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Business Mayor
26-05-2025
- Business
- Business Mayor
Canadian pension giant to invest more than £8bn in UK
Stay informed with free updates Simply sign up to the Pensions industry myFT Digest — delivered directly to your inbox. Canada's second-largest pension fund plans to invest more than £8bn in the UK over the next five years, in a boost to chancellor Rachel Reeves as she seeks external investment to fund big infrastructure projects. Caisse de dépôt et placement du Québec, which manages C$473bn (£254bn) on behalf of 6mn pension savers, planned to increase its allocation to UK assets by 50 per cent over the next five years, the fund's chief executive Charles Emond told the Financial Times in an interview. 'We'd like to be a partner of trust and choice in the UK,' said Emond, adding that the government's plans to increase infrastructure spending were 'a huge opportunity and we'd like to be there in the early stages to see if we can do something'. He added that the UK would be 'top of the list' compared with many other countries in terms of 'willingness, clarity, transparency, deal mode and execution, seriousness and welcoming us . . . from that perspective they stood out and I think real stuff will come out of it'. CDPQ — one of the world's largest infrastructure investors — currently invests C$32bn (£17bn) in the UK, with assets including stakes in Wales-based electricity generator First Hydro Company and London Array Offshore Wind Farm, located in the Thames Estuary. The fund sold its stake in Heathrow airport late last year after owning it for more than 16 years. Emond, who took the reins at CDPQ in 2020, a year after joining from Scotiabank, said he expected the fund's allocation to Europe more broadly to grow from its current level of 15 per cent of the portfolio to as much as 17 per cent, with new investment focused on assets linked to the energy transition. 'In Europe, energy security matters a lot . . . governments have financial constraints . . . that's where private capital like us can come in,' said Emond. The Montreal-based fund's plan to increase investment in the UK, as well as in France and Germany, comes as it is preparing to rebalance assets away from the US, which currently make up around 40 per cent of its portfolio. The 52-year-old chief executive said the fund's US exposure would probably be 'trimmed a little bit' as it was 'at a peak after a decade of outperformance'. But he added it remained the 'deepest, biggest, closest market to us and we will continue to deploy money there'. Recommended CDPQ's plan to invest more in Britain comes as 17 of the UK's largest defined contribution pension providers have pledged to invest at least 5 per cent of assets in their default funds in British private markets by the end of the decade, a move the government hopes will drive £25bn of investment into the UK. Emond said this commitment from UK pension funds could create a 'positive synergy' and help attract more overseas investment into the UK. He said CDPQ was keen to invest alongside British retirement funds as 'like-minded partners' with local knowledge. The fund currently has C$25bn in France — its second-largest market in Europe — which Emond also expects to increase by 50 per cent by the end of the decade. He added he was investing 'time and effort' in exploring opportunities in Germany, with the country's energy needs and loosened fiscal rules ushering in 'a new beginning there with plenty of opportunities'.
