WEDNESDAY 9 JUNE 2021 NEWS PROVIDER OF THE YEAR UK £2.90 Channel Islands £3.20; Republic of Ireland €3.

20

Remember the 70s Hot commodities Hong Kong cocoon

Fed must not be too slow to act on Clean energy is stoking a new Bankers say city’s role as financial
inflation — MARTIN WOLF, PAGE 23 supercycle — BIG READ, PAGE 21 hub is at risk — INSIDE BUSINESS, PAGE 9

Records leak Briefing

US billionaires i Big EU states push back on capital rules

pay little tax

Paris and Berlin are leading a last-ditch battle to
thin down the bloc’s most significant change in
banking regulation for a decade, as Brussels
prepares long-awaited legislation.— PAGE 4
A leak of private tax records of US bil-
lionaires showing many paid little tax i Talks to calm Northern Ireland tension
has prompted an investigation by the Brexit minister Lord David Frost and European
Internal Revenue Service and com- Commission vice-president Maros Sefcovic will
plaints over alleged illegal disclosure of meet today in an attempt to calm post-Brexit
confidential information. tensions after days of accusations.— PAGE 2
The investigative journalism outlet
ProPublica said the data showed that i Internet glitch shuts global websites
legal tax avoidance had allowed the 25 Silicon Valley-based web infrastructure provider
richest Americans, including, from left, Fastly has admitted that a problem with its systems
Warren Buffett, Michael Bloomberg, caused an outage of up to an hour for sites including
Jeff Bezos and Elon Musk, to pay just the FT, New York Times, CNN and Spotify.— PAGE 9
$13.6bn in federal income tax in the five
years to 2018. Their collective wealth i Cevian builds Aviva stake and urges cuts
rose by an estimated $401bn in the Europe’s largest activist
same period, it said. Bloomberg, former investor has built a 5 per cent
New York mayor, pledged to use “all stake in the insurer, urging
legal means” to find the leak’s source. deeper cuts and return of £5bn
Probe ordered page 8 to investors. Its shares rose
Bloomberg; AFP/Getty Images
3 per cent.— PAGE 12; LEX, PAGE 24

i Ethics chief’s Greensill fears revealed

Sunak presses for City exemption

MPs have heard that former Whitehall ethics chief
Sue Gray raised concerns over how Lord Jeremy
Heywood, the late cabinet secretary, secured an
advisory job for Lex Greensill, his friend.— PAGE 3

from G7’s global taxation regime

i 800 arrested in international FBI sting
A police sting that lured criminals to an encrypted
message platform secretly run by the FBI has led to
seizures of 32 tonnes of drugs, $48m in currencies
and the foiling of 100 murder plots.— PAGE 4

i Alzheimer’s drug poses $56,000 question

3 Hit to City banks feared 3 Stance at odds with US 3 Biden wants reach beyond Big Tech
EMMA AGYEMANG, GEORGE PARKER
AND CHRIS GILES
Rishi Sunak is pushing to win a carve-
out for the City’s big banks in the G7’s
drive for a new global tax system to
cover the world’s “largest and most
profitable multinational enterprises”.
Sunak said the weekend’s “historic
agreement” by G7 finance ministers
would force “the largest multinational
tech giants to pay their fair share of tax
in the UK”.
But one official close to the talks said
the UK was among those countries
pushing “for an exemption on financial
services”, reflecting Sunak’s fears that
global banks headquartered in London
could be affected.
HSBC, the UK’s biggest bank in terms
of revenues, generates more than half its
income from China, while Standard
Chartered, another UK-headquartered
lender, conducts little business in Brit-
ain, with most from Asia and Africa.
Sunak raised the issue at the G7 talks
in London, according to those briefed on
the meeting, and his allies confirmed he
would continue to make the case when
the talks move to the G20 next month.
“Our position is, we want financial
services companies to be exempt and
EU countries are in the same position,”
said one British official. However, Joe
Biden, US president, wants to broaden
the scope of the tax so it does not hit just
US tech giants.
The Treasury said of the G7 agree-
ment: “The deal makes sure that the
system is fair, so that the right compa-
nies pay the right taxes in the right
Biogen’s decision to price its new treatment at
$56,000 a year has reignited controversy over the
cost of drugs in the US, the most profitable market.
places.” It would now be discussed in in the pillar one plan was cross-sector, — PAGE 10; EDITORIAL COMMENT, PAGE 22; LEX, PAGE 24
further detail by G20 finance ministers based on the 100 biggest and most prof-
and central bank governors. itable businesses, and brought the issue
Under “pillar one” of the deal, it was of financial services back in scope. Datawatch
agreed that countries could tax 20 per The G7 agreement is seen as a step-
cent of the profits of the biggest multi- ping stone towards a global deal under
nationals above a 10 per cent margin HSBC generates the auspices of the OECD, the Paris- Class divide There can be stark
based on where the company made its more than half based club of advanced economies, and Primary school completion rates (%) gaps between the
sales, regardless of whether they had a its income from the G20, which includes China and Disabilities No disabilities levels of education
gained by children
physical presence in that country. China, while India. Mexico with disabilities
The rationale for excluding financial Standard Sunak has said that the proposals Vietnam compared with
services was set out in October 2020 in a Chartered does agreed at the G7 under pillar 1 would Egypt those without.
“pillar one” plan, which said that finan- little business increase revenues to the Exchequer. But Cambodia In Vietnam, 92 per
cial services were a special case because in Britain neither he nor the Treasury have put cent of those with
Iraq
they were generally required to have any figure on it. TaxWatch, a think- no disability finish
appropriately capitalised entities in tank, has calculated that “Big Tech” Bangladesh their primary
each jurisdiction and therefore paid the companies will pay less tax in the UK Ethiopia education, against
right level of local tax. under the G7 plan than they currently 0 20 40 60 80 20 per cent
But Biden’s proposals in April to pay under the digital services tax. Sources: The Disability Data Portal (2021) of the disabled
define the type of companies included Brexit tension ahead of G7 page 2

NHS delays pooling of patients’ records

Lords of the Ring fight off
bid to close trading floor
Metals trading in London’s distinctive
pit exchange has been preserved after
traditionalists’ passionate appeals
forced the withdrawal of plans to end
it. The Ring dates back to the 19th
century when merchants drew a circle
on the sawdust floor of a City coffee
house as a signal to begin trading. The
London Metal Exchange was pleased
with electronic trading in the pandemic
but has now modified its plan to end
the Ring by offering a hybrid system.
Analysis i PAGE 13
in vast database after injunction threat
MADHUMITA MURGIA
The NHS has pushed back plans to pool
the full medical histories of 55m
patients in England into a single data-
base after extensive pressure from
campaigners, politicians and patients.
NHS Digital, which runs the health serv-
ice’s IT systems, confirmed plans for the
database, which will be made available
to academic and commercial third par-
ties for research and planning purposes.
However, Lord James Bethell, junior
health minister in the House of Lords,
said the programme, originally sched-
uled for July 1, would now be delayed to
September 1.
“We will use this time to talk to
patients, doctors, health charities and
others to strengthen the plan, build a
trusted research environment and
ensure that the data is accessed
securely,” said Bethell. Simon Bolton,
chief executive of NHS Digital, said: “We
take our responsibility to safeguard the
data we hold incredibly seriously.”
The government was threatened with
an injunction last week if it did not
pause the plans, with signatories includ-
ing Conservative MP David Davis warn-
ing that the programme would be
“unlawful” without patient consent.
NHS Digital said it had been cleared by
the Information Commissioner’s Office.
Labour MP Jonathan Ashworth, the
shadow health secretary, had also called
for the rollout to be delayed, saying that
sensitive data such as “termination of
pregnancy, matters of domestic or sex-
ual abuse, issues of substance misuse or
alcohol abuse” were being shared with-
out patient knowledge.
Elizabeth Denham, information com-
missioner, said it was “sensible for NHS
Digital to take more time to engage with
its stakeholders, and consider the feed-
back it is receiving about its plans”.
In the House of Lords, Baroness Sal
Brinton, the Liberal Democrat spokes-
person for health, asked why a data pro-
tection impact assessment had yet to be
published, to which she did not receive a
direct response.
The delayed rollout would give the
NHS just three extra weeks, after acc-
ounting for the six-week summer holi-
days, Brinton added.
Cori Crider, co-founder of digital
rights group Foxglove, one of the parties
threatening legal action, said the gov-
ernment now needed to answer two key
questions: “How will the trusted
research environment work? On what
terms will corporations be given the
keys to the incredible asset that is the
nation’s health data?”

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2 ★ † FINANCIAL TIMES Wednesday 9 June 2021

NATIONAL

Post-Brexit ties Foster ousting

UK and EU aim for N Ireland agreement DUP leader

names close
British officials allege Britain and Northern Ireland. Ahead of Johnson. The White House has already act much more aggressively once the G7 Johnson’s allies believe that Brussels is ally Givan as
first minister
the meeting British officials claimed confirmed that Biden will raise North- and US meetings are over. trying to blame Frost, formerly Britain’s
Brussels trying to ‘exploit’ Brussels was trying to “exploit” the ern Ireland at the meeting. One diplomat told the Financial chief negotiator, for the bad atmosphere
imminent arrival of Biden imminent arrival of US president Joe Irish premier Micheál Martin yester- Times that the fear expressed was that around the talks.
Biden in the UK to put pressure on Frost day called for both sides to “depoliti- Britain might then go “full throttle” on “They are playing the man not the ball
JIM BRUNSDEN — BRUSSELS to give ground in talks on the Northern cise” the protocol and treat the disagree- the Northern Ireland issues, including but it won’t work,” said one senior Brit-
GEORGE PARKER — LONDON Ireland protocol. ments as technical trade problems to be possible “unilateral measures” to dilute ish official. “David is actually quite LAURA NOONAN — DUBLIN
PETER FOSTER — BRIGHTON Frost said yesterday that “time is overcome. “It’s important that we do the protocol. moderate when you compare him to the
Edwin Poots, the Democratic Unionist
Britain and the EU will today attempt to short” to make the new arrangements resolve these issues and that trust is Frost earlier this week accused the EU PM. Boris takes a really hard line on all
leader, has named Paul Givan, a close
rescue a plan to calm post-Brexit ten- work: the protocol is the part of the 2019 built up between the European Union of “legal purism” in its demands for how of this.”
ally, as Northern Ireland’s first minis-
sions in Northern Ireland, after days of Brexit withdrawal treaty the UK agreed and the United Kingdom,” he said. “Oth- the protocol should be applied. But behind the scenes work has been
ter, ending weeks of speculation over
threats and accusations. with Brussels which seeks to avoid a erwise we will have continuing issues The EU has said that Britain is failing intensifying to find what Frost called
who will lead the region’s government
Lord David Frost, UK Brexit minister, hard border in Ireland by creating new and problems.” to implement basic parts of the new “practical solutions” to soften border
following the ousting of Arlene Foster.
and Maros Sefcovic, the European Com- checks on trade across the Irish Sea. For its part, Brussels warned EU dip- arrangements, such as building and controls on trade from Britain to North-
mission vice-president, will meet for- Biden arrives in Britain tomorrow lomats at a closed-door meeting on properly staffing border control posts
Givan, who like Poots represents the
ern Ireland. The minister was due to
mally to try to resolve issues around the ahead of the G7 summit in Cornwall and Monday that Britain may soft pedal on for goods, and sharing data with
Lagan Valley constituency at the Stor-
have a private dinner with Sefcovic in
post-Brexit trade border between Great will hold talks with Prime Minister Boris disagreements this week only to then Brussels. mont assembly, was one of the front-
London yesterday.
runners for the top job. Other contend-
ers had included Paul Frew, who ran
Poots’ leadership campaign and was

Virus Jab rollout and Delta variant in race for supremacy

awarded the post of economy minister
yesterday, and Mervyn Storey, who was
named chair of the Stormont justice
committee.
Since being elected party leader last
month, Poots had made clear he did not
OLIVER BARNES AND want the first minister role despite lead-
JOHN BURN-MURDOCH — LONDON ing Stormont’s biggest party, because he
ANDY BOUNDS — MANCHESTER
wanted to focus on rebuilding the DUP
Greater Manchester and Lancashire will ahead of elections next May.
have access to military back-up and The DUP has suffered a string of
surge testing as part of a “strengthened defections in the aftermath of Foster’s
package of support” to combat the unseating. The latest opinion polls show
spread of the Delta variant of coronavi- support for the party at 16 per cent,
rus, the government has announced. trailing the republican rival Sinn Féin by
The two regions were added to a list of 9 percentage points.
areas, including Leicester and Houns- Poots, who will retain his portfolio as
low in London, where travel and indoor agriculture minister, did not immedi-
mixing is discouraged. Supervised in- ately say when his new ministers would
school testing will also begin, health sec- take up their roles. He said at the week-
retary Matt Hancock told MPs. end that Foster would lead a “signifi-
The announcement adds to fears the cant” meeting of the British Irish Coun-
spread of the Delta variant, first identi- cil on Friday.
fied in India, could scupper the prime Givan, 39, is best known internation-
minister’s hopes of lifting all remaining ally for an ill-fated 2014 campaign to
restrictions on social contact on June 21. introduce a “conscience clause” that
At the end of the week, the main sci- would allow businesses to refuse service
entific advisory bodies, Sage and on the basis of strongly held religious
Nervtag, will assess latest data about the Cases, hospital admissions and patient numbers are rising exponentially in north-west England, though deaths remain low and stable beliefs after a Christian-owned bakery
spread of the Delta variant in England. was sued for refusing to make a cake for
Their conclusions on transmission, vac- Relative increase in each metric (log scale), by number of days since it began to rise. a gay wedding.
cine efficacy and rates of severe disease Showing current wave compared to last autumn
Autumn TitleHe Mewent on to serve as Northern Ire-
will heavily influence ministers. wave land’sMetric
communities
Cases
16x
Daily admissions
16x
Total patients
16x
Deaths
16x Subtitle reg 9.6ptminister
on 11pt from 2016
Autumn to 2017 before failing to secure a cabinet
Has transmissibility increased? wave Autumn Autumn B seat in Foster’s 2020 government. He
wave wave
In mid-May, the Delta variant overtook Me has led the charge to prevent late
8x 8x 8x 8x
Current
the Alpha variant, first identified in wave abortions for non-fatal disabilities and
Kent, to become the dominant strain of L abnormalities, and has also been out-
the virus in England. Three-quarters of 4x 4x 4x 4x adipiscing
spokenelit on the challenges raised by the
Current eu, mole
the nearly 14,000 viral genomes Current wave Northern Ireland protocol that governs
wave
sequenced in England by the Wellcome 2x 2x 2x 2x Note: Metric Reg 7.2pt
post-Brexit on 8ptbetween Britain, the
trade
Source: Metric Reg 7.2pt on 8pt
Sanger Institute in the two weeks to May Current region and the Irish Republic.
29 were Delta. wave He takes over Northern Ireland’s gov-
1x 1x 1x 1x
Peter Openshaw, professor of experi- 0 30 60 days 0 30 60 days 0 30 60 days 0 30 60 days ernment at a critical point, as Brussels
mental medicine at Imperial College has warned it will retaliate against
Source: FT analysis of UK government Covid-19 dashboard
London and a member of Nervtag, told the UK if there are any further attempts
the Financial Times the Delta variant’s to postpone implementation of a trade
“considerable competitive advantage” Curbs deadline: cine, according to Hancock. Based on told the FT: “We thus appear to be in a ‘If [the increase in severity, because an increase border between Northern Ireland and
was now “beyond doubt”. Boris Johnson the data, FT analysis suggests two doses race between giving two vaccine doses in transmissibility makes thse virus that Great Britain. The issue has caused
Hancock confirmed on Monday that hopes to lift all of a vaccine are around 95 per cent effec- to everyone versus the spread of the vaccines] much harder to control and threatens to costly problems for all businesses and
the strain was at least 40 per cent more remaining tive at preventing hospital admission Delta variant.” are undo more of the progress we’ve made punctured unionists’ sense of identity.
transmissible than the previously domi- restrictions, with the Delta variant, and one dose By June 7, 53.6 per cent of adults in the in administering vaccines”, said Davies. The UK and EU will meet for crunch
nant Alpha variant. “Higher infectivity including on upwards of 70 per cent. UK had received both doses of a vaccine. stopping talks on the Northern Ireland protocol
means it could rip through unvacci- social Ian Jones, virology professor at Read- How are hospitals coping?
nated populations if life returns to nor- distancing, ing university, said the data implied the Does Delta cause worse disease?
[hospital After falling for months, hospital admis-
today.
Leo Varadkar, Ireland’s deputy prime
mal in a fortnight,” Openshaw said. on June 21 vaccines would “restrain” the Delta var- Latest PHE data suggest Delta increases admissions] sions and patient numbers are climbing, minister, said last week his primary
Oliver Johnson, director of the Insti- Nicklas Halle’n/AFP
iant even if government proceeds with the risk of hospital admission by 2.6 and very with north-west England showing signs relationship would be with the leader of
tute for Statistical Science at Bristol uni- step four of its path out of lockdown. “If times and critical care admission by 1.6 of exponential growth. Between May 22 Stormont’s government rather than
versity, said the “compound interest [the vaccines] are stopping hospitalisa- times compared with the Alpha variant. likely and 29 weekly admissions climbed by a with Poots, who accused Varadkar of
effect” from “each new generation of the tions and very likely deaths, there’s not However, Jones warned against jump- deaths, third from 121 to 163. The following acting in a “frankly disgraceful” way
virus” added to the danger. At its cur- much more you can ask for,” he said. ing to “quick conclusions”. “At one week saw another 31 per cent rise to 214. ahead of Brexit.
rent weekly growth rate of 50 per cent, According to Public Health England, point, our best estimates implied the there’s not That rise has been driven by younger There is precedent for Northern Ire-
there could be at least 10,000 cases a day the effectiveness of both the Oxford/ Alpha variant had a higher death rate much more adults, among whom admissions are land’s political party leaders not having
by June 21, he added. AstraZeneca and BioNTech/Pfizer vac- but that’s since been proven not to be climbing at the same rate as last Sep- the most senior government seats. But
How effective are vaccines against
cines in preventing symptomatic dis- the case,” he said. you can ask tember, while rates for over-65s are the DUP arrangement has raised some
ease after a single dose dropped to 33 Greater transmissibility is a bigger for’ declining. eyebrows in political circles. With Poots
the variant? per cent because of the Delta variant. concern than greater severity according “We are in a much, much better situa- remaining in the cabinet, said one
Scientists are reassured by the sustained But, after two doses, this figure rises to Nick Davies, epidemiological model- tion than we would have been without former Stormont adviser, no one would
pace of England’s vaccine rollout and steeply to 60 per cent for Oxford/Astra- ler at the London School of Hygiene and vaccines protecting the majority of vul- look to the first minister but instead to
the way fully vaccinated people have Zeneca and 88 per cent for BioNTech/ Tropical Medicine and member of the nerable people”, said Davies. “But we his boss.
fought off symptomatic and severe dis- Pfizer. Scientific Pandemic Influenza Group on will still see transmission among people Poots told an Irish television show last
ease. Of the 126 Delta variant cases in Deborah Dunn-Walters, chair of the Modelling (Spi-M). “All else [being] who have not been offered the vaccine week that the first minister would “seek
hospitals across England, only three British Society for Immunology’s Cov- equal, an increase in transmissibility is a yet, and to a lesser extent, those with advice” from him on difficult decisions
people had received both doses of a vac- id-19 task force, who has advised Sage, greater cause for concern than an only one vaccine dose.” but would be in charge day to day.

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Football Association picks Ombudsman hits at effort to
FRIDAY 31 MARCH 2017

Trump vs the Valley

Tech titans need to minimise
political risk — GILLIAN TETT, PAGE 13
WORLD BUSINESS NEWSPAPER

A Five Star plan?

Italy’s populists are trying to woo
the poor — BIG READ, PAGE 11
UK £2.70 Channel Islands £3.00; Republic of Ireland €3.00

Dear Don...
May’s first stab at the break-up
letter — ROBERT SHRIMSLEY, PAGE 12
Hewitt as first female chair tell women of pension age rise
HMRC warns Lloyd’s of Brussels Insurance market
to tap new talent pool with EU base
UK £3.80; Channel Islands £3.80; Republic of Ireland €3.80
Briefing
SATURDAY 1 APRIL / SUNDAY 2 APRIL 2017

customs risks THE END

i US bargain-hunters fuel Europe M&A
Europe has become the big target for cross-border
dealmaking, as US companies ride a Trump-fuelled
equity market rally to hunt for bargains across the
HOW DRIVERLESS
OF THE TECHNOLOGY IS
Atlantic.— PAGE 15; CHINA CURBS HIT DEALS, PAGE 17

being swamped i Report outlines longer NHS waiting times

A report on how the health service can survive CHANGING AN
ROAD
more austerity has said patients will wait longer for
non-urgent operations and for A&E treatment while AMERICAN WAY OF LIFE
by Brexit surge
some surgical procedures will be scrapped.— PAGE 4 Censors and sensitivity

have shown, this is a significant moment planned female pension age rises
Warning: this article may be

SAMUEL AGINI JOSEPHINE CUMBO

i Emerging nations in record debt sales
FT WEEKEND MAGAZINE
FEBRUARY 4 2017

Developing countries have sold record levels of

government debt in the first quarter of this year,
upsetting — LIFE & ARTS
taking advantage of a surge in optimism toward
emerging markets as trade booms.— PAGE 15

Credit Suisse
3 Confidence in IT plans ‘has collapsed’ i London tower plans break records
Art of persuasion Mystery deepens
SPORTS BUSINESS REPORTER
3 Fivefold rise in declarations expected
A survey has revealed that a

over disputed painting of Jane Austen How To Spend It

in time for English football, with a clear between 1995, when the change was first
record 455 tall buildings are
plan d de tio

Maladministration by the government

The Football Association has hired purpose for all stakeholders to secure legislated for, and 2004. But the
FINANCIAL TIMES Reproduction of the contents of this newspaper in
Debbie Hewitt from The Restaurant the long-term health of the game at all
led to many women suffering delays of
ombudsman decided the DWP failed to
Bracken House, 1 Friday Street, London EC4M 9BT. any manner is not permitted without the publisher’s more than two years in being informed
Group as its chair, making her the first levels,” said Hewitt. act promptly after analysis in 2004
prior consent. about rises in their pension age,
Published by: The Financial Times Limited, woman to hold the position at the gov- The government has established a found an information campaign was not
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Wednesday 9 June 2021 ★ FINANCIAL TIMES 3

NATIONAL

Livestock farmers fear Australia

Whitehall

trade deal will threaten way of life
Concerns centre on loss of market share and precedent being set for talks with other countries
JUDITH EVANS AND SEBASTIAN PAYNE
Jimmy Ireland’s small upland livestock
farm in Darvel, East Ayrshire, has
weathered the uncertainty of the Scot-
tish independence referendum and new
trading conditions with the EU.
But he now perceives a greater threat
to the family business — from more than
9,000 miles away.
The UK government’s decision to
offer Australia a tariff-free post-Brexit
trade deal has sparked fears among
farmers that it will open up free trade
with a series of big livestock-producing
countries, potentially undercutting UK
farmers and threatening their way of
life.
In Scotland, the concern is particu-
larly intense, since farming accounts for
more than 80 per cent of its land area.
“Agriculture is crucially important to
an awful lot of people, upstream and
downstream,” said Ireland, who chairs
the livestock committee of the National
Farmers’ Union in Scotland. “It’s a cry-
ing shame if they sell that down the
water.”
Under current trading arrangements,
Australia sent £45.7m of lamb and mut-
ton and £4.3m of beef to the UK in 2020
— a fraction of the multibillion-pound
UK domestic markets. The Australian
Agricultural Company, Australia’s big-
gest beef exporter, has said there may be
a tenfold rise in beef exports to the UK if
the zero-tariff deal is agreed.
But UK farmers fear a greater threat
will come from the precedent that the
Australian deal will set in negotiations
with other countries, including big meat
producers such as the US, Brazil and
New Zealand.
An Australia-UK trade deal is
expected to be sealed next week when
Scott Morrison, the Australian prime
minister, is set to meet Boris Johnson in
Downing Street after the G7 summit,
according to senior Whitehall officials.
Those involved with the negotiations
said that agriculture and the implemen-
tation period for the agreement
remained the final sticking points. But
Johnson is among those trying to pro-
mote the deal among farmers.
“I do think that free-trade deals
present a fantastic opportunity for our
farmers, for businesses of all kinds, and
for manufacturers,” the prime minister
said last week.
Government estimates suggest a
trade deal with Australia would be
worth an additional 0.01-0.02 per cent
of gross domestic product over 15 years.
The NFU has reacted with fury, argu-
ing such deals would not only remove
trade protections from the UK farming
sector, but would force it to compete on
an unfair playing field.
While the World Organisation for
Animal Health has noted Australia’s
“high animal health status” and food
safety standards, Australian farmers,
like those in some other countries, are
allowed to use techniques banned in the
UK such as long-distance live animal
transport and pesticides such as
paraquat.
The UK can bar specific products,
such as hormone-treated beef, from
entering the country using its sanitary
and phytosanitary (SPS) standards, but
Uncertain times: it is much more difficult to account for
sheep are broader welfare and environmental fac-
gathered for tors in trade negotiations.
inoculation in Minette Batters, NFU president, said
Swaledale, the government “must recognise that
North opening up zero-tariff trade on all
Yorkshire. imports of products such as beef and
Below, farmer lamb means British farming, working to
Jimmy Ireland its current high standards, will struggle
Gaertner/Alamy
to compete”.
There is another concern: with their
patchwork of small farms on a densely
populated island, England, Scotland
and Wales have far smaller average
holdings than those in Australia, with
little prospect of gaining planning per-
mission for vast feedlots such as those in
the southern hemisphere.
“Farmers will have to get bigger in
Scotland to compete,” said Robin
Traquair, vice-president of NFU Scot-
land. “We can’t all compete on top-end
products. There has to be an amount of
commodity product and that’s what will
take the brunt.”
Farmers will also have to adapt in the
coming years to a new, post-Brexit, gov-
ernment support system. EU-style sub-
sidies based on land area, which have
helped keep many afloat, are set to be
replaced with separate schemes in each
of the devolved nations, with England
and Wales planning environment-based
payments.
In the Australia trade deal, farming
groups had wanted a tariff rate quota
system, or an alternative mechanism to
trigger tariffs once a given threshold was
met, either in terms of import volumes
or impact on domestic prices. Another
option considered was a dual-
tariff structure, with lower tariffs for
products made to the highest welfare
standards.
Supporters of the government’s strat-
egy argue that the increased competi-
tion will push UK farmers to adapt so as
to survive, as well as adding to their
export opportunities.
Jethro Elsden, who grew up in a farm-
ing family and works for the conserva-
tive Centre for Policy Studies think-
tank, said: “We can’t romanticise farm-
ing. The same rules apply as in other
industries . . . If you have high tariffs
and subsidies, you protect [farming] in
the short term but weaken it fundamen-
tally in the long term . . . [Lower tariffs
will] force them to innovate and be
more productive.”
As an example, he cited farmers mov-
ing into free-range egg production —
where consumer demand is growing —
‘Opening up to become more profitable. One such
farmer is Llyr Jones, a beef and sheep
zero-tariff farmer in north Wales who diversified
trade on all into eggs six years ago and also runs hol-
iday homes, produces cold-pressed
imports of rapeseed oil and generates electricity
products for local homes through ground source
heat pumps.
means He is worried about banks withdraw-
British ing support for operations such as his if
meat prices are forced down. “Farms
farming will are always buying more land, but if
struggle to you’re getting cheap meat in such a
quantity . . . the banks aren’t going to
compete’ support it.”
Small farmers such as himself were
key to maintaining the UK’s landscapes
and rural economies. “When I did my
VAT return last year I realised I had
dealt with more than 170 businesses —
76 per cent of those are within Wales and
70 per cent of those were in Welsh,
which is my first language. In rural
Wales it’s all interlinked . . . it always
comes back to farmers.”
Georgie Styles of the Landworkers’
Alliance, representing more than 1,500
smaller farmers, said small farms were
“hugely beneficial”. “They create more
resilient farming systems and operate in
more local supply chains,” she added.
Jones was pessimistic about what he
perceives as a “race to the bottom” on
food standards and trade. “Brexiters
were promising the earth . . . But ulti-
mately they didn’t treat the fishermen
right and I feel we are next in line,” he
said. But he added: “Farmers are very
resilient. We would literally just carry
on until the bank pulls the plug on us.”
Former ethics
chief queried
Greensill
post, MPs told
JIM PICKARD
Whitehall’s former ethics chief raised
concerns about how Lord Jeremy Hey-
wood, the late cabinet secretary,
secured a government advisory job for
Lex Greensill, his friend, a parliamen-
tary select committee heard yesterday.
Greensill has been in the public spot-
light since the collapse in March of
Greensill Capital, his finance company,
which employed David Cameron as an
adviser. The company had a “symbiotic
relationship”, in the former prime min-
ister’s words, with GFG Alliance, a met-
als group being investigated by the Seri-
ous Fraud Office.
Questions have been raised about
why Greensill was given an unpaid advi-
sory role by the Cameron government in
2012 where he pushed “supply chain
finance”, a form of factoring.
Before setting up Greensill Capital the
Australian financier had worked closely
alongside Heywood at Morgan Stanley,
the US investment bank. Heywood
arranged for Greensill to have his own
desk, security pass and four civil serv-
ants in the Cabinet Office.
Sue Gray, then Whitehall’s ethics
adviser, was “uncomfortable” about the
informal role, Bill Crothers, a former
senior civil servant who later joined
Greensill Capital, told the Commons
Public Administration and Constitu-
tional Affairs select committee.
Lord Francis Maude, former Cabinet
Office secretary, told the committee
that Heywood had invited him to meet
Greensill, saying he was a “very clever
guy who is going to help you to save lots
of money”. Maude said he was unim-
pressed by the idea that government
departments could borrow more
cheaply through a third party.
“I didn’t see how Jeremy’s contention
that this would save us a lot of money
would stack up,” he told the MPs. “Rule
101 of finance is that no one can provide
finance more cheaply than a triple A
rated government.”
Sir John Manzoni, former Cabinet
Office permanent secretary, told the
committee that Greensill was given the
role by Heywood and “he did not go
through an open recruitment process”.
Manzoni approved an arrangement
whereby Crothers, former head of pro-
curement, in 2015 took a part-time job
at Greensill while working for the civil
service. Manzoni said this arrangement
was approved by Gray, then head of pro-
priety and ethics at the Cabinet Office.
At the time Greensill Capital was a
small start-up with no UK public sector
practice and was mostly working over-
seas, he said. “There didn’t seem to be
any conflict.”
Crothers said he was introduced to
Greensill by Heywood. When he
decided to leave the civil service and
join Greensill Capital that was partly
because Heywood had recommended
the Australian as a “man of the highest
integrity”, Crothers told MPs. That was a
“clear influence on me deciding to join
his company and become a director”.
His simultaneous work for the civil
service and Greensill is the subject of an
internal inquiry. But he said the role was
cleared by Gray. “Conflicts of interest
were never discussed with me as a con-
cern,” he added.

