Category: Business News

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For a few days every August, a remote Wyoming valley known for mountain views and wildlife sightings sets the stage for serious talk about interest rates, inflation and the world’s labour markets.

How did Jackson Hole – more than 2,000 miles west of Washington DC – become a favoured retreat for central bankers and economists from around the world?

Officially, the answer is work.

A regional branch of the US Federal Reserve hosts an annual conference each August at the Jackson Lake Lodge in the heart of Grand Teton National Park.

But as with the millions of other tourists who pass through the area every summer, nature was the original draw.

Why Jackson Hole?

The Kansas City Federal Reserve, one of the US central bank’s regional entities, started holding an annual conference in 1978. In the early years, the discussions focused on agriculture, but organisers had aspirations for a more high-profile event.

The hope was that the location – in the middle of a national park – might help woo then Federal Reserve chairman Paul Volcker, who was known to be “fond of fly-fishing”, the bank’s history of the event recounts.

“I said we need a place for our next symposium (where) people can fish for trout,” recalled Tom Davis, a former senior vice-president and head of economic research at the Kansas City Federal Reserve.

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Mr Volcker accepted, but did reportedly raise questions about the distance.

“He said, ‘Roger, how in the hell did you ever get to Jackson, Wyoming?’” former Federal Reserve president Roger Guffey said.

Sounds nice. Is it?

Indeed. Jackson Hole has been a haunt for plutocrats for decades.

John D. Rockefeller, heir to the Standard Oil fortune, vacationed there, famously buying up thousands of acres that eventually formed much of what is now Grand Teton National Park.

The valley counts actors Sandra Bullock and Harrison Ford among its homeowners. Celebrity sightings include Pippa Middleton, while singer James Blunt recorded the music video for his song Bonfire Heart in the area.

“It’s one of the most beautiful spots in the United States and it is sometimes hard to tear oneself away from the views to go back inside and listen to more discussions about monetary policy,” said economist Alan Auerbach of the University of California, Berkeley, who will be speaking at the conference this year.

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The Federal Reserve knows the prime location is part of the conference’s popularity, but officials are alert to any implication that the conference is just an excuse for a luxury escape.

“The symposium is not considered a vacation getaway,” the bank insists in its materials. “Jackson Hole is well known for its many resorts catering to outdoors enthusiasts from around the world, but the symposium is held each year at the Lodge, which, in line with its National Park setting, does not have some accommodations commonly found at other sites, such as a spa, exercise room or salon. In fact, televisions are not available in the Lodge’s rooms.”

(The website of the hotel is a bit more enthusiastic, citing “all the amenities and guest services you would expect from a full-service resort”.)

Hmmm. Can I get in on this?

A spokesman for the Federal Reserve declined to reveal how much the event costs, what participants are charged or how it is kept within the venue’s capacity limits.

The company that runs the Jackson Lake Lodge for the National Park Service also declined to comment on the event or how quickly the 300-plus rooms at the lodge get booked. (Cabins and camp sites are also a possibility.)

Nothing appeared to be available this weekend, but some rooms were going for about £270 a night at the start of September if you can stand a 14-hour flight from London, according to hotel booking websites.

Technically, the lodge, as a National Park Service facility, remains open to the public throughout the event.

In 2014, a group of green-shirted protesters crashed the party. They were convinced to return to meet with officials in a more formal capacity two years later.

What do locals think?

The tiny town of Jackson, a 45-minute drive south from the hotel, sees about four million people pass through every summer. Visitors are such a reliable crowd that the Jackson Hole Travel and Tourism Board focuses its promotion efforts on other seasons, says its boss, Kate Sollitt.

So while investors around the world may be alert to any hints given by Federal Reserve chair Janet Yellen and European Central Bank president Mario Draghi on Friday, locals say it’s practically a non-event.

“The majority of our community doesn’t even know they’re here,” Ms Sollitt said.

