Business secretary: £170m taxpayer bailout to steel tycoon Sanjeev Gupta would have been “completely irresponsible”

(qlmbusinessnews.com via news.sky.com– Wed, 14th April 2021) London, Uk – –

GFG asked the government for an emergency bailout of as much as £170m, as thousands of steel jobs were hanging in the balance.

Giving a £170m taxpayer bailout to steel tycoon Sanjeev Gupta would have been “completely irresponsible”, the business secretary has told MPs.

Kwasi Kwarteng was answering questions from members of the business, energy and industrial strategy committee about Liberty Steel, which is owned by GFG Alliance, the conglomerate headed by Mr Gupta.

Sky News revealed in March that GFG had written to the government to request an emergency bailout of as much as £170m, as thousands of jobs were hanging in the balance.

Mr Kwarteng told the committee that there were fears the money could be moved out of the UK to the group's assets overseas.

He said: “If you look into the Gupta Family Group, they're not the most transparent organisation and it also has assets all over the world and they employ something like 35,000 people all over the world.

“So if the Gupta family asked the British government to give £170m of taxpayers' money, it is incumbent on ministers to be sure, to have some degree of surety, that the money will stay in the UK and won't simply be dispersed across the Gupta Family Group's other steel manufacturing assets across the world.”

He added: “As far as I could understand, we did not have these guarantees, it was a very opaque structure, and there was a reluctance to give the group the money.”

Mr Kwarteng said ministers had “no idea where this money would end up”, adding: “I think we came to the right decision in that particular instance”.

In March it was reported that Mr Kwarteng had met Liberty executives several times to discuss the crisis at the group, amid concerns that it could collapse into administration without taxpayer help.

Its reliance on financing from Greensill, the supply chain finance provider which collapsed earlier that month, had left it in a parlous state.

In April, Mr Gupta told Sky News that he would not close any of the group's plants.

In comments directed at Liberty Steel's 3,000 UK workers, Mr Gupta said: “I will not give up on you. You are my family.

“Under my watch, none of my steel plants will close, I promise.”

He had added: “We are handling the situation as it has arisen, but we need to keep in mind that our business actually is enjoying one of the best times it's ever had.”

When Mr Kwarteng was asked by the committee on Tuesday if there was a danger of job losses or of losing the plants if action was not taken, he said: “I'm very keen to see that these assets, which are good assets, continue to operate, and the company continues to operate.

“But we can't strip Liberty Steel from the wider group under which it sits and, as Mr Gupta says, they're billions and billions of pounds in debt.

“The idea that the British government or any British minister would give this group, which is completely opaque…we don't know the full extent of their liabilities… the idea we would sign a cheque would be completely irresponsible and if I had done so, you would rightly be grilling me about this now.”

Mr Kwarteng was asked what the government's contingency plans were for Liberty Steel.

He replied: “We have to work through (Mr Gupta's) plans. He keeps reassuring his workforce that he has refinancing plans in place and the local management also have their own plans.

“Ahead of any government intervention or otherwise, I'm very keen that the plans of local management and Mr Gupta are indeed worked through. Let's see if Mr Gupta can refinance his businesses in the way he said he would.”

Liberty controls 11 sites, including ones at Rotherham and Stocksbridge in South Yorkshire, Newport in South Wales and Hartlepool.

By Sharon Marris

How Ultra-Rich Are Keeping Hold And Consolidating Their Fortunes Amid The Global Debris of The Pandemic

(qlmbusinessnews.com via uk.reuters.com — Sat, 27th March 2021) London, UK —

By Brenna Hughes Neghaiwi, Simon Jessop

ZURICH/LONDON (Reuters) – In 2020, as the world convulsed under COVID-19 and the global economy faced its worst recession since World War II, billionaires saw their riches reach new heights.

Now some are talking to their wealth managers about how to keep a hold of and consolidate their fortunes amid the global debris of the pandemic. Others are discussing how to preempt and navigate demands from governments, and the wider public, to pick up their share of the recovery costs.

“The stock market crashed a year ago, by July or so my portfolio was back where it was before, at the beginning of the year, and now it’s far higher,” said Morris Pearl, a former managing director at BlackRock who chairs Patriotic Millionaires, a group that believes the high net worth should do more to close the wealth gap.

“The fundamental problem is this gross inequality that’s getting worse.”

The plans being discussed by the ultra-rich range from philanthropy, to shifting money and businesses into trust funds, and relocating to other countries or states with favourable tax regimes, according to Reuters interviews with seven millionaires and billionaires and more than 20 advisers to the wealthy.

