Aurelia Butler

P&O Ferries has brought a brutal end to a lengthy truce between labour and capital in the UK. On Thursday, the company sacked 800 sailors without warning. The RMT union said P&O had bussed in lower-paid contract staff to replace them. The company, ultimately controlled by the Emirate of Dubai, said in a statement that it would have “no future” without the job cuts.Tactics as aggressive as these have rarely been seen in a UK labour confrontation since the Wapping print workers strike of 1986. They make P&O Ferries an outlier among UK employers. But industrial disputes are set to increase in frequency and intensity as a result of spiralling inflation. CPI inflation hit 5.5 per cent in the 12 months to January. The median pay settlement in the three months to January was up 3 per cent, according to data company XpertHR.P&O said it had made “a £100mn loss year on year”, implying consecutive hits in 2021 and 2020, the last year disclosed in Companies House filings. That would reflect tough trading during intermittent lockdowns and travel bans — but not the current buoyant outlook for short-hop leisure travel.P&O’s maritime staff earned an average of £35,000 each on a yearly basis in 2020, according to Lex calculations, for staff ranging from ferry captains to deckhands. That compared with UK median annual full-time earnings of £31,500. Staff overheads increased 200 basis points to 17 per cent of revenues that lossmaking year.Fuel costs are likely to be a far bigger burden on P&O Ferries than its unionised workforce.A typical ferry burns three tonnes of fuel an hour. The cost of that has risen from $700 two years ago to $2,400 today. DP World, the group’s immediate owner, is heavily leveraged following a 2020 buyout of minorities.By happenstance, UK prime minister Boris Johnson this week visited the United Arab Emirates, of which Dubai is a member, to lobby for increases in oil and gas production. The actions of P&O Ferries are out of kilter with his government’s insistence that employers should be prepared to pay UK workers higher wages as a “Brexit dividend”.Few UK managers are old enough to have any experience of pay bargaining during a period of sustained wage inflation. If they are wondering how to do it, P&O Ferries provides them with a clear example: not like this.The Lex team is interested in hearing more from readers. Please tell us what you think of the actions of P&O Ferries in the comments section below More

Sentiment is rising for so-called secondary sanctions on any country or entity that helps Russia evade sanctions. On Thursday, Republican Senator Marco Rubio introduced a bill specifically aimed at Chinese financial institutions that conduct transactions with Russian entities through any alternative to the SWIFT financial messaging system.“We cannot allow China to become a safe haven for Russian firms seeking to avoid international sanctions,” Rubio said in a statement. “My bill would make it nearly impossible for Chinese banks to access the U.S. financial system if they choose to transact with Russian banks using Chinese or Russian financial messaging systems.”READ MORE: Why China’s Payment System Can’t Easily Save Russia: QuickTakeRubio said the legislation is a “powerful” disincentive for China deepening its ties with Russia. It would impose sanctions on any Chinese financial institution that uses the Cross-Border Interbank Payment System, or CIPS, to help Russia evade sanctions.Senator Chris Van Hollen, a Maryland Democrat, said he has discussed the issue of secondary sanctions with President Joe Biden’s administration. Any such move by the U.S. should be done in coordination with European allies, he said.The moves in Congress come as Biden is set to speak with China’s President Xi Jinping on Friday as the U.S. leader looks to shore up global pressure on Russia to halt its war in Ukraine. It will be their first call since November, and follows a meeting in Rome Monday between National Security Adviser Jake Sullivan and China’s top diplomat, Yang Jiechi. “The two leaders will discuss managing the competition between our two countries, as well as Russia’s war against Ukraine and other issues of mutual concern,” the White House said in a statement.Biden to Speak With Xi Friday in Bid to Pressure Putin (2)Lawmakers acknowledged that Xi could be one of the few people in the world capable of persuading Putin to pull back from Ukraine, though that’s tempered by skepticism that he would take that extraordinary step after publicly backing the Russian president in the weeks leading up to the invasion. “Could Xi be aggressive enough to convince him to do something different?” Senator Jim Risch, the top Republican on the Foreign Relations Committee said, referring to Putin. “Perhaps but I don’t think he’d do it.”The CIPS system was set up in October 2015 as a settlement and payment clearing system for transactions that use the yuan, also known as the renminbi, or “people’s currency.” It is supervised by China’s central bank but is run by CIPS Co. Ltd in Shanghai, with ownership spread among dozens of shareholders including state-owned Chinese financial institutions, exchanges and Western banks. While the system handles only a fraction of global financial transactions, lawmakers worry it could become a back door for Russian banks and oligarchs to transfer money out of the country.©2022 Bloomberg L.P. More

