long warned of risks to crypto investors and raised concern about the threat of wider financial turmoil, as traditional financial companies expand their investments in the market, despite little regulation.

FTX, which is now reportedly under investigation by several financial authorities, had enjoyed backing from major investment firms, including Blackrock, Softbank and the Ontario Teachers' Pension Plan in Canada.

But Dan Ives, analyst at Wedbush Securities, said he did not think FTX's troubles would spark wider problems in the stock market.

“It's a black swan event. There's really no bleed over into the overall market, there's containment,” he said. “That's extremely important and another positive signal in terms of the walls between systematic risk and not.”


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Mr Bankman-Fried admitted that the downfall is “on me” but that will be scant consolation to the potentially 1.2 million FTX customers who could now lose their crypto savings.

Despite potentially losing his money, Mr Culham said this week's events wouldn't put him off investing in more cryptocurrencies in the future.

“I think there's a lot of opportunity,” he said, adding that he was not investing more than he could afford to lose, and also not investing in only one type of crypto.

By Natalie Sherman & Joe Tidy

EXCLUSIVE Behind FTX’s fall, battling billionaires and a failed bid to save crypto

(qlmbusinessnews.com via uk.reuters.com — Thur, 10th Nov, 2022) London, UK —

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On Tuesday morning, Sam Bankman-Fried, owner of cryptocurrency exchange FTX, caught his employees off-guard with a somber message.

“I’m sorry,” he told them. “I f@#*d up.”

The reason for the mea culpa: His announcement half an hour earlier that FTX’s arch-rival, Binance, planned to mount a shock takeover of its main trading platform to save it from a “liquidity crunch.” Binance founder Changpeng “CZ” Zhao, whom the billionaire had accused of sabotage, would now be his White Knight.


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The seeds of FTX's downfall were sown months earlier, stemming from mistakes Bankman-Fried made after he stepped in to save other crypto firms as the crypto market collapsed amid rising interest rates, according to interviews with several people close to Bankman-Fried and communications from both companies that have not been previously reported.

Some of those deals involving Bankman-Fried’s trading firm, Alameda Research, led to a series of losses that eventually became his undoing, according to three people familiar with the company's operations.

The seeds of FTX's downfall were sown months earlier, stemming from mistakes Bankman-Fried made after he stepped in to save other crypto firms as the crypto market collapsed amid rising interest rates, according to interviews with several people close to Bankman-Fried and communications from both companies that have not been previously reported.

Some of those deals involving Bankman-Fried’s trading firm, Alameda Research, led to a series of losses that eventually became his undoing, according to three people familiar with the company's operations.

Neither Binance nor FTX responded to requests for comment. Bankman-Fried told Reuters on Tuesday that “I'll probably be too swamped” to do interviews. He didn't respond to further messages.

Binance earlier said it decided to pull out of the deal as a result of its due diligence on FTX and news reports about U.S. investigations into the company.

Zhao's unveiling of the planned takeover capped a stunning reversal for Bankman-Fried. The 30-year-old had set up Bahamas-based FTX in 2019 and led it to become one of the largest exchanges, accumulating a near $17 billion fortune.

News of the liquidity crunch at FTX – valued in January at $32 billion with investors including SoftBank and BlackRock – sent reverberations through the crypto world.

The price of major coins plummeted, with bitcoin slumping to its lowest in almost two years, heaping further pain on a sector whose value has fallen about two-thirds this year as central banks tightened credit.

By ditching the deal, Binance had also avoided the regulatory scrutiny that would likely have accompanied the takeover, which Zhao had flagged as a likelihood in a memo to employees that he posted on Twitter.

Financial regulators around the world have issued warnings about Binance for operating without a license or violating money laundering laws. The U.S. Justice Department is investigating Binance for possible money laundering and criminal sanctions violations. Reuters reported last month that Binance had helped Iranian firms trade $8 billion since 2018 despite U.S. sanctions, part of a series of articles this year by the news agency on the exchange's financial crime compliance.

RELATIONSHIP SOURS

Zhao and Bankman-Fried’s relationship began in 2019. Six months after FTX’s launch, Zhao bought 20% of the exchange for about $100 million, a person with direct knowledge of the deal said. At the time, Binance said the investment was “aimed to grow the crypto economy together.”

Within 18 months, however, their relationship had soured.

FTX had grown rapidly and Zhao now viewed it as a genuine competitor with global aspirations, former Binance employees said.

When FTX in May 2021 applied for a license in Gibraltar for a subsidiary, it had to submit information about its major shareholders, but Binance stonewalled FTX’s requests for help, according to messages and emails between the exchanges seen by Reuters.

Between May and July, FTX lawyers and advisors wrote to Binance at least 20 times for details on Zhao’s sources of wealth, banking relationships, and ownership of Binance, the messages show.

In June 2021, however, an FTX lawyer told Binance’s chief financial officer that Binance wasn’t “engaging with us properly” and they risked “severely disrupting an important project for us.” A Binance legal officer responded to FTX to say she was trying to get a response from Zhao’s personal assistant, but the requested information was “too general” and they may not provide everything.

By July of that year, Bankman-Fried had tired of waiting. He bought back Zhao’s stake in FTX for about $2 billion, the person with direct knowledge of the deal said. Two months later, with Binance no longer involved, Gibraltar’s regulator granted FTX a license.

That sum was paid to Binance, in part, in FTX’s own coin, FTT, Zhao said last Sunday – a holding he would later order Binance to sell, precipitating the crisis at FTX.

