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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Coutts CEO stands down in Farage bank account row, as Sunak fails to back NatWest chairman Davies – as it happened

Shell Centrica British Gas Greenpeace United Kingdom Ed Miliband Ofgem Oil TUC Wael Sawan
General view of Coutts Bank in London.
General view of Coutts Bank in London. Photograph: Susannah Ireland/Reuters

Afternoon recap

Time for a recap of this afternoon’s events…

The head of NatWest’s private banking arm Coutts has resigned with immediate effect.

Peter Flavel became the second top executive to quit NatWest in a row over the closure of the account of former Ukip leader Nigel Farage.

Paul Thwaite, NatWest’s new interim CEO, said Flavel was leaving by mutual consent.

Thwaite said:

Whilst I will be personally sorry to lose Peter as a colleague, I believe this is the right decision for Coutts and the wider Group.

Flavel said he was taking “ultimate responsibility” for the bank’s treatment of Farage, after a report showed that “reputational risks” were a factor, along with commercial considerations, in the decision to closing his account.

Farage claimed that Flavel had been “asleep at the wheel” and had shown “an extraordinary kind of arrogance” by not getting in touch after receiving two emails about the situation.

Senior bosses at NatWest Group will face scrutiny from shareholders tomorrow when the bank releases its latest financial results.

The UK government is the largest investor, with a 39% stake. And earlier today, Rishi Sunak declined to say whether he had confidence in NatWest’s chairman, Sir Howard Davies.

Sunak said his Government was taking “tough action” to protect the free speech, amid concerns that banks are dropping customers over their political views.

Asked by broadcasters on Wednesday if he had confidence in Davies, Sunak said:

“What I said right at the start of this was that it wasn’t right for people to be deprived of basic services like banking because of their views.

“This isn’t about any one individual, it’s about values – do you believe in free speech and not to be discriminated against because of your legally held views?

“Do you believe in privacy, particularly on matters as sensitive as your financial information? Those are the values and questions at stake here and that’s why I said what I did.”

Shares in NatWest have dropped again today, and just closed down 0.8% at 239.9p.

That takes their total losses over the last two days, since Alison Rose’s departure early on Wednesday morning, to around 4.5%.

That has knocked around £1bn off the market capitalisation of the bank, in which taxpayers own a 39% stake.

NatWest won’t be able to escape the glare of the spotlight tomorrow, when it is due to release its financial results for the second quarter of the year, at 7am.

It can expect a flurry of question about the events of the last few days, and also on whether chairman Howard Davies will follow Dame Alison Rose and Peter Flavel out of the bank (Sir Howard is due to step down by next summer).

NatWest will also be quizzed about UK economic conditions, as mortgage-holders are hit by higher interest rates.

PA Media reports:

The bank, whose largest owner is the Treasury, is expected to reveal an operating pre-tax profit of £3.3 billion for the latest half year, up from £2.6 billion in the same period last year.

It could also see its provisions for loan losses surge to £264 million from £70 million in the previous quarter, as it braces for more borrowers struggling with debt repayments.

It follows rival lenders Lloyds Banking Group and Barclays reporting a jump in their half-year profits as they continue to benefit from interest rate rises.

Farage: Flavel was asleep at the wheel over my emails

Nigel Farage has now posted emails he sent to Coutts’s now-departing CEO, Peter Flavel.

In the first letter, sent on April 19, Farage says he has been told “out of the blue” that his account is to close, and suggests there may have been “some prejudice” in the decision.

Farage insists that he has no desire to go public with the issue (as he later did), but warns Flavel that “both of us would be in a very interesting public position” if he couldn’t find a new bank account.

In the second letter, sent on May Day, Farage says he has been rejected by several banks and “on current course” will be turning up at Coutts with a security van to collect the balance of his account.

Updated

Compliance expert: Flavel's departure inevitable

Neville Hall, risk & compliance partner at Punter Southall Law, says Peter Flavel’s exit from Coutts was ‘inevitable’ for three reasons.

