Morrisons boss to step down; UK approval of Rosebank oilfield condemned as ‘environmental vandalism’ – business live
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Introduction: Britain gives go-ahead for Equinor to develop Rosebank oil field
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Rosebank, the largest untapped oilfield in UK waters, has been approved by the UK government, sparking outrage from environmental campaigners.
Britain has given the go-ahead for Oslo-listed energy company Equinor to develop the oil and gas field in the North Sea, northwest of the Shetland islands.
Equinor, which holds a majority stake in Rosebank, will develop it with its British partner Ithaca Energy and invest $3.8bn. The field is expected to produce at least 300m, possibly up to 500m barrels of oil and is three times bigger than the controversial Cambo field that was put on hold more than a year ago.
A spokesman for the North Sea Transition Authority said:
We have today approved the Rosebank Field Development Plan (FDP) which allows the owners to proceed with their project.
The FDP is awarded in accordance with our published guidance and taking net zero considerations into account throughout the project’s lifecycle.
Rosebank is one of the most controversial energy projects, with hundreds of climate scientists and academics and more than 200 organisations from the Women’s Institute to Oxfam joining tens of thousands of people across the UK in opposition. Environmentalists argue that it contravenes Britain’s plan for a net zero economy.
Philip Evans, Greenpeace UK’s climate campaigner, said:
Rishi Sunak has proven once and for all that he puts the profits of oil companies above everyday people. We know that relying on fossil fuels is terrible for our energy security, the cost of living, and the climate. Our sky-high bills and recent extreme weather have shown us that.
The ugly truth is that Sunak is pandering to vested interests, demonstrating the stranglehold the fossil fuel lobby has on government decision making. And it’s bill payers and the climate that will suffer because of it. Why else would he make such a reckless decision?
This decision is nothing but carte blanche to fossil fuel companies to ruin the climate, punish bill payers, and siphon off obscene profits. We already have the solutions to cut bills, increase energy security and cut emissions, but the government ignores them in favour of handouts to corporations at the expense of the rest of us.
The news came as oil prices climbed by $1 a barrel, as markets worry about tight supplies heading into the winter and higher interest rates.
The oil producers’ cartel Opec, led by Saudi Arabia, and allies such as Russia have cut production and forecast supply shortfalls.
Brent crude rose more than 1% to $94.98 a barrel while US light crude is up 1.1% at $91.4 a barrel.
There are also concerns that higher interest rates could slow economic growth and reduce demand for oil. The US Federal Reserve has signalled that borrowing costs may need to be stay higher for longer than expected.
Separately, Hui Ka Yan, the billionaire chairman of the stricken property developer Evergrande, has been placed under police control, Bloomberg reported.
Hui was taken away by Chinese police earlier this month and is being monitored at a designated location.
It’s not clear why Hui is under so-called residential surveillance, a type of police action that falls short of formal detention or arrest and doesn’t mean Hui will be charged with a crime, Bloomberg said. This means he is unable to leave the location, meet or communicate with others without approval. Passports and identification cards must be handed to police but no longer than six months, according to the law.
Evergrande, the world’s most indebted property developer, is at the centre of a crisis in China’s property sector. A wave of defaults in the property sector has dragged down growth in China’s economy.
The Agenda
Key events
Everyman cinema chain recovers after Barbie and Opppenheimer boost
Mark Sweney
Everyman said a weaker slate of films fuelled a widening of losses in the first half, but the runaway success of summer blockbusters Barbie and Oppenheimer has put the upmarket cinema chain back on track for the year.
Everyman, which runs 41 cinemas, reported a £4.3m pre-tax loss for the first six months of the year, up from £798,000 a year earlier.
The cinema operator saw losses balloon to more than five times the same period last year, as ticket sales declined from 1.8m to 1.6m and revenues fell 6% to £38.2m.
However, Alex Scrimgeour, chief executive at Everyman, re-iterated the company’s full year guidance praising the performance of the two summer blockbusters and a strong slate of films in the run up to Christmas.
The recent and resounding Box Office success of Barbie and Oppenheimer drove exceptional performance throughout July and August.
We remain confident in our prospects as we continue to be supported by a slate of high-quality second half releases.
