Aurelia Butler

About 1.5mn UK local government employees have been offered a wage rise worth more than 20 per cent over two years for the lowest paid, increasing pressure on ministers to make more generous offers to striking teachers, NHS staff and other public sector workers.The Local Government Association said on Thursday that council employees at some 350 local authorities in England, Wales and Northern Ireland had been offered an increase of at least £1,925 for the year from April 2023, following a similar settlement for 2022-23.If agreed, that would mean an increase of 9.42 per cent this year and 22 per cent over the two years since April 2021 for the lowest paid, with a 2023 uplift of 3.88 per cent for top earners. The offer would result in a £1.093bn, or 6.42 per cent, increase to the national pay bill, similar to the current average for private sector pay deals.The offer — which covers care workers, school teaching assistants and refuse collectors, among others — stands in sharp contrast with the awards handed down last year by central government departments for teachers, hospital staff and civil servants, which have led to a wave of strike action.Ministers this week told the independent pay review bodies that awards higher than 3.5 per cent in 2023-24 would not be affordable within current budget allocations, although Prime Minister Rishi Sunak is exploring a 5 per cent pay rise that could potentially be backdated to cover part of 2022-23.The Royal College of Nursing entered talks on pay with ministers this week, but the National Education Union, which received a similar invitation to talks alongside other teaching unions, has said it needs to see a more concrete offer on pay before it will call off strikes and negotiate. Sian Goding, chair of the National Employers body that negotiates the local government pay deal with unions, said it was “acutely aware” of the pressure the offer would place on council finances, since it would need to be met from existing budgets, but that it believed the offer was “fair . . . given the wider economic backdrop”.One reason the offer looks relatively generous is that many council employees are on salaries that are not far above the statutory wage floor, which is set to rise by 9.7 per cent to £10.42 per hour in April.Local authorities want their lowest hourly rate to remain well above this floor, while also maintaining incentives for staff to move higher up the pay scale. The rising minimum wage is also a factor in other parts of the public sector, but some of the main groups of workers who have been involved in strike action, such as nurses and teachers, are much higher paid.

However, unions say councils have also been quicker to respond to the recruitment pressures seen across the public sector, with many local authorities now struggling to stop low paid school and care staff leaving for supermarkets that compete on pay and flexibility. Laurence Turner, head of research at the GMB union, said local government employers had shown “a higher degree of independence” than the pay review bodies tasked with recommending pay for other parts of the public sector, adding there had been “quite a sober recognition of how acute the recruitment and retention problems in local government have been”.The offer nonetheless falls short of the pay claim initially put in by Unison, Unite and the GMB, the three unions representing council employees, which will now consider their response. More

Cheniere Energy, the largest US liquefied natural gas exporter, is planning a major expansion at its flagship terminal on the Louisiana coast, aiming to capitalise on surging overseas energy demand after Russia’s full-scale invasion of Ukraine.The company said on Thursday that it would launch the permitting process to add 20 million tonnes per year of gas export capacity at its Sabine Pass LNG plant, up by 74 per cent from the facility’s current capacity of 27mn tonnes. Cheniere pioneered foreign sales of US LNG when it began exports from Sabine Pass in 2016.Cheniere’s ambitious growth plans are a sign of optimism from the US LNG industry that a boom in fuel demand set off by Moscow curtailing supplies into Europe last year is set to persist for decades.“The need for further investment in LNG capacity was again laid bare last year. Over the next few decades, both the supply and demand side trends are supportive of new liquefaction infrastructure,” Anatol Feygin, Cheniere’s chief commercial officer, said on a call with investors.Cheniere did not provide cost estimates for the project, but at current construction rates it would likely top $10bn. The Houston-based company says it hopes to start exporting from the new facilities by the end of the decade, and said it could add carbon capture and storage capabilities to reduce the plant’s greenhouse gas emissions.Feygin said that Cheniere was trying to sign up “European and Asian buyers” for the project. Adding capacity to an existing plant would give it a cost advantage over other competing projects, he said.US natural gas prices have fallen nearly 80 per cent from their highs last year, largely because a warm winter has weakened demand for heat. Domestic US gas production also remains strong.Prices have traded well below gas sold overseas, underscoring the attractiveness of US exports. The US benchmark gas price was trading at about $2.28 per mn British thermal units on Thursday, compared to Europe’s main hub price of about $16/mn Btu.US President Joe Biden last year struck a deal with European Commission president Ursula von der Leyen to encourage US exporters to keep supplying the continent with natural gas at higher volumes through to the end of the decade.

