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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Prime Minister Rishi Sunak should appoint a high-level investment minister and create a beefed-up “concierge service” to attract foreign cash to the UK, according to a key report to be published ahead of next week’s Autumn Statement.Lord Richard Harrington, a Tory peer, has produced the report for chancellor Jeremy Hunt on how to improve Britain’s flagging levels of inward investment in the face of tough competition from the US and elsewhere.It will be a key part of Hunt’s Autumn Statement on November 22, as the chancellor tries to raise Britain’s growth performance and stop its slide down global league tables for inflows of foreign direct investment.The report will make a series of proposals to sharpen Britain’s efforts to lure inward investment, including creating a high level minister to oversee a new strategy, the Financial Times has learned.Harrington wants the minister to have cabinet rank, but government insiders say Sunak does not want another cabinet upheaval after reshuffling his team on Monday. Instead they say the role of investment minister will be given extra clout, with accountability to the chancellor.According to people briefed on its contents, the report will also propose the creation of a cross-government committee, chaired by the chancellor, acting as the “board” for setting a detailed investment plan.The Office for Investment, a relatively small unit in the trade department, would be “massively” beefed up and would report to the investment minister, according to one official briefed on the plan.Harrington’s report proposes that the OFI, created in 2020, should play a higher profile role as a “one-stop shop” providing a concierge service for investors.Harrington declined to comment, but in an interview with the FT in July he said Britain was facing tough competition from countries including the US, France, Ireland and Singapore in developing new sectors.“We have to change the whole culture in government,” he said, noting that the $369bn US Inflation Reduction Act — a package of tax breaks and subsidies — posed a particular threat to Britain.Harrington said in July it was vital for the cabinet to “pick the race” it wanted to win, arguing that ministers should have a clear and detailed idea of the precise sectors they wanted to focus on.Hunt has spoken of his desire to turn Britain into “the world’s next Silicon Valley” with a focus on five sectors: green industries, advanced manufacturing, life sciences, digital technologies and creative industries.He has also said that his Autumn Statement will be focused on shaking Britain’s economy out of its flatlining growth pattern. The Treasury declined to comment.There have been successive annual falls in the value of investment into the UK since a peak in 2016, with the country dropping down OECD rankings for FDI flows from 12th place in 2015 to 20th in 2022. That trend will be examined in a FT series of articles on FDI in the coming days. Trade and manufacturing groups have blamed the declining investment on a toxic combination of post-Brexit regulatory uncertainty, government policy flip-flops, labour shortages and high energy prices.Evidence submitted to Harrington’s inquiry by UK industry bodies seen by the FT pointed to multiple shared frustrations with the post-Brexit investment environment. Concerns included rising trade barriers with the EU, regulatory uncertainty caused by plans to rip up EU-era legislation and, most recently, Sunak’s decision to scrap part of the HS2 high-speed rail link and delay key targets in transitioning to a net zero economy.Stephen Elliott, head of the Chemical Industries Association, which represents a key sector for manufacturing, said that while the total stock of FDI in the UK was still globally competitive, the decline in the “flow” year on year was worrying.“We are falling behind competitor nations and struggling to offer a unique selling proposition,” he said.Stephen Phipson, chief executive of Make UK, the umbrella organisation for UK manufacturers, said there appeared to be “no overall plan” to capitalise on British scientific prowess.“What you hear constantly from inward investors is that it would be very helpful to see a clear plan that addresses areas like labour shortages and the energy price differential,” he said.Among Make UK’s proposals are tax deductions for training and investing in capital equipment as well as regulatory policies that are “considerate of regulatory standards overseas” to give confidence to international investors.William Bain, head of trade policy at the British Chambers of Commerce, said: “Reforming our planning system and speeding up grid connectivity will also help reassure investors that putting money into the UK will yield a swift return.”He added: “The UK needs to up its game.” More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The incoming chair of the international certification scheme for conflict diamonds has hit out at a plan by the G7 group of developed nations to track and trace Russian diamonds, warning of “irreparable harm” to African producers.Ahmed bin Sulayem, who this week was elected to take charge of the Kimberley Process, a multilateral body tasked with cleaning up the diamond trade, said any proposed scheme “must take into account African diamond producing nations” such as Botswana, the Democratic Republic of Congo and South Africa.But the Emirati warned that a Belgian proposal to put restrictions on the international trade of diamonds, which the G7 is considering adopting, “falls well short of this important goal”.The EU’s chief diplomat Josep Borrell last week said the bloc was set to move ahead with a ban on Russian diamonds after securing sufficient backing from the G7 group of