Key events
Unite: We’ll fight to defend every steel job under threat
The Unite union has vowed to fight to defend every job under threat at British Steel’s Scunthorpe plant, through the proposed closure of its coke ovens.
Unite national officer Linda McCulloch suggests this could include strike action, saying:
“This union has not yet seen any financial justification for the closure of the coking ovens. British Steel needs to come clean and open its books in order to try to justify its decisions.
“Unite will pursue every avenue, including industrial action, to defend members’ jobs at British Steel.”
British Steel proposes closure of Scunthorpe coke ovens, with loss of up to 260 jobs
Newsflash: British Steel is proposing to close the coke ovens at its plant in Scunthorpe, with the loss of up to 260 jobs, the company has announced.
This confirms the fears voiced by unions this morning, that the company was planning to cut hundreds of jobs and shutter its coking ovens, which produce the fuel to power its blast furnaces.
The company’s owner, China’s Jingye Group, says the move is partly “to overcome global economic challenges,” and also due to rising costs (such as energy bills).
Jingye says in a statememt:
“Decisive action is required because of the unprecedented rise in operating costs, surging inflation and the need to improve environmental performance.
Community union warns of ‘catastrophic’ impact from steel job losses
The steelworkers union, Community, has warned that it will not accept redundencies if British Steel closes Scunthorpe’s coke ovens, as feared today.
Community’s national officer Alun Davies says the move would threaten the UK’s ability to produce steel, as it would rely on imported coke instead.
Davies say:
“British Steel’s plan to close the coke ovens could have a catastrophic impact on jobs and steel production at Scunthorpe and the UK as a whole.
“This move would see the company depending on unreliable imported coke and puts at risk our sovereign capability to produce steel in the UK for strategic infrastructure such as our rail networks.
“We will not accept redundancies and nothing is off the table when it comes to protecting our members’ jobs.
“The Government must do whatever it takes to reach a deal with British Steel that protects the loyal workforce and the future of steelmaking in this country.”
More encouragingly, German business morale has improved this month.
The Ifo institute’s business climate index has risen to 91.1 for February, up from 90.1 in January.
It adds to signs that Europe’s largest economy is recovering despite the energy crisis and high inflation.
Sentiment among German businesses rose for a 5th consecutive month on a brighter outlook BUT less than expecetd. Ifo Business morale rose to 91.1 in Feb from 90.1 in Jan. Ifo Expectations Index rose to 88.5 vs 88.4 exp. But Ifo Current Assessment Index dropped to 93.5 vs 95 exp. pic.twitter.com/c33CgWQIbu
— Holger Zschaepitz (@Schuldensuehner) February 22, 2023
ING economist Carsten Brzeski says that mild weather and fiscal stimulus measures helped the German economy.
He warns, though, that recession risks haven’t abated, saying:
The current assessment component dropped for the second month in a row and remains weak. It is expectations which surged and they have now improved for the fifth month in a row.
The inflow of optimistic data continues.
After the PMI and the ZEW, it is now the latest Ifo index reading which points to an improving outlook for the German economy.
But @carstenbrzeski explains why those recession fears haven’t gone away.https://t.co/QxMhyjc3DN
— ING Economics (@ING_Economics) February 22, 2023
Taiwan has cut its forecast for growth this year as weak exports continue to drag on the economy.
Gross domestic product is likely to grow 2.12% in 2023, Taiwan’s Directorate General of Budget, Accounting and Statistics said Wednesday. That’s down from 2.75% year-on-year growth predicted in November.
Taiwan, which is home to many major tech companies, has been hit by a slump in exports as high global inflation, interest rate rises and the war in Ukraine hits demand.
The statistics body says:
“Under the influence of monetary tightening by various countries to combat inflation and the stalemate in the Russia-Ukraine war, terminal consumer demand has weakened, product prices have fallen, industrial supply chain inventories have been adjusted, and global economic growth has slowed.”
New data today has shown that Taiwan’s economy shrank by 0.4% in the last quarter of 2022, putting it on the brink of a technical recession.