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This week especially bankers were eclipsed, as Jackson was one of the places in the US where the sun and the moon would fully overlap, said Gavin Fine, owner of Fine Dining Restaurant Group and Rendezvous Bistro, which he said has been patronised by former Federal Reserve chairs Alan Greenspan and Ben Bernanke among others.

“We were in the path of totality so we had an influx of hundreds of thousands of people,” he said.

Still, when it comes to name recognition, Mr Fine says playing host to the Federal Reserve every year “doesn’t hurt”.

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The government is set to reveal whether companies should publish their pay ratio – the salary gap between their executives and wider workforce.

The question was first raised in a government discussion paper last year.

The move came after public pressure on firms to justify top pay packages.

A three-month consultation period has also asked for submissions on whether shareholders should be given a binding vote over executive pay, and on how to put worker voices in the boardroom.

Reports from Sky have indicated that 1,000 UK listed firms will be forced to publish their pay ratios.

It is unclear whether the sum used to measure executive remuneration would be their basic pay, or total package of financial benefits.

When he launched the consultation last November, Business Secretary Greg Clark said that any new reporting measure would have to be carefully designed.

‘Limited and late’

Earlier this month, the High Pay Centre, a think tank, said top chief executives’ pay had fallen in the past year, but there was still “a huge gap” between them and the rest of their staff.

The bosses of FTSE 100 companies now make on average £4.5m a year, down 17% from £5.4m in 2015, it added.

The think tank said the fall was welcome, but “limited and very late”. It said the average UK full-time worker on pay before tax of £28,000 would take 160 years to earn the same amount.

The outcome of the Corporate Governance Reform Green Paper consultation is expected to be revealed after the UK Bank Holiday weekend.

The Department for Business, Energy and Industrial Strategy said it would not comment on what the government’s response to the consultation would be.

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The alcohol content of Carling – one of the most popular lagers in the UK – is weaker than advertised, it has emerged.

Carling advertises the lager as 4% alcohol by volume (ABV) but it has been brewed at 3.7% since 2012, its US owners Molson Coors have said.

ABV was reduced in order to cut tax on Carling products, the firm said during a hearing brought by HMRC.

Molson Coors said beer was allowed to have a natural variation of 0.5%, and said customers had not been misled.

There is no suggestion Molson Coors has broken any laws.

Cost saving

Beer brewed in the UK is subject to excise duty decided by its alcoholic strength – meaning stronger products pay higher rates of tax.

According to documents from the tax tribunal – held in February and March this year – HMRC argued Carling had underpaid tax by more than £50m between 1 September 2012 and 31 January 2015.

It claimed the owners of Carling should have paid tax according to the 4% alcohol strength stated on cans, bottles and other products.

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However, the firm successfully argued the actual strength of the lager meant it was right to pay less tax.

Giving evidence to the tribunal, Philip Rutherford, vice president of tax for Molson Coors Europe, argued Carling it should pay tax on “the actual ABV of the beer” rather than the one stated on the label.

According to the papers, Mr Rutherford told the tribunal the “key driver” behind the decision not to change the labelling on Carling products was to stop retailers – including supermarkets and pub chains – demanding “a slice” of the savings.

The tribunal found in favour of Molson Coors.

‘Slight variation’

According to EU laws relating to the labelling of alcohol, products are allowed an ABV tolerance of +0.5% or -0.5% on products between 1.2% and 5.5% ABV.

Molson Coors said Carling customers have not been misled.

“As a major brand, the trust of our consumers is paramount. We abide by all legal requirements in the brewing and labelling of Carling,” it said in a statement.

“The natural process of brewing means all batches of Carling vary fractionally in alcohol content – the variation range for Carling is less than a quarter of 1% (0.23%).

“It is completely normal for consumable products to have a slight variation. For example, the allowed variation for wine is 1%.”

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One of the world’s biggest insurers has begun testing the impact of driverless cars on our premiums.

AXA is advising the UK government on how claims will work in future, when computers are driving us around.

The company has deliberately crashed a number of cars to recreate various “autonomous” scenarios. They mocked-up three different accidents.

