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Thames Water is facing crunch talks over its finances amid mounting concerns about its ability to service a debt mountain which stands at more than £14bn.

Sky News has learnt that Thames Water, which is privately owned and employs about 7,000 people, has in the last few weeks hired Rothschild, the investment bank, and the law firm Slaughter & May to explore financing options for the company.

The appointment of the advisers has taken place against a backdrop of growing public and political fury about the company’s dire record at preventing leaks and raw sewage discharges.

Thames Water serves nearly a quarter of Britain’s population, with 15m customers across London and the Thames Valley.

Industry sources said the government and Ofwat, the industry regulator, were aware of growing concerns about its financial position.

A Thames Water spokesperson said: “It’s normal course of business to appoint advisors to support the funding of our investment programme.”

Sarah Bentley, who joined as chief executive in 2020, is overseeing an eight-year plan to transform the company’s operating and financial performance.

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Ms Bentley recently declared that she was “heartbroken” about the company’s historical failings, blaming “decades of underinvestment”.

It has been fined numerous times, and is facing a deluge of regulatory probes.

In 2021, it was hit with a £4m penalty for allowing untreated sewage to escape into a river and park, while in August 2021, it was ordered to pay £11m for overcharging thousands of customers.

The range of financing options to Thames Water’s board – which is chaired by the former SSE chief Ian Marchant – beyond seeking new equity investors or attempting to raise additional debt was unclear this weekend.

Nearly £1.4bn of the company’s bonds mature by the end of next year, with Ofwat price controls meaning water companies have little scope to generate additional income.

In an investor update published last September, Ms Bentley said that “the difficult external environment has increased the challenge of our turnaround”.

“We’ve…made progress improving some of our performance metrics with a 43% reduction in customers’ complaints, as well as reductions in total pollutions and sewer flooding incidents.

“That said, there’s still a long way to go, and the recent drought affected progress on water metrics following a spike in leakage caused by exceptional dry ground conditions.”

Last July, the company said it had agreed with shareholders the injection of £500m of new equity funding, with a further £1bn expected to be delivered by the end of next year.

Thames Water is owned by a group of pension funds and sovereign wealth funds, some of which are said to be sceptical about delivering additional funding referred to in the company’s last financial update.

Its largest shareholder is Ontario Municipal Employees Retirement System (Omers), a vast Canadian pension fund, which holds a stake of nearly 32%, according to Thames Water’s website.

Others include China Investment Corporation, the country’s sovereign wealth fund; the Universities Superannuation Scheme, the UK’s biggest private pension fund; and Infinity Investments, a subsidiary of the Abu Dhabi Investment Authority.

Hermes, which manages the BT Group pension scheme, is also a shareholder.

The additional shareholder funding formed part of a £2bn expenditure increase, taking its total spending during the current five-year regulatory period to £11.6bn.

In its September update, Thames Water said shareholders had “further evidenced their support for [Thames Water] and its business plan through an Equity Support Letter where the shareholders have committed to hold investment committee meetings (for their respective institutions) as a path to obtaining approval (in the discretion of the investment committee) for funding their pro rata share of conditional commitments in respect of the further £1bn of additional equity which is assumed in TWUL’s business plan”.

“Whilst this is not a legal commitment to fund, is subject to conditions and is dependent on governance arrangements between shareholders, given that [Thames Water] and its shareholders are currently engaged in a collaborative process to agree and facilitate such equity commitments, the [Thames Water] board believes it is reasonable to incorporate this additional £1bn of equity funding in its assessment.”

The company has not paid its owners a dividend for nearly six years, and some shareholders are said to be increasingly keen to offload their holdings.

“In the scenario where sufficient equity commitments and/or funding were not forthcoming, [Thames Water], at that point, could revise its business plan to fit with then available funding, and adjust total expenditure down accordingly,” the company said last autumn.

Thames Water is due to complete a consultation with Ofwat later this month on the establish of a Water Resource Management Plan, setting out how it will meet customer needs until the 2050s.

“Customers depend on companies to provide reliable water supplies,” David Black, the regulator’s chief executive, said.

“This requires companies to prepare properly for population growth and the impact of climate change.”

Thames Water is not the only major water company to face questions about its financial resilience and operational track record.

Ofwat has also been in talks with others, including Southern Water and Yorkshire Water, in recent years about strengthening balance sheets amid performance issues.

There have been growing calls for the industry’s ownership model to be overhauled because of the disquiet over lavish executive pay and the failure of companies to prevent waste and sewage contamination.

