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Rail minister Huw Merriman will meet union leaders including Mick Lynch of the RMT on Monday after three weeks of unseasonal disruption left the two sides apparently as far apart as ever.

While both say they are ready to talk, unions remain committed to further strikes if required and the government is legislating to limit industrial action, an inauspicious background to the first direct talks between ministers and bosses since November.

Ultimately, progress will depend on concessions on both sides, but at its heart are financial considerations that have changed radically in the three years since COVID-19.

These changes, driven by necessity and government strategy, have fundamentally altered the incentives for the constituent parts of the fiendishly complex rail network to do a deal.

Understanding those changes may help explain why a dispute that began in high summer seems no closer to resolution in the depths of the following winter.

The pandemic has dramatically and perhaps permanently changed the financial model. In 2019-20, the last full year before COVID struck, there were 1.74 billion passenger journeys generating £10.4bn in fares. Government subsidy amounted to £6.5bn.

The following year COVID lockdowns and working from home saw the position flip, with a meagre 388 million passenger journeys producing just £1.8bn in fares, and government support to keep the wheels turning rising to £16.5bn.

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Even in the year to March 2022, with the pandemic in abeyance and recovery under way, there were fewer than a billion journeys, fares revenue was still below £6bn, and the government was putting in £13.3bn, more than double the pre-COVID cost to taxpayers.

So when Network Rail says the railways no longer have the revenue to meet inflation-matching wage demands they are at least half right.

Passenger fares revenue has plummeted.

Yet the most recent pay offers, of 5% plus 4% over two years from Network Rail, and 4% plus 4% from the train operators, are below the 5.9% fare rise that will apply from March.

But there is another equally important change underlying this dispute; where that revenue goes.

Revenue risk from train operators removed

In response to the pandemic the government tore up franchise agreements with privately owned train operators and replaced them with service contracts, removing at a stroke the revenue risk from train operators.

Instead of fares going to train operators who paid guaranteed revenue to the government, fares now go directly to the Department for Transport, which pays the operator to run services.

Crucially though, the train operators still get paid when workers are on strike, receiving compensation for lost revenue of £20m-£25m a day. The RMT claims that adds up to £340m paid by the government to private companies since the dispute began.

The Department of Transport would not provide a figure for total compensation paid but did say: “We do not tend to penalise the train operators for failing to run a full service on a strike day given it’s not the train operators who have opted to strike.”

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A changed calculation for Network Rail

While the new contracts have reduced the incentive for train companies to do a deal by removing their risk, the restructuring has also changed the calculation for Network Rail, involved in its own dispute with the RMT.

Under the old franchise system, if trains could not run because Network Rail signalling and station staff were on strike, it compensated the operators for lost fares.

That meant that for train operators, Network Rail and the unions there was a basic calculation when considering a pay deal.

If the pay demand from workers was cheaper in the long run than the lost revenue or compensation cost of strike action, a deal could, and usually would, be done.

That basic calculation has helped rail workers remain one of the few public sector groups whose pay has kept track with inflation since 2010. With revenues collapsing since COVID that balance of incentives has changed.

Cost of industrial action

Taxpayers are now the ones bearing the overwhelming cost of industrial action, not the employers, meaning it is ministers and the Treasury whose appetite for financial pain is being tested.

On the union’s side it is still workers who pay for strike action in lost pay and their resolve will be weighing on the minds of bosses and ministers this weekend.

Rail workers are paid on four-week shift cycles and each of the six waves of strike action so far has taken place in a separate cycle limiting the loss of wages from a single wage slip.

The cost is adding up for RMT members even with support from strike funds that ease the blow. They have lost up to 19 days pay since the first strikes in June, and at least four days pay in each of December and January, a significant hit for anyone.

As Mick Lynch considers his next move he will be weighing up how much more his members can bear. They have shown remarkable solidarity since the dispute began but in a cost of living squeeze it may not be infinite.

Barriers to a deal

There are many issues that could prevent a deal, not least the new demands to change certain working practices unions believe have been deliberately introduced to derail progress.

The planned restructuring of the entire network under a new body ‘Great British Railways’ is also muddying the waters.