“TRYING TO GO AFTER US”

This May and June, Bankman-Fried’s trading firm, Alameda Research, suffered a series of losses from deals, according to three people familiar with its operations. These included a $500-million loan agreement with failed crypto lender Voyager Digital, two of the people said. Voyager filed for bankruptcy protection the following month, with FTX's U.S. arm paying $1.4 billion for its assets in a September auction. Reuters could not determine the full extent of losses Alameda suffered.

Seeking to prop up Alameda, which held almost $15 billion in assets, Bankman-Fried transferred at least $4 billion in FTX funds, secured by assets including FTT and shares in trading platform Robinhood Markets Inc, the people said. Alameda had disclosed a 7.6% share in Robinhood that May.

A portion of these FTX funds were customer deposits, two of the people said, though Reuters could not determine their value.

Bankman-Fried did not tell other FTX executives about the move to prop up Alameda, the people said, adding he was afraid that it could leak.

On Nov. 2, however, a report by news outlet CoinDesk detailed a leaked balance sheet that allegedly showed that much of Alameda’s $14.6 billion in assets were held in FTT. Alameda CEO Caroline Ellison tweeted that the balance sheet was merely for a “subset of our corporate entities,” with over $10 billion of assets not reflected. Ellison did not return requests for comment.

That failed to douse growing speculation over what Alameda’s financial health might mean for FTX.

Then Zhao said Binance would sell its entire share in the token, FTT, worth at least $580 million, “due to recent revelations that have come to light.” The token's price collapsed 80% over the next two days and a torrent of outflows from the exchange gathered pace, blockchain data show.

WITHDRAWAL SURGE

In his message to staff this week, Bankman-Fried said the firm saw a “giant withdrawal surge” as users rushed to withdraw $6 billion in crypto tokens from FTX in just 72 hours. Daily withdrawals normally totaled tens of millions of dollars, Bankman-Fried told his employees.

After Zhao’s tweet that Binance would sell its FTT holding, Bankman-Fried projected confidence that FTX would weather its rival’s attacks. He told staff on Slack that withdrawals were “not shockingly, way up,” but they were able to process the requests.

“We’re chugging along,” he wrote. “Obviously, Binance is trying to go after us. So be it.”

But by Monday the situation became dire. Unable to quickly find a backer, or sell other illiquid assets short-notice, Bankman-Fried contacted Zhao, according to a person familiar with the call. Zhao later confirmed that Bankman-Fried had called him.

Bankman-Fried signed a non-binding letter of intent for Binance to buy FTX’s non-U.S. assets. This valued FTX at several billion dollars, two people familiar with the letter said – enough for the exchange to cover all withdrawal requests but a fraction of its January valuation.

Zhao announced the potential deal several hours later, with Bankman-Fried tweeting “a huge thank you to CZ.”

“Let’s live to fight another day,” Bankman-Fried told staff on Slack.


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His employees were shocked. Even executives had been in the dark about the Alameda shortfall and takeover plan until Bankman-Fried informed them that morning, two people working with him said. Both people said they had been unaware that the withdrawal situation was so serious.

Then came Binance’s announcement on Wednesday scrapping the takeover. “The issues are beyond our control or ability to help,” Binance said. Zhao tweeted “Sad day. Tried,” with a crying emoji.

Reporting by Angus Berwick and Tom Wilson

 

Barclays to be fined £50m for alleged “reckless” conduct by City watchdog

(qlmbusinessnews.com via news.sky.com– Fri, 21st Oct 2022) London, Uk – –

The bank has requested that a tribunal review the findings.

The City regulator has revealed plans to fine Barclays £50m for alleged “reckless” conduct in relation to its 2008 financial crisis fundraising.

The Financial Conduct Authority (FCA) said the penalty relates to a failure to disclose “certain arrangements” made with Qatari entities during the deals.

The fundraising ultimately averted any need for the bank to seek a taxpayer-led bailout like its rivals Lloyds and RBS, the latter now known as NatWest Group.

The regulator added that Barclays had referred its ruling to a tribunal, which will determine whether to uphold the fine.

Mark Steward, the FCA's executive director of enforcement and market oversight, said of its findings: “At the height of the financial crisis in October 2008, Barclays paid hundreds of millions of pounds in fees to certain Qatari investors so that they would contribute new capital.

Chancellor reverses ‘almost all’ tax cuts of mini-budget

(qlmbusinessnews.com via news.sky.com– Mon, 17th Oct 2022) London, Uk – –

Jeremy Hunt says he is reversing “almost all” of the tax cuts announced in his predecessor's mini-budget, and scaling back support on energy bills.

The chancellor says a 1p cut to income tax will be delayed “indefinitely” until the UK's finances improve.

And he said the government's energy price guarantee will be universal until April – not for two years as originally planned.

After April the scheme will be more targeted, he said.

In a bid to calm the markets, the Treasury announced at 6am on Monday Mr Hunt was going to reveal parts of his medium-term fiscal plan – which was due to take place on 31 October.

Over the weekend, Mr Hunt promised to slow down Ms Truss' tax cuts and said “some taxes will go up” as he worked on tearing up the mini-budget that has caused weeks of economic turmoil.

His comments were welcomed by the Bank of England's governor, Andrew Bailey, who said there had been an “immediate meeting of minds on the importance of stability and sustainability” when he spoke to Mr Hunt on Friday.

The decision for Mr Hunt to make a statement on Monday was made after meetings between the chancellor, Ms Truss, Mr Bailey and the head of the Debt Management Office on Sunday night.

 

Unfunded tax cuts mean UK ‘will need £60bn spending cuts’

(qlmbusinessnews.com via theguardian.com – – Tue, 11th Oct 2022) London, Uk – –

IFS says Kwasi Kwarteng’s mini-budget will leave ministers making serious reductions in public services

Kwasi Kwarteng will need to find £60bn of savings by 2026 to fill the gap left by unfunded tax cuts and the costs of extra borrowing triggered by a panicked reaction on international money markets to the chancellor’s “mini-budget”, according to the Institute for Fiscal Studies.