Everyman said that when the “Barbenheimer” effect through the summer is factored in, revenues for the yeast to the end of August are up 13% over 2022 to 60.2m, while adjusted profits are up 12% to £11m.
The cinema chain said that the cost of living crisis that is forcing consumers to cut household budgets is not yet impacting movie-going. Average ticket prices are up from £11.32 in the same period last year to £11.49, while average food and beverage spend per head has climbed considerably, from £8.96 to £10.25.
Scrimgeour said:
Despite the current discretionary spend environment, we have continued to trade resiliently, highlighting our guests’ desire to be entertained.
10 former Wilko stores to reopen as Poundland on Saturday
Ten former Wilko stores are set to reopen as Poundland outlets this Saturday, after being bought out of administration by the value retailer.
Poundland owner Pepco agreed earlier this month to buy up to 71 Wilko stores from administrator PwC following the collapse of the high street chain.
Victoria Scholar, head of investment at interactive investor has looked at the changes at Morrisons.
Morrisons’ CEO David Potts is stepping down after nine years in the top job. He will be replaced by Rami Baitieh who was previously CEO of one of France’s largest food retailers, Carrefour.
Baitieh, who will take up the role in November, has many years of experience working in supermarkets. He marched his way up to the top job at Carrefour having previously held regional CEO roles. There will of course be major similarities but also differences between the supermarket sectors in France and the UK. Getting to grips with the UK market dynamics is likely to be among his first tests. But Morrisons certainly has confidence in him. Sir Terry Leahy, a senior adviser to CD&R and the former boss of Tesco said Morrisons is ‘poised for growth.’
Potts said there had been discussions about succession planning since the supermarket was bought by private equity firm CD&R in 2021. There were concerns at the time about the high levels of debt involved in the £7bn deal. In its first year in private equity hands, the company reported a pre-tax loss of £1.5bn including £400m in interest payment costs.
The reality though is that Morrisons has also struggled in terms of market share in recent years, weighed down by cost inflation. Aldi overtook and forced the supermarket out of the Big Four last year. In the latest Kantar figures, Morrisons’ market share stands at 8.6% versus the market leader Tesco with 27.2% and Aldi and Lidl with a combined 17.7% grip on the sector.
Morrisons is somewhat squeezed in the middle with intense competition from Tesco’s sheer size as well as the rock bottom prices on offer from the German discounters. The challenging economic backdrop with elevated inflation and higher interest rates has squeezed consumer budgets and impacted shoppers’ behaviour by making them increasingly price sensitive and on the hunt for bargains. Analysis from Which? showed that this behaviour pays off – some staple foods can cost as much as 910% more than the same product from a budget range. Aware of this, Morrisons has been desperately trying to remain competitive by announcing eight round of price cuts this year, reducing over 1000 prices since January.
The Tories’ huge new oilfield is a moral obscenity – but Rosebank can still be stopped, writes Caroline Lucas, co-leader of the Green party.
This is just the start,” said Rishi Sunak last week in his climate-wrecking speech from Downing Street. It certainly was just the start, because today, the government has sanctioned drilling in Rosebank, the biggest undeveloped oilfield in the North Sea.
This just 14 months after the UK’s hottest day, in July 2022. In that same month, the high court ruled the government’s net zero strategy unlawful, and ministers were ordered to redo their homework.
As the flames rise higher and the sirens grow louder, the day could – and should – have marked a genuine sea change in the government’s approach to the climate emergency. Its plan was failing – and the longer it continued to fail, the greater the price we would all pay.
But there was no such sea change. In fact, the government doubled down, with a green light for a new coalmine in Cumbria and now approval for Rosebank.
Let’s call out this latest act for what it is. Approving this oilfield is morally obscene; it is a climate crime for which the government must be held accountable. Burning Rosebank’s oil and gas would create more CO2 pollution than the combined emissions of 28 low-income countries, home to more than 700 million people. This field’s operational emissions alone would exceed the UK’s entire carbon budget allocated to oil and gas production.
US billionaire in talks over bid to buy Telegraph led by GB News co-owner
Mark Sweney
The American billionaire Ken Griffin, the founder of the Citadel hedge fund, is in discussions to join a group of investors led by Sir Paul Marshall, the co-owner of GB News, that is preparing a bid to buy the Telegraph.
