Aurelia Butler

Having survived the financial hardship triggered by the pandemic, Sadie Shard, owner of the Crescent Hotel in Scarborough, is now faced with another risk to her business: sky-high energy prices.Shard has owned the hotel in the northern English coastal town since 2014 and until November had been paying £1,000-£2,000 a month to power its 20 guestrooms and restaurant.But in November her supplier, CNG, went bust shortly before her latest energy deal was up for renewal. The company appointed by the regulator, Ofgem, to take on CNG’s customers said her electricity tariff would increase more than fivefold, reflecting surges in wholesale prices. This would have meant her energy bill jumping to as much as £10,000 a month.CNG, which had 41,000 business customers, is among 26 suppliers that have gone to the wall in the past five months as surging wholesale gas and power prices have triggered the biggest crisis in Britain’s energy supply sector in 20 years.

For months the government has been subjected to high-profile lobbying by the “energy-intensive industries” such as ceramics and steel, which have warned of potential shutdowns if ministers do not intervene — only to be stonewalled by the Treasury. Now small businesses such as Shard’s, of which there are about 5.5m in the UK, are also sounding the alarm over spiralling energy costs at a time when many of them are still reeling from the pandemic. Shard has managed to negotiate her tariff down slightly — although it remains more than four times what it was under her previous deal. She says the overnight increase in her energy costs is the “icing on the cake” after all the difficulties hospitality businesses have been through in the past two years of pandemic restrictions.“We are in a position now where our [monthly] energy bill is essentially the same as our restaurant takings [every month] which is not feasible unless something changes,” said Shard. “It would be ironic if we survived Covid . . . and it was the energy bills that pushed us under.”In the Federation of Small Businesses’ latest quarterly survey, 45 per cent of the nearly 1,300 firms that participated said their costs had increased in the past three months because of rising utility bills, driven by the price of energy. “The picture we’re seeing is that unplanned-for bill increases are hitting firms when they’re already up against other major headwinds — supply chain disruption, inflation heading for 6 per cent, increasing late payment from large business customers, and the biggest tax increase in small business history coming in April,” said Craig Beaumont, the industry body’s chief of external affairs.He fears this additional pressure will force many small firms to slash costs, let go of staff or “give up altogether”.There is particular concern about the very smallest businesses with fewer than 10 employees, which don’t have the energy management teams or trading arms of larger corporates. They may not even have an office manager to help them shop around for a better deal.These “micro businesses”, of which there are an estimated 1.2m in the UK, employing 4.2m people, also have fewer protections over their energy purchasing than households. For example, Britain’s energy price cap does not apply to them.The cap, introduced in 2019, is adjusted twice a year in October and April, meaning many of the steepest rises in wholesale gas and electricity prices in the past few months will not hit households until the spring, when bills tend to decline as heating demands reduce.Businesses generally have bespoke contracts with suppliers that can expire at any point in the year. However, a large number of deals come to an end on April 1 and October 1, one big energy supplier told the Financial Times.“April will be the next big crunch time to see business falling off low contract prices on to high renewal rates,” the supplier said.

Britain’s fourth biggest energy supplier, EDF Energy, said fortunately many businesses were still on multiyear deals but it was “concerned” for those that are due to renew their contracts in coming months.The government has been looking at ways to mitigate the spiralling energy costs. Kwasi Kwarteng, business secretary, has been holding talks with suppliers and Ofgem over ways to soften the blow of high energy prices for households in April. The consumer price cap is forecast to rise by about £700 to £2,000 a year from that month, unless mitigations can be agreed.Kwarteng also last year agreed a short-term bailout of Britain’s biggest producer of carbon dioxide following concerns that its closure due to escalating energy costs could lead to chaos in critical industries that rely on the gas, including meat and health.Small business owners argue that they also need help from ministers. The FSB has added its voice to a growing chorus of energy companies and politicians pushing for a cut in the 5 per cent rate of value added tax on energy bills. But it would also like to see other measures such as a portion of a “redress fund” overseen by Ofgem to be made available for microbusinesses in trouble because of high energy costs, plus an energy price cap for the very smallest firms.Back in Scarborough, Shard says she is trying to remain positive after an already “tricky” couple of years. “We are just trying to take every day as it comes and plough forward,” she said. More