Electoral map Shipbuilding

Boundary review set to shore up Tory gains
SEBASTIAN PAYNE
Proposed changes to England’s parlia-
mentary constituencies will strengthen
Conservative party gains in parts of
Labour’s former “red wall” heartlands,
according to Tory MPs and strategists.
Tentative proposals for redrawing vot-
ing boundaries to reflect population
shifts were released yesterday by the
Boundary Commission. England will
gain 10 new seats in the House of Com-
mons, Wales will lose eight and Scotland
two.
Although the north-east stands to lose
two seats, new Conservative MPs in the
region hope the redistribution will help
solidify gains made in the 2019 election,
such as Sedgefield, former Labour
prime minister Tony Blair’s old seat,
and Bishop Auckland.
The independent review has been
stalled for a decade by political wran-
gling over the expectation that the out-
come would disproportionately benefit
Conservatives. The new seats are due to
be finalised by mid 2023, ahead of the
next general election expected in 2024.
One red wall Tory MP said the outlook
had “improved slightly” for many con-
stituencies that would take in more
rural elements. “All of the Tees Valley
seats improve for us, except for Redcar,
which is relatively neutral,” said the MP.
Darlington and North West Durham,
which the Tories won for the first time
with a majority of 1,144 in 2019, would
become “much better” for the party,
said another MP.
One party strategist said the picture
would be reflected elsewhere: “If you go
back to 2015 when we had nobody in
places in Darlington and Stockton, we
are now building on gains. These are our
seats for the foreseeable future and the
‘These are our seats
for the foreseeable
future and the changes
are broadly good’
changes are broadly good.”
An ally of Keir Starmer, Labour
leader, however, was sanguine about the
impact of the review. “It’s pretty neu-
tral, it won’t cost us or gain us many
seats all round,” the official said.
Sir John Curtice, professor of politics
at Strathclyde university, said the elec-
toral impact of the 2023 boundary
review would be limited as a result of
population and political shifts over the
past decade, with cities expanding and
towns shrinking.
“The difference in the average size of
Conservative and Labour constituen-
cies is not as big as it was once was,” he
said. “In the 2019 election, the differ-
ence in the size of the average constitu-
ency was 2,500 voters. In England, it
was just over 1,500, whereas the figure
in 2015 and 2017 was 4,000.”
Curtice said the Tories stood to gain
about six seats by the new boundaries.
“The pattern of people moving out of
cities is no longer true. The rise in Lon-
don’s population means the impact of
the boundary review is less than
expected,” he said.
Lord Robert Hayward, a Conservative
peer and polling expert, said the net
benefit to the party would be between
five to 10 seats in total. “There is a net
benefit to the Conservatives, no ques-
tion,” he said.
Several high-profile MPs, including
Ben Wallace, defence secretary, whose
Wyre and Preston North constituency is
subsumed into the surrounding area,
are expected to lose their seats. The
seats of Matt Hancock, health secretary,
and Gavin Williamson, education secre-
tary, are also set to disappear.
Ian Lavery, the leftwing Labour MP
who served as party chair under Jeremy
Corbyn, is expected to lose his Wans-
beck constituency in Northumberland.
Yacht plan breaks WTO accord, warn experts
JIM PICKARD
CHIEF POLITICAL CORRESPONDENT
Boris Johnson’s plan to build a new
yacht in the UK is set to fall foul of a
World Trade Organization agreement
struck by his own government last
year, experts have warned.
The prime minister last month said he
hoped a domestic shipbuilder would
create the £200m vessel, a successor to
the Royal Yacht Britannia, to promote
British trade and industry around the
world. But while Number 10 has
announced its “intention” to build the
as yet unnamed ship in the UK, this
would breach an agreement Britain
signed up to only eight months ago.
Ministers failed to exclude the con-
struction of civilian ships from the list of
contracts that must be opened to global
competition when it signed the WTO
“government procurement agreement”
covering 48 countries last October.
The government has set up a national
flagship task force, hosted in the
defence ministry, to oversee the crea-
tion of the trade yacht, which will be
manned with Royal Navy personnel.
However, its purpose is entirely for busi-
ness rather than security.
Liz Truss, trade secretary, boasted in
October that the GPA would allow Brit-
ish companies to keep bidding for public
sector contracts around the world worth
£1.3tn a year. Likewise, she said, over-
seas groups would be able to continue to
bid for public sector contracts, “deliver-
ing better value for UK taxpayers”.
But that could frustrate the govern-
ment’s attempts to use a “Buy British”
approach to building the yacht. Item 47
of annex 4 of the UK schedule of the GPA
explicitly says the procurement of
“ships, boats and floating structures,
except warships” must be advertised
internationally and awarded without
discrimination. Other countries, includ-
ing the US, Canada, Japan and Australia,
have, by contrast, ensured their GPA
agreements exclude civil shipbuilding.
Out of the largest 50 motor-powered
superyachts currently at sea, only one
(El Mahrousa) was built in the UK — in
All at sea: an artist’s impression of
the new national flagship
1865. However, Cammell Laird, which
has a shipyard in Merseyside, says it is
ready and willing to manufacture the
new trade yacht.
Aline Doussin, head of the interna-
tional trade team at law firm Hogan
Lovells, said it would be hard for the UK
to avoid allowing international competi-
tion to build the ship unless it was an
actual military vessel. “It is likely that
the GPA will be engaged, which means
that open, fair and transparent condi-
tions of competition will have to be met,
and GPA country suppliers would have
to be treated in the same manner as
domestic ones,” she said.
Emily Thornberry, shadow trade sec-
retary, said the government had failed
to take “the most basic and simple
steps” to guarantee the boat could be
built in Britain. “It is yet more copper-
bottomed, ocean-going incompetence
from Boris Johnson and Liz Truss, and
they need to get themselves on solid
legal ground before spending any more
public funds on this project,” she said.
A government spokesperson said the
ship would definitely be built in UK
shipyards. She said the programme
would be “compliant with our obliga-
tions under the WTO GPA” but did not
say how that could be the case given
Item 47 of annex 4.
4 ★
World Bank
Poorest nations ‘left behind’ in recovery
Report says record level of
post-Covid debt threatens
global economic stability
JONATHAN WHEATLEY
Developing countries are being left
behind in the pandemic recovery and
face the risk of a renewed economic
downturn if vaccine supplies fail to
materialise and global inflation rises,
the World Bank warned yesterday.
Emerging economies are particularly
vulnerable, it said, as increasing prices
and interest rates undermine their abil-
ity to deal with the high levels of debt
accumulated during the coronavirus
crisis.
“While advanced economies are
rebounding, many of the world’s poor-
est countries are being left behind, and
Genocide
Mladic loses
court appeal
Former Bosnian Serb commander
Ratko Mladic sits in court in The
Hague yesterday before his appeal
against a life sentence for genocide
and war crimes was rejected.
Michelle Bachelet, UN human
rights chief, said the ruling meant the
international justice system had held
Mladic, who led Bosnian Serb forces
during Bosnia’s 1992-95 war, to
account. “Mladic’s crimes were the
abhorrent culmination of hatred
stoked for political gain,” Bachelet
said. “Today’s decision is about his
individual responsibility for his
dreadful acts, not about collective
punishment or apportioning guilt to
any particular community.”
Alice Wairimu Nderitu, special
adviser to the UN secretary-general
on prevention of genocide, said the
verdict sent a message to the western
Balkans, where “genocide denial”
was on the rise. Reuters, The Hague
France
Macron slapped in face on walkabout ahead of regional polls
VICTOR MALLET
A man slapped Emmanuel Macron in
the face yesterday, briefly interrupting
a walkabout during the French presi-
dent’s tour of the provinces ahead of
this month’s regional elections.
Two 28-year-old men were being ques-
tioned by the gendarmerie after the
audible blow — accompanied by a shout
of the royalist slogan “Montjoie Saint-
Denis!” and “Down with Macronism!” —
was delivered by a man among a group
of onlookers in the southern town of
Tain-l’Hermitage.
The Elysée Palace said that a man had
“tried to hit” the president, and that the
conversations and handshakes with the
crowd resumed immediately after the
incident and the visit continued.
Opposition parties have been fiercely
FRIDAY 31 MARCH 2017
Trump vs the Valley
Tech titans need to minimise
political risk — GILLIAN TETT, PAGE 13
HMRC warns
customs risks
being swamped
by Brexit surge
3 Confidence in IT plans ‘has collapsed’
3 Fivefold rise in declarations expected
JAMES BLITZ — WHITEHALL EDITOR
A computer system acquired to collect
duties and clear imports into the UK
may not be able to handle the huge
surge in workload expectedonce Britain
leaves the EU, customs authorities have
admitted to MPs.
HM Revenue & Customs told a parlia-
mentary inquiry that the new system
needed urgent action to be ready by
March 2019, when Brexit is due to be
completed, and the chair of the probe
said confidence it would be operational
in time “has collapsed”.
Setting up a digital customs system
has been at the heart of Whitehall’s
Brexit planning because of the fivefold
increase in declarations expected at
British ports when the UK leaves the EU.
About 53 per cent of British imports
come from the EU, and do not require
checks because they arrive through the
single market and customs union. But
Theresa May announced in January that
Brexit would include departure from
both trading blocs. HMRC handles 60m
declarations a year but, once outside the
customs union, the number is expected
to hit 300m.
The revelations about the system,
called Customs Declaration Service, are
likely to throw a sharper spotlight on
whether Whitehall can implement a
host of regulatory regimes — in areas
ranging from customs and immigration
to agriculture and fisheries — by the
time Britain leaves the EU.
Problems with CDS and other projects
essential to Brexit could force London to
Shutdown risk as border
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A Five Star plan?
Italy’s populists are trying to woo
the poor — BIG READ, PAGE 11
adjust its negotiation position with the
EU, a Whitehall official said. “If running
our own customs system is proving
much harder than we anticipated, that
ought to have an impact on how we
press for certain options in Brussels.”
In a letter to Andrew Tyrie, chairman
of the Commons treasury select com-
mittee, HMRC said the timetable for
delivering CDS was “challenging but
achievable”. But, it added, CDS was “a
complex programme” that needed to be
linked to dozens of other computer sys-
tems to work properly. In November,
HMRC assigned a “green traffic light” to
CDS, indicating it would be delivered on
time. But last month, it wrote to the
committee saying the programme had
been relegated to “amber/red,” which
means there are “major risks or issues
apparent in a number ofkey areas”.
HMRC said last night: “[CDS] is on
track to be delivered by January 2019,
and it will be able to support frictionless
international trade once the UK leaves
the EU . . . Internal ratings are designed
to make sure that each project gets the
focus and resource it requires for suc-
cessful delivery.”
HMRC’s letters to the select commit-
tee, which will be published today, pro-
vide no explanation for the rating
change, but some MPs believe it was
caused by Mrs May’s unexpected deci-
sion to leave the EU customs union.
Timetable & Great Repeal Bill page 2
Scheme to import EU laws page 3
Editorial Comment & Notebook page 12
Philip Stephens & Chris Giles page 13
JPMorgan eye options page 18
City watchdog sends a clear message as
banker loses job over WhatsApp boast
LAURA NOONAN — DUBLIN
JENNIFER THOMPSON — LONDON
A boastful WhatsApp message has cost
a London investment banker his job
and a £37,000 fine in the first case of
regulators cracking down on commu-
WORLD BUSINESS NEWSPAPER
Lloyd’s of Brussels Insurance market
to tap new talent pool with EU base
Lloyd’s of London chose Brus-
sels over “five or six” other
cities in its decision to set up an
EU base to help deal with the
expected loss of passporting
rights after Brexit.
John Nelson, chairman of the
centuries-old insurance mar-
ket, said he expected other
Berrys after discussions with regulators.
Christopher Niehaus, a former Jeffer-
ies banker, passed confidential client
information to a “personal acquaint-
ance and a friend” using WhatsApp,
according to the FCA. The regulator said
M Niehau had turn d hi d vic
Visit FT.com/subscribenow
insurers to follow. Most of the
business written in Brussels
will be reinsured back to the
syndicates at its City of London
headquarters, picturedabove.
The Belgian capital had not
been seen as the first choice for
London’s specialist insurance
groups after the UK leaves the
media at work, but banks are unable to
ban people from installing apps on their
private phones.
Andrew Bodnar, a barrister at Matrix
Chambers, said the case set “aprecedent
in that it shows the FCA sees these mes-
gin th
UK £2.70 Channel Islands £3.00; Republic of Ireland €3.00
Dear Don...
May’s first stab at the break-up
letter — ROBERT SHRIMSLEY, PAGE 12
AFP
EU, with Dublin and Luxem-
bourg thought to be more likely
homes for the industry. But
Mr Nelson said the city won on
its transport links, talent pool
and “extremely good regula-
tory reputation”.
Lex page 14
Insurers set to follow page 18
erythi
FINANCIAL TIMES Wednesday 9 June 2021
INTERNATIONAL
Basel III
EU states
launch
much remains to be done to reverse the income countries,” said David Malpass, the main opposition to such a move. It said the global financial system was attempt
to weaken
pandemic’s staggering human and eco- president of the World Bank. Malpass said the World Bank did not vulnerable to a sudden increase in inter-
nomic costs,” the bank said in its twice- The report stressed the need to support the lifting of IP rights because to est rates if there was a rise in risk
yearly Global Economic Prospects expand vaccine distribution and do so could jeopardise spending on aversion among investors, inflation,
report.
It said the near-term resumption of
economic growth worldwide could not
deployment as a precondition for a last-
ing global recovery.
research and development.
“The World Bank supports the licens-
ing and transfer of technology to devel-
or expectations of faster monetary
tightening.
Consumer price inflation is likely to
bank reforms
make up for the misery the pandemic oping countries to bolster global sup- exceed expectations this year in half of
had inflicted on the poorest. Per capita
‘Much remains to be done ply,” he said. all emerging economies that set such SAM FLEMING — BRUSSELS
income losses incurred in 2020 would to reverse the pandemic’s “A very critical part of the supply targets, the report said. MARTIN ARNOLD — FRANKFURT
not be fully unwound by 2022 in about chain is the invention and creation of If the increase is temporary, and con-
two-thirds of emerging and developing
staggering human and manufacturing techniques. Above all, as sumers and investors continue to
Several of the EU’s largest member
states are fighting a last-ditch battle to
countries, it said, and in 75 per cent of economic costs’ we go into the booster stage, it will be believe the targets will be met, policy- water down the bloc’s most significant
the most fragile, conflict-affected vital that [research and development] makers may be able to leave monetary change in banking regulation for a dec-
economies. It made no mention, however, of vac- flows continue to increase so that we can policy unchanged. ade, as Brussels prepares to set out
By the end of this year, about 100m cine manufacture or of rising demands create vaccines that apply to new vari- “If, however, inflation expectations long-awaited legislation.
people will have fallen back into for the suspension of intellectual prop- ants.” risk becoming unanchored, [emerging
extreme poverty since the onset of the erty rights by pharmaceutical compa- The Washington-based institution market and developing economy] cen- The proposed rules will introduce a new
pandemic, estimated the World Bank. nies to deal with supply shortages. singled out the record level of debt tral banks may be compelled to tighten capital minimum, or floor, making it
“Globally co-ordinated efforts are Last month, the US backed a tempo- around the world, particularly among monetary policy more than would be harder for banks to use their own inter-
essential to accelerate vaccine distribu- rary suspension of such rights for Covid emerging and developing countries, as a appropriate,” the report warned. nal calculations to decide the size of
tion and debt relief, particularly for low- vaccines, leaving the UK and the EU as threat to economic stability. Martin Wolf see Opinion their capital base.
The European Commission is
expected to propose the rules — part of
the international Basel III banking
reforms — in September or October.
But capitals led by Paris, Berlin,
Copenhagen and Luxembourg are try-
ing to convince the commission to mod-
erate the minimum level imposed,
according to those involved in the talks.
The way in which the international
standards have been drawn up risks
penalising EU banks, they argue.
Jörg Kukies, deputy finance minister
of Germany, told the Financial Times
that the Franco-German proposal was
“a pragmatic way of ensuring a truthful
and compliant Basel implementation on
the one hand and respecting the politi-
cal mandate of the Ecofin and G20 for no
significant increase in capital require-
ments, as well”.
The new rules are due to come into
force between 2023 and 2028, delayed
by a year due to the pandemic. Some
diplomats said the need to foster
Europe’s economic recovery from Cov-
id-19 had strengthened the case for the
commission to strike a balance.
Central bankers and regulators struck
the deal to tighten the rules in 2017,
including a contentious “output floor”
preventing banks from using risk esti-
mates that are too far below the outputs
of a standardised model devised by reg-
ulators.
The concept caused concern in coun-
tries including France, Germany and
Nordic states that make heavy use of
internal models and feared it would dis-
Jerry Lampen/EPA-EFE/Shutterstock proportionately hit their banks.
The standards could force banks to
increase the amount of capital they
must hold by as much as 10 per cent and
potentially more than 20 per cent,
according to calculations by the Euro-
pean Banking Authority.
The four member states are arguing
instead for a so-called “parallel stack”
approach that would turn the rules into
critical of Macron’s “Tour de France” of his position as president to campaign ceptable and to be thoroughly con- else, they are tired of the crisis and of more of a backstop, limiting the addi-
ahead of the regional elections on June for the regional elections?” demned in a democracy”, while Jean- bad news.” tional capital requirements that banks
20 and 27, arguing he was using his pres- Yesterday, however, politicians across Luc Mélenchon of the far-left La France Although Macron is sometimes would face. In 2019, the EBA warned the
idential status to promote his La Répub- the spectrum condemned an act of vio- Insoumise (France Unbowed) party, accused by his detractors of being arro- “parallel stack” approach was not com-
lique en Marche party without being lence against the country’s president. normally a fierce critic of Macron, said gant and out of touch, he relishes walka- pliant with the Basel agreement.
subject to campaign finance limits. Le Pen said the “behaviour was unac- he was in solidarity with the president. bouts and arguments or conversations Andrea Enria, president of supervi-
His supporters have argued that he Shortly before the incident, Macron with bystanders. He is notorious among sion at the European Central Bank, said
merely wants to “take the pulse” of the was calling for political calm. He was his critics for having told a gardener vis- last month it was “of fundamental
French people to work out what he can reacting to Mélenchon’s prediction that iting the Elysée who complained about importance” that the EU “does not give
achieve in the final year of his presiden- there would be a staged “murder or seri- the lack of work that he could find him a in to the temptation to introduce crea-
tial mandate, which was scarred first by ous incident” in the final week of the job in a restaurant or hotel just by cross- tive approaches”, such as a parallel stack
the anti-government gilets jaunes pro- presidential election campaign next ing the road. rule. An EU official said the commission
tests from 2018 and then by the year in order to demonise Muslims, and Macron is not the first French presi- believed it could avoid “a significant
Covid-19 pandemic. to the subsequent posting by a right- dent to be targeted with violence in a increase in capital for the European
But Marine Le Pen, leader of the far- winger of a video showing the simulated public place. banking sector in general — even if
right Rassemblement National party murder of a Mélenchon supporter. Nicolas Sarkozy was sometimes requirements might go up for some
and the politician expected to be his “Opposition parties can express abused and once manhandled. And dur- banks”.
main rival in next year’s presidential themselves freely in a democracy,” ing the national day parade in July 2002, The commission is working on legisla-
election, asked: “Is there a single person Macron said yesterday, “but the other an extreme-right activist tried to shoot tion for the new regime. It will then be
in France who hasn’t understood that Emmanuel Macron is slapped by side of that is an end to violence and Jacques Chirac with a rifle, but he finalised by the European Parliament
Emmanuel Macron is taking advantage a protester in Tain-l’Hermitage hate . . . The French need something missed and was later jailed. and the Council of Ministers.
Law enforcement
FBI encrypted app sting deals blow to global organised crime
UK £3.80; Channel Islands £3.80; Republic of Ireland €3.80 SATURDAY 1 APRIL / SUNDAY 2 APRIL 2017
THE END
Briefing
HOW DRIVERLESS
i US bargain-hunters fuel Europe M&A
Europe has become the big target for cross-border
OF THE TECHNOLOGY IS
dealmaking, as US companies ride a Trump-fuelled
equity market rally to hunt for bargains across the
Atlantic.— PAGE 15; CHINA CURBS HIT DEALS, PAGE 17
CHANGING AN
ROAD
“The success of operation Trojan tonnes of drugs during the operation. latest use of technologies such as spy-
i Report outlines longer NHS waiting times
AMERICAN WAY OF LIFE
JAMIE SMYTH — SYDNEY
A report on how the health service can survive
more austerity has said patients will wait longer for Censors and sensitivity
non-urgent operations and for A&E treatment while
Warning: this article may be
some surgical procedures will be scrapped.— PAGE 4
FT WEEKEND MAGAZINE
upsetting — LIFE & ARTS
i Emerging nations in record debt sales
AND MICHAEL PEEL — BRUSSELS
Developing countries have sold record levels of
Shield is a result of tremendous innova- They monitored more than 25m mes- ware and Trojan horse software during
government debt in the first quarter of this year,
Credit Suisse
taking advantage of a surge in optimism toward
emerging markets as trade booms.— PAGE 15
Art of persuasion Mystery deepens
i London tower plans break records
A survey has revealed that a over disputed painting of Jane Austen How To Spend It
engulfed in
record 455 tall buildings are
planned or under construction
in London. Work began on
tion, dedication and unprecedented sages sent in real time, Australian and investigations by law enforcement
almost one tower a week
during 2016.— PAGE 4
fresh tax probe More than 800 people have been
i Tillerson fails to ease Turkey tensions
The US secretary of state has failed to reconcile
tensions after talks in Ankara with President Recep
Chic new lodgings
Tayyip Erdogan on issues including Syria and the
extradition of cleric Fethullah Gulen.— PAGE 9
in Scotland
international co-operation,” Shivers US investigators said at a joint news con- authorities of criminals and terrorist
MAGAZINE
FEBRUARY 4 2017
i Toshiba investors doubt revival plan
3 UK, France and Netherlands swoop
arrested around the world in a sweep-
In a stormy three-hour meeting, investors accused
3 Blow for bid to clean up Swiss image
managers ofhaving an entrenched secrecy culture
and cast doubt on a revival plan after Westinghouse
filed for Chapter 11 bankruptcy protection.— PAGE 16
RALPH ATKINS — ZURICH it followed “a strategy offull client tax
i HSBC woos transgender customerscompliance” but was still trying to
DUNCAN ROBINSON — BRUSSELS
said. “The results are staggering.” ference that detailed the three-year organisations.
The bank has unveiled a range of gender-neutral gather information about the probes.
Credit
titles suchSuisse
as “Mx”,has been targeted
in addition by Miss HM
to Mr, Mrs, or Revenue & Customs said it had
ing police sting that lured drug dealers,
Ms,sweeping
in a move taxtoinvestigations
embrace diversity in the
andUK,
cater tolaunched
the a criminal investigation into
France
needs and the Netherlands,
of transgender customers.— PAGE setting
20 suspected tax evasion and money laun-
back Switzerland’s attempts to clean up dering by “a global financial institution
its image as a tax haven. and certain ofits employees”. The UK
The Swiss bank said yesterday it was tax authority added: “The international
Datawatch
co-operating with authorities after its reach of this investigation sends a clear
offices in London, Paris and Amsterdam message that there is no hiding place for
The lure of the exotic
Authorities were able to uncover large police operation. The ANOM app was installed on
wereattacks
Terror contacted by local
in western Europe officials those
Recent attacks — seeking to evade tax.” Robin Lane Fox on the flair
“concerning client tax matters”. notably the 2011 Dutch prosecutors, who initiated the
mafia members and other organised
Dutch authorities
Highlighted attack said their counter-
Others massacre by action, said they seized jewellery, paint-
of foreign flora — HOUSE & HOME
parts in Germany were also involved, ingsinand gold ingots as part of their
Anders Breivik
while Australia’s revenue department Norway, the probe; while French officials said their
said it was investigating a Brussels
Swiss bank.attacks in Paris
investigation had revealed “several
The inquiries threaten to undermine and Nice, and the
Norway thousand” bank accounts opened in
efforts by the Paris country’s banking Brussels suicide
sector Switzerland and not declared to French
quantities of cocaine hidden in ship- Police said 9,000 officers had taken mobile phones stripped of any other
Nice bombings — have
to overhaul business models and ensure tax authorities.
customers meet international bucked tax the trendThe Swiss attorney-general’s office
criminals to an encrypted communica-
of generally low
requirements following a US-led clamp- said it was “astonished at the way this
fatalities from
down on evaders, which resulted in operation has been organised with the
Sources: Jane’s Terrorism and Insurgency Centre terror incidents in
billions of dollars in fines. deliberate exclusion of Switzerland”. It
western Europe
The probes risk sparking an interna- demanded a written explanation from
tional dispute after the Swiss attorney- Dutch authorities.
general’s office expressed “astonish- In 2014, Credit Suisse pleaded guilty
ments of fruit and canned goods by part in co-ordinated raids in multiple capability. The phones, which were
ment” that it had been left out of the in the US to an “extensive and wide-
Escape the taper trap
actions co-ordinated by Eurojust, the ranging conspiracy” to help clients
tions platform secretly run by the FBI.
EU’s judicial liaison body. evade tax. It agreedto fines of $2.6bn.
Credit Suisse, whose shares fell 1.2 per Additional reporting by Laura Noonan in How high earners can evade
cent yesterday, identified itself as the Dublin, Caroline Binham and Vanessa
subject ofinvestigations in the Nether- Houlder in London, and Michael Stothard a pension headache — FT MONEY
lands, France and the UK. The bank said in Paris Austen’s descendants insist the Rice portrait depicts her as a girl — see magazine Bridgeman Art Library
Brussels takes tough stance on Brexit
monitoring communications on the countries and that there had been 224 bought on the black market, could not
with Spain handed veto over Gibraltar
Investigators said they monitored more platform known as ANOM, Shivers said. make calls or send emails. They could
than 12,000 devices used by about 300 Gangs targeted, including outlawed send messages only to another device
Big consignments
criminal syndicates in an operation that
led to seizures of more than 32 tonnes of
motorcycle outfits, operated in more
than 100 countries, the authorities said.
of cash and drugs
have been seized
that had the organised crime app, Aus-
tralian police said.
drugs, $48m in currency and the disrup- The FBI “strategically developed” around the world The devices circulated organically
tion of more than 100 murder plots. ANOM in 2018, said Jean-Philippe Lec- during operation
Trojan Shield
and grew in popularity among crimi-
The crackdown by law enforcement ouffe, deputy director for operations at nals, who were confident of the app’s
agencies in 17 countries, known as Tro- Europol, the EU law enforcement co-op- security because high-profile crime fig-
jan Shield, is the latest thrust in a battle eration agency. Criminals began to use it arrests in Australia and 35 in New Zea- ures vouched for it, police said.
against crime enabled by digital encryp- in large numbers after busts of other land. Details of other national police Greg Barton, a counter-terrorism
tion. European authorities swooped on encrypted chat networks including the operations were due to be released later. expert at Deakin University in Mel-
gangs across the continent last year Sky ECC platform in March. Scott Morrison, Australia’s prime bourne, said deploying the Trojan horse
after cracking the EncroChat communi- “After this significant takedown, glo- minister, said the international opera- software on modified phones was a bril-
cation service. bal criminal operating networks were tion marked a watershed in law enforce- liant example of using social engineer-
Calvin Shivers, an assistant director looking for an alternative,” Lecouffe ment. “The Australian government, as ing to fight organised crime.
from the FBI’s criminal investigative said. “This is where the encrypted plat- part of a global operation, has struck a “Australian police authorities and
division, said Trojan Shield was a “shin- form, ANOM, under the control of the heavy blow against organised crime, not their counterparts around the world
ing example” of what could be achieved FBI, was in a situation to fill the commu- just in this country, but one that will will have gathered more insight into the
when authorities developed “state of the nication void.” echo around organised crime around workings of organised criminals and
*Terms and conditions can be found at www.ft.com/subscribenow art investigative tools to detect, disrupt Australian police said they had dis- the world,” he said. disrupted their operations for a period,”
and dismantle criminal organisations”. rupted 21 murder plots and seized 3.7 The police sting operation marked the he added.
Wednesday 9 June 2021 ★ FINANCIAL TIMES 5
6 ★
UAE shifts focus
from muscular
foreign policy to
economic drive
Diplomats asked to prioritise attracting
investment to oil-dependent nation
SIMEON KERR — DUBAI
ANDREW ENGLAND — LONDON
For a decade, the United Arab Emirates
has been the Arab world’s most muscu-
lar regional actor, deploying its petro-
dollar wealth and military power to bol-
ster allies and weaken foes.
But after the coronavirus pandemic
hit the Gulf state’s economy and under-
scored its linkages to global trade, its
focus is shifting from robust interven-
tion, including militarily, to “economic”
diplomacy, two people briefed on the
strategy shift said.
As a result, Emirati diplomats and
embassies are being judged more heav-
ily on their ability to attract investment
to the oil-dependent nation. “We
thought about what is best for the UAE,”
a senior UAE official told the Financial
Times. “There’s going to be a much big-
ger focus on the economy.”
It is the latest sign that the pandemic
and the election of Joe Biden as US presi-
dent are combining to alter the dynam-
ics of the Middle East and generating a
tentative move towards de-escalation
after the turbulent Trump years.
In tandem with the new directives,
the UAE will seek a more active role in
mediating disputes, such as between
Sudan and Ethiopia, and even India and
Pakistan, the people say.
The strategy marks a shift for a nation
that under the stewardship of Sheikh
Mohammed bin Zayed al-Nahyan, Abu
Dhabi’s crown prince and the UAE’s de
facto leader, emerged as the Arab
world’s most assertive power in the
wake of the 2011 popular uprisings. The
UAE sought to impose its vision on the
region, with Sheikh Mohammed con-
vinced that his state had to fill a per-
ceived vacuum of US indifference and
take the lead in preventing the rise of
Islamist movements and countering
Iran’s influence.
The aggressive approach led to the
UAE deploying thousands of troops to
the war in Yemen as it became Saudi
Arabia’s main partner in an Arab coali-
tion that intervened in the conflict in
2015 to fight Iran-backed Houthi rebels.
It has also been a supporter of Libyan
warlord Khalifa Haftar. And in 2017,
Abu Dhabi was at the forefront of a
regional embargo on Qatar, which the
UAE and Saudi Arabia imposed after
accusing Doha of supporting Islamists
and being too close to Iran.
The interventions raised the profile
and influence of Abu Dhabi, as the
small, oil-rich nation — an impor-
tant partner of the west —
punched above its weight. But
none ended with great success
and all inflicted reputational
damage on the UAE.
In Yemen, Abu Dhabi won
Washington’s plaudits for its
campaign against al-Qaeda
militants. But the Saudi-led
coalition failed to dislodge
the Houthis and the UAE
withdrew most of its troops
in 2019 as regional tensions
with Iran escalated and criti-
cism mounted of a war that
FINANCIAL TIMES
INTERNATIONAL
triggered a humanitarian disaster. In
Libya, Haftar suffered a series of defeats
last year after Turkey, the UAE’s arch-ri-
val, intervened militarily to support
Libya’s UN-backed government and
ended the warlord’s more than year-
long offensive against Tripoli. Western
diplomats say the UAE has in recent
months withdrawn its military assets
from Libya. In January, Abu Dhabi fol-
lowed Saudi Arabia’s lead in lifting the
regional embargo on Qatar.
Emile Hokayem, Middle East expert
at the International Institute for Stra-
tegic Studies, said the UAE had come
to understand there was “no hard
win anywhere at the moment”.
He added that it was logical that
its leadership would focus on the
economic recovery and position
itself to benefit from the post-
pandemic world, a theme
repeated by UAE officials.
“They tested the proposi-
tion that military power can
bring hard returns, but it
turns out not really, so they
are adjusting,” Hokayem
said. “No one knows if there’s been a
shift in the leadership’s mindset. But
what you clearly see is the UAE reducing
its military involvement, reducing its
exposure and focusing on what is more
strategic in terms of its own macro-se-
curity and prosperity.”
Elham Fakhro, Gulf analyst at Crisis
Group, said the UAE had recognised that
the mood had shifted towards diplomacy
with the election of the Biden administra-
tion and believed it was “time to capital-
ise on that”. She added: “The UAE does
not want to be seen as overtly intervening
in regional conflicts such as Libya, or
arming allied actors. But I don’t think
they are moving away from their more
confrontational approach, they just want
to be smarter at it and that means
expanding their efforts at diplomacy and
mediation too.”
The Emirati official said the UAE was
“proud” of its “achievements” in
Yemen, citing its successes over al-
Qaeda affiliates and stemming the
Houthis’ advance. “The military
approach, we hadn’t used it much
before [and] we’ve now seen how effec-
Wednesday 9 June 2021
Armed might: a tive it can be, and sometimes can’t be,”
soldier loyal to the official said. “We’ve understood the
the UAE-backed costs — and things outside our control.”
government in Another person briefed on the shift
Yemen in 2018 said that as well as back channel talks
passes a mural with Iran, the UAE had been holding dis-
in Mukalla of cussions to reduce tensions with Tur-
late UAE key. “We want to be friends with every-
founder Sheikh one — from Israel to Iran,” the person
Zayed bin Sultan said, citing the UAE’s move to normalise
al-Nahyan. relations with Israel last year.
Left, Sheikh The Emirati official said Saudi Arabia
Mohammed bin was leading the outreach to Turkey,
Zayed al- adding that “our approach is to see what
Nahyan, crown happens there”. Turkey’s foreign minis-
prince, and the ter visited Saudi Arabia last month as
founder’s son part of efforts to resolve issues between
Karim Sahib/AFP/Getty
Riyadh and Ankara. President Recep
Tayyip Erdogan said last week that he
wanted to boost Turkey’s ties with
Egypt and Gulf states.
But Hokayem cautioned that the
‘We thought apparent move towards de-escalation in
the region was “very fragile”, warning:
about what “All the problems are still there and, just
is best for as we saw the limits of coercion under
Trump, we are now going to face the lim-
the UAE’ its of diplomacy.”
Wednesday 9 June 2021 ★ FINANCIAL TIMES 7
8 ★ FINANCIAL TIMES Wednesday 9 June 2021

