The Sunday Times - UK (2022-05-22)

2

BUSINESS

UK to invest in £150m plant to

boost supply of vital minerals

Business secretary Kwasi

Kwarteng is to back a

£150 million rare earth metal

processing plant on the

Humber that could reduce

the UK’s reliance on imports

of critical minerals from

China.

The facility will be built by

London-listed Pensana at

Saltend Chemicals Park to

refine rare earths for use in

magnets in electric vehicles

and wind turbines.

The business

department is putting up

£4 million of taxpayers’

money from the

£1 billion

Automotive

Transformation

Fund, which was

set up last year

to speed the electrification of

Britain’s car industry. The

grant is intended to help

Pensana unlock the private

investment needed to fund

the plant, which is expected

to cost £150 million and

create 125 local jobs.

Pensana’s facility will

process the minerals

neodymium and

praseodymium, which it

plans to mine in Angola from

late 2023.

Kwarteng’s support

comes as the West

seeks to tackle China’s

dominance in the

refining of minerals

that are vital for

electric cars and

batteries.

China

refines

about 90 per

cent of these

metals,

stoking

concerns

Jon Yeomans that it can cut off supply or

raise prices at will.

A Whitehall source said

Kwarteng wanted “to chip

away at Beijing’s dominance

in rare earth metals” and

stop Britain and Europe

“becoming price-takers”.

The government has

formed a critical minerals

expert group and has

pledged to publish a strategy

in this area later this year.

Pensana’s market value

has risen steadily since its

listing on the London Stock

Exchange in July 2020. Its

shares closed at 81p on

Friday, valuing it at

£193 million.

Chairman Paul Atherley

said: “We’re working hard to

establish Saltend as the

world’s first independent and

sustainable rare earth

processing hub at a time of

growing concern for critical

metals supply-chain

resilience.”

Kwasi Kwarteng

is to put up £4m

of state cash

Deep-seated changes to work

and leisure patterns since the

pandemic have led the

operators of the £19 billion

Elizabeth Line to slash their

forecast for passenger

numbers by half before the

railway’s opening this week.

Transport for London

(TfL), which is in charge of

the Elizabeth Line — formerly

known as Crossrail — said this

weekend that it was planning

for 130 million to 170 million

passengers a year by 2026, far

short of the 277 million it had

predicted three months

before Covid struck.

Passenger journeys on the

rail network have not

recovered to pre-Covid levels,

raising questions about the

wisdom of proceeding with

HS2, the high-speed railway.

Construction of the first

phase of HS2, from London to

Birmingham, is under way,

Crossrail reins back

passenger forecasts

while a bill to authorise the

third stretch from Crewe to

Manchester is currently

passing through the House of

Commons. It will cost

£42.5 billion for the railway to

reach Crewe, with a further

£17 billion required to

continue on to Manchester.

Lord Berkeley, a critic of

HS2 who in 2019 was deputy

chairman of the Oakervee

review, which advised the

government on the line’s

future, said: “The Crossrail

evidence is absolutely

frightening. It means that if

that reduction in passenger

forecasts is replicated on

HS2, there can be no

argument for building it.”

TfL said that its forecasts

were affected by “uncertainty

about recovery in demand for

rail trips”. Crossrail will

enable trains to run for 73

miles across London.

News Review, page 21

these documents for details

on costs and budgets.

The data came to light after

a separate employee moved

from McCarthy & Stone to

Churchill and told his new

employer of the alleged

wrongdoing. Churchill claims

that it has suffered damage as

a result, as its rival will be

able to reduce build costs and

increase its supply of houses

similar to Churchill’s own

retirement homes.

Sabah Meddings McCarthy & Stone was

established by John McCarthy

and Bill Stone in the 1960s. In

2003, McCarthy resigned as

chairman after failing in a

£600 million bid to take the

company private, and sold

his stake for £75 million a year

later. He put up the money

for Churchill, which his sons

Spencer and Clinton started

from a garage in 1994. The

company made a pre-tax

profit of £38.9 million in the

year to June 2021.

McCarthy & Stone made

sales of £335.5 million in the

year to October 2021 and a

pre-tax loss of £37.5 million.

In a defence lodged at the

High Court, the housebuilder

said it had “made no profit

from the very limited

interaction” with the

documents disclosed by the

former employee, and added

that they had been deleted.

Both parties declined to

comment.

Nicholas Hellen

Spencer McCarthy leads

Churchill Retirement

Housebuilder McCarthy &

Stone has been accused of

using confidential

information belonging to

rival Churchill Retirement

Living to slash costs and

design cheaper properties.

