Budget Small Print
It was a busy Budget, with announcements on pensions, childcare, energy prices, a reclassification of nuclear which should boost ESG investment into the sector. There were also big economic calls, notably that we will swerve recession this year and inflation will fall to less than 3% by the end of the year — announcements that may put pressure on the Bank of England to hold off further rate rises next week.. But inevitably the tax giveaways announced at the despatch box weren’t quite as generous once the small print of the accompanying documents had been digested. Take the chancellor’s flagship pledge to scrap the pensions lifetime allowance (of £1.07m) — effectively allowing higher earners to build unlimited pension pots, provided they don’t contribute more than £60,000 a year.
Jeremy Hunt chose to gloss over the fact that the tax-free cash element will be restricted for these higher earners. Currently the vast majority of pension savers can take out a quarter of their retirement fund as a tax-free lump sum. In future this will be limited to 25% of the current LTA — a lump sum of £268,275. Of course, this is generous by most people’s standards. But it does mean the fundamental principle of pension rules has been broken, and over time the tax-free perk will be significantly eroded for higher earners.
Bank Bailouts Back
Politicians, central banks and regulators have been keen to stress that there aren’t systemic weaknesses across the global banking system, and this isn’t a re-run of 2008. After a difficult week for the banking sector, US Treasury secretary Janet Yelland insisted to congress that the US banking system was “sound”. But one bank collapse and at least three bailouts make for some scary headlines, for both depositors and investors. Problems stem from the collapse of Silicon Valley Bank in the US at the end of last week. This led to its UK arm being rescued by HSBC over the weekend, for a nominal £1 price tag.
Nervousness caused bank shares for fall across the globe. Beleaguered bank Credit Suisse — which has faced a raft of self-inflicted problems in recent years — was particularly badly hit. Shares plunged 25% before it announced it had secured a 50 billion franc (£44 billion) lending facility from the Swiss Central Bank. Meanwhile, back in the US a consortium of Wall Street investment banks stepped in to rescue First Republic in a bid to calm markets. This mid-sized Californian bank had a high number of deposit accounts above the government-insured limited of $250,000, thanks to its affluent customer base. Hopefully these actions will be enough to rebuild confidence in the sector.
All Change at John Lewis
Things are certainly changing at high street stalwart John Lewis, with its well-heeled customer base seeking bargains elsewhere. This week we learned even Waitrose customers are turning to the discount supermarket chains amid a cost-of-living squeeze, as the group unveiled losses of almost £80 million. As a result the mutual said it won’t be paying a bonus this year — only the second time staff have not received this payment since 1948. This isn’t the only change afoot: John Lewis has also just appointed its first chief executive, to help revive its fortunes. Last year the retailer ditched its ‘never knowingly undersold’ price pledge, which it’s used for almost 100 years, and more recently parted ways with the creative advertising agency behind its big budget Christmas ads. What next?
Soundbars in, Superkings Out
The nation’s changing shopping habits are reflected in the updated basket of goods used to calculate official inflation figures. Alcopops and Superking cigarettes are out; frozen berries and electric bikes are in. Other changes reflect our hi-tech homes, with the price of home security camera, video doorbells and soundbar speakers now being fed into the CPI calculator. But how long before these new additions become superseded? It’s interesting to note that some of the items jettisoned from the basket include digital cameras and CDs that seemed cutting edge and futuristic once.
Mega Job Losses at Meta
The job losses keep coming in the tech sector. Meta, owner of Facebook, Instagram and WhatsApp, is shedding another 10,000 jobs. This is the second wave of mass redundancies at the social media company, which laid off 11,000 people last November. A further 5,000 advertised positions will also be left unfilled. In typically corporate tech-speak Mark Zuckerberg, Facebook’s founder and Meta CEO, said 2023 would be a “year of efficiency” at the company. Other tech firms, such as Amazon and Google, have also been make swingeing job cuts in what is proving to be a difficult period for the so-called FAANG tech giants. One US-based research company, layoffs.fyi estimated that there have been 128,000 jobs cut in the tech industry so far this year.
Brand it like Beckham?
Celebrity-branded perfumes used to be all the rage. Now it seems that the A-list crowd are looking to lend their name and Hollywood cachet to high-end alcoholic spirits. This week David Beckham ended his nine-year “brand partnership” with Diageo, where’s he credited with boosting sales of Haig Club whisky, fuelling speculation he is planning to launch his own branded-booze. In recent years we’ve seen George Clooney and Dwayne ‘The Rock’ Johnson launch tequila brands, Ryan Reynolds a gin brand and Jay-Z and LeBron James also launch their own premium drinks ranges. Despite admitting his is not much of a drinker, Beckham is clearly a canny businessman, and no doubt clocked that Clooney recently sold his Casamigos tequila brand to Diageo in a deal worth around $1 billion.
Pooling Resources
The UK’s swimming pools and leisure centres were awarded extra funding in this week’s Budget to help keep them open amid spiralling heating costs. But one public pool in Devon is taking more radical action to reduce bills. Exmouth Leisure Centre will use the energy generated from a nearby computer data centre to heat the water in its pool, cutting its gas bill by 60% a year. Startup company Deep Green has developed these “digital boilers” and says pools around the UK could benefit from this technology, as well as other small businesses and blocks of flats. The news comes after reports that the prime minister has recently installed a private pool in his Yorkshire residence. Perhaps he might be tempted to look at this new technology — though given the extent of his family’s fortunes paying the heating bill is less likely to be a concern.
Allow All Cookies
Big Bird would no doubt be scratching his head on the news that Sesame Workshop, the company behind the US TV kids show, is the latest organisation to jump on the NFT bandwagon. Its first range of “digital collectibles” will go on sale next week and feature Cookie Monster, the bright blue biscuit-guzzling puppet that was a firm favourite with kids. It remains to be seen whether later ranges will feature the vampire who helped its pre-school audience learn their numbers. Perhaps he could explain to buyers what these digital tokens are worth a year or two from now when sports teams, gaming companies, film franchises, TV networks and other popular TV shows have all flooded the market with these esoteric “investments”.
A Bug's Life
One of the many terrible consequences of climate change is a warmer climate means more insects, particularly in the more humid parts of the globe. Bad news if, like most of us, you don’t want to deal with swarms of flies, mosquitoes or cockroaches. But good news if you are Rentokil and are paid to deal with these invasions. The pest control company reported rising profits this week, saying global warming, a return to office life, and a growing middle class in Asia and Africa helped fuel global demand for its services.
Naked Capitalism
For a private equity firm called Ethical Capital Partners the decision to to acquire MindGeek, owner of one of the biggest adult entertainment sites, Pornhub, might seem an odd one. Leaving aside questions about the morality of the pornography industry generally, this particular site has attracted criticism and controversy in recent years. In 2020 the site was cut off by Visa and Mastercard after investigations identified unlawful content on the platform. Meanwhile, concerns about Pornhub’s business model resulted in many of its senior managers leaving the company last year. ECP is clearly aware of these issues, stating it plans to go beyond its “legal and regulatory obligations” when it comes to working with the team at Luxembourg-based MindGeek, policymakers, law enforcement and civil society partners to “strengthen” the platform.