INTERNATIONAL
GLOBAL INSIGHT
IRS data

Probe ordered into billionaires tax leak

DEFENCE

Legal strategies enabled
the 25 richest to pay just
$13.6bn over five years
ANDREW EDGECLIFFE-JOHNSON
NEW YORK
US tax authorities have launched an
investigation into a leak of private
records of billionaires including Warren
Its report concluded that legal tax-
avoidance strategies had allowed the 25
richest Americans to pay just $13.6bn in
federal income taxes in the five years to
2018, even as the rising value of their
stocks, properties and other assets had
inflated their collective wealth by an
estimated $401bn.
Charles Rettig, the IRS commissioner,
told a Senate finance committee hearing
that the agency had opened an investi-
Helen
Warrell
the article’s premise, saying that he ‘[The very viduals with net worth above $50m,
“scrupulously obeys the letter and spirit with a further 1 per cent surcharge imp-
richest
of the law” and distributes about
three-quarters of his annual income
in taxes and charitable giving.
Americans]
osed on any wealth above $1bn. Presi-
dent Joe Biden has proposed increases in
the tax rate on capital gains and divi-
Nato allies become
“The release of a private citizen’s tax
returns should raise real privacy con-
can
basically
dends for those earning more than $1m
but has not backed the wealth tax.
alert to the merits
cerns regardless of political affiliation or
views on tax policy,” he said. “We intend
to use all legal means at our disposal to
choose
Warren seized on the report, writing
on Twitter that it was time “to make the of AI co-operation
determine which individual or govern-
whether ultra-rich finally pay their fair share”.
Morris Pearl, who chairs the Patriotic

Buffett, Jeff Bezos and Elon Musk that
show many of them have paid little tax
even as their wealth ballooned.
ProPublica published details of what
it called “a vast trove of Internal Reve-
nue Service data” covering more than 15
years of tax returns from thousands of
the wealthiest Americans. The non-
profit investigative journalism outlet
did not disclose the source of the leak.
gation to uncover the source of the leak. ment entity leaked these and ensure
He said he shared “the concerns of every that they are held responsible.”
American” that sensitive confidential Some Democrats advocate a tax on
information had been disclosed. the richest Americans’ total wealth,
Mike Bloomberg, the financial data rather than focusing on annual incomes
tycoon and former presidential candi- that can be offset by deductions, bor-
date, pledged to use “all legal means” to rowing and investment losses.
uncover the source of the leak. Elizabeth Warren, the Massachusetts
The founder of the eponymous finan- senator, introduced legislation this
cial information group pushed back at spring to apply a 2 per cent tax on indi-
Agriculture. Record shipments
to pay taxes Millionaires, a group of wealthy cam-
or not’ paigners for higher taxes, said the very
richest Americans “can basically choose
whether to pay taxes or not”.
Bloomberg and Buffett have been
among those calling for higher taxes on
the wealthiest for several years but the
economic divides exposed by the pan-
demic have raised the political stakes.
The IRS did not provide a comment.
A
s Russia intensifies cyber hostilities and China
weaponises artificial intelligence, co-opera-
tion in high-tech warfare will feature high on
the list of topics Nato allies will discuss at a
summit next week. The 30 members will need
to move fast if they aim to make up lost ground.
Nato is proposing a tech innovation centre bringing
together military personnel with industry to foster digital
defence start-ups. Some might be financed by a separate
initiative, also to be debated: a venture capital fund for
innovation which member states could choose to opt in to.
The efforts are belated, as Jens Stoltenberg, secretary-
general, acknowledges. “For decades, Nato allies have
been leading when it comes to technology but that’s not
obvious any more,” he said last week. “We see China espe-

US farm belt thrives on Chinese demand
Healthy order books and high
crop prices boost incomes
while subsidies wane
AIME WILLIAMS — WASHINGTON
Donald Trump’s trade war with China
left US farmers dependent on govern-
ment handouts to survive. But China is
now at the heart of a reversal in farmers’
fortunes, as booming exports and soar-
ing food prices fuel a recovery in the US
agricultural economy.
The US is on course to ship a record
$37.2bn of farm goods to China this year,
led by sales of soyabeans, corn, tree
nuts, beef, wheat and poultry, the US
Department of Agriculture has forecast.
The sum is 23 per cent of total US agri-
cultural exports estimated at $164bn.
Increased demand from China, and
supply constraints on corn and soya-
beans caused by a drought in Brazil,
have driven a surge in global food
prices, providing a further boost for US
farmers. “Things have really turned
around,” said Mark Wilson, a corn
grower from Toulon, Illinois. “It’s look-
ing pretty nice right now.”
US farmers received unprecedented
government subsidies after China hit
back at Trump’s tariffs with punitive
levies on US farm goods in 2018. A
hoped-for reprieve in early 2020, when
Beijing pledged vast agricultural pur-
chases under a trade deal with the US,
quickly vanished as the coronavirus
pandemic spread and led Washington to
deliver more aid.
Government payments drove US net
farm income in 2020 to its highest level
since 2013, adjusted for inflation. USDA
economists forecast that income will
decline 8 per cent as many of those pay-
ments disappear in 2021. But at
$111.4bn, the total will still be 21 per
cent higher than average annual income
between 2000 to 2019.
Soyabeans, which are crushed to
make pig feed and vegetable oil, have
historically been the US’s biggest agri-
cultural export to China. But China has
also entered the market for US corn in a
big way, with 23.2m tonnes either
shipped or booked for the marketing
year that ends in August, compared
with fewer than 200,000 tonnes five
years ago, government data showed.
cially investing heavily in new, disruptive technologies like
artificial intelligence, autonomous systems, big data, and
they implement them into new advanced weapon systems,
drones, submarines, aircraft and so on.”
He is not the first to sound the alarm. Eric Schmidt, the
former Google chief executive who chairs the US National
Security Commission on AI, warned in March that Beijing
was planning to undermine conventional forces by “leap-
frogging” to new technologies. In a report, the commission
raised concerns that China would use AI for “reconnais-
sance, electromagnetic countermeasures and co-ordi-
nated firepower strikes”.
Part of the problem is that western defence institutions
have been slow to recognise the potential of innovation
beyond their own industry. “For decades, a lot of techno-
logical development
would happen within the
defence sector — the
‘The internet,
internet, nuclear, GPS, all nuclear, GPS,
of that was developed by
the defence industry and
all of that was
then shared with the developed by the
civilian sector,” Stolten-
berg said. “Now . . . it’s a
defence industry’
civilian sector leading in
the development of artificial intelligence, quantum com-
puting and many of the new disruptive technologies.”
Some Nato members are ahead of others. The US and
France have published military AI strategies, and the UK
said this year it is setting up a defence AI centre. Britain’s
Secret Intelligence Service is, for the first time, recruiting a
head for its technical branch from the private sector.
A Nato hub in which tech and military personnel work
on new ideas has advantages, said Professor Fiona Murray,
co-director of MIT’s innovation initiative. Start-ups and
Feeding time: Corn and soyabean prices this spring decent conditions, we just put the crop deal for the rising sales. He pointed to investors do not always have the time to tackle defence
beef cattle at neared record highs reached when a in the ground and it’s looking great right China’s partial recovery from African issues when solutions are “hard to test, markets are frag-
Senterfitt Farms brutal drought in the summer of 2012 now. So there’s a lot to be thankful for.” swine fever, which decimated the coun- mented and procurement is slow”, Murray said.
in Madison, devastated US production. While the The US farm belt’s strong sales to try’s pig herd, as a force behind feed Working together would create a wider market and
Virginia. Beef growing season is early, forecasters this China come as tensions grow between grain demand. enhance collective security, she noted. It was “not enough”
ranks high on year expect healthy crops, enabling Washington and Beijing. The Biden “I don’t think this is a temporary phe- for countries to be handling this individually, she said.
the list of farm farmers to take advantage of soyabeans administration in recent days declared nomenon,” Glauber said. “I think China The US has started marshalling allies on the policy
goods wanted by selling for more than $15 a bushel and dozens of Chinese companies off limits will continue to be a very strong implications of using new technology. The Pentagon’s AI
China corn above $6 a bushel. to US investors over national security importer.” Partnership for Defense, comprising 13 countries includ-
Al Drago/Bloomberg
“The handouts were just a Band-Aid concerns, while most of Trump’s tariffs The trade war that began in 2018 ing Nato members Canada, Denmark, Estonia, France,
to get us through, we always hoped we’d on Chinese goods persist. made some parts of the farm industry Norway and the UK, met virtually last year to agree joint
see this kind of demand and these kinds Whether the sales would continue wary of reliance on Chinese purchases. military standards. Schmidt’s commission has called on
of prices,” said Dave Walton, a soyabean was “the $64,000 question that every- John Baize, a consultant to the US Soy- the Five Eyes intelligence-sharing alliance comprising the
and corn farmer from Iowa. “We’ve got one wants to know the answer to”, said bean Export Council, said diversifying US, UK, Canada, Australia and New Zealand to work more
Scott Irwin, an agricultural economist at demand was a “major objective”, with closely on developing AI systems.
China’s consumers help boost US farmers the University of Illinois. But he added: the industry spending on marketing in Ulrike Franke, an expert in military technology at the
US agricultural exports to top five destinations ($bn) “I don’t see any reason that China’s buy- south-east Asia, north Africa and the European Council on Foreign Relations, said Nato’s tech
ing is going to alter substantially, at least Middle East. centre will be most effective if it prioritises systems
China on a global scale.” “We’re very dependent on China right designed to facilitate joint operations. The alliance should
Canada 40
Beijing promised to import at least now,” said Baize. “But, you know, look at areas such as AI-enabled command and control,
Mexico $80bn of US agricultural products over China’s heavily dependent on the rest of she said, which could give members a unified picture of the
Japan 30
EU and UK
two years in its early 2020 trade deal the world for its soyabeans, too.” battlefield across multiple regions, using intelligent data
20 with the White House. China was 22 per The American Farm Bureau Federa- analysis to sift information.
cent behind its commitment for 2021 as tion said it would not be pressing Wash- In the vast arena spanning drones to quantum comput-
10 of April, but was “catching up quickly”, ington for more subsidies. ing, there was a temptation to cover too much. “It makes
according to the American Farm Bureau In Iowa, Walton is cautiously optimis- massive sense for Nato to look more at this [technology],”
0 Federation, a lobby group. tic: “We’re going to see increased profits she said. “The question is, what exactly are they focusing
2001 05 10 15 21 Joseph Glauber, a former chief econo- for sure. It’s not going to be a big wind- on? There’s a danger of Nato spreading itself too thin.”
US fiscal years; 2021 is a forecast
Source: US Department of Agriculture
mist at the agriculture department, was fall, or diamonds, but it’s going to be
reluctant to credit the preliminary trade comfortably profitable for a while.” helen.warrell@ft.com

Economist’s research Southern Africa

Beijing’s claim of ending poverty challenged
CHRISTIAN SHEPHERD AND YUAN YANG
BEIJING
The Chinese Communist party’s claim
that it had eliminated extreme poverty
has been challenged by a study by a
former UN economist that argues Bei-
jing used a limited and inflexible defini-
tion of what it means to be poor.
Late last year, the party announced that
extreme poverty had been successfully
eradicated, despite negative economic
growth in the first half of the year
caused by the coronavirus pandemic.
Hitting the target on schedule deliv-
ered a propaganda coup for President Xi
Jinping ahead of celebrations of the cen-
tenary of the party’s founding in July
this year.
Beijing has also offered up its
approach as worthy of study across the
developing world and released a white
paper describing how China achieved its
“final victory” against poverty.
However, research published yester-
day by Bill Bikales, former senior econo-
mist for the UN in China, said that China
has not done enough to claim final vic-
tory over poverty.
“China has not eradicated poverty —
even extreme poverty. And it will not
until it has viable systems in place that
will identify poor people every-
where . . . and until the country provide
a safety net for all its people [including]
those who are hit by a death, serious ill-
ness, loss of work or other shock,” he
wrote in the report, funded by the Swiss
Agency for Development and Coopera-
The eradication
of poverty has
been billed as a
triumph ahead of
the Communist
party’s centenary
tion. Bikales agreed that last year’s mile-
stone was “indisputably an achieve-
ment of great historical significance”
and that all available evidence sug-
gested China did what it set out to do.
But that success remains distinct
from having eliminated poverty,
because the static definitions Beijing
used were at odds with the international
realities of poverty, which change.
The Chinese government did not
respond to a request for comment
In the April white paper, China
described the targeted system adopted
under Xi as the “strongest weapon”
towards reaching “complete victory”
and “eliminating overall and extreme
poverty for the first time in [China’s]
history of thousands of years”.
China considers poverty to be a purely
rural phenomenon, even though more
than 60 per cent of its population lives
in urban areas.
Launched in 2013, Xi’s campaign
identified all rural poor — 89.98m in
2015 — and logged them in a database. It
then mobilised vast resources to ensure
they were no longer below the poverty
line by the end of 2020.
The rigid approach meant that even
when the coronavirus pandemic pushed
economic growth into decline, anti-
poverty work in China focused on aiding
the remaining 5.51m registered rural
poor on the original list. Few resources
were directed towards vulnerable
households who were not originally reg-
istered as poor. “To accurately capture
the impact of Covid-19 on poverty any-
where other than in the already identi-
fied counties and villages would have
required systems that were simply not
in place,” Bikales wrote.
German solar company pursues Lesotho debt
JOSEPH COTTERILL — JOHANNESBURG
A German solar company is stepping
up efforts to seize assets from Lesotho
as it pursues the tiny mountain king-
dom for damages after it reneged on its
contract to build a power station.
Frazer Solar has begun seizing Lesotho’s
assets abroad in order to enforce €50m
in contractual damages. It has already
taken control of royalties Lesotho earns
on water and power supplies to South
Africa, after a US court gave it the go-
ahead last month to employ tactics simi-
lar to those used by creditors to chase
countries that have defaulted on debts.
International asset seizures have
increasingly become part of enforcing
contracts against governments. Earlier
this year, a construction company
sequestrated an international bank
account of the Republic of Congo’s state
oil group over a contractual dispute.
Lesotho, one of the poorest countries
in southern Africa, reneged on an “out-
standing opportunity” to acquire
renewable energy assets, including a 20-
megawatt solar plant, when it aban-
doned a deal to finance the project in
2018, Frazer Solar said. This was despite
a sign-off by the office of the then prime
minister, it added. A South African arbi-
trator this year said the company should
have about half of the €100m in dam-
ages it sought.
Moeketsi Majoro, Lesotho’s prime
minister, said he did not know about
Frazer Solar’s damages claim until it was
reported in South African newspapers.
‘Lesotho’s properties are
protected . . . and we don’t
think the action that they
are proposing will succeed’
“Lesotho’s properties both in Lesotho
and overseas are protected and we don’t
think the action that they are proposing
will succeed,” Majoro said last month.
But Frazer Solar said that it had noti-
fied the government more than two
dozen times about its lawsuit and the
seizures. The group has also moved to
seize Lesotho’s shares in the Mauritius-
based West Indian Ocean Cable Com-
pany, one of Africa’s biggest internet
infrastructure providers.
The seizures are a big blow to Lesotho,
where public spending makes up half of
gross domestic product. More than half
of the 2m population are subsistence
farmers and many people work in South
Africa, sending remittances equivalent
to about a fifth of GDP.
The arbitration found the deal failed
because Majoro, then finance minister,
favoured a rival project backed by Chi-
nese investors. The government of
Lesotho did not attend proceedings, it
added. The prime minister did not
respond to a request for comment.
Majoro took power last year after
Tom Thabane stepped down over a
police investigation into the murder of
his ex-wife. Thabane denies wrongdo-
ing. Thabane, whose premiership was
marked by scandals over the alleged
looting of public contracts, has always
denied corruption.
Frazer Solar “skipped a whole lot of
steps — they also had a role to play in
this thing”, said Kanono Thabane, man-
aging director of Arbitrage, a Lesotho
renewable energy company.
The German company said that it had
met the Lesotho government’s guide-
lines on deal approval “at every stage
preceding the signing of the contract”.
Wednesday 9 June 2021 ★ FINANCIAL TIMES 9

Robin Wigglesworth AI might mean the start of a textual revolution that could upend investment decisions y MARKETS INSIGHT, PAGE 14

Cloud group Chip crunch Carmakers must ‘put money on

table’ to avoid supply shortages, warns Bosch
Lithuanian
fintech in
outage brings Wirecard case
loses licence
down websites RICHARD MILNE
NORDIC AND BALTIC CORRESPONDENT

across world
Lithuania’s central bank has revoked
the licence of a fintech implicated in
the Wirecard scandal because of
breaches of anti-money-laundering
and counter-terrorist financing rules.
Prosecutors in Munich suspect that UAB

3 US-based Fastly admits to glitch Finolita Unio, a fintech registered in Vil-

nius, was used to steal more than €100m

3 Millions of internet users disrupted
TIM BRADSHAW
GLOBAL TECH CORRESPONDENT
Thousands of websites went offline for
as much as an hour yesterday, including
several of the world’s largest news sites,
streaming services, online retailers and
even the UK government, disrupting
millions of internet users.
Connectivity problems appeared to
affect news sites including the BBC, New
York Times, CNN and FT.com, stream-
ing services Spotify, Twitch, Hulu and
HBO Max, payments service Stripe and
message board Reddit. Together, the
online services reach hundreds of mil-
lions of people every day.
Fastly, a Silicon Valley-based internet
infrastructure provider, admitted that a
problem with its systems caused the
‘We were offline for a few
minutes because the whole
internet broke down’
Jitse Groen, Just Eat chief
outage. It blamed a configuration error
but has not provided a full explanation
of what went wrong.
The group operates a content delivery
network, which is designed to facilitate
faster loading times for web pages and
larger files such as music and video.
Other large CDN providers include
Cloudflare, Akamai and Limelight. “We
identified a service configuration that
triggered disruptions across our POPs
[points of presence] globally and have
disabled that configuration,” said Fastly.
Though that would appear to rule out
foul play, the UK’s National Cyber Secu-
rity Centre, a branch of GCHQ, said: “We
are aware of an issue affecting a number
of websites and are working to under-
stand the cause.”
CDNs store their corporate custom-
ers’ data on servers all over the world,
easing the burden on the “backbones” of
the internet by bringing content closer
to consumers’ smartphones and PCs.
“It’s astonishing that one small piece
of the immense jigsaw that powers the
internet is able to cause such a massive
outage,” said Ben Wood, an analyst at
CCS Insight. “On the one hand, it’s an
unbelievably robust platform. On the
flip side, these occasional blips under-
line the fragility of its fabric.”
Previous large-scale internet infra-
structure outages have been triggered
by problems at widely used cloud host-
ing services such as Amazon Web Serv-
ices, as in November last year, or the
domain-name services that link a web-
site’s numerical internet code to its user-
friendly .com address, as experienced
by Cloudflare DNS customers in 2020.
Fastly’s online status page started
reporting problems with its CDN serv-
ices at 09.58 UTC. After 59 minutes, it
said: “The issue has been identified and
a fix has been applied. Customers may
experience increased origin load as glo-
bal services return.”
Even an hour-long outage can cost
millions of dollars in lost advertising
revenues and online sales for the many
companies that rely on vital infrastruc-
ture providers such as Fastly.
“We were offline for a few minutes
because the whole internet broke
down,” Jitse Groen, chief executive of
food-delivery group Just Eat Takea-
way.com, wrote on Twitter.
As well as big media groups, Fastly’s
website lists ecommerce platforms
Shopify and Stripe, and retailers includ-
ing Wayfair, Boots, Dunelm, Ticketmas-
ter and Deliveroo among its customers.
Shares in Fastly, which is listed on the
New York stock exchange with a market
capitalisation of just under $6bn, were
about 2 per cent lower in pre-market
trading yesterday.
Additional reporting by Helen Warrell
A technician prepares Bosch’s €1bn semiconductor factory in Dresden to start production — Jens Schlueter/AFP via Getty Images
JOE MILLER — FRANKFURT
Bosch, Europe’s largest auto supplier,
has warned car manufacturers that
they must “put money on the table”
and make a “rock solid” commit-
ment to orders if they are to avoid a
repeat of the chip shortage bedevil-
ling the industry.
“The only way to get out of [the recent
crisis] is to have a different level of
commitment,” said Harald Krüger, a
board member at the privately owned
German group.
Automakers can no longer make
last-minute decisions based on fluctu-
ations in demand, said Krüger, point-
ing to the long lead times in chip pro-
duction and increasing demand for
the semiconductors.
“Money needs to be put on the table
and actually parts have to be bought,”
Krüger said. “The commitment needs
to be rock solid that those parts will be
bought. It can’t be: ‘Maybe I [will] buy
them, prepare for it, and maybe not.’
This doesn’t work.”
Carmakers have been forced to
scale back production after a robust
rebound in sales this year caught
them flat-footed and battling against
the consumer electronics industry for
a limited supply of chips.
The industry is expected to produce
at least 1m fewer cars than initially
forecast this year, with several com-
panies, including Bosch, warning that
shortages will continue into 2022.
The deepening crisis has already
prompted some to consider radical
measures. Last month, the Financial
Times reported that Tesla was about
to take the unusual step of paying for
chips in advance while also exploring
buying a semiconductor plant.
The bosses of Mercedes-Benz
maker Daimler and Volkswagen’s
Porsche told the FT this year that
their companies were considering
building up stockpiles of the crucial
components, in a departure from the
industry’s decades-old “just in time”
procurement system.
Krüger’s intervention came as
Bosch opened a new semiconductor
factory in Dresden, which will pro-
duce chips on 300mm wafers.
The €1bn plant is the largest invest-
ment in the company’s history. The
vast majority of semiconductors
made there will end up inside Bosch’s
own automotive parts.
“By doing our own stuff we can ease
some pain in the system,” Krüger said,
although he added that the ramp-up
“will take some time”.
The decision to build the plant was
made four years ago. Krüger said
competitors would find it hard to fol-
low belatedly. “It is mission impossi-
ble to enter now into the game. It
would be so much effort, and too
much time needed to get something
meaningful out of [the investment].”
Taiwan disruption page 10
from Wirecard just before the German
payments company collapsed, the
Financial Times reported last month.
The Bank of Lithuania said Finolita
had treated anti-money-laundering and
counter-terrorist financing rules “irre-
sponsibly”, failing to assess the risks of
its customers and adequately check
identities and beneficial owners.
The Finolita case has given rise to
scrutiny of Lithuania which, following
the UK’s departure from the EU, has the
highest number of fintechs in the bloc.
Some politicians in both Lithuania and
Germany called Finolita a “wake-up
call” over the need to keep up with the
fast-moving fintech sector.
Marius Jurgilas, the Lithuanian cen-
tral bank board member responsible for
supervision, said yesterday it would be
“unfortunate” if there was a perception
that “we could be under pressure”.
The Lithuanian central bank con-
tacted local payment companies in June
2020 after the German financial regula-
tor belatedly acknowledged problems at
Wirecard, which went bust shortly
afterwards. It identified issues at Finol-
ita and began a formal investigation in
the autumn of 2020.
The probe found Finolita had failed to
comply with rules on international
sanctions and “inadequately moni-
tored” operations of people related to
the company.
German prosecutors suspect that part
of a €100m loan granted by Wirecard in
March 2020 to a subsidiary of Finolita’s
owner, Singapore-based Senjo Group,
and processed by the Lithuanian
fintech, was channelled to Jan Marsalek,
Wirecard’s now fugitive second-in-
command.
Finolita said the revocation of its
licence was “extremely severe”, espe-
cially because it had notified the central
bank of the suspicious payments and
was in the middle of selling itself to new
investors, having already transferred
voting rights from Senjo to an independ-
ent trustee. It added that it would appeal
against the decision.