OTTAWA (Reuters) – A commodities rally sparked by Russia’s invasion of Ukraine will push Canadian inflation higher for longer, with the headline rate now seen peaking at or above 6%, forcing the central bank to raise interest rates more aggressively, economists told Reuters.Canada’s inflation rate has already surged well above the 5.1% that the Bank of Canada forecast for the first quarter in January, highlighting the tough road ahead to get price growth back down to the 2% target. Graphic: Canada’s annual inflation rate: https://graphics.reuters.com/CANADA-ECONOMY/INFLATION/egpbkqrxrvq/chart.png The central bank will have to balance efforts to tamp down on soaring prices against the risks that spiraling levels of mortgage debt could make Canada’s economy more sensitive to interest rate hikes than before the coronavirus pandemic. Some investors worry that the BoC could cut short the economic expansion if it tightens too fast. A Reuters survey of economists at five leading financial institutions and a consultancy showed that most now expect the Bank of Canada to hike borrowing costs four to five times in 2022, lifting its policy rate to 1.25% or 1.5% by the end of the year. Scotiabank is forecasting a year-end policy rate of 2.5%. Canada’s latest inflation data on Wednesday surprised on the upside, with the Consumer Price Index hitting a new 30-year high of 5.7% in February. The jump was driven by broad gains across all sectors.All six economists surveyed now see inflation peaking at or above 6% in the coming months, with their year-end forecasts ranging from 3.3% to 5.8%. The BoC in January forecast fourth-quarter inflation of 3.0%.”The commodity price increases that we have seen in the past couple of weeks – that’s something that a central bank would normally want to look through,” said Josh Nye, a senior economist at RBC Capital Markets who was among those surveyed. “But with inflation already so far above the Bank of Canada’s target, they’ve said they’re more concerned about upside surprises than they are about downside surprises on inflation.”CATCHING UPThe central bank raised its policy rate to 0.50% from 0.25% this month, its first increase in three years. Bank of Canada Governor Tiff Macklem said more rate hikes were coming and he left the door open to a rare half-percentage-point increase.Money markets see a roughly 50% chance of the larger rate increase when the central bank issues its next policy decision on April 13. It has been almost 22 years since Canada saw a 50-basis-point rate hike. The conflict in Ukraine and ensuing sanctions on Russia have played havoc with global supply chains, sending prices of many key commodities higher. Russia is one of the world’s biggest energy producers, and both it and Ukraine are among the top exporters of grain.Nye estimated the surge in oil prices since late February on its own will add about three-quarters of a percentage point to Canada’s CPI.U.S. inflation is expected to average 7.7% this quarter, according to a Reuters poll of 69 economists last week, up from the 7.1% forecast in February.With Canada’s economy firing on all cylinders, its central bank must now act forcefully on interest rates to tame price surges, said Derek Holt, head of capital markets economics at Scotiabank.”Given how far behind the inflation curve the Bank of Canada finds itself, they need to do something more convincing in order to demonstrate that they are serious about their inflation mandate,” said Holt, who also participated in the survey. Still, the central bank will need to take into account the potential that war will slow global economic activity, while also balancing the inflationary pressures coming from supply shortages due to the latest COVID-19 restrictions in major Chinese manufacturing hubs.”There is the probability of renewed supply chain issues in other goods that will also keep inflation more elevated than we previously anticipated,” said Andrew Grantham, a senior economist at CIBC Capital Markets who was among those surveyed. Graphic: Forecasts for Canadian interest rates: https://graphics.reuters.com/CANADA-ECONOMY/INFLATION2/mypmnxdnnvr/chart.png More

The Bank of England raised interest rates from 0.5 per cent to 0.75 per cent on Thursday, underlining its resolve to fight soaring inflation, which is now expected to hit 8 per cent by the end of June. The quarter-point rise — the third back-to-back increase since December — has returned interest rates to their pre-Covid level and places the BoE at the forefront of a global move to tighten monetary policy, following this week’s increase by the US Federal Reserve.The Monetary Policy Committee said Russia’s invasion of Ukraine would “accentuate both the peak in inflation and the adverse impact on activity by intensifying the squeeze on household incomes”.It now expects inflation to rise to about 8 per cent in the second quarter of 2022 — around 1 percentage point higher than its February forecasts showed — and potentially climb even higher in October, when regulated energy prices are set to rise again.This means inflation could rise temporarily into double digits: minutes of the MPC’s meeting said that, if the latest rise in energy futures was sustained, consumer price inflation could be “several percentage points higher” than had been expected in February, with disruption to global supply chains also threatening to fuel core goods inflation. Eight of the MPC’s nine members voted to raise rates to reduce the risk that businesses and households will come to see these high levels of inflation as normal — adjusting their prices and wage demands to match, in a self-fulfilling spiral.However, the MPC was much more cautious about the potential path of interest rates over the coming year, in contrast with the hawkish tone adopted on Wednesday by the US Federal Reserve.

The committee said that, while business confidence and the jobs market had so far remained strong, consumer confidence was already falling and the squeeze on household incomes was set to be “materially larger” than thought in February, weakening an already subdued outlook for growth.It said “some further modest tightening in monetary policy” might be needed over the coming months, but that there were risks on both sides of that judgment, and that it would “review developments in the light of incoming data” before updating its forecasts in May.Sir Jon Cunliffe, a BoE deputy director, went against the majority, voting to leave policy unchanged, arguing that the hit to household incomes, combined with the effect of the Ukraine war on business and consumer confidence, would hit economic activity and employment and bring down inflation. More