Tuesday 28 February 2023

THE HIGH STREET’S FUTURE? IT MIGHT BE IN HOUNSLOW. ELENA SINISCALCO ON A BRAVE NEW IDEA P14-15

HARRY KANE IN RED? WHY SPURS SHOULD BRACE FOR A UNITED BID P17

GETTING BREXIT DONE

PRIME MINISTER Rishi Sunak appeared to close the book on the first tempestuous chapter of Britain’s postBrexit relationship with the EU yesterday with the signing of a new deal for Northern Ireland.

The Prime Minister secured what he called a “decisive breakthrough” in talks with the European Commission’s President Ursula von der Leyen in Windsor.

The so-called ‘Windsor Framework’ will change customs arrangements for goods

crossing the Irish Sea, and the Northern Ireland Assembly will have the chance to trigger the ‘Stormont Brake’ if changes to EU rules which would apply to Northern Ireland were considered unacceptable. That would act as an effective veto.

Last night, figures within the DUP, the unionist Northern Irish party, said that progress had been made but that there were still areas of concern.

Jacob Rees-Mogg, the de facto spokesperson for a group of hard Brexiteer backbenchers within the Tory party, said that “there will be quite a significant number of Conservatives

who are unhappy”.

Rees-Mogg also set the stage for another round of Tory in-fighting, warning that the opinion of Boris Johnson would be “fundamental”.

The former Prime Minister had pushed for the negotiations with the EU to end, and a bill to rip up the Northern Ireland protocol –which he agreed in 2020 –pursued through parliament instead.

However last night the mood music was that Sunak would be able to move his deal through parliament without a widespread Tory rebellion. Steve Baker, the arch-Brexiteer and now Northern

Ireland minister, said it was a “fantastic result” for the UK.

Both the FTSE 100 and 250 enjoyed a spark of life thanks to the deal, as did the pound, which rose 0.8 per cent against the dollar.

Business groups welcomed the deal and the constructive language used by both Sunak and von der Leyen in yesterday’s press conference, with the latter saying the pact marked a “new chapter in our partnership” and making warm noises regarding the UK’s participation in continent-wide research projects.

The City of London Corporation said the

“positive news” on the deal would “allow us to focus on the critical challenges facing our economy”.

“With this resolution I welcome the chance for UK financial services to once again engage productively with our partners in the EU for the benefit of both our economies,” the body’s policy chairman said last night.

The unexpected inclusion of the ‘Stormont Brake’ will also put pressure on all Northern Irish political parties to rebuild the assembly in the country, which has not sat since the DUP pulled out of power-sharing in October.

Dealmakers of the world unite: City bosses expect 2023 rebound in M&A activity

CHARLIE CONCHIE

BOSSES at the UK’s top firms are braced for a wave of takeovers this year as foreign buyers continue to swoop on cheap London-listed companies amid a rebound in dealmaking, new research has found. Nearly ninety per cent of FTSE 250

directors said they believed UK firms were vulnerable to foreign takeovers this year, with a weak pound and falling valuations making firms an appealing prospect for buyers, according to research from investment bank and broker Numis.

Numis found that overseas corporates and private equity firms

were “motivated to be active in UK M&A this year”, with 97 per cent of UK corporates predicting increased competition for UK businesses and assets.

The predictions come after London-listed Wood Group said last week it had rebuffed a number of offers from US buyout giant Apollo,

while events firm Hyve said it was mulling a £306m takeover approach from US private equity outfit Providence Equity.

Lawyers said the quality of UK firms combined with a weak pound meant unsolicited approaches were likely to come thick and fast this year.

“Private equity and strategic buyers are keen to do deals and a significant amount of preparation and outside-in diligence is underway,” Katherine Moir, M&A partner at Clifford Chance told City A.M. yesterday.

£ CONTINUED ON PAGE 3

Was yesterday the day Sunak made his mark as Prime Minister?

RISHI Sunak is a funny old Prime Minister. He was vaulted up the political ranks almost by accident; his accession to Chancellor coming years before he could reasonably have expected it as a result of Dominic Cummings firing Sajid Javid’s special adviser, a situation which up with the then-resident of Number 11 would not put. A pandemic and hundreds of billions of giveaways later, he was roundly defeated in

a leadership election by a politician who would only a few weeks later be unfavourably compared to a lettuce. And then, somehow, he became Prime Minister.

Rishi Sunak’s deal with the EU yesterday appears as of this

minute to be a political triumph. Whether the European Union’s negotiators simply have no interest in talking to the Brits anymore or whether they had a Damascene conversion to the belief that Brexit can in fact work for both sides of the argument is up for debate, but it is clear that Brussels went far further yesterday than anybody had reasonable cause to expect. In doing so, Sunak has –in theory –done much to smooth

the cogs of trade across the Irish Sea and the Irish border, with a limited role for EU judges and crucially a mechanism for a functioning Northern Irish Assembly –recently kiboshed once again by the unionist DUP –to protest EU impositions. The devil will be in the detail but it appears a sensible way for Britain to move forward in building a less fractious relationship with our closest trading partner.

Sunak has also performed something of a magic trick –in getting this deal across the line, he has managed to firmly take the mantle away from Boris Johnson as the man who can ‘get things done’ with the European Union – in a constructive way, without the drama of previous engagements. Where does the former PM go now? Where do his allies? Our advice to all is a period of silence –the public, frankly, have had enough.

SUN SPOTS This week, the Northern Lights have been seen across the UK in places they aren’t usually visible. Here they are witnessed in the Hebrides in western Scotland.

THE CITY VIEW PUTIN’S £274M SPY PLANE BLOWN UP BY BELARUSIAN PARTISANS

THE DAILY TELEGRAPH

A Russian spy plane worth £274m has been severely damaged by partisans in Belarus. The A-50 aircraft, which is used to track targets for military operations, was rendered non-operational.

THE GUARDIAN LIDL BECOMES LATEST RETAILER TO RATION SALES OF SALAD INGREDIENTS

Lidl has become the latest major supermarket chain to ration sales of some fruit and vegetables after an increase in shoppers looking for them after rival retailers introduced limits.

FINANCIAL TIMES

RSA AGREES £6.5BN BUY-IN WITH PENSION INSURANCE CORPORATION

Insurer RSA has agreed to offload £6.5bn worth of pension liabilities to Pension Insurance Corporation, marking the biggest transaction of this kind in the UK.

Energy bills to keep rising despite drop in price cap

NICHOLAS EARL

THE GOVERNMENT has pledged to continue helping households with skyhigh energy bills, but stopped short of pledging fresh support packages despite the hike in the price cap.

The move was despite industry warnings that customers will be paying more for their energy usage this spring following yesterday’s Ofgem announcement. A spokesperson for the department for energy security and net zero (DESNZ) confirmed the Energy Price Guarantee (EPG) would provide household support, but at a raised subsidy rate of £3,000 per year from April in line with Chancellor Jeremy Hunt’s announcement last year.

This compares with the current subsidy rate of £2,500 per year.

They said: “Government support will continue to help households with their energy bills. In the meantime, we’re committed to helping people with rising costs by reducing inflation and growing the economy.”

DESNZ’s comments follow Ofgem yesterday slashing the price cap from £4,279 per year to £3,280 per year for the April-June window.

While this is a vast reduction on current rates, it is still above the pledged subsidy rate of £3,000 per year, meaning households on standard variable tariffs will have to swallow a £500 bill hike alongside losing the £400 discount provided in the Energy Bill Discount

Scheme unveiled last year.

Cornwall Insight expects the price cap to fall to £2,112 per year from July. Nevertheless, this is still a historically elevated cost for energy, with the price cap hovering between £1,000-£1,200 prior to the post-pandemic energy crisis.

Dr Craig Lowrey, principal consultant at Cornwall Insight, said: “With consumers currently shielded from price cap rates by the government’s EPG, it is not the falling cap that households should be concerned with, but the rising rates of the government scheme.” Industry body Energy UK was optimistic bills will drop significantly later this year, but chief exec Emma Pinchbeck recognised the news meant “most people’s bills will rise significantly”.

WHAT THE OTHER PAPERS SAY THIS MORNING

Brits forced to slash £14,000 off house prices

LAURA MCGUIRE AND JACK BARNETT

BRITS are being forced to accept an average cut of £14,000 on the price of their homes to achieve a sale, according to new figures from Zoopla.

More than four in 10 (41 per cent) homes currently listed for sale on Zoopla have had their asking prices reduced to attract buyers, the real estate firm said.

Zoopla said annual house price inflation has slowed to 5.3 per cent, down from 8.6 per cent last year.

“Discounts to asking price have widened and while 4.5 per cent discounts are manageable, if these were to widen further then this would point to a greater likelihood of larger house price falls,” Richard Donnell, executive director at Zoopla said.