McCarthy & Stone, a

specialist in retirement

homes, owned by US private

equity firm Lone Star, is due

to appear in court tomorrow

after a legal claim alleged that

a former Churchill employee

brought trade secrets to it

with the intention of reducing

the price of house builds.

Historically, Churchill’s build

costs have been lower, giving

it higher profit margins.

According to court filings,

hundreds of documents

belonging to Churchill were

shared among staff at

McCarthy & Stone responsible

for procurement. The filings

allege that staff searched

McCarthy & Stone in court over

claim it used rival’s trade secrets

W

hen Lidl reopened the

doors to its refurbished

supermarket in Wim-

bledon, southwest

London last Thursday

morning, a palpable

sense of relief swept

the aisles.

Among those cele-

brating the dis-

counter’s return after a five-month hia-

tus was local resident Wayne Randall,

who made no effort to conceal his

delight that he would no longer need to

take the bus to the local Asda, where a

loaf of bread was costing him an addi-

tional 20p. “The prices have increased a

hell of a lot,” he said, exasperated.

“Things like bread, milk, eggs... the

basic stuff you need to live on.”

The supermarket price war catalysed

by the expansion of Lidl and fellow Ger-

man discounter Aldi has conditioned

shoppers such as Randall — who can reel

off the price of a loaf of bread or a carton

of eggs — to expect rock-bottom prices.

British consumers are spending just

11 per cent of their disposable income on

food and non-alcoholic drinks from

shops, less than any other major Euro-

pean nation. That compares with more

than a quarter of disposable income

going on the same products in the late

1970s, according to the Food & Drink

Federation.

Inflation stoked by economies reopen-

ing after the pandemic had already guar-

anteed a rise in food prices, but shortages

of wheat and other grains created by Rus-

sia’s invasion of Ukraine have unleashed

a wave of protectionist food policies and

raised the spectre of Britain’s golden era

of cheap food ending for good. Former

Sainsbury’s boss Justin King predicts that

we are facing a “radical and permanent”

reset of food prices.

The war in eastern Europe has in effect

reduced global exports of wheat by

almost a third. Prices jumped to an all-

time high of $12.81 a bushel last week after

India, the world’s second-largest wheat

producer, banned exports amid soaring

domestic inflation. Though the UK grows

much of its own wheat, it is still exposed

to global movements in prices.

That risk, alongside export bans by

major fertiliser and palm oil-producing

nations, has thrust the issue of food secu-

rity up the agenda and raised questions

over prime minister Boris Johnson’s

pledge to rewild 30 per cent of Britain’s

land, rather than prioritise agriculture.

Ukrainian farmers have, in many

cases, been able to plant their crops,

despite shortages of diesel fuel and a lack

of machinery such as trucks, many of

which have been seconded to the war

effort. The main problem they face now is

exporting the largest bounty in Europe

beyond Ukraine’s borders.

Britain’s golden era of cheap groceries

may be coming to an end. We need to

rethink our farming policy to improve

food security, writes Sam Chambers

relied on a plentiful supply of cheap

European labour — harder to

come by post-Brexit — and honed

techniques to wring more out of

their land and their herds.

Selective breeding of dairy

cows, for example, means

they typically produce double

the amount of milk they did

20 years ago.

The emergence of Aldi

and Lidl after the financial

crisis created an unprece-

dented level of competition

in the British supermarket

industry. After years of losing

customers to the discounters, Tesco

and Sainsbury’s have instituted “Aldi

price match” schemes to claw them

back. While the supermarkets claim

they are funding the schemes with

Last week, World Bank president

David Malpass called on countries to

make concerted efforts to increase

the supply of fertiliser and help

farmers plant more crops to ease a

“food security crisis” that threat-

ens runaway inflation in the

developed world and starvation

in the developing one.

Andrew Bailey, governor of the

Bank of England, was accused of

hyperbole last week for warning MPs

of an “apocalyptic” increase in food pri-

ces. The jury is out as to whether his lan-

guage will prove clumsy or prophetic,

but there is little doubt that global tur-

moil will soon hurt British consumers.

While the long-term decline in spend-

ing on food as a proportion of disposa-

ble income can be partly explained by

rising wages, the buying power wielded

by supermarket chains has helped keep

prices in check. To survive, UK farmers

Taste of things

to come as

food prices

skyrocket

onising hunger by seeking to destroy its

agricultural industry. Grain storage facili-

ties and producers of diesel fuel have

reportedly been obliterated by Russian

missiles. The knock-on effects will hit

countries in Africa and the Middle East

dependent on Ukrainian grain.