However, the Biden administration is under mounting pressure from climate activists not to grant permits for new long-term oil and gas projects they argue will lock in carbon emissions for decades to come. Cheniere will have to obtain federal permits before proceeding with the expansion.Cheniere’s expansion plans come as some other US gas executives have warned that a recent drop in Europe’s energy prices and the continent’s climate ambitions have cooled interest in new export projects.The US has the capacity to export about 110mn tonnes of LNG a year, and projects currently under construction are set to cement its status as the world’s biggest exporter, with about 140mn tonnes of capacity by 2025.Competitors of Cheniere, including Sempra Energy and NextDecade, already have permits and have lined up long-term customers for rival projects. They hope to make final investment decisions this year that would add significantly to capacity.Wood Mackenzie, a consultancy, says more than $100bn could be ploughed into US LNG projects over the next five years. More

Germany’s deputy chancellor said Berlin will crack down on companies that dodge western sanctions imposed on Moscow, including the threat of criminal prosecution for false export declarations. Robert Habeck said sanctions evasion was “no minor misdemeanour” as he unveiled proposals to clamp down on the practice of companies selling goods to Russia via third countries. He said he wanted the plan to be adopted across the EU.A paper released by Habeck’s economy ministry said trade data showed a “considerable amount” of sanctioned products were being exported from the EU and Germany to certain third countries “and then exported further from there to Russia”, despite the swingeing sanctions imposed on Moscow since it launched its full-scale invasion of Ukraine nearly a year ago.“We have to jointly deal with these [attempts to] bypass sanctions more effectively than we have up till now, both on a national and an EU level,” it said. Germany will push for the proposals to be enacted as part of the EU’s 11th package of sanctions against Russia, Habeck said on Thursday, adding that such businesses were “betraying the interests of [the Ukrainian] people who are fighting for their freedom”. EU ambassadors are aiming to sign off a tenth sanctions package this week. The minister said companies will have to provide transparent “end-use statements” as part of their export declarations “to say that they will not export [their goods] further to Russia”. The ministry said this new rule would apply to “all sanctioned goods that have a significance for Russia’s war machine”. Anyone who provides false information in the end-use statement would face criminal conviction, it said. Habeck’s intervention came as the EU and its partners including the US and UK met to share intelligence on possible sanctions dodging. David O’Sullivan, the EU’s newly appointed sanctions envoy, told the FT before the meeting that a surge in exports to countries in Russia’s neighbourhood suggested banned products could be entering the country via the back door.The European Bank for Reconstruction and Development said Armenia and Kyrgyzstan have experienced a sharp increase in western imports and a rise in exports to Russia. Turkey’s exports to Russia have also jumped.Habeck said trade data showed that exports of certain goods to third countries which had been at stable levels for years “had suddenly shot up since the start of the war or the introduction of sanctions”. “This can’t just be a coincidence,” he said. “The idea that this is a business model that has established itself beyond war and sanctions is completely implausible.”

Under the proposals set out by his ministry, Habeck said sanctions-dodging companies should be blacklisted, “so trade with such companies would no longer be possible” and “the flow of goods to Russia would be interrupted”. He said Berlin would also seek to introduce new rules obliging “anyone who has knowledge of, or suspects, sanction evasion to report it”. People who fail to disclose such information would face punishment, the ministry said. Germany will also seek to sanction individuals or companies for exporting products manufactured in the EU to Russia via a company in a third country. Habeck’s ministry said countries that failed to co-operate on anti-Russian sanctions should be threatened with punishment, including potentially withdrawing the relief they currently obtain from EU import tariffs on certain goods. More

