British Steel, Freetrade's Future and Investment Association grumbles

British Steel, Freetrade’s Future and Investment Association grumbles

Thursday, February 23, 2023 7:42 a.m.

Mark Kleinman gets the town talking

I was not mistaken a few weeks ago when I wrote here that the settlement of the financially troubled UK steel industry would ultimately be someone other than Grant Shapps’ mess to clean up. What I didn’t anticipate at the time was that a month later, Kemi Badenoch would become the fourth business secretary in six months, tasked with delivering a taxpayer-funded decarbonization agenda.

Distributing public money seems a more difficult task than it should be. Badenoch county officials were due to travel to China this week to convince Jingye Group, the owner of British Steel, that a £300million grant and substantial energy subsidy was an act of genuine benevolence on the part of the government British.

The message doesn’t seem to get through. Hundreds of job cuts Scunthorpe company plant, with hundreds more to follow, arrived yesterday when a moratorium on layoffs was one of the conditions for government funding.

This implies that the Chinese conglomerate is playing a risky tightrope game, or is so disappointed by the government’s offer that it is pursuing its own restructuring anyway.

“British Steel has a crucial role to play in ensuring that the UK has its own supply of high quality steel. To ensure we can supply the steel Britain needs, we are undergoing the biggest transformation in our 130-year history,” CEO Xifeng Han said yesterday.

When Mr Shapps and Michael Gove, the Leveling Secretary, wrote to Jeremy Hunt a few weeks ago warning that without public money British Steel had no viable business, they effectively tied the hands of the Chancellor behind his back.

A similar offer has been made to British Steel’s arch-rival Tata Steel, but it is unclear whether the Indian group finds the offer more attractive.

Government officials may end up feeling like they have misplayed a weak hand. Both Jingye and Tata seem well placed to extract more public money, with fewer stringent conditions, than ministers would like. The alternative, as they are painfully aware, would be another bloodbath on industrial jobs, and it would do little for the Tories’ already shaky general election prospects.

The future of free trade?

For more than two months I have been wondering about the fate of Freetrade, the stock market app which appears to have struggled to win new investors at an expected valuation of £700m at the end of 2021. At that time I wrote that talks with Wall Street giant JP Morgan were unlikely to succeed to a transaction – and the lack of news since then seems to support this theory. Further talks with Monzo, the app-based bank, also proved fruitless. So here’s a piece of advice for somewhat sensitive fintech founder Adam Dodds: Organize a sale to Lloyds Banking Group instead.

Free Trade would provide the kind of innovative customer interface that the front-end apps of Lloyds and other established banks lack.

For Charlie Nunn, the still relatively new chief executive of Lloyds, it would be a ready-made solution to the rather clunky equity trading platform it currently operates. And as Nunn takes the UK’s biggest high street bank deeper into the affluent mass segment he outlined in his strategy update a year ago, it could be a cheap way to revive its investment ambitions.

Yesterday’s disappointing results and advanced advice from Lloyds underscore the need for a spark of inspiration.

An obstacle to a deal (involving Lloyds or any other potential suitor): how Dodds and its institutional shareholders, including publicly listed venture capitalist Molten Ventures and LVMH-backed private equity firm L Catterton, are they ready to accept?

A spokesperson for Freetrade says there are “no updates” on the company’s future. Much like with struggling UK fintechs like Railsr, the integrated finance sector that briefly yearned for a buoyant unicorn valuation but is now scrambling to find a buyer to save its future, the lack of concrete news on a takeover is often a bad omen. I look forward to Freetrade proving me wrong – whether in tandem with Nunn or a new alternate owner.

Now the fees are the subject of grumbling at the Investment Association

Fresh off low-level discontent over the £1.1million package handed to Investment Association (IA) chief executive Chris Cummings, a number of members of the trade body have been in touch – this time to complain about fee increases.

IA underwriting fees are based on a company’s assets and funds under management, set by a committee of members, and then approved by its board of directors.

Increases this year have been, a spokeswoman points out, below headline inflation rates despite the burden on AI to respond to an intense regulatory environment.

Additionally, she adds, membership has increased, with a higher percentage of full fees paid earlier this year than last.

“Feedback from our members demonstrates that they value the support provided by IA and strongly believe that our organization has a positive influence on policy and regulatory issues,” she says.

Still, I suspect those who complained about Cummings’ salary last year will be watching him closely in 2023, given their views on his fee hikes.