Channel 4 is no stranger to privatisation talk – but this feels different
Almost since Channel 4 launched 38 years ago, with the first episode of Countdown, there has been speculation that it is facing privatisation.
In January 1983, just two months after the channel launched, Kevin Goldstein-Jackson – the executive who helped launch hits like Tales of the Unexpected and who later headed the ITV franchise operator Television South West – was calling for it to be privatised.
As Margaret Thatcher’s privatisation revolution rolled on through the 1980s, the calls kept coming, often from surprising directions.
In 1987, Michael Grade, who was then managing director of BBC television and who later went on to be dubbed Britain’s ‘pornographer in chief’ when he became Channel 4’s chief executive, said “it would be a very good thing indeed for British broadcasting if that were to happen”.
The FT reported that John Whittingdale, a firm supporter of a privatisation historically, is to lead a consultation
Somehow, though, Channel 4 managed to remain state-owned. The last serious calls for the broadcaster to be privatised came after David Cameron’s 2015 general election victory, when John Whittingdale, the then Culture Secretary and Matt Hancock, the then Cabinet Office Minister, were said to be pushing for it.
A key aspect to their proposal was that it would raise up to £1bn for the government.
Now, however, privatisation talk is again in the air.
The Financial Times reported on Friday that Channel 4 will be “steered towards privatisation” by the UK government as soon as next year. It said ministers were set to launch a formal consultation within weeks on the future of the broadcaster.
This could, according to the FT, even see an outright sale of Channel 4.
Ominously for Channel 4, which has always opposed being privatised, the FT said the consultation would be run by Mr Whittingdale himself.
There are a number of reasons why the idea has resurfaced now. The first is that, in the eyes of some in government, Channel 4’s business model is under pressure. As a free-to-air broadcaster that has few programme rights to exploit, it is unusually exposed to the vagaries of the advertising market, as has been shown during the last year.
The broadcaster reported a pre-tax loss of £26m in 2019 – Channel 4 itself has put this down to the cost of opening its new site in Leeds – but then suffered a collapse in advertising revenues when the COVID-19 pandemic erupted in March last year.
Channel 4’s historic headquarters in London (pictured) has been watered down through a new site in Leeds. Pic: AP
For its part, Channel 4 itself has said that it expects to report a surplus for the year, with advertising having bounced back strongly in the second half of the year.
The broadcaster also shored up its finances with aggressive cuts to its budget during the pandemic and by taking out loans. One indication of its recovery to financial health was that it repaid furlough money to the Treasury as long ago as last autumn.
It is also argued that the rise of streaming platforms like Amazon Prime, Disney+ and Netflix and the continued strength of multi-channel television broadcasters like Sky, the owner of Sky News, makes Channel 4 vulnerable to a loss of viewers that would eventually hit its advertising revenues.
Channel 4 has responded by arguing that, in 2020, it actually raised its share of television viewing, not only in terms of linear television, but also via digital platforms. It said at the end of last year that digital viewing now accounted for one in every eight hours of Channel 4 viewing.
Despite all this ministers fear that, as a business, Channel 4 is unusually vulnerable.
Earlier this year, Oliver Dowden, the Culture Secretary, vetoed the reappointment of two of Channel 4’s directors, Uzma Hasan and Fru Hazlitt, even though both Channel 4 itself and Ofcom, the broadcasting regulator, were supportive.
It was reported at the time that Mr Dowden wanted the two women, both of whom come from a production background, replaced with new directors boasting more financial experience.
The FT reported that John Whittingdale, a firm supporter of a privatisation historically, is to lead a consultation
Another reason why privatisation may be back on the agenda is the public finances.
Some in Whitehall believe that a significant sum of money could still be made from a sale of Channel 4 – although most analysts who have run the numbers believe any sale proceeds would fall well short of the £1bn mooted six years ago.
It is also argued that a new owner for Channel 4, with deep pockets, might help ensure the quality of its output. The problem is that there are few obvious buyers out there for the channel.