Business Mayor
25-05-2025
- Business
- Business Mayor
UK household energy bills to fall after Ofgem lowers price cap 7%
Stay informed with free updates Simply sign up to the UK energy myFT Digest — delivered directly to your inbox. Britain's household energy bills are set to fall in the summer after regulator Ofgem lowered the price cap by 7 per cent, in a boost to Sir Keir Starmer's government as it tries to tackle the high cost of living. Ofgem on Friday set the price cap for July to September at a level that would mean a typical household pays £1,720 per year, down from £1,849 at present, following a fall in wholesale gas prices. It is the first reduction in the cap since July 2024 and will provide some relief for households struggling to pay energy bills. Utility bills helped drive inflation to a 15-month high of 3.5 per cent in April, according to figures released this week, dampening expectations of interest rate cuts from the Bank of England. Ofgem's move comes as the government this week said it would backtrack on cuts to winter fuel payments for pensioners, following a public backlash. Despite the cut in the cap, bills will be 9 per cent higher than last summer, said Ofgem, and remain hundreds of pounds a year higher than before the energy crisis that started in late 2021. Craig Lowrey, principal consultant at market analysts Cornwall Insight, said the reduction in the cap was a 'welcome development' but there remained a risk that 'energy will remain unaffordable for many'. He urged the government to 'continue to explore targeted support, including social tariffs, to ensure those most in need are not left behind as the market evolves'. The price cap sets a limit on how much energy companies can charge homes on default tariffs per unit of gas and electricity consumed. It is reset every three months to reflect changes in wholesale prices. Gas heats the vast majority of Britain's homes and is used to generate more than one-third of its electricity, meaning any changes in wholesale prices have an impact. Ed Miliband, the UK's energy secretary, welcomed the reduction in the cap, but said prices would only come down 'for good' through the government's plan to build more renewable power capacity. The UK imports nearly 90 per cent of its gas from Norway and the US, according to official statistics. Cornwall Insight said wholesale gas prices had fallen in recent months, partly due to mild temperatures and the prospect of a slowing demand in the US. It expects Ofgem will set the price cap at a similar level for the final three months, a period when households typically consume more energy. On a per unit basis, the cap for July to September will be 25.7 pence per kilowatt-hour for electricity with a daily standing charge of 51.4 pence. For gas, the cap will be 6.3 pence per kWh with a daily standing charge of 29.8 pence. That compares with the current cap of 27.03 pence per kWh for electricity with a daily standing charge of 53.80 pence, and 6.99 pence per kWh for gas with a daily standing charge of 32.67 pence.
Business Mayor
23-05-2025
- Business
- Business Mayor
Output in UK energy-intensive industries hits 35-year low
Stay informed with free updates Simply sign up to the UK energy myFT Digest — delivered directly to your inbox. Output in the UK's energy-intensive industries has fallen by a third since 2021 to reach a 35-year low, reflecting their exposure to the highest electricity prices of any rich economy, official data showed on Monday. The production of paper, petrochemicals, basic metals and inorganic products such as cement and ceramics was in 2024 at its lowest level in records stretching back to 1990, the Office for National Statistics said. The figures underline the challenge facing ministers as they seek to shield British industry from high energy costs that put businesses at a severe disadvantage to competitors in the US and China. Proposals to tackle the problem are likely to be central to the industrial strategy that the government will set out in June. The ONS said UK electricity prices were high by international standards because of the country's relative dependence on natural gas, whose price in European markets rocketed after Russia's full-scale invasion of Ukraine in February 2022. Gas-fired power stations generated less than a third of the UK's electricity on average across last year, but they typically set the price of electricity most of the time due to the UK's marginal pricing system. Under the UK system, the price is set by the most expensive supply bid accepted from the various electricity generators. The government considered splitting up the wholesale market to break this link, but decided against last spring, saying it would be too disruptive to deliver and that gas should set the price less of the time as more renewables are built. Read More UK set to miss 2030 clean power targets, experts warn Britain also sets a relatively high minimum price for carbon emissions and gives energy-intensive industries less generous carve outs from climate-related levies than Germany, France and the Netherlands. The average electricity price for non-domestic users almost doubled over a three-year period up to late 2023 and remains 75 per cent higher than it was at the start of 2021. The ONS said the industries it had identified were all operating in competitive international markets, putting them 'at greater risk from a relatively large increase in UK electricity and gas prices'. Between 2021 and 2024, manufacturing of paper and paper products contracted by 28.9 per cent. Manufacturing of petrochemicals plunged by 30.2 per cent, and that of inorganic non-metallic products, including concrete, cement, glass and ceramics, by 30.6 per cent. Meanwhile, output of basic metals fell by 46.5 per cent, a finding that reflects Tata Steel's closure of the two blast furnaces at its Port Talbot plant. Britain's domestic crude steel production last year fell to just 4mn tonnes — the lowest total since the Great Depression of the 1930s. The decline, from 5.4mn tonnes in 