UK regular pay rising faster than inflation again; Goldman Sachs profits fall by a third – business live | Business

Vodafone and Three will be forced to make major job cuts if a proposed merger of their British businesses is blocked, as they increasingly struggle to compete with market leaders BT and Virgin Media O2, top executives from the mobile companies told a committee of MPs on Tuesday.

In June, Vodafone and Three, the UK’s third and fourth-biggest operators respectively, agreed a deal to merge to create the UK’s biggest mobile company with more than 27 million subscribers.

The companies have argued that the merger is essential as they lack the financial resources to invest in their networks and make a viable commercial return, with rivals EE, owned by BT, and Virgin Media O2, dominating the market.

Nicki Lyons, corporate affairs and sustainability director at Vodafone UK, said that while there would inevitably be job cuts across both companies if the deal is cleared by regulators, such as at head office level, there would be much greater cuts if it is blocked.

“The biggest risk is the failure of each company,” said Lyons, speaking to the business and trade select committee of MPs.

“We are falling behind. We are struggling to compete with the two much bigger scaled companies. If we end up failing consumers will have less competition, less options to choose from, and our employees will no longer be employed by us. It is a significant risk if the deal doesn’t go ahead the (mobile) network sector will look dramatically different in the future. It is hard to say when but that is a definite risk.”

In May, Vodafone announced 11,000 job cuts from its global workforce over the next three years, the largest in its history, and the troubled telecom’s group has sold or is exploring the sale of assets in a number of markets around the world.

“Unless (Vodafone Group) can transform the fortunes of Vodafone UK it would ultimately start to question its strategic ownership,” said Karen Egan, head of mobile at Enders Analysis, one of a number of experts that gave their views to MPs.

Stephen Lerner, general counsel and regulatory affairs director at Three, said the company hasn’t grown in five years and is operating at an “unsustainable investment level”.

“Absent this merger we don’t see any real ability to move forward and grow the business that is going to break that cycle,” he said. “The current industry trend is job losses, not gains. The long term outlook for jobs in our companies if the merger doesn’t go ahead is not good. We are subscale and can’t afford to invest. Without this merger things are not looking great.”

Lerner re-iterated that Vodafone and Three have pledged an £11bn investment in next generation standalone 5G infrastructure over the next decade.

However, critics including Tommaso Valletti, professor of economics at Imperial College London, and George Stevenson, bargaining and investigative researcher at union Unite, argued that evidence from other countries shows that reducing competition from four to three major mobile operators results in consumers’ bills going up by 16% to 20%.

“The scientific evidence is uni-directional,” said Valletti, former chief competition economist at the European Commission. “The merger is an exit, it is not the entry of a player in the market.”

Three’s Lerner said that price rises outside of standard annual increases relating to inflation would mean the joint venture would not be competitive with BT and VMO2.

“There are no merger related price rises in the joint business plan, it is not part of the transaction rationale,” he said. “It is not in the interests of the merged entity to increase prices. If we don’t price competitively we will struggle to compete.”

Just in: Goldman Sachs has reported that net earnings fell by a third, year-on-year, in the last quarter.

Goldman posted net earnings of $2.058bn for the three months to the end of September, down from $3.069bn in the same quarter a year ago.

Revenues from commissions and fees dropped 11%, while investment banking revenues rose 1%.

Net revenues in Asset & Wealth Management were 20% lower than a year ago, due to net losses in equity investments.

But operating expenses rose by 18%, including a 16% jump in compensation and benefits paid to staff.

The quarterly results also included a $506m writedown related to GreenSky, the home improvement lender which Goldman sold last week.

Goldman CEO David Solomon (who has stopped DJing at high-profile events following claims it was a distraction) says:

“We continue to make significant progress executing on our strategic priorities and we’re confident that the work we’re doing now provides us a much stronger platform for 2024. I also expect a continued recovery in both capital markets and strategic activity if conditions remain conducive.

As the leader in M&A advisory and equity underwriting, a resurgence in activity will undoubtedly be a tailwind for Goldman Sachs.

Over in Australia, mining giant Glencore is reportedly planning to cut 1,000 jobs.

Glencore is planning to close its copper mining operations in Mount Isa, Queensland, by the end of 2025, according to the Australian Financial Review.

The AFR says:

With global miners struggling to contain costs and boost profitability amid increasing economic uncertainty, Glencore on Tuesday will announce its three underground copper mines in Mt Isa will be closed by the second half of 2025.