Hall told my colleague Anna Isaac:

“Peter Flavel’s departure was inevitable for three reasons; failure to put a customer’s interests first; poor oversight within Coutts; and inaccurate communications with its parent.

It shouldn’t have been down to the government to initiate Alison Rose’s departure, not least because they are conflicted as the largest shareholder. I’d expect the FCA to be actively engaged with the Boards of Coutts and NatWest to discuss how they can demonstrate adequate oversight, judgment and above all customer protection.

Updated

Peter Flavel had joined Coutts as chief executive in March 2016 after leading JPMorgan’s private wealth business in the Asia-Pacific region.

Since taking over he had sought to modernise the image of the institution formerly known as the “Queen’s bank”, the FT points out.

One of NatWest’s 20 largest shareholders has told Reuters that chairman Howard Davies’ position is looking increasingly shaky.

Sir Howard’s head of one of the three which Nigel Farage demanded on Tuesday night, after Alison Rose confirmed she was the source of the BBC’s now-corrected story that the ex-Ukip leader lost his Coutts account for commercial, not political, reasons.

On Tuesday evening, Farage told viewers of his GB News TV show that:

Sir Howard Davies is responsible for overall governance. He has clearly failed in this task, least of all by endorsing their [Rose and Flavel’s] conduct. In my view they should all go.”

Updated

Peter Flavel
Peter Flavel Photograph: Martin Godwin/The Guardian

Full story: Coutts chief executive resigns over Nigel Farage row

The head of the private bank Coutts has resigned, less than 48 hours after the departure of his boss, NatWest chief executive Alison Rose, amid over a growing row over former Ukip leader Nigel Farage’s bank accounts.

Peter Flavel stepped down “by mutual consent with immediate effect”, said NatWest Group’s acting chief executive, Paul Thwaite.

“While I will be personally sorry to lose Peter as a colleague, I believe this is the right decision for Coutts and the wider group,” Thwaite said.

More here.

Here’s our timeline of how the crisis at NatWest, one of the UK’s largest banks, has unfolded in recent weeks:

Nigel Farage tweets that it was “only a matter of time” before Coutts CEO Peter Flavel stood down:

Peter Flavel: I bear ultimate responsibility for Farage case

Peter Flavel, the departing head of Coutts, says he is taking responsibility for the Bank’s handling of Nigel Farage’s case.

Flavel explains:

“I am exceptionally proud of my seven years at Coutts and I want to thank the team that have built it into such a high performing business. In the handling of Mr Farage’s case we have fallen below the bank’s high standards of personal service.

As CEO of Coutts it is right that I bear ultimate responsibility for this, which is why I am stepping down.”

Coutts CEO stands down in Farage bank account row

Newsflash: The head of Coutts has resigned, over the row about Nigel Farage’s loss of a his bank account.

NatWest, which owns Coutts, has just announced that Peter Flavel will step down immediately.

Paul Thwaite, who was appointed as NatWest Group CEO yesterday after Alison Rose stepped down, says:

“I have agreed with Peter Flavel that he will step down as Coutts CEO and CEO of our Wealth Businesses by mutual consent with immediate effect.

Whilst I will be personally sorry to lose Peter as a colleague, I believe this is the right decision for Coutts and the wider Group.

Mohammad Kamal Syed, the head of Coutts’ asset management team, has been asked to step into the role of interim CEO of Coutts, Thwaite says.

Thwaite adds:

Mo has extensive Wealth Management experience and is the ideal person to lead Coutts through this difficult time as we begin the search for Peter’s replacement.”

Earlier this week, Farage called for Flavel to step down, after it emerged that a Coutts dossier showed the former Ukip leader’s bank account was closed after commercial considerations – wealth falling below a threshold – and concerns over his “xenophobic, chauvinistic and racist views”.

Rose resigned around 1.30am yesterday following government pressure.

She was forced out after admitting being the source for a BBC story that said Nigel Farage’s bank account was shut because he fell below the wealth limit, thus solely for commercial rather than for political reasons.