The UK will also struggle to hit the chancellor’s 2.5% growth target, with economic forecasts by the investment bank Citigroup that the IFS uses to underpin its analysis showing the UK will struggle to grow at more than 0.8% on average over the next five years.


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That sluggish growth rate, thanks to a toxic cocktail of a slowing global economy, the UK’s weakened trade balance after Brexit and the fallout from the mini-budget, would be slightly less than half the growth rate forecast by the Office for Budget Responsibility in March.

The £45bn cost of the mini-budget will wipe out any financial space left to the chancellor by his predecessor, swelling Britain’s debt as as share of national income for at least the next five years.

The IFS director, Paul Johnson, said that while it was “technically possible” for Kwarteng to balance the books via spending cuts, he warned public sector spending had already suffered a huge hit over the last decade and that there was “not much fat left to cut”.

In 2026 the government is likely to still be borrowing £100bn a year when previous forecasts showed it falling to nearer £30bn, the IFS said.

A proportion of the rise in borrowing is accounted for by the energy price cap that ministers agreed to maintain the average household bill at £2,500 a year.

The IFS said the cost of the package was likely to be lower than the £150bn expected by the Treasury at about £114bn, though it would still add to the avalanche of unfunded proposals put forward to boost growth.

Kwarteng and Liz Truss have argued that their policies of tax cuts and deregulation will improve the business environment and boost profits, lifting tax revenues to pay for state services.

However, the IFS said government plans to inject vigour into the UK economy over the next five years to pay for a boost in spending were likely to have only a limited effect, leaving ministers to make hefty reductions in public services and to keep a tight rein on welfare benefits.

The chancellor has announced a 1p cut in the basic rate of income tax from next April and a reduction in national insurance contributions by 1.25%. In addition he plans to freeze corporation tax at 19%, costing an estimated £19bn compared with the previous plan to raise the rate to 25%.

Johnson said all the options open to Kwarteng were unpalatable as they either increased the public deficit, or to avoid this, involved swingeing cuts to public spending or broke manifesto commitments.

In one scenario, he said Kwarteng could retain his tax cuts if he indexed working age benefits to earnings and not inflation, reducing the uplift to about 5% from 10%, to save £13bn. A reduction in public investment by a third to 2% would save £14bn, while a return of austerity across most Whitehall departments – excluding health and defence – could save £35bn.

Johnson said the scenario also only protected the NHS and defence budgets from inflation when the health sector was likely to need even more cash to cope with higher demand and the prime minister wanted to increase defence spending from 2% of GDP to 3%.

“Uncertainties about the path of the economy over the next few years make public finance forecasts very difficult indeed. We project borrowing of £100bn a year in the medium term – but that could be wrong by tens of billions in either direction,” he said.

“A credible fiscal plan will recognise that uncertainty, but cannot ignore the fact that, on a reasonable central forecast, debt is forecast to continue rising in the medium term,” he added.

Local authority bosses reacted angrily to the prospect of further cuts to council budgets.

The Tory councillor James Jamieson, the chair of the Local Government Association, said councils had implemented £15bn worth of cuts between 2010 and 2020.

“Given the funding gaps they are seeing, councils will have no choice but to implement significant cuts to services including to those for the most vulnerable in our societies,” he said.

The IFS report said the mini-budget prompted a seismic shock to the outlook for the public finances that left them deeper in the red.

“This is because the permanent tax cuts were bigger than had been expected,” and because the expectations for Bank of England interest rates have rocketed to almost 6%, pushing mortgage rates towards 8%.

Most economists have warned ministers their plans to lift the economy come at the wrong time, with inflation soaring to about 10% and unemployment at a 40-year low.

Handing households extra funds via tax cuts is likely to push inflation higher, adding pressure on the central bank to increase interest rates by even more than currently expected.

The OBR is the Treasury’s independent forecaster and will provide estimates for economic growth and the impact of the budget on the public finances when the chancellor publishes his autumn statement on 31 October.

Citigroup said the weaker outlook was likely to temper the Bank of England’s appetite for interest rate rises next year and it would cap rates at a peak of 4.5%, rather than the 6% investors currently expect.

Benjamin Nabarro, the bank’s chief UK economist, said the devaluation of the pound towards parity with the dollar would previously have made exports cheaper, boosting output and productivity and giving the government a quick exit from economic stagnation.

He said the negative impact of Brexit and the lack of skilled workers meant industry would struggle to benefit from a lower value currency, meaning stagnation was likely to persist.

“The medium-term outlook for investment remains strikingly weak. Aggressive monetary tightening [by the Bank of England] suggests any meaningful recovery is likely to be pushed into 2025,” he said.

By Phillip Inman

£1bn Serco pension scheme seek financial support from outsourcer amid markets turmoil

(qlmbusinessnews.com via news.sky.com– Fri, 30th Sept 2022) London, Uk – –

Serco's pension trustees asked the company to provide a standby credit facility as it faced growing demands for collateral amid a surge in gilt yields, Sky News learns.

Sky News has learnt that the outsourcing giant's pension trustees contacted the company in recent days about establishing a new credit facility in the event of a continued deluge of collateral calls.

The request is thought to be highly unusual and highlights the turmoil caused even in well-funded and well-run corporate pension schemes by the sudden surge in gilt yields that followed last Friday's fiscal statement by Chancellor Kwasi Kwarteng.

