Government set to officially scrap caps on bankers’ bonuses
The government is poised to confirm that it is to scrap caps on bankers’ bonuses, almost a decade after the UK was forced to implement the legislation by the EU.
The government has long said it plans to scrap the legislation – and former chancellor George Osborne even attempted to overturn it at the European court of justice – which limits bonuses to twice base pay for employees of banks, building societies and investment firms.
The imminent announcement, first reported by the Financial Times, follows a consultation earlier this year with the government claiming that lifting the ban will increase its aim to increase the attractiveness and competitiveness of the City of London in a post-Brexit market.
Last October, chancellor Jeremy Hunt said he would press on with plans to scrap the legislation, after he replaced Kwasi Kwarteng, who had announced the intention to get rid of it in the run-up to his disastrous mini-budget.
Hunt defended his decision, saying that the policy had merely increased fixed salaries to make up for lower bonuses.
The cap emerged as part of changes introduced after the 2007-08 banking crash, and aimed to stamp out a bonus culture blamed for encouraging short-term profits over longer-term stability.
The hope was that, with less of an individual’s pay riding on performance, there would be a lower incentive for risky behaviour.
Key events
JP Morgan boss Jamie Dimon has accused central banks of getting their forecasts “100% dead wrong” about 18 months ago, adding that this should prompt some humility about the outlook for next year.
Dimon, speaking on a panel at the Future Investment Initiative in Saudi Arabia, expressed doubts that central banks and governments around the world can manage the economic impact of rising inflation and allowing global growth.
“Fiscal spending is more than it’s ever been in peacetime and there’s this omnipotent feeling that central banks and governments can manage through all this stuff. I am cautious about what will happen next year.”
Dimon compared the current situation to the high-spending global economy of the 1970s, when there was a lot of wastage, and brushed off the impact of further rate hikes.
“I don’t think it makes a piece of difference whether rates go up 25 basis points or more,” he said. “Whether the whole curve goes up 100 basis points, be prepared for it. I don’t know if it’s going to happen.”
Government set to officially scrap caps on bankers’ bonuses
The government is poised to confirm that it is to scrap caps on bankers’ bonuses, almost a decade after the UK was forced to implement the legislation by the EU.
The government has long said it plans to scrap the legislation – and former chancellor George Osborne even attempted to overturn it at the European court of justice – which limits bonuses to twice base pay for employees of banks, building societies and investment firms.
The imminent announcement, first reported by the Financial Times, follows a consultation earlier this year with the government claiming that lifting the ban will increase its aim to increase the attractiveness and competitiveness of the City of London in a post-Brexit market.
Last October, chancellor Jeremy Hunt said he would press on with plans to scrap the legislation, after he replaced Kwasi Kwarteng, who had announced the intention to get rid of it in the run-up to his disastrous mini-budget.
Hunt defended his decision, saying that the policy had merely increased fixed salaries to make up for lower bonuses.
The cap emerged as part of changes introduced after the 2007-08 banking crash, and aimed to stamp out a bonus culture blamed for encouraging short-term profits over longer-term stability.
The hope was that, with less of an individual’s pay riding on performance, there would be a lower incentive for risky behaviour.
Spotify bounced back to profit after beating estimates on new subscriber gains and reaping the rewards of a cost-cutting drive, including paring back its podcasting ambitions, including ending an exclusive deal with Prince Harry and Meghan Markle.
Spotify, which enjoyed a share price bump of 5% as investors welcomed its better-than-expected third quarter results, reported an operating profit of €32m.
It is the first quarterly operating profit the company has managed since 2021.
The company, which reported a €228m loss for the same period last year, added 4m paying subscribers across the quarter – two million ahead of its guidance.
In total, Spotify now has 226m paid premium subscribers globally, and has forecast ending the year with 235m.
Total monthly active users grew by 26% year-on-year to 574m, with the company expecting to break 601m by the end of the fourth quarter.
Total revenues grew by 11% year-on-year to €3.4bn, again exceeding guidance.
In July, Spotify announced a range of price rises in its premium plan in a number of companies including the US.
Operating expenses fell 13% year-on–year as the company reaped the benefits of a cost cutting drive, as it pared back its podcasting operation, including ending its exclusive deal with Prince Harry and Meghan Markle.
The streaming company laid off 200 employees in June, having previously cut 600 staff in January.
The CBI has said that UK manufacturers cut employee numbers for the first time in nearly three years as output contracted in the quarter to October, according to the business trade body’s latest industrial trends survey.
The embattled Confederation of British Industry (CBI), which was dealt another blow after business secretary Kemi Badenoch turned down an invitation to speak at its annual conference, said that its latest survey for the quarter to October showed that the “red lights are flashing” in the UK manufacturing industry.
Anna Leach, deputy chief economist at the lobby group, said that the chancellor needs to use November’s autumn budget statement to reinvigorate the sector by encouraging investment and skills development.
“The warning lights are flashing red in our latest manufacturing survey, with business sentiment deteriorating, output volumes falling and manufacturers becoming more cautious over their employment and investment plans.
