The City wanted Labour to succeed, but the goodwill has been rapidly squandered
The '80's were the halcyon years for the City, triggered by the abolition of exchange controls in 1979, followed up in 1986 by 'Big Bang', which saw international investment banks such as Goldman Sachs, JP Morgan, Deutsche Bank and UBS rub shoulders and then usurp many of the grand old merchant banks of the day such as SG Warburg, Morgan Grenfell, Schroders, Samuel Montagu and Barclays Capital. The introduction of the LIFFE futures market in 1984 and the explosion of derivative trading triggered the expansion of capital markets and a tsunami of IPOS and privatisations.
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The Independent
10 hours ago
- The Independent
The City's U-turn on WFH tells you everything you need to know about bad bosses
Barclays has taken overflow office space in Shoreditch. HSBC, having decided to relocate from Canary Wharf to new headquarters near St Paul's, is looking for extra room, including moving some workers back to Canary Wharf (and has told staff that their bonuses could be cut unless they're back in the office). JPMorgan and BBVA are finding accommodating everyone a tight squeeze. And BlackRock is also struggling to fit in all its staff. Some City firms are using a booking system, which sees those who wish to come to the office having to reserve a slot, such is the demand for desks. After three years, Citigroup has shut its Malaga outpost, billed as providing a better work-life balance for the bank's analysts, and steered its staff to London. What distinguishes all these financial corporations and others is that they claim to only recruit the brightest and the best. They make fortunes from advising the rest of us, along with businesses and governments, how to manage our affairs. On deals, they take command, devise strategy, issue orders and tell those involved how to behave. Yet when it comes to their own internal management, they are all over the place. We've seen it before, of course – the sector is littered with numerous instances of banks and investment houses being penalised huge sums for their poor conduct or for showing a lax attitude to other people's money. Frequently, they've set out on one course only to change direction, usually at a substantial cost in both money and people. Their approach to working from home (WFH) and remote working shows a herd instinct – something of which they are often guilty. If their customers did the same, these companies would be the first to complain and criticise. This is the most stark example of the confusion that rages around hybrid working, certainly in Britain. A recent study by King's College London found that Britain is the remote-working capital of Europe, with UK employees WFH 1.8 days a week on average – a number that is well above the global average of 1.3 days, and the highest in Europe. Globally, only Canadians average more days a week at home, WFH for 1.9 days. Dr Cevat Giray Aksoy, associate professor of economics at King's and lead economist at the European Bank of Reconstruction and Development, says: 'Remote work has moved from being an emergency response to becoming a defining feature of the UK labour market.' Dr Aksoy, who also advises the House of Lords on policy regarding the implications of remote working for productivity and labour markets, adds: 'This shift is forcing businesses, policymakers and city planners to reimagine everything from office space to transport to regional growth.' But is it? While his study may point to Britain being out in front or lagging, depending on how the figures are viewed, growing apocryphal evidence indicates something different. The City, for one, is signalling 'enough'. Stockbroker Panmure Liberum, reports the Financial Times, has joined Deutsche Bank in barring staff from working at home on consecutive Mondays and Fridays. UBS has told its folk they must be in on either Mondays or Fridays or both, as one of their three mandated days in the office. Broker Peel Hunt insists on four days a week in the office, while traders at Man Group are up to five. Santander views five days as the default option. Goldman Sachs regards WFH as an 'aberration'. JPMorgan chief Jamie Dimon, probably the most influential banker on the planet, argues that remote working allows 'bad habits to develop'. Where the City leads, like it or not, the rest of the country, business and organisation-wise, tends to follow. Brightmine, which studies HR practices, claims that 15.1 per cent of UK companies have reduced their WFH hours. Slowly but surely, the TWaTs – those who go in on Tuesdays, Wednesdays and Thursdays – have begun to retreat. What began as a temporary solution to Covid and morphed into a trend, then a stampede, is coming to an end. Commuter numbers are edging towards their pre-pandemic levels. There will be those who resist, and there are bound to be lingering pockets of refuseniks, but by and large, Britain will fall into line. Maybe not reaching all five days, but the number WFH will be lower than it is currently, and will no longer be an outlier. It was predictable, and the banks for one should have seen what was likely to happen. After all, that is what they do, paying huge sums to smart graduates and deploying state-of-the-art technology to forecast the future. Seemingly no amount of qualifications from Stanford and MIT, no brilliant algorithms or AI, no 'thought leadership' gleaned in sessions at Davos or elsewhere, prepared them. This, too, in spite of the refusal of the mighty Goldman and JPMorgan's Dimon to play ball. If they had only stopped to think, it would have been obvious. Those super-smart hires are also intensely ambitious. How you get ahead, anywhere, is by standing out, making the boss sit up and notice. It's by showing that creative spark, which often results from being in the right spot at the right time. Convenient as they may be, the stultifying environments of Zoom or Teams, or even the sunny delights of Malaga and the Costa del Sol, are not that place. Ours – again, like it or not – is a globally connected world where commerce and trade are concerned. Nowhere more so than in banking. Why should workers in London, or the UK, operate to a different standard from everyone else? It does not make sense. At present, many employers are on the cusp; they are playing a balancing game. They are keen to not dissuade, and some Gen-Z and millennial employees expect to have the option to work from home. For now. But as they see those who spend more time in the office forging closer relationships with the chiefs, and winning promotions and higher salaries, it is surely a matter of when, not if, that changes.
