Chancellor Jeremy Hunt ‘wary’ of new subsidies as companies look to US for government support

Published

2 years ago

April 16, 2023

admin

One of Britain’s only battery producers is considering shifting manufacturing from the UK to the US to benefit from American subsidies, Sky News can reveal.

AMTE Power, a Thurso-based firm with a history going back to the very earliest days of lithium ion batteries, told Sky News it is now very difficult to justify keeping production in the UK given the incentives being offered to companies to make green technology in the US.

It comes after America introduced an unprecedented set of subsidies for green companies as part of its multibillion dollar Inflation Reduction Act (IRA).

However, the Chancellor Jeremy Hunt told Sky News that Britain should be wary of any new subsidies, warning that they could undermine the economy and might even trigger a protectionist trade war.

AMTE, whose history includes having made some of the world’s very first lithium ion batteries for military customers in the 1990s, has plans for three new special types of cells: one for high-performance vehicles, one for energy storage and one very long-lasting battery.

The business is already making batches of the cells in its Thurso base but has plans to build a bigger plant – a gigafactory, as large battery plants are sometimes called – in Dundee. But the IRA has completely changed the calculus, according to chief executive Alan Hollis.

“In the Inflation Reduction Act, the typical support for the running costs of a gigafactory would be between 30 and 50% of the operating costs,” he said. “The answer is perfectly clear [about] where the most economic place for the gigafactory will be.

“We don’t have a competitive environment in the UK at this moment in time.”

Several large and small companies, including car giant Volkswagen, have announced plans to open new battery production in the US. And since the IRA covers all green technologies there are fears that other UK businesses, focused on hydrogen, carbon capture and wind power among others, might relocate.

AMTE’s warning is of particular symbolism, however, since some of the world’s very first lithium ion batteries were made at its Thurso plant.

Mr Hollis said AMTE was now actively considering shifting its production overseas.

“We are a home-grown UK business,” he said. “We see ourselves as a UK company. We’ve developed the technology here. We want to commercialise the technology here and we want to manufacture the product here.

“But we have to ask the question if the subsidies are available overseas.”

The warning follows the implosion of the great hope for the UK battery sector, BritishVolt, which faced administration and whose plans for a gigafactory in Blythe remain in doubt.

Mr Hollis said: “Unless we make the UK a competitive place for battery manufacturer, we probably won’t end up with a battery manufacturing industry in the UK. And the consequences of that are clear for the automotive industry and for the energy storage sector as well.”

However, the chancellor, who discussed the Inflation Reduction Act with his international counterparts in Washington over the past week, signalled that he had no plans for fresh subsidies.

“If you depend entirely on subsidies, there’s a risk,” he told Sky News. “First of all it’s wasteful to spend money subsidising factories that would have been built anyway. Secondly, when you take subsidies away, you can end up with a business that’s not viable.”

“So our model in the UK is a combination of some support to get businesses off the ground and then some market regulatory changes that mean those businesses have a long-term future and investment incentives through the tax system.”

Asked whether he feared the IRA would lead to more protectionism around the world, Mr Hunt said: “We can be sensible and pragmatic and develop supply chain sources through our friends – sometimes through ourselves – and continue to benefit from sharing and benefiting mutually from technology.

“If we were to turn our backs on free trade that will be a disaster for the world economy. We will enter into a dark ages period.”

The chancellor intends to reveal more details of his response to the US Inflation Reduction Act at the Autumn Statement later on this year. However, many businesses are already starting to make plans to shift production.

“The time to be thinking about making investments is now; it’s not in six months’ time. It’s now. Our competitors are getting significant advantage from their governments… We’re struggling to raise the funding and to get the government support.

“And so that ideally, what we need is a joined-up end-to-end industrial strategy from the government that enables the creation of a competitive environment for the UK battery industry here in the UK. That then enables us to become competitive and create jobs, drive the investment and achieve our green goals.”

Business

Former Tory minister Heaton-Harris eyes top job at football regulator

Published

22 hours ago

November 16, 2024

admin

Former Tory minister Heaton-Harris eyes top job at football regulator

A former Conservative cabinet minister has thrown his hat into the ring to become the inaugural chair of Britain’s new independent football regulator.