The survey, which is based on the responses of 253 manufacturing firms, found that the numbers employed fell marginally in the three months to October, the first time since January 2021.
It also found that output volumes declined in 11 of the 17 manufacturing sub-sectors, driven by lower volumes in the chemicals, metal products, building materials and furniture & upholstery sub-sectors.
However, manufacturers expect output volumes to return to growth over the next three months.
UK private sector output declines for third month running in October, as the economy continues to “skirt” recession
The UK’s latest purchasing managers’ index (PMI), conducted by S&P and the Chartered Institute of Procurement and Supply, registered declines in both manufacturing and services sectors.
The UK recorded a combined PMI of 48.6 last month – anything under 50 indicates contraction – a slight improvement on the 48.5 recorded in September.
Chris Williamson, chief business economist at S&P global market intelligence, said that the UK economy continues to “skirt with recession”.
The UK economy continued to skirt with recession in October, as the increased cost of living, higher interest rates and falling exports were widely blamed on a third month of falling output. Gloom about the outlook has intensified in the uncertain economic climate, boding ill for output in the coming months. A recession, albeit only mild at present, cannot be ruled out.
The figures show that the manufacturing sector is showing the steepest rate of decline, at 45.2, with a reduction in output for the eighth consecutive month – the longest streak since 2008/9.
Service providers showed only a marginal fall in business activity in October.
“This supports our view that a mild recession is underway and that the Bank of England has finished hiking interest rates,” said Ruth Gregory, deputy chief UK economist at Capital Economics.
Earlier this morning, S&P published PMI figures showing that the eurozone suffered its worst private sector performance in almost three years.
Worst is yet to come on household energy debts, warns British Gas boss
Another tough winter of high energy bills and the continuing impact of the cost-of-living crisis s stretching household budgets to the limit, according to the head of Centrica, the parent of British Gas.
“My worry is that the worst is still to come,” said Chris O’Shea, chief executive, in an interview with Bloomberg. “We are seeing direct debits being cancelled. We are seeing people struggling.”
O’Shea said that higher rents, mortgage costs and everyday living expenses such as supermarket shopping were adding to the strain on household budgets.
On 1 October, the price cap set by energy regulator Ofgem was reduced to £1,834 a year, the first time it dropped below the £2,000 mark since April 2022.
However, it is forecast to climb again to £1,976 in the first three months of next year, according to analysts at Investec – almost double the level before Russia invaded Ukraine.
Earlier this month, Ofgem said it is considering a one-off increase to the price cap to reduce the risk of suppliers going bust, as customer energy debt hits a record £2.6bn.
Barclays in cost cutting drive after profits fall
Kalyeena Makortoff
Our banking correspondent Kalyeena Makortoff writes:
Barclays is drawing up fresh cost-cutting plans after a slowdown across its investment bank and concerns over a rise in customer defaults led to a slight drop in third-quarter profits.
The lender also saw growth in net interest income from its UK retail business stall, suggesting it was no longer benefiting from a gap between what it charges for mortgages and what it pays out to savers.
Barclays said its pre-tax profits fell 4% between July and September compared with a year earlier, to £1.9bn, roughly in line with analyst expectations.
Introduction: UK jobless rate rises to 4.2% according to new experimental official data
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The rate of UK unemployment rose 0.2% to 4.2% in the three months to the end of August, according to new data from the Office for National Statistics (ONS).
Over the same period the number of people in work fell by 0.3 percentage points to 75.7%, the Office for National Statistics said – the equivalent of 82,000 jobs. That follows a 113,000 drop in the previous quarter.
Vacancies fell below 1m to 988,000, a drop of 43,000 and the 15th consecutive quarterly fall, the ONS said.The ONS delayed the reporting of the figures by a week due to low response rates to its survey and the implementation of the new methodology.
Marcus Brookes, chief investment officer at Quilter Investors, said that the use of new data has led to a “slightly clouded” picture of the state of the labour market.
“Looking at the ‘experimental’ data, we can see that unemployment in the UK is remaining stable, for now. However, the fast rise in interest rates is beginning to bite and we are seeing companies scale back hiring and in some cases shed jobs, with the employment rate falling and unemployment rising gradually in the last three months. We know that economic growth in the UK is slowing and could potentially turn negative for the fourth quarter, so today’s data provides further evidence that things may be beginning to roll over.
However, Brookes added that the figures may provide “just enough” evidence for the Bank of England to continue to hold the UK base interest rate at 5.25% when its monetary policy committee next meets.
This health check on the UK jobs market comes as Barclays draws up fresh cost-cutting plans after reporting a 4% fall in profits in the third quarter.
Barclays, which saw profits fall from £1.9bn in the same quarter a year ago, said the dip was due to profits at its corporate investment bank tumbling 11%, despite the bank taking part in the $65bn (£53bn) stock market debut of Cambridge-based chip maker Arm in the US.
Also coming up today
Google parent Alphabet and Microsoft are set to report results in the US this evening.
The Agenda
9.30am BST: Manufacturing ‘flash’ PMI
11am BST: CBI Industrial Trends quarterly survey
