Aurelia Butler

Brewers and hospitality groups are preparing for a hit to beer sales this year after signs emerged of UK and European consumers limiting their drinking budgets.The squeeze on the cost of living has so far affected big-ticket purchases such as electronics and clothing more than drinks, but people are beginning to hold back from spending in hospitality venues or are choosing less expensive brands of beer, brewers and pub groups said.In the UK, beer purchasing across bars, pubs, restaurants and stores declined 2.6 per cent year on year in the third quarter of last year to 7.1mn barrels, according to the British Beer and Pub Association. Both Heineken and Carlsberg have warned of early signs of softening demand in Europe.“People are still out and about but understandably are cautious,” said Tim Martin, chair of JD Wetherspoon, one of the UK’s largest pub groups. The company said sales in the five weeks to November 6 were down 1.1 per cent from the same period in 2019. Oliver Robinson, managing director at Robinsons brewery in Stockport, said: “We are starting to see less frequent visits, and people are very happy to spend £5.50 on a pint but maybe two rather than three.”Spiros Malandrakis, head of research for alcoholic drinks at Euromonitor, said there was a “clash between the cost of living squeeze and the need to go back and socialise after three years of being stuck in our basements . . . this creates volatility”.The World Cup and Christmas are expected to provide a seasonal boost, and not all pub groups are suffering: in the 10 weeks to December 3, like-for-like sales at Mitchell & Butlers, the UK’s largest listed pub group, were up 9.2 per cent compared with the same weeks in 2019. “Everyone is expecting that the real squeeze in disposable incomes is going to come next year,” said Trevor Stirling, analyst at Bernstein.“For the brewers, input cost inflation in Europe is going to be very high. For example the price of malting barley . . . is up about two-thirds compared with the prior year. So we will see another round of big price increases in the spring.”He added: “And if the consumer is more fragile, another round of big price increases will have a big volume impact.”He said the UK had some of the lowest consumer confidence in Europe but there were signs of declining volumes in Spain and of trading down in France, where mainstream brands are growing faster than premium beers, reversing a long-lasting trend of premiumisation.“The alcohol business — beer, wine and spirits — is declining both in terms of value and volumes,” said Ananda Roy, senior vice-president at data analytics firm IRI.He said the World Cup would provide a boost, though not as strongly as when the tournament is held in summer. Seasonal drinks such as champagne and port are also expected to hold up this month, he said.A large decline in drinking volumes will only occur if there is large-scale unemployment, said Stirling.Heineken’s president for the Europe region, Soren Hagh, told investors this month that the war in Ukraine “has had a major impact on consumer confidence across markets [and] on inflation, which hits consumers in all countries”. More