New data:
– Taiwan is forecast to experience a technical recession, with the economy expected to contract 1.2% in Q1 2023 (after 0.41% contraction in Q4 2022)
– Recovery expected in second half of year
– But GDP forecast for 2023 revised down to 2.12% from 2.75%— James Chater (@james_chater) February 22, 2023
Weaker forecast driven mostly by slowing demand for TW’s exports. Gov’t now forecasting:
– 5.84% y/y contraction in exports over 2023
– from just 0.22% contraction predicted in November— James Chater (@james_chater) February 22, 2023
Lloyds bankers to share £446m bonus pot
Kalyeena Makortoff
Lloyds Banking Group staff will share their largest bonus pot in four years, despite the lender reporting flat profits as it put aside more money to protect against a potential jump in defaults amid ongoing economic uncertainty.
Lloyds, which owns Halifax and is the UK’s largest mortgage lender, said its top performing bankers would share a bonus pool worth £446m for their work in 2022 – up 11% from £399m last year and the largest sum to be distributed among employees since 2018.
The lender also revealed a £3.8m pay packet for its chief executive, Charlie Nunn. However, that is down 31% from the £5.5m he received in 2021, when he was handed a £4.2m buyout to compensate him for shares he gave up when he left HSBC to become Lloyds chief executive in August that same year.
The banking group reported flat profits of £6.9bn for the year, in line with average estimates from analysts, despite recording a near-50% jump in net interest income to £14bn, which accounts for the difference between what the bank pays out to savers and charges its loan and mortgage customers.
Labour: British Steel job cuts reports are very worrying
Jonathan Reynolds MP, Labour’s Shadow Business Secretary, is concerned by today’s reports that British Steel will announce 300 job cuts in Scunthorpe.
Reynold says:
“Yet more worrying news for our steelworkers who desperately need a Government on their side securing the bright future our steel sector could have.
Steel is the bedrock of many communities across the UK. It is the foundation our manufacturing sector is built on, crucial to any net zero ambition and the beating heart of our sovereign capability.
That is why Labour will partner with industry to invest in the new technologies needed to keep well paid steel jobs in the UK for decades to come.”
Speaking of inflation….French food company Danone has grown its revenues at the fastest rate in more than a decade, boosted by higher prices on products from Activia yogurt to Evian water.
Danone reported that its sales rose 7.8% on a like-for-like basis in 2022. Prices were 8.7% higher over the year, while sales volumes dropped by 0.8%.
That shows how multinational companies have succeeded in hiking their prices last year, passing on costs to consumers and fuelling the highest inflation rates in decades.
In the final quarter of 2022, Danone’s prices were 11.3% higher, while sales volumes dropped 4.4%, leaving sales +7.0% on a like-for-like basis.
Danone’s CEO Antoine de Saint-Affrique says:
“While 2022 was a year of unprecedented external challenges and volatility, for Danone it has also been a year of deep transformation and solid delivery.
I am grateful to all Danoners for their resilience and their passion for customers, consumers, patients and for making our company a stronger one.
There’s no “cost-free” solution to the UK’s public sector pay disputes, a UK Government minister has said this morning.
Cabinet Office minister Johnny Mercer was asked on Times Radio whether departmental submissions for 3.5% pay rises in 2023/24 for police, teachers, nurses and other workers was likely to solve the current strikes, and argued “this is an intractable problem”.
Mercer argued that inflation-matching pay rises would push up prices further [a point disputed by some economists], saying:
“If you look at what is going on in communities like I represent in Plymouth, the biggest challenge is inflation, without a shadow of a doubt. That is driving up prices across the board.
“If you chase that inflation with public sector pay rises, as people like the governor of the Bank of England have pointed out, you are into a never-ending circle where prices just continue to rise.
“I will always advocate for people who work in my constituency to be paid more if they work in the public sector.
“But you have to do it in a balanced way. This is not a binary argument, there is no cost-free solution.”
Earlier this month BoE governor Andrew Bailey argued that the impact of inflation-matching pay increases would depend how they were funded – extra borrowing might require higher interest rates, while pay rises funded by taxation might not.
Mr Mercer added that:
“the easy option would be to cede to everyone’s demands but then inflation would continue to go up and prices would continue to go up, and life gets harder”.
FTSE 100 drops as Rio Tinto reports profits plunge
As predicted in the introduction, European stock markets are dropping in early trading as worries about future interest rate increases weigh on shares.
Britain’s FTSE 100 has shed 66 points, or 0.85%, dropping to 7911 points – away from the record highs over 8,000 points set last week.
