The Times - UK (2022-04-28)

38 Thursday April 28 2022 | the times

Business

Go-Ahead, which benefited from
taxpayer subsidies during the pan-
demic, is to start repaying dividends
after reporting that it expects to exceed
City forecasts for its profits.
Shares in the bus and train group,
which were more than £21 each before
the pandemic, fell to a low of 540p this
year. That was after its removal from
the Southeastern Trains franchise in a

Bus and rail group back on the move as it plans to restart dividend

Robert Lea Industrial Editor scandal in which Go-Ahead secretly
withheld £50 million of cash that was
due to the Treasury.
There were fears that the Depart-
ment for Transport would also remove
it from its remaining operation, the
Southern Railway and Thameslink
combine known as GTR.
Since then Go-Ahead has settled its
Southeastern row with the transport
department, paid a £23.5 million fine
and has been handed a new

restricted-profit management contract

to run GTR.

With news of dividend payouts of not

less than 50p a share returning when its

financial year ends in the summer, the

shares rose 12½p to 937½p on the ses-

sion, up 75 per cent in eight weeks.

The company said revenues were

£1.7 billion in the six months to January

1, a period in which its income was un-

derpinned by the taxpayer to maintain

a minimum frequency of services on

the buses and railways. It reported a

profit before tax of £50 million.

On GTR trains, Go-Ahead reported

that passenger numbers were at 70 per

cent of pre-pandemic levels, with some

in the industry wondering whether

changed working practices have

changed passenger levels for good.

On the buses, passenger numbers are

about 80 per cent of pre-pandemic

levels, though the story is regionalised.

In Manchester, which as a younger and

more blue-collar workforce, Go-

Ahead’s buses are back to 92 per cent.

London is at about 80 per cent. In Go-

Ahead’s big operation in and around

Oxford, which depends much more on

tourists, the number is much lower.

“The outlook means we are very

confident that we will exceed market

expectations,” Christian Schreyer, a

European transportation veteran who

came in as Go-Ahead’s chief executive

last autumn, said.

The government should abandon at-
tempts to “reindustrialise” the British
economy and focus instead on enhanc-
ing the country’s status as a global
services powerhouse, according to a
report from the Resolution Foundation
think tank.
It says that the UK economy boasts
world-beating industries such as pro-
fessional services, pharmaceuticals and
cultural sectors that should be the sub-
ject of better designed government
policy to protect and promote them.
“Reorienting the economy towards
manufacturing, as some have encour-
aged, risks squandering the UK’s signif-
icant long-term economic strengths,”
said Krishan Shah of the Resolution
Foundation. “An economic strategy
which builds on specialisms and inno-
vates in areas close to the UK’s current

Focus on boosting services not

reviving industry, ministers told

mix of exports offers substantial gains.”

The UK is the world’s fourth largest

export economy and the largest ex-

porter of services. Services make up just

under half of total exports, which were

worth $418 billion in 2019.

Britain’s services dominance is not

only concentrated in areas such as

banking and finance but is widespread

in sectors that include education and

the selling of intellectual property in-

cluding television rights, the report

says. The UK also outperforms in the

exports of goods such as aircraft, art,

beverages and pharmaceuticals.

Britain’s dominance in particular sec-

tors has stretched over decades and

means that attempts to shift production

and investment to relatively under-

developed areas such as manufacturing

to compete with powerhouses like Ger-

many will be expensive and unlikely to

succeed, the think tank says. “Manufac-

turing employment is only 8 per cent of

the total, suggesting that the number of

extra jobs available from even a propor-

tionally large expansion in manufactur-

ing would be limited,” the report adds.

The Conservative government this

year launched its long-awaited “level-

ling up” strategy to reduce regional in-

come inequality and investment gaps

in the country. But nearly a third of UK

manufacturers say they have yet to feel

any benefits from such policies, accord-

ing to Make UK, the industry group.

The Resolution Foundation said that

comparisons with other rich services-

reliant economies such as Singapore

and France showed that specialisation

in services “does not of itself explain the

shortfall in productivity and incomes...

nor the recent stagnation in product-

ivity growth”. However, it warned that

the boom in high value services jobs

had contributed to regional and income

inequality because better-paid jobs in

banking were mostly in financial cen-

tres such as London.

“Policy will need to do more work

than it is currently doing to ensure that

the gains from international trade are

spread widely across the country and

across the income distribution,” says

the report, which was co-authored by

the London School of Economics and

funded by the Nuffield Foundation.

