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The Sunday Times Business - 15 October 2017

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BUSINESS
&MONEY
October 15, 2017 · thesundaytimes.co.uk/business
thesundaytimes.co.uk/money
A CHIP OFF THE
OLD BLOCK
SPENCER McCARTHY
INTERVIEW,, PAGE 6
TECH
FLIGHTS, NOT
SHARKS, COST ME
AN ARM AND A LEG
FAME & FORTUNE
MONEY, PAGE 22
Hinkley nuclear plant hit by concrete flaws
John Collingridge
Part of the giant Hinkley Point
nuclear plant will have to be
demolished and rebuilt after
inspectors found problems
with its concrete foundations,
in the latest setback for the
£20bn project.
EDF, the owner, is
understood to have found
weaknesses in a small area of
the foundations that have
been laid on the Somerset
coast. The French energy
giant insisted the problem is
isolated to 150 cubic metres
where pipes and cables are
due to be laid, and said it will
not delay construction.
Yet the discovery will raise
concerns about the plant,
which will house Britain’s
first new nuclear reactors in a
generation. EDF admitted in
July that costs at Hinkley,
which is being bankrolled by
the French and Chinese
governments, would rise by
£1.5bn to £20.3bn and that it
may be completed 15 months
later than its December 2025
deadline. Hinkley’s two sister
plants, Flamanville in France
and Olkiluoto in Finland,
have suffered hefty cost hikes
and long delays.
British households will pay
for the plant through a
controversial deal that
guarantees EDF a set price of
£92.50 per megawatt hour of
electricity for 35 years — far
above the current wholesale
power price. However, cost
overruns are borne by EDF
and China General Nuclear,
which owns 33% of the plant.
Funds fire
broadside
over Saudi
oil f loat
Institutions tell
City watchdog
not to bend rules
Aimee Donnellan
Britain’s largest investors have turned up
the heat on the City watchdog over its
controversial plan to allow Saudi Arabia’s
state-owned oil giant to float in London.
The Financial Conduct Authority
(FCA) has proposed bending stock market rules to accommodate Saudi Aramco,
which is aiming to go public next year in a
mooted $2 trillion deal. However, the
Investment Association, the lobby group
for fund managers, has warned the FCA
that any changes could damage London’s
status as a global financial centre.
The intervention could shatter the government’s hopes of luring Aramco to the
Square Mile and complicate Saudi Arabia’s efforts to raise as much as $100bn
(£75bn) to modernise its economy.
Chris Cummings:
‘New initiatives
should not be
at the expense
of investor
protections’
The Saudis want to sell just 5% of
Aramco to public investors — far short of
the 25% required for a “premium” London listing. FCA chief Andrew Bailey has
proposed a new category for government-controlled companies.
Chris Cummings, the Investment Association’s chief executive, is understood to
have rejected the plan outright in his formal response to the FCA.
“For the premium segment of the UK
main market, investors must have confi-
dence that a company is run for all shareholders, not just the major or controlling
shareholder,” the association said.
The snub from Britain’s top fund managers threatens to derail the listing,
which would be the biggest in stock market history. Bankers and City lawyers
have lobbied aggressively for London to
host Aramco, arguing it would yield a fee
bonanza and make London the top destination for global stock listings after
Brexit. Theresa May travelled to Saudi
Arabia in April with London Stock
Exchange chief executive Xavier Rolet to
lobby the Saudi authorities.
Cummings said he supported the FCA’s
efforts to ensure the UK remains competitive. However, he declared that any “new
initiatives should not be at the expense of
investor protections or the high standard
of the listing regime”. Late last week Bailey said he did not believe investor safeguards would be “weakened”.
Nevertheless, the intervention has
ratcheted up the pressure on Bailey, who
is already under fire for having met
Aramco before unveiling the proposal to
change listing rules.
Last week he confirmed that he had
held conversations with Aramco and its
advisers, but said “we emphasised during those conversations that we were
reviewing the listing regime”.
The Investment Association’s move
could stymie the Saudis’ plan to float
Aramco on an overseas exchange. New
York and London are considered the only
markets with a deep enough pool of capital to absorb Aramco. However, experts
said it would struggle to go public in the
US due to the country’s anti-cartel laws.
Saudi Arabia is the lynchpin of Opec,
which seeks to fix the price of crude.
Saudi Arabia is understood to have
stepped up attempts recently to sell a
chunk of Aramco to China and other
deep-pocketed sovereign wealth funds.
Agenda, page 4
The problems were found
in a patch of “substitution”
concrete that forms the
foundations of the first of the
site’s 5 miles of “galleries” — a
series of deep trenches that
will house the plant’s pipes
and electric cables.
The inspection found
problems including “weak
concrete”, “poor-quality
cleanliness” and an area of
concrete that was not wide
enough.
Fixing the problem will
mean demolishing another
layer of “slab” concrete that
had been poured on top of
the foundations.
EDF said there were no
problems with the rest of the
galleries that have since been
built — or with the nuclear
island, the critical base on
which the reactors will be
built. EDF added that the
problematic concrete was a
fraction of the 60,000 cubic
metres of concrete that have
already been poured at
Hinkley.
It said nothing has yet
been built on top of the
foundations and slab layer.
Hinkley construction
director Nigel Cann said: “We
have decided to replace a
small area of concrete poured
as part of the work to create
tunnels for the pipes and
cables. This is in line with the
uncompromising attitude to
quality taken at the Hinkley
Point C project. It is a very
small proportion of the
concrete poured on site so far
and has no impact on the
project schedule.”
NETFLIX RULES HOLLYWOOD
BUYING STUFF IS
SO LAST CENTURY
PAGE 5
APPOINTMENTS
PAGE 10
PUZZLES
PAGE 20
12
14
McEwan ‘tired
of RBS being
badmouthed’
Michael Glackin
Royal Bank of Scotland boss
Ross McEwan has launched a
blistering attack on former
business customers, accusing
them of “badmouthing” the
lender and making “false
accusations” about its
controversial Global
Restructuring Group
(GRG) division.
McEwan’s broadside
comes amid increased
political pressure for the
Financial Conduct Authority
to publish its year-old report
on the conduct of GRG,
which, it alleged, deliberately
stripped assets from small
businesses to bolster profits.
The leaked report revealed
that GRG, a division created
to help companies in
financial trouble, had taken
“inappropriate action”, such
as sharply increasing interest
charges or imposing
unnecessary fees, at 92% of
viable companies it handled.
However, McEwan told
The Sunday Times that the
“accusations should stop”,
adding that he was “tired” of
the criticism.
“Lots of people want to
take a dig at us, but we have
done nothing wrong in the
cases of the vast majority of
businesses we handled and
there is absolutely no
evidence that we deliberately
destroyed businesses for
their assets,” said RBS’s
New Zealand-born chief
executive.
He added that there was a
compensation scheme for
business customers who
believe they have suffered
losses. “If people aren’t
happy with our procedures,
let them sue us, take us to
court and present the
evidence. I’m tired of all
this talk constantly
badmouthing RBS. We’re
supporting British
businesses,” said McEwan.
His robust defence of RBS’s
actions in the aftermath of
Continued on page 2→
Sainsbury’s warns of
‘no deal’ Brexit cost
Tommy Stubbington
Families will have to pay
more for their weekly shop if
Britain leaves the EU without
a trade deal, the chairman of
Sainsbury’s has warned.
David Tyler said customs
delays and tariffs would add
to the costs facing shoppers.
His warning comes after
Theresa May said she was
making plans for a “no deal”
Brexit, which would see
Britain trading with the EU
under World Trade
Organisation rules.
“If we don’t get a deal and
we move to WTO rules, we
could face an average tariff of
22% on foodstuffs we import
from Europe,” Tyler said.
Under current customs
arrangements, a lorry leaving
Italy early in the morning
Netflix is rebooting the 1980s soap opera Dynasty, featuring Grant Show and Nathalie Kelley
Danny Fortson
San Francisco
Netflix is expected to cement
its position as Hollywood’s
biggest spender this week,
after adding more than
50,000 subscribers a day
over recent months.
The streaming giant will
tomorrow outline its ambitions
to build a dominant television
and film production
powerhouse. The Silicon Valley
giant is on track to splash out
$6bn (£4.5bn) this year on
shows such as Dynasty, The
Crown and House of Cards, far
outpacing the budgets of
virtually any Hollywood studio
or TV network, as well as
newcomers such as Amazon
and Hulu.
The company is expected
to have added more than 4m
new subscribers in the third
quarter, according to Wall
Street forecasts.
Founder Reed Hastings is
investing heavily in his own
shows to reduce Netflix’s
dependence on those
produced by rival studios and
producers. Disney said it
would pull all its movies from
Netflix by 2019 and launch its
own service.
Earlier this month, Netflix
raised its fees in a number of
key markets, including Britain,
where the price increased by
50p to £7.99 a month. The rise
will fund Netflix’s original
content budget, which is set
to grow again next year.
Shares in Netflix closed
at $199.49 last week, valuing
the company at $86bn.
would be able to deliver to
Sainsbury’s in time for the
food to be on shelves the
following day.
“There is considerable
worry about wastage,” he
said, warning that trucks
could face delays leaving
French ports and again on
reaching Britain.
Hauliers have warned that
delays in cross-Channel trade
could place Britain’s supply
chain under pressure,
potentially leaving
supermarkets short of food
and manufacturers without
vital components.
“The resilience of the
supply chain is about one
week,” said James Hookham
of the Freight Transport
Association.
Ports fear gridlock, page 8
Robots in the driving
seat for economy
Sabah Meddings
Robot doctors and fleets of
self-driving cars are among
the innovations tipped to add
£630bn to the British
economy by 2035.
A report published today
aims to spur investment in
artificial intelligence, which
experts say could transform
the health, banking,
education and automotive
industries in coming years.
In the governmentsponsored study, academics
and industry chiefs propose a
raft of measures to ensure the
UK does not fall behind its
international peers.
Recommendations to
turbocharge the industry
include a new master’s
course in AI and 200
specialist PhD places.
The report, led by Dame
Wendy Hall, professor of
computer science at
Southampton University, will
be followed by a sector deal,
to include commitments from
government and industry.
2
The Sunday Times October 15, 2017
BUSINESS
DIGEST
FUND BITES INTO
RESTAURANT
TESLA LAYS OFF
400 WORKERS
The electric car maker
Tesla has made more than
400 employees redundant
after a company-wide
annual review.
The automotive and
energy storage company,
led by tech pioneer Elon
Musk, above, has dismissed
associates, team leaders
and supervisors, it said
in a statement.
Tesla, known for its
cutting-edge self-driving
vehicles, has soared in
value to become a $59bn
(£44bn) company.
However, the Californiabased company has
suffered from
manufacturing problems in
recent months, after
production of its Model 3
car fell short of estimates.
MERLIN LOSES
MAGIC
Merlin Entertainments
540p
500
460
420
380
2016
2017
Source: Thomson Reuters
Theme park operator
Merlin Entertainments will
reveal how it fared over the
crucial summer period
when it reports its thirdquarter trading update on
Tuesday.
The owner of Alton
Towers is likely to present a
mixed picture, as a wet
summer kept some families
at home. Yet figures could
be lifted by its flagship
Staffordshire theme park,
where numbers are still
recovering from the
rollercoaster crash in 2015.
Merlin, which last week
said it was not involved in
talks relating to a SeaWorld
takeover, also faces rising
wage costs and a slump in
consumer confidence.
Lenders to Busaba Eathai
have gobbled up a portion
of the Thai restaurant
business in a financial
restructuring, amid
growing pain in the dining
sector.
New York debt fund
Muzinich has taken a slice
of the company from
Busaba’s private equity
owner, Phoenix Equity
Partners. It comes after
Jason Myers stepped down
as chief executive of the
14-strong chain this month.
Busaba has been forced
to shut several sites this
year due to falling profits
and sterling-related price
inflation.
£2.9bn
The amount by which
Britain’s overall trade deficit
grew in the three months to
August, raising the total to
£10.8bn. Total goods
exports fell, driven lower by
a drop in exports to non-EU
countries, but this was
partially offset by higher
exports to the EU.
Carney poised to write
‘Dear chancellor’ letter
Governor may have
to explain if inflation
rises above 3%
Tommy Stubbington
Mark Carney could have to write a letter
to the chancellor explaining the Bank of
England’s failure to bring inflation under
control, with the rise in the cost of living
set to reach 3% for the first time in more
than five years.
Confirmation that inflation is still on
the rise would provide more ammunition
to hawks on the Bank’s monetary policy
committee (MPC), after strong hints that
rates could rise as soon as next month.
Economists expect figures on Tuesday to
show consumer price inflation climbed
to 3% last month, up from 2.9% in August.
If the Bank misses its 2% inflation target by more than one percentage point,
the governor has to give an explanation in
a letter to the chancellor. A significant
minority of economists expect the figure
for September to be higher than 3%.
Inflation has not formally overshot the
target since Mervyn King wrote to George
Osborne in March 2012, although Carney
has had to account for too-low inflation.
“Now that we’re in letter-writing territory, a November rate hike is starting to
look like a done deal,” said Alan Clarke,
UK and eurozone economist at Scotiabank. Clarke said the prices of imported
goods continued to rise because of sterling’s weakness since the Brexit vote.
The Bank had expected inflation to
peak this month, then fall back. One
influential forecaster has urged the MPC
to keep rates on hold for a year, as the
economy will be “stuck in low gear”. The
EY Item Club, which uses the Treasury’s
forecasting model, said growth would be
1.5% this year and 1.4% in 2018.
“While it is understandable that the
MPC will want to gradually normalise
rates from their current ‘emergency levels’, it would be better to do so once the
economy is on a stronger footing,” said
Howard Archer, chief economic adviser
to the Item Club.
“It is still likely that inflation will fall
back markedly during 2018 as the impact
of sterling’s past drop fades. Brexit uncertainties are also likely to remain elevated
well into 2018 and perhaps beyond.”
VARSITY WARNING
Mark Carney:
expected the rise
in the cost of
living to peak
this month
Universities said they must not be
“taken for granted” in Brexit talks,
as a study showed that they
supported nearly 1m jobs and
generated £95bn of economic
output. The research, for lobby
group Universities UK, said the sector
employed 404,000 people, but
supported an additional 430,000
jobs through spending by staff and
students. It claimed uncertainty over
Brexit, which could make it harder for
students from the Continent to study
in the UK, is threatening this
contribution to the economy.
VICKI COUCHMAN
LET’S GET FINANCIAL
Capital’s
waste
giant up
for grabs
John Collingridge
BODEN’S NEW
HELPER
Middle-class fashion brand
Boden has enlisted the
former boss of Urban
Outfitters to help drive its
international expansion.
Glen Senk, who led the
on-trend youth brand from
2007 to 2012, has been
appointed to the Boden
board as a non-executive
director.
He will join chief
executive Jill Easterbrook,
a former Tesco director
appointed in February, as
the brand prepares to open
its first mainstream store on
the King’s Road in Chelsea,
west London.
HULL’S £10M
INVESTMENT
A £10m investment in Hull
internet firm Connexin is
creating 100 new jobs in
the city. The move, led by
US fund Digital Alpha, will
pay for a new tech campus
and back up to £100m in
smart city projects.
A boutique gym that
started life eight years ago
has raised £6m from the
private equity firm Piper,
writes Peter Evans.
Frame, which specialises
in dance, yoga and Pilates
classes and refers to its
customers as Framers, will
use the cash to expand
across London and then
the UK.
The business was
founded in east London by
friends Pip Black, left, and
Joan Murphy, right, and
employs 26 staff at its
headquarters plus 149
personal trainers in its four
gyms. Sales this year are
expected to be about £5m.
The British health and
fitness industry, which is
worth more than £4bn, has
seen a spate of recent
investments. Earlier this
month, 1Rebel — another
London gym chain —
Ex-Barclays bosses
could face legal bill
Aimee Donnellan
Exceptional
People,
Exceeding
Expectation
Barclays has told four former
employees accused of fraud
that they could be liable for
their own legal expenses.
Experts said the legal bill
could total £12m for the men,
who have been charged by
the Serious Fraud Office after
an inquiry into the bank’s
multibillion-pound
fundraising in 2008.
The four, who all deny
conspiracy to commit fraud
by false representation, are
John Varley, former chief
executive of Barclays; Roger
Jenkins, a star investment
banker in the Middle East;
Richard Boath, who led
Barclays’ Middle East funding
operation; and Tom Kalaris,
who ran the bank’s wealth
division.
Barclays has also been
charged. The trial is due to
start in January 2019.
The bank is understood to
have sent letters to the four
former executives in the past
month, reminding them that
it is standard practice for
Barclays to claw back legal
fees in the event of
conviction. Sources said it
was common for such letters
to be sent out in cases of this
nature.
The former Barclays
bankers are the first to face
criminal charges over events
linked to the financial crisis,
when the bank raised £11.8bn
of emergency funds from
large investors, including
Abu Dhabi and Qatar.
The fundraising allowed
the bank to avoid the same
fate as Royal Bank of Scotland
and Lloyds, which received
taxpayer-funded bailouts.
Barclays and the four men
declined to comment.
raised £6.6m in a funding
round led by Codex Capital
Partners. Piper’s other
investments include the
cocktail chain Be At One,
Turtle Bay restaurants and
Proper Corn popcorn.
A huge incinerator on the
south bank of the Thames in
London has been put up for
sale for more than £1bn.
Cory Riverside Energy is
being sold by the vulture fund
Strategic Value Partners,
which seized control of the
plant in 2015 as it struggled
with its debts.
Cory, which is based in
Belvedere, burns 750,000
tons of rubbish a year that has
been shipped to the plant by
barge along the river —
generating enough electricity
to power 160,000 homes.
Cory was founded in 1896
and played a vital role during
the Second World War,
distributing coal across the
capital.
SVP, an American debt
fund that targets struggling
companies, has hired
JP Morgan to handle the sale,
which is likely to attract
pension and sovereign wealth
funds. SVP owns about 60%
of the company, along with
lenders including
Commerzbank and EQT.
SVP has carved up Cory
since acquiring the company
in a debt-for-equity swap,
selling businesses and
restructuring its debt pile,
which now stands at £550m.
Cory is chaired by Jonson
Cox, who is also chairman of
the water regulator Ofwat.
Gulliver’s £50m
HSBC farewell
Aimee Donnellan
Varley: 2019 court date
l A group of Lloyds
shareholders will go to the
High Court on Wednesday to
sue the bank and its former
directors over its rescue deal
of Halifax Bank of Scotland at
the height of the financial
crisis.
The chief executive of HSBC
could walk away with nearly
£50m in cash and shares
when he leaves the bank in
February.
The pay bonanza for Stuart
Gulliver includes an expected
£5m pay package for 2017. He
has also built up a £21m share
pot during more than three
decades at the bank and has a
further £24m of bonus stock
that will vest in coming years.
Gulliver, 58, has run the
bank since January 2011. In
a previous stint as head of
HSBC’s investment bank, he
was reputedly one of
London’s best-paid bankers.
Two years ago he was at
the centre of a political storm
after it emerged he used a
Panamanian bank account to
stash millions of pounds of
bonuses while working in
Hong Kong. He was criticised
by MPs for maintaining his
status as a non-domiciled
taxpayer despite living in the
UK since 2003. Gulliver has
claimed tax domicile in Hong
Kong since joining the bank in
1980. In March, he lost a legal
bid to prevent HM Revenue &
Customs investigating his
non-dom status.
Gulliver said last week he
was confident HSBC was in
better shape than when he
became chief executive.
John Flint, 49, has been
selected as the new chief
executive, less than two
weeks after Mark Tucker
became chairman.
If he hits all his targets,
Flint could earn nearly £10m
a year in his new role, making
him one of the highest-paid
bosses in the FTSE.
Prufrock, page 12
NOMINATE A NON-EXECUTIVE
DIRECTOR, CHAIRMAN OR
TRUSTEE TODAY
Get off our backs,
RBS tells accusers
www.nedawards.co.uk/nominate
→ Continued from page 1
the financial crash, and of its
compensation scheme, was
dismissed by small business
groups taking legal action
against the bank.
Ali Akram, a partner with
LexLaw, which represents a
number of businesses that
passed through GRG, said:
“The GRG compensation
scheme has been designed
to be slow in order that
legal claims become
time-barred. It’s designed
to limit redress to
small-business victims.”
SPONSORED BY
James Hayward, chief
executive of RGL
Management, another group
of businesses handled by
GRG, also criticised the
scheme: “It’s self-managed,
self-policed, self-serving and
precludes thousands of
legitimate claims for
consequential loss from
proper compensation.”
Hayward added that his
group still intended to take
RBS to court. “We have
evidence there was deliberate
harm done to businesses in
our group,” he said.
3
The Sunday Times October 15, 2017
BUSINESS
MP seeks pledge
on pensions from
steel colossus
John Collingridge
A senior MP has demanded
assurances over the fate of
130,000 British steelworkers’
pensions when a giant new
European steel venture is
created.
The Indian industrial
behemoth Tata recently won
permission to offload the
British Steel Pension Scheme
and create a new fund with
poorer benefits.
The deal paves the way for
Tata to merge its European
steel operations, including
the Port Talbot plant in south
Wales, with those of
Germany’s ThyssenKrupp.
The British Steel scheme
will fall into the Pension
Protection Fund (PPF), the
government-backed lifeboat.
Under the deal, backed by the
Pensions Regulator, current
and retired workers will have
a choice of transferring to the
new scheme or to the PPF. In
most cases, they will lose less
of their benefits by opting for
the new scheme.
However, Frank Field, who
chairs the Commons work
and pensions committee, said
it was uncertain whether the
joint venture — which will be
Europe’s second-biggest steel
maker — will honour the
terms of the scheme.
“It is now all too clear that
the livelihoods of 130,000
British Steel pensioners lie in
the hands of the new owners
— a pan-European super-giant
— and not the Pensions
Regulator. Even if the vast
majority of members opt for
the new scheme, the owners
could still pull the plug and
send them into the PPF,” said
the veteran Labour MP.
Field also raised concerns
over the qualifying criteria for
the new scheme, which he
believes are unclear. “I will be
writing to ThyssenKrupp and
Tata to ask what assurances
they can give to British Steel
pensioners.
“What will the mysterious
qualifying criteria be? What
commitments will they make
to ensure the scheme starts
and stays in a healthy state?”
He added: “In the event
the new scheme does go
ahead, the owners will decide
whether to start paying
cost-of-living increases for
pensions accrued before
1997, the oldest members.”
l The head of the PPF, Alan
Rubenstein, has said he is
“comfortable” about coming
behind the investment firm
Greybull Capital in the list of
Monarch Airlines’ creditors.
The PPF took on the carrier’s
pension scheme three years
ago, when Greybull bought
Monarch. The PPF has lost its
10% stake in the airline,
which collapsed this month,
and ranks behind Greybull in
recouping £7.5m of debt.
Court showdown for
Caudwell and accuser
Sabah Meddings
A legal spat between the
billionaire founder of Phones
4u and his former protégée
will be aired this week as the
case opens in the High Court.
John Caudwell, 65, is
locked in a feud with Nathalie
Dauriac-Stoebe, a financier
who ran Signia Wealth — an
asset manager backed by the
tycoon.
She was suspended a few
days before Christmas 2014,
and resigned weeks later.
Dauriac-Stoebe, 39, has
accused the company of
unfair dismissal. She has
alleged Signia had used
a“sham transaction” to help
lower Caudwell’s tax bill.
Signia responded with
accusations of “misconduct,
dishonesty and lack of
integrity” — alleging she
instructed her PA to falsify
£33,000 of expenses.
Signia and Dauriac-Stoebe
deny the claims.
Nurofen maker may
seek rights issue for
painkiller deal
Daniel Dunkley
The founder of Poundworld is
being lined up to take the top
post at struggling rival
Poundstretcher to try to
revive its fortunes, writes
Sabah Meddings.
Chris Edwards, above, sold
Poundworld to the US private
equity firm TPG for £150m in
2015 and is now expected to
turn his attention to
Poundstretcher, owned by
reclusive brothers Aziz and
Rashid Tayub. It is understood
that Edwards, 67, was first
approached last year and will
move to the Huddersfield
head office next month. He is
likely to bring his own
management team.
Poundstretcher has been
hit by inflation and increased
competition from the likes of
Aldi, Lidl and Poundland.
The chain, which has about
390 stores, reported pre-tax
profits of £2.4m on sales of
£429.5m in the year to March
2016. Earlier this year the
turnaround fund Endless is
Facebook suffers as trust
ebbs away on fake news
Danny Fortson
San Francisco
Facebook shares could slump
20% as mounting controversy
over “fake news” and wild
overestimates of its online
audience lead advertisers to
turn their backs on the social
media platform, a Wall Street
analyst has warned.
The prediction from
Pivotal Research came as
Sheryl Sandberg completed a
charm offensive in
Washington DC. Facebook’s
operations chief met dozens
of congressmen on Capitol
Hill last week, pledging
repeatedly that the company
would “do better” in tackling
the scourge of fake news. Her
mission came as public
outrage hit new heights in the
wake of Facebook’s
admission that it ran political
ads during the 2016
presidential election that
were created by groups
linked to the Russian state.
The House and Senate
intelligence committees are
investigating Facebook’s role
in the election of Donald
Willetts
warns on
biotech
‘ignorance’
Sabah Meddings
Promising UK biotech
companies are being forced
to list on Nasdaq because
British investors are not savvy
enough to understand their
ground-breaking technology,
a former government
minister has warned.
Lord (David) Willetts, who
was minister for universities
and science under David
Cameron, said a “lack of
depth of understanding”
made UK investors wary of
innovative science.
“Conversations with
Reckitt eyes
up Pfizer
cast-offs
FOUNDER POUNDS ON
Facebook chief Sheryl Sandberg pledged to ‘do better’
Trump. The controversy has
sparked a wider debate over
Silicon Valley’s growing
power and whether tech
giants such as Facebook
should be hit with harsh new
regulations or even broken
up.
Mark Zuckerberg, the
social media site’s chief
executive, has posted a video
pledging his devotion to the
integrity of the democratic
process, and the company
ran several big newspaper
ads defending itself.
Combined with other
operational mistakes,
however, for the first time
Facebook “faces a lack of
trust” among advertisers and
regulators, according to a
research note from Pivotal.
The analyst also highlighted a
list of damaging revelations,
including how Facebook’s
potential investors in the UK
start with elementary
questions about the science
and what the company does,”
said Willetts, now executive
chairman of the Resolution
Foundation think tank.
“In the US, however,
you’re more likely to be
talking to someone who has a
doctorate in the subject.”
Willetts said youngsters
giving up science at the age of
16 were partly to blame for
City investors’ “lower levels
of understanding”.
Willetts, who also sits on
the board of the Bioindustry
Association trade body, said
too many fragile companies
were being spun out of
universities prematurely.
Instead, he suggested they
should be matured in
university laboratories — and
given more financial backing
by the institution.
Americans
tie up with
Oxford
spin-out
Sabah Meddings
A university spin-out backed
by fund manager Neil
Woodford has secured a
multimillion-pound deal with
the US drugs giant Biogen.
Oxford-based Genomics
will work with the listed,
£53bn company to search for
new treatments for multiple
sclerosis. The aim is to cut the
failure rate of clinical trials —
currently about 90%.
Genomics has developed a
database of human genetic
information, providing a
source for drugs companies
advertising claimed that it
could reach 100m young
Americans — about 25m more
than exist, according to
official census figures.
“The series of errors and
flaws in the company’s ad
products that have come to
light over the past year will
eventually have a negative
effect,” said the research.
Facebook shares closed on
Friday at $173.82, valuing it at
$505bn (£380bn). Pivotal
slapped a $140 price target on
the stock.
The company has also
been slammed for allowing
advertisers to target ads using
racist terms, and for inflating
video views. “Brand-based
advertisers have only recently
become comfortable
challenging digital media
owners to provide higher
standards of accountability
. . . and some are finding
limited benefits from digital
media,” added Pivotal.
It predicted that the
advertisers’ awakening will
ultimately lead them to spend
less with Facebook, but any
fall-off will be very gradual.
to use in their research. If a
scientist wants to know what
might happen when a
particular patient is given a
gene therapy drug, they can
search the database for
people with a similar genetic
profile. By analysing the
different DNA sequences,
potential treatments can be
identified and the drug trial
process streamlined.
“We can only tell what
drugs will do in humans first
by developing the drug,
testing it for safety and then
actually giving it to humans,”
said Genomics’ founder,
Peter Donnelly. “This has the
ability to transform drug
development.”
Genomics was spun out of
Oxford University in 2014 and
secured £10.3m of backing
from investors including IP
Group, the intellectual
property company.
understood to have held
informal sale talks with the
brothers, whose family
fortune is worth £250m,
according to The Sunday
Times Rich List.
The appointment of
Edwards would follow a string
of management changes over
the years. Richard Kirk stood
down in 2012 in a difference of
opinion with the brothers, it
was claimed. Poundstretcher
did not respond to requests
for comment.
Reckitt Benckiser is to explore a raft of
financing options, including a multibillion-pound rights issue, when it enters
the race for a division put up for sale by
the US pharmaceutical giant Pfizer.
City sources said the British household
goods company, the owner of Nurofen,
would “run the slide rule” over the consumer drugs division, which will be
placed on the auction block next year.
The unit comprises a raft of over-thecounter treatments, including the painkiller Advil.
The sale comes at a time of heightened
turbulence for Reckitt, which in February bought the US-owned baby-food
maker Mead Johnson for £13.2bn. That
deal, financed with a combination of cash
and debt, has stretched the company’s
balance sheet, raising doubts over its ability to pull off another large takeover.
However, City sources said Reckitt will
review all options when Pfizer fires the
starting gun on a sale.
Sources familiar with Reckitt said it
would look at different ways to try to
participate in the auction, including a
rights issue, a potential swap of assets,
or buying individual assets from Pfizer.
Reckitt declined to comment.
The company has coveted the Pfizer
business for several years. In 2015, chief
executive Rakesh Kapoor said he would
be “very interested” in buying it.
Since acquiring Mead Johnson, Kapoor
has endured a number of setbacks. Reckitt’s share price has tumbled in the wake
of a slowdown in sales and a damaging
cyber-attack, leading to the company cutting its growth targets for this year. In a
sign of the turmoil engulfing it, four of
Reckitt’s 10-member executive committee said they would be leaving.
Reckitt’s shares closed at £71.87 on Friday, giving it a market value of £50.3bn,
down from a high of more than £80 a
share in early June.
Analysts have warned that Reckitt is
likely to struggle to win shareholder support for a deal with Pfizer. Analysts at the
investment bank Jefferies said it was an
“unhelpfully timed dilemma”. In a note
last week, they pointed out that a deal
would push Reckitt’s net debt to more
than four times its earnings.
Jefferies added: “We think [Reckitt’s]
best hope is that the Pfizer review plays
long. This would give them the opportunity to sort out [Mead Johnson] and hopefully rebuild market confidence.”
Reckitt will face intense competition
from a number of global rivals for Pfizer’s
consumer business. Food giant Nestlé
recently revealed it was on the lookout
for over-the-counter consumer drugs,
and the healthcare titan Johnson & Johnson is also on the takeover trail.
Glaxo Smith Kline has also been touted
as a potential bidder but is first expected
to attempt to strike a deal to buy out
Swiss giant Novartis’s stake in a consumer drugs joint venture when it comes
up for sale in March.
BUILDER MULLS FLOAT
The owners of builder Keepmoat
Homes are exploring plans for a
£350m float, writes Daniel Dunkley.
The private equity firms TDR and
Sun Capital are weighing a listing
next year, buoyed by the success of
rival Countryside on the London
market, sources said.
The stock market expects a
building boom after the government
pledged an extra £10bn for its Help
to Buy scheme earlier this month.
Keepmoat specialises in affordable
and social housing, and sells 70% of
its homes to first-time buyers.