“It’s quite evident that the bill is coming for everybody,” said Rob Weeber, CEO at Swiss wealth manager Tiedemann Constantia, who said some clients were also considering selling major assets like businesses before tax rates rise.

In the United States, the election of Joe Biden as president, and anticipated higher taxes for the rich, have in particular triggered a sharp increase in demand from clients to set up trusts, according to wealth managers.

This would allow them to pass along money to children or other relatives under the current $11.7 million tax-free threshold per person. During his campaign, Biden proposed to return to 2009 levels, when the exemption stood at $3.5 million.

“We saw a surge of trusts created and funded in Q4 of last year,” said Alvina Lo, chief wealth strategist at Wilmington Trust. “The vast majority of our clients adopted a wait-and-see approach until the election in November, and then it just kicked up into high gear.”

‘EXTRAORDINARILY AGILE’

Nearly two-thirds of the world’s billionaire class amassed greater fortunes in 2020, according to Forbes, with the biggest gainers reaching unprecedented levels of wealth, helped by the trillions of dollars in recovery money from policymakers.

Forbes, which tracks publicly known fortunes, estimated billionaires had gotten 20% richer in 2020 by mid-December.

Many enjoyed investment opportunities off-limits to ordinary retail investors, capitalising on market volatility with short-term derivative trades, according to Maximilian Kunkel, UBS’s chief investment officer for wealthy family offices.

When asset prices tumbled, he said, many of the bank’s biggest private clients sold put options or opted for more complex trades known as risk reversals, helping them capitalise on their bet that prices would eventually rise.

“Some of our clients were extraordinarily agile in taking advantage of the biggest market dislocations,” Kunkel added.

Now, as governments globally grapple with ballooning debt and growing social unrest, billionaires know the spotlight on their wealth will get stronger, according to the interviews.

Many of the wealthy are mindful of looming demands from tax authorities, and are speeding up plans to pour money into trust funds for their children.

Wealth strategist Jason Cain said many ultra-rich families had also sought to move other assets including businesses into trust funds, capitalising on the “unique” situation presented by the pandemic of low interest rates and depressed valuations to make potentially windfall tax savings in years to come.

Inquiries in such strategies tripled during the first seven to eight months of the pandemic, according to Cain, who works for U.S.-based wealth advisory Boston Private.

“75-80% of the families that we talk to were convinced that that was an opportunistic time and they needed to do something.”

THE HAMPTONS, OR SINGAPORE?

Others across the globe are also taking more drastic action, by relocating to countries and areas where the tax regimes and societies are more benign for the mega-rich.

Henley & Partners, a global citizenship and residence advisory firm based in London, said inquiries from high-net-worth individuals seeking to relocate had jumped during the pandemic. The number of calls from U.S.-based clients surged 206% in 2020 from the prior year, for example, while calls from Brazil rose 156%.

For many in emerging countries, fears that strains on public services could lead to civil unrest have prompted younger generations of wealthy families particularly to seek opportunities abroad.

“COVID just basically took the clothes off the Emperor, and all of a sudden, people started to realize: our healthcare system is not strong, our social safety net is really not available,” said Beatriz Sanchez, head of Latin America at global wealth manager Julius Baer.

Switzerland, Luxembourg and Singapore have become popular targets as wealthy individuals consider where they want to be based in the long term, said Babak Dastmaltschi, Credit Suisse’s head of strategic clients in its international wealth management division.

“They are actually saying: look, we see the world inevitably going towards more and more transparency. And there’s no point fighting a trend,” Dastmaltschi said.

“Let’s just find suitable jurisdictions which are transparent, open, respected, and internationally recognised, and establish our structures there,” he said.

Cindy Ostrager, tax director at Clarfeld Citizens Private Wealth, said she also saw many ultra-wealthy clients moving out of New York City into their vacation getaways in the likes of the Hamptons, initially to escape the worst of the pandemic, and subsequently staying to pay lower taxes.

Moves to low-tax states, including Texas, Florida and Washington, have also become more popular, said Kristi Hanson, director of taxable research at investment consulting firm NEPC’s Private Wealth group.

FOCUS ON PHILANTHROPY

As countries continue to grapple with the pandemic’s fallout, economists point to a larger looming issue: the decoupling of extreme wealth from overall economic prosperity.

By early March, the wealth of U.S. billionaires had risen $1.3 trillion, or by nearly a half, since the start of the pandemic, according to research conducted by the Institute for Policy Studies and Americans for Tax Fairness.