Political support for the Boris Johnson-Grant Shapps reform has fluctuated with the political chaos in Downing Street, leaving the industry uncertain if and when permanent change will come, and the railways effectively being run and paid for by ministers who claim to oppose nationalisation.

In the short term though this dispute may come down to who has the higher threshold for the financial pain: the Treasury paying hundreds of millions in compensation, or rail workers sacrificing their pay.

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ITV back in spotlight as suitors screen potential bids

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ITV back in spotlight as suitors screen potential bids

Potential suitors have again begun circling ITV, Britain’s biggest terrestrial commercial broadcaster, after a prolonged period of share price weakness and renewed questions about its long-term strategic destiny.

Sky News has learnt that a number of possible bidders for parts or all of the company, whose biggest shows include Love Island, have in recent weeks held early-stage discussions about teaming up to pursue a potential transaction.

TV industry sources said this weekend that CVC Capital Partners and a major European broadcaster – thought to be France’s Groupe TF1 – were among those which had been starting to study the merits of a potential offer.

The sources added that RedBird Capital-owned All3Media and Mediawan, which is backed by the private equity giant KKR, were also on the list of potential suitors for the ITV Studios production arm.

One cautioned this weekend that none of the work on potential bids was at a sufficiently advanced stage to require disclosure under the UK’s stock market disclosure rules, and suggested that ITV’s board – chaired by Andrew Cosslett – had not received any recent unsolicited approaches.

That meant that the prospects of any formal approach materialising was highly uncertain.

The person added, however, that Dame Carolyn McCall, ITV’s long-serving chief executive, had been discussing with the company’s financial advisers the merits of a demerger or other form of separation of its two main business units.

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Its main banking advisers are Goldman Sachs, Morgan Stanley and Robey Warshaw.

ITV’s shares are languishing at just 65.5p, giving the whole company a market capitalisation of £2.51bn.

The stock rose more than 5% on Friday amid vague market chatter about a possible takeover bid.

Bankers and analysts believe that ITV Studios, which made Disney+’s hit show, Rivals, would be worth more than the entire company’s market capitalisation in a break-up of ITV.

People close to the situation said that under one possible plan being studied, CVC could be interested in acquiring ITV Studios, with a European broadcast partner taking over its broadcasting arm, including the ITVX streaming platform.

“At the right price, it would make sense if CVC wanted the undervalued production business, with TF1 wanting an English language streaming service in ITVX, along with the cashflows of the declining channels,” one broadcasting industry veteran said this weekend.

“They would only get the assets, though, in a deal worth double the current share price.”

Takeover speculation about ITV, which competes with Sky News’ parent company, has been a recurring theme since the company was created from the merger of Carlton and Granada more than 20 years ago.

ITV said this month that it would seek additional cost savings of £20m this year as it continued to deal with the fallout from last year’s strikes by Hollywood writers and actors.

It added that revenues at the Studios arm would decline over the current financial year, with advertising revenues sharply lower in the fourth quarter than in the same period a year earlier because of the tough comparison with 2023’s Rugby World Cup.

Allies of Dame Carolyn, who has run ITV since 2018, argue that she has transformed ITV, diversifying further into production and overhauling its digital capabilities.

The majority of ITV’s revenue now comes from profitable and growing areas, including ITVX and the Studios arm, they said.

By 2026, those areas are expected to account for more than two-thirds of the group’s sales.

This year, its production arm was responsible for the most-viewed drama of the year on any channel or platform, Mr Bates versus The Post Office.

In its third-quarter update earlier this month, Dame Carolyn said the company’s “good strategic progress has continued in the first nine months of 2024 driven by strong execution and industry-leading creativity”.

“ITV Studios is performing well despite the expected impact of both the writer’s strike and a softer market from free-to-air broadcasters.”

She said the unit would achieve record profits this year.

ITV and CVC declined to comment, while TF1, RedBird and Mediawan did not respond to requests for comment.

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Ann Summers’ family owners to explore options for lingerie chain

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Ann Summers' family owners to explore options for lingerie chain

The family which has owned Ann Summers, the lingerie and sex toy retailer, for more than half a century is to explore options for the business which could include a partial or majority sale.

Sky News has learnt that the Gold family is close to hiring Interpath, the corporate advisory firm, to work on a strategic review which could lead to the disposal of a big stake in the chain.