TDR and Sun bought the company
for an undisclosed sum three years
ago and sold its regeneration arm to
the French energy giant Engie in
March for £330m.
Keepmoat made an underlying
profit of £36m on continuing
operations last year.
Sources said it could be valued at
£350m, based on the market worth
of industry peers.
4
The Sunday Times October 15, 2017
BUSINESS
Saudi black gold could leave a stain on the City
Simon Duke Agenda
T
here are few spectacles quite as
unedifying as a swarm of City
advisers buzzing around a
honey pot. For the past year or
so, every banker and lawyer in
town has been jostling for a
piece of the biggest deal of all
time. Saudi Aramco, the
state-owned oil giant, has been
considering London as one of the venues
for its mooted $2 trillion float, and a
great fees bonanza beckoned.
Even Theresa May got in on the act.
With London Stock Exchange boss
Xavier Rolet by her side, the prime
minster flew into Riyadh in April to fight
Britain’s corner. The City’s main
watchdog also weighed in with a
proposal to water down the listing rules
to accommodate the opaque oil giant.
However, the proposed float is now
hanging by a thread. Andrew Bailey,
head of the Financial Conduct Authority,
has become embroiled in a political
storm. And, as we report today,
investors have told the regulator that
bending the rules for Aramco could
tarnish the London market’s credibility.
The row revolves around the Saudi
government’s desire to retain absolute
control over the sprawling oil producer
Aramco. Riyadh wants to sell just 5% of
its shares to outside investors, compared
with the 25% it would have to offload to
secure a “premium” London listing. To
overcome this obstacle, the FCA has
suggested creating a bespoke category
for state-controlled companies.
But suspicions are growing that
Bailey, one of the favourites to succeed
Mark Carney as governor of the Bank of
England, has been leant on by No 10 — a
charge he denies.
Nicky Morgan, who heads the
Treasury committee, questioned the
“level of political involvement” in the
decision. Late last week it emerged that
the FCA had met Aramco executives
several times before unveiling its
proposed reform in July
Shareholders are also feeling queasy.
In a letter to Bailey, the Investment
Association said London’s position as a
global financial centre could be
preserved only by maintaining the
current “high standards” of the listing
regime. It’s the clearest signal yet that
City fund managers would snub the float.
May believes that enticing Aramco
would bring prestige to London and a
seam of cash that can be mined for years
to come. Neither argument is especially
convincing. Yes, the float would
generate very large fees, and,
presumably, tax revenues. But the longterm benefits are much harder to
discern. As for prestige, the judgment
depends on the vision for Brexit the
government pursues. If the idea is
to race towards the bottom in a
Singapore-style bonfire of red tape, it
makes sense to give Aramco the London
imprimatur. However, institutions take
the opposite view; after scandals at
ENRC and Bumi, shareholders are in no
mood to relinquish hard-won
protections for a pot of Saudi gold.
They appear to be winning the battle;
Aramco is stepping up its efforts to sell
stakes to China and other sovereign
states, and could push its international
listing into 2019.
That will be music to the ears of the
FTSE 100’s dwindling band of oil and
Royal Dutch Shell
£24
20
16
12
2013
2014
2015
2016
2017
gas majors. They fear Aramco would
suck investor cash away from rival
extractors, driving up their cost of
capital.
Shell has bounced back from the
crude price crash of 2015, and is the
world’s second-largest listed oil
company after Exxon. The Anglo-Dutch
giant maintains a dual listing in London
and Amsterdam. It would be a shame if
Aramco tilted Shell’s centre of gravity
away from Britain.
Source: Thomson Reuters
May believes
Aramco will
bring prestige
to London
Beyond the pale
When Tidjane Thiam landed the top job
at Prudential in 2009, it was seen as a
watershed moment in the drive to
promote diversity in British businesses.
The Ivorian was the first black person to
run a FTSE 100 company, and it was
hoped that others from ethnic minorities
would follow in his footsteps.
The reality has not lived up to the
promise. The Parker Review into the
composition of Britain’s top 350 listed
companies, published last week, makes
for depressing reading. Only 1.5% of
board positions are held by non-white
directors — even though 14% of the UK
population is non-white. This is not only
socially wrong but also makes no sense
commercially.
Having a diverse boardroom fosters
challenge and debate, reduces the risk of
groupthink and boosts profits. A 2015
McKinsey study of 366 public companies
found that those in the top quartile on
ethnic and racial diversity measures
were 35% more likely to deliver financial
returns above their industry average.
The government-backed review, led
by departing Anglo American chairman
Sir John Parker, wants all Footsie
companies to have at least one
non-white director by 2021. However, it
is just a target — there’s no compulsion.
I have a feeling that shareholders will
want to start kicking up a fuss over racial
diversity, as they have done so
effectively in their mission to get more
women in boardrooms. Shareholders
have been quick to punish companies
that have failed to hire female
independent directors. They should do
the same for all-white boards.
Iain Dey is away
Don’t give up on British
productivity just yet
How chaos will hit
the Republicans
David Smith Economic Outlook
Irwin Stelzer American Account
T
he biggest UK economic news
last week came from an unusual
source. When the Office for
Budget Responsibility (OBR)
reviews its own forecasts, as it
does regularly, this is normally
one for the nerds and pointyheads. But, without wishing to
align myself too much with either group,
the latest forecast evaluation report
from the government’s fiscal watchdog
had bite as well as bark. One unnamed
Treasury official described it as a
“bloodbath” for the public finances.
The issue is a straightforward one,
which has appeared on many occasions
here. Productivity is the key to
prosperity and living standards. Higher
productivity — more output for every
worker or hour worked — determines the
growth of real wages and the economy’s
ability to grow with a given size of
workforce. It is, as the economist Paul
Krugman once memorably put it, not
everything, “but in the long run it is
almost everything”.
It is also intimately linked to the state
of the public finances — government
debt and deficits. Productivity growth
has a direct impact on tax revenues and
establishes the economy’s “speed limit”.
The lower that speed limit, the more
difficult it is to grow your way out of a
budget deficit. As the OBR puts it: “Other
things being equal, a downward revision
to prospective productivity growth
would weaken the medium-term
outlook for the public finances.”
The significance of its latest
assessment is that the OBR has been
dutifully waiting for something to turn
up on productivity for many years.
Every year since 2010, when it came into
being, it has assumed a recovery in
productivity growth to its long-run
average of about 2% a year. Every time it
has been disappointed.
Even when all the ducks have been in
a row for a productivity rise, it has failed
to happen. Instead of a 2% annual rise in
productivity, the past five years have
delivered just 0.2% a year. Productivity
is no higher than it was a decade ago,
when a normal performance would have
delivered a 20% rise.
So, while the OBR has not said
precisely what figures it will use to
underpin the November 22 budget, it
will be “significantly reducing” its
assumption for productivity, to bring it
more into line with the recent
disappointing experience.
The story of how it has got to this
position reads a little bit like a
whodunnit. Post-crisis productivity
weakness is not confined to Britain but
the gap with other countries — German
output per hour is 36% higher than the
UK’s, France’s 29% — is embarrassing.
One of the first explanations for the
weakness of productivity in Britain was
that firms hoarded labour during the
2008-9 recession, when employment fell
a lot less than feared. With a surplus of
workers relative to output, productivity
weakness was not surprising.
However, as the OBR notes, that
explanation “became less appropriate
once firms began hiring again”, so
attention turned to other factors.
High on the list of these was that
problems in the banking system had
prevented the normal process of
creative destruction working. The banks
forgave weak businesses, which in other
circumstances might have failed, and
failed to lend enough to new, dynamic,
high-productivity firms.
Clearly, there was some truth in that.
The latest report
from the fiscal
watchdog had bite
as well as bark
But, as the OBR again concedes: “The
banking system is now much better
capitalised and more robust than it was
in the immediate aftermath of the crisis,
so this explanation no longer looks as
relevant as it once did.”
That still leaves us with plenty of
explanations. One, which I devoted a
piece to here a few weeks ago, is that
ultra-low interest rates have contributed
to productivity weakness. The banks
showed forgiveness and near-zero
official rates made it easier for them to
do so. Zombie firms have stalked the
land, driving down productivity.
Sectoral shifts in the economy have
also been important. I have yet to come
across a business that says it is not
making an effort to boost productivity
and, in most cases, achieving gains. Yet
if there has been a shift from higher to
lower productivity activities, as there
has been, it is perfectly possible for the
majority of firms to be increasing
productivity while the performance of
the average stagnates.
The single most important
explanation for the weakness of
productivity, however, jumps out of the
OBR report. Ten years on from the start
of the financial crisis, business
investment is just 5% above its pre-crisis
peak. At this stage in the two previous
recessions and recoveries, in the 1980s
and 1990s, business investment was up
by 63% and 30% respectively. This is a
huge contrast.
A couple of years ago, Britain was on
the brink of a significant business
investment upturn. Predicted annual
growth rates of 8% or 10%, sustained for
some time, were not unrealistic. Then
came the referendum and, according to
the Bank of England, business
investment by 2020 will be 20% lower as
a result. We should also be concerned
about Britain’s ability to attract inward
investment in a post-EU future.
The delayed investment upturn may
mean we have to get used to weaker
productivity than is healthy for a while
PRODUCTIVITY HAS CONTINUED TO DISAPPOINT...
Output per house
Average, 1972-2007
Average, 2008-17
8% change
6
4
2
0
-2
1975
1980
1985
1990
1995
2000
2005
2010
2015
Source: ONS
...AND THE OBR IS FED UP WAITING FOR AN UPTURN
Outturn
Productivity forecasts 2010-17
120 (2009 Q1 = 100)
115
110
105
100
95
09
Sources: ONS, OBR
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
yet. But we should not throw in the towel
entirely on a productivity revival.
For one thing, we have a tight labour
market with an unemployment rate of
just 4.3%, and a labour supply shock on
the horizon. I do not buy the simplistic
argument that EU migrants have enabled
firms to employ rather than invest. In
most cases a decision to employ also
means a decision to invest, for example
in new outlets. But migration from the
EU to Britain is already falling and, given
the tightness of the labour market, we
will soon be facing the choice of raising
productivity or not growing at all.
The shift in the mix of economic
activity to lower-productivity sectors,
made possible by a good supply of
labour, may also have run its course. It is
hard to expand the number of coffee
shops or sandwich bars when there is
nobody to staff them.
Meanwhile, the latest figures show
that manufacturing, which had a good
summer, is outgrowing services and
generally has higher productivity. We
may be seeing a shift back towards
higher-productivity activities, or at least
the start of it.
Above all, the idea of permanently
stagnant productivity is too depressing
to contemplate. It means stagnant living
standards. The OBR is right to adjust its
projections in the light of productivity
weakness. It would be wrong to give up
the ghost entirely.
PS
Richard Thaler, the Chicago professor
who has been awarded the Nobel prize
in economics — the Bank of Sweden
prize — is a deserved winner. A pioneer
of behavioural economics and finance,
he has helped change the way
economists think about human
behaviour. We are not always rational.
He is also, more than most of his
peers, a master in explaining his ideas in
a way that anybody can understand. I
interviewed him in 2008 on the
publication of his book Nudge, when
politicians and civil servants were keen
to meet him and put those ideas into
practice. David Cameron established the
nudge unit in Downing Street in 2010 as
a direct result.
Thaler’s work helped pioneer
important changes in thinking on
pensions, auto-enrolment getting more
people into schemes than voluntary
enrolment. His Save More Tomorrow
initiative in America sees the proportion
that people contribute to pensions rise
automatically as their income goes up.
We met in London’s Victoria, where
as we walked he spotted successful
nudges at work, including “look left”
and “look right” signs at traffic lights.
Children, he and co-author Cass
Sunstein demonstrated, could be
nudged towards healthier eating.
He was also a great fan of the wheeze,
no pun intended, originally thought up
by Amsterdam’s Schiphol airport and
since widely adopted, of etching a fly
onto men’s urinals, or placing a plastic
fly in them. If men had something to aim
at, spillage rates apparently fell 80%.
There has been no take-up of one of
his other ideas, however. He suggested
that a way of encouraging drivers to
move to energy-efficient vehicles would
be to enforce the display of fuel
consumption figures on the back of cars.
Given the problems with diesel cars and
the reliability of consumption and
emissions data, that one was probably
best left on the drawing board.
david.smith@sunday-times.co.uk
S
o that’s what it’s come to.
Duelling IQs on the White
House lawn. The president of
the United States, the most
powerful man on the planet,
has challenged his secretary of
state to an IQ test because poor
Rex Tillerson refuses to deny
that he called his boss a “moron”.
As they prepare to walk the 10 paces,
Trump has two advantages. He can
choose his seconds from his large staff,
whereas Tillerson has none, the
president having refused to allow him to
select deputies to staff his budgetsqueezed department. And if Trump
loses, he can fire the winner.
The president’s shaky grip on his selfesteem would be comic, were it not for
its serious policy implications. Bob
Corker, a Republican senator from
Tennessee, has announced that he will
not seek re-election next year. He is
highly regarded and chairs the foreign
relations committee. Corker publicly
worried aloud about the president’s
competence, triggering a highly
personal Twitter response — “a fool . . .
didn’t have the guts to run . . .” Trump
also mocked the senator’s height.
Three defections from the 52-48
Republican majority in the Senate and
down goes the Trump tax plan. With
Rand Paul and John McCain already
likely to defect, Corker could get his own
back by joining the dissenters. He will be
torn between his desire to vote against a
rise in the national debt and a desire to
prevent so many of his long-time
Republican colleagues from being forced
to earn their keep in the private sector.
This week the Senate will vote on a
budget that sets the framework for the
tax bill that will follow later. The debate
centres on two issues. The first is
whether and by how much the tax cuts
will increase the deficit and the already
bloated national debt. Trump contends
that the cuts will be self-financing. By
stimulating economic growth, they will
increase the flow of revenues to the
Treasury. His opponents argue that even
if the move does produce some added
growth, it will be insufficient to offset the
loss of revenue caused by the cuts. In the
case of corporate taxes, it would be a
drop to 20% from the current level of
about twice that. My guess is that the
opponents have it right.
The second issue concerns winners
and losers. To say economists disagree
on this issue is to put it mildly.
Kevin Hassett, new chairman of the
president’s Council of Economic
Advisers and a former colleague of mine
at a Washington think tank, estimates
that much of the benefit of lower
corporate taxes will flow through to
higher wages. Larry Summers, the
former Treasury secretary, for whom I
have equally high regard, says it is
“ludicrous”. The economist Paul
Krugman, from his perch at The New
York Times, says Hassett is “boneheaded”. Larry Lindsey, another excolleague and a former governor of the
Federal Reserve Board, has bet Summers
and Krugman $60,000 that they are
wrong, and that if the tax bill is passed,
growth will accelerate, real wages will
rise and inequality will decline. All are
competent economists, and Hassett and
the two Larrys have until now been
known for their respectful treatment of
adversaries.
If the Senate fails to adopt the budget,
probably ending the possibility of a
significant tax cut, Republican chances
of holding their majorities in both
houses next year will go from reasonably
good to probably nil. Voters will wonder
why a party that controls the White
House and Congress could not pass a
healthcare bill, and could not
restructure the nation’s labyrinthine,
inefficient and unfair tax code.
The result of the tax battle will be of
importance to the immediate future of
the American economy and the nation’s
politics. But nowhere near as important
in the longer term as the outcome of the
battle within the Republican party.
Trump engineered what can only be
called a hostile takeover of the
Republican Party. He defeated 16
traditional Republicans for the
nomination, after which he and the
party negotiated a truce of sorts. That
could not hold. Trump voters are angry
with the Republican establishment that
Reality TV has
honed Trump’s
skills at appealing
to the discontented
stood idly by as both parties combined
to ignore them in favour of Wall Street
billionaires and free traders, in the case
of Republicans, and, in the case of
Democrats, minorities, immigrants legal
and otherwise, rabid secularists,
environmentalists, LGBTs, and anti-gun
liberals. Congress’s approval rating
stands at 16%.
Years of reality television have honed
Trump’s skills at appealing to this
audience of the discontented, out-ofsight, out-of-mind “deplorables”, to use
Hillary Clinton’s description. He has
converted these voters into a loyal core,
unshakable by his antics. Add to that mix
Steve Bannon, liberated from formal
employment with the president to
become a leader rather than a mere foot
soldier in the war against the Republican
establishment, and you have what critics
are calling “chaos” in the White House.
They are right that chaos reigns, but
wrong that Trump or Bannon takes that
as a criticism. Chaos is the stated goal of
the president who, urged on by a wellfinanced Bannon, plans to mount
primary challenges against any
Republican candidates who want to
retain the existing party leadership.
If Trump succeeds, the chaos will
produce a party unrecognisable both to
small “c” ideological conservatives and
its current establishment leadership.
With socialist Bernie Sanders tugging the
Democrats further and further left, and
never-Trump conservatives hunting for a
third-party candidate, we may have seen
the last of the tame, civil campaigns to
which we’ve grown accustomed.
irwin@irwinstelzer.com
Irwin Stelzer is a business adviser
5
The Sunday Times October 15, 2017
BUSINESS
Buying stuff ?
That’s so last
century
ILLUSTRATION: JULIAN
OSBALDSTONE AND
MATTHEW CORNICK
From reading to renting a car,
ing of the past?
is ownership a thing
n in San Francisco
By Danny Fortson
T
rip Adler hasn’t bought a book
for a long time. The very concept — buying, not reading —
doesn’t sit well with the
33-year-old
entrepreneur.
“This whole idea of, like,
every time you want something, having to spend
money, I mean, that’s kind of
like an old-school idea,” he
said. “As a futurist, I’m of the mindset
that you won’t really buy anything, and
people won’t own anything and that’s
just kind of how the world will work.”
Adler is working hard to bring that
vision to fruition. The Harvard classmate
of Mark Zuckerberg is the founder of
Scribd, a book and newspaper subscription service that styles itself as the “Netflix of reading”.
Adler’s aim? To ensure that 10-year-old
Scribd soon joins the ranks of a privileged
club: the handful of subscriptions that, if
the technorati are to be believed, will
define life in the coming decades. There
is already Netflix for video, Amazon for
shopping and Spotify for music. “The
future,” Adler said, “is you just pay one
thing and then you have total freedom to
consume what you want.”
Buying stuff? It’s so last century.
All the companies mentioned above
are thriving on the back of the same
dynamics. The internet has made distribution so cheap and convenient, and
made accessible for so many more customers, that it has opened the way for
models that sell access rather than products. Aaron Perzanowski, a professor at
Case Western Reserve University in Ohio
and author of The End of Ownership,
said: “There’s no doubt the notion of
ownership is in decline, and we’re likely
to see this trend continue.”
These forces have been at work for
years. What has changed is that the psychological barriers that have long held
them back — the fixation with ownership
— have begun to crumble. This is partly
due to companies simply getting better at
offering compelling services. It is also
about demographics. Adler said the biggest chunk of his paying customers are
aged between 25 and 45 — Generation X
and Millennials.
Meanwhile, economic needs have
become more acute as the proliferation
of smartphones has accelerated the
death of old models. Why buy a morning
paper if you can scroll through the news
before you get out of bed? The question
is, how widely those dynamics can be
applied and how quickly they will take
hold. And perhaps more importantly,
should we be worried?
Perzanowski listed a number of
“troubling” potential consequences of
this shift, from the personal data that the
big platforms collect to societally
y important questions such as “cultural preservation”. He said: “If one of these subscription services decides the deal they have
with a publisher no longer works, or a
book from a controversial public figure is
no longer something they are interested
in being associated with, they can pull
that book from their service, and then it’s
potentially lost to history.”
And there is a reason that subscriptions
are often priced so low. “I don’t think people appreciate what’s at stake in these
trade-offs,” he said. “Don’t think that Netflix, for example, is not using the data on
what you watch when it decides which
projects to green-light, or what
films it suggests to you. There’s a
financial value there.”
For now, those trade-offs
appear to be worth it. Spotify this
summer announced that more
than 60m people pay a monthly
fee for access to its library of 30m
songs. That surge has coincided
with the revival of the industry.
This year is set to be the first
since 1999 — when the file-sharing
phenomenon Napster burst on to
the scene — that the industry will
actually record consecutive years
of revenue growth. Netflix
launched its film streaming operation 10 years ago, and this summer
it surpassed 100m subscribers.
The news industry’s trajectory
is more akin to music’s. As the pillars of the old model — classifieds,
ads and subscriptions — crumbled, a brutal shakeout ensued. In
Britain alone nearly 200 local
newspapers have closed.
In May, Scribd announced that
it would begin offering long-form
f
articles and opinion from newspapers including The New York
Times, the Financial Times and
The Wall Street Journal. In total,
Adler has signed up 75 papers and
magazines to go along with the
more than 1m books it has in its
digital library.
Crucially, Scribd does not provide breaking news, but rather
“evergreen” content such as features and analysis. The cost for
access to all of it: $9 (£6.77) a
month — less than what any of the
newspapers mentioned above
charge for their own single subscriptions. Adler declined to detail
how he splits revenues with publishers. He said, however, that of
the 100m people who use Scribd
each month, only 500,000 are
paid subscribers. Yet it is enough
to make his company a healthy
profit. The deal for publishers?
That is less clear.
This is a thorny issue. Taylor
Swift famously removed her songs
from Spotify in protest at the
music-streaming giant handing
over fractions of a cent for each song
played — although she subsequently
returned after securing a better deal. The
Guardian this year dropped out of mobile
publishing partnership programmes
with Apple and Facebook because they
did not fit with the paper’s “editorial and
commercial objectives”.
That push-and-pull will no doubt continue. As the platforms grow in power,
hammering out a deal that is fair to the
content creators and palatable to customers is likely to become increasingly
fraught.
Spotify, for example, is deeply lossmaking and is under pressure to list on
the stock market, where investors will
want to see a path to profitability. That
may lead it to raise its subscription price,
SUBSCRIPTION SERVICES
IN NUMBERS
100m
180,000
60m
The number of people who
subscribe to Netflix
The number of people who have
signed up to the Turo car-sharing site
The number of people who subscribe
to Spotify’s music-streaming service
Curse of zombie restaurants
The owner of
Frankie & Benny’s
is shutting 41 sites
in order to revive
the business, says
Daniel Dunkley
The boarded-up Frankie &
Benny’s in York’s Foss Islands
retail park is a bleak reminder
of better times for the
restaurant industry. Last year
it became a casualty of
changing customer appetites,
increased competition and
falling profits among the
country’s biggest operators.
The Restaurant Group
(TRG), owner of Frankie &
Benny’s, is struggling more
than most. The zombie site in
Yorkshire is one of 41 outlets
in the group’s portfolio that it
has decided to shut down.
TRG, which is chaired by
Debbie Hewitt and employs
15,000 people, may have to
shrink still more to survive.
Led by chief executive Andy
McCue, the company
launched a dramatic
restructuring plan in the
summer to halt a rapid
decline over the past two
years. It is set to slash costs,
close dozens of sites and try
to revamp tired brands such
as Chiquito and Garfunkel’s.
The strategy is fraught with
risk, however, as it will first
have to win back customers.
The aggressive price cuts
that some restaurants are
using to woo customers are
already shaking the sector.
Byron and Gaucho are among
a clutch of operators to have
retrenched in recent months.
For many the outlook is
bleak. The impact of
inflation, a rise in the national
living wage and soaring
business rates are cutting
profit margins to the bone.
The doom is not universal.
Some large operators, such as
Wagamama, are still doing
well and smaller independent
eateries continue to thrive.
Yet they are the exceptions.
Until two years ago, TRG
was something of a stock
market darling, with sales
and profits expanding. Since
the start of last year, though,
its share price has more than
halved, with its market value
tumbling to £618m. Profit
before tax fell to £77.1m last
year, from £86.8m in 2015.
Compounding the company’s
problems, two finance
directors have left. Investors
have begun to question
whether it can be revived.
Central to the turnaround
plan is an effort to revamp
Frankie & Benny’s, the
258-strong chain of Italianthemed restaurants whose
glory days feel like they have
slipped into the past. Analysts
say the chain, which provides
the bulk of its owner’s profits,
over-expanded and raised
prices too aggressively.
Mark Brumby, an analyst at
the adviser Langton Capital,
said the company’s problems
began after it changed menus
under former chief executive
Danny Breithaupt. “They
pushed it too far and were
selling the wrong thing to the
wrong people,” he explained.
“When you are in a hole, you
have to stop digging, but that
is easier said than done.”
In an attempt to stop the
rot, TRG is trying to undercut
The Restaurant Group
700p
600
500
400
300
200
2015
2016
2017
Source: Thomson Reuters
Shrinking feeling: Debbie
Hewitt, who chairs the
Restaurant Group
its rivals. It is offering large
discounts to win back
customers, hoping a shortterm hit will bring a long-term
gain.
Yet while the price war
may attract customers,
industry executives say
private operators such as
Prezzo and Pizza Express are
also slashing costs. City
sources expect a drag on
TRG’s profits into the new
year. “If they don’t recover by
then, they are going to be in
big trouble,” one restaurant
executive said.
Analysts at the broker Peel
Hunt have warned that a
“transitional” 2018 could hit
its dividend, which offers a
5% yield to investors.
McCue is also shutting
down unprofitable sites. But
while smaller rivals can
quickly offload leases to new
tenants, property sources say
TRG has struggled to sell its
larger sites in out-of-town
retail parks.
The company has been
saddled with unwanted
leases, many locked in to 25year contracts. It will have to
pay rent on a number of
zombie restaurants —
including its £110,000-a-year
site in York.
Woes outside the dining
sector have also hit TRG hard.
Frankie & Benny’s, for
example, has a number of
branches near cinemas,
where attendances have
fallen this year after a
number of Hollywood flops.
In August, TRG said it was
making “good progress” with
its turnaround. It reported a
30.4% drop in underlying
pre-tax profit to £22.5m in the
six months to July, while likefor-like sales over the same
period fell by 2.2%. But the
results were better than the
City had expected and left
some more optimistic.
Nigel Parson, a leisure
analyst at wealth manager
Canaccord Genuity, said the
company’s lack of debt meant
it could “cope with the pain”.
He added: “They can deliver
the recovery plan without
needing to return to
shareholders for funds.”
If the turnaround fails,
the group could explore a
break-up and sell its lucrative
airport concessions business,
which runs outlets for
operators including Giraffe.
A long-touted private
equity takeover could also
offer McCue and investors a
way out. The likes of Apollo
and Cinven are believed to
have run the rule over TRG,
though bankers believe the
business is too expensive for
a debt-fuelled buyout.
Potential buyers may wait
for things to get worse before
they gobble up the company.
In that event, a takeover
could be on the menu.
something Netflix did this month.
With reading, however, the answer is
simple, Adler argued. “It’s just having a
paywall,” he said. “There’s been this big
debate about how to monetise journalism for the past 10-plus years and I think
the answer is actually pretty clear.”
Those economics, however, are more
complicated than they appear. Scribd last
year put limits on how many books its
members can access in a given month
because it had become too costly to maintain its “all-you-can-eat” model.
Perzanowski said technology’s ability
to bend the concept of ownership is seeping into other, unexpected corners of life
— such as cars. The typical automobile
sits idle 95% of the time, yet most people
would rather it stayed parked in the
garage than hand the keys to a stranger.
Turo was founded to change that. The
San Francisco company connects people
looking for cars to rent with owners willing to lend.
Nearly 180,000 people have put their
cars up for hire on the site, up from the
fewer than 5,000 it had lured in 2012, the
first year of nationwide operation. Chief
executive Andre Haddad said shared
ownership helped to alleviate the cost of
buying and maintaining a car. “We can
make the car an asset for the first time,”
he said. Last month, Daimler led a $90m
financing round in the company
y — its bet
on the future of car sharing.
As technology becomes more deeply
ingrained into products, the very notion
of what a product is, and where its value
lies, gets muddied. When Hurricane Irma
was bearing down on Florida last month,
Tesla made a striking move. It remotely
lifted the battery-charging constraints on
some of its cheaper models to help people who were desperately trying to get
out of town before the hurricane hit.
“The cars all had the same physical
batteries. What that showed is what’s
important isn’t the product, it’s the code,
and it also demonstrated that Tesla can
do the exact opposite,” said Perzanowski.
“If you haven’t paid your bill, maybe they
cut back your battery capacity. Even with
these things in our possession, we don’t
The big
opportunity is to
get hundreds of
millions of people
paying $10 a month
have control in the way we might expect.”
It is an interesting concept, especially
if the future that Adler envisions comes to
pass. He reckons that, over time, a few big
players will bundle together our subscriptions. “The big opportunity is to get
hundreds of millions of people, or even a
billion people, paying $10 a month [for a
bundle],” he said. “That’s actually a bigger opportunity than getting a smaller
number of people that pay $50 a month.”
Say Amazon bought Scribd, Turo and
Spotify, and then included them all as
part of it annual Prime subscription.
It’s not that hard to envisage, is it?
Car sharing suits us, Money, page 13
PODCAST
‘IN THE FUTURE, WE
WON’T BUY OR OWN
AANYTHING,
NYTHING,’ SAYS
SA
TRIP ADLER
ADDLER OF
TRIP
SSCRIBD
CCRIBD
THESSUNDAYTIMES.CO.UK/
THESUNDAYTIMES.CO.UK/
THES
DANNYINTHEVALLEY
DANN
DAN
NNYINTHEVALLEY
6
The Sunday Times October 15, 2017
BUSINESS
Polo-playing ex-bricklayer
who’s a chip off the old block
Spencer McCarthy believes he can make his Churchill Retirement Living business the most successful housebuilder in Britain
TOM STOCKILL
INTERVIEW
OLIVER
SHAH
F
orty-five minutes into our
meeting, Spencer McCarthy is
confronted with an interviewee’s nightmare. The scion of
the McCarthy & Stone retirement homes empire has been
showing me around a property
in Surrey built by Churchill
Retirement Living, the rival
company he runs with his
brother, when an elderly resident
approaches with an accusatory look in
her eyes.
“Are you Churchill’s people?” she asks.
McCarthy’s facial expression hovers
between hope and despair. He asks how
he can help.
“I’ve not made very good progress
with you,” the 92-year-old says, darkly.
“I’ve had a lot of trouble. I’ve had three
weeks with no water.”
Despair sets in. McCarthy wraps up
our tour and dashes off to investigate.
He has a uniquely demanding set of
customers. Last year, Churchill sold 590
flats in its retirement developments,
which it builds and then manages for a
service charge paid by each resident. The
average buyer is a 79-year-old widow
swapping a £360,000 terraced house for
a more manageable apartment, though
buyers can be in their mid-nineties. Some
are “very lonely” and are attracted by the
coffee mornings and film nights the properties lay on, he says. Others are independent and sprightly, and want to be
near a town centre.
McCarthy’s grandmother and parentsin-law live in Churchill developments,
and he insists that most customers love
the experience. He rings back after the
interview to say the unfortunate encounter in the corridor was based on a misunderstanding: apparently, a relative had
accidentally turned down the pressure in
her hot-water tank, and the problem had
already been fixed by the time she
bumped into the boss.
Such attention to detail will be important if he and his brother, Clinton, are to
Spencer McCarthy trained as a
carpenter — as did his father
achieve their long-held goal of overtaking
the business co-founded by their father in
the early 1960s. McCarthy & Stone, which
returned to the stock market in 2015 after
a tumultuous period in private ownership, sold 2,300 homes in 2015-16 and
turned over £635.9m, resulting in pre-tax
profits of £92.9m.
Churchill is a fraction of the size in
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sales terms, with turnover of £190.5m,
but higher margins meant it reported
pre-tax profits of £57.3m.
Sales rose 33% year-on-year, but
McCarthy — a “big believer in sanity as
opposed to vanity” — says he will not
chase sales at the expense of profit margins. His “mission is to make Churchill
the most successful housebuilder in the
UK — not just in retirement”.