Ian Fraser is the author of ‘Shredded: Inside RBS: The Bank that Broke Britain’Following the global financial crisis, Iceland came down hard on its bankers. As of 2018, 25 of them — including the chief executives of leading banks — had been jailed. The approach won plaudits among some because it was seen as a way to enable the country to reform its financial sector and rebuild its economy. But such conventional wisdom is wrong, argues Jared Bibler, the lead investigator at Icelandic regulator the Financial Supervisory Authority (FME) whose own probes culminated in sending some of these guilty bankers to jail. Now, in his recent book, Iceland’s Secret: The Untold Story of the World’s Biggest Con, he says the country’s approach has neither cleaned out the Augean stables of Icelandic finance nor slain “the dragon of deeply corrupt financial markets”. The Icelandic banking crisis, which came a few weeks after Lehman Brothers filed for bankruptcy on September 15 2008, was more extreme and longer-lasting than those endured almost anywhere else. This was partly because the country’s three largest banks — Kaupthing, Landsbanki and Glitnir — had been allowed to swell their balance sheets to gargantuan proportions. Their assets were 11 times the country’s gross domestic product at the time of their collapse, making bailouts all but impossible.Few people are better-equipped to chronicle this extraordinary saga than Bibler. A graduate of MIT, he moved to Reykjavik in summer 2004. He had a ringside seat as the Nordic nation’s banking sector over-extended itself and imploded, first as an asset manager at the country’s second-largest bank, Landsbanki, then as a regulator. His book is a blend of candid personal memoir and a Nordic noir that reveals his jaw-dropping discoveries as a regulator.

Three days after starting as an investigator at the FME in April 2009 (he became lead investigator once he had hired a team), Bibler was handed a dossier showing evidence of market abuse by Kaupthing. After poring over extensive trading data and five years’ of emails — plus a top-secret file of major loans leaked by WikiLeaks — he built the “Big Kaupthing Market Manipulation Case”, which was couriered to Iceland’s notoriously driven prosecutor Olafur Hauksson within six months. Delving deeper, Bibler and his team discovered that, in every year since 2004, Glitnir, Landsbanki and Kaupthing had engaged in illegal share-support operations on a massive scale. These securities frauds involved the banks extending huge loans to British Virgin Islands-based shell companies, which had been set up with the sole purpose of secretly buying up the banks’ shares and inflating their share prices, with only the shares themselves as collateral — or variations on this theme.Bibler says these crimes normalised corruption right the way across the three institutions’ operations — and indeed across wider Icelandic society. He also makes clear they were far from being victimless. Suckered into believing these three “crown jewels” of Icelandic finance were safe, shareholders lost everything when the banks’ share prices dropped to zero in October 2008. The failures, coupled with the UK government’s decision to use anti-terror legislation, which meant freezing Landsbanki’s UK assets in a bid to protect the banks’ British depositors, brought the country to its knees. The value of the krona halved and Bibler and his Icelandic fiancée lost their house and 90 per cent of their savings, and were reduced to eating bjugur (horse meat sausages).