Most of the big US buyers who might be interested are focused on other things while Channel 4’s relative lack of intellectual property rights – a big contrast with, for example, ITV – means there would be few gains to be made by a big media buyer.
Viacom-CBS, the owner of Channel 5, is seen as the likeliest buyer but it, too, is more focused currently on building its streaming service, Paramount+, as well as trying to shore up confidence among its investors after a calamitous drop in its share price earlier this year related to the collapse of the hedge fund Archegos Capital.
Investors also suspect Viacom-CBS will be looking to conserve capital to invest more in content as it battles it out with rivals like Netflix and Disney, whose Disney+ streaming service has strongly outperformed Wall Street’s expectations, rather than use it buying an asset like Channel 4.
Channel 4 has prided itself on alternative, original programming throughout its history. Pic: AP
Moreover, if any of the big US broadcasters were interested in acquiring a UK free-to-air broadcaster, they are far more likely to alight on ITV which, unlike Channel 4, has its own production arm in ITV Studios and far more intellectual property assets to exploit.
That might make a flotation on the stock market, which would provide Channel 4 with more access to capital, as a likelier outcome – although it has been speculated in some quarters that ITV itself might be a buyer.
Expect Channel 4 to strongly resist any attempt to privatise it.
In the past the broadcaster has been able to muster a substantial lobbying campaign, relying on members of the arts establishment, to argue that its remit to produce distinctive programming would be jeopardised by a change of ownership.
It is also likely to point to the fact that it is a major investor in British content and spends heavily with independent production companies.
That, however, is a harder argument to make when the likes of Sky and Netflix are investing record sums in British programming, when the BBC’s drama output is still scoring hits and when ITV’s production arm is in such fine fettle.
In short, a lot of the arguments Channel 4 has used to resist privatisation in the past may not be as pertinent as was once the case.
This may represent Mr Whittingdale’s best opportunity yet to push for a policy he has sought for 25 years.
Six months ago the International Monetary Fund (IMF) warned that the world economy was heading for a serious slowdown, in the face of Donald Trump’s tariffs.
It slashed its forecasts for economic growth both in the US and predicted that global economic growth would slow to 2.8% this year.
Today the Fund has resurfaced with a markedly different message. It upgraded growth in both the US and elsewhere. Global economic growth this year will actually be 3.2%, it added. So, has the Fund conceded victory to Donald Trump? Is it no longer fretting about the economic impact of tariffs?
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Either way, the World Economic Outlook (WEO), the IMF’s six-monthly analysis of economic trends, is well worth a look. This document is perhaps the ultimate synthesis of what economists are feeling about the state of the world, so there’s plenty of insights in there, both about the US, about far-reaching trends like artificial intelligence, about smaller economies like the UK and plenty else besides. Here, then, are four things you need to know from today’s WEO.
The tariff impact is much smaller than expected… so far
The key bit there is the final two words. The Fund upgraded US and global growth, saying: “The global economy has shown resilience to the trade policy shocks”, but added: “The unexpected resilience in activity and muted inflation response reflect – in addition to the fact that the tariff shock has turned out to be smaller than originally announced – a range of factors that provide temporary relief, rather than underlying strength in economic fundamentals.”
In short, the Fund still thinks those things it was worried about six months ago – higher inflation, lower trade flows and weaker income growth – will still kick in. It just now thinks it might take longer than expected.
The UK faces the highest inflation in the industrialised world
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August: Tax rises playing ’50:50′ role in rising inflation
One of the standard exercises each time one of these reports come out is for the Treasury to pick out a flattering statistic they can then go back home and talk about for the following months. This time around the thing they will most likely focus on is that Britain is forecast to have one of the strongest economic growth rates in the G7 (second only to the US) this year, and the third strongest next year.
But there are a couple of less flattering prisms through which one can look at the UK economy. First, if you look not at gross domestic product but (as you really ought to) at GDP per head (which adjusts for the growing population), in fact UK growth next year is poised to be the weakest in the G7 (at just 0.5 per cent).
