MONDAY 17 JULY 2023
00
US Supreme Court rulings may not be all bad
RANA FOROOHAR, PAGE 17
Alcaraz wins
Djokovic loses
tennis crown
Spanish tennis player Carlos Alcaraz
Garfia, right, defeated Novak Djokovic
yesterday to win his first Wimbledon
final after a five-set battle.
Alcaraz won 1-6, 7-6, 6-1, 3-6, 6-4,
denying Djokovic, the bookmaker’s
favourite, the opportunity to match
Australian Margaret Court’s record of
24 Grand Slam wins.
The Spaniard, 20, was the youngest
player to appear in a Wimbledon final
since his compatriot Rafael Nadal in
2006. His victory is set to mark the
beginning of a new era in tennis as the
men’s game searches for stars to replace
the trio of Djokovic, Roger Federer and
Nadal. Alcaraz won his first Grand Slam
at the US Open last year.
The women’s final on Saturday was
won by Czech player Marketa Von-
drousova, who beat Tunisian Ons
Jabeur to become the first unseeded
player to win the tournament.
Call for European funding increase to
compete with US on green incentives
3 EU economy chief sounds warning 3 Biden subsidies could top $1tn 3 Bloc must spend to stay in ‘race’
SAM FLEMING — BRUSSELS
Europe will need to step up its response
to Washington’s Inflation Reduction Act
as the US programme to finance the
industrial green transition is set to be
larger than expected, Brussels’ econ-
omy chief has warned.
Paolo Gentiloni, the EU economy
commissioner, told the Financial Times
that the bloc had enough money on the
table for the immediate future, thanks
to programmes including the €800bn
NextGenerationEU recovery fund,
which runs until 2026.
But Brussels will have to boost its
financial firepower after next year’s EU
elections, he said — potentially via the
previously mooted idea of a European
Sovereignty Fund that would pump bil-
Kremlin ponders the fate
of Prigozhin’s troll farms
Yevgeny Prigozhin’s failed mutiny in
June has left the Moscow with a
dilemma. Patriot, the warlord’s media
empire of websites and anonymous
troll farms, reaches millions of people.
Even after being blocked for most of
the past month, its sites have still
drawn more than 20mn users. ‘If
Prigozhin ends up losing control of it,
[the troll farms] will quickly be
assigned to another structure close to
the Kremlin,’ said one activist.
Toxic media empire i PAGE 2
Subscribe In print and online
www.ft.com/subsusa
lions into crucial industrial initiatives
such as green technologies.
“You have a global race, and in this
global race economic support from the
public is part of the race — regulation is
not enough,” Gentiloni, a social demo-
crat and former Italian prime minister,
said in an interview. “The pull factor of
the IRA is increasing.”
Washington is proffering hundreds of
billions of dollars in subsidies and tax
credits for new investments in renewa-
’If we are late movers
the better jobs will be
taken by someone else’
Paolo Gentiloni
UBS hands EY one of finance’s richest
audit deals after Credit Suisse takeover
OWEN WALKER AND
MICHAEL O’DWYER — LONDON
UBS executives have chosen EY for one
of the world’s most lucrative banking
audit contracts after the bank’s take-
over of rival Credit Suisse.
EY, which has been UBS’s external audi-
tor since 1998, will audit the enlarged
bank from 2024, according to people
with knowledge of the decision. The size
of the contract means EY will have to
call in staff from other countries to work
on the audit, two people said.
UBS’s state-orchestrated takeover of
Credit Suisse was completed last month
but integrating it into the wider group is
expected to take several years.
PwC, which had been Credit Suisse’s
auditor, will audit the stricken bank’s
accounts for 2023, according to people
with knowledge of the matter.
STOCK MARKETS
bles and green manufacturing, includ-
ing electric vehicles, hydrogen projects
and batteries. Other governments are
rushing to come up with their own green
industrial policies in response, as wor-
ries mount that the US incentives will
hit jobs elsewhere.
After months of debate, the European
Commission last month announced the
Strategic Technologies for Europe Plat-
form (Step), which will allocate €10bn
to science and innovation programmes
in the coming years to “stimulate invest-
ments in critical technologies”.
But member states have been luke-
warm on contributing to the platform,
which is a fraction of the size of the US
programme.
The Congressional Budget Office ini-
tially estimated the IRA carried a
The audits of UBS and Credit Suisse
were already among the biggest in
Europe. Last year, UBS paid EY $70mn
in fees, while Credit Suisse paid PwC
$90mn — a 10 per cent rise on the year
before — according to the banks’ annual
reports. The audit fee for the combined
group is expected to be less than the
sum of the standalone audits but would
still be one of the highest in banking.
HSBC paid PwC $148mn last year,
while Barclays paid KPMG £71mn. Wall
Street trio Citigroup, JPMorgan Chase
and Goldman Sachs each paid their
auditors between $95mn and $103mn,
Ideagen Audit Analytics data shows.
EY did not comment on whether it
had been retained by UBS but said: “The
size and scale of the global EY financial
services audit practice means we are
able to access resource and specialist
skills from across our network.”
World Markets
CURRENCIES
Breaking the barriers to more female CEOs
WORK & CAREERS, PAGE 12
$391bn price tag, but Goldman Sachs
estimated it could eventually amount to
more than $1tn, given it included
uncapped tax credits.
Gentiloni said that if it grew to that
kind of scale, the EU would have to come
up with a stronger response. The pro-
posed Step programme should be con-
sidered a starting point, he said, as the
EU recovery fund runs only until 2026.
“We need to build the conditions to have
something more substantial.”
That is especially important, he said,
given the need to counter political argu-
ments that the EU was suffering from
being an early mover on environmental
issues.
However, it was too late to attempt to
push through such an initiative before
EU elections next year, he added.
The firm has 20,000 banking audit
staff globally. Its international opera-
tions are more closely integrated than
its rivals, making it easier to share
resources across borders, according to
one person familiar with the business.
Auditor appointments are subject to
shareholder approval.
EY continues to win banking audits
despite its role in signing off the accounts
of German fintech Wirecard, which col-
lapsed in a fraud scandal in 2020.
Last year EY won a share of the
€60mn-a-year audit contract for BNP
Paribas. It also audits Deutsche Bank,
Germany’s biggest lender, but it has
been barred from bidding for new
audits of German-listed companies for
two years after its failures at Wirecard.
UBS, Credit Suisse and PwC declined
to comment.
BNP’s ‘introvert’ boss braced page 7
GOVERNMENT BONDS
USA $2.50 Canada C$3.
Julian Finney/Getty Images
The political argument for industrial
subsidies should not focus on warnings
that “the planet will die” but rather that
households would prosper from green
investments, Gentiloni said.
“Your family will have advantages.
Your children will find better jobs. And
if we are late movers the better jobs will
be taken by someone else.” It was, there-
fore, “already time to reflect [on] fur-
ther tools after 2026”.
He spoke after meetings in Brussels at
which finance ministers debated plans
to overhaul the EU’s fiscal rules. Draft
legislation unveiled by the economy
chief in April would usher in far-
reaching reforms by granting states
greater ownership of their national debt
reduction plans.
EU presses big polluters page 2
Briefing
i Defence spending crunch
looms over ‘woke’ clauses
The Pentagon’s annual funding
bill has been drawn into the
“culture war” after Republicans
inserted “anti-woke” provisions
into the legislation.— PAGE 4
i Turkey triples petrol tax
Ankara has boosted fuel levies as
it tries to raise cash to recoup the
cost of election giveaways and to
fund post-earthquake rebuilding
that could cost $100bn.— PAGE 2
i Split on Goldman forecast
Analysts have become sharply
divided over the extent of the
blow the Wall Street bank is likely
to suffer in its second-quarter
earnings on Wednesday.— PAGE 6
i UK trails in inflation race
Britain’s position as a global
inflationary outlier is likely to be
confirmed this week as the gulf
between price pressures in the US
and the UK widens.— PAGE 4
i Actor Birkin dies at 76
Jane Birkin, the British singer and
actor who became notorious with
lover Serge Gainsbourg for their
1969 song “Je t’aime . . . moi non
plus”, has died in Paris.— PAGE 2
i Crossword and Lex
The Lex column, Pilita Clark’s
Business Life column and the
FT crossword can today be found
on Page 9.
Datawatch
Do me a favour
% who say corruption is widespread
in their country 2022 2023
Finland
Germany
Romania
Italy
Spain
Malta
Greece
EU
0 25 50 75 100
Source: Eurobarometer
More than two-thirds of Europeans
believe corruption is widespread in their
country, an uptick of two percentage
points since last year, according to a new
poll from Eurobarometer. Malta has seen
the biggest rise in this perception
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2 ★ FINANCIAL TIMES Monday 17 July 2023

INTERNATIONAL

Climate change Recovery plan

EU presses biggest polluters to hasten cuts
Brussels faces own fight
over setting 2040 target
to reduce emissions
ALICE HANCOCK AND ANDY BOUNDS
BRUSSELS
ATTRACTA MOONEY — LONDON
The EU is putting pressure on big
polluting countries to cut greenhouse
gas emissions faster as the bloc faces
an internal fight about its own climate
targets.
Senior officials in Brussels told the
Financial Times that they wanted large
economies such as China, India and the
US to share the burden as European
consumers and industry begin to balk at
the costs of the necessary green shift in
the energy system.
The move comes as temperatures
climb towards 40C across much of Italy,
Spain, parts of France, Greece and the
Balkans. Meteorologists predict that
Rome could tomorrow experience an
all-time high for the city of 43C, while on
the island of Sardinia the mercury is
projected to touch 48C. Italian authori-
ties urged citizens to stay indoors in the
middle of the day.
A wildfire on La Palma, one of the
Spanish Canary Islands off the coast of
Africa, prompted the evacuation of at
least 4,000 people over the weekend.
The world’s largest emitters today are
the US, China and India, followed
closely by the EU. The bloc’s share of glo-
bal greenhouse gas emissions dropped
from 16.8 per cent in 1990 to 7.3 per cent
in 2021, according to European Com-
mission data. The EU cut emissions by
about a third, mainly as dirty coal in the
electricity mix fell, while the share from
China and India rose as energy demands
increased.
But the EU is now struggling with
internal discussions over setting a 2040
target to reduce emissions.
Geopolitical tensions over climate
policies are rising as governments grap-
ple with overstretched budgets, at the
same time as extreme weather raises
fears about global warming.
Global emissions need to fall by 43 per
Russia. Fake media
cent by 2030 to keep alive the Paris goal
of limiting global temperature rises to
1.5C above pre-industrial levels.
The world remains on track for a tem-
perature rise of between 2.4C and 2.6C
by 2100, according to the UN Environ-
ment Programme.
US climate envoy John Kerry is
restarting climate talks in China this
week. Environment ministers from G20
countries, including China, met in Brus-
sels last week to set the agenda for the
UN COP28 summit in the UAE, where a
“global stocktake” will take place.
The EU has committed to cut green-
house gas emissions by 55 per cent by
2030 and reach net zero by 2050, with
the 2040 goal intended as a milestone.
Turkey triples
petrol taxes as
Draft text being prepared by EU coun-
tries ahead of COP28, seen by the FT,
Erdoğan tries
shows that a section committing the
bloc to update its contribution from 55
to fix public
per cent to 57 per cent is bracketed,
meaning that it could be changed before
the UN summit in December.
finances
The EU’s main scientific advisory
board has suggested that it should be set ADAM SAMSON — ANKARA
as high as 95 per cent. Lawmakers are
Turkey has tripled petrol taxes as the
concerned that a backlash against the
government tries to raise money to
green transition could grow as EU indus-
recoup the cost of huge giveaways in
try is squeezed by US competitors with
the run-up to May’s election and to
lower energy costs and subsidies under
fund a reconstruction effort costing up
the Inflation Reduction Act, and China’s
to $100bn after February’s devastating
dominance of the supply chain for green
earthquake.
technologies.
Opinion see Letters page Taxes on regular petrol were increased
about 200 per cent to TL7.53 a litre, with
levies on diesel and a series of other
petroleum products lifted as well,
according to an announcement yester-
day in Turkey’s official gazette.

Prigozhin’s army of trolls remains on the march

Lucrative online empire in
limbo as Kremlin struggles to
untangle ties with warlord
ANASTASIA STOGNEI AND MAX SEDDON
RIGA
A week after Yevgeny Prigozhin’s Wag-
ner group’s mutiny failed in June, the
warlord’s online media empire
announced that it would close and
“depart the country’s news agenda”.
But since then Prigozhin’s notorious
troll army has kept up its frenetic post-
ing rate online, while the former caterer
has remained in Russia — even meeting
Vladimir Putin in the Kremlin — despite
a deal to leave for exile in Belarus.
The curious afterlife of Prigozhin’s
fake media empire is a window on a big-
ger challenge for Putin’s Russia: the
regime is still struggling to unwind its
tangled ties to the warlord, even after
Wagner came close to overthrowing it.
Russia’s internet censor has banned
Prigozhin websites and some troll
accounts pivoted to criticise the war-
lord. But the media enterprise still
stands in post-mutiny limbo.
Prigozhin appears so central to the
Kremlin’s subterranean life — from cov-
ert military escapades to troll farms —
that extracting him has proved difficult,
according to Russian elites, people
familiar with the media business and
western officials.
Within hours of Wagner’s march
towards Moscow, Russian secret serv-
ices raided the headquarters of Prig-
ozhin’s media empire and troll farm,
which are grouped together under an
umbrella company called Patriot.
Rather than wait to potentially serve a
new owner close to the Kremlin, Patriot
declared on social media that it would
shut down. But its ultimate fate has yet
to be decided, according to people
familiar with its operations.
“I know how [Patriot] media works,”
said Alexander Ionov, who has been
placed under sanctions and charged by
the US over working with Prigozhin and
the Russian security services to under-
mine US elections. “The group was put
on hold, not closed, because at the
moment there are more urgent things to
deal with,” Ionov said. He added that
commercial buyers could be interested
in the holding’s “very large patriotic
audience”.
Prigozhin’s legion of anonymous troll
The online accounts have continued to post as
media empire of before, according to Antibot4Navalny
failed mutineer and Chef’s Trap, two anonymous volun-
Yevgeny teer groups that track Prigozhin’s online
Prigozhin has activities.
enjoyed access “The mutiny did not interrupt the
to substantial trolls’ work for a second,” said one of the
sums from activists, who gave their name as Anti-
the Kremlin bot. But a new owner could be only a
FT montage:
Bloomberg/Reuters
matter of time, Antibot added. “The
farm is a rare commodity . . . If Prig-
ozhin ends up losing control of it, it will
quickly be assigned to another structure
close to the Kremlin.”
The prize of taking over Prigozhin’s
old operations is considerable. Though
Wagner was primarily funded through
the Russian defence ministry, the war-
lord’s complex relations with the elite
long predated the paramilitary group —
and gave him access to more sources of
funding. “Prigozhin got along with abso-
lutely everyone,” a former senior Krem-
lin official said. “[The Kremlin] were
asking pretty much everyone to give
him money.”
Following the mutiny, the Kremlin for
the first time disclosed the vast sums
once used to finance his companies —
money that will now presumably go
elsewhere. The extraordinary admis-
sion of what was a closely guarded,
fiercely denied Kremlin secret
attempted to underscore Prigozhin’s
status as a contractor, rather than inde-
pendent political player. But it also indi-
cated potential paths to enrichment for
others: state media put total funding to
Prigozhin at up to Rbs1,700bn
($18.8bn) over the past decade.
Prigozhin first began tapping the
Kremlin’s largesse in the 2000s. After
turning his role as “Putin’s chef” into a
billion-dollar business supplying food
on public contracts, Prigozhin
expanded into media. Yevgeny
Zubarev, Patriot’s director, called it
“working for the state”.
Starting with a staff of just 20, accord-
ing to Zubarev, Prigozhin’s trolls pre-
tended to be ordinary Russians online
and ruthlessly attacked opposition fig-
ures such as anti-corruption activist
Alexei Navalny.
The trolls’ effectiveness was difficult
to judge but their reach — and financing
— grew as people such as Navalny led a
significant challenge to Putin’s return to
the presidency in 2011. The Kremlin
began to crack down on independent
media in response to the protests — and
made more money available to those
willing to attack them. Before long, Prig-
ozhin’s operations were so flush with
state cash that “everyone was stealing”,
according to a person familiar with their
inner workings at the time.
By 2017 Prigozhin’s group had
reached millions of users. Even after
being blocked for most of the past
month, sites under the Patriot umbrella
have still drawn more than 20mn users
— an audience comparable to that of big
state media such as Russian RT, data
from LiveInternet shows. But despite
that audience, the business model ran
huge expenses and raised little advertis-
ing revenue, making it financially reli-
ant on Kremlin sponsorship.
In the past year alone, according to
Putin, Prigozhin’s businesses received
more than Rbs270bn from the budget —
a sum comparable with the annual
profit at Sberbank, Russia’s largest
lender. Though much of the funding
went to arming Wagner and paying its
fighters, the media empire also enjoyed
access to substantial sums, according to
people familiar with its workings.
Following the failed mutiny, state
media published photos of suitcases full
of cash found at the warlord’s garish
mansion and reported that security
‘The services had seized a minivan heaving
with banknotes at a hotel he owned.
mutiny Prigozhin retorted that the minivan
did not stuffed full of cash was only one of three,
and insisted he had received all the
interrupt money legally from the state.
the trolls’ At one point during Putin’s 2018
re-election campaign — a period during
work for which Patriot director Zubarev said the
a second’ group was “particularly active” —
Prigozhin’s representatives even
approached a big Russian social net-
work with an offer to buy the company,
according to a former senior executive.
He said: “They claimed to work for ‘a
cook’ and offered to pay in cash for our
platform. They mentioned minivans
full of banknotes and assured me that
they were ‘not counterfeit’, as if that was
the only possible concern.”
The murky nature of Prigozhin’s
operations means their true value could
be greater still, according to one person
familiar with their inner workings.
“We don’t know about all of [the con-
tracts]. There are so many that were set
up through frontmen that appropriated
the dough,” the person said. “There’s
just so damn much, billions, billions, bil-
lions. He’s a very rich man.”
The increase pushed up petrol prices
at the pump by about 20 per cent, data
from state oil company Turkish Petro-
leum showed.
The tax increase is the latest in a
string of measures announced by Presi-
dent Recep Tayyip Erdoğan since his re-
election on May 28. Value added taxes
on a wide variety of goods and services
were increased earlier this month as
Erdoğan’s new economic team has
pledged “rational” policies, after years
of unconventional measures pushed
Turkey’s $900bn economy into a crisis.
The VAT and fuel tax rises will add to
New economic team has
pledged ‘rational’ policies,
as country faces $100bn
reconstruction costs
the financial burden for Turks, who
have dealt with a prolonged period of
high inflation and have watched the lira
depreciate almost 30 per cent against
the US dollar this year alone.
In a sign of how Erdoğan is seeking to
revive the economy, the president will
also travel this week to Saudi Arabia,
Qatar and the United Arab Emirates as
he looks to attract fresh investment
from Gulf countries.
Inflation fell to 38.2 per cent a year in
June from its October 2022 peak of
85.5 per cent a year, but economists
worry the weak lira and the new taxes
will send it back up.
Tighter fiscal policy is part of a multi-
pronged effort by finance minister Meh-
met Şimşek, who was appointed in June,
to pull Turkey’s economy back on to a
sustainable path.
Erdoğan launched a big spending
spree ahead of May’s election, giving
away a month of free natural gas and
increasing public sector wages and pen-
sions. Turkey is also facing a bill of up to
$100bn to rebuild a large area in the
south that was badly damaged by Feb-
ruary’s earthquake.
Economists expect Turkey’s govern-
ment budget deficit to jump to 4.4 per
cent of gross domestic product this year,
from just 0.9 per cent in 2022, according
to a FactSet poll, underscoring the fra-
gility of public finances.
Şimşek is also seeking to cool domes-
tic demand, which many economists
say is far too high after years of loose fis-
cal and monetary policy.
The overheating economy has caused
imports to far outstrip exports, pushing
the current account deficit to a record
$37.7bn in the first five months of this
year. Higher prices could cool demand
for fuel and hence reduce imports, since
Turkey is a big energy importer.