“The main problem at the moment is

that we can’t sell anything,” said Andriy

Dykun, chair of the Ukrainian Agrarian

Council. “Farmers will be out of cash in

one or two months. We will go into har-

vest season with no cashflow, no place to

sell and no storage. It’s a big, big issue.”

Michael Magdovitz, a commodities

analyst at Rabobank, said the strength of

the dollar was exacerbating price rises.

The protectionism sweeping the globe is

threatening to send them even higher.

Indonesia temporarily banned exports of

palm oil; China has halted exports of fer-

tiliser components; Russia stopped ship-

ping fertiliser and wheat.

In peace-

time, between

5 million and 6 mil-

lion tonnes of grain

was exported each

month, largely from the ports

of Odesa and Mykolaiv, but a Rus-

sian blockade of the Black Sea is pre-

venting any vessels from departing.

Exporting by rail is complicated by the

need to switch from Soviet-era tracks to

the narrower EU gauge at the border.

Roman Slaston, director-general of the

Ukrainian Agribusiness Club, said there

were about 3,000 rail wagons waiting on

the border with Romania — but only 30

get through each day. Slaston is optimis-

tic, though, that by using railways, roads

and rivers, Ukraine’s food exports can

recover to about half their peacetime

level in the coming months.

Others are less hopeful. The Ukrainian

government has accused Russia of weap-

NATIONS

SIT ON

THEIR

STORES India has announced that it

will be banning exports of

wheat as a current heatwave

has seen production fall by

nearly 5 per cent. The world’s

second largest producer of

wheat had been aiming to

export record shipments but

was forced to backtrack last

week to prioritise domestic

supply. The move was a blow

to global buyers, who were

hoping that India, which has

been a relatively small player

in global food export

markets, could make up the

shortfall from Ukraine. The

ban is expected to push up

the global price of wheat

still further.

This week Indonesia will lift

its export ban on palm oil,

which had caused the global

price of edible oils to rocket.

The country, a centre of palm

oil production, initially

banned exports last month

after falling domestic

production triggered price

rises that squeezed local

buyers, causing the

government to step in and

impose an outright ban to

secure domestic supplies.

Global buyers scrambled to

find alternatives to the oil,

which is used widely in food

products and cosmetics, but

which has been lambasted

for driving deforestation.

Argentina may soon raise its

cap on the volume of maize

exports from 30 million

tonnes to 35 million tonnes.

The world’s second largest

maize exporter, which also

capped the volume of wheat

exports, first imposed trade

restrictions in December,

pushing US maize prices to a

six-year high. Argentina

curbed its grain exports to

alleviate shortages and

counter domestic food

inflation. While the modest

revision upwards in exports

will be welcome, it will do

little to significantly check

high prices and global

shortages of the cereal.

While Ukraine has not been

protectionist, Russia’s

invasion and the blockage of

Black Sea ports has sent a

shockwave through global

food markets, writes Laith Al-

Khalaf. In 2019, Ukraine

exported 42 per cent of the

world’s sunflower oil, 16 per

cent of its maize and 9 per

cent of its wheat. The supply

crisis has hit nations such as

Egypt dependant on imports.

Daniel Pryor at the Adam

Smith Institute think tank

said: “The biggest single

thing we can do to alleviate

the shutting off of the global

wheat trade is lifting the

blockade on the Black Sea.”

Russia has curbed exports of

key foodstuffs as a way of

shoring up domestic supply,

after western sanctions

made it harder for it to

access international markets.

In March, Russia banned

exports of wheat, rye and

barley, pushing up prices on

world markets. A limited

amount of exports are still

being made to countries

allied to Russia — but with

payments only being

accepted in roubles to help

bolster the value of its

declining currency. Russia

has also restricted exports of

fertiliser, helping inflate input

costs for farmers globally.

A shortage of ammonia, a

key ingredient in making

nitrogen fertilisers, sent

prices spiralling in China last

year. In response, it banned

exports to shore up supplies

for domestic farmers. As a

sizeable exporter, its move

helped push global fertiliser

prices up 30 per cent this

year alone. China’s National

Development and Reform

Commission said the move

would “strengthen market

supervision and resolutely

crack down on hoarding

[and] price hikes”. Coal, the

main source of ammonia

production in China, has also

been rising in price.

NFU president Minette Batters