Paris is set to host the 2024 Summer Olympics, welcoming the world's nations for the quadrennial sporting competition. Before that, though, France's capital city will have to deal with some less-wanted guests: bedbugs. 

The pests have been infesting the city for weeks, and they're not confined to their namesake beds, either. Videos have been circulating on social media claiming to show bedbugs taking over Paris trains, subways, buses, movie theaters and even at Charles-de-Gaulle Airport.

With nine months to go until the start of the Summer Olympics, questions remain as to whether the plague of insects can be controlled before the Olympians arrive — or even if the plague is real. For now, though, it appears that residents of Paris are having trouble not letting the bedbugs bite.

Why are bedbugs invading Paris?

A lot of it has to do with an increase in global trade and, especially in Paris, tourism. "Every late summer we see a big increase in bedbugs," entomologist Jean-Michel Berenger told BBC. "People have been moving about over July and August, and they bring them back in their luggage. And each year, the seasonal increase is bigger than the last one."

Bedbugs used to be easier to control in the 1940s and 1950s, thanks to the widespread use of the insecticide DDT. However, DDT has been banned in the decades since due to its harmful health effects on humans. Modern bedbugs are the descendants of "those that survived the DDT blitz," BBC noted. So unfortunately, today's bedbug population is "far more resistant." 

In Paris, videos posted on TikTok and other social media platforms purported to show bedbugs crawling on subway and train seats. Another post on X, formerly Twitter, showed a woman covered in what she said were bedbug bites obtained when visiting a Paris movie theater. These increased sightings, and the resulting panic, come months after a study by French health agency ANSES found that 11% of French households were "infested by bedbugs" between 2017 and 2022.

The ANSES study concluded that bedbugs were a psychological strain and "financial burden" on the French, with households spending 230 million euros ($241 million) a year to fight bedbugs and 83 million euros ($87.7 million) treating bedbug-related health problems.

Concerns have inevitably turned to what could happen if the bedbugs linger for the Summer Olympics. In the meantime, "Paris companies specializing in treating insect infestations say they've been overwhelmed in recent weeks." CBS News reported.

What is being done?

City officials have sounded the alarm, and French President Emmanuel Macron's government has gotten involved. Paris Deputy Mayor Emmanuel Grégoire urged French Prime Minister Elisabeth Borne on X and in a letter to bring "all stakeholders" to the table and "put an action plan in place against this scourge" as France prepares to welcome the Olympic Games.

The French government has said it will take steps to eliminate the infestation and "reassure and protect" the public, CNN reported. It is assembling pest control experts to come up with bedbug-fighting best practices, some of which are already on an anti-bedbug site the French government set up three years ago.

After raising the alarm, Grégoire warned against "hysteria" related to the pests. "There is no threat to the Olympic Games," he said. "Bedbugs existed before and they will exist afterward."

Is the bedbug panic overblown?

Bedbugs are making a comeback  — "and have been for perhaps 20 or 30 years," not just in Paris but everywhere in the world, BBC said. The pests are a problem in Paris but so is "the general psychosis which has taken hold," said Berenger, the French bedbug expert. "A lot of the problem is being exaggerated."

"The question of whether France is in the grip of a bedbug outbreak or simply grappling with normal levels of pestilence has become a political Rorschach test," The Wall Street Journal explained, with opposition lawmakers feeding the panic and Macron's government pointing out that there's more rumor than fact.

French Transport Minister Clément Beaune said Wednesday, after a meeting with public transportation providers, that no bedbugs had been found in the subway or on trains after dozens of sightings were investigated. "The response to a serious problem should not be a counterproductive caricature," he said. "We must take every case seriously, not fall into psychosis."

The Bank of England governor Andrew Bailey recently received an email from a member of the public begging him to “please, please, please be more cheerful”. The best he could come up with, said The Economist, was: “We are not doomed, far from it. But we are in difficult times.” He’s not kidding. For the first time since polling began in 1999, more people are “dissatisfied” with the Bank’s performance than satisfied. And “the political environment” has become ever more “hostile” – with the frontrunner to be the next PM, Liz Truss, attacking the Bank for excessive money-printing and “suggesting that its mandate needs toughening up”.

Even by his own standards, Bailey delivered “an unusually apocalyptic economic outlook” as he announced the biggest interest-rate hike for 25 years, said Marcus Ashworth on Bloomberg. After the Truss camp accused the Bank of “talking Britain into a recession”, tensions were further fuelled by Business Secretary Kwasi Kwarteng, who warned that “something has gone wrong” on Threadneedle Street, said Tony Diver in The Daily Telegraph. Under plans being floated, the Bank could be told to abandon its 2% inflation target and ordered to target nominal GDP (the size of the economy in cash terms) instead. It sounds a minor tweak, but it actually spells a “radical” overhaul.

There’s no doubt the BoE needs it, said Ambrose Evans-Pritchard in The Daily Telegraph. Whatever new model Truss suggests “could not be worse” than the “dog’s dinner of corrupted New Keynesian fallacies” currently dictating BoE policy. By worshipping at the altar of “inflation expectations”, and ignoring money supply signals, the Bank wildly underestimated the inflation danger. Now it is compounding the error with “a double-decker” interest-rate rise just as the inflation cycle has “already rolled over” and the threat is receding.

Yet there are actually plenty of reasons for maintaining the status quo, said Valentina Romei in the FT: not least the fact that the Bank has a pretty good long-term track record of hitting its mandated inflation target. Moreover, any call for a review by the Government is likely to raise “questions about the BoE’s independence” – and that would certainly worry investors. Truss’s “frankly bizarre suggestion that the Bank should target money supply makes little sense to anyone who remembers the lesson of the 1980s”, said The Economist: namely, that “the relationship between money supply and inflation is too unstable for it to work”. In circumstances like these, “a sensible politician ought to be grateful” for the Bank’s monetary policy independence – “and leave it well alone to take unpopular decisions”.

The highlight of the last gathering of the global elite at Davos, in January 2020, “was a spat between Greta Thunberg and Donald Trump”, said Larry Elliott in The Observer. “Scant attention was being paid to reports of a new virus recently detected in China”; most of those who’d trekked to the Swiss alpine resort “were too busy virtue-signalling” about inequality and the climate emergency. A lot has happened in the past 28 months, and this week’s meeting of the World Economic Forum (delayed from January because of Omicron) had a very different feel. “Davos has always been dedicated to globalisation”, but “a combination of pandemic and Putin” has accelerated an existing trend. A big unofficial theme of this year’s shindig, therefore, was an existential question: does Davos still have any relevance in “a fragmented world where globalisation is in retreat”?

The mood among the CEO crowd was “anxious and dour”, said Andrew Ross Sorkin in The New York Times. Many comparisons were made to the 1970s (or the tech crash of 2001). There was “a sense that inflation will remain persistently high and that a recovery will take many years”. The good news is that the famous “Davos Consensus” is often wrong – a clear “contra-indicator for the future”.

Nonetheless, it was hard to laugh off the gloomy economic backdrop to this year’s meeting, said Ben Woods in The Daily Telegraph. IMF chief Kristalina Georgieva warned of a “confluence of calamities” in the world economy: from growing food protectionism to “mounting concerns that the world could split into two economic blocs”. It’s what the economist Mohamed El-Erian calls the “little fires everywhere” characterisation of the global economy.

This year, Davos was preoccupied with what Jane Fraser of Citigroup called “the three Rs”, said the FT. “Russia, recession and [interest] rates.” The star of the show, appearing via video link, was Ukraine’s president Volodymyr Zelenksyy, who earned an ovation after imploring business leaders to stop “all trade with the aggressor”. Conversation at Davos revolved around “deglobalisation and its discontents”, said Rana Foroohar in the same paper. The arguments are familiar: “unless we return to the mid-1990s status quo of neoliberalism, doom awaits”. Yet the economic and political consequences of lopsided globalisation “are the key reason that we are now in a period of deglobalisation”. As Davos types “continue to debate whether decoupling is possible”, business is “simply getting on with the new reality of a post-neoliberal world”, creating their own regional supply chains. “They should get out of the ivory tower.”

Problem habit?

Addiction experts report that “young men trading cryptocurrency have begun to seek help for symptoms associated with problem gambling,” said Patrick O’Donoghue in The Sunday Times (Ireland). Barry Grant of Extern Problem Gambling warns of a “classic” progression. “You dabble with it. You do something small, you’re having a bit of fun. Maybe you’re doing a bit of research about it. Then you have a big win.” Once hooked, the lack of safeguards means it may well be more difficult “to quit crypto than it is to kick a problem gambling habit”.

Crypto conversion

The findings aren’t great news for the Treasury, which has just laid out plans to make the UK “a global hub” for the crypto industry, following criticism that its “stringent approach was throttling innovation”, said the FT. The shift in tone is welcome, but care clearly needs to be taken. The new initiative coincided with a warning from BoE governor Andrew Bailey that crypto­currencies were the new “frontline” in criminal scams. Much of what the Treasury is proposing is uncontroversial, said Charles Walmsley on Citywire. Plans include advancing the use of “stablecoins” (online currencies pegged to the traditional, fiat sort) in payments, and creating a regulatory “sandbox” to allow businesses “to experiment with cryptocurrency models”. But the most eye-catching plan – to create an NFT (non-fungible token) via The Royal Mint – was also the most controversial. While some compare these digital assets to works of art, others argue “they are very risky investments” with no “inherent value”.

Rule Bit-tannia!

“There’s nothing wrong with the Treasury taking an exploratory walk round the crypto block,” said Nils Pratley in The Guardian. Yet the Chancellor, Rishi Sunak, has “rather undermined” the seriousness of the project by dabbling in “faddish stunts” like NFTs. Better to “stick to boring technical assessments of payment systems”. It feels as though the Treasury is ignoring all that dull stuff about “illicit activity and carbon emissions” to embrace crypto as “the best thing ever”, agreed Jemima Kelly on FT Alphaville. “Rule Bit-tannia!” and all that. Or as the crypto bros like to say “WAGMI” – “we are all gonna make it”. What could possibly go wrong?

“The last comprehensive default on Russian foreign debt was in the aftermath of the Russian Revolution when the Bolshevik government repudiated Tsarist-era debts,” said Tommy Stubbington and Max Seddon in the FT. More than 100 years on, default loomed again this week as investors awaited payment of debt interest worth $117m on two dollar bonds due on Wednesday. “The deadline marked a crucial test of Moscow’s willingness and ability to continue servicing its external debt”, following the freezing of half its $630bn war chest of foreign reserves. Earlier this month, President Vladimir Putin said that creditors in “unfriendly” countries “should be paid in roubles rather than foreign currency”. Fitch, the credit ratings agency, said it would view any such “forced redenomination” as indicative “that a default, or a default-like process has begun”.

Whatever the outcome this week, it looks like the start of “a long battle over Russian debt”, said DealBook in The New York Times. The question is just how damaging a series of defaults might be. There are good reasons to think that “the contagion should be limited”, said Julian Jessop in The Spectator. The total exposure of foreign banks to Russian entities was estimated at around $105bn last year, but in the context of the global financial system, which is in much better shape than in 2008, that isn’t huge. Moreover, the size of the problem is generally well-known (the UK’s direct exposure to Russian financial institutions, for instance, is much smaller than many EU members, notably France, Italy and Austria). And central banks still have some firepower left to limit any collateral damage. “Yet one lesson from past crises is that ripples in what might appear to be one small pond can cause a tsunami of losses.” We could see a domino effect if managers are forced to sell “good” assets as well as bad, to reduce risk and cover redemptions.