Contracts & Tenders

Hong Kong’s Covid policies threaten its role as a financial hub
Although the government is scram-
INSIDE BUSINESS bling to improve vaccine rates, it has yet
to connect its plan for this to a strategy
ASIA to reopen borders. This has led to fears
that the city will be left behind when
Tabby Europe and the US reopen this summer,
at a pivotal time for its reputation as a
Kinder global financial centre.
“We are effectively signalling that we
are closed for business,” one Wall Street
banker in Hong Kong said this week.
lation of 7.5m), the territory is at risk of
becoming trapped in a purgatory of
small outbreaks and extreme restric-
tions. A proposed travel corridor with
Singapore has been delayed twice due to
rising cases.
Managers at Hong Kong’s biggest
international banks were briefly excited
last week when the government
announced that up to four executives at
a company could fly in each month

T
here has been more
outspoken criticism of
Hong Kong government
policy from business and
finance circles in the past
two months than in two years of
political and social turmoil.
A slow Covid-19 vaccine rollout com-
bined with the failure to outline an exit
plan from the pandemic has finally lit a
fire under the territory’s bankers.
Hong Kong’s financial services sector
has enjoyed a gilded status, contributing
more than a fifth of the territory’s gross
domestic product each year. About 70 of
the 100 largest banks have operations in
the city, and have so far been mostly
shielded from the consequences of Bei-
jing’s tightening grip over Hong Kong.
Now the bankers are revolting. It is
just over 100 days since Hong Kong
started rolling out vaccines, and only
about 17 per cent of adults — and less
than 5 per cent of people over 70 — have
come forward for the jabs. That is half as
many as in London and Singapore.
The disappointing vaccination pro-
gramme, hampered in part by mistrust
in the government, has crushed hopes
of international travel for people in
Hong Kong. Borders remain closed to
foreign visitors and a punishing two- or
three-week hotel quarantine for return-
ing residents has created a de facto lock-
down that is entering its second year.
“Hong Kong’s position as an important
financial centre is in question.”
Frederik Gollob, chair of the terri-
tory’s European Chamber of Commerce,
said the quarantine rules meant “Hong
Kong could lose its competitive edge to
attract top talent”, and people were
already leaving “for good”.
Even HSBC, which has been burnt
before by airing an opinion on Hong
Kong policy, has
told the govern- ‘It’s like day release for
ment that “safe-
guarding public prisoners’ as executives
health and allow- are told to return to
ing business travel
to gradually get quarantine at the end of
back to normal can each day of meetings
coexist”.
By cocooning itself, Hong Kong has
stumbled into a compelling experiment:
how long can a financial centre survive
without foreign travel? How long will its
large expat community put up with not
being able to go abroad? How long can
airlines and hotels cope without busi-
ness travel or tourism?
The government has yet to set out a
timeline that would let these businesses
and individuals plan ahead.
Hong Kong chief executive Carrie
Lam has said she will not “sacrifice the
safety of the people of Hong Kong just to
rush reopening borders”. But like other
places that suppressed the virus (Hong
Kong has had just 210 deaths in a popu-
without having to quarantine.
The small print has since damped
sentiment. It revealed that they would
have to return to quarantine at the end
of each day of meetings.
“It’s like day release for prisoners,”
said David Webb, a high-profile activist
investor.
For now, Hong Kong has revived its
inoculation campaign with zeal. Local
newspapers have been plastered with
adverts. Businesses have been encour-
aged to do their part. Bookings for vac-
cines are climbing.
Yet businesses are still confused about
Hong Kong’s goal. Is it to reopen to the
world before rival Asian hubs such as
Singapore, or to open the boundary with
mainland China? If the latter, Hong
Kong would be at the behest of Beijing
for its timeline for reopening to interna-
tional travel. That would probably
mean a much longer delay than if the
decision on travel had been made for Public Notice
Hong Kong alone.
Hong Kong has so far only approved
quarantine-free travel for government
officials and executives of big mainland
companies such as Tencent. To some in
the international finance community, it
is a signal that Hong Kong has accepted
its fate as a global financial centre for
China that is at risk of becoming too reli-
ant on Chinese capital.
tabby.kinder@ft.com
10 ★ FINANCIAL TIMES Wednesday 9 June 2021

COMPANIES & MARKETS

Technology Pharmaceuticals

Nvidia seeks Beijing’s backing on Arm Biogen draws

Battle over China business
adds to challenges as deal
is submitted to watchdog
RYAN MCMORROW — BEIJING
RICHARD WATERS — SAN FRANCISCO
Nvidia has submitted an application to
Chinese competition regulators to
according to Chinese antitrust lawyers.
That would exceed the 18-month time-
line set out by Nvidia when it unveiled
the deal last September.
China is a big market for Arm, which
licenses its energy-efficient chip designs
through a local joint venture. Its sales in
the country, which two people familiar
with the venture put at $500m in 2019,
give Chinese regulators the right to
Israeli company Mellanox, which was
announced in 2019, in which Chinese
regulatory approval was the last step in
a 13-month process. “China usually
The application to review
the $40bn takeover of
the UK chip designer kicks
familiar with the thinking of China’s
antitrust regulators said the country’s
chipmakers, such as Huawei’s HiSilicon
and Semiconductor Manufacturing
International Corporation, as well as
state-backed chip investment group
E-Town Capital, had opposed the deal.
Their concerns stemmed from fears
of handing greater control of the designs
that underpinned China’s chip industry
criticism for
$56,000 cost
have yet to produce results. Wu brought
proceedings against Arm China last of Alzheimer’s
treatment
summer in Shenzhen, where the ven-
ture is registered. The lawsuit, filed by
two Arm China shareholders under
Wu’s control, alleged that the board’s
decision to remove him was invalid. Wu
has been permitted to represent both NIKOU ASGARI — NEW YORK
HANNAH KUCHLER — LONDON
Arm China and the two investors, mak-
ing him both plaintiff and defendant.
KIRAN STACEY — WASHINGTON

review a $40bn takeover of UK chip
designer Arm, according to people
familiar with the matter, roughly eight
months after it announced the deal.
The application, which the people
said was made in recent weeks, sets in
motion a period of scrutiny that could
take between a year and 18 months,
review the acquisition.
Jensen Huang, Nvidia chief executive,
said last month that the US chip com-
pany had “started the process” of engag-
ing with Chinese regulators. He was con-
fident the deal would be cleared within
the timeframe set by Nvidia.
He referred to Nvidia’s purchase of
Financials. Blank-cheque vehicles
off a period of scrutiny
comes after all the other regula-
tors . . . This is consistent with the last
experience I had,” he said.
Nvidia said the “regulatory process is
confidential and we are not able to com-
ment on its progress”. Several people
to US-based Nvidia. But Huang said a
union between Arm and Nvidia would
“only bring more innovation”.
Arm is fighting a battle for control of
its China business, after it and its part-
ners failed to oust the head of its joint
venture, Allen Wu. Wu remains in legal
control, and negotiations for his exit
“He is basically suing himself,” said a
person close to the matter.
The Shenzhen court has yet to hold an
official hearing for the case.
Wu and Arm China did not respond to
a request for comment.
Additional reporting by Qianer Liu
in Shenzhen
Biogen’s decision to price its newly
approved Alzheimer’s treatment at
$56,000 a year has reignited the debate
over the high cost of drugs in the US,
the world’s largest and most profitable
healthcare market.
Shortly after securing US approval on
Monday for the first new Alzheimer’s
medicine in almost two decades, the
Massachusetts-based biotech group
announced a price that was well above
even the highest analyst estimates.
Evercore ISI had been expecting a

Ackman’s Universal Music deal heralds Spac 2.0
Hedge fund magnate’s
Pershing Square rewrites
rules after boom cools
ORTENCA ALIAJ AND
JAMES FONTANELLA-KHAN — NEW YORK
Bill Ackman has already once tried —
and failed — to redefine the Spac. Now
he is trying again.
The hedge fund manager’s special
purpose acquisition company, Pershing
Square Tontine Holdings, which raised
$4bn last year, was not just the largest
blank-cheque vehicle launched; it did
away with some of the perks for found-
ers, such as free shares, which have
given the Spac phenomenon a bad name
in some quarters.
Few Spacs followed the model, as the
boom in new issues continued into this
year, only to cool suddenly in the past
few months. With his complex deal to
buy a stake in Universal Music and split
PSTH into three, announced on Friday,
Ackman is positioning himself for the
next phase of the Spac era.
The headline acquisition was not
what anyone expected.
Instead of buying a Bloomberg or a
Stripe, private companies of the size and
stature to go public in the US through a
$4bn Spac, Ackman said he was pur-
chasing a 10 per cent stake in the music
publisher at a $40bn valuation and
would distribute Universal shares to
PSTH investors after the company lists
in Europe later this year.
That looked more like a short-term
hedge fund deal than a traditional Spac
transaction. Yet it was the other parts of
the announcement that could be a har-
binger of what is to come for Spacs, as
they navigate a new landscape of inves-
tor scepticism and regulatory pressure.
After the distribution of Universal
Music shares, PSTH will carry on as a
smaller blank-cheque group that will
continue to hunt for targets. There is
also to be a new vehicle that will give his
current investors an option to
finance another future transac-
tion, but without having to pony
up the cash in advance as they
do in a traditional Spac.
The three-pronged plan ini-
tially sent shares in PSTH down
to their lowest since September
last year, but on Monday
they had rebounded a
bit as investors
digested Ackman’s
ability to get out of a
tough situation in a
fairly elegant way.
Universal is PSTH is hardly the only Spac strug-
home to artists gling to find a full-blown acquisition.
including Billie After the burst of fundraising, more
Eilish. Bill than 400 are looking.
Ackman, below, Michael Ohlrogge, an assistant profes-
is buying a 10% sor at New York university, said it was
stake in the hard for Ackman to find a decent deal in
group before part because valuations of private com-
distributing panies willing to go public had reached
shares via his feverish heights over the past year.
PSTH vehicle “To the extent that Ackman wasn’t
Luigi Rizzo/Pacific Press via
ZUMA Wire/Shutterstock
able to find a deal that could deploy all of
his Spac’s capital in a company at a rea-
sonable valuation, I think that it’s good
that he found a creative alternative as he
did,” Ohlrogge said.
Now investors will have two more
opportunities to participate in deals led
by Ackman, neither of which will be
under the usual constraints of Spacs.
PSTH will remain a cash shell com-
pany that will have access to up to
$2.9bn through an agreement with
Ackman’s hedge fund, but this
time there will be no two-year
time limit. Pershing Square
funds will own about 29 per
cent of the company.
The other vehicle is a new entity that
Ackman is calling a special purpose
acquisition rights company, or Sparc,
whose holders will have an option
but not an obligation to participate in
the next deal. The Sparc will list on
the New York Stock Exchange, but
unlike a Spac, it will not raise money
before finding a target and there is no
obligation on PSTH investors to exercise
the option. If they choose to do so, they
will pay $20 a share.
Shivaram Rajgopal, a professor at
Columbia Business School, said there
were positive aspects.
“The Sparc structure goes a step fur-
ther than the Spac and gives better
options to the capital providers. It
involves a little bit less ‘Trust me with
the money’ kind of situation that we
have with Spacs.”
The US Securities and Exchange Com-
mission has put the brakes on the Spac
phenomenon since a record number of
fundraisings in the first two months of
2021. It has stepped up scrutiny of deal
announcements, warned promoters
against making outlandish growth fore-
‘The Sparc casts for the companies they acquire
and forced Spacs to make time-consum-
structure ing changes to their accounting.
goes a step Criticism of Spacs has reached Con-
gress. “It appears that Spac mergers
further and are structured to ensure Wall Street
gives better insiders receive huge profits, and retail
investors pay the costs,” Maxine Waters,
options to the California Democrat who chairs
the capital the House of Representatives commit-
tee on financial services, said at a hear-
providers’ ing last month.
Investor enthusiasm for Spacs has
Shivaram further waned this year in part because
Rajgopal,
Columbia of the poor share price performance
Business School from companies that have announced
or completed their acquisitions.
The two-year time limit imposed on
Spacs is thought to lead to lower quality
deals as sponsors, faced with losing their
initial investment if they fail to strike a
deal, rush to woo companies that may
not be ready to go public. The Sparc
could help alleviate the pressure and
potentially lead to better dealmaking.
“This structure makes far more
sense,” Rajgopal said. “I think this is
Spac 2.0.”
pricetag of $10,000-a-year while UBS, at
the upper end of the range, had pre-
dicted $24,000.
Drug pricing campaigners sharply
criticised Biogen for the price it assigned
to the drug, called aducanumab, adding
to years of criticism levied at the com-
pany over the high cost of its medicines
for conditions including multiple sclero-
sis and spinal muscular atrophy.
They said the price of the Alzheimer’s
medicine, which will be sold under the
Aduhelm brand name, was particularly
egregious given that it has proved so
divisive among doctors and scientists,
many of whom say there is scant evi-
dence that it even works.
Michael Carome, director of the
health research group at Public Citizen,
said “these costs to patients, to their
families, are just not justified based
upon what we know about this drug”.
Carome also hit out at the US Food
and Drug Administration for approving
aducanumab in the first place. The
agency gave a green light to the medi-
cine — despite staunch opposition from
a panel of its own scientific advisers —
using an “accelerated pathway” that
allows it to sign off on drugs in advance
of conclusive clinical trial data.
Carome said the medicine’s approval
was “one of the worst decisions the
agency has ever made” and “eviscerates
the . . . standards for approving new
drugs”.
The FDA’s decision to approve the
drug for all Alzheimer’s patients, rather
than only the subset of mild sufferers it
was tested on, surprised investors.
Biogen’s shares closed up 38 per cent
at $395.85 on Monday, a six-year high.
David Mitchell, founder of Patients
For Affordable Drugs, said: “The people
who are going to be asking for [aducanu-
mab] are going to pay $56,000 for
hope.”
The Institute for Clinical and Eco-
nomic Review, a US non-profit that tries
to calculate a fair price to drugs, said the
treatment was worth between $2,500
and $8,300 per year based on existing
evidence.
ICER also hit out at the FDA’s decision,
saying the agency had “failed in its
responsibility to protect patients and
families from unproven treatments
with known harms”, referring to the
brain swelling experienced by some
participants in clinical trials.
Aducanumab is the first drug that has
been approved to slow down the pro-
gression of Alzheimer’s, in contrast to
other medicines that treat the symp-
toms rather than altering the course of
the disease.
The FDA’s decision creates a conun-
drum for regulators in other countries,
which will have to decide whether to fol-
low its interpretation of the evidence in
favour of approval.
See Lex

Automobiles Technology

Cheaper car batteries spark fears over waste
HENRY SANDERSON
Some of the world’s biggest carmakers
risk creating a waste problem for the
future by using cheaper electric car
batteries made in China, according to
Europe’s largest battery materials
company Umicore.
Tesla, Volkswagen and Ford have all
said they will use lithium batteries that
contain abundant iron rather than more
valuable metals such as nickel and
cobalt in some of their electric cars in
order to make them less expensive.
But Marc Grynberg, chief executive of
Umicore, warned that they would have
to pay more to have the batteries recy-
cled once they reached the end of their
lives. The cost may be borne by manu-
facturers if vehicles are within war-
ranty.
“The recycling will come at a different
cost which is not being factored into the
equation so far,” said Grynberg. “The
lower the metal value, the higher the net
cost you have to incur to get the material
recycled.”
The transition to electric cars is
expected to create a large amount of
waste batteries over the next two dec-
ades. Electric vehicle batteries will last
an average of about 15 years, according
to consultancy Circular Energy Storage,
after which they can be reused in other
applications or recycled.
Most lithium-ion batteries in electric
cars contain nickel and cobalt, as well as
lithium — metals that are expensive to
extract.
But the use of alternative lithium-iron
phosphate batteries, which contain no
cobalt or nickel, has surged in China in
recent years, as carmakers look to
reduce the cost of electric vehicles to
make them competitive with petrol
rivals.
While they are less powerful, they can
reduce the costs of manufacturing the
battery by about 20 per cent, according
to McKinsey.
Last week Tesla’s chief executive Elon
Musk said on Twitter that “iron cathode
cells are now competitive for stationary
[energy storage] packs & mid range
cars”.
Because iron is cheap and abundant
there is little profit to be made from
recycling it, reducing the incentives.
Grynberg said the value of recovered
iron was low, while he had “no clue”
whether the phosphates would be recy-
cled. “The value of the materials
included in an LFP battery are very
low,” he said.
Umicore is Europe’s largest battery
recycling company and also produces
materials for battery makers such as
South Korea’s LG Chem.
Last week it pledged to be carbon neu-
tral by 2035 for its direct Scope 1 and
Scope 2 emissions.
The Brussels-based company is work-
ing with BMW and Swedish battery
start-up Northvolt on using more recy-
cled metals in car batteries.
Covid spread threatens Taiwan chip supplies
KATHRIN HILLE — TAIPEI
The spread of Covid-19 into Taiwan’s
electronics factories is threatening to
delay chip shipments, according to
companies and analysts, raising the
prospect of renewed disruption to an
industry gripped by a global shortage.
The country, viewed as a linchpin in the
world’s semiconductor supply chain, is
suffering from its first large coronavirus
outbreak. It has come against a back-
drop of warnings about the chip short-
age, which has hit everything from cars
to consumer electronics.
King Yuan Electronics, a chip testing
and packaging company, said on Mon-
day that it expected an outbreak among
its workers to reduce its June output and
revenue by up to 35 per cent. Of KYEC’s
7,300 staff, 238 are confirmed to have
been infected with Covid-19.
An outbreak among migrant workers
in Taiwan has also hit chip packager
Greatek, telecoms gear producer Accton
and Foxsemicon, a semiconductor
equipment maker affiliated with Apple
supplier Foxconn.
Taiwan reported 214 new Covid-19
cases yesterday, 211 locally spread, and
26 deaths. The country has recorded
more than 11,000 cases and 260 deaths
since the start of the pandemic.
238 11,000
Confirmed Covid Recorded cases
infections in chip of the virus in
testing specialist Taiwan since the
KYEC’s workforce pandemic began
KYEC and Foxsemicon have each
closed one factory for two days for disin-
fection, and all four companies are test-
ing their entire workforce.
“The supply market is already under
huge pressure, we have already got four
months lead time from order to delivery
for Taiwan chips, so any further reduc-
tion in supply capacity is going to exac-
erbate the shortage as it stands,” said
Olaf Schatteman, a supply chain expert
at Bain, the consultancy.
KYEC and its ilk test and package
chips produced by contract manufac-
turers such as Taiwan Semiconductor
Manufacturing Company. Those are the
last steps in a complex manufacturing
process before the chips are shipped to
the companies that designed them.
Among KYEC’s customers is Medi-
aTek, one of the world’s largest chip
design houses, which sells semiconduc-
tors for electronics gadgets from smart-
phones to televisions.
Analysts said there were few options
for customers of KYEC and Greatek to
shield themselves from delivery delays
as other testing and packaging compa-
nies were running at full capacity.
Mark Li at Bernstein, said the disrup-
tion was likely to be short term. “My
guess is that it will mostly hurt smaller
chip design houses as priority will be
given to large customers,” he said.
Wednesday 9 June 2021 ★ FINANCIAL TIMES 11

COMPANIES & MARKETS

Europe’s banks take on US payments ‘oligopoly’

A processing system for the continent is seen as a matter of sovereignty and competitive survival as the threat from Big Tech grows
DAVID KEOHANE — PARIS
OLAF STORBECK — FRANKFURT
The last time Europe’s banks tried to
build a payments group capable of tak-
ing on the US companies that dominate
the sector, they failed miserably.
But when Project Monnet collapsed
in 2011, nobody was talking about
the commercial threat from US
tech companies; and the EU’s politicians
had not just lived through the Trump
presidency.
Now, with those politicians convinced
that a European payments system is a
question of sovereignty, some of the cur-
rency area’s largest lenders have teamed
up to launch a new attack on the US
rivals that dominate the market.
It got off to a rocky start last summer
when US soft drinks group PepsiCo
objected to its proposed name: the Pan-
European Payment System Initiative,
or, Pepsi.
However, backers are still optimistic
that the idea, now dubbed the European
Payments Initiative, can succeed.
In 2011 “there was no political sup-
port at all”, Wolf Kunisch, head of strat-
egy at Paris-based payments processor
Worldline, said. Now “the European
Commission and the European Central
Bank . . . understand that to have Euro-
pean sovereignty you also need to have
European payment systems in place”.
The realisation that a US president on
any given day could decree Mastercard
or Visa should no longer do business
“with a certain part of the popula-
tion . . . that is too much of a depend-
ence”, said Kunisch.
EPI is backed by 30 banks and two of
the continent’s largest payments proc-
essors. It is tasked with creating a pan-
European payments service that can be
used to pay online as well as in stores, to
settle bills between individual consum-
ers and to withdraw cash at ATMs.
It is designed to break up what its
chair Joachim Schmalzl calls a US-domi-
nated “oligopoly”. Europe’s banks are
considering their own interests, aware
that if they do not act now, they could be
challenged by tech companies such as
Apple and Google, which are increas-
ingly on their turf.
“If we don’t build a European player
in payments today, it will be either Chi-
nese or Americans [calling the shots],”
said Philippe Heim, chief executive of
France’s Banque Postale.
Schmalzl, who is also a board member
of the German Savings Banks Associa-
tion, the country’s biggest retail banking
group, said those rivals would “increas-
ingly take away market share” from
European banks.
Today, four in five transactions in
Europe are handled by Mastercard and
Visa, according to EuroCommerce, a
lobby group of European retailers.
While on the other side of the table, the
banks and acquirers driving EPI process
more than half of all EU payments.
The critical mass of business brought
by banks such as Deutsche, BNP
Paribas, ING, UniCredit and Santander
give the EPI weight. The Brussels-
based entity has until September to
draw up a blueprint. If the banks behind
EPI then give the green light, the first
real-world applications could be
launched in early 2022.
Some obstacles that brought down the
2011 Monnet project have disappeared.
Back then, European banks owned Visa
Europe — an independent company
until it was bought back by its parent in
2015 — and were reluctant to build a
competitor. Now the profit motive is
clearer.
Heim added: “If it is our tool, it means
that the margin is ours. Because we have
seen that with Visa Europe or Visa Inc,
or Mastercard at the end of the day, the
financial conditions are imposed on us
by the big operators.”
Working groups are meeting weekly
Use of non-cash payments increases in Europe
Transactions (bn)
Card payments
Credit card transfers
Direct debits
Cheques
2000 05 10 15
Source: ECB
to try to hammer out the shape of the
EPI, but there are hurdles.
“It is not the case that the world has
been waiting for another player that
offers additional [payments] solutions,”
said Schmalzl, adding that EPI’s prod-
ucts “of course need to be as customer-
friendly, if not better” than the offerings
from Visa, Mastercard and PayPal.
EPI faces a chicken-and-egg dilemma.
For a system to work, you need mer-
chants ready to accept payments and
users ready to make payments. Having
both in place at the same time is not an
‘If we don’t build a player
today, it will be either
Chinese or Americans’
Philippe Heim, Banque Postale
easy task, particularly since the full roll-
out could take years, and a bad start
could kill EPI’s chances of success.
One French banker involved in the
project said: “It took a decade and a pan-
demic for contactless payments to really
get going.”
One question is whether German and
French banks will be willing to migrate
existing national payment schemes —
Girocard in Germany and Carte Ban-
caire — into EPI.
“Without a credible commitment to
do so, EPI won’t be able to succeed,” said
a German banker involved in the talks.
National pride, and fear of replacing
established payment systems with an
Number of payment terminals (m)
ATMs
50
Point-of-sale terminal
40
30
20
10
0 0
19 2000 05 10
unproved alternative, were obstacles,
people familiar with the project said.
On the other hand, bankers fear that
the domestic schemes do not have a
future on their own. “Girocard has been
suffering from at least a decade of
under-investment,” said another pay-
ment expert working at a German
lender, pointing to the fact that the sys-
tem worked neither online nor abroad.
A figure at a French bank agreed, say-
ing that if card schemes in France did
not grow to a European scale, they
“would be dead” in the next 10 years.
The executive expected cards to start
migrating to EPI in 2023.
“What EPI needs is someone to take
leadership,” said the German banker, as
even the co-ordination between the var-
ious German lenders who were partici-
pating was “painful and ineffective”.
The need for consensus, they said,
was time-consuming and often resulted
in agreeing on “the lowest common
denominator”.
“The biggest risk,” said another
French banker on the inside, “is that
those involved eventually decide it’s too
complicated and decide to leave.”
One example of the need for compro-
mise trumping commercial sense is the
Brussels site of the EPI’s headquarters.
“That choice looks like a political
decision,” said Marcus Mosen, a consult-
ant and former chief of payments firm
Concardis, adding that on commercial
grounds, Berlin, Paris or Amsterdam
would have been a better choice.
For now, EPI’s backers have forked
Many lenders believe that if they do
not act, they will face a challenge
from the likes of Apple and Google,
which are increasingly on their turf
Stéphane Cardinale/Corbis/Getty Images
out €30m, a decent sum to fund the ini-
tial development of a blueprint, but
short of the “billions of euros” that
Schmalzl deems necessary.
Bankers in Germany and France
agree because, as it stands, the EPI
shareholders will have to bear the cost
of development and the potentially high
transition costs, such as cancelling con-
tracts and swapping out cards, for users
and merchants.
One way to defray the costs could be
to tap EU funds.
“We believe that in supporting infra-
structure in Europe, one should not just
build roads, but potentially also pay-
ment roads,” said Schmalzl.
Banks are also concerned that
EU funds could come with strings
attached.
And while European policymakers
have given the EPI the green light, bank-
ers are concerned about competition
stemming from plans for a digital ver-
sion of the euro.
The ECB’s planned digital currency,
itself partly conceived as a way to
improve cross-border payments, could
be in direct competition with the EPI
and eat into bank margins.
But as one Eurosystem official said:
“We have to think about consumers,
banks and the overall financial system.
Card transactions by value (€tn)
The banks should do their jobs and we’ll
do ours.”
12 2.0
European banks and payment proces-
10 sors are optimistic that this time will be
different.
1.5
8 Although the scheme only has banks
from six countries on board, people
6 1.0 close to it are hopeful others will join
soon, including Italy.
4 Kunisch is ready to bet on EPI work-
0.5 ing. “Our real assumption is that this
2
will happen,” he said. “And I don’t really
0 see any fundamental deal-breakers
coming up. But if you’d asked me to put
15 19 2000 05 10 15 19
€100 on this, I’d put it fully on the side of
this happening.”
Legal Notices