Insurers regularly crash their own cars, using the results to work out how much to charge us in premiums.

The head of Accident Research for AXA, Bettina Zahnd, says these new, driverless tests are vital: “We want to demonstrate that we cannot have the same accident investigation methods as we had before, for autonomous cars, we need to know whether the driver or the car was in charge.”

Take over

Driverless cars won’t be with us overnight.

They’ll come along in stages. You may already have a vehicle that parks itself or brakes automatically if you’re about to hit the person in front.

That last system has already reduced low speed rear end accidents.

But in the end, computers will take over more and more of the driving and it could make driving cheaper.

David Williams from AXA UK is advising the government on its driverless car policies: “The good news is that people can expect their premiums to reduce in the long run.

“Insurance premiums are based on the cost of claims and we are going to see much safer roads and fewer accidents so that will feed through into producing lower premiums.”

Compensation

These tests will also begin answering another vital question. If you crash in a computer driven car, is it your fault?

David Williams says drivers needn’t be concerned: “I don’t think people need to worry whether it’s their fault or the computer’s fault.

“The UK government has decided that an insurance policy will be required and that will deal with the claim in the first instance.

“So people will be compensated and then the insurance companies and motor manufacturers can argue among themselves in the background.”

The UK wants to be a world leader in developing driverless cars. The industry could be worth billions of pounds.

Sorting out how the insurance will work is vital to smooth the way for the vehicle makers to test on our roads.

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Aldi has apologised after customers in some Midlands stores were charged twice for purchases made this month.

The company said a “processing error” led to a number of its customers at “some” stores in the Midlands being charged a second time on Thursday for purchases made on 4 and 7 August.

Some 4% of all transactions made in the UK on those dates were affected by the technical fault, Aldi said.

All affected customers were reimbursed within 24 hours, the supermarket added.

When asked if customers would be refunded for any overdraft fees they might have incurred, a spokesman for the company said it was advising customers to contact their bank.

Shoppers took to Twitter to complain about money being taken from their bank accounts.

The company said: “We are sorry for this error and any inconvenience caused to our customers.

“The issue is now resolved, but if customers require any further assistance, we advise them to contact our customer services team on 0800 042 0800, or by emailing .”

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Four out of five UK businesses have seen costs rise because of changes in employment legislation, the British Chambers of Commerce (BCC) reports.

The apprenticeship levy, pensions auto-enrolment and a new higher minimum wage have increased business costs.

The BCC’s annual workforce survey interviewed some 1,400 businesses.

The trade body wants the government to ensure no new upfront costs or taxes are imposed on businesses for the remainder of this Parliament.

The changes to employment legislation were designed to help improve wages and prospects for workers, but the BCC is concerned that high employment costs will have a negative impact on employees.

The Office for Budget Responsibility forecasts that the National Living Wage will increase to £8.75 per hour by 2020.

“Higher employment costs impact on the bottom line and reduce the resources available to invest in the business and its people,” said Jane Gratton, the BCC’s head of business environment and skills.

“Our survey shows that two-thirds of businesses will need to take action in response to proposed increases in the National Living Wage over the next three years. Firms are most likely to respond by raising prices or adjusting employee pay growth and wider benefits.

“There comes a point at which rising employment costs can no longer be absorbed through reduced profits.”

Key findings

The survey found that:

• 75% of respondents report an increase in costs as a result of pensions auto-enrolment
• 50% of businesses report an increase in costs due to the National Living Wage
• 20% of businesses report an increase in costs as a result of the Apprenticeship Levy

To deal with minimum wage increases:

• 38% of respondents plan to raise prices of products and services
• 25% of businesses intend to reduce pay growth for staff
• 21% of companies plan to reduce staff benefits
• 20% of respondents are likely to scale back on recruitment

“Employment is just one element of the high upfront cost of doing business in the UK,” said Ms Gratton.

“It is the cumulative impact of all of these changes, and the pace at which they are being introduced, that causes the greatest concern and poses the biggest risk.