That brings their wealth to $4.2 trillion, roughly a fifth of U.S. economic output for 2020 and double the total wealth held by the bottom-half of the 330 million population.

“We’re at a moment, you might say, after four years of celebrating inequality, people are saying that wasn’t exactly the right answer,” said Nobel Laureate and Columbia University economist Joseph Stiglitz, referring to the U.S. Trump administration reducing taxation for the rich.

The pandemic has focused the attention of many super-rich people on social causes, according to UBS’s American head of family advisory and philanthropy services Judy Spalthoff.

“There’s been a massive shift in the conversations we’re witnessing among families, in terms of the consideration of social inequity,” she said. “The younger generation has really been pushing this topic at the board level.

“We see so many conversations in families really gut-checking to say, ‘Yes, we’ve had success. We’ve worked hard for this success. But let’s not be blind to the world around us. And let’s make sure we can step out of our bubble’.”

For many that means philanthropy.

Spalthoff’s team saw a surge in clients partnering with the UBS Optimus Foundation, which channels money to causes such as Action Against Hunger, with donations rising 74% last year versus 2019, to $168 million.

Yet for UK-based millionaire Gary Stevenson, a former trader at Citibank, any plan to tackle inequality must include a wealth tax.

“We live in a situation right now where billionaires often pay lower rates of tax on their income than ordinary workers,” he said. “But I don’t think it will be enough just simply to tax their income … it needs taxes that apply on wealth.”

Thomas Cook shares plunge after request of additional £150m from investors

(qlmbusinessnews.com via theguardian.com – – Mon, 12th Aug 2019) London, Uk – –

Travel operator, which had already asked for £750m, wants to stave off winter cash crunch

Shares in Thomas Cook have slumped after the troubled travel operator said it was seeking to raise another £150m from investors – after already asking for £750m – to stave off a Christmas cash crunch.

Thomas Cook said it was in advanced discussions with its banks and Fosun, the Chinese conglomerate and its biggest shareholder, over the “substantial new capital investment”.

The British travel company, which traces its history to 1841, has struggled in recent years due to a large debt pile, intense competition and structural change to a travel industry lumbered with large branch networks. In recent months unseasonable weather and the impact of Brexit on consumers’ travel plans have added to its woes, pushing it to a £1.5bn loss for the six months to 31 March.Quick guide

Thomas Cook shares fell by a fifth on Monday to 6.2p amid questions of whether the company would survive. The price was a far cry from highs of 140p reached as recently as May 2018. The former FTSE 100 blue chip company was worth only £147.9m before the latest fall in its value.

The latest cash injection comes a month after Thomas Cook revealed it was in talks over a £750m rescue deal with Fosun, a Shanghai-based company with diverse interests that include Wolverhampton Wanderers football club, insurance and property businesses and the Club Med tourism brand.

Thomas Cook said the extra £150m would provide it with liquidity headroom during the winter months, when travel operators generally ran low on cash after bulk buying hotel space before a surge of bookings for the next summer. It expects the bailout to be concluded in early October.

Those shareholders who have remained with Thomas Cook are expected to have the value of their shares “significantly diluted” by the bailout, which will result in about £1.7bn in debt converted to equity alongside the £900m cash injection.

The plans would also involve splitting its profitable airline from the tour operator business, which Fosun would essentially take over. Fosun would then have to decide on any reorganisation, prompting concern about the future of the 21,000-member workforce. The company has 563 high street branches in the UK.

By Jasper Jolly

BOE states solid economic growth linked to ‘smooth’ Brexit

 

The head of the UK's central bank Mark Carney has said Britain should enjoy solid economic growth through to the end of the decade, but only if the government achieves a smooth departure from the European Union.

The Bank of England (BoE) trimmed its forecast of growth this year to 1.9 percent from 2.0 percent, but nudged up its forecasts for 2018 and 2019 to 1.7 percent and 1.8 percent. Last year Britain's economy grew 1.8 percent.

The head of the UK's central bank Mark Carney has said Britain should enjoy solid economic growth through to the end of the decade, but only if the government achieves a smooth departure from the European Union.

The Bank of England (BoE) trimmed its forecast of growth this year to 1.9 percent from 2.0 percent, but nudged up its forecasts for 2018 and 2019 to 1.7 percent and 1.8 percent. Last year Britain's economy grew 1.8 percent.

Carney said the BoE had not made forecasts based on the scenario of a “disorderly Brexit” where Britain crashes out of the EU without an agreement on future relations.