Tension is running high in Chinese markets, where several indices suffered their “biggest plunge” since 2008 this week, said Bloomberg. The “broad rout” followed reports that Russia had asked China for military help. Despite denials from Beijing, there are fears its embroilment “could bring a global backlash against Chinese firms, even sanctions”. There is a growing consensus that Beijing will reply “nyet” to Moscow’s requests and may even broker peace talks, said Ben Wright in The Daily Telegraph. Let’s hope so. “If China does back Russia financially – let alone militarily – then we need to brace ourselves.” Cutting Russia out of world trade may or may not result in a global recession. “Doing the same to China would doubtless result in a global depression.

“No one said the broadening sanctions regime against the Kremlin was going to be anything but disruptive,” said Alex Brummer in the Daily Mail. But “it is starting to reach parts of the global industrial economy which rarely command notice”. Witness the mayhem on the London Metal Exchange this week when the rocketing price of nickel forced the exchange to suspend dealing for the first time since “the tin crisis” of 1985-86, which pushed many brokers out of business. The price of nickel, used in stainless steel and EV batteries, “surged as much as 250% in two days”, said Bloomberg, leaving brokers “struggling to pay margin calls against unprofitable short positions”, in a massive squeeze that embroiled both the world’s largest nickel producer, the Tsingshan Holding Group, and a major Chinese bank. The root cause: fears about interrupted Russian supplies.

“Overall commodity inflation is higher than it has been for a quarter of a century,” said Ben Wright in The Daily Telegraph. But most of the pain continues to be felt in energy markets. Politicians globally are now warning of a 1970s style “oil shock”. Talk of an oil embargo sent the price of Brent futures to almost $140/barrel on Monday, “smashing records in euros, sterling, and most other currencies”, said Ambrose Evans-Pritchard in the same paper. After the US actually banned imports of Russian oil and gas, prices settled back a little because Europe held back (the German foreign minister said it would cause “chaos”), but JPMorgan has pencilled in $185 in the event of “a sustained stand-off”. Barclays fears $200, and rocketing gas prices. “These sorts of prices imply violent demand destruction and an economic recession” – bad all round, but “horrible for China, which uses twice as much energy per unit of GDP as France and Germany”.

The White House ban “is the most significant move yet in a rapidly escalating global energy war”, said the FT. Can the US or other producers step into the breach? US oil executives say a quick response from America’s shale industry is unlikely. The Biden administration scoured the globe for extra barrels, lobbying the OPEC+ alliance to boost supply, and pushing potential deals to unfreeze sanctioned Iranian and Venezuelan crude. The International Energy Agency has announced a 60 million barrel release of stocks from emergency storage. “Yet the sheer scale of Russia’s footprint” in oil markets – it is the world’s third largest producer, supplying around 10% of oil used globally – means a total loss of its supplies would be almost impossible to replace quickly. The uncertainty is unprecedented – and markets remain in brace position.

It hasn’t been a great week for former Barclays boss Jes Staley, said James Sillars on Sky News. The bank has frozen share awards worth in the region of £22m while Staley “contests the findings of a regulatory probe” into his relationship with the sex offender Jeffrey Epstein. Still, elsewhere at the bank champagne corks have been popping on news of a giant leap in annual profits to a record £8.4bn.

Cue a bonus bonanza, said Kalyeena Makortoff in The Guardian. Barclays has increased its bonus pool “by more than 17% to £1.3bn” – the latest large British bank to up its payouts. Earlier this week, HSBC confirmed that it is “boosting its pool by nearly a third” to $3.5bn (£2.6bn). State-backed NatWest has also resumed paying cash bonuses to top bosses for the first time since the Fred Goodwin era.

Bank bosses talk of needing to pay “competitively” – but the largesse is bound to jar with more cash-strapped Britons, said Jamie Nimmo in The Sunday Times. A “bonus spending guide” compiled by Bloomberg rubs salt in the wound. “It’s no crime to treat yourself,” it observes – going on to recommend snapping up a $19,400 Vacheron Constantin Overseas watch (“an investment on your wrist”), bidding on a $420,000 2015 Ferrari 458 Speciale, or treating yourself to a bottle of Glen Grant Scotch for a cool $34,999. What cost-of-living crisis?

As Britons face the “biggest squeeze on their incomes” since at least 1990, the “particularly obscene” bonuses come after Bank of England governor Andrew Bailey called on workers across the country not to ask for pay rises to help control inflation, said Rupert Neate in The Guardian.

These “sky-high” payouts are “a kick in the teeth for everyone suffering with the cost of living crisis”, said Gary Smith, general secretary of the GMB union. Frances O’Grady, general secretary of trade union body the TUC, called the increase in bankers’ pay “an insult to working families across Britain”.

Going Ape

“If you see this, you’re very early.” The line has become a familiar trope in the frothy market for nonfungible tokens (NFTs), “where block-chain powered proof of ownership has created a hyper-speculative digital art market”, said Tim Bradshaw in the FT. Being “early” in the unregulated world of NFTs can be highly lucrative.

The first supporters of a new project are often rewarded with “whitelist” access before the token goes on sale to the general public – meaning a purchase costing “a few hundred dollars” can be “resold for thousands just hours later” if all goes well. Still, “in the increasingly desperate scramble to find the next Bored Ape Yacht Club” (the “iconic” NFT cartoonish series, which frequently sell for millions) “the opportunities for due diligence are limited”. And fraud is increasingly rife.

Monkey Business

So is money-laundering, said Tristan Kirk in the London Evening Standard. Last week, a New York couple – Ilya Lichtenstein and Heather Morgan (a rapper who dubs herself the “Crocodile of Wall Street”) – were accused of using fake IDs to convert a stash of bitcoin stolen five years ago into other digital currencies and NFTs. In Britain, the taxman is on the case, said Tom Rees in The Daily Telegraph. In a recent sting, HMRC seized “its first NFTs”, claiming they were part of a “sophisticated” VAT scam to defraud the taxman of £1.4m. Crypto and NFT dabblers beware: the taxman isn’t just “stepping up its clampdown on criminal gangs hiding money”, but also on regular investors unaware that they may be evading tax. Most investors who have sunk funds into these assets will be liable to pay Capital Gains Tax (CGT) if they exceed their annual £12,300 allowance when they sell or use them in a transaction. In other words, “gains should be treated like those made on other investments, such as shares”.

Block buster

In the space of a year, NFTs have exploded from obscurity to a $40bn market. All credit to HMRC for being on top of the situation, said Emma Agyemang in the FT. As David Carlisle of the blockchain analyst Elliptic observes: “the UK is demonstrating increased sophistication in its ability to seize crypto assets”. There’s a new cop on the block.

Blundering Bailey

“Unhappy times are here again,” said Martin Wolf in the FT. Thanks to soaring inflation, “the Bank of England is forecasting the weakest growth of real post-tax labour incomes in more than 70 years” – with a fall of 2% this year and a further 0.5% in 2023. Yet up pops governor Andrew Bailey to urge pay restraint. “We do need to see a moderation of wage rises… to get through this problem more quickly,” he said.

This immediately earned a slap down from the Government, which stressed “Boris Johnson’s desire for a high-wage, high-growth economy”. Bailey’s remark was certainly unpopular. “But analytically he was right.” The more wage earners “seek to restore their purchasing power” in an economy hit by “externally imposed losses”, such as energy prices, “the higher will be inflation and the more merciless the needed monetary squeeze”.

1970s folk myth

Bailey’s spectre of wages rising “out of control” summons up “scary 1970s folk myths, in which the unions were blamed for striving to keep up with mushrooming inflation”, said Polly Toynbee in The Guardian. But there is something grotesque about a central banker who earned £575,538 last year demanding restraint from “hungry families relying on food banks”. As Torsten Bell of the Resolution Foundation asked: “Why wages? Why didn’t he call for profits to be squeezed?” Unsurprisingly, union leaders also weighed in to lambast Bailey. So too did economist Julian Jessop of the free market think tank the Institute of Economic Affairs, said the FT. “People should ask for the biggest pay rise they can get,” he tweeted. “Wages are a relative price, like any other, and should be left to the markets.” Tesco chairman John Allan joined the fray as well, telling the BBC that the supermarket’s employees “deserve to be protected from inflation”.

Tone-deaf

“A self-feeding spiral of higher inflation and rising wages would be damaging,” said Swaha Pattanaik on Reuters Breakingviews. But so too would be the inevitable hit to consumer spending – a vital engine of the economy – “if pay falls too far behind inflation”. There are no easy answers. But having spent too long “insisting that price pressures were transitory”, Bailey’s remarks were, at best, “tone-deaf”.

This year marks the 25th anniversary of the Bank of England’s independence. But the celebrations may be muted in Threadneedle Street, said Russell Lynch in The Daily Telegraph. Uncomfortably for governor Andrew Bailey, the BoE’s silver jubilee coincides “with the greatest test of its credibility in a quarter of a century” – owing to an “inflationary tsunami” critics claim it failed to anticipate. Ahead of this week’s meeting, markets had priced in a 90% chance the Bank would be forced to make its first back-to-back monthly interest rate hike since 2004, taking the base rate from 0.25% to 0.5%. Many are betting on four more hikes this year. Bailey “bristled” when MPs on the Treasury Select Committee suggested he had got the “judgement call” wrong by not acting earlier. “But it is difficult to argue from a position of strength” when inflation, at 5.4%, is nearly treble the Bank’s 2% target, and could possibly run as high as 7% in April.

In fairness, Bailey wasn’t alone in failing to read the inflationary runes, said Alex Brummer in the Daily Mail. In fact, he was “the first central banker of out the blocks” – hiking rates in December when such measures are only now on the way in the US and Europe. And it isn’t really his fault that the British economy now faces a debilitating “double whammy of higher rates and higher taxes” that could knock the recovery for six; the greater blame lies with the Government’s insistence on ploughing ahead with its “fiscal squeeze”. Still, there’s no escaping the fact that the BoE has been “getting its forecasts badly wrong”, with “serious consequences for the management of economic policy”, said Andrew Sentance in The Times. The Monetary Policy Committee’s record has been “chequered” for a decade. “Diversity of debate” has faded away, communication is poor, and there’s been “no clear strategy for normalising UK monetary policy since the global financial crisis”. A “robust review” is urgently needed.

What matters most to the average Briton is what the rate rises will mean for their pockets, said Hugo Duncan in The Mail on Sunday. A hike to, say, 1.5% doesn’t sound too scary, but analysts warn it may come as “a shock” to about ten million British adults who have “never experienced base rates above 1%” – adding £1,300 a year to the cost of a typical mortgage. That’s why a more “measured” rate rise makes sense, said Chris Giles in the FT. The BoE will hope “to shock people into believing it’s serious about bringing inflation down, without having to prescribe the painful medicine of markedly higher borrowing costs”. Tricky to pull off.

“Credit Suisse is proving something of a graveyard for the reputations of once high-flying international financiers,” said Peter Thal Larsen on Reuters Breakingviews. Less than a year after arriving “to stabilise” the scandal-hit bank, chairman Sir António Horta-Osório – formerly the toast of Lloyds Bank – has sparked a scandal of his own, having been caught out breaching both UK and Swiss Covid quarantine rules (in the former case to attend the Wimbledon men’s tennis final). “Horta-Osório may have salvaged some of his good name by quickly accepting the consequences of his actions”, and resigning. “But another round of boardroom upheaval is the last thing Credit Suisse needs.” The bank has appointed a safety candidate, UBS’s Axel Lehmann, to replace him. But it’s a blow for international investors “who had pinned their hopes” on the Portuguese banker’s “turnaround skills”.

