Closing summary
The UK chancellor, Kwasi Kwarteng, is reportedly planning to scrap caps on bankers’ bonuses in a controversially timed move to attract more talent to the City of London.
A source close to Kwarteng confirmed the chancellor was considering lifting the cap but emphasised that no decision had been taken. The Unite union said “workers will be appalled and angry” at these plans, at a time when the Bank of England governor Andrew Bailey has repeatedly called for pay restraint.
Kwarteng will deliver his emergency mini-budget to bring in winter tax cuts for millions of people and set out more detail on energy support next Friday, the Guardian understands.
The John Lewis Partnership has warned its annual staff bonus is at risk this year after it slumped to a first half loss of £99m and said the outlook in the run-up to Christmas was “uniquely uncertain”.
The group, which is staff-owned and includes the Waitrose supermarket chain, blamed soaring inflation for the loss in the 26 weeks to 30 July, which compared with a £29m loss before tax in the same period last year.
Shell has appointed Wael Sawan, a 25-year company veteran , as successor to Ben van Beurden, the company’s long standing chief standing chief executive.
Our other stories today:
Setting a new example in environmental corporate leadership, the billionaire owner of Patagonia is giving the entire company away to fight the Earth’s climate devastation, he announced on Wednesday.
Thanks for reading, folks. We’ll be back tomorrow. Bye! – JK
Updated
UK emergency budget next Friday
Kwasi Kwarteng will deliver his emergency mini-budget to bring in winter tax cuts for millions of people and set out more detail on energy support next Friday, according to sources, report our political editor Pippa Crerar and our economics editor Larry Elliott.
Although normal politics has been paralysed by the death of the Queen, the chancellor and his team have been putting the final touches to the budget with the aim of announcing it once the country emerges from national mourning.
However, with Liz Truss expected to be at the UN general assembly in New York next week and the government also planning to set out its priorities for the NHS, there was limited time available for a fiscal event.
Unite: workers 'appalled and angry' if bonus cap scrapped
The Unite union has responded to the news that the new chancellor Kwasi Kwarteng is considering scrapping the cap on bankers’ bonuses, saying “workers will be appalled and angry at these plans” – especially as the Bank of England has been calling for pay restraint.
Unite general secretary, Sharon Graham, said:
Millions are struggling to feed their families and keep the lights on, the government’s priority appears to be boosting the telephone number salaries of their friends in the city.
Britain’s economy is now dominated by rampant profiteering. Removing the cap on banker’s bonuses will make that worse. Last year Britain’s banks made £45.6bn of profits. So the chancellor’s signal to the city is ‘let it rip’ further and further, while the Bank of England lectures workers about pay restraint. You could not make it up.
Britain’s competition watchdog has decided to carry out an in-depth investigation into Microsoft’s $69bn purchase of the Call of Duty maker Activision Blizzard after the US tech giant failed to offer remedies to allay competition concerns.
The Competition and Markets Authority (CMA) reiterated its warning that:
it is or may be the case that this merger may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.
The Xbox owner’s proposed takeover of the company behind popular titles including World of Warcraft and Candy Crush would be the biggest ever gaming industry merger.
The deal, which was announced in January, will also require approval in the US, the EU, China and other places.
Reuters has reported that Microsoft would pay a $3bn break-up fee if the deal falls through, suggesting the company is reasonably confident of winning regulatory approval.
Here is our full story on John Lewis:
People in Britain have cut back on spending on credit and debit cards, and have been eating out less amid the cost of living crisis, according to figures published by the Office for National Statistics.
UK credit and debit purchases fell by 2 percentage points in the week to 11 September, while the number of seated diners was down by 16 percentage points, but were 117% of the level in the same week in 2019, before the pandemic.
Visits to shops and leisure venues fell by 6%, while more people went to work – workplace visits increased by 14% and were 79% of their pre-pandemic levels.
Pret A Manger transactions increased in most locations in the week to 8 September. The largest increases were seen in the London city worker and Manchester stores, which both saw an increase of 19 percentage points. The only two regions to see a week-on-week fall in transactions were Yorkshire and Scotland. London stations, London airports and regional stations all saw transactions increase by 7 percentage points in the latest week.
As petrol and diesel prices have fallen, people have been filling up their cars and vans more: over the last month, the estimated quantity of automotive fuel demand per transaction has gradually increased.
The latest business stats show a small fall in total online job adverts and decreases in 13 of the 28 categories; meanwhile, a net 2% of firms reported increasing turnover in August when compared with the previous month.
John Lewis slumps to £99m loss
The John Lewis Partnership slumped to a first half loss of £99m driven by soaring inflation, as the department store group warned a “uniquely uncertain” outlook in the run-up to Christmas would put the staff annual bonus at risk this year, reports my colleague Mark Sweney.
The group, which is staff-owned and includes the Waitrose supermarket chain, made a profit of £69m in the same period of the six months to 30 July last year. Sharon White, the partnership’s chair, said:
No one could have predicted the scale of the cost of living crisis that has materialised, with energy prices and inflation rising ahead of anyone’s expectations.
As a business, we have faced unprecedented cost inflation across grocery and general merchandise.
JLP warned the outlook for the rest of the year was “uniquely uncertain” owing to the cost of living crisis and its impact on discretionary spending, particularly on its key Christmas trading period.
White warned that the business, which is “heavily skewed” toward the so-called golden final quarter in the run up to Christmas, will need to substantially outperform in the second half of its financial year for staff to receive an annual bonus. She said:
A successful Christmas is key for the business given the first half. We will need a substantial strengthening of performance, beyond what we usually achieve in the second half, to generate sufficient profit to share a partnership bonus with Partners. Much will depend on the wider economic outlook and consumer sentiment.