Technology

G7 plan offers lower Big Tech tax haul for UK

EMMA AGYEMANG — COPENHAGEN
Big Tech groups will pay less tax in the
UK under a deal agreed at the G7 than
they currently pay under the country’s
digital service tax, according to calcula-
tions by a think-tank.
TaxWatch said that based on their 2019
revenues, Amazon, eBay, Facebook and
Google would pay £232.5m less in tax
under the G7 plans.
Last weekend, the G7 backed a global
minimum corporation tax rate of at
least 15 per cent and also agreed that
countries could tax the “largest and
most profitable multinational enter-
prises” at 20 per cent of their profits
above a 10 per cent margin.
The UK Treasury said at the weekend
that the deal would result in the largest
multinationals paying “more” to the
exchequer, but this will come mostly
from other large international compa-
nies that make sales in Britain, rather
than from Big Tech.
The G7 deal also called for the UK and
other countries that have imposed dig-
ital sales taxes unilaterally to withdraw
them.
US online
marketplace
eBay’s UK taxes
could drop from
£15.7m to £3.8m
under the deal
But TaxWatch said if the UK signed up
to the deal, “the package of reforms will
lead to a net loss of tax in the UK from
eBay, Amazon, Google and Facebook.”
The UK’s DST, which came into effect
in April 2020, applies to all social media
services, search engines and online mar-
ket places. It is levied at the rate of 2 per
cent on revenues above £25m, with a
discount for any corporation tax paid.
The Treasury expects to raise £500m a
year from it by 2024-25.
TaxWatch calculated that the tax take
from Google would fall from £219m a
year to £60m under the G7 plan. Face-
book’s taxes would drop from £49m to
£27.7m and eBay’s would drop from
£15.7m to £3.8m. TaxWatch said eBay Legal Notices Contracts & Tenders
might even fall out of the scope of the G7
plan, which is designed to capture about
100 of the biggest global companies.
Amazon currently pays £50.1m under
the UK’s DST. It is not yet clear how it
would be captured by the G7 plan,
because its profit margins are below 10
per cent. Finance ministers are consid-
ering how to tax Amazon on the basis of
its highly profitable cloud computing
division. TaxWatch estimated Amazon
Web Services, its cloud unit, would pay
£10.1m under the G7 proposals.
Additional reporting by Chris Giles
12
Miners’ woes show need for climate ‘bad banks’
Helen
Thomas
Y
ou can’t please all of the peo-
ple all of the time. Except if
you’re Anglo American or
other miners with thermal
coal assets: then you can’t
seem to please all of the people any of
the time.
Anglo did win some ESG plaudits for
its plans to spin off its remaining South
African thermal coal mines into a Johan-
nesburg-listed company called Thun-
gela. It also took sustainability brickbats
from those who saw it cutting loose a
problem to its shareholders.
Boatman Capital, the short-selling
research group, this week questioned
assumptions around the rehabilitation
of Thungela’s mines, arguing new regu-
Insurance
Activist pushes
for deeper cost
cuts at Aviva
Cevian wants leaner
operation and return
of £5bn to investors
IAN SMITH
Cevian Capital, Europe’s largest activist
investor, has built a 5 per cent stake in
Aviva and is pressing the FTSE 100
insurer to make deeper cost cuts and
return £5bn to shareholders.
“Aviva has been poorly managed for
many years, and its high-quality core
businesses have been held back by high
costs and a series of bad strategic deci-
sions,” said Christer Gardell, Cevian co-
founder.
Shares in Aviva rose 3.3 per cent to
£4.24 after Cevian released a statement
yesterday morning.
‘High-quality core
businesses have been held
back by a series of bad
strategic decisions’
Rather than urging a change of leader-
ship, Cevian is pushing chief executive
Amanda Blanc to build on the series of
disposals she has announced since tak-
ing over almost a year ago.
Aviva has agreed over the past year to
sell eight non-core businesses, raising
almost £8bn, in an attempt to refocus
on UK, Irish and Canadian markets. The
global ambitions pursued by previous
chief executives were criticised by some
analysts as unfocused and leaving the
group with too big a cost base.
The company “has the potential to
become a focused and well-capitalised
market leader that produces profitable
growth, generates significant cash, and
is highly appreciated in the equity mar-
kets”, Gardell said.
Cevian, which manages more than
$16bn on behalf of about 350 pension
Financial services
EY’s top France adviser quits to form boutique
MICHAEL O’DWYER
EY’s top deal adviser in France has quit
the accounting group to launch a rival
boutique advisory practice, becoming
the latest senior dealmaker to leave a
Big Four firm.
Yannick de Kerhor’s Paris-based EKEM
Partners will team up with EOS Deal
Advisory, the London firm run by two
former senior partners at KPMG UK
who quit over the firm’s response to bul-
lying allegations.
The alliance, which also includes 42-
person German adviser AC Christes &
Partner, will compete with the Big Four
to advise companies and private equity
firms on corporate transactions.
The three firms said that they would
work together on an informal basis at
first with a view to forming a more
structured relationship in future.
Separately, one of EY’s most senior
French partners, Laurent Miannay,
regional account leader for western
Europe & Maghreb, has also resigned,
people briefed on the matter said.
Miannay and de Kerhor’s exits leave
lations could nearly triple costs to
$1.4bn, wiping out the company’s value.
South Africa’s newest coal miner was
always going to have a turbulent start as
international investors scarpered: the
shares fell nearly 25 per cent on Mon-
day’s debut before jumping yesterday.
This troubled separation adds to a
sense that a different model is needed,
what some in the industry think of as a
“bad bank” structure to manage the
demise of pariah climate assets.
The miners are just the canary in this
particular thermal coal mine. Divest-
ment and coal exit policies, from inves-
tors and financiers, have made coal
largely uninvestable in western finance,
and uncomfortable to hold for the big
listed miners. Glencore is unusual in
keeping coal, with plans to run its pro-
duction down by 2050, a position that
could still come under pressure.
As the transition to net zero acceler-
ates, more and more assets will become
“stranded”: Not just in terms of oil and
gas left in the ground but in terms of
funds, endowments and other investors,
started building its Aviva stake early
this year, according to a person familiar
with the matter. With a 4.95 per cent
holding, the Swedish group is now
Aviva’s second-largest shareholder,
after BlackRock.
Aviva has promised substantial
returns and cost reductions as central
planks of its strategy shift under Blanc,
who has told investors that her mantra
is to move quickly.
Cevian wants a specific return of £5bn
in dividends or buybacks of capital that
the insurer has in excess of regulatory
requirements. The activist also believes
that the cost-cutting can go further, call-
ing for reductions of more than £500m
from Aviva’s annual cost base by 2023,
compared with the management’s tar-
get of £300m.
It was pushing for a leaner manage-
ment structure, according to a person
familiar with the matter.
There had been constructive talks
between Cevian and Aviva managers in
recent months, according to people
familiar with the matter, who said the
fund was not pushing for a board seat.
Aviva’s share price should climb to
more than £8 within three years, based
on a more than doubling in the full-year
dividend to 45p, Cevian estimated. The
insurer could also stand to benefit if
interest rates started to rise.
Aviva’s shares trade at seven times
forward earnings, according to S&P
Capital IQ data, a discount compared
with UK rivals including Legal & Gen-
eral, Phoenix Group and Direct Line,
which trade at nine times or more.
Aviva said that it had made “signifi-
cant strategic progress over the past 11
months” and remained “sharply
focused” on improving its performance.
Cevian waged a multiyear campaign
against rival RSA, which completed its
sale to Canada’s Intact and Denmark’s
Tryg last week.
See Lex
EY with vacancies for two of the six posi-
tions on its executive committee in
France, one of its most important Euro-
pean markets.
The resignations create further
upheaval as EY prepares to centralise
control of its operations in 25 countries
in a new Europe West region.
The overhaul has caused concern
Some partners fear closer
integration would force
partners to share the bill
for possible fines losses
among French partners that they could
be left financially exposed after the
firm’s audit of Wirecard, the German
fintech company that collapsed in a
fraud scandal last year.
Some partners fear closer integration
would force partners outside Germany
to share the bill for possible fines, law-
suits or client losses.
Independent boutiques lack the scale
and geographic footprint offered by the
★ FINANCIAL TIMES
COMPANIES & MARKETS
assets with no good owner from the
point of view of the markets and the
planet, whether that is mines, associ-
ated rail and port infrastructure, or oil
and gas production.
True, Anglo sent Thungela on its way
with no debt, a hefty endowment and
protection against a sliding coal price.
The mines stay in the listed sector,
rather than disappearing into the shad-
ows of private ownership.
But the environmental impact looks,
at best, neutral. In fact, the new com-
pany seems more likely to try to
lengthen the mines’ lives, currently only
five to 11 years. And a smaller company
is less able to handle the mines’ rehabili-
tation costs, which are uncertain.
What’s needed, argues Tim Buckley at
the Institute for Energy Economics and
Financial Analysis, is an alternative to
the options of divest or retain, one with
the right funding, transparency and cor-
porate governance and that recognises
that this will be a 15-year process.
Just as financial institutions turned to
Cloud nine
BAT cheered
by success of
vaping device
Big Four and other global advisory
firms.
Forming an alliance of independent
firms would help to win clients and to
attract talented employees, de Kerhor
said. Another advantage of being inde-
pendent was “getting rid of all the regu-
latory constraints of being within an
audit firm”, de Kerhor told the Financial
Times.
There has been a trend of senior part-
ners and business units breaking from
the Big Four accountants — Deloitte, EY,
KPMG and PwC — as partners complain
about missing out on work because they
have to avoid potential conflicts of inter-
est between different parts of their busi-
nesses, particularly between the audit
and advisory arms.
Big Four firms have sold multiple
business units in recent months and
industry executives expect more deals
could follow the disposals of Deloitte’s
UK restructuring business to US com-
munications and advisory group Teneo
and KPMG UK’s pensions and restruc-
turing businesses in private equity-
backed deals.
bad banks to manage toxic assets after
the financial crisis, the miners need a
way to quarantine theirs. This could
keep the assets tied to the deep pockets
and (one would hope) higher standards
of the global listed sector but separate
them from commodities such as copper,
nickel and cobalt, which the world
needs more of in the climate transition.
As the transition to net
zero accelerates, more
and more assets will
become ‘stranded’
It is a structure that industry chatter
suggests is being considered by some
miners and their advisers, possibly with
involvement of outside investors chosen
for their environmental credibility.
Sustainably minded investors would
need to sign up to a structure that keeps
coal, and ultimately other fossil fuels,
associated with companies they’re
British American Tobacco has
increased its forecast for sales growth
after reporting a record number of new
users for its vaping products.
The company said the appeal of
“non-burning” products, such as its
vaping device Vuse, continued to grow,
with 1.4m customers added in the
latest quarter ending in June.
Tobacco groups are seeking to build
market share in “modern products”.
BAT has nearly 15m consumers of
products such as vaping devices,
heated tobacco and oral nicotine
pouches. This compares with the
638bn sticks of cigarettes it sold last
year to roughly 140m smokers.
The “record quarter for consumer
acquisition” prompted BAT to raise its
full-year revenue growth forecast to
more than five 5 per cent. Previous
guidance was 3 per cent to 5 per cent.
Automobiles
Hitachi venture buys car charging network
PETER CAMPBELL
The company that operates Britain’s
electric vehicle motorway charging
network is being bought by a business
funded by Hitachi in a move expected
to lead to tens of millions of pounds in
investment across its sites.
Gridserve, which is backed by the Japa-
nese conglomerate and took a 25 per
cent stake in the Electric Highway in
March, is understood to be buying the
remainder of the business from Ecotric-
ity, a green energy group.
Dale Vince, Ecotricity’s owner, who
has run the Electric Highway network
since installing the first charging points
in 2011, will use the proceeds to invest in
other green technologies such as mak-
ing natural gas from grass.
Despite being the first motorway
charging network in the UK, Electric
Highway has been roundly criticised by
the industry and rival operators for
putting consumers off buying electric
vehicles because of under-investment
in recent years.
Gridserve is understood to be paying
invested in. And there is a credibility
gap to bridge in ensuring mines are run
off to schedule, that sinking funds for
rehabilitation are untouchable and that
communities are properly supported.
This could involve some public sector
involvement, argues Ben Caldecott at
the Oxford Sustainable Finance Pro-
gramme.
It might ultimately need to: the
understandable ambivalence of some
jurisdictions such as South Africa or
Australia to the idea of putting coal
mines into run-off, with jobs and com-
munities at stake, has been a complicat-
ing factor for miners. That has included
discouraging progressive rehabilitation
as sites are mined and even allowing
smaller companies to tap ringfenced
clean-up funds, says Buckley.
But Anglo isn’t alone in battling to fig-
ure out what to do with its coal. And a
robust bad bank model could find itself
in demand far beyond mining in future.
helen.thomas@ft.com
Earnings per share remained at the
previous forecast of “mid-single-
digit” growth as it lifts investment in
modern products, a category it
expects to be profitable by 2025.
Jack Bowles, chief executive, said
2021 was a pivotal year for the
business, which owns brands
including Lucky Strike and Dunhill.
Tobacco stocks have been under
pressure, partly because of worries
about further regulation. But some
countries have less tough anti-
smoking rules, including Pakistan,
Bangladesh and Vietnam, which
BAT singled out as growth areas.
Alicia Forry, at Investec, said
BAT’s Vuse was “approaching global
leadership” in vaping, with a share
of more than 31 per cent in five of
the largest markets. Patricia Nilsson
See Lex
Guy Corbishley/Alamy
tens of millions of pounds for the
remaining stake of the Electric Highway
business, which is separate to the
amount it is expected to invest in the
sites in future.
The state of the network, which has
deals with all three major service area
operators, was part of the subject of a
wider competition probe this year.
Increasing the number and speed of
Gridserve is
purchasing service
area business
Electric Highway
from green energy
group Ecotricity
charging points at motorways is key to
increasing confidence in the ability of
motorists to drive distances beyond the
reach of EV batteries, which can typi-
cally last for up to 300 miles.
The government wants at least six
superfast charging points at each
motorway service area by 2023 to ease
consumers into battery vehicles, as
part of its aim to phase out the sale
Wednesday 9 June 2021
Financials
BoE launches
first stress
test of global
warming risks
to businesses
CAMILLA HODGSON
The Bank of England kicked off its
inaugural stress test of the climate
risks facing banks and insurers yester-
day, but its scope was scaled down after
participants raised concerns that they
would be unable to model the expo-
sures of potentially thousands of busi-
ness partners.
The so-called “biennial exploratory sce-
nario” will work out the exposure of the
largest UK banks and insurers to cli-
mate-related risks, and identify where
companies might need to adjust their
business models to become more resil-
ient. Both physical risks, such as flood-
ing, and “transition” risks, such as
potential regulatory or policy changes,
will be considered.
The exercise is “absolutely critical” to
understanding “future costs and risks”
and informing present-day decision
making, said Sarah Breeden, BoE execu-
tive sponsor for climate change.
The BoE had initially wanted compa-
nies to scrutinise the vulnerability of 80
per cent of their counterparties. That
was scaled back to the top 100 counter-
parties, the top three from certain car-
bon-intensive sectors, and the top five
banks and top five non-bank financial
institutions, because companies were
concerned about the magnitude of the
challenge.
That was “the issue that caused the
most consternation, and we adjusted
our proposals on the back of that”, said
Breeden. Companies were “absolutely
most concerned” about having to
The BoE governor has
made clear the tests will
not be used to set higher
capital requirements
undertake a granular analysis of the cli-
mate plans and risks faced by what
could be thousands of companies, she
said.
Companies’ end-2020 balance sheets
will be tested against three climate sce-
narios based on the speed and success of
limiting global warming over a 30-year
period.
The “early”, “late” and “no policy”
action scenarios — which imply an
orderly transition to 1.8C of warming by
2050, a disorderly transition to 1.8C of
warming, and no action, resulting in a
catastrophic 3.3C of warming, respec-
tively — were based on those developed
by the Network for Greening the Finan-
cial System and tailored to take account
of UK-specific risks and legislation.
Central banks around the world have
started embracing climate stress test-
ing, with the European Central Bank
and French central bank having pub-
lished initial findings this year.
BoE governor Andrew Bailey has
made clear that the UK tests, results of
which are likely to be published next
year, will not be used to set higher capi-
tal requirements. “Any incorporation of
climate change into regulatory capital
requirements would need to be
grounded in robust data,” he said last
week. “In my view, the case for this has
yet to be clearly established and possi-
bly may never be. But our work to
improve climate disclosures, scenario
analysis, and risk management, could
help unlock such assessments.”
of any non-electric models by 2035.
Transport minister Rachel Maclean
told an Financial Times summit earlier
this year that “we do need to do a lot
more on the infrastructure side of
things”, saying the chief complaint she
hears is about the reliability of the
charging network.
She added: “We want people to be able
to undertake those longer journeys, and
more importantly, to have an electric
vehicle as their main car.”
Speaking yesterday, Vince said Elec-
tric Highway “needs an owner with
access to serious funding and real com-
mitment to the cause” to help fund a
“growth spurt” required to keep pace
with demand and meet the new regula-
tions. He told the Financial Times that
the network needed “tens of millions” of
pounds spent to bring it up to current
standards.
“Electric car take-up has been beyond
our wildest dreams when we started ten
years ago,” he said. But now Ecotricity
“wants to get out of things we feel we
don’t need to be in any more, and wants
to get into things at the cutting-edge”.
Wednesday 9 June 2021 ★ FINANCIAL TIMES 13

COMPANIES & MARKETS

Commodities. Outcry success Equities

Stock pickers
London’s Ring metals trading shine after
floor wins battle to reopen record May
performance
MICHAEL MACKENZIE AND CHRIS FLOOD

Stock pickers are increasingly beating

the broad market after a record May
performance for managers of large-cap
US equity funds.
Last month, 70 per cent of active fund
managers outperformed the Russell
1000 index, making it “one of the best
months in history”, according to Bank of
America, and the strongest May in at
least three decades.
February proved slightly stronger, at
70.3 per cent. Those two months now
ranked as the strongest for active
managers since June 2007, said Ohsung
Kwon, US equity strategist at the bank.
The generation of outperformance, or
alpha, suggests that, with big tech stocks
fading in dominance over US markets,
bargain-hunting fund managers could
snap two decades of drab returns.
“What you saw in May and indeed all
year has been the underperformance of
the largest names in the index,” said
David Giroux, chief investment officer
of equities and multi-assets at T Rowe
Price. “Most active managers . . . tend
to own more small and mid-caps, so the
current market trends have benefited
them quite a bit.”
This marks a rebound. In the past 12
months, only about one-third of active
managers have beaten the Russell 1000.
But so far this year, more than 60 per

‘It is no longer just 20

LME bows to strong campaign
from brokers and traders who
championed 140-year-old pit
PHILIP STAFFORD
AND HENRY SANDERSON
The London Metal Exchange has
withdrawn plans to close its distinctive
Ring trading floor permanently, bowing
to a passionate effort to maintain the pit
where brokers and industrial traders
have gathered for more than 140 years.
The LME Ring has been closed for
more than a year during the pandemic
and the exchange operator had
suggested shifting to a fully electronic
model.
But the plans united traders and
industrial users of all sizes in opposition
to the LME, which is owned by Hong
Kong Exchanges and Clearing.
It received 192 individual comments
in a two-month consultation period, an
“unprecedented” response, according
to the exchange.
In a statement yesterday, the LME
said it would allow official prices for
metals — set in its trading pit in a lively
period before lunchtime every day — to
continue. Full-time trading will recom-
mence in the Finsbury Square facility on
September 6.
Matthew Chamberlain, chief execu-
tive, said the LME had been surprised
by the response from members,
especially physical traders, sparking the
shift from the initial plan. It will hold a
fresh consultation on the amended
plans over the summer.
“We can’t be the sole arbiters of the
best interests of the market,” he told
reporters. “We must listen to what the
market actually wants.”
While keeping the Ring open, the
exchange is still making some conces-
sions to more modern practices, such as
allowing members to continue using
electronic trading to set the daily closing
price, as they have done through the
pandemic.
Many market participants, such as
hedge funds and market makers, rely on
the final price to calculate the value of
their portfolios.
During the temporary closure in the
pandemic, the smooth operation of the
exchange — typically used by brokers on
behalf of companies that produce
metals for manufacturing — suggested
that the famous historic red sofas of the
physical trading Ring had become a
relic. Its stay of execution means this
will be the last major physical trading
venue in Europe.
Trading volumes had increased
without any deterioration in the
window to set pricing in its main metals
markets, one of the chief functions of
the Ring, the LME added.
But users worried that a switch to full
electronic trading would mean they
could no longer hedge metals prices for
specific days into the future — a unique
feature of the LME — rather than in the
standardised one- or three-month
increments available on most futures
exchanges.
The split in views was most apparent
between traditional participants and
the LME’s larger merchant trader and
financial participants, who backed the
Ring back: the move towards electronic trading, the
current version LME said.
of the LME “We do have this ability to respond to
trading pit dates both sets of feedback,” Chamberlain
to 1877. Below, said. “And to calibrate each pricing
traders on the session accordingly.”
exchange’s red However, Neil Welsh, metals broker
sofas in 1988 at LME member Britannia Global
Facundo Arrizabalaga/EPA/
Brian Harris/Alamy
Markets, said the Ring could lose its
relevance if there was not enough
physical trading to sustain it.
The Ring name reflects its origins
when metals merchants would draw a
circle on the sawdust floor of a City of
London coffee house in the 19th
century, as a signal to begin trading. The
current version of the Ring dates back to
1877.
Since the turn of the century, more
investors have preferred to trade
electronically and remotely, leading
exchanges around the world to shut
their floors.
The coronavirus pandemic has
applied a further blow. CME Group, the
world’s largest futures exchange, will
close most of its remaining open-outcry
pits in September.
The LME, which was bought by HKEX
‘We can’t be for £1.4bn in 2012, has sought to
broaden its number of market
the sole participants in the face of growing
arbiters. We competition from rival exchanges in the
US and China.
must listen Chamberlain said he was confident
to what the that making the closing prices
electronic would attract more financial
market participants to the exchange.
actually “Do I think we’ll be able to get more
business from the changes I’m making?
wants’ Yes I do,” he added.
stocks driving the S&P
and we now have a broader
spectrum to choose from’
cent have outperformed. Compared
with the blue-chip S&P 500, a tougher
index to beat, the long-run performance
has been poor for several years.
Just over 60 per cent of actively
managed large-cap US equity funds
underperformed the S&P 500 in 2020
and 75 per cent failed to beat the bench-
mark over the past five years, according
to S&P Global, the data provider. So far
this year, almost half of funds are
succeeding in outperforming the index.
The period since November’s pan-
demic vaccine breakthroughs has
boosted a wider range of companies,
particularly some of the smaller compo-
nents of the Russell index.
Last month, 54 per cent of Russell
1000 shares outperformed the bench-
mark, up from 46 per cent in April. This
breadth helps large-cap active funds to
own more winners.
A bias towards cheaper “value”
shares in active portfolios is helping.
“We are still relatively early in this
transition [from growth to value] and it
can run for the next 12 to 18 months,”
said Colin Moore, global chief invest-
ment officer at Columbia Threadneedle.
“It is no longer just 20 stocks driving
the S&P and we now have a broader
Our global spectrum of companies to choose from.”
team gives you For now, stock pickers can gain
market-moving comfort that the correlation between
news and views, stocks in the S&P 500 is below its long-
24 hours a day term average, Kwon said. The lighter
ft.com/markets tendency for stocks to move in lockstep
generally throws out opportunities.