The Bank of England intervened in financial markets on Wednesday by promising to buy tens of billions of pounds in government bonds during the next fortnight in an attempt to stabilise the market.

That followed a slump in sterling's value against the dollar to its lowest-ever level and deep anxiety about investors' appetite to buy UK government bonds.

Ministers have sought to blame the turmoil on global market forces, but Mr Kwarteng's £45bn of unfunded tax cuts, announced in last week's mini-budget, have been held responsible by many analysts for sparking the most dangerous financial markets rout since the 2008 banking crisis.

A person close to Serco pointed out that its retirement schemes boasted a surplus, before tax, of £105.3m at its latest half-year results.

The source added that the standby loan request from its pension trustees was simply to provide liquidity to help it meet demands for additional collateral.

Corporate pension fund trustees were faced with no choice but to sell billions of pounds of equities and bonds this week to meet margin calls – forcing them to put up extra collateral – as gilt yields surged and upset delicately balanced hedging strategies.

The turmoil has drawn closer attention to so-called Liability-Driven Investing, in which many pension schemes use financial instruments such as derivatives to help them match their long-term assets and liabilities.

The precise number of Serco's pension scheme members was unclear on Friday.

Members' retirement funds are not at risk as a consequence of the move to seek financial support from the schemes' sponsor.

According to its most recent results, Serco makes annual deficit recovery payments of £6.6m, a figure that is fixed until 2030.


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Serco is one of Britain's biggest outsourcing groups, handling contracts for a multitude of government departments.

This month, the company announced that Rupert Soames, its long-serving chief executive and grandson of Sir Winston Churchill, would retire.

He is regarded as one of Britain's most capable chief executives, having transformed Serco's fortunes since taking over in 2014.

Serco and its pension trustees both declined to comment.

By

BoE set for second hefty rate rise in a row

(qlmbusinessnews.com via uk.reuters.com — Thur, 22nd Sept, 2022) London, UK —

The Bank of England looks set to raise interest rates by at least half a percentage point on Thursday in a bid to tame inflation that is just off a 40-year high, against a backdrop of a tumbling currency and a free-spending government.

Economists polled by Reuters last week expect the BoE to announce at 1200 GMT that rates will rise to 2.25% from 1.75%, while financial markets have priced in a bigger move to 2.5%.

The BoE is also expected to confirm that it will soon sell some of the 838 billion pounds ($944 billion) of government bonds which it bought during more than a decade of quantitative easing – the first major central bank to do so.


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The BoE's half-point increase in rates last month was its biggest since 1995. If it raises rates by three-quarters of a point on Thursday it would be the largest hike since 1989, barring a failed, temporary attempt to shore up sterling in 1992.

The U.S. Federal Reserve increased its main interest rate by three-quarters of a percentage point on Wednesday and signalled more large increases to come.

Sterling sank to its lowest since 1985 against the U.S. dollar after the Fed decision and is at its lowest against a basket of currencies since 2020, pushing up the price of imports.

Central banks globally have been hiking rates to tackle inflation caused by the surge in energy prices following Russia's invasion of Ukraine, as well as supply-chain pressures and labour shortages since the COVID-19 pandemic.

The BoE was the first major central bank to raise rates in the current cycle, beginning in December last year.

Britain's annual rate of consumer price inflation edged down to 9.9% in August from a 40-year high of 10.1% in July, its first drop in nearly a year though still far above the BoE's 2% target and the highest in the Group of Seven.

MIXED INFLATION OUTLOOK

The short-term outlook for inflation is now somewhat better than at the time of the BoE's last meeting in early August.

New Prime Minister Liz Truss's caps on household and business energy tariffs mean inflation is unlikely to rise as high as the 13.3% peak the BoE had pencilled in for October, or rates of more than 15% which economists expected for early 2023.

However, the caps – combined with likely cuts to taxes on employment, business profits and potentially house purchases – amount to more than 150 billion pounds of economic stimulus that was not factored into the BoE's forecasts last month.

This, in turn, could prompt the BoE to raise rates more than previously thought over the coming year, despite what will still be a big squeeze on living standards from high inflation.

“Although the immediate risk of recession over the coming winter is diminished, substantial fiscal stimulus adds to the risk of high inflation being maintained for longer – and hence the chances of, ultimately, substantially more policy tightening by the Bank of England being required,” Investec economist Sandra Horsfield said.

Interest rate futures late on Wednesday showed BoE rates reaching 3.75% in December and plateauing at 4.75% from March.

New finance minister Kwasi Kwarteng will set out more details of the budget plans on Friday, including an update to debt issuance.

Last month, the BoE forecast the economy would enter recession in the final quarter of 2022 and shrink throughout 2023.


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A recession of this length now looks unlikely, economists say, but there is a risk – following contraction in the second quarter and weak retail sales and business survey data since – that the economy is already in a technical recession.

A public holiday to mark Queen Elizabeth's funeral, following more than a week of national mourning that led to the cancellation of some public events, will also reduce third-quarter output. The BoE also decided to delay by a week its policy announcement, which had been due out on Sept. 15.

Reporting by David Milliken

Pound falls to its lowest in 37-year as retail sales slide

(qlmbusinessnews.com via bbc.co.uk – – Mon, 19th Sept 2022) London, Uk – –

By Michael Race

The pound has fallen to a new 37-year low against the US dollar after figures showed UK retail sales fell sharply in August as the rise in the cost of living continued to hit households.

The larger-than-expected drop in sales volumes of 1.6% prompted fresh concerns over the state of the economy.

Sales across all retail sectors fell in August as households cut back in the face of rising prices.

One analyst suggested the figures showed the UK is already in recession.

