Also in this newsletter: UK/China spy saga, ‘Brexit 2.0’, chickens come home to roost
Today’s top stories
The European Commission downgraded its growth forecasts for the EU economy and upped its predictions for inflation. Brussels now suggests 0.8 per cent growth for 2023 and 1.4 per cent in 2024, with inflation at 6.5 per cent this year and 3.2 per cent next year. The European Central Bank faces a tough decision on interest rates on Thursday.
A British parliamentary researcher accused of working for Beijing has denied spying allegations levelled against him. Prime Minister Rishi Sunak told Chinese premier Li Qiang he had “significant concerns about Chinese interference in the UK’s parliamentary democracy”.
US Treasury secretary Janet Yellen rejected accusations that the G20 watered down its position on Ukraine over the weekend after it appeared the wording in the group communique was softened to stave off the prospect of a split. The group did, however, agree on a bigger role for the reformed World Bank.
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Good evening.
BMW’s decision to invest more than £600mn to make electric Minis in Oxford has given a much-needed shot in the arm to the UK car industry in the latest example of how the west is scrambling to respond to a wave of electric vehicle competition from China.
UK car production has fallen 40 per cent since the start of the pandemic thanks to plant closures, component shortages and decisions by manufacturers to move operations abroad. Brexit has been a key issue: China’s BYD, the world’s largest seller of electric and hybrid cars, blamed it for ruling out the UK as a location for its first European factory.
The threat from China — the world’s largest market for cars — is all-encompassing. Over the past 15 years, it has built up an EV industry that is now making a concerted push into Europe with sales that could reach 1.5mn vehicles by 2030. Last week, BMW chief Oliver Zipse said the EU ban on combustion engines from 2035 was pushing European makers of cheaper cars into a price war with Chinese rivals that they were unlikely to win (although an exemption from Brussels for cars powered by e-fuels may provide a bit of a lifeline).
China’s incursion into Europe was on full display at last week’s Munich motor show, with its carmakers taking up almost two-thirds of the floor space. Its industry has capitalised on the experience of joint ventures that international auto groups were required to form, while simultaneously placing significant bets on electric batteries.
Underpinned by vast state subsidies and unchecked bank lending, China, which has already cornered the market in the wider clean tech supply chain, is building battery plants far beyond levels needed for domestic demand, while manufacturers including world leader CATL are planning to expand into the US and Europe. It is also pouring record amounts into metal and mining investments to defend its position.
The most significant response in the west has been the US Inflation Reduction Act, which has pumped money into clean tech, including electric vehicles and batteries. However, the investment has failed to quell discontent from autoworkers whose threatened strike over pay could deliver a multibillion-dollar blow to the US economy.
In the EU, member states are being allowed to “match” incentives from elsewhere, while economy commissioner Paolo Gentiloni has urged Brussels to go further.
Meanwhile, the UK and Germany are trying to postpone tariffs on EV sales between the UK and the EU after industry warned that the measure would backfire. At present, Britain’s post-Brexit trade deal means levies of 10 per cent will be imposed on EVs shipped across the Channel from January if they have batteries made outside Europe.
France has introduced its own plan to subsidise EVs based on the emissions of their producers, in effect hitting Chinese manufacturers whose factories are run on electricity powered by coal.
Need to know: UK and Europe economy
A British Chambers of Commerce survey showed small and medium-sized businesses were completely unprepared for an impending “avalanche” of new EU regulations and taxes as they grapple with “Brexit 2.0”.
UK researchers are looking at using artificial intelligence to reduce the environmental impact of aviation. A £15mn project will determine the role that AI could play in advising and eventually replacing human air traffic controllers.
The EU is rethinking plans for stricter animal welfare measures over concerns they could fuel food price inflation. Brussels had promised to stop practices such as the use of cages for livestock, the killing of day-old chicks and the sale and production of fur.
Need to know: global economy
China gave a strong warning against bets on renminbi depreciation and released a batch of positive lending data earlier than usual, spurring the currency to bounce back from last week’s 16-year low against the dollar.
Subscribers can join our webinar this Wednesday (07.30 ET/12.30 UK) on China’s economic slowdown. Register here for your free ticket and send in your questions for FT specialist reporters and UBS economist Tao Wang.
Singapore has for decades prospered because of its reputation as a safe and neutral haven for business but its reputation has been dented by a billion-dollar money-laundering scandal.
Vietnam has boosted ties with the US during a visit by President Joe Biden with a new “comprehensive strategic partnership” and billions in semiconductor and AI deals. The US views developing countries in Asia as crucial to countering China’s power in the Indo-Pacific.
North Korea is belatedly reopening from some of the most stringent Covid-19 restrictions in the world, ending a long self-imposed isolation that was unprecedented even by the reclusive regime’s standards.
Need to know: business
Wilko’s remaining stores will shut by early October after a rescue deal for a large chunk of the UK high-street discount chain fell through. About 300 Wilko stores and distribution centres are expected to shut in the coming weeks although administrators have sold 51 sites to discounter B&M.
A Washington courtroom tomorrow becomes the focus for a historic government effort to rein in Google in the biggest antitrust showdown since Microsoft 25 years ago.
Chipmaker Qualcomm said it had struck a three-year deal with Apple to supply it with 5G chips for its smartphones, in a sign that the latter’s in-house efforts may take longer than expected. Apple launches its iPhone 15 tomorrow and the company had hoped — before last week’s crackdown by China on iPhone usage among officials — this would help it become the world’s largest handset maker.
Legal disputes in the shipping industry have hit the highest level in at least seven years, as declining profits and disruption caused by the war in Ukraine lead to clashes between shipowners and their customers, according to analysis shared with the Financial Times.
The poultry industry for much of the postwar period was one of the fastest growing and productive sectors in UK farming, but it has been hit by a series of upheavals that illustrate not only the fragility of food systems but broader issues plaguing the economy. Read our new deep dive.
Islamic scholars have ruled on how to make lab-grown meat halal in a sign of how the food industry is exploring how their products can fit religious dietary rules.
Columnist Helen Thomas highlights how UK supermarkets are ramping up efforts to sell ads, either in-store or online, to consumer goods companies desperate for targeted marketing and measurable returns, similar to Amazon’s “sponsored products” feature.
Another Big Read shows how the music industry has managed to remake itself after fears it would be left for dead in the digital era.
The world of work
UK trade unions are reporting the government to the UN watchdog on workers’ rights over its new anti-strike laws, arguing they fall short of international legal standards.
Even as some employers take a more aggressive approach to getting staff back in the office, new data shows the picture on working patterns is more nuanced, with many companies moving from fixed positions to offer much more flexibility.
And although divides between work and leisure time may have become blurred since the adoption of hybrid working, it’s still important to draw deliberate boundaries between the two, writes columnist Tim Harford.
Some good news
A giant leap for womankind: trailblazing 19th-century UK astronomers Annie Maunder and Alice Everett have had two asteroids named in their memory. The Guardian reports: “They charted the stars for pitiful wages, knowing their observations about the universe would be attributed to male colleagues, and died in relative obscurity, their scientific achievements unrecognised and overlooked.”
Source: Financial Times