“We believe the market remains on track for a soft landing in 2023 with modest price falls of up to five per cent and one million housing sales.”

However, while some are slashing the asking price for their homes, separate research from Halifax revealed house

Bargain prices to tempt in foreign buyers amid wider M&A rebound

CONTINUED FROM PAGE 1

prices have made significant gains during the pandemic.

It found house prices have risen by 20.4 per cent over the last three years compared to just 7.8 per cent in the three years prior to the pandemic. In London, these figures saw the biggest increase, up by £90,000 for semi-detached homes and £69,000 for terraced homes.

It comes as the surge in house prices since the beginning of the Covid-19

Moir added that the FTSE 250 may “be most at risk given lower bid financing needs”, but warned that UK firms have been in defence mode for months and were likely to push bidders “hard on price”. A host of London-listed companies fell into the sights of foreign buyers last year, with Ted

Baker picked off by a US-based bidder, tech firm Aveva bought by French firm Schneider electric and software firm Micro Focus bought by Canadian Opentext.

Richard Spedding, a partner at law firm Travers Smith told City A.M. that the general quality of UK corporates and lower price tags were a tempting prospect for foreign buyers.

“Buyers of the FTSE100/250 can have a strong degree of confidence in what they are buying –and they may also feel that they can get better value than comparable stocks on rival exchanges,” Spedding said. Bosses at Numis said foreign takeover interest this year was likely to come amid a rebound in wider M&A activity, following a sharp downturn last year.

pandemic has outpaced wage increases over the same period, making it much less affordable for people, especially first time buyers, to buy a home.

Mortgage providers typically decide whether or not to lend a prospective buyer cash based on whether home prices are above or below a multiple of their income.

People have been priced out of the market due to home prices racing ahead of stagnating wages.

NOTEWORTHY The Tube’s major overhaul of the City’s Bank station has been finished

London businesses begin to sweat over UK’s unclear economic outlook

JACK BARNETT

UNCERTAINTY over whether the UK economy will tip into recession this year has led London businesses to sweat over their finances this year, a closely watched survey revealed yesterday.

Optimism among the capital’s companies slid 19 points in February to 18 per cent, arresting a steady upward rise in confidence, according to Lloyds Bank’s business barometer.

Concerns about whether the wider

UK can withstand a much tipped spending slowdown pushed confidence lower.

London firms’ confidence in the UK economy slid 34 points this year to minus one per cent, while optimism in their own business prospects dropped four points to 37 per cent.

Becci Wicks, regional director for London at Lloyds Bank Commercial Banking, said: “Despite the dip in confidence, London firms have optimism in their own businesses.”

THE £700m upgrade of Bank station has been completed at last after seven years of construction, transforming London Underground’s major hub in the City into a “like-new, world-class” station. The overhaul increases the station’s capacity by forty per cent.

Despite the drop, house prices have made sharp gains since the pandemic

Amazon workers to walk out today in Coventry as pay row rumbles on

LAURA MCGUIRE

AMAZON workers have said that they are ready for a “David and Goliath battle” as they begin their second round of strikes this year over poor pay and working conditions.

More than 350 workers at Amazon’s Coventry warehouse will walk out today in a row over pay.  Employees at the warehouse have said they want a wage of £15 an hour, after a recent rise saw their pay increase to £10.50 an hour.

The workers initially began strike action in January, making history as the first UK branch of Amazon employees to revolt over conditions.

Amazon workers will also walk out on Thursday 2 March and for five consecutive days from 13-17 March.

Stuart Richards, senior organiser at GMB union, described the action as “a David and Goliath battle” and said its members were “determined to make sure it ends with a pay rise they deserve”.

Amazon is also facing allegations

of poor working conditions, with workers previously alleging to the BBC that staff toilet breaks are timed.

“Amazon does not recognise the trade union involved (GMB) so this is a very difficult position to manage for them,” Jo Mackie, head of employment law at Lawrence Stephens, told City A.M.

When approached for comment on the strikes, an Amazon spokesperson said only a “tiny proportion” of its workforce was involved and defended its pay offer as “competitive”.

Gravity jumps higher with £30m funding

LAURA MCGUIRE

GRAVITY, which runs trampoline parks and other active entertainment experiences across the UK, has secured £30m in funding from investor Sculptor to help grow the business.

Gravity, which has 17 sites nationwide, said the funding will help to expand the business, with the group expected to announce a pipeline of new venues in UK cities and overseas.

It currently has one London location at Southside shopping centre in Wandsworth, but is set to open a new site in Westfield Stratford at the end of this year.

Primark owner hikes outlook amid resilient consumer spending

PRIMARK owner Associated British Foods has upped its outlook for the full year after reporting a jump in sales at the budget fashion chain as consumer spending held up better than expected. The group said sales at the retailer, which has 419 stores, are set to rise by 16 per cent at actual exchange rates to £4.2bn in the first half to 4 March, up 10 per cent on a like-for-like basis – and

ahead by 14 per cent in the UK.

AB Foods said while it continues to see “significant” cost pressures, consumer spending has “proven to be more resilient in this trading period than anticipated at the start of the financial year”.

The firm now expects group-wide halfyear operating profits to be flat and for annual group-wide underlying earnings to be broadly in line with the previous year, against prior guidance for lower earnings.

It comes as its food business and

ingredients arm are also set to see a higher half-year result.

AB Foods cautioned over consumer spending in the second half as the cost-ofliving crisis continues to put households under pressure. It said Primark’s first-half performance was boosted as it came up against comparatives from a year earlier, when Omicron weighed on trading, and that like-for-like sales growth will slow in the final six months.

Speaking to the PA news agency, AB

Foods finance director John Bason said Primark’s comparative store sales are still expected to remain positive in the second half.

He said the group had seen Primark’s half-year sales growth boosted by price hikes pushed through last August, but that sales by volume still rose by around seven per cent.

He added the group was seeing price inflation getting “close to a peak”.

Shares closed up 1.44 per cent.

PA

Harvey Jenkinson, chief executive of Gravity, told City A.M. that entertainment-led experiences are the “way forward” to bring consumers back to the high street and the country’s shopping centres.

“We have seen the proven added value of Gravity sites at these shopping centres, for example at Wandsworth, we saw a 20 per cent increase in footfall, which was fantastic for ourselves, but also for the other retailers in the building and ultimately the landlord,” Jenkinson said.

News of the additional funding comes as the group posted net revenue of £27m in 2022, up from £17m in 2021, with the firm’s management projecting revenues of more than £50m in 2024.

Paperchase collapse and raft of firm insolvencies boost Begbies Traynor

ANNA WISE

RESTRUCTURING specialist Begbies Traynor Group says its finances have been boosted by the collapse of Paperchase earlier this year.

Begbies Traynor was appointed as administrator after the struggling stationery chain failed to secure any buyers. The retailer’s 106 branches

could face closure after Tesco agreed to buy the brand but not its stores or workforce.

Begbies said the ongoing administration, which involves keeping the stores open and running the firm in the short term, is a “higher-value” insolvency case which has helped strengthen its financial performance.

The restructuring business hailed a good pipeline of financial advisory appointments, and said it was confident it would meet market expectations of between £19.7m and £20.6m in pre-tax profit and between £117.7m and £121.4m in revenue for the year.

Shares bounced to close up 5.3 per cent on the news yesterday.

The restructuring specialist has benefitted from a raft of high street insolvencies

Amazon workers will also walk out on 2 March and 13-17 March

HOLLY WILLIAMS

IFS: No room for tax cuts in the March budget

JACK BARNETT

THERE is no room for tax cuts or spending increases at the March budget despite Jeremy Hunt being handed an around £60bn windfall from lower energy prices and interest rates, a top economic think tank forecast today.

The Chancellor will be held back from handing households and businesses a tax giveaway due to the UK economy growing at a snail’s pace over the coming years, according to the Institute for Fiscal Studies (IFS).

A £13bn reduction in the cost of capping typical household energy bills at £2,500, lower “debt interest, a shallower recession and stronger revenues for a given size of the economy” have beefed up the UK’s public finances, the think tank said.

Borrowing is on track to be around £30bn lower this year and next.

But most of that saving will be temporary due to the government ditching the cap later this year.

As a result, “the room for either permanent tax cuts or spending increases that are not offset elsewhere remains very limited,” the IFS said.

The warning suggests Hunt and Prime Minister Rishi Sunak next month will be limited to offering oneoff support packages to help households cope with the cost of living crisis.

“Short-term savings cannot finance permanently higher spending,” Isabel Stockton, senior research economist at IFS, said, adding “the Chancellor likely has less fiscal room for manoeuvre than recent headlines might suggest”.

Paul Johnson, director of the IFS, said a “very serious national discussion” needs to be thrashed out sooner rather than later about whether public services take the hit or taxes keep rising if growth continues to be awful.