Sterling fell more than 1% against the dollar to $1.1351 at one point, its lowest since 1985, following the release of the retail sales figures. The pound recovered later to climb above $1.14.

The pound has been falling against the US currency for most of the year, partly due to the strength of the dollar. A weak pound means Brits travelling overseas will find their spending money will not stretch as far.

This comes at a time when UK inflation, which is the rate at which prices rise, is running at a near 40-year high, despite slipping to 9.9% from July's 10.1%.

The Bank of England has predicted the UK will fall into recession towards the end of this year and it is expected to keep increasing interest rates in a bid to curb inflation.

Olivia Cross, assistant economist at Capital Economics, said August's retail sales figures backed up the consultancy's view that the UK economy is “already in recession”.

A recession is defined by the economy getting smaller for two consecutive three-month periods.

“Retail sales will probably continue to struggle as the cost of living crisis hits harder in the coming months,” Ms Cross said.

“But nonetheless the Bank of England will still have to raise interest rates aggressively.”

Higher prices, along with upcoming energy bill rises in October, have led households to tighten their belts when it comes to spending.

The government announced the Energy Price Guarantee last week to help people with energy bills. The support will see annual energy bill for a typical household capped at £2,500 for two years.

Typical energy bills were set to rise to £3,549 a year and even higher in 2023, before the government intervened.

Ms Cross, of Capital Economics, said that because of the intervention, any recession would be “smaller and shorter” than it had expected previously.

Martyn Beck, chief economic adviser to the EY Item Club, said the government support “should ease both the income squeeze and lift consumers' sentiment, suggesting the outlook for retailers isn't as gloomy as could have been the case”.

“However, real household incomes are still on course for a significant fall over the next 12 months or so,” he added.

The government is expected to set out the estimated cost of plans to cap energy prices in a “mini-Budget” next Friday, as well as tax cuts pledged by Prime Minister Liz Truss in a bid to boost the economy.

Analysis: Faisal Islam

Sterling's fall to a fresh 37-year low against the dollar today is not isolated. The pound also hit its weakest level against the euro for nearly a year and a half.

So while the big picture movement is strength in the US dollar, there continues to be specific additional pressure on the pound sterling in international markets.

This morning's trigger was far weaker than expected retail sales figures. But markets await next Friday and the extent of borrowing required for the government's energy plan and tax cuts.

The eurozone too is heading for recession, but there is little comfort in such company.

The risk is that a weaker currency, makes imports of essentials, from energy to food, more expensive, prolonging the period of high inflation. And if the UK's nearest trading partners are also in recession, exporters will not see significant benefit from a weaker pound.

The fall in retail sales continues the slide since the summer of 2021, when all Covid restrictions were removed, the Office for National Statistics (ONS) said. The drop seen in August was the largest month-on-month fall since December 2021.

Sales of food, online, non-food and fuel all fell in the month, the ONS said.

Supermarkets' sales volumes also fell by 0.9% in August, but alcohol and tobacco sales rose by 6.3%.

“Feedback from retailers suggests that consumers are cutting back on spending because of increased prices and affordability concerns,” the ONS said.

Danni Hewson, AJ Bell financial analyst, said people were “clearly thinking hard about what they spend their money on”.

“It's just not stretching as far as it used to, and essentials have to come first. But even essentials are costing more and with the spectre of unmanageable fuel bills looming large people did the only thing they could, cut back,” she said.

According to the ONS, department stores saw a large drop in sales in August – 2.7% – while sales in clothing shops fell by 0.6%.

“Big ticket purchases are being put off and that's unlikely to change in the coming months,” said AJ Bell's Ms Hewson.

On Thursday, John Lewis revealed that while its shopper numbers were higher than last year, customers were spending less and avoiding buying as many “big ticket” items.

The department store and its supermarket chain Waitrose reported a loss of £99m for the first half of its trading year. Waitrose said it sales were down 5% on last year, with basket sizes shrinking by “nearly a fifth”.

Food prices have been increasing around the world following Russia's invasion of Ukraine, which has been one of the main factors pushing up prices at supermarket tills.

Meanwhile, the proportion of retail sales online fell to 25.7% in August from 26.3% in July, but the figure remains significantly above pre-pandemic levels.

 

Ethereum cryptocurrency completes plan to reduce its carbon emissions by more than 99%

(qlmbusinessnews.com via theguardian.com – – Thur, 15th Sept 2022) London, Uk – –

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Ethereum, the second largest cryptocurrency, has completed a plan to to reduce its carbon emissions by more than 99%.

The software upgrade, known as “the merge”, will change how transactions are managed on the ethereum blockchain, a public and decentralised ledger that underpins the cryptocurrency and generates ether tokens, the world’s most popular cryptocurrency after bitcoin.


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Vitalik Buterin, ethereum’s inventor, announced the completion of the plan on Twitter on Thursday morning, tweeting “Happy merge all”.

The move means that ethereum will no longer be created by an energy intensive process known as “mining”, where banks of computers generate random numbers that validate transactions on the blockchain and generate new ether tokens as part of the process. The process, known as “proof of work” in the cryptocurrency world, will now move to a “proof of stake” system, where individuals and companies act as validators, pledging or “staking” their own ether as a form of guarantee, to win newly created tokens.

Ethereum mining used up as much electricity as Austria, according to the Digiconomist website, at 72 terawatt-hours a year. Alex de Vries, the economist behind the website, estimates that the merge will reduce the carbon emissions linked to ethereum by more than 99%.

De Vries added that the move could represent 0.2% of the world’s electricity consumption disappearing overnight. However, he said bitcoin remained the biggest single contributor to the crypto world’s carbon footprint.