Horta-Osório “was hoping for a slap on the wrist”, said Margot Patrick and Emily Glazer in The Wall Street Journal. He didn’t get it. His disregard of Covid rules while jetting in and out of Switzerland “struck a nerve with many Credit Suisse employees and the order-minded Swiss public”. It may also lead to greater scrutiny of executives in other companies. Hitherto, the only known corporate casualties of rule breaches were three Canadians who travelled out of the country to get early vaccines. “The default assumption”, said Nils Pratley in The Guardian, is that “Swiss banks are inward-looking institutions that always find a way to remove a reform-minded outsider from the boardroom”. But “no such conspiratorial thinking” is required here – especially as “Saint António” was hired to promote “a culture of personal responsibility and accountability”, after a boardroom spying scandal and expensive failures including the collapses of hedge fund Archegos and the supply-chain lender Greensill. “Resignation was the only possible outcome… Even on his own patch at Lloyds, AHO surely wouldn’t have survived this episode.”

Horta-Osório did at least set the ball of reform rolling on risk management at Credit Suisse, said Brooke Masters in the FT – but in a bumper year for banks, “shares are still down more than 20% over the past year”. And “many at the bank were heartily sick” of the “flamboyant and outspoken” Horta-Osório, who had little experience of investment banking or wealth management. Ultimately, his actions illustrate a common attitude among the elite: that rules are for other people. “But what does it say about accountability that the chair of a Swiss bank has been held to a higher standard than the sitting UK Prime Minister?”

Ovo Energy has got in early as a contender for “PR fail of the year”, said Ben Wright on Telegraph.co.uk. Its handy list of tips for householders facing a big jump in their energy bills includes: eating porridge, buying woolly socks, and finding “extra heat” by keeping the “oven door open after you’ve finished cooking”.

The situation for many households is likely to be acute when the energy price cap rises in April. But businesses – to which the cap has never applied – are already feeling the pain of surging prices, said the FT. “Energy-intensive industries”, such as ceramics and steel, have been warning for months of “potential shutdowns if ministers do not intervene”. Now the UK’s 5.5 million small businesses are sounding the alarm. Having survived the pandemic, some are being pushed to the brink by a “fivefold” increase in tariffs as old contracts expire and suppliers go bust.

The contrast in fortunes between the winners and losers of this crisis couldn’t be more stark, said Francesca Washtell in the Daily Mail. Shell last week reclaimed its position as the “biggest company on the FTSE 100” on the back of surging oil and gas prices. This is not, of course, a development that will be popular with environmental campaigners, politicians or the wider public.

It certainly isn’t, said Alistair Osborne in The Times. “Anyone would think Shell wants a windfall tax”, judging by the tin-ear of CEO Ben van Beurden, who popped up with the news that the group’s “integrated gas” division has enjoyed a quarter of “significantly higher” earnings, while confirming plans to return $5.5bn to investors. No wonder Lib Dem leader Ed Davey is calling for a “Robin Hood” levy on the “superprofits of oil and gas firms”.

As energy secretary in David Cameron’s coalition government, “Ed Davey helped lay the ground for the disaster zone that UK energy policy has become”, said Jeremy Warner in The Sunday Telegraph. Now he seems “determined to foul things up even more”. The most obvious problem is “who and what” the tax would target. The bulk of Britain’s gas is imported, which essentially “limits the field” to North Sea producers and UK-domiciled companies like Shell and BP. The effect of taxing the North Sea more would be to “deter investment” in an already declining asset – making us “even more dependent” on imports from Russia and the Middle East”.

As for whacking Shell and BP, hasn’t Davey noticed they’ve already embraced green energy, but need to fund the transition “from the abundant returns of hydrocarbon runoff”? Calling for “big oil” to be hammered is an easy rallying cry, but it will do nothing to help either fuel poverty or the planet.

1. January

The second year of the Covid era began with much of the world, including Britain, back in lockdown. Hopes of a vaccine-led recovery were tempered by the threat of a double-dip recession. A new trading regime with the EU came into force; the “thin” deal excluded services – and nearly €6bn of share-dealing shifted to the continent on the first day of trading.

US stock exchanges wobbled as a lawless mob stormed the Capitol, but recovered to hit new all-time highs, on the prospect of a big-spending Democrat administration led by President Joe Biden. Surging Tesla shares saw founder CEO Elon Musk become the world’s richest man, worth $185bn.

EU/UK relations were strained by a “battle for jabs” following a delay in AstraZeneca’s supply of the vaccine. CEO Pascal Soriot said the pharma was “working 24/7” to fix production issues. A “people’s revolt” – pitting day-traders on the forum WallStreetBets against hedge funds – saw shares in a heavily shorted video retailer, GameStop, rise 1,625% in a month, burning many funds in the frenzy.

2. February

Hopes of a bumper IPO year in London were boosted by the flying debuts of the online card retailer Moonpig and bootmaker Dr. Martens. The ONS confirmed that the economy shrank by 9.9% in 2020 – the biggest contraction since the Great Frost of 1709.

As CPI inflation fell to just 0.4%, the Bank of England gave banks six months to prepare for the possibility of negative interest rates. But there were signs of potentially inflationary bottlenecks in global supply chains.

The Nigerian economist, Ngozi Okonjo-Iweala, became director-general of the WTO – the first woman and the first African in the role.

The disgraced fund manager Neil Woodford made his comeback via a Jersey investment firm. Ministers published a “roadmap” out of lockdown, offering a glimmer of hope for battered hospitality and travel sectors.

3. March

Vowing to rebuild “the backbone of this country”, President Biden signed a $1.9trn economic relief package.

The spectacular collapse of Greensill Capital – a “supply-chain finance” firm founded by the Australian financier Lex Greensill and advised by the former PM David Cameron – sent ripples through finance, industry and government. There were fears that one big debtor, Sanjeev Gupta’s global steel empire, GFG Alliance, could fail.

The headline measure of Chancellor Rishi Sunak’s “jam today, pay tomorrow” Budget – a hike in corporation tax to 25% – was delayed until 2023 and cushioned by a £25bn tax break. The furlough scheme and the stamp duty holiday on house sales were extended.

Plans for a more “entrepreneur-friendly” FTSE listing regime were undermined when the poster-child for the initiative, restaurant delivery group Deliveroo, flopped on flotation. Shares fell 26% on day one, the worst performance for a big UK listing in decades.

4. April

The US treasury secretary, Janet Yellen, called for a global minimum tax rate for large companies; it was eventually agreed in November. The IMF warned that monetary stimulus was fuelling “excessive risk-taking”.

The price of bitcoin shot to a new record of $65,000 ahead of the blockbuster $100bn flotation of the US crypto exchange Coinbase. The value of Dogecoin – a “joke” currency championed by Elon Musk – rose by 9,000% on January prices.

Shops and pub gardens reopened in Britain, amid a continuing housing boom. Plans to create a breakaway football European Super League collapsed following widespread protests; JPMorgan apologised for financing the scheme. The cybersecurity firm Darktrace staged a successful listing in London.

Apple, Sony, Microsoft and big carmakers warned of a shortage of computer chips. A catastrophic wave of Covid, the Delta variant, struck India.

5. May

Debenhams closed its final department stores, ending more than 200 years on the high street. The BoE upgraded the growth forecast for 2021 to a booming 7%, claiming that inflation was still “well-anchored”, but outgoing chief economist Andy Haldane warned of “a wagey-pricey spiral”.

Prices of building materials soared as iron ore and copper prices hit new record highs. Shares in The Hut Group, Matt Moulding’s e-commerce empire, jumped following a £1.9bn cash injection from the Japanese investor SoftBank. China took the lead in rolling out a national digital currency – the e-CNY.

The Swedish oat milk producer Oatly floated on Nasdaq – a measure of accelerating consumer demand for “plant-based alternatives”. The Government announced a big shake-up in railways, overseen by a new state-owned body, Great British Railways.

6. June

Royal Mail made a triumphant return to the FTSE 100 following turbocharged demand for parcels. Tim Martin, the Brexit-backing Wetherspoon pubs boss, called for a relaxation of visa rules to tackle acute labour shortages.

The outbreak of the “sausage wars” – a standoff over EU regulations on uncooked meat products – threatened to jeopardise trade talks over Northern Ireland.

The green hedge fund Engine No. 1 forced a boardroom coup at Exxon. Ahead of the G7 meeting in Cornwall, the US and the EU called a truce on the 17-year-old fight over subsidies to plane-makers Boeing and Airbus.

Britain signed a trade deal with Australia – the first negotiated from scratch since Brexit. Shares in the Chinese ride-hailing app DiDi tanked after it listed in New York, in defiance of the Chinese government.

7. July

The £8bn flotation of Wise – the Shoreditch-based money-transfer firm founded by Estonians Kristo Käärmann and Taavet Hinrikus – broke records for the biggest-ever tech listing in London. The shortage of HGV drivers was reported to have reached crisis point.

Virgin Galactic’s successful test flight enabled founder Sir Richard Branson to claim the crown of the first billionaire into space, beating Jeff Bezos, who also stepped down as CEO of Amazon after 27 years on 5 July.

The Government lifted the order to work from home, stressing a gradual return, amid mounting cases of the Delta variant. The “pingdemic” – large numbers being ordered to isolate by the NHS app – worsened staff shortages.

Robinhood’s $32bn Nasdaq float underlined the online brokerage’s “stratospheric growth” since the start of the pandemic. A stream of government crackdowns prompted big falls in Chinese blue-chips.

8. August

Mike Ashley, founder of Sports Direct, announced he would step down as CEO of his sprawling high-street empire in 2022, to be succeeded by Michael Murray, his daughter’s fiancé.

The BoE predicted that CPI inflation would reach 4% in late 2021/early 2022, but maintained that it was “transitory”. Pfizer reported that its Covid vaccine would likely generate $33.5bn in 2021.

Macquarie, the Australian investment giant, bought a controlling stake in Southern Water – reflecting an explosion of foreign interest in “cheap” UK blue-chips, from the supermarket Morrisons to the defence companies Ultra Electronics and Meggitt.

City investment banks celebrated their best year on record for M&A fees. The biggest company in the FTSE 100, the £137bn Australian mining behemoth BHP, announced plans to quit London.

Health Secretary Sajid Javid vowed to crack down on “cowboy” companies providing PCR tests at grossly inflated prices. Sharon Graham became general secretary of Unite, vowing to do away with union “passivity”.

9. September

The surprise announcement of a national insurance hike met with protest from business groups. The £12bn annual increase left the UK with its highest tax burden since 1950. The Government launched Britain’s first “green gilt”, raising more than £10bn for green projects on its first day.

The London Metal Exchange’s trading floor, the Ring, reopened for business after 18 months, but elsewhere the return to work was hesitant. Consultants dubbed it “The Great Wait”. Companies dangled ever more imaginative carrots to employees to avoid falling victim to “The Great Resignation”.

A record spike in natural gas prices forced several small energy firms to cease trading. Washington abandoned its long-running quest to extradite Huawei’s CFO, Meng Wanzhou, from Canada for alleged fraud.

10. October

The tobacco giant Philip Morris bought the UK inhaler-maker Vectura for £1.1bn, to the disgust of medical professionals. Several Chinese cities suffered blackouts, owing to further steep energy price rises.

A sharp slowdown in UK manufacturing growth prompted warnings of “stagflation” – as a series of disruptions choked global supply chains. The fast-fashion retailer Boohoo reported that shipment prices from Asia had jumped “sixfold”. Maersk diverted its big cargo ships from UK ports, blaming the HGV shortage.

Persistent inflation prompted City speculation of a rate rise as early as November. In his Autumn Budget, the Chancellor claimed he was on a “moral” mission to limit state spending and cut taxes – while pumping more money into public services.

Morrisons was bought by private equity firm Clayton Dubilier & Rice for £10bn. Sanjeev Gupta’s UK Liberty Steel resumed production following a restructuring.