Reuters
a day ago
- Reuters
Big disruption to oil supply unlikely after Israel's attack on Iran, say analysts
June 13 (Reuters) - Israel's attack on Iran is unlikely to cause a major disruption to oil supply, analysts at two major banks said, but a worst-case scenario involving blockades in the Strait of Hormuz could push prices above $100 per barrel, Goldman Sachs said. Oil prices climbed nearly 9% after Israel launched widescale strikes against Iran targeting nuclear facilities and missile factories, with benchmark Brent crude futures trading near $74.74 per barrel. Goldman Sachs has incorporated a higher geopolitical risk premium into its adjusted summer 2025 oil price outlook, but "we still assume no disruptions to oil supply in the Middle East," the bank said in a note Friday. The bank continues to forecast "that strong supply growth outside U.S. shale will reduce Brent and WTI oil prices to $59/55 in 2025Q4 and $56/52 in 2026." Analysts at Citi also said that supply disruptions should be limited, adding that while heightened geopolitical tensions may linger, energy prices are unlikely to stay elevated for a sustained period. Commerzbank said a further rise in oil prices would depend on supply risks in the event of an escalation, adding that prices are unlikely to fall below $70 for the time being. OPEC Secretary-General Haitham Al Ghais also said the escalation does not justify any immediate changes to supply, as current conditions remain stable. One of the risk factors the market is considering is a possible blockade of the Strait of Hormuz, a sea corridor through which around a fifth of the world's total oil consumption travels. While an interruption is unlikely, the strait remains in focus because it may prevent core OPEC+ producers from deploying spare capacity, Goldman Sachs said, adding that in an extreme scenario involving an extended disruption, prices could even top $100 a barrel. JP Morgan had, in a note dated Thursday, said certain worst-case scenarios in the Middle East could send oil to $120–130 a barrel.
