Connect with us

Published

on

The pound has hit its highest level against the US dollar since March 2022 after the chair of the Federal Reserve declared that “the time has come” for an interest rate cut.

Jay Powell’s remarks to the US central bank’s annual economic conference at Jackson Hole, Wyoming, did not specify when rate cuts would begin or how large they might be.

But financial markets and economists widely expect a quarter-point reduction in the Fed’s benchmark rate – the first since its hiking cycle began in 2022 – when its rate-setting committee next meets in mid-September.

Money latest: Warning £2,500 will be added to stamp duty ‘overnight’ in March

“The time has come for policy to adjust,” Mr Powell said.

“The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”

Should predictions prove accurate, the Fed will follow the European Central Bank and Bank of England in starting to adjust policy after sharp rises in interest rates to combat inflation.

More from Business

The seeds of price growth were sown when economies began to gradually reopen following the COVID pandemic but the pace rose substantially in the wake of Russia’s invasion of Ukraine, taking inflation to a 40-year high.

Inflation across Western economies has proved more stubborn to shake than many expected – with central banks anxious to avoid so-called secondary effects such as prices being stoked further by high wage increases.

Mr Powell said that the US jobs market was “no longer overheated”.

US Federal Reserve Board Chairman Jerome Powell
Image:
Fed chair Jay Powell. File pic: Reuters

The purpose of interest rate increases is to choke demand – helping price growth ease as a consequence.

Higher interest rates are generally supportive of a domestic currency.

A lack of guidance on how many cuts were likely across the rest of the year bolstered market predictions that several were on the cards before the end of 2024.

Please use Chrome browser for a more accessible video player

Bailey rules out rapid rate cuts

That pushed the US currency sharply down against a basket of international rivals.

The pound stood above $1.32 – more than a cent up on the day. It had stood at $1.30 earlier this week.

The gains are good for UK holidaymakers heading across the Atlantic as their pounds will go further if reflected in rates at the currency exchange.

Even the cost of servicing UK government debt dropped, with the yield on 10 year bonds down five basis points to 3.9%.

Stock markets put on some gains across Europe and in the US.

The FTSE 100 was 0.5% higher – building on earlier gains that were put down to expectations of Mr Powell’s remarks.

In New York the S&P 500 was more than 1% higher.

Read more from Sky News:
Energy price cap to rise from October amid winter fuel payment row
Consumers more optimistic about finances but not economy

The gains prompted warnings of caution in some quarters.

George Lagarias, chief economist at Forvis Mazars, said: “The immediate market reaction seems again to be one of unjustified exuberance.

“Despite the Fed’s lack of clarity regarding the pace of rate cuts, bond markets continue to price in four cuts this year.

“We believe investors should pace themselves in the next few months… for the Fed certainly will.”

Continue Reading

Business

WH Smith buyer ‘faces 12-month ban’ on mass shop closures

Published

on

By

WH Smith buyer 'faces 12-month ban' on mass shop closures

The new owner of WH Smith’s high street chain has effectively been barred from launching a wave of mass store closures for at least 12 months amid plans for rapid restructurings at two other retailers it owns.

Sky News has learnt that WH Smith would have the right to cancel a year-long transitional services agreement (TSA) put in place with Modella Capital – which struck a deal to acquire the business in March – if it launched a company voluntary arrangement (CVA) before the first anniversary of the transaction’s completion.

The clause in the TSA, which enables Modella Capital to continue using WH Smith’s systems after it takes ownership, is significant, according to retail insiders.

WH Smith agreed to sell its 480 high street shops to Modella in a £76m deal, ending 233 years of high street history.

Modella plans to rebrand the chain under the name TG Jones after it takes control.

In recent weeks, Sky News has revealed plans drawn up by Modella to launch CVAs at both Hobbycraft and The Original Factory Shop, which it has owned for nine and three months respectively.

Both of those restructuring processes have put significant numbers of stores at risk, and industry executives say that, over time, a sizeable part of the WH Smith high street estate could also be at risk.

More from Money

A spokesman for Modella said: “We have a number of exciting plans for the future of TGJones.

“A CVA is not on the agenda, as it is a solvent business.”

WH Smith, which will become a pure-play travel retailer once the Modella deal completes, declined to comment further ahead of the completion of the sale.

Continue Reading

Business

Hovis and Kingsmill-owners in talks about historic bread merger

Published

on

By

Hovis and Kingsmill-owners in talks about historic bread merger

The owners of Hovis and Kingsmill, two of Britain’s leading bread producers, are in talks about a historic merger amid a decades-long decline in the sale of supermarket loaves.

Sky News has learnt that Associated British Foods (ABF), the London-listed company which owns Kingsmill’s immediate parent, Allied Bakeries, and Hovis, which is owned by investment firm Endless, have been involved in prolonged discussions about a combination of the two businesses.