Mining companies are among the fallers, after natural resources giant Rio Tinto (-1.6%) reported a 38% drop in profits for last year and more than halved its dividend.
Rio was hit by weaker demand from China last year; pandemic restrictions meant less need for steel in its economy, pushing weaker iron ore.
Victoria Scholar, head of investment at interactive investor, says:
“Rio Tinto reported underlying earnings of $13.3 billion last year, below analysts’ estimates for $13.8 billion and a fall from 2021’s record high $21.4 billion. It cut its dividend by more than 50% from $10.40 per share in 2021 to $4.92 last year and cut its 2023 capital investments guidance from between $8 billion and $9 billion to $8 billion.
China’s draconian zero-tolerance to covid approach, which is finally being unwound, weighed on iron ore prices last year, negatively impacting Rio Tinto. While’s China’s economic reopening looks set to provide a tailwind to Rio this year, the risk of further restrictions from Beijing and another spike in infections remain potential hurdles. The inflationary backdrop is also adding to Rio Tinto’s cost burden with higher fuel and raw material costs as well as higher wage bills as a result of labour shortages.
Shares in Rio Tinto have rallied by more than a third since the start of November but have retreated from the January highs with earnings putting further pressure on the stock today. Other stocks in the sector like Endeavour Mining, Anglo American, Glencore and Antofagasta are also taking a hit in today’s trade.”
Bloomberg: China urges state firms to drop Big Four auditors on data risk
Chinese authorities have urged state-owned firms to phase out using the four biggest international accounting firms, Bloomberg News are reporting this morning.
The move shows China continues to be concerned about data security even after Beijing reached a landmark deal last summer to allow US audit inspections on hundreds of Chinese firms listed in New York.
China’s Ministry of Finance is among government entities that gave window guidance to some state-owned enterprises as recently as last month, urging them to let contracts with the Big Four auditing firms expire, according to people familiar with the matter.
While offshore subsidiaries can still use US auditors, the parent firms were urged to hire local Chinese or Hong Kong accountants when contracts come up, one of the people said, asking not to be identified discussing private information.
Sky: Government officials fly to China to win support for British Steel bailout
Sky News reported overnight that government officials will this week fly to China in an effort to convince Jingye, the owner of British Steel, to finalise plans for a state funding package
Civil servants from the Department for Business and Trade are travelling to meet executives from Jingye Group amid protracted talks about a £300m grant to the Scunthorpe-based company.
Sources told Sky the talks were expected to focus on the value of an energy subsidy package, which could take the overall value of government support for British Steel to approximately £1bn.
The timescale for the feared closure of British Steel’s coking ovens in Scunthorpe is unclear, the BBC says, as is how many compulsory redundancies it will involve.
The BBC’s Simon Jack reports:
Union officials told the BBC that the industry “is on a knife edge”.
Government sources described the decision as “disappointing” given that negotiations are still ongoing between British Steel’s Chinese owners Jingye, Tata, and the Treasury about a support package worth £300m to each company.
British Steel: We reluctantly have to consider cost-cutting
British Steel points out that Jingye has invested £330m in capital projects during its first three years of ownership.
But, a British Steel spokesman says the energy crisis has driven up the company’s costs. That, and the tough economic outlook, means it must consider cost-cutting.
The British Steel spokesman says:
“Jingye is committed to our long-term future but decarbonisation is a major challenge for our business and, like most companies, we’re facing significant challenges because of the economic slowdown, rising inflation and exceptionally high energy prices.
“For example, last year our energy bill rose by £120 million while we’ve also faced an increase of over £70 million in our annual carbon costs.
“We have taken action to reduce costs within our control; however, steelmaking in the UK remains uncompetitive when compared to other international steelmakers.
“Our energy costs, carbon costs and labour costs are some of the highest across the world, which are factors that we cannot influence directly. For the reasons outlined, we entered into talks with the UK Government in summer 2022 and are extremely grateful for its support.
“It’s important we have the correct policies and frameworks in place to back our drive to become a clean, green and sustainable company, and we’re continuing to discuss this with the Government.
British Steel insists that it is “committed to working together”, so that Britain can make home-made steel for generations to come, adding:
“Unfortunately, like many other businesses we are reluctantly having to consider cost-cutting in light of the global recession and increased costs. We have discussed this in preliminary talks with the trade unions in which we shared the challenges we face.