He says the Brexit vote has had an
impact on Churchill’s trading in the past
year, despite many of its potential buyers
being in the “leave” camp. “While our
customers voted for Brexit, there was
caution with them, so they just stepped
back and wanted to see where the market
was going,” says McCarthy. “For the first
six months it was difficult. We then had a
pick-up, and then Theresa May came
along and announced an election. Again,
it slowed things up.”
He points out that the cut in interest
rates to 0.25% after the EU referendum
lowered savers’ incomes. “Pensions have
reduced, so our customers are just holding back,” he says. McCarthy & Stone’s
share price, the closest proxy for City sentiment about the sector, has fallen 12%
over the past year.
An understanding of the grey pound is
part of the McCarthy family tradition. His
father, John, founded McCarthy & Stone
as a developer of houses and offices in
1963 with a business partner, Bill Stone.
They switched to retirement properties
in 1976 after spotting a government newspaper ad asking for private sector help in
providing for Britain’s ageing population.
John McCarthy resigned as chairman
in 2003 after failing in a £600m bid to
take the business private and falling out
with the board. He sold his 13% stake for
£75m a year later and put the money
behind Churchill, which his sons had
started from Clinton’s garage.
Spencer says his father’s bid in 2003
was financed by “the infamous Peter
Cummings”, then head of corporate
lending at Bank of Scotland, who quicklyagreed to provide £500m of debt. Three
years later, Cummings backed the £1.1bn
takeover of McCarthy & Stone led by
retail tycoon Sir Tom Hunter and property moguls David and Simon Reuben.
After Hunter and the Reubens lost control in 2009, the family tried to buy back
the company — this time for £400m. They
were turned down by its lenders and
THE LIFE OF
SPENCER
McCARTHY
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Top film: Hacksaw Ridge
“decided not to pursue it any further”.
There is clearly rivalry between
Churchill and McCarthy & Stone.
McCarthy says the company his father
created used to have “a tremendous
entrepreneurial spirit”. However, “since
those days, things have changed, different people have come in and the culture’s
changed”, he claims.
A trim and youthful 51-year-old,
McCarthy is a polo enthusiast who has
played against members of the royal family. He is on the board of the Guards Polo
Club and has competed in top tournaments with his team, Emlor — although
an arm injury has kept him off the field
since May.
McCarthy is Churchill’s executive
chairman. Clinton, 52, is managing
director. They grew up in Lymington,
Hampshire. Their father was “tough, a
The headmaster
told my father:
‘Academically,
your son’s no good,
so send him off
to college to be
a bricklayer’
real driver”, and insisted the boys went to
an ordinary school even though both are
dyslexic. They struggled in lessons but
Spencer “always had an eye for making
money”. He remembers being stopped
by the police for stealing daffodils from
the garden of a stately home to sell on
Mother’s Day (“So that had to stop”).
Towards the end of his time at school,
the headmaster told his father that “academically, your son’s no good, so send
him off to college to be a bricklayer”.
McCarthy left at 16 with no qualifications. He and Clinton trained to be carpenters, as their father had at the beginning of his career. “I suppose it was
VITAL STATISTICS
Born: March 24, 1966
Status: married, with two
children
School: Priestlands in
Pennington, Hampshire
Pay: undisclosed; the
highest-paid director
received £1.9m last year
Homes: Brockenhurst, in the
New Forest, and Mallorca
Cars: black Bentley
Bentayga and red Ferrari
F12 tdf
Favourite book: The Art of
the Deal, by Donald Trump
Film: Hacksaw Ridge,
starring Andrew Garfield
Music: Madness and, more
recently, Coldplay. “I’m
moving on with age”
Gadget: iPhone
Last holiday: St Barts
following in his footsteps,” says
McCarthy.
They entered the family firm and
Spencer gradually worked his way up the
ladder between 1982 and 1994, whereas
Clinton left early on “and went off to
work with a mate”.
The brothers joined forces in 1994.
Their Hampshire-based business was
originally called Emlor Homes, after Clinton’s daughters, Emma and Laura. They
started out building thatched cottages
and doing barn conversions, “which at
the time was great fun”, then shifted into
retirement flats after a one-off scheme in
Hampshire sold out in eight months.
Churchill now has 135 retirement
developments, with another 32 under
construction. The chairman applies strict
criteria to new sites: he refuses to buy
anything on an incline, as older people
dislike walking up hills, and there must
be a bus stop within half a mile.
Tony Pidgley, chairman of the upmarket housebuilder Berkeley, says: “Spencer talks a lot of sense and he cares. He’s
got a good product and he runs a good
business.”
Churchill recently obtained £100m of
debt financing from HSBC and Royal
Bank of Scotland, which McCarthy hopes
will fuel a drive to double sales to 1,000
flats a year. Churchill paid £8m of dividends to John McCarthy’s trust last year.
McCarthy won’t say what yield that represented, although he half-jokingly
observes that his 77-year-old father
“would say it’s not enough”. The Sunday
Times Rich List puts the family’s fortune
at £600m.
Churchill’s boss then starts our tour of
its Farnham property, formerly a police
station. The residents’ lounge is full of
chatter. “We call them halls of residence
for lifetime’s graduates,” he says.
There are posters for events and tai chi
classes. It’s all going swimmingly until
McCarthy is accosted by the disgruntled
nonagenarian. Before he goes off to look
into her water problem, he says: “The
smallest thing to us can be the biggest
thing to them, particularly when they’re
on their own and they’ve got no one to
help them deal with it.”
When McCarthy calls back after the
interview, he adds: “The frustrating thing
is the moment you left, someone else
came up to me to say how much she
enjoyed living there.”
Charity: the Churchill
Foundation, which supports
health and well-being for
young and old
WORKING DAY
The executive chairman of
Churchill Retirement Living
wakes at 6.30am and is out
of bed by 7am. Spencer
McCarthy drives from his
home near the village of
Brockenhurst to Churchill’s
head office in Ringwood,
arriving for 9am.
McCarthy looks after
sales, marketing, land
buying and planning. He
visits every site the
company buys. His older
brother, Clinton, who is the
managing director, is
responsible for construction
and customer service. The
chairman spends a lot of his
time in internal meetings.
He usually returns home by
6.30pm but is “then on my
phone until about 10pm,
reading emails and doing
things”.
DOWNTIME
McCarthy and his wife,
Bridget, have two children
— Ellie, 20, and James, 18.
Family life revolves around
horses. Churchill’s boss is a
keen polo player, and has
competed against Princes
William and Harry. His son
also plays polo.
Ellie represented Britain
in the European dressage
championships in Sweden
in August.
8
The Sunday Times October 15, 2017
BUSINESS
JASON HAWKES
Ports fear
gridlock
without
EU deal
A ‘hard’ Brexit with longer customs
checks would cause traffic chaos,
reports Tommy Stubbington
Jam tomorrow:
longer customs
checks could
mean 17-mile
queues at Dover
10,000
The number of
lorries passing
through Dover
each day
70%
The amount of
EU/UK trade
leaving or
entering by lorry
200m
The number of
extra customs
forms after hard
Brexit
T
here is gridlock at the quayside as customs checks snarl
up Britain’s ports, and lorries
queue for miles across southeast England. This may sound
like a scare story from the
height of “Project Fear”, but
these images were playing on
a loop at the Conservative
Party conference in Manchester this month.
The alarming ad, aired by the Port of
Dover, may have caused some Brexit-supporting delegates to choke on their coffee. Theresa May, however, warned last
week that the government must begin
planning for a “no deal” Brexit. Such an
outcome, which would see Britain’s trade
with Europe revert to World Trade Organisation (WTO) rules, could usher in
chaos at the docks. A white paper even
outlined plans for giant inland lorry
parks to ease pressure on ports.
Why is “no deal” such a big deal for
UK-EU trade? Advocates of a clean break
from Brussels point out that WTO rules
already govern the majority of world
trade, and close to half of Britain’s. If
goods headed for New York or Hong Kong
are already subject to lengthy customs
checks, why is it such a headache to apply
the same system to shipments bound for
Calais or Rotterdam?
The reason, experts say, is that our
trade with the EU is a different beast from
trade with the rest of the world. About
70% of EU trade enters or leaves Britain in
the back of a lorry, unlike the containers
of goods that arrive from farther afield.
“Ports like Dover have adapted to the
lack of customs checks,” said James
Hookham of the Freight Transport Association. “They are set up to get things off
the ferry and away from the port as
quickly as possible. It’s treated like an
extension of the motorway system.”
The emphasis on speed means that
plenty of fresh food and other perishable
goods crisscrosses the Channel, as well as
“just-in-time” components delivered to
manufacturers. Containers arriving at a
WTO port such as Southampton have
typically been at sea for days or even
weeks, time that can be used to get customs paperwork in order.
Lorries passing through Dover, meanwhile, are stopped for an average of just
two minutes for border checks. If that
waiting time doubled, the result would
be 17-mile tailbacks across Kent, the Port
of Dover advert warned.
Every day 10,000 lorries pass through
Dover — enough to stretch as far north as
Stansted airport in Essex by road if they
were lined up end-to-end from the port
gates. Carrying out customs checks on all
that cargo would be demanding. The government estimates that there will be an
additional 200m customs declarations
after Brexit, up from 55m at present.
A fivefold increase in the number of
declarations does not necessarily mean a
similar rise in the number of customs
staff, but HMRC would need to hire “several thousand” new officials if it subjected EU trade to the same checks as
non-EU trade, according to Joe Owen at
the Institute for Government. In addition, extra specialists who check everything from animal health to rare art
would have to be found.
Then there is infrastructure. Owen
points to a four-year €250m (£222.7m)
upgrade under way at Dunkirk and says
something similar would be necessary at
UK ports. Beyond expansion works
already planned before last year’s Brexit
referendum was even announced, there
was little sign of such a project for Dover.
Technology could help to ease the burden. HMRC’s new customs computer system is due to enter service in early 2019.
However, a National Audit Office report
last July warned that the upgrade might
not be ready in time, leading to a potential “horror show”.
So should the government bite the bullet and start spending millions to gear up
for a “no deal” Brexit? This would make
May’s promise to walk away from a bad
deal more credible, according to Michael
Gasiorek, a trade expert at Sussex University, but it could also make businesses
twitchy, and see them activate their own
contingency plans.
“Preparing too much for the WTO
option risks becoming a self-fulfilling
prophecy,” Gasiorek said. “The government is in a very difficult position.”
9
The Sunday Times October 15, 2017
BUSINESS
Frankly, Scarlett,
Huawei doesn’t give
a damn about Apple
The biggest name in China’s mobile phone
industry is convinced it is destined to be No 1
in the world. But suspicions over its ties to the
Beijing government are holding it back in
the West, says John Arlidge in Shenzhen
T
omorrow afternoon, Richard
Yu will take to the stage in
front of 1,200 people in the
Olympic Park stadium in
Munich to unveil the most
important new tech product
you’ve never heard of — made
by a company whose name
you probably can’t pronounce. It’s the Huawei Mate
10. It is a smartphone and the brand is
pronounced Hwah-way (meaning magnificent achievement or splendid act,
according to the company).
The launch is the first big step in the
Chinese tech giant’s wildly ambitious
march to try to topple both Apple, whose
iPhone X will go on sale next month, and
Samsung, whose new Galaxy Note 8 is
selling fast.
“We are not humble,” says Yu, Huawei’s consumer boss. “We are growing
very fast and we definitely will be the
best — No 1.”
Huawei is the biggest global seller of
the equipment that phone companies
use to run 4G mobile networks and has
been making popular cheap and cheerful
handsets for years. It is the market leader
in China, which has helped to make it the
world’s third-largest mobile phone
player by handset sales, with about 10%
of the market, behind Apple with 15% and
Samsung with 25%.
Now, with the Mate 10, it is out to win
an even bigger slice of the high-margin
premium market. The handset is
expected to boast a two-lens Leica camera with whizzy new image-recognition
technology to help users sort and edit
pictures. Analysts say Huawei’s new Kirin
970 chip means it will have the fastest
processor of any handset. It is also likely
to claim class-leading battery life, superfast charging, and advanced artificial
intelligence smarts.
Yu vows it will be “the best, most powerful smartphone in the world”. Priced
lower than the iPhone X, Huawei will sell
“at least 10m globally in the first year”, Yu
predicts, and help boost consumer revenues by 25% to $34bn (£26bn) this year.
Huawei’s total revenues were $75bn last
year and are expected to exceed $80bn
this year. The idea of Huawei taking on
the Pepsi and Coca-Cola of the mobile
business, succeeding where Microsoft
and Nokia have failed, might sound fanciful, but its sales are rocketing.
In 2016, thanks to the Mate 9, handset
sales jumped a whopping 30% to 140m
and the firm’s phone revenues rose by
more than 40% to $26.5bn, compared
with an industry average of 2-3%. It has
already overtaken Apple to become the
No 2 brand by handset sales in Italy, Spain
and Portugal.
But there is a problem — and it’s so big,
it could upset Yu’s bold strategy. Huawei
is about as trusted as North Korea.
Some western governments believe
the company is in cahoots with Beijing,
and fear Chinese spooks use its networks
to spy and to steal rival companies’ commercial secrets.
Australia has argued there is “credible
evidence” that Huawei is connected to
the People’s Liberation Army. Huawei’s
founder, Ren Zhengfei, is a former engineering officer in the PLA.
A report from the US Office of the
National Counterintelligence Executive
Chinese president Xi Jinping (left)
with Huawei’s founder Ren Zhengfei
We are not
humble. We are
growing very fast
and we definitely
will be the best
called the Chinese the “world’s most
active and persistent perpetrators of economic espionage”. Huawei’s networking
equipment is all but banned in America.
Cisco and Motorola took action against
Huawei over alleged patent infringement. The cases were settled out of court.
Britain and most other EU nations are
more relaxed. Huawei equipment is used
in the mobile and fixed-line networks for
BT and Vodafone, and the firm recently
confirmed a £1.3bn investment to
develop the next generation of mobile
broadband technology here, creating
700 jobs.
Huawei employs 1,400 people in Britain and has research and development
centres in Ipswich, Cambridge and Bristol. However, few British consumers have
heard of the brand and few would choose
it over Apple or Samsung. To realise its
lofty ambitions, it must increase its profile — and trust. Which is why, after years
of avoiding the media, Huawei is opening
its doors, and I find myself turning left at
the Gentleman Hotel and on to Chongzhi
Boulevard in Shenzhen, China’s Silicon
Valley, and into its headquarters.
The first thing you feel when you step
inside is that the company is as big as a
planet. Forget Apple’s new $5bn “ring” in
Silicon Valley, this is a small town. It occupies about 500 acres, and 60,000 people
work here. Thousands live in low-rent
apartments on site. There is a hotel for
visitors, swimming pools, a hospital and
a Huawei university, where new employ- Actress Scarlett Johansson is
ees undergo a three-month familiarisa- the star of Huawei’s advertising
tion course.
There are few of the snazzy perks you
find in the hi-tech temples of California —
no dry-cleaners or oyster bars — but there
are, of course, dozens of ping-pong
tables. (Top tip: don’t be foolish enough
to challenge anyone to a game.) The
architecture veers from drab grey Chinese to, at times, comedic: the R&D centre is modelled on the White House.
Huawei is also the most “national” of
any global tech giant. Go to Silicon Valley
and you will see as many Asian people as
locals; here, the only westerner I meet in
three days is an American, Winter
Wright, vice-president of content strategy. He tells me there are only 300-400
westerners. “We are an endangered species here,” he jokes.
I meet Yu on the eve of his Munich HUAWEI
speech. If anyone can convince the world IN NUMBERS
that Huawei’s handsets are the best — at
the best price — and the company can be
trusted, he can. He is sharp, funny and
remarkably free-speaking for a Chinese
executive.
He starts by poking fun at Apple for still
selling old “grandfather products — the
iPhone 5, 6, 7. That’s not good. That’s The company’s share of global handset
greedy.” Making fun of Americans is easy; sales, behind only Apple and Samsung
winning US customers is hard. Can Huawei achieve its wildly ambitious goals
without conquering the US, which is the
world’s most lucrative mobile phone
market?
“We had very good consumer feedback on the Mate 9,” he says. Maybe — but
overall sales were lousy, I point out. “Yes.
Mini, mini. Too, too small. Nothing,” he Huawei’s revenue in 2016 — it is set to
be more than $80bn this year
concedes. “I hope we can do better.”
A deal with a US mobile phone carrier
to sell the Mate 10 would be a huge breakthrough. Eight years ago a proposed deal
with Sprint collapsed after Washington
raised objections.
Has Huawei signed a contract with
AT&T to distribute the Mate 10, as has
been reported? “I cannot disclose any
The number of people employed by
information.” Sounds like a yes.
So, to the tough issues. Who owns Hua- the company in Britain
wei? Does the Chinese government or
10%
$75bn
1,400
Communist Party have a stake? “We are
owned 100% by our employees — no
share from government.” Zhengfei is the
largest shareholder, with 1.4%. Western
critics reject the idea of worker control
and ownership as a smokescreen.
Does any government official sit on
any committee? “No, no, nothing.” It has
been reported that the Communist Party
has a secret office in the Huawei campus,
is that true? “There is no government
office. We’re totally independent.”
So why are so many people suspicious
of Huawei? He blames its competitors,
“who use political weapons to attack us.
It’s ridiculous. We are open, more open
than many western companies.”
Western critics beg to differ. So do my
iPhone, iPad and MacBook. While I can
access Google in my Venice-themed hotel
outside the campus, all Google services
are blocked the moment I walk in. It certainly makes the place feel like an arm of
the government.
It is not Huawei that blocks Google, Yu
retorts angrily. “It’s the Chinese government! Ask the government. The government is really worried about outside
information. They have content control.”
He says I can get Google in my hotel,
“because it is a hotel for westerners” —
who, unlike the Chinese, are allowed
free(ish) information.
Does Huawei respect other companies’ internet security? “Sure. Yes. That’s
policy.” Many corporate victims of Chinese-inspired cyber-attacks will find that
hard to swallow.
My time on planet Huawei is up. I have
to get back to reality — and to Google. As I
walk out past the Megabite cafe (humour
is not Huawei’s strong point), I bump into
Li Changzhu, one of the company’s top
handset engineers.
Can the Mate 10 really beat the iPhone,
I ask. “The final choice will be made by
the consumer,” he says. Then he grins. He
clearly thinks it will.
So keep an eye on the handsets you see
in Starbucks after tomorrow’s launch. If
you spot Huawei’s silver “flower” logo,
you might be witnessing the first steps in
the long march of the Apple of the east.
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10
The Sunday Times October 15, 2017
BUSINESS
What a way to build
a railway, Mr Brunel!
JACK BOSKETT
Billions over budget
and often delayed,
the Great Western
upgrade is unlikely
even to speed up
journeys, reports
John Collingridge
W
hen passengers board
a gleaming new Hitachi
Intercity Express train
at
Bristol
Temple
Meads for the first time
this week, they may
not realise the tortuous
journey that has led to
this point.
The trains, bought
by taxpayers as part of an £8bn private
finance initiative (PFI) deal, were supposed to be a potent symbol of Britain’s
reinvigorated railways. Services between
London and south Wales would be transformed by the clean, fast and more frequent electric service.
The reality is very different. The trains
are years late, hundreds of millions of
pounds more expensive than intended,
and experts reckon they may be slower
than the three-decades-old InterCity 125
diesel locomotives they are replacing.
The problems stem from Network
Rail’s hugely delayed and over budget
upgrade of the route — the biggest since
Isambard Kingdom Brunel completed
the Great Western Railway in 1843. The
project, necessary to allow electric trains
to run instead of diesel, is still unfinished.
Vast sums of taxpayer cash have been
poured into the upgrade and the new
trains. Instead of potency, however, the
route has come to typify the problems of
Britain’s railways.
The Intercity Express Programme
(IEP) was Britain’s biggest purchase of
trains in more than 30 years. They were
bought under a PFI deal to keep the debt
off the state’s balance sheet and avoid
tying the government into a contract with
a privately-owned leasing company.
The hunt for the new trains started in
2007. Almost immediately the government’s search for bidders for the contract
collided with the financial crisis, which
cooled investor appetite for debt-backed
deals. That cast doubt on the October
2017 deadline for all the trains to be in service. When the first contract was finally
signed, in 2012, it was for 57 trains for the
Great Western route. A later deal added
65 trains for the East Coast main line.
Taxpayers were cemented into two
27½-year contracts with Agility Trains, a
consortium of Hitachi and the infrastructure company John Laing, to build and
maintain the trains.
Agility guaranteed to provide fully
We have bought
the most costly
trains of their
type in the world
APPOINTMENTS
functioning trains in return for a steady
stream of revenues. No train? No payment. In 2014, the National Audit Office,
the government spending watchdog, estimated the contract would cost taxpayers
almost £8bn over its lifetime.
That deal has come back to haunt the
government. Roger Ford, industry and
technology editor of Modern Railways
magazine, called it an “appalling deal”
that “turns them into a very expensive
form of trains”. He estimates that each
will work out at about twice the cost of a
Pendolino tilting train, the type run by
Virgin on the West Coast main line.
The root of the crisis lies with the Great
Western upgrade, where costs have trebled from £874m to £2.8bn and completion has been repeatedly delayed. It is
now due at the end of next year, but many
in the industry expect the deadline to be
pushed back again — or that the line will
simply not be fully electrified.
Last week Chris Grayling, the transport secretary, revealed that Network
Rail, the state-owned company which
owns and maintains Britain’s 20,000
miles of railway, will be given £48bn to
spend between 2019 and 2024. Although
that is higher than the £38.5bn budget for
the current five years, it has to cover a
hefty slug of work that has been postponed, partly because Great Western has
absorbed so much cash.
The watertight IEP contract that was
What would Isambard Kingdom
Brunel have made of the GWR
upgrade shambles?
supposed to give the government certainty has become a millstone. The infrastructure delays have forced Whitehall
into expensive renegotiations with Hitachi and John Laing — the cost of which
must all be borne by the taxpayer.
The contract obliged Agility to deliver
one of the Great Western trains — manufactured in Japan and assembled in
Co Durham — every week from May 25.
But, faced with a fleet that would only sit
rusting in a field because the track was
not ready, the government changed the
order so all 57 trains would have diesel as
well as electric motors. That has meant
fitting heavier diesel engines and fuel
tanks into trains that were supposed to
run on electricity, which will raise running and maintenance costs.
Network Rail has completed electrification of only the section of line between
London Paddington and Maidenhead,
Berkshire. The franchise operator, First
Group, has had to pay to lease the InterCity 125s for longer. It is making less
money than forecast from passengers
because the old trains have fewer seats
than their replacements.
Last year the National Audit Office said
these changes would add up to £330m to
the cost of the trains. That number keeps
rising. New diesel refuelling equipment has to be installed along the
route. Meanwhile, Agility is
understood
to
have
demanded compensation
— believed to be up to
£80m — to cover the five
months’ lost revenue.
The
transport
department and Hitachi declined to comment on the compensation claim.
Lord (Tony) Berkeley, a former engineer who worked on
the Channel tunnel,
said: “We have bought the
most expensive trains of
their type in the world. It
is unacceptable that they
can’t be used properly
due to Network Rail’s
inability to build
things on time or to
budget.”
Then there is the
problem of speed.
The new trains are
heavier and slower
than
intended,
because of the diesel motors and fuel
tanks.
Industry
insiders reckon
they will struggle
to reach the speed
of the existing trains. Hitachi has
denied they will be slower. It said:
“Once Network Rail has completed
electrification of the line between
London and Cardiff, passengers
will see their journey times cut by
15 minutes.” If they end up slower,
passengers and First Group will be
able to demand compensation.
The transport department said:
“The state-of-the-art Intercity
Express Programme trains will
give more seats, greater comfort,
better reliability and faster, more
frequent services when they enter
service on time this autumn after
being fully tested.”
11
The Sunday Times October 15, 2017
ENTERPRISE
Why won’t business schools
argue the case for capitalism?
Luke Johnson Animal Spirits
W
hat are business schools
for? I assumed that their
primary purpose was to
teach students about
business. No doubt the
academics who run them
would argue that their
other key role is to
research the field of business, so it can
be better understood.
I fear they are generally failing in this
second task.
There are 120 members of the
Chartered Association of Business
Schools in the UK: between them they
must employ thousands of academics.
Presumably they publish hundreds of
scholarly papers about business every
year, and attend countless conferences
to discuss them. Yet they are missing the
big picture.
For if they really cared about the
world of business in this country, rather
than simply busying themselves in their
ivory towers, they would be actively
engaged in defending the achievements
of business.
These are the intellectuals who
supposedly possess great insight and
knowledge about business — and are,
therefore, perhaps best equipped to
promote the merits of the private sector,
of entrepreneurship, of trade, of
innovation, markets, competition, profit
motive and wealth creation. If you are
not in favour of all these things, then you
should not be teaching or researching
business.
Why aren’t all the expert professors
standing up for business? I never see any
leading figures from our business
schools taking the fight to the enemies of
business. And the anti-business mob are
certainly on the march: Jeremy Corbyn
and his band of socialists want
nationalisation, rent controls, price
caps, higher taxes on success, more
regulation and much more state
intervention. Perhaps I don’t know
where to look to find the output of
business school academics who actually
endorse the importance and value of
business. I looked at the Conversation, a
website that sources scholarly articles
from universities around the world from
more than 400,000 academic authors,
with a monthly online audience
exceeding 5m. It had 20 British
universities as its founding partners, and
carries at least 2,300 articles on
business. Yet I could not find one that
gave broad, positive arguments in favour
of capitalism. Instead, there were
endless obscure subject titles such as
“What business can learn from
Buddhism” and “Three reasons why
employers need to recognise the
menopause at work”.
Business schools are mostly located
on university campuses where the
majority of faculties and students
associate capitalism with greed,
selfishness and corruption. So business
schools are on the front line in the war
for hearts and minds about business.
They should be educating all
undergraduates that business is not zero
sum: it grows the economy and makes
society richer.
It is the overwhelming source of
innovation and job creation. Without
business there would be minimal
exports and tax generation to pay for
public services. The private sector
accounts for 85% of the workforce.
By contrast, socialism has an
unstinting faith in bigger government,
and the idea that more state spending is
both virtuous and generally beneficial.
But human nature tells us that no one
spends other people’s money as
carefully as they spend their own. Both
common experience and academic
research suggest high government
spending is inefficient and
unproductive.
State expenditure is often beset with
conflicts and influenced by vested
interests, such as unions, and tainted
with ideological bias. Government
spending distorts markets and ignores
the laws of supply and demand,
frequently leading to misallocation of
taxpayer resources and waste.
Meanwhile, bureaucratic processes
mean big government projects are
typically slow, late and over budget.
I care about what business schools do
because I visit many universities, and
know they could help Millennials to
realise that the Labour Party’s policies
are riven with fantasy, delusion and
ignorance. If Corbyn were to assume
power, then business would be
demonised. It would hardly be worth
business schools providing students
with MBAs and suchlike if our industrial
and commercial base were subject to
full-scale socialism.
Ideas matter, and there is a history of
universities making a difference in such
philosophical clashes: Milton Friedman
and his colleagues at Chicago University
helped convince the West anew in the
1970s and 1980s that free markets and
economic liberalism work, and helped
make the world dramatically richer.
I’ve recently been made a professor of
practice at the new King’s Business
School in London. In that role I shall
advocate remorselessly for business. For
business is surely the greatest engine for
human progress ever devised, but each
generation needs reminding of this
compelling truth, and sitting passively
by will not convert the many sceptics.
We need to put our shoulders to the
wheel, engage the opposition at every
opportunity, and prove them wrong.
Luke Johnson is chairman of Risk Capital
Partners and the Institute of Cancer
Research. luke@riskcapitalpartners.co.uk
@LukeJohnsonRCP
Against the grain,
we succeeded
with flour power
MARK PINDER
HOW WE MADE IT
PHILIP AND
JASON BULL
EUROSTAR
COMMODITIES
Former steelman
Dan Wilcox, with
wife Debbie,
started a firm
that trains
lorry drivers
Men of steel show their
mettle after Redcar closure
More than 300 new businesses have sprung up since 2015, fanned by an £80m support package
PETER
EVANS
T
@peterevans10
he vast steelworks still dominate
the North Sea shoreline just outside Redcar. Drones patrol the
plant’s perimeter, watching for
trespassers. But there is no sign
of human life.
When the Thai company
Sahaviriya Steel Industries (SSI)
called in administrators at the Teesside
site two years ago, it was not just one of
Britain’s last remaining blast furnaces
that was extinguished. So too were the
prospects for thousands of steelworkers
and their families.
“We were told to empty our lockers
and get out,” said Dan Wilcox, who
TEACH YOURSELF TO . . .
LIST ON THE JUNIOR
STOCK MARKET
Listing on the stock market
used to be the ultimate goal
for many owners of small
businesses. Build a company
from scratch, prove its
business model, then float
on the public markets.
But in recent years listing
has fallen out of fashion. The
number of companies
registered on AIM, London’s
junior stock market, has
fallen every year since 2007,
and stood at 959 at the end
of September. At its 2007
worked at the SSI plant for five years as a
foreman and machine instructor. “It was
a black day.” Wilcox, 55, was one of 2,066
workers who lost their jobs.
Yet, out of the desperation, hope is
emerging thanks to a flurry of start-ups
founded by former steelworkers. They
include cocktail bars, carpet cleaners
and a haulage business. One former production worker at the plant has set up a
photography company that uses drones.
Many of the founders poured their
redundancy payments into new ventures. David Connor applied for 600 jobs
before using his payout to buy Zero Dry
Time, a cleaning franchise. The 47-yearold also received a grant from an emergency fund set up for steelworkers.
Politicians say such stories are proof
that the £80m support package, derided
by some at the time as meagre compensation for 170 years of steel production on
Teesside, is starting to bear fruit. A small
chunk of the SSI fund — just £3.9m — was
set aside to provide advice and grants for
peak, AIM was home to
1,694 small and mediumsized companies.
There are still many
benefits to going public,
including access to capital
through a wider range of
investors and an increased
profile.
To list, a company needs
to issue a pre-application
announcement, appoint a
nominated adviser and
prepare an admission
document. It’s not cheap,
with the total bill often
exceeding £300,000. An
additional application fee is
often payable upon listing.
Yet it can still be the right
option for some companies.
former steelworkers to start their own
businesses. It has had a disproportionate
effect: more than 550 grants have been
made and 304 new businesses started,
according to figures compiled last month
by the SSI Taskforce, the body set up to
distribute the support funds.
The initiative is being seen as a model
for how post-industrial towns can start to
thrive again. By creating an army of
entrepreneurs, towns such as Redcar can
reduce their reliance on a single, declining industry — or so the argument goes.
“The 21st century is not about steel
monoliths,” said Ben Houchen, mayor of
Tees Valley. “We’ve been overly reliant
on foreign investment for too long in this
part of the world.”
Still, succeeding without steelmaking
has proved hard work for northeast
England, which had the highest rate of
unemployment in Britain in the three
months to July. In November 2015, just
after the SSI plant was shut down, 2.5% of
those claiming unemployment benefits
“There are clear advantages
to having a public price for
your shares,” said Patrick
Birley, chief executive of
Nex Exchange, a rival to
AIM, which counts Arsenal
football club and brewer
Shepherd Neame among its
constituents. “It’s easier to
incentivise management. It
makes an exit process much
more straightforward.”
Despite these potential
rewards, public listings
among small companies
have continued to drop in
recent years.
Experts point to several
reasons for the decline.
Whereas a listing used to be
one of a small number of
ways for companies to raise
finance, now there is a
multitude. In particular, the
rise of crowdfunding and
peer-to-peer lending has
delayed the float plans of a
number of private
companies. Last year,
companies on AIM raised
£4.8bn, compared with
£16.2bn 10 years ago.
Another explanation is
the return to the market of
private equity cash after the
financial crash.
“It’s easy to see the
attraction of private equity,”
said Birley. “You have a
single party making a single
decision to inject capital.”
Peter Evans
We’ve
been
overly
reliant
on
foreign
money
in Britain lived in the Tees Valley, according to the Office for National Statistics.