France

‘Je t’aime’ singer and actress Birkin dies in Paris aged 76

MAKE A WISE SARAH WHITE — LONDON Birkin was found yesterday at home in Her wide-eyed look, straight locks and Gainsbourg, and Lou Doillon, her
INVESTMENT Jane Birkin, the British-born actress
her Parisian apartment by a nursing fringe, and tomboyish style were much daughter with French director Jacques
aide, according to Le Parisien newspa- admired and copied. Doillon. Both are actors.
Subscribe today at and singer who had transfixed her
per and BFM TV, which first reported In later decades she even came to Birkin met Gainsbourg on the British
adopted country of France since the
ft.com/subscribetoday news of her death. She had recently can- inspire the luxury Hermès leather “Bir- set of her film Slogan. The pair went on
1960s, has died in Paris aged 76.
celled a series of planned concerts, cit- kin” bags, whose prices start at $10,000, to record “Je t’aime . . . moi non plus”,
Birkin’s waif-like, almost androgynous ing health problems. which were designed in her honour and which Gainsbourg had originally writ-
style made her a hit with French audi- Birkin was born in London in 1946; launched in 1984. ten for former partner Brigitte Bardot.
FINANCIAL TIMES Good Friday, Independence Day, Thanksgiving, the ences after she became a star through a her mother was an actress, her father a Birkin’s life was also marked by trag- The song’s conspicuous sighs and sexu-
330 Hudson Street, day after Thanksgiving, Christmas Day and the day
New York, NY 10013 after Christmas Day. series of collaborations with the late navy commander. She captured the edy. A daughter, Kate Barry, from a rela- ally explicit lyrics shocked at the time,
singer and songwriter Serge Gains- imagination of French audiences with tionship with composer John Barry, died and it was banned by the BBC and radio
Subscriptions and Customer Service US subscription rates, 1 year $406. Periodicals bourg. her tumultuous love life as well as her in 2013 at 46. Birkin is survived by two stations from Brazil to Spain, though it
Tel: +1 800 628 8088 postage paid at New York, NY and at additional
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The duo, who were lovers, became style and music. Part of her charm came other daughters — Charlotte still reached number one in Britain.
Advertising to F.T. Publications Inc., PO Box 469, Newburgh, NY notorious for the provocative 1969 song from the English accent she never lost. Gainsbourg, whose father was Serge The pair became regulars on the buzz-
Tel: +1 917 551 5040 12551; USPS number, 190640; ISSN# 0884-6782. “Je t’aime . . . moi non plus”, though Bir- ing Parisian nightclub scene, but Bir-
usads@ft.com kin went on to release many of her own kin’s relationship with Gainsbourg, a
Letters to the editor © Copyright The Financial Times Limited 2023.
letters.editor@ft.com All rights reserved. albums, appeared in film roles and had a heavy drinker, fell apart in the early
Executive appointments Reproduction of the contents of this newspaper in long career of touring and performing, 1980s.
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prior consent. ‘Financial Times’ and ‘FT’ are
Published by registered trade marks of The Financial Times
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F.T. Publications Inc. Limited. The Financial Times and its journalism are Birkin’s death yesterday and lauded her Jane Birkin Delon and the late Romy Schneider.
330 Hudson St, New York, subject to a self-regulation regime under the FT collaborations with some of the coun- captivated her She had kept her status as a fashion
NY 10013, USA; Editorial Code of Practice: try’s biggest figures in film and music, adopted France, idol in recent years, performing her hit
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Editor: Roula Khalaf from the singer Étienne Daho to the late where she Baby Alone in Babylone in the middle of a
Reprints are available of any FT article with your director Agnès Varda. The ministry collaborated with Gucci catwalk show at the former Palace
Printed by company logo or contact details inserted if required called Birkin a “timeless francophone some of the nightclub in Paris in 2018.
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Evergreen Printing Company, Bellmawr, NJ licences for reproduction of FT articles are also icon”. biggest stars in Singer Daho, who collaborated on
Bay Area Production Services, Fremont, CA available. Prime Minister Élisabeth Borne, writ- film and music albums with Birkin, said on social media
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Published daily except Sundays, New Year’s Day, alternatively, email syndication@ft.com
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Monday 17 July 2023
Hong Kong chief
attacks activist
‘rats’ in drive to
put security first
Crackdown on groups comes amid
bid to win back business and tourists
CHAN HO-HIM — HONG KONG
“Rats” is how Hong Kong leader John
Lee has taken to referring to a group of
eight pro-democracy activists with a
combined $1mn of bounties on their
heads.
The activists, self-exiled in the UK, US
and Australia, were this month made
the subject of the reward for alleged
national security offences including
secession and foreign collusion as Lee’s
government cracks down on dissent.
Since then Hong Kong authorities
have gone further in showing their
determination to suppress any sign of
support for the eight, the chief execu-
tive’s rhetoric reinforcing the message.
“We should treat those wanted by
police, especially the eight who violated
the national security law, as street rats
that should be avoided,” Lee said during
a trip to south-west China this month,
before repeating the term in a press con-
ference in Hong Kong. Authorities
would “exhaust all means” to pursue the
wanted eight, who should surrender or
“live in fear” forever, he said.
The parents and brother of Nathan
Law, one of the activists, were held for
questioning this week as his family
home was raided last week, although
Law, who is in the UK, said in 2020 that
he had cut his ties to his family. Police
also arrested five former members of
Law’s pro-democracy political party for
allegedly running an app to boost so-
called yellow businesses that were sym-
pathetic to pro-democracy protests that
erupted in Hong Kong in 2019. The
apparent aim is to cut any financial ties
to the exiled eight.
Lee is also the jovial face of a “Hello
Hong Kong” government campaign
drawing international visitors. “A world
city like no other extends the warmest
welcome to you,” he says in a promo-
tional video. The Chinese territory is
also attempting to reboot its Covid-hit
Asian premier financial hub status and
woo foreign investments.
But analysts said Lee’s priority — with
the backing of Beijing — was to stamp
out the influence of political activists
and reinforce China’s tough line on
national security.
“That’s what authorities are doing.
National security is number one,” said
John P Burns, an honorary professor of
politics and public administration at the
University of Hong Kong. “It demon-
strates seriousness [on national secu-
rity] . . . to foreign governments, Hong-
kongers overseas and people in Hong
Kong.”
Officials say Hong Kong is bouncing
back. The city was “moving full steam
ahead”, justice minister Paul Lam told
lawyers and business representatives on
July 11. “Hong Kong is resilient and
remains a leading international finan-
cial centre and an ideal place for doing
business.”
But a foreign business chamber repre-
sentative said Hong Kong “is sending
out so many mixed signals” as the hard
line pursued by Lee — a former career
policeman handpicked by Beijing as
Hong Kong’s chief executive last year —
hinders attempts to restore confidence.
★ FINANCIAL TIMES
INTERNATIONAL
Tough line: Unease in the business sector has
John Lee last been fuelled by events such as a looming
week. Below, Hong Kong government court injunc-
activist Nathan tion against US tech giants including
Law in London Google and Meta, which could compel
last month them to remove a popular protest
Isaac Lawrence/AFP/Getty anthem from their platforms. A hearing
Images; Kin Cheung/AP
is due this month.
“It seems that the national security
and political correctness priority
trumps economic priority,” said Ho-
fung Hung, a professor of political econ-
omy at Johns Hopkins University. “We
will see a tug of war between these two
priorities.”
Lau Siu-kai, a Beijing adviser and a
consultant to the Chinese Association of
Hong Kong and Macau Studies,
described Hong Kong authorities’ move
as “pre-emptive” against western inter-
ference, with support to exiled activists
being cut.
Lau said “Hong Kong’s commercial
ties with the west are seeing limited
impacts”, making a distinction between
the views of investors and businesses
and the different agenda of western gov-
ernments. Beijing has hit back at the
outcry from the US, UK, Australia and
Canada over the “extraterritorial reach”
of the city’s security law.
Asked about the raid and bounties,
the Hong Kong security bureau said the
government would “fight against”
national security violators “in full
force”, utilising all necessary measures.
Lee’s hardline echoing of some Beijing
diplomatic positions was also illustrated
3
‘It seems by the city’s threat this month to ban
Japanese seafood imports from 10 pre-
that the fectures if Tokyo goes ahead with plans
national to release treated radioactive water
from Fukushima. The release has been
security approved by the UN nuclear watchdog.
Hong Kong’s pandemic-battered
and economy is still in need of a boost amid
political the exodus of more than 140,000 resi-
correctness dents. The total investment volume of
non-residential investment deals
priority exceeding HK$100mn ($13mn) dipped
trumps 45 per cent year on year during the first
six months of this year, according to real
economic estate agency Cushman & Wakefield, as
priority’ prime office vacancies stood at record
high levels.
A quarter of businesses surveyed by
the American Chamber of Commerce in
Hong Kong said this year they expected
to reduce investments in the territory,
while 40 per cent described “overseas
public perceptions of Hong Kong” as a
top challenge.
Some financiers are, however, still
bullish, citing Hong Kong’s proximity to
mainland China and more business
opportunities to come.
4 ★ FINANCIAL TIMES Monday 17 July 2023

INTERNATIONAL

Defence spending Price pressures

Capitol Hill showdown looms on military bill Transatlantic

inflation gap
Republicans add measures
against abortion, diversity
and transgender rights
JAMES POLITI — WASHINGTON
The Pentagon’s annual funding bill is set
to become the focus of a political
showdown after Republicans inserted
“anti-woke” social provisions into the
legislation.
The bill, known as the National
Defense Authorization Act, is normally
shielded from the most bitter partisan
bickering and often passes with support
from both political parties.
But on Friday, Republicans in the
House of Representatives passed their
version of the legislation, worth $886bn,
by adding measures designed to curb
abortion rights, diversity training and
medical care for transgender patients in
the military. Democrats are likely to
fight back by seeking to exclude the pro-
visions.
The latest tensions suggest that Capi-
tol Hill is about to embark upon a new
period of brinkmanship, just weeks
after the US came within days of a debt
default because of divisions over budg-
etary policy and the need to raise the
country’s borrowing limit.
Steve Scalise, the House majority
leader, said the bill was “an important
victory for every American in this coun-
try that wants to see our military
focused on our enemies abroad — not on
White House race. Pence
wokeness and all of the indoctrination
attempts you’re seeing within the
Pentagon”.
Kevin McCarthy, House Speaker,
declared: “We don’t want Disneyland to
train our military.”
Unless the stand-off is resolved
quickly, it risks becoming a hindrance
for Washington as it presses ahead with
efforts to support Ukraine against Rus-
sia’s full-scale invasion and attempts to
bolster its presence in the Indo-Pacific
region.
The Pentagon is already suffering
through a domestic political firestorm
as Tommy Tuberville, a Republican sen-
ator from Alabama, is holding up the
Senate confirmation of top military
officers. Tuberville is protesting against
the defence department’s new policies
that facilitate access to abortion after
the Supreme Court struck down the
constitutional right to the procedure.
Democrats have responded angrily to
Republican attempts to tie military
spending to social policy demands.
“They chose culture war over national
security,” Elissa Slotkin, the Michigan
Democratic congresswoman, said on
the House floor.
Hakeem Jeffries, the Democratic
leader in the lower chamber, issued a
statement with other party leaders
accusing Republicans of turning “what
should be a meaningful investment in
our men and women in uniform into an
extreme and reckless legislative joyride”.
The House bill clashed with a biparti-
san defence spending bill that will be
considered in the Senate, which is con-
set to hit
trolled by Democrats, this week.
Talks to resolve the differences could
highest level
take several more weeks, potentially
getting close to the September 30 dead-
line when funding for all federal agen-
in decades
cies, including the Pentagon, is set to
expire. VALENTINA ROMEI — LONDON
Since striking an agreement with
The gulf between price pressures in the
President Joe Biden to avert a debt
US and the UK is likely to widen to lev-
default in early June, McCarthy has
els not seen since the late 1970s this
faced a backlash from the right flank of
week, as Britain increasingly becomes
his party, leading him to take a harder
a global inflationary outlier.
line in this summer’s spending fights.
But lobbyists for defence companies Figures out last week confirmed US con-
still praised the defence spending legis- sumer price inflation is abating fast,
lation passed in the House as a step for- with the annual figure for June falling to
ward towards eventual passage. a two-year low of 3 per cent. That con-
trasts with economists’ expectations
that last month’s CPI reading for the UK,
due out on Wednesday, will come in at
above 8 per cent.
As of Friday afternoon, economists
polled by Reuters expected, on average,

Republican divisions exposed at Iowa summit
Former vice-president booed
at Christian conference over
backing further aid for Kyiv
LAUREN FEDOR — DES MOINES
Mike Pence was booed by an audience of
some 2,000 evangelical Christians in
Iowa after the former US vice-president
said it was in America’s interest to con-
tinue providing weapons and aid to
Ukraine.
The audience’s reaction to Pence, who
is challenging Donald Trump for the
party’s presidential nomination in
2024, underscored the sharp split
among Republicans over military sup-
port for Kyiv. That divide has cast doubt
on whether Congress will approve more
aid for Ukraine later this year.
“I believe that it is in the interest of the
United States of America to continue to
give the Ukrainian military the
resources that they need to repel the
Russian invasion and restore their sov-
ereignty,” Pence said on Friday.
His answer was in response to dogged
questions from conservative pundit
Tucker Carlson, the former Fox News
host, at The Family Leadership Summit,
an annual gathering of influential evan-
gelical leaders in the key early voting
state of Iowa.
Carlson — who was ousted this year
from Fox after the cable news channel
agreed to pay $787.5mn to settle a defa-
mation case from voting machine
maker Dominion — is one of the most
prominent voices on the American right
to attack Ukrainian leader Volodymyr
Zelenskyy and praise Russian president
Vladimir Putin.
The Iowa crowd cheered as Carlson
told Pence: “Your concern is that the
Ukrainians, a country most people can’t
find on a map, who have received tens of
billions of US tax dollars, don’t have
enough tanks? I think it’s a fair question
to ask, like, where is the concern for the
United States here?”
“It’s not my concern,” Pence replied.
“Tucker, I have heard that routine from
you before, it’s not my concern . . . Any-
body that says that we can’t be the
leader of the free world, and solve our
problems at home, has a pretty small
view of the greatest nation on Earth.”
The testy back-and-forth highlighted
the growing divide between hawks and
isolationists in the Republican party.
Opinion polls suggest US public sup-
port for aiding Ukraine has waned since
the Russian invasion last year, with
Party faithful: Republicans far more likely to object to
presidential more support than Democrats. Pew
candidate Mike polling conducted last month found
Pence talks to 44 per cent of Republicans and Republi-
moderator can-leaning independents said the US
Tucker Carlson was giving too much aid to Ukraine,
at a Christian compared to 14 per cent of Democrats
summit in Des and Democrat-leaning independents.
Moines, Iowa US president Joe Biden is expected to
Charlie Neibergall/AP
ask a sharply divided Congress to
approve more funding for Ukraine later
this year. Biden has insisted that a
spending package will be approved by
lawmakers, even as Republicans, who
control the House of Representatives,
have voiced opposition.
Biden told western allies in Lithuania
this week at the Nato summit: “We will
not waver . . . We’re going to help
Ukraine build a strong, capable defence
across land, air, and sea, which will be a
force of stability in the region and deter
against any and all threats.”
Tim Scott, the Republican senator
from South Carolina, also made the case
for more military aid at Friday’s sum-
mit, while Nikki Haley, the former gov-
ernor of South Carolina and Trump’s
ambassador to the UN, shrugged when
Carlson asked who had blown up
the Nord Stream pipeline. “I mean, I
don’t know. Do you know who did it?”
Haley said.
Carlson replied: “Seems pretty obvi-
ous that it was backed by the Biden
administration.”
The Kremlin has accused the US of
destroying the pipeline, a claim that has
been sharply rejected by the White
House and US and European intelli-
gence agencies.
Ron DeSantis, the Florida governor
who is polling a distant second behind
Trump among Republican voters, has
sought to carve out his own position on
Ukraine. Earlier this year, he said the
war was a “territorial dispute” and not
in America’s “vital interests”, but later
walked back from the comments, call-
ing Putin a “war criminal”.
DeSantis told Carlson on Friday: “My
critique of the DC foreign policy elite is
that they are doing a blank cheque pol-
icy without telling us when we will have
achieved our objective.”
DeSantis added: “Now, because you
dissent from the DC foreign policy elite,
they then try to smear you and say, Oh,
you must be for Putin.
“I’ve always thought Putin is a bad
‘Most guy. I still think he’s a bad guy. But that’s
a separate question . . . you have to
people make a judgment about what’s in Amer-
can’t find ica’s national interests.”
Trump, who has said he could end the
[Ukraine] war in Ukraine in a single day, did not
on a map. attend the evangelical conference in
Iowa. The summit was hosted by
Where is Bob Vander Plaats, a prominent Chris-
the concern tian leader who has called on Republi-
cans to embrace an alternative candi-
for the date in 2024.
United Vivek Ramaswamy, the biotech
entrepreneur and fund manager who
States launched his long-shot presidential run
here?’ on Carlson’s now-cancelled Fox News
show, pitched a more radical position on
Tucker Carlson Ukraine at the conference. He said he
could end the war by convincing Kyiv to
cede part of the Donbas region to Russia
in exchange for Moscow breaking ties
with Beijing, and a US commitment to
block Ukraine from joining Nato.
But Ramaswamy — who has risen
steadily in opinion polls in recent weeks
— admitted his position was not popular
with the Republican establishment, tell-
ing Carlson: “To be really honest with
you, I have lost many large donors, or
prospective donors, over this issue.”
a figure of 8.2 per cent for June. If they
are right, that would mean UK inflation
is now 5.2 percentage points higher than
in the US — the widest gap since Novem-
ber 1977, when the country was beset by
economic stagnation and political strife.
“The drop in US inflation shines a
light on the UK’s persistent inflation
problem,” said Victoria Scholar, head of
investment at Interactive Investor, an
online investment service.
Economists blame a combination of
EU-style high energy prices and US-
style labour shortages for the UK
becoming the G7 economy most
plagued by inflation.
“Inflation is higher in the UK than the
US because it has suffered a worse
energy shock, worse labour shortages,
and goods inflation rose later and subse-
quently started to fall later than in the
US,” said Simon MacAdam, economist
at research firm Capital Economics.
Food price inflation, another impor-
tant aspect of the surge in global prices,
has also fallen faster in the US and much
of Europe — partially because of Brit-
ain’s reliance on imports and weather
limiting crop supplies.
Historically the US and UK inflation
measures have tended to track one
another. However, over the past year, a
gap has emerged. US inflation began
declining during the autumn of 2022
after hitting its highest level in decades
last June on the back of falling energy
costs and slowing food inflation, while
UK inflation continued to climb during
the autumn, on the back of a surge in
European energy prices and accelerat-
ing services price growth.
While UK inflation has declined since
hitting a peak of 11.1 per cent in October,
it has done so less dramatically than
elsewhere in Europe.
In the eurozone, where inflation hit a
high of 10.6 per cent last October, the
annual rate is now 5.5 per cent, with
price growth in Spain falling even below
the European Central Bank’s target of
2 per cent.
In emerging markets, inflation is also
plummeting as the after effects of the
coronavirus pandemic and a surge in
commodity prices during the early
stages of the Ukraine war drop out of
indices.
The widening gap between the UK
and the US comes despite the Bank of
England abandoning its near-zero inter-
est rate policy ahead of the Federal
Reserve.
The Fed first raised rates in March
2022, while the BoE’s hikes began in the
autumn of 2021. However, the Fed
moved more quickly once it started to
tighten, raising rates by 5 percentage
points in little more than a year.
The ECB did not begin raising interest
rates until the summer of 2022.