LONDON (Reuters) – Heavy falls in stock and bond markets over the last year have cut the combined value of the world’s sovereign wealth and public pension funds for the first time ever – and to the tune of $2.2 trillion, an annual study of the sector has estimated.The report on state-owned investment vehicles by industry specialist Global SWF found that the value of assets managed by sovereign wealth funds fell to $10.6 trillion from $11.5 trillion, while those of public pension funds dropped to $20.8 trillion from $22.1 trillion.Global SWF’s Diego López said the main driver had been the “simultaneous and significant” 10%-plus corrections suffered by major bond and stock markets, a combination that had not happened in 50 years.It came as Russia’s invasion of Ukraine boosted commodity prices and drove already-rising inflation rates to 40-year highs. In response, the U.S. Federal reserve and other major central banks jacked up their interest rates causing a global market sell-off.”These are paper losses and some of the funds will not see them realized in their role as long-term investors,” López said. “But it is quite telling of the moment we are living.”Graphic: Sovereign wealth and public pension funds hit by market troubles, https://fingfx.thomsonreuters.com/gfx/mkt/byprllwawpe/Pasted%20image%201672418487721.png The report, which analysed 455 state-owned investors with a combined $32 trillion in assets, found that Denmark’s ATP had had the toughest year anywhere with an estimated 45% plunge that lost $34 billion for Danish pensioners.Despite all the turbulence though, the money funds spent buying up companies, property or infrastructure still jumped 12% compared with 2021.A record $257.5 billion was deployed across 743 deals, with sovereign wealth funds also sealing a record number of $1 billion-plus “mega-deals”.Singapore’s supersized $690 billion GIC fund topped the table, spending just over $39 billion in 72 deals. Over half of that was piled into real estate with a clear bias towards logistics properties.In fact, five of the 10 largest investments ever by state-owned investors took place in 2022, starting in January when another Singapore vehicle, Temasek, spent $7 billion buying testing, inspection and certification firm Element Materials from private equity fund Bridgepoint.In March, Canada’s BCI then agreed to acquire 60% of Britain’s National Grid (LON:NG) Gas Transmission and Metering arm with Macquarie. Two months later, Italy’s CDP Equity wealth fund spent $4.4 billion on Autostrade per l’Italia alongside Blackstone (NYSE:BX) and Macquarie.”If financial markets continue to fall in 2023, it is likely that sovereign funds will keep ‘chasing elephants’ as an effective way of meeting their capital allocation requirements,” the report said.It tipped SWFs from the Gulf such as ADIA, Mubadala, ADQ, PIF, QIA to become much more active in buying up Western firms having received large injections of oil revenue money over the past year. More

With foreign currency in short supply in Egypt, Rafik Clovis spent December anxiously waiting to find out whether his bank would be able to provide the $67,000 he needed to fund the import of a consignment of car parts from Europe. But by the end of the year, the dollars were still not available; as a result, his imports in 2022 were just a tenth of a normal year’s amount.“Conditions are catastrophic,” Clovis said. “There are no dollars and I have no idea how it will be resolved. I have five employees, and now we are surviving off what we made in previous years.”The importer’s predicament is shared by many businesses as Egypt struggles with a foreign currency crunch. The first three weeks of Russia’s full-scale invasion of Ukraine in February led to $20bn of outflows from the Arab world’s most populous country as foreign portfolio investors rushed to safe havens. Despite $13bn in deposits from the United Arab Emirates, Saudi Arabia and Qatar and another $3.3bn in asset sales to the UAE in 2022, foreign currency has remained in desperately short supply for the import-dependent country.A week ago President Abdel Fattah al-Sisi said banks would secure the foreign currency necessary to clear a backlog of imports within four days, without going into detail. According to Mostafa Madbouly, the prime minister, $9.5bn worth of goods are still held up at the country’s ports.The Ukraine war’s inflationary impact on prices for basic commodities such as wheat — Egypt is the world’s biggest importer of the grain — has added to pressures on the country’s foreign currency resources, forcing the Central Bank of Egypt to devalue the pound in March and October. Inflation in November reached 18.7 per cent, its highest rate in five years. For the fourth time in six years, Egypt has had to resort to the IMF, which last month approved a $3bn loan over four years. At the heart of the agreement is a commitment by Cairo to move to a flexible exchange rate regime in which market forces determine the currency’s value — something Egyptian governments have long resisted.