Crypto Crypto

FBI seizes majority of Colonial Pipeline ‘Speculative frenzy’ prompts Ruffer to

ransomware payments, US officials say
KIRAN STACEY — WASHINGTON
HANNAH MURPHY — SAN FRANCISCO
MYLES MCCORMICK — NEW YORK
US officials said they have recovered
$2.3m worth of the ransom payment
made to hackers who shut down the
Colonial Pipeline last month and
disrupted the country’s fuel supplies
for several days.
Justice department officials said they
identified a virtual wallet used by
suspected Russia-based ransomware
group DarkSide and seized the funds in
a rare instance of a ransom recovery.
The pipeline, which supplies almost
half of the motor fuel consumed on the
US east coast, was shut down for five
days, triggering a run on petrol supplies
as drivers rushed to fill their tanks.
“Ransomware attacks are always
unacceptable but when they target
critical infrastructure, we will spare no
effort in our response,” said US deputy
attorney-general Lisa Monaco. “Follow-
ing the money remains one of the most
basic, yet powerful, tools we have.”
Joseph Blount, Colonial’s chief
executive, said the company had paid a
ransom in bitcoin worth $4.4m because
it was “the right thing to do for the
country” amid a growing debate over
whether there should be a blanket ban
on making payments to hackers.
Blount, who is due to appear at a con-
gressional hearing this week, thanked
the FBI for its “swift work and profes-
sionalism in responding to this event”.
He said the private sector had an
“equally important role to play” in hold-
ing cyber criminals to account and
added that Colonial would continue to
collaborate and share information with
Lisa Monaco, US deputy attorney-
general, announced the recovery
federal agencies and the industry at
large “so that we can thwart these types
of attacks before they happen”.
Anonymous cryptocurrencies are the
payment method of choice for cyber
criminals. However, every transaction is
recorded on an immutable blockchain,
giving private and public sector
investigators opportunities to monitor
and trace payments.
The justice department said FBI
officers had been able to track “multiple
transfers” of cryptocurrency to one
virtual currency wallet, totalling 63.7 of
the 75 bitcoin paid. It said the FBI had
the “private key”, or password, enabling
it to seize the funds.
It is unclear how exactly the FBI got
hold of the hackers’ private key. Dave
Jevans, chief executive of the blockchain
analytics group CipherTrace, said the
FBI is believed to have seized some of
DarkSide’s servers, which “may have
hosted wallet private keys”.
The Biden administration has vowed
to crack down on ransomware hackers,
who typically operate from regions
such as Russia, which lie outside of
extradition treaties with the US, leaving
officials with little recourse.
cash out after lucrative bet on bitcoin
JOSHUA OLIVER
Wealth manager Ruffer has exited its
high-profile bet on bitcoin after grow-
ing nervous about the “speculative
frenzy” in the cryptocurrency but said
it would consider holding the asset
again as a defence against inflation.
The normally cautious UK fund man-
ager turned heads in November when it
took a roughly $600m position in bit-
coin. Since then, it has netted a $1.1bn
profit as it sold down the stake in 2021.
But the fund manager said the rush of
speculation in the market this year —
including huge rallies in the price of
joke-based cryptocurrencies — has
made the digital asset too hot to hold.
“It just looked like this would be a
time when it would be nicer to be watch-
ing from the sidelines than from in the
trenches,” said Duncan MacInnes, an
investment director at Ruffer who
helped manage its bitcoin stake.
Ruffer bought bitcoin when it was
trading at about $15,000 and completed
its exit in early April when the price
stood at $55,000.
Shortly afterwards, cryptocurrency
prices dived after Tesla chief executive
and former bitcoin advocate Elon Musk
voiced concerns over the environmen-
tal impact of the token’s “mining”.
Even after a sharp correction that has
left bitcoin at a three-month low trading
at about $33,000 against the dollar,
MacInnes said he is not tempted to buy
the dip. “When something like dogecoin
is still [valued at] $40bn, it’s hard to say
that the froth has come out,” he said.
‘When something like
dogecoin is still [valued at]
$40bn, it’s hard to say that
the froth has come out’
Bitcoin is largely a speculative bet for
some wealthy individuals and other
small retail investors seeking quick
returns.
Ruffer’s investment was seen as the
kind of institutional adoption that could
provide lasting support to the tokens as
investors sought out new ways to diver-
sify portfolios and offset inflation risks.
But MacInnes said that, as bitcoin’s
price doubled from January to a
peak around $60,000 in mid-April, the
market appeared overextended. “You
could see very clearly that there was a
rise in speculative behaviour,” he said.
An increase in debt-fuelled leveraged
bets on crypto and the influx of new
retail traders in to the market added to
Ruffer’s concerns. The surging price also
left less room for further growth to off-
set the risk of holding bitcoin, including
the growing threat of regulation.
Ruffer, which manages about £24bn
mainly for wealthy individuals and
charities, has shifted funds into gold,
inflation-protected bonds and com-
modity stocks as it tries to offset the risk
of inflation. It has returned about 20 per
cent, net of fees, over the past 12 months
with its bitcoin profits contributing
about a sixth of that performance.
Ruffer said bitcoin was still “on the
menu” of potential investments for the
future as fund managers hunt for new
sources of returns and diversification.
“The rise in the bitcoin price has been
pretty rational in the sense that inves-
tors are having to take increasingly
drastic steps to protect against inflation
and figure out what to do with the 40 per
cent of their portfolio that is earning
nothing,” said MacInnes.
14
AI generates a
textual revolution
in investment
Robin Wigglesworth
Markets Insight
W
hen US Steel released
America’s first annual
report more than a
century ago, it was an
admirably trim 40
pages and mostly photos of smoke-
stacks. Its 2020 annual report clocked in
at 162 packed pages — and even this is
concise by modern standards.
Public companies release reams of
financial information and insight into
their business every quarter but the
annual report is the big blue whale of
corporate reporting. These days, the
average length is equivalent to a 240-
page novel, according to S&P Global.
It is popular to bemoan that quarterly
and annual reports are word salads,
consisting of vast amounts of often use-
less reporting requirements and stand-
ardised legal caveats, and then sprin-
kled with a big dose of PR guff. The core
accounting numbers have not changed
meaningfully in quantity and quality
over the past century, cynics complain.
It is true that corporate reports
contain verbiage that would make even
a journalist blush. But instead of
heaping scorn on these reports, savvy
investors should embrace this
admittedly waffly textual information
as a potential gold mine that can finally
be mined with modern technology.
Historically, investing has primarily
rested on a bedrock of numbers, such as
stock prices and profits, revenues and
research spending. Traditional stock-
pickers would supplement this with
plenty of qualitative analysis, such as
interviewing a company’s chief financial
officer, chatting to industry experts and
poring through annual reports.
Yet the swelling volume of corporate
statements means that no one can real-
istically consume everything. In the US,
★ FINANCIAL TIMES Wednesday 9 June 2021
COMPANIES & MARKETS
The day in the markets
What you need to know
3 Yields slide as US considers probe into
Treasuries rally on US-China tension
rare earth magnets from China
3 European stocks edge upwards to 10-year government bonds (%)
another record high
3 Sterling weakens as concerns mount
that lifting of Covid curbs will be delayed
1.8
Government bonds rallied yesterday as
investors bought up haven assets in a
1.6
reaction to increasing US-China tension
and deepening concern about the spread
1.4
the “risk factors” section of annual mated that algorithmic downloads of of Covid-19.
reports has alone almost tripled in quarterly and annual reports in the US The yield on the 10-year US Treasury,
length since 2006 and now averages exploded from about 360,000 in 2003 to the benchmark for global debt, fell as
more than 11,000 words, according to a 165m in 2016, when they accounted for much as 5 basis points to 1.53 per cent, its 1.2
recent report by S&P Global. 78 per cent of all downloads. second-lowest level since early March
But there are valuable signals hidden Since 2016, the rate has almost Germany’s equivalent Bund yield
within even the subtlest changes, said certainly soared further. Industry slipped 2bp to minus 0.22 per cent, its 1.0
Frank Zhao, an analyst at S&P’s Market insiders say there is a quasi arms race lowest in about a month.
Intelligence team. nowadays between NLP algorithms that The moves came after President Joe
The tool to glean tradable signals from scour corporate statements and Biden launched a task force to boost the
textual noise is known as ‘‘natural company executives that attempt to resilience of supply chains and moved to 0.8
language processing”, an increasingly outfox them by avoiding certain touchy examine new tariffs on the Chinese rare Jan 2021 Jun
popular field of artificial intelligence words and phrases. earth magnets that are used in goods Source: Refinitiv
that involves teaching machines how to Yet, in reality, NLP is an opportunity such as electric vehicles and
read and understand the intricacies of for all investment managers, not just smartphones.
human language. NLP allows tracts of quants that try to exploit textual signals “I think a lot of investors initially making bets because of what David Moss, tomorrow was expected to show that US
systematically. expected Biden to take a more co-head of global equities at BMO Global consumer prices, excluding volatile food
For example, Nomura analyst Joe conciliatory stance towards China than Asset Management, said was “a sense and energy costs, would rise 3.4 per cent
‘Cross the Rubicon into Mezrich has used an NLP system to [former President] Trump but he is taking that the good news has all come out”. year-on-year in May.
unstructured data and scour through transcripts of corporate quite a tough position,” said Catherine Wall Street’s blue-chip S&P 500 index This would be the strongest increase
executives talking to financial analysts, Doyle, investment specialist at Newton traded flat by lunchtime in New York, just since 1993, although US Federal Reserve
suddenly the fruit is grading the companies by their appar- Investment Management. “You’ve also below its all-time high achieved in early chair Jay Powell has maintained for
hanging much lower’ ent adherence to ESG standards. He got worries building up about the [new May. The region-wide Stoxx Europe 600 months that bursts of inflation will be a
discovered that the stocks of the most coronavirus] variants.” gained 0.1 per cent, building on its record temporary effect.
ESG-compliant companies performed The UK announced a “strengthened high reached on Monday. In currencies, sterling slid 0.2 per cent
previously recondite non-numeric better than the broader equity market. package of support” to combat a rise in Bond prices rose despite jitters over against the dollar to $1.4148 as concerns
“unstructured” data to be harvested Quarterly and annual reports are now northern England of the Delta variant, rising US inflation, which erodes the mounted that rising coronavirus cases
and analysed at dizzying speeds. generally released in a machine- first identified in India. returns from fixed interest securities such would push back the UK government’s
The potential is immense. Kai Wu, a friendly format but they are the tip of US and European equities lacked as Treasuries. June 21 deadline for easing lockdown
former GMO analyst who now runs the iceberg of written information that direction as traders held back from Data scheduled to be released curbs in England. Naomi Rovnick
Sparkline Capital, a start-up investment investors can rummage around for valu-
firm, said many trading strategies built able signals. Transcripts of manage-
on traditional data are “tapped out” ment calls with analysts or TV inter- Markets update
after having been analysed to death for views with chief executives, newspaper
decades and now mined to oblivion. reports, central bank speeches or even
“But once you cross the Rubicon into social media chatter can all be mined.
the world of unstructured data, sud- The finance industry loves its US Eurozone Japan UK China Brazil
denly the fruit is hanging much lower,” buzzwords and anything to do with arti- Stocks S&P 500 Eurofirst 300 Nikkei 225 FTSE100 Shanghai Comp Bovespa
Wu wrote in a paper last month. ficial intelligence is particularly hot Level 4224.44 1748.52 28963.56 7095.09 3580.11 130121.87
Many sophisticated quantitative these days and should be treated warily. % change on day -0.05 0.08 -0.19 0.25 -0.54 -0.50
investors — those that primarily use But we might be at the beginning of a Currency $ index (DXY) $ per € Yen per $ $ per £ Rmb per $ Real per $
algorithms to systematically trade, textual investing revolution that could Level 90.029 1.219 109.435 1.415 6.397 5.035
rather than traditional human fund upend the industry. % change on day 0.088 0.000 0.128 -0.141 0.016 -0.360
managers — are already grasping at this Govt. bonds 10-year Treasury 10-year Bund 10-year JGB 10-year Gilt 10-year bond 10-year bond
fruit. Last year, an NBER paper esti- robin.wigglesworth@ft.com Yield 1.533 -0.224 0.070 0.771 3.110 8.799
Basis point change on day -2.970 -2.600 -0.600 -3.400 -3.000 3.700
World index, Commods FTSE All-World Oil - Brent Oil - WTI Gold Silver Metals (LMEX)
Level 473.10 71.76 69.58 1888.40 27.58 4223.60
% change on day -0.02 0.36 0.46 -0.12 0.79 -0.78
Yesterday's close apart from: Currencies = 16:00 GMT; S&P, Bovespa, All World, Oil = 17:00 GMT; Gold, Silver = London pm fix. Bond data supplied by Tullett Prebon.
Main equity markets
S&P 500 index Eurofirst 300 index FTSE 100 index
4240 1760 7200
4160 1720 7040
4080 1680 6880
| | | | | | | | |
4000 || | | | | | | | | | | | | | | | | | | 1640 || | | | | | | | | | | | | | | | | | | 6720 | | | | | | | | | | |
Apr 2021 Jun Apr 2021 Jun Apr 2021 Jun
Biggest movers
% US Eurozone UK
Technipfmc 3.30 Accor 3.04 Thungela Resources 29.74
Diamondback Energy 3.06 Edenred 2.25 Intermediate Capital 5.89
Ups
Darden Restaurants 3.02 Hugo Boss 2.17 Flutter Entertainment 3.98
Domino's Pizza 2.68 Wartsila 2.13 Intercontinental Hotels 3.86
Gap (the) 2.55 Thyssenkrupp 1.88 Whitbread 3.41
%
Cms Energy -5.43 Kpn -4.30 Taylor Wimpey -1.90
Micron Technology -4.43 Volkswagen -3.83 Smith & Nephew -1.90
Downs
Biogen -4.05 Porsche -3.79 Int Consolidated Airlines S.a. -1.87
American Electric Power -3.91 Coloplast -2.74 Melrose Industries -1.71
Dish Network -3.01 Galp Energia -2.47 Lloyds Banking -1.47
Prices taken at 17:00 GMT Based on the constituents of the FTSE Eurofirst 300 Eurozone
All data provided by Morningstar unless otherwise noted.
Wall Street Europe London
Forecast-beating results sent Stitch Fix Swiss contract drugmaker Lonza rallied Halfords shifted up a gear after RBC
higher with the online personal styling following US regulatory approval of Capital Markets initiated coverage of the
service reporting net revenue of $535.6m aducanumab, a treatment that purports motoring and cycling retailer with an
for its fiscal third quarter, up 44 per cent to slow down the onset of Alzheimer. “outperform” recommendation and target
year on year and exceeding the mean The green light would provide a price of £4.50 a share.
estimate of $510m from analysts polled “meaningful” tailwind for the Basel-based An RBC survey pointed to UK
by Refinitiv. group, said Deutsche Bank, as “pent-up consumers putting aside more time for
Because of the performance the group demand for the Alzheimer’s drug should cycling while 80 per cent intended “to
raised its net revenue guidance for the lead to a significant production capacity spend at least as much on their car over
full year to $2.07bn-$2.08bn. shortage for biologic drugs”. the next six months compared to [before]
BMO Capital Markets said Stitch was Within such a consolidated sector, the pandemic”, said analysts.
evolving beyond its core fix offering there was a strong likelihood that Lonza The group was set to benefit from both
although at current levels its shares would be involved in aducanumab’s trends as its share of the UK motoring
already reflected “that future hope”. production, added analysts. and cycling product markets was about
Cloud-based platform Coupa Software “A potential near-term announcement 20 per cent to 25 per cent, said the
sank after posting an operating loss of of a partnership would be a positive broker.
$73.9m for the first quarter against a loss catalyst and it would likely lead to upside Better than expected results sent buy-
of $5.6m for the same period last year. to consensus estimates (no Alzheimer’s to-let lender Paragon surging.
The news coincided with the drug is included in Lonza’s midterm For the six months ending March 31,
announcement that chief accounting guidance),” said the German lender. underlying profits rose 44.9 per cent to a
officer Tony Tiscornia would become A downgrade weighed on Danish record high of £82.9m, above the £67.9m
chief financial officer. shipping group Maersk as JPMorgan forecast by Shore Capital.
Digital Ally, which makes body lowered the Copenhagen company’s It also declared an interim dividend for
cameras and in-car video systems for law rating to “neutral” from “overweight”, the year of 7.2p per share and a stock
enforcement, jumped on news from the arguing its shares were expensive while buyback of up to £40m.
US Department of Justice that agents in its midterm outlook was “tough to call”. “We view this as a strong performance
Federal agencies such as the Bureau of Meyer Burger slid after Credit Suisse which is likely to drive material current-
Alcohol, Tobacco, Firearms & Explosives reiterated its “underperform” rating for year earnings forecast upgrades,” said
would be required to wear body cams the Swiss photovoltaics group that the broker.
while serving arrest and search warrants. specialises in production of solar cells. Investment company Intermediate
Bitcoin’s slide dragged companies Its management has hit various Capital Group rallied after reporting a
linked to cryptocurrencies lower with Riot milestones but “without any significant 19 per cent increase for the year in third-
Blockchain, Overstock.com and earnings being generated”, said analysts. party assets under management of
MicroStrategy all dipping. Ray Douglas Ray Douglas $56.2bn. Ray Douglas
Wednesday 9 June 2021 ★ FINANCIAL TIMES 15

MARKET DATA

WORLD MARKETS AT A GLANCE FT.COM/MARKETSDATA

Change during previous day’s trading (%)
S&P 500 Nasdaq Composite Dow Jones Ind FTSE 100 FTSE Eurofirst 300 Nikkei Hang Seng FTSE All World $ $ per € $ per £ ¥ per $ £ per € Oil Brent $ Sep Gold $

-0.05% -0.03% -0.04% -0.19% -0.02% -0.02% -0.141% -0.66% -0.12%

No change
0.25% 0.08% 0.128% 0.116%
Stock Market movements over last 30 days, with the FTSE All-World in the same currency as a comparison
AMERICAS EUROPE ASIA
May 09 - - Index All World May 09 - Jun 08 Index All World May 09 - Jun 08 Index All World May 09 - Jun 08 Index All World May 09 - Jun 08 Index All World May 09 - Jun 08 Index All World

S&P 500 New York S&P/TSX COMP Toronto FTSE 100 London Xetra Dax Frankfurt Nikkei 225 Tokyo Kospi Seoul
20,075.79
4,224.44 7,129.71 7,095.09 15,640.60 29,518.34
4,188.43 19,472.74 28,963.56 3,249.30 3,247.83
15,399.65

Day -0.05% Month -0.19% Year 30.69% Day 0.20% Month 3.09% Year 25.66% Day 0.25% Month -0.39% Year 9.73% Day -0.23% Month 1.42% Year NaN% Day -0.19% Month -1.36% Year 26.66% Day -0.13% Month 1.58% Year 48.86%

Nasdaq Composite New York IPC Mexico City FTSE Eurofirst 300 Europe Ibex 35 Madrid Hang Seng Hong Kong FTSE Straits Times Singapore
13,877.85 51,042.33 1,748.52
13,752.24 9,144.30 9,153.60 3,173.00 3,167.14
49,867.15 1,713.44 28,595.66 28,781.38

Day -0.03% Month 0.92% Year 39.84% Day -0.75% Month 3.68% Year 27.80% Day 0.08% Month 2.14% Year 20.00% Day -0.11% Month 1.04% Year 16.27% Day -0.02% Month 0.54% Year 16.13% Day -0.27% Month -0.93% Year 15.23%

Dow Jones Industrial New York Bovespa São Paulo CAC 40 Paris FTSE MIB Milan Shanghai Composite Shanghai BSE Sensex Mumbai
6,551.01 52,275.57
34,777.76 130,121.87 25,809.16 3,580.11
34,616.06
6,385.99 24,802.90
0
122,038.111 3,427.99 49,206.477

Day -0.04% Month -0.47% Year 25.55% Day -0.50% Month 6.67% Year 33.32% Day 0.11% Month 2.59% Year 26.03% Day -0.06% Month 4.91% Year 27.90% Day -0.54% Month 4.72% Year 22.15% Day -0.10% Month 6.24% Year 52.47%