“We look forward to working closely with them to ensure a long-term, safe and sustainable future for the company, thousands of employees and many more in people in our supply chain.”
The Unite union is also concerned that British Steel will announce job cuts today.
Unite general secretary Sharon Graham says:
“British Steel workers are faced with the toxic combination of a greedy employer that is reneging on investment promises and a shambolic UK Government that has no serious plan for the industry.
“Unite’s members in British Steel are clear that they will fight this and they will have the full support of their union.”
Unions warn British Steel jobs at risk amid coking ovens closure fears
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Unions fear British Steel is set to announce the closure of coking ovens at one of its plants today, with the loss of hundreds of jobs.
Union officials were told earlier this month that British Steel, owned by China’s Jingye, was considering closing coke ovens at its site in Scunthorpe.
An announcement could be made on Wednesday, unions believe.
Charlotte Brumpton-Childs, GMB national officer, said it would be “devastating news“ for the people of Scunthorpe and all British Steel workers across the UK.
She explains (via PA Media):
“With grim predictability, the Government’s investment is a sticking plaster that does nothing to help the long-term structural issues affecting our steel industry.
“Now steel workers, their families and communities will once again be asked to pay the price.
“GMB urges British Steel and the UK Government to continue talks.
“Ministers need to decide if they want the UK to have a future in steel or whether they want it to wither and die like so much of our proud manufacturing heritage.”
Coking ovens turn coal into coke, which burns at the higher temperature needed for the steel production process.
British Steel, which was bought in 2020 by Jingye, has been in talks with the government over a possible £300m support package for several months, as is its Indian-owned rival Tata Steel.
At the start of February, the Unite union warned that 1,2000 jobs were at risk at British Steel’s Scunthorpe steelworks.
Jingye and Tata Steel (which owns Port Talbot near Swansea, in Wales) are seeking support to upgrade their steel blast furnaces to electric arc furnaces with much lower carbon emissions.
Also coming up today
UK supermarket shoppers could be facing weeks of shortages of fruit and vegetables.
Yesterday, Asda introduced a limit on tomatoes, peppers, cucumbers, lettuce, salad bags, broccoli, cauliflower and raspberries, and today Morrisons will restrict customers to two per item on packs of tomatoes, cucumbers, lettuce and peppers from Wednesday.
UK prime minister Rishi Sunak is exploring a 5% rise for public-sector workers, the Financial Times reports, to end an escalating wave of strikes.
This possible breakthrough comes after yesterday’s public finances gave the Treasury was given an unexpected £30bn windfall.
Ministers and nurses’ leaders are due to hold “intensive talks” on Wednesday in an unexpected move that has raised hopes that they will thrash out a deal to end the long-running pay dispute. The Royal College of Nursing has suspended next week’s planned strike.
But yesterday, Jeremy Hunt insisted the government is unable afford a bigger pay increase for nurses and other public sector workers at next month’s budget, despite official figures showing an unexpected boost for the exchequer in January.
Lloyds Banking Group has reported a flat annual pre-tax profit for last year. Lloyds made £6.9bn last year, as a jump in income driven by higher interest rates was offset by mounting bad loan provisions.
Lloyds CEO Charlie Nunn says the results are ‘resilient’, and told the Today Programme that the bank expects a mild UK recession in 2023, with a recovery in 2024.
European stock markets are set to open lower, after Wall Street posted its biggest loss of 2023 so far.
The Dow Jones industrial average shed 2% on Tuesday, as a strong survey of US purchasing managers fuelled concerns that America’s central bank will keep interest rates higher for longer than hoped.
The US Federal Reserve will release the minutes of its last meeting tonight, which will give insight into whether policymakers expected to ‘pivot’ away from higher borrowing costs anytime soon.
The agenda
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7am GMT: German inflation rate for January
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9am GMT: Italian inflation rate for January
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9am GMT: Ifo index of German business confidence
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9.30am GMT: House of Commons Science and Technology Committee to question Google, Microsoft and BT on AI regulation
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1.55pm GMT: US Redbook Index of retail sales growth
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7pm GMT: US Federal Reserve to publish minutes of this month’s meeeting
