Disaster Movie: 10 Things We Learned This Week

This week, we look at Cineworld's woes, Biden's student gambit and the price of chips

Emma Simon 26 August, 2022 | 10:29AM
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Closing Credits Start to Roll?

It’s been more of a disaster movie than a summer blockbuster for Cineworld investors this week, with the debt-laden cinema chain – at one point the most shorted stock on the FTSE 100 – announcing it was considering bankruptcy. Investors have been warned that they could be left with nothing in this happens, and as a result dumped stocks as the week went on, causing the share price to spiral downwards. Back in 2019 shares in the company were valued at more than 300p; after the latest slide they stood at just 2p. Cineworld, the world’s second largest cinema chain, has struggled since Covid, with moviegoers failing to return in sufficient numbers amid increased competition from home-screening services like Netflix, and a dearth of big film releases. The only question now is whether there will be some final plot twist, or will this all end predictably, with no happy-ever-after for investors.

Inflation Heading for 18%?

Rocketing fuel bills mean UK inflation could top 18% by January, according to forecasts from US bank, Citi. This is nine times the official Bank of England forecast and would see prices rising at a rate not seen since 1976. In a note to clients, Benjamin Nabarro, chief UK economist at Citi, said that UK inflation is “entering the stratosphere” as he added that affordability concerns are “growing more deafening by the day”. This forecast assumes big jumps in the energy price cap, the first of which was announced today, in line with the upper end of these predictions.  Both Liz Truss and Rishi Sunak, still slugging it out to be the next Conservative leader, say it is important to get inflation under control, but detailed policy announcements about how they would actually tackle this growing crisis seem strangely unforthcoming.

Listed UK Tech Dwindling

To paraphrase Oscar Wilde (badly), to lose one UK tech giant to overseas investors might be regarded as a misfortune; to lose two (or more) starts to look like carelessness. This week controversy swirled around Aveva, one of the tech stars of the FTSE 100 that is now subject to a bid from French firm Schneider Electric. The £8 billion firm, which grew from a start-up as part of Cambridge University’s "silicon fen", produces software for major engineering projects. This latest approach follows news that US firm NortonLifeLock was acquiring cybersecurity firm Avast for £7.1 billion. If the Aveva deal goes through the FTSE 100 would have just two companies classified in the software and computer services category (Sage and Auto Trader), after another newly floated cybersecurity firm Darktrace dropped out of the main index after falling share prices.

Biden, Student Hero?

Low- and middle-income earners in the US could see up to $10,000 (£8,466) of their student loans wiped out, under plans announced by President Joe Biden. However, while many have welcomed this debt forgiveness it has prompted fears this could further stoke inflation, and has been criticised for penalising students who have already repaid debts, or avoided these loans in the first place. Biden appears unmoved by such arguments, pointing out that it was unfair that wealthy tech billionaires enjoyed tax breaks that are not available or ordinary American families.

This news comes as UK universities are calling for an increase in tuition fees from £9,000 a year to a whopping £24,000 a year. This demand has been made as concerns have been raised about UK institutions giving more places to overseas students, who pay this higher rate. However, an increase of this magnitude surely raises the prospects that the next generation of UK students will graduate with the mammoth debt burdens now commonplace in the US, no doubt opening the door to similar debt cancellation plans in the UK in future.

Emily Maitlis Turns on BBC

The former Newsnight presenter, whose interview with Prince Andrew caused serious ructions within the Royal Family, has now set her sights on another national institution. At a lecture at the Edinburgh TV Festival she criticised the BBC for Tory cronyism and adopting a "both-sides-ism" approach to issues like Brexit and climate change, so creating a false equivalence and platforming individuals who did not deserve air time. Interestingly, the lecture has acted like a political Rorschach test amongst the Twitterati, with talking heads saying this either demonstrates the BBC is staffed with left-wing Remoaner Marxists, or is proof it’s run by right-wing Brexit-supporting Boris acolytes s. However, Maitlis’s reasoned and authoritative defence of facts which don’t always need to be balanced by an alternative opinion will hopefully be embraced and adopted across serious media outlets.

UK Gamers Pay the Price

Parents might see Sony’s decision to bump up the price of its PlayStation 5 as more of a Grand Theft Auto than Call of Duty. Prices will rise by 10%, pushing the price of this popular games console up to £389.99 ahead of the expected Christmas demand. But while Sony is hiking prices for European, Japanese, Middle Eastern and even Canadian customers, prices will be held in the US, where the entertainment giant remains locked in a battle for market share with Microsoft’s Xbox. Sony blamed the price increase on rising costs and supply chain issues, which have included a global shortage of computer chips.

…while Chip Shops Battered

Small businesses in many sectors face a torrid time, amid rising fuel and wholesale prices, and a cost of living crisis that will curtail customer spending. This week the National Federation of Fish Friers warned that without targeted help, the nation’s fish and chip shops face “extinction”. It says the soaring price of cod and sunflower oil, on top of rising fuel bills is leaving many businesses struggling, particularly with many families cutting back on takeaways to help save money. The federation is calling for the government to slash VAT and help shops with energy bills. Without this it warns Friday night fish suppers could soon be a thing of the past.

Boardroom Pay Booming

Despite the economic doom and gloom FTSE 100 bosses awarded themselves bumper pay rises last year, with CEOs seeing their average remuneration increase by an inflation-busting 39% in 2021. This has fuelled calls for “pay restraint” this year, with many of their workers facing a wages cuts in real terms, thanks to inflation. The figures, from the High Pay Centre and TUC, show that the highest paid FTSE boss last year was Sébastien De Montessus, the CEO of Endeavor Mining, which owns a number of African goldmines. He received $22.7m, including a $10m award following the company’s decision to re-domicile and list in the UK. While politicians have called for restraint when it comes to pay settlements for public sector staff in a bit to limit inflation, it remains to be seen whether they will be as vocal when it comes to denouncing bumper pay packages in UK boardrooms.

Skipper Chipper as He Gets a C

Some good news about exams, amid reports of falling GCSE grades, and a widening north-south divide in the top results: at the ripe old age of 92, Derek Skipper has become the older person to pass his maths GCSE. Derek, who last sat a maths exam in 1946, has passed with a grade 5, the highest level he could have got on this foundation paper. In old money that translates into a solid C grade. Derek, who had to use a magnifying glass to read the questions on the paper, said he is delighted with the result although unlike scores of 16 year-olds he isn't now planning to go on A-levels.

Atomic Time

At this time of year we are all forward to a three-day weekend. But these could be a weekly occurrence if businesses follow the example of Atom Bank, who switched to a four-day working week last November. The challenger bank has now revealed that this had led to improved productivity, boosted staff morale and had helped the firm recruit and retain talent. Atom, one of a growing number of digital-only banks, said applications for jobs were up 49% compared with the equivalent period the year before. But before you put the beers on ice, other business involved in this four-day week trial have raised doubts about feasibility of reducing hours while keeping pay level and said they may stick with a more traditional working week.







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About Author

Emma Simon

Emma Simon  is a financial journalist, specialising in investment and consumer issues, writing for Morningstar.co.uk

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