Channel 4 is no stranger to privatisation talk – but this feels different

Published

4 years ago

June 18, 2021

admin

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”.

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.

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.

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.

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.

Business

Trump trade war escalation sparks global market sell-off

Published

1 day ago

April 3, 2025

admin

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.

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%.

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.

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.”

Business

British businesses issue warning over ‘deeply troubling’ Trump tariffs

Published

1 day ago

April 3, 2025

admin

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.

Money blog: Pension top-up deadline days away

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.

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.

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.

Business

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

Published

1 day ago

April 3, 2025

admin

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.

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%.

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?

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.