Government in denial about UK growth problem, says Saunders

A FORMER rate setter at the Bank of England has accused Hunt and Sunak of being “unwilling to admit the [growth] problem even exists” in his blueprint to lift the UK’s long-term economic performance.

Michael Saunders, a former member of the monetary policy committee

Keir: Migration won’t solve UK’s growth issues

SOPHIE WINGATE

KEIR Starmer has said migration is not “the answer to all of our problems” as he fleshed out Labour’s mission to secure the highest sustained growth in the G7. He used a speech in the City of London yesterday to pledge that his party’s model for growth would increase living standards “everywhere across the country”. Asked about businesses’ pleas to allow more migrant workers to come to the UK to fill labour shortages, Starmer said: “We recognise the short-term problem and we are not going to be antibusiness or anti-growth or anti-farming about this and allow short-term problems to create longterm problems.

and now senior economic advisor to Oxford Economics, has strong feelings about a sluggish UK economy.

“But we do have to get ourselves off the idea that migration is the answer to all of our problems.

“The debate over the UK’s low potential growth has barely got out of first gear,” he said. Saunders urged the Chancellor to raise public sector investment to three per cent of GDP and take on some of the burden of childcare costs. PA

“We’ve had a skills problem in this country for decades.”

A visa scheme for industries hit by Labour shortfalls would be “more likely” than granting young people from the European Union access, Starmer indicated.

Michael Saunders wants the UK to acknowledge its economic shortcomings

JACK BARNETT

THE hastily arranged Recharge deal spares Britishvolt’s blushes and eases pressure on the government, which last year refused to provide an advance on £100m of funding promised for its new gigafactory. But the deal also takes the government back to the drawing board when it comes to boosting its own electric vehicle dreams.

Britishvolt’s planned gigafactory was meant to be the centrepiece of the UK’s electric vehicle ambitions –producing hundreds of thousands of lithium-ion batteries per year for electric cars, boosting the country’s manufacturing sector and reducing the UK’s reliance on overseas

THE BOTTOM LINE

suppliers such as China. But following the deal, the factory will instead be a secondary factory for the Australian firm, and focus on batteries for energy storage and sport cars.

Such a shift in focus and priority pivots the company – and the government – away from their original goals. This means the government needs to assess whether more public funds should be channelled into powering the UK’s electric car industry. Right now, the UK is home to just one Chinese-owned EV battery plant next to the Nissan factory in

Sunderland. Meanwhile 35 EV battery plants are planned or under construction within the EU, and China continues to dominate the sector –which produces 77 per cent of the world’s EV battery supply. Half-measures are no longer acceptable for the government, which will have to decide whether or not EVs are a core part of the UK reaching its net zero goals, or part of its new economic future. This will dictate whether to go again, and fund other early-stage EV projects, or pull out altogether and rely on allies, and even less friendly trading partners, to build a greener future for the country.

Britishvolt gets a new spark from Aussies Recharge

JOHN BESLEY

BRITISHVOLT, the company which failed to build a battery factory in the northeast of England, has been bought by Australian firm Recharge Industries, Recharge’s boss confirmed yesterday.

The start-up was founded in 2019 but collapsed just three years later, laying off most of its 200 staff.

The company had high ambitions of building an almost £4bn battery plant in Cambois, outside Blyth in the North East, but was unable to secure sufficient funding for the project.

It emerged earlier this month that Recharge had been selected by auditors as the preferred bidder to take over the majority of the business.

In an interview with the BBC, Recharge’s chief executive David Collard said the deal had now been finalised.

“What we are bringing is validated technology,” he said.

“The US defence industry has validated it and it is already supplied to the

UK navy through a subcontractor.”

Founded in 2022, Recharge is an Australian company which is owned and run by New York-based investment fund Scale Facilitation.

Collard said the Britishvolt brand name would remain, but the business would initially focus on batteries for energy storage.

It then intends to produce batteries for high-performance sports cars, he said.

Speaking to the broadcaster, Collard confirmed

Britishvolt has been looking for a rescuer since its collapse in January

the business retained the ambition to complete construction of the Blyth factory.

“I spent a lot of time with Northumberland County Council. They genuinely want a gigafactory,” he said. Housing secretary Michael Gove previously told the Northern Echo: “The government is ready to stand behind the right company with the right investment.”

REACTING WELL The reactor arrives at Somerset’s Hinckley Point C power station

Shapps makes bid for new joint ventures as UK lags behind the US

NICHOLAS EARL

ENERGY secretary Grant Shapps is hoping to woo his American counterpart with plans for British and US companies to work together on joint ventures for clean energy projects across both countries.

Shapps chaired a green investment roundtable with the US energy secretary Jennifer Granholm yesterday, who joined him in London for the first time, to win over energy firms.

This follows last year’s passing of the US Inflation Reduction Act. The $738bn (£612bn) package includes $391bn of spending on clean energy, making it the largest piece of federal legislation ever to address climate change.

The effects are already taking shape in the US, where solar power developers plan to install a record 29.1 gigawatts of utility-scale capacity in 2023 alone, while states like Georgia are benefitting from new jobs across electric vehicle and batterymanufacturing.

THE FIRST nuclear reactor has made its way to Hinkley Point C power station in Somerset. The reactor pressure vessel is the first to be built for a British power station for more than 30 years. It will create the heat needed to make steam for the world’s largest turbines.

NICHOLAS EARL

City minister clashes with FCA over duty plans

CHARLIE CONCHIE

THE CITY minister’s damning comments on planned consumer protection rules are a case of the government criticising the Financial Conduct Authority (FCA) “for doing exactly what [it] has told it to do”, a former top regulator has said.

City minister Andrew Griffith was reported to be scathing about the FCA’s planned consumer duty, which is set to come into force this summer and will require firms to ramp up their protection of consumers.

In private comments reported by the Financial Times, Griffith reportedly said the changes will tie firms up in restrictive red tape just as the government was looking to loosen the regulatory burden on financial services post-Brexit. However, the comments have come under fire from a former top FCA official, who says that ministers are sending mixed messages on how they would like to regulate the sector.

“It is strange, but perhaps not that surprising given recent times, that a government minister is criticising the FCA for doing exactly what the government has told it to do,”

Matthew Nunan, the former head of wholesale enforcement at the FCA and

Bunzl snaps up Canadian and German firms as profits hit £634m

CHARLIE CONCHIE

OUTSOURCING specialist Bunzl yesterday revealed it had snapped up two businesses in Germany and Canada as it reported a jump in pre-tax profits for the full year.

Germany, as well as Capital Paper, a distributor of consumables, cleaning supplies and industrial packaging products in Canada.

it was now eyeing further acquisitions in the near future.

now partner at law firm Gibson Dunn & Crutcher, told City A.M. yesterday.

“The FCA consumer duty is intended to ensure firms have a goal of delivering good outcomes for clients.

To say UK regulated firms should not have such a goal imposed is the kind of comment that almost seems designed to demonstrate that the current government prefers large firms to individual consumers.”

He added that, while the new duty will create additional work for many firms, it “should pay off” as consumers invest with firms that are “positively looking after them”.

A spokesperson for the regulator yesterday said the consumer duty would “bring about a cultural shift in financial services” and set “higher and clearer standards for firms”.

“We believe it will encourage innovation while driving growth in the financial services industry in the UK,” the spokesperson added.

The comments come after the FCA warned last week that much of the asset management sector was lagging in its progress in preparing for the plans and told firms to speed up their preparation.

The London-listed firm yesterday said it had acquired ArbeitsschutzExpress, a German online workwear and PPE seller in

EY’s China staff asked to wear communist party badges to work

LOUIS GOSS

STAFF in EY’s Beijing offices have reportedly been asked to wear their communist party badges to work.

A communist party committee in EY’s China business called on party members to wear their hammer and sickle pins in the office, the Financial Times reported.

In an email to party members working in EY’s Beijing office, the committee reminded staff they are

obliged to wear the party badges to work.

“The badge should be placed in the middle of the left chest and cannot be worn on the collar,” the committee said in an email to staff, according to the report. “When worn with other badges, it should be placed above them.”

EY’s email to communist party members notes that its call sits in line with a wider Beijing accountants association campaign to boost badgewearing adherence.

Bosses at Bunzl said ArbeitsschutzExpress generated £35m revenue last year and marks a ramping up of its expansion efforts after the acquisition of Hygi.de last July.

Bunzl has been on an acquisition push and chief Frank van Zanten said

Bunzl chiefs said the Canadian acquisition of Capital Paper “strongly complements” its existing business in Canada, after the firm boasted revenues of £16m last year. The comments came as Bunzl reported a 11.6 per cent boost in pre-tax profits to £634.6m for the full year.

