Full story: BMW U-turns on plans to move electric Mini production from UK to China
Kalyeena Makortoff
BMW will unveil plans today to build its next-generation electric Mini in Oxford after securing a government funding package, in a move that will secure 4,000 jobs.
The decision by the German carmaker to invest in the Oxford plant is the result of “extensive” engagement with the UK government, according to the Department for Business and Trade. It is understood the commitment was made after the government promised tens of millions of taxpayer funds.
It marks a reversal of fortunes for the UK, after BMW last year said it would make most of its electric Minis in China, citing difficulty in producing electric vehicles and cars with internal combustion engines at the Cowley plant.
The U-turn was hailed by government ministers including the chancellor, Jeremy Hunt, who said BMW’s investment was “a huge vote of confidence in this country as a global leader in electric vehicles”.
Hunt said:
“This industry is motoring, creating thousands of jobs and powering our green transition.”
The government said BMW’s move represented a “multimillion-pound investment” but did not disclose a figure.
The carmaker is expected to provide further details on the investment, including the total sum, later on Monday, with the taxpayer also providing government funding (previously reported at £75m).
More here:
Key events
The EC also forecasts that inflation across Europe will remain above the official target this year, and in 2024.
Its Summer Forecasts, just released, predict:
Euro area inflation:
2023: 5.6%
2024: 2.9%
EU inflation:
2023: 6.5%
2024: 3.2%
The European Central Bank’s target is to have annual inflation close to 2%, but consumer prices were rising at 5.3% per year in August.
The EC predicts that retail energy prices will continue to fall this year, but rise in 2024, driven by higher oil prices.
The reported collapse of Doug Putman’s take-over of a number of Wilco stores appears to be a further blow for Wilko employees, says Jeremy Whiteson, restructuring and insolvency partner at city law firm Fladgate:
One of the primary concerns may be the implication of the TUPE regulations. In simple terms, these have the effect of transferring contracts of employment (with all outstanding liabilities) to a buyer who carries on a similar business. They are designed to stop unscrupulous business buyers sacking staff or changing employment terms without compensating staff. However, they may also have the effect that a buyer of a large part of the Wilco business may be forced to take on employees in warehousing, office and other central functions- in addition to staff at stores they want to take. That cost may make the acquisition unviable. With bitter irony, the effect of regulations designed to protect employees could have the effect of making a rescue which saves jobs less likely.
There are reports of ongoing discussion with other bidders. If successful bidders want a smaller number of sites, it may be possible to structure the deal so that the TUPE regulations do not transfer central employees leaving the position of warehouse, office and other central staff will be left very vulnerable. That is not a desirable outcome but may be all that is possible from this point.
Another hurdle, though, is that some major suppliers want their debts repaid now in order to continue to guarantee supplying Wilko’s stores.
Whiteson adds:
If these goods were supplied under a long terms contract this behaviour by the suppliers, if correctly reported, may fall foul of new legislation introduced during the pandemic period to prevent termination of supply on insolvency.
Those new rules were designed to protect business rescues being torpedoed by suppliers who demanded payment of arrears or other sums on a customer’s insolvency. However, the new rules have not been fully tested through the courts and contain ambiguities which may be exposed on their application to particular cases.
The European Commission has also cut its forecasts for growth across the EU, and in the eurozone.
In its new summer forecasts, it says:
The EU economy continues to grow, albeit with reduced momentum.
The eurozone is now forecast to only expand by 0.8% this year, down from 1.1% forecast in the spring forecasts, and by 1.3% in 2024 (down from 1.6%).
GDP across the whole EU is also foreccast to only rise by 0.8%, down from 1% expected before, and by 1.4% in 2024, (down from 1.7%).
Paolo Gentiloni, EU Commissioner for Economy, says:
The EU avoided a recession last winter – no mean feat given the magnitude of the shocks that we have faced. This resilience, most evident in the strength of the labour market, is a testimony to the effectiveness of our common policy response.
However, the multiple headwinds facing our economies this year have led to a weaker growth momentum than we projected in the spring. Inflation is declining, but at differing speeds across the EU. And Russia’s brutal war against Ukraine continues to cause not only human suffering but economic disruption. Yet we must have trust and confidence in the future of the European economy. There is much that we can do to support sustained and sustainable growth. The effective implementation of national recovery and resilience plans remains a key priority.
Prudent, investment-friendly fiscal policies should be pursued, in sync with the ongoing efforts of our central banks to tame inflation. Lastly, we must work with determination to conclude an agreement on the reform of our fiscal rules by the end of the year.
EC: German economy will shrink this year
Newsflash: The European Commission has predicted that Germany’s economy will shrink this year.
In its updated economic forecasts, just released, the EC forecasts that German GDP will fall by 0.4% this year, down from a previous forecast of 0.2% growth.
The EC points out that Germany has been hit “particularly hard’ by the energy price shock following Russia’s invasion of Ukraine, saying”:
Since January 2023, confidence indicators for manufacturing have been on a downward trend. This was particularly pronounced in the energy-intensive industries.
That would make Germany the worst-performing of the six largest EU members.
The economy is expected to grow next year, but by less than expected.
The EC says:
In 2024, real GDP is forecast to rebound by 1.1% driven by a recovery in consumption. This is less than projected in the spring due to a slowdown in the construction sector, as well as to less dynamic exports growth.