“There is little scope for firms to absorb any further costs without there being damaging effects on competitiveness, growth and opportunities for people in the workforce.

“The government must ensure that there are no upfront further costs or taxes on businesses and entrepreneurs for the remainder of this parliament.”

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The City of Edinburgh Council has proposed a new fund to protect the legacy of the city’s festivals.

The council would invest £1m each year for a period of five years – with match funding from the Scottish government and Edinburgh’s Festivals.

One of the aims of the fund is to extend the tourism season in winter and late spring.

Council leader Adam McVey said the plan would protect Edinburgh’s position as “the world’s festival city”.

Mr McVey said: “Our festivals have been driving Edinburgh’s tourism for 70 years. Attracting audiences of over 4.5 million every year, they add £313m to the Scottish economy.

“If we are to sustain our position as the world’s festival city and protect their legacy, we need to make a joint commitment towards supporting their future success.

“In this crucial year, we need to recognise how our festivals support tourism, create jobs, and develop the creative and hospitality industries.”

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The aims of the fund, which marks the 70th anniversary of the International Festival, include:

• Enhancing the reputation of the festivals
• Creating opportunities in disadvantaged areas
• Finding new ways to export cultural products
• Increasing visitor numbers

Culture Secretary Fiona Hyslop said: “The internationally-renowned Edinburgh festivals attract visitors from across the world every year and make a significant contribution to our economy.

“The Scottish government has long made clear our commitment to supporting the festivals – awarding £19m since 2008 through the Expo Fund.

“I welcome the council’s in-principle agreement to invest an additional £5m over the next five years and we are finalising our discussions on the Scottish government’s support for the festivals.”

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Wisconsin, a state located in the middle of the US on the shores of Lake Michigan, has offered $3bn (£2.3bn) in subsidies to convince Taiwanese manufacturer Foxconn to construct a new plant there.

President Donald Trump and others say the investment will help spur a US manufacturing revival. But as state legislators debate the costs of the proposal, another question looms in the background: will it work?

Foxconn, one of the largest electronics manufacturers in the world, said it expects to invest $10bn over four years in the plant.

It will make liquid crystal display panels – screens for everything from televisions to cars and healthcare equipment.

The firm said it would employ 3,000 workers initially, with the potential for up to 13,000.

Wisconsin leaders say the investment is a once-in-a-century opportunity that will jumpstart a new electronics manufacturing industry in the US.

They see a bright future well worth the $3bn in subsidies that the state is offering in exchange for hiring and spending in the state.

“It is transformational and once in a while, I think it’s worthwhile for Wisconsin to do something to take that big leap,” said Robin Vos, who leads Republicans in the Wisconsin State Assembly.

The deal got a high-profile endorsement from President Trump, who announced Foxconn’s investment last month at the White House, claiming it as a victory for his push to revive US manufacturing.

“We have companies pouring into our country. Foxconn and car companies, and so many others, they’re coming back to our country,” he said at an event this month.

But critics say Foxconn and the president have histories of making big promises that don’t pan out.

They point to Foxconn announcements in places such as Pennsylvania, India and China that have not borne fruit. And they say the subsidy proposal does not have strong enough safeguards if the firm’s investment is smaller – and less transformative – than promised.

“How much Kool-Aid do you have to drink to believe that is going to happen?” asked Gordon Hintz, a Democrat, during the debate in the Wisconsin State Assembly.

What’s the case for the subsidy?

Foxconn, which employs about one million people globally, told the BBC it was “committed to all of the projects that have been proposed… and have invested billions more to ensure that those investments are realised”.

The firm, which works with US companies such as Apple and Tesla, has cast the investment as part of a global expansion that will place it in the heart of one of the world’s major markets. It expects to use the plant to create cutting-edge manufacturing systems.

Foxconn, which considered offers from other states before picking Wisconsin, said it always worked with governments on big projects because of the infrastructure needs involved.