Diplomacy

Brussels struggles to revive Latin America relations amid rifts on trade and Ukraine
MICHAEL STOTT — LONDON
IAN JOHNSTON — BRUSSELS
The EU wants to revive relations with
Latin America at a summit with the
region’s presidents this week, but
delays to trade deals and a rift over the
Ukraine war have underlined their
political differences after eight years
without a top-level meeting.
Concerned by China’s growing eco-
nomic power in one of the world’s big-
gest commodity-exporting regions, and
keen to secure supplies of critical miner-
als, the EU wants to convince Latin
American and Caribbean leaders that
the two blocs are natural partners.
But a key trade deal between the EU
and the South American Mercosur bloc
remains stalled, and Ukrainian presi-
dent Volodymyr Zelenskyy will not
address the two-day event. Although he
has appeared at recent forums from the
Arab League to Nato’s summit, some
Latin American nations blocked the
idea of inviting him to speak in Brussels.
Brazil and Mexico favour a more neu-
tral position on the Ukraine war, while
Cuba and Venezuela are close allies of
Moscow. Many governments in the
region would prefer to see Europe push
harder for peace talks instead of supply-
ing more weapons to Kyiv.
During awkward pre-summit discus-
sions, some Latin American nations
sought the removal of wording from a
draft text condemning Russia’s invasion
of Ukraine and tried to add a demand
for reparations for the transatlantic
slave trade, moves one EU diplomat
described as “provocative”.
Today’s gathering comes a month
after European Commission president
Ursula von der Leyen toured Latin
America, meeting the presidents of Bra-
zil, Argentina, Mexico and Chile. She
pledged more funding from Europe’s
infrastructure programme, Global
Gateway. “Europe is back in Latin
America,” she announced.
Latin American nations have wel-
comed Europe’s increased attention but
expressed concern that the initial sum-
mit agenda appeared tailored to Old
World interests such as securing critical
minerals rather than addressing their
big issues, like poverty and inequality.
“There’s something rather naive and
arrogant about saying, ‘We will pay you
attention now because we’ve suddenly
discovered we need friends and want to
project power’,” said one senior diplo-
mat from the region.
Few expect a breakthrough in the EU-
Mercosur trade agreement. The pact,
signed in 2019 after two decades of
negotiations, has not been ratified as EU
member states raised concerns that it
could fuel deforestation.
Brazil president Luiz Inácio Lula da
Silva reiterated last week that addi-
tional environmental demands on Mer-
cosur, led by France, were “unaccepta-
ble” because they would impose sanc-
tions on Mercosur countries which did
not abide by climate commitments.
Argentina has backed his position.
Trade groups Business Europe and
the Brazilian Confederation of Industry
have warned meanwhile that India and
South Korea overtook Brazil in the past
two decades in the EU’s list of top trad-
ing partners, while the EU has gone from
being Brazil’s biggest trading partner to
its third-largest. “For us, a successful
summit is one that delivers free trade
agreements,” said Eleonora Catella,
deputy director of international rela-
tions at Business Europe.
Brazil trip: Ursula von der Leyen and
Luiz Inácio Lula da Silva last month
Despite the EU’s stated desire to bol-
ster relations, some of its proposals lack
economic weight. At the summit, a list
of about 100 Global Gateway projects
would be touted, the senior EU official
said, but many still lack funding.
During last month’s visit, von der
Leyen raised the EU’s pledge of grants
and loans from €6bn to €10bn for 2021-
2027. But this pales beside the €150bn
dedicated to Africa under the scheme.
China has made development finance
loans totalling $136bn to Latin America
and the Caribbean from 2005 to 2022.
Some leaders invited may also prove
problematic for the EU. Cuban presi-
dent Miguel Díaz-Canel, who has pre-
sided over the jailing of hundreds of
opposition activists, was likely to
attend, diplomats said. Venezuela presi-
dent Nicolás Maduro, currently under
investigation by the International Crim-
inal Court for alleged crimes against
humanity, is not expected to come.
More than 170 Nicaraguan opposition
activists and civil society groups yester-
day called on presidents taking part in
the Brussels summit to discuss the dra-
matic deterioration of human rights in
Nicaragua, where President Daniel
Ortega has jailed, tortured and expelled
opponents.
Cuba and Venezuela have publicly
denounced the EU for “manipulative
behaviour and a lack of transparency”
ahead of the gathering, accusing Brus-
sels of trying to organise parallel events
without all the invited nations.
After disagreements between the EU
and the Community of Latin American
and Caribbean States over the lengthy
summit text, EU states are pushing for a
leaner, less controversial document, but
one that will still mention Ukraine.
However, Javi López, a Spanish social-
ist MEP who chairs the European parlia-
ment’s delegation to the Euro-Latin
American parliamentary assembly,
insisted that after years of neglect, “the
photo and participation is a success in
itself”, adding: “The summit is not a
port of arrival, it’s a port of departure.
It’s the start of the relaunch of our ties.”
Martin Sandbu see Opinion
Monday 17 July 2023 ★ FINANCIAL TIMES 5
6 ★ FINANCIAL TIMES Monday 17 July 2023

Just say no The thankless, invisible work that eats into time and career priorities is mostly done by women y PILITA CLARK

Wall St sharply Options shift Investors hedge against Europe

stock market slide with derivatives switch
Doubts raised
over directors
divided on how carrying out
multiple roles
bad Goldman SIDDHARTH VENKATARAMAKRISHNAN

More than a quarter of board members

earnings will be
at European financial services compa-
nies hold at least four such positions
across different organisations, raising
concerns about their ability to carry
out their roles effectively.
The data, part of broader research
including interviews with fund manag-
ers released today by EY, also showed
that more work is needed on gender
3 Uncertainty over second-quarter profits representation to meet a forthcoming
EU directive.
3 Lender likely to lag behind peers again “When you’re attempting to create
more diversity of skills, having the same
person appearing multiple times and
JOSHUA FRANKLIN AND recent acquisition and losses from its Luxury goods: LVMH is part of the blue-chip Euro Stoxx 50 index, up 14% since January — Dominique Charriau/WireImage being brought on to different boards
STEPHEN GANDEL — NEW YORK
consumer and commercial real estate works against that,” said Tara Cemlyn-
Analysts are sharply divided over just loan portfolios. Investors opt for protection Jones, chief executive of non-profit
how bad Goldman Sachs’ second- Analysts are guessing Goldman’s net 25x25, which aims to improve female
Euro Stoxx 50 put/call ratio
quarter earnings will be, offering a income might be as high as $1.7bn for representation in senior executive roles.
much wider range of estimates than is the quarter or as low as $116mn, accord- 2.2 The number of directors with multi-
typical for the Wall Street bank. ing to data compiled by Bloomberg, a far ple board positions varied between
2.0
There is a consensus that it will not be steeper drop than peers. sectors. Close to half of board members
one of Goldman’s best quarters, but On an earnings per share basis, these 1.8 at asset management firms held more
some are predicting it could be one of estimates for Goldman range from as than two positions.
the bank’s worst. Earnings estimates low as 33 cents to as high as $4.99, far 1.6 But even among banks the number
range from Goldman making 33 cents wider than they have for other banks was about 40 per cent, despite a belief
per share and barely eking out a profit, this quarter and the broadest range ana- 1.4 among headhunters that board direc-
to almost $5 a share and netting more lysts have had for Goldman in more than tors at lenders avoid so-called “over-
than $1.5bn. two years. On Wall Street, 10 cents a 1.2 boarding” because of governance risks.
While it is not uncommon for analysts share can count as a big earnings beat. 2014 15 16 17 18 19 20 21 22 23 The EY data covers all organisations.
to disagree, the debate over what Gold- The unpredictability comes despite Higher ratio suggests investors are looking for protection Usually such data sets only cover public
Goldman’s management flagging for Source: Bank of America companies, even though roles with pri-
investors that this quarter would be vate companies, charities and public
‘Goldman cannot afford to challenging for the bank. GEORGE STEER AND MARY MCDOUGALL since January to its highest level since pushed higher so far this year even as institutions are often just as demanding
be a serial offender . . . to It will be another quarter in which LONDON
2007. the European Central Bank has ratch- and can be overlooked.
Goldman has lagged behind peers such “Fundamentally, we’re still in a eted up interest rates at unprece- Of the 300 fund managers surveyed
tell investors about more as Morgan Stanley and JPMorgan Chase,
Cautious investors are snapping up
place where [Europe’s] growth out- dented speed to combat inflation. by EY, more than 80 per cent said they
derivatives that would protect them
charges they need to take’ which have other businesses including if this year’s rally in European stocks look isn’t amazing,” said Abhinandan This year’s stock market gains have believed that holding more than three
wealth management and retail banking crumbles, in a sign of mounting con- Deb, head of global cross asset quant come despite the eurozone economy board positions could affect directors’
man, which is led by chief executive to pick up slack when trading and cerns that slowing economic growth investment strategy at BofA Global sinking into a mild technical recession abilities to fulfil their duty.
David Solomon, will report on Wednes- investment banking sputter. will weigh on markets sitting close to Research. “People are uncomfortably in June after two consecutive quarters Chairs at financial services companies
day is more divided than usual. One rea- This will add to the challenges facing record highs. long [Europe], they’re long because of contraction, stoking concerns “spoke of concerns that the prestige of a
son for the uncertainty is because some Solomon, Goldman’s chief executive they need to participate but the among investors who worry that the board seat could affect willingness to
analysts expect Goldman’s leadership to since 2018, who is already dealing with Traders have been buying an increas- fundamental conviction isn’t there. rally rests on shaky foundations. challenge the status quo”, said Omar Ali,
take a “kitchen sink” approach, by stuff- unrest among many employees and ing number of “put” options, which No one wants to chase this market so “The whole bounceback of share EY’s financial services managing part-
ing in as many one-off items as it can in pressure to deliver on his strategy to provide insurance against a slide in close to its high.” prices in Europe after last winter was ner for Europe, the Middle East, India
what was already shaping up to be a diversify the bank’s business. prices, relative to “calls”, which pay Other investors point out that a due to this rebound in services. People and Africa, “and that some board
challenging quarter. Despite Solomon’s efforts to expand out if the market rises. recent slowdown in activity across thought and still think that the econ- members might be financially depend-
“Goldman Sachs cannot afford to be a into newer areas, Goldman is still heav- In so doing, they betrayed an Europe’s hitherto resilient services omy remains resilient,” said Tomasz ent on their board positions, which
serial offender, to go back next quarter ily reliant on its legacy businesses of “underlying nervousness” about sector also bodes poorly for local Wieladek, chief European economist impacts their independence”.
and tell investors about more charges investment banking and trading, which European stocks despite their recent stock markets. at T Rowe Price. The research also found that almost
they need to take. That’s CEO school do not lead to a higher stock market val- run, said analysts at Bank of America. S&P Global’s eurozone services pur- However, “[services PMI] will prob- 30 per cent of European financial
101,” said Mike Mayo, a longtime bank- uation from investors due to their The ratio of puts to calls tied to the chasing managers’ index, a measure ably go down significantly as part of boards had less than 40 per cent female
ing analyst at Wells Fargo. volatility. blue-chip Euro Stoxx 50 benchmark of activity in services, fell for a second the natural monetary policy tighten- representation.
Like its peers, Goldman’s earnings are Goldman’s return on equity, a critical has risen to its highest level in BofA month running in June to 52, indicat- ing cycle and that’s something that Under a European Commission direc-
suffering from a sharp drop in invest- measure of profitability, is forecast to be data stretching back a decade. ing continued expansion albeit at the markets are not prepared for,” he said, tive due to enter force in July 2026, large
ment banking fees and a slowdown in about 5 per cent for the quarter, below The index — which includes luxury slowest pace since January. adding that the euro area services PMI listed companies across the EU will have
stock and bond trading. the 10 per cent hurdle seen as earning goods group LVMH, chip equipment The decline in service sector had been “highly correlated” with to reach that 40 per cent level among
But the bank’s profits will also take a back the cost of capital, and well off the maker ASML and industrial conglom- momentum may soon begin to weigh European share price moves over the non-executive directors, or 33 per cent
hit from probable writedowns on a bank’s own target of 14-16 per cent. erate Siemens — has risen 14 per cent on European equities, which have past three years. across all directors.

Travel & leisure. Dispute

Hollywood prepares for lengthy strike
Writers and actors take action
over pay and use of AI just as
Legal Notices
industry shakes off pandemic
CHRISTOPHER GRIMES — LOS ANGELES
Hollywood has not seen anything like it
in more than 60 years: thousands of
striking actors and writers picketing
together outside movie and TV studios,
where production has ground to a halt.
Demetri Belardinelli, who has acted
in TV shows such as Silicon Valley, was
among hundreds of picketers outside
Walt Disney’s Burbank studios in swel-
tering heat on Friday. He and 160,000
Motion Picture and Television Produc-
ers — is high, veterans of previous Holly-
wood labour negotiations say. Many in
the industry are preparing for a lengthy
strike at a moment when the main stu-
dios are in retrenchment mode.
Disney, Warner Bros and Paramount
are slashing costs following multibil-
lion-dollar investments in streaming
and sharp declines in the linear TV busi-
ness. Their share prices are also under
pressure.
Key sticking points for both the writ-
ers and actors include royalties, which
have declined significantly in the
streaming era, and establishing rules
over the use of artificial intelligence.
Writers fear being paid far less to adapt
a strike captain outside Disney. “It is
worth fighting for residuals at a time
when you have some of the biggest hits
on streamers paying us less money than
ever.”
The strikes come as cinema owners
are enjoying their first full summer
movie slate since 2019. SAG rules pre-
vent actors from promoting new mov-
ies, including the release of the highly
anticipated Barbie and Oppenheimer on
Friday. Such promotion is vital to
raising awareness of films, studio execu-
tives and analysts say. Universal, which
is distributing Oppenheimer, said the
film’s New York premiere had been
cancelled.
Bob Iger, Disney’s chief executive,
Disney announced last week that
Iger’s tenure would be extended by two
years and that his annual bonus scheme
had been increased by five times.
Iger has long been considered Holly-
wood’s de facto leader, and many in the
industry had hoped he might be able to
use his clout to broker some kind of set-
tlement between the studios and the
unions. But the hostile reaction to his
comments only emphasised the angry
divide between the two sides.
Last month more than 300 leading
Hollywood stars, including Jennifer
Lawrence and Meryl Streep, wrote to
SAG-AFTRA leadership in support of
strike action. “This is no time to meet in
the middle,” they wrote, signalling they

Imagine your advert here other members of the SAG-AFTRA

trade union had voted to strike a day
before, after talks with the studios
collapsed.
Belardinelli and the other actors took
their places on the picket lines alongside
members of the Writers Guild of Amer-
ica, who have been on strike since May 2
— and in the process escalated pressure
on the Hollywood studios.
“This is a much-needed surge of
Business for Sale, Business Opportunities, Business Services,
energy and people,” Belardinelli said as
Business Wanted, Legal Notices, Company Notices, Public Notices, Floating Rates Notes, passing cars honked their horns in soli-
Shareholder Messages, Property For Sale, Tender Notices darity. “None of us want to continue this
.........................................................................................................................................................................................................................................................................
strike. But the [studios] have to meet
Classified Business Advertising
Tel: +44 20 7873 4000 | Email: advertising@ft.com
our demands.”
The Screen Actors Guild has not had a
strike in 43 years, and it has been even
Notice to Advertisers longer since the actors and writers have
Calls to the Financial Times Advertising Department may be monitored.
gone on strike at the same time. Their
last joint industrial action was in 1960,
Acceptance of any advertisement for publication will be subject to the then current terms and conditions of insertion when Ronald Reagan was the head of
of advertisements in FT publications.
the Screen Actors Guild.
A copy of the terms and conditions of insertion of advertisements in FT publications can be obtained from The level of anger and mistrust
+44 (0)20 7873 3000, or viewed at www.FT.com/advertising between the unions and the studios —
which are represented by the Alliance of
basic scripts generated by AI pro-
grammes, while actors are concerned
their digital likenesses will be used with-
out compensation.
“Both the writers and the actors have
noticed a substantial change in the way
we are paid and in the way we are
treated by big streamers and legacy
companies alike,” said Emily Cheever-
Mallonee, a writer who was serving as
told CNBC last week that it was the
“worst time in the world” for work stop-
pages, given the industry’s nascent
recovery from the coronavirus pan-
demic. “There’s a level of expectation
that they have that is just not realistic.”
Iger was speaking at the Allen & Co
conference in Sun Valley, Idaho, which
has been dubbed “billionaires’ summer
camp”.
Defiant:
actors join
writers on strike
outside Disney’s
studios in
Burbank,
California
Kevin Winter/Getty Images
wanted the union to take a tough line.
One Hollywood executive argued that
the unions had walked away from a
strong pay offer from the studios, espe-
cially given the rocky state of the film
and TV business. “With an industry
crawling its way out of the near-death
experience of three years of the pan-
demic, this is the essential moment to
meet in the middle,” the executive said.
“We can argue what the middle is, but
let’s compromise.”
The strike will also have an impact on
the California economy. The last writers
strike, which lasted 100 days in 2007-08,
cost the state an estimated $2bn but did
not shut down production as extensively
as this one is set to do.
“We definitely understand that this
strike is disrupting not just our work,
but the workers that are not unionised,
and that cannot really stand here with
us,” said Cheever-Mallonee. “We’re
essentially fighting for the continuation
of all of our jobs. We don’t strike lightly
and we don’t strike for fun, right?”
Monday 17 July 2023 ★ FINANCIAL TIMES 7

COMPANIES & MARKETS

BNP’s ‘introvert’ boss braced for battles ahead

Green transition and succession among challenges facing man who led French bank through eurozone crisis and pandemic
SARAH WHITE — LONDON
Most chief executives might be tempted
by the limelight if they had spent more
than a decade running the eurozone’s
biggest bank and outperformed
regional rivals blighted by crises.
Not Jean-Laurent Bonnafé, who if
anything, has retreated farther from
view in his 12 years in charge of BNP
Paribas. “I’m just the one who suc-
ceeded someone else,” the 61-year-old
told the Financial Times in a rare inter-
view in Paris. “The bank was incorpo-
rated in 1848 and is here to stay for a
very long period of time. This is a team.”
But although he may prefer to hide
from view, Bonnafé has a set of chal-
lenges that will eventually define his
record at the French bank — not least
that of assuring his own succession,
even if BNP’s bylaws allow him to stay
on until 2028.
During a tenure that has included the
eurozone crisis and the coronavirus
pandemic, BNP’s shares have held up
better than most of its European peers
but its price-to-book ratio of 0.54 lags
behind those of some, including HSBC
and Santander, and particularly most
big US lenders.
The bank has cemented its status as
one of Europe’s top corporate financiers
and is further bolstering its ambitions as
the continent’s go-to investment bank,
beating one-time potent rivals Deutsche
Bank and Barclays by revenue, although
Wall Street banks remain by far the
market leaders.
As he looks to deliver on a promise of
higher returns over the next two years,
Bonnafé must now prepare BNP for a
greener makeover — a source of growing
scrutiny as climate campaigners who
accuse it of not dropping fossil fuels fast
enough bring lawsuits against the bank
and plaster the elusive chief executive’s
face on protest posters.
At the same time, BNP has a “steady-
as-she-goes” reputation to uphold, with
a streak of regular quarterly profits over
the past decade marred only by the
$9bn in penalties the bank faced for
breaking US sanctions in 2014.
“In a sector in which it’s tough to sleep
easy, BNP is seen as a higher-quality,
safer organisation,” said Barclays ana-
lyst Amit Goel.
Bonnafé is more positive than some
peers about the threat posed to banks by
the rapid reversal of ultra-low interest
rates in Europe and the US, with the
industry having reinforced its defences
and regulatory buffers since the 2008
financial crisis.
That is despite growing warnings of a
looming plunge in the valuations of
commercial property and companies,
the collapse this year of Californian
lender Silicon Valley Bank and the
forced takeover of long-suffering Credit
Suisse by its Swiss rival UBS.
“So far, yes, there were some isolated
issues, but no major global problem,”
Bonnafé said, adding: “I am a bit con-
flicted to say this is great, but if we try to
look calmly at the situation maybe 15
years before, the system would be in a
very different shape.”
In his time running BNP, calmness has
been among Bonnafé’s trademarks.
“He’s always been very self-
contained,” said Olivier Andriès, chief
executive of jet engine maker Safran
and a former classmate both at the Poly-
technique engineering school and the
elite Corps des mines, a training ground
for French civil servants. “I’ve never
known him to fly off the handle.”
BNP insiders and rival bankers credit
Bonnafé for creating a tightly managed
operation that has proved conservative
on risks and costs, with some describing
a highly hierarchical internal culture.
Straight talker: While French media have cited one of
associates say his nicknames as J’Lo, a riff on his
Jean-Laurent shared initials with US singer and
Bonnafé does actress Jennifer Lopez, some employees
not mince his raised less flattering monikers — includ-
words but some ing “the Supreme Soviet”.
French officials Bonnafé’s reserve goes beyond his
claim he is a public persona, even if he is no stranger
mystery to them to establishment circles.
Gilles Bassignac/Divergence
Some French officials said he was a
mystery to them, an anomaly for the
head of a lender that was state-owned
until the year he joined in 1993 — at the
start of a wave of French privatisations
— and remains a go-to bank for the
French government.
BNP, which has remained France’s
dominant primary dealer for govern-
ment bonds, was instrumental in
orchestrating emergency state-backed
loan schemes funnelled via French
banks during the pandemic.
Born to a family from the southern
city of Albi, Bonnafé initially followed in
his EDF engineer father’s footsteps in
his studies.
At Polytechnique, a recruiting ground
for blue-chip French companies, he
rubbed shoulders with other future
European bank bosses including Tid-
jane Thiam of Credit Suisse, Jean Pierre
Mustier of UniCredit and Frédéric
Oudéa of Société Générale.
A lover of classical music, one of Bon-
nafé’s few public pursuits is as head of
the Friends of the Paris Opera, where he
entertains big clients.
Another yearly outing is the Roland-
Garros tennis tournament. But people
BNP Paribas’ share price has outperformed many major
European rivals
Rebased in euros
600
500
400
300
200
100
0
2012 13 14 15 16 17 18 19 20 21 22 23
Source: Refinitiv
operations in Belgium and Luxem-
bourg. Internally, he has made little
secret over how laborious the BNL deal
was, after BNP had to grapple with its
poor-quality loan book — a cautionary
tale for other cross-border mergers.
Bonnafé has since favoured smaller
deals, including the 2019 purchase of
Deutsche Bank’s prime brokerage oper-
ations that serve hedge funds, to boost
its standing in equities markets.
He has insisted a €7.6bn war chest set
aside from the $16.3bn sale of US retail
business Bank of the West will be spent
on IT and system upgrades and incre-
mental acquisitions, to build up scale in
areas such as asset management, insur-
ance and consumer finance.
A diversified business, from car leas-
ing group Arval to a wealth manage-
ment arm, has also helped BNP’s steady
growth. BNP used its balance sheet
aggressively during the pandemic,
expanding it by €500bn in mere
months, to win over loan-starved corpo-
rate clients across Europe when US
rivals temporarily retrenched.
The group reported a record €10.2bn
annual profit in 2022.
When asked where he and the bank
might go from here, Bonnafé shifted to
the much broader challenge lenders
face in serving societies that must rap-
idly transition to cleaner energy models.
He wants the bank to be at the fore-
front of clients’ financing needs for new
‘The only who know him professionally struggle “He spent a lot of time telling me ‘it infrastructure, and insisted BNP was
to detail how he spends his downtime. will be hard but you’ll get there’.” reducing support to the oil and gas sec-
real thing “He’s an introvert,” said one senior Rodolphe Saadé, head of Marseille- tor — albeit at its own pace, and not one
Bonnafé banker who has known him for years. based shipping group CMA CGM, that he said could “kill the economy”.
“He’s not going to tell you what he did on described Bonnafé as a straight talker: “There’s a lot to do,” Bonnafé said.
has left to the weekend, or only if you really force “He says things the way he sees “The last time was maybe just after the
prove is to him.” them . . . when something is not possi- second world war if you look at the mag-
Corporate bosses are more forthcom- ble he’ll say so.” nitude of what we need to invest to
succeed in ing. Bonnafé’s first job at BNP was to Bonnafé made his mark at BNP pur- implement the transition.”
his exit and manage big clients, after stints at suing some of its biggest mergers, How long he will stay on to see that
France’s ministry of industry and in pri- including a double bid for SocGen and through is unclear. No dauphin has yet
leave at the vate equity. Paribas in 1999 when he was head of been anointed at a bank that has tended
right time’ Arthur Sadoun, who once advised strategy. The first offer was eventually to promote from within.
BNP on campaigns as a publicist, said dropped. In the words of one rival banker, “the
Bonnafé gave him counsel when he He later helped integrate Italy’s Banco only real thing Bonnafé has left to prove
became chief executive of advertising Nazionale di Lavoro, which BNP is to succeed in his exit and leave at the
group Publicis in 2017. acquired in 2006, as well as Fortis’s right time before it’s deemed too long”.
JPMorgan
BNP Paribas
Société Générale
Barclays
Deutsche Bank