“All eyes will be on bitcoin. It remains the largest polluter in the crypto space. Even today bitcoin is responsible for as much electricity consumption as Sweden. And we know that’s not going to change,” said De Vries.


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Ethereum rose 2% to $1,630 (£1,417) after the move, according to website coinmarketcap, valuing the currency at just under $200bn. Bitcoin is worth $387bn, having fallen sharply from its peak of more than $1tn last year.

Carol Alexander, professor of finance at University of Sussex Business School, said the merge was a significant event for the crypto industry

“The merge is the most important event in blockchain history,” she said. “In my opinion, today marks the beginning of the end of bitcoin’s dominance over crypto assets. Ethereum is achieving something that bitcoin never could because bitcoin is a purely speculative asset and its mining network would never agree to drop that source of income.”

By Dan Milmo

Tata Motors Indian automaker to buy Ford car plant in Gujarat for $91.5m

(qlmbusinessnews.com via bbc.co.uk – – Mon, 8th Aug 2022) London, Uk – –

Indian automaker Tata Motors has agreed to buy a Ford manufacturing plant in the western state of Gujarat for 7.26bn rupees ($91.5m).

The deal comes as Tata moves to boost its car production to meet demand.

The deal between Tata's electric vehicle subsidiary and the US car maker's Indian unit covers land, machinery and all “eligible employees”.

Ford stopped production in India last year after struggling for more than two decades to generate profits there.

“With our manufacturing capacity nearing saturation, this acquisition is timely and a win-win for all stakeholders,” Tata Motors said in a statement.

The parent company of the UK's Jaguar Land Rover added that annual production at the Sanand plant will initially give it new capacity of 300,000 vehicles a year, which could be increased to 420,000.


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In September last year, Ford said it would close its Indian car factories as part of a move that would cost it around $2bn.

At the time, the US car maker said that about 4,000 workers would be affected by the decision.

Ford's operations in India had seen losses of $2bn in the previous ten year.

The major scaling back in its Indian operations was in stark contrast with the company's previous ambition to make the country one of its biggest markets.

Foreign auto makers have found it difficult to succeed in India. Ford's exit is just the latest in a series of departures.

Companies like General Motors, Volkswagen-owned MAN Trucks and even iconic motorbike maker Harley Davidson have been among the firms that have stopped manufacturing in India in recent years.

Earlier this year, Japanese motor industry giant Nissan decided to pull its small car brand Datsun out of the country because of poor sales.

While GM and Harley Davidson have said these decisions were part of their global strategic shift from certain markets, analysts also point to lacklustre revenues and lack of economies of scale in India.

India is still seen as a car market with great potential but sales have plunged to a decade low due to a slowdown in economic growth, weak labour markets, higher fuel prices and pandemic-related disruptions.

The country's passenger vehicle market has stagnated for the last half a decade at around 3 million units a year.

In China, on the other hand, more than 20 million cars are bought annually.

Analysis by Nikhil Inamdar, India Business Correspondent

But some Indian car makers have seen demand rise. One of Tata's rivals Mahindra and Mahindra said on Friday that demand for its vehicles was outstripping production as people rushed to buy its popular sport-utility vehicles.

That helped boost its quarterly profits as sales of its passenger vehicles soared to by 74% from a year earlier.

“We have kicked off capacity expansion programmes but had not anticipated this kind of demand,” Mahindra and Mahindra's executive director, Rajesh Jejurikar said.


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Tata Motors is the vehicle making division of Indian multinational conglomerate Tata Group.

In the UK, Tata Motors bought Jaguar and Land Rover from Ford in 2008 and merged the British luxury car brands into one company.

Tata Group owns a range of major businesses around the world including Tata Steel Europe, which includes former British Steel assets in the UK.

By Peter Hoskins

Phoenix life insurer purchase Sun Life of Canada’s UK unit in £248 deal

(qlmbusinessnews.com via uk.reuters.com — Thur, 4th Aug 2022) London, UK —

Phoenix (PHNX.L) has bought closed life insurer Sun Life of Canada's UK unit for 248 million pounds ($301 million) in cash, it said on Thursday and its chief executive said the insurer had more than one billion pounds to spend on similar deals.

Phoenix specialises in buying and operating books of life insurance businesses which are closed to new customers.


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Closed life insurance specialists like Britain's Phoenix say they can use economies of scale to run such books more cheaply.

“We have over a billion pounds of remaining firepower as of the year-end,” CEO Andy Briggs told Reuters by phone.

“We would still be interested in larger-scale M&A, but alongside that we think there's the potential for a series of these smaller cash-funded deals.”

Sun Life manages around 10 billion pounds of closed life policies in a market totalling around 480 billion, Phoenix said.

The deal enables Phoenix to offer a 2.5% dividend increase, payable from its 2022 final dividend.

The purchase is expected to deliver around 470 million pounds of long-term cash generation, and Phoenix said it was targeting 125 million pounds of cost savings from the deal.

Phoenix shares were up 1.9% at 665 pence at 0712 GMT, one of the top performers in the FTSE 100 (.FTSE). KBW analysts called the deal “strategically sensible”, reiterating their “outperform” rating on the stock.


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As part of the deal, Sun Life will form a long-term partnership to become a strategic asset management partner to Phoenix, the Canada-based insurer said in a separate statement.

BoA Securities advised Phoenix and Fenchurch Advisory Partners advised Sun Life UK.

Reporting by Carolyn Cohn

 

BP profits triple to £7bn in second quarter as oil prices surge

 

(qlmbusinessnews.com via theguardian.com – – Tue, 2nd Aug 2022) London, Uk – –

Labour says government is ‘totally wrong’ to give tax breaks to oil companies amid cost of living crisis.