These ongoing controversies have fuelled demands for the consideration of mutual ownership structures, which would prohibit returns to shareholders and guarantee that profits would be reinvested in improving the sector’s dire performance, while upgrading water infrastructure assets.

In total, tens of billions of pounds have been handed to shareholders in water utilities across Britain since privatisation, stoking public and political anger given the industry’s frequent mishaps.

A spokeswoman said an update on Thames Water’s net debt position would be published in its annual report in July.

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Trump trade war escalation sparks global market sell-off

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Trump trade war escalation sparks global market sell-off

Donald Trump’s trade war escalation has sparked a global sell-off, with US stock markets seeing the biggest declines in a hit to values estimated above $2trn.

Tech and retail shares were among those worst hit when Wall Street opened for business, following on from a flight from risk across both Asia and Europe earlier in the day.

Analysis by the investment platform AJ Bell put the value of the peak losses among major indices at $2.2trn (£1.7trn).

The tech-focused Nasdaq Composite was down 5.8%, the S&P 500 by 4.3% and the Dow Jones Industrial Average by just under 4% at the height of the declines. It left all three on course for their worst one-day losses since at least September 2022 though the sell-off later eased back slightly.

Trump latest: UK considers tariff retaliation

Analysts said the focus in the US was largely on the impact that the expanded tariff regime will have on the domestic economy but also effects on global sales given widespread anger abroad among the more than 180 nations and territories hit by reciprocal tariffs on Mr Trump‘s self-styled “liberation day”.

They are set to take effect next week, with tariffs on all car, steel and aluminium imports already in effect.

Price rises are a certainty in the world’s largest economy as the president’s additional tariffs kick in, with those charges expected to be passed on down supply chains to the end user.

The White House believes its tariffs regime will force employers to build factories and hire workers in the US to escape the charges.

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The latest numbers on tariffs

Economists warn the additional costs will add upward pressure to US inflation and potentially choke demand and hiring, ricking a slide towards recession.

Apple was among the biggest losers in cash terms in Thursday’s trading as its shares fell by almost 9%, leaving it on track for its worst daily performance since the start of the COVID pandemic.

Concerns among shareholders were said to include the prospects for US price hikes when its products are shipped to the US from Asia.

Other losers included Tesla, down by almost 6% and Nvidia down by more than 6%.

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PM: It’s ‘a new era’ for trade and economy

Many retail stocks including those for Target and Footlocker lost more than 10% of their respective market values.

The European Union is expected to retaliate in a bid to put pressure on the US to back down.

The prospect of a tit-for-tat trade war saw the CAC 40 in France and German DAX fall by more than 3.4% and 3% respectively.

The FTSE 100, which is internationally focused, was 1.6% lower by the close – a three-month low.

Financial stocks were worst hit with Asia-focused Standard Chartered bank enduring the worst fall in percentage terms of 13%, followed closely by its larger rival HSBC.

Among the stocks seeing big declines were those for big energy as oil Brent crude costs fell back by 6% to $70 due to expectations a trade war will hurt demand.

The more domestically relevant FTSE 250 was 2.2% lower.

A weakening dollar saw the pound briefly hit a six-month high against the US currency at $1.32.

There was a rush for safe haven gold earlier in the day as a new record high was struck though it was later trading down.

Sean Sun, portfolio manager at Thornburg Investment Management, said of the state of play: “Markets may actually be underreacting, especially if these rates turn out to be final, given the potential knock-on effects to global consumption and trade.”

He warned there was a big risk of escalation ahead through countermeasures against the US.

Read more:
Trump tariff saga far from over
‘Liberation Day’ explained
What Sky correspondents make of Trump’s tariffs

Sandra Ebner, senior economist at Union Investment, said: “We assume that the tariffs will not remain in place in the
announced range, but will instead be a starting point for further negotiations.

“Trump has set a maximum demand from which the level of tariffs should decrease”.

She added: “Since the measures would not affect all regions and sectors equally, there will be winners and losers as in 2018 – although the losers are more likely to be in the EU than in North America.

“To protect companies in Europe from the effects of tariffs, the EU should not respond with high counter-tariffs. In any case, their impact in the US is not likely to be significant. It would be more efficient to provide targeted support to EU companies in the form of investment and stimulus.”

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British businesses issue warning over ‘deeply troubling’ Trump tariffs

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British businesses issue warning over 'deeply troubling' Trump tariffs

British companies and business groups have expressed alarm over President Donald Trump’s 10% tariff on UK goods entering the US – but cautioned against retaliatory measures.

It comes as Business Secretary Jonathan Reynolds launched a consultation with firms on taxes the UK could implement in response to the new levies.