Updated
The Financial Times has spoken to the boss of Goldman Sachs International, Richard Gnodde, who has claimed that scrapping the bonus cap would “make London a more attractive place for sure.”
The argument seems to centre on the fact that banks have had to increase salaries to attract talented staff in lieu of bonuses, and that it is harder to cut back a banker’s salary during more challenging years.
However, a bonus can be scrapped entirely, making it a more attractive lever for rewarding workers.
Gnodde said that, under the current system:
If I move a senior person between New York and London I am driving up the fixed cost of our operations
If that rule doesn’t exist, I don’t have to think about that.
Updated
Adding to what is proving to be a lively debate, Mick McAteer, a former board member at City regulator the Financial Conduct Authority has warned that scrapping the banker bonus cap is a “bad idea” and could encourage risk taking.
Interesting discussion on @BBCr4today about gov scrapping bankers bonus cap.
— Mick McAteer (@MickMcAteer) September 15, 2022
There's a number of reasons why this is a bad idea.
Will encourage the type of aggressive, risk taking socially useless market behaviours we really dont need. 1/
Finance person on Today said other regulatory measures could limit harm caused by removing bonus cap. Not really.
— Mick McAteer (@MickMcAteer) September 15, 2022
Even if individual firms think they're behaving what matters is aggregate impact on system. Removing cap will encourage fierce competition and create huge risks. 2/
I'm not sure it's appreciated just how dangerous fierce competition can be. Doesn't just have destabilising market effects, it creates incentives for institutional manufacturing and misselling of toxic socially useless financial products to eg. pension funds 3/
— Mick McAteer (@MickMcAteer) September 15, 2022
Moreover, scrapping bonus cap comes at a time when gov intends to force fin regulators to champion City interests, to promote 'growth and competitiveness'. So, further increasing pressure to expand risky activities, sell toxic products. 4/
— Mick McAteer (@MickMcAteer) September 15, 2022
And if that's not bad enough, looks like gov intends to give itself 'call in' powers to override regulators' decisions. So much scope for City lobbyists to get what they want.
— Mick McAteer (@MickMcAteer) September 15, 2022
Regulatory independence under serious threat from political expediency/ industry lobbies now. 5/
Already it looks like gov thinking about relaxing bank capital requirements after pushing BoE/ PRA to weaken critical insurance Solvency II regulations.
— Mick McAteer (@MickMcAteer) September 15, 2022
And what does scrapping bonus cap mean for levelling up? Why give London a further rocket boost?
6/
Shell shares are up nearly 0.8% on the back of confirmation of Ben van Beurden’s departure and replacement this morning.
Relatively flat open for European markets
We’re not seeing a lot of movement from European stocks this morning, which are mixed but relatively flat.
Here’s how major indexes are starting the Thursday trading session:
FTSE 100 is up 0.2%
French CAC 40 is down 0.1%
German DAX is up 0.2%
Spain’s IBEX is flat
Pan-European Stoxx 600 is up 0.1%
Shell names Wael Sawan as new chief executive
Shell has appointed Wael Sawan, a 25-year company veteran , as successor to Ben van Beurden, the company’s long standing chief standing chief executive.
Sawan will replace Ben van Beurden, Shell’s boss for almost a decade, who will be stepping down at the end of this year. Reports of Van Beurden’s planned departure emerged earlier this month, and Sawan was considered frontrunner to take the top job.
As Shell’s current head of integrated gas and renewables division, Sawan oversees its push into into low-carbon energies as well as its giant gas business.
Sawan, born in Beirut with dual Lebanese and Canadian nationality, will officially take over as chief executive from 1 January at which point he will also join Shell’s board.
The 64-year-old Van Beurden, who has worked at Shell for almost four decades, will continue to work in an advisory role to the board until the end of June.
Shell chairman Sir Andrew Mackenzie said:
Ben can look back with great pride on an extraordinary 39-year Shell career, culminating in nine years as an exceptional chief executive.
He leaves a financially strong and profitable company with a robust balance sheet, very strong cash generation capability and a compelling set of options for growth.
Read more here:
Introduction: Banker bonus cap on the chopping block
Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.
Banker pay is back in the spotlight this morning after reports emerged that Chancellor Kwasi Kwarteng is considering lifting a bonus cap as part of the government’s wide-ranging post-Brexit reforms.
The cap was part of the EU’s reaction to the 2008 financial crisis, and means that year-end bonuses are currently limited to two times their annual salary.
But those EU rules are now likely to be repealed eight years after their introduction. The Financial Times, which first reported the news, said the controversial move was part of the government’s plans to boost the City’s global competitiveness and make the UK a more attractive place for banks to do business.
Remember that the government is also planning to controversially re-introduce “competitiveness” as a secondary objective for UK regulators through the Financial Services and Markets Bill, which is about to head to committee. Though economists and ex-politicians have warned it is an inappropriate throw-back to pre-crisis conditions. Critics are likely to make the same argument about lifting the bonus cap.
It all seems to be part of the government’s wider strategy to put growth at the centre of all decision making, and generally lure more business, stock market listings and start-ups to London.
But lifting the cap could prove widely controversial at a time when households are struggling to make ends meet amid the cost of living crisis, even with the government’s £150bn support package for energy bills on the horizon.
We’ll bring you more debate and analysis as we get it.
The agenda
1.30pm BST: US retail sales for August
2:15pm BST: US industrial production for August