Updated

Lagarde: Outlook for growth and inflation is highly uncertain

The outlook for economic growth and inflation in the eurozone remains highly uncertain, ECB chief Christine Lagarde tells reporters.

Downside risks to growth include Russia’s war against Ukraine, or the possibility of a wider increase in geopolitical tensions that fragments trade.

She warns that inflation could be pushed up by rising costs of energy and food, related to Russia’s withdrawal from the Black Sea grain initiative.

Lagarde adds that adverse weather conditions, due to the “unfolding climate crisis” could push up food prices by more than projected.

Christine Lagarde then explains that eurozone manufacturing is being held back by weak external demad, while momentum is slowing in the services sector.

She predicts that growth will remain weak in the near term, but then pick up, helped by the “robust” labour market.

Lagarde: ECB will take "data-dependent approach" to rates

ECB president Christine Lagarde is holding a press conference now to explain today’s interest rate rise.

She begins by reading out the statement released half an hour ago, which warns that inflation is expected to remain too high for too long, and that underlying inflation remains high overall.

Lagarde insists that the ECB will keep interest rates at “sufficiently restrictive levels for as long as necessary” to bring inflation down to its 2% target.

She adds:

The Governing Council will continue to follow a data-dependent approach to determining the appropriate level and duration of restriction.

In particular, its interest rate decisions will continue to be based on its assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation, and the strength of monetary policy transmission.

ECB rate hike: What the analysts say

Here’s more reaction to the European Central Bank’s interest rate rise.

Carsten Brzeski, global Head of Macro at ING, says:

The ECB just hiked its main policy interest rates by 25bp. The deposit interest rate is now at 3.75%. What is more interesting, the accompanying policy statement kept the door for further rate hikes wide open and did not strike a more cautious note. Let’s see whether this stance will be confirmed at the press conference, starting at 2.45pm CET.

After the June pre-announcement, it was hard not to hike interest rates today. The ECB has been too explicit that the risk of stopping rate hikes prematurely is much higher than going too far.

And here’s Alex Livingstone, head of trading for FX & ETFs at Titan Asset Management:

“The ECB decided to follow in the Fed’s footsteps today hiking rates by 25bps to 4.25%. However, the language in the statement struck a more dovish tone than markets anticipated as the ECB gestured to clearer signs of inflation easing and admission of tightening financial conditions weighing on demand.

This is a clear nod to economic growth becoming a more important topic of focus down the line as inflation dissipates.”

Europe’s rate hikes are “drawing to a close”, predicts Ben Laidler, global markets strategist at trading and investing platform at eToro.

“With a sharp energy-driven fall in inflation already underway, and a German-led recession looming, the ECB opted to raise rates by 0.25% today and its approach will be increasingly cautious and data-driven from here on in, with one final rate rise the most likely outcome.

“This more dovish stance will take the wind out of the sails of the Euro rally, be a relief to the continent’s many exporters, while putting the world’s two dominant central banks tantalisingly close to the end of their dramatic tightening cycles.”

Updated

US growth accelerates to 2.4% per year

Newsflash: the US economy grew faster than expected in the second quarter of this year, as America batted away recession worries.

US GDP grew at an annualised rate of 2.4% in April-June, the equivalent of quarterly growth of 0.6%.

That’s an acceleration on the 2% annualised growth recorded in January-March.

Economists had forecast a slowdown, to 1.8%.

This pickup in growth could lift hopes that America’s economy could achieve a soft landing, as its central bank raises interest rates to battle inflation.

Richard Flynn, managing director at Charles Schwab UK, says:

“Today’s figures exceed expectations for growth in the second quarter. While this growth is a positive sign of a strengthening economy, high demand will also reinforce the inflationary pressures that are an ongoing concern for the Fed.

“As long as the labour market remains tight and inflation remains above the central bank’s 2% target, we can expect to see further rate increases in coming months. The market eagerly awaits the end of the rate hiking cycle, but may be reassured to see that policy has not yet pushed the economy closer to recession as some investors fear.”