2023, was primarily due to the closures at the Port Talbot steelworks, though production issues at British Steel, over which the government seized control last month, played a part. Both businesses and unions have urged ministers to take action to cut costs, with Stephen Phipson, chief executive of the Make UK manufacturing lobby, warning that Britain risked 'passive deindustrialisation'. Recommended Although details are still being thrashed out, one option under consideration is to further cut network charges paid by industrial users, according to people working on the plan. Rishi Sunak's government last year put in place the 'British Industry Supercharger' measures to help energy intensive industries, which cut network charges for eligible companies by 60 per cent. The Trades Union Congress, the umbrella body for the labour movement, is urging ministers to match the 90 per cent compensation that France and Germany offer industrial users for these network charges. The UK compensation rate is now 60 per cent. Paul Nowak, TUC general secretary, said companies were being 'pushed to the wall', and called for 'decisive' action to level the playing field. Additional reporting by Sylvia Pfeifer in London
Business Mayor
22-05-2025
- Business
- Business Mayor
Kensington and Chelsea house prices fall to lowest level since 2013
Stay informed with free updates Simply sign up to the UK house prices myFT Digest — delivered directly to your inbox. House prices in Kensington and Chelsea have fallen to their lowest since 2013, underscoring the underperformance of prime London property due in part to higher property levies, uncertainty over Brexit and non-dom tax changes. The average price in the UK's most expensive borough plunged 15.1 per cent year on year in March to £1.19mn, the lowest since May 2013, according to Financial Times analysis of data from the Office for National Statistics. In the same month, UK house prices rose an annual rate of 6.4 per cent to a record high of £271,000, the fastest annual pace since December 2022. Local housing data is based on a smaller number of transactions, resulting in more volatility and larger revisions, but prices in affluent Kensington and Chelsea have fallen year on year for the past 30 consecutive months and for more than half the time since 2015. In March, house prices were also down in other high-end locations in the UK capital, including Hammersmith and Fulham, and Westminster, which registered annual contractions of 13.2 per cent and 20.1 per cent. In both areas, the decline lasted for at least the past 15 months. Lucian Cook, head of residential research at real estate company Savills, said the 'prolonged bull run' enjoyed by the prime London market 'really changed around 2014' when reforms to stamp duty drastically widened the gap in fees between high-end properties and cheaper ones. Factors including Brexit, the abolition of the non-dom tax regime, the Covid-19 pandemic, increased stamp duty fees on second homes and higher interest rates had since 'played against a market which has essentially been much more dependent upon flows of international wealth than it has necessarily on the cost and availability of domestic mortgage debt', he added. The non-dom regime — which allowed foreign domiciled nationals resident in Britain to earn money from abroad without paying UK tax on it for up to 15 years — was scrapped by chancellor Rachel Reeves last year, after her Conservative predecessor Jeremy Hunt said he would abolish it. The ONS on Wednesday said the end of a temporary stamp duty holiday on April 1 — which took thresholds back to pre-2022 levels — boosted national house prices in March, particularly in the North East, where costs jumped an annual rate of 14.3 per cent. As of last month, first-time buyers will start paying the levy when they buy properties worth £300,000 or more, down from £425,000 during the holiday. Stamp duty on the most expensive properties, which make up the prime London market, remains unchanged. Despite not being adjusted for inflation, house prices in prime London local authorities were down from their mid-2024 levels in March, but up almost 60 per cent in the UK and 33 per cent in London overall. House prices in the capital underperformed the rest of the country during the pandemic, though detached properties in prime locations enjoyed temporary boosts. Stuart Bailey, head of super-prime London sales at real estate group Knight Frank, said it had 'been a 10-year slow ebbing in pricing, because there has been less demand' as stamp duty rose and 'international buyers are thinking about what they want to do'. A 'massive price influx' in the four years to 2014, Bailey added, was 'not sustainable over the longer term' and 'we ended up on a longer downward trend'. Across 21 international prime markets, London and Kuala Lumpur were the only markets to register a fall in property prices in dollar terms over the past decade, according to research by Savills. While the ONS tracks all properties in each London local authority, Savills based its research on only high-end properties. Its analysis of the capital's prime properties in the most expensive local authorities found the average property price in central London was 21.2 per cent down on its June 2014 peak in the first three months of this year — equivalent to a saving of £1.2mn on the typical property, which now costs about £4.6mn. Savills expects house prices in prime central London to contract by 4 per cent this year. Richard Donnell, executive director of property consultancy Houseful, said sustained house price growth in high-end parts of the capital would be 'dependent upon stronger economic growth and increased inward investment into the London economy'. Bailey at Knight Frank said 'sentiments need to improve' for the trend to be reversed. While the capital's long-term stability in terms of politics, personal security and financial stability meant it still had 'allure and attraction' for many international buyers, 'we mustn't be complacent about that', he added.