Despite his successes, Bibler believes he only managed to scratch the surface of financial corruption in Iceland. He resigned from FME in November 2011, after his team was dismantled from under him as the regulator’s appetite for pursuing criminal bankers began to wane. He feels ancillary activities around the illegal share support schemes have been swept under the rug, and that some of the worst crimes — including the alleged use of fake invoices to cheat Iceland’s central bank of its foreign-exchange reserves — persisted in the sector for at least six years after the banking crisis. He also believes that, as many of the guilty bankers were released early with their wealth and status largely intact, the deterrent effect of their hard-won sentences was reduced.Though I could have done with some photographs and an index, Iceland’s Secret is a fantastic read. An eye-opener and a cautionary tale, it is evidence of the brazen and protracted frauds that can occur if bankers are given a free pass by a country’s journalists, regulators, politicians and government. The trouble is that, according to Bibler, unless regulators globally wake up and find some backbone, similar sorts of shenanigans could be going on in any corner of the financial markets, not just in Iceland, with potentially devastating results.Iceland’s Secret: The Untold Story of the World’s Biggest Con by Jared Bibler, Harriman House, £22.99, 272 pages. More

LONDON (Reuters) – Major British companies plan a surge in investment in 2022 to meet strong demand and respond to climate change against a backdrop of growing labour shortages, according to a survey from accountants Deloitte.Some 37% of chief financial officers viewed higher capital spending as a priority for 2022, the most since the quarterly survey started in 2009 and up from 20% at the start of 2021.If the plans translate into action, they could help ease long-standing problems with weak productivity in Britain, which many economists blame on lower rates of business investment than in other rich nations.”CFOs seem to be looking past Omicron and plan to focus their businesses on growth in 2022,” said Ian Stewart, chief economist at Deloitte. Previous concerns about Brexit and weak global growth have eased. Instead, businesses named persistent labour shortages as their biggest threat, ahead of the COVID-19 pandemic, while climate change then higher inflation and asset price bubbles were in third and fourth place. The Bank of England said a tight labour market, which had pushed wage growth above pre-pandemic levels, was one of the main reasons why it raised interest rates last month from their record low 0.1%. Policymakers expect inflation to peak at a 30-year high of around 6% in April and take more than two years to return to its 2% target.Digital technology was the area of investment which businesses expected to increase most relative to the pre-pandemic trend, followed by more general productivity and workforce skills. Physical plant and machinery and real estate were the least likely areas to see faster investment.The biggest motivation for the investment was to support expected growth in demand in Britain, followed by longer-term business plans and overseas demand. Tax incentives and the government’s levelling-up agenda – investment aimed at reducing regional inequality – were named as smaller factors.Deloitte conducted the survey from Dec. 1-14, and spoke to 85 CFOs from 60 listed companies with a market value of 493 billion pounds ($669 billion) and 25 subsidiaries of large foreign firms.($1 = 0.7372 pounds) More

Pressure is mounting on Rishi Sunak, chancellor, to levy a one-off windfall tax on UK offshore oil and gas operators, just weeks after the boss of BP said high commodity prices had turned his company into “a cash machine”.Labour, the Liberal Democrats and some Tory MPs want Sunak to levy a tax on the profits of North Sea operators to alleviate soaring domestic energy bills, arguing the sector can easily withstand the hit.Rachel Reeves, shadow chancellor, said a windfall tax would partly fund a Labour plan to cut energy costs for all consumers by about £200 this year, with a further £400 taken off the bills of more than 9m poorer households.The industry has claimed a one-off windfall tax on UK offshore oil and gas operators would cause “irreparable damage” to the sector and leave consumers even more exposed to global shortages.But politicians at Westminster are eyeing the operators as a potential source of money to alleviate the cost of living crisis, not least because industry leaders have suggested their companies are awash with cash.In November, Bernard Looney, BP chief executive, said soaring global commodity prices had made his company a “cash machine”, as it bolstered its share buyback programme, thanks to a sharp rise in quarterly profits. “When the market is strong, when oil prices are strong and when gas prices are strong, this is literally a cash machine,” he told the Financial Times.Meanwhile, Serica Energy, the North Sea company responsible for 5 per cent of UK gas production, said in September it was expecting to make “very significant returns” to shareholders, thanks to record high prices. Despite that, Oil and Gas UK, the offshore industry body, claimed companies would become increasingly reluctant to make long-term investments if they were threatened with windfall taxes whenever prices rose.Mike Tholen, sustainability director at OGUK, said that calls for a windfall tax were “in no one’s interest” and that the Treasury was already seeing “significantly higher returns” from North Sea energy companies.“Over the next two years, the Treasury expects an additional £3bn in tax revenue from this industry — with a predicted direct tax take of almost £5bn. The upstream oil and gas industry already pays almost double the rate of corporation tax that other sectors pay,” Tholen said.