It is understood the mines are reaching the end of their natural life and the copper grade had become much lower which forced the decision.

But in a bid to allay local concerns, Glencore will confirm it will keep its copper smelter in Mt Isa and refinery in Townsville open, with enough third-party work to keep them profitable.

The rollback of hybrid working patterns is forcing women out of the City of London, MPs have been warned this morning.

The Treasury Committee is holding a hearing into sexism in the City, and asks whether things have improved over the last five years.

Fiona Mackenzie, CEO of thinktank The Other Half, tells MPs that the “accidental” introduction of hybrid working in the financial sector due to the Covid-19 pandemic did lead to some “fantastic progress”.

She says:

That has had a huge impact on working parents, (and brought) huge benefits for working parents, particularly for women – whether they or their partner are hybrid-working.

I think that has been life-changing.

There are lots of women in the City who are doing roles they would not be able to fulfill before, Mackenzie says, because they can be home-based sometimes, and due to the flexibility over when and where they work.

That is a huge thing if you have children, it makes such a difference to your ability to work.

Mackenzie warns, though, that very few people defend hybrid working – many CEOs don’t love it, and are quite keen to switch it off even though their staff love it.

So “lots” of hybrid working is being dialled back, particularly in founder-led firms, US-based firms and the investment industry.

This is forcing many high-performing women out of their jobs, Mackenzie warns:

There are women all over the City who are now working their notice, who have left jobs where they were high-calibre performers, because hybrid working enabled them to stick in those roles.

And there are leaders who are tearing their hair out, because they know they are losing great people because of these decisions to just switch off hybrid working unthinkingly.

More bad news on jobs, this time in the accountancy world.

KPMG will launch fresh job cuts in the UK and freeze pay for its deal advisory staff, the Financial Times is reporting.

The cuts come as a subdued deals market and difficult economic environment hit demand for KPMG’s services.

The FT says:

The redundancies in the deal advisory team were set to be announced during hastily convened calls on Tuesday morning and would affect about 110 people, close to 7 per cent of the nearly 1,700-strong UK deals business, according to people familiar with the matter.

KPMG had previously launched a targeted set of job cuts aimed at 2.3 per cent of its UK consultants — 125 positions. The firm, where partners earned an average of £717,000 last year, employs about 17,000 people in total across its audit, consulting, tax and deals practices.

The redundancy consultation was a last resort after other steps such as reallocating staff to divisions with more work, said a person familiar with the matter.

Last week, KPMG was hit with a record £21m fine by Britain’s accounting watchdog, for its botched auditing work on the failed government contractor, Carillion,

Larry Elliott

Today’s UK pay data leaves ministers with a big decision to make on next year’s state pension uprating, our economics editor Larry Elliott says.

That’s because of the pension triple lock, which states that pensions will rise by earnings, inflation or 2.5% – whichever is higher.

But which earnings figures will the government pick? They may be tempted to use the regular pay statistics, which exclude bonuses, and shows a smaller rise than total pay.

Larry explains:

The period over which the earnings component of the triple lock is calculated is the three months from May to July, when there was an increase of 8.5%. But earnings growth during that time was boosted by one-off payments to NHS staff and civil servants which, according to the ONS, led to “a spike in bonus payments that has never been seen before”.

Using regular growth in the three months to July would mean uprating pensions next year by 7.9% rather than 8.5% – and would save the exchequer about £1bn. It is safe to say that that option is under careful consideration.

Hundreds of UK jobs are at risk at Swedish electric truck maker Volta, which is filing for bankrupcy protection.

Volta Trucks’ board announced this morning that, “with deep and sincere regret”, they have decided to file for bankruptcy proceedings in Sweden.

The main trading entity of the Group, Volta Trucks Limited, will shortly file for administration in England, with insolvency practitioners from Alvarez & Marsal anticipated to take over, they add.

Volta blames problems with its suppliers; its battery supplier, Proterra, recently filed for Chapter 11 Bankruptcy, which affected how many vehicles Volta could make.

It says:

The uncertainty with our battery supplier also negatively affected our ability to raise sufficient capital in an already challenging capital-raising environment for electric vehicle players.

Volta Trucks has been developing its products in Warwick, including 7.5-tonne and 12-tonne all-electric lorries, and employs around 600 people in the UK.

Back in June, Volta Trucks launched its truck as a service hub in Tottenham, north London – where the rollout of the ULEZ clean air zone has lifted demand for electric vehicles.