Brexit has also delivered a blow for

Britain’s economic strengths because

services will disproportionately suffer

from barriers such as the non-recogni-

tion of professional qualifications. The

EU has also not provided so-called

equivalent recognition of UK financial

services regulation to access its single

market for banks. The government’s

post-Brexit trade agreement with the

EU is light on provisions for services,

which make up 80 per cent of UK GDP.

Mehreen Khan Economics Editor

Car factory

output slows

to a crawl

Robert Lea

Already depressed car factory output

fell further in the first quarter of 2022 as

British plant production plunged by

another third, with nearly 100,000 few-

er units assembled in the three months.

Twelve months ago the industry was

complaining of computer chip shorta-

ges on top of other pandemic impacts

including lockdowns and staff illness or

enforced isolation.

This year that has been overlaid by

further supply chain dislocation

because of the Russia-Ukraine crisis

and soaring raw material and energy

costs leading to new car prices soaring

during a cost of living crunch.

While the impact of Britain’s with-

drawal from the European Union is dif-

ficult to quantify because of the disrup-

tion of the pandemic, the decisions by

Honda to close its large factory in Swin-

don and Stellantis to wind down pro-

duction of cars at the Vauxhall factory

in Ellesmere Port have hit the numbers.

F

armers have

criticised a

government

plan to cut

tariffs on food

imports, saying it

would not “even begin

to deal” with the

causes of rising prices

(Louisa Clarence-

Smith writes).

A proposal to cut

tariffs on food that is

mostly imported, such

as rice, was discussed

in cabinet this week.

However, Lord Frost, a

former Cabinet Office

minister, went further,

saying that tariffs

should also be

scrapped on imports of

food that is produced

in large quantities in

Britain, such as beef

and lamb, to “bring

our prices down to

world levels and help

with the cost of living

crisis”.

The suggestion

angered farmers.

Minette Batters,

president of the NFU,

said: “I think we’ve got

to be really careful

about thinking food

prices can be any

lower because I really

do not think it’s

sustainable. The world

is facing a shortage of

availability... It’s

about making sure

that everybody keeps

producing what

they’re good at, so we

don’t drive shortages

and availability that

will drive further

inflation. With the

retail price war that is

currently going on,

we’ve probably got the

most affordable [food

prices in the world].”

Jimmy Dickinson,

66, a farmer from

Yorkshire, said it was

“clearly unsustainable”

for prices to fall.

“Farmers’ margins are

very low, and they

can’t go any lower,” he

added. He is planning

to stop rearing pigs

because he’s “being

asked to sell a pig for

£30 less than the cost

of production”.

Anne-Marie

Trevelyan, the

international trade

secretary, told MPs

yesterday that there

was no cabinet split on

cutting tariffs on food

imports. However, she

indicated that she was

not supportive of the

proposal, saying that

such measures would

have only a 0.4 per

cent impact on the

cost of living.

Farmers

fear cut

to import

tariffs

Pushing food prices

any lower would be

unsustainable for

farmers, according

to union leaders

TIMES PHOTOGRAPHER JACK HILL

Source: SMMT

2016 17 18 19 20 21 22

Car output

Mar 0.8

1

1.2

1.4

1.6

1.8

Rolling year totals (millions)

760,364

Last month UK car factories, domi-

nated by the big plants of Nissan, Jaguar

Land Rover and Mini, which together

account for more than 70 per cent of

total production, delivered only 76,000

units, down by 33 per cent year on year

and the worst March since the shut-

downs during the depths of the global

financial crisis in 2009.

During the first quarter, only 207,000

cars rolled off assembly lines, down

from 306,000 in the first three months

of 2021.

The 12-month rolling production

figure is now running at 760,000, com-

pared to 1.7 million in the Brexit refer-

endum year of 2016.

Mike Hawes, chief executive of the

Society of Motor Manufacturers and

Traders, which collated the figures, said

the industry needed government relief

from energy costs.

“Two years after the start of the pan-

demic, automotive production is still

suffering badly,” he said. “Recovery has

not yet begun and with a backdrop of an

increasingly difficult economic envi-

ronment, urgent action is needed to

protect the competitiveness of UK

manufacturing.

“We want the UK to be at the fore-

front of the transition to electrified ve-

hicles. Action is urgently needed if we

are to safeguard jobs and livelihoods.”