BP’s first-quarter profit was already its highest for more than a decade. Energy bills have been a key contributor to inflation, experts say.

BP will hand billions of pounds to shareholders after tripling its profits to nearly £7bn in the second quarter of the year amid high oil prices during Russia’s invasion of Ukraine, even as families struggle in a cost of living crisis.


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The FTSE 100 oil company on Tuesday said its preferred measure of profit, which it describes as its underlying replacement cost profit, rose to $8.5bn (£6.9bn) between April and June. That is up from $6.2bn in the first three months of the year, and three times BP’s underlying profits of $2.8bn in the second quarter of 2021.

It was the second highest quarterly profit in BP’s history, behind only its $8.8bn underlying profit in the summer of 2008.

Rachel Reeves, the shadow chancellor, said the “eye-watering profits” showed that the government was “totally wrong” to have given significant tax breaks to oil companies. However, the government’s Brexit opportunities minister, Jacob Rees-Mogg, said he was not in favour of an extra windfall tax.

BP also said it would hand investors $3.5bn through a share buyback programme, while it increased its total dividend payout by 10% to about $1.1bn.

Oil companies in the UK and beyond have enjoyed booming earnings in recent months on the back of rising energy prices as households around the world have struggled with soaring bills. As Russia’s invasion grinds on, the research firm Cornwall Insight predicts the energy price cap on bills in Great Britain is on track to rise to £3,615 a year from January .

Shell last week reported record quarterly profits of nearly £10bn between April and June, while the British Gas owner, Centrica, made operating profits of £1.3bn, most of which came from its oil and gas drilling division. Shell and France’s Total last week said they would also give shareholders billions of dollars in share buybacks and dividends.

BP said its huge profits were caused by higher refining margins and “continuing exceptional oil trading performance”.

The company was forced to write down the value of its investments in Russia by $24bn in the first quarter, but higher oil prices have made up for much of the lost ground. The strong cashflows have allowed it to cut its debt pile, in a further boost to investors.

BP’s share price increased by 4% on Tuesday morning.

Energy bills have been an important contributor to inflation, which has risen to a 40-year high of 9.4% in the UK. Several forecasters believe inflation will move above 10% in the coming months.

The UK government belatedly responded to political pressure amid soaring energy prices with a windfall tax on oil companies’ “extraordinary profits”. However, the 25% tax, known as the energy profits levy, did not come into force until 14 July, meaning that it does not apply to profits made by BP or other oil companies during the second quarter.

Reeves criticised the government for at the same time giving the oil companies 80% tax breaks for new investments that reduce their tax bill. She said Labour would use extra cash from abolishing the tax breaks for a “green energy sprint” instead, as well as for more home insulation to cut energy use.

“People are worried sick about energy prices rising again in the autumn, but yet again we see eye-watering profits for oil and gas producers,” she said.

“Labour argued for months for a windfall tax on these companies to help bring bills down, but when the Tories finally U-turned they decided to hand billions of pounds back to producers in tax breaks. That is totally wrong.”

Rees-Mogg told LBC radio: “I’m not in favour of windfall taxes. The energy industry is enormously cyclical. You need to have a profitable oil sector so it can invest in extracting energy.”

The BP chief executive, Bernard Looney, declined to respond directly to the criticisms on Tuesday morning.


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A spokeswoman for BP said the company expected to pay £1.9bn in UK tax in 2022, after it added an $800m charge on Tuesday to account for the energy profits levy. She said the company has invested twice the amount it has returned to shareholders, and that many of those investments in oil and renewables will build a more reliable energy system that will cut bills down the line.

BP reports its own replacement cost profit measure to indicate its profitability before taking into account swings in the value of the oil it has in storage.

The UK government was approached for comment.

By Jasper Jolly

Embattled property giant Evergrande faces deadline after bosses quit

(qlmbusinessnews.com via bbc.co.uk – – Mon, 25th July 2022) London, Uk – –

Embattled Chinese real estate giant Evergrande is expected to deliver a preliminary restructuring plan this week, following the exit of two bosses.

The firm says its chief executive and finance head have resigned, after an internal probe found that they misused around $2bn (£1.7bn) in loans.

Evergrande has more than $300bn in liabilities and defaulted on its debts late last year.


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The crisis has spooked traders who fear contagion in China's property sector.

On Friday, Evergrande said it found that chief executive Xia Haijun and chief financial officer Pan Darong were involved in diverting 13.4bn yuan ($2bn; £1.7bn) in loans secured by its property services unit to the wider group.

The firm said in a filing to the Hong Kong Stock Exchange that Mr Xia and Mr Pan had resigned because of their “involvement in the arrangement of the pledges”.

In a separate statement, it said the funds “were transferred and diverted back to the group via third parties and were used for the general operations of the group”.

Evergrande added that it was in talks with its property services unit over a repayment plan.

A $2.6bn deal to sell a majority stake in the unit to a rival developer fell through in October.

Evergrande, which is the world's most indebted property developer, had been struggling to make payments on its over $300bn of liabilities and missed a crucial repayment deadline on its offshore debt in December.

Its shares have fallen by more than 75% over the last year in Hong Kong and have been suspended from trading for months.

The company is scheduled to announce a preliminary plan to restructure its debts before next week.

China's property crisis is estimated to have wiped more than a trillion dollars off the value of the sector last year.

The very serious potential fallout from Evergrande collapsing has led some analysts to suggest that Beijing may step in.

On Monday, Japanese banking giant Nomura said “an increasing number of developers have failed to repay their debt and continue their construction works” since the Evergrande crisis.