Second, and perhaps more worryingly, UK inflation remains stubbornly high in comparison to most other economies, the highest in the G7 both this year and next. Why is Britain such an outlier? This is a question both Chancellor Rachel Reeves and Bank of England governor Andrew Bailey will have to explain while in Washington this week for the Fund’s annual meeting.
What happens if the Artificial Intelligence bubble bursts?
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Nvidia CEO hails UK’s place in global AI race
Few, even inside the world of AI, doubt that the extraordinary ramp up in tech share prices in recent months has some of the traits of a financial bubble. But what happens if that bubble goes pop? The Fund has the following, somewhat scary, passage:
“Excessively optimistic growth expectations about AI could be revised in light of incoming data from early adopters and could trigger a market correction. Elevated valuations in tech and AI-linked sectors have been fuelled by expectations of transformative productivity gains. If these gains fail to materialize, the resulting earnings disappointment could lead to a reassessment of the sustainability of AI-driven valuations and a drop in tech stock prices, with systemic implications.
“A potential bust of the AI boom could rival the dot-com crash of 2000 in severity, especially considering the dominance of a few tech firms in market indices and involvement of less-regulated private credit loans funding much of the industry’s expansion. Such a correction could erode household wealth and dampen consumption.”
Pay attention to what’s happening in less developed countries
For many years, one of the main focuses at each IMF meeting was about the state of finances in many of the world’s poorest nations.
Rich countries lined up in Washington with generous policies to provide donations and trim developing world debt. But since the financial crisis, rich world attention has turned inwards – for understandable reasons. One of the upshots of this is that the amount of aid going to poor countries has fallen, year by year. At the same time, the amount these countries are having to pay in their annual debt interest has been creeping up (as have global interest rates). The upshot is something rather disturbing. For the first time in a generation, poor countries’ debt interest payments are now higher than their aid receipts.
I’m not sure what this spells. But what we do know is that when poor countries in the Middle East and Sub-Saharan Africa face financial problems, they often face instability. And when they face instability, that often has knock on consequences for everyone else. All of which is to say, this is something to watch, with concern.
The IMF’s report is strictly speaking the starting gun for a week of meetings in Washington. So there’ll be more to come in the next few days, as finance ministers from around the world meet to discuss the state of the global economy.
The jobs market continued to slow, with 9,000 fewer vacancies in the three months to September, official figures show.
It is the 39th consecutive period where vacancy numbers have dropped.
Having fewer job openings can mean it is harder to find work.
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There was also a surprise increase in the unemployment rate, up to 4.8% from 4.7% a month earlier, primarily driven by younger people, as a record number of people over 65 are in work, the Office for National Statistics (ONS) said.
Economists polled by Reuters anticipated no change in the jobless rate, but instead the figure is now the highest since the three months to May 2021, when the country was in lockdown due to the COVID-19 pandemic.
The ONS, however, has advised caution when interpreting changes in the monthly unemployment rate and job vacancy numbers due to concerns over the reliability of the figures.
The labour market has struggled in recent months as the cost of employing staff became more expensive due to higher employers’ national insurance contributions and an increased minimum wage.
Wage rises slowing
Further signs of a slowing labour market were seen in the fall of annual private sector wage growth to the lowest rate in nearly four years – 4.4%.
Public sector pay growth increased more quickly, at 6%, as some public sector pay rises were awarded earlier than they were last year.
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Inflation up: the bad and ‘good’ news
Average weekly earnings rose more than expected by economists at 5% and also more than previously thought after a revision to last month’s figures (4.8%).
Also published by the ONS was data on industrial action, which showed August had the fewest working days lost to strike action in a single month for nearly six years.
What does it mean for interest rates?
While a tough job market is difficult for people looking for work, the slowing wage rises can mean interest rates are brought down.
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The rate-setters at the Bank of England had been concerned about the effect higher wages could have on inflation, which it is mandated to bring to 2% though latest figures showed it was at 3.8%.
Following today’s figures, traders expect a cut in the interest rate to 4.75% in December.
No change is anticipated at the next interest rate setter meeting in November.
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