The Times - UK (2022-03-18)

36 Friday March 18 2022 | the times

Business

Diverging paths

2012 2014 2016 2018 2020 2022

Inflation targetr

6 5 4 3 2 1 0

Interest rate

Consumer price

index

%

1

Former special forces soldiers

boarded P&O ferries to remove

crew members after the

company sacked 800 staff without

notice and replaced them with

cheaper overseas workers.

Employees were sacked via a

Microsoft Teams video call in

which they were told yesterday

would be their “final day of

employment”. Page 14

2

Mortgage holders will feel the

pinch from higher interest

rates but savers may not fully

benefit from the same rise in

returns, experts have warned as

the Bank of England raised rates

to pre-pandemic levels. The

interest rate has returned to

0.75 per cent, up from a historic

low of 0.1 per cent set in 2020.

Pages 16, 35

3

HSBC may be closing down

dozens more of its branches in

the real world, but in the

virtual world the bank is

embarking on an expansion drive.

It has bought a plot of virtual real

estate in The Sandbox, an online

gaming space majority-owned by

the Hong Kong-based Animoca

Brands. Page 35

4

A slump in the sale of suits

and formalwear during the

pandemic has knocked the

124-year-old TM Lewin retailer

into administration for the second

time in two years. Page 35

5

Metal traders endured

another chaotic session as

nickel prices came under

continued heavy-selling pressure,

causing the price to drop below its

new daily limit for a second

consecutive day.

6

Harbour Energy, the biggest

oil and gas producer in the

UK North Sea, has said it

should generate up to $1.7 billion in

spare cash this year if prices stay

high, prompting renewed calls for

a windfall tax. Page 38

7

Go-Ahead Group has received

a lower than expected fine

from the government over the

mishandling of its former London

and South Eastern Railway

franchise. The Newcastle-based

bus and train operator was handed

a £23.5 million penalty by the

Department for Transport, less

than the £30 million provision

made in Go-Ahead’s accounts

published last month for the year

ending July 3, 2021. Page 39

8

Getir, the six-year-old rapid

delivery service, has raised

fresh funds at an $11.8 billion

valuation, greater than the market

capitalisation of Sainsbury’s.

Page 40-41

9

One Savings Bank notched up

record profits of more than

half a billion pounds on the

back of a pick-up in activity

among its landlord customers, a

widening of margins and the

release of bad debt provisions

made a year ago. Page 42

10

The chief executive of

Cineworld declared a new

chapter and shrugged off

fears over the company’s financial

position. Mooky Greidinger said

the fourth quarter of last year had

“made it clear that nobody is going

to give up the cinema experience”

and he was confident the recovery

was on its way. Page 43

Need to know

Nickel price tumbles below LME limit

Metal traders endured another chaotic

session yesterday as nickel prices came

under continued heavy-selling pres-

sure, causing the price to drop below its

new daily price limit for a second

consecutive day.

Even after the London Metal

Exchange widened Wednesday’s 5 per

cent circuit breaker to 8 per cent, the

price quickly fell to its limit of $41,495.

The exchange’s electronic system

LMEselect has been hit by technical

glitches since the market reopened this

week. On Wednesday the reopening of

the nickel market came to a temporary

halt in the morning after the price

slipped by 5 per cent after a “systems er-

ror” that allowed a small number of

trades to go through below the daily

price limit.

Yesterday, the LME said that some

nickel orders could not be entered in

the pre-open period via the system. Cir-

cuit breakers were introduced to pre-

vent wild swings in the nickel price,

which surged amid fears Russia’s inva-

sion of Ukraine would disrupt supplies.

The exchange has also imposed a

15 per cent limit on other metals. For

today, the limit-down level will be about

$38,590 a tonne. It does not publish offi-

cial nickel prices if prices move to their

daily limit.

“We suspect that there will be more

limit-down sessions until the market

finds an equilibrium level,” Edward

Meir, an analyst at ED&F Man Capital

Markets, said. “We will not know where

they will stabilise until the limit down

moves fully play out.”

The turmoil has been a blow to the

exchange, which sits at the heart of the

world’s trading of industrial metals. On

March 8, trading was gripped by a short

squeeze that caused prices to soar, with

its benchmark three-month nickel fu-

tures briefly doubling to above

$100,000 a tonne, by far its record level.

While LME nickel was suspended,

trading continued on the Shanghai Fu-

tures Exchange and prices there have

been falling steadily to trade at about

219,440 yuan, or $34,550 a tonne

yesterday, with many traders claiming

that LME nickel will continue to slide

until it reaches parity with the price of

metal in China.

Russia is the world’s third largest pro-

ducer of nickel, after Indonesia and the

Philippines, responsible for roughly

two-thirds of nickel used to make stain-

less steel. Prices of other commodities

including wheat, oil and natural gas

have all jumped since Russia’s invasion.