Business Mayor
19-05-2025
- Business
- Business Mayor
Climate disasters are raising risk of US home repossessions, warns research group
Stay informed with free updates Simply sign up to the Climate change myFT Digest — delivered directly to your inbox. Climate-related disasters are raising the risk of home repossessions in the US and could cause billions of dollars in annual mortgage-related credit losses over the next decade, according to a new report by a risk-modelling group. The report was released as the economic toll of the latest tornadoes that swept through Missouri and Kentucky, leaving at least 25 people dead and scores injured, was still being calculated. Uninsured damage from flooding, as well as the depreciation of home values and rising insurance premiums from increasingly destructive climate disasters, could lead to as much as $1.2bn in credit losses in 2025, said risk-modelling group First Street. It was estimated that mortgages on about 19,000 properties could be repossessed — or foreclosed, as the process is known in the US — this year due to climate risk. That figure is estimated to rise to $5.4bn in losses from almost 84,000 repossessions by 2035, according to First Street calculations. In 2024, lenders began the repossession process for about 253,000 properties in the US, according to real estate data company ATTOM. 'Mortgage markets are now on the front lines of climate risk,' said Jeremy Porter, First Street's head of climate implications. 'Our modelling demonstrates that physical hazards are already eroding foundational assumptions of loan underwriting, property valuation and credit servicing — introducing systemic financial risk,' he said. Rising global temperatures are leading to more frequent and extreme weather events, such as storms, drought and flooding. The increase in climate-related disasters is already driving insurance losses, which hit $320bn globally in 2024, according to Munich Re, the world's largest reinsurance group. In 2024, the US alone suffered damage costing at least $182.7bn as a result of extreme weather and climate disasters, according to the National Oceanic and Atmospheric Administration. In response, private insurers have raised premiums, stopped underwriting new policies, or dropped coverage entirely in high-risk areas, such as locations in California and Florida, which experience higher than average policy non-renewal rates. In turn, higher insurance premiums can lead to higher mortgage and credit card delinquency, according to a January report by the Federal Reserve Bank of Dallas. These risks to a borrower's creditworthiness — stemming from climate change — can ultimately 'threaten household financial health and potentially impact the stability of the financial system', wrote the bank authors. St Louis was among the Midwest cities hardest hit by tornadoes this weekend © Reuters In its report, First Street — which analysed how past wildfire, flooding and hurricane events affected repossession rates, as well as indirect factors such as insurance premiums and home prices — found that insurance coverage was a crucial factor in recovering from disasters and avoiding repossession. For example, because standard homeowners insurance typically covers storm wind and wildfire damage, repossession rates were, in fact, lower for homes damaged by those types of disasters than those that were not because of insurance payouts, according to First Street. In the case of some storms, federal emergency and disaster funding brought in another 'influx of cash' to a community, added Porter. Flood insurance, on the other hand, is often optional and costly. Many areas of the US are also not considered nationally designated 'Special Flood Hazard Areas', where federally backed mortgage holders are required to buy flood insurance. But in those areas, heavy rainfall can cause flooding, resulting in property damage. This gap in flood insurance coverage leaves many properties exposed and is a major factor in increasing a homeowner's risk of repossession, according to First Street. Overall, a combination of financial stressors due to climate risks can amplify a borrower's risk of defaulting, said the report, from high insurance premiums and broader economic strain to home equity losses from property value declines. 'We have this climate debt built up that we're trying to correct for', Porter told the Financial Times. 'At this point, part of that is pricing risk properly so people know what they're getting into when they buy their home.' Where climate change meets business, markets and politics. Explore the FT's coverage here. Are you curious about the FT's environmental sustainability commitments? Find out more about our science-based targets here