In an email to staff, EY told Beijing workers party badges must be worn on the left chest

Griffith said the rules were too restrictive

THE NOTE BOOK

Dynamism is the motor that continues to power the City of London

As a child, I was fascinated by trains –not necessarily how diesel engines worked, but how the various moving parts of a train system worked together. Alas, the space limits of a terraced house in south London meant that my dream to build an entire train set across the top floor were thwarted.

The fascination with how ‘all the pieces fit together’ hasn’t changed though –the fact that the Tube works as well as it does, for instance, is a marvel of engineering, logistics and human innovation. We shouldn’t take these things for granted.

But since I began to work in the Square Mile, I’ve begun to notice that complicated, dynamic systems are not just reserved for train networks. Indeed the City is a living, breathing ecosystem in which all the parts have to work together in order to stay ahead of global competition.

This Thursday, the great and good (and the fun) of the Square Mile and beyond will gather in the Guildhall to celebrate those businesses, investors and personalities who have seen success over the past year.

What is perhaps most notable about our awards is the sheer breadth of excellence we recognise –from the bank of the

year battle between household names to a more polite, backroom battle between the capital’s law firms. The great truth is, of course, that it is the variety and breadth of the City’s offering that makes it work –just like my imaginary train set, which would never have run smoothly if even a signal light was out or a point set the wrong way. There is much chatter about what the City’s post-Brexit future might look like –and we as much as anyone would welcome a ‘Big Bang 2.0’ (a phrase coined by thenChancellor Rishi Sunak in a City A.M. interview, in fact) to turn the Square Mile into a swashbuckling financial centre.

But like most ecosystems, it is probably the case that the City’s post-Brexit future is more likely to be secured not by dramatic interventions and grand legislative moves, but by the gradual, intelligent iteration of all of those different parts of the City’s model, be it the smarter use of AI to draw up contracts in the legal sector or the gradual integration of the best of ‘fintech’ into traditional banking services.

No one industry will ensure the City’s post-Brexit future –it will be the product of a functioning whole. Now, where’s my Hornby instruction manual?

BUILDING HOPE INDEED

To the Oval, last week, to celebrate the work of a charity doing wonderful things –with a bat in hand. Cricket Builds Hope, a charity now just a little over ten years old, has been the driving force behind building a new cricketing nation –Rwanda, complete with a high quality stadium. It has been so successful that the country’s U19 women knocked off rivals from the West Indies and Zimbabwe in a recent tournament, two far more established homes of the greatest of games. Rwanda is by no means a perfect country, and its leader Paul Kagame a distinctly complicated figure, but targeted programmes to grow civil society like this one can only be a good thing. The do raised a cool £100,000 for the charity.

£ The purported ‘price crash’ in the property market in 2023 already appears to have been slightly overcooked. And even if it’s bad as some say, we’re only looking at prices heading back to where they were at the start of 2021 or so. No significant fall in prices will make much difference to first-time buyers, especially in the UK, where deposits continue to outpace average wage growth. The only answer is building houses –and we can start with those bits of the greenbelt that not even a twitcher could love.

£ To the BBC homepage we go, keen to take in lashings of public service journalism. Or, as it turns out, a ‘top rack’ of stories which includes the results of a concocted boxing match featuring a Youtuber in Saudi Arabia, a press release on the BBC’s decision to bring back its own series The Traitors and a story on how a “man uses a £2 bus fare cap to travel 137 miles”. Meanwhile, the BBC is shutting down valuable broadcasting services across the world, not least BBC Persia –never more needed than now. Auntie has her priorities out of order.

LEADERSHIP EXAMPLES WORTH HEEDING

CAN I QUOTE YOU ON THAT?

You’ve

Former speaker Betty Boothroyd, who died yesterday

It is fair to say –at least judging from the occasional look at my Linkedin feed –that advice on leadership is in distinctly greater supply than great leadership itself. There are plenty of examples around in the sporting world –much has rightly been made of Ben Stokes and Brendon McCullum’s transformation of English cricket –but frankly there is probably not that much to be learnt from the success of a team that includes the world’s number one bowler and arguably the planet’s best batsman. Indeed it is probably more helpful to look at the business world in rather greater detail. Chris Hirst’s ‘No Bullsh*t Leadership’ is the best of a broad canon. The former global CEO of Havas Creative’s book is one of the few that manages to actually translate a title into workable lessons for anybody looking to move a team forward, and I’m told a sequelNo Bullsh*t Change - is on the way. As for the ‘no bullsh*t’ part, I hope his third book is targeted at whoever writes ESG strategies...

CITY of LONDON

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Emma Corrin joins campaign to save arts festival

ADAM BLOODWORTH

LONDON risks losing a jewel in its cultural crown if the Vault Festival doesn’t find an alternative venue, Emma Corrin, star of Netflix’s Lady Chatterley’s Lover, told City A.M.

Our paper has added its name to those looking to save Vault Festival, the second-biggest Fringe festival in the UK behind the Edinburgh Fringe, which has been booted out of its venue by landlords favouring more commercial work.

Emma Corrin, the British A-List actor who recently starred as Diana in The Crown, told City A.M. the Waterloo festival was “incredibly important” to Britain’s theatre sector.

“It’s where a lot of new work originates, where a lot of new voices can be heard. I think that’s integral in keeping the fabric of theatre alive.”

The UK’s arts sector contributes £2.8bn a year to the Treasury and generates a further £23bn annually, with 40 per cent of jobs in the sector

based in London. Corrin follows Bridgerton stars Jonathan Bailey and Nicola Coughlan who also put their names behind our campaign.

Coughlan said losing Vault Festival “would be a devastating loss” while Jonathan Bailey said the festival “needs to be protected at all costs”.

Vault Festival funds two thirds of the costs of putting on a show from box office takings, giving a vital platform for actors, writers and directors, who can stage professional productions on lower budgets.

Actor Emma Corrin is the latest thespian recruit to join the campaign to save London’s Vault Festival

Today, the notebook pen is held by City A.M.’s editor, Andy Silvester, ahead of our awards later this week

got to ensure that the holders of an opinion, however unpopular, are allowed to put it across

ECONOMICS

THE MAGIC money tree is shedding its leaves. Over a decade of cheap cash propping up the global economy has been toppled by a once-in-a-generation inflation problem.

Quantitative easing, or QE, was a necessary response to the batch of shocks ricocheting around the global economy since 2008. Now it’s shifted into reverse. But how did we get here?

Central banks across the world created new money to support the financial system after the 2008 banking crash.

The world’s largest lenders were burnt from handing out money to people who, once the economy experienced a downturn and their incomes were knocked, couldn’t afford to repay their debts.

Fellow banks also became very weary of handing money to each other. The global financial system seized up.

The likes of the US Federal Reserve, Bank of England and European Central Bank slashed their official interest rates in a bid to get money flowing again. Those moves were supported by QE.

QE supports official deposit rates falling by putting downward pressure on rates in international debt markets by jolting demand. Bond prices and yields move inversely, so when demand rises, then rates drop.

Central banks buy government debt hoovered up by lenders in exchange for pumping up their reserves.

Government debt is an instrument that’s contained in financial markets, though it is highly liquid, meaning it can be exchanged for cash immediately. But a bank would never lend an individual a gilt or a treasury.

When banks have a greater amount of cash on their balance sheet held at the central bank, it pushes the amount of money they need to hold in reserve above the necessary threshold, freeing up money to distribute to businesses and households.

As a result, the banking sector is incentivised to boost lending, giving businesses more opportunities to expand and households more avenues to spend. Rates are lower, so people should be more comfortable taking on debt.

The sum total of this complicated process is that, in theory, it boosts spending.

QE lasted the whole way through the financial crisis and until basically the end of last year. Cumulatively, the Bank of England now holds more than £800bn of government and corporate bonds, around a third of the size of the UK economy.

End of Bank of England’s £800bn bond buying spree poses headaches for the Treasury and taxpayers

WHAT I’M READING

Chancellor Jeremy Hunt, Prime Minister Rishi Sunak and, well, the whole government is “unwilling to admit [a growth] problem even exists”. That’s according to former rate setter Michael Saunders, who in a note for his new employers, Oxford Economics, set out his blueprint for lifting the UK economy out of its low growth malaise. Encouraging young people to study science, maths and other STEM subjects, using the state’s balance sheet to absorb eye-watering childcare costs and raising public investment were all tabled as ideas by the former Bank of England man.

the market, spearheaded by the Bank. That, combined with investors demanding a higher rate of return, has pushed down prices and sent yields higher.

be said that the Bank was sending profits to the Treasury when rates were low.

The Treasury in January paid the Bank over £4bn to cover losses, a trend that will continue throughout the year as the Bank shrinks its balance sheet.

Banks’ reserves held at Threadneedle Street receive interest equivalent to the UK’s base rate, which is now four per cent. Yields on the Bank’s bond portfolio is lower than that, again, prompting the Treasury step in.