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20
Smooth, elegant — and radical
Ghosts of history inhabit this
year’s Serpentine Pavilion,
designed by Sumayya Vally.
Edwin Heathcote reports
T
he trick to creating a pro-
vocative work of contempo-
rary statement architecture
is to make a striking object
while crediting its compo-
nents to an existing vocabulary of found
elements. It’s a process that allows the
architect to present a work in a way that
deflects critique through the conceit
that its language has been discovered
rather than designed.
This year’s Serpentine Pavilion in
London’s Hyde Park, the 20th in a line
that began in 2000 with Zaha Hadid,
skirts the edges of this kind of perform-
ance. The result, though, is theatrical in
a good way: a seductive space densely
packed with surfaces for lounging in the
shade, a pile of architectural memories
and eye-catching shadows.
It was designed by Sumayya Vally of
Johannesburg-based practice Counter-
space who, at 31, becomes the youngest
architect of a pavilion at the Hyde Park
gallery. Her research involved scouring
the archives of the Bishopsgate Institute
in Whitechapel for pamphlets and radi-
cal histories of London. “I was inter-
ested in the history of events,” she tells
me, “migrant histories and in how peo-
ple gathered. I was looking at the way
people used steps in Railton Road in
Brixton before the [1981] riots, at an
Iftar table, how people shared surfaces.”
She also looked at barber shops and
bookshops, cafés and women’s centres,
many now only memories. These
inspired a design which, as you move,
continually reveals new layers of seat-
ing, ledges you might use as tables, a
condensed accumulation of the most
public and convivial aspects of the city.
Few elements remain recognisable
from the dozens of bits of city Vally vis-
ited, from Dalston to North Kensington,
but there are material and textural
Above: the Serpentine Pavilion. Below: a fragment of the pavilion in Deptford, south-east London — Iwan Baan
qualities discernible in what seem to be
evocations of the corduroy concrete of
council blocks, the giant mouldings of
Edwardian Baroque, the slanting
shelves of a bookshop or the awkward
junctions of this incoherent, though
rarely entirely unplanned, city.
The radical histories and migrant
★ FINANCIAL TIMES
ARTS
meeting points haunt the structure as
ghosts rather than physical presences,
ideas about the city as a place of congre-
gation. The absence of the real is felt
both in the smooth, pastel-toned ren-
dering of the surfaces and the artifice of
the abstracted fragments. Unlike the ad
hoc spaces adopted and adapted by
migrants, the pavilion feels smooth.
I ask Vally about the disjuncture
between the real and the represented. “I
have a real appreciation of the ad hoc
and the informal,” she says, “but I also
think it can be easily romanticised.
Those spaces arise because we haven’t
evolved an architecture for them — it’s
source material waiting to turn into its
designed form.” How, then, does she
square the adaptive ingenuity of those
reimagined spaces with this pavilion in
London’s poshest park? “I’m a believer
in beauty and elegance as a form of poli-
tics,” she says.
Beauty? Elegance? It is incredibly rare
to hear an architect talk in those
terms. But this is an undeniably elegant
pavilion. Its pale pinks and light greys
filter out some of the harshness of Lon-
don’s backstreets in a postmodern,
pastel, artisanal ice-cream spectrum.
Brutalist moments mix with delicate
classical cornices.
The word Vally uses most is “hybrid”.
And it’s a word she applies to herself as
well: a South African woman of Indian
heritage building in a London park. “We
are all very entangled,” she says. She has
also been careful to entangle the pavil-
ion in the broader city; this year’s effort
includes architectural fragments else-
where in London.
The pavilion itself, beneath the cool
shade of its floating circular roof, is
huge. It resembles slightly Herzog and
De Meuron and Ai Weiwei’s 2012 design,
which aimed to excavate the archaeol-
ogy of previous pavilions, but this one
excavates the subconscious of commu-
nity and belonging. Smart, elegant,
inhabitable, politically inflected, it is
enjoyable and intimate, a charged space
which never overwhelms with its mes-
sage. The inspiration of the ephemeral
seems perfectly attuned to the imper-
manence of a pavilion in the park.
Appeal of games that never existed
GAMING
Tom
Faber
A
fter leading the team that
created the first Xbox, in
2004 Microsoft’s Ed Fries
stepped down from his role
as vice-president of game
publishing and took up an unusual
hobby — creating a version of the
cutting-edge Halo series for the Atari
2600, a 30-year-old console. He relished
the challenge of making a recognisable
Halo for a device that was — in techno-
logical terms — ancient, swapping high-
definition graphics for 2D characters
each composed of just a few pixels.
The result was Halo 2600, later
acquired by the Smithsonian for an exhi-
bition on gaming and art. In interviews,
Fries compared the process of down-
grading the game to adapting a novel
into a haiku; finding creative liberation
by working with tight, self-imposed con-
straints. Besides being a satisfying per-
sonal project and a pleasurable curio for
Halo fans, his project challenged the
accepted notion in gaming, and the
wider world of technology, that bigger
and faster is always better. Perhaps, he
argued, the relentless expansion of
video game complexity comes at the
cost of taking pleasure in design, and
even of genuine creativity itself.
In today’s terminology, Halo 2600
would be called a “demake”, an increas-
ingly popular type of fan-made game.
Unlike a remake, which enhances a
game from an older platform to run on a
more advanced one, demakes translate
modern games to the standards of older
hardware. They are thought experi-
ments, counterfactual histories which
imagine what contemporary classics
might be like if they were conceived a
few hardware generations earlier.
One of the primary engines for the
rise of demakes is, unsurprisingly, nos-
talgia. Just as how in music and fashion
guitar solos and trenchcoats come back
on trend every decade or so, the draw of
retro gaming is both seductive and
OPERA
desert.in
Circus Days and Nights
Streamed online
aaaee
Richard Fairman
There has been no holding back
American composers during the
pandemic. The more intrepid of
the US opera companies have
pushed the boat out with commis-
sions for new works online,
keeping composers employed
and helping to win them a
wider audience.
There has been a lot to watch
that is quirky or adventurous.
American composers have never
been afraid to push the boundaries
and the latest two operas, both
available to view online, include
an eight-part mystery mini-series
and a circus extravaganza. Who
said opera is predictable?
The outcome of the mystery
opera is not yet known. The eight
parts of desert.in, commissioned
and produced by Boston Lyric
Opera, are being unveiled on the
company’s streaming service,
operabox.tv, weekly throughout
June. Each episode lasts 10 to 20
minutes and has a different
creative team.
The Desert In is a motor lodge
on a desolate stretch of highway
in the American desert, where
guests pay to be reunited with lost
loves. As memories are retrieved
and forgotten feelings uncovered,
the opera enters the world of
the supernatural.
No wonder there is such spook-
ily atmospheric music in episode
one, courtesy of composer Ellen
Reid, one of the masterminds
behind the project. There is some-
thing of the music video about
these short episodes, as there has
been for many of the new online
Philip Glass’s ‘Circus Days and Nights’ — Mats Bäcker
lucrative. Older players are cosily
reminded of the simpler time of their
gaming childhood, while younger ones
discover the innovation that went into
designing games for more limited hard-
ware. Both Nintendo and PlayStation
have recently released successful “clas-
sic” versions of old consoles which come
preloaded with vintage games.
While many gamers agree that the 2D
aesthetics of pixel art feel timeless,
today’s most popular demakes refer-
ence more recent history: the rough,
wobbly 3D graphics pioneered on the
original PlayStation. They mostly func-
tion as parodies, not playable releases
but rather videos that mock up games in
older graphical styles. Laugh at Geralt
from The Witcher 3 taking a bath as a col-
lection of textureless polygons, or wit-
ness how Resident Evil Village actually
The project challenged
the accepted notion in
gaming that bigger and
faster is always better
looks more frightening as a 20-year-old
game, its crude graphics leaving more
fear to the imagination. Even more
amusing was the demake of Wolfenstein
3D downgraded to run in “1-D”, showing
only a single line of horizontal pixels and
rendered utterly unplayable.
Some demakes do result in playable
games. There is D-Pad Hero, a NES-style
remake of Guitar Hero which includes
bleepy versions of Michael Jackson and
Wednesday 9 June 2021
operas during the pandemic, and
viewers are likely to find the visu-
als catch the imagination more
than anything the singers do.
The way forward promises
twists and turns. Episode two
plunges into a quite different style,
an upbeat party hosted by a drag
queen, with music by Nathalie
Joachim. Jazz, electronic sound-
scapes and cinematic sweep are
promised. The story can be diffi-
cult to follow, but hopefully all will
be revealed by episode eight. At
that point, viewers will be able to
watch desert.in Netflix-style, as a
bingeable set.
While Boston is promoting
young composers, one of the US’s
senior figures has just had his lat-
est opera premiered in Sweden.
Philip Glass has broken the
operatic mould decisively in the
past and continues to explore
new ideas.
His Circus Days and Nights was
given its premiere by Malmö
Opera and Cirkus Cirkör at the end
of last month, and has further
livestreams to come until June 13.
It involves a full-scale circus with
acrobats, jugglers, a lion-tamer
(but no lion) and even a bearded
lady. The writings of Robert Lax,
on which the opera is based,
present the circus as a microcosm
of the world (“We have seen all the
days of creation in one day”), but
the idea is not followed through in
any meaningful way.
What we get is two hours of cir-
cus fun with a bit of opera thrown
in. Do not ask much of the music,
which presents a less rigid style of
minimalism in Glass’s recent man-
ner, the small instrumental
ensemble coloured by the whine of
the accordion. Anything can count
as an opera now, but that is surely
a step forwards, not a step back.
operabox.tv/desert-in;
malmoopera.se/in-english/
circus-days-and-nights
Elvis Presley, and Gang Garrison 2, which
squeezes shooter Team Fortress 2 into
two dimensions (it also exemplifies the
droll demaker tendency to swap titles of
original games for their nearest syno-
nyms to avoid copyright claims: see also
Soundless Mountain II, a demake of Silent
Hill II).
Meanwhile Minimal Mario is an
exercise in reduction where the
beloved plumber is shrunk to a single
red pixel — it’s credit to Nintendo’s
iconic designs that the game is still
immediately identifiable.
In China throughout the 2000s, a
company named Shenzhen Nanjing
Technology Co. specialised in demakes
for the local Subor console (a clone of
Nintendo’s Famicom, which was diffi-
cult to obtain). They released more than
a hundred bootleg demakes, including a
famously meticulous 2005 recreation of
Final Fantasy VII which translated the
game’s sprawling story on to a 2D plane
and limited hardware.
Though some demakes are playable,
they aren’t popular because of great
gameplay. It’s rather the pleasure in see-
ing how demakers reinterpret beloved
characters and adapt to technological
limitations. Demakes are love letters to
old games, both homages and distinc-
tive products that demand precise study
of the source material and artistic
choices. These projects highlight the dif-
ferences between each console, and
their enduring potential. They question
this relentless pursuit of the next big
thing — how sustainable is our current
path, and what objects of value are we
leaving behind?
‘Halo 2600’
was a ‘demake’
that swapped
high-definition
graphics for 2D
characters
composed of
just a few pixels
Wednesday 9 June 2021
Demand for copper is set to explode with the increased focus on renewables technology. But even
as prices for the metal rise, years of under-investment threaten to leave supplies short.
Clean energy
fuels a new
commodities
supercycle
K ‘We thought
amoa-Kakula in the Dem-
ocratic Republic of Congo
is a rare commodity in the
modern resources industry: a
high-grade copper mine that
one day could produce enough metal to
satisfy more than 5 per cent of China’s
annual demand.
Surrounded by small villages, the
mine employs about 7,000 workers
and has its own road for trucks to carry
rock to a nearby smelter. The company
is also upgrading a 40-year-old hydro-
power station on the Congo River to
provide electricity to run the mine.
The first phase of the $2bn project
began operating in May, more than four
years after the last big copper mine of
similar scale, MMG’s Las Bambas, in
Peru, came online. Despite these exam-
ples, years of belt tightening mean the
pipeline of new copper projects is run-
ning dangerously thin just as demand
for the metal — used in everything from
wind turbines to electric vehicles — is
set to soar.
Governments around the world are
launching huge stimulus programmes
focused on job creation and environ-
mental stability. The coming together
of such demand and potential supply
shortages has many people on Wall
Street, and in the City of London, hailing
the arrival of a commodities supercycle
and asking if copper is set to become the
new oil, a strategically important raw
material.
“We see potential for a multi-decade
commodity cycle ahead, driven by
decarbonisation of the global economy
and a shift to cleaner energy,” says
Tal Lomnitzer, a fund manager at Janus
Henderson. “It has more legs to it than
the China boom of the early 2000s.”
Commodities have enjoyed a dizzying
run over the past year, initially on
the back of strong demand from China
and more recently other big economies.
Supply disruptions have provided fur-
ther impetus.
Copper, iron ore, the key ingredient
needed to make steel, palladium and
timber all hit record highs in May, while
agricultural commodities, including
grains, oilseeds, sugar and dairy, have
also jumped.
While there is no agreed definition
of a supercycle, it has been commonly
used to describe a period where com-
modity prices rise above their long-term
trend for between 10 and 35 years.
These cycles are typically triggered by a
structural boost to demand that is large
enough to register globally and to which
supply is slow to respond, according to
Capital Economics.
There have been just four sustained
periods of above-trend commodity
prices over the past 120 years. The first
came with the emergence of the US as
an economic powerhouse in the 1880s
and the last with China’s rapid industri-
alisation in the early 2000s.
“Most people in commodities mar-
kets thought we were never going to
see another Chinese urbanisation story.
But it is now pretty clear that the
green capital expenditure story is going
to be bigger and multiples bigger
because it is global”, says Ben Cleary, a
partner at Tribeca Investment Partners,
a boutique fund management group
based in Australia.
“I also don’t think the China green
capex numbers are fully appreciated,”
★ FINANCIAL TIMES
FT BIG READ. COMMODITIES
By Neil Hume and Henry Sanderson
he adds. “It’s $2tn a year for 40 years
to get to net zero carbon. The numbers
we were are mind blowing.”
never going The green effect
to see It is not a universal sentiment. Many
another economists believe the current boom in
commodity prices is cyclical rather than
China structural and can be explained by
urbanisation strong Chinese demand, a post-pan-
story. But it’s demic economic recovery in Europe and
the US overlaid with supply chain dis-
clear that the ruptions. They expect the rally to peter
green capital out as China — still the world’s biggest
buyer of commodities — tightens credit.
expenditure Indeed some raw materials have
story, is already fallen in price. Iron ore is down
10 per cent from its recent record high
going to be of $233 a tonne in May as Beijing has
bigger’ moved to cool runaway prices.
“Commodity prices have rallied
because demand is so strong,” says Ric
‘If you Deverell, chief economist at Macquarie
in Sydney. “But in large parts that is
want to a cyclical rebound from a very large
decarbonise recession. And, of course, it has been
turbocharged by stimulus.”
transport Sceptics are also quick to point out
and that not all commodities are in short
supply. A case in point is oil, where Opec
industrial and its allies have yet to fully unwind the
fuels huge production cuts from April 2020.
through “When we are talking about a super-
cycle, we are talking about something
electricity, bigger and that has to involve the major
you are commodities, such as oil and iron ore,”
says Mark Williams, chief Asia econo-
going to mist at Capital Economics. “And, for
need copper those commodities, the demand out-
look is weaker.”
. . . a lot of it’ However, when it comes to copper
and other metals linked to investment
in green technology, such as cobalt and
nickel, even sceptics accept the outlook
is bright, because supply is constrained
and demand is set to accelerate.
“In terms of trying to decarbonise the
world, the only possible way we can do
that is through copper. There’s really
nothing else that can conduct electricity
as well,” says Jeff Currie, head of com-
modities research at Goldman Sachs
and one of the strongest proponents of
the idea that we are in a new supercycle.
“That’s why we say it is as strategically
important as oil, because if you want to
decarbonise transport and industrial
fuels through electricity, you are going
to need copper,” he says. “And a lot of it.”
An electric vehicle contains five times
more copper (60-83kg) than a car with
an internal combustion engine, accord-
ing to Goldman, while a 3MW wind tur-
bine uses up to 4.7 tonnes of the metal.
Goldman is not alone in forecasting
strong demand growth. To achieve net
Capital expenditure on copper
sector set to fall
$bn, mined commodities
Finished steel Copper Iron ore
Coal Gold Other
Forecast
200
150
100
50
0 Tolgoi
2009 2015 2020 2025
Source: Wood Mackenzie
zero emissions by 2050, the Inter-
national Energy Agency says the total
market for critical minerals such as cop-
per, cobalt and various rare earth met-
als will have to grow almost sevenfold
between 2020 and 2030.
“Every supercycle in commodities
has been tied to redistribution policies,”
says Currie. “What’s the redistribution
story this time? Tackling income in-
equality. It is clear we are going to tackle
it the same way Franklin Roosevelt did
in the 1930s, through green capex, like
the Hoover Dam.”
Currie points to US President Joe
Biden’s jobs plan and Europe’s Green
New Deal as evidence for that view. But
just as demand is expected to take off,
the copper market is arguably the clos-
est it has ever been to peak supply, due
to big miners curtailing investment in
new projects. That trend started around
seven years ago, after a brutal downturn
in commodity markets pushed many
miners close to financial ruin.
“Mining companies are likely to con-
tinue to prioritise capital returns and
balance sheet strength over investment
in long-lead-time, capital-intensive
growth projects,” says Christopher
LaFemina, an analyst at Jefferies. “The
economics of these projects are moving
targets that are in many ways beyond
the control of the mining companies.”
Fall in capital spending
Robert Friedland started searching for
copper in the DRC more than a quarter
of a century ago. Many people thought
he was crazy. At the time the country
was in the midst of a brutal war.
“Our team of geologists worked 15
years in the bush to find this deposit
against a great deal of scepticism,”
Friedland says of the Kamoa project, a
joint venture involving his company
Ivanhoe Mines, China’s Zijin Mining and
the DRC government. “It is unquestion-
ably the largest discovery in the history
of the African copper belt.”
The copper market is relatively well
supplied for the next couple of years,
thanks to developments such as Kamoa
and Quellaveco — the $5bn Peru-
vian mine Anglo American expects to
bring online in 2022 — but beyond that
the pipeline of new projects looks thin.
“People look at the supply numbers,
but they don’t filter in how difficult it is
to get that supply,” says Farid Dadashev,
co-head of European metals and mining
at RBC Capital Markets. “The last time
the copper price was high in 2011 and
2012 there were a couple of new projects
but they were all delayed and the capital
expenditure was extremely high.”
The copper projects due to
deliver 2020-24
Kilotonnes*
DRC Chile
Kamoa- Quebrada Spence
Kakula 100 Blanca 184
425 290
Mutanda
124
Almalyk
Other 100 Escondida
Cobre Grasberg
Panama 420 Timok
195
129
100
Udokan
Quellaveco 137
Oyu 380
*Estimated deposits mined 2020-24
Sources: Wood Mackenzie; UBS estimates
After blowing billions of dollars in the
last commodity boom on overpriced
deals and over ambitious projects, the
mining industry has scaled back spend-
ing and focused on returning cash to
shareholders, who have become used to
receiving fat dividends from the sector.
“All the major producers have been
returning capital for the best part of six
or seven years with a gun to their head
from shareholders who don’t trust their
ability to reinvest profits into growth,”
says Cleary from Tribeca Investments.
Global mining and smelting capital
expenditure, which peaked at $220bn in
2012, only reached half that level last
year, according to Wood Mackenzie.
Exploration spending has also dropped
sharply. from $35.7bn in 2012 to just
over $10bn last year, says Tribeca.
In spite of rising commodity prices —
copper has almost doubled in the past
year, recently hitting a record above
$10,500 a tonne, although it has since
slipped almost 5 per cent — miners
are either unwilling or unable to sign
off on new copper projects.
Unless that changes, Goldman sees an
annual supply shortfall of 8.2m tonnes
emerging by 2030. To put that figure
in perspective, last year global refined
copper production was 23.5m tonnes.
And it is becoming increasingly difficult
to find high-grade copper projects in
safe mining jurisdictions.
Ivan Glasenberg, the long-serving
boss of miner and commodity trader
Glencore, said recently that the copper
price would need to rise 50 per cent to
meet projected demand from the
global green revolution. “You will need
$15,000 copper to encourage a lot of this
more difficult investment,” he told the
Financial Times. “People are not going
to go to those more difficult parts of the
world unless they are certain.”
It is not just in the more difficult parts
of the world where there are problems.
Proposed tax changes in Chile and
Peru — gripped by the most divisive
Copper prices have surged in
the past 18 months
LME Grade A ($’000 per tonne)
10
8
6 discovery on a parcel of land close to
4
2 funds and international financial insti-
0 “Kamoa wasn’t just the discovery of a
2000 2005 2010 2015 2020
Source: Refinitiv
21
Copper smelting presidential election in recent history —
in Verkhnyaya could make it very difficult for foreign
Pyshma, Russia. miners to invest in the world’s two
Glencore CEO biggest copper producing nations.
Ivan Glasenberg “Fiscal uncertainty is likely to deter
says ‘you will investment and impact future supply,”
need $15,000 says Liam Fitzpatrick, an analyst at
copper to Deutsche Bank, who has identified
encourage a lot $50bn of projects in Chile, Peru and
of this more Zambia that are up for approval over the
difficult
investment’ and
next decade but could be delayed.
Ageing mines and declining ore
meet projected grades present other challenges for the
demand. Below: mining industry. These are particularly
the Kamoa- pronounced in Chile, where state-
Kakula project owned Codelco — the world’s biggest
in Democratic copper miner — needs to spend $35bn
Republic of between now and 2030 to keep annual
Congo — Andrey output steady at 1.6m to 1.7m tonnes.
Rudakov/Bloomberg;
Ivanhoe Mines
It can take up to 10 years to develop
a new copper project, assuming all
the approvals are in place. So even if the
mining industry, swayed by higher
prices, opened the purse strings now
it may already be too late to prevent
large supply deficits later in the decade.
“If we knew how hard it was going
to be to find a major copper system
and bring it into production with hydro-
electricity in the Congo, I can assure you
we would have given up,” says Friedland.
“That’s the problem with mineral explo-
ration. Very few efforts come to fruition.”
Aluminium as an alternative
Not everyone is convinced that copper is
set for a supercycle. Julian Kettle, vice-
chair of metals and mining at Wood
Mackenzie, says higher copper prices
will incentivise substitution towards
aluminium, which has lower conductiv-
ity than copper, but is much lighter.
In May, London-listed Tirupati
$10bn Graphite said it had developed a graph-
ene-aluminium composite material
Was spent on
mining exploration that it said had conductivity similar to
last year, down from copper. The company is working with
$35.7bn in 2012 Rolls-Royce on using it to replace cop-
per in thermal, power and propulsion
60-83kg systems, according to a person familiar
with the company.
Of copper in an
average electric During the last commodity supercy-
vehicle, five times cle, Kettle estimates the copper market
the amount in an lost 2 per cent, or between 400,000 and
equivalent
traditional car,
500,000 tonnes a year, of demand due
according to to aluminium substitution as prices
Goldman Sachs increased to $6,000 a tonne.
“If raw materials prices are rising
>$10,500 quickly, you look at opportunities for
thrift,” he says. “The notion the price
A tonne, the record
price for copper
will go to fanciful numbers on a sustain-
reached this year, able basis . . . that [scenario] tells the
although it has market you can’t deliver supplies and
since fallen by consumers will look elsewhere.”
about 5 per cent But even Kettle concedes that the out-
look for the copper market is relatively
bullish. It needs to double in size by
2040 if the world is to meet the targets
set out in the Paris climate agreement.
“If there is one commodity where you
will see supercycle characteristics it is
copper. But the fundamental drivers
aren’t there just yet,” he adds.
Back in the DRC, Ivanhoe Mines has
begun searching for another big copper
Kamoa-Kakula. And this time the work
of its geologists is drawing attention
rather than scepticism from big western
miners, as well as sovereign wealth
tutions, according to Friedland.
mine,” he says. “It was the discovery of
a whole new mineral province.”
22
WEDNESDAY 9 JUNE 2021
Making the most of the
dementia drug approval
FDA decision must bring benefits beyond Biogen’s bottom line
The US Food and Drug Administration
has this week announced one of its
most controversial drug approvals. The
FDA permitted Biogen to market adu-
canumab, the first drug designed to
treat an underlying biological cause of
Alzheimer’s disease, in the face of con-
siderable scientific doubts about its
clinical effectiveness — and without the
expected limits on the severity of
symptoms for which it could be pre-
scribed. Massachusetts-based Biogen
also set a list price of $56,000 a year,
well above most analysts’ forecasts,
which some of the pharma industry’s
critics said would bring the company
billions of dollars in profits without sig-
nificantly benefiting patients.
Now that the FDA has made its unex-
pectedly generous decision, govern-
ments, industry and patients groups
must ensure the approval gives a boost
to the so far unsuccessful process of
developing effective treatments for
dementia. The World Health Organiza-
tion says there are nearly 10m new
dementia cases every year, two-thirds
of which are Alzheimer’s disease.
The first essential is for the US
authorities to ensure that Biogen car-
ries out the most rigorous possible
post-launch surveillance of the drug —
whose trade name is Aduhelm — to
gather data on effectiveness and
adverse reactions as it is prescribed to
people in the real world. Unambigu-
ously positive findings would dispel
much of the suspicion among neurosci-
entists, which arose from the convo-
luted way in which Biogen processed
ambiguous clinical trial data.
Success for aducanumab would pro-
vide a fillip to what had long been the
dominant approach to developing
Alzheimer’s drugs but was falling from
favour because of its lack of success:
targeting the sticky plaques of amyloid
protein that build up in the brains of
many patients as their cognitive facul-
The world forgets Syria
at its extreme peril
No chance of refloating shattered state with Assad tyranny in place
Much of the world seems to have for-
gotten Syria’s savage civil war, 10 years
old and still well able to flare up and
radiate chaos across the Middle East —
and Europe.
The international complacency that
set in after the defeat of Isis is mis-
placed. So is the idea that fragile neigh-
bouring states such as Lebanon, Jordan
and even Turkey can indefinitely be
bought off to act as holding pens for 6m
Syrian refugees, and funnels for aid to
6m Syrians internally displaced.
The forerunner of Isis in Iraq was
reborn in Syria after being reduced to
600 fighters; security experts reckon it
now still has up to 40 times that
number, enough for a resurgence in
two rotting states. Europe, as well as
the Middle East, should know from bit-
ter experience that jihadi cut-throats
are not confined to the killing fields of
Iraq and Syria.
Yet it seems to take unconscionably
long to learn even basic lessons from
this tragedy.
The World Health Organization, a
UN agency, has just elevated Bashar
al-Assad’s government to its executive
board. In the decade until this Febru-
ary, this murderous regime attacked
and in many cases destroyed about
600 hospitals and clinics, driving phy-
sicians physically underground.
The Assads, backed by patrons such
as Vladimir Putin’s Russia, have prol-
iferated the fiction they are a secular
bulwark against religious extremism.
In fact, they are incubators of poison-
ous forces to which they offer them-
selves as the antidote. The regime emp-
tied jails of jihadis in 2011, betting they
would hijack the mainly Sunni rebel-
lion; just as they had fomented sectari-
anism in Lebanon and funnelled Sunni
extremists into US-occupied Iraq —
midwifing the precursor of Isis.
Assad was trapped in a shrinking
rump state until first Iran and then
ties fade. A few other amyloid-busting
drugs, which may work better than
aducanumab, are in clinical trials.
But a resurrection of the amyloid
approach must not divert resources
and attention away from other ways to
tackle dementia, which are in earlier
stages of research and might give better
results. The Dementia Discovery Fund,
a UK-based venture fund backed by
government, industry and charities,
has invested in 18 different projects.
One alternative is targeting other
harmful proteins that do not show up
as obviously as amyloid in brain scans
but may play an important role in
undermining cerebral functioning.
Another is to modulate the inflamma-
tion and abnormal immune responses
implicated in dementia. There is a
growing belief among experts that a
successful Alzheimer’s therapy will
require a combination of drugs
addressing multiple targets.
A big investment in associated infra-
structure will be required for a success-
ful rollout of aducanumab across the
US — and in other countries if their reg-
ulators and health services are per-
suaded it works well enough to justify
the price. Clinics will have to install
expensive infusion equipment to give
patients their monthly dose.
The most important investment,
however, not only for aducanumab but
for any Alzheimer’s treatment, will be
to identify suitable patients through
diagnostic tests as early as possible in
the progression of the disease. Drugs
are more likely to work well if they are
administered before amyloid and other
toxic compounds have built up in the
brain, ideally before symptoms appear.
If this approval spurs preparatory
investment in diagnostics such as brain
scanners, and in “brain clinics” where
trained staff assess patients with very
early signs of dementia, the FDA will
have done the world a valuable service.
Russia came to his rescue. Now, he has
recovered about 70 per cent of Syria,
although swaths are held by regime-
allied warlords and racketeers. The rest
by jihadis, US-allied Kurdish militia,
and Turkey in four northern enclaves.
The country is in ruins. Russian
and Syrian bombardment has reduced
cities including Aleppo and Homs to
rubble. Most of the more than 500,000
dead were civilians.
Such institutions as existed have col-
lapsed. A rare functioning unit of the
army, the Fourth Armoured Division
led by Maher al-Assad, the president’s
volatile younger brother, provides
cover for the trade and exactions
conducted by mafias and militias.
Half the population has been dis-
placed, many for good. The minority
Alawite regime, short of manpower,
likes the new demography, and licenses
war profiteers to expropriate refugee
property. Along with the Covid-19
emergency it cannot cope with, famine
is stalking Syria.
Assad staged another farcical elec-
tion last month, emerging with 95 per
cent of the vote. Despite his bombast,
he is the ward of three states: Russia,
Iran and Turkey. US president Joe
Biden will be meeting Putin next week
in Geneva, and Turkey’s president
Recep Tayyip Erdogan at the Nato
summit in Brussels. The US is engaging
Iran on reviving the 2015 nuclear
restraint deal. Syria is on all their
tables.
This is treacherous ground for Biden
but it is time to insist the Assads are a
locus of instability. The only way for-
ward is a new regional entente, led by
arch-rivals Saudi Arabia and Iran, and
an externally agreed security architec-
ture. This could unlock reconstruction
funds that Gulf Arab countries could
profit from as they diversify away from
oil. That may look more mirage than
vision. The alternatives are all bloody.
★ FINANCIAL TIMES
Letters
Companies must be discerning when picking causes to support
Andrew Edgecliffe-Johnson is right to
argue that companies should pay heed
to what campaigners are saying (“CEOs
should heed difficult activists”,
Opinion, June 4).
However, unless chief executives and
their boards are clear about their own
values, and the values of the companies
they run, they will fall down a rabbit
hole into a world of confusion.
Rather than think too hard about
what principles it should uphold, it
might seem easier for a company to act
Britain finds new term
for breaking one’s word
Whatever else one’s reaction may be to
the news that Lord Frost blames
Brussels for its “legal purism” towards
Northern Ireland’s post-Brexit impasse
(Report, FT.com, June 7), it is certainly
consistent with this government’s
general attitude to law, where binding
international agreements can be
overridden, parliament sent packing
and the power of the judiciary to test
the constitutional validity of
government decisions eliminated.
For its wider international
consequences the worst of these
horrors is undoubtedly the
introduction of the concept of
“overriding” as a legitimate term for
breaking one’s word. So far such
governments have mainly had to rely
on straight denials. In the future they
will have the option of using “the
British variant” instead.
Helge Vindenes
Padstow, Cornwall, UK
A welcome recalibration
on Northern Ireland issue
May I congratulate you on your leader
(“A Northern Ireland deal needs
realism on all sides”, FT View, June 8)
which marks a welcome recalibration
from your previous rock solid support
for Brussels on the Northern Ireland
issue.
As you in effect acknowledge, the
UK, after a bruising battle to “take
back control”, is not about to make
itself again subject to Europe’s
phytosanitary rules.
So the problem boils down to less EU
“legal purism” (ie, massive
bureaucracy) in applying the rules.
It is surely a scandal that blind
people travelling to Northern Ireland
are having trouble bringing their guide
dogs. Let us hope that, as Northern
Ireland edges closer to the political
abyss, your shift in position will help
others to do the same.
Sir Anthony Brenton
Cambridge, Cambridgeshire, UK
The PM’s assurances on
the protocol ring hollow
Lord Frost writes that some suppliers
in Great Britain are “simply not
sending their products (to Northern
Ireland) because of the time-
consuming paperwork required”. He
must surely be mistaken (Opinion,
June 7). “No forms, no checks, no
barriers of any kind . . . [You will] have
unfettered access to GB” (Boris
Johnson explaining how the Northern
Ireland protocol would work,
November 7, 2019).
Patience Wheatcroft
London SW1, UK
Nigerians
blame Shell for
‘community
problems’ in
Niger delta
West Africa
Notebook
by Neil Munshi
in a way that would ensure it does not
attract brickbats from campaigners.
With shrewdness, it might be able to
navigate its way into the future as
society’s norms change.
That is not a viable option. Noble
causes may attract popularity, but
ignoble, populist, causes can also win
support. An immoral view might be
shouted from the fringes of society
today, but be mainstream tomorrow.
There is no guarantee we live in a
progressive world in which society will
Stormont rules would give
Sinn Féin the top job
Your correspondent, Laura Noonan,
quotes the legislation on the
designation of the Northern Ireland
first minister correctly (“Unionists face
‘huge pivot moment’ in Stormont”,
Report, June 7). Unfortunately, she
doesn’t refer to the extra clauses that
mean that, contrary to the implication
of the bit she does quote, the largest
party regardless of designation gets to
nominate the first minister.
What this means in practice is that
Sinn Féin will secure the position of
first minister as the largest party in the
assembly next May, even if a slightly
larger number of unionists is elected
than nationalists. In fairness to
Noonan, it should be said that the
wording of the legislation is
convoluted.
Adrian Guelke
Emeritus Professor, Centre for the Study of
Ethnic Conflict, Queen’s University of
Belfast, Northern Ireland, UK
Draghi should first tackle
Italy’s regional railways
We all wish the best for Mario Draghi
and his efforts to rebuild Italy (Report,
May 31), and high speed trains for sure
is a good idea. But has he ever tried the
regional trains? Connecting relatively
wealthy cities such as Milan with
Bergamo, and the latter with Brescia —
distances of about 50km — takes at
least one hour, if you are lucky enough
to be on time.
Journeys are on single tracks, 10km
per hour speed limits when crossing
dangerous bridges. What is required is
a half-hour service, on modern trains
without old fashioned toilets, to get the
Italians back on track.
Ove Dahl Kristensen
Former Rail Director, Danish State
Railways, Copenhagen, Denmark
Last month heralded the end of an era
in Nigeria. Royal Dutch Shell, the
company that in 1956 discovered oil at
Oloibiri in the swamps of the Niger
Delta and helped turn it into a
posterchild for the resource curse,
announced that it plans to end its
onshore activity in the area.
Chief executive Ben van Beurden
blamed the winding down on the risk
profile of the delta, which has been
wracked by communal tensions and
criminality for generations. “We
cannot solve community problems in
the Niger Delta — that’s for the
Nigerian government perhaps to
solve,” he said. “We can do our best,
but at some point in time, we also
have to conclude that this is an
exposure that doesn’t fit with our risk
appetite any more.”
The delta is full of lush mangroves
sprouting from water that shimmers
with an oily, rainbow sheen. While
crude worth billions has been
extracted from its shores, it shows few
signs that the industry has operated
there for decades. Yet it is rife with
“community problems”. They have
flowed alongside its oil, which has
wrought economic and environmental
devastation, sowed poverty, destroyed
farmland and fisheries, enriched
corrupt politicians and strengthened
organised crime syndicates.
For many who live there, the region
is what it is today in large part because
of Shell. The company “has huge
historical and legacy issues with
communities . . . that cannot be
wished away,” says Ledum Mitee,
If you are not satisfied with the FT’s response to your complaint, you can appeal
to the FT Editorial Complaints Commissioner: complaints.commissioner@ft.com
steadily improve ethically. A company
should not simply blow with the
populist wind.
Likewise, while companies should
“avoid dismissing every critic as a
crank”, they should also avoid
ascribing to every critic unquestionable
wisdom and virtue.
Campaigns to highlight the urgent
need for corporate action on the
climate crisis are essential, but the
demands of some of those campaigns
might derive from a poor
Undercut by one boss’s
delightful candour on pay
Tom Braithwaite’s case for even higher
executive pay (“Attacks on the pay of
top-performing CEOs can backfire”,
Top Line, FT Weekend, May 22) might
have been stronger but for that
delightful moment of candour from the
chief executive of Royal Dutch Shell, a
not entirely unsuccessful company,
back in 2009.
Responding to the debate about his
own remuneration of €11.7m, Jeroen
van der Veer conceded to critics that “if
I had been paid 50 per cent more I
would not have done it better. If I had
been paid 50 per cent less, I would not
have done it worse” (“Departing Shell
chief calls for pay shake-up”, Report,
June 9, 2009).
And there may be limits to Pascal
Soriot’s image as AstraZeneca
corporate hero too.
The 2014 approach by Pfizer was
repulsed in part by the assailant’s own
goals, such as the closure of its largest
European R&D centre in 2011 and an
obvious quest for tax inversion rather
than industrial logic.
The AstraZeneca board’s stand
would have been slightly more
inspiring if it hadn’t later turned out to
have been in secret talks with its
stalker for many weeks before the bid.
Surely the greatest achievement of
Soriot is his exemplary response to a
national emergency, supplying at
extraordinary speed and no profit a
vaccine that has saved countless lives.
And it saved the skin of a
government which might otherwise
have been remembered mainly for
lethal incompetence.
Anthony Warwick-Ching
London W13, UK
Look at the counterfactual
of reining in bank support
Late last year, former US Treasury
secretary Steven Mnuchin lapsed the
Federal Reserve’s corporate bond
facilities. Many considered this move
risky. Markets sided with Mnuchin as
prices barely budged.
Now the Fed is liquidating its
investment grade inventory (“Federal
Reserve to unwind its emergency
purchases of US corporate bonds”,
Report, FT.com, June 2). Again
markets shrugged.
Given the challenges of reining in
central bank support, we should
consider the counterfactual.
Much ado about nothing was far
from a foregone conclusion. With
tapering more topical, policymakers
would benefit from studying the
lessons learned from this successful
exit.
Gray Schweitzer
New York, NY, US
former head of the Movement for the
Survival of the Ogoni People. “They
certainly have a responsibility to solve
the problems in the Niger Delta
caused by their activities.”
Mitee took over Mosop from Ken
Saro-Wiwa, the celebrated activist and
writer who led a peaceful protest
seeking justice for the Ogoni over the
environmental devastation of their
homeland until Nigeria’s military
government executed him and eight
others in 1995.
“There is no doubt in our minds
that Ken and my [other] colleagues
were executed for the purposes of
making it possible for Shell to operate
without hindrance,” Mitee says. A
Shell spokesperson says the company
has “always denied, in the strongest
possible terms” any responsibility for
the state’s executions of the Ogoni
Nine.
Shell argues that it contributes to
Nigeria’s economy. It has 2,700
employees and more than 9,000
contractors, and paid $4.6bn into the
country’s coffers in 2019 alone. The
company says its withdrawal from
onshore production would be done in
collaboration with the government and
local communities, and it will continue
to meet its obligations for oil spills.
“The challenges of the Niger Delta
are complex and widespread, affecting
communities where we may never
have operated,” the spokesperson
says. “Where we do operate, we bring
jobs, support local supply chains and
invest in the education and healthcare
people rely on, as well as providing
Wednesday 9 June 2021
Email: letters.editor@ft.com
Include daytime telephone number and full address
Corrections: corrections@ft.com
understanding of economics or be
based on ideologies which most
citizens would oppose. The same
applies to campaigns on other issues.
Companies need to learn the art of
public discernment, based on openness
and the sharing of facts and opinions.
To exercise such discernment,
however, they have to put in the hard
work to define the ethical foundations
on which they are based.
Stephen Beer
London SW9, UK
The Olympics could do
without straw man threat
Professor Tatsuo Masuda (“Tokyo
Games could be a Covid
superspreader”, Letters, June 7) seems
to be creating a straw man in terms of
the Covid-19 threat from Olympic
athletes. All foreign athletes heading
for the Games must test negative
within 72 hours of flight departure and
must continue to test negative every
four days once in Japan. Many will have
been fully vaccinated in their home
countries, thus this is not squeezing
any scarce Japanese resources.
Japan should significantly increase
its pace of vaccinating its people. Its
ability to do so is independent of the
Olympics. National teams will bring
their own doctors who can perform the
required Covid-19 testing and
administer vaccines.
Finally, democracy involves the
public electing governments
periodically and letting them take
charge. It does not involve allowing the
public to micromanage, between
elections, the country’s sports agenda,
or any other government agenda.
Masuda seems to be advocating mob
rule, not democracy.
Jan Harrington
New York, NY, US
Banking needs its ‘fuzzies’
now more than ever
Thank you Gillian Tett for finally
providing me with a label (Life & Arts,
FT Weekend, May 29). It seems I am
and have always been a “fuzzie”. I am
not an anthropologist or social scientist
among the techies, but a one-time
liberal arts/humanities graduate in a
banking world peopled by algorithm-
clinging, data-loving economists,
scientists and mathematicians.
For years I have argued that banking
needs to balance its linear-thinking
numbers people with a liberal dose of
lateral-thinking historians, linguists or
classicists. They make for good people
managers and client-facing staff, but I
also suspect that “fuzzies” might also
have made good risk managers in an
industry with a somewhat patchy
record on this (Archegos, Greensill,
Wirecard anyone?).
So there it is. I now know I am a life-
long humanities “fuzzie”, helping to
keep the number-crunchers on the
straight and narrow.
Tim Skeet
London SW19, UK
Correction
c The market capitalisation of Facebook
was wrongly stated as $1.6tn in a Lex
graphic on June 8. The correct figure
was $950bn.
billions of dollars in income to the
Nigerian government.”
The perception that Shell has been a
negative actor has made it a
convenient scapegoat for Nigeria’s
corrupt political class, says Idayat
Hassan, head of the Abuja-based
Centre for Democracy and
Development. “The problem is that of
lack of governance, not just business,”
she says.
Mike Karikpo, a delta-based lawyer
with Friends of the Earth
International, helped negotiate a long-
delayed, billion-dollar clean-up of
Ogoniland, which is largely funded by
Shell and Nigeria’s state oil company
but has been wracked by allegations of
graft. “We hold the company
accountable for nearly 70 years of
reckless and self-regulated operation
in our communities,” he says. “No
matter how much Shell tries to evade
responsibility for the destruction of
our ecosystem, local livelihoods and
the sociocultural fabric of our
communities, it will fail.”
Karikpo points to a landmark Dutch
court judgment which held Shell’s
Nigerian subsidiary liable for oil spills
in the delta and could open the door
for more such cases. “Shell must pay
for the clean-up and restoration of our
environment,” he says. “It is debt it
owes our generation and future
generations of people in this region
and it is debt we will work diligently
and strongly to extract to the very
last dime.”
neil.munshi@ft.com
Wednesday 9 June 2021
A MER ICA
Janan
Ganesh
I
t is not just their mortifyingly
under-attended speaking tours. It is
not even their ethical demotion in
the light of MeToo. “The fall of the
House of Clinton” — the headline
recurs through the years — is the fall of
nothing less than the moderate left
itself. Progressives have come around to
Christopher Hitchens’s once-lonely
view of Bill Clinton’s presidency as a
round of half-measures, cavalier only in
the jailing of minorities and the dispos-
session of the poor.
When Clinton’s Treasury secretary
worries aloud about the cost of
The Fed risks
being too slow
on inflation
Martin Wolf Economics
And that will be bad news for the
rest of the world as it recovers
from the pandemic
T
he world economy is enjoy-
ing a vigorous, but diver-
gent, recovery. This is what
the World Bank’s June Glo-
bal Economic Prospects is
telling us. The main reason for the
recovery is the successes of the vaccine
programme. The main reason for the
divergence is the limitations of the vac-
cine programme. Some parts of the
world economy may become too hot,
while others are too cold. So, stay alert.
This time is indeed different: the
recession was caused not by the need to
curb excessive inflation, nor by an oil
shock, nor by a financial crisis, but by a
virus. Now, with the success of the vac-
cine programmes, the world is enjoying
among the strongest recoveries from
recession since 1945. (See charts.)
That is the good news. The bad news is
how uneven the recovery will be.
According to Global Economic Pros-
pects, 94 per cent of high-income coun-
tries will regain pre-recession gross
domestic product per head within two
years. This would be the highest share in
so brief a period after any recession
since the second world war. But the pro-
portion of emerging and developing
countries expected to achieve such an
outcome this time is forecast to be 40
per cent. That would be the lowest share
after any postwar recession.
The relative success of the high-
income countries is due to the scale of
their fiscal and monetary responses and
their vaccine rollouts. Emerging and
developing countries are far behind in
Anne
Finucane
M
omentum on the road to
net zero by mid-century
is rapidly building. The
US has recommitted to
the 2015 Paris Agree-
ment, China has promised meaningful
climate-related investments, while the
EU has its sweeping Green Deal. Recent
shareholder and court actions on oil and
gas companies have only served to
accentuate growing pressure on carbon-
intense industries.
As governments, industries and com-
panies make ambitious commitments
to reduce their emissions, the concept of
carbon offsets has likewise gained both
more attention and greater criticism.
Why the Clintons are having the last laugh
pandemic relief, he is scolded for Old-
think. When a Clinton-era strategist
warns the party off “wokeness”, he does
so almost alone. A Democratic right that
once commanded the US — and through
its sister movements the west — now
struggles for a hearing. It has just one
prize to hang on to by way of consola-
tion. That happens to be a decisive say in
the running of the country.
America’s vaunted turn to the left is
plainly stalling. President Joe Biden’s
infrastructure plan is said to have been
haggled down to less than half of its orig-
inal $2.3tn value. Legislation on voting
reform and wage discrimination are
unlikely to pass in their current form.
At the same time, the president is sof-
tening on corporate tax increases to
fund his new Jerusalem. So far, then, the
legislative basis for the Biden-as-Frank-
lin-Roosevelt trope is a pandemic relief
bill of mostly transient measures. And
this is before the midterm elections that
all these respects. Quantitative easing
averaged 15 per cent of GDP in high-in-
come countries, against 3 per cent in
emerging and developing countries. Fis-
cal support averaged 17 per cent in high-
income countries, against 5 per cent in
emerging and developing countries.
Even so, half of all low-income countries
are in debt distress. According to World
Bank president David Malpass, the
“pandemic not only reversed gains in
global poverty reduction for the first
time in a generation but also deepened
the challenges of food insecurity and ris-
ing food prices for many millions of peo-
ple”. The UK’s decision to cut its foreign
aid budget is breathtakingly ill-timed.
Given all this, the most important
decision for leaders of the G7 high-
income countries to take this week is to
fund a sharp acceleration in the supply
and distribution of vaccines. This will
also benefit donors. The pandemic must
be stopped everywhere if people are to
be truly safe anywhere.
Among high-income economies, the
most important locomotive of growth is
the US, with its highly aggressive mone-
tary and fiscal policies. The budget pro-
posal of Joe Biden forecasts federal defi-
cits of 16.7 per cent of GDP this fiscal
year (to end-September) and 7.8 per
cent next year. Meanwhile, most mem-
bers of the Federal Reserve’s board
expect interest rates to stay near zero
even until the end of 2023. These poli-
cies are bringing big benefits. But how
risky are they?
This has become much debated. It is
Carbon offsets can help in the transition to net zero
Offsets are ideally the final mile in
reducing emissions. Even after a com-
pany has improved its energy efficiency,
electrified operations, installed solar
and purchased renewable grid energy, a
residual carbon footprint may remain.
This is then “offset” by an investment in
projects that avoid or further reduce
emissions.
Critics argue that buying such offsets
does little to directly reduce a company’s
carbon footprint. But the world must
have a transition period to move from
high-emitting fossil fuels — the source of
80 per cent of the world’s energy — to a
zero carbon solution. That means offsets,
especially carbon removal offsets, will
continue to be needed.
There is important work under way to
address the need for offsets. Recently,
the Taskforce on Scaling Voluntary Car-
bon Markets, overseen by the Institute
of International Finance, has encour-
aged the financial world to help provide
★ FINANCIAL TIMES
Opinion
have routed the last two Democratic
presidents.
At this point, it is natural to blame the
obstinacy of Republican senators. They
even used the filibuster, which is only
broken with a two-thirds vote in that
chamber, to quash a probe of the Capitol
siege. But the president is not just failing
to meet that supermajority. He has ever
Today’s Democratic
right has rarely had less
cachet and goodwill
but it has the casting vote
more trouble reaching a majority at all.
And it is conservative-minded col-
leagues, West Virginia’s Joe Manchin
and Arizona’s Kyrsten Sinema, who con-
stitute the blockage.
The Democratic right finds itself in a
The recovery is forecast to be one of the
strongest since the second world war
Recoveries in global output (trough of recession = 100)
114
112
2020
110
108
106
104 1945-46
102
100
0 1
Years after recession
Data for 2021-23 used in the 2020 episode are forecasts
Sources: World Bank, Bolt et al (2018); Kose, Sugawara, & Terrones (2020)
also not a purely local matter. If the Fed
has to raise rates sharply, it is likely to
cause another sharp recession in the US.
That would not only be bad for America,
but also be bad for the world, including
vulnerable developing countries.
It is this context that makes the
debate on inflation particularly signifi-
cant. Stephen Roach, who worked at the
Fed in the 1970s, has recalled Arthur
Burns, the Fed chair who let the infla-
tion genie out of the bottle in the early
1970s. If that were to be repeated, it
If the central bank has to
raise rates sharply, it is
likely to cause another
sharp recession in the US
funding for long-term solutions through
responsible investment in offsets.
The research and technology needed
to reduce the risks of climate disruption
could partly be funded through offsets.
Aggregating this funding from multiple
companies would be an effective way to
They can be used to fund
research and technology
needed to reduce the risks
of climate disruption
reduce the cost of low carbon technolo-
gies in emerging economies.
Many think offsets mean planting
trees or preserving forests. But these
nature-based efforts are limited and
will surely be insufficient relative to
growing demand. Instead, new partner-
ships between companies, governments
peculiar fix. It has rarely had less cachet
and goodwill. At the same time, it is the
casting vote in the administration. As
something like the ideological midpoint
of a split Senate, Manchin has more
effective power than all but a handful of
individuals in the US. Invoking the old
Republican master of the Senate, one of
the “Squad” of leftwing Representatives
describes him as the “new Mitch McCo-
nnell”. With subtler menace, if not strict
accuracy, Biden himself refers to “two
members of the Senate who vote more
with my Republican friends”.
The regression to the Clintonian
mean goes beyond them, though, and
beyond the domestic realm. Biden has
defied liberal calls to excommunicate
Saudi Arabia for its dark ventures
abroad. His no less controversial meet-
ing with President Vladimir Putin of
Russia next week evokes Hillary Clin-
ton’s “re-set” as secretary of state. As for
vice-president Kamala Harris, she had a
Inflation rose very quickly in the 1970s
Annual % change in US price measures
Chair of the
1975 Federal Reserve:
William M Martin
2009
1982
1991
Headline CPI
2 3
1964 1970
*Personal consumption expenditure Source: Refinitiv
would be costly for almost everyone.
But is that outcome actually likely? The
answer is “yes” — not because of what
has already happened, but because of
the Fed’s commitments.
The rise in inflation we are now seeing
might be both modest and temporary
and not affect inflationary expectations,
as the Fed believes. But the Fed has
locked itself into responding too slowly,
especially given the fiscal expansion.
This is because, in the words of Richard
Clarida, vice-chair, “we expect it will be
appropriate to keep the federal funds
rate in the current 0 to 25 basis point
target range until inflation has reached
2 per cent (on an annual basis) and
labour market conditions have reached
levels consistent with the [Federal Open
market] Committee’s assessment of
maximum employment”.
and NGOs can underwrite promising
and scalable initiatives.
Mini-grids provide a compelling
example. Six hundred million people
across Africa lack access to affordable,
reliable, sustainable energy. Solar, wind
or hybrid mini-grids could accelerate
clean energy access. The International
Energy Agency forecasts that they will
be the lowest cost method to connect at
least 264m people in Africa by 2030.
Funding such efforts offers potential
for blended finance funds, which com-
bine different sources of capital to
reduce risk and make otherwise unaf-
fordable efforts viable. Such vehicles
exist today but are small, emerging and
highly complex. Instead, pooled offset
funds would initially be established
among companies, restricted to a speci-
fied percentage of the overall decarbon-
isation effort, and time limited to ensure
continued commitment towards
achieving longer-term sustainable car-
curt line for would-be migrants in Gua-
temala this week. “Do not come.” A gen-
eration ago, we would have called that
triangulation.
If a wry smile plays on the lips of the
Clintons, it is only half-merited. Today’s
Democratic right are distinct at least in
style from their technocratic forebears.
Sinema is a former Mormon and social
worker. Manchin’s state is an (unfair)
byword for backwardness. Like Senator
Bob Menendez, another of their
number, both were elected in a post-
millennium world of terrorism and eco-
nomic insecurity. It is hard to picture
their wing of the party bonding with,
say, President Emmanuel Macron of
France as the Clintons once did with
European leaders of a modern bent.
Often enough, though, their influence
comes down to the same thing. In sub-
stance, it is a wariness of higher taxes
and a mild social conservatism. In tac-
tics, it is a lack of appetite for partisan
Central banks of high-income countries
are forecast to persist with ultra-loose
Arthur F G William Paul monetary policy
Burns Miller Volcker 14 Average central bank policy rates (%)
12
10 Emerging
& developing
8 economies
6
4 2
Core PCE* deflator, Advanced
excluding food 2 economies
and energy
0 0
1980 1984 2019
Sources: World Bank; Oxford Economics
This is “outcome-based” as opposed
to “forecast-based” policy. What in lay-
man’s language does it mean? It means
that the Fed will persist with ultra-loose
monetary policy until employment has
already reached its (unknowable)
“maximum”. Given the lags between
policy and outcomes, this guarantees
overshooting. By the time the economy
finally reaches the point when the Fed
starts to tighten, it will be smoking hot
(at “maximum employment”) and,
inevitably, getting hotter.
That is what happened in the 1970s. In
that case, the necessary disinflation was
postponed until Paul Volcker took over
in 1979. The experience was brutal.
Given the inevitable lags between tight-
ening and bringing inflation under con-
trol, the costs are again likely to be
severe. That would not matter to the US
bon neutrality. In other words, by limit-
ing both the quantity and duration
of offsets, no company would be over-
reliant on them.
There is a growing resolve to build a
more sustainable world. More than 160
financial institutions with assets total-
ling over $70tn have signed up to the
Glasgow Financial Alliance for Net Zero,
committing their companies and bal-
ance sheets to a net zero outcome. This
will take years of work, and new finan-
cial products and avenues for financing
are needed. Further building out and
connecting renewable energy, electric
vehicle and other low carbon infrastruc-
ture will only be possible with substan-
tial private and public partnerships.
Pooled offsets could play an important
role in accelerating the pace.
There are arguments around what
is an acceptable offset but there is
an opportunity to secure a positive
climate-related outcome. By advancing
23
confrontation. As a block on, say, voting
reform, the Democratic right is mad-
dening and perhaps unconscionable.
But a party without them would lack
broad enough appeal to govern at all.
Among the weirder things I have lived
through is the reframing of the era of my
youth as “neoliberal”. You would not
know that Clinton passed the last com-
prehensive increase in federal taxes.
Or that Tony Blair was still running a
fiscal deficit in 2007, Britain’s 15th year
of economic growth, so lavish was he.
Whether through amnesia or bad
faith, the Third Way is slandered among
those old enough to know better as a
craven sop to the 1980s. In truth, it was
a generous correction of them. The
cautious, unideological left has a decep-
tive power to achieve reform. If it
survives, it is not just the Clintonian ego
that stands to gain.
janan.ganesh@ft.com
7
Forecast
6
5
4
3
1
20 21 22 23
alone. Remember: the Volcker shock
triggered the Latin American debt cri-
sis. This time, there is much more debt
around almost everywhere. A severe
monetary tightening would create even
more devastation than then.
Getting the world as a whole out of the
pandemic crisis is far from a done deal.
Much more still needs to be done on
that. Furthermore, the new approach to
monetary policy of the world’s most
important central bank risks serious
overshooting. By responding only to
outcomes, it is nigh on certain to react
too slowly. It is possible that this will not
matter, because expectations remain
well anchored, whatever happens. I
pray this will be case. The alternative
does not bear much thinking about.
martin.wolf@ft.com
the public/private alliance we can also
advance the pace of transition. Should
participation in the COP26 road to
net zero or the Task Force on Climate-
Related Financial Disclosures be a pre-
requisite for a company to use offsets
towards any carbon neutral or net zero
claims? Many companies would surely
be supportive of a global standard
around the use of offsets.
The path to net zero is complicated.
The technology to fully replace or decar-
bonise is nascent and we need the best
minds in research, technology and
financial markets to work in partner-
ship with government to find a realistic
way to accelerate our efforts. Well-de-
signed offset frameworks can both
speed up the effort to decarbonise our
planet and create the financial collateral
needed to fund the innovation that will
get us there faster.
The author is vice-chair of Bank of America
24 ★ FINANCIAL TIMES Wednesday 9 June 2021

