Archive forSeptember, 2017

Oil prices jump over 3% on rising demand and production cuts

Oil prices jumped on Monday with the Brent benchmark hitting its highest in more than two years. Rising demand and geopolitical worries fuelled the increase, along with indications that production cuts by Opec members are starting to bite. Brent rose 3.8% to $59.02 a barrel, its highest since July 2015, while the US West Texas benchmark rose 3% to $52.22. “The production cut is starting to work and the rebalance is underway,” said Gene McGillian, at Tradition Energy. The oil market has been in a downturn for almost three years. But the head of BP’s oil trading division in Asia, Janet Kong, told a Financial Times conference the market was now “at a juncture”. As well as increased demand, especially from China, Turkey’s threat to disrupt oil flows from Iraq’s Kurdistan region, helped push up prices on Monday. Turkey has said it could cut off a pipeline that carries oil from northern Iraq to the global market, putting more pressure on the Kurdish autonomous region over its independence referendum. “If this boycott call proves successful, a good 500,000 fewer barrels of crude oil per day would reach the market,” analysts at Commerzbank said in a research note. Meanwhile, Opec, Russia and several other producers have cut production by about 1.8 million barrels per day (bpd) since the start of 2017, helping lift oil prices by about 15% in the past three months. At an Opec meeting on Friday, several countries said output curbs were having the desired impact on the market and price. Kuwaiti Oil Minister Essam al-Marzouq said the cuts had reduced global crude stocks to their five-year average, Opec’s target.

Labour pledges law to cut credit card debt

Legislation limiting the amount of interest that can be charged on credit card debts is being promised by the Labour Party. Under the changes, nobody would pay more in interest than they had originally borrowed. Shadow chancellor John McDonnell says more than three million people are “trapped” by credit card debt. He will unveil the planned change in the law in a speech at Labour’s conference in Brighton. Labour said the changes would work in a similar way to measures on payday loans, which came into force in 2015. The Financial Conduct Authority has called for new measures to help people in “persistent debt” as a result of credit cards. The regulator says over three million people are in persistent debt, which it defines as having paid more in interest and charges than they have repaid of their borrowing over an 18-month period. Labour said its “total cost cap” would help “tackle the persistent debt spiral”, claiming growing consumer debt was becoming a “threat to our economy”.

Facebook to share Russia-linked political adverts with investigators

Facebook founder Mark Zuckerberg says his company will share 3,000 Russia-linked political adverts with US investigators. He also pledged to make political advertising more transparent on his network in future. “We will work with others to create a new standard for transparency for online political ads,” he said in a live address on his Facebook profile. He said political advertising will now carry disclaimers about which campaign or organisation paid for it. He added that the company was continuing to investigate instances of foreign actors abusing its advertising platform, including Russia and other “former Soviet states”. The move to share details with investigators comes after considerable public pressure for Facebook to be more transparent – and is being interpreted by some as an attempt to fend off any potential regulation from the US government.

Forward Diary: 25th – 29th September 2017

Company and economic announcements planned for the week commencing 25th September 2017

Ryanair pilots reject bonus to work through cancellation crisis

A group of Ryanair pilots has rejected a cash bonus to work extra days after the airline cancelled 2,100 flights because it “messed up” crew holidays. In a letter seen by the BBC, pilot representatives from 17 of the company’s 80 or so European bases have told bosses that most are not enthused. They want new contracts and better working conditions instead. Ryanair had offered captains a one-off payment of £12,000 or 12,000 euros, and first officers £6,000 or 6,000 euros. But the letter said: “The pilot market is changing, and Ryanair will need to change the ways which the pilots and management work together to ensure a stable and common future for everyone”. New contracts, it says, “should help stop the large number of colleagues who are leaving for “greener pastures”. It also asks to bring in professional negotiators to help broker a deal. They have given the airline until tomorrow to respond.

Tata and ThyssenKrupp seal steel deal

Indian conglomerate Tata’s European steel business has agreed the first stage of a joint venture with German steel manufacturer ThyssenKrupp. The tie-up will lead to job losses, to be shared between the two companies. The deal would create Europe’s second-largest steel group, after ArcelorMittal. The two companies have been in negotiations since last year, when Tata scrapped plans to sell off its UK operations. The two partners expect the move will require a reduction in workforce of about 4,000 jobs, with half coming from administration and half from production. The job losses will be shared evenly between the two companies. In a statement, the chief executive of ThyssenKrupp, Heinrich Hiesinger, said the two companies needed to consolidate and become more efficient because of increasing pressure from imports and an overcapacity within the industry. “We will not be putting any measures into effect in the joint venture that we would not have had to adopt on our own,” he said. Roy Rickhuss, chair of the National Trade Union Steel Co-ordinating Committee, said: “The steel trade unions cautiously welcome this news and recognise the industrial logic of such a partnership.