A former Facebook employee turned whistleblower, Frances Haugen, accused it of “prioritising profits over user safety”. Founder Mark Zuckerberg rebranded the parent company Meta – in line with his plan to create a virtual “metaverse”.

11. November

Barclays CEO Jes Staley quit, following an investigation into his links with the sex offender Jeffrey Epstein. Shares in The Hut Group plunged to an all-time low as fund manager BlackRock halved its stake.

The Irish airline Ryanair said it would delist from the London Stock Exchange, blaming EU rules banning foreign ownership of airlines. The Government ordered an investigation into the proposed $54bn takeover of the British chip champion Arm by the US giant Nvidia.

US inflation hit 6.2% – the highest rate in three decades. Jerome Powell was reappointed chair of the US Fed.

BoE governor Andrew Bailey was accused of “bottling” a signalled interest rate rise. The UK’s seventh largest energy supplier, Bulb Energy, collapsed, taking the tally to more than 20. It was effectively nationalised.

The value of the electric truck-maker Rivian, which had yet to produce any revenue, shot to $140bn after its Wall Street debut, making it the third most valuable carmaker. M&S bounced back to profitability. Stock exchanges plunged on the emergence of a new Covid variant, Omicron.

12. December

The UK Government announced new Plan B measures to combat Omicron, including the return of home-working. The High Court in London ruled that it is unlawful for Uber to act as an “agent” between a driver and passenger – upending its business model.

DiDi Chuxing bowed to pressure from Beijing to delist from the US stock market. Evergrande, China’s second largest property developer, officially defaulted on its vast debts.

High demand for rapid lateral flow tests in the UK prompted fears of shortages. As inflation hit a decade-high of 5.1%, the BoE raised interest rates for the first time in three years, to 0.25%, claiming it was “in the price stability business”.

The 15-week trial of Elizabeth Holmes, the founder of the Silicon Valley blood-testing start-up Theranos, was set to conclude in California. She was facing 11 counts of wire fraud and conspiracy.

This was meant to be a red-letter week for the City, as new rules “intended to boost London’s role as a global centre for listing companies” came into force, said Huw Jones on Reuters. The hope is that a more relaxed regime will help the Square Mile “catch up with New York”. “The penny seems to have dropped that the London stock market is not the first port of call for fast-growing tech companies which, if they list in Europe at all, increasingly favour Amsterdam,” said Larry Elliott in The Guardian. Daily trading in Tesla alone on Wall Street is “worth more than three times the trades of the entire London stock exchange”. The Financial Conduct Authority wants to make it easier for tech founders to bring their businesses to market, while retaining sufficient protection (via sometimes controversial “golden shares”) against hostile takeovers. But last week Paul Marshall, who heads the $55bn hedge fund Marshall Wace, fired off a broadside arguing “it will take more than changes to listing rules to restore London’s mojo”.

The City will continue to be a “global backwater” until we address a far more fundamental malaise, said Paul Marshall in the FT. One crucial reason is London’s “signature dish”: income funds, which prioritise dividends over any other kind of return and, by definition, “penalise” growth and productivity because they discourage capital investment. These funds are “a form of financial decadence” and should be phased out. “The City is in danger of becoming a sort of Jurassic Park, where fund managers dedicate themselves to clipping coupons rather than encouraging growth and innovation.”

The immediate cause of Marshall’s ire was one of his investments, said Neil Collins on Reaction: Scottish & Southern Energy (SSE) last month asked shareholders to take a dividend cut to finance more wind turbines. Shares promptly fell. Short-termism, Marshall felt – although arguably many investors had valid doubts about SSE’s strategy. Still, his more general point – that “the UK’s biggest quoted companies are stodgy businesses with high yields and a dreary outlook” – has some force. The harder question is what can be done about it. “The FTSE 100 contains two of the world’s major oil companies, two of its biggest tobacco companies, three world-scale banks and a major mining company. They can hardly be thrown out because they have poor growth prospects.” And scrapping rules is a “two-edged sword”. Many fund managers are grateful in hindsight that they weren’t able to buy shares in The Hut Group because of its voting structure. “The shares soared, and have since collapsed faster than a mobile home in a gale.”

The fading buzz

“Previously Wall Street’s hottest investment product”, special purpose acquisition companies (Spacs) have “plunged in popularity”, with investors withdrawing cash at ever increasing rates, said the FT. This week, it emerged that investors in the Spac taking BuzzFeed public “have pulled 94% of their money out” – signalling “scepticism over the media group’s prospects” and “underlining just how far Spacs have fallen from favour”. Many more are now either underwater, or subject to regulatory investigation. One such is Digital World Acquisition, the Spac set to merge with Donald Trump’s “non-woke” social media and entertainment start-up, Trump Media and Technology Group, which claims to have raised $1bn from “unidentified investors”. The probe could hinder the former president’s plan to raise further cash on the market.

After the flood

Spacs work like “blank cheques”: they raise money from investors and list on the stock market, with the promise of finding an attractive private company to merge with. At the height of the boom, everyone who was anyone piled in, said The Economist. Between June 2020 and November 2021, 700 Spacs were created, raising $235bn. The frenzy ended in April when regulators started to grumble. “Oh my goodness, has there been a washout,” observed former Barclays chief Bob Diamond. “The days of the celebrity Spac are gone.” He hopes the next phase will involve sponsors with “proven track records”. But it’s unclear whether the Spac model has reformed enough to blow away all the froth.

Europe’s Spac capital

Spacs certainly have their uses, said Aimee Donnellan on Reuters Breakingviews. The latest big deal in Amsterdam is a shot in the arm for a promising British drug discovery firm, BenevolentAI, providing “fresh cash” to keep its “algorithms whirring”. Amsterdam has emerged as “Europe’s Spac capital” with two-thirds of recent listings coming from blank-cheque firms, according to Bloomberg. In London, Hambro Perks has just completed the first Spac listing since the City regulator relaxed the rules to kickstart the market, raising £143.5m – “the first key test of British investors’ appetite”, said Ben Martin in The Times. The firm is now hunting for a tech company to buy. Spacs have waxed and waned, but they’re not going away.

“We’ve always acknowledged there could be bumps on our road to recovery,” observed the Chancellor, Rishi Sunak, last week. Omicron looks like a sizeable one, said Simon Duke in The Times. Before the variant struck, it seemed “all but certain” that the Bank of England would this week lift borrowing costs from a historic low of 0.1% to tackle rising prices. Indeed, ahead of the decision to increase the interest rate to 0.25%, some economists were still arguing that a raise would send the important message that policymakers are serious about tackling inflation, which jumped to a ten-year high of 5.1% in November. For most, however, “the pendulum has swung decisively in the other direction”. There are now real fears that the economy will contract, said Maike Currie of Fidelity on Sky News. “The BoE will be acutely aware that it’s harder to dig an economy out of recession than to cool rising inflation.”

In fact, “Britain’s economic recovery had come close to stalling”, even before the onset of the new variant, said Larry Elliott in The Guardian. ONS figures show that in October – the first month after the end of the furlough scheme – output grew by just 0.1%, with signs of “a sharp drop-off in visits to restaurants, pubs and bars”. They have now been whacked even further by the tougher Plan B curbs. “Of the three main sectors of the economy, only services expanded in October.” Manufacturing fell by 0.6%, and construction by 1.8% – “the steepest fall since April 2020”. The effect of Omicron on inflation is “unclear”, said the FT. But the variant is certainly “likely to soften growth” – spreading the slowdown to the services sector, especially after the changed guidance on working from home. “Monetary easing, at this point, can do little to help. Fiscal policy – government spending – is the right way to support the economy.”

“The Treasury will hate the idea of another furlough, let alone more bounceback loans and support for the self-employed,” said James Moore in The Independent. But if the pandemic worsens, it may be the only way to save legions of businesses in hard-hit sectors which have only just emerged from “hibernation”. The last lockdown borrowing bill was huge, but it was “good borrowing”, which “facilitated a faster recovery”. The new restrictions “are not the main cause of the pain now being felt in the economy”, said Jeremy Warner in The Daily Telegraph. “Rather, it is the gathering sense of public panic.” As things stand, it’s unclear whether there’s “justification for another round of business support”. Indeed, “I’m willing to bet” that, three months on, the chief worry will not be the necessity for another furlough, but big “inflationary pressures”.

China Plus One

When the pandemic hit, many “wrote an obituary for China-focused globalisation”, said Megan Greene of Harvard Kennedy School in the FT. But there’s actually little evidence of it slowing down. US imports hit “an all-time high” of $288.5bn in September, and China’s trade surplus has exceeded pre-pandemic levels. True, we don’t know how the geopolitics will “play out”. But what seems more likely than deglobalisation is the developing “China Plus One” strategy: companies keeping factories in China, but hedging their bets elsewhere. Foreign direct investment (FDI) has thus been growing fast in Thailand, Vietnam and Malaysia – spelling opportunities for investors.

Viet opportunity

The market that catches my eye, said Jeff Prestridge in The Mail on Sunday, is Vietnam – a comparatively new Asian tiger, which enjoyed pre-pandemic growth of 7-8%, and seems “set for a big leap”. The Vietnamese stock market is among Asia’s best performing – up more than 30% this year. More of the same is predicted for 2022 as corporate earnings recover – particularly if, as seems likely, Vietnam is reclassified from an embryonic “frontiers” market to a fully- fledged “emerging” market, which will attract the big international investors. Three trusts trading on the London Stock Exchange invest exclusively in Vietnamese companies: VinaCapital Vietnam Opportunity, Vietnam Holding and Vietnam Enterprise. But they’re only for “brave hearts”. A safer bet, says Brian Dennehy of Fund Expert, is a fund broadly invested across Asia, such as Barings ASEAN Frontiers, which has 2.5% of its assets in Vietnam.

India’s stealthy bull

Don’t forget India, said Rob Morgan of Charles Stanley in Investment Week. Thanks to a “stealth” bull market, the country’s main Sensex index is up by almost 50% over one year. Shares are now expensive, but India “remains unique among major economies” for its scope for fast growth: predicted at 9% this year, and around 6% in 2022. The country is increasingly seen “as a natural alternative to China” for outsourcing manufacturing. If you’re looking for “broad exposure to Asia”, with a significant Indian exposure, consider the Stewart Investors Asia Pacific Sustainability fund, which has around 40% of its portfolio in Indian equities.

Greenwashing

As companies announce a barrage of commitments to reach net zero by 2050, the onus is on their biggest shareholders to hold them to account, said Attracta Mooney in the FT. There’s work to be done. Climate Action 100+, a coalition of big investors, recently found that while “half of the world’s largest carbon emitters had set net zero goals”, pledges often failed to “cover the full scope of their emissions”. Asset managers such as BlackRock have begun “voting against” laggardly directors. But many believe “investors will have to get tougher”.

Leading the field is Sir Chris Hohn, billionaire founder of hedge fund TCI, said Amy O’Brien on City AM. Hohn – who has emerged as a leading financial backer of Extinction Rebellion – reckons that even the Glasgow Financial Alliance for Net Zero (which this week claimed to have attracted a “watershed” $130trn in financial pledges) is dragging its feet over ending “fossil fuel lending”.

A plethora of funds

The problem for ordinary investors, said Angharad Carrick on This Is Money, is knowing where to start. Nearly 400 ESG funds launched in the first half of this year, according to Morning- star data, and with so much on offer, it’s difficult to pick out the best. Rob Burgeman of Brewin Dolphin singles out the AXA WF Global Clean Economy Fund, managed by Amanda O’Toole, because of its focus on “a pillar of companies poised to benefit” from Activist investors need to “get tough” the new “direction of travel” across recycling, water, energy and food. The fund has returned 24.11% in the past year. He also rates Pictet Global Environmental Opportunities (returning 19.2%), which invests in a range of largely US-based life sciences, water and engineering companies.