He added that, by taxing companies more, the government also risked holding up investment into green energy infrastructure in the UK.Despite energy companies’ UK tax contribution, North Sea operators still benefit from one of the most favourable tax regimes compared with other oil and gas-producing regions around the world.Under Labour’s plan, North Sea energy producers would be forced to pay £1.2bn to mitigate household bills through a year-long increase to their corporation tax of 10 percentage points.Labour would also scrap VAT on fuel bills as part of a drive to contain energy prices; a cap on household bills is in April expected to rise from £1,277 for an average household to almost £2,000, driven by high wholesale gas prices.Reeves said the whole package would cost £6.6bn; she claimed that aside from the £1.2bn windfall tax, the Treasury would raise £3.1bn from higher-than-expected VAT receipts from higher prices and £2.3bn from higher tax receipts from North Sea energy production. Sir Ed Davey, Lib Dem leader, who also backs the windfall tax, said: “It can’t be right that a few energy fat cats are raking it in from record gas prices while millions of people can’t even afford to heat their homes.” Chris Skidmore, a former Tory energy minister, has also endorsed the idea.Sunak will hold a mini-Budget in March but the Treasury has been wary in the past of one-off taxes, which can have the effect of significantly reducing investment and supply in the year they are implemented — putting further upward pressure on prices.There is a fear in government circles that an offshore windfall levy would also largely hit oil rather than gas producers, forcing up fuel prices. But Sunak has also said he is considering a range of options to help people with their domestic energy bills.Meanwhile, Labour will set out proposals on Monday to help businesses facing higher power costs, with a “£600m contingency fund to support struggling firms, including energy-intensive industries”. More

