It used to be the Bank of England’s job to look after the pound, but as consumers move on they’ll find it doesn’t stretch very far, says ALEX BRUMMER
You have to go back in time to the start of the pandemic to see the pound in such bad shape.
It used to be the Bank of England’s job to look after the pound, but when consumers head back out this spring, they’ll find that at $1.23 it doesn’t go very far.
The Bank’s rhetoric of collapsing real incomes and recession left the pound plummeting. The silver lining is that a cheaper pound, if maintained, will make UK exports more competitive. But it also increases the cost of raw materials and imported goods that are not currently needed.
Broken down: You have to go back to the start of the pandemic to see the pound in such bad shape
It is not just the pound sterling or the Bank’s reputation that is currently under threat.
Any traveler using British Airways, the “world’s favorite airline”, will be aware of the dangers.
Phone lines are seldom answered and Avios points (airline miles) are useless unless flying into New York on Christmas Day.
Worse still (in my case), a request to be at the airport four hours before a flight departed was followed by a five hour delay. The meal consisted of a soggy breakfast served as an afternoon tea.
The first quarter results of the parent company IAG do not reassure passengers or investors. Capacity has recovered to 65% of pre-Covid levels, but that was not enough to significantly reduce a £700million loss in the first quarter. The total deficit since the start of the pandemic stands at £8.5bn.
Managing director Luis Gallego promises a return to profit in the current period. It is admitted, without apology, that the focus is on “improving operations and the customer experience”.
Why the unfortunate Gallego and his sidekick Sean Doyle were so slow to recognize the damage to the brand is a mystery.
BA and other UK-based carriers have not received the vast cash injections provided by the EU and US government during the pandemic. Airlines had to line up for Bank of England loans with everyone else. The consequence has been painful with current borrowing standing at £16.1bn. It’s heavy because of soaring interest rates.
BA may now be part of a bigger group, but have suffered a catastrophic loss of pride for what they do.
Lord King, one of Mrs Thatcher’s favorite tycoons, must turn her grave.
Running defense companies isn’t the easiest job in the age of political correctness.
No one wants conflict, but BAE Systems noted in its AGM update that Ukraine and rising geopolitical tensions mean many countries buying advanced British defense equipment are increasing spending.
BAE’s order book is quickly filling with work for the F-35 cybersecurity fighter for the US Navy.
The biggest pot of gold may be Germany’s vow to increase defense spending.
As a major UK exporter, this all bodes well, not just for BAE (shares are up 40% this year), but for the whole of Britain’s booming high-tech defense sector.
It is imperative that UK security technology champions Ultra Electronics, Meggitt and Inmarsat are not traded for paper deals on R&D and jobs. Selling out Britain’s wartime defense leaders would be a dereliction of duty.
Kwasi and Boris are you listening?
With Terry Leahy incumbent chairman of private equity firm Morrisons, it’s no surprise that she was the first to emerge as a potential savior for McColl’s.
As chief executive of Tesco, Leahy pioneered the move of Britain’s big grocers to convenience stores two decades ago when he bought the T&S chain’s 850 stores for £530million.
When local shopping became fashionable again, Sainsbury’s, M&S with Simply Food and Asda followed.
Morrisons took a chance but most stores were then closed.
Big private equity buyers abound. The Asda-backed TDR, the highly ambitious Issa brothers, have joined the fray.
Morrisons owner Clayton, Dubilier & Rice may return and that may not exhaust the cast list.
The buyer would still be at a disadvantage to Tesco, which controls cash and carry champions Booker, with much of the robust tobacco trade.
But there can be few better opportunities for ambitious grocers.