Retail industry sources said this weekend that Ann Summers had been in talks with Interpath for several weeks, although it has yet to be formally instructed.

The chain, which was founded in 1971 and acquired by David and Ralph Gold when it fell into liquidation the following year, trades from 83 stores and employs over 1,000 people.

The family continues to own 100% of the equity in the company.

Sources said that some dilution of the Golds’ interest was probable, although it was far from certain that they would sell a controlling stake.

In a statement issued in response to an enquiry from Sky News, Vanessa Gold, Ann Summers’ chair, commented: “We, like many other retailers, are dealing with the unhelpful backdrop to business of the decisions announced by the government at the Budget and the rising cost to retail.

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“As a family-owned business, we are in a fortunate position and have committed investment for over 50 years.

“This has created a robust and resilient business.

“We are exploring a number of options to further grow the brand into 2025 and beyond.”

Ms Gold is among many senior retail figures to publicly criticise the tax changes announced in the Budget unveiled by Rachel Reeves, the chancellor, last month.

The British Retail Consortium published a letter last weeks signed by scores of its members in which they warned of price rises and job losses.

Private equity firms and other retail groups are expected to express an interest in a takeover of Ann Summers.

One possible contender could be the Frasers billionaire Mike Ashley, who already owns upmarket rival Agent Provocateur.

Any formal process is unlikely to yield a result until next year, with the key Christmas trading period the principal focus for the shareholders and management during the next month.

Ann Summers is one of Britain’s best-known retailers, with a profile belying its relatively modest size.

In the early 1980s, Jacqueline Gold, the then executive chairman who died last year, conceived the idea of holding Ann Summers parties – a key milestone in the company’s growth.

At its largest, the chain traded from nearly twice the number of shops it has today, but like many retailers was forced to seek rent cuts from landlords after weak trading during the COVID-19 pandemic.

This week, The Daily Telegraph reported that the Gold family had stepped in to provide several million pounds of additional funding to Ann Summers in the form of a loan.

Vanessa Gold – Jacqueline’s sister – also asked bankers to explore the sale of part of the family’s stake in West Ham United Football Club last year.

That process, run by Rothschild, has yet to result in a deal.

Interpath declined to comment.

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Thousands of jobs to go at Bosch in latest blow to German car industry

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Thousands of jobs to go at Bosch in latest blow to German car industry

Bosch will cut up to 5,500 jobs as it struggles with slow electric vehicle sales and competition from Chinese imports.

It is the latest blow to the European car industry after Volkswagen and Ford announced thousands of job cuts in the last month.

Cheaper Chinese-made electric cars have made it trickier for European manufacturers to remain competitive while demand has weakened for the driver assistance and automated driving solutions made by Bosch.

The company said a slower-than-expected transition to electric, software-controlled vehicles was partly behind the cuts, which are being made in the car parts division.

Demand for new cars has fallen overall in Germany as the economy has slowed, with recession only narrowly avoided in recent years.

The final number of job cuts has yet to be agreed with employee representatives. Bosch said they would be carried out in a “socially responsible” way.

About half the job reductions would be at locations in Germany.

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Bosch, the world’s biggest car parts supplier, has already committed to not making layoffs in Germany until 2027 for many employees, and until 2029 for a subsection of its workforce. It said this pact would remain in place.

The job cuts would be made over approximately the next eight years.

The Gerlingen site near Stuttgart will lose some 3,500 jobs by the end of 2027, reducing the workforce developing car software, advanced driver assistance and automated driving technology.

Other losses will be at the Hildesheim site near Hanover, where 750 jobs will go by end the of 2032, and the plant in Schwaebisch Gmund, which will lose about 1,300 roles between 2027 and 2030.

Bosch’s decision follows Volkswagen’s announcement last month it would shut at least three factories in Germany and lay off tens of thousands of staff.

Its remaining German plants are also set to be downsized.

While Germany has been hit hard by cuts, it is not bearing the brunt alone.

Earlier this week, Ford announced plans to cut 4,000 jobs across Europe – including 800 in the UK – as the industry fretted over weak electric vehicle (EV) sales that could see firms fined more for missing government targets.

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