“If we are to make large investments, in any location, we need a government partner who is able to commit the levels of support needed to make them economically viable for our company and, in many cases, also for the many other companies whose investments are attracted by the technology manufacturing hub we establish,” the firm said in a statement.

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The subsidy package negotiated by Wisconsin Governor Scott Walker, a Republican, has won widespread support from business groups.

Despite fierce debate, it is expected to pass in the Republican-controlled state legislature, where advocates say the deal will help reverse decades of manufacturing job losses and have broad economic impact.

Supporters say benefits are already evident, as Foxconn announces partnerships with local ginseng growers and other companies. Glass-maker Corning is expected to follow Foxconn with an investment of its own.

Daniel Gouge, vice-president of sales at Triangle Tool Corp, says he expects his company to win work from Foxconn if the proposal moves forward and cannot believe the state would hesitate with this type of investment at its door.

“This is a huge win for Wisconsin,” he said. “Everyone should be on board.”

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Analysts said the choice of Wisconsin – which helped secure President Trump’s victory in the 2016 election and is home of leading Republican Paul Ryan – underscores Foxconn’s political calculation, as it responds to the president’s tough-on-trade talk.

Mr Gouge, who voted for Mr Trump in the 2016 election, said he is optimistic Foxconn’s plans are a sign that the president’s strategy will produce more announcements.

“He may be totally bluffing, but it’s working,” he said.

What do opponents say?

Environmental groups have raised alarm about exceptions promised to Foxconn as part of the subsidy package.

But the price is the major sticking point, drawing objections even from Americans for Prosperity, which typically supports Republicans.

The Foxconn deal ranks as the fourth-largest subsidy package in the US, behind deals for firms such as aerospace giant Boeing and aluminium-maker Alcoa, according to Good Jobs First, which tracks them.

Assuming that the firm hires 13,000 people, the proposal works out to more than $230,000 a job, not including anything it makes back in the form of new economic activity.

State analysts estimate that Wisconsin would not start collecting any new tax revenue until 2032 and would not break even for more than 25 years.

State officials are negotiating a contract with Foxconn that will outline what the firm must do to receive the money, but critics say they want clearer commitments.

“My constituents want to be assured that these jobs will actually happen,” said Todd Novak, one of two Republicans in the Wisconsin state assembly to vote against the deal.

“They want a guarantee, a timetable for making it happen. Without it, I worry about whether this is the best deal for Wisconsin.”

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Some economists say costs are likely to be even higher than estimated, since the analysis does not include local government expenses that might be triggered by the project or factor in the possibility that many workers will commute from nearby Illinois.

That means the state will probably have to raise taxes or cut other kinds of spending, said Timothy Bartik, a senior economist at the WE Upjohn Institute for Employment Research, a non-partisan research organisation.

“There’s not a free lunch here,” he said. “The money comes from somewhere.”

The money might be worth it if the project is as successful as promised in its broader aim of creating a new industry, Mr Bartik says. But he thinks claims of Foxconn’s impact are overblown.

“I’m somewhat sceptical,” he said. “When you come down to it, this is a production facility to make flat-screen TVs.”

Opponent Carrie Scherpelz, a marketing and communication professional based in the Madison area, said the state would do better to invest in education or public infrastructure, instead of providing a handout to a single company.

“It makes no sense to me,” she said.

Do these kinds of deals work?

The high-profile nature of the Foxconn deal has reignited a perennial debate in the US over corporate subsidies, which critics say produce draining bidding wars between states and come without clear benefits for taxpayers.

In the EU, member states are permitted to offer benefits to companies only under certain conditions, typically tied to an area’s wealth, because of concerns that it skews competition.

But these kinds of packages remain a popular tool in countries such as the US, China, India and Brazil, says Kenneth Thomas, a professor of political science at University of Missouri-St Louis.

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Sceptics say previous announcements made by President Trump show the risks of relying on subsidies to keep manufacturing in the US.