That dynamic has left “the British state with a large risk exposure to rising interest rates,” Paul Tucker, a former deputy governor at the Bank, said in a report published by the IFS late last year.

He urged policymakers to examine whether paying interest on a fraction of lenders’ reserves would limit the public finances’ exposure to losses accrued on the QE scheme. Doing so could save the UK “£37bn over the next few years” on its debt interest bill, he reckons.

A tiered reserve remuneration system would suck income out of the banking sector. A tax rise in all but name.

This massive bond-buying regime has been a fixture of the global economy since 2008. This has now changed drastically, sparked by a severe inflation problem

prompting central banks to raise rates at the fastest pace since the 1980s and switch off QE.

Now most of them are selling bonds into

You might be thinking: this is all academic, isn’t it?

Well that dynamic has hit the UK’s public finances. The Treasury pays for any losses the Bank accrues on QE bonds. It should

Monzo and Wise founders back AI robot lawyer

LOUIS GOSS AND CHARLIE CONCHIE

A CITY computing company has raised $10.5m (£8.8m) from backers including Magic Circle law firm Clifford Chance to develop an AI driven, robot lawyer.

The founders of fintech firms Monzo and Wise have also thrown their weight behind London’s Robin AI, which is seeking to disrupt the legal sector with its AI technology.

Robin AI, which uses AI to generate legal documents, said it had bagged $10.5m funding in a round led by Plural, the venture capital firm founded by Wise co-founder Taavet Hinrikus.

Monzo founder Tom Blomfield has also backed the round as an angel investor, alongside senior chiefs from private equity firms Bridgepoint and Apollo and law firm Clifford Chance,

an existing client of the company.

Robin AI was founded by exClifford Chance lawyer Richard Robinson and machine learning researcher James Clough in 2019. The software developer now employs 75 full-time staff.

Bosses at Robin AI said the cash would be channelled into boosting its tech team and allow it to snap up a stake in competitor Lawgeex, whose customers include UBS, PwC, Ebay and Pepsi.

The fundraise comes amid a wave of investor interest in artificial intelligence after the recent launch of AI chat software ChatGPT.

Robin AI says its machine learning model allows users to draft and negotiate contracts 60-80 per cent faster while saving up to 75 per cent on legal fees, as well as keeping a “lawyer-in-the-loop” throughout the process.

After over a decade of cheap money flooding into the world’s biggest economies was slayed by the historic inflation surge, trade-offs on how best to wind down QE need to be confronted.

As Tucker acknowledges: “As of now, however, there are no easy options.”

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City A.M.’s economics editor Jack Barnett takes a deep dive into the state of the economy in his weekly column

The fresh funding boost will help Robin AI develop an AI robot lawyer

CITY DASHBOARD

Bunzl and Rolls-Royce help FTSE 100 to shrug off its interest woes

LONDON’s FTSE 100 opened the week in positive territory yesterday as investors appeared to shrug off concerns about inflation and how forcefully central banks would respond to it.

The capital’s premier index jumped 0.72 per cent to 7,935.12 points, while the domestically-focused midcap FTSE 250 index, which is more aligned with the health of the UK economy, gained around one per cent to close at 19,886.10 points.

Last week, stock markets around the globe notched some of their worst performances of the year, as traders expressed concern that the US Federal Reserve and Bank of England would be forced to keep rates high.

“The FTSE 100 made a strong start to the week as investors shrugged off the inflation and interest rate concerns

which bedevilled markets last week,”

Russ Mould, investment director at broker AJ Bell, said.

A batch of hotter-than-expected inflation, consumer confidence and spending data on both sides of the Atlantic raised markets’ peak rate expectations, weighing on equities last week.

But a string of decent corporate results yesterday offset those concerns.

Outsourcer Bunzl rose to the top of the FTSE 100 during the morning session, adding nearly three per cent, after it reported a jump in profits. It eventually finished up a shade under 2.5 per cent.

Aerospace giant Rolls-Royce topped the premier index as investors continued to pile into the stock after it released a decent set of earnings at the back end of last week. It advanced around six per cent yesterday.

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RHI Magnesita recorded a “better-than-expected” second half, analysts at Peel Hunt said as it announced full year results. 2022’s performance provides a “robust platform into 2023”. The company recorded a 22 per cent increase in ebita on a constant currency basis. A changing emphasis to roll-up M&A should keep leverage higher for longer and generate growth. The analysts rated it a ‘buy’ .

Analysts at Peel Hunt said Senior had made “good progress” in its final year results after recording a 20 per cent increase in revenue on a constant currency basis. Working capital management continues to be “impressive”, the analysts said. All in all, it was “a good performance with more to come”. Senior was rated a ‘buy’ with a target price of 175p by Peel Hunt.

STANDING UP FOR BUSINESS

A RESILIENT MARKET “It’s been a solid start to the week after last week’s sharp selloff, and the worst weekly decline this year for European markets, with some resilient earnings numbers and broker upgrades helping to support early gains.”

MICHAEL HEWSON, CMC MARKETS

OPINION

EDITED BY ELENA SINISCALCO

To dream up what can be done with the empty Debenhams, look at Hounslow

Elena Siniscalco

SOMETIMES things feel too good to be true. That’s definitely what you think walking into The Loft, a multipurpose creative space in Hounslow. The regeneration project, yet to be completed, will include a marketplace offering space at cheap rent rates to emerging businesses, a restaurant serving evening menus designed by refugees, a youth centre, and a mental health charities hub. It’s a vast safe space for underrepresented communities. Yet this time, it isn’t too good to be true - it’s simply an example of good ideas and planning gone right.

The Loft has taken up the second floor of what used to be a huge Debenhams store in the Treaty Centre. The latter opened in 1988, becoming a focal point for the Hounslow communityan extremely diverse borough right next to Heathrow airport. Debenhams was the key tenant, so when the department store chain shut down after 242 years, the Centre found itself with just too much empty space. The private owner, BWM Capital, filled the bottom and first floors. The second floor risked remaining vacant - facing the same destiny of nine out of ten of the former Debenhams.

But as dust was piling up on the empty shelves and naked mannequins, Jonathan Ashby-Rock, the artistic director of The Arts Centre on the floor below, was getting interested. He ended

up leading the project with the council’s regeneration team. They got a grant from the Mayor’s High Streets for All Challenge Fund. The GLA followed the project step by step, providing guidance. The result is exactly what a regeneration project should look like.

You are walking into 2787m2 of potential. There’s space for up to 64 small businesses to set up camp here - and some already have, selling hand-made cushions or sustainable jewellery. A huge room in the back will be a youth centre, giving a place to be to all the kids whose parents work at Heathrow during the evenings or at unsociable hours. Next is The Kitchen, a colourful

small restaurant collaborating with refugees to recreate their traditional recipes for evening menus. The first one, starting this week, will be a Mexican night. The mental health hub has taken up what once were the Debenhams offices, and now hosts charities like Mind and The Practical Approach. Ashby-Rock designed this space for the local community: for everyone in the council who can’t afford to be on the high street because of high rent and business rates; for the kids sitting at home alone; for the people struggling with their mental health. “No square foot that was Debenhams is now not being used”, he says with

a smile.

Unfortunately, inclusive regeneration projects are in scarce supply nowadays. The housing ones have so often pushed poor families out of their London neighbourhoods. Commercial ones often end up the home of boutique shops unapproachable for locals. The Mayor has acknowledged the issue: the importance of including local communities in the projects now underpins his development strategy, the London Plan. But a real recognition of the systemic issue at the national level is still lacking.

So it’s no coincidence that most of the old Debenhams shops are empty, de-

London’s small businesses want to achieve net zero - but we must help them get there

THE pandemic taught us we can achieve great things together when we focus our efforts and resources towards a common goal. When thinking about climate change, we need to ask ourselves if we can go further and faster. Could 2045 become our new target? Or even 2040? Just think: businesses could take advantage of the opportunities for green growth, investment could increase, and we could acquire new talent pools and skill sets while working towards a common goal of protecting the environment for future generations.

Yet this transition is not without its challenges - it requires time, effort, and knowledge. We all know there is a need for urgent transformation: we see it everywhere; we are surrounded by the consequences of climate change on our planet. But how can we achieve this change in a sustainable way without leaving smaller and independent businesses behind?

The government’s Net Zero review

Paul Gordon

recognised the need to bring small and medium-sized enterprises (SMEs) along on the journey. For some, such a transition seems challenging in this difficult economic climate; we are hearing these concerns from clients on a day-to-day basis.

What’s good news is that the transition is already well underway amongst these businesses. In fact, 64 per cent of SMEs said they have a plan in place to curb, or reduce, emissions ahead of the government’s 2050 target.

Our research also showed that SMEs in our capital city are paving the way.