Imports of salad vegetables to the UK have dropped by at least half, according to the main group representing English growers, highlighting the scale of the shortages facing households.Four UK supermarkets began rationing products including peppers, cucumbers, lettuces and tomatoes this week after frost in Spain and north Africa led to a steep decline in availability, with the UK among the destinations worst affected by reduced supplies.Lee Stiles, secretary of the Lea Valley Growers Association, whose members also import produce, said that “around half of everything that we would expect is arriving . . . this will have the biggest effect on companies that procure in the open market”.The British Retail Consortium said in 2019, the last year for which it has data, imports have accounted for about 95 per cent of the tomato market in March and 90 per cent of lettuces.A major Spanish grower told the Financial Times current industry supplies were a third of normal levels for this time of the year, while one UK supermarket said it had about two-thirds of its usual amount of produce.The shortage has been exacerbated by UK and Netherlands-based glasshouse growers opting not to cultivate fruit and vegetables over the winter because of high energy costs and UK labour shortages, said farming groups. Tesco, Asda, Aldi and Morrisons are now limiting purchases.Environment secretary Thérèse Coffey told the House of Commons on Thursday that retailers had told her the shortages were expected to last two to four weeks.“It’s important to make sure that we cherish the specialisms that we have in this country,” she said. “A lot of people would be eating turnips right now, rather than thinking necessarily about . . . lettuce and tomatoes.”Prices have soared for salad vegetables across the continent following the poor weather. But the UK has been especially affected by shortages because of the extra journey to transport produce across the Channel, together with comparatively low retail prices for vegetables, Stiles said. Shortages have also been reported in Ireland.UK supermarkets buy most of their vegetables under contract but some suppliers have been prioritising other contracts or selling produce at higher prices on the open market, executives said.Pressure on UK supermarkets has been heightened by businesses such as greengrocers and hospitality outlets turning to supermarkets for their supplies, as well as by consumers’ preference for eating salads out of season.Jesús Pérez, commercial director of Spanish grower Verdimed, said production volumes had fallen to about 30 per cent of normal levels after the autumn planting grew too fast because of unusually warm weather, then the winter planting was slow to grow.“We think next week will be normal, but I don’t know how long it will take until the UK market will get product because of packing, transport to depots, delivery to shops.”The UK is also especially dependent on Morocco, which has placed limits on tomato exports following price jumps. Mehdi Benchekroun, of Moroccan fruit and vegetable exporter DMB & Co, said: “Because European supplies from Spain and Portugal have fallen because of the cold weather, all the buyers have come to Morocco. This situation started at the start of the year and domestic prices have risen to records.”Pekka Pesonen, secretary-general of Copa-Cogeca, the EU farmers’ union, said extra post-Brexit paperwork was also a factor, even though full sanitary and phytosanitary checks on imports have not yet been implemented.“There is high demand for certain Spanish produce and if Spanish companies are approached, would they opt to sell to the British, or to EU countries, which are easier to export to, where they don’t have all the paperwork?” he said.“It’s more of a hassle exporting from Spain to the UK instead of to Germany. If you pay enough there will always be sources, but I don’t know whether UK retailers are willing to pay extremely high prices.” More

The writer is CEO of Hermitage CapitalAs Vladimir Putin’s murderous invasion enters its second year, it is time to take stock of what we can do now to help Ukraine win. The British government and Nato allies have come a long way from the early days of the war when they endlessly repeated: “No offensive weapons for Ukraine”. Certainly, more needs to be done in terms of quantity but we have now provided most of the categories of weapons Ukraine requested. A live debate is raging over whether to provide fighter jets.However, we need to fight Russia with banks as well as tanks. In this area, we still have a lot of work to do. Western allies froze well over $300bn of Russian central bank reserves in the first week of the war. This money is currently sitting in the Bank of England, the US Federal Reserve, the European Central Bank and others. Since then, the Russian invasion has caused at least $1tn of damage to Ukraine, and possibly much more. We have sent money to help the Ukrainians fight the invasion but not enough to help them win. Meanwhile, complaints are growing (notably among US Republicans) that the war is costing too much as the conflict drags on. People wonder why we should pay for a war in a faraway country when we have a cost of living crisis and strikes for higher wages to contend with at home. These sentiments will only get louder so we have to come up with a solution of how to pay for this war. And that’s when we come back to the $300bn plus in central bank reserves. This money should not just be frozen. It should be seized for the defence and reconstruction of Ukraine. This seems entirely morally logical. It makes financial sense. It would be an easy response to those complaining about the costs of this war. And it makes political sense for every allied leader struggling with the long term consequences of the conflict.So why isn’t this happening? Some are concerned that seizing this money would lead to further de-dollarisation of the global economy as other countries respond out of fear that similar action will be taken against them. This would be a risk if the US alone was raiding the central bank reserves. But if every country with a reserve currency were involved, then investors would have no alternative.The UK Foreign, Commonwealth and Development Office, the US State Department and other foreign ministries in allied countries are also standing in the way. Their argument is that Russian Central Bank Reserves are protected by a legal concept known as sovereign immunity. But Putin continues to push our definitions of what constitutes an international crime, by invading a peaceful neighbour and redrawing the map of Europe. It seems entirely logical that we need to update the law in response. My proposal is that allied countries that have frozen central bank reserves should all revise their laws on sovereign immunity in unison. Of course, sovereign immunity should apply in every scenario apart from the specific instance in which a country commits an act of aggression against its neighbouring country. The move to prosecute Russia for an act of aggression (defined by the Rome Charter of the International Criminal Court as “the use of armed force by a state against the sovereignty, territorial integrity or political independence of another state, or in any other manner inconsistent with the Charter of the United Nations”) is gathering momentum. Only by revising our laws so that sovereign immunity does not apply under these specific circumstances, can those assets be seized.I believe the UK, the US, Canada, Japan, the EU and Australia all need to unify around this simple, viable proposal. That would go a long way to at least starting to repair the financial damage that Russia has wrought with this terrible invasion of Ukraine. More