However, there is no doubt that
encouraging steelworkers to set up small
businesses has helped the region’s recovery. More than 90% of those who made
an initial benefits claim following the closure of the steelworks have ended the
claim, according to the SSI Taskforce.
Among the companies to rise from the
ashes of the SSI facility is Cleveland LGV,
founded by Wilcox weeks after the steelworks was mothballed, using his savings
and a £10,000 grant from the support
fund. The business, which provides training for lorry drivers, turned over nearly
£3m in the past year. Wilcox now
employs 35 people, 14 of whom came out
of the SSI plant.
“The pleasure you get when you see
ex-colleagues coming in and getting
reskilled is unbelievable,” he said. The
former SSI worker has not forgotten his
time at the plant; he has adorned some of
his trucks with pictures of the steelworks.
ANGEL Q&A
PIP WILSON
Every week we talk to a
business angel, one of the
early-stage investors who
collectively inject £1.5bn a
year into British start-ups
Pip Wilson, 42, set up her
consultancy Bluefin in
London in her late twenties,
selling it for $66m two years
ago. She then started
Amicable, which helps
couples divorce without
involving lawyers. Her
investments include mental
health start-up Sanctus
and MindMate, a brain
training app.
Lessons
I only invest directly. At first
I worked with a syndicate,
but I couldn’t get the right
connection with the
founder. I can make the
biggest difference when I
invest directly.
Philip Bull was the go-to guy
for northern England’s
chapati makers. So when he
was made redundant in 1994,
Bull exploited his contacts to
start a grain importer,
Eurostar Commodities,
helped by a London miller,
GR Wright & Sons.
“They took a risk with me
and we built up a good trade,”
said Bull, 60.
GR Wright & Sons bought
the chapati flour distribution
business from him three
years later, leaving him to
expand by importing and
selling other ingredients.
Huddersfield-based
Eurostar imports flour, rice
and maize to distribute to
wholesalers, restaurants and
food manufacturers. Last
year it made a pre-tax profit
of £400,000 on sales of
£4.9m. It employs 13 people.
Bull’s son, Jason, joined
Eurostar 14 years ago. “I
bought a really old car, got a
stack of A-Z maps and tried to
find some new prospects for
customers,” he said. He
started by selling pallets of
rice to Chinese wholesalers.
When Jason joined,
Eurostar’s only staff were his
father and a finance director.
It was turning over less than
£1m. Today Jason, 34, runs
the company, which has
more than 200 products and
supplies sushi chains with
rice, as well as making flours
for supermarket own-brand
pasta. Philip is still involved —
he is “good to bounce
ideas off ”, said his son —
although there have been
some disagreements. “We
don’t always see eye to eye,
but we do 90% of the time,”
said Philip.
Eurostar has had its share
of luck. It was among the first
British companies to import
rice from the Continent
rather than America. When a
scare over genetically
modified crops hit the US in
2006, Eurostar capitalised.
“That really helped us grow,”
said Jason.
Eurostar has recently
moved into the food retail
market, developing a range of
healthy baked snacks under
the Pure Bite brand. The Bulls
hope these will help boost
growth by capitalising on
clean eating trends.
The business remains
wholly owned and operated
by the family. While Jason
says he would be open to
outside investment, “my first
instinct is to say no”.
Father and son live within
15 minutes of the office, Philip
in Halifax and Jason in
Huddersfield.
Jason lives with his wife
Danielle — who recently
joined Eurostar as a part-time
saleswoman — and their 18month-old son, Leo. They are
expecting a second child in
the new year.
Jason’s advice to
entrepreneurs is to have
faith. “Believe in yourself and
your product, no matter what
some people tell you,” he
said. “And learn to meditate,
to give your mind a break.”
Philip added that
entrepreneurs should “work
hard and be honest, never
overstate your position and
deliver what you promise”.
Liam Kelly
SIMON MORLEY
The millers’ tale: Philip Bull and son Jason
Pitch essentials
A clear financial model with
growth potential, diverse
founding teams and a clear
social purpose.
No charity
I like start-ups with a social
purpose as well as a business
purpose, but I don’t want a
charity. Sometimes it takes a
commercial solution to get
something done.
Level the playing field
There’s evidence that
businesses with a woman on
the founding team deliver
better returns. We are
missing so many
opportunities. If I and other
angels can help even things
out, then that makes sense
to me.
Wish I saw fewer . . .
People passionate only
about running a start-up
rather than solving a
particular problem. There
are too many businesses
aimed at Millennials
because they think it’s cool.
Next disrupted industry
Services, especially the legal
industry. People now expect
to be able to book
appointments wherever
they are and receive the
service the same day.
Peter Evans
12
The Sunday Times October 15, 2017
BUSINESS
Andrew Lynch
A
Dianne’s still a winner with Camelot
Imagine you can’t stop
winning the lottery. No, I’ve
tried; it doesn’t work.
Unless of course you’re
Dame Dianne Thompson,
the former chief executive of
Camelot, the lottery
organiser. Although
Thompson, 66, retired in
2014 after 14 years in charge,
she is still a lucky winner
every year.
According to the 2016-17
accounts of Camelot
Business Solutions, filed at
Companies House last week,
she received £800,000 from
a long-term incentive plan
JUST SAYING . . .
I am certain
that HSBC is in
better shape
than it was
seven years ago
HSBC chief executive
Stuart Gulliver after his
successor, John Flint —
another bank lifer —
was appointed
that will keep on paying out
until 2019.
Regular readers will recall
the red faces all round when
this newspaper revealed in
2013 that Thompson
received £2.1m as an
unnamed shadow director of
Camelot Business Solutions.
Thompson, who owns and
runs the George Hotel at
Yarmouth on the Isle of
Wight, now sits on the board
of high street retailer Next.
And on the remuneration
committee, of course.
The banker’s
pregnancy test
As another Flint is seamlessly
slipped into the top slot at
HSBC, the tributes are still
coming in for Douglas Flint,
who recently rode into the
sunset as chairman of
Britain’s biggest bank.
Here’s a story, from the
days of the global financial
crisis, showing the 62-yearold Scot’s ability to take the
heat out of any situation.
In 2008, fearing a rough
ride at a meeting with
investors and analysts after
announcing a £12.5bn rights
issue, Flint, then chief
financial officer, told his
investor relations manager,
who was eight months
pregnant: “If the analysts ask
any tough questions, can I
send you a signal by pulling
my ear and you pretend to go
into labour?”
Smash hit for
productivity
Some sniggers last week
when the virtues of strong
leadership were praised by
Ann Francke, the Chartered
Management Institute boss,
in the dining room of the
House of Commons. Perhaps
not the best place to seek
firm government after the
past few weeks.
Francke was launching the
senior leader master’s
degree apprenticeships,
which mean studying for a
master’s while you’re still at
work — a great wheeze to
improve British managers.
While Dame Fiona
Kendrick, the UK boss of
FUNNY BUSINESS
Former Wimbledon tennis
champion Boris Becker cut a
sad figure lunching by
himself at Mayfair hotel
Claridge’s last week. The
baseball-capped Becker, 49,
was declared bankrupt in
July after private bank
Arbuthnot Latham
demanded repayment of a
£10m loan. Does Claridge’s
ask for cash in advance?
SIGNALS
AND NOISE . . .
Send your letters, including
full name and address,
to: The Sunday Times,
1 London Bridge Street,
London SE1 9GF. Or email
letters@sunday-times.co.uk
Letters may be edited
Forget diversification —
just pay farmers a fair price
I am a dairy farmer in
Cornwall and would be very
wealthy if I had a pound for
each time someone suggested
that farmers should diversify
to survive (Luke Johnson,
October 1).
Farmers who diversify to
produce food products, such
as Tyrrells and Wilfred
Emmanuel-Jones (as cited by
Luke Johnson), are catering
for a limited spectrum of
consumers. In fact, to
succeed financially, taking
this route requires more
niche products that have a
limited market and therefore
cannot be available to all
farmers.
The vast majority of the
57,000 farms that Luke
Johnson refers to need to
produce a primary
commodity (milk, beef,
cereals) for other larger-scale
businesses to process into
food for the masses.
Subsidies have done little
to help British agriculture
and have, in fact, now largely
been capitalised into land
values. To existing farmers,
the benefit of the annual
payment is also usually
“stolen” by the purchaser of
the farm products as the
subsidy on costs is recognised
Nudge, nudge: when Nobel
prize winner Richard Thaler
was invited to Westminster a
decade ago to discuss his
work as a behavioural
economist, the Chicago
professor was derided. But
he became an adviser to
David Cameron and his ideas
even inspired faster payment
of taxes, recalls Rohan Silva.
NEWS REVIEW, PAGE 27
TWITTER POLL
Yes
No
70% 30%
Should the government be
spending more money now
to prepare for ‘no deal’ on
Brexit?
@ST_Business
in the prices paid for
commodities. This, together
with the increasingly
ridiculous rules surrounding
European subsidy payments,
is the reason that the majority
of farmers voted for Brexit.
What is needed is a
consumer price that reflects
the value of the food — the
vast quantity thrown away
shows how cheap it is
perceived to be — and a fair
return to the primary
producer from further up the
food chain. In those
circumstances, Luke
Johnson’s hope that a new
generation of farmers will
seize opportunities may
come about.
In the meantime, like
many farming families, my
new generation have got their
degrees and strangely
decided not to work seven
days a week producing 1m
litres of milk for an annual
income of £9,000 (2016-17
accounts).They have gone off
to careers in the big cities
instead.
Jonathan Bird, Bude,Cornwall
housing shortage in and
around London is important,
regeneration of communities
elsewhere in Britain remains
a priority, too. High-quality
affordable housing can
address not just the issue of
generational justice in the
southeast, but fairness
between regions, too.
Housing associations have
a key role to play in the
success of housing policy.
They understand the
importance of building
sustainable communities and
the need for effective mixedtenure housing — rent, buy
and shared ownership.
Regenerating communities
and delivering housing
innovations, such as new
garden villages, can cool
down housing hotspots and
increase desirability in areas
that have suffered decline.
A planned response to
housing issues, tailored to
geographical needs, is the
most appropriate way to
move forward.
Ian Wardle, chief executive,
Thirteen Group, Stockton-on-Tees
Housing policy must help
the regions, not just London
The debate sparked by the
prime minister’s
announcement of new
affordable rented homes
highlights the variation in
housing issues facing
different areas of the UK, and
the need for policies with the
flexibility to address them (“A
housing revolution that’s
built on sand”, last week).
While alleviating the
UK should be above asking
for permission to leave
The rules of any negotiation
can never be set by just one of
the parties. Brexit cannot be a
success unless the UK insists
on a fair approach and makes
it clear that its failure would
also damage the EU. It is time
to show that the UK is a free
country and not asking for
permission to leave.
Mark Scibor-Rylski,
London SW6
THE ECONOMY
THE WEEK IN THE MARKETS
its oil and gas business with
Baker Hughes, and
Schlumberger buying
Cameron International.
Then the competition
watchdog weighed in. Wood
was forced to sell Amec’s
North Sea operations, where
otherwise the combined
group would have had a
market share of more than
60%. While Wood insists it
always expected disposals,
chief executive Robin Watson
clearly didn’t anticipate
having to sell more than
£700m of revenues and shed
4,000-plus staff.
“It [the North Sea] is a
significantly smaller market,”
was his initial response when
asked about competition
worries. “Regulators need to
ask whether there is room
for four top-tier contractors
in the North Sea.”
Evidently they did. Those
Wood Group
850p
750
650
550
2016
Broke Boris eats
out at Claridge’s
Oxford’s Said Business
School shot the lights out last
week at the opening of its
entrepreneurial hub, the
Oxford Foundry, by getting
Apple chief executive Tim
Cook to talk to students.
But who was that sliding
into the front row next to
Cook after the vicechancellor’s introduction?
None other than serial
founder and Foundry adviser
Brent Hoberman. Oh Brent,
you’re so lastminute.com!
INSIDE THE CITY JOHN COLLINGRIDGE
Is big better? Oil services
provider Wood Group
certainly thought so when it
pounced on Amec Foster
Wheeler, a £2.2bn takeover
that completed last week.
The all-share deal was an
opportunistic one, struck in
March when the engineer was
at a low ebb and about to do a
£500m rights issue to patch
up its balance sheet. It had
long been on the cards, but
until a few years ago, you
would have bet that Amec
would be the acquirer.
Wood wanted to reduce its
reliance on the oil and gas
sector, where low prices have
slashed margins. By buying
Amec, Wood would be able to
branch out into other areas of
engineering, such as nuclear,
where it otherwise faced a
long slog to achieve scale.
There was precedent:
General Electric’s merger of
Nestlé, who sits on the board
of the Institute for
Apprenticeships, opined on
productivity, it was cheering
to hear the Unknown British
Labourer set to work with a
hammer, smashing seven
bells out of something right
outside the dining room’s
open windows.
Late arrival at
an Oxford ball
DATABANK
Amec deal
won’t lift
the clouds
over Wood
LETTERS
2017
Thomson Reuters
lost revenues matter. The
buyer, Australia’s Worley
Parsons, is now a rival on
Wood’s home turf. The
disposal has already forced
Watson to pare back his target
on cost savings from the deal
to $170m (£128m). Analysts at
Jefferies reckon the lost staff,
plus the weak market and
fewer acquisitions, make this
cost saving target a tough ask.
They see echoes of Amec’s
ill-fated Foster Wheeler deal,
and worry what it means for
Wood’s dividend. “A deal to
take away the pain may just
transfer the pain,” they
warned. Then there’s £1bn of
debt that comes with Amec —
although asset sales will help.
Other clouds are gathering
too, such as a Serious Fraud
Office probe into Amec, and
an internal investigation at
Wood — both involving their
dealings with Unaoil, a
Monaco energy consultancy.
Little wonder shares in the
company have struggled
since the deal was announced
(although they have
rebounded in recent weeks).
At 717p, that puts Wood in
touching distance of a
coveted FTSE 100 spot.
That might be as good as
it gets. Avoid.
@jcollingridgeST
FTSE 100
7,535.44
20,259.51
H:7,599.0
L:6,676.6
12.57
0.17%
FTSE 250
92.97
0.46%
H:20,300.41
L:17,068.0
DOW JONES
22,871.72
NASDAQ
6,605.80
15.62
0.24%
H:6,616.6
L:5,034.4
464.47
2.24%
6,800
6,400
O N D
J
F M A M
RISERS
Aldermore Group: 303.5p, U 27.4% on
takeover talks Millennium & Copthorne
Hotels: 568.5p, U 25% on bid
XP Power: £33.50, U 16.7% on revenue
boost Georgia Healthcare: 339.8p,
U 15.2% on sentiment Ashmore: 378.5p,
U 11% on emerging market surge
J
A
S O
FALLERS
Renold: 45.5p, V 13.3% on profit
warning Pets at Home: 192p, V 12.5%
on stock sale GKN: 318p, V 10.8% on
trading update Mondi: £19.12, V 9.6%
on rising costs Ultimate Products: 83p,
V 9.5% on sentiment
FTSE EUROFIRST
1,537.27
H:1,559.7
L:1,292.2
6.44
0.42%
H:28,626.4
L:21,488.8
SHANGHAI
3,390.52
SENSEX
32,432.69
CAC 40
5,351.74
ALL ORDS
5,884.75
8.16
0.15%
DAX
12,991.87
H:21,211.3
L:16,111.8
J
Source: Thomson Reuters
41.58
1.24%
H:2,557.6
L:2,083.8
NIKKEI
21,155.18
7,200
18.39
0.06%
S&P 500
2,553.17
3.84
0.15%
$1.33
7,600
HANG SENG
28,476.43
H:22,905.3
L:17,883.6
98.05
0.43%
DOLLAR
USD > GBP
FTSE 100
35.93
0.28%
618.47
1.94%
H:3,410.2
L:3,016.6
H:32,686.5
L:25,717.9
H:5,983.2
L:5,138.9
107.32
1.86%
H:5,442.1
L:4,344.9
S&P TSX
15,807.17
78.85
0.50%
H:13,036.7
L:10,174.9
H:15,943.1
L:14,481.6
Consumer prices index
CPI including housing
U 0.02
12-month high: $1.37
low: $1.20
Retail prices index
EURO
EUR > GBP
Average weekly earnings
€1.12
U 0.01
12-month high: €1.20
low: €1.07
YEN
YEN > USD
¥111.87
V 0.76
12-month high: ¥118.66
low: ¥101.15
OIL
DOLLARS/BARREL
$57.17
U 1.55
12-month high: $59.49
low: $43.57
GOLD
DOLLARS/TROY OZ
$1,299.57
U 27.90
12-month high: $1,347.38
low: $1,126.52
current rate
prev. month
2.9%
2.6%
current rate
prev. month
2.7%
2.6%
current rate
prev. month
3.9%
3.6%
on prev. month on last year
£505
W
Unemployment
0%
U
current rate
1.46m
2.1%
prev. month
4.3%
4.4%
Manufacturing output
on the year
on last month
Retail sales
on the year
U
U
UK trade
balance (£bn)
Gross domestic
product
Budget deficit
(PSNB) in £bn
2.8%
U
0.4%
on last month
2.4%
U
1.0%
latest month
prev. month
latest 12 mths
-5.6
-4.2
-38.9
latest quarter prev. quarter
U
0.3%
U
0.3%
annual change
U
1.5%
latest month
prev. month
year to date
5.7
+0.7
28.3
10-YEAR BOND YIELDS %
variation
12 months
high
low
UK
1.37
W 0.00
1.56
0.92
US
2.28
V0.09
2.64
1.72
JAPAN
0.06
U 0.01
0.16
-0.08
GERMANY
0.41
V0.05
0.59
-0.02
TOP 200 COMPANIES
Market cap ranking
V
Price Change
on week
52-week
Yield
high
low
49 3i Group
967.0 +31.0 969.5 604.5
186 3i Infrastructure
199.2
+0.5
199.2
183.0
88 Admiral
1883.0 +30.0 2178.0 1732.0
173 Aggreko
895.5 +10.5 1064.0 765.0
164 Alliance
733.5
–9.5 743.0 569.5
28 Anglo American
1469.5 –11.5 1481.0 959.4
45 Antofagasta
1015.0 +17.5 1061.0
512.5
159 Ashmore
378.5 +37.5 378.5
274.1
51 Ashtead
1861.0 +16.0 1865.0 1217.0
25 Associated British Foods
3348.0 +76.0 3348.0 2361.0
7
Astra Zeneca
5127.0 –27.0 5508.0 4007.0
122 Auto Trader
371.9 –4.0 435.9 338.9
29 Aviva
499.6
+2.3 544.0
418.9
109 Babcock International
825.5
–3.5 1026.0 795.5
30 BAE Systems
613.5
+0.5 677.0 534.5
197 Balfour Beatty
268.0
+0.4 298.4 253.5
19 Barclays
191.2
+1.0 239.2
169.6
68 Barratt Developments
681.0 +25.0
681.0 438.9
130 BBA Aviation
310.6
+5.2 323.7
246.1
161 Beazley
499.9 +17.2 525.0
361.9
105 Bellway
3520.0 +132.0 3520.0 2250.0
91 Berkeley
3861.0 +69.0 3861.0 2330.0
22 BHP Billiton
1398.0 +18.0 1486.0 1117.0
112 B&M European
394.0
–3.4 397.5 232.5
200 Bodycote
932.0 –19.0 962.5 569.0
121 Booker
204.1 –4.4
212.3
168.0
3 BP
490.8
+2.7
519.3 433.5
4 British American Tobacco
4858.0 +76.5 5643.0 4258.5
75 British Land
608.5
+8.0 674.0 578.0
187 Britvic
773.0 +15.0
778.5 523.5
23 BT
274.9
–8.3 396.9 274.9
152 BTG
705.0 –8.0 730.0 534.5
61 Bunzl
2284.0 –24.0 2465.0 1988.0
55 Burberry
1892.0 +95.0 1896.0 1383.0
176 Capital & Counties Properties
261.7
+3.5 324.8 255.2
116 Capita
571.5
+2.0 705.5 452.4
43 Carnival
5000.0 +71.0 5380.0 3752.0
47 Centrica
174.6
+0.1 235.8
172.8
196 Cineworld
693.0 –8.0 740.0 534.5
179 Close Brothers
1449.0 –42.0 1715.0 1273.0
126 Cobham
144.5
–2.9
174.6
110.7
48 Coca Cola HBC
2600.0 +50.0 2671.0 1615.0
24 Compass
1620.0
–1.0 1757.6 1370.7
87 Convatec
279.3 –4.9 344.0 225.0
27 CRH
2752.0 –22.0 2920.0 2551.0
89 Croda
3959.0 +59.0 4020.0 3072.0
155 CYBG
306.9
+4.4
309.1 260.0
72 DCC
7335.0 +15.0 7540.0 5860.0
189 Dechra Pharmaceuticals
2153.0
+4.0 2175.0 1235.0
131 Derwent London
2801.0 +43.0 3007.0 2359.0
8 Diageo
2551.5 +16.5 2594.0 1956.5
2.8
4.0
2.8
3.0
1.8
1.4
4.4
1.2
1.1
4.2
0.7
4.3
3.2
3.5
0.3
1.6
2.7
3.1
2.0
3.1
4.8
3.0
1.3
1.7
2.3
6.5
3.2
4.8
3.2
5.3
1.8
2.0
0.6
5.6
2.3
6.9
2.5
4.0
1.2
1.3
2.0
2.1
1.8
1.4
0.9
1.9
2.4
P/E
Mkt Cap
(£m)
23.6
18.3
14.8
40.3
16.0
18.6
24.1
21.8
23.8
33.1
13.4
18.4
14.6
12.1
21.4
13.6
10.3
8.6
16.5
27.5
23.0
23.8
55.1
19.5
41.4
18.1
17.1
82.0
26.6
29.1
90.2
732.7
17.5
17.5
22.8
11.4
32.1
23.1
19.7
27.0
32.6
145.4
29.3
23.7
9371.0
2045.9
5362.5
2293.6
2553.9
20640.7
10006.5
2677.4
9290.6
26505.2
64894.9
3617.6
20209.1
4173.7
19533.8
1848.5
32579.9
6857.6
3204.6
2628.0
4322.5
5280.4
29525.8
3940.0
1784.4
3638.4
96587.2
90575.0
6266.4
2038.0
27376.6
2719.5
7671.0
8294.2
2218.6
3813.6
10669.4
9590.5
1876.9
2198.2
3455.0
9472.8
26642.3
5450.5
23014.6
5349.6
2709.4
6533.5
2006.1
3121.7
64232.6
Market cap ranking
V
95
181
93
133
100
36
39
127
42
104
86
6
11
191
188
150
102
108
63
185
151
143
147
113
163
158
1
170
128
21
125
168
82
142
60
154
54
40
178
132
119
67
140
148
123
70
157
98
118
69
167
59
Direct Line Insurance
Dixons Carphone
EasyJet
Electrocomponents
Evraz
Experian
Ferguson
Foreign & Colonial
Fresnillo
G4S
GKN
Glaxo Smith Kline
Glencore
Grafton Group Units
Great Portland Estates
GVC Holdings
Halma
Hammerson
Hargreaves Lansdown
Hastings
Hays
HICL Infrastructure
Hikma Pharmaceuticals
Hiscox
Homeserve
Howden Joinery
HSBC
IG Group
IMI
Imperial Brands
Inchcape
Indivior
Informa
Inmarsat
Intercontinental Hotels
Intermediate Capital
Intertek
International Airlines Group
International Public Partnerships
Intu Properties
Investec
ITV
IWG
Jardine Lloyd Thompson
JD Sports
Johnson Matthey
Jupiter Fund Management
Just Eat
Kaz Minerals
Kingfisher
Ladbrokes Coral
Land Securities
Price Change
on week
376.5
187.2
1310.0
700.5
321.7
1536.0
5260.0
621.5
1467.0
281.3
318.0
1516.0
376.6
822.5
619.0
912.5
1177.0
534.5
1536.0
314.5
190.0
160.8
1155.0
1367.0
835.5
425.8
739.0
640.0
1235.0
3144.5
830.5
335.9
687.5
635.0
4103.0
967.0
5205.0
621.5
163.0
229.7
558.0
172.6
324.1
1266.0
366.5
3475.0
587.0
732.5
849.0
309.3
129.5
986.5
+12.2
–10.3
+47.0
+12.5
–3.8
–8.0
+60.0
–6.5
+43.0
nc
–38.3
–12.5
+9.7
+1.5
+18.0
+56.5
+26.0
+0.5
+44.0
+9.4
+0.6
+0.6
–44.0
+43.0
+7.0
–9.3
–17.9
–4.0
–1.0
+10.0
–33.5
–9.0
+5.0
–10.5
+10.0
+16.0
+60.0
+7.0
+1.6
–2.4
+1.0
–5.1
+11.5
–2.0
–5.5
+69.0
+31.5
+35.5
+24.0
+2.0
+5.6
+6.5
52-week
Yield
high
low
411.3
366.7
1431.0
709.0
335.2
1705.0
5260.0
628.0
1780.0
341.1
376.5
1722.0
376.6
831.5
739.0
912.5
1179.0
609.5
1536.0
325.0
194.4
174.6
2297.0
1373.0
838.0
475.7
769.5
848.5
1319.0
3993.0
880.5
419.5
712.5
850.5
4468.0
969.5
5210.0
633.5
166.6
295.1
627.5
219.6
365.2
1273.0
456.0
3540.0
587.0
749.0
875.0
369.7
140.4
1208.5
333.8
164.6
873.5
360.0
173.2
1383.0
4142.0
509.5
1091.0
220.0
299.6
1452.0
228.2
492.5
587.5
594.0
886.5
526.5
1148.0
209.0
135.4
155.4
1119.0
982.0
523.0
356.0
594.8
450.7
911.0
3120.0
590.5
267.6
629.5
603.0
3155.3
587.0
3038.0
377.5
151.8
227.0
473.0
153.0
237.8
947.5
303.3
2727.0
393.4
496.0
258.2
288.0
111.3
968.0
3.9
4.1
1.7
2.1
1.9
1.6
1.6
3.3
2.8
5.3
0.7
1.7
1.6
1.1
4.2
1.6
3.2
1.5
4.9
1.9
1.8
1.6
2.4
5.3
4.9
3.1
4.9
2.9
2.9
2.8
5.8
1.6
2.6
1.2
2.8
4.0
6.0
3.8
3.8
1.6
2.5
0.4
2.1
2.5
3.3
2.3
4.0
P/E
Mkt Cap
(£m)
16.2 5176.9
8.8 2158.9
21.0 5203.4
33.7 3093.1
- 4606.9
22.4 14352.6
29.6 13311.9
- 3370.1
24.7 10810.2
15.3 4364.6
22.7 5461.4
38.5 74554.7
32.6 54210.6
18.9 1949.0
- 2022.5
- 2743.6
34.4 4463.0
13.3 4239.8
37.1 7285.5
22.1 2066.9
19.9 2741.7
- 2879.1
21.6 2778.3
11.8 3906.0
35.4 2596.0
14.5 2680.0
96.0 148170.5
13.9 2348.7
25.7 3358.9
29.6 30146.7
17.3 3463.7
18.0 2421.8
27.5 5665.0
24.3 2895.8
23.6 7795.3
13.0 2712.8
30.7 8400.4
8.0 13038.0
9.5 2200.2
20.5 3112.5
11.4 3719.8
15.6 6947.9
22.5 2963.5
23.4 2773.0
19.9 3566.9
17.3 6725.3
18.9 2686.7
69.8 4975.9
17.0 3792.6
11.5 6800.1
- 2479.5
64.7 7800.8
Market cap ranking
V
34
14
38
134
81
97
110
106
101
144
44
198
66
84
199
20
165
64
79
192
46
145
92
129
169
52
136
138
115
73
15
65
13
171
17
124
83
117
12
137
32
172
18
2
5
114
111
76
182
58
90
Legal & General
Lloyds Banking Group
London Stock Exchange
Man
Marks & Spencer
Mediclinic International
Meggitt
Melrose
Merlin Entertainments
Metro Bank
Micro Focus International
Millen & Copthorne Hotels
Mondi
Morrison Supermarkets
National Express
National Grid
Nex Group
Next
NMC Health
Ocado
Old Mutual
Paysafe
Pearson
Pennon
Pershing Square
Persimmon
Phoenix Group Holdings
Playtech
Polymetal International
Paddy Power Betfair
Prudential
Randgold Resources
Reckitt Benckiser
Redrow
Relx
Renishaw
Rentokil Initial
Rightmove
Rio Tinto
RIT Capital Partners
Rolls-Royce
Rotork
Royal Bank of Scotland
Royal Dutch Shell A
Royal Dutch Shell B
Royal Mail
RPC
RSA Insurance
Saga
Sage
Sainsbury, J
Price Change
on week
266.3
65.9
3922.0
186.1
350.8
679.0
518.5
221.4
452.8
3567.0
2412.0
568.5
1912.0
234.9
351.9
931.8
661.0
4911.0
2915.0
308.9
200.9
584.0
634.0
793.0
994.0
2807.0
773.0
940.0
895.5
7725.0
1828.0
7535.0
7187.0
631.0
1680.0
4850.0
305.5
4121.0
3688.5
1951.0
913.0
264.0
275.2
2285.5
2328.0
387.4
950.5
612.5
191.9
726.0
241.7
+3.5
–0.7
–32.0
+15.2
+2.1
–7.0
–2.0
+0.7
–12.6
+152.0
–20.0
+113.5
–202.0
+2.8
–3.0
–6.0
+3.0
–254.0
+77.0
+12.9
+4.7
+1.0
+4.5
–2.0
–19.0
+100.0
+15.0
–0.5
+45.0
+40.0
+9.0
+105.0
+351.0
+21.0
–11.0
+180.0
+1.7
+89.0
–21.5
–21.0
–6.5
+0.2
+2.6
–12.0
–3.5
+9.0
–18.5
–11.5
–1.0
–4.0
–0.3
52-week
Yield
high
low
276.0
73.1
3983.0
186.1
395.5
932.0
526.0
261.2
537.0
3834.0
2660.0
575.0
2130.0
252.9
380.0
1166.7
848.8
5320.0
2952.0
317.9
229.1
595.0
832.5
944.0
1250.0
2807.0
893.5
1016.0
1095.0
9180.0
1885.5
8190.0
8108.0
647.0
1717.0
5015.0
307.2
4346.0
3759.5
1979.0
979.0
267.4
277.5
2309.0
2377.5
499.2
1079.0
666.5
215.3
731.5
281.7
205.7
52.4
2621.0
112.7
312.9
641.0
410.6
165.5
425.9
2657.0
1960.0
410.2
1511.0
211.0
334.7
920.9
464.5
3617.0
1282.0
238.5
184.9
305.7
566.5
768.0
959.0
1663.0
697.5
767.0
731.5
6665.0
1304.5
5470.0
6514.0
372.4
1282.0
2416.0
206.0
3631.0
2588.5
1740.0
639.5
194.6
170.4
1928.0
2017.5
372.8
720.5
521.0
182.7
599.0
228.7
5.4
3.9
1.1
3.8
5.3
1.2
2.9
1.0
1.5
2.7
1.4
2.6
2.2
3.5
5.1
5.8
3.2
0.4
4.4
8.2
4.3
3.9
5.9
3.1
2.0
1.7
2.2
1.0
2.1
1.6
1.9
1.0
1.1
1.1
3.2
0.5
1.9
6.3
6.2
5.8
1.9
2.6
4.4
2.0
4.8
P/E
Mkt Cap
(£m)
10.3 15859.1
31.4 47289.8
46.2 13600.9
- 3082.8
48.7 5699.5
21.9 5004.3
13.8 4022.3
- 4297.8
21.9 4599.6
- 2867.6
43.5 10494.1
20.7 1846.2
16.9 7021.6
18.1 5486.5
15.3 1800.8
17.8 31953.8
25.8 2510.1
11.5 7222.0
47.4 5954.9
172.6 1946.3
19.9 9904.3
25.8 2832.0
- 5215.2
20.0 3302.4
- 2386.9
14.2 8663.1
- 3036.8
15.1 2983.0
11.9 3851.7
- 6506.4
24.4 47268.9
31.2 7082.5
24.1 50520.6
10.0 2333.4
30.1 34815.5
34.3 3530.2
8.2 5613.0
30.2 3812.1
17.9 50817.8
- 3035.6
- 16800.5
30.3 2297.2
- 32682.9
30.3 102314.9
30.9 87194.9
14.2 3874.0
25.8 3943.9
54.7 6263.4
14.1 2145.4
32.1 7847.2
14.6 5292.4
Market cap ranking
V
50
78
85
99
146
16
33
94
41
74
174
96
160
141
107
177
37
156
26
77
53
190
135
71
183
35
194
139
120
57
162
153
175
9
80
166
184
10
103
62
180
195
193
149
56
31
Schroders
Scottish Mortgage
Segro
Severn Trent
Shaftesbury
Shire
Sky
Smith (DS)
Smith & Nephew
Smiths
Smith WH
Smurfit Kappa
Sophos
Spectris
Spirax-Sarco
Sports Direct International
SSE
SSP
Standard Chartered
St James's Place Capital
Standard Life Aberdeen
TalkTalk
Tate & Lyle
Taylor Wimpey
Templeton Emerging Markets
Tesco
Thomas Cook
TP Icap
Travis Perkins
Tui
Tullow Oil
UBM
UDG Healthcare
Unilever
United Utilities
Vedanta Resources
Victrex
Vodafone
Weir
Whitbread
William Hill
Witan Investment Trust
Wizz Air
Wood Group
Worldpay
WPP
Price Change
on week
3507.0
435.7
549.5
2104.0
1000.0
3848.0
931.5
486.3
1422.0
1602.0
2062.0
2180.0
578.0
2481.0
5795.0
398.8
1391.0
566.5
746.1
1177.0
437.2
204.9
662.0
202.4
772.5
186.0
123.1
536.5
1475.0
1339.0
190.0
689.5
911.0
4502.5
845.5
898.0
2452.0
215.6
2007.0
4028.0
255.1
1052.0
3310.0
717.0
407.4
1378.0
+44.0
+0.7
+16.0
–54.0
+10.5
–14.0
+8.0
–13.7
+30.0
–13.0
–3.0
–156.0
+5.5
+8.0
+80.0
+5.5
+20.0
+16.5
–26.8
+45.0
+8.7
–10.4
–0.5
+3.0
–13.5
–2.4
+1.3
–3.5
+16.0
+54.0
+7.9
–6.0
+10.0
+120.5
–17.0
–3.5
+22.0
+3.8
+13.0
+165.0
–0.2
–8.0
+155.0
–13.0
–6.6
–29.0
52-week
Yield
high
low
3507.0
438.8
550.0
2553.0
1016.0
5147.0
1007.0
515.0
1423.0
1684.0
2085.0
2419.0
595.0
2834.0
5835.0
419.5
1599.0
568.0
846.7
1238.0
441.6
218.0
807.0
203.3
786.0
218.7
126.9
540.0
1696.0
1344.0
333.6
764.5
911.0
4530.0
1056.0
1102.0
2455.0
231.5
2083.0
4307.0
313.4
1060.0
3310.0
894.5
430.4
1921.0
2743.0
304.2
403.3
2073.0
872.5
3613.0
750.5
380.1
1067.0
1370.0
1447.0
1738.0
224.9
1996.0
4125.0
268.3
1367.0
324.3
617.2
908.5
405.0
152.5
625.5
138.9
559.0
166.5
67.0
342.1
1331.0
1001.0
145.6
645.0
614.5
3092.0
840.5
575.0
1683.0
190.5
1580.0
3408.0
240.0
833.5
1479.0
560.0
256.6
1348.0
P/E
Mkt Cap
(£m)
2.5 20.1
0.7
3.0 7.8
3.8 15.1
1.5 23.0
0.6 76.9
2.2 23.3
2.8 22.1
1.7 18.9
2.6 11.3
2.1 21.0
3.2 14.5
0.3
2.1 266.8
1.3 32.8
- 10.6
6.5 8.8
0.9 35.6
- 1614.9
2.5 55.3
4.3 23.5
7.8 34.2
4.2 12.2
0.8 11.3
1.1
- 229.6
0.4 175.9
3.1 34.0
3.0 295.0
4.2 16.6
3.2 30.8
1.1 38.1
2.6 25.3
4.6 13.3
4.3
1.9 25.1
5.6
2.2 67.3
2.3 17.5
4.9 13.6
1.8
- 18.1
3.6 121.4
0.5 48.5
4.1 10.1
9360.0
6114.1
5486.2
4966.6
2790.1
34929.9
16012.7
5189.8
12442.0
6335.5
2289.2
5162.7
2663.9
2957.7
4261.6
2202.9
14026.9
2692.1
24554.2
6221.5
8654.2
1956.8
3076.2
6622.4
2145.0
15229.2
1890.6
2972.9
3703.4
7860.4
2627.9
2716.1
2262.3
57637.3
5765.4
2488.3
2104.0
57414.5
4380.3
7387.1
2188.2
1878.6
1902.5
2747.4
8148.0
17562.2
Price/earnings ratios are based on historic data, with yield and p/e values
calculated from the most recent reported dividends and earnings per share,
using trailing 12-month figures. 52-week highs and lows are end of day.