Making an impact

Closer to home, many investment managers are fans of Liontrust Sustainable Future UK Growth, which has delivered a 73.59% total return over five years. Alternatively, check out the UK’s largest environmental investment trust, Impax Environmental Markets, which focuses on energy, water treatment, waste technology and sustainable food. Many of Impax’s investments “are not household names”, said Burgeman. “But this is precisely what can make it a good foil for other investments in an area where there can be little differentiation between funds.”

Economists at Bank of America are not doing much “to crank up the Christmas cheer”, said Alistair Osborne in The Times. Having noted the “more hawkish tone over inflation” coming out of the Bank of England (BoE), they’re forecasting a hike to 0.25% in December (from 0.1% now) followed by a further quarter-point rise next February. The City’s bond traders are on the same page. Yields on UK government bonds (gilts) – which tend to mirror interest rate expectations – climbed to “a two-and-a-half-year high” of 1.19% this week. Even if BoE governor Andrew Bailey wants to hold fire, he “may struggle to resist the markets’ push for movin’ on up”.

Bailey has finally conceded that he is “concerned” about inflation being above target. Fellow rate-setter Michael Saunders argues that markets are right to price in a rate rise “significantly earlier” than previously expected. “The language is loose enough to allow all possible outcomes,” said Nils Pratley in The Guardian, “but this already looks like a warming-up exercise.” The good news, for borrowers, is that any move from 0.1% to 0.25% “cannot be called dramatic”. Still, “2022 suddenly looks interesting”. The money markets are already agitated, said Tom Rees in The Daily Telegraph. Fears of stagflation – where prices and wages rise, but economic growth remains sluggish – have “sent bets against the pound soaring”. Trades insuring “against a sterling plunge against the dollar” have jumped sharply, despite talk of higher interest rates, which would normally support the currency. This implies that sterling traders reckon inflation pressures could prove more troublesome in the UK than elsewhere.

Alternatively, said Bloomberg, it may mean currency traders think “the Bank of England is about to make a mistake” – that overzealous efforts to curb inflation will “darken the outlook for growth and consumer sentiment”. Certainly, “the gnashing of teeth about imminent stagflation looks wildly misplaced”. UK growth this year is likely to be above 6% – leading the G7 – and inflation is lower than in the US. The panic looks irrational. “The BoE has been in stimulus mode for too long without having its faith challenged.” But now it seems to have lost its faith “that inflation is purely transitory”. Hiking interest rates isn’t going to lower gas prices, train more truck drivers or produce more microchips. Why respond to “overseas cost-push inflation” with “a blunt demand-side hammer”? The US Fed and the European Central Bank are in “no hurry to rein back stimulus”. Britain looks to be going it alone. Given that the world’s central banks “are, in effect, umbilically linked”, that is “an invidious place for the BoE to find itself”.

Soaring wholesale gas and electricity prices over the past six months have left millions of UK households “facing the biggest rises in their energy bills in a decade”, said Emily Gosden in The Times. This week, matters came to a head with a record spike in prices. The benchmark “month-ahead” UK NBP gas price jumped almost 16%, to a record 192p per therm on Tuesday. “Day-ahead” prices are also closing in on the 230p per therm record set during the “Beast from the East” cold snap in February 2018. The problem isn’t confined to Britain. Prices across Europe have also been jumping – provoking protests in Spain last week. We are seeing a global gas crunch as economic recovery from the pandemic accelerates demand. “There could be worse to come.” What worries experts is that it is only September, making the current spike very unusual. Winter is coming, and there’s not much margin for error.

Prices of natural gas are now “almost treble their level at the start of year”, and up 70% since early August alone, said David Sheppard in the FT. “That is also stoking record electricity prices, as gas is key for power generation.” This has raised fears of “a severe economic hit” to industry. The causes of the crunch are manifold. “Russia has been sending less gas to Europe this year.” The recent phasing out of coal plants has limited the opportunity to switch fuels when prices rise. The “remarkably still weather” has also slashed the contribution of wind turbines to the grid. The problem for Britain is that we are “arguably more exposed than the rest of Europe”, because of our heavier reliance on renewables and a “just-in-time” approach to gas supplies that makes us dependent on EU pipelines linked to Russia. “Some are concerned that, after Brexit, Europe might prioritise its own supplies.” As Niall Trimble of the Energy Contract Company puts it: “We’re effectively at the end of the pipe – not just physically, but politically as well.” We saw as much this week, said Hannah Boland in The Daily Telegraph, when Ireland was forced “to freeze power exports to the UK to prevent a shortage”.

There are, in short, any number of factors behind the crunch – “which, embarrassingly, is seeing the UK shovel millions in the direction of coal plant producers just ahead of the Cop26 climate conference in Glasgow”, said Nils Pratley in The Guardian. The hope is that high prices will “encourage more supply and dampen demand” before winter. But this “mini-crisis” has revealed that “there’s not much resilience in the system”. Politicians take note: “an energy crisis is quietly building”.

The numbers speak for themselves. Inflation – the general rate at which prices of goods and services in the economy are rising – has leapt substantially this year.

In the US, consumer price inflation hit 5.4% in June, the highest rate in more than a decade; the Bank of England expects the UK consumer price index to reach 4% by the end of the year – double its 2% target.

The big debate is whether this jump is down to the extraordinary hiatus caused by the pandemic and therefore, in the soothing term favoured by central bankers, it is “transitory”; or whether it presages something more “sticky” and problematic. Consensus still favours the first. But some economists think we may have reached a historic turning point: that the scourge of entrenched inflation is making a comeback.

What causes inflation?

It usually results from an increase in production costs such as raw materials or wages (known as “cost-push inflation”); or an increase in demand for products or services (“demand-pull inflation”). We’ve seen both in action during the pandemic.

A third big cause – officially lumped in the “demand-pull” bracket – is an increase in overall money supply: when central banks print more money, whether literally or via quantitative easing, or use other forms of stimulus; or when banks choose to lend more cash.

Psychology plays a part, too. Expectations of higher inflation are themselves inflationary, because they feed into a spiral in which demand is pushed up (buy now, before the price rises!) putting pressure on wages to rise to maintain living standards. That’s why inflation, once out of the bottle, is so difficult to tame.

What makes inflation so scary?

Out-of-control inflation eats away at purchasing power, erodes savings, and tends to affect the poor the worst. And when the catastrophe of “hyperinflation” (when prices rise at an annual rate of 1,000% or more) sets in, it can impoverish citizens and destroy economies.

However, even the double-digit inflation common in postwar Western nations posed a serious threat to economic health – particularly when it combined with stagnant growth to create a debilitating condition known as “stagflation”.

How was that situation tamed?

By a tough combination of high interest rates and monetarism – the practice of controlling the supply of money – which was championed most vigorously by the US economist Milton Friedman, and embraced by the Reagan and Thatcher governments of the early 1980s.

The heavy price paid was a deep recession. Friedman maintained, controversially, that “inflation is always and everywhere a monetary phenomenon”. That view, however, has fallen out of fashion.

Indeed, the taming of inflation in rich economies from the 1980s onwards is now more usually ascribed to price-lowering structural forces on the supply side – notably the impact of the technology revolution and globalisation, which led to a huge transfer of the production of goods from high-wage economies to territories like China and eastern Europe.

Are rising prices ever good news?

As former IMF chief economist Kenneth Rogoff points out, “a little inflation is no bad thing”: it’s the sign of a healthily growing economy, and encourages borrowing and spending – one reason why the Bank of England, in common with other central banks, sets a 2% target. This is considered a “sweet spot” because it’s enough to reduce the risk that an economic crisis could spark a deflationary spiral in which prices, wages and spending all fall.

Deflation is even harder than inflation to combat. Japan, which has been struggling with it for three decades, is a case in point. In fact, since the 2008 financial crisis, deflation has been the prevailing paradigm in rich countries globally; even trillions in stimulative quantitative easing, and super-low or negative interest rates have failed to shift it.

Many economists still believe that, despite the inflationary blip of the pandemic, this state of play might last decades.

Was the pandemic expected to be inflationary?

No. In the depths of the 2020 Covid slump, no one predicted the blistering pace of this year’s recovery. Even at the turn of the year, the Bank of England was still pondering the prospect of negative interest rates to stimulate the economy.

Yet after plummeting by almost 10% in 2020 (its biggest drop in more than 300 years), the UK economy is expected to grow by 7% this year. Inflation has hitched a lift on the ride.

Locked-down consumers, buoyed by government support and savings, splurged on durable goods such as clothes, cars and appliances, exacerbating the pressure on the disrupted global supply chain. The reopening has seen a storm of pent-up demand for services.

Bars, restaurants and hairdressers have raised prices to recoup closure losses and offset higher costs, while a dire shortage of workers has seen wages shoot up.

Is this just a temporary burst?

Probably, says the economist Kallum Pickering of Berenberg Bank. “However, the warning from history is clear: all periods of high sustained inflation appear temporary at first.”

Monetarists insist that quantitative easing’s great boost to the money supply is bound to tell: the amount of money in circulation (by the key M2 measure) has been growing in the US at an annualised rate of over 20% since February 2020, the fastest since the 1940s.

One question is whether the disinflationary forces of past decades are played out: globalisation is being rolled back, as Western economies reduce reliance on China; people in advanced economies are ageing, and may spend less.

Roger Bootle, the economist who declared “the Death of Inflation” 25 years ago, also warns that the aim of “net-zero” emissions will bring about “a whole series of costs and price increases”

The battle between rival US private equity outfits for Britain’s No. 4 supermarket group has reached the “phase when ego, pride and the thrill of the chase can start to impinge on good judgement”, said Patrick Hosking in The Times. Last week’s £7bn bid from Clayton, Dubilier & Rice – recommended by Morrison’s board to shareholders – is pitched at 20.7 times last year’s profits. That’s a “fabulous sum for a grocer” and a 60% premium to the undisturbed share price. Investors think Fortress, the SoftBank-backed rival group, will now go even higher. But the frothier the price, the harder the winner will need to “drive the business to get their sums to add up”. That may not be good news for anyone.

If the “leapfrogging” continues, said Zoe Wood in The Guardian, the Takeover Panel could insist on an auction to bring matters to a head before the proposed shareholder vote in October. The excitement is proving “contagious”, said George Hay on Reuters Breakingviews. On Monday, shares in J. Sainsbury surged 15% to a seven-year high following a Sunday Times story reporting interest from Apollo, a US private equity group also once linked to Morrisons. Still, it might be “classic silly season” stuff: neither party has confirmed a thing.

Yet it’s highly plausible that Apollo, or a thwarted Morrisons suitor, could chase Sainsbury’s, said Lex in the FT. True, it’s not quite as “appetising” as Morrisons; that chain has a pension fund surplus, owns 87% of its properties and has the lowest gearing in the industry. But Sainsbury’s is also an “asset-rich, cash-generative” business with a nice property portfolio. “Investors are going wild in the aisles” at Morrisons. Don’t bet against it happening at Sainsbury’s, too.

Burryed alive?

Michael Burry rose to fame when his bets against mortgage securities during the 2007-08 financial crisis were featured in the movie The Big Short. Now he has a new target, said Bloomberg. Burry’s fund, Scion Asset Management, “has taken aim at one of Wall Street’s hottest stars”: Cathie Wood, whose flagship exchange-traded fund, the ARK Innovation ETF, has lured in billions from investors since “her thematic tech-focused bets trounced the market in 2020”. Scion isn’t alone. Several other hedge funds have amassed big short positions. Wood may have her critics, but she was “ahead of many peers” in “paring” Chinese tech holdings during the country’s recent crackdown. And she’s not afraid of taking on Burry – observing on Twitter that while he made “a great call” in the mortgage market, he doesn’t really understand “the fundamentals that are creating explosive growth and investment opportunities in the innovation space”.