Marshall, the founder of the London-based hedge fund Marshall Wace, is planning a bid through his UnHerd Ventures media group before an auction of the Telegraph and Spectator titles that is expected to begin in the coming weeks.
Citadel is one of the world’s most successful performing hedge funds, with more than $62bn (£51bn) under management. Griffin is estimated to have a personal fortune of $35bn, according to Forbes magazine.
Lloyds Banking Group, which seized control of the Telegraph and the Spectator in June after the owners, the Barclay family, failed to reach an agreement over the repayment of more than £1bn of debt, is using the investment bank Goldman Sachs to handle the auction.
Everton’s financial future could be in doubt unless takeover approved
Andy Hunter
Everton’s financial future could be in jeopardy unless the proposed takeover by the controversial US-investment firm 777 Partners is approved.
Everton’s debt and cashflow problems have increased considerably since the owner, Farhad Moshiri, stopped propping up the football club, with a recent loan from 777 Partners taking the total of outstanding loans above £350m. Interest on loans from Rights and Media Funding, MSP Sports Capital and 777 Partners is understood to be costing Everton more than £30m per year.
A loan of about £20m from 777, which has signed an agreement with Moshiri for his entire 94.1% shareholding, recently provided Everton with short-term working capital. That was required despite the club making a profit on player trading this summer and drastically reducing the head count, and wage bill, of Sean Dyche’s squad.
Saga, which sells cruises and insurance for people over 50, has been boosted by a rebound in demand for ocean and river cruises in recent months.
It expects to report better-than-expected profits for the full year as a result.
It reported a 15% rise in revenues for the six months to 31 July. It made a loss before tax of £77.8m, down from £262m a year earlier.
Evan Sutherland, the chief executive, said:
In Ocean Cruise, bookings are on track to achieve our targets for the full year, reflecting continued strong customer demand, while our River Cruise business has returned to profit with a 34% increase in guest numbers. Travel is also on track to return to profit for the full year.
In insurance, we continue to develop our business against the backdrop of a difficult inflationary market. While travel and private medical insurance are achieving strong year-on-year revenue growth, the performance in motor continues to weigh on earnings and this has resulted in an impairment of goodwill.
For the full year, we expect to achieve significant double-digit growth in revenue and underlying profit before tax when compared with the prior year, ahead of current estimates.
Morrisons names Rami Baitiéh as new CEO
Joanna Partridge
David Potts is stepping down as chief executive of private equity-owned supermarket chain Morrisons after nine years, and will be succeeded by the former chief executive of retailer Carrefour France.
Potts will step down from the top job in November, when Rami Baitiéh will take up the role.
Potts’ departure comes a little more than a year after the completion of the £7bn takeover of the retailer by the US private equity firm Clayton, Dubilier & Rice following an intense bidding war.
Morrisons said Baitiéh would “work closely with David Potts to ensure a smooth handover period.”
Potts’ departure comes after the supermarket’s most recent annual results, released in March, showed that it slumped to a £1.5bn loss during its first full year in private-equity ownership, revealing the grocers’ struggles after it was taken private.
Mace CEO: ‘very rare’ for big projects to be scrapped, would damage investment
Mark Reynolds, the chief executive of the construction company Mace that’s involved in the HS2 rail project, has been talking about it on BBC radio 4 today.
It’s to benefit the whole country. It’s not just Euston. It’s the whole country will benefit from a significant rail network.
The Birmingham to Manchester leg of the high speed line could be scrapped because of rising costs. There have been delays to the project, and the planned eastern leg between Birmingham and Leeds was axed in 2021.
Reynolds warned that this would make international businesses more reluctant to invest in the UK, and that the uncertainty has already had an impact.
It’s very rare that you work on a major scheme and it gets stopped. It happens but it doesn’t normally happen in the UK, quite frankly at this scale. Certain projects around schools, hospitals get cut detailed or delayed, which is a frustration and it means that it’s more challenging for the industry to plan its workforce and invest.
But I must say over the last three or four years it’s certainly been more challenging in the UK, which actually is also damaging investment into the UK we know that international finance business leaders are reluctant to invest in the UK.