Financial services

Auditors accused of missing climate risks

CAMILLA HODGSON — LONDON
Senior managers at the world’s six larg-
est accounting firms are failing to
ensure that climate change is ade-
quately addressed in financial reports
and audits, a prominent environmen-
tal law charity has alleged.
In a letter sent to the Global Public Pol-
icy Committee — a group made up of
senior leaders from “big four” firms
PwC, Deloitte, KPMG and EY, as well as
BDO and Grant Thornton — Client Earth
said it was “very concerned” that audi-
tors were not fully considering
climate-related matters when assessing
corporate accounts. The group said it
also feared audit standards were not
being properly followed.
The non-profit group said it had sent
the letter, seen by the Financial Times,
in May but received no response. That
followed 18 months of engagement with
the GPPC, which Client Earth said it was
directed to after raising its concerns
with the big four firms in 2021. “The
largest audit and accounting firms have
a huge sphere of influence over the cru-
cial issue of how climate risk is reflected
in financial reporting and audit, yet it
is hard to discern any meaningful
leadership from the GPPC when it
‘It is hard to discern any
meaningful leadership
from the GPPC when it
comes to climate change’
comes to climate change,” said Client
Earth lawyer Robert Clarke.
Investor group Climate Action 100+,
which manages a collective $68tn in
assets, found last year that 94 per cent of
152 large companies it had assessed on a
range of climate-related metrics had not
met any of its audit-related criteria.
The International Accounting Stand-
ards Board has said that material
climate-related matters need to be
incorporated into financial reporting
standards, and the auditing standards
body has issued similar guidance.
The GPPC said in 2020 it would “play
its part” in supporting the application of
the guidance. However, Client Earth
said in its letter that “the evidence sug-
gests that only limited shifts in financial
disclosure practices by companies and
their auditors have taken place, and the
GPPC has not provided any further pub-
lic statement as to why this is consid-
ered acceptable.”
It was “essential” for the group to pub-
lish a “clear public statement” on its
position, the letter said. “We do not con-
sider the GPPC’s position (or rather, its
lack of a public position) to represent
adequate leadership on these issues.”
Client Earth’s letter said it understood
from a meeting with the GPPC in Janu-
ary that the group’s position was that
its members’ audits complied with the
relevant guidance.
8 ★ FINANCIAL TIMES Monday 17 July 2023

COMPANIES & MARKETS

Retail Technology

Křetínský set to win battle for Casino
Billionaire poised to take
control of food retailer
after rivals quit race
ADRIENNE KLASA AND LEILA ABBOUD
PARIS
Czech billionaire Daniel Křetínský is
poised to win the battle for control of
Casino after a trio of investors led by bil-
lionaire Xavier Niel dropped out of the
running to bail out the heavily indebted
French food retailer.
Křetínský said in an interview with
the Financial Times that he had submit-
ted a revised offer on Saturday to Casino
as part of the company’s voluntary
debt restructuring negotiation with
creditors. In it, he and Marc Ladreit de
Lacharrière’s Fimalac would put in a
€1.2bn equity injection to take a 53 per
cent stake in the company. On top of
that, €4.9bn of Casino’s debt would be
converted into equity.
The trio dubbed 3F, including Niel,
investment banker Matthieu Pigasse
and retail entrepreneur Moez-
Alexandre Zouari, had been working on
a new offer but decided to abandon it
late yesterday blaming Casino for run-
ning “a biased process” and singling out
investment fund Attestor for switching
sides to rally to Křetínský’s bid.
“Today after months of work, 3F has
decided not to submit an offer,” they
said in a statement.
Casino, France’s sixth-biggest food
Market questions. Week ahead
retailer with 53,000 employees in the
country, has been controlled for dec-
ades by Jean-Charles Naouri, who built
it up but has saddled it with €6.4bn in
‘Our desire is to preserve
the maximum rational
perimeter of Casino’
Daniel Křetínský
debt that rating agencies doubt it can
repay.
The company, which has been burn-
ing through cash while losing market
share to rivals, has been in a voluntary
debt restructuring negotiation with
creditors aimed at saving the company
from bankruptcy. The process, which
started in May, is being overseen by a
court-appointed agent and closely
watched by the French finance ministry.
Casino shares have fallen more than
75 per cent in the past year.
In an interview prior to the trio
announcing they would pull out, Křetín-
ský argued his offer was the best one for
the company and its creditors. He called
on creditors to be “realistic” and that “a
business plan that is based on hopes or
imagined hopes will not succeed”.
Křetínský also proposed that Casino
boss Jean-Charles Naouri stay on in a
“respectable” role once he takes control
of the indebted French grocer, which he
vowed to keep together to the “maxi-
mum possible” extent.
“Our desire is to make the greatest
effort possible to preserve the maxi-
mum possible, rational perimeter of
Casino,” the Czech billionaire said, in an
effort to quell fears that the retail chain
could be sold off in parts.
Křetínský said no agreements to sell
stores to rivals were in place and that he
would work to preserve and eventually
create jobs as part of a turnaround
focused on Casino’s extensive network
of small urban stores. However, “if the
reaction of customers, for example to
the hypermarket format, is really very
negative, with a continuing negative
trend, you have to respect reality”.
Křetínský said if he took control he
would want to take advantage of
Naouri’s “very deep knowledge”.
South Korean
‘ant’ traders
swarm all over
battery stocks
SONG JUNG-A AND CHRISTIAN DAVIES
SEOUL
An army of South Korean retail traders
has sparked a nine-fold rise in the
shares of a battery materials producer
as it takes on hedge funds betting
against the company’s stock.
The individual investors — known
locally as “ants” — have bought a net
Won3.1tn ($2.5bn) of shares in EcoPro
and its subsidiary, cathode producer
EcoPro BM, in an episode with echoes of
the US “meme stock” craze, where small
traders used platforms such as Reddit to
whip up enthusiasm for previously
unloved stocks.
EcoPro’s rally of 833 per cent this year
has come as bigger investors ramp up

Speed of UK inflation slowdown holds key to rate rises
How fast is UK inflation falling?
Investors are expecting UK inflation to
have slowed when figures for June are
published on Wednesday — the question
is, how quickly?
Expectations for UK policy rates
ramped up sharply last month following
unexpectedly strong wage numbers and
stubbornly high consumer price infla-
tion data, as markets priced in substan-
tially higher interest rates to bring down
inflation to the Bank of England target
of 2 per cent.
The June numbers will also be
watched by the government, as Prime
Minister Rishi Sunak has made it one of
his five goals to halve inflation over the
course of this year. Economists polled
by Reuters forecast that rises in prices
slowed to 8.2 per cent in June, down
from 8.7 per cent in the previous month.
That would still be above the BoE’s fore-
cast of a decline to 7.9 per cent.
Sandra Horsfield, economist at
Investec, expects a sharper decline to
8.1 per cent, driven by lower petrol and,
to a lesser extent, food price inflation.
However, she forecasts that core infla-
tion, which strips out the more volatile
food and energy prices, will be
unchanged at 7.1 per cent.
“As concerns primarily centre on the
sticky nature of core inflation, merely
seeing lower headline inflation would
not deter additional tightening,” said
Horsfield. She expects that the BoE will
increase rates by another half percent-
age point to 5.5 per cent in August fol-
lowing the same increase in May.
“Indeed, we doubt the MPC [Monetary
Policy Committee] will be confident
enough to pause raising rates in Septem-
ber either,” she added.
Markets are betting that the BoE will
lift interest rates to 6 per cent by the end
of the year. To reverse some of the
recent surge in rates expectations, that
pushed up mortgage rates, “data will
have to show clear signs that disinflation
is accelerating”, said Horsfield.
Valentina Romei
Will the euro keep rising against
the dollar?
The euro hit a 16-month high against the
dollar this week as traders ramped up
their bets that the Federal Reserve will
stop raising interest rates ahead of the
European Central Bank.
The euro has risen by more than
2.3 per cent against the greenback since
City of London: the start of July to trade at $1.1171, its
economists highest level since March 2022, lifted by
polled by US inflation slowing faster than ex-
Reuters predict pected to 3 per cent for the year to June.
UK inflation The outlook for inflation in the euro-
slowed to 8.2% zone is more difficult, with consumer
last month, prices in Germany rising 6.8 per cent for
above the Bank the year to June, higher than economists
of England’s had forecast. Traders have still fully
forecast of 7.9% priced in two more 0.25 percentage
Kin Cheung/AP
point rate rises for the ECB, but have
removed bets the Fed will move beyond
a widely anticipated rate rise in July.
“The euro had no difficulty at all tak-
ing out its spring high against the dollar
this week,” said Jane Foley, head of FX
strategy at Rabobank.
“But what’s interesting now is that
you’ve seen Isabel Schnabel, member of
the ECB governing council, talking
about weakening economic data, in con-
trast to sentiments from [ECB president
Christine] Lagarde last week,” she said.
The eurozone has already entered a
technical recession, with output across
the bloc shrinking by 0.1 per cent in
each of the past two quarters, and Ger-
man house prices falling at a record rate
this year and manufacturing struggling
with weaker demand from China.
“It could be that once we get to Sep-
tember the market may realise that the
eurozone has growth issues of its own,
interest rates have peaked and suddenly
the euro doesn’t look very attractive any
more,” Foley said.
Mary McDougall
What will retail sales tell us about
the health of the US consumer?
Retail sales data for June to be released
tomorrow will offer insight into the
health of the US consumer as the labour
market begins to slow.
Economists polled by Reuters fore-
cast that the Census Bureau will report a
0.4 per cent increase in overall retail
sales in June from the prior month, fol-
lowing an increase of 0.3 per cent in
May. Excluding the automotive sector,
‘It could be retail sales for June are expected to have
risen 0.3 per cent.
that once Bank of America analysts believe that
we get to last month’s figures will be lower than
the estimate, however, in part because
September the bank — which has a large retail pres-
the market ence in the US — has seen a decline in its
own credit and debit card spending.
may realise The analysts cite a 0.2 per cent decline
that the in card spending in June, consistent with
the recent slowdown in the labour mar-
eurozone ket. Bank of America therefore expects
has growth the Census Bureau data to show a
0.2 per cent decline in retail sales ex-
issues of its automotive for June, and a 0.1 per cent
own’ drop in the core control group.
The US reported last week that hiring
Jane Foley, had slowed in June after months of
Rabobank unexpected strength. That slowdown,
which is nevertheless still modest, could
put pressure on spending, and comes
amid expectations of a recession, tight
financial conditions and slowing infla-
tion, all of which weigh on spending.
Kate Duguid
their short positions, or bets that the
stock will fall. Short positions in EcoPro
shares have surged from Won54bn at
the beginning of the year to Won1.3tn,
according to data from Korea Exchange.
EcoPro BM shares have gained about
200 per cent in the year to date.
But South Korean retail investors,
who call themselves ants because of
their capacity to act as a powerful collec-
tive, keep buying shares.
Spurred on by popular YouTubers
including Park Soon-hyuk, a former
chemical company executive known as
“Mr Battery”, the retail investors have
shrugged off warnings that the stock is
overvalued.
EcoPro and EcoPro BM “are typical
meme stocks”, said Chan Lee, managing
‘Retail investors are crazy
about the shares so short
sellers find it difficult to
withstand their losses’
partner at Petra Capital Management, a
Seoul-based hedge fund. “They have
become too expensive even if you factor
in their future growth potential.”
EcoPro’s operating profit jumped sev-
enfold from Won86bn in 2021 to
Won613bn last year. But its price-to-
earnings ratio is nearly 700 times, com-
pared with 267 for fellow Korean bat-
tery material producer Posco Future M,
166 for battery maker LG Energy Solu-
tion, and 31 for cathode producer L&F.
Retail investors are betting that South
Korean battery makers and material
producers will benefit from a booming
market in electric vehicles, and US pres-
ident Joe Biden’s landmark programme
of subsidies for clean energy.
The legislation restricts the use of Chi-
nese components in green technologies
if they are to qualify for generous US tax
credits, potentially eliminating compe-
tition for Korean companies.
But analysts at Goldman Sachs
warned last month that the global cath-
ode market may be oversupplied over
the next decade, advising investors to
sell shares in EcoPro BM and Posco
Future M.
“It is hard either to buy them or to
short the shares, as short covering is also
boosting their prices,” said An Hyung-
jin, chief executive at the Seoul-based
hedge fund Billionfold Asset Manage-
ment. “Retail investors are crazy about
the shares so short sellers find it increas-
ingly difficult to withstand their bal-
looning losses,” An added.
“Amateur traders are winning the bat-
tle against the short sellers.”

Technology. Geopolitical tension

Multinationals rush to decouple China data

Western groups reorganise IT
systems in face of Beijing’s
strict new anti-espionage law
RYAN MCMORROW, JOE LEAHY
AND SUN YU — BEIJING
ELEANOR OLCOTT — HONG KONG
Global companies are accelerating their
push to decouple China data in response
to the country’s increasingly stringent
data and anti-espionage laws, as rela-
tions between Washington and Beijing
deteriorate.
The drive for full localisation of data
in China and separation of information
technology systems from the rest of the
world is happening as Beijing strength-
ens its control and regulation of data.
US consulting firms including McKin-
sey, Boston Consulting Group and Oliver
Wyman are splitting their IT systems,
according to a half-dozen staff at the
companies. “Multinationals are con-
cerned . . . it’s named the anti-espio-
nage law and espionage naturally gets
people a bit worried,” said Alex Roberts,
a data compliance expert at law firm
Linklaters in Shanghai.
On July 1, Beijing put into effect an
expanded anti-espionage law to
strengthen national security. A series of
raids and sanctions on US consultancies
such as Bain & Company and Mintz
Group, along with semiconductor giant
Micron Technology, have put more
pressure on companies operating in
China.
Roberts said the wording in the
updated anti-espionage law unveiled in
April introduced the possibility of crim-
inal sanctions and being policed by the
country’s state security agency for shar-
ing information deemed sensitive. The
revised law and the raids “have busi-
nesses scrambling to understand their
current compliance footing”, he said.
In the past, western companies were
concerned about taking electronic
devices into the country over fears that
China could access their data. Now they
are equally concerned about sensitive
data leaving China for fear of violating
Beijing’s rules.
An executive at a US consultancy said
his company started reorganising its
systems months ago, creating a costly
“for China” version of nearly every dig-
ital tool. Staff were banned from taking
their China-issued laptops out of the
country and the company is creating
Chinese servers and second email
addresses ending in “.cn” for local team
members.
“We’ve got two IDs now basically,”
said the consultant, adding that the data
issue “goes to the heart of why it’s hard
to do business in China”.
The company had not figured out
what to do about phones, he added. Four
staff at Big Four accounting firms KPMG
and EY said their groups had started
reorganising IT systems in China
around the time Beijing rolled out sev-
eral data security and cyber laws in
2021. At EY, the costly second IT system
has led to a fee dispute between the
China arm and headquarters.
The growing push to localise data also
comes as China’s internet regulator, the
Cyberspace Administration of China,
has started to conduct data security
High security:
guards inside the
Great Hall of the
People in Beijing.
The government is
strengthening
control over data
Greg Baker/Reuters
assessments to control the flow of out-
bound data.
The reviews — the first of their kind —
apply to any group sending abroad
“important data” or the “sensitive per-
sonal information” of more than 10,000
Chinese people over a two-year period.
They were supposed to be completed by
the end of March, but for many compa-
nies they are still not finished.
“While it’s not entirely clear if they
must, companies are finding it easier
and less risky to localise data within
China as much as possible instead of
sending data across borders. They want
to avoid risks,” said Sally Xu, manager of
government affairs at the British Cham-
bers of Commerce in China.
Almost 10 per cent of roughly 500
European companies surveyed this
spring by the European Union Chamber
of Commerce in China said they were
completely decoupling their China IT
systems from the rest of the world.
Three-quarters said they had localised
their IT systems and data storage to
some degree.
Compliance costs would be “unmeas-
urable” for financial institutions if they
fully comply with China’s data laws, said
the American Chamber of Commerce in
China in April.
Banks such as JPMorgan, which can
now run its own securities arm in the
country, are building separate infra-
structure for China, according to two
people briefed on their operations.
Mutual fund managers such as Black-
Rock and Neuberger Berman, which
have approval to manage local mutual
funds for domestic Chinese investors,
are prohibited under sector-specific
rules from sharing information on their
shareholdings or research from local
units to their parent organisations.
Carolyn Bigg, head of DLA Piper’s Asia
data privacy team, said the data locali-
sation drive even extended to retailers’
global loyalty programmes, where some
companies were moving to cut out Chi-
nese customers.
McKinsey, BCG, Oliver Wyman,
KPMG, EY and BlackRock did not
respond to requests for comment.
JPMorgan and Neuberger Berman
declined to comment.
Additional reporting by Nian Liu
and Cheng Leng
Monday 17 July 2023 ★ FINANCIAL TIMES 9

Ryan Roslansky, LinkedIn boss

‘You can only learn how to
be a CEO by being a CEO’
Z WORK & CAREERS

Just say no
if working
while female
{ UK labour shortage:
making crime pay }
Campaigns to get more UK companies show more
willingness to hire people
are bearing fruit with convictions
Employment of people on probation Employers indicating they would hire
following release from custody, someone who had committed these
offences (%)
Driving

Alcohol-
after release related
Criminal
damage
Common
assault
after release
Drug-related

Benefit fraud
‘White collar’ Would recruit:
crime a man
Burglary, a woman

Pilita Clark
Apr Jul Oct Jan robbery, theft

Business Life
Source: UK Ministry of Justice and hiring responsibilities by NfpResearch for the UK
HM Prison and Probation Service charity Working Chance

