Key events
UK new car sales up 26%; industry calls for VAT cut on electric vehicle charging
The number of new cars sold in the UK rose nearly 26% in June year-on-year, as the industry called for a VAT cut on electric vehicle charging.
Some 177,266 vehicles were registered in June, according to the Society of Motor Manufacturers and Traders. It is the 11th consecutive month of growth, as carmakers gradually recover from the pandemic-induced supply chain shortages that held back production for much of the previous two years.
Growth was mainly driven by companies rebuilding their fleets, with large fleet registrations up nearly 38% to 92,699, reflecting a normalisation.
While petrol car sales rose 22.7%, purchases of battery electric vehicles leapt 39% to 31,700. Hybrids and plug-in hybrid sales were also strong, up 40% and 65.5% respectively. Diesel registrations fell by 13.5%.
Mike Hawes, SMMT chief executive, said:
The new car market is growing back and growing green, as the attractions of electric cars become apparent to more drivers. But meeting our climate goals means we have to move even faster.
Most electric vehicle owners enjoy the convenience and cost saving of charging at home but those that do not have a driveway or designated parking space must pay four times as much in tax for the same amount of energy. This is unfair and risks delaying greater uptake, so cutting VAT on public EV charging will help make owning an EV fairer and attractive to even more people.
City watchdog investigates whether Crispin Odey is ‘fit and proper person’ to work in finance
The City watchdog has revealed it is investigating whether hedge fund manager Crispin Odey is a “fit and proper person” to work in financial services, as part of “intensive” oversight of the scandal-hit firm he founded.
Odey’s £3.5bn hedge fund was broken up a month ago, a week after the multimillionaire Conservative and Brexit donor was accused of sexual misconduct by junior female members of staff and ousted.
In a letter to the Treasury Committee, the chief executive of the Financial Conduct Authority (FCA), Nikhil Rathi, confirmed an ongoing investigation into Odey and his firm Odey Asset Management (OAM), which began in 2021.
He said the FCA probe into Odey is focused on “allegations that he dismissed OAM’s executive committee for an improper purpose” and whether he is a “fit and proper person” to work in financial services.
He added that the regulator is also looking at whether he “failed to comply with the FCA’s conduct rules relating to integrity and acting with due skill, care and diligence”.
“It’s not happening.”
This is the blunt assessment of the success of efforts to turn Canary Wharf into a shopping and leisure destination. “Mondays and Fridays are dead,” says the frank shop worker. “This shop used to take a fair bit before Covid but now everything’s changed.”
(I went to talk to shop workers and food places last week and had a look around Canary Wharf.)
It’s a verdict that appears to be shared by other tenants in the vast east London financial hub. HSBC’s decision to leave its “tower of doom” in the docklands and move back to the City of London after more than two decades has dealt a hammer blow to Canary Wharf’s standing as a global financial centre.
The move has left onlookers examining landlord Canary Wharf Group (CWG)’s plans raise the appeal of the former wasteland, at a time when hybrid working has reduced the throng of office workers descending on the area each day.
HSBC will ditch its 45-floor skyscraper at 8 Canada Square when the lease expires in 2027 and move to an office near St Paul’s Cathedral that’s roughly half the size, following in the footsteps of other companies such as the law firm Clifford Chance.
AO World boss: Inflationary pressures have reduced ‘dramatically’
The boss of the electrical retailer AO World said inflationary pressures have reduced “dramatically,” as the company swung back into the black.
The retailer, which is based in Bolton and sells household appliances like fridges, also announced a “significant reduction in headcount” but declined to give further details.
AO World reported a pre-tax profit of £8m in the year to 31 March, against a loss of £11m the previous year. Mike Ashley’s Frasers Group has become its biggest shareholder.
John Roberts, the founder and chief executive, said:
The macro economic situation and the inflationary pressures that households are dealing with are clearly going to have an issue.
The core category that we sell, we do major domestic appliances is much more resilient. When your fridge breaks, then you’re likely to buy a new one and we still have full employment [in the economy].
Because of the energy crisis, what we are seeing is customers are moving much more to energy efficient products where they tend to invest more into them. We are seeing customers spending more on an average product basis over the last couple of years.
He dodged the question whether the company would raise its prices further.
Over the last 12 months we’ve seen inflationary pressures reducing dramatically. It’s very much levelled out as shipping prices have returned to more normal levels and supply chains have returned to a normal situation.
