Aurelia Butler

LONDON (Reuters) – A London judge has told Kazakh mining company ENRC, its former legal adviser Dechert and the UK Serious Fraud Office (SFO) to consider mediation to end bitter litigation over events that led to a near 10-year criminal investigation.Despite ruling in May that former veteran Dechert partner Neil Gerrard had grossly betrayed his own client and former senior SFO officers had behaved with bad faith, High Court Judge David Waksman suggested all sides call a truce.”Notwithstanding what’s happened in the past and the serious allegations … I can certainly see the sense in which somebody looking at all of this may say there needs now to be closure,” he told a two-day hearing to discuss legal costs. “Enough is enough. I do think the parties at the very least need to turn their mind to the question of … a possible mediation.”The SFO and Dechert declined to comment. Representatives for ENRC and Gerrard, who represented ENRC between 2010 and 2013, did not immediately reply to requests for comment. Eurasian Natural Resources Corporation (ENRC) alleged Gerrard leaked confidential information to the SFO, so he could expand an internal investigation and milk the company for hefty fees, and that the SFO encouraged him in order to try and claim a high-profile corporate scalp.The SFO opened a criminal investigation into allegations of fraud, bribery and corruption linked to ENRC’s purchase of mineral assets in Africa in 2013, but no charges have been brought against the company or suspects. ENRC denies wrongdoing.After an initial trial to establish liability last year, Waksman found Gerrard breached his duty of care to ENRC, leaked privileged material to the media, engaged with SFO officials without authority in a “reckless breach of duty” and that the SFO induced him to do so with “bad faith opportunism”. But the judge dismissed ENRC’s other allegations against the SFO, including misfeasance in public office, deliberate destruction of evidence and leaking to reporters.Gerrard said in May he remained convinced of the appropriateness of his actions, his advice to his former client and his personal and professional integrity.Dechert, meanwhile, has said it recognises the seriousness of the judge’s findings in relation to Gerrard’s conduct, noting that up to and including the trial, it acted “in good faith in reliance on the assurances given to us by Mr Gerrard”.ENRC has said it is seeking multi-million pound losses against both Dechert and the SFO and a further trial will establish whether the wrongdoing caused any loss.In the meantime, Dechert has agreed to pay ENRC 20 million pounds ($24 million) towards interim costs and says its insurers stand by the firm. ($1 = 0.8227 pounds) More

The Bank of England on Thursday lived up to its promise to act “forcefully” to curb surging inflation, by announcing the biggest increase in interest rates for more than a quarter of a century.But while the rise in borrowing costs was no more than analysts had expected, the central bank’s intensely gloomy view of the immediate economic outlook came as a shock.BoE policymakers have stepped up the pace of monetary tightening despite predicting a recession set to match that of the early 1990s, and the biggest fall in household incomes for more than 60 years.Andrew Bailey, BoE governor, argued this painful squeeze on living standards was now inevitable and necessary to bring inflation under control and avoid a harsher economic downturn later.“Inflation hits the least well-off hardest. If we don’t act now . . . the consequences later will be worse,” he said at a press conference after the BoE Monetary Policy Committee’s decision to raise interest rates by 0.5 percentage points to 1.75 per cent.He added that despite the “very uncomfortable position” in which policymakers found themselves, “there are no ifs or buts in our commitment to the 2 per cent inflation target”. Consumer price inflation hit a fresh 40-year high of 9.4 per cent in June.Big downgrades to the BoE’s growth forecasts are almost entirely because of the renewed surge in wholesale gas prices stemming from Russia’s restriction of supplies. Analysts said this could hit the UK economy harder than others in Europe, where governments have done more to shield consumers.The BoE estimates a typical UK household’s annual fuel bill could now rise from just under £2,000 to about £3,500 when regulators reset their cap on prices in October — driving consumer price inflation above 13 per cent by the end of the year and keeping it in double digits for much of 2023.“The immediate inflation outlook is now so dire that the Monetary Policy Committee feels it has no option but to engineer a more severe economic downturn,” said Ross Walker, economist at NatWest Markets, calling it a “deeply sobering shift in policy”.But this near-term surge in inflation is not policymakers’ main concern — despite criticism levelled at the BoE by some Conservative MPs for failing to act sooner to curb price rises.Policymakers said the inflation spike was largely because of global pressures that are already easing, with commodity prices edging down and supply chains starting to run more smoothly.Ben Broadbent, BoE deputy governor, said the central bank could not have foreseen the war in Ukraine and could not realistically have countered its effects, even with “extraordinary insight”, given the scale of the response needed to offset such an unprecedented set of shocks.The MPC’s bigger worry is that inflation will remain above the BoE’s 2 per cent target once these global pressures subside, if businesses and households become accustomed to prices rising rapidly and change their behaviour as a result.“We’ve seen things which do concern us, frankly,” said Bailey, pointing to survey evidence that wage growth had accelerated since May, against a backdrop of ongoing labour shortages, while businesses still felt confident of passing on higher costs to consumers.But the BoE thinks the looming recession will soon take the heat out of the labour market, with unemployment set to rise from the middle of next year and exceed 6 per cent by the middle of 2025. The central bank’s forecasts suggest inflation could fall below its 2 per cent target by the end of 2024, even if energy prices remained high for longer than markets currently expect and if the BoE took no further policy action, with interest rates constant at the new level of 1.75 per cent.Bailey said the uncertainty around these forecasts was exceptionally high, especially when it came to energy prices, and made it clear that the BoE’s aggressive action on Thursday should not be taken as a signal that it would now embark on a pre-determined series of rapid rate rises.“Policy is not on a preset path, and what we do this time does not tell you what we’re going to do next time,” he said. “All options are on the table at our September meeting and beyond.”One step the BoE does plan to take in September is to start monthly sales of the £875bn of assets accumulated under its quantitative easing programmes — with steady disposals aimed at reducing the stock by about £80bn over the first 12 months. But the BoE made it clear that interest rates would remain its main tool for adjusting monetary policy.Analysts said the BoE’s forecasts suggested interest rates might need to fall over the longer term, even if the MPC thought it necessary to tighten policy further in the near term to bring inflation in check.“Overall the bank is forecasting stagflation and suggesting that in the near term, the medicine is the tough love of higher interest rates and that further ahead the comfort blanket of interest rate cuts may be needed,” said Paul Dales at the consultancy Capital Economics.But Sandra Horsfield, economist at Investec, noted the BoE’s forecasts did not factor in any of the fiscal stimulus both candidates for the Conservative party leadership had proposed — and that tax cuts, or other political choices, could affect the outlook “materially”. More