6 Some creditors have received pay-

ment, in dollars, of Russian bond cou-

pons that fell due this week, meaning

Russia may for have averted what

would have been its first external bond

default in a century. Russia’s finance

ministry said it sent funds to cover $117

million in coupon payments on two

dollar-denominated sovereign bonds.

The payments, due on March 16 but

with a 30-day grace period, are regard-

ed as the first test of whether Moscow

will meet its international debt obliga-

tions after western sanctions hobbled

its financial dealings.

Jessica Newman

Lifeline may

be offered to

Arm workers

Poppy Koronka

Imagination Technologies, the chip

designer, is planning to recruit 250 staff

worldwide, increasing its international

headcount by more than 30 per cent.

It comes as Arm, the technology

group, announced this week that it was

set to shed up to 1,000 jobs after the col-

lapse of the company’s $40 billion sale

to Nvidia, the American chip-maker.

Imagination, which is based in Kings

Langley, Hertfordshire, could be poised

to employ those who lose their jobs at

Arm. A spokesman from Imagination

said: “We’re genuinely very sorry to

hear that a thousand people will be lost

from Arm. Although we’re competi-

tors, we share a lot of customers and so

historically we’ve worked very closely

with them. We are very interested in

Bank keeping

its powder dry

in the battle

with inflation

Just as hawks seemed

to be in the ascendant

the Ukraine crisis has

changed the mood,

Mehreen Khan writes

The Bank of England has pulled the

trigger on another interest rate rise but

its signalling will do little to assuage

critics who think it is dangerously be-

hind the curve on taming inflation.

An increase of 25 basis points to the

UK’s main Bank rate is a return to the

pre-pandemic level of 0.75 per cent and

was widely anticipated by markets.

The decision was near unanimous,

with eight out of nine rate-setters in

favour and one, Sir Jon Cunlife, voting

to keep rates unchanged. No member

of the monetary policy committee was

in favour of a rate rise greater than 0.25

percentage points.

The Russian war in Ukraine and the

yet to be realised economic fallout has

quietened the Bank’s hawks for now. In

February, four members of the commit-

tee wanted to tighten at a more aggres-

sive rate of 0.5 percentage points. It is

the single biggest swing from hawkish

dissent to doveish dissent since the

financial crisis struck in 2007, accord-

ing to Pantheon Macroeconomics.

The outlook for the global economy

has deteriorated since the Bank’s

February rate rise, with Russian tanks

rolling into Ukraine weeks later. Food

and energy prices are on the up, supply

chains are continuing to be squeezed

and the war is weighing down business

and consumer sentiment.

Projected UK inflation is expected to

hit four times the bank’s target rate at

8 per cent by June, up from the peak of

7.25 per cent in April that was estimated

last month. Prices will remain elevated

for most of the year and could climb

“several percentage points”, raising the

spectre of double-digit inflation for the

first time since Margaret Thatcher was

prime minister in the 1980s.

In the trade-off between growth and

inflation, the Bank is choosing to veer

on the side of caution in the face of

severe uncertainty on how events in

Ukraine will affect the price of com-

modities such as grain, cereals, fertilis-

er, crude oil and natural gas. Hopes of a

negotiated peace deal have gathered

momentum in the past week and it

would be a significant lift for the world

economy if a ceasefire materialises.

In the absence of hard data on the

impact of the war, Bank rate-setters

chose to soften their language around

rate rises this year. They warned that

“further modest tightening in

monetary policy might be appropriate

in the coming months” — a change

from the “likely” tightening suggested

in February.

It is a far cry from the stance taken by

the US Federal Reserve, which

began an aggressive tight-

ening cycle on Wednes-

day and signalled an

additional six rate

increases for the

year. Even the

European Central

Bank delivered a

surprisingly

hawkish message

this month, opening the door to

exiting its mass bond-buying

programme in the face of

record inflation.

Unlike its fellow

central banks, the

Bank of England

began acting

before the Fed and

the European

bank in curbing

inflation risks

before the invasion

of Ukraine. The rise

announced today

means it is the first time

the Bank has carried out a

third consecutive rate rise since it

gained independence from the Trea-

sury in 1997. The Bank has also led the

way in “quantitative tightening” — the

gradual shrinking of its balance sheet

after more than a decade of bond

purchases. It has promised to carry out

active bond sales once the interest rate

reaches 1 per cent, which is just one

increase away.

At the core of the Bank’s doveish

assessment was the expectation that

inflation would fall to just above its 2

per cent target in two years and slip

below the mandate over the next three

years. The judgment is based on market

expectations for where interest rates

ve tight-

dnes-

an

te

exiting its m

program

record

U

cen

Ba

be

b

th

b

in

be

of U

anno

means

ttthe Bank

Inflation could hit

double digits for

the first time since

Margaret Thatcher

was prime minister