Asked whether Mace would consider working on a big UK government infrastructure project in the future, he replied:
Well, we’re certainly cautious.
Pulling plug on HS2 ‘would be final nail in coffin for levelling up’
Josh Halliday
Abandoning high-speed rail in the north of England would be an “appalling dereliction of responsibility” risking tens of thousands of jobs and “the final nail in the coffin” for levelling up, political and business leaders have warned, my colleagues Josh Halliday and Jessica Murray report.
Rishi Sunak is considering scrapping the Birmingham to Manchester leg of HS2 despite a furious response from senior Conservatives and business chiefs.
The move, expected to be announced in the autumn statement in November, would scupper plans for a Northern Powerhouse Rail (NPR), connecting the north of England from Liverpool to Hull, which relies on part of HS2’s network.
Ithaca Energy, the British oil and gas firm, confirmed this morning that together with Equinor it will invest $3.8bn in the Rosebank oil field. Ithaca owns a 20% stake in Rosebank while Equinor, the operator of the field, owns the rest.
Gilad Myerson, executive chairman at Ithaca Energy, said:
Rosebank stands as the largest undeveloped field in the UK, and with the receipt of development consent from the North Sea Transition Authority, we are now poised to embark on a journey that will not only provide critically important domestic energy but also ignite substantial economic impact. The Rosebank project will create thousands of jobs and contribute significantly to securing the UK’s energy needs for many years to come.
Rosebank, which is 130km north-west of Shetland, is estimated to produce around 300m barrels of oil from the first two phases of the project (245m during phase 1). It is expected to lead to £8.1bn of total direct investment and support 1,600 jobs during the height of the construction phase, and support 450 UK-based jobs during the lifetime of the field, Ithaca said.
Project management and engineering activities will be performed mainly from Aberdeen and tree systems will be manufactured in Dunfermline. Umbilicals will be produced in Newcastle, pipelines will be fabricated in Evanton and the main vessel mobilisation site will also be in the UK. In addition, several other fabrication sites in the UK will contribute to the project.
Alan Bruce, the Ithaca chief executive, said:
We look forward to expanding our working partnership with Equinor to deliver one of the lowest emission intensity assets in the UK. The Rosebank development represents a significant investment in the UK and Scotland, and we are delighted to be supporting our local supply chain.
You can read the full announcement here.
H&M blames hot weather for poor September sales
Swedish clothing giant H&M has blamed unusually hot weather across Europe for poor sales in September, saying this disrupted the start of the autumn shopping season.
H&M, the world’s second-biggest fashion retailer, said September sales will be down 10% year on year, measured in local currencies. By contrast, its biggest rival, Spain’s Inditex which owns the Zara chain and other brands, reported a 14% rise in sales between 1 August and 11 September.
Vera Diehl, portfolio manager at Union Investment, which holds shares in both H&M and Inditex, told Reuters:
If the sales at your competitor basically go up by 14% with the same weather, that tells you something, to my mind.
However, H&M’s profits in the June to August quarter jumped to 4.74bn kronor from 902m a year earlier. The retailer stuck to its goal of increasing its operating margin to 10% next year (from 8% in the quarter and 3% last year) and said its cost-cutting programme was continuing “at full speed”.
H&M shares rose nearly 4% in early trading.
RBC analyst Richard Chamberlain said:
We believe H&M is very much in ‘trading sales for profits’ mode which is leading to margin improvement but some pressure on volumes. It appears to be losing some like-for-like share in major markets.
Back to the Rosebank oil field approval. Jess Ralston, energy analyst at the Energy and Climate Intelligence Unit, a non-profit group, said:
A week after a swathe of net zero U-turns and a few days after abandoning the expert Energy Efficiency Taskforce, the prime minister has shown that he’d rather give tax breaks to oil companies than lower energy bills. Taxpayers will fork out around £4bn to the developers of the oil field, money that could have insulated millions of homes with many set to be colder and poorer this winter.
To make matters worse, Rosebank oil will mostly be exported and then sold back to us at whatever price the oil companies can get. So it won’t help one bit with energy independence or gas bills, despite the government’s rhetoric. New renewables could help, but Treasury rules meant that no new wind power was secured at the latest renewable auction.