nc = no change. Data provided by Morningstar. Any enquiries please contact:
dataquestions.uk@morningstar.com
MONEY
13
The Sunday Times October 15, 2017
MONEY
DON’T WAIT FOR THE
ENERGY CAP. SLASH
YOUR BILLS NOW
PAGE 14
12
14
30 YEARS ON, EVEN
THE WORST STORM
SEEMS A BREEZE
IAN COWIE
PAGE 15
YOU’RE HIRED:
HUNTER DAVIES
AUDITIONS A NEW
ACCOUNTANT
PAGE 17
PUZZLES
CROSSWORDS,
SUDOKU & MORE
PAGES 20-21
Follow us on Twitter @ST_Money
Child’s play: why car sharing suits us
AKIRA SUEMORI
City drivers tired of
the stress and cost
of motoring are
opting for high-tech
alternatives to
buying a vehicle
of their own, says
Anna Mikhailova
W
hen Antoinette PetersAdenle’s
son
was
unwell last week and
needed to go to the
doctor, it didn’t faze
her that she had no car
to drive him there. She
picked up her phone
and booked a Zipcar
instead.
The career coach from Herne Hill,
southeast London, gave up car ownership five years ago in favour of short-term
rentals, and has never looked back.
“My old Peugeot would break down all
the time and cost more than £1,000 to
insure because it had such a big engine,”
said Peters-Adenle, 40. “It drank up diesel. I also had to pay the congestion
charge whenever I drove into central
London. All in all, it was a headache and I
felt guilty if I wasn’t using it much.”
Now she uses Zipcar whenever she
needs to drive anywhere — typically
spending £6 an hour and about £70 when
she uses it for a day trip.
Peters-Adenle and her husband, Yemi,
45, have two children — Ella, 12, and Luis,
4. The kids miss the old family car but,
as Peters-Adenle said, “they don’t pay the
bills”.
The couple are among a growing number of people trading in car ownership
for alternative options, from short-term
rentals to sharing schemes.
Despite the best efforts of the car makers, fewer and fewer of us are buying
their products. Sales of new cars fell by
9.3% in September — the sixth consecutive monthly fall — according to data from
the Society of Motor Manufacturers and
Traders. Diesel car sales dropped by
more than a fifth.
Even Jeremy Clarkson admits our love
of cars is waning, writing in his Sunday
Times column this month: “Being a car
enthusiast is like being a Tory. You just
don’t admit it in polite company.”
So is it still worth buying a car, especially once depreciation and all the running costs are factored in?
“Owning a car is no longer the necessity it once was,” said James Daley of the
consumer group Fairer Finance. “If you
live in a city, there is likely to be a car
sharing scheme available, which can
work out much cheaper than owning
your own vehicle.
“Car insurance and petrol are expensive enough, but routine maintenance
can also run to hundreds, sometimes
thousands of pounds a year.”
Hiring a car can now be done at the tap
of a smartphone screen — you no longer
need to turn up at the rental company
office armed with documents or book the
vehicle days in advance.
Launched in Boston, Massachusetts, in
2000, the app-based Zipcar is the bestknown of the bunch, operating across
500 cities in nine countries — including
London, Bristol, Oxford, Cambridge,
Edinburgh and Glasgow in the UK, as well
as New York, Paris, Taiwan, Barcelona
and Istanbul. Members can rent one of its
1,500 cars or vans by the hour or day.
Antoinette Peters-Adenle, with children Ella and Luis, prefers hiring a Zipcar to the ‘headache’ of her old Peugeot
Increasingly for
young people, it
makes no sense at
all to own a car,
especially in a city
9.3%
£2,861
September’s decline in sales of new
cars — the sixth straight monthly fall
Average annual cost of running
a car for a driver aged 17-22
Vehicles are picked up from designated
spots, to which they must be returned at
the end of the rental period.
Membership is free, for a limited trial
period, with cars costing from £3 an hour
and £33 a day. Different plans allow frequent users to hire cars for less, in return
for a monthly fee of £6 or £15.
The company, which is now owned by
the rental giant Avis Budget, recently
introduced a new service, Zipcar Flex,
for one-way journeys. So far confined to
parts of London, it allows users to pick up
a car at one point in the city and leave it in
another — making it a cost-effective alternative to a taxi or Uber.
Its rival, Enterprise Car Club, offers a
similar service, with more than 1,000 cars
available in more than 30 locations across
Britain. Monthly membership costs from
£6 and car hire from £3.45 an hour.
DriveNow, a car sharing club that has
just signed up its millionth customer, specialises in BMWs and Minis, but is confined to four boroughs in northeast London — Islington, Hackney, Haringey and
Waltham Forest.
“Most car-club schemes charge an
annual membership plus an hourly rate,
and many include added extras such as
free fuel for shorter journeys,” said Matt
Oliver from the comparison site Gocompare. “Membership is usually less than
£100 a year but there are usually hourly
charges, with prices varying depending
on where you are.”
Such alternative options are particularly appealing to younger drivers, who
are usually stung by high insurance costs
when they own a car.
The average annual cost of running a
car for a driver aged between 17 and 22 is
£2,861, according to analysis by the
insurer Cuvva — £1,771 for motor cover,
£880 for fuel, £110 for road tax, £55 for
the MOT and £45 for breakdown insurance.
The analysis does not take account of
what is often the biggest cost of all: depreciation. Thousands of pounds can be
OWNING v SHARING: HOW THEY STACK UP
The cost of 10,000 miles of motoring
Brand-new Ford Focus, ST-Line 1.5 litre
Price: £21,305
Three-year-old Ford Focus
Price: £7,500
Annual running costs
Vehicle depreciation
Tax
Annual running costs
Vehicle depreciation
Tax
Insurance
MOT
Petrol
Total
£4,602
£135
£637
£0
£1,311
£6,659.00
per year
Insurance
MOT
Petrol
Total
Zipcar
Total
£667
£135
£438
£54.85
£1,311
£2,605.85
per year
£1,457.00
per year
Based on Zipcar’s SMART membership
package, costing £6 per month with 300
hours of car use, mix of short and long trips
Sources: DVLA, Ford, Autotrader, thisismoney.co.uk, gocompare.com
and moneysupermarket.com
wiped off the value of a new car the
moment it leaves the dealer’s forecourt.
The rise of the “sharing economy” has
prompted the emergence of other innovative options, such as the car-pooling
service BlaBlaCar. Those looking for a
ride to a certain place at a certain time
put their request into the site and are presented with a choice of lifts from people
going in that direction, in return for a set
fee. For security, drivers provide member profiles and, as with Uber, they are
rated by previous users.
BlaBlaCar’s French founder, Frédéric
Mazzella, came up with the idea just
before Christmas in 2003, while being
driven by his sister from Paris, where he
worked, to his home several hundred
miles to the southwest. Seeing so many
half-empty cars on the road, he vowed to
come up with a way of offering rides
online, so seats in cars could be booked
like seats on trains.
Meanwhile, HiyaCar (slogan “Rent
a car from someone near you”) and
easyCar Club (“The social way to hire”)
let owners rent their vehicles to neighbours when they’re not driving them.
EasyCar Club — whose website features pictures of owners standing in front
of their vehicles, such as Stacey and her
2009 Kia Picanto or Rosemarie and her
2014 Volvo V40 — says Millennials are its
biggest users. The company’s customer
base has doubled to 90,000 this year and
is available in cities including Leeds,
Brighton and Edinburgh.
Jasmine Birtles, director of the consumer advice site MoneyMagpie, said:
“Increasingly for young drivers, it makes
no sense at all to own a car, particularly in
a city. The insurance premiums and run-
ning costs mean it could be cheaper simply to take taxis everywhere.”
The new breed of car companies usually have their own insurance in place.
For example, Zipcar will cover you in the
event of an accident; there will be a £250
excess to pay but this can be removed by
paying an additional £2 per journey.
You could also try borrowing a neighbour’s car. Many insurance policies will
cover you to drive an insured vehicle on a
third-party basis even if you’re not
named on the paperwork, but it is worth
double-checking just in case.
James Lamb, 37, from Wimbledon,
southwest London, was persuaded to try
Zipcar by the cost of maintaining his
nine-year-old BMW. When he took the
car in for its latest annual service, the bill
came to £600 — on top of the almost
£2,000 he pays every year in running
costs.
About 18 months ago, Lamb and his
wife, Catherine, who have a one-year-old
son and a second baby on the way, considered buying a second car — but soon
reconsidered. “We added up the potential costs and thought, there has to be a
better option,” he said.
The couple are now so happy with Zipcar they may give up the BMW too. “As
well as the money I save, I care about the
environmental footprint I leave,” said
Lamb. “And if I’d bought another car, I
would only have increased it. Car sharing
allows me to minimise that.”
YOUR STORY
Have you reversed your thoughts on
car ownership?
Email money@sundaytimes.co.uk
14
The Sunday Times October 15, 2017
MONEY
BRIEFING
STAMP DUTY DRIVE
SPEND THOSE OLD
FOR GREENER HOMES POUND COINS NOW
SQUARE METRE COSTS
£20,000 IN CHELSEA
If you would like to receive the
free weekly Money email bulletin,
visit thesundaytimes.co.uk/
moneybulletin. You must be
a digital subscriber.
Stamp duty in England may
be changed to encourage
people to make their homes
more energy efficient.
The proposals are part of
the government’s Clean
Growth Strategy, which was
published last week.
Energy minister Claire
Perry said it was an option
being considered as part of a
wider drive to help the UK
meet its legal obligations
under the Climate Change
Act. This requires a 57%
reduction in carbon
emissions by 2032,
compared with 1990 levels.
Homes in the south Wales
county of Blaenau Gwent
were worth £777 a square
metre in 2016, compared
with £19,439 for homes in
the borough of Kensington
and Chelsea, the most
expensive place to live in
England and Wales,
according to figures from
the Office for National
Statistics last week. While
the average value of a home
in England has risen 44% to
£2,463 a square metre since
2004, the average value of a
home in Wales has risen 28%
to £1,408 a square metre.
Contact us Money,
The Sunday Times,
1 London Bridge Street
London SE1 9GF
Email money@sundaytimes.co.uk
Advertising If you would like to
buy an advertisement in Money,
email Paul Douglass at
paul.douglass@news.co.uk
or call him on 07917 598 422
Today is the last day to spend
the “round pound” before it
ceases to be legal tender.
From tomorrow the old £1
coins can be exchanged for
new in banks or post offices.
STUDENT LOANS
UNDER SCRUTINY
The Treasury committee
has launched an inquiry into
the student loan system.
MPs will scrutinise interest
rates, repayment thresholds
and tuition fees.
STRUGGLING BUYERS’ HOW THE FOOTSIE
35-YEAR HOME LOANS HAS PERFORMED
Making a mobile
phone call is like
watching a
Charlie Chaplin
film where the
picture is fuzzy
Lord Adonis
laments the
UK’s ‘deplorable’
mobile phone coverage
The FTSE 100 rose 12 points to finish the week at 7,535. The
index closed at a record high on Thursday as uncertainty over
the Brexit talks hit the pound, boosting UK exporters’ shares.
First-time buyers are
increasingly choosing long
mortgage terms of up to 35
years in a bid to be able to
afford a property. Mortgage
broker London & Country
said the proportion of new
buyers taking out mortgages
of 31-35 years has doubled
to 22% in 10 years, while the
proportion taking out
mortgages of 21-25 years has
fallen from 59% to 39%.
Extending the term of a
mortgage will reduce
monthly repayments but
increase the amount of
interest paid in total.
+8%
over a year
(up 12.8% with dividends)
three years
+18.4% over
(up 33.3% with dividends)
+30.1%
over five years
(up 57.4% with dividends)
+12%
over ten years
(up 63.8% with dividends)
Inflation: in August, CPI was 2.9% and RPI was 3.9%
Who wants to be taxed like a millionaire?
JAMES CLARKE
With some workers
paying 70p of every
extra pound they
earn, it’s time to close
‘tax traps’, writes
Nina Montagu-Smith
THE THREE TAX TRAPS
P
hilip Hammond is being
urged to remove anomalies
in the tax system that mean
almost 800,000 people hand
over to the exchequer a
larger proportion of each
extra pound they earn than
those who make millions.
It is a basic principle of the
British tax system that the
proportion of income paid in tax — the
so-called marginal rate — is higher the
more you earn, rising to 45% on any
income above £150,000 a year.
Yet changes over the past few years
have created three “tax traps”: for a parent earning £50,000-£60,000 a year; for
all those on £100,000-£123,000 a year;
and for those earning £150,000£210,000 a year who save into a pension.
Those caught can pay as much as 74p on
each extra pound they earn.
Sir Steve Webb, the former pensions
minister and now head of policy at Royal
London, is urging the chancellor to use
next month’s budget to address the
anomaly, which, in an analysis published
today, Royal London estimates affects
775,000 people.
“Most would agree that as people earn
more, they should pay a higher rate of
tax,” said Webb. “But a series of complex
changes that have been bolted on to the
tax system over recent years mean this is
no longer true.
“This analysis shows that there are
hundreds of thousands of people who
pay more tax on each extra pound they
earn than a millionaire.
“It is hard to believe this is a sensible
way to run a tax system. As part of his
budget, the chancellor should be looking
to rationalise the tax system so that it is
simpler, fairer and easier to understand.”
Liam Davies, 34, an accountant and
father of one from Hove, East Sussex, is
among those caught in a tax trap. He
earns £60,000 a year, putting him well
within the 40% higher-rate tax band, but
pays 52.8% on anything above £50,000.
This is because, in addition to paying
40% income tax and 2% national insurance contributions (Nics), he loses 1% of
the £20.70-a-week child benefit paid for
his one-year-old daughter, Isla, for every
£100 he earns above £50,000. At
£60,000 he will have lost the lot.
“It is so frustrating,” said Davies,
Parents where one partner
earns £50,000-£60,000
People who earn
£100,000-£123,000
People who earn £150,000-£210,000
and pay into a pension
Estimated 375,000 people
Estimated 250,000 people
Estimated 150,000 people
59.9%
Energy customers could save
hundreds of pounds a year by
taking steps to cut their bills
now, rather than relying on a
government cap that may not
take effect until spring 2019,
consumer groups have said.
Draft legislation designed
to lower the cost of gas and
electricity for about 12m
households was published
last week. The aim is to give
the energy regulator, Ofgem,
the power to cap standard
variable tariffs (SVTs) and
other default deals to which
customers are moved at the
end of their fixed-rate or
discount arrangement.
The cap will last until 2020
and possibly be extended to
2023 if Ofgem decides that is
necessary.
Theresa May said the
62%
tax
Figure based on two children
Annual income,
£0 before tax
£50,000
69.5%
tax
£100,000
£150,000
tax
£200,000
Income tax bands
PERSONAL ALLOWANCE
Up to £11,500
Caught out by child benefit: Liam and Ali Davies with their daughter Isla, 1
whose wife, Ali, 36, earns £32,000 a year
as a project manager. “We could each
earn £40,000 and be fine, but because I
earn more than £50,000 we are being
taxed more than if we earned millions.
“I even considered increasing my
pension contributions to bring my net
pay to below £50,000, but we are saving
to buy a house and couldn’t afford to do
that.”
The system seems doubly unfair to
Davies because it is based on individual
rather than household income. A couple
earning £49,000 each could receive
household income of £98,000 and still
receive full child benefit, whereas Davies
and his wife, who have a combined
income of £92,000, lose it all.
A parent earning £50,000 to £60,000
— 59.9% tax (based on two children)
Affected: 375,000 people
Since January 2013, members of this
group, such as Davies, have lost child
benefit at a rate of 1% for every £100
earned over £50,000. This equates to a
marginal rate of tax of 52.8% for those
with one child and 59.9% for those with
two. It can be even higher for those with
more, rising to 74.1% for a parent with
four children.
People earning £100,000 to
£123,000 — 62% tax
Affected: 250,000 people
Those earning less than £100,000 a year
benefit from a personal tax allowance of
£11,500 a year. However, this allowance
tapers away at a rate of 50p for each £1
earned above this threshold, until it is
withdrawn completely for those earning
more than £123,000.
Someone earning £101,000 will therefore pay 40% income tax, 2% Nics and a
further 20% taper tax on every extra
pound over the threshold, meaning a
total of £62 out of each extra £100 earned
— a marginal tax rate of 62%.
Pension savers earning £150,000 to
£210,000 (including employer’s
pension contributions) — 69.5% tax
Affected: 150,000 people
Most people can save up to £40,000 a
year into a pension, including tax relief.
However, since April 2016, once earnings
exceed the threshold of £150,000, this
allowance is reduced at a rate of 50p for
every £1 earned, until you have lost
£30,000 of the allowance at earnings of
£210,000. After this, you may continue to
save £10,000 a year into a pension,
including tax relief. People in this income
0% tax
energy market “has to offer
fairer prices for millions of
loyal customers who have
been paying hundreds of
pounds too much”.
Greg Clark, the business
and energy secretary, said
customers of the big six
energy suppliers were
“overpaying to the tune of
£1.4bn a year”.
“That is simply wrong,” he
said, adding that the draft
legislation would send a
“clear message to suppliers
they must act to put an end to
loyal consumers being
treated so unfairly”.
However, the cap is
unlikely to take effect this
winter and possibly won’t be
in place by next winter. It is
also not clear how much it
will save consumers, as the
details are yet to be
determined.
Alex Neill, managing
director of home products
and services at the consumer
group Which?, said: “For
millions of consumers
worried about their energy
bills, a cap might sound like a
HIGHER RATE
ADDITIONAL RATE
Up to £150,000 pay
Over £150,000 pay
20% tax
How to escape the trap
Salary sacrifice
First, maximise your pension contributions to bring down your total taxable
income, said Patrick Connolly of financial adviser Chase de Vere. However, this
would not work for the third group of
earners, as they will already have used
their pension contributions allowance.
Rachel McEleney, associate tax
director at Deloitte, said this method
would allow you to achieve 59.9% tax
relief in the first scenario and 62% marginal relief in the second, if you do it via a
salary-sacrifice arrangement, meaning
you also save on Nics. If you just make
additional contributions, you will still
save 57.9% and 60% in the first two scenarios.
Other salary-sacrifice strategies, such
as using childcare vouchers and cycle to
work schemes, can also be useful and
effective, said McEleney.
Childcare vouchers worth up to £28 a
Hot topic:
consumers
should try to cut
their energy bills
before the cap is
implemented
is £1,260 for those who pay
on receipt of a bill; customers
who switch to direct debit
pay £1,166.
Switch to the cheapest
deals — save £292
You could save even more if
you move to the cheapest
deal on the market. The
figure will depend on where
you live and how much
energy you use, as different
40% tax
week for a higher-rate taxpayer or £25 for
an additional-rate taxpayer are exempt
from income tax.
It will be possible to join these voucher
schemes only until April 5, 2018, but it
will be possible to remain in existing
schemes after that date, said McEleney.
Give it away
When you give to charity, be sure to sign a
Gift Aid declaration to enable the charity
to claim back your basic-rate tax. You can
claim back income tax paid at the higher
rate (40%) via your tax return.
“Gift Aid donations are effective in
reinstating child benefit and personal
allowances,” said McEleney. “They also
attract income tax relief at the individual’s marginal tax rate.”
In the first earnings scenario, there
would be a 57.9% effective rate of relief
(that is, full income tax relief but no Nics
saving). A 60% saving would be available
on the second scenario. There would be
only a 45% saving on the third, as Gift Aid
does not affect the pension allowance
tapering or Nics.
Tax-friendly investments
You can benefit from 30% initial income
tax relief plus tax-free capital growth by
Households
shouldn’t have
to wait up to
two years for
the cavalry
positive move. [But] as it will
take some time to come into
effect, customers sitting on
expensive standard variable
tariffs should switch now.”
John Penrose, a
Conservative MP who is a
leading advocate of a price
cap, said: “Households
shouldn’t have to wait up to
two years for the cavalry to
arrive. We need faster routes
to deliver our pledge.”
Looking to find ways of
cutting your bills now? Here
are our five tips.
Switch to direct debit —
save £77
Almost a third of energy
customers pay on receipt of a
paper bill every three
months. Those also on their
supplier’s SVT are charged a
premium of about £77 a year
compared with those who
pay by monthly direct debit,
according to the comparison
service Energy Helpline.
Customers of Npower
could make the biggest
savings by switching. The
average annual cost of its SVT
BASIC RATE
Up to £45,000 pay
band will pay tax at 45%, so a reduction of
50p in the annual allowance will mean an
additional 22.5% in tax. Including Nics,
this means a tax rate of 69.5%.
Lower the cost of that
cuppa with our guide
to cutting energy bills
With the price cap
not in force until
2019, it pays to
make savings now,
writes Ali Hussain
Source: Royal London
suppliers have different costs
for delivering gas and
electricity to your home.
Also, while some charge a
daily fee, regardless of how
much energy is used, others
apply a higher rate for a set
number of units used each
year, followed by a lower
tariff the rest of the year.
Use a comparison service
such as Moneysupermarket,
uSwitch or Energy Helpline to
find the best deal. You will
need to know your average
annual usage to get the most
accurate results. These
details can be obtained by
logging into your online
account. They may also be on
your last paper statements.
When using a comparison
site, ask to see a full list of
deals. This is important
because some smaller
suppliers, which tend to offer
the best rates, do not pay to
appear on the sites’ default
results page.
45% tax
investing in venture capital trusts (VCTs)
and enterprise investment schemes
(EISs). “VCTs also provide tax-free
income, which can be particularly useful
for those trying to supplement pension
and other investment income, or stay
below a particular tax band, while EISs
allow capital gains tax deferral for other
gains made, and can also provide inheritance tax savings,” said Connolly.
Use up your Isa allowance
The annual allowance for Isa savings is
£20,000 a person and all income from an
Isa is tax-free.
Make use of capital gains
Structure investments so they are subject
to capital gains tax (CGT) rather than
income tax, suggested Connolly.
“Spouses and civil partners both have an
annual capital gains tax allowance and so
could protect up to £22,600 of gains
between them each tax year, especially
as assets can be transferred between
them on a no-gain, no-loss basis,” he said.
This would mean holding income-producing assets inside tax-efficient wrappers, such as Isas and Sipps, and keeping
growth-orientated investments, such as
shares, outside.
The average standard bill
(including both direct debit
and other customers) is £1,116
a year, according to Ofgem.
However, the cheapest deal
on the market is just £824 if
you pay by direct debit.
Bear in mind that you will
need to switch regularly to
ensure you stay on the
cheapest tariff.
If you do nothing, you will
be moved to that supplier’s
SVT, or another default tariff.
This will be more expensive
even after the government
cap is introduced.
Go dual fuel — save £25
If you use both gas and
electricity, you can get a
discount of about £25 if you
use one supplier for both,
according to uSwitch.
Get cashback — save £140
Once you have found the best
deal for you, use a cashback
website such as Quidco or
Topcashback when making
the switch.
Like comparison websites,
these services make money
by referring customers to
suppliers. In the case of
cashback websites, however,
some of this payment is paid
back to the customer.
For example, last week
Quidco was offering up to
£140 to those who used its
website to switch to a dualfuel deal with Npower. It was
also offering £40 to those
switching to a dual-fuel tariff
with First Utility.
Always check the level of
cashback available on the
day, as the deals can be
withdrawn quickly.
Claim a refund — save £50
One disadvantage of paying a
fixed monthly direct debit is
that energy customers tend to
build up a credit balance on
their account during the
summer months, and a deficit
in the winter.
In theory, if your supplier
estimates your annual energy
usage correctly, you should
end up with a zero balance at
the end of a 12-month cycle.
In some cases, however,
you may be overpaying.
Check your online account to
see if you have built up a
significant credit balance. If
you have about £300 or
more, you should ask your
supplier either to lower your
monthly payments or give
you a refund.
In most cases, any
outstanding debts or
overpayments are settled
when customers switch
supplier. In some cases,
though, you may still be owed
money by a company from
which you have switched in
the past.
Energy UK, the trade body
for the industry, has set up a
website called My Energy
Credit (myenergycredit.com)
that aims to help people
claim money back from their
old energy companies. The
average amount you may be
able to claim is about £50.
15
The Sunday Times October 15, 2017
MONEY
Markets fall, but even crushing
losses may be recouped in time
The Great Storm of 1987 exacerbated the effects of Black Monday. Thirty years later, some find the financial weather eerily familiar
PERSONAL
ACCOUNT
IAN COWIE
B
lack Monday was a baptism
of fire for this cub reporter in
the Square Mile almost a
working lifetime ago, but the
30th anniversary this week
of the 1987 stock market
crash may still have lessons
for investors today.
For example, people who
fear another October crisis
after the FTSE 100 hit an all-time high of
7,556 last Thursday might find that distance lends perspective to the view.
In plain English, if you can afford to
remain invested for five years or more,
then even the most dramatic short-term
setbacks fade in significance.
Not that it felt that way on October 19,
1987, when the index of Britain’s 100 biggest shares fell by 10% in a day — and then
by the same margin the next day. Panic
turned to pandemonium partly for technical reasons: the worst storm in living
memory had hit southeast England the
previous Thursday night and Friday
morning, disrupting rail, road and telephone communications.
In those distant days, without mobile
phones or the internet, that meant many
City folk couldn’t get into the office and
couldn’t work from home either — but
they still knew the American market was
falling.
So, with trading in many London offices suspended, fear spread like wildfire.
This helped turn mildly disappointing
economic data into a proper, old-fashioned stock market crash. Teething
troubles with newish technology made
matters worse. Caspar Rock, chief investment officer at Cazenove Capital, told
me: “I had been working for all of a
month as a graduate trainee in the
eurobond markets. We were sat in a
classroom for most of October, but on
the Monday after the storms, we were
hauled out to help on the trading floor.
“The Telerate [financial information]
machines weren’t working fast enough,
so we went back to using chalk boards.
My role was to update various securities
prices on these boards while being
shouted at by market makers.”
Justin
Urquhart
Stewart,
the
co-founder of Seven Investment Management, recalled: “It had been a year since
Big Bang shone a glorious light over the
brave new world of a deregulated City
and electronic trading. Then the crash of
Black Monday blew the fuse of Big Bang
and the trading lights went out.
“What did I learn? When it’s all going
too smoothly, that’s when you need to
question. Parallels with today? It does
feel eerily familiar, given levels of market
exuberance and similar complacency.”
One of the few fund managers who
have run the same trust for 35 years,
Peter Spiller at Capital Gearing, agreed.
He told me: “There was simply no
demand for many shares on Black Monday and fund managers could not sell at
any reasonable price. Often they did not
answer the phone to unitholders who
wanted to get back into cash.