Also on Monday, it was reported that China was planning to start a real estate fund to support more than a dozen property developers, including Evergrande.

The fund could be worth up to 300bn yuan, according to reports.

Home sales in China have fallen for 11 consecutive months, official data shows. That is the longest slump since China created a private property market in the late 1990s.

Several Chinese developers have halted the construction of homes that had already been sold, because of concerns over cash flow.

In recent weeks, some home buyers have threatened to stop paying their mortgages until the work restarts.


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More than 200 projects by at least 80 developers have been affected, according to the Shanghai-based E-house China Research and Development Institution.

The China Banking and Insurance Regulatory Commission has pledged to help local governments in “guaranteeing the delivery of homes,” state media reported.

 

Royal Mail profit missed analysts’ estimates amid labour dispute

(qlmbusinessnews.com via uk.reuters.com — Thur,  19th  May, 2022) London, UK —

Britain's Royal Mail (RMG.L) said on Thursday the pay dispute with its largest labour union is a “key uncertainty” for the group this fiscal year after 2021-22 profit missed analysts' estimates, sending shares 12% lower.


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The Communication Workers Union (CWU), which represents more than a hundred thousand Royal Mail postal workers, had criticised and rejected the company's latest wage offer, and the two parties are now in a dispute resolution procedure.

Royal Mail said it could meet 2022-23 market expectations of UK adjusted operating profit of 303 million pounds ($375.11 million) if it reached a deal with the union in line with its current offer, and if it avoids a strike.

Analysts at JPMorgan said they believed it was unlikely that wage talks would go smoothly, and expected there still could be a material downside risk to estimates.

The relationship between Royal Mail and the CWU has been a tumultuous one in the past, with the prior dispute lasting two years before the December 2020 settlement.

“We are at a crossroads with the transformation of Royal Mail,” Non-Executive Chairman Keith Williams said.

“We need to adapt our business to a post-pandemic world and whilst we are making progress in some areas, more needs to be done in others.”

The 500-year-old company had benefited from a boom in parcel deliveries during the COVID-19 pandemic, but a slowing UK economy, subsiding demand on lower consumer spending amid the cost-of-living crisis, and rapid inflation also pose a challenge to its outlook.

Adjusted operating profit for the year ended March 27 was 758 million pounds, slightly below average market expectations of 771 million pounds, as cost savings fell short of targets and parcel volumes tapered off lockdown highs.


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Shares in the FTSE 100 company, which gained around 50% last year, were down 12% by 0911 GMT, touching a near one-and-half year low.

Reporting by Yadarisa Shabong

Federal Reserve announce sharpest rise in interest rates in over 20 years

(qlmbusinessnews.com via theguardian.com – – Thur, 5th May 2022) London, Uk – –

Benchmark interest rate raised 0.5 percentage points, with more rises expected

The Federal Reserve moved to tamp down soaring inflation in the US on Wednesday, announcing the sharpest rise in interest rates in over 20 years.


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The Fed’s benchmark interest rate was raised by 0.5 percentage points to a target rate range of between 0.75% and 1%. The hike is the largest since 2000 and follows a 0.25 percentage point increase in March, the first increase since December 2018.

More rate rises are expected. The Economist Intelligence Unit expects the Fed to raise rates seven times in 2022, reaching 2.9% in early 2023. Starting in June, officials also plan to shrink their $9tn asset portfolio, a policy move that will further push up borrowing costs.

In a statement the Fed said that although “overall economic activity edged down in the first quarter, household spending and business fixed investment remained strong”. But it warned that inflation “remains elevated”, the invasion of Ukraine had implications for the US economy that remain “highly uncertain” and Covid-related lockdowns in China “are likely to exacerbate supply chain disruptions”.

Rates were cut to near zero in March 2020 when the pandemic hit the US but they were already low and years of low rates left the US and other countries ill-prepared for a sudden rise in inflation. Until recently the Fed had dismissed rising prices as “transitory” and expected them to fall as economies recovered from the pandemic.

All that has now changed. The Fed chair, Jerome Powell, took the unusual step of addressing the American people at the start of a press conference following the rate hike announcement. “Inflation is much too high, and we understand the hardship it is causing. We are moving expeditiously to bring it back down,” he said.

“Some of us are old enough to have lived through high inflation and many aren’t. But it’s very unpleasant … If you are a normal economic person, then you probably don’t have that much extra to spend, and it’s immediately hitting your spending on groceries, on gasoline, on energy, things like that. We understand the pain involved.”

Thanks in large part to the unprecedented impact of the coronavirus on the global economy, inflation is now running at a 40-year high in the US. In March, the Consumer Price Index (CPI) was 8.5% higher than it was a year ago, driven up by rising prices for gasoline, shelter, and food. The increasing costs of essential goods and services are now outstripping average wage gains.

Ahead of the announcement Jamie Dimon, JP Morgan Chase chief executive officer, warned that the Fed may have waited too long to raise rates. “We’re a little late,” he told Bloomberg. “The sooner they move the better.”

The impact of the Fed’s policy is already being felt in the wider economy. Since the start of the year, mortgage rates have climbed at their fastest pace in decades, rising nearly two percentage points. Some hot property markets have started to cool as a result. The impact of tighter monetary policy has also triggered selloffs in the stock markets.

Powell said the economy remained strong and that he was confident the Fed could act without triggering a recession but he warned it would act aggressively to tackle inflation.


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“We need to do everything we can to restore stable prices,” he said. “We will do it as quickly and effectively as we can. We think we have a good chance to do it without significant increase in unemployment or sharp slowdown. But ultimately, we think about the medium and longer term, and everyone will be better off if we can get this job done – the sooner, the better.”

By Dominic Rushe