developed nations.The diamond dispute is only the latest rift between Europe and African capitals. A ministerial meeting set for next week has been postponed after officials decided there was little chance that the two sides would agree on a joint communiqué containing language regarding Israel’s war against Hamas and Russia’s war in Ukraine, according to three people briefed on the discussions.The postponement follows disagreement between mainly western countries which have offered strong backing to Israel, and members of the Global South that have called for a ceasefire.An employee holds a rough diamond at a factory in Moscow More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The writer is chief European economist and head of the investment strategy group at Vanguard, Europe.Rates are not going back to zero — central banks know it, bond markets have priced it, and equity markets fear it. Central banks should do more to communicate this.But it is not just what central banks say, but also how they say it. In a recent paper, Haroon Mumtaz, Roxane Spitznagel and I study how asset prices move following Bank of England communication — speeches, monetary policy announcements and press conferences. We find that asset prices respond differently to how new information about the future path of policy is transmitted. Speeches by Monetary Policy Committee members are more potent in influencing medium to long run gilt yields than interest rate announcements and press conferences.The evidence is stronger for the US. The Federal Reserve prefers not to surprise markets. Fed chair speeches are more important than FOMC announcements in driving US stock prices and bond yields beyond the very shortest maturities.Measuring good communication is not easy. But complex communication tends to be followed by greater asset price volatility, which is undesirable from a macroeconomic perspective.The issue is, of course, complicated. The source of complex communication could be a poor choice of words and lack of clarity of thinking. But it could also be a challenging economic environment. That would make it harder to forecast where the economy is heading and complicate the appropriate policy response. For example, when the economy was hit by shocks, like the pandemic and war in Ukraine, central banks had to work with new concepts and data to determine the best course for policy. Based on language structure and words, we find Bank of England communication has become more complex over time, as the environment has become more challenging. Complex communication could also be the result of conflict among members of the Monetary Policy Committee: it may be hard to convey the differences of view in a simple way. But the importance of communication is particularly pertinent now, as markets debate just how long high rates will persist. Good luck and good policy have been discussed as key drivers of the Great Moderation of 1987-2006 — a period of economic stability and low market volatility. Following the pandemic, war in Ukraine and continuing geopolitical tensions, there is concern that we are entering a period of great volatility.You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.The cyclical and structural component of interest rates have undoubtedly increased. The cyclical stance of interest rates is set by central banks. When inflation is high and growth resilient, central banks set the policy rate above the neutral rate — the level at which the economy runs at an equilibrium level, also known as the r-star. That is the story of today. The Fed, the European Central Bank and Bank of England have said rates are restrictive and will remain so for some time.Our view is that rates will recede from their cyclical peaks in 2024. As the economy returns to equilibrium, the cyclical component will fall to zero. But our research shows that the US neutral real rate of interest has increased by about 1 percentage point since the great recession after the 2007-8 financial crisis to around 1.5 per cent today, making the neutral nominal rate around 3.5 per cent. In-house estimates suggest the UK and euro area neutral rates have increased by similar amounts.Average interest rates over the next decade will thus be significantly higher than its average over the past decade. If correct, this will have profound implications for the governments, markets and investors. The Federal Reserve provides projections of what its policymakers think will be the level of longer run interest rates with its dot plots of individual forecasts. But the Fed has been slow to change its neutral rate call: its longer run interest rate was over 4 per cent in 2012 and fell below 3 per cent only in 2016. The ECB and Bank of England have been reluctant to give guidance on what a neutral policy setting looks like. This comes from fear of getting things wrong and uncertainties around estimating R-star. However, good communication — that is clear and simple — is one potential way to mitigate volatility, providing financial markets with an anchor for medium-term rates. Simply put, speeches help monetary policy get the job done. Timely communication of the neutral policy setting is essential. It influences asset prices and financial conditions, an important channel for the transmission of monetary policy. Policymakers can do better. They should embrace the neutral rate and talk about it. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.This article is the latest part of the FT’s Financial Literacy and Inclusion CampaignThe number of UK households seeking help with cost-of-living issues is heading for a record going into winter as the voluntary sector warned that it would struggle to cope as it is squeezed by rising costs and dwindling donations.Data collected by Citizens Advice, the charity that offers independent counselling to those struggling to pay their bills, shows demand for consultations well ahead of last year as the poorest families struggle with rising housing costs and the removal of state support for energy bills.The number of people requesting help from Citizens Advice for cost-of-living issues last month was a fifth higher than in October 2022 and more than 40 per cent higher than a decade ago when records first began, according to its latest figures. Sarah Vibert, chief executive of the National Council for Voluntary Organisations (NCVO), the largest membership body for charities in England, warned that this winter was shaping up to be the “toughest yet” for charities, which have become an increasingly important part of the social safety net in recent years.You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.Almost a third of the income of the voluntary sector comes from contracts delivering government services, which were being hit by inflation and continuing high energy costs, she said, while donations were dwindling.She urged chancellor Jeremy Hunt to use the Autumn Statement to intervene and boost the value of the contracts to prevent voluntary organisations from going under. FT FLICFind out more and support the Financial Literacy and Inclusion Campaign“The value of these contracts isn’t rising in line with inflation and we’re calling on the chancellor to correct this in the Autumn Statement by ensuring these contracts are uplifted to meet the true cost of delivery. If this goes unheard, many charities could cease to exist,” she said.Morgan Wild, the head of policy for Citizens Advice, said that rapidly rising housing costs were the biggest driver of demand for requests for help at the charity’s UK network of 3,300 advice bureaus.The ending of the universal £400 grant to help households with energy bills in March, combined with the freezing of housing benefit rates since 2020, was leaving more people unable to make ends meet.Housing benefit payments covered the full cost of just 5 per cent of new private rentals in the first quarter of 2023, compared with one in four in April 2020, according to the Institute for Fiscal Studies. You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.Half of the people who reach out to Citizens Advice for debt counselling, including growing numbers of mortgage holders, are in so-called “negative budget” where necessary spending exceeds their income, up from 37 per cent before the pandemic, Wild added. “Energy prices have come down to some extent, but are still higher than three years ago, but the real shift is in housing-related demand. We’re seeing record numbers of evictions and record numbers of people seeking advice on housing issues,” he said.Nicole Sykes, the head of policy at Pro Bono Economics, a consultancy for the charity sector, said that real-term incomes for the charitable sector were projected to fall by £800mn this year, based on analysis of forecasts from the Office for Budget Responsibility.“We have a population and a sector which are both receiving much less support from the government than last winter, but a year of high prices and almost four years of ever-increasing demand have taken a toll,” she added. More

(Reuters) -Commonwealth Bank of Australia’s home loan book slumped A$4.5 billion ($2.9 billion) in the September quarter as it shied away from cut-throat competition but the nation’s biggest lender said margins had stabilised, sending its shares higher.The update from the originator of a quarter of Australia’s A$2 trillion mortgage market suggests a strategic change is paying off: CBA was first among Australia’s major banks to stop luring borrowers with cash handouts and what it called uneconomic lending rates – now it says its margin compression has stopped.Earnings reports from Australia’s other so-called Big Four lenders ANZ, Westpac and National Australia Bank (OTC:NABZY) showed narrowing margins in recent months as interest rate hikes since May last year spur a rush of refinancing.CBA said cash profit was A$2.5 billion ($1.6 billion) for the quarter, which was 3% better than a consensus estimate for the period, according to data aggregator Visible Alpha.CBA’s shrinking mortgage book “reflects a disciplined approach to pricing which ensures marginal shareholder returns remain above the cost of capital in a highly competitive market”, the bank said in its limited first-quarter update.”Home lending margins stabilised in the quarter,” it added, without giving figures.Shares of CBA rose as much as 1% in morning trading, in line with the broader market as analysts welcomed the better-than-expected margin outcome and a smaller-than-expected provision for potential loan impairments.”With many trends similar to peers, we think the market will take the slightly better NIM outcome well,” said Citi analyst Brendan Sproules in a client note, using the acronym for net interest margin.E&P Financial analyst Azib Khan noted the bank’s statement that home loan margins had stabilised and added that “it would be helping on this front that CBA has been willing to forgo market share”.In its limited update, CBA said cash profit was A$2.5 billion ($1.6 billion) for the quarter, which was 3% better than a consensus estimate for the period, according to data aggregator Visible Alpha.($1 = 1.5686 Australian dollars) More