“That is what is most relevant to
today’s richly priced markets. All sorts of
funds offer daily liquidity — or the ability
to buy and sell assets in illiquid underlying markets. These days, it’s not just unit
trusts but open-ended investment companies [Oeics] and exchange-traded
funds [ETFs]. A bear market could see a
lot of distressed selling. Be prepared for
interesting times.”
Another man who traded through
Black Monday is less gloomy. Alan Steel,
who founded the Scottish independent
financial advice firm of that name in 1975,
said: “Numerologists have noticed that
stock markets fell in 1987, 1997 and 2007.
Is there a curse on the year seven?
“Nonsense. Practical analysts who are
more streetwise are more confident, and
even expect an end-of-year rally in 2017.
Methinks the big difference is that there is
no euphoria in markets today — and,
remember, a bull run is like sex: it’s at its
best immediately before it ends.”
Returning to the numbers, statisticians at the investment research firm
Morningstar say £100 invested in the
average unit trust just before Black Monday would be worth £796 now. Only £258
was needed to keep pace with inflation,
according to the Bank of England.
Better still, if you put £100 in the average investment trust in 1987, it would be
worth £1,383 today. Setting aside specialist tiddlers, the best-performing big
investment trust over the entire three
decades is Scottish Mortgage, where
hefty stakes in new technology have
£1,383
Return on £100 placed in the
average investment trust in 1987
ST DIGITAL
Read a breakdown of Ian Cowie’s
‘forever’ fund
thesundaytimes.co.uk/cowieholdings
IAN GOODRICK
The great crash: trees and telephone lines were felled by strong winds in 1987, leaving traders stranded and incommunicado as shares nosedived days later
turned £100 into £2,570. In second place
is Finsbury Growth & Income, where
blue chips have lifted returns to £2,440.
Perhaps most surprisingly, European
Assets, the continental smaller companies trust that happens to be in my “forever fund”, is third overall, with a total
return of £2,428.
Not that I was a shareholder 30 years
ago. Back then, I had just got married and
didn’t have any money to invest. I
watched the 1987 crash with the detachment of someone who had no skin in the
game — and, I confess, I rather enjoyed
the excitement of it all.
Then I began to think that shares
priced 26% lower than they had been a
week before might represent bargains. So
I got going with a modest monthly savings
plan soon afterwards.
Since then, there have been plenty of
bumps and a couple of crashes but the
long-term trend has been upward. For
example, the Footsie fell to 1,684 points
in October 1987 — that’s less than a quarter of its level now.
Never mind the past, though — what
about the present and the future? The
best way to cope with share price volatility and the occasional stock market crisis
remains to stay calm and buy on the dips.
The rest, as they say, is hysteria.
ian.cowie@sunday-times.co.uk or
Twitter @iancowie
Waiter, there’s a fly in my soup. I’d
like to order a full refund, please
Food hygiene
complaints are
soaring — here’s
how to respond.
By Ruth Emery
A fake fingernail, an earwig, a
lump of wood, even a deepfried battery. These are just
some of the nasty surprises
British diners have found in
their meals recently, giving
rise to an increasing number
of complaints.
Grumbles about
restaurants jumped 47% in
the six months to September,
while those about takeaways
were up 34%, according to
Resolver, an online service
that helps customers lodge
complaints about 80 different
products and services.
The site now logs more
complaints about restaurants
than it does about mobile
phones or broadband. Only
payment protection
insurance (PPI), packaged
accounts, shopping rights
and flights generate more
complaints.
In the six-month period,
the website helped users with
19,927 complaints about food
hygiene, food quality and the
odd items we shouldn’t
expect to find in our meals.
Horror stories include a
fake nail in a vegetarian
sausage, a half-inch chunk of
wood in an ice-cream — which
lodged in a man’s gum as he
tried to eat it — and a deepfried battery served up with a
piece of chicken.
Martyn James, head of
marketing at Resolver,
describes another case:
“Lurking in the bottom of a
packet of crisps was a nasty
surprise: half an earwig.
“The user who contacted
us wasn’t thrilled to discover
this — or with the fact that her
toddler, who had been
munching them, wasn’t
revealing what happened to
the other half.”
Last month, Zorba’s
Greek Taverna in
Bayswater, west
London — dubbed the
“dirtiest restaurant in
the world” — was shut
down by health
inspectors who found
cockroaches in a store room
and rat droppings on the
kitchen floor. Sewage flies
were also found in the tahini
dip and a mincer was covered
in mouse droppings.
So what can you do if you
have had a bad experience?
Under the Consumer Rights
Act 2015, restaurants and
takeaways are legally
required to use “reasonable
care and skill” when
providing a service. So the
first thing to do if you
discover your meal is not as it
should be — after stopping
eating — is to complain.
“You shouldn’t have to pay
for the unsatisfactory dish,
although you should pay for
parts of the
meal that were OK.
Speak to the manager if the
waiter or waitress can’t help,”
advised the consumer group
Which?
You can refuse to pay the
service charge or, if there has
been a particular problem,
such as a waiter spilling red
wine on your clothes, you can
claim the cost of putting it
right — in this case, having the
clothes cleaned.
James added: “Take a
photo — you can then escalate
the complaint to head office if
it’s a chain. If the meal is a big
event, let the restaurant
know how this has impacted
you; they may come up with a
solution that compensates for
the event being spoilt.”
If something unexpected
appears in your food, then
you should receive a written
apology, a refund and some
compensation. “But don’t
start booking that holiday or
paying off your mortgage just
yet,” said James.
“We’ve always been
amazed by how stingy
businesses can be. The
norm seems to be a
voucher around the £10
to £20 mark, although
we have occasionally
seen higher amounts —
but even then, it’s rarely
over £100.”
If you are not happy
with a firm’s response,
you could consider
taking action in the small
claims court. Fees vary
according to the amount
being claimed. For claims
up to £300, the charge is
£35 for a paper form, or
£25 for doing it online.
To bring a restaurant or
takeaway to the attention of
the authorities, contact your
council’s environmental
health department, or the
Food Standards Agency
(food.gov.uk/enforcement/
report-problem).
Do not be tempted to make
a fraudulently claim for a
food poisoning incident
abroad, though. Last Friday,
the government announced a
crackdown on the growing
number of claims for fake
holiday sickness. Justice
minister Dominic Raab said:
“Bogus claims against tour
operators risk driving up the
price of summer holidays.
We’re taking action to deter
these claims and protect
holidaymakers from being
ripped off.”
PUTTING MONEY
AWAY SOONER
BEATS PLAYING
SAVINGS CATCH-UP
Nudge, the bestselling book
about how to influence
individual behaviour, helped
Richard Thaler win the
Nobel prize in economics
last week. It also shows why
the little-reported proposal
to extend auto-enrolment
for workplace pensions to
include adults aged under
22 is a good idea.
Nudging young workers
towards saving sooner will
help them more than many
might expect, because few
people understand how
compound interest can
boost long-term returns.
Here’s how, in a personal
finance parable about twin
sisters Prudence and
Extravaganza. Their
example, based on
mathematical fact, shows
how the earliest pounds
invested work hardest to
deliver a decent pension.
Prudence invested
£1,000 a year from the age
of 18 until she was 38 and
then stopped saving
altogether. She achieved an
average of 5% annual
growth for the 20 years she
invested and her fund
continued to grow at 5% for
the next 27 years until she
retired at 65.
Extravaganza frittered
away her money, saving
nothing until she was 38.
Then she put aside £1,000 a
year, which also grew at 5%
until she retired at 65.
Now, here’s the point of
the tale: at age 65
Prudence’s pension was
worth £129,620, but
Extravaganza’s only
£57,400, despite having
invested £7,000 more than
her sensible sister.
The explanation is that
Prudence invested for 20
years before Extravaganza
got going, which meant
those early pounds had
longer to fructify.
This tale won’t win any
prize for economics but
does show why the
government should nudge
young people to think about
saving sooner rather than
later.
16
The Sunday Times October 15, 2017
MONEY
Pick your own workplace pension
portfolio for the sweetest returns
Shares pick’n’mix: savers with workplace pensions who select their own investments get returns as much as 5% higher per annum than those who go with the funds chosen for them
‘Active choosers’ are
better off than those
who stick with their
provider’s default
funds. By Ruth Emery
P
eople with workplace pensions could boost their
returns by picking their own
investments, instead of staying in their scheme’s specially chosen “default fund”
alongside the vast majority of
savers.
That is the startling message from research compiled
for Money. It reveals that the small minority of “active choosers” — fewer than 10%
of all savers in workplace schemes — outperform those invested in the default
fund by as much as 5% each year.
This month marks the fifth anniversary of automatic enrolment, the government policy of “nudging” workers into
pension plans. Unless you actively opt
out, part of your pay packet is diverted
into a retirement pot.
About 8.7m workers have been autoenrolled since 2012 — taking to 43.5m the
number of members in company and
public sector pension schemes. Yet 92%
of savers remain in a default fund chosen
by their pension provider, such as Prudential or Scottish Widows, according to
the Pensions and Lifetime Savings Association (PLSA).
Such funds are designed for all those
people who do not want, or cannot be
bothered, to pick their own investments.
If you do not know where your pension
pot is invested, you are almost definitely
sitting in the default fund.
The wealth manager Hargreaves Lansdown analysed more than 300 autoenrolment schemes, covering nearly
80,000 members, and compared the
average return of six default funds with
the average return of the 10 most popular
funds picked by active choosers.
It found that, over the past year, the
active choosers will have enjoyed a
21.28% return, while the others will have
seen their pot grow by 16.53%. Over five
years, the average annual return of the
top 10 funds was 14.76%, against 9.9% for
default funds.
“Taking the time to understand where
your pension is invested is time well
spent,” said Nathan Long, senior pension
analyst at Hargreaves Lansdown.
“Default funds are designed to be conservatively managed. They are one size
fits all, but that will not suit everyone.”
How to take back control
So should you start picking your own
investments? Well, only if you are happy
managing your own pension pot, and if
you are prepared to take some risks.
First, work out if the default fund is
suitable for you. Most are “lifestyle”
funds, meaning that as you near your
retirement date, they move from holding
riskier assets, such as shares, to bonds
and other lower-risk investments. Yet this
may not be the most appropriate strategy
for everyone, according to Daniela Sil-
cock, head of research at the Pensions
Policy Institute think tank.
“Some of those planning to continue
investing their savings after retirement
might benefit more from a fund that prioritises growth even in later years — such
as by investing in the stock market,” said
Silcock. “A lifestyle fund is likely to meet
the needs of those who plan to convert
their savings into an income, through, for
example, an annuity.”
Savers should pay close attention to
how the default fund is invested: the consultancy Punter Southall Aspire found
wide variations when it studied those of
nine big pension providers. Scottish Widows had the highest exposure to shares,
at 85% of the fund, while Legal & General
and Standard Life had the lowest, at 45%.
HOW TO SAVE FOR AN ETHICAL RETIREMENT
Many consumers do their bit
for sustainability by buying
organic food and diligently
recycling, but how do you
grow an ethical pension,
asks Ruth Emery.
Workplace pension
schemes typically offer at
least one investment option
badged as “ethical”, but
their default fund is unlikely
to fit the bill — because it
invests in an oil company, for
example. For something
truly ethical you must
actively switch out.
Look for funds with “SRI”
(socially responsible
investment), “sustainable”
or “ethical” in their names,
but do your research before
signing up.
The financial adviser
Castlefield has found that
products claiming to be
ethical are sometimes
anything but. The Vanguard
SRI European Stock fund
features British American
Tobacco in its top 10
holdings, for example, while
Aviva Stewardship Pension
fund has a large stake in the
mining company Rio Tinto.
Olivia Bowen, a partner at
Castlefield, said: “Some of
these funds give ethical and
sustainable investing a bad
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name and are in danger of
watering down the meaning
of responsible investment.”
Aberdeen Ethical World
Equity fund is another villain,
with millions invested in the
Texan shale-oil producer
EOG Resources.
Castlefield suggests
three funds to look out for in
your workplace scheme if
you want good performance
and “credible green
strategies”: Liontrust UK
Ethical, WHEB Sustainability
and Rathbone Ethical Bond.
The country’s biggest
pension provider, Nest,
offers an ethical fund that
has delivered an average
annual return of 11.8% over
the past five years. This
tops the 11.3% return
achieved by Nest
Retirement Date (Growth
Phase), its main default
fund, proving ethical
investors do not have to
sacrifice performance. Nest
has 5m members across
430,000 employers.
Staff of the environmental
group Greenpeace and the
fashion designer Vivienne
Westwood enjoy a
“completely fossil-free
pension scheme”,
according to Castlefield.
Funds heavily invested in shares will do
well as stock markets rise, of course, but
take a hit when they fall. Younger savers
can afford to take some risk because, over
long periods, shares nearly always beat
lower-risk assets such as cash and bonds.
“To work out if the default arrangement is suitable, you need to understand
if its objectives are aligned with yours,”
said Shri Rengasamy, senior investment
consultant at the HR consultancy Mercer.
“For example, if it targets a specific outcome at retirement, is that a likely outcome for you, based on your plans?”
Study the objectives of the funds: look
out for mention of risk levels, investments held and target outcomes. Sometimes the name of the fund will tell at
least part of the story — “moderate risk”
or “annuity default arrangement”, for
example. Assess this information against
your own circumstances and decide if the
fund is aligned with your objectives.
“A higher earner may wish to take a
greater level of risk within their investments and have plans to leave their pot
invested in retirement — only making
withdrawals for income when needed,”
said Rengasamy.
“For such a person, a default arrangement targeting moderate levels of risk
and annuity purchase at retirement
would likely not meet their needs.”
The PLSA says pension schemes offer a
list of 15 funds, on average, for those
active choosers wanting to escape the
default fund. You can pick one or a selection. When choosing, consider your risk
appetite, how long your pension is likely
to be invested for and the fees. Check
how your pension is performing at least
once a year or whenever your circumstances change, such as your anticipated
retirement age or if you have children.
Released a lump
sum? Then
beware new cap
on contributions
Nina Montagu-Smith
Older employees earning as little as
£25,000 a year could be landed with
an unexpected tax bill if they have
withdrawn money from one pension
but are still contributing to another,
particularly a workplace scheme.
A new £4,000-a-year cap on pension
contributions for those aged 55 and
over who have already drawn out more
than the 25% tax-free lump sum from
another pension will be confirmed in
next month’s budget.
The cap — reduced from £10,000 —
had been due to be introduced in April
but was dropped from the Finance Bill
in order to get a curtailed act passed
before parliament was dissolved for
the general election. It will be applied
retrospectively by the end of the year,
when a second Finance Bill is expected
to be made law.
Those most likely to be caught by the
new limit are members of workplace
schemes, into which employers also
make contributions on their behalf.
The number of older people in
employment has been steadily rising
for years: the percentage of employees
aged over 65 has doubled in 20 years.
About 71% of people aged 50 to 64
now work, compared with 59% two
decades ago, according to the Office
for National Statistics. The number of
over-65s who are employed has risen
to 10% from 5.1%.
Calculations done for Money by
Prudential, the pensions firm, found
that someone earning as little as
£25,000 a year could be caught out. If
they were to contribute 6% of their
income to a workplace scheme, with
their employer paying 12% — £4,500
over a year, including tax relief — they
would breach the new limit by £500.
Someone earning £35,000 a year
and contributing 6% to a pension,
matched by 6% from their employer,
would breach the £4,000 limit by
£200.
If you have paid too much into a
pension, you will have to declare this
on your self-assessment tax return.
You will pay tax at your marginal rate
on any contributions you have made
above £4,000.
If your tax bill comes to more than
£2,000, you can ask your workplace
scheme to pay the bill and deduct it
from your fund — however, the scheme
is not obliged to do this.
“Many employers offer very
generous contributions but they may
be unwittingly putting even part-time
and average paid employees in a fix,”
said Sean McCann, chartered financial
planner at NFU Mutual.
“Many workplace schemes offer
larger employer payments in return
for a greater employee contribution,”
he added.
Les Cameron, retirement expert at
Prudential, said: “Many people will
have flexibly accessed their benefits
for genuine reasons, perhaps to help
with wedding cots or clearing a debt,
with no intention of gaming the tax
system, but they’ll still be subject to
the reduced allowance.”
Same funds, lower
cost, but unless you
ask, this platform
won’t switch you
ARE YOU PAYING MORE THAN YOU NEED TO?
Cheaper versions
of Hargreaves
Lansdown funds
are available,
writes Ali Hussain
Customers of Britain’s largest
investment platform could be
paying up to four times more
than necessary for their
funds, an investigation by
Money has revealed.
About 550 of the 2,070
funds sold by Hargreaves
Lansdown, which has almost
1m clients, have cheaper
versions — though investors
must ask to be switched to
these lower-cost options.
Customers who invested
with the company before
2013 on a non-advice basis
are most likely to benefit from
switching.
For example, someone
with the Fidelity Multi Asset
Allocator Adventurous fund
may pay an annual fee of 1.2%
of the value of their
investment. Yet it is possible
to hold the same fund for just
0.25%. Similarly, the Capital
Group Investment Company
of America fund can cost
1.77% a year — or just 0.8%.
The situation has arisen
because fund providers
launched different versions of
the same investments, known
as share classes, in response
to regulatory changes in 2013.
The aim of the rule changes
was to make fund charges
more transparent, though
critics argue they have only
complicated matters further.
Some platforms, such as
Fidelity Personal Investing
and AJ Bell Youinvest,
automatically moved clients
to the cheaper versions.
Hargreaves Lansdown,
however, said this could not
be done except for people
who pay it for advice. The
overwhelming majority of its
954,000 customers are DIY
investors — receiving what is
known as a self-directed
service — while only about
10% pay for advice.
“As a self-directed service,
it would be wrong for us to
make unilateral investment
decisions and execute
transactions on our clients’
behalf,” said Danny Cox at
Hargreaves Lansdown.
He said the firm regularly
writes to customers,
informing them of the
different versions of funds
and inviting them to switch,
at no cost. “The share-class
conversion is free and simple
for clients to use, and we
continue to remind them of
this service,” said Cox.
The firm would not
disclose the proportion of
customers who are invested
in the costlier versions,
saying it was “commercially
sensitive” information.
By contrast, Fidelity
Personal Investing, another
leading platform, converted
its DIY customers to the
cheaper funds at the end of
2015 on a “deemed consent”
What you may be paying
What you could be paying
0%
1
2
3 Difference
Capital Group Investment
Company of America
0.97%
Fidelity Multi Asset Allocator
Adventurous
0.95%
SVS Brown
Shipley Balanced
0.79%
Ashmore Emerging Markets
Asian Corporate Debt
0.70%
Ashmore Emerging
Markets Total Return
0.65%
MFM Techinvest
Special Situations
0.63%
Blackfriars Oriental
Focus
0.60%
Source: Hargreaves Lansdown
basis. AJ Bell Youinvest did so
early last year.
“We did the conversions in
stages and wrote to
customers before each
tranche, showing them the
existing fund charge and the
one they were being
converted to,” said AJ Bell.
“This gave them the
opportunity to sell their
holdings if they wanted to.”
Those paying the higher
fee are simply allowing the
fund manager — with which
Hargreaves Lansdown
negotiates exclusive deals on
charges — to pocket more of
their money. The platform
itself does not benefit from
the higher charge.
In the case of some of the
more expensive funds, part of
the fee is paid back to the
customer. The Aberdeen
Latin American Equity fund,
for example, costs 2.02% a
year, but customers pay 1.27%
— Hargreaves Lansdown
rebates 0.75 percentage
points as a loyalty bonus.
However, the firm has
another version of the fund
costing just 0.87%.
“It’s disappointing
Hargreaves Lansdown has
not followed rivals by
automatically moving
customers to the cheaper
fund versions,” said Justin
Modray of the adviser Candid
Financial Advice.
He urged investors to
check their platforms online,
or contact them directly, to
see if lower-cost versions of
funds are available. “Why pay
more if you don’t need to?”
said Modray. “Failing to act
now could mean your savings
or retirement pots are worth
thousands of pounds less
over time.”
The Financial Conduct
Authority said platforms were
not required to convert
customers to cheaper funds
but they must not benefit
from higher fees. It is up to
individual platforms whether
they pay clients a loyalty
bonus or move them to lowercost funds, said the regulator,
which recently published a
report on improving price
competition in the market.
The FCA fears people do
not appreciate the long-term
impact of charges on their
savings or retirement pots. If
you had £100,000 invested
and added £100 every month
for 20 years, assuming annual
growth of 6%, your fund
would be worth £306,073
before tax if the fee were 1% a
year, according to Candid
Financial Advice. A fee of 1.5%
would give you £279,733 — a
difference of £26,340.
The launch of low-cost
investment platforms, such as
the newcomer from
Vanguard, the American
tracker fund specialist, is
driving established platforms
to review their fees.
Fidelity International,
which operates Fidelity
Personal Investing, plans to
overhaul the charges on its
actively managed funds next
year. Funds that beat their
benchmark indices will cost
more while underperforming
funds will cost less.
17
The Sunday Times October 15, 2017
MONEY
Would like to meet: a
bean counter who’ll
be with me for life
Hunter Davies has
one simple request
of his prospective
new accountant:
don’t hang up your
calculator too soon
I
have just been auditioning someone. Not another lady friend — that
is too exhausting — but an accountant. My present one, whom I have
had for 30 years, is retiring. So selfish, leaving me to find someone
new at the fag end of my working
career. The accountant before him,
whom I used for 25 years, did not
quite retire. I gave him the push
after he told me a certain investment I
had was tax-free, so I cashed it in to pay a
tax bill. But it wasn’t, yet I did have taxfree investments that were free from tax.
I was spitting.
It still sounds strange after all these
decades to be talking about “my accountant”; I feel equally pretentious when I
refer to “my solicitor”, “my agent”, “my
publisher” or “my consultant”. My
mother would have been most impressed
— and surprised.
My consultant is not a financial consultant. I would never consult any of
them; what do they know, apart from
how to take a slice of your money?
I did something stupid with my back,
laying concrete slabs in the garden. I
must be potty. I now seem to have a hernia.
My GP said the wait on the NHS to see
someone, who will turn out to be a
13-year-old registrar, would be three
months, so I paid to see a consultant.
I have never had private medical care,
so of course it grieves me, the thought of
paying, but, with age, I can’t wait. After
all, how long have I got?
He turned out to be an actual professor, a West Ham supporter. He charged
me £250. I could have bought a car for
that, if I were ever daft enough again to
buy a car. He said await events, no need
for surgery yet, come back in six months.
So that will be another £250.
So I now have my own medical consultant, to go with my portfolio of other
top professionals.
As I was sitting in some smart offices
near King’s Cross, waiting to be seen, I
was wondering what this accountant
would look like. I only had his name, as
recommended by the Society of Authors.
In the main entrance was a large photo
of a famous woman author, one of their
satisfied clients, with a quote from her
saying: “You should be worrying less
about your income tax than your plot.”
How true.
I could not decide if I wanted a young
thrusting accountant, up to date with all
the technology, or a wise old bird who
has seen it all.
My accounts are, in theory, straightforward. I do not have a limited company,
any foreign investments or any schemes.
I just want an accountant to tot up my
income and expenses and tell me how
much tax I should pay.
Most of all, I want simplicity. It is my
own fault that I haven’t got it. I took out
Tessas, Peps, Isas and other lovely girls,
plus loads of National Savings certificates, going back decades, as well as
accounts in building societies that
changed their names.
I had always planned to live on my taxfree investments when I was old and out
of work, and give up the need for an
accountant (hurrah). I am now old but, to
my surprise, still in work, so I have never
cashed in any savings. Every year when
the tax return is due, I go mad trying find
all the bits of paper.
I was eventually shown up to the
accountant’s room and given a nice cup
of coffee by his secretary. My goodness,
you don’t see many of them these days.
Went out with crinolines.
After some idle chat, I thought I would
ask him some cheeky personal questions,
such as where do you live, have you got
children, where did they go to school
and, finally, how old are you? My wife,
should she have been living at this hour,
would have been appalled. When you get
to my age, I reckon you can ask personal
questions without getting your face
slapped. I did think of asking him to open
his mouth so I could check his teeth but
thought better of it.
Personal questions are not allowed
these days in job interviews. In 1960, my
wife, when she was 22 and had just left
university, got a final interview at the BBC
for its prized training scheme for producers. At the last interview, as she was leaving the board room, she said, “Oh, by the
way, I am getting married next week”.
They had not actually asked her, but that
was it — they lost all interest in her.
Such personal information should not
matter either way, but it did, in those
days. She did not, in fact, want to be a
producer, but a novelist .
The answer was 71. My prospective
accountant turned out to be just 10 years
younger than me. He said he had no plans
for retirement, and anyway had an excellent team behind him who were used to
dealing with authors.
His firm looks after hundreds of them,
as well as journalists and TV people. My
present accountant, the one who is retiring, did have two big media stars on his
books, Jeremy Clarkson and Melvyn
Bragg, so I am used to rubbing shoulders
with the stars, at least on paper, although
I never noticed their pin -ups in his office.
He looked fit and well, with a good tan,
having just come back from holidays in
Turkey. It is vital to me to think this will be
my last accountant, the one who will see
It is vital to me
that this will be
the one who will
see me out. I don’t
want to change
yet again
me out. I don’t want to change yet again
as it such a faff. He is not planning to
marry my daughter but I don’t see why I
should not check whether his intentions
are honourable — in this case, if he is liable to retire soon. Yes, I know it is ageist,
but is it ageist when someone older asks
you your age ? I think not.
Anyway, I have decided. I am going to
tell him next week that I would like to join
him, if he will still have me after my
cheeky questions. I do like to give
younger folks some work
The real reason, though, is to get my
photo up in his foyer, with a suitably
cheesy quotation.
Families left out in cold by
‘chaotic’ childcare scheme
Children entitled
to 30 free hours
a week aren’t
getting their dues,
says Ruth Emery
Thousands of families still
can’t get access to the
government’s promised 30
hours of free childcare, six
weeks after the scheme was
launched.
Under the initiative,
parents of children aged 3-4
in England are entitled to
twice the number of hours
they had previously.
Yet according to official
figures released last week, a
total of 21,039 “childcare
codes” — which parents must
request to prove their child is
eligible — have yet to be
validated by local authorities
and childcare providers. This
is despite families having
applied for the codes before
the deadline of August 31.
Neil Leitch, chief executive
of childcare organisation the
Pre-school Learning Alliance,
called the situation
“unacceptable” and slammed
the rollout of the scheme,
which was launched on
September 1, as “ill-thoughtout and chaotic”.
He added: “It is concerning
that, nearly halfway through
the autumn term, more than
20,000 parents still haven’t
been able to access a place.”
Parents are struggling to
use the codes due to a
shortage of 30-hour places, as
not all childminders and
nurseries offer the scheme.
Some mothers are losing out
Experts say this is due to a
disparity between the money
government is providing local
authorities to fund the
scheme and the actual cost to
childcare providers.
Families who have not had
their code validated will have
lost out on hundreds of
pounds. Those paying for 30
hours of care in a nursery
have an average weekly bill of
about £139.50 in England,
based on figures from the
charity Family and Childcare
Trust (FCT). If only half is
footed by the government —
as under the previous policy
of 15 hours of free childcare —
they must pay £69.75. This
means they will have forked
out £418.50 over the past six
weeks due to not being able
to use the new scheme.
In the summer, Money
reported on the fact that
many families were struggling
even to apply for codes due to
problems with the HM
Revenue & Customs website
VICKI COUCHMAN
(“Parents caught in childcare
chaos”, August 27).
Those who wish to receive
a code for the new year must
now apply by December 31.
Once a code has been issued,
HMRC will ask the parents to
reconfirm each term that
their child is still eligible.
“It is unacceptable that
thousands of families have
been unable to find a
childcare place as the result
of the ill-thought-out and
chaotic rollout of this
scheme,” warned Leitch.
“Given childcare providers
tend to have more places
available during the autumn
term, ensuring all eligible
children are able to access a
30-hours place is only going
to get more difficult as the
year progresses. We know
that, as a result of the lack of
adequate funding, many
childcare providers are still
limiting the number of 30hours places they offer.”
Ellen Broomé, chief
executive of the FCT, said:
“Extending free childcare for
working families is popular
with many parents, but there
is a risk the policy may not
live up to these high
expectations. The
government must make sure
all families are able to access
the high-quality, affordable
childcare they need.”
Families who get a code
validated after September 1
will not receive backdated
payments covering the cost of
childcare already paid for.
To be eligible for the 30
hours, parents must work at
least 16 hours a week and
earn less than £100,000 each.
Safe arbour: Hunter, at home in north London with his tortoise, has been searching for someone to look after his money
18
The Sunday Times October 15, 2017
MONEY
Black box
bother cost
us £1,000
premium
QUESTION
ON
OF MONEY
EY
JILL INSLEY
LEY
Fighting your financial
and consumer battles
M
y 17-year-old daughter
has to commute more
than 20 miles to college,
so to make the journey
easier we invested in a
second- hand car. On
June 30 we paid more
than £1,300 to insurance
broker Adrian Flux for a
year’s cover.
A black box was fitted, but there have
been issues with it not charging properly
or with the satellite signal being lost. On
each occasion, my daughter dealt with
Adrian Flux and the issue was resolved.
Almost immediately after the
resolution of the last issue in September,
the broker phoned my daughter about a
further satellite reception issue. She did
not pick up the call and no message was
left. Yet this triggered an email stating
that if she did not contact Adrian Flux
within seven days, her policy would be
cancelled. The company said it also sent
her a letter, which she did not receive.
My daughter checks her emails
infrequently and the first she was aware
of anything wrong was when she got an
email at college saying her policy had
been cancelled without a refund.
On the lack of refund, Adrian Flux
explained that shortly after passing her
test, my daughter informed it of a lowspeed rear contact with another vehicle.
Her car was undamaged and, almost
three months later, there has been no
claim from the other driver. Yet Adrian
Flux said the case is “unresolved”.
Although my daughter was no doubt
careless in not checking her emails more
regularly, the company appears to have
“commandeered” more than £1,000 of
our premium. Worse, having had a
policy cancelled and with the reported
incident still live on its books, she is
virtually uninsurable elsewhere. Adrian
Flux said it will reinsure her — but at
almost double the previous premium.
If we make a formal complaint, the
broker has up to eight weeks to respond
— unlike its customers. In the meantime
my daughter’s car is parked at college,
unable to be moved, and Adrian Flux has
trousered a four-figure sum.
Jill replies
This was your daughter’s first
experience of adult-type responsibility
and you say the fact it has all gone so
wrong so quickly means her confidence
has taken something of a knock. I
understand you want her to take
responsibility, but car insurance is too
important to take chances with. I still
manage my daughter’s policy and she is
nearly 21.
That said, your daughter did liaise
successfully with Adrian Flux about
previous problems with the telematics
“black box” in her car. You suspect that,
after receiving regular marketing emails
from the broker, she had difficulty
spotting an urgent message among the
inconsequential ones.
Cancelling your daughter’s policy in
these circumstances seemed harsh, so
I asked Adrian Flux if it could help. It
explained that, due to the hour of the
original order, the phone would arrive
the next day, a Saturday, and I should
not have been told to expect delivery on
the 22nd. I then asked for a home
delivery, but was told that the parcel was
on the delivery van and the destination
could not now be amended. I made an
online complaint with DPD, anticipating
I would need to return to the shop the
following day or on Monday.
The next morning I received an email
from the company telling me the phone
could not be located, even though it had
been accepted at the DPD depot.
I was advised to call it in a few days,
but when I did, I was told that no
information could be released to me as
the contract for the delivery of the
phone was with Vodafone and not me.
Vodafone told me that DPD could not
find the phone and “a claim was being
raised”. I would be required to wait for a
further five to seven days while DPD
commenced an investigation into the
loss of the phone at its depot.