S
aying no to people is one of
the most important skills you
can develop. You can only
achieve great things if you
know how to say no. People
pleasing is driven by fear, not virtue.
All this advice comes from three of
the many books on how to say no that
have gushed forth from a publishing
industry apparently incapable of
saying anything but yes to this idea for
decades.
Don’t Say Yes When You Want to Say No
came out in 1975. In the past 15 months
alone it has been joined by The Power of
Saying No, 100 Ways to Say No, The Joy of
Saying No, How to Say No, and No Will
Set You Free.
You would think we might have
conquered the problem by now. The
fact that we have not came to mind last
week, as I contemplated the onset of
one of the gravest moments for the
people pleaser: summer.
Working through July and August
poses the constant risk of being asked
to fill in for absent colleagues and do
work that equally absent bosses fail to
notice.
This year, as the humdrum trials of
working life are compounded by cost of
living miseries, it seems even more
important to understand the persistent
inability to say no.
The remorseless slew of books on the
topic is not helping. Many make a
reasonable fist of outlining the
consequences of being too ready to say
yes — exhaustion, resentment, burnout
and so on.
But they struggle to identify the
cause of the dilemma: poorly managed
organisations that do not know who is
doing what and do not formally
recognise work that is vital but mostly
invisible.
In other words, they blame
individuals for a problem that is largely
caused by organisational systems.
Some books offer useful guidance on
how to be more assertive, or wily,
about saying no. They rightly say too
many of us worry unduly about letting
others down, while too few appreciate
the damage of being known as a
workaholic doormat.
“ The thankless, invisible
work that eats into time
and career priorities
is overwhelmingly done
by women ”
I will never forget hearing a senior
executive from a large company
explain that an internal search for
people to promote had immediately
ruled out anyone who compulsively
worked through their evenings,
weekends or vacations. These people
obviously did not know how to
prioritise or work effectively, the
executive told me, so why would you
promote them?
I have seen men fall into this trap.
But I also remember the shocked look
of a male colleague with the same job
as mine who one day saw my online
calendar on my computer. “What’s all
that?” he laughed, staring at all the
appointments, meetings and task
reminders crowding each week. His
own calendar turned out to be virtually
empty in comparison.
He was not alone. The thankless,
invisible work that eats into time and
career priorities is overwhelmingly
done by women.
If you don’t believe me, I suggest you
read an excellent book on saying no
that came out last year called The No
Club. It was written by four female
academics who realised that they and
others like them were drowning in
NPTs, or “non-promotable tasks”:
Kenneth Andersson
mentoring, training, organising
schedules, taking notes or serving on
committees to pick a new travel firm.
They repeatedly found research
evidence that women were asked to do
this work more than men, and were
more likely to agree to do it.
In other words, there is a collective
expectation that women will do more
of the work that never makes it into an
organisation’s press releases or weekly
updates.
The story was the same whether
women worked in supermarkets,
airport security lines or law firms. At
one big professional services firm, the
authors found the average woman was
spending about 200 hours a year —
nearly one whole month — more than
the average man on non-promotable
work.
Their findings have had an impact.
Some organisations have come up with
ways to make staff aware of the NPT
gender divide and allocate such work
fairly.
A lot more must follow them. It’s not
just fairer. It’s better for a business to
use all its workers’ time well, rather
than lumbering one group with so
much stressful drudgery that they end
up saying yes to a better job.
In an attempt to plug the UK’s chronic,
1mn-plus labour shortage, employers
are tapping 16 to 18-year-olds,
over-50s and recent retirees.
The government has another idea. It
has embarked on a drive to persuade
more companies to hire former
offenders. More than 12mn people in
the UK have a criminal record,
according to the charity Unlock.
Supporting ex-offenders in
employment cuts reoffending rates.
Previous attempts to integrate more
former prisoners into the workplace are
bearing fruit. The share of ex-offenders
in work six months after their release
increased to more than 30 per cent at
the end of March from just over 14 per
cent in April 2021. Organisations
working in the field are encouraged,
even though statistics during the
pandemic were artificially low.
A survey from the charity Working
Chance last year found that 45 per cent
of employers would theoretically take
on someone with a conviction. In 2010
this figure was 25 per cent.
Shoe repair and key-cutting chain
Timpson has a long history of
employing former prisoners. They
account for more than 10 per cent of its
workforce — some 650 people. A
number of small businesses such as
Redemption Roasters in London, which
owns a chain of 10 coffee shops, were
born out of efforts by the Ministry of
Justice to encourage entrepreneurs to
train inmates.
But there are difficulties for both
ex-prisoners and employers. Former
prisoners are praised for displaying
high work rates and levels of loyalty.
But they can also be among the most
vulnerable people in society. Employers
with experience of working with
ex-convicts estimate that only about a
third of prisoners would be in a position
to take up employment successfully on
release. Others need support with
issues such as addiction and mental
health before they can work.
Charities say overcrowding and
understaffing in the prison service
mean people close to release have
often not received support and training
needed to prepare for work.
Companies that successfully recruit
from prison populations often have
separate programmes tailored to the
needs of former offenders. These
frequently start with training
academies within prison walls. But such
schemes are resource-intensive.
Companies will need to balance the
cost of such partnerships against
potential losses from understaffing.

CROSSWORD
No 17,470 Set by SLORMGORM
        ACROSS
1 Airlines obtain whistle in case of ditches
(9)
6 Cheap wine set (5)
 
9 Tory right to cut most of cost for
authority (7)
10 Flash director singers knocked back in
Fame (7)
   11 Fat old worker eating slice of salami (5)
12 Noisy couple love, primarily, to get
passionate (9)
14 Vessel in service after refurbs essentially
   (3)
15 Most unmanageable weed I insult angrily
(11)
17 Thorny climber replanted using a pot (11)
19 Infusion of blood type given by
  
companion (3)
20 One enjoying a benefit of their golden
years? (9)
22 Noisily eat meal left out for Frenchman
    (5)
24 Outfit in German tank powerless to take
town at front (7)
26 Two heads will have a vegetarian dish (7)
   27 Friend that’s put on Republican
convention (5)
28 At this moment in time, criminal enters
into fold (9)
 
DOWN
1 Eccentric with a cold fine after a turn (5)
2 Buff eager to give support to old relative
(7)
3 A favourite city you recalled as eternal (9)
JOTTER PAD 4 She is one with The Force (11)
5 Relative fractions I solved ... partly (3)
6 Good doctor screening a music producer
Solution 17,468 (5)
7 A shade past it to get on the wine! (3,4)
$ $ , ( ) & & + 8 Manual promoting diversity in union?
0 $ ' $ 6 $ 0 $ 5 & + + $ 5 ( (4,5)
$ 9 / 0 , ( 6 / 13 A man looking like Trump’s a stripper
7 + ( 7 $ $ / * 2 5 , 7 + 0 (5,6)
( 1 1 + 8 $
14 Pollarded brown tree outside uni not
loved by all (9)
8 1 7 , ' , ( 6 7 % 2 1 & (
16 Last month I joined up with soldiers in
5 ( 9 ( ( 8 unit (9)
, 0 0 ( 5 6 , 2 1 + ( $ 7 ( 5 18 Private shot by a loony leader in error
6 $ 7 ( $ < (3,4)
+ 2 9 ( 5 $ / ' ( 5 6 + 2 7 19 Prisoner meeting with kind partner (7)
( ( 3 ' 2 + 21 One lake feeding river in the country (5)
) $ 5 0 6 7 ( $ ' 5 ( $ / 0 23 Sizable broadsheet taken over by Hello!
(5)
, , , 5 , 8 5 , You can now solve our crosswords 25 Sink installed in Burundi, perhaps (3)
% $ & . * 5 2 8 1 ' 0 8 6 , & in the new FT crossword app at
6 . 1 1 . 6 ( 6 ft.com/crosswordapp
10 ★ FINANCIAL TIMES Monday 17 July 2023

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 $

-0.08% -0.06% -0.09% -0.26%

0.20% 0.39% 0.36% 0.33% 0.20% 0.447% 0.076% 0.203% 0.351% 0.24%
Stock Market movements over last 30 days, with the FTSE All-World in the same currency as a comparison
AMERICAS EUROPE ASIA
Jun 15 - - Index All World Jun 15 - Jul 14 Index All World Jun 15 - Jul 14 Index All World Jun 15 - Jul 14 Index All World Jun 15 - Jul 14 Index All World Jun 15 - Jul 14 Index All World

S&P 500 New York S&P/TSX COMP Toronto FTSE 100 London Xetra Dax Frankfurt Nikkei 225 Tokyo Kospi Seoul
4,519.02
20,307.70 7,628.26 16,290.12 16,128.02 33,485.49 2,628.30
20,015.09 2,608.54
4,372.59 7,434.57 32,391.26

Day 0.20% Month 3.34% Year 19.21% Day 0.00% Month 1.31% Year 10.63% Day -0.08% Month -2.13% Year 5.69% Day -0.22% Month 3.71% Year NaN% Day -0.09% Month -1.77% Year 22.49% Day 1.43% Month -0.37% Year 12.87%

Nasdaq Composite New York IPC Mexico City FTSE Eurofirst 300 Europe Ibex 35 Madrid Hang Seng Hong Kong FTSE Straits Times Singapore
14,194.28 19,828.92
55,344.25 1,838.15 1,824.51 19,413.78 3,248.63
9,430.80 9,438.30 3,218.14
13,573.32 54,119.71

Day 0.39% Month 4.15% Year 26.14% Day -0.67% Month -2.26% Year 15.31% Day -0.06% Month -0.81% Year 13.93% Day -0.43% Month 1.12% Year 18.80% Day 0.33% Month -0.64% Year -6.73% Day 0.31% Month 1.87% Year 3.84%

Dow Jones Industrial New York Bovespa São Paulo CAC 40 Paris FTSE MIB Milan Shanghai Composite Shanghai BSE Sensex Mumbai
7,374.54 28,663.30 66,060.90
34,520.43 119,221.00 7,290.91 3,237.70
118,520.92 27,731.78 3,233.67
34,212.12 63,143.16

Day 0.36% Month 1.60% Year 12.71% Day -1.06% Month -0.91% Year 22.74% Day 0.06% Month 1.15% Year 22.90% Day -0.39% Month 3.98% Year 34.66% Day 0.04% Month 0.12% Year -1.42% Day 0.77% Month 4.74% Year 23.59%

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12 ★ FINANCIAL TIMES Monday 17 July 2023

WORK & CAREERS

Listen and
‘
Of all the management techniques, Some writers have been telling If they co-ordinate supplies, they After that, you can announce your
few are as powerful as curious business leaders this for years. Stephen know the suppliers. If they deal with decision: for all the listening, to lead is

you might conversation. If one of your staff tells

you how their job is going, or how they
think it should change, or what the
learn organisation should be doing
differently, say “tell me more” and ask
something some follow-up questions. It has an
instant effect.
There may be some initial
wariness, especially if people aren’t
used to having these sorts of chats with
their boss. But after that they often
widen their eyes, or give an
acknowledging nod, and open up. If
you haven’t done it, give it a go. It’s
Covey wrote about empathetic
listening in his 1989 book The 7 Habits
of Highly Effective People. Psychologist
and author Daniel Goleman wrote that
knowing how to listen was an essential
component of a leader’s emotional
intelligence.
Why don’t leaders listen? Partly
because, as Covey wrote, they are
thinking about what they are going to
say next. And partly because listening
is not an attribute many leaders think
is important. They think leaders
should lead and set out a vision.
customers, they learn what impresses
or upsets them.
But your people don’t always know
you are interested in their views. This
can have a pernicious knock-on effect:
they may lose interest in their insights
themselves, or disengage from work
altogether. Why bother if it makes no
difference?
If you listen and ask interested
questions, you may decide to do what
your staff think you should do — or you
may conclude you need to do
something else, or nothing. Your
still to decide. Those who argued
against your choice at least know you
took their views into account, and are
more likely to go along cooperatively
with your course of action.
You need to do this Curious listening can also avert
disaster. When I asked management
in good faith, experts why they thought no one
showing you have had spoken up inside Silicon Valley
Bank before it collapsed, or at
understood not JPMorgan Chase when it kept on
just people’s words Jeffrey Epstein as a client, they said
it was because there wasn’t a culture
but the feelings of voicing doubt. People thought

magic.
Why does it work? Because people
feel listened to. They feel they matter.
You can achieve this, too, by repeating
whatever they have just told you.
Psychologists call it “reflecting back”.
A 2009 study assessing randomised
control trials of therapy sessions in
the US and Norway found that of
all the techniques counsellors
attempted — including confrontation,
questioning and offering support —
“the therapist listening carefully and
reflecting back what the patient said”
Michael Skapinker was the most effective. The “listening
carefully” part is vital. People know
Management when you are only going through
the motions.
They’re at the top because they have
the answers.
Those who educate leaders often
don’t think listening is important
either. A 2015 study of US
undergraduate business programmes
found that 76 per cent included oral
presentation and 22 per cent some
aspect of conversation. Just 11 per cent
focused on listening.
You can learn the techniques of
listening — reflecting back, asking
questions — but there is more to it
than that. You need to believe your
teams have interesting insights.
Luckily, they are bound to have them.
They do their jobs every day, and
know them better than anyone else.
employees may not be pleased, but at
least they have been heard.
The same applies to chairing a
meeting. You are far more likely to
reach a productive outcome if you
spend the first part just listening,
encouraging others to talk. As people
share their thoughts, you can begin to
see the ways different groups are
thinking. You can use the same
listening techniques with each group:
reflecting back, asking for more
information. As the meeting moves
on, you can summarise different points
of view. You need to do this in good
faith, showing that you have
understood not just people’s words but
the feelings behind them.
’
behind them speaking up would make them stand
out and leave them vulnerable to
victimisation.
If, as a leader, you are known for
eliciting opinions and engaging with
them, people are more likely to bring
looming trouble to your attention.
Having those “so what you are saying”
or “tell me a bit more” conversations
not only makes for a more engaged
workforce. It could save your
organisation — and your leadership
reputation.
The writer is an FT contributing editor
and author of ‘Inside the Leaders’ Club:
How Top Companies Manage Pressing
Business Issues’

Women in business

The obstacles that stop

women winning the top job
The FT analyses exclusive needed for leadership and expectations
among employees.”
data on the pipeline of Positive signs
women coming up Other factors are also advancing the
through the ranks of pipeline of potential female CEOs.
business. By Emma Jacobs The share of divisional and regional