Ryanair publishes full list of cancellations

Ryanair has published full details of which of its flights are being cancelled between now and 28 October. Customers whose flights have been axed will also receive an email, chief executive Michael O’Leary has said. The budget airline is cancelling 40-50 flights every day for the next six weeks, after it admitted it had “messed up” the planning of pilot holidays. Mr O’Leary said most people would be transferred to an alternative Ryanair flight on the same day. If not, they would be moved to flights the day before or the day after, and the airline would meet its obligations over compensation. Details of all the cancelled flights are available on the Ryanair website. More than 200 of the cancelled flights are either into or out of London Stansted, with a handful in Edinburgh, Manchester and Birmingham also affected.

PwC reveals black and Asian workers are paid 13% less

Black, Asian and minority-ethnic staff (BAME) who work at PwC in the UK earn almost 13% less than other employees, according to figures provided by the professional services firm. The firm said its BAME workers were statistically paid less because more of them worked in administrative and junior roles, rather than senior ones. PwC said it had published the data to help it speed up progress on the issue. Currently reporting on BAME pay isn’t required under government regulations. PwC said it hoped that publishing the data would help the firm to tackle “ethnicity challenges”. “The more transparent we are with our diversity and social mobility data, the more we hold ourselves accountable to achieving real change,” said PwC chairman Kevin Ellis.

Top China Bitcoin exchange to stop trading

One of China’s biggest Bitcoin exchanges has said it will stop trading, after a government warning over virtual currencies. BTCC said it would stop buying and selling on 30 September in response to tightening regulation. It comes after authorities banned initial coin offerings on 5 September. The country has seen an explosion of digital currency trading, sparking fears about the financial risks and speculative investing. The price of Bitcoin tumbled sharply following the BTCC announcement late on Thursday but has since regained some ground.

Forward Diary: 18th – 22nd September 2017

Company and economic announcements planned for the week commencing 18th September 2017

John Lewis profits fall by half

John Lewis Partnership profits have fallen by more than 50% after the retail group was hit by costs to reorganise the business. Profit before tax fell 53.3% to £26.6m for the half-year ending 29 July after a £56.4m charge mainly for restructuring and redundancy costs. At the John Lewis department store, operating profits rose by 10%. But at Waitrose operating profits fell 18% as its margin was eaten into by higher costs. “Look, nobody should be surprised that this is a tough market for retailers. There’s any number of reasons for that,” John Lewis Partnership chairman Sir Charlie Mayfield told the BBC. “The reason our profits are down is predominantly because of margin, and cost prices are rising. It’s a very competitive market, retail prices are not rising as fast.”

‘Pay outpaces house prices’ in many areas

More than half of Britain has seen wages rise faster than house prices in the last 10 years, research by a mortgage lender has suggested. Edinburgh and Birmingham are among the 54% of areas where pay has outpaced property prices since 2007, the Yorkshire Building Society found. Yet the gap between wages and house prices has widened dramatically in other areas. The building society suggested this had accentuated a north-south divide. Across London and much of southern England, it has become “increasingly difficult for first-time buyers and those wanting to move up the housing ladder”, said Andrew McPhillips, chief economist at the Yorkshire Building Society. “However, the north of England, Wales and Scotland present a different picture entirely, with many places more affordable than they were before the credit crunch,” he said. “While some northern cities, such as Manchester, are less affordable than they were in 2007, in much of the north of England, Scotland and Wales, the gap between earnings and house prices is around a third of the average for London.”

Volkswagen plans electric option for all models by 2030

Volkswagen, the world’s biggest carmaker, will offer an electric version of all its 300 models by 2030, becoming the latest manufacturer to move away from petrol and diesel. VW will double investment in zero-emission vehicles to 20bn euros (£18bn) as it seeks to put the diesel emissions scandal behind it. The German firm plans to offer 80 new electric cars across the group by 2025. It comes as Mercedes-Benz also promised electric versions of all its cars. Mercedes chief Dieter Zetsche said the entire range would have electric or hybrid versions by 2022.

Apple suffers ‘major iPhone X leak’

Details of new iPhones and other forthcoming Apple devices have been revealed via an apparent leak. Two news sites were given access to an as-yet-unreleased version of the iOS operation system. The code refers to an iPhone X in addition to two new iPhone 8 handsets. It also details facial recognition tech that acts both as an ID system and maps users’ expressions onto emojis. One tech writer said it was the biggest leak of its kind to hit the firm. Apple is holding a launch event at its new headquarters on Tuesday. The California-based company takes great efforts to keep its technologies secret until its showcase events, and chief executive Tim Cook spoke in 2012 of the need to “double down” on concealment measures. Some details about the new devices had, however, already been revealed in August, when Apple published some test code for its HomePod speakers. But while that was thought to have been a mistake, it has been claimed that the latest leak was an intentional act of sabotage.