Hello and welcome to the working week.Brace yourselves. The coming seven days will be a struggle as the temperatures chill the bones, the post-festive period comedown continues and people grapple with new year’s resolutions that will test them to the limit. Across the northern hemisphere, countries have been weighed down by the Omicron coronavirus variant and the Christmas holidays seem an almost distant memory. Diary items this week include inflation updates and details about how climate change has affected (negatively) the weather in the US.Are there any reasons to be cheerful — apart, of course, from the resumption of The Week Ahead newsletter? Well, yes. Covid-19 rules are being loosened for British travellers and Belgians needing to self-isolate. Also, pandemic data are being added to daily, increasing our knowledge of how to tackle Omicron and showing that its spread may have peaked in some places.For English cricket fans, the final Test match in the Ashes series gets under way this week in Hobart, meaning that the daily stream of miserable scoreline news will soon be at an end. Australians cannot only enjoy the spectacle but they can look forward to the start of the Australian Open tennis tournament in Melbourne in seven days. And, subject to a court hearing on Monday to decide whether to proceed with the deportation of Novak Djokovic, they have the promise of a new men’s singles champion.There is likely to be some positive news from corporate diaried items this week. Upbeat reports are expected from several leading retailers and Wall Street banks — see the Companies section below. And the Dutch can look forward to a government finally being installed, 10 months after the elections. Things might not appear to be getting better generally, but there is always some cause for hope if you look hard enough — email me with your take to [email protected] dataThe economic data reports this week will begin with EU unemployment figures on Monday. Inflation will also be a news item (again) with monthly updates from China, the US, India, Japan and France.CompaniesHow was your Christmas? This week we will discover how good it was for a clutch of retailers, mostly in the UK. The process started with bullish updates last Thursday from Next — a British retailer that has been upgrading its outlook throughout the past 12 months — and popular bakery chain, Greggs. This week’s updates might be more mixed.When Asos last updated the market, its chief executive departed and its shares fell almost a fifth. Investors will probably be relieved just to hear that things have not got any worse in “P1” — the company’s term for the all-important four months to the end of December. There will also be quarterly results this week from retailers, notably Fast Retailing, owner of Uniqlo, on Thursday.Elsewhere, it is the start of the banking reporting season — and hopes are high after a recent rally in the sector in anticipation of higher interest rates and signs that demand for loans is picking up. JPMorgan Chase, Citigroup and Wells Fargo will kick off proceedings on Friday. Investors are watching out for updates on their outlooks for 2022.Key economic and company reportsHere is a more complete list of what to expect in terms of company reports and economic data this week.MondayEU, eurozone unemployment rateResults: Brunello Cucinelli FYTuesdayEU, industrial production figuresUK, British Retail Consortium-KPMG monthly retail sales monitor reportWorld Economic Forum publishes its Global Risks ReportWednesdayChina, India, Russia, US: monthly consumer price index (CPI) dataEU, India: monthly industrial production figuresItaly, retail sales figuresJust Eat Takeaway Q4 trading updateUK, 2020-based interim national population projectionsUS, Federal Reserve Beige Book publishedWhitbread Q3 trading updateThursdayAsos trading statementChina, monthly trade dataItaly, industrial production figuresJapan, US: monthly producer price index dataMarks and Spencer Q3 trading updatePersimmon trading updateTesco Q3 trading statementUK, Recruitment & Employment Confederation and KPMG monthly jobs reportResults: Südzucker Q3, Fast Retailing Q1FridayEU, monthly international trade in goods figuresFrance, CPI dataGermany, full-year GDP figuresUK, monthly GDP estimate, industrial production data, trade figures and productivity dataUS, industrial production and retail sales figuresResults: Citigroup Q4, JPMorgan Chase Q4, Wells Fargo Q4World eventsFinally, here is a rundown of other events and milestones this week. MondayRelaxing of Covid-19 rules comes into effect in Belgium. Fully vaccinated people will no longer have to self-isolate if they come into close contact with someone infected with coronavirus and the length of time for isolation is being cut from 10 to seven days. This follows a relaxation of rules for fully vaccinated travellers arriving in the UK, who can now take a cheaper lateral flow test instead of a PCR test.Belgium, the Nato-Ukraine Commission is to meet in BrusselsNetherlands, almost 10 months after elections, the new Dutch government is due to be installedUS, the Golden Globes awards for film and television are announcedTuesdayCuba, 20 years since first detainees arrived at Guantánamo BayUK, Hilary term for the High Court and Court of Appeal beginsWednesdayThe Military Committee, the highest military authority of Nato, meets in Chiefs of Defence session at Nato headquarters in Brussels. Separately, the Nato-Russia Council will meet to discuss the build-up of Russian soldiers along Ukraine’s borderThursdayItaly, tenth anniversary of the Costa Concordia cruise ship disaster that killed 32 peopleUS, space agency Nasa and the National Oceanic and Atmospheric Administration announce where 2021 ranks for global temperaturesUN is to publish its World Economic Situation and Prospects report for 2022FridayAustralia, start of the fifth Test cricket match in the Ashes series in HobartNew year celebrations for Orthodox ChristiansTunisia, anniversary of the overthrow of president Zine El Abidine Ben Ali SaturdayAnniversary of Wikipedia going publicInternational Renewable Energy Agency holds its annual assembly in Abu DhabiSundayIreland, state ceremonial 100th anniversary event in Dublin Castle to mark the start of the formal handover of power to the Irish Free StateNetherlands, march in Amsterdam by protesters opposed to the government’s coronavirus responseSerbia holds a constitutional referendum on its judiciary More