C
hanel boss Leena Nair and
former Xerox head Anne
Mulcahy have something in
common: they were
appointed chief executive
after extensive experience in human
resources.
But their promotions were not typi-
cal. Figures from global data company
BoardEx show a far more common
route to the top job is through finance
and operational roles — and these are
still overwhelmingly held by men.
For the number of female CEOs in the
US and UK to increase, BoardEx says
there must be a significant shift in
recruitment practices. Either compa-
nies broaden their search beyond tradi-
tionally male-dominated jobs or step
up efforts to appoint women to these
positions.
Using exclusive data on senior roles
within the S&P 500 and FTSE 350, the
Financial Times has analysed the pipe-
line of potential future female CEOs and
assessed the path to greater equality at
the head of business.
Route to the top
UK telecoms group Vodafone this year
elevated its finance chief, Margherita
Della Valle, to become its first female
CEO. It is a common career path — in the
FTSE 350 as a whole, 13 per cent of cur-
rent CEOs were promoted from a CFO
position, according to data provided by
BoardEx.
But still only 23 per cent of UK CFO
positions are currently held by women,
indicating the challenge for companies
to achieve better gender diversity.
Similarly, of the S&P 500 bosses that
were not already a CEO in their previous
role, 13 per cent were promoted from
the position of chief operations officer
and 6 per cent from CFO, both heavily
male-dominated roles in the US.
The BoardEx data analysed the
careers of current CEOs over a 20-year
period. This showed a clear trend of
CEOs coming up through the ranks of
traditionally male-dominated finance
and operational roles. About 45 per cent
of those holding S&P 500 and FTSE 350
CEO jobs in the first quarter of 2023 had
previously run a division. A fifth of S&P
500 and a quarter of FTSE CEOs had
held a role in finance.
Only 1.4 per cent of current CEOs in
the S&P 500, and 1.6 per cent in the
FTSE 350 had HR experience over the
20 years prior to their appointment.
About 9 per cent of US bosses and 5 per
cent of those in the UK had held market-
ing roles.
Where are the women?
There are more female CEOs in the
US and UK than five years ago, accord-
ing to the BoardEx data — but the
numbers still do not even make double
digits. Women account for 8 per cent
of CEOs in both the S&P 500 and
Ruth Porat, left, FTSE 350 now, up from 4 per cent for
Margherita both indices in 2018.
Della Valle and Drop one tier down and women are
Amy Hood
FT montage/Reuters/Getty
still by far the minority, although the
numbers are higher. They hold 21 per
Images
cent of senior finance roles in the top US
companies, up from about 18 per cent
five years ago, according to BoardEx.
Amy Hood at Microsoft, Ruth Porat at
Alphabet and Colette Kress at Nvidia
are among the female CFOs in the
US. British water group Severn Trent,
one of the few FTSE 100 businesses
with a female CEO, recently appointed
Helen Miles as CFO. The same role at
Barclays has been held by Anna Cross
since last year.
The “C-suite” roles where women
make up the majority are HR, market-
ing and PR. They account for about half
the senior sustainability positions and
40 per cent of senior legal roles. But the
BoardEx data suggests these functions
have not historically been a stepping
stone to the top job.
Maya Imberg, senior director at
Jobs running divisions, operations and finance are
common paths to chief executive
% of current CEOs with experience in the following areas in the
20 years before their appointment
US (S&P 500) UK (FTSE 350)
0 20 40 60 80 0 20 40 60 80
Chief executive/president
Other executive positions
Division chief
Operations
Finance
Sales, strategy and
business development
Regional chief
Marketing and PR
Chair/vice-chair
Consultant/adviser
Technology, data and digital
Others
Legal
HR
Sustainability
Source: BoardEx, an Altrata company, April 2023
BoardEx, said not enough women were Roisin Currie, chief executive of
gaining the relevant experience as UK bakery chain Gregg’s, spent 30 years
their careers developed to later become in HR but gained additional experience
CEO of a large listed company. With
women a minority in top level commer-
as the company’s retail and property
director.
cial, operations and finance roles, she However, there are signs of a shift in
said “there is a limited pipeline of possi- how companies perceive HR roles,
ble female candidates for an eventual which could help more women progress
CEO position”.
She added that to build that pipeline
up the ranks. HR positions are now
more likely to be considered part of
at UK and US-listed companies, “female the C-suite than five years ago. Accord-
leaders need to gain more experience in ing to the BoardEx data, 59 per cent of
either commercial and executive func- FTSE 350 companies have an
tions, finance, operations or sales. HR officer in their senior leadership
team, up from 42 per cent in 2018, while
Future route through HR? in the S&P 500 77 per cent of companies
Female CEOs who initially worked in
HR often gained experience elsewhere
do, up from 61 per cent.
The inclusion of female-dominated
in their companies before landing the roles, such as HR, in senior leadership
top job. Mulcahy at Xerox, for example, teams could help broaden the pool of
began her career in HR, but moved into potential chief executives.
senior operational positions before
becoming CEO. Mary Barra, CEO and
“HR is not the country cousin it
used to be,” said Denise Wilson, chief
chair of General Motors, led other sec- executive of the FTSE Women Leaders
tions of the carmaker following her time Review. “Post-Covid has brought about
as vice-president of global HR. monumental changes about what is
Women make up the majority of executive
appointees in HR, sustainability, marketing and PR
% of executives appointed in 2022-23, by area and gender
Women Men
US (S&P 500) UK (FTSE 350)
0 50 100 0 50 100
HR
Sustainability
Marketing and PR
Legal
Others
Chief executive and similar
positions
Technology, data and digital
Finance
Operations
Sales, strategy and
business development
CEO roles and similar executive posi-
tions held by women has increased,
according to the BoardEx data. In the
S&P 500, women make up 22 per cent of
these roles, up from 14 per cent in 2018.
In the UK, it is 18 per cent, up from 10.
This matters particularly in the US,
as these roles are increasingly a
stepping stone to the CEO position.
Over the 20 years before their appoint-
ment to the top job, 45 per cent of US
CEOs had experience as divisional
chiefs, up from 39 per cent in 2018,
while the proportion of CEOs with
experience as regional chiefs increased
from 5 per cent to 8 per cent.
Katie Bickerstaffe, who was
appointed co-CEO of British retailer
Marks and Spencer last year, has experi-
ence in HR and marketing, but was also
a regional CEO of Dixons Carphone
(now Currys).
Imberg noted that more women were
being appointed to C-suite roles in
finance, operations and sales, although
these remained heavily male-domi-
nated. “In the long run this will help
boost the pipeline for future female CEO
The candidates.”
Some companies are also making
inclusion of efforts to give women exposure to other
female- parts of the business. Danny Harmer,
Aviva’s chief people officer, said the
dominated insurer had created a commercial lead-
ership programme to develop a diverse
roles, such pipeline. “The programme covers eve-
as HR, in rything from commercial insights and
case studies to understanding the inves-
senior tor perspective and AI. It even includes
a mini MBA.”
leadership The increase in female non-executive
teams directors is also preparing women to
become CEO, acting as “an accelerator,”
could help according to Laura Sanderson, UK
broaden country head at headhunter Russell
Reynolds Associates. She cited Liv
the pool of Garfield, chief executive of Severn
Trent, and Alison Rose of NatWest as
potential examples.
chief What needs to change now?
executives Wilson said a big part of the problem
was “a bias in the selection process
[and] about our perception of what a
leader looks like. It feeds into our
choice.”
“It’s not that [women] don’t have the
right experience,” she added.
Sanderson agreed: “There are still
some basic hangups about how a CEO
looks, sounds and behaves.”
Leagh Turner, co-CEO at Ceridian, a
US-listed HR software provider, said
leaders, especially in male-dominated
sectors, should encourage women to
join their teams. “Companies should
reflect the world their customers are
operating in. When they do they imme-
diately strengthen the relationship with
their customers.”
Wilson said that even the slow
progress in appointing women to CEO
roles was not reason alone to be gloomy.
“Is it woeful? Yes, it is. [But] it’s our stan-
dout poor statistic in good progress.”
Monday 17 July 2023
‘You can only learn how to be
a CEO by being a CEO’
Networking site boss says
building a strong team
and avoiding day-to-day
minutiae are key, writes
Andrew Edgecliffe-Johnson
R
yan Roslansky’s LinkedIn
page lists 46 skills, from
product management to
problem solving.
But none fully prepared
him to run the networking site for pro-
fessionals when he took over as chief
executive three years ago.
“I fundamentally believe you can only
learn how to be a CEO by being a CEO,”
he says. “On day one in a role like this,
you’re entering a world where you’re
about to face a large list of unexpected
challenges that you don’t know how to
do. The problem is the entire world
expects you to know how to do it.”
Sitting behind his tidy desk, 16 floors
up LinkedIn’s San Francisco headquar-
ters, with a bookshelf behind him fea-
turing a daughter’s picture of Baby Yoda
and a sign saying “hard things are hard”,
Roslansky points to his dark computer
screen. He will switch it on again after
our hour-long conversation and dis-
cover he has been mentioned 500 times
on LinkedIn, he predicts. With 20,000
employees and more than 930mn users,
something will have gone awry. Custom-
ers, whose complaints range from rou-
tine glitches to fake commenters and
abuse by fraudsters, will be looking to
him to fix it.
“It’s probably not on my LinkedIn
profile, but I think the most important
skill I had to pick up early on was learn-
ing how to manage my psychology,” Ros-
lansky says.
“Product strategy, business strategy,
people, operations: those things you can
easily figure out, but you have to learn
how to quickly get your mind in the
right spot”.
Doing so, the 45-year-old says,
requires first assembling the right team
around you — both direct reports and
mentors (among whom he diplomati-
cally highlights Satya Nadella, the
‘You cannot let the highs
get too high, or the lows
get too low . . . maintain
a band in the middle’
Microsoft chief executive who led the
software group’s 2016 acquisition of
LinkedIn). Second, “you cannot let the
highs get too high, or the lows get too
low . . . You have to maintain kind of a
steady band in the middle of all of it.”
And finally, he says, you cannot get so
caught up in the day-to-day minutiae
that you lose sight of the bigger corpo-
rate vision.
Roslansky delivers such insights in a
crisp, bullet-point style befitting an
executive who launched the “influ-
encer” and content programmes that
turned LinkedIn from a site for recruit-
ers and jobseekers into a haven for peo-
ple to disperse views on how to get to the
top and what to do once you get there.
The CVs that LinkedIn’s members
have shared since it started two decades
ago add up to 10bn years of experience,
he says. One of the challenges of his role
has been to work out how to “pull all of
this knowledge out of people’s heads”.
The new sharing tools, news feeds,
newsletters and video series he and his
team have built are designed to keep
users coming back more often. “Solving
problems is much more of a frequent
use case than searching for a job,” he
observes.
Roslansky’s own LinkedIn profile
details his 14 years at the company,
starting as chief product officer in 2009,
and his jobs before that at Glam Media,
Yahoo and the housing-themed dotcom
start-up he dropped out of college to run
in 1997.
But it does not capture the experience
he says most shaped him as a leader —
an episode from his childhood. Roslan-
sky grew up in the Sierra Nevada moun-
tains near Lake Tahoe. His parents were
hippies-turned-real estate entrepre-
neurs who taught him something about
taking control of one’s career.
When he was 13, they put him on a
plane to Florida, where he enrolled in
the intensely competitive Nick Bollet-
tieri Tennis Academy alongside the likes
of Maria Sharapova and Andre Agassi.
The only American in his dorm, “I
learned how to survive by understand-
ing other people very well”, he recalls,
building an empathy in later life for
Ryan Roslansky says he prefers ‘small pivots’ in response to challenges so that he avoids ‘whipsawing’ by lurching too far in a new direction, only to have to pull back later — Jason Henry/FT
what motivates people and how they
think. “As a product person, it’s proba-
bly the most important skill that one
could have.”
Roslansky describes himself as an
“adaptive” leader. “You can practically
decide that you are going to adapt as a
leader, or you can stay who you are,” he
explains. But when challenges hit, he
prefers to make “small pivots” rather
than “whipsawing” — lurching too far in
a new direction, only to have to pull
back later.
It is one reason he has avoided making
proclamations about when people
should return to its offices. (LinkedIn
has still not laid down the law on how
often it expects staff to come in, saying it
trusts them to decide whether to choose
in-person, remote or hybrid work.)
Otherwise, he says, “you’re just thrash-
ing these people in these companies
around”.
There is one place where adaptation
and pivots seem not to have paid off. In
May, LinkedIn closed its jobs app for
Chinese users and cut more than 700
jobs, in the face of fierce competition
and regulatory scrutiny. The Financial
Times dubbed the first stage of its pull-
back from China — the shutdown of its
localised social media site in 2021 — the
end of an unsustainable compromise
between profit and ethics.
“I’ve constantly been trying to figure
A day in
the life
There’s a set of [meetings] we use to
run the company effectively that are
very important to me. Every Tuesday,
we have our executive team meeting.
It’s half the day and that’s where we
just talk about everything that’s
happening across the company.
Every two weeks, I bring the entire
company together for what we call a
“company connects”. It’s in a format
where we go through the top priorities
of the company, we have “open mic”,
we call it, for anybody’s questions. It’s a
coming together moment every two
weeks no matter what . . . You know,
trust is consistency over time and you
can’t substitute either of those things.
The thing that’s, probably ironically,
most important to me is having a
strong work-life balance. I have three
daughters and it’s extremely important
for me to make sure I’m there for them
as much as I’m here for LinkedIn. So I
will always take my daughters to
school. I will always be home for
dinner. Those things are non-
negotiable. And I think more than
anything, it keeps me grounded and
balanced. Because if I didn’t have
those set in place, it’s very easy to get
caught up in just answering what’s
going on here all day long.
★ FINANCIAL TIMES 13
WORK & CAREERS
Leadership. Ryan Roslansky, LinkedIn
out ways for us to get LinkedIn to work
inside of China,” Roslansky admits. He
says he is still bullish on the opportunity
the country’s vast working population
offers, even though he has not yet found
a sustainable business case.
LinkedIn is keeping its options open
by letting Chinese companies hire via its
global platform, he notes, but “one of
the worst things that you can do . . . is to
keep something going that is just kind
of working and thinking that next year
is going to be the year this is actually
going to work. We tried that for about
10 years.”
Roslansky’s definition of adaptive
leadership also means trying to “play
up” rather than down, or looking for the
opportunities a situation presents
‘The most important skill
I had to pick up early on
was learning how to
manage my psychology’
rather than succumbing to the fear the
worst will happen.
He had been named to LinkedIn’s
top job in February 2020, weeks before
Covid-19 was declared a pandemic,
and took the reins that June when a
sudden freeze in hiring and advertis-
ing was throttling the company’s two
main revenue sources. He made a big
early bet that LinkedIn could find new
growth by rolling out tools for users who
were out of work, pushing skills-build-
ing content to job-swappers engaged in
what he dubbed “the great reshuffle”,
and helping previously desk bound
employees navigate the shift to remote
working.
“I put all of my eggs in the basket
of we’re going to transform LinkedIn
to help the world learn when they
can’t get together in person, sell when
you can’t go and meet a customer,
and recruit when you can’t interview
somebody in person.” As companies
started hiring and advertising again,
revenues climbed from $8bn to $10.3bn
in the year to June 2021. They are
expected to exceed $15bn for the year to
June 2023.
Along the way, Roslansky has been
working to master the platform he
helped to create. With more than
725,000 followers, he has become one of
LinkedIn’s “Top Voices”, part of a pan-
theon of corporate influencers that
includes Bill Gates, Arianna Huffington
and Nadella. His regular videos on the
site, in which he interviews other execu-
tives about their career paths, also make
him something of a rival to journalists
writing about leadership, I observe.
“I’m excited to talk to you because
I’m excited to learn how you do this,”
he replies disarmingly. He has 46 skills,
in other words, but is still looking to
add to them.
14
Never mind the buildings — here’s the process
The work of architects Herzog
& de Meuron is celebrated in a
London show which focuses
on the stuff of their profession,
writes Edwin Heathcote
W
ith the opening of the
Schaulager in the Swiss
town of Basel in 2003,
architects Herzog & de
Meuron initiated the
shift in curatorial attention from the
exhibition space to the archive. There,
in their home town, in that vast, enig-
matic shed, they created a warehouse
for art, not a museum but a place in
which, in theory at least, it was the
visitor who determined the objects that
were of interest rather than the curator
or the institution. Twenty years later
the trend is gathering pace: the V&A
is building an open storage facility in
east London and the Boijmans van Beu-
ningen opened its version in Rotterdam
last year.
With the construction of the Kabinett
(2014), a concrete structure looming
over the old railway yards in Basel, this
45-year-old practice — founded in 1978
by Jacques Herzog and Pierre de Meu-
ron — turned their archival attention on
themselves. This massive concrete box,
almost medieval in scale and presence,
would house their own vast archives of
design and process but also of art and
photography. It is designed as a
public archive capable of evolving into
a museum. Any exhibition then of
the architects’ work must, in a way,
compete with this legacy.
The last exhibition of their work was
housed in another of their creations,
the cavernous Turbine Hall of Tate
Modern in London. Their newest show
is in the very different confines of the
classical Royal Academy in London, a
space lacking in the raw, brutal qualities
of their architecture.
So what they have done is to import
the cabinets from the Kabinett. Or at
least reconstruct them. The first room is
★ FINANCIAL TIMES
ARTS
Above: Herzog & filled with large timber-framed glass
de Meuron’s vitrines which are stuffed with the
extension of the working models, material samples and
Stadtcasino in waste products of their design proc-
Basel. Left: esses, illustrating how architecture
model for the
Elbphilhar-
progresses and how emerging technolo-
gies influence it.
monie concert There is a roughly taped-up card-
hall in Hamburg board model of their “Bird’s Nest”
Ruedi Walti
stadium (designed with Ai Weiwei, who
later disassociated himself from the
project) for the 2008 Beijing Olympics
and there is an exquisite copper model
for their railway signal box in Basel
(1999). Their preoccupation with skins
and surfaces is displayed here in abun-
dance, from that copper to the ceramics
used in their M+ museum in Hong Kong
and the bronze of the De Young Museum
in San Francisco, but also the rammed
earth walls of their Ricola Herb Centre
in Switzerland, the coarse ground, the
pebbles and the mud. This is categori-
cally a display of architecture as a mate-
rial practice, far removed from the con-
temporary curators’ vogue for archi-
tects who engage in social and environ-
mental activism or spatial justice.
Yet unlike, say, the current Norman
Foster exhibition at the Pompidou in
Paris, it refuses to fetishise the finished
building. Instead we are presented with
the exhaust, the detritus of process
placed in a vitrine. The things here are
intriguing but this is a cabinet of curiosi-
ties and not a traditional retrospective
in which we are shown sculptural mod-
els on plinths and suspiciously exquisite
construction drawings. But then neither
are there glimpses of anything personal.
Even Foster’s show features his old
snapshots and early sketchbooks. Here
we have architecture as a collaborative
pursuit, the practice as workshop.
While we might expect large-format
photos in an architecture exhibition,
here we find not architectural photo-
graphy but architecture as a subject for
Doctor, pilot, suitor . . . murderer?
PODCASTS
Fiona
Sturges
A
t first, Bob Bierenbaum
seemed quite the catch. A
surgeon who could speak
five languages, he was at
the top of his field and
frequently travelled via a private jet that
he piloted himself. When Carole Fisher,
a divorced single parent from Las Vegas,
began dating him in the mid-1990s, she
was delighted, as was her mother who
always wanted her daughter to get
together with a Jewish doctor. But then
Fisher discovered that Bierenbaum had
a short fuse: he yelled at her after she
broke a glass at his home, and falsely
accused her of giving him syphilis after
noticing a rash on his hands. After six
months, he called off the relationship.
But the story doesn’t end there. Fisher
had learned that Bierenbaum had
an ex-wife, Gail Katz, who was missing,
presumed dead. Wanting to know more,
she teamed up with another of his ex-
girlfriends, Mindy, to discover the truth.
Their findings led to the creation of a
new nine-part podcast hosted by Fisher.
Installation view of the new Royal Academy exhibition — David Parry/Andreas Gursky
a photographer. That photographer is
Thomas Ruff, with whom H&deM have
been collaborating for decades. And just
as we are shown how their design has
developed through the application and
evolution of technology, so we see on
one wall a conventional, if epic, photo of
the Ricola storage building (1987) amid
other shots which seem to be blurred
and pixelated. At the end, a huge photo-
collage fantasia of their Tai Kwun centre
in Hong Kong is set against an X-ray
skyline with buildings appearing as
structural cages being overwhelmed by
speculative foliage.
The first of the three rooms does all
this. It is also employs an augmented
reality app which sees chunks of struc-
ture floating about on your phone
screen as if in real space. It works better
than most of these ventures but fails to
add a huge amount to the material
uality of the things behind glass.
The next room is dark and quiet. A big
screen in the middle. One side features
films of views of their buildings, each
seen as a triptych. It is a reminder of how
many astonishing structures they have
contributed to architecture since their
foundation in 1978.
The other side features a newly com-
missioned film from architecture’s
pre-eminent filmmakers, Ila Bêka and
Louise Lemoine. It is an exploration of
the practice’s Rehab clinic for neuro-
rehabilitation in Basel. A pioneering and
humane building made for people who
find themselves confined by their disa-
bilities. The humanity and the joy in
simple things — a garden, a breeze, the
skylights which allow patients to enjoy
views of the clouds from their beds — is
abundant and allowed to shine through
without words.
Herzog & de Meuron’s new Royal College of Art London campus — Iwan Baan
In The Girlfriends we hear from the
women who dated Bierenbaum and
suspected something was amiss. We also
hear from Katz’s sister, Alayne, who tells
of Gail’s stormy relationship with the
surgeon. As she tells it, Bierenbaum
sought to control every aspect of his
wife’s life, and once tried to drown her
cat on the grounds that she was too fond
of it. After Gail disappeared, Alayne was
convinced that Bierenbaum was
responsible and resolved to bring him
to justice.
True crime podcasts have evolved
since the early days of Serial, when hosts
and producers salivated over the details
of murder cases without giving due time
to the victims. The Girlfriends takes pains
to tell Gail’s story with sensitivity (the
series has been made in collaboration
with the domestic violence charity
NO MORE).
But despite its good intentions, the
series never quite hangs together.
Having Fisher as its presenter is the first
error. In the opening episodes she is
both host and interviewee as she is
quizzed by the series producer Anna
Sinfield about her relationship with
Bierenbaum. Fisher is a compelling
interviewee but, as a first-time podcast
host, she lacks the required charisma
and naturalism.
The tone is also wildly uneven. At the
start, it is that of a comedy caper as
Monday 17 July 2023
This leads us into the final room
and its subject, the architects’ plans for
the huge and nearing completion
Kinderspital (children’s hospital) in
Zurich. This is a very different kind of
architecture to that which we might be
used to seeing displayed in the cultural
context: fiercely complex, highly
serviced and technical.
It is presented here in a ghostly white
room with a mocked-up section of a
child’s hospital room with its opening
porthole window and seats. On the rear
wall a huge plan drawing reveals the
complexity of the construction in all its
meticulous detail. This is architecture
not as precious finished object but diffi-
cult details, conditions and gestation.
This is architecture
not as precious
finished object but
difficult details,
conditions and gestation
It is a powerful statement and here the
augmented reality kicks up a gear —
point your phone at the plan and a con-
struction site envelops you in all its dark
contingent impenetrability. The con-
trast between this clinical white room
and the dark density of the construction
site is stark. In that gap lies an entire
world. That, it seems to me, is what Her-
zog & De Meuron are attempting to con-
vey. This is not a retrospective, not a
hagiographic rear-view but a paean to
the power of architecture to make the
world better through building.
To October 15, royalacademy.org.uk
Fisher paints Bierenbaum as a larger-
than-life man who is every Jewish girl’s
dream — a doctor, with his own plane! —
and who, on visiting her parents for
dinner, insists they buy in live lobster.
But as events take a dark turn, the series
suddenly becomes solemn and
emotional. I have only heard the first
four episodes, so there is still time for
it to find its feet. But currently, in trying
to be all things to all people — comedy,
murder-mystery, meditation on
domestic abuse — The Girlfriends is
just a bit of a mess.
Bob Bierenbaum in New York in
1999; women who dated him tell
their stories in ‘The Girlfriends’
Monday 17 July 2023
The battle over M&S Oxford Street
E
very day, fleets of heavy-duty
dump trucks carry about
28,000 tons of construction
waste out of London.
Much of the tangled steel
rebar, hunks of concrete, and alumin-
ium, stone, timber and glass from build-
ings demolished across the capital is
destined for recycling plants, where it
will be crushed into tiny fragments and
turned into aggregate for use in building
roads or foundations.
The carbon “embodied” in these
materials — the emissions created in the
sourcing and manufacturing of them —
will be wasted. A ruling due to come
down this week will decide whether the
daily exodus of construction debris
from the capital will soon include the
materials that make up Marks and
Spencer’s flagship store near Marble
Arch, at the west end of Oxford Street.
The retailer wants to demolish the
Orchard House building, opened in
1930, and replace it and two neighbour-
ing buildings with a 10-storey edifice
comprising offices and a revamped
store. Despite being granted planning
permission by Westminster City Coun-
cil in 2021, the scheme has become a
lightning rod in a wider debate over the
impact of the built environment on car-
bon emissions.
Opponents, led by the conservation
group SAVE Britain’s Heritage, argue
that demolishing it would be an affront
not just to history but to the environ-
ment. Razing it would release 40,000
tonnes of embodied carbon, they say,
equivalent to almost 20,000 flights from
London to Sydney — whereas a “retro-
fit” retaining parts of the building would
leave a much smaller footprint.
The government decided the case was
significant enough to review the coun-
cil’s decision. In June 2022, the planning
application was “called in” by the level-
ling up, housing and communities sec-
retary Michael Gove. A planning inquiry
into the proposal took place in London
in November; Gove is poised to issue a
final decision by July 20.
The debate over the building has
received national attention, catapulting
the issues of embodied carbon and ret-
rofitting from trade magazines into
national newspapers. On one side, a
range of conservationists, architects
and engineers oppose what they say is
an environmentally wasteful proposal
whose approval would send a disastrous
message about how seriously the UK
takes its green commitments. On the
other, the retailer’s Oxford Street neigh-
bours, such as Selfridges and Ikea, sup-
port the company’s proposals as the best
way to regenerate the city’s historic
shopping destination, which has
become increasingly down-at-heel.
Gove’s decision will help address the
wider question of what role the con-
struction industry plays in decarbonis-
ing the economy. The UK built environ-
ment is responsible for about 25 per
cent of total UK greenhouse gas emis-
sions, and the sector produces almost
two-thirds of the waste Britain gener-
ates every year. If the UK is to meet its
legally binding net zero commitments,
it must make its building stock more
sustainable.
The government recognises this to the
extent that the energy consumption of
buildings is now subject to rigorous
standards. But emissions embodied in
the construction process itself — the car-
bon cost of materials, maintenance and
demolition — are not, either in building
regulations or planning guidance.
Opponents of M&S’s scheme say this
ruling is the government’s opportunity
to set a precedent on what it expects
from the owners and stewards of the
country’s non-domestic buildings.
Henrietta Billings, director of SAVE
Britain’s Heritage, called it “a major test
of our disposable, knock-it-down and
rebuild attitude, [with] potentially far-
reaching consequences for construction
and development”.
The debate over M&S at Marble Arch
is happening at a time when the con-
struction industry is uniting behind a
consensus of “retrofit first”. Industry
trade publication The Architects’ Jour-
nal has led a campaign on the issue since
2019, while over the past year alone
industry bodies from the UK Green
Building Council to the London Prop-
erty Alliance have published reports
calling for government to set clearer
standards. Although few will say so pub-
licly, some feel the M&S inquiry is
putting welcome pressure on govern-
ment to catch up with where the indus-
try says it already is.
“We’ve been doing construction in the
same way for a long, long time,” says
Kirsty Draper, head of sustainability at
★ FINANCIAL TIMES
FT BIG READ. CONSTRUCTION
Retailer’s redevelopment bid has raised questions about the ‘embodied carbon’ that is
lost by demolishing and replacing older buildings as opposed to retrofitting them.
By Dan Stewart
Construction’s footprint: the scope of the challenge to get
to net zero
Built environment emissions, UK only (million tonnes CO2e)
Buildings (non-domestic)
Embodied carbon Historical up to 2018
Buildings (domestic)
Embodied carbon
Infrastructure
Embodied carbon
Infrastructure
Operational carbon
Buildings F-Gas
Buildings (non-domestic)
Operational carbon
Buildings (domestic)
Operational carbon 1990 2000 10 20 30
Source: UK Green Building Council
‘They want property advisers JLL, who co-wrote the
LPA report. “Now we’re realising we
to build a big have to do things better.”
new building Arch rivals
because it’s “The Arch”, a store that M&S’s vener-
going to be ated former chair Simon Marks once
regularly patrolled to ensure high stand-
very ards, might appear an unlikely vehicle
valuable. for the hopes of the conservation lobby.
That is the Despite a handsome Art Deco facade,
it has little of the grandeur of its Beaux
bottom line’ Arts neighbour Selfridges, and is not
listed as having special architectural or
historical significance. In M&S’s estima-
tion, the overall quality of the three
buildings that make up the site is “very
poor”, according to Sacha Berendji, the
retailer’s operations director. The build-
ings are old, poorly laid out and “rid-
dled” with asbestos, he says.
M&S proposes to replace the store
with a building it says will be among the
most sustainable in London. It will be
built along the principles of the “circular
economy”, with 95 per cent of the exist-
ing materials recovered, recycled or
reused in the new building. When com-
pleted, the company says it will use less
than a quarter of the energy of old one.
These energy savings will eventually
make up for the emissions from demoli-
tion and reconstruction, M&S says,
delivering a “carbon payback” within 11
years. The new building would have less
retail space but more offices, creating
jobs, regenerating the area and improv-
ing experiences for customers and local
residents, says Berendji. “This scheme is
good for the environment, for the econ-
omy, and it will be good for M&S.”
SAVE counters that a retrofit of the
existing building would do all that with-
out the upfront emissions of demolition.
It also charges M&S with making “unre-
liable and unrealistic” accounts of the
new scheme’s benefits, and estimates it
would take three decades or more for
Cleaning up the materials: massive reductions needed
Required carbon intensity reduction projections* per category, UK (rebased, %)
300
250
200 Plastics and chemicals
Business as usual
Timber
150
Glass and ceramics
100 Other materials
Steel and other metals
50 Brick and ceramics
Cement and concrete
0 0
40 50 2020
the new building’s carbon savings to
make up for those lost in demolition.
The proposal flies in the face not just
of M&S’s own stated ambition to
become carbon neutral by 2040, SAVE
says, but also the UK government’s legal
commitment to do so by 2050. Simon
Sturgis, an architect and environmental
consultant who acted as SAVE’s expert
witness on embodied carbon, claims
M&S refused to examine properly the
case for refurbishment.
“They want to build a big new build-
ing because it’s going to be very valua-
ble. That is the bottom line,” he says.
“Whatever they say about the existing
buildings, they are perfectly capable of
being reused.”
A proposed tower
in the City, the
Tulip, was rejected
by planners partly
because of its
carbon footprint
Berendji rejects this. “Our position on
all of our estate is always to start by ask-
ing the question: is refurbishment possi-
ble?” he says. “For Oxford Street, we
looked at 16 different options, every-
thing from a light to a deep refurbish-
ment through to demolition.” But ulti-
mately, he says, they concluded a refit is
“not suitable or viable” for a flagship
retail experience.
“[M&S is] extremely well aware of the
climate emergency and . . . [we] are
doing everything we can to minimise
our carbon footprint,” he adds. “I would
take massive issues with any suggestion
that demolishing and rebuilding this
isn’t better for the environment over the
[life] of the building than worse.”
The retailer put these arguments to a
planning inspector over the course of
the 10-day hearing, while SAVE Brit-
ain’s Heritage made its own case with
30 40
* In accordance with the Government Industrial Decarbonisation Strategy
the aid of well-known advocates such as
actor Kristin Scott-Thomas and come-
dian Griff Rhys-Jones. The hearings
made headlines at home and abroad. “It
was emotive,” says architect Julia Bar-
field, who gave expert testimony against
the scheme. “Everyone loves M&S.”
Berendji recognises the building sits
on a faultline that runs through the con-
struction industry. “There is a genuine
debate to be had on refurbishment ver-
sus demolition, we are not dismissing
that. But we just feel we have been on
the right side of it every step of the way.”
He is concerned about the message it
would send to businesses such as M&S if
Gove rules against the application. “I
know that there’s a lot of others looking
at this decision,” he says, who may base
their investment calls on “whether or
not we get consent”.
Raze or remake?
Every commercial building has obsoles-
cence built into its fabric. Within a dec-
ade or two, light fittings and ductwork
will need extensive repairs or replace-
ment. Internal partitions, cladding and
glazing will last perhaps 35 years.
With patchwork upgrades, a commer-
cial building constructed today has a
lifespan of between 60 and 100 years.
Many buildings completed between the
1920s and the 1950s are coming to the
end of their lives — presenting their
owners with the same question faced by
M&S: raze or remake?
“It’s a bit like buying a car isn’t it?”
says Jason Millett, chief executive of
consulting at construction group Mace.
“Shall I buy the shiny new electric one or
stick with the one I’ve already got where
all the carbon is already embed-
ded? . . . It’s the same with buildings.”
In a report for Mace published in June
entitled “Transform and Renew”, Mil-
lett made the case that the construction
industry is better equipped and more
15
willing than ever before to repurpose
ageing commercial buildings to exceed
contemporary energy efficiency stand-
ards. He says that, provided buildings
are well laid-out with core elements
such as stairs and lift-shafts in the right
places, “they can be refurbished”.
The industry also understands this is
not a simple decision, says Draper. “The
reality is that anything you do involves
intervention but the scale of that inter-
vention sits across a huge spectrum.”
Buildings designed in the 1980s and
1990s “generally retrofit quite well”, she
says. But buildings from the postwar era
present a “greater challenge”, with com-
mon issues ranging from asbestos to
inflexible floor layouts and poor struc-
tural integrity, limiting what can be
done to revitalise them.
Developers are beginning to set their
own benchmarks to dictate what
approach they will take while also meet-
ing their own net zero commitments.
Grosvenor, whose core asset is the epon-
ymous historic estate in central London,
puts a cap on the amount of emissions
that will be embodied in a building’s fab-
ric on every new development.
“It provides a set of incentives and
constraints,” says Ed Green, sustainabil-
ity director of Grosvenor Property UK.
“Designers and developers are great
problem-solvers and respond very well
to constraints.” He says that since they
introduced the cap, which will be low-
ered over coming years, the company
has not demolished a single building.
The challenge, says Green, is that
national planning policy and building
standards do not state what level of
embodied emissions is acceptable.
This puts the UK behind other coun-
tries such as Sweden, Denmark, France,
Finland and the Netherlands, which
now regulate “whole-of-life” carbon
emissions. Some planning authorities in
Britain now require whole-life carbon
assessments to be carried out, but with-
out set benchmarks or targets.
With a regulatory focus solely on a
building’s operational emissions, says
Green, you risk skewing incentives for
developers. “Let’s say it’s 2015. You
100 could build the world’s most sustainable
building, then 10 years later decide to
knock it down and build what in 2025
80
would be the world’s most sustainable
building — and still sell that as a really
60
sustainable thing to do.”
The issue will only become more
40 acute as buildings become more effi-
cient and embodied carbon accounts for
20 a greater share of the total carbon cost.
Seeking clarity, the construction
industry’s main professional groups
50
united in July 2021 to propose an
amendment to the building regulations
entitled “Plan Z”. For the first time, it
would set requirements on how to
Despite its Art assess a building’s whole-life carbon
Deco facade, footprint and limit embodied emissions
M&S’s flagship for all major building projects.
store in London Conservative MP Jerome Mayhew has
is not listed as put forward a bill in the House of Com-
having special mons that would put the proposals into
architectural or law but it has not yet been taken up by
historical government. “The government decided
significance. two things: one, we don’t think there is
The retailer industry consensus on this. And two,
proposes to there’s a risk to SMEs,” says Will Hurst,
replace it with a managing editor of The Architects’ Jour-
building that nal, who has spearheaded its RetroFirst
will be among campaign. He counters that “there is a
the most clear direction of travel, and growing
sustainable in calls for action . . . there is cross-indus-
London try consensus on this”.
FT montage/Charlie Bibby With no indication of how important
embodied carbon is to government, says
Hurst, “people are hoping the M&S deci-
sion fills that vacuum”.
In making that decision, Gove must
take into account the findings of the
planning inspector, David Nicholson,
who has past form with embodied car-
bon; it was one of the reasons he recom-
mended rejecting the “Tulip”, an obser-
vation tower designed by Lord Norman
Foster in the City of London.
In the meantime, Sturgis believes the
furore over M&S is making other devel-
‘[M&S is] opers think twice. The City of London
extremely Corporation has already backtracked
on proposals to demolish Bastion
well aware of House, an office block near the Barbican
the climate that it had described as “unsustainable,
outdated” and beyond saving. It now
emergency has “several expressions of interest” and
and . . . [we] is “keeping all options for this site”.
Sturgis says the message “is starting to
are doing filter through”, pointing to Euston
everything Tower, the 1970s skyscraper whose
developer has said it will aim to reuse at
we can to least a quarter of the existing building’s
minimise fabric. “British Land is working hard to
figure out how much of it they can
our carbon keep,” he says. “Ten years ago, they
footprint’ would have just knocked it [all] down.”
16 ★ FINANCIAL TIMES Monday 17 July 2023