PR firm Bell Pottinger ‘nearing collapse’

Bell Pottinger’s Asian unit has said it will separate from its British parent, amid reports the public relations firm is nearing collapse. Bell Pottinger’s UK business is expected to go into administration as early as next week, the firm said. The Asian business will begin trading under a new name “in the coming days”. The PR firm was expelled from the industry trade body after being accused of stirring up racial hatred in South Africa. The company’s Asian business is seeking to distance itself from the scandal. “The Asia business is entirely ringfenced and solvent,” Asia Chief Executive Ang Shih Huei said in a statement sent to clients on Friday seen by the BBC. “Our teams are intact, we continue to serve our clients and it is entirely business as usual.” Bell Pottinger Asia said it would soon re-launch with a new ownership structure and operate under the name Klareco Communications.

Forward Diary: 11th – 15th September

Company and economic announcements planned for the week commencing 11th September 2017

Asda: Hundreds of jobs lost at supermarket offices

Asda is to axe hundreds of jobs at its West Yorkshire head office and a further site in the East Midlands as part of a major cost-cutting drive. About 300 jobs are to go at Asda House in Leeds and George House in Leicester the chain said, with job descriptions to a further 800 roles changed. The grocery giant said its home offices needed to “adapt how they operate to support our stores”. Affected staff were informed about the cuts on Wednesday afternoon.

Archbishop of Canterbury calls for radical economic reform

The Archbishop of Canterbury, Justin Welby, says Britain’s economic model is broken, as the gap between the richest and poorest parts of the UK widens. Britain stands at a watershed and must make “fundamental choices” about the direction of the economy, he said. The remarks come in a report by a commission set up by the centre-left Institute for Public Policy Research. The UK Treasury said: “Employment is at a record high, the deficit is down and inequality is at a 30-year low.” The IPPR’s interim Commission on Economic Justice report says the UK economy is the most unbalanced in Europe, and contains more workers overqualified for their jobs than the rest of the European Union. Britain’s economic model is simply unfit for the 2020s, the IPPR argues. The organisation proposes a “fundamental reform” of the economy, on a scale comparable with the Atlee reforms of the 1940s and the Thatcher revolution of the 1980s. Committee members include the Archbishop, along with leading figures from business and civil society. The archbishop said: “Our economic model is broken. Britain stands at a watershed moment where we need to make fundamental choices about the sort of economy we need. “We are failing those who will grow up into a world where the gap between the richest and poorest parts of the country is significant and destabilising.” The report sets out new analysis which suggests that, although GDP per head has risen by 12% since 2010, average earnings per employee have fallen by 6%.

Bank of Scotland receives most complaints – again

The Bank of Scotland remains the most complained about financial business in the UK, according to the complaints watchdog. In the first six months of 2017 the Financial Ombudsman said it dealt with 20,541 complaints about the firm – part of the Lloyds Banking Group. However only 22% of those complaints were upheld. The vast majority of the complaints about the Bank of Scotland – 83%- concerned its sales of PPI insurance. Meanwhile PPI complaints once again topped the table of consumer concerns, with a 14% rise in complaints to the Financial Ombudsman compared in the first half of the year, compared to the same period in 2016. In total the Financial Ombudsman Service received 89,513 PPI complaints, up from 78,375 in the previous period.

No rate rise until 2019, economists say

Most economists do not expect UK interest rates to rise until 2019 despite inflation remaining above target, according to a BBC survey. Most of those surveyed think the Bank of England’s Monetary Policy Committee (MPC) will be reluctant to raise rates during Brexit negotiations. Inflation stood at 2.6% in July – well above the Bank’s official target of 2%. Half the economists surveyed by the BBC think wages growth will outpace inflation in the first half of 2019. Last week, one MPC member, Michael Saunders, said a “modest rise” in rates was needed to curb high inflation. The base rate has stood at a record low of 0.25% since August 2016 – the first move since March 2009, when it was reduced to 0.5%. In June, three of the MPC’s eight members voted for a rate rise – the first time since May 2011 that so many had wanted to tighten policy. The same month the Bank’s chief economist, Andy Haldane, also made a call for a rate rise this year. However, Mark Carney, the Bank governor, said in his Mansion House speech in late June that “now is not yet the time” to start raising rates once more.

VW launches new UK diesel scrappage scheme

Volkswagen UK is offering customers discounts of up to £6,000 to trade in diesel vehicles when buying a new car. All the Volkswagen UK brands – including Audi, Seat, Skoda and Volkswagen Commercial Vehicles – will participate. VW launched a more generous scheme in Germany in August in the wake of its diesel emissions scandal. Competitors in the UK, including BMW, Ford, Hyundai, Mercedes-Benz and Vauxhall have already launched schemes. Rival Toyota also launched a scrappage scheme on Friday, offering up to £4,000 off a new Toyota. VW’s UK scheme is a continuation of the initiative launched in Germany, which was brought in after a top level summit between politicians and the country’s leading carmakers, including BMW, Daimler and Opel. VW’s German scheme offered a discount of up to 10,000 euros (£9,000) to trade in diesel vehicles. Diesel cars have been under scrutiny over high levels of nitrogen oxide emissions, sparked by VW’s diesel scandal. Two years ago, it was revealed that Volkswagen had cheated emissions tests that affected 11 million vehicles worldwide. Car manufacturers have been under increasing political pressure, especially in Germany, to encourage consumers to buy less polluting cars.