Eurozone interest rates are near, it not at, their peak following today’s increase, suggests Niil Birrell, chief investment officer at Premier Miton Investors.

“The ECB went with the expected 0.25% rate hike, but of much more interest is whether there will be another one in September.

That will clearly be subject to the two inflation data releases between now and then. Whatever they mean for the overall outlook, either way, the ECB will want to retain flexibility.

If rates are yet not at the peak, we are not far away, and the conversation may soon move to how long they will stay at the peak.”

Updated

ECB raise interest rates to highest ever levels to battle inflation

Newsflash: The European Central Bank has lifted eurozone interest rates back to the highest level ever, as it tries to cool inflation.

At its regular meeting today, the ECB raised its three key interest rates by 25 basis points, or a quarter of one percentage point.

Announcing the move, it says:

Inflation continues to decline but is still expected to remain too high for too long. The Governing Council is determined to ensure that inflation returns to its 2% medium-term target in a timely manner.

The move means that the ECB’s deposit rate – what banks receive for depositing money with the central bank overnight – will rise to 3.75%, matching the previous record set in 2000-2001.

The ECB’s main refinancing operation rate – what banks pay to borrow from the ECB – rises to 4.25%.

The ECB’s governing council decided to raise borrowing costs again, squeezing households and businesses, despite inflation falling to 5.5% in June, from 6.1% in May.

The ECB explains:

The rate increase today reflects the Governing Council’s assessment of the inflation outlook, the dynamics of underlying inflation, and the strength of monetary policy transmission.

The developments since the last meeting support the expectation that inflation will drop further over the remainder of the year but will stay above target for an extended period.

Updated

Rishi Sunak silent on future of NatWest chairman

The NatWest crisis rumble on today, with Rishi Sunak declining to say whether he had confidence in the Group’s chairman, Sir Howard Davies.

Asked about the ongoing row over the closure of Nigel Farage’s Coutts account, Sunak said:

“What I said right at the start of this was that it wasn’t right for people to be deprived of basic services because of banking, because of their views.

“This isn’t about any one individual, it’s about values - do you believe in free speech and not to be discriminated against because of your legally held views?

“Do you believe in privacy, particularly on matters as sensitive as your financial information. Those are the values and questions at stake here and that’s why I said what I did.”

Back in April, Davies said he would step down by summer 2024.

NatWest, in whom the UK owns a near 40% stake, is due to release financial results tomorrow, two days after the resignation of CEO Dame Alison Rose.

Updated

Updated

Lunchtime summary: Energy industry facing new windfall tax demands

A quick recap…

Calls for a wider windfall tax on Britain’s energy sector are rising, after two major companies reported bumper profits.

Centrica burst back into the black, with a statutory operating profit of £6.5bn for the first half of this year, up from a loss of £1.1bn a year ago.

Its British Gas arm grew its earnings by almost 10 times, from £98m to a record £969m, at a time when many households have struggled to pay their energy bills.

British Gas benefitted from Ofgem’s controversial decision to allow energy suppliers to claim greater profits from hard-hit customers via the energy price cap.

Energy giant Shell made $5bn, or £3.85bn, in the last quarter. Earnings were hit by the drop in wholesale oil and gas prices this year, with Shell making less than half the $11.47bn of Q2 2022.

Both companies lifted their dividends, and are also passing spare cash to investors through share buyback programmes.

Campaigners have heavily criticised the government for not reining in the sector.

The TUC said ministers were allowing energy companies to “laugh all the way to the bank”.

Greenpeace UK erected a giant spoof advertising billboard outside Shell’s HQ, drawing attention to the oil and gas industry’s responsibility for extreme weather linked to the climate change caused by the burning of fossil fuels.

It shows an image of a Greek firefighter battling to contain a wildfire near Athens last week, is emblazoned with Shell’s logo and features the slogan “Our profit, your loss”.

Greenpeace Stage Protest Outside Shell HQ Amid Profits Announcement

Opposition politicians also weighed in.