Growth forecast for the 6 largest EU economies for 2023 (%):
🇪🇸 2.2
🇫🇷 1.0
🇮🇹 0.9
🇳🇱 0.5
🇵🇱 0.5
🇩🇪 -0.4🇪🇺 1.4
Summer #ECForecast ↓
— European Commission (@EU_Commission) September 11, 2023
The GMB union say the attempted Wilko rescue deal with Putman Investments has now “run out of time”, and blamed Wilko’s owners for the retailer’s collapse.
Nadine Houghton, national officer for the GMB union, said:
“Due to the incompetency of Wilko bosses the deal has now run out of time.
“If the owners had been transparent and honest, thousands of loyal Wilko workers may not now be in this awful position.
“This is another devastating blow for them, who have seen their lives and futures gambled on the whims of millionaires and billionaires.
“Wilko bosses should be ashamed that this once great family business now appears to be beyond saving.”
The collapse of the Wilko rescue deal proposed by the owner of HMV today will lead to more vacancies on the high street, fears Susannah Streeter, head of money and markets at Hargreaves Lansdown:
It leaves the future of more than 10,000 workers highly unclear, with the administrators who currently run Wilko likely to announce further job losses and store closures this week.
She explains:
‘’Wilko faces disappearing from the high street after a rescue bid to save the name and a vast chunk of stores appears to have collapsed. This is the news thousands of staff had been fearing, and with hopes of a white knight rescue receding into the distance, they are staring at the prospect of redundancy.
B&M has already swooped into the bargain bin and picked up 51 stores from the administrators PwC and it’s likely that other value chains may still be hovering, ready to hoover up a handful of other outlets in cut-price deals. There is a chance that the brand itself may survive but as a range on another retailer’s shelves, and further deals are rumoured to potentially be announced this week. But it looks like the famous red and white shopfronts will be dismantled and Wilko will join Woolworths in the high street history books.
The ditched deal could not come at a worse time for the high street, Streeter adds, amid the cost-of-living crisis and competition from online.
Wilko’s demise comes amid heightened warnings about the long-term decline of town and city centres, with shoplifting on the increase and boarded up outlets now commonplace.
Dame Sharon White, the chair of John Lewis is the latest to warn about the increase in anti-social behaviour and has called for a Royal Commission to look at ways of solving the problems (see earlier post for details).
Rents are forecast to rise more than four times as fast as house prices between the end of 2022 and the end of 2026, according to estate and lettings agent Hamptons.
Hamptons estimate today that rents across Britain could rise by 25% over the four-year period, compared with 5.5% growth in house prices, estate and lettings agent Hamptons predicts.
As mortgage rates gradually fall and households benefit from real income growth, Hamptons said it expects house price falls to come to a halt in 2024, with growth picking up in 2025.
2025 could be the year when a new housing market cycle starts, Hamptons suggests.
EA @Hamptons1869 PREDICTS – Rents will rise 25% over the next 4ys, outpacing the modest 5.5% house price growth across Britain during the same period with London & the North expected to see the most growth. Rates will determine this or not https://t.co/6XxZUFYVch
— Emma Fildes (@emmafildes) September 11, 2023
Oxford Mini plant saved with £600m UK electric car investment
BMW will spend £600m to upgrade its factory in Oxford to electric production of the Mini, my colleague Jasper Jolly reports.
The plant will start production of the electric Mini Cooper and the new electric Mini Aceman crossover SUV, lifting a threat to the future of Mini’s production in the UK.
Wilko rescue hopes fade as talks with HMV owner collapse
Sadly, it does appear that a last-ditch attempt by the owner of HMV to strike a rescue deal for stricken retailer Wilko has failed.
Administrators for the high street chain had been in discussions with Doug Putman, who owns the entertainment retailer, over a deal to buy around 200 Wilko shops. That would have saved around half of Wilko’s stores and secured the future of thousands of jobs has collapsed.
However, those talks have now collapsed (as flagged earlier), intensifying fears over the future of thousands of jobs.
In a statement, Mr Putman says:
“It is with great disappointment that we can no longer continue in the purchase process for Wilko having worked with administrators and suppliers over several weeks to seek a viable way to rescue it as a going concern.”
Sky News has reported that administrators from PwC are now in talks with Poundland over a potential deal to offload about 100 stores.
Wilko, which employed around 12,500 staff, had already announced a £13 million deal to sell 51 shops to B&M, although the rival discounter has not agreed to take on Wilko workers as part of the deal.
Administrators have already announced more than 1,600 redundancies at Wilko in recent weeks.
We should hear details from BMW about its new investment in its Oxford plant later this morning.
But in the meantime, here’s some of the other City news today:
The Restaurant Group has agreed to sell its Frankie & Benny’s and Chiquito brands to Cafe Rouge owner Big Table Group. Both brands are loss-making, so The Restaurant Group is actually paying Big Table £7.5m to take them off its hands.
The move will help Restaurant Group to boost its profit margins and cut debt – sending its shares up 6% this morning.
Housebuilder Vistry has announced a new focus on affordable housing. It will merge its housebuilding operations (which has suffered more from rising interest rates) with its partnerships business
CEO Greg Fitzgerald explains:
“Delivering on the acute social need for housing across the country and increasing the availability of affordable, sustainable homes is at the core of the Group’s social purpose and vision, and I look forward to delivering upon this exciting and unique opportunity for Vistry.”