A worker delivers bread to stalls in Cairo © Roger Anis/Getty Images

In an effort to conserve foreign currency, the CBE placed restrictions on imports in March. The requirement to use letters of credit slowed the process and created a backlog of unfulfilled demand for dollars. It also prioritised access, placing basic commodities such as staple foods and medicines at the top of the list. The CBE cancelled the requirement to use letters of credit on December 29.The two devaluations have reduced the pound from around E£16 to the dollar to E£24.7. The black market rate is even lower.The CBE increased interest rates by 300 basis points on December 22, taking the overnight deposit rate to 16.25 per cent. The rise surpassed analysts’ expectations and reflected increasing concern about inflation and the falling pound, according to London-based consultancy Capital Economics.Businesses from poultry farms to car manufacturers have been badly hit in a country that imports most of its food and many of the inputs for its industries. As policymakers ponder when and how to move to a flexible exchange rate regime where the value of the pound is not propped up by the CBE, entrepreneurs complain they have no visibility on the future.“We are working day by day,” said the head of a poultry-based business who complained that shipments of grain, mainly soya and corn, used for feed, were stuck at ports because of the dollar shortage. “Every day we have to find feed, and we sometimes run out and the birds are not fed.”He said the agribusiness had had to “depopulate” some flocks by selling birds at a loss before the age at which they were usually sent to market. “The price is way below cost and we know some of our competitors have had to kill chicks,” the executive said. The “substantially” lower supply of chickens being sold for meat had increased prices by more than 50 per cent, he added.A vendor grabs a live chicken from a cage at a Cairo market © Islam Safwat/BloombergMohamed Abu Basha, head of macroeconomic analysis at Cairo-based investment bank EFG-Hermes, said the shift to a flexible exchange rate could not “happen overnight” and that the authorities needed to “ideally first build up a buffer of foreign currency to help clear the backlog of demand” before moving on the exchange rate. Farouk Soussa, economist at Goldman Sachs, outlined the difficult options facing Cairo as it sought to build up liquidity to deal with near-term demand for dollars. “The CBE could clear the market by continuing to raise rates, floating the currency and restricting the money supply, but the implications for prices and growth are problematic,” he said. “The authorities’ preferred option is to wait for inflows from the Qataris, the Emiratis and the Saudis to buy assets in Egypt, but that is also uncertain.”As policymakers weigh up the options, the outlook for many businesses is uncertain. A senior manager in a multinational auto components company said his business had fared better than most because it was also an exporter, giving it access to foreign currency. But those reserves were being depleted and the company was unsure whether to accept new orders.“I am not certain that I’ll be able to clear imported inputs for a new order and have to pay thousands in [holding fees] as I wait for dollars,” he said. “If my supplier abroad agrees to defer payment and I can get the goods out of the port, maybe the dollar will have gone up by the time I have to pay.” He added: “It is also possible the automobile manufacturer I am supplying here will have problems because [supply] of a different part has fallen through, so there is no final product and we all fail.” More

Noun: collective term for interlocking and simultaneous crises of an environmental, geopolitical and economic natureShortly before October’s IMF and World Bank meetings in Washington DC, former US Treasury secretary Lawrence Summers surveyed the global scene. “I can remember previous moments of equal or even greater gravity for the world economy,” he said. “But I cannot remember moments when there were . . . as many cross-currents as there are right now.”Galloping inflation had set in across the developed world, Summers noted, forcing central banks to tighten monetary policy more or less simultaneously. Meanwhile, an energy shock caused by the Russian invasion of Ukraine was hitting Europe particularly hard. And concerns were growing about the direction of Chinese policymaking, notably the country’s handling of Covid-19, not to mention Beijing’s designs on Taiwan. Summers thought the term “polycrisis”, popularised in recent months by the economic historian and FT contributing editor Adam Tooze, “apt” as a way of capturing a historical moment characterised by multiple global crises unfolding at the same time on an almost unprecedented scale. Tooze didn’t coin the word, however. It appears to have first been used in the late 1990s by the French social scientists Edgar Morin and Anne Brigitte Kern, who employed it to describe the “interwoven and overlapping crises” facing humanity, especially in the ecological sphere. The term re-entered wider circulation in 2018, in a speech delivered by Jean-Claude Juncker, then president of the European Commission. He recalled that in the middle of that decade, the EU had been in danger of “sleepwalking from one crisis to another without waking up” — from the sovereign debt crisis, through the influx of migrants and refugees fleeing war in the Middle East, to Brexit and the rise of populism. But since then, he declared, “We have slowly but surely turned the page from this so-called polycrisis”.In the wake of the global dislocations caused by the pandemic and the intensification of the contest between great powers, Juncker’s confidence that Europe, or the world for that matter, have put the polycrisis behind them looks sublimely [email protected] More