Last year, he claimed a jobs victory at a Carrier plant in Indiana. In that case, the company received $7m from the state in exchange for agreeing to keep 1,100 jobs at the plant for 10 years and invest $16m in the facility.

But the company issued layoff notices to 632 workers in May – manufacturing jobs that the president suggested would remain.

Despite their mixed record, state subsidies appear to have a champion in the president, says Greg LeRoy, executive director of Good Jobs First, which tracks these deals in the US.

“I don’t like where this is going,” he said. The Foxconn deal, he said, “is like a checklist of everything that’s gone wrong with economic development”.

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British Airways has criticised Border Force over “serious inefficiencies” that have caused both citizens and visitors to endure long delays at UK airports.

The airline is concerned that only a third of the 29 electronic passport gates are open at Heathrow Terminal 5.

BA says the gates shut prematurely at 23:00 while customers are still disembarking, causing huge queues.

The Home Office has said it strongly disagrees with BA’s remarks.

Back in 2015, when the electronic gates at Terminal 5 were opened, the Home Office said that the technology would help the Border Force to process a higher number of low risk passengers “more quickly and using less resources” to reduce queuing times.

The electronic gates were meant to help border control officers to focus on “more priority work” like cracking down on people trafficking and drug smuggling.

However, since many of the gates are often closed, families returning from holidays have been facing long queues to pass through immigration, particularly late at night.

‘Insult to injury’

“It is a constant frustration to us and to our customers that after a long flight they have to stand in queues, sometimes for over an hour, just to get back into the country,” said Raghbir Pattar, British Airways’ director of Heathrow.

“And it is a dreadful welcome for visitors to the UK… It adds insult to injury when you’re stuck in a queue but can see numerous gates which just aren’t being used.”

British Airways has submitted its concerns to the Home Office and hopes that action can be taken to reduce unnecessary delays.

Mr Pattar said: “We recognise some of the steps being taken by Border Force to improve the service they provide to travellers. However more focus must be put on operating in the most efficient and flexible way and ensuring that passengers’ needs are put first.”

Heathrow Terminal 5 currently only serves BA and Spanish airline Iberia.

A spokesperson for Virgin Atlantic told the BBC: “This hasn’t been a particular issue for our customers as all our flights land before 10pm.”

Dispute over eGates

The Home Office strongly disagrees with British Airways’ comments.

“This statement significantly misrepresents the experience of the vast majority of passengers arriving at Heathrow this summer,” a spokesperson said.

“More than 99% of British and European passengers arriving at Heathrow are dealt with within 25 minutes. For passengers from outside the European Economic Area, 87% of passengers have been dealt with within 45 minutes.

“Border Force and British Airways have an agreement to close the Terminal 5 ePassport gates at 11pm every evening. In recent months, Border Force has kept the gates open beyond 11pm – often to accommodate passengers arriving on delayed British Airways flights.

“The security of our border is paramount – which is why 100% of scheduled passengers are checked when arriving in the UK. While every effort is made to keep delays for passengers to a minimum, we make no apology for carrying out this important work.”

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Shares in London turned south after a key speech by the US central bank chairman.

In it, she said existing banking rules should be left largely as they were. US president Donald Trump has called these rules a “disaster”.

Overall, the benchmark FTSE 100 index was down 5.6 points at 7,401.46.

Shares in troubled doorstep lender Provident Financial rose 22% – their third increase in a row, following their 66% plunge on Tuesday.

The stock was bolstered by news of a management shake-up at the firm.

Tuesday’s slump was prompted by the company’s second profit warning in three months.

Provident rose 13% on Thursday and 12% on Wednesday.

Friday’s trading was not so rosy for advertising giant WPP, another firm that has seen big losses this week.

Its shares fell 11% on Wednesday after it reported slowing sales, then rose 2.9% on Thursday. But on Friday it was back in the losers’ table, shedding 1.7%.

On the currency markets, the pound gained on the dollar’s fall post that Yellen speech.

It was up 0.61% at $1.2879 and rose 0.04% against the euro at 1.0842 euros.