Feeling peaky

In fact, fund managers globally are signalling “peak boom” and “peak risk”, said Jeremy Gordon on Citywire. But that doesn’t mean they’re selling shares. According to Bank of America Merrill Lynch’s latest survey, optimism about the global economic recovery has plummeted, with just 27% of respondents expecting continued improvement – down from a peak of 91% in March. There’s “growing consensus that the rebound in corporate profitability is set to move into reverse”, and that “monetary authorities will start to reduce stimulus”. But while bond yields are “anchored near record lows”, investors see no choice but to remain “loaded up with equities”.

Stalling house prices

“The long surge northwards in UK house prices” may have peaked too, said Investors Chronicle. According to online estate agency Rightmove, the average price of houses coming onto the market has dipped by 0.3% (or about £1,000) so far in August and now stands at £337,371. “Summer is traditionally a quieter time for the market but, until now, there had been little sign of house price growth abating.” It appears that the end of the stamp duty holiday for houses priced above £500,000 – and the “impending removal” of the tax break for houses above £250,000 – may finally be having an effect.

British bank HSBC has announced a steep fall in profits and warned it will now cut 35,000 of its 235,000-strong global workforce. It is not known how many jobs will go in the UK.

Founded as the Hong Kong and Shanghai Banking Corporation in the mid-19th century, HSBC makes most of its profit in Asia, despite being headquartered in London. Most of the drop in profits has come from its European operations.

What happened to profits?

Annual profit before tax for 2019 fell by 33% on the previous year, down to $13.35bn (£10.3bn), the bank reported. In the fourth quarter, HSBC made a loss of $3.9bn (£3bn), the Financial Times reports.

What drove the poor results?

The loss was largely due to a $7.2bn (£5.5bn) write-off in HSBC’s European investment and commercial banking operations. As such, it was not unexpected. The bank blamed it on “lower long-term economic growth rate assumptions”, notes the FT.

Factors behind the European problems include historically low interest rates worldwide and lower growth caused by the UK’s protracted exit from the EU, says the BBC.

Banking expert Peter Hahn, however, told the broadcaster he believed HSBC had been “too optimistic about their chances of success in investment banking” and lacked clout in the US.

What about coronavirus?

The rapidly spreading virus will have an impact on HSBC’s performance this year, commentators agree, but the current figures relate to last year. Covid-19 was identified in Wuhan, China, only in December 2019.

What will the bank do next?

HSBC today announced its third major restructure in a decade in an attempt to lift future profits. It plans to sell assets totalling $100bn (£77bn) and “dramatically downsize” its investment banking operations in a bid to save $4.5bn (£3.5bn) a year, says City AM.

Interim chief executive Noel Quinn told Reuters that HSBC will cut its global workforce by 15% or 35,000 – reducing the total from 235,000 to 200,000 – over the next three years. It is not known how many jobs might go in the UK but the BBC says the job losses are “deeper” than the 10,000 analysts had predicted. Around 40,000 people work for the bank in the UK.

Quinn said job losses would be achieved partly through natural attrition, and redundancies would be “managed in a sensible and sensitive manner”. In the US, HSBC has committed to cutting one third of its retail branches.

How did the markets react to the rescue plan?

Not well, says the FT. HSBC’s share price dropped 6% in early trading in London this morning. Some investors were disappointed HSBC was planning to prioritise its growth in Asia and other emerging markets, reports the newspaper.

The Bank of England's next governor Andrew Bailey is facing a grilling by the Treasury Select Committee over his impending ascension to the role later this month.

The meeting comes after lawyer Gina Miller called on Chancellor Rishi Sunak to launch an independent review into Bailey’s tenure as CEO of the Financial Conduct Authority (FCA) ahead of his appointment to the BoE.

Miller alleges that his time at the FCA was characterised by a “toxic cocktail of negligence, incompetence and indifference” that allowed a string of financial scandals to go unchecked, wiping out the savings of small investors, The Guardian reports.

The FCA has said it “utterly” rejects the claims, which it says contains “numerous inaccuracies and are made with little understanding of the role of the FCA”.

He will replace Mark Carney on 16 March.

Who is Andrew Bailey?

Bailey spent the vast majority of his career at the Bank of England, which he joined in 1985, but is currently the chief executive of the Financial Conduct Authority (FCA), the City watchdog.

He was chief cashier at the Bank of England during the financial crisis when, he told the Financial Times: “The [RBS] treasurer, John Cummins, came in and I thought he was going to have a heart attack... and he looked at me and said: ‘I need £25bn today, can you do it?’ I said: ‘Yes, I can do that.’”

Bailey has also been deputy governor and was head of the Bank’s prudential regulation division, before leaving to join the FCA as its chief executive in 2016.

He is highly thought of by colleagues and civil servants, says the BBC’s business editor Simon Jack, and will be paid £495,000 a year in the role.

Announcing the appointment, then-chancellor Sajid Javid said Bailey was “the stand-out candidate in a competitive field”.

“He is the right person to lead the Bank as we forge a new future outside the EU and level-up opportunity across the country,” he added.

But the FCA has been criticised in recent months over its regulatory scrutiny of the fund managed by the disgraced Neil Woodford, says the BBC. The fund was suspended in June and eventually closed, meaning investors are likely to lose considerable sums of money.

And an FCA report into the Royal Bank of Scotland’s treatment of small businesses was called a “whitewash” by MPs after it recommended taking no further action against the bank, despite RBS allegedly engineering defaults on loans so that it could acquire business’s property, says The Independent.

–––––––––––––––––––––––––––––––For a round-up of the most important stories from around the world - and a concise, refreshing and balanced take on the week’s news agenda - try The Week magazine. Start your trial subscription today –––––––––––––––––––––––––––––––

What challenges will he face as governor?

According to City A.M., Bailey will face a number of issues as he takes the role. First off, he is likely to be pressured to “maintain Threadneedle Street’s concern with climate change” after more than 101 economists, scientists and industry leaders penned a letter to him.

The paper adds that the BoE has “earned international plaudits for its approach to climate change under current governor Mark Carney, who has warned that the financial sector’s investments are currently not consistent with stopping global temperatures rising 2C” - a path Bailey will have to follow Carney down.

And he will have to deal with calls for a regulatory shake-up aimed at stopping investors withdrawing their money from funds instantly, after high-profile funds got into trouble last year because of high demand for withdrawal.

The new governor will also need to address criticism of a lack of diversity at the Bank. Only one of its nine-member rate-setting committee is a woman – Silvana Tenreyro – and Carney’s four deputy governors are all white, middle-aged men. There has never been a female governor of the Bank of England in its 325-year history.

On top of this, Bailey will need to take steps to handle the continued reliance on the London Interbank Offered Rate (Libor), the interest rate used between banks and the benchmark for lending rates on financial contracts, that is being phased out by the end of 2021.

Lloyd’s of London will post flyers in City pubs urging workers to report inappropriate behaviour, after mass complaints of sexual harassment.

After hundreds of the giant’s underwriters and brokers said they witnessed abuse or harassment in the past year, the City institution is launching a campaign of advertising, banners and vinyl posters in the company’s headquarters at One Lime Street and in local bars and cafes.

A staff survey found that nearly 500 respondents either suffered or witnessed sexual harassment in the past 12 months alone. Previously, Bloomberg reported evidence from 18 women complaining of a range of sexual harassment, from inappropriate remarks to physical assault.

One allegation involved a senior manager drunkenly attacking a woman in a pub around the corner from Lloyd’s. Bloomberg reports that her employer “convinced her it would be bad for her career to pursue a complaint”.

One of the new posters reads: “We stand for integrity, respect and inclusion. And always speak up.” Another states that a Lloyd’s there is “no room for unacceptable behaviour”. Both feature the telephone number for a confidential helpline.

Lloyd’s chief executive, John Neal, says: “At Lloyd’s we expect all market participants to act with integrity, be respectful and always speak up. I hope this campaign encourages more people to do so. You will be heard, you will be supported, and we will act, because no matter what form it takes, harassment is never acceptable.”

In 2017, Lloyd’s banned drinking alcohol during working hours as part of its drive to cut out bad behaviour. The Times says “the move was welcomed by some, while others condemned it as overbearing”.

The insurance market has been described by the shadow City minister Jonathan Reynolds as being “institutionally sexist”.

–––––––––––––––––––––––––––––––For a round-up of the most important business stories and tips for the week’s best shares - try The Week magazine. Start your trial subscription today –––––––––––––––––––––––––––––––

Traders across Europe could be set to work shorter hours as part of a bid to improve work-life balance, boost liquidity and attract more women and working parents.

The London Stock Exchange is to consider cutting 90 minutes of the trading day after City lobby groups sent a letter to nine exchanges, including Germany’s Deutsche Boerse and the Amsterdam-headquartered Euronext, urging them to adopt the proposal.

The Financial Times says London markets are open longer than those in Europe, the US and Asia, “in part because they can span more time zones in a single day”.

At present, LSE is active from 8am until 4.30pm, bridging the trading hours in Hong Kong and New York. In Asia, by contrast, the trading day is usually six hours, and in the US it is six and a half hours.

“But being a bridge has a human cost” says Quartz.

The Investment Association, which represents City firms and the Association for Financial Markets in Europe (AFME), said that the City’s trading day was one of the longest in the world but did not deliver “material benefits to savers, investors or firms”.

“This long hours culture impacts on traders’ mental health and wellbeing. It has also been identified as a key obstacle in recruiting and retaining more diverse talent, in particular for those with family or caring commitments” the IA and AFME said.

Stock market trading “has traditionally been seen as male-dominated, lagging behind other areas of financial services in terms of attracting women into roles” says the BBC.

Figures from the Financial Conduct Authority last year show that only 13% of staff permitted to take part in regulated activities at trading firms were women.

“Many sectors like tech and banking have begun to admit, in recent years, that the structure of work is one of the reasons women and people from less privileged economic backgrounds aren’t well-represented. Long hours make it difficult for parents, carers, or anyone with other responsibilities than work to get ahead” says Quartz.

City lobby groups also said the lengthy hours were putting a strain on workers’ mental health. “The physical drag on individual staff is also significant. Staff are habitually doing a 10-hour working session at their desk in an industry where lunch breaks are often still frowned upon. This is not conducive to good mental and physical health.”

Shortening the hours would also “concentrate liquidity leading to more consistent trading costs and provide more time for traders and the market to digest corporate announcements” reports Yahoo Finance.

Yet there could be strong resistance to change in a sector where long hours are worn as a badge of honour and where traders and investors in Europe “are already under pressure as automation removes jobs and more investment banks review their entire equities business in a bid to save costs” reports the FT.

–––––––––––––––––––––––––––––––For a round-up of the most important business stories and tips for the week’s best shares - try The Week magazine. Get your first six issues for £6–––––––––––––––––––––––––––––––

The City of London reeled yesterday as news emerged that Hong Kong’s main stock exchange had made an unsolicited £32bn bid for the London Stock Exchange.

Hong Kong Exchanges and Clearing said in a statement that combining the two exchanges would bring together “the largest and most significant financial centres in Asia and Europe”.

The company’s chief executive, Charles Li, said the deal would “redefine global capital markets for decades to come... Together, we will connect East and West, be more diversified and we will be able to offer customers greater innovation, risk management and trading opportunities.”