London has the highest concentration

of SMEs already at net zero – 12 per cent compared to an average of 7 per cent across the rest of the country. We know from conversations with clients that the businesses already at net zero are an inspiration to those just starting out on their journey. Businesses see the success of others and the tangible benefits such as cost savings, employee retention and recruitment, and this drives them to make changes, however small they may be.

London SMEs have a strong desire to reach net zero – over half have a plan in place and say they are motivated to make progress. Eighty-two per cent of London-based SMEs stated that sustainability considerations increased in importance for them last year. Interestingly, the desire to protect the environment for future generations (the main motivation for 40 per cent of London SMEs) outweighs commercial considerations of waste reduction (38 per cent) and cost savings (36 per cent).

Businesses in London and further afield need to know where to turn to

and receive support to help them deliver change. Large organisations have a responsibility to support smaller companies across all industries and regions of the UK to meet their environmental challenges and to set stretching, sustainable and, ultimately, attainable goals.

Achieving net zero is not without its own challenges. London’s small and medium businesses face a range of competing priorities like insufficient budget - cited by 38 per cent as their major challenge - and difficulties measuring emissions outside of their operations (34 per cent) as well as low return on investment (33 per cent). But with the UK’s 5.5 million small and medium enterprises making up the majority of the UK’s business population, the acceleration and progress these businesses make is crucial to the UK reaching its net zero target by 2050.

£ Paul Gordon is the managing director of relationship management at Lloyds Banking Group

spite the potential of so much needed space. You could split them up into housing, open them up to host community centres, repurpose them for projects like The Loft. The one in Wandsworth has been turned into an entertainment centre with mini-golf and bowling; the one in Gloucester will become a university campus. Others, like the one in Southampton, will become apartment buildings.

And yet in many towns up and down the country, the new tenants are trying to sell the leasehold for a price no one in the area can afford. So these spaces will stay empty, or end up in the hands of an external buyer who might not care very much about how its new development affects the neighbourhood. This story is not new; it happened to all the empty shops sitting on our high streets. Nearly a fifth of our shops are owned by overseas investors with huge portfolios who, to put it very simply, don’t care that they’re empty. Last summer, campaigners urged the government to create a £350m high street buyout fund allowing businesses, local communities and councils to work together to repurpose empty shops. The GLA funding backing The Loft is a step in that direction.

“Times of change require new solutions, so people come up with solutions, and who knows, in ten years someone who starts here could be huge”, says John Abbate of SaveTheHighStreet, looking at the stalls in The Loft. The optimism of everyone involved in this project is contagious. It’s so powerful you’d think it could power up every empty Debenhams in the country - but that, unfortunately, would definitely be too good to be true.

The Loft, replacing the old Debenhams shop, will host up to 64 independent businesses

TRYING, AND FAILING to steal the show yesterday was Labour leader Keir Starmer. He spent the morning telling business leaders about his plan for economic growth, but all the coverage seemed to go to Rishi Sunak and his newly signed deal on the Northern Ireland protocol. Bad timing...

Feature writer and housing correspondent at City AM

WE WANT TO HEAR YOUR VIEWS

LETTERS TO THE EDITOR

A new Labour for business

[Re: Starmer speaks at UK finance, yesterday]

It is telling that the launch of Labour’s ‘economic mission’ yesterday morning was packed with influential business leaders. As I craned my neck to see through a crowd that included Tesco’s chairman John Allan, and respected entrepreneurs such as Deborah Meaden, there was a palpable sense that we were witnessing a Party within touching distance of power.

Keir Starmer and Rachel Reeves were in confident mood, and it is hard to argue with their diagnosis of the challenge facing the UK economy. As the shadow chancellor pointed out, we are trapped in a cycle of low growth, shaky confidence, and weak demand –

exacerbated by short-term thinking. The argument is not dissimilar to the one made by Liz Truss as she took office six months ago. But Labour’s proposed solution looks rather different. “If you think it’s not government’s role to shape markets, that we’re only here to serve them… that’s not going to work for us,” Starmer said.

Business is listening to Labour once again. Starmer has said “the whole future of Britain rests upon the success of industry”. I speak to clients every day, from renewable energy investors to asset managers, who all believe they have a part to play in building the dynamic, future-facing, post-Brexit economy Starmer and Reeves hope to deliver. 18 months is a very long time in politics, but the battlelines for the next election have been drawn.

Andy Williams Penta

GOODBYE TO AN INSPIRATION

Political icon Betty Boothroyd dies at 93

Betty Boothroyd was not only the first female Speaker in the House of Commons, but also “something of a national institution”, as Tony Blair described her. Tributes poured in yesterday to celebrate her kindness, wittiness and common touch.

EXPLAINER-IN-BRIEF: WHAT’S INSIDE RISHI SUNAK’S NORTHERN IRELAND DEAL?

The squabble between the government and the EU started with trade. The original NI protocol created a de-facto trade frontier between the UK and Northern Ireland. Sunak’s deal includes a new system. Those exporting goods to Northern Ireland will go through the “green lane”, with limited checks. Those whose produce travels further, into the EU, will go through the “red lane”, in line with EU checks. Another element is Northern Ireland’s place within the UK. The Union has agreed to a “lighttouch” approach, thus enabling Northern Ireland to follow Great Britain’s line on things like state

aid and VAT, but leaving open for itself the possibility of intervening on final decisions. Lastly, there’s the European Court of Justice (ECJ). Sunak seems to have negotiated a more flexible settlement. The EU would have to inform Westminster of any future regulations which would apply to Northern Ireland, and the government could object, opening up a conversation with the EU. Disputes over the application of EU laws would be considered first and foremost by the courts in Northern Ireland, and then, if there’s a need to, by the ECJ.

Microsoft knows ChatGPT won't crash and burn like previous AI technologies

Howard Yu

CHATGPT is not ready yet. A major problem with it - and with other large-language models - is that they are often inaccurate or don’t properly cite information sources.

Microsoft hoped to circumvent these limitations when it integrated the AI chatbot into Bing, combining OpenAI's language abilities with Bing's search function using a tool known as Prometheus. In a nutshell, this technology applies users' requests, pulling out search terms to run them through Bing's search index. Then, it combines the results with the language model to create an answer. That is how Bing types out a response in full sentences, annotated with links to the websites from which it is retrieving information.

Issues persisted during early trials. People who had enrolled noticed the new Bing would give irrelevant background information or go on seemingly random tangents, and sometimes come across as excessively aggressive.

But then, what alternative does Microsoft have? The product is still far from satisfactory, but it is a much smarter tool than anything we have seen in spellcheck or Grammarly. The only way to improve further is to get users to use it more, maintaining an open approach. Microsoft has chosen a relatively low-risk area for experimentation: Internet search. It deployed ChatGPT among a selected population to play with it at home. Wisely, Microsoft did not try and implement its use in hospitals for doctors and clinicians to use professionally, which is what IBM Watson once attempted.

In February 2011, IBM made a lasting impression on the American public when its supercomputer, Watson, beat two human contestants in the popular game show Jeopardy!.

To achieve victory against the human players, the computer had to be able to rapidly search, generate hypotheses, analyse, and rank possible answers. Deploying this technology to the real world appeared to be a logical extension. In March 2012, Memorial SloanKettering Cancer Center (MSKCC) in New York and IBM announced their collaboration to develop a decisionsupport tool that would help physicians recommend cancer diagnostics

and treatments to patients.

On the eve of the second anniversary of this partnership, the first Watsonbased commercial program was launched: “Interactive Care Insights for Oncology.” By that time, Watson had been presented with 25,000 test-case scenarios, 1,500 real-life cases, 605,000 pieces of medical evidence and two million pages of text.

With great fanfare, the whole thing quickly came crashing down. Difficulties soon became apparent. The oncologists, having seen Watson’s “Jeopardy!” performance, assumed it was an answering machine. The IBM technologists were frustrated by the complexity, messiness, and gaps in the genetic data.

It wasn’t for lack of warning. Martin Kohn, who had worked for IBM Research, recalls recommending that Watson be used only for things that it would definitely be good at, such as knowing if a person would have a bad reaction to a drug. He suggested taking smaller steps first, not making a giant leap straight away. His advice was

roundly ignored by the business executives, eager to “go big” and be at the forefront of innovation.

Watson stands out as a sobering example of the pitfalls of technological hype and hubris around AI, making Microsoft's decision to envelope ChatGPT into Bing even more prescient.

There is no doubt about what Microsoft seeks to achieve long term: embed AI into every one of its products. The millions of dollars invested in OpenAI will serve to get exclusive access to the emerging technology and breathe new life into its entire product offering.

This presents a dilemma: How to get quick feedback on a product that isn’t ready to be widely rolled out to a mass market yet? Microsoft has taken the initial step in a likely long journey. By deploying ChatGPT into Bing first, the business has shown the wisdom of starting small, while never losing sight of the bigger picture.