Sky News has learnt that Chris Heaton-Harris, who stood down as an MP at July’s general election, is among those who applied for the role ahead of a deadline on Friday.

Mr Heaton-Harris is himself a qualified football referee who has officiated at matches for decades.

A former Northern Ireland secretary and chief whip under Rishi Sunak and Boris Johnson respectively, he said in 2022 of his part-time career as a football official: “I took a [refereeing] course and that was it, I’ve been going ever since.

“Football has done wonders for me throughout my life so I would recommend it to everybody.”

Mr Heaton-Harris is among a large number of people who have applied for the role of chair at the Independent Football Regulator (IFR), according to officials.

A publicly available timetable for the search says that interviews for the £130,000-a-year post will end on 11 December, with an appointment expected in the new year.

It is the second time that the government has embarked on a search for a chair for the IFR after an earlier hunt was curtailed by the general election.

The role will be based at the watchdog’s new headquarters in Manchester and will require a three-day-a-week commitment.

The Football Governance Bill had its second reading in the House of Lords this week, as part of a process that will represent the most fundamental shake-up in the oversight of English football in the game’s history.

The Labour administration has dropped a previous stipulation that the regulator should have regard to British foreign and trade policy when determining the appropriateness of a new club owner.

The IFR will monitor clubs’ adherence to rules requiring them to listen to fans’ views on issues including ticket pricing, while it may also have oversight of the parachute payments made to clubs in the years after their relegation from the Premier League.

The top flight has issued a statement expressing reservations about the regulator’s remit, while it has been broadly welcomed by the English Football League.

The IFR’s creation will come with the Premier League embroiled in a civil war over Manchester City‘s legal battles emanating from allegations that it breached the competition’s financial rules.

Next week, the 20 Premier League clubs will meet for a lengthy shareholder meeting, with a vote on amended Associated Party Transaction rules hanging in the balance.

The league needs 14 clubs to vote in favour for the rule changes to be passed.

Contrary to earlier expectations, however, a detailed discussion on a financial distribution agreement between the Premier League and EFL is unlikely to be on the agenda.

A Department for Culture, Media and Sport spokesperson said: “The process for recruiting the Independent Football Regulator chair is under way but no appointment decisions have been made.

“We do not comment on speculation.”

This weekend, Mr Heaton-Harris could not be reached for comment.

Business

Pizza Hut UK hunts buyer amid Budget tax hike crisis

Published

1 day ago

November 16, 2024

admin

Pizza Hut UK hunts buyer amid Budget tax hike crisis

Pizza Hut’s biggest UK franchisee has begun approaching potential bidders as it scrambles to mitigate the looming impact of tax hikes announced in last month’s Budget.

Sky News has learnt that Heart With Smart (HWS), which operates roughly 140 Pizza Hut dine-in restaurants, has instructed advisers to find a buyer or raise tens of millions of pounds in external funding.

City sources said this weekend that the process, which is being handled by Interpath Advisory, had got under way in recent days and was expected to result in a transaction taking place in the next few months.

HWS, which was previously called Pizza Hut Restaurants, employs about 3,000 people, making it one of the most significant businesses in Britain’s casual dining industry.

It is owned by a combination of Pricoa and the company’s management, led by chief executive Jens Hofma.

They led a management buyout reportedly worth £100m in 2018, with the business having previously owned by Rutland Partners, a private equity firm.

One source suggested that as well as the talks with external third parties, it remained possible that a financing solution could be reached with its existing backers.

HWS licenses the Pizza Hut name from Yum! Brands, the American food giant which also owns KFC.

Insiders suggested that the increases to the national living wage and employers’ national insurance contributions (NICs) unveiled by Rachel Reeves would add approximately £4m to HWS’s annual costs – equivalent to more than half of last year’s earnings before interest, tax, depreciation and amortisation.

One added that the Pizza Hut restaurants’ operation needed additional funding to mitigate the impact of the Budget and put the business on a sustainable financial footing.

The consequences of a failure to find a buyer or new investment were unclear on Saturday, although the emergence of the process comes amid increasingly bleak warnings from across the hospitality industry.

Last weekend, Sky News revealed that a letter co-ordinated by the trade body UK Hospitality and signed by scores of industry chiefs – including Mr Hofma – told the chancellor that left unaddressed, her Budget tax hikes would result in job losses and business closures within a year.

