Today’s top stories
UK government ministers are on standby for the collapse of Thames Water, the country’s biggest water utility, and considering options that include the temporary nationalisation of the debt-laden business. Chief executive Sarah Bentley stepped down yesterday.
Ukraine’s defence minister Oleksiy Reznikov told the FT that the “main event” in its counteroffensive against the Russian invasion was yet to come. Here’s our new explainer on why the EU is split over raiding Russian assets, a move fraught with legal and financial hurdles.
Germany suffered an “alarming” decline in its attractiveness for business investment last year, when €125bn flowed out of the country in foreign direct investment, according to a leading economic institute.
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Good evening.
Are airlines using the surge in demand for flights to jack up ticket prices? And how is the aerospace industry coping with the need for more — and greener — aircraft to satisfy our post-pandemic yearning to take to the skies?
As we report today, Olivier Jankovec, director-general of airport trade body ACI Europe, has urged regulators to look at fares — which have risen 30 per cent year on year — for evidence of price gouging.
The claim is rejected by airlines, which blame airports for increasing charges. The battle has been particularly fierce at London Heathrow, where carriers including British Airways and Virgin Atlantic led a successful campaign to stop it raising its fees by 90 per cent following the pandemic.
The renewed demand for flying since restrictions were lifted was reflected in a slew of deals at the Paris air show last week — the first in four years — including the largest single jet deal in civil aviation history: Indian carrier IndiGo’s order for 500 aircraft from Airbus.
The head of French jet engine maker Safran told the FT earlier this month of an “unprecedented crisis of supply” in the aerospace industry, which would likely stretch into next year as manufacturers struggle to source the parts and staff they need to keep up with increased demand. Airbus made a similar point last month, pointing to shortages in components, semiconductors, labour and even seats. Engine maker Rolls-Royce was more bullish, noting that recovery in demand for large long-haul aircraft, its key market, was “coming back strongly”.
Airlines are reorganising to cope. In Latin America a flurry of business tie-ups and new routes has been accompanied by billions of dollars from investors. The region last year ranked first for passenger recovery and is now virtually back to pre-pandemic rates, boosted by “revenge tourism” — holidaymakers seeking escape following the confinement of social distancing. And unlike in Europe and North America, the region’s carriers have had to survive without targeted state financial assistance.
Sustainability, alongside the rush to increase defence budgets after Russia’s invasion of Ukraine, was another hot topic at the Paris show. The aviation industry has committed to achieving net zero carbon emissions by 2050 via new technologies including sustainable aviation fuels (SAF) and green hydrogen.
Environmental groups however maintain that a credible path to net zero is not compatible with an industry that is set on expansion. “If you want to solve a problem, start by not making it worse,” said Carlos Lopez de la Osa, of Transport & Environment, a clean transport campaign group. “If the sector keeps growing, sustainable flying will remain a pipe dream. It’s simple maths: more planes in the sky means more SAF required.”
Need to know: UK and Europe economy
Chancellor Jeremy Hunt discussed the UK cost of living crisis with regulators, asking whether there was any evidence of price gouging by companies. Supermarkets yesterday backed greater transparency on fuel prices but denied profiteering from food inflation. New data suggested the growth in food prices was slowing.
The situation for mortgage holders however remains bleak. Hunt also demanded banks do more to reward savers.
A UK-EU deal on financial services regulation was finally signed in a fresh sign of improving relations between the two sides since problems over Northern Ireland’s post-Brexit trading arrangements were resolved in February. Manufacturers though are less happy: Brexit is undermining their place in EU supply chains. Gibraltarians too: their post-Brexit trading deal is at risk from a power struggle in Spain.
The EU rebuffed a proposed US solution to end tariffs on steel and aluminium, heightening fears of a renewed trade dispute. The two sides paused a tariff war over measures imposed by then US president Donald Trump in 2021 but must find a binding deal on a new “green steel” club by October.
European Central Bank chief Christine Lagarde reiterated the need for high interest rates to fight off a wage-price spiral. Italian prime minister Giorgia Meloni was not impressed. Bank of England governor Andrew Bailey likewise signalled UK interest rates were likely to stay higher for longer than financial markets were expecting.
Need to know: Global economy
US president Joe Biden is making a new push to sell his economic vision to voters as the effects of his industrial policies start to filter through and inflation eases. US foreign policy is the theme of Martin Wolf’s new column: Is America feeling buyer’s remorse at the world it built?
China’s premier Li Qiang hit out at the west’s “de-risking” drive, denouncing economic “politicisation” and defending globalisation in an address to the World Economic Forum.
Deputy head of the IMF Gita Gopinath said central banks had to accept the “uncomfortable truth” of inflation staying above their 2 per cent target if they were to avoid a financial crisis.
The new head of the Democratic Republic of Congo’s state mining company said the country had missed the chance to leverage its dominance in the cobalt market and attract investment. Indonesia’s sudden emergence as a rival supplier has also threatened DRC’s position.
The World Bank said an extra 4mn Nigerians were pushed into poverty in the first five months of this year as African’s largest economy was hit by soaring inflation.
Need to know: business
Cyber security experts warned about the growth of deepfake scams where criminals pair artificial intelligence software with personal information to create digital likenesses of people to bypass traditional security checks.
KPMG is shedding 5 per cent of its US workforce in another sign of the slowdown in demand for consulting and other services. EY, Deloitte, McKinsey and Accenture are also cutting back. PwC told its UK staff to expect smaller pay rises and bonuses.
Hosts of Chinese companies are pivoting to the manufacture of lithium batteries, sparked by the government’s plan for energy independence. India is set to offer billions of dollars in subsidies for companies making electricity grid batteries as it tries to speed up its transition from coal.
A Big Read discusses the role of Macquarie, the Australian group that has become the world’s largest infrastructure manager but prefers to downplay its influence.
A new series of the Tech Tonic podcast focuses on social media, beginning with Twitter. Will Elon Musk save it or destroy it?
The World of Work
Goldman Sachs and Morgan Stanley are among US companies offering British employees medical services on site. The trend, deemed a business efficiency in the US when it emerged in the 1980s as healthcare costs rose, is becoming more common in the UK.
Isabel Berwick talks to broadcaster Davina McCall on how managers can tackle taboos and help women work through the menopause in the latest Working It podcast.
Some good news
Some encouraging news in the treatment of Alzheimer’s: recent phase 3 trials have showed the effectiveness of new therapies in slowing cognitive and functional decline.
Source: Economy - ft.com