At the end of this period, Vodafone
would either replace the phone or give
me the cash value. I was advised that the
delivery charge levied when I bought the
phone covered loss or theft from a DPD
perspective, and, as the phone was on its
way to me, there was no other option
than to wait for the investigation to be
completed, as it was in effect my phone
after point of postage.
I cannot believe that Vodafone would
attempt to shift responsibility for the loss
of this phone on to the customer, and
that it will not accept responsibility for
the lost phone and send me another
straight away.
‘I’m calling to report yet another crash. No, not the car — the black box’
told me your daughter’s insurance,
provided by Equity Red Star, was
dependent on the telematics device
working properly.
No refund was due because of your
daughter’s collision, with any claim
likely to be settled as being her fault, in
accordance with industry practice.
The broker said: “We were never in a
position to influence how the fault
incident would be treated. But we have
approached Equity Red Star and have
asked it to reinstate the policy. It has
agreed to do this and to allow time for
the box to be checked for any defects.”
Your daughter can now drive again,
you do not have to pay for a new policy
and Adrian Flux is liaising with you
about mending the wretched telematics.
Ryanair plane wrong
about alternative flights
Earlier this year we booked a three-leg
trip with Ryanair, flying from Stansted to
Berlin to meet friends for four days, then
from Berlin to Bologna, with a final flight
from Bologna to Stansted.
Our Stansted to Berlin flight, which
had been due to take place on Friday,
was cancelled. That meant we would not
be able to connect with our flight to
Bologna.
We contacted Ryanair and were told
there was another flight to Berlin on the
same day but we would have to pay a
further £180 each. We decided this was
too much, abandoned our Berlin trip
and rebooked flights direct to Italy from
Stansted. This meant we could not catch
our flights from Berlin to Bologna, or
from Bologna back to Stansted.
We have since discovered that we
should have been offered the alternative
flight to Berlin without surcharge. This
has resulted in our paying for alternative
flights to Italy from the UK, and not
being able to access flights we had paid
for. We do not qualify for a refund for the
last two legs of our trip as those flights
have not been cancelled.
We feel let down and out of pocket for
reasons not of our own making. We have
tried contacting Ryanair again, without
success.
Jill replies
Ryanair’s customer service team must be
pretty busy right now, given the huge
number of cancellations caused by its
holiday rota problems, but it still took
HAVE
YOUR SAY
EDITED BY
NINA
MONTAGU-SMITH
Shared leave isn’t
fair to fathers
I work for a large (FTSE 350)
company and have applied
for shared parental leave
because my wife is expecting
our first child in November
(“Counting the cost of
parental leave”, last week).
She is self-employed,
which means that, unless
we shut down her business,
she cannot be the primary
carer.
I will only receive statutory
pay, which will be a massive
reduction in our family
income because I am by far
the highest earner. This is
despite the fact that my
company has recently
introduced enhanced terms
for both maternity leave and
adoption leave of about six
months’ full pay.
This seems deeply unfair, if
not discriminatory, as surely
the principles of shared
parental leave are based on
both the mother and father
being able to act as the
primary carer.
The issue is further
confused by the fact that, if
we were to adopt a child and I
became the primary carer, I
would be entitled to
enhanced benefits.
This is clearly a significant
issue for us and causing us
considerable stress at a time
when we should be excited.
OT, by email
Pension transfers
aren’t all bad
Yet another negative article
on transferring out of a
defined benefit scheme
(“Savers with gold-plated
pensions short-changed by
poor advice”, last week).
only one day to respond after I asked it
to review your complaint. It not only
refunded you the cost of the flights you
could not use because of the initial
cancellation but also credited £40 per
person for the cost of a flight you have
booked for next January. You are now
planning to rebook flights to visit your
friends in Berlin.
Vodafone disconnect
over missing iPhone 8
I decided to treat myself to a new iPhone
8, which was released on September 22,
and upgraded my monthly “SIM-only
plan” to a 24-month contract for £54 a
month.
I knew the phone was valuable and
that I would be at work most of the day,
so I asked for it to be delivered to a shop
near my home. I received email
confirmation from Vodafone that the
courier firm DPD would take it to my
local wine merchant after 12pm on
September 22.
However, the parcel had not been
delivered when I went to the shop — after
having sat in rush-hour traffic for 45
minutes. So I called DPD, which
In May, at the age of 59, I
happily gave up a pension of
£18,000 a year in exchange
for £450,000 — a transfer
value of 25 times. I retired
and moved the fund to a
flexible drawdown plan.
My pension benefits had
been reduced twice in
previous years, and indeed,
since I retired the company
has set about closing the
defined benefit scheme, so
I had real concerns it could
go bust.
Now the pension I worked
for more than 30 years to
earn will not be lost when my
wife and I are gone. My
daughter and grandchildren
may benefit from it. If my
investments perform well
then I may be able to help
Jill replies
You are a senior police officer and the
letter you sent me was meticulous in
setting out what happened. It was
obvious the loss of the phone was
nothing to do with you and that the
insurance you had paid for would cover
its cost. I suggested Vodafone replace
your phone straight away and deal with
DPD in its own good time.
Vodafone agreed and has now
delivered a new phone to you — via DPD.
It has also credited you with £145 by way
of apology. This covers the cost of
delivery charges and your monthly
contract payment for a month. It said:
“We do try to find out why our processes
have failed when a phone goes missing,
but we accept that it was frustrating for
our customer to have to wait.”
CAN WE HELP YOU?
Please email your questions to Jill
Insley at questionofmoney@sundaytimes.co.uk or write to Question of
Money, The Sunday Times, 1 London
Bridge Street, London SE1 9GF.
Please send only copies of original
documents. Letters should be
exclusive to The Sunday Times.
Advice is offered without legal
responsibility. We regret Jill cannot
reply to everyone who contacts her.
this can also be misleading.
The advice itself may have
been sound but the
documentation not detailed
enough to show that.
The subject matter is not
clear at a basic level, never
mind when you add in this
level of complexity.
Steven Leicester, via
sundaytimes.co.uk
That would be fair in
return for the pension benefit
and tax relief received — and
plug a leaky revenue hole for
the Treasury.
“David at Wateroakley”, via
sundaytimes.co.uk
The idea that some defined
benefit scheme members are
short-changed is like offering
the groom a bonus when he
has scarpered with the Derby
winner after the stable door
was left open.
What are really inequitable
are the fiscal privileges that
defined benefit schemes
receive, compared with
I was interested to read your
article concerning travel
insurance and medical
treatment (“Economy travel
cover — it simply won’t fly”,
last week).
Recently, while on holiday
in Mallorca, my husband cut
his foot badly and had to see a
doctor. He refused to accept
our European health
insurance cards and we had
to pay €160 (£140), plus extra
costs for antibiotics.
We have claimed the
money back but it really does
show the necessity of having
travel insurance.
MW, Harleston, Norfolk
VICKI COUCHMAN
Take cover if
you’re travelling
No tax credit for
the Tories
Ruth Emery and family featured in last week’s article
my family out during my
lifetime.
JC, Runcorn, Cheshire
The default position that it is
better to leave a defined
benefit pension where it is, is
open to debate. Longevity is
increasing but quality of life
in the later years is not.
Most people in their late
eighties and nineties are not
going on holiday and partying
the night away; their financial
needs are generally modest
unless they need nursing
care. A higher income in
the early years of retirement
can often serve someone’s
needs better.
Also, this “one cap fits all”
default position does not take
account of the huge regional
variations in life expectancy.
What it does highlight is
the need to take financial
advice and to find a company
that specialises in this area.
Sometimes advice will be
proved on review to be
unsuitable or unclear, but
defined contribution plans,
and the fact the Treasury
continues to allow them. For
example, there is a significant
fiscal bonus for transferring
out of a defined benefit into a
defined contribution scheme
— a double-dip cash wallop in
excess of the “20 times
annual pension” measure
that HM Revenue & Customs
uses to assess a fund’s value
for tax purposes.
I suspect I will wait in vain
for a pension provider that
will give me a pension of
£5,000 per annum — with a
50% widow’s pension and
protected against inflation —
in exchange for £100,000 in a
defined contribution scheme.
To place pension savers on
a level playing field, where
defined benefit scheme
members leave for a defined
contribution scheme with a
valuation exceeding the
HMRC multiple of 20 times,
the transfer should be taxed
on the excess benefit at the
recipient’s marginal rate.
Contrary to Ian Cowie’s
assertion, it wasn’t the
Conservatives who raised the
income tax thresholds in
2010 (“Trainspotting Tories
rail against Labour but should
be focused on tax”, last week)
— it was the coalition
government under the urging
of the Liberal Democrats.
The Tories, at that time,
wanted nothing to do with it.
GMR, Bexhill-on-Sea,
East Sussex
We love to receive your
feedback on stories and
your views on any issues
you would like us to
investigate. Always
include your name and
address when contacting
us. Letters may be edited.
WRITE TO
Money, The Sunday Times
1 London Bridge Street
London SE1 9GF
EMAIL
money@sundaytimes.co.uk
TWITTER
@ST_Money
19
The Sunday Times October 15, 2017
MONEY
Best Buys
CURRENT ACCOUNTS
FOREIGN
CURRENCY
CREDIT INTEREST
Provider
Account name
Account fee
Interest rate
TSB
Classic Plus
None
3% + £10 a month 2 £1-£1,500
Balance
0345 975 8758
Halifax
Reward
None
£3 a month
£1+
0345 720 3040
Nationwide
FlexDirect
None
5% 3
£1-£2,500
0800 302 010
1
Contact
These are the interbank
rates at 5pm on Friday,
which show where the
market is trading.
They are not indicative
of the rate you will be
able to get.
OVERDRAFTS *
Provider
Account name
Account fee
First Direct
1st Account
£10 a month 5 15.9%
M&S Bank
M&S Current Account None
Post Office Money Standard Account
Interest rate 4
None
0% overdraft limit Contact
£250
0800 242 424
15.9%
£100
0345 900 0900
14.6%
£0
0345 266 8977
EURO
GBP>EUR
1.12
1.33
1.30
1.69
1 Based on funding of £1,000 a month. 2 To receive £10 you must have two direct debits and make 20 card payments a month. 3 Introductory rate for one year, then 1%. 4 Equivalent annual
rate. 5 Fee waived if minimum funding of £1,000 is met. * Based on an overdraft of £500 for 15 days a month. Some accounts require minimum funding to open or receive rates shown.
Source: Moneyfacts.co.uk
AMERICA
GBP>USD
CREDIT CARDS
INTRODUCTORY RATES
Provider
Card type
Sainsbury’s Bank Purchase Mastercard
30-Month Purchase Mastercard
Halifax
Sainsbury’s Bank Dual Offer Mastercard
Introductory purchase
APR 1
Reward
Contact
0% for 32 months
18.9%
Yes
0808 540 5060
0% for 30 months
18.9%
No
0345 944 4555
0% for 30 months
18.9%
Yes
0808 540 5060
SWITZERLAND
GBP>CHF
BALANCE TRANSFERS
Provider
Card type
Introductory purchase Transfer fee 2
APR 1
Contact
MBNA
Platinum 39-Month BT V
0% for 39 months
1.99%
19.9%
0345 606 2062
Sainsbury’s Bank
Nectar 39-Month Mastercard
0% for 39 months
2.39% (min £3) 18.9%
0808 540 5060
Virgin Money
39-Month BT Mastercard
0% for 39 months
2.40%
20.9% 0800 389 2875
AUSTRALIA
GBP>AUD
CASHBACK CARDS
Provider
Card type
APR 1
Cashback
28.2%
1%-1.25%. Intro 5% for 3 months (up to £125) 0800 917 8047
American Express Platinum Cashback Everyday 22.9%
0.5%-1%. Intro 5% for 3 months (up to £100) 0800 917 8047
American Express Platinum Cashback
Select Visa
Nationwide
15.9%
Contact
0.5%
0800 055 6611
1 APR = annual percentage rate dependent on credit rating. 2 Fee charged on the amount of each balance transfer during the introductory period.
Source: Moneyfacts.co.uk
Source: timescurrencyservices.co.uk
020 7294 7970
MORTGAGES
MONEY
MADE EASY
CYBER-FRAUD
WARNING
2-YEAR FIXED RATES
Lender
Rate
Scheme
Deposit
Fee
Notes
Contact
Sainsbury’s Bank
1.09%
Fixed to 31.12.19
40%
£745
LV
0345 111 8010
Hanley Economic
1.12%
Fixed to 31.12.19
25%
£745
LV
01782 255 000
Co-operative Bank
1.79%
Fixed to 30.11.19
10%
£1,499
R
0800 840 4980
Lender
Rate
Scheme
Deposit
Fee
Notes
Contact
Post Office
1.37%
Fixed to 30.11.20
40%
£995
V
0800 077 8033
Yorkshire BS
1.46%
Fixed to 30.11.20
25%
£995
Hinckley & Rugby
2.19%
Fixed for 3 years
10%
£999
L
0800 774 499
Contact
Consumers have been
urged to be alert for scam
phone calls, texts and
emails claiming to be from
their bank, other trusted
companies or the police.
The warning follows an
admission by the credit
reference agency Equifax
that millions of Britons
may have had their
personal details stolen by
cyber-criminals.
3-YEAR FIXED RATES
0345 166 9510
LONG-TERM FIXED RATES
Lender
Rate
Scheme
Deposit
Fee
Notes
TSB
1.69%
Fixed to 31.1.23
40%
£995
MR
0800 056 1088
Barclays
1.94%
Fixed to 31.10.22
20%
£999
LV
0333 202 7580
Hanley Economic
2.45%
Fixed to 31.12.22
10%
£999
LV
01782 255 000
First Direct
2.49%
Fixed for 10 years
40%
£0
R
0800 482 448
Deposit
Fee
Notes
Contact
ELV
What happened?
Equifax is one of the three
main credit reference
agencies. It collates data
such as how much money
we have borrowed. This is
used by banks, building
societies and other
companies to decide our
creditworthiness.
Last month, the US
company reported a “data
breach”, which means the
details of millions of
people may now be in the
hands of fraudsters.
Equifax initially suggested
400,000 data records in
Britain were affected, but
last week admitted it is
more likely to be 15m.
TRACKERS */ DISCOUNTS
Lender
Rate
Scheme
Skipton
0.99%
Tracker +0.74% for 2 years 40%
£995
Yorkshire BS
1.5%
SVR -3.24% to 30.11.19
£1,495
Nationwide
1.89%
Tracker +1.64% for 5 years 25%
£999
EGV
0800 302 010
Hanley Economic
1.50%
SVR -3.44% for term
25%
£950
LV
01782 255 000
10%
0845 850 1755
0345 166 9510
FIRST-TIME BUYER / LOW DEPOSIT
Lender
Rate
Scheme
Deposit
Fee
Notes
Contact
Yorkshire BS
3.3%
Fixed to 30.11.19
5%
£995
BP
0345 166 9510
Hanley Economic
2.85%
SVR -2.09% for 2 years
5%
£250
PV
01782 255 000
Barclays
2.99%
Fixed to 31.10.20
10%
£0
FP
0333 202 7580
Lender
Rate
Scheme
Deposit
Fee
Notes
Contact
Virgin Money
1.54%
Tracker +1.29% to 1.1.20
40%
£995
D
0345 605 0500
Post Office
1.83%
Fixed to 30.11.19
25%
£995
V
0800 077 8033
Barclays
2.17%
Fixed to 31.10.22
40%
£1,950
R
0333 202 7580
BUY TO LET
Early repayment charge applies unless otherwise stated. * Most deals track Bank of England base rate. Notes: SVR = Standard variable rate;
B = £250 cashback; D = £500 cashback; E = No early repayment charge; F = Family Springboard, 10% deposit must be in a Barclays Helpful Start
account; G = £500 cashback for first-time buyers and remortgages; M = remortgages only; L = Free legal work for remortgages; P = Purchases
only; R = Free valuation and legal work for remortgages; V = Free valuation
Source: landc.co.uk — 0800 373 300
What is the company
doing about it?
It is writing to about
700,000 customers who
are at higher risk of fraud
because more of their
data was stolen. They will
be given specific advice
about how to protect
themselves.
Equifax has apologised
to other consumers and
says they do not face a
“significant risk”.
SAVINGS ACCOUNTS
INSTANT ACCESS
Provider
Account name
Min deposit
Interest rate
Contact
RCI Bank
Freedom Savings
£100
1.3%
rcibank.co.uk
Online Easy Access
£1
1.28%
bankofcyprus.co.uk
Online Saver Issue 26
£1
1.27%
postoffice.co.uk
Bank of Cyprus UK
Post Office
1
2
1 Rate includes 0.68% bonus for first 12 months. Account not available to those who have held it in past 6 months. 2 Rate includes 1.02% bonus for first 12 months.
NOTICE ACCOUNTS
CASH ISAS
INSTANT ACCESS
Provider
Account name
Leeds BS
Limited Issue Online Access (3) £1,000
Min deposit Interest Transfers in Contact
1.11%
Yes
leedsbuildingsociety.co.uk
Virgin Money 1
Defined Access E-Isa Issue 16
1.11%
Yes
uk.virginmoney.com
£1
1 Maximum 3 withdrawals a year. Additional withdrawals subject to rate reducing to 0.25% for remainder of calendar year.
Provider
Account name
Notice period
Min deposit
Interest rate
Contact
FIXED RATE
Paragon Bank
120-day Notice (Issue 7)
120 days
£500
1.45%
paragonbank.co.uk
Provider
Account name
Term
Min deposit Rate
Harrods Bank
120-day Notice Account Issue 9
120 days
£20,000
1.5%
harrodsbank.co.uk
Virgin Money
Fixed Rate Cash Isa
1 year
£1
1.35% Yes
uk.virginmoney.com
Wyelands Bank
95-day Notice
95 days
£5,000
1.4%
wyelandsbank.co.uk
Charter Savings Bank
Fixed Rate Cash Isa
2 years
£1,000
1.65% Yes
chartersavingsbank.co.uk
How can I protect
myself?
Change your passwords
for internet banking and
other online services
involving payment. Hang
up on cold callers — they
are often fraudsters.
Conmen may claim to be
calling from Equifax
because of the publicity
around the cyber-attack.
Transfers in Contact
Source: Savingschampion.co.uk — 0808 178 5354
FIXED-RATE BONDS
Provider
Account name
Term
Min deposit
Interest rate
Contact
Access Bank UK
Fixed Rate Bond
1 year
£5,000
1.85%
sensiblesavings.co.uk
Harrods Bank
Fixed Rate Deposit
2 years
£20,000
2.05%
harrodsbank.co.uk
Paragon Bank
Fixed Rate Savings
3 years
£1,000
2.2%
paragonbank.co.uk
DEALS ARE LISTED ONLY IF THEY ARE COVERED BY THE UK FINANCIAL SERVICES COMPENSATION SCHEME (FSCS) OR A EUROPEAN EQUIVALENT
Source: Savingschampion.co.uk — 0808 178 5354
CHILDREN’S ACCOUNTS
Provider
Account name
Account type
Min deposit
Interest rate
Contact
Halifax
Kids’ Regular Saver
Regular Saver
£10-£100
4%
halifax.co.uk
Santander 1
123 Mini Current Account
Current Account
£100-£300
1%-2.96%
santander.co.uk
Cambridge BS
3-year Fixed Rate Bond (Issue 1) Fixed Rate Bond
£1,000
2%
cambridgebs.co.uk
1 Interest rates are tiered: 1% on balances of £100-£199; 1.98% on £200-£299; 2.96% on £300-£2,000.
ENERGY DEALS
Table shows the cheapest tariff from the 3 cheapest
suppliers.Excludes
suppliers.
Excludesfixed
fixedtariffs
tariffsof
ofless
lessthan
than12
12
months’ duration. Excludes tariffs that do not have
national coverage. Excludes tariffs where payments
are taken in advance of the customer coming on
supply. F=Fixed rates V=Variable rates
Average annual bill
Rate
Contact
Provider
Account name
Min deposit
Interest rate
Rate
Contact
Tonik
£841
F
0333 344 2686
Coventry
Junior Cash Isa
£1
3.25%
V
coventrybuildingsociety.co.uk
Green Network Energy
£847
F
0800 520 0202
Nationwide
Smart Junior Isa
£1
3%
V
nationwide.co.uk
Bulb
£855
V
0300 303 0635
Halifax
Junior Cash Isa
£1
3%
V
halifax.co.uk
Source: TheEnergyShop.com — 01259 220 270
V = variable rate. Source: Savingschampion.co.uk — 0808 178 5354
Ombudsman backed my bank, so I sued — and won
An unfair ruling
forced one woman
to go to court to get
her fees refunded,
writes Ali Hussain
A court has ordered M&S
bank to refund a customer
more than two years’ current
account fees, just months
after the financial
ombudsman said it did not
need to pay her a penny.
The bank, which is owned
by HSBC, was told to pay
Amanda Bishop £390 after
failing to defend itself at a
court hearing sparked by a
dispute over “exclusive
access” to a high-interest
savings account.
The case raises questions
about how the Financial
Ombudsman Service (FOS)
handles complaints and
whether customers would be
better off going to a small
claims court.
Bishop opened an M&S
Premium current account in
2012. It has a £10 monthly fee,
but she was willing to pay
because it offered exclusive
access to a high-interest
savings account, which paid
6% at that time.
The marketing material,
kept by Bishop, said:
“High-rate savings accounts
can be hard to find these
days, unless you have one of
the M&S Premium current
accounts, in which case you
have exclusive access to a
competitive rate of 6%.”
Two years later, the bank
introduced a free current
account that also offered
access to the 6% savings rate.
However, Bishop continued
paying £10 a month for the
Premium account because,
she said, she was unware of
the free alternative until last
year. She felt she had paid
M&S bank the £10 fee
unnecessarily for two years.
“I moved my account
immediately to the fee-free
account and complained,”
said Bishop, 50, of Datchet,
Berkshire. “I agreed to pay for
the Premium current account
only so I could have access to
the savings deal.”
She took her dispute to the
ombudsman, which found
against her. It later admitted
there had been an
“inaccuracy” in its final
decision and it had delayed
responding to Bishop.
The ombudsman paid her
£150 in recognition of this but
stuck to its decision in favour
of the bank.
Not satisfied, Bishop
decided to sue. M&S bank did
not attend when the case was
heard at Slough County Court
earlier this year. It was
ordered to refund £340 in
Bishop
insisted she
had not been
informed
about the
fee-free
alternative
account fees and pay £50 to
cover Bishop’s costs. She
received the refund last week.
The FOS was established
by parliament in 2001 as an
independent arbiter of
disputes between companies
regulated by the Financial
Conduct Authority and their
customers. It is funded by a
levy on the companies — as
high as £300,000 a year for
big banks and insurers.
Consumers do not have to
pay to lodge a complaint with
the ombudsman. In the year
to April, it received 321,283
complaints. Just over 40%
were decided in the
consumer’s favour.
About 42,000 cases went
for further consideration by
the ombudsman because the
customer was unhappy with
the initial conclusion.
Money can reveal that in
about 5,500 of these cases,
the consumer rejected the
ombudsman’s final
conclusion. Some will have
decided to take legal action.
There are no figures to show
how many times a court went
against the ombudsman’s
decision.
Bishop’s case centred on
her insistence that the bank
had not informed her about
the fee-free alternative. The
bank argued that it had
publicised the new account.
In its ruling, the
ombudsman found the bank
“wasn’t under any obligation
to notify her of any new
products that it decided to
introduce to its range, let
alone each and every one”.
In an email to Bishop in
February, however, the
ombudsman said: “It would
have been better if M&S had
done more to make sure [you
The Financial
Ombudsman
Service sided
with M&S bank
against Amanda
Bishop. She won
£390 in a small
claims court
were] aware of its new range
of bank account options.”
Bishop, who owns a card
shop, claims the ombudsman
is biased against consumers
because it is funded by the
industry it regulates.
“The ombudsman initially
accepted M&S’s position that
the bank told me about the
new account,” she said. “It
also initially assumed I did
not use the savings account.”
The ombudsman denied a
bias in favour of businesses.
“A consumer is not bound by
our decision if they reject it,
so they remain free to pursue
any claim through the courts,
although this happens very
rarely. As we consider cases
on a fair and reasonable
basis, rather than a strict legal
one, it’s possible a court will
reach a different conclusion,
for different reasons,” it said.
M&S bank said: “We have
no record of having received
a claim from the court. We
therefore didn’t contest it and
it was upheld by default.”
It added: “The Premium
current account, which
launched in 2012, offers
customers a transparent
structure, along with a wealth
of retail rewards — worth over
£220 each year — in return for
a fee of £10 per month. The
overwhelming majority of
Premium customers who
took out the account in 2012
still hold it today.”
If you have a dispute, the
ombudsman requires that
you first complain directly to
the company, which has eight
weeks to respond. You can
lodge a complaint with the
ombudsman if the company
fails to respond or you are
unhappy with its response.
Rather than approaching
the ombudsman, you could
go straight to the small claims
court. The cost depends on
the sum claimed: anything
less than £10,000 has a fixed
fee, from £35 to £455 for
paper applications or £25 to
£410 for online applications.
For larger claims, the cost is
4.5% or 5% of the sum
involved. For more
information, go to gov.uk/
make-court-claim-for-money.
YOUR STORY
Did you challenge an
ombudsman decision?
money@sundaytimes.co.uk
ICONS BY JAMIE JONES
JUNIOR ISAS
Supplier
Top tip
Activate two-stage
verification on online
accounts. It requires you
to enter a code sent to
your smartphone, as well
as your password. Apple,
Google and many other
digital services offer this.
Ali Hussain
20
The Sunday Times October 15, 2017
MONEY
Puzzles
FEEDBACK
Comments about our puzzles
can be sent to puzzle.feedback@
sunday-times.co.uk or Puzzles
Editor, The Sunday Times,
1 London Bridge Street,
London SE1 9GF
GENERAL KNOWLEDGE JUMBO CROSSWORD 79
1
2
3
4
5
6
7
Across
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
1 In which Ventôse, Germinal and Thermidor appeared (13,8)
13 Former Parisian palace designed for Catherine of Medici
and burnt down in 1871 (9)
14 Spanish port on the Bay of Biscay, where a film festival has
been held since 1953 (3,9)
16 Mozart opera in which Pamina and Papageno appear (3,5,5)
17 Writer of contemptible verse (9)
18 Informally, parts of the human hearrt (7)
19 Spike of small flowers on trees and shrubs such as willow (6)
20 Liliaceous plant, or its juice used in skin and hair
preparations (4,4)
22 A young Italian man (9)
24 Pants and knickers (6)
25 Music-hall entertainer Harry ____ (pictured) wrote and sang
Roamin’ in the Gloamin’ (6)
27 The Crewe ____ were featured in Gridiron UK, a film about
American football (11)
29 Eponymous outlaw in a Walter Scott novel (3,3)
30 Stricken with reverential fear (4)
33 German art song — usually for solo voice with piano (4)
34 The capital of Croatia (6)
36 Public transport route from Stanmore to Stratford (7,4)
38 Small portable organs (6)
40 In showjumping, a fence made of rough branches (6)
41 Impose beliefs upon (5-4)
43 The king is persuaded to marry Reignier’s daughter ____, at
the end of Henry VI Part 1 (8)
44 Millwall’s football ground in Cold Blow Lane from 1910 to
1993 (3,3)
45 Andrea Newman’s novel ____ of Barbed Wire was adapted
for a 1976 ITV drama series starring Frank Finlay (7)
48 The decisive 1942 second battle of ____ was the watershed of
the Western Desert campaign (2,7)
49 Director of Rosemary’s Baby
in 1968 and Chinatown in
1974 (5,8)
50 Armenian composer of the
ballets Gayane and
Spartacus (12)
51 Bellini opera based on the
English Civil War (1,8)
52 Magnus Magnusson’s
catchphrase in
Mastermind (3,7,2,3,6)
2 Name first used for François Leclerc du Tremblay,
Richelieu’s right-hand man (8,5)
3 Arkwright and Granville sitcom (4,3,5)
4 The dramatic ____ relate to action, time and place (7)
5 Latin phrase indicating that something is the direct
consequence of an action (4,5)
6 Garden plants with bright red, orange or yellow flowers
and edible leaves (11) (pictured)
7 Distance calculator (11)
8 A feeling of horror or revulsion (6)
9 “Tinopolis” in South Wales, home of the Scarlets rugby
union team (8)
10 Hypnotic, tranquillising drug taken for the relief of
insomnia (10)
11 Official South African governmental policy of racial
segregation, renounced in 1992 (9)
12 Crackling on a vinyl record (6)
15 John Timpson’s co-presenter on Today from 1975 to 1986 (5,7)
21 An Etonian oarsman, rather than a cricketer (3,3)
22 England’s World Cup-winning manager (3,3,6)
23 Home of Nigeria’s oldest university, and capital of the state
of Oyo (6)
26 London metropolitan borough which became part of
Tower Hamlets in 1965 (6)
28 Capital of France’s Eure department, whose name comes
from the Gallic Eburovices tribe (6)
31 Cocktails with vodka, coffee liqueur and cream or milk (5,8)
32 The privatisation of the bus industry following the 1985
Transport Act (12)
35 A name for some shrikes (11)
36 The principal presenter of Today from 1958 to 1970 (4,2,5)
37 The eviction of tenants from large Scottish estates in the
early 19th century (10)
39 Soviet president who introduced glasnost and perestroika (9)
41 The ____ Times or “Pink ’Un”
was founded in 1888 (9)
42 River in Guyana, or a type of
brown sugar (8)
45 Old English epic in which the
dragon Grendel is mortally
wounded (7)
46 In botany, split into three
parts (6)
47 Formally install in office (6)
NEWS QUIZ
4
An Austrian fined €150
(£135) because of a burka
ban was wearing what?
5
Silvio Berlusconi gave
Vladimir Putin, pictured,
what for his birthday?
1
Solution to 78
Across: 1 Steerpike, 6 Hydrant, 10 Khmer, 13 Nelis, 14 Augusta, 15 Ogen melon, 16 Cape Cod, 17 Apocope, 18 Oddjob, 20 Eleanor Rigby, 21 Bella Darvi, 23 King and I, 25 Full
steam ahead, 27 Soda, 28 Goodness Gracious Me, 32 Margaret Rutherford, 33 Floe, 35 Not Only But Also, 38 Ligament, 41 Abel Tasman, 42 Iconographer, 45 Fabric,
46 Brocade, 47 Ovulate, 49 Bandicoot, 50 America, 51 Fleet, 52 Yodel, 53 Derwent, 54 Alpenhorn
Down: 1 Sand Creek, 2 Ellipse, 3 Russ Conway, 4 I Wandered Lonely as a Cloud, 5 Ex gratia, 6 Heston Blumenthal, 7 Deacon, 8 Atonement, 9 The World According To Garp,
10 Komodo dragon, 11 Melbourne, 12 Rand, 19 Birds Eye, 22 Blessed sacrament, 24 Nadir, 26 Oder, 27 Sam Snead, 29 Ruff, 30 Salve, 31 Jayne Torvill, 34 Ragamuffin, 36 The
Damned, 37 Ulan Bator, 39 Turkestan, 40 Annelida, 43 Heave to, 44 Bocage, 48 Abby
CONCISE CROSSWORD 1543
1
2
3
4
5
Across
6
7
8
9
10
11
12
13
14
15
16
17
Down
Commit oneself (4,3,6)
Government coffers (9)
Japanese assassin (5)
Medieval steward (9)
Colour (3)
Uncommon (4)
Sunrise (4)
Space (3)
Results, often of
something bad (9)
20 Go in (5)
21 Design (9)
23 Tease or ridicule (4,3,6)
1
8
9
10
12
13
14
17
19
1
2
3
4
5
6
7
11
15
16
18
22
Portmanteau meal (6)
Astonished (13)
Bursar (9)
Former prisoners (2-4)
Exploit (3)
Target of ridicule (8,5)
Buzz (6)
Pasta type (9)
Manoeuvre (6)
Narrow gorge (6)
Lampoon (6)
Favourite (3)
18
19
Down
2
3
Who was reportedly very
rude to Mr and Mrs
Andrews?