£ Howard Yu is Lego chaired professor of management and innovation at IMD business school

The supercomputer Watson beat human contestants on Jeopardy!

MOTORING

ROLLING THUNDER

Tim Pitt drives the new Mercedes-AMG SL 55, a sportier take on the glamorous German roadster.

Mercedes-Benz and Aufrecht, Melcher and Grossaspach – better known to the world as AMG – have always been curious bedfellows. One is conservative and mild-mannered, the other rebellious and hedonistic. Whereas BMW M and Audi Sport feel broadly aligned with their respective parents, AMG drifts off on a tyre-smoking tangent.

The SL has traditionally been a very ‘Mercedes-Benz’ sort of sports car. Picture the original 190 SL of 1955 (like a Gullwing minus the doors), the beautiful ‘Pagoda’ model that followed, Bobby Ewing’s scene-stealing 450 SL in Dallas or the crisply elegant ‘R129’ SL of 1989. Now, as this most glamorous and distinguished roadster nears its 70th anniversary, AMG has gatecrashed the cocktail party. Uh-oh… There have been AMG versions of the

SL before, of course, but this is the first version developed entirely in Affalterbach. Contrary to rumours, it doesn’t also replace the AMG GT –which returns in coupe-only format later this year – but it does channel some of its chutzpah. You sense the Porsche 911 Cabriolet is firmly in AMG’s crosshairs.

Topping the range is the 585hp SL 63 – yours for a somewhat alarming £176,000. Next up is the SL 55, which uses a 476hp version of the same 4.0-litre twin-turbo V8 and costs a smidge over £147,000. Then there is the entry-level SL 43, with a 381hp four-cylinder engine and a projected price tag of £110,000. It’s the middleranking SL 55 we’re driving here.

In the metal (largely aluminium, although it still weighs a portly 1,870kg), the new SL looks every inch the AMG muscle car, with a broad grille, power-bulged bonnet and pur-

MERCEDES-AMG SL 55

PRICE: £147,475

POWER: 476HP

0-62MPH: 3.9SECS

TOP SPEED: 183MPH

FUEL ECONOMY: 21.9MPG

CO2 EMISSIONS: 292G/KM

posefully squat stance. I suspect it won’t age as gracefully as its ancestors, but it certainly has plenty of presence.

While the previous two generations of SL had folding hard-top roofs, this ‘R232’ model reverts to a fabric soft-top. It’s also the first SL with two rear seats as standard, although my eight-year-old whinged about the bolt-upright backrests and Ryanair levels of legroom. Best to treat them as extra luggage space, I think, to

supplement the modest 240-litre boot (213 litres with the roof stowed).

When it came to the SL’s glitzy, techladen dashboard, however, young Jessica was robustly in favour, while her dad felt slightly overwhelmed by it all. A giant central touchscreen adjusts its position to be more readable in bright sunshine, and multicolour ambient lighting makes the cabin feel genuinely futuristic at night. Call me old-fashioned, though (and she did) but I really don’t need a car to wish me Happy Valentine’s Day – complete with showers of pink cartoon hearts. Bah, humbug. Fire up the engine and you’re rewarded with AMG’s signature Sturm und Drang. A menacing V8 backbeat is overlaid with a metallic rasp as the revs soar, the four square tailpipes detonating with gratuitous glee. It’s a bit childish, perhaps even anti-social, but it can’t fail to make you smile.

With similar power and performance to a 911 GTS, the SL 55 isn’t supercar-quick. However, a brawny 516lb ft of torque, on tap from just 2,000rpm, means you never feel shortchanged on the road. Factor in four-wheel drive, a nine-speed auto gearbox and stability-enhancing rearwheel steering, and the result is confident and very rapid progress. Where the SL does trail the sports car from the far side of Stuttgart is in terms of engagement. Its steering feels oddly artificial and no amount of electronics can entirely mask all that weight. Then again, not everyone wants to drive like their pants are on fire, and the SL still does the longstriding, luxurious GT thing very well. Overall, it’s an easy car to admire, but a harder one to love – no matter how many hearts it tries to woo me with.

Tim Pitt writes for motoringresearch.com

PORSCHE SALUTES A 50-YEAR-OLD ICON WITH SPECIAL GT3 RS

Porsche has revealed a new special edition 992 GT3 RS that pays tribute to its first roadgoing Rennsport: the 911 Carrera 2.7 RS of 1973. While ‘Porsche 911 GT3 RS Tribute to Carrera RS Package’ hardly rolls off the tongue, it makes no bones about this supercar's iconic inspiration.

The Tribute to Carrera RS Package is offered solely in the United States, with first deliveries due next month. However, given the feverish market for Porsche GT cars, don’t be surprised if a few examples make it across the pond.

Porsche has chosen eye-catching Python Green, from its Exclusive Manufaktur paint palette, for the

911's alloy wheels, side mirror caps and GT3 RS sill graphics. More Python Green is used for the Porsche text on the massive rear spoiler, while the end plates feature an American flag design.

Inside, the modifications include bright green contrast stitching, keys painted in white, and illuminated door sill guards with a ‘Tribute to Carrera RS’ script. Buyers also get a host of special accessories, such as a bespoke Porsche Design watch, custom car cover, RS-branded valve caps and two Porsche scale models.

The GT3 RS is unchanged under the skin, which means a 4.0-litre naturally aspirated flat-six

producing 525hp. The Weissach Package is included as standard, adding carbon fibre components for the bodywork and suspension.

Ticking the Carrera RS box for a new 911 GT3 RS takes the total price to $312,550 (approximately £258,000).

“This package pays tribute to the 911 Carrera 2.7 RS, an absolute driver’s car and an icon,” said Kjell Gruner, president and CEO of Porsche Cars North America. “Today, nothing epitomises the idea of a driver’s car more than the new 911 GT3 RS. Like the original, it uses cutting edge aerodynamics to achieve incredible performance, making this a perfect homage to the legend from 1973.”

DeChambeau tees up rivalry with Johnson

BRYSON DeChambeau believes his Crushers can become the team to beat in the inaugural LIV Golf League season after Charles Howell helped them to win the first event.

Howell topped the individual leaderboard in Mayakoba, Mexico, on Sunday after his final round of 63 left him on 16 under par, four ahead of overnight co-leader Peter Uihlein.

His display did the heavy lifting in the Crushers’ combined score of 26 under par for the three days’ play, nine better than their closest challengers, Dustin Johnson’s 4Aces.

Johnson’s team dominated last year’s LIV Golf Invitational Series, the dry run for this year’s league, but DeChambeau believes this could be his side’s year.

“I knew it would happen, I just didn’t know when,” DeChambeau said of the

FOOTBALL COMMENT

Trevor Steven

IF THE hallmark of a good manager is improving your players then I have to take my hat off to what Erik ten Hag has accomplished at Manchester United.

Marcus Rashford, who is playing at a level that nobody thought he would get near, is the most obvious example but the new Carabao Cup holders are stacked with them.

Luke Shaw is one of the best English full-backs around but Ten Hag saw something else in him, using him at centre-back, while Aaron Wan-Bissaka is looking more like the right-back United signed in 2019.

David de Gea is back to his best, Raphael Varane is showing what a classy centre-back he is, Jadon Sancho’s swagger has returned after Ten Hag took him out of the spotlight, and even Fred is performing like a £50m player.

The jewel in the crown has been Casemiro. When he arrived last summer Graeme Souness likened him to an ordinary player who’d been lucky to be at Real Madrid while plenty of other pundits didn’t rate him either, but he has proved them all wrong. It hasn’t all been plain sailing. Ten Hag was doubted at first, depicted as another Ralf Rangnick who couldn’t get to grips with English football after a shaky start, but he has engineered a dramatic turnaround

WINNING MENTALITY

The key was the winter break for the World Cup, which gave United time to offload Cristiano Ronaldo. Since then United have gone from strength to strength and Rashford in particular is a changed man.

Another big factor has been the signing of Lisandro Martinez.I don’t know how many managers would have stuck to their guns and kept leaving out captain Harry Maguire, but it shows the trust Ten Hag has in his players.

Take Wout Weghorst. The 6ft 6ins journeyman centre-forward is far from your typical United player but Ten Hag knows what he wants from him and, in its own way, it works.

Perhaps his biggest achievement has been restoring a winning mentality and hunger for silverware. Sunday’s win over Newcastle United in the

Big hitter fancies his Crushers team to take on DJ’s 4Aces after winning start to the LIV Golf League, writes Frank Dalleres

win. “To start off the year with a crushing victory, how much more can you ask for a statement piece? The 4Aces, they won a lot last year – but it’s a different year.”

Howell’s first win since the 2018 RSM Classic on the PGA Tour earned him a total of $4.75m (£3.96m) – $4m for topping the individual standings and his share of the $3m Crushers shared for winning the team contest.

