CITY 45
9 April 2022 THE WEEKUK companies braced for further pain as
April’s tax and NI rises kicked in, adding
to spiralling energy costs. Insolvency
expert, Begbies Traynor, predicted the
expiry of government support measures,
such as tax reliefs, could push many
companies over the edge. The number
of insolvencies in February was 23%
higher than a year ago, with county
court judgements against firms (an early
sign of financial distress) doubling.
The grim domestic picture was mirrored
in markets. The UK-focused FTSE 250
suffered a 10.6% drop in the first quarter,
and the junior Aim index of minnow
companies lost 16%. By contrast, the
blue-chip FTSE 100 ended the quarter
1.8% up – thanks to big gains made by
its constituent metal miners and oil
companies. The index has bucked
the global equity trend. Wall Street’s
benchmark S&P 500 closed Q1 4.9%
lower; the MSCI gauge of worldwide
stocks lost 5.7% in dollar terms.
The UK Government indicated fracking is
back on the agenda; Business Secretary
Kwasi Kwarteng has asked the British
Geological Survey if new technology can
help predict and manage seismic events.
The Chinese fashion retailer Shein was
valued at $100bn in a new fundraising –
more than the combined value of the
world’s two biggest clothing companies,
Inditex and H&M. Jeremy King, the
restaurateur behind The Wolseley, lost
his battle to buy his Corbin & King group
out of administration. The Thai group
Minor International won the bidding war.Channel 4: privatisation row
Following protracted rows about Channel 4’s future, “the Government has given the
green light” to its privatisation, said Martin Robinson on MailOnline. Culture Secretary
Nadine Dorries is “pushing ahead with plans to sell the broadcaster” for around £1bn.
There’s already a good deal of interest: “US TV giants Paramount and Discovery are
said to be vying with ITV and Sky” to acquire it, but a backlash is also in play. Labour
claims the Government is selling Channel 4 to punish it for its critical coverage of issues
such as Brexit, and senior Tories have also called for a rethink: Ruth Davidson called the
proposed sale of the publicly-owned channel the “opposite of levelling up”. Channel 4
itself says it is “disappointed” by the decision. The “commercial logic” is certainly
questionable, said Dorothy Byrne (a former head of Channel 4 news) in The Guardian.
The broadcaster – which is financed by advertising, not the public coffers – was founded
in 1982 to boost the UK’s nascent independent production sector. It succeeded brilliantly.
“Currently two-thirds of Channel 4’s main channel content is commissioned from
companies in the nations and regions.” It is unlikely that a hard-nosed new owner will
share the profits around the country quite so generously.
Travel companies: chaotic getaway
Airline companies “sacked thousands of workers” during the peak of the pandemic, said
Suban Abdulla on Yahoo Finance. Now, that is coming back to bite them. “Severe staff
shortages”, exacerbated by Covid-related absences, were cited as the main cause of
numerous flight cancellations as Britain’s Easter getaway got under way. According to
figures from Cirium, 1,143 flights were cancelled to and from the UK in the week to
3 April (BA cancelled 662 flights; easyJet, 357). This week, there were reports of long
queues of holidaymakers and “scuffles” at Britain’s busiest airports, said Oliver Gill in
The Daily Telegraph. The MD of Manchester Airport, Karen Smart, resigned after being
criticised for the chaos there. Airline chiefs have tried to blame the Government, arguing
that their hiring plans have been hampered by long delays in the “vetting” process for
staff working “airside” (beyond the security scanners). There had been fears that “war in
Ukraine and rising jet fuel prices” would cloud aviation’s “summer revival”, said Gwyn
Topham in The Observer. The “good news” is that, despite the spiralling cost of living,
demand for tickets seems buoyant. Brits, it seems, “would rather spend their dwindling
pounds on flying abroad than on insane energy bills”. With luck, they’ll get there.
M&S: just kidding
With the sniff of revival in the air, there’s no stopping M&S, which has just become the
first major high-street retailer to join the “circular” market for children’s clothes, said
George Iddenden on ChargedRetail. M&S has signed a partnership with Dotte, an online
marketplace where parents can “buy, sell, donate and recycle outgrown kidswear”. Dotte
was founded by Louise Weiss and Samantha Valentine after they became frustrated by
how quickly their own kids grew out of clothes, said Ashley Armstrong in The Times.
M&S, which is investing via its “start-up accelerator” Founder’s Factory, is certainly
on the money: the “resale” sector is one of retail’s fastest-growing segments. The second-
hand clothing app Vinted was valued at $4.5bn in a fundraising last year.
Twitter: intriguing deal sparks Musk alert
Tesla founder, Elon Musk, loves to set the cat
among the pigeons. In that respect, his decision
to spend $2.9bn on a 9.2% stake in Twitter –
making him the company’s largest shareholder- was a textbook move, said Martin Peers on
The Information; and to add to the fun, “the
world’s most talkative CEO” suddenly came
over all “coy” about his motivations. “Oh hi lol,”
he tweeted to his 80 million followers as shares
in the platform jumped by 27.1%. Musk recently
indicated that he was interested in shaking up
social media to advance “free speech”. It had
been thought he was thinking about starting
his own platform, noted The Times, but he has
now joined the Twitter board. Conveniently,
founder Jack Dorsey – a friend of Musk – is
“due to vacate his seat next month”.
There was speculation that Musk’s investment was simply
“a canny value play” for a stock that has fallen by 40% in thepast year, said Lex in the Financial Times. His
move onto the board suggests he could look
to create a “meme stock”. Either way, given his
online pull and the tendency of past tweets to
land him in “regulatory hot water”, Washington
should “set a Twitter alert” if the world’s richest
man puts more capital into this deal.“The hearts of Tesla shareholders must sink
every time Elon Musk takes on a new project,”
said Nils Pratley in The Guardian. At least
this deal (unlike his huge bitcoin investment
through Tesla) is “with his own money”.
Still, the Twitter stake has the potential to
be “a serious distraction from the day job”.
Musk’s high profile has saved Tesla a fortune
in advertising; but there’s little upside to him
getting “sucked into toxic battles” about the role social media
plays in the US’s politics. “Leading the electric vehicle revolution
is hard enough without unnecessary detours.”Set your Twitter alerts...Seven days in the
Square Mile