City sources said this weekend that the talks were ongoing, but that there was no certainty that a deal would be finalised.

Bankers are said to be working with both sides on the talks about a transaction.

A deal could be structured as an acquisition of Hovis by ABF, according to analysts, although details about the mechanics of a merger or the valuations attached to the two businesses were unclear this weekend.

ABF is also said to be exploring other options for the future of Allied Bakeries which do not include a deal with Hovis.

If completed, a merger would unite two of Britain’s best-known ambient food brands, with Allied Bakeries having been founded in 1935 by Willard Garfield Weston, part of the family which continues to control ABF.

More from Money

Hovis traces its history back even further, having been created in 1890 when Herbert Grime scooped a £25 prize for coming up with the name Hovis, which was derived from the Latin ‘Hominis Vis’ – meaning strength of man.

Persistent inflation, competition from speciality bread producers and shifting consumer habits towards lower-carb diets have combined to impair the bread industry’s financial health in recent decades.

The impact of the war in Ukraine on wheat and flour prices has been among the factors increasing inflationary pressures on bread producers, according to the most recent set of accounts for Hovis filed at Companies House last year.

The overall UK bakery market is said to be worth about £5bn in annual sales, with the equivalent of 11m loaves being sold each day.

The principal obstacle facing a merger of Allied Bakeries, which also owns the Sunblest and Allinson’s bread brands, and Hovis would reside in its consequences for competition in the UK market.

Warburtons, the family-owned business which is the largest bakery group in Britain, is estimated to have a 34% share of the branded wrapped sliced bread sector in the UK, with Hovis on 24% and Allied on 17%, according to industry insiders.

A merger of Hovis and Kingsmill would give the combined group a larger share of that segment of the market, although one source said Warburtons’ overall turnover would remain larger because of the breadth of its product range.

Nevertheless, reducing the number of major supermarket bread suppliers from three to two would be a test of the Competition and Markets Authority’s approach to such industry-reshaping mergers at a time when the watchdog is under intense government scrutiny.

Read more on Sky News:
Aston Martin in pay concern
Co-op ‘sorry’ over hacking
Mintago £6m funding boost

In January, the government removed the CMA chairman, Marcus Bokkerink, as part of a push to reorient Britain’s economic regulators around growth-focused objectives.

An industry insider suggested that a joint venture involving the distribution networks of Hovis and Kingsmill was a possible, although less likely, alternative to a full-blown merger of the companies.

They added that a combined group could benefit from up to £50m of cost savings from such a tie-up.

In its interim results announcement this week, ABF said the performance of Allied Bakeries had continued to struggle.

“Allied Bakeries continues to face a very challenging market,” it said.

“We are evaluating strategic options for Allied Bakeries against this backdrop and we expect to provide an update in [the second half of] 2025.”

In a separate presentation to analysts, ABF described the losses at Allied as unsustainable.

The company does not disclose details of Allied Bakeries’ financial performance.

Allied also owns Speedibake, an own-label bread manufacturer.

Hovis has been owned by Endless, a prominent investor in British businesses, since 2020, having previously been owned by Mr Kipling-maker Premier Foods and the Gores family.

At the time of the most recent takeover, High Wycombe-based Hovis employed about 2,700 people and operated eight bakery sites and its own flour mill.

Hovis’s current chief executive, Jon Jenkins, is a former boss of Allied Milling and Baking.

This weekend, ABF and Endless both declined to comment.

Continue Reading

Business

Struggling Aston Martin steers into fresh pay controversy

Published

on

By

Struggling Aston Martin steers into fresh pay controversy

Aston Martin is steering a path towards a twin-pronged pay row with shareholders as it grapples with the impact of President Trump’s tariffs on car manufacturers.

Sky News can reveal that the influential proxy voting adviser ISS is urging investors to vote against both of Aston Martin Lagonda Global Holdings’ remuneration votes at next week’s annual general meeting.

The pay policy vote, which is binding on the company, has attracted opposition from ISS because it proposes significant increases to potential bonus awards to Adrian Hallmark, the company’s new chief executive.

“Concerns are raised regarding the increased bonus maximums, which are built upon competitively[1]positioned salary levels and do not appear appropriate given the company’s recent performance,” ISS said in a report to clients.

More from Money

Aston Martin is also facing a meaningful vote against its pay report for last year – which is on an advisory basis only – because of the salaries awarded to Mr Hallmark and other executive directors.

The company’s shares have nearly halved in the last year, and it now has a market value of little more than £660m.

Despite the ISS recommendation, Aston Martin will win the vote by virtue of chairman Lawrence Stroll’s 33% shareholding.

The luxury car manufacturer has had a torrid time as a public company and now faces the headwinds of President Trump’s tariffs blitz.

This week it said it would limit exports to the US to offset the impact of the policy.

Aston Martin did not respond to a request for comment ahead of next Wednesday’s AGM.

Continue Reading

Trending