Who blamed shortness
for falling short?
6
What made the church
organist Rosie Bryant fall
asleep driving her car?
Who did coastguard and
RNLI teams “rescue” from
the sea near Sunderland?
7
What is the average age of
MARK MY
WORDS 77
Terms and conditions:
Competition closes at
midnight on Tuesday.
Over 18, residents of
the UK and ROI only.
One entry per person.
The winner will be the
best entry as judged by
The Sunday Times. No
cash alternative to
prize in whole or in
part. Prize is nontransferable. Your
information will only be
used for the purposes
of this competition.
Promoter is Times
Newspapers Ltd. Not
open to staff of the
Promoter and
promotional
partner or
their families.
Readers are invited to guess
what was said last week as
Theresa May was greeted by
primary pupils at Dunraven
School in Streatham, south
London. See right for how to
enter.
Send your entries to: puzzle.entries@
sunday-times.co.uk by no later than
Tuesday. Entries should include a postal
address and ‘Mark My Words 77’ in the
subject line of the email. The best entry as
judged by The Sunday Times will win The
Chambers Dictionary of Great Quotations.
the world’s most beautiful
women?
8
Which town was named
Britain’s happiest?
9
What did Osei Tutu II, the
king of Ashanti, hand to
Mark Arthur of the Ghana
International Bank?
10 Who left £5,000 to his
head gamekeeper?
Last week’s winning entry, for
this picture of the sprinter
Usain Bolt visiting Munich’s
Oktoberfest beer festival,
was: “Bolt is already looking
ffor his next gold.” It was
submitted by Stephen Woods,
of Sandyhills, Glasgow.
20
21
Solution to 1542
Across: 1 Wisecracker, 8 Ivory, 9 Antenna, 10 Exculpate, 12 Odd, 13 Novena,
15 Picnic, 17 Con, 18 Unethical, 20 Lined up, 21 Wrong, 22 Reconnoitre
Down: 1 White-knuckle, 2 Stoic, 3 Cry, 4 Avatar, 5 Kittenish, 6 Rundown, 7 Eau de
Cologne, 11 Langue d’oc, 14 Vintner, 16 Weapon, 19 Croft, 21 Woo
22
23
EASY
19 TREBLE
IT
–7
+ 20%
OF IT
x3
DOUBLE
IT
÷ 12
x7
DOUBLE
IT
÷ 15
x2
- 1/3
+6
- 20% OF
IT
÷8
MEDIUM
10
x 5 + 15 + 1
TREBLE
IT
HARDER
130
x3
+5
–7
60% OF
IT
CELL BLOCKS
OF IT
- 3/5 HALF OF
OF IT
IT
÷ 2 – 20
CUBE
IT
ANSWER ANSWER ANSWER
BRAIN TRAINER
7
4
2
2
4
3
4
4
2
14
Divide the grid into blocks.
Each block must be square or
rectangular and must contain
the number of cells indicated
by the number inside it.
3
Just follow the instructions from left to right, starting with the
number given to reach an answer at the end
TETONOR
MODERATE
Each number in the main grid
can be formed by adding or
multiplying a pair of numbers
in the strip below the grid.
Each pair of numbers should
be used twice: once as part of
an addition and once as part
of a multiplication. For
example, a 10 and 24 in the
main grid may be solved by
the sums, 4 + 6 and 4 x 6,
respectively. Enter each sum
in the boxes below its answer.
Any blanks in the strip must
be deduced, bearing in mind
the numbers are listed in
ascending order.
112
78
23
140
22
124
24
100
35
26
120
96
88
19
29
20
3 4 6 6
8
14 16
26
POLYGON
From these letters, make
words of four or more letters,
always including the central
letter. Answers must be in the
Concise Oxford Dictionary,
excluding capitalised words,
plurals, conjugated verbs
(past tense etc), adverbs
ending in LY, comparatives
and superlatives.
How you rate
17 words, average; 23, good;
32, very good; 41, excellent.
EVENT
The Florida Project: preview screenings
A n e xc l u s i ve o p p o r t u n i t y fo r s u b s c r i b e r s
The Florida Project (Cert TBC) follows the summer adventures of two six-year-old girls as they run
amok while living at a motel and getting under the feet of the tough-but-tender manager, played
by Willem Dafoe. It will be in cinemas Friday, November 10 but subscribers can see it first and free
on Tuesday, October 24.
Book tickets now at mytimesplus.co.uk
Image credit: © 2017 Florida Project 2016, LLC. This Times+ event is open to UK subscribers only. For full terms and conditions, visit mytimesplus.co.uk
21
The Sunday Times October 15, 2017
MONEY
MEPHISTO 2981
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
21
20
22
26
23
27
24
25
28
29
30
31
32
33
NAME
34
...................................................................................
ADDRESS ...................................................................................
...................................................................................
Post your solution to The Sunday Times Mephisto 2981,
PO Box 29, Colchester, Essex CO2 8GZ, or email
puzzle.entries@sunday-times.co.uk
The first correct solution picked at random after next
Saturday wins Whitaker’s Concise, worth £45. Four
runners-up will each receive £20.
The Chambers Dictionary 13th edition is the primary
reference. Readers are invited to visit Tim Moorey’s
website at timmoorey.info
Solution to 2980
Across: 1 Tara fern, 6 Areg, 9 Weeke, 10 Herb tea, 12 Nagas, 14 Priers,
15 Sevastopol, 18 Ogler, 19 Curliest, 22 Basinful, 24 Afara, 27 Pyrolusite, 29 Inlier,
30 Gatso, 31 Acetose, 32 Likin, 33 Nete, 34 Hebetate
Down: 1 Twos, 2 Aeneous, 3 Reaver, 4 Feast, 5 Repoussé, 6 Abiogenist, 7 Eerie,
8 Gastrula, 11 Telly, 13 Galleryite, 16 Accadian, 17 Sea horse, 20 Put to it, 21 Caple,
23 Friska, 25 Fence, 26 Quale, 28 Eine
SUDOKU
WARM-UP
Ian Gilchrist
Circular logic
Ten of us (me, Alice, Arnold,
Carla, Celia, Clara, Ina, Rona,
Ronald and Roland) were
sitting equally-spaced around
CODEWORD
In the grid, each number
represents a letter of the
alphabet — all 26 letters are
used. Use the initial clues in
the code table to work out the
rest of the code.
STUCK? To get four random
extra letter clues, call 0901
322 5309 (ROI 1514 415128) or
text STCLUE to 88010 (UK
only). Calls cost 75p (ROI 75c)
plus your telephone
company’s network access
charge. Texts cost £1 plus
your standard network
charge. SP: Spoke, 0333 202
3390 (Mon-Fri 9am-5.30pm).
other pieces will follow into
the breach. 18…0-0-0 Black
bravely castles into danger,
but it was unclear where else
his king could hide. 19 Bg5
Re8 20 Kh1 Nc7 21 axb4
axb4 22 Nf4 Kb7 23 Qh5!
Spotting Black’s only
undefended square on f7.
23…Qxd4 24 Qxf7 Re7?
Black sacrifices his rook to
trap White’s queen. An
ingenious idea, but with
one fatal flaw. 25 Bxe7 Be8
26 Bxd5+ Kb6 The queen is
trapped. However… 27 Qxe8!
A spectacular blow to
effectively end the game. It
turns out that Sarin had
calculated further than his
opponent. 27…Nxe8 28 Bd8+
Kb5 Blocking with 28…Nc7
does not help: 29 Bxc7+ Kxc7
30 Ne6+ is a deadly check.
29 Ra5 mate
Spot the Move 1084:
White
to Move
________W
1
12
14
23
15
20
20
19
13
2
D
6
3
10
4
7
17
1
15
7
8
22
7
6
17
23
2
7
10
17
7
20
16
20
4
20
14
W
15
15
2
13
14
8
9
19
11
4
26
5
15
7
2
20
15
20
7
14
19
14
20
8
13
2
9
17
7
19
3
17
4
7
17
17
NS vulnerable, Dealer West
17
4
20
2
13
/ A92
. AQ65
v74
,9872
21
20
13
/ 8
. K 10 9 7
v Q 10 9
, K J 10 6 3
15
24
24
Sally Brock
One of our Under-20 pairs,
Ben Norton and Sam Behrens,
is featured this week. The
team came second in the
Channel Trophy just before
Christmas, helped by a
couple of tricky four spade
contracts in the match against
the Netherlands.
19
16
8
BRIDGE
4
13
7
Send your solution to: The Sunday
Times Teaser 2873, PO Box 29,
Colchester, Essex CO2 8GZ or email
puzzle.entries@sunday-times.co.uk.
The first two correct solutions opened
after next Saturday win £20.
2
17
N
W
E
S
/ 5
. J432
v AKJ653
, Q5
/ K Q J 10 7 6 4 3
.8
v 82
, A4
23
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
1
2
3
14
15
16
W
4
5
6
7
8
9
10
11
12
13
17
18
19
20
21
22
23
24
25
26
KENKEN
D
East opened one diamond in
third seat, South overcalled
four spades and West’s double
closed the auction.
The defence started with
three rounds of diamonds.
Declarer, Ben Norton, ruffed
KILLER SUDOKU EASY
23
23
18
10
8
3
28
17
10
11
13
6
21
11
13
13
17
18
9
7
16
3
11
17
6
7
14
15
17
18
20
21
19
22
23
24
25
26
27
NAME
...................................................................................
ADDRESS ...................................................................................
...................................................................................
Across
Down
1 Ace time with one
drinking last of this? (4)
4 Resident wearing clothes
given by social worker (10)
9 Sweet-hearted ass kids
give stick to at parties? (6)
10 Country store that might
flog neckwear on radio? (8)
11 One with great reason to
adjust air in cab (8)
12 Durable stocking beginning
to ladder, just (6)
13 Bishop in riot waving
around union banner (14)
16 As the chap prone to be
written off? (2,3,9)
20 Having toured Wales,
minister to swing to the
left? (6)
22 Ruined fossil in
overturned Edwardian
dresser (8)
24 Praise leading lady securing
one’s Western repeat fee (8)
25 I might’ve flown the 18
setters east of central
Reno (6)
26 Go on a circuit of lengthier
travelling around Gulf (5,5)
27 What can be just as vulgar
with a capital C? (4)
Mirza-Vijups, European Club
Cup 2017. Here White made
an error and went on to lose.
What decisive move had both
players missed?
Send your solution (first move only), to Sunday Times Spot the Move 1084,
The Sunday Times, PO Box 29, Colchester, Essex CO2 8GZ, or email to
puzzle.entries@sunday-times.co.uk. The first correct answer drawn after next
Saturday wins £20.
2 Part of the body that one
up might put a foot in? (7)
3 Paramilitary group I
question about
foreigner (5)
4 Asinine rubbish containing
bits of idiotic trivia? (9)
5 A parts problem at centre
ruins electronics firm (7)
6 Composer’s filled with
ecstasy to see Sandy
strip (5)
7 Let no care put off
the endurance of
misfortune (9)
8 Puzzle certainly not new?
Good point! (7)
14 If not sensible, mum will
go topless at the front (9)
15 Braggart’s admission can
make you tense! (9)
17 Sheep mean to Spooner —
time for resolution? (3,4)
18 One highlighting danger of
wine on Blue Peter? (3,4)
19 Stewed in hot water might
one say? (7)
21 Question dividing EU: are
leavers primarily alike? (5)
23 Time to get both hands
around boozy beverage (5)
Solution to 4767
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Crossword 4768, PO Box 29, Colchester,
Essex CO2 8GZ, or email
puzzle.entries@sunday-times.co.uk
T OMA
I
A
T HRO
I
T
CH I
A A
CONT
A
I N
F N
A L TO
S E
CANA
I
S
AYEA
H AWK S M A L L S
E
I
A A H
T T L E S K I DOO
U L S E R W
P R I MU S S T OV E
E P H N R
RACEP T I VE
E A L
F
E
FORMER T I ME S
I
S M
A T
N T OW E R S S K I
E N N
I
C M
D A S T I GMA T A
L
A H R T
YE F L A TMA T E
high and West showed good
technique by discarding a
club to help his partner count
the suit. Declarer led the
queen of spades, which held
the trick, and now West’s club
discard persuaded declarer to
play for the actual layout. He
cashed the ace and king of
clubs, bringing down the
queen, and discarded a
heart on the jack of clubs
while East discarded and
West followed impotently.
A few boards later, it was
Ben’s partner, Sam Behrens’,
turn to shine (rotated for
convenience):
spades and West led the
king of diamonds.
Declarer won the ace in
dummy, ruffed a diamond
high, cashed the ace of spades,
played a spade to dummy
nine and led a heart from the
table. East went in with the
ace and exited with the queen
of hearts. Declarer won the
king, crossed to dummy again
and led the last heart. East did
not know who held the ten of
hearts, so he went in with the
jack and was now endplayed.
He exited with a low club and
there was no way declarer
could go wrong.
CLUE WRITING CONTEST 1678: CYLINDRICAL
EW vulnerable, Dealer South
This week’s problem
NEWS QUIZ
/
.
v
,
/
.
v
,
6
10 7 3
K Q J 10 4 2
10 9 4
98752
965
A3
Q52
/
.
v
,
N
W
E
S
/
.
v
,
J
AQJ2
9875
AJ63
A K Q 10 4 3
K84
6
K87
North/South once again
got themselves to four
/
.
v
,
K964
AK532
AJ
KJ
N
W
E
S
/
.
v
,
8
12
16
áWDW!WDW$]
àDWDWDp0W]
ßbDpDpDW0]
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ÝWDWDqDWD]
Ü4WDWDN)W]
ÛWDWDW)KD]
ÚDWDWDWDW]
ÁÂÃÄÅÆÇÈ
Readers are invited to compose a clue for the word above.
Clues must be original, cryptic, and similar to those in the
Sunday Times crossword. Send your entry by email to
puzzle.entries@sunday-times.co.uk. The best entry selected
after next Saturday wins £20.
Winner 1675: Ross Harrison, Dechmont, West Lothian
Chanterelle: Fungus can make feet really dry and itchy, if cases are neglected
For a full report, visit thesundaytimes.co.uk/cluewriting
Winners Crossword 4765 J Widger, Altrincham, Greater Manchester, R Bentley,
London W21, S Ellis, Newcastle upon Tyne, S Rymanz, Dereham, Norfolk
Mephisto 2978 P Gregson, Amersham, Buckinghamshire, R Allen, Birmingham,
R Cassidy, London SE5, J Kell, Cleveleys, Lancashire, P Tozer, Altrincham, Greater
Manchester Teaser 2870 J Harkness, Gretton, Gloucestershire, DA Thomas,
South Wonston, Hampshire Chess 1081 G Naldrett, Stoke Poges, Buckinghamshire
Sudoku September 24 J Alario, London W12
TODAY’S SOLUTIONS
A5
J764
K86
Q 10 4 2
You stop in five hearts after
looking for a slam. North
leads a club to South’s ace and
the two of spades is returned.
You win the ace and lay down
the ace of hearts but North
shows out. Plan the play.
Solution next week.
BRAIN TRAINER
POLYGON
TETONOR
CODEWORD
F L A I R
O
L
UN
R E BU S
U
U
K A
MAMA M
L
B AN
B I RO
E
B
D E S
J I V E
I
U
I
E A
MA SON
B
T
V I
OV AR Y
F
M
I T E
Z
M
Z OO
V
D E A
R
P A I
L
R L Y
I
E
N Y L
K
L
UCK
A
AN S
A
G L A
U M
AWA
R
S
D A S
D
QU A
L
A T E
Y
I
E
L
D
126
24
72
Each row, column and 3x3 box must contain the digits 1 to 9.
The digits within each group of cells joined by dotted lines
must add up to the figure in the top-left-hand corner of each
group. Within each dotted-line group, a digit cannot be
repeated.
SPOT THE MOVE 1083
1 Nxe6! creates a dual threat of Qg7
mate and 2 Rxc8+. Black cannot
prevent both
TEASER 2872
23, 46 and 75
18
23
224
27
3
7
3 4
21
5 + 18 14 x 16 6 + 21 9 + 12
70
27
140
90
5 x 14 3 + 24 10 x 14 5 x 18
80
19
30
108
4
8 x 10 5 + 14 14 + 16 9 x 12
3 5 5 6 8 9 10 10 12 14 14 14 16 18 21 24
J K D Z VWX L CU ABG
I F O T Y N E H PQR SM
12
CELL BLOCKS
6 x 21 3 x 24 10 + 14 8 + 10
Y
H
E
L
I
X
KENKEN
SUDOKU
WARM-UP
14
13
All the digits 1 to 6 must appear in every row and column. In
each thick-line “block”, the target number in the top left-hand
corner is calculated from the digits in all the cells in the block,
using the operation indicated by the symbol.
3
13
13
5
LAST WEEK’S SOLUTIONS
7
4
4
10
13
VERY HARD — PRIZE 1175
Who from the twelve was
then directly opposite
Alice? And who was
opposite Celia?
17
2
20
17
11
14
9
10
9
20
4
11
19
18
4
15
11
20
14
2
5
15
25
9
15
14
18
13
2
3
14
Then Ari and Ira joined us.
We found two extra chairs
and all budged up to make
two spaces. With the twelve
of us equally-spaced around
the circular table all the
above facts remained true. I
was now opposite a different
person, Roland.
3
David McLean
11
9
9 7 2 6
1 2
5
6 7
1 3 2 8
2
7
8 7
5
3 4
2
a circular table. None of us
was directly opposite or next
to anyone whose name was
an anagram of theirs, or
between two people whose
names were anagrams of
each other. The same applied
when looking at the initial
letters of the names.
2
9
7 2
4 6
5
8
Hard
TEASER 2873
Last week we witnessed the
prodigious endgame skills of
young Indian player
Rameshbabu Praggnanandhaa.
I have also been impressed by
the recent progress of his
compatriot, 13-year-old Nihal
Sarin. As we will see in today’s
game, Sarin displays a very
direct approach which often
brings swift victories.
With contrasting styles but
equal measures of talent, I
anticipate a great rivalry
between Praggnanandhaa
and Sarin. No doubt they will
reach the top of world chess
before too long.
White: Nihal Sarin
Black: Maciej Swicarz
Czech Open, Pardubice 2017
Queen’s Indian Defence
1 d4 e6 2 c4 b6 3 a3 Bb7 4
Nc3 Nf6 5 Nf3 Ne4 6 Nxe4
Bxe4 7 Nd2 Bb7 8 e4 d5 A
dubious decision. Black
blocks his own b7-bishop.
9 cxd5 exd5 10 e5 c5 11 f4 c4
11…cxd4 is met by the simple
12 Nf3, regaining the pawn.
12 Nb1! We saw a similar
retreat by Boris Gelfand in a
recent column. Sarin shows
no prejudice and correctly
senses that the knight belongs
on c3. 12…b5? This neglects
piece development. 12…Be7
followed by 13...0-0 was safer.
13 Nc3 Bc6 14 g3 a5 15 Bg2
Na6 16 0-0 b4 17 Ne2 Qb6
18 f5 Fearlessly edging
forward with his pawns. The
HARD — PRIZE 1174
3
Each row, column and 3x3
box must contain the digits 1
to 9. Winners will receive a
Collins English Dictionary &
Thesaurus.
1 Evening primrose plants
acceptable above Indian
city (6)
2 Proper idol losing hearts
in card game (7)
3 Welsh rugby star’s name
made by contribution to
historic win (9)
4 Provided with many plans,
one finished enthralling
term of office (6)
5 Consider brass? One does,
with much account
switching (8, two words)
7 Rod’s stuck on pouch for
white wine (6)
8 Walk wearily south
to north in European
break (5)
9 Mark’s fine chaplaincy (5)
10 Italian work set on
foremost of stages in
Ancona (6)
15 Usain Bolt arranged
showy plants (9)
17 Mum’s sharing curry in
large vessel (8)
20 Female’s on ecstasy and
tobacco, not entirely
fruity tobacco (7)
21 Clay pipe, useless exactly
as before (6)
22 The accused not being
there, a beer’s in order (6,
two words)
24 West African trees at a
distance on a square (6)
25 Really empty at last, tear
up the M1? (6)
26 Eastern sailor leaving
middle island is ready for
the Maldives (5)
27 A case of tacos, saucy
types (5)
abbot, abort, aerobe, arbor, arrow, barrow, boab, boar, boart, boat, boater, boer,
bora, borate, bore, borer, bort, bower, brow, browbeat, browbeater, oater, orate,
orra, rebore, retro, roar, robber, robe, rort, rota, rote, rower, tabor, taro, toea, tore,
torr, tower, trow, wort
3
1 Clock mostly in gold
originating here? (5)
6 Call to witness most blunt,
brushing us aside (6)
11 Container of no worth
containing a snake (8)
12 Plate of armour, excellent
type without backing (7)
13 Navigational aid that’s
reversible (5)
14 Plastic shelf with no end
of hooch holds box for
minerals (8)
16 Retired imbibing author
lying on the ground (6)
18 Veteran’s explained notice
about former fleet
squadron (5)
19 A check introduced in
North America for boragetype plant (7)
21 Stupid Scottish fellow’s
hoax about to come out (7)
23 Horse-drawn carriage
indeed dropping off
monarch in front of
Academy (5)
28 Not so sure whether backto-back game finally
meets resistance (6)
29 Old umpire weakminded? Not half, one
who never says no! (8)
30 Bore in English suit
snubbed (5)
31 Curtly perhaps, a doctor
stood up (7)
32 African retainer sacked (8)
33 Head home going around
sort of hut (6)
34 Endeavour? It’s
“backward-looking” —
Express (5)
CROSSWORD 4768
David Howell
Easy 28; Medium 27; Harder 27
2
CHESS
Down
1 Gainsborough drew hidden genitalia in portrait, critic claimed 2 Scotland
manager Gordon Strachan said his team too short to win. He was sacked
3 Classic FM, court heard 4 Shark costume 5 Former Italian PM gave
Russian president duvet cover with their pictures on 6 Spider-Man balloon
7 38.9, researchers found 8 Leamington Spa 9 £350,000 worth of cash,
employment tribunal told 10 Late Duke of Westminster
1
Across
Tim Moorey
KILLER SUDOKU
4
8
3
6
1
9
5
2
7
9
6
7
5
2
3
4
8
1
2
5
1
4
7
8
9
3
6
5
3
4
9
8
1
6
7
2
7
1
6
2
3
5
8
9
4
8
9
2
7
6
4
3
1
5
1
7
5
8
9
6
2
4
3
3
4
8
1
5
2
7
6
9
6
2
9
3
4
7
1
5
8
2
6
9
7
1
5
3
8
4
3
8
5
2
4
6
7
1
9
1
7
4
3
8
9
2
5
6
5
9
2
8
6
4
1
7
3
4
1
7
9
3
2
8
6
5
PRIZE 1172
6
3
8
1
5
7
4
9
2
7
4
3
6
9
8
5
2
1
8
5
6
4
2
1
9
3
7
9
2
1
5
7
3
6
4
8
4
2 2
3
4
2
5 2
PRIZE 1173
2
2
22
The Sunday Times October 15, 2017
MONEY
FAME AND FORTUNE
JORDY SMITH
Flights, not
sharks, cost
me an arm
and a leg
NATE LAWRENCE / MARK CLINTON
World champion surfer Jordy Smith is
fearless in the water but blanches at his
travel bills, he tells Anna Mikhailova
T
he South African surfer Jordy
Smith started earning money
from the sport as a child,
but his parents refused to tell
him how much he had
earned until he was 18 — to
keep him focused on his
training.
Smith is the current world
No 1, clinching the title after
coming top of the World Surf League
last year.
He was born and grew up in Durban,
and got his first surfboard when he was
four years old — his father made them for
a living and had a “vision” for his son’s
future. Twelve years later, Smith won the
junior world title and lucrative
sponsorship contracts started to roll in.
After finishing school, he became a
professional surfer and has won a
number of the sport’s main trophies.
He is hoping to compete in the 2020
Olympic Games in Japan, when surfing
will be included as an Olympic sport for
the first time. It has been added
alongside five other sports, including
skateboarding, baseball and karate.
Sponsorship continues to be one of
Smith’s main sources of income. He is
sponsored by brands including O’Neill,
Red Bull and Oakley.
Smith, 29, has homes in Cape Town
and California, although he spends 10
months of the year travelling for work,
along with his wife, Lyndall Jarvis, 33.
How much money do you have in your
wallet?
Only 25 [American] cents. I am in Wales
surfing, so there is no need for any cash
when I’m doing that.
What credit cards do you use?
I have a Visa with Absa, a South African
bank.
Are you a saver or a spender?
I am more of a saver but I have to spend a
lot of money on plane tickets: I need to
buy my own air fare when I am
competing. I usually travel for about 10
months of the year.
If I ever feel
negative about
surfing, all I have
to do is speak to
one of my friends
who works in a
desk job
In his element: Jordy Smith got his first sponsorship deal at 16. ‘My parents, who were also my managers, did not tell me how much I had earned until I was 18’
How much did you earn last year?
About $272,500 (£205,000) which
included the World Surf League win. I
also have sponsorship endorsements
with Red Bull, O’Neill and Oakley.
Have you ever been really hard up?
Yes. I come from a background with
almost no money. My parents would
work two or three jobs each and sell
things at garage sales to make extra
money. It was only once I got sponsored
by Billabong when I was 16 that we
realised we could start eating at slightly
better restaurants.
My parents, who were also my
managers, did not tell me how much I
had earned until I was 18, so that it
wouldn’t affect my focus on surfing.
They kept the money in a separate
account for me, so I could use it to go
overseas for competitions.
Do you own a property?
I bought my house in Cape Town about
five years ago, and my California home
three years ago. Both have four
bedrooms. We bought the first house in
cash then used it as collateral to buy the
second one.
My life pretty much exists in my
suitcase, though, and I don’t need many
more things.
When did you first feel wealthy?
I don’t know if I do feel wealthy. The
end of my career will probably be the
point when I will look back at what I
have had. For now, I am focused on
trying to make as much as I can and
enjoying it.
What was your first job?
When I was 12 to 15, I worked at a
themed chain restaurant in South Africa.
I had to dress up, have my face painted
and pose for photos with the kids. I
finished school — I couldn’t not: my
mum was a teacher and she wasn’t going
to let that happen — then went straight
into the big league. I didn’t have time for
university.
Now that you are world No 1, what
motivates you?
The love of surfing. I think you have to
be a bit psycho about it — pretty
obsessed. I surf every day, as much as I
can.
What are you worried about?
Not much. You can put everything into
perspective pretty quickly. If I ever
feel at all negative about surfing, all I
have to do is pick up the telephone
and speak to one of my friends who
works in a desk job. That soon puts me
in my place.
What’s been your best investment?
My properties. I know I can get a great
return on them, because they are in
places where people want to live.
What about sharks?
If it’s your time, it’s your time.
What’s been your most lucrative
work?
Definitely surfing. It makes me both
healthy and wealthy — the best of both
worlds.
And the worst?
I haven’t really lost money on anything —
I am not the kind of guy who goes to
Vegas and blows his money.
Are you better off than your parents?
Maybe financially, but I see how much
love they have for each other and know
it depends on what you call well-off.
My mum, Luellen, was a teacher and
then a head teacher in a primary school.
My dad, Graeme, is a surfboard
manufacturer, which is how I got started
in surfing. I got my first board when I
was 4½. He had a vision [for me] and
understood the ocean — he never put me
in circumstances that were too
dangerous while I was very young.
What’s your money weakness?
I like good food and I don’t mind
spending money on it.
What’s your financial priority?
To not have to continue to work once I
retire from surfing. Surfing careers used
to end around the age of 40, but now it
comes later, at about 45.
Do you support any charities?
I support Surfers Not Street Children, a
charity in South Africa that takes
homeless kids off the streets and gives
them the tools to learn to surf and create
a life for themselves.
What would you do if you won the
lottery?
Try to help my country out in as many
ways as possible, and try to make sure
the money goes to the right places.
Do you invest in shares?
I invest in a few things, most recently in a
headphone company called Muzik. I
bought both shares and stock options.
What’s better for retirement —
property or pension?
For me, property. I am self-employed
and do not have a pension.
What’s the most extravagant thing
you have ever bought?
Business-class flights, which I tend to get
when I am flying from South Africa to
America, because it is such a long
distance.
Gnarly there: Smith catching a wave
What’s the most important lesson you
have learnt about money?
It’s not everything. You need a little to
get around, but it is not the be-all and
end-all. You can’t buy health.
anna.mikhailova@sunday-times.co.uk
Miliband’s cap doesn’t fit, but
the Tories want us to wear it
PETER
CONRADI
So is that it, then? Supporters say it will
ease the financial burden on millions of
hard-working families. Critics say it will
propel us into a “Marxist universe”. In
reality, the government’s long-awaited
energy price cap, unveiled last week,
looks likely to have little impact.
For a start, the proposal has to grind
its way through parliament, which
means it is unlikely to come into effect
until spring 2019, giving suppliers
plenty of time to think up ways of
getting round it. Furthermore, by
introducing an absolute limit — rather
than a relative one limiting the ratio
between the highest and lowest prices
— some suggest the cap could push
average costs up rather than down.
The stock market appeared quickly
to have got the measure of it: shares in
energy companies that tumbled after
Theresa May announced the move to
her party conference, such as British
Gas’s parent, Centrica and SSE,
bounced back sharply after the details
emerged last Thursday.
There is no doubting the public
anger at the behaviour of the suppliers,
which, in the three decades since
privatisation, have developed a
business model that means customers
who go to the trouble of switching are
subsidised by those who, out of inertia
or ignorance, remain stuck on the
punitive standard variable tariff.
Figures released in August showed
profit margins at the big six had hit a
record high. The data came out just
weeks after British Gas raised some
prices by 12.5%
But is a cap the solution? The Tories
certainly did not think so when Ed
Miliband suggested something similar
back in 2015. The proposal, they
claimed, would take the country “back
to the Seventies”.
The former Labour leader’s glee at
seeing his idea reheated was
understandable. “Given that this policy
was once described from that dispatch
box as a con, a joke, disastrous and
living in a Marxist universe, it would be
churlish not to welcome his conversion
to it today,” Miliband said after Greg
Clark, the business and energy
secretary, set out the details in the
Commons.
So what has happened to the energy
market over the past two years to make
May’s government change its mind?
The answer is not much at all, which
reinforces the impression that this is
little more than the Conservatives yet
again abandoning their traditional freemarket policies in an attempt to steal
Jeremy Corbyn’s thunder.
There has been no shortage of
experts warning us the policy could
backfire. Set the cap too low, it is
argued, and competition will be stifled.
Set it too high and suppliers will treat
that price as the norm rather than the
maximum. Comparisons have been
drawn with the universities, which —
surprise, surprise — almost all decided
to charge the maximum fee when an
upper limit was set.
Underlying the proposal is a broader
question about the efficacy of
government intervention in an industry
that must surely count as competitive,
given the dozens of players.
The energy market is “broken”, the
prime minister has told us. So, too,
according to the government, is the
property market. Yet, so far at least, the
Conservatives are not proposing a cap
on rents, let alone on house prices.
Indeed, the energy market’s business
model is not much different from that
of banks, credit card providers,
insurers or all manner of other
companies that offer teaser rates for
new customers while “rewarding” the
loyalty of existing customers with the
least favourable terms.
As with so many other aspects of
modern financial life, the only solution
is to play the system. As we point out on
page 14 this week, there are plenty of
ways to ensure you pay as little as
possible for your gas and electricity,
from paying by direct debit — if you do
not already do so — to switching to a
low-cost supplier, ideally using one of
the cashback websites.
It is not the most interesting way of
spending your time but it can pay
dividends — as long as we continue to
live in a capitalist universe rather than a
Marxist one.
@Peter_ Conradi
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