Sky News reports that the “tie-up would create the world’s third largest exchange operator in the world after ICE and CME Group and, for HKEX, would represent a significant diversification away from China that might go some way to calming the nerves of its stakeholders in the wake of the turmoil in Hong Kong this summer.”

The news was greeted with caution in the UK. The Treasury released a statement to say: “The London Stock Exchange is a critically important part of the UK financial system, so as you would expect, the government and the regulators will be looking at the details closely.”

The LSE confirmed it had received an “unsolicited, preliminary and highly conditional” offer from its Hong Kong rival, saying an announcement would be made in “due course”.

Commentators speculate that the timing of the bid can be put down to the LSE’s recent £27bn bid for financial data provider Refinitiv, a move intended to bring the LSE into competition with larger rivals in financial data, namely Bloomberg, and in the financial sector, to take on global juggernauts such as Intercontinental Exchange and CME Group.

Once the LSE has completed the move for Refinitiv, it will be out of reach for any competitor to take over.

“HKEX’s bid therefore depends on LSE shareholders rejecting the Refinitiv takeover,” Reuters explains. “The Hong Kong exchange’s offer of 83.61 pounds per LSE share is enough to make them think twice. That is 23% above LSE’s closing price on Tuesday, and a stonking 47% more than the shares were worth before news of the Refinitiv deal broke in July.”

The Financial Times reports that the London Stock Exchange is poised to reject the approach: “The LSE said it was committed to its own blockbuster deal, the $27bn acquisition of data and trading group Refinitiv. It is leaning towards rejecting the Hong Kong approach, two people close to the board said.”

HKEX chief executive Charles Li insisted the LSE offer was not “hostile”, telling reporters: “We are openly expressing our admiration for the city of London and LSE so that we give all the stakeholders the opportunity to openly evaluate our transaction and conclude it is a compelling transaction.”

Another notable aspect of the bid is that it comes at a time of escalated political tensions for both companies. In Britain, Brexit brings a great deal of uncertainty, while in Hong Kong, protests are entering their fourth month.

“At a time when anti-China feeling is already running high, HKEX will struggle to distinguish itself from the exchanges in mainland China, all of which are controlled directly by the Chinese Communist party,” reflects Jamil Anderlini in the Financial Times. “A CCP-controlled London Stock Exchange would surely be intolerable for any British government, no matter how chaotic or desperate Brexit Britain becomes.”

One top-ten LSE shareholder said HKEX was “trying to diversify away from their Chinese exposure, which is why they are bidding now and not nine months ago”.

“Shareholders won’t be rushed to make a decision as we like the Refinitiv deal. If this is an opening gambit by HKEX and they go 10 per cent higher, then it will be a case of what might happen in the short term to the LSE share price versus a five-year view on where the share price can go on a successful Refinitiv integration,” said the investor.

The pound plunged yesterday after Prime Minister Boris Johnson said he would ask the Queen to prorogue parliament for an extended period soon after its return in September.

The lengthened suspension creates an even narrower window for an already ramshackle opposition to stand in the way of a no-deal Brexit, an outcome markets fear and the Bank of England has deemed the worst-case scenario for the economy.

Sterling was the world’s worst-performing currency on Wednesday morning, diving 0.7 per cent to $1.2201, and was down 0.6 per cent against the Euro. It remained volatile throughout the day.

“This seems like a pre-emptive strike from [Johnson] against those seeking to block a no-deal Brexit and once more it seems that the opposition are in danger of fluffing a big opportunity to have an impact,” said David Cheetham, an analyst at currency trader XTB Online Trading, quoted by the BBC. “If the government is successful in this, then a no-deal Brexit wouldn't be taken off the table until the 11th hour at the earliest and this keeps a significant downside risk to the pound in play.”

Speaking to Business Insider, Craig Erlam, senior market analyst for the UK & EMEA at Oanda, had a starker analysis: “The pound is in freefall this morning after plans emerged to prorogue parliament and prevent MPs from passing legislation to prevent no deal. This isn't the first we've heard of these dirty tactics but it was maybe hoped that such un-democratic measures would not be needed or used.”

Derek Halpenny, head of research for global markets at MUFG, said to Reuters. “No-deal Brexit is looking ever more likely; sterling downside risks will continue to plague the market.”

“Investors’ expectations for swings in sterling over the next three months rose 5.5 per cent on Wednesday to their highest since January when former prime minister Theresa May tried to force her original Brexit deal through the House of Commons,” reports the Financial Times.

However, according to many experts, the stock market is not yet panicking. “The pound appears to be taking the strain of any news flow related to Brexit and we would expect the volatility to continue,” said Georgina Taylor, a fund manager at Invesco, to the FT.

Indeed, for many investors, yesterday’s news isn’t all bad. “Many bumps and twists remain, but today’s announcement makes our base case, another Brexit delay and a general election, more likely,” said Citi economist Christian Schulz in MarketWatch.

Writing in the Financial Post, Jasper Lawler from London Capital Group, agrees. “Here’s the dilemma for whether traders follow through on the knee-jerk selling: Chances of a no-deal exit increase if Parliament cannot block it, but arguably the chance of a deal improves if the EU recognizes that the fate of no deal rests with them. This latest twist in the Brexit saga reinforces our view that the odds of a Brexit deal have improved, but still that no-deal is most likely.”

London icons including the Gherkin, the Walkie Talkie and the Shard may soon be joined a new skyscraper called the Tulip.

Revealing the plans for the new tower, architects Foster + Partners said the proposed structure would be a “public cultural attraction” without any office space. If approved, it will be built next to 30 St Mary Axe, or the Gherkin, which the firm also designed.

At 1,000ft (305 metres) tall, the Tulip would be the UK’s second-tallest skyscraper, after the 1,003ft (306-metre) Shard.

Jacob J. Safra, owner of Bury Street Properties, will fund the proposed development. The billionaire banker also financed the construction of the Gherkin.

“The Tulip’s elegance and soft strength complements the iconic Gherkin,” Safra told the BBC.

The design features “internal slides and moving transparent pods running outside the building for visitors to ride in”, the news site reports.

The UK’s current second-tallest skyscraper is One Canada Square. The 1991 office building, located in Canary Wharf, East London, would be dwarfed by the Tulip, measuring in at 774ft (236 metres).

Additional upcoming London skyscrapers include the Scalpel, which will be 630ft (192 metres) tall. Owned by the W.R. Berkley Corporation, construction of the site, at 52-54 Lime Street, is set to finish in the spring.

Outside London, a proposed tower, Trinity Islands-Tower X, will be the first to compete against the capital’s skyscrapers. According to The Skyscraper Center, a global database on tall buildings, the proposed development in Manchester is set to be 700ft (213 metres).

If planning permission is granted for the Tulip, construction would begin in 2020 and could be completed by 2025.

The head of the Treasury select committee, Nicky Morgan, has called for hedge funds to be banned from commissioning private polls and then making huge profits on the stock market when the results go public.

It follows a Bloomberg report that found hedge funds had hired leading pollsters to provide private exit polls and other data on voter behaviour in the run-up to the EU referendum.

Electoral law prohibits pollsters from making their findings public while the voting booths are open, but no laws prohibit the data being passed directly to city institutions for trading purposes.

The Times says this means “hedge funds would be in an ideal position to bet on changes to the pound when the private polling data went public”.

Shorting the pound also “let hedge funds avoid the ensuing crash which led to chaos in the global markets”, says the London Evening Standard.

“Pollsters said they believed Brexit yielded one of the most profitable single days in the history of their industry,” Bloomberg said. “Some hedge funds that hired them cleared in the hundreds of millions of dollars, while their industry… was battered by the chaos Brexit wrought in global financial markets.”

Polling companies that sold data included YouGov, Survation, ICM, BMG and ComRes, “with at least a dozen hedge funds buying the exclusive or syndicated polling data” reports Business Insider UK.

According to one source, YouGov made £760,000 selling a private exit poll to one hedge fund, while several investment firms made in excess of £750 million in the hours after the Brexit vote closed.

Even before the vote there were fears many financiers were looking to cash in on early exit polls.

Bloomberg also raised questions about the referendum night pronouncements of prominent Brexiteer Nigel Farage. The news agency claimed the former leader of Ukip leader had twice said publicly on the night that Leave had likely lost despite having information suggesting that it had won.

It also said that he had changed “his story” about who told him what when.

Jeremy Corbyn has gone on an all-out offensive against the City of London, vowing to make bankers “the servants of industry not the master of us all” if he wins power.

Addressing the EEF manufacturing conference, the Labour leader promised “decisive action” to rebalance the economy and break the finance sector’s “destructive” and “undemocratic” control over industry and politics.

“For a generation, instead of finance serving industry, politicians have served finance. We've seen where that ends,” he said, promising to be “the first in 40 years to stand up for the real economy” and combat the “financial wizardry” running through the City.

After the attempted takeover of the GKN engineering group by Melrose Industries, Corbyn also promised to strengthened government powers to intervene in hostile takeovers.

It was a speech “that will send shivers through the banking industry”, says The Daily Telegraph, and was roundly criticised by financiers, business groups and some Tory MPs for what they saw as an overly aggressive tone.

The Conservatives renewed their familiar attack line, saying Labour would “end up harming Britain's businesses”, while prominent Tory backbencher and possible leadership candidate, Jacob Rees-Mogg, said the attack on the City would hit industry as well.

“To view them as masters and servants is ill-informed,” he told the Telegraph.

The Institute of Directors was more measured in its response, with its head of external affairs Jamie Kerr saying: “This reality is often lost in the rush to cast bankers as the bogeymen of British business. Blaming the financial sector for all our woes is neither constructive nor legitimate.”

A Royal Bank of Scotland manager suggested struggling business customers be left to “hang themselves” following the 2008 financial crisis that saw taxpayers spend £45bn to bail out the failed bank.

The 2009 internal memo, called “Just Hit Budget!”, provided staff with a list of ways to squeeze money out of business clients scrambling to repay loans following the collapse of banking giant Lehman Brothers, HBOS and Edinburgh-based RBS.

“Sometimes you need to let customers hang themselves. You have then gained their trust and they know what’s coming when they fail to deliver,” the junior manager wrote, according to Bloomberg. “Missed opportunities will mean missed bonuses.”

The document was intially provided to Parliament’s Treasury Committee.

Scotland’s Daily Record says the document lays bare the bank’s “predatory practises” at the expense of its customers. Former SNP MP George Kerevan said it was “undeniable” that RBS’s tactics drove some small business owners to suicide, reports the Daily Mirror.

The Herald says RBS staff were given “tactics” on how to leverage earnings from businesses referred to the lender’s Global Restructuring Group (GRG).

Labour MP Clive Lewis is calling today for a public inquiry over allegations that GRG “drove companies to the wall for profit”, The Guardian says.

Meanwhile, in a letter to Treasury Committee chair Nicky Morgan, RBS CEO Ross McEwan said that the controversial memo “should be viewed in context”, but added that “the language used in the document was completely unacceptable”.

The author of the memo, who has not been named, no longer works at the bank, McEwan added. RBS declined to comment further, says Bloomberg.

A major regulatory shake-up of EU financial markets comes into force tomorrow - and Europeans are expecting the new rules to give them an advantage over their American rivals.

What is Mifid II?

The revised Markets in Financial Instruments Directive (Mifid II) is a massive legal overhaul across the entire EU bloc that aims to make markets more transparent and competitive. The directive covers banks, brokers and asset managers and a large swathe of the work they all do, ranging from stock trading to how analysts’ research is bundled and billed.

The legislation will make markets more investor-friendly, Bloomberg says, offering more information on fund managers’ fees, the execution of trades and the pricing of bonds and derivatives. Regulators will also have more precise market data to help them avert anomalies such as “flash crashes”.