Ed Miliband, Labour’s shadow climate and net zero secretary, said Labour would introduce a “proper windfall tax” on oil companies and promote cheap renewables to bring down bills for households.

Miliband said:

“These figures demonstrate the continuing scandal of the Tory failure to act on the windfalls of war being pocketed by oil and gas companies

The Liberal Democrat leader Sir Ed Davey called for a general election, saying:

“It beggars belief that after all these months this Conservative Government is still allowing energy firms to rake in extraordinary profits while millions of families struggle.

“It’s time for a general election and a proper windfall tax to fund the support families desperately need.”

The Green Party called for a carbon tax would provide the money to invest in free home insulation, properly-funded public services and a universal basic income.”

The Unite union argued that public ownership is the only way to end the ‘chaos in Britain’s energy sector.

Scope, the disability equality charity, says Britain needs a social energy tariff - a discounted rate - for disabled people to protect them from sky-high energy bills.”

Updated

Centrica’s shares are continuing to climb after this morning’s jump in profits.

They’re now up over 7% to 132p. their highest level in almost four and a half years.

Investors will be cheered by the 33% increase in Centrica’s dividend, and a £450m extension to its share buyback programme.

AJ Bell investment director Russ Mould says:

“British Gas owner Centrica won’t be winning a popularity contest with the public anytime soon, but shareholders may not be too bothered.

“The massive increase in first-half profit reflects the impact on its retail energy-facing business of a lifting of the price cap but the contribution made by its energy marketing and trading division, helped by the big volatility in commodity prices, should not be ignored.

“The strengths of Centrica’s integrated model have really come to the fore in recent times and after several lean years, the company is able to reward investors handsomely – lifting its dividend substantially and extending a share buyback.

“Centrica needs to tread carefully given many households are struggling to pay the bills. The scandal over forced installation of pre-payment meters means the company is already skating on thin ice.

“Political and regulatory pressure may mount on the business if it continues to show largesse with its shareholder returns while taking a hard line with vulnerable customers. All in all, these stonking numbers could put Centrica in the firing line.”

Ofgem’s controversial decision to allow energy suppliers to claim greater profits from hard-hit customers via the energy price cap has also led to a windfall for EDF Energy and Scottish Power, as well as British Gas, my colleague Jillian Ambrose reports.

French state-owned EDF reported this morning that its UK business made profits of almost €2.3bn (£2bn) for the first half of the year, up from €860m in the same months last year. That included the earnings from EDF’s nuclear power plants in the UK.

It said this increase was driven mainly by the regulated price cap, with EDF telling shareholders:

The rise in EBITDA is essentially explained by a recovery of margins in the supply business, driven mainly by allowances in the UK domestic default tariff cap allowing suppliers to recover costs incurred through the market turbulence of previous years.

Scottish Power, which is owned by Spain’s Iberdrola, reported a profit of £576m for the first half of the year from a loss of £86m last year.

Charity Scope: 'obscene' Centrica profits show need for social energy tariff

British Gas’s blistering 900% jump in profits so far this year is fuelling calls for discounted energy bills for disabled people, their carers and older people struggling with bills.

Scope, the disability equality charity, has been calling for a social energy tariff, which would benefit those receiving means tested benefits or disability benefits, or receiving Carer’s Allowance.

James Taylor, head of strategy at Scope says today:

“It’s obscene that energy companies continue to make massive profits whilst people can’t afford to charge wheelchairs and stairlifts and still have huge energy debt.

“Energy companies need to start putting disabled customers first.

“We need a social energy tariff - a discounted rate - for disabled people to put an end to sky-high energy bills.”

Centrica chief executive Chris O’Shea has defended the group’s profits, arguing that its solid balance sheet had helped to protect consumers after several energy suppliers collapsed over the past few years.

O’Shea told a briefing:

“To be sustainable and stable you have got to make a profit,” he said during a briefing.

Centrica also points out that it has committed £100m in additional customer support since the start of the energy crisis.