What does this mean for today’s young and future generations? Inheriting the huge costs of decommissioning oil and gas fields and ever more emissions that are driving climate change.
Labour mayors urge Sunak not to scrap, delay or scale back HS2
Five Labour mayors have urged Rishi Sunak not to scrap, delay or scale back HS2 as it would “leave swathes of the north with Victorian transport infrastructure that is unfit for purpose”.
Sadiq Khan, Andy Burnham, Tracy Brabin, Oliver Coppard and Steve Rotheram say they have been “inundated” with concerns from constituents about the potential “economic damage that will result from any decision not to proceed with HS2 and Northern Powerhouse Rail (NPR) in full”.
The regional mayors issued a shared statement to express dismay at the prospect of the UK government scrapping the rail project’s northern leg, ahead of a collective meeting on Wednesday.
The cabinet minister Lucy Frazer, when asked if they would listen to the mayors’ plea not to cut the rail project further, said the prime minister and chancellor “listen to a wide variety of voices”.
The ethical fashion brand People Tree is putting its UK business into liquidation with debts of more than £8.5m including money owed to suppliers, customers and most of its British workforce.
Founded by the former wife and husband team Safia and James Minney, People Tree’s celebrity following included the film star Emma Watson and the model Jo Wood. It became an influential voice in UK fashion, using organic materials and campaigning for better treatment of garment workers around the world.
In other news…
Scrapping inheritance tax would cost the government almost £15bn a year in lost revenue by 2032, according to analysis by the Institute for Fiscal Studies that follows calls from Tory MPs for the main tax on inherited wealth to be abolished.
The thinktank said the latest figures from HMRC showed fewer than 4% of estates paid inheritance tax (IHT) in 2020–21, but the rapid growth in wealth among older individuals meant this number was set to rise to more than 7% over the next decade.
While London has the most estates liable to pay the tax, hotspots across Sussex, the Cotswolds and around Birmingham will have the greatest number per 100,000 residences.
Dr Paul Balcombe, senior lecturer in chemical engineering and renewable energy at Queen Mary University of London, said:
Signalling the expansion of North Sea oil and gas won’t make energy cheaper for us and will make it more difficult to transition to net zero. Together with the announcements of the rollback of marquee policies relating to petrol/diesel cars, energy efficiency improvements in homes, and phasing out boilers for home heating, this is a rather comprehensive dismantling of the policy measures in place to get to the next deeper phase of decarbonisation.
On the prime minister’s net zero policy changes last week, he said:
The UK Committee on Climate Change has previously warned that we are not on track for our interim decarbonisation targets, and delaying further will inevitably remove Britain from the forefront of the global decarbonisation drive. The rollback on policy implementation will inevitably make deep decarbonisation in 2030/2040 much more expensive to the government and to the public.
Ithaca Energy shares jump 8%
Shares in Ithaca Energy, which will partner with Norway’s Equinor to develop the huge Rosebank oil field, 80 miles west of the Shetland islands, have jumped more than 8% on news of the approval of the controversial project.
The shares are the top riser on the FTSE 250 in London.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said:
The waiting game is over and with approval now granted by the UK government for the exploitation of Rosebank, Ithaca Energy investors have cheered at the news, with shares rising by more than 8% in early trade. The company and its giant Norwegian partner Equinor have announced they have taken the final investment decision to progress phase 1 of the development on the UK continental shelf, 80 miles west of Shetland.
Ithaca Energy has been on a rollercoaster ride since its launch onto the London market, weighed down partly by the windfall tax. It said the energy profits levy forced it to write down its assets by £58m. So, the approval marks a ray of light for the company, and it is ploughing on with its plans.
The decision will undoubtably allay some energy security concerns, given that the partnership estimates that 245m barrels of oil could be produced in phase 1 on the project, but it pushes the UK down a notch in terms of its net zero leadership. Even though the regulator has said that these considerations have been taken into account, and the companies have stressed that electrification of operations will reduce emissions, it muddies the playing field again when it comes to government support for the green transition. The decision, coming so swiftly after the Sunak administration pushed back the ban on sales of new petrol and diesel cars to 2035, leads to more uncertainty for companies and investors focused on cleaner energy solutions.
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