British American Tobacco: the ashes

In an already unpopular sector, British American Tobacco gets little respect. Its forward earnings multiple
wallows near decade lows, well below that of peers. Sales of cigarettes in the US, its top market, could
disappear by 2050. Alternative vaping products are not popular with all age groups.

Twitter: @FTLex
Aviva/Cevian:
good cop, bad cop
Scandinavian visitors had a mixed
reputation in Britain’s distant past.
They might be raiders, traders or
peaceful settlers. Amanda Blanc must
countenance all three scenarios in
dealing with Cevian, the powerful
Stockholm-based investor that has
taken a 5 per cent stake in Aviva.
The Swedish activist has engineered
break-ups, takeovers and management
rejigs across Europe. It would be just as
happy if gentler remedies doubled the
value of its £800m cash equity stake in
the UK insurer over three years.
Aviva is a tempting target. Large,
lethargic and underperforming, it has
been a graveyard for managerial
ambitions for at least a decade. Newish
chief executive Blanc has shown
greater dynamism than predecessor
Maurice Tulloch, agreeing £8bn in
disposals. But the business remains the
last big insurance conglomerate listed
in London. RSA, another Cevian
investment, has just completed its well-
priced £7.2bn break-up sale to Canada’s
Intact and Tryg of Denmark.
Cevian has not suggested that Aviva
should hoist a For Sale sign over
remaining assets that include life and
non-life insurance, lacklustre fund
manager Aviva Investors and a big
“closed book” of legacy cover.
The investor has set financial targets
instead. The first two look tough, but
achievable. The eye-catching biggie is a
£5bn capital return. The starting point
is Aviva’s capital. This is about 250 per
cent of its regulatory minimum, 70
percentage points or £6.6bn above the
insurer’s 180 per cent target.
Cevian is making lower subsequent
deductions than some analysts. Ming
Zh of Panmure thinks just under £4bn
may be refundable to shareholders. As
a second aim, the activist wants Blanc
to lift her cost-saving target from
£300m to £500m yearly out of
operating expenses of some £3bn.
Blanc’s sharpest intake of breath
must have been reserved for Cevian’s
suggestion that she should more than
double the dividend to 45p within
three years. The activist optimistically
hopes the share price would also
double to over £8, a level not regularly
seen since 2007.
To get anywhere close, Blanc would
need to do two things: hit annual and
half-yearly targets with the same
consistency as Legal & General. Then
strip out layers of management while
galvanising ordinary staff. External
pressure from Cevian should make
both tasks easier to justify and achieve.
Wuling/China:
big hopes for mini EVs
Tesla’s rise to the top of Chinese
electric-car sales did not last long.
More galling, the local carmaker that
has taken the lead has done so with a
smaller, slower vehicle. The Wuling
Hong Guang Mini EV has a top speed of
100 kmph and a 170km driving range.
Once scoffed at for its size and weak
horsepower it has become the most
sold electric vehicle in China this year.
A $4,500 pricetag helps. Tesla’s
Model 3 costs about $39,000 in China.
Wuling has worked around the issue of
high fixed battery prices by making its
car small and light, meaning smaller
and cheaper batteries can be used. The
car is made by SAIC-GM-Wuling
Automobile, a joint venture known as
Wuling in which state-backed SAIC
Motor and Guangxi Automobile Group
own a joint 56 per cent and General
Motors of the US 44 per cent.
Sales of Wuling-made electric cars
almost tripled in 2020. Yet SAIC shares
(one of the listed components of the
joint venture) have fallen 15 per cent
this year as its other foreign ventures,
including SAIC Volkswagen, have
underperformed. Local demand for
cheaper EVs has hurt sales of more
pricey vehicles. SAIC trades at just 9
times trailing earnings, a big discount
to EV and traditional carmaker peers.
The share price decline makes this a
good time to buy. Tesla’s slowing sales
in China come amid increased state
scrutiny, including reported bans on
parking Teslas in Chinese government
offices. This gives Wuling a chance to
capitalise on mainstream demand
amid a price war that Tesla’s locally
made Model Y sparked last year.
Like the slogan “Young and Eager”
painted on Wuling’s headquarters,
there is ample room for growth. EVs
account for less than a tenth of all cars
in China, the world’s largest car sector.
Narrow streets, young demographics
and small budgets in nearby countries
such as Vietnam and Indonesia offer
significant potential too. Longer term,
BAT’s earnings multiple has compressed On this trend, US sales will disappear by 2050
12-month forward price/earnings ratio
MSCI World
MSCI World
Tobacco
British American Tobacco
2018 2019 2020
FT graphic Source: BAT
Cigarette packets in many countries
carry health warnings. British
American Tobacco’s shares have their
own in the form of an ultra-low
valuation. Despite efforts to shift
away from smoke-producing
products, BAT still relies on 140m
smokers for the bulk of its income.
Meanwhile, the trend for
sustainable investment is steadily
filtering out buyers of tobacco stock.
Even an outlook upgrade published
yesterday added little light. Sales
forecasts were lifted to the top of the
previous 3 per cent to 5 per cent
growth range, though earnings per
share was not revised. A substantial
pick-up in reported customers for
non-combustible products helped,
primarily vaping and tobacco heating
it might even have a chance at
capturing low-price EV car sales in
Europe and the US.
Aramis:
dealer wins
Aramis was the most ambitious of the
swashbuckling Three Musketeers. The
French online car dealer that shares his
name has high hopes too. An upcoming
IPO values the group at €1.9bn-€2.3bn.
It plans to raise at least €250m of
new money in Paris by following peers
such as Germany’s Auto1 and Vroom of
the US to public markets.
Excitement around online dealers
began last year when lockdowns
shuttered forecourts. Tight supply of
Cigarette unit sales (bn)
25
20
15 2001 2005
Vaping has become less popular among teens
Current nicotine usage by US high school students (%)
10
Cigarettes
5 15
0 0
2021 2011 12 13 14
Source: Centers for Disease Control and Prevention
devices. Unfortunately, new products
made up just 5 per cent of sales last
year. Both Philip Morris and Japan
Tobacco have more.
BAT trades near a decade low on a
forward price to earnings multiple of
just over eight times, fully a quarter
cheaper than global peers.
What hurts BAT is not just the
comparison to peers but the surge of
money into environmental, social and
governance funds, for which it does not
qualify. A consensus earnings growth
rate of mid-single digits and little hope
of a quick end to cigarette dependence
means the tobacco group will struggle
to get attention, argues Jefferies.
A new controversy over the sale of
menthol cigarettes, which face a ban in
the US, makes things worse. BAT
new cars has helped. Second-hand car
prices in Europe are rising faster than
at any time in the past decade,
contributing to fears of inflation.
Aramis founders Nicolas Chartier
and Guillaume Paoli are among those
planning to sell existing shares, even as
the business raises new money.
Stellantis, the combination of FCA
and Peugeot, owns almost 70 per cent
of the current equity. Along with the
founders, it will remain the group’s
largest shareholder.
Carvana is the most richly valued of
the new crop of online dealers, trading
at an enterprise value of 2.5 times sales
over the next 12 months. Aramis points
to its retail business as reason to
compare itself to that US-listed peer. Its
gross profit per car sale of €2,322 lags
behind Carvana by just a few hundred
400
300
200
100
0 For decades Alzheimer’s sufferers have
2010 2015 2019
Sources: BAT
Total nicotine
30
25
20
E-vapour
Cigars 10
5 treatment to be approved that purports
Smokeless (MST)
15 16 17 18 19 20
controls top US brand Newport. The
vultures are beginning to circle.
Kenneth Dart, backed by a fortune
made from polystyrene cups, has no
qualms about picking up some cheap
butts. He snapped up a 6.6 per cent
stake in BAT and about half that in
rival Imperial Brands in late April.
He may have been lured by BAT’s
dividend yield of 7 per cent.
No wonder. Among about 40,000
listed companies in North America
and Europe, Lex could find only
about 50 that offer BAT’s
combination of value and income,
using Bloomberg data.
For patient investors, BAT’s low
price may strike a spark. But most
portfolio managers will find it a tough
holding to defend.
euros. Auto1 achieved gross profit per
unit of just €633 in the first quarter.
Fears of a valuation bubble may keep
some investors away. Auto1 shares
have fallen more than a fifth since
listing in February. In the US, Carvana
and Vroom have traded flat.
It makes sense for Aramis to offer
investors a discount compared with
peers listed in the frothy US. At the
lower end of the mooted range, Aramis
would be priced 40 per cent lower than
Carvana. A decent profits performance
should help to close the gap over time.
Chip shortages will disrupt new-car
supplies, meanwhile. That points to
further rises in used-car prices and
fatter profits for dealers. This should
support Aramis in an industry where it
is everyone for themselves, not “all for
one and one for all”.
Biogen/Alzheimer’s:
the high cost of hope
had few treatment options.
Existing drugs focused on easing the
symptoms rather than slowing or
reversing cognitive decline.
US biotech giant Biogen promises to
change that. This week US regulators
gave the green light to its new drug,
aducanumab. Developed by Biogen and
Japanese drugmaker Eisai, it is the first
to slow progression of the disease. The
problem is that aducanumab costs
$56,000 per year per patient.
Big Pharma has long asserted the
costliness of innovation. Lofty prices
reward risky and expensive research.
But aducanumab’s cost particularly
arches an eyebrow given uncertainties
about its benefits. The US Food and
Drug Administration used a so-called
“accelerated pathway” to clear the
drug in advance of conclusive clinical
trial data. The price tag is well above
analyst expectations of $10,000-
$24,000 annually. It also trumps by
many times the $2,500-$8,300 range
that the Institute for Clinical and
Economic Review, an influential voice
on drug pricing, said it was worth
based on existing evidence.
For Biogen, which pulled in $13bn in
revenue last year, the approval will add
a new growth driver and offset some of
the pressure that its existing drug
portfolio faces from generics. Biogen’s
shares have jumped over a third since
Friday, adding more than $13bn to the
company’s equity value.
But markets may presume too much.
For starters, doctors may hesitate to
prescribe the drug until further proof
of its effectiveness appears. Expect
payer pushback on the cost too. The
high price point probably will
reinvigorate a national debate over
drug pricing and even encourage the
government to take action.
All this means that the number of
patients that aducanumab could treat
may fall short of consensus 2023
forecasts of 161,000 patients. Biogen
may well regret its decision to set the
price for its success so high.
Lex on the web
For notes on today’s stories
go to www.ft.com/lex

CROSSWORD
No 16,807 Set by MONK
ä á Þ Ú Ö Ò Î ACROSS
8 Lie about Romeo in disagreement
Ë È (8)
9 Anything made in France beneficial
to stopping European market’s
ä. ää
closure (6)
10 Possibly punchy first line in
Liverpool, for example (6)
11 Graceful after only hints of excuse
äá for discharge (8)
12 Temporarily staying in position after
me fortieth shot (3,3,4,5)
13 One side of Manchester chasing
äÞ äÚ äÖ äÒ
money for profitable conditions (3,4)
15 Doctor following writer (7)
äÎ
18 Fancy treacherous prof getting what
äË äÈ á. one expected? (3,3,3,6)
21 A bit of fighting on Friday (8)
22 Caught hard old hooligan sporting a
goatee? (6)
áä áá 23 Some diplomats and others like
what’s yet to be delivered? (6)
24 Paper coverage offered to recently
inaugurated union members (8)
áÞ áÚ
DOWN
1 Fictional duke captured by actors in
Othello (6)
2 City still jubilant (8)
3 Hauls associated with amended
awful weapon (10,5)
4 Succeed because of their supply (7)
JOTTER PAD 5 Horrid deflating creeps belittling
themselves (4-11)
6 Force needed to enter unopened,
rubbish shed (6)
7 Big guns planning to sack
international (8)
Solution 16,806 14 Unusually arcane about Greek lyric
poet (8)
Ú Ô 8 8 æ 7 ã : ‚ 7 H N 7 × 16 One cutting crewman who keeps
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members up? More like down (8)
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Endeavour Morse, perhaps (6)
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