According to CNBC, the changes affect investors buying or selling stocks, bonds, commodities, foreign exchange or exchange-traded funds. European firms are not the only ones involved. Banks in Asia and the US that sell financial instruments to EU clients will have to abide by the rules. Options that have an underlying asset listed in Europe also fall under the legislation, as do stocks that have a separate listing in Europe.

“Once the bugs are ironed out, Europe will emerge with a system much better suited to modern investing - arguably surpassing the US, long considered the global leader in sophistication and transparency,” Bloomberg says.

Why has it taken so long to implement?

The European Commission initiated the changes after the collapse of Lehman Brothers, and the 2008 financial crisis.

Once agreed, the rules proved to be a €2.5bn (£2.2bn) headache for the sector to implement, requiring a major IT revamp. Dozens of trading and compliance systems had to be upgraded, and the execution will be just as laborious. For example, the Financial Times says, investors must fill in up to 65 data fields and identify traders even if an order is not executed.

What happens to UK financial firms post-Brexit?

Mifid II allows for non-EU financial firms to operate across the Continent as long as they are based in a regime with “equivalent” regulation, Moody’s says.

This opens the door for UK banks to keep their passporting rights - which allow UK banks, insurers and asset managers to sell services freely across the EU - but is only likely if the UK adopts EU rules.

EU chief Brexit negotiator Michel Barnier has said financial services couldn’t be included in a UK-EU trade agreement, but Theresa May has said there would be a “greater recognition of the role the City plays in the financial provisions for Europe as a whole” during negotiations.

“Whether or not the trade talks extend to finance, the EU may use market access for UK banks and insurers as leverage on other issues,” Bloomberg reports.

Theresa May is planning to water down proposed curbs on pay for top executives, according to the Daily Telegraph. The newspaper says City and Whitehall sources expect the most radical planned reforms will be shelved "in the coming weeks".

The proposals, which included giving shareholders binding votes on pay at the top of the businesses in which they are invested, are now thought too controversial for May's minority government to push through, says the paper.

At present, firms listed on the stock exchange must hold a binding vote on executive remuneration every three years. The new plans would have meant such a vote could be triggered at any time, if 25 per cent of investors expressed concern with a pay package.

Some of the plans may still go ahead, says the Telegraph – those which do not require fresh legislation from parliament.

The papers quotes Deloitte, which says the latest figures show average bonuses for FTSE bosses on the downturn. The accounting firm asserts that current laws on pay are "working well".

Last year, May retreated from another proposal to restore trust in business when she dropped plans to force companies to have workforce representation on boards.

Mike Ashley raised quite a few eyebrows yesterday after comparing himself to a Star Wars character while testifying in the High Court in London.

"I am not Obi Wan Kenobi controlling the Death Star, let's be clear," the Sports Direct founder said, discussing his influence on the sportswear firm.

Obviously, Ashley is "not a Star Wars geek", says the BBC, which points out: "Obi Wan Kenobi has also denied controlling the Death Star - that was Darth Vader's department."

The businessman's faux pas also earned him a roasting from fans of the sci-fi saga on Twitter.

Steve Matthewson, London chief for S&P Global Market Intelligence, said the "annihilation of the Star Wars story" might actually be worse than revelations of Ashley's "bizarre business practices".

Ashley is accused of reneging on an alleged deal made in a pub to pay a former colleague, Jeff Blue, £15m if he oversaw a substantial rise in the share price. He denies the claim and argues the former investment banker is trying to exhort money.

Boozy sessions at the pub were not formal meetings, he said, and any conversation during the evening would have been "banter", reports The Guardian.

"If I did say to Mr Blue that I would pay him £15m… it would be obvious to everyone, including Mr Blue, that I wasn't being serious," he said.

Waitrose boss Mark Price caused a bit of a stir last week with a speech about how he felt capitalism is failing society. So, is it time we changed the way businesses operate?

What did Price say?

Speaking at the Telegraph Festival of Business Mark Price, the outgoing deputy chairman of the John Lewis Partnership and managing director of Waitrose, “declared that capitalism is failing to serve society,” says Ashley Armstrong in The Telegraph.

Price said that companies that put employee happiness first are contributing to a “fairer form of capitalism”. He went on to state that research had found that engaged employees would result in a 20 per cent improvement in productivity, around a 150 per cent improvement in company earnings per share and a 28 per cent reduction in wastage.

“Smart societies cannot be created without fairness, equality and enfranchisement and business has a crucial role to play here,” said Price.

“Society, quite rightly, expects a lot in return from business for the privileges it is afforded. It’s time we all delivered the goods and, in return, we will all benefit from significantly improved performance.”

Is he right?

Price’s viewpoint is hardly surprising when you consider he helms the country’s most successful employee-owned company, the John Lewis Partnership. But he isn’t alone in his view.

Back in July the Bank of England’s chief economist Andrew Haldane took “a swipe at the way corporations are run, accusing business leaders of serving the short-term interest of shareholders at the expense of the wider economy,” reported Ferdinando Giugliano in the Financial Times.

He argued that British companies need to look at different ways of running businesses that “place greater weight on the interests of employees and customers”. Haldane also quoted statistics that show back in the 1970s only 10 per cent of company profits were returned to shareholders, but that has now climbed to 60-70 per cent.

This drive to pay dividends and conduct share buybacks is cutting the amount of money being used to finance new projects and stifling economic growth, according to Haldane.

Haldane went on to argue that the public limited company has dominated British capitalism for too long, and it was time to look at other models of corporate governance including those “which share the spoils more equally between a wider set of stakeholders in a firm” such as employees and customers”.

Vive la révolution?

We won’t all be storming Tesco and demanding a share of the profits any time soon, says Matthew Gwyther, editor of Management Today, in response to Mark Price’s comments.

“I don’t think that the self-described Chubby Grocer [Price] was advocating either storming the Bastille, a 'year zero' Pol Pot-style return to the fields or taking a lead from Hugo Chavez,” says Gwyther. “Business is certainly beset with trust issues at the moment… but unless another viable socio-economic system is coming down the pipeline, capitalism remains the best we’ve got.”

In truth Price wasn’t calling for an end to capitalism, just a fairer version of it. A version that allows for companies to focus on what they do rather than how much money they hand back to shareholders. The sort of employee-focused model used by, say, John Lewis.

How can this be achieved?

When Google floated in 2004, founders Larry Page and Sergey Brin gave their own shares 10 times more voting rights than other shares “in order to protect their capacity to innovate” and avoid the tyranny of shareholders hungry to boost their dividends.

“From robots to self-driving cars, from virtual reality glasses to investigating artificial intelligence, Google is now one of the most innovative firms on Earth,” says Will Hutton in The Guardian.

There is certainly evidence in John Lewis, Waitrose and Google that ignoring shareholders and focussing instead on employee happiness, customer experience and innovation can create very successful companies.

But, it remains to be seen how many profitable companies will want to risk upsetting their shareholders by changing their business model.

After the financial crisis of 2008, the government set up a committee which in 2011 recommended tough new rules in the hope of staving off future banking collapses. Key to this is 'ring-fencing', the separation of deposit-holding retail banking from so-calling 'casino' investment banking.

What is bank ring-fencing?

The Prudential Regulation Authority (PRA) wants the big banks to split their investment arms from their retail business. This means “the separation of their riskier ‘casino banking’ activities from the retail side that looks after your and my money,” says Martin Waller in The Times.

The idea is that by putting a ring-fence around retail operations, the high street banking that customers rely on will become safer. This in turn will prevent there being a run on a bank as happened with Northern Rock - and so prevent taxpayers having to step in.

“Even if the bank does crash, the new rules should make it easier for the Bank of England to let investment banking operations collapse, but keep the retail bank running,” says Tim Wallace in The Telegraph.

The ring-fencing will mean that the retail side of the bank – that’s the part that handles current accounts, savings accounts, mortgages, credit cards and loans – must not be too reliant on the investment bank part of the company for revenues. The retail arm will also have to have large capital buffers to protect it from financial uncertainty.

The rules aren’t scheduled to come into force until 2019.

Is it likely to work?

“In theory, it means the government will never have to bail out a lender with a big investment bank like Royal Bank of Scotland ever again,” says Wallace. “But of course the real test will come at a time when financial markets are panicking.”

Are the rules too harsh?

When the ring-fencing idea was initially announced many big banks reacted with horror. There were concerns that the changes needed would cost a fortune and some banks have complained that the ring-fencing “puts them at a competitive disadvantage to their overseas rivals,” says Caroline Binham in the Financial Times.

However, this month the PRA has announced some concessions that have led to a collective sigh of relief amongst the banks. Firstly, it has stated that banks will be able to distribute profits from their retail operations to other parts of the group - as long as the retail bank retains ‘sufficient capital’.

This “so-called ‘transferability’ will allow bundles of cash to be thrown over the ring-fence to prop-up any parts of the business that are loss-making,” says Waller.

Secondly, the ring-fenced banks will be able to transact with other parts of the group, as long as they are treated on the same terms as any other third-party would be. This means banks will be able to cross-sell products and lend money across divisions.

“Following some lobbying, the PRA is being nowhere near as draconian as some of the industry had feared,” says Investors Chronicle.

Why are the rules being toned down?

First of all, good old politics is at play. “The U-turn is the latest in a series of emollient moves to banks since the Tories’ victory in May’s general election and since HSBC and Standard Chartered threatened to move their headquarters overseas in response to proposals to stiffen regulation,” says Binham.

The other issue is the government’s imminent sale of the bulk of its holding in Royal Bank of Scotland and many of its Lloyds shares too. “A cynic might interject that… now is not a great time to undermine the sector’s stock market valuation,” says Waller.

The regulators are also trying to tread a fine line between making retail banking more secure for UK consumers and allowing the banks to remain competitive on a global scale.

“The government has got a difficult line to take on this – part of why London is such a significant global financial sector is that we take a lead on financial regulation… [you have got] to be able to judge what is taking a sensible lead and what is over-enthusiastic,” says Mark Garnier, a Conservative MP on the Treasury select committee, in the Financial Times.

UK banks have slipped further down a benchmark list of global brands and no longer occupy any of the top five places, as regulatory controls limit scope for international expansion.

In the list of the top 1,000 global banks, compiled by the Financial Times' banking trade publication The Banker, Britain's highest ranked bank, HSBC, slipped to ninth position based on the size of its core equity capital reserves, a key measure of financial strength.

According to the Daily Telegraph, as recently as 2008 HSBC had been the largest bank in the world by this measure and Royal Bank of Scotland was third. RBS, which fell from grace during the crisis that year and is now majority owned by the taxpayer, has dropped from 15th to 19th position. Barclays and Standard Chartered also fell, from 12th to 13th and 34th to 39th respectively.

The top two places were taken by Chinese banks – the Industrial and Commercial Bank of China and China Construction Bank – CNBC reports. A third Chinese bank, Bank of China, also made the top five. The Banker says Asia-Pacific banks now account for more than half of global profits for the sector.

Successive rounds of regulation have sought to curtail British banks' ambition in the wake of the financial crisis, demanding that retail banking operations be ring-fenced from so-called "casino" investment banking. The sector has also been hit with a £3bn levy and recent curbs on bonuses that go beyond those imposed anywhere else in the world.

The Banker's Editor Brian Caplen told The Independent that "we may have seen the end of the UK-based global bank".

HSBC has suggested that it may seek to move its headquarters back to Hong Kong in what has been widely perceived as an attempt to persuade the government to relax its approach to the industry. The Financial Times reports this morning that French and Belgian banks Credit Suisse and ING may also seek to restrict their UK operations.