The FT View
Khan’s FTC should aim for evolution, not revolution
Microsoft-Activision deal
setback suggests antitrust
chief has over-reached
Lina Khan has had a rough few days.
The Federal Trade Commission chair
suffered a setback in her ambitions to
beef up antitrust enforcement for the
Big Tech era when a California judge
rejected her attempt to halt Microsoft’s
$75bn purchase of Activision Blizzard, a
video game maker. On Thursday, Khan
endured a four-hour grilling at an often
hostile Congressional hearing. The FTC
appealed against the California judge’s
decision, but was rebuffed. The losses
are a sign that Khan’s team, however
well-intentioned, has over-reached.
Khan, along with Jonathan Kanter at
the Department of Justice, came into
office determined to establish new prin-
ciples to shake up decades of antitrust
thinking. One is that the conventional
ft.com/opinion test of harm to consumers from exces-
sive market power — rising prices — is
outdated. The second is that vertical
mergers, or consolidation between com-
panies with a supplier-customer rela-
tionship, can merit tougher antitrust
action, not just “horizontal” mergers
between rivals in one sector. Third, reg-
ulators should attempt to spot incipient
monopolies as they emerge, rather than
tackle them only after they have formed.
The arguments, particularly the first,
have merit, and efforts to get ahead of
the regulatory curve on tech are worth-
while. But the FTC’s crusading zeal has
moved too fast, given this is untested
ground. With no congressional majority
to enact Khan’s ideas into law, more-
over, she was always likely to have to
rely in part on creatively reinterpreting
existing law and fighting cases in court.
The Microsoft-Activision deal was an
important test incorporating elements
of the new thinking. But Judge Jacque-
line Scott Corley denied an injunction to
stop the deal completing, rejecting the
FTC’s assertion that the combined busi-
ness would pull the popular Call of Duty
game from Sony’s rival PlayStation plat-
form. The judge said the FTC had also
failed to show the combination would
substantially lessen competition in the
embryonic market for cloud gaming.
The EU had already cleared the deal.
The UK’s Competition and Markets
Authority, which had blocked it, rowed
back after the California decision. Yes-
terday, Microsoft Gaming said it had
signed an agreement to keep Call of Duty
on PlayStation after the acquisition.
The FTC may yet press ahead with
efforts to scupper the deal in its own
administrative court, but that will be
much harder if the deal has already
closed. And as one lawmaker noted last
week, the latest loss meant Khan was
now “0 for 4 in merger trials”.
Khan made clear last year she would
push the legal envelope, noting: “You lose
all the shots you don’t take”. But shots
that fail to hit the mark can prejudice
shots that might be taken later. Repeated
losses risk undermining the credibility
Repeated of the regulator and its thinking. And the
losses risk Supreme Court’s conservative majority
makes this an especially tricky environ-
undermining
ment in which to persuade lower court
the credibility judges to back novel legal theories.
of the regulator Khan’s FTC should be more selective
and its thinking in the cases it fights, focusing on those
where it has the most powerful evi-
dence. It could then focus its best efforts
on winning key cases, or at least bring-
ing compelling arguments. That is espe-
cially true with two potential landmark
cases looming — against Meta over its
2012 takeover of Instagram, and a suit
Khan is said to be readying over Ama-
zon’s online marketplace.
There is still scope for Khan’s FTC to
make a mark through rulemaking, such
as its proposal to ban employers from
imposing non-compete agreements on
workers. It is preparing to unveil new
merger guidelines, and its probe into the
data privacy risks of OpenAI’s ChatGPT
chatbot is an innovative step. But when it
comes to modernising antitrust, evolu-
tion may succeed better than revolution.

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from killing biodiversity OECD’s lobbying points to failure on fair corporate taxation
We wish to congratulate the FT
María Hergueta
for exposing the duplicity of the
OECD (“OECD lobbied to weaken
tax plans”, Report, July 8). The article
deftly explains how the organisation
pressured the Australian government
to weaken critical transparency
requirements for multinational
corporate taxation.
The Independent Commission for
the Reform of International Corporate
Taxation (ICRICT) has long been
concerned about the OECD’s central
role in recent efforts to make
multinationals pay their fair share
of taxes. We grew especially worried
in 2021 after the OECD released
their anaemic proposals, which are
expected to provide minuscule sums
to developing countries and emerging
markets in return for holding off
imposing digital and other taxes on
multinationals. These taxes are critical
for raising badly needed revenues in
coming decades.
The OECD has designed reforms
tilted in favour of its members —
advanced countries — and the
corporations in them. There’s
a distinct possibility that the allegedly
minimum standards set in the
agreements will turn out to be the
de facto standards. If so, a reform
effort intended to raise revenues
may actually have the opposite
effect. The reported attempts of
the OECD in Australia to actively
undermine efforts to increase
transparency confirms we were
right to worry.
Given the situation, ICRICT urges
developing countries and emerging
markets to, first, think carefully
before signing on to the multilateral
convention to implement what is
known as amount A of pillar one of
the October 2021 G20-OECD inclusive
framework agreement, which
prohibits digital taxation and other
measures needed to enhance tax
revenues. Second, they should support
efforts to kick-start a new round of
negotiations at the UN, as called
for by the African Group at the UN
and following the adoption last
autumn of the general assembly’s
resolution to scale up international tax
co-operation, fight illicit financial flows
and combat aggressive tax avoidance
and evasion.
Joseph Stiglitz
Co-Chair, ICRICT, Professor, Columbia
Business School, Columbia University,
New York, US
Jayati Ghosh
Co-Chair, ICRICT, Professor,
Department of Economics, University
of Massachusetts, Amherst, MA, US

ecosystems, block fish migration

Henry routes and cause flooding. Clearing Post-Leveson rule a lifeline Neurotech requires careful Admissions policy forgets
natural habitats to produce biofuels is
Paulson leading to a rapid decline of rainfor- for victims of press abuse regulation, not new rights key purpose of education
ests in Asia and Latin America. And I was disappointed that in your report The principle of not leaping to assume The Supreme Court ruling against the