Here we go again. Last month, the American S&P 500 jumped 7 per cent, supposedly because investors started to think (or hope) that lower inflation rates would slow Federal Reserve rate rises.On Tuesday, however, US equity markets suffered their biggest fall for two months, as strong economic data sparked a welter of market chatter about the prospect of more tightening from the Fed.That dragged other indices down and intensified arguments between those observers (such as Morgan Stanley’s research team) who view January’s market euphoria as overdone and those (such as Jim Cramer, the celebrity host of Mad Money) who think it is the market bears who are “in denial”.This debate will undoubtedly run and run, particularly since the latest Fed minutes suggest that even US central bankers weren’t entirely unified about the outlook. However, while investors obsessively wait for the next batch of economic data or the latest words of Fed chair Jerome Powell, they urgently need to cast their gaze wider as well — towards what is happening with big central banks outside American shores.This is not something that US television luminaries and pundits often do. No wonder: American investors (and voters) are famously myopic, and journalists are trained to explain market swings in terms of hard economic and corporate news. But right now those oft-ignored, worldwide central bank flows really do matter, since something rather surprising — if not counterintuitive — is going on.Most notably, since last spring the Federal Reserve has tried to combat inflation by raising rates and moving from quantitative easing to quantitative tightening. Thus the Fed balance sheet shrunk from $8.96tn in April to $8.38tn today. This was initially primarily due to declines in commercial banks’ reserves, but more recently it has been because the Fed has run down securities. Economic logic might suggest that this American QT should have created tighter financial conditions. But this is not the case. An unexpected wrinkle of recent months, which has complicated the Fed’s policy challenge, is that the Chicago Fed’s national financial conditions index has dropped to minus 0.45, compared to minus 0.13 last September. (A more negative number represents greater loosening.)Why? One reason might be investor optimism about growth. But a far more likely culprit, says Matt King, Citi’s Global Markets Strategist, is non-US central bank flows. For even as the Fed’s balance sheet has been shrinking, the People’s Bank of China has been pumping more liquidity into the system and the Bank of Japan has maintained its so-called yield curve control policies.Meanwhile, the behaviour of the European Central Bank has been somewhat unexpected. Like the Fed, the ECB has been raising rates, with more to follow. But its balance sheet has marginally increased, due to some arcane shifts in government deposits.The net result, Citi calculates, is that these three central banks have collectively pushed almost $1tn of additional liquidity into the global system since October (when adjusted for exchange rates). This more than offsets what the Fed has done. Call it, if you like, some accidental anti-QT. And King thinks that this trillion-dollar boost helps to explain January’s stock surge. His historical models show that in recent years, “there has been a 10 per cent gain in equities [in MSCI world and S&P]” for each $1tn of new liquidity supplied by central banks.Torsten Slok, chief economist at Apollo, agrees. “BoJ purchases of Japanese government bonds to keep yields low are now bigger than Fed QT,” he says. “The result is that central banks are once again adding liquidity to global financial markets, which [likely] contributed to the rally in equities and credit in January.”If this analysis is correct (as I think it is), it raises another trillion-dollar question: will this anti-QT last and keep supporting asset prices? King thinks not, and expects markets to soften this year. One reason is that the PBoC is unlikely to loosen policy further because Chinese officials do not want to stoke more real estate bubbles. Another is that the BoJ will come under pressure to reduce its yield curve control policies when it changes governor in April.But there are some very big wild cards in the pack. The Fed could face pressure to slow QT if there is a US debt ceiling crisis. Flows around commercial bank and government reserves could turn even more surprising at the ECB and other central banks. After all, as economists such as Raghuram Rajan have noted, given that QT has never been conducted before on this scale, the plumbing around this process is untested and unclear.More important still, nobody knows whether the BoJ will really have the courage to exit yield curve control, since the man slated as the next governor — Kazuo Ueda — has said remarkably little about QE recently. This matters for many asset classes. To cite just one example: higher rates in Japan could well prompt its investors to reduce holdings of non-Japanese fixed income, influencing US bond prices in turn. So the key point for American investors is this: even as they track inflation data, corporate earnings and Fed speeches at home, they need to watch what people like Ueda do too. Maybe Cramer should host his next show from Tokyo or [email protected] More