SINGAPORE (Reuters) – The battered yen was stuck near a three-decade low against the dollar on Tuesday, struggling to find a floor as the Bank of Japan’s (BOJ) ultra-easy monetary policy settings remained at odds with the prospect of higher-for-longer rates elsewhere.The Japanese currency similarly slumped to a 15-year low of 162.38 per euro in early Asia trade and slid to a roughly three-month trough of 186.25 per British pound.Against the dollar, the yen last stood at 151.72, languishing near a one-year low of 151.92 hit on Monday. A break below last year’s trough of 151.94 per dollar would mark a fresh 33-year low for the yen.The yen had jumped briefly against the greenback in New York hours on Monday after striking the year-to-date low, which analysts attributed to a flurry of trading in options that come due this week.Despite the BOJ’s carefully orchestrated steps to phase out its controversial yield curve control (YCC) policy and hints of an imminent end to negative interest rates, the piecemeal moves have done little to prop up the yen, particularly as central banks globally maintain their hawkish rhetoric of higher-for-longer rates.”I think the market has come to the realisation that the Bank of Japan is going to exit its policy but at a very, very, very slow and cautious pace,” said Rodrigo Catril, senior FX strategist at National Australia Bank (OTC:NABZY) (NAB).”A weak yen is probably going to stay here for a little bit longer, and the market has been testing to see what the appetite is, particularly for the (Ministry of Finance) and the BOJ, to allow for weaker levels.”Japanese authorities in September last year intervened in the currency market to boost the yen for the first time since 1998, after a BOJ decision to maintain its ultra-loose monetary policy drove the yen as low as 145 per dollar.It intervened again in October 2022 after the yen plunged to a 32-year low of 151.94.INFLATION AND THE FEDOutside of Asia, traders also had their attention on U.S. inflation figures due later on Tuesday, which will provide further clarity on whether the Federal Reserve would need to raise interest rates further to tame inflation.Fed Chair Jerome Powell and his chorus of policymakers have in recent days pushed back against market expectations that the U.S. central bank was done with its aggressive rate-hike cycle after it held rates steady at its latest policy meeting.The comments have kept the U.S. dollar bid, and the greenback rose marginally to 105.64 against a basket of currencies.Sterling steadied at $1.22775, while the euro last bought $1.0701, having largely traded sideways over the past few sessions.The New Zealand dollar languished near a one-week low and last stood at $0.5879.”Overall, the market is also kind of worn out by all messages coming from central banks and the higher-for-longer and wait-and-see mode is keeping volatility low,” said NAB’s Catril.”We need to wait for that CPI number tonight, which could be a bit of a shaker. If it’s strong, then obviously it brings in the idea that another rate hike from the Fed is there.”Down Under, the Australian dollar edged 0.03% higher to $0.63785.A survey on Tuesday showed Australian business conditions held firm in October even as confidence slipped a little, a resilience that will be tested by higher borrowing costs following a rise in official interest rates last week. More

(Reuters) – Electric-vehicle startup Fisker (NYSE:FSR) slashed its 2023 production guidance on Monday as it struggles to ramp up deliveries and flagged weakness in internal controls over financial reporting, sending its shares down 14% after the bell.Fisker now expects production of 13,000 to 17,000 electric vehicles in 2023, down from its prior projection of 20,000 to 23,000 vehicles to make sure the company does not sit on too much inventory and to better manage working capital.”This may be short-term pain and it may not be something that Wall Street wants to hear but it is extremely responsible for us, and it is essential for us that we do this for the long term,” Chief Financial Officer Geeta Fisker said on a post-earnings conference call. Fisker had already cut its production forecast in August, blaming a key supplier that needed more time to lift capacity, and on Monday said that though supply chain had stabilized it still expects “the occasional bottleneck” from a few suppliers going ahead.Fisker’s latest cut comes amid fears of a slowdown in EV demand, with market leader Tesla (NASDAQ:TSLA) CEO Elon Musk warning that high interest rates, meant to cool stubborn inflation, are souring consumer sentiment and cautious commentary from Ford (NYSE:F) and General Motors (NYSE:GM). Last week Luxury EV maker Lucid (NASDAQ:LCID) also slashed its production forecast to align with the lower number of deliveries.Fisker cut prices of its high-end Ocean Extreme SUV last month, joining peers in a profit-sapping price war sparked by Tesla to stoke demand.But Fisker said it was limited by its delivery and service infrastructure rather than production and demand, tough it acknowledged the impact of high interest rates on consumer spending. “We have not been able to follow through with deliveries fast enough,” CEO Henrik Fisker said on the call. “People have paid and are waiting for their cars, and some of them are really getting annoyed,” he said, adding that Fisker was hiring 20-30 people a week, getting more logistics partners and opening new facilities in an effort to ramp up deliveries. Fisker said it delivered 1,200 vehicles in October, more than the 1,097 it delivered in the third quarter, and was on track to deliver even more cars this month.Revenue for the third quarter was, however, lower than analysts’ expectations at $71.8 million with a larger-than-expected loss of $91 million.Fisker had delayed its results from Nov. 8, citing the departure of its former chief accounting officer and on Monday said it had “determined that it has material weaknesses in the company’s internal control over financial reporting.”The issues were related to complex accounting in multiple countries, involving convertible notes, derivatives as well as raw material and finished goods inventory in the contract manufacturing of its vehicles, Fisker said, adding that it was hiring experts to better address the issues. More