Labour’s ‘growth’ agenda already looks like a bad joke
Well, that didn’t take long to unravel: the first Labour Budget for nearly 15 years, and the first ever by a female chancellor, saw the parallels with Kwasi Kwarteng’s infamous 2022 mini-Budget emerging within hours.
The comparison was misguided, although the jittery reaction of financial investors and rise in government funding costs told its own story. While an increase in borrowing had been anticipated, the downgrade in economic growth forecasts (beyond the short-term spike prompted by higher spending) illustrates the gamble that Rachel Reeves is taking.
Don’t forget that this Budget came from a government which told a galaxy of global investors less than ten days earlier that it was an administration laser-focused on policies which would grow the economy and make Britain the most attractive place in the work to do business.
Those words already ring hollow to many, after Reeves’s inaugural fiscal statement piled taxes onto companies with sizeable workforces. They will be in no doubt that the chancellor’s refusal to rule out further tax hikes during this parliament leaves the door open for just such a move.
Whether the changes to employers’ national insurance raise the projected £25bn annually is highly debateable, as companies scale back hiring – a risk already openly acknowledged by Cabinet ministers. Just as concerning, the hike will inevitably flow through to higher prices at the till, so Britain might have a new set of inflationary pressures from next spring. Marks & Spencer’s boss, Stuart Machin, said yesterday he couldn’t rule that out, and I suspect his Sainsbury’s counterpart, Simon Roberts, will make similar noises this morning.
Bosses who took part in a conference call with Jonathan Reynolds, the business secretary, on Monday didn’t hold back. Rami Baitieh, the Morrisons CEO, warned of “an avalanche of costs”, while Simon Emeny, boss of pubs group Fullers, said he would be forced to halve investment next year to £30m. So much for Labour’s ‘growth, growth, growth’ agenda – unless, of course, it was referring to inflation, insolvencies and unemployment.
A bonfire of the altnets? It rings true
We may be past the nationwide conflagrations of the 5th of November, but another bonfire is still escalating: the finances of the alternative networks set up to deliver full-fibre broadband services across Britain.
Rachel Reeves, the chancellor, will have been advised by her officials that the additional £500m of taxpayers’ money allocated to rural broadband will scarcely touch the sides. And many altnets are now on life support, having stopped building new infrastructure amid an unexpectedly high cash burn, in favour of a focus on connections.
There’s a legitimate case for arguing that altnets, just as energy suppliers before them, were licensed too liberally by Ofcom in the name of fomenting competition. Investors also deserve their share of the blame – billions of pounds were poured mindlessly into companies without regard to their overlap with larger competitors or the financial risks associated with their business plans.
According to a research note published by Enders Analysis last week, the sector lost more than £1bn last year, constrained by higher capital expenditure costs and weaker-than-expected average revenues per user as altnets slashed costs to compete for customers.
Spring Fibre became the latest to stare into the abyss last week, when its backers pulled the plug and it filed a notice of intention to appoint administrators. I understand that CityFibre Holdings, which recently signed a significant deal with my employer, Sky, to double its addressable market, has hired Evercore, the investment bank, to help raise another £1bn of debt.
Industry sources also tell me that Hyperoptic, another of the larger altnets, has struck a deal with the National Wealth Fund (formerly the UK Infrastructure Bank) to borrow another chunk of money to finance its rollout.
The pattern is clear, though: many of the remaining players need to consolidate fast, because investors are hanging up.
Digital change is Fenwick’s department
Intriguing developments at Fenwick, the family-owned department store chain which closed its most prominent shop on Bond Street earlier this year?
Last month, accounts filed at Companies House disclosed a £28.4m annual pre-tax loss for the year to January 26. Not unreasonably, it blamed the impact of inflation, discounting by competitors and the broader cost-of-living crisis.
Then there’s the farrago surrounding the appointment of its next chief executive. It was supposed to be welcoming Nigel Blow, a former Harrods executive, to the role this autumn, but it emerged several weeks ago that he would no longer be taking it up. Blow declared himself “shocked” that the offer had been withdrawn amid protracted headlines about the shocking abuse committed by his former Harrods boss, Mohamed al-Fayed. Blow himself has not been accused of any wrongdoing.
Now, I hear that Fenwick is working with AlixPartners, the professional services firm typically involved in corporate restructuring projects, on a digital transformation effort.
People close to the company insist that reducing its remaining store footprint further from eight stores is not on the agenda, nor part of AlixPartners’ mandate.
I understand that last week, the 30-or-so family members who own the company convened for one of their regular quarterly meetings. In this week of pyrotechnics, one wonders if there were fireworks?