Ofwat boss says ‘hard lessons’ to learn from water crisis as he defends watchdog’s role
David Black, chief executive of Ofwat, has defended the water watchdog’s role in the water crisis. It has allowed Thames Water and other companies take on huge amounts of debt.
He said generally it is fine to use debt financing to fund infrastructure investments, but when a company goes too far, they need to sort out their problems.
Talking about Thames Water, he said:
Their performance needs dramatic improvement and we do think they need to sort out their finances. It is their responsibility to do that. That’s what we’ll be holding them account to do. We are here to protect customers and we will continue to do that.
He claimed that customers don’t pay more for water and wastewater despite the company’s ballooning debt, which has reached around £14bn. Most this was piled on when Thames was owned by Australia’s Macquarie, a major infrastructure investor.
We’ve set price controls which set an efficient return on capital and that protects customers’ interests.
We received new powers in the Environment Act 2021 to change company licences and we’ve used those powers to amend those licences.
He said water companies had taken on debt to invest £190bn in infrastructure in recent years.
It is about the level of investment in the sector which has changed and the level of investment has been funded by debt. In one sense that is fine, the level of debt in the sector is responsible. A prudent company should use debt financing.
It’s a question of whether they’ve gone too far.
The views on debt levels are varied.
Numbers of 60% are consistent with prudent financial management.
Where companies have gone beyond, that is their issue to to sort it out.
The privatisation – when we were set up we weren’t given those powers. At that point there wasn’t a question of levels of debt that companies were taking on.
What we’ve seen is some companies go too far. We saw the same in the banking sector, there are some hard lessons to learn.
But we have got the arrangements in place to protect customers.
Black condemned the “excessive” dividends paid by Thames Water to shareholders in the past, and the “excessive” executive pay packages.
It is right to say that the dividend levels were excessive, which is why we’ve introduced the new powers to prevent this from happening…
The excesses of executive pay also anger me. We’ve taken action to protect customers from paying for these pay packages.
Q: This is not a well regulated industry?
Companies make mistakes. In any sector you get poor-performing businesses. The question is are customers going to pay for that.
Q: Are higher water bills coming?
We expect companies will request increases in bills at the next price review to fund larger investment programmes and those investments will deliver improvements to the environment.
Thames Water is now trying to persuade its investors, a clutch of pension funds and sovereign wealth funds, to stump up more cash for the business.
Q: They are reluctant, are they?
Yes.
The company has been in crisis talks with ministers and Ofwat to discuss the option of putting it into a special administration.
The provisions are there to impose a special administration. That’s the backstop option, but we are still a long way from that position.
Black said the company has until the early part of next year to get shareholders to inject more equity into the business. He noted that Thames Water has £4.2bn of cash in the bank and access to credit.
Introduction: Train companies to begin process of closing hundreds of ticket offices in England
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Hundreds of rail ticket offices are set to be closed across England, with details of the plans to be released today.
Train companies are expected to confirm a public consultation on the mass closure of ticket kiosks over the next three years. The majority of nearly 1,000 remaining ticket offices are to be shut under the plans, and a 21 days public consultation kicks off today. The RMT union has said it will fight the plans.
The industry says that only 12% of tickets are sold at station kiosks on average, compared with 85% in 1995, as people buy more tickets online or at machines. But rail users argue that the rail ticketing system is “mind-bogglingly complicated”.
Stewart Palmer of Railfuture which represents rail users, has been talking about the planned closures on BBC radio 4’s Today programme. He noted that we don’t have the details yet.
The question is not whether that person sits behind a glass screen or whether the person can be doing other things as well. Most rail users want members of staff available on the stations for help, advice, security and lots of other reasons, and they also want those people to be able to sell them a ticket.
One of the root causes of this issue is that the present ticketing system on the rail network in Britain is mind-bogglingly complicated. This consultation appears to me to be putting the cart before the horse.
The root cause of the problem is that people want versatile, knowledgeable staff, not necessarily behind a glass screen, but they also want to know that they are buying the right product at the right price.
The Agenda
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8.15am BST: Spain Services and Composite PMIs (final) for June
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8.45am BST: Italy Services and Composite PMIs
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8.50am BST: France Services and Composite PMIs
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8.55am BST: Germany Services and Composite PMIs
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9am BST: Eurozone Services and Composite PMIs
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9.30am BST: UK Services and Composite PMIs (final) for June
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3pm BST: US Factory orders for May
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7pm BST: US Federal Reserve minutes