T
here is widespread agree-
ment that climate change
is an existential threat.
But in our rush to address
this challenge, our efforts
must not heighten another, more
immediate one: the global decline of
biodiversity.
We are losing species at more than
1,000 times the natural rate. If we stay
on this trajectory, we risk losing up to
half of them by the middle of the cen-
tury. Science is only just beginning to
quantify the magnitude of throwing a
complex system like Mother Nature
out of balance. But we know that biodi-
versity loss poses a fundamental risk
to health, prosperity and wellbeing.
Sadly, the singular focus on solving
climate change has led to the neglect of
biodiversity. The alarming result is that
many climate efforts inadvertently
accelerate nature’s destruction. Take
the huge need for solar farms. If not
located properly, they will have a big
The result of this singular
focus is that many efforts
inadvertently accelerate
nature’s destruction
impact on ecosystems and habitats.
In Virginia, for example, more than
half of solar facilities are being built on
forested land rather than areas such as
rooftops or parking lots. The state’s
push for solar development could lead
to the deforestation of nearly 30,000
acres annually.
In California, 161 planned or operat-
ing utility-scale solar power develop-
ments were built on undeveloped
desert with sensitive wildlife habitats.
This has been a disaster for a wide
range of plants and animals in the
Mojave Desert, and the destruction is
only going to expand.
Wind farms present a similar chal-
lenge. To meet net zero targets, wind
electricity generation needs a massive
build out. But in meeting the Biden
administration’s admirable goal of
deploying 30 gigawatts of offshore
wind by 2030, bird deaths from colli-
sions could rise to more than a million
per year.
There is a real risk that badly
planned renewable infrastructure will
have an even greater impact on biodi-
versity than existing fossil fuel infra-
structure. A Brookings Institution
report says that wind and solar gener-
ation require at least 10 times as much
land per unit of power produced as
fossil fuel-powered plants.
Hydropower can disrupt aquatic
mining for the critical minerals
needed for green tech is occurring in
environmentally sensitive regions.
We need to chart a path that does
not address one environmental chal-
lenge by creating others. Indeed, with
pragmatic choices, we can do the
opposite, harnessing nature to address
climate change.
Consider carbon removal. Research
shows that between 2001 and 2019,
forests around the world sequestered
more than twice the amount of carbon
dioxide that they emitted — absorbing
more than the combined annual emis-
sions of the US and UK. Nature is also
critical in dealing with the adaptation
necessary to prepare for increasingly
severe weather shocks, such as the
role of marshes and mangroves in
absorbing storm surges and floods.
Governments must think differ-
ently, employing better infrastructure
planning at all levels. A report from
The Nature Conservancy shows care-
ful siting can reduce the effects of the
clean energy build out by 70 per cent
compared with siting-as-usual prac-
tices. Solar farms can be put on
already degraded land. Transmission
lines and pipelines can be placed to
minimise impact. Wind turbines can
be sited to avoid important migratory
pathways: even painting one blade
black can help birds avoid collisions.
We need creative solutions, such as
high-quality carbon credits, to protect
rich ecosystems such as rainforests,
while also helping finance a transition
to a clean energy economy.
Regulators should take concrete
measures to signal to the market that
there is no place for policies harmful
to biodiversity in efforts to achieve net
zero. Global governance structures
should be reformed to ensure that cli-
mate and biodiversity efforts are not
disjointed and siloed. Currently, there
is a global scientific body dedicated to
biodiversity, and a separate one for cli-
mate. Likewise, there is a global UN
conference for climate, and a separate
one for biodiversity.
COP28 is an opportunity to elevate
biodiversity to the main stage. The
United Arab Emirates, taking the
COP28 presidency, must ensure that it
is treated in tandem with climate
change and develop a global agenda
that deals with both. This should be a
low lift given the UN’s COP28 high-
level champion Razan Al Mubarak is
also president of the International
Union for Conservation of Nature.
It would be a tragic irony if, in our
efforts to deal with climate change, we
end up accelerating a bigger and
immediate crisis in the natural world.
The writer, a former US Treasury secre-
tary, chairs the Paulson Institute
on the Conservative government’s
plans to repeal the legislation
underpinning the Leveson system of
independent press regulation (“Labour
to oppose scrapping of controversial
post-Leveson press rule”, Report,
FT.com, July 7) you explained only one
side of how that measure, Section 40
of the Crime and Courts Act 2013,
would operate.
Section 40 is a provision that
would level the playing field between
defendant and claimant in media
cases. It would incentivise both sides
to use cheap arbitration to resolve
legal disputes.
Your report claimed that, under
Section 40, “any publishers outside
the only officially recognised regulator,
Impress, would be required to pay legal
costs of both sides regardless of the
outcome of any court case”.
While it is the case that defendant
news organisations that refuse to join
a regulator may face an adverse costs
order whether or not the claim is
successful, this applies only if the
judge deems such an order to be just.
Your account also makes no mention
of Section 40’s reverse effect — that any
regulated newspaper title would be
immune from paying claimant costs
even if it were to lose.
The article makes no reference to
the plight of ordinary people, like me,
who suffered libellous coverage at the
hands of multimillionaire newspaper
publishers. I was able to bring an action
on the basis of a no win, no fee
agreement, but these agreements are
now almost impossible to get hold of.
For ordinary people abused by the
press, Section 40 would be a lifeline.
Christopher Jefferies
Bristol, UK
Investment zones add to
the levelling-up neglect
Last month Chloe Smith, the UK’s
science secretary, spoke about the
government’s ambitions of creating
a scientific superpower (Report,
FT.com, June 27). Two days later,
Michael Gove, the levelling-up
secretary, announced Dundee had
missed out on a designation as one
of Scotland’s new investment zones.
This is despite the University of
Dundee being ranked the UK’s top
university for biological sciences and
one of the best institutions for turning
innovation into economic impact.
Life sciences is one of the priority
sectors that investment zones are
intended to drive growth in by
“leveraging existing strengths and
assets to increase opportunities for
local communities”. Dundee’s case was
a compelling one.
Like many areas of the UK, the city
The University of North Carolina lost
its affirmative action case last month
has social issues. Few, however, are also
home to world-leading biomedical
innovation with the potential to
transform our local community while
delivering high returns on investment.
The snub follows on from Dundee’s
green port bid being knocked back and
government failure to use levelling-up
funding to support the city’s vision for
long-term economic transformation.
Our university’s spinout successes
include the UK’s fastest-growing
pharma company, Exscientia, which
completed Europe’s biggest ever
biotechnology intellectual property
offering in 2021. A lack of
infrastructure has hampered our
ability to anchor successful companies
in the area, however, and investment
zone funding would have supported
the creation of a life sciences
innovation district to grow capabilities,
attract inward investment and create
hundreds of high-quality jobs.
Our ambition is that the innovation
district unlocks the city’s expertise in
life sciences, digital and artificial
intelligence by building on connectivity
with local research institutes and the
public and private sectors. This will
bring economic benefits and
improvements to healthcare, food
productivity, and the health and wealth
of our citizens.
With the third round of levelling-up
funding, the government can rectify
this by delivering support to one of the
UK’s most innovative — and deprived
— cities to realise its potential while
transforming the prospects of its
population.
Professor Dario Alessi
Director of the Medical Research Council
Protein Phosphorylation and
Ubiquitylation Unit
Professor Julian Blow
Dean of the School of Life Sciences
Professor Doreen Cantrell
Wellcome Trust Principal Research Fellow
Full list of signatories on FT.com/letters
new innovations require new laws is
one we would do well to remember at
the moment (“We don’t need new
‘neurorights’ — we need to know the
existing law”, Opinion, July 13).
But Susie Alegre is mistaken in
setting her sights on the UK’s
Information Commissioner’s Office
in this regard. We are not calling for
new neurorights. The report she
references focuses on the application
of the existing data protection rights
we regulate.
Regulating this area is not a task
we take lightly, particularly where
technologies can have such an
impact on people’s lives. Our report
was produced by data protection
experts and lawyers, and peer
reviewed by respected experts in
the neurotech field.
We will continue to work with
industry in this space, including
through our technology advisory panel
that met last week, to offer sensible
and pragmatic advice on how data
protection laws apply.
Stephen Almond
Executive Director, Information
Commissioner’s Office, Wilmslow,
Cheshire, UK
Hunt’s pensions plan falls
down at question of fees
Helen Thomas is right that the
government’s umpteen pension
documents don’t “inspire confidence”
that there is a clear “direction of travel”,
as promised by the chancellor (“The
future of UK pensions: delayed and
confused”, Opinion, FT.com, July 12).
Moreover, Jeremy Hunt’s “big idea”
— boosting pensions by “over £1,000
a year” by getting all defined
contribution pension savers to put
5 per cent into private equity — is
pure snake oil.
Even if we believe private equity
returns are more than just a function
of very high debt, and very low interest
rates — now no longer the case — most
outperformance is lost to end-investors
in very high annual and performance
fees. Even the government’s analysis
shows people could easily be worse off,
after fees, than sticking with quoted
equities with very low fees.
The clutch of City firms that have
signed up to the Mansion House
compact will certainly make money
out of pushing pension savers into
private equity. If it really does lead
to higher average long-term returns,
with negligible risk, why don’t these
firms offer to provide a guarantee
of outperformance, for a modest
fee reflecting the (supposedly)
modest risk?
John Ralfe
Kirk Ireton, Derbyshire, UK
affirmative action in higher education
has sparked numerous discussions of
admission policies (Report, July 11).
These discussions have focused on
admissions from under-represented
communities, yet fail to consider the
first thing — the purpose of higher
education. I find this very odd.
Any evaluation of an admission
policy must start with determining
whether it serves the purpose of a
college. In my view, the purpose of
higher education is to produce as
well-qualified graduates as possible. To
that end, colleges should select
students based on their predicted
competence on graduation. And
qualifications of college graduates
correlate with their performance on
traditional academic metrics on
entering the college and not on
whether they come from historically
under-represented communities.
The only way to increase admission
from these groups without subverting
the college’s purpose is to better
prepare applicants from these
communities. Tinkering with
admission policies can make diversity
numbers right but it cannot make
more diversity students Harvard or
Yale qualified.
Lenny Gengrinovich
Oradell, NJ, US
An AI in play can keep
the doctor’s mistakes away
The biggest promise of artificial
intelligence lies in supporting the
decisions doctors make when
diagnosing and treating patients
— not simply in expanding medical
care in the absence of doctors
(“Should the AI doctor see you now?”,
Opinion, July 14).
Doctors are trained to see patterns,
and invariably try to squeeze
symptoms and outcomes into the
limited patterns they feel familiar with.
However, diseases and patients are
much more complex, and doctors
invariably miss important hints.
AI, however, can deal with more
complexity, alerting the doctor to
potential diagnoses or treatments that
she or he would not have thought of.
We would all get better medical care if
our doctors made good use of AI.
Ludwig Kanzler
Tokyo, Japan
Correction
c William Li, chief executive of Chinese
electric vehicle maker Nio, did not make
a reference to the red carpet treatment
Elon Musk received from Chinese
officials last month, as wrongly
attributed to him in an article on July 13.
Monday 17 July 2023
MARKETS
Ruchir
Sharma
T
he buzz around “American
exceptionalism” keeps on
growing, boosted by the
strength of the US economy
and markets compared with
other developed countries — and to a
stumbling China. But this confident talk
overlooks the extent to which US growth
now depends on deficits and debt.
Based on those measures, the US has
started to look exceptional in a bad way.
Once typical, it is now the biggest deficit
spender in the developed world. During
the pandemic, the US budget deficit tri-
pled to more than 10 per cent of gross
domestic product, more than double
the peak in other developed economies.
In coming years, the US deficit is
expected to average close to 6 per cent of
GDP — well above its historic norm, and
Supreme Court
rulings hold
silver lining
AMERICA
Rana
Foroohar
T
wo recent Supreme Court
rulings — one ending
affirmative action in uni-
versity admissions and
another vetoing Joe Biden’s
student debt forgiveness plan — have
been lambasted by progressives as yet
more evidence that the judicial branch
is wrecking America. But there is a silver
lining to almost everything, and I can
see one here. The Supreme Court has
unwittingly elevated the issue of income
inequality, and the need for class-based
educational reform in the US.
Let’s start with the first ruling, out-
lawing affirmative action, which has for
more than half a century allowed col-
leges to admit more minority students
on the basis of race. Certainly, this has
helped more people of colour into top
schools, which is a good thing. But the
dirty little secret of affirmative action is
that colleges also use it to help get well-
off students of all colours (and national-
ities — nothing says “global luxury
brand” like a degree from a top Ameri-
can university) through the doors.
This means that while higher education
has become more diverse by culture
and ethnicity, the income gap has grown
ECONOMICS
Martin
Sandbu
O
n paper, the EU should be
an attractive partner for
many low- and middle-in-
come countries across the
globe. It is the biggest mar-
ket in the world, its social model is
widely admired and it is less pushy on
foreign policy alignment than either
China or the US.
Also on paper, Latin America should
be the most promising place for the EU
to press this advantage home. The
region is culturally close to Europe,
it is largely democratic and shares
the EU’s founding values, and immigra-
tion from it into the bloc has been
relatively easy to absorb.
But when European and Latin Ameri-
can leaders meet this week for their first
summit in almost a decade, their
attempts at collaboration will feel like
The trouble with US exceptionalism
a full six times the average in other
developed economies.
How did the US steer so deeply into
the red? Most countries have ended the
spending programmes they launched to
ease the pain of pandemic-induced
lockdowns. But all the $6.7tn in new
spending from the Biden administra-
tion came after 2020 was over. Most of it
had nothing to do with pandemic relief.
Instead, Joe Biden used the sense of
crisis to launch a latter-day New Deal,
building infrastructure and industry
ostensibly to compete with China and
combat climate change. No other gov-
ernment plans to spend as heavily, leav-
ing the US all but alone on the road to
deeper deficits. Bidenomics fans see it as
smart investment. But they ignore the
curve-busting scale of new spending and
its potential consequences for US debt,
inflation, and growth in the long run.
The US has been running deficits
almost every year since the 1960s with-
out triggering a serious financial crisis.
So the conventional wisdom is that defi-
cits don’t matter. Many economists
argue that they pay for themselves if the
economic growth generated by new
to be twice as large as the race gap.
As Georgetown’s Richard D Kahlen-
berg (the author of The Remedy: Class,
Race and Affirmative Action) has pointed
out, racial preferences have not changed
economic power structures in the US.
Indeed, they’ve arguably hardened
them by creating what might be called a
rainbow aristocracy.
Research by the economist Raj Chetty
shows that Harvard, for example, has 15
times as many students from the richest
fifth of the population than the poorest
fifth. Likewise, black, Hispanic and
Native American students received a
bigger boost than lower income stu-
dents in admissions. No wonder 71 per
cent of those students come from col-
lege-educated homes with incomes
above the national median. That puts
them in the top fifth of the income spec-
trum of their own racial groups. Many
top schools have similar trends.
All this ends up pitting low income
students — no matter what their colour
is — against each other. This phenome-
non is, of course, cleverly exploited by
some conservatives, in order to fuel
anger among poorer white voters that
the system is rigged against them. It’s an
effective argument because it’s partly
true. The system is rigged against the
less affluent.
This gets to the second Supreme Court
ruling, barring Biden’s debt forgiveness
scheme for students. This may create
what a number of economists believe
could be a recessionary headwind as the
27mn people who borrowed to pay for
EU needs to aim for its own Belt and Road
starting, if not from square one, then not
much further than square two. At best,
the EU-Mercosur trade agreement,
under way for decades, will get a politi-
cal push towards ratification.
The likely underwhelming summit is
a sign that the EU has not contemplated,
let alone articulated, what deeper forms
of relationship it can offer non-mem-
bers beyond traditional trade deals and
association agreements.
The pandemic and Russia’s war
against Ukraine woke European leaders
up to their continent’s dangerous
dependence on others for the founda-
tions of its security, from energy to
microchips. They also found their geo-
political priorities were less widely
shared than they may have assumed
when this mattered less.
The first step to solving the problem —
recognising that it exists — is happening,
then. Not before time. The construction
of post-1945 European unity around
economic integration conditioned lead-
ers to seeing the world stage as a market
square: a place to sell exports and source
raw materials.
A marketplace, however, is so easy to
take for granted that one forgets it
★ FINANCIAL TIMES
Opinion
public spending exceeds the govern-
ment’s interest payments. That feat was
easier to achieve when interest rates
were near zero, however. Now that rates
are rising, it’s almost impossible.
Though public debt is at historic highs
— more than 100 per cent of GDP across
the developed world — it is stabilising in
Europe but rising relentlessly in the US.
With interest rates rising rapidly at the
No other government plans
to spend as heavily, leaving
the country all but alone on
the road to deeper deficits
same time, the interest paid on public
debt is increasing — and doing so much
faster in the US.
Within 10 years, US government
interest payments will exceed spending
on defence and on social programmes
such as Medicaid. The Bank for Interna-
tional Settlements says developed econ-
omies need to bring deficits down
sharply in this high-rate environment or
their degrees have to start making pay-
ments again. This will inevitably start
lessening their ability to spend on other
things. New York Fed research has
shown that student debt levels are one
of the biggest mid to longer term struc-
tural risks to the US economy.
I believe this decision is also going to
add fuel to the fire of an already testy
debate about the ridiculous levels of
inflation in higher education, and how
to rein in costs while simultaneously
improving education itself. This would
be a very good thing.
Between 1979 and 2021, the price of a
four-year degree from an American col-
lege (either public or private) tripled —
and that’s after accounting for normal
inflation. I am about to pay the fourth
Justices have elevated the
issue of income inequality
and need for class-based
educational reform
requires political underpinnings —
which Europe was long content to let the
US sustain. After the 2008 crisis, Euro-
pean leaders were too consumed by
internal problems to adapt to America’s
increasing dereliction of this role.
The pandemic and the war have
boosted French president Emmanuel
Macron’s concept of “strategic auton-
omy”, but even this comes with a dose of
solipsism. More than standoffish auton-
What is missing is a
strategy for relationships
with countries beyond the
membership candidates
omy, the EU needs strategic engage-
ment to get other countries more firmly
on its side.
Europe’s neglect of the world con-
trasts with China’s Belt and Road Initia-
tive, which uses geopolitics and infra-
structure to reshape trade patterns to
its advantage — including by turning
the heads of some EU states. The fact
that Beijing has not fully succeeded
end up with more new debt than new
growth. The Biden team clearly feels
this advice doesn’t apply to the world’s
leading economic superpower.
Through 2025, the trillions unleashed
by this administration will push govern-
ment spending up to 39 per cent of GDP,
most of it not covered by new revenue.
In other big developed economies,
spending is poised to fall sharply as a
share of GDP, while revenues hold up
relatively well.
Under pressure from Congress last
month, Biden signed the Fiscal Respon-
sibility Act of 2023, creating the appear-
ance of a new restraint. Despite what
look like large spending cuts of $1.3tn
over 10 years, the US deficit is still pro-
jected to hover near 6 per cent of GDP
throughout the next decade.
Though inflation dipped last week, it’s
still running well above 2 per cent, and
Biden’s defenders blame its return on
anything but his spending plans, includ-
ing the lingering effect of global supply
chain disruptions. While inflation did
spike worldwide, it did so most sharply
in nations that spent the most during
the pandemic. Few spent more than the
year of roughly $80,000 in university
fees for my eldest child. If you aren’t sit-
ting on lots of cash, or if you are not
receiving a fair amount of financial aid,
you have only a couple of ways to deal
with this.
First, you can take on boatloads of
debt (student loan debt payments actu-
ally skewed towards upper income
households, which are rich in the meri-
tocratic anxiety that props up the busi-
ness models of so many schools). Or you
can make some major lifestyle changes.
This is becoming a macro as well as a
microeconomic issue. Many people I
know are working longer than planned
in order to pay for a child’s education as
well as their own retirement. That will
inevitably distort labour markets and
thus the economy as a whole.
Clearly, this system isn’t working.
Unless Biden can somehow push
through a student debt jubilee in the
future, I think we are going to have
broad-based college education reform.
That means we are likely to have a
national conversation that is long over-
does not mean it has been wrong to try.
The EU is, to be fair, catching up. Its
pandemic recovery fund, new energy
policy and drive to promote technologi-
cal and industrial investment have
righted the balance that made some
member states look kindlier on Beijing
than on their neighbours. The war has
rekindled the political will to use mem-
bership prospects to mould others in the
EU’s image. The current difficult deal-
ings with Turkey should be a cautionary
tale: that country was reforming until it
was convinced in the 2000s that the
EU’s door was not open in good faith.
The EU cannot afford to lose Ukraine in
the same way.
What is missing still is a committed
strategy for deep relationships with
countries beyond the conceivable mem-
bership candidates. This is not just a
matter of, say, securing critical minerals
and metals supplies (though it is that
too). It is about shaping a world where
the EU remains relevant because it has
more and closer allies on global issues
such as the geography of supply chains,
tech rules, multilateral governance and
climate change.
That is a much higher-stakes ambi-
US. A recent study from the Federal
Reserve attributed two-thirds of Amer-
ica’s recent inflation surge to excess
demand, and half that increase in
demand to deficit spending.
But the positive view on American
exceptionalism still dominates. Many
favour Biden’s calls for bigger govern-
ment, dismissing fears of a deficit-
driven crisis as crying wolf and pre-
paring for a threat that never comes.
They scoff at the idea that foreigners
might ever tire of financing US spending
habits or buying into US markets.
America’s flaws pale and its technology
dazzles in comparison to rivals in
Europe and Asia.
So why should anyone care about the
US’s deepening debt and deficits?
Because it is now one of the most fiscally
irresponsible nations. Its deficit has
climbed the ranks to worst in the devel-
oped world, its public debt is already the
third highest after Japan and Italy. To
wilfully ignore this new reality is an
exceptionally risky mistake.
The writer is chair of Rockefeller Interna-
tional
Matt Kenyon
due, given that university education in
America hasn’t been revamped in a
major way since the end of the second
world war.
Indeed, this is already starting to hap-
pen. The huge amount of stimulus
money being poured into the re-indus-
trialisation of the US has put vocational
education back in vogue. The need to
reduce the overall burden of college
costs has created a tailwind for so-called
“6 in 4” schools, which offer two years of
college credits within the context of a
four year secondary education. These
schools — which are catching on not
only in the US but in many other parts of
the world — have the effect of improving
high school curriculums even as they
make college shorter and cheaper.
The Supreme Court didn’t set out to
revolutionise American higher educa-
tion by killing affirmative action and
cancelling Biden’s debt forgiveness
plans. But if that’s the end result, so
much the better.
rana.foroohar@ft.com
tion than the EU has shown to date. It
would require a commensurate devo-
tion of both financial and political
resources, and partnership forms going
deeper than conventional trade deals.
This could mean new forms of partici-
pating in the single market itself, or
large-scale migration partnerships.
As EU leaders contemplate how
they adapt their institutions to a larger
membership, they should also consider
how to create tighter links with far-
flung non-members. They should
match China’s ambition and aim for a
global economy as centred on Europe
as possible. But they should aim higher
than Beijing in attracting countries
not through financial entrapment but
by offering deeper, mutually beneficial
links.
Think of this more-for-more
approach as “Belt and Road with liberal
democratic characteristics”. That may
seem unrealistic. Yet it is of the deepest
realism, for nothing less can protect
Europe’s interests if the US gives up on
the liberal rules-based order after next
year’s presidential election.
martin.sandbu@ft.com
17
Idea of migrant
barges should
be consigned
to history
Anna
McKay
I
n the coming weeks, the British gov-
ernment will accommodate asylum
seekers on board a barge in Port-
land, Dorset. This plan was for-
mally announced in April, but the
barge is yet to arrive, delayed by pro-
tests and growing public criticism.
Britain has seen this before: it’s
impossible to look at the policy without
making historical comparisons to
prison hulks, 19th-century floating pris-
ons etched on to public memory thanks
to screen adaptations of Great Expecta-
tions. What’s different today is that we
no longer hold the Victorian values that
upheld that system. Back then, it took
far longer for public opinion to turn
against these sites.
There are striking parallels between
those days and now. Prison hulks were
introduced as emergency measures in
1776, one year after the American War
of Independence began. No longer being
shipped to the American colonies, con-
vict numbers threatened to overwhelm
prisons. Hulks became the linchpins
that supported the government’s policy
of deportation to New South Wales and
Tasmania.
Of course, ships have always been
used to provide temporary accommo-
dation, as reformatory units for juve-
niles or hospitals to quarantine the sick.
As such, it’s perhaps unsurprising that
the Home Office has decided to use the
Bibby Stockholm in Dorset, and soon
other vessels, to house “non-detained”
asylum seekers.
Back in 1776, when the first prison
hulk, the Justitia, was moored in Wool-
wich, local residents expressed fears
There are striking
parallels between the
days of prison hulks in
the 19th century and now
that escaped convicts would pose a
threat to the community. During recent
protests against the Bibby Stockholm,
the people of Portland expressed similar
concerns that the town does not have
adequate infrastructure to support the
plan, that streets will not be safe and
that tourism will be affected. Already,
cruise ships scheduled to visit the
Jurassic Coast are beginning to bypass
the port due to the disruption.
Others object to the policy on human-
itarian grounds, given that the ship is
due to house asylum seekers — many of
whom have fled war and persecution.
The detainees will probably arrive in
small, staggered groups: imagine being
met by protests, shouts and placards.
In the 19th century, ordinary people
initially turned a blind eye to the hulks
— they were immersed in their own
problems, since wars with America and
France had caused a recession and pov-
erty was widespread. But public opinion
experienced a shift thanks to a boom in
Victorian-era press coverage. Newspa-
pers, pamphlets, and periodicals circu-
lated, and literacy rates climbed. Rich
and poor alike read about the hulks.
Opinion began to shift. People stopped
thinking of the convicts as dangerous —
instead, they began to see them as hav-
ing been let down by the state.
Prison inspectors published reports
that outlined the cost of maintaining the
leaky and rotting wooden ships, and
pointed out that it was significantly
more expensive to continually repair
and modify them than it was to build
permanent prisons on land. Today,
campaigners argue that the plans to put
asylum seekers on the Bibby Stockholm
won’t end the use of hotels, and that sav-
ings will be trivial.
The change in public opinion in the
mid-19th century undoubtedly contrib-
uted to the demise of the hulk system in
England. It took longer to end in the col-
onies, including Bermuda and Gibraltar,
where media coverage was less outspo-
ken, and ships were removed from the
public eye. Hulks haven’t been con-
signed entirely to history. HMP Weare, a
prison ship that was in use in Portland
Harbour from 1997-2005, was the object
of political controversy as it was both
unpopular and costly to run.
Today, it feels as though support for
migrant barges is already beginning to
falter. While the Home Office may
choose to ignore the historical parallels,
the public is not. It may only be a matter
of time before the policy sinks.
The writer is a historian at the University of
Liverpool
18 ★ Monday 17 July 2023*