But that figure is dwarfed by British Gas’s adjusted profits of £969m so far this year.

Over half of those earnings relate to changes to the regulator’s price cap which allowed Britsih Gas to recoup losses earlier in the energy crisis.

Ofgem set its price cap at £4,279 for a typical household in January 2023, rather higher than the £2,500 cap under the government’s Energy Price Guarantee to protect households. The difference was covered by the Treasury; with government payments to soften the impact of rocketing energy bills pushing up public borrowing.

Centrica shareholders are to benefit from the surge in profits reported this morning – the company is proposing an interim dividend of 1.33p, up a third from the 1p paid last year.

UK businesses are less anxious about soaring energy bills, according to new data from the Office for National Statistics.

The ONS reports that fewer than 1 in 10 businesses (9%) reported energy prices as their main concern. That is the lowest proportion since the question was first asked in February 2022, the month of Russia’s full-scale invasion of Ukraine.

Firms were more worried about the risk of falling demand for their goods and services, and about the impact of inflation.

The ONS also reports that 1 in 8 businesses were experiencing worker shortages in mid-July 2023, with 38% of those businesses reporting that employees were working increased hours as a consequence.

British Gas profits make the case for a carbon tax, say Greens

The near-900% jump in British Gas profits so far this year to almost one billion pounds show there are “still massive profits to be made from letting the climate burn,” says Green Party co-leader Carla Denyer.

The Green Party are calling for a carbon tax, paid by major polluters, which could fund cost of living support.

Denyer said:

“It’s not acceptable that customers struggling through a cost-of-living crisis are facing higher bills because the regulator and British Gas have done a deal allowing it to rake in a 900 per cent increase in profits.

“If nationalisation wasn’t already one of the most popular Green Party policies there is - these profits very much make the case for the public to take control of this business.

“Making so much profit whilst so many people are struggling to pay their bills, shows our cost of living crisis for what it really is - a greed crisis.

“Fossil fuel companies drive the world’s greenhouse gas emissions, but are still allowed to profit from their damaging activities. A carbon tax would target these big polluters and render coal, oil and gas financially unviable as cheaper renewable energies rise up to take their place.

“These green policies work best when everybody benefits. That is why our policy has always been to use the proceeds of a carbon tax as a social dividend. This will help people to get through this cost of living crisis and make the UK a more equal society. Yields from a carbon tax would provide the money to invest in free home insulation, properly-funded public services and a universal basic income.”

Shadow climate secretary Ed Miliband has repeated Labour’s call for a more stringent windfall tax, after Shell reported profits of over $5bn for the last quarter.

Miliband said:

“These figures demonstrate the continuing scandal of the Conservatives’ failure to act on the windfalls of war being pocketed by the oil and gas companies.

“Labour would bring in a proper windfall tax to help tackle the cost-of-living crisis.”

Last November, chancellor Jeremy Hunt increased the current energy profits levy (EPL) from 25% to 35% and extended by two years, until March 2028.

The EPL is levied on North Sea oil and gas operators, but is criticised for not capturing excess cash generated by oil and gas giants’ trading, refining and forecourts divisions.

Although Shell’s shares are down today, -1.7% at £23.57, they’re sharply higher than before Russia’s full-scale invasion of Ukraine.

In mid-February 2022, Shell’s shares traded around £20. During 2022, its shares jumped by around 43%, as did rival BP.

This year, Shell are only up around 1%, as the drop in wholesale oil and gas prices eat into its earnings.

Shell’s share price over the last two years
Shell’s share price over the last two years Photograph: Refinitiv

Victoria Scholar, head of investment at interactive investor, says:

After collapsing in 2020 at the height of the pandemic when the global economy ground to a halt, shares in Shell have been sharply rebounding off the lows, although the pace of gains has tempered with shares up modestly so far in 2023.

Despite this, the analyst community remain bullish towards the stock with no sell recommendations and a majority of buy recommendations. Today Shell is under pressure, dragged down by lower earnings.”

