It used to be Bank of England’s job to look after the pound, but as consumers jet off again they will find that it doesn’t stretch very far, says ALEX BRUMMER
One has to time shift back to the start of the pandemic to see sterling in such a bad way.
It used to be the Bank of England’s job to look after the pound, but as consumers jet off again this spring they will find that at $1.23 it doesn’t stretch very far.
The Bank’s talk of collapsing real incomes and recession has left sterling flailing. The silver lining is that a cheaper pound, if sustained, will make UK exports more competitive. But it also raises the cost of imported raw materials and goods which is not needed at present.
Breaking down: One has to time shift back to the start of the pandemic to see sterling in such a bad way
It is not just sterling, or the reputation of the Bank, currently at risk.
Any traveller using British Airways, the ‘world’s favourite airline’, will be aware of the perils.
Phone lines are rarely answered and Avios points (air miles) are useless unless flying to New York on Christmas Day.
Worst of all (in my case), a request to be at the airport four hours before a flight departure was followed by a delay of five hours. The meal consisted of a soggy breakfast served at tea.
First quarter results for parent IAG provide little comfort for passengers or investors alike. Capacity recovered to 65 per cent of pre-Covid levels but this was not enough to shave much off a first quarter loss of £700m. The total deficit since the start of pandemic is up to £8.5billion.
Chief executive Luis Gallego pledges a return to profit in the current period. There is admission, without apology, that the focus is on ‘improving operations and customer experience’.
Why the hapless Gallego and his BA sidekick Sean Doyle have been so slow to recognise brand damage is a mystery.
BA and other UK-based carriers did not receive the vast cash injections provided by the EU and the US government in the pandemic. Airlines had to queue up for loans from the Bank of England along with every one else. The consequence has been painful with current borrowings standing at £16.1billion. That is burdensome as interest rates soar.
BA may now be part of a grander group but has suffered a catastrophic loss of pride in what it does.
Lord King, one of Mrs Thatcher’s favourite tycoons, must be spinning his grave.
Running defence companies is not the easiest gig in an age of political correctness.
No one wants conflict, but BAE Systems noted in its AGM update that Ukraine, and a rise in geopolitical tensions, mean that many countries buying advanced UK defence equipment are stepping up outlays.
BAE’s order book is filling fast with work for the F-35 fighter to cyber security for the US Navy.
The biggest pot of gold could be Germany’s vow to lift its defence spending.
As a big UK exporter, all of this bodes well, not just for BAE (the shares have advances 40 per cent this year), but for all of Britain’s thriving high-tech defence sector.
It makes it imperative that the champions of UK security technology Ultra Electronics, Meggitt and Inmarsat are not to be bargained away for paper thin agreements about R&D and jobs. Selling Britain’s defence leaders in a time of war would be a dereliction of duty.
Kwasi and Boris are you listening?
With Terry Leahy titular chairman of private equity-owned Morrisons, it should come as no surprise that it was first to emerge as a potential saviour for McColl’s.
As chief executive of Tesco, Leahy pioneered the move by Britain’s big grocers into the convenience stores two decades ago when he bought the 850 chain T&S stores for £530m.
When local shopping became fashionable again, Sainsbury’s, M&S with Simply Food and Asda followed.
Morrisons tried its luck but most stores were subsequently closed.
Big-buck private equity buyers are swarming. The TDR backed onwers of Asda, the very ambitious Issa brothers, have joined the fray.
Morrisons’s owner Clayton, Dubilier & Rice could come back and that may not exhaust the cast list.
The buyer would still be at a competitive disadvantage to Tesco, which controls cash and carry champs Booker, with a big slice of the robust tobacco trade.
But there may be few better opportunities for ambitious grocers.