The Intercept’s Ken Klippenstein has done some sharp reporting on national security, along with many other documents that weren’t meant to reach the public. So we regret that we need to publish this take. But it seems like it would be useful to clarify that there is no real scandal in the so-called private memo from Bank of America published last Friday by the Pierre Omidyar-backed outlet. First, the memo was actually a research note, and those notes are distributed to thousands of clients. To be fair, we can see the appeal of the story idea. Sell-side research has long reminded us of the conflicts between investors’ priorities and the wellbeing of workers, even if those reminders are unintended. Investors may find political gridlock to be helpful, for example, and cures for chronic diseases to be unprofitable. Still, after listening to the discussion over jobs and wages over the past couple of years, Bank of America’s note seems downright milquetoast. The offending sections are as follows (via the Intercept): A modest further rise in the participation rate should help push up the unemployment rate, but we think most of the increase will likely come from weaker demand for workers. By the end of next year, we hope the ratio of job openings to unemployed is down to the more normal highs of the last business cycle. Keep a close eye on this metric and timely indicators of labour market balance like jobless claims and survey questions on the job market . ..wage pressures are also going to be hard to reverse. While there may have been some one-off increases in some pockets of the labour market, the upward pressure extends to virtually every industry, income and skill level.”In other words, they are hoping that the ratio of job openings to unemployed people is somewhere closer to its 2018 levels by the end of 2023. They are referencing JOLTS data, of course. There are currently 1.8 openings for every unemployed worker, and late-2018 levels would imply 1.2 job openings for every worker.

This does drive home the point that think-tank Employ America made early this year: One main way the Fed actually manages inflation is by reducing employment. Central-bank officials raise rates, financing becomes more expensive, companies have to choose between paying creditors and employees, and the creditors win out. People have less money to spend, so prices stop rising so much. In that light we can look at comments from Larry Summers, who said the following in a June speech, per a Bloomberg report: We need five years of unemployment above 5% to contain inflation — in other words, we need two years of 7.5% unemployment or five years of 6% unemployment or one year of 10% unemployment . . . There are numbers that are remarkably discouraging.One year of 10% unemployment would mean roughly 33mn 16mn people out of a job! 33mn 16mn people who want a job! [Corrected: Our toddlers and grandparents aren’t looking for jobs. Yet.] That makes Bank of America’s argument sound humane.The bank is correct to say that there are a record-high number of job openings, and also correct that employment costs are rising — the US employment cost index climbed 5.1% in the second quarter of this year, according to the BLS. Excluding state and local government employment costs, it was the quickest increase since at least 2006:

Even with all of that, Deutsche Bank argues that labour-market tightness is adding around one percentage point to the US’s 9.1-per-cent annual rate of inflation, citing the Chicago Fed to make its case. In contrast, West Texas crude-oil prices are up 18 per cent this year at $88.40 a barrel, even after a significant decline from its peak above $120. Here’s what the Bank of America note has to say about that: Only once in a generation economic downturns like the double-dip recession of 1980-82 or the Global Financial Crisis in 2008-09 have resulted in oil demand contractions in excess of 2mn b/d. To put this number in context, Russian energy exports were about 8mn b/d before the war started, stressing the difficulty of blocking large quantities of Russian oil off the global market. Unfortunately, the Fed can’t do anything about Russia’s invasion of Ukraine. So Bank of America’s conclusion sounds oddly hopeful: There is only one major imbalance in the US economy — high inflation. Hence slow growth is unlikely to reveal some hidden weaknesses like in the 2008-9 recession. Moreover, in our view, it is easier for the Fed to manage a sharp slowdown if Fed policy is the cause of the slowdown. For the same reasons, we think that if there is a recession, it will likely be mild…In other words, the bank is arguing that a small tick higher in unemployment — relative to job openings, at least — will reduce demand for gas enough to keep the economy out of a crisis that would bring oil demand down by more than 2mn barrels per day. What’s a smidgen less bargaining power weighed against a once-in-a-generation downturn for the second time this generation? Larry Summers, on the other hand, seems to think that the latter option is required — remember, the US unemployment rate peaked at 10 per cent during the financial crisis. More

Liz Truss was forced into an ignominious U-turn this week over her plan to cut public-sector salaries outside the UK’s prosperous south-east — the first big mis-step of her campaign to succeed Boris Johnson as prime minister. Yet the backlash to her proposals, including from Tory MPs, was at least a sign that the party has not entirely forgotten the stated mission to “level up” the UK economy. Truss and her rival Rishi Sunak have both devoted surprisingly little time to discussing this agenda. But Truss’s plan looked like “levelling down” poorer regions — when doing the opposite is key not only to the government’s re-election hopes, but to making the UK economy work better. Both budding premiers have voiced support for levelling up, but with different emphases and limited detail. Truss has pledged to level up “in a Conservative way”, promising low-tax, low regulation investment zones. Sunak has echoed similar support for investment incentives, alongside his earlier freeports initiative, while pressing on with various Johnson-era programmes.With Britain’s tax burden set to rise to its highest since the late 1940s, the leadership contest’s focus on tax cuts is little surprise. Yet the UK has moved towards being a higher-tax country in part because it has also become a low-growth one. This stems from its lacklustre productivity, or output per hour, which has stagnated and lagged behind other advanced economies since the financial crisis. Huge disparities in prosperity between UK regions and nations reflect a failure to draw upon the whole country’s productive potential to drive up growth. Both Tory candidates should put forward more detailed solutions for what is a significant driver of the UK’s recent economic malaise.Building on existing strengths should be a big focus. Supporting clusters — especially in growth sectors such as clean tech, AI, and life sciences — that are sprouting across the country can bring global clout to the regions, attract finance and stimulate the development of the second-tier towns and cities, which do not compete well internationally. UK regions are also well-blessed with world-class universities that have the potential to become hubs for driving research and development, jobs growth and diffusing innovations into the economy.Levelling up should also be about addressing what the UK lacks. Investment has dragged across the country, but rural, coastal, and former industrialised regions have been hardest hit. Both Sunak and Truss have supported tax incentives for investment in some form. These have a role in catalysing growth in struggling areas. But this needs to be matched by government support for boosting skills, housing and infrastructure linking big cities in the North and the Midlands — the dearth of which only encourages the drain of talent and enterprise to the south.The right institutional set-up is important if all this is to happen. The government’s February white paper on devolution rightly emphasised devolution as vital to ensuring local politics can respond to local needs. But this needs to be matched by more resources and revenue-raising powers if regional weaknesses are to be addressed.Yet greater speed and leadership is needed, too, from central government in bringing big infrastructure projects, from rail links to power grids to nuclear power stations, to investment stage. Here, the levelling-up agenda can dovetail with net zero and energy security targets. After the Bank of England’s stark warning of an impending slump, Tory candidates should note that speeding up the flow of “shovel-ready” projects will not only provide stimulus for the long run, but for an economy facing a near-term recession.This is the second in a series of editorials on the Conservative leadership candidates’ stance on key policy issues More