Reuters
a day ago
- Reuters
Breakingviews - Unloved emerging markets are due a revival
LONDON, June 12 (Reuters Breakingviews) - Investors in emerging market stocks get biblical returns. Seven years of plenty are often followed by seven lean ones. The recent experience has been a great deal worse. By the start of this year, developing markets had delivered 15 years of disappointment. The good news is that the conditions are ripe for emerging equities to recover some of their lost ground. The group of countries that we now call emerging markets were a complete washout in the first half of the 20th century, largely due to war and the expropriation of shareholders by Communist governments in Russia and China. Since the 1950s, they have earned 6.7% a year in real terms, measured in U.S. dollars. That's in line with the average returns of developed markets. These returns have been lumpy, though: emerging markets delivered 9.5% a year in the 1980s, 3.4% annually in the 1990s, and 8.4% in the 2000s, according to UBS. From 2010 to the start of this year, dollar returns were just 1.3% a year, after inflation – the worst performance since the 1940s. At the start of this disappointing run, investors' expectations for this asset class had never been more ebullient. Antoine van Agtmael, the former World Bank economist who coined the term 'emerging markets' in 1981 after being told that a proposed Third World Equity Fund would never catch on, was proclaiming the 'Emerging Century'. Goldman Sachs was touting the rapid economic growth of the so-called BRIC countries: Brazil, Russia, India and China. Whereas the developed world was mired in aftermath of the global financial crisis, emerging markets escaped largely unscathed. Commodity prices rocketed. Capital flows into emerging markets soared. At the height of this euphoria the lean period commenced. In 2011, commodities markets turned down. Foreign capital inflows reversed after the U.S. Federal Reserve's announcement of monetary tightening sparked a 'taper tantrum' in 2013. Brazil, India, Indonesia, South Africa and Turkey, which were dubbed the 'fragile five', hit the buffers. In 2014, investigators exposed widespread corruption at Brazil's state oil company Petrobras, which not long earlier had persuaded investors to buy into the world's largest secondary share offering. Emerging stocks remained in the doldrums for the rest of the decade. Their fortunes turn down again in 2022 following Russia's invasion of Ukraine. After Western governments imposed sweeping sanctions on the country led by President Vladimir Putin, foreign shareholders in Russia found themselves once again holding worthless pieces of paper. Around the same time, China's real estate bubble imploded and President Xi Jinping launched a crackdown on large tech companies. By the start of this year, the share of emerging markets in the global stock markets had shrunk to 10%, less than half the combined market capitalisation of the 'Magnificent Seven' U.S. tech stocks. Revulsion against emerging markets was so severe that some called for the label to be dropped. John-Paul Smith, a former emerging-market specialist strategist at Deutsche Bank, declared, opens new tab that it was not a viable asset class, as the 24 countries spread across four continents that make up the MSCI Emerging Markets Index have little in common. The earlier assumption that these markets were converging towards western norms of corporate governance had been proven false. The emerging markets moniker, in Smith's view, was simply a marketing tool that allowed the financial services industry to charge higher fees. There are grounds for believing, however, that the forces that depressed returns for emerging markets are dissipating. In a recent note, the investment strategist Gerard Minack of Minack Advisors argues that the high profitability of emerging market companies in the early 2000s attracted excessive investment. Their share of global capital spending climbed from below 4% in 2000 to 11% by 2011 and remained elevated for several years. This splurge hurt profits. By the middle of the decade, emerging markets' return on assets had fallen to 3%, roughly a third of its level a decade earlier and below that of the developed world. High capital spending combined with falling returns on investment resulted in companies issuing more shares, which in turn depressed growth in earnings per share (EPS). Between 2000 and 2011, the EPS of listed emerging market companies grew by 17% a year. Over the next 14 years, annual EPS growth collapsed to 2.3%. China was the prime culprit, says Minack, but the trend holds true for emerging markets beyond the People's Republic. The tide is now turning. Emerging market companies have reined back investment. Last year, their net capital spending (as a share of assets) was down more than 70% from its peak, according to Minack. As capital spending drops, EPS growth has started to pick up. Emerging markets are also a potential beneficiary from the end of 'American exceptionalism' in global financial markets. The extraordinary gains in the U.S. stock market since 2009 sucked in foreign capital and crowded out other bourses, including those in emerging markets. Since Donald Trump returned to the White House, foreign investors in the United States have started to get cold feet and are beginning to look elsewhere. The U.S. president is actively courting a weaker dollar, which generally benefits emerging markets, as it did in the early 2000s. Emerging markets should receive a further fillip if the Federal Reserve cuts interest rates again. Emerging markets currently trade at attractive valuations. Rob Arnott of Research Affiliates forecasts a potential real return of 8% a year (in U.S. dollars) over the next decade. Value stocks in those markets should do even better. Relative to the U.S. stock market, emerging markets are close to the lows of 2000, when their last bull run commenced. Over the following decade, emerging market stocks beat their U.S. counterparts by around 10% a year, after inflation. One person who hasn't lost faith is van Agtmael. The heterogeneity of emerging markets is a strength rather weakness, he says, since it provides opportunities for diversification. Besides, his original investment case was never based on the markets' superior GDP growth. Rather, it was because he found many neglected world-class companies selling at attractive valuations across less-developed economies. That remains the case today. 'If people don't like an asset class, it's probably a good investment,' the father of emerging markets concludes. 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