“I don’t think you ever see a win coming,” said the 43year-old American.

“I’ve played in a lot of golf tournaments in my life, and I haven’t won a

lot of them, and you have the doubts and the feelings, will you ever win again? To do it against this competition with these guys standing up here is more than I could ever dream of.”

His team-mate, England’s Paul Casey, finished fourth on the individual leaderboard, meaning he pocketed $1.8m (£1.5m) in all from LIV Golf Mayakoba.

Crushers colleagues DeChambeau and Anirban Lahiri finished tied for 19th and 32nd respectively and both banked more than $900,000 (£748,000).

Joaquin Niemann’s Torque finished third

in the team standings on 13 under, one better than the South African quartet of Stinger, among whom Branden Grace placed third in the individual competition.

DeChambeau has been a hands-off captain, leaving his players to prepare for and play in the league as they see fit, although they did bond over a team dinner in Bangkok towards the end of last season.

“There’s a great synergy in this team, and there’s glue that sticks us all together,” said Casey.

“This is not hard work. This is really, really easy hanging out with these three guys and trying to play amazing golf.”

KANE CAN TURN TEN HAG’S UNITED INTO TITLE TEAM

LIV GOLF MAYAKOBA: FINAL STANDINGS

would do well in Ten Hag’s United. He doesn’t stand still for long so would be a good fit for their fluid front line.

Tottenham look no closer to winning major honours so Kane could be tempted to leave in the summer for a team that can offer the lure of trophies. With just a year left on his contract, Spurs could be tempted to cash in too.

Kane already has a good understanding with United’s Christian Eriksen

up in conversations about the title race, if they want to do what Arsenal have done and lay down the gauntlet to the rest of the Premier League then they need to build on what they’ve done this season.

Kane would be ideal

and immediately make United Uncertainty around the club’s ownership must be a distraction and the players deserve credit for putting that

Ending their six-year wait for a trophy might have put the price tag up a few million pounds but I don’t think it will have changed the Glazers’ minds about selling either way. As a neutral, though, selling United when they are back on the up would allow them to leave with minimal hostility and might be the best solution all round.

Trevor Steven is a former England footballer who played at two World Cups and two European Championships. @TrevorSteven63

INDIVIDUAL LEADERBOARD

1. Charles Howell III -16

2. Peter Uihlein -12

3. Branden Grace -10

4. Paul Casey -7

5. Brendan Steele -6

6. Cameron Smith -6

TEAM LEADERBOARD

1. Crushers GC -26

2. 4Aces GC -17

3. Torque GC -13

4. Stinger GC -12

5. Ripper GC -12

6. Fireballs GC -11

Eriksen from Tottenham, while playing with Rashford would make sense for England too

SPORT

France set up bruising battle of the back rows in Le Crunch

MATT HARDY

ENGLAND’S crucial Six Nations clash with France at Twickenham in two weeks is set for a monumental back row battle with Francois Cros expected to come into Les Bleus’ starting XV.

Cros is expected to replace Anthony Jelonch in the starting line up after the Toulouse flanker suffered a serious knee injury (ACL) in his side’s 32-21 win over Scotland on Sunday.

The back row had already been subbed off for a Head Injury Assessment following a tackle that handed Scottish forward Grant Gilchrist a red card but was then injured minutes after returning to the field.

“We don’t have good news: the first diagnosis is a rupture of the inner cruciate ligament,” Galthie said.

“You know the protocol for this type of injury. It takes almost six months between the surgery and the rehabilitation. That’s also why our joy is moderate this evening.”

Sources in France have told City A.M. that the expectation is for Les Bleus to make minimal changes to their starting 23, for what’s known as Le Crunch, despite the injury.

France Rugby head coach Fabien Galthie has chosen to retain much of his squad for this weekend’s Six Nations fallow week before Les Bleus take on England on 11 March.

The French manager has released

TENNIS

just four of the starting 23 who beat Scotland 32-21 in Paris on Sunday.

Fly-half Matthieu Jalibert will return to Bordeaux while hooker Gaetan Barlot, flanker Sekou Macalou and scrumhalf Baptiste Couilloud, too, will head back to their clubs.

Assuming the fallow week goes as planned and there are no severe injuries, Francois Cros is expected to take Jelonch’s spot in the starting back row with Macalou on the bench – making the call to return Macalou to Stade

Francais for the week a curious one.

France deployed a replacement split of six forwards and two backs against Scotland but could revert to five forwards

WINTER SPORTS

Mia Brookes pulled off one of the sport’s toughest moves on her way to the win

Brit teen Brookes makes snowboarding history

FRANK DALLERES

and three backs at Twickenham, negating the need to bring a new face into camp. If that were to be the case, south west London could be decided by back row dominance.

England are expected to continue with Lewis Ludlam, Jack Willis and Alex Dombrandt in their pack while a back row of Cros, Charles Ollivon and Gregory Alldritt would aim to put Les Bleus on the front foot.

Should England win in two weeks, defending champions France will be out of contention for the Six Nations Championship. If France win then England are likely to be out of contention.

Norrie overcomes ‘demons’ to beat world No2 Alcaraz in Rio

FRANK DALLERES

CAMERON Norrie, the British No1 in men’s tennis, admitted battling some personal demons on his way to winning his first title of the year at the Rio Open on Sunday.

Norrie beat US Open champion Carlos Alcaraz – at No2 in the world, the highest-ranked opponent he has ever beaten in a knockout tournament – 5-7 6-4 7-5 in Brazil.

It came seven days after losing a final in Argentina to Spanish teenager Alcaraz and just weeks after coming within one win of the title in Auckland.

“It’s so special to win this one,”

said Norrie, who has climbed to 12th in the ATP rankings.

“I have lost a couple of finals this year. I had to do it the tough way – I was a set and a break down and I was looking done – but I managed to flick a switch and turn it around, so it was a good day.

“I had to battle a lot of demons the last couple weeks, but I managed to play well in the big moments and that’s what it took.”

Alcaraz, who could play Norrie again next week, added: “Even with the injury and the pain, I could say I’m happy with my performance this whole week and the level that I played in these matches.”

TEENAGE snowboarding sensation

Mia Brookes pulled off one of the sport’s toughest moves on her way to becoming Britain’s first ever slopestyle world champion yesterday.

The 16-year-old from Cheshire recorded the first ever 1440 double grab – in which a snowboarder takes off backwards and rotates four times – in a women’s competition to beat Olympic champion Zoi Sadowski-Synnott at the championships in Bakuriani, Georgia.

Brookes was too young to compete at last year’s Winter

Olympics in Beijing and is in her first season on the World Cup circuit but is already living up to expectations set as a child prodigy.

“I honestly feel like I’m going to cry. I’ve never been so happy in my life,” she said. “My coach was like, ‘you know what, if you want to win this, just try the 14’. I’d tried 1260 in practice and I came round and almost went 14, so I knew it was possible on this jump.

“I’d tried it once before and this is the first time I’ve stomped it. I actually can’t believe it.”

New Zealand’s Sadowski-Synnott pipped Brookes to gold at the World Cup in Austria last month but the young Briton got her own back at

CRICKET

the Snowboard, Freestyle and Freeski World Championships.

“What Mia’s done out here is just next level,” said GB Snowsport head coach Pat Sharples.

“We all know Mia’s got the talent but this is her first season on the World Cup circuit and her first World Championships, so to land a run like that with all the pressure of a World Championships tells you everything you need to know.”

Brookes started competing aged six and by 11 had joined the World Rookie Tour for the best under-15 talent and was being called “one of the most exciting young talents not just in the UK, but in snowboarding globally”.

ITV and DAZN in UK rights deal for IPL competition

MATT HARDY

FREE-TO-AIR broadcaster ITV will show 16 regular season matches of this year’s Indian Premier League (IPL) after the broadcaster struck a deal with DAZN for the rights to the cricket franchise competition.

The two broadcasters have purchased the rights for the famous competition with 16 matches to be exclusively shown on ITV while DAZN will broadcast the others – including the playoffs and final, according to the Mail. This will be DAZN’s first entrance into the cricketing world in the United Kingdom but will sub-licence some of the matches to ITV throughout the

2023 competition in a deal which is understood to be for five seasons.

The streaming platform has history with the IPL and holds the competition rights in both Australia and South Africa.

The IPL is the leading franchise cricket model in the world at the moment with a number of the franchises having stakes in overseas teams – the recent SA20 competition involves six teams all of whom are owned by IPL franchises.

The Gujarat Titans – owned by private equity firm CVC – won the 2022 competition in a final in Ahmedabad – it was the Titans’s first season involved in the competition.

KANE TO MAN UTD? Striker would make them title contenders, says Trevor Steven PAGE 17

Jelonch injured himself in France’s 32-21 win over Scotland