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A 400-page list of 8,000 US goods that could be targeted by UK tariffs has been published, including items like whiskey and jeans.

On so-called “Liberation Day”, Mr Trump announced UK goods entering the US will be subject to a 10% tax while cars will be slapped with a 25% levy.

The government’s handling of tariff negotiations with the US to date has been praised by representative and industry bodies as being “cool” and “calm” – and they urged ministers to continue that approach by not retaliating.

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The latest numbers on tariffs

Business lobby group the CBI (Confederation of British Industry) said: “Retaliation will only add to supply chain disruption, slow down investment, and stoke volatility in prices”.

Industry body the British Retail Consortium (BRC) also cautioned: “Retaliatory tariffs should only be a last resort”.

‘Deeply troubling’

While a major category of exports, in the form of services – like finance and information technology (IT) – has been exempted from the tariffs, the impact on UK business is expected to be significant.

Mr Trump’s announcement was described as “deeply troubling for businesses” by the CBI’s chief executive Rain Newton-Smith.

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The Federation of Small Businesses (FSB) also said the tariffs were “a major blow” to small and medium companies (SMEs), as 59% of small UK exporters sell to the US. It called for emergency government aid to help those affected.

“Tariffs will cause untold damage to small businesses trying to trade their way into profit while the domestic economy remains flat,” the FSB’s policy chair Tina McKenzie said. “The fallout will stifle growth” and “hurt opportunities”, she added.

Companies will need to adapt and overcome, the British Export Association said, but added: “Unfortunately adaptation will come at a cost that not all businesses will be able to bear.”

Watch dealer and component seller Darren Townend told Sky News the 10% hit would be “painful” as “people will buy less”.

“I am a fan of Trump, but this is nuts,” he said. “I expect some bad months ahead.”

Industry body Make UK said the 25% tariffs on cars, steel and aluminium would in particular be devastating for UK manufacturing.

Cars hard hit

Carmakers are among the biggest losers from the world trade order reshuffle.

Auto industry body the Society of Motor Manufacturers and Traders (SMMT) said the taxes were “deeply disappointing and potentially damaging measure”.

“These tariff costs cannot be absorbed by manufacturers”, SMMT chief executive Mike Hawes said. “UK producers may have to review output in the face of constrained demand”.

The new taxes on cars took effect on Thursday morning, while the measures impacting car parts are due to come in on 3 May.

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Trump trade war: The blunt calculation that should have spared UK from reciprocal tariffs

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Trump trade war: The blunt calculation that should have spared UK from reciprocal tariffs

Economists immediately started scratching their heads when Donald Trump raised his tariffs placard in the Rose Garden on Wednesday. 

On that list he detailed the rate the US believes it is being charged by each country, along with its response: A reciprocal tariff at half that rate.

So, take China for example. Donald Trump said his team had run the numbers and the world’s second-largest economy was implementing an effective tariff of 67% on US imports. The US is responding with 34%.

Trump latest: UK considers tariff retaliation

How did he come up with that 67%? This is where things get a bit murky. The US claims it studied its trading relationship with individual countries, examining non-tariff barriers as well as tariff barriers. That includes, for example, regulations that make it difficult for US exporters.

However, the actual methodology appears to be far cruder. Instead of responding to individual countries’ trade barriers, Trump is attacking those enjoying large trade surpluses with the US.

A formula released by the US trade representative laid this bare. It took the US’s trade deficit in goods with each country and divided that by imports from that country. That figure was then divided by two.

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So, in the case of China, which has a trade surplus of $295bn on total US exports of $438bn, that gives a ratio of 68%. The US divided that by two, giving a reciprocal tariff of 34%.

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PM will ‘fight’ for deal with US

This is a blunt measure which targets big importers to the US, irrespective of the trade barriers they have erected. This is all part of Donald Trump’s efforts to shrink the country’s deficit – although it’s US consumers who will end up paying the price.

But what about the small number of countries where the US has a trade surplus? Shouldn’t they actually be benefiting from all of this?

Read more:
Trump tariff saga far from over
‘Liberation Day’ explained
What Sky correspondents make of Trump’s tariffs

That includes the UK, with whom the US has a surplus (by its own calculations) of $12bn. By its own reciprocal tariff formula, the UK should be benefitting from a “negative tariff” of 9%.

Instead, it has been hit by a 10% baseline tariff. Number 10 may be breathing a sigh of relief – the US could, after all, have gone after us for our 20% VAT rate on imports, which it takes issue with – but, by Trump’s own measure, we haven’t got off as lightly as we should have.

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