It also said that the scope for pubs and restaurants to pass on the tax rises in the form of higher prices was limited because of weaker consumer spending power.

That was followed by a similar letter drafted by the British Retail Consortium this week which also warned of rising unemployment across the industry, underlining the Budget backlash from large swathes of the UK economy.

Even before the Budget, hospitality operators were feeling significant pressure, with TGI Fridays collapsing into administration before being sold to a consortium of Breal Capital and Calveton.

Sky News recently revealed that Pizza Express had hired investment bankers to advise on a debt refinancing.

HWS operates all of Pizza Hut’s dine-in restaurants in Britain, but has no involvement with its large number of delivery outlets, which are run by individual franchisees.

Accounts filed at Companies House for HWS4 for the period from 5 December 2022 to 3 December 2023 show that it completed a restructuring of its debt under which its lenders agreed to suspend repayments of some of its borrowings until November next year.

The terms of the same facilities were also extended to September 2027, while it also signed a new 10-year Pizza Hut franchise agreement with Yum Brands which expires in 2032.

“Whilst market conditions have improved noticeably since 2022, consumers remain challenged by higher-than-average levels of inflation, high mortgage costs and slow growth in the economy,” the accounts said.

It added: “The costs of business remain challenging.”

Pizza Hut opened its first UK restaurant in the early 1970s and expanded rapidly over the following 15 years.

In 2020, the company announced that it was closing dozens of restaurants, with the loss of hundreds of jobs, through a company voluntary arrangement (CVA).

At that time, it operated more than 240 sites across the UK.

Mr Hofma and Interpath both declined to comment.

Business

UK economy grows by 0.1% between July and September – slower than expected

Published

2 days ago

November 15, 2024

admin

UK economy grows by 0.1% between July and September - slower than expected

The UK economy grew by 0.1% between July and September, according to the Office for National Statistics (ONS).

However, despite the small positive GDP growth recorded in the third quarter, the economy shrank by 0.1% in September, dragging down overall growth for the quarter.

The growth was also slower than what had been expected by experts and a drop from the 0.5% growth between April and June, the ONS said.

Economists polled by Reuters and the Bank of England had forecast an expansion of 0.2%, slowing from the rapid growth seen over the first half of 2024 when the economy was rebounding from last year’s shallow recession.

And the metric that Labour has said it is most focused on – the GDP per capita, or the economic output divided by the number of people in the country – also fell by 0.1%.

Reacting to the figures, Chancellor of the Exchequer Rachel Reeves said: “Improving economic growth is at the heart of everything I am seeking to achieve, which is why I am not satisfied with these numbers,” she said in response to the figures.

“At my budget, I took the difficult choices to fix the foundations and stabilise our public finances.

“Now we are going to deliver growth through investment and reform to create more jobs and more money in people’s pockets, get the NHS back on its feet, rebuild Britain and secure our borders in a decade of national renewal,” Ms Reeves added.

The sluggish services sector – which makes up the bulk of the British economy – was a particular drag on growth over the past three months. It expanded by 0.1%, cancelling out the 0.8% growth in the construction sector

The UK’s GDP for the the most recent quarter is lower than the 0.7% growth in the US and 0.4% in the Eurozone.

The figures have pushed the UK towards the bottom of the G7 growth table for the third quarter of the year.

It was expected to meet the same 0.2% growth figures reported in Germany and Japan – but fell below that after a slow September.

The pound remained stable following the news, hovering around $1.267. The FTSE 100, meanwhile, opened the day down by 0.4%.

The Bank of England last week predicted that Ms Reeves’s first budget as chancellor will increase inflation by up to half a percentage point over the next two years, contributing to a slower decline in interest rates than previously thought.

Announcing a widely anticipated 0.25 percentage point cut in the base rate to 4.75%, the Bank’s Monetary Policy Committee (MPC) forecast that inflation will return “sustainably” to its target of 2% in the first half of 2027, a year later than at its last meeting.

The Bank’s quarterly report found Ms Reeves’s £70bn package of tax and borrowing measures will place upward pressure on prices, as well as delivering a three-quarter point increase to GDP next year.