Roberto Rivero, market analyst at Admirals, reckons the drop in Shell’s profits in the last quarter shows the energy sector is moving from boom to bust.

“The nature of the oil and gas industry is one of boom and bust. Prices rise, then they fall. When prices are high, oil and gas companies inevitably make hefty profits. When they fall, these profits begin to normalise.

It has been evident for some time that we are entering the “bust” phase of the oil and gas cycle, as prices ease from the multi-year highs of last year. As prices have trended downwards over the last year, so too have Shell’s earnings, which dropped more than 50% in the second quarter.

Shell could take a further hit in the second half of 2023 as sluggish economic growth in advanced economies and a lacklustre post-Covid Chinese recovery could exert further downward pressure on oil and gas prices.

However, OPEC+, who have been cutting production since November to shore up oil prices, may have something to say about that.”

Barclays plays down risks of mortgage crisis

In the banking sector, Barclays has played down the risks of the UK mortgage crisis for its own customers.

Barclays says more than half are five-year fixed contracts and have been “behaving rationally” by dipping into savings to make larger payments, our banking correspondent Kalyeena Makortoff reports.

The comments came as the London-headquartered bank revealed its own profits had jumped by nearly a third to £1.96bn in the second quarter, despite putting aside £372m to protect against potential defaults by borrowers.

Around £95m of those loan loss provisions were linked to its UK business, but executives assured that Barclays’ mortgage book was sound.

“There are a number of factors that contribute to our comfort in the higher rate environment,” Barclays CFO Anna Cross told journalists, including that the bank applied “strict affordability tests” since 2013.

“Second, looking at the profile for refinancing, the proportion…on five-year and over initial fixed rates [mortgage] has increased materially since 2019, from 33% to 51%. This shift delayed the potential increase in rates for many borrowers, allowing them more time to mitigate the impact.”

Cross added that despite forecasts for more persistent inflation and a higher peak for UK interest rates, she was assured by the fact that customers were “behaving rationally and have started to use surplus deposit balances to manage their finances more accurately.”

She added:

“Over a quarter of our customers with mortgages have been making excess repayments reducing their loans ahead of potential remortgaging.”

Financial data firm Moneyfacts has reported that the average 2-year fixed residential mortgage rate has dropped to today, to 6.83% from 6.86% on Wednesday.

The City view is that Shell’s results are somewhat disappointing, as Jamie Maddock, equity research analyst at Quilter Cheviot, explains:

“In its latest quarterly report, Shell disappointed by missing consensus profit expectations by around 10%, reporting sharply lower year-on-year performance due to weak oil and gas prices plus refined product margins. While the energy crisis resulted in elevated plus volatile prices that had previously boosted Shell’s results across a couple of divisions, this was no longer the case for Q2’23.

However, the hike in dividend payments – and a new $3bn share buyback – should cushion any disappointment.

Maddock says:

“Analysts had previously called for an increase in dividends and Shell has delivered by raising its dividend by 15%, as previously indicated at its capital markets day.

The company remains committed to using its bumper profits over the past 18 months to fund a repurchasing scheme. Its stock buyback programme of at least $5.5bn is better than previously indicated, but only modestly so. The high end of the company’s capital expenditure guidance has also been trimmed.

Public ownership is the only way to end the ‘chaos in Britain’s energy sector, argues Unite general secretary Sharon Graham:

“British Gas’ owner Centrica has just reported its highest ever first half year profits, raking in almost £1 billion.

“We need to stop dancing around our handbags and grasp the nettle. The only way to end the chaos in our energy supply is staring us in the face - public ownership. It is absolutely affordable. It would protect businesses and households. Put simply, it’s a no brainer.

“Both the Government and Labour need to decide whose side are they on.”

Oxfam: Rich polluters should be taxed more

Katy Chakrabortty, head of policy and advocacy at Oxfam GB, says we shouldn’t be fooled by the fall in Shell’s profits in the last quarter.

Profits still running into the billions, points out Chakrabortty (to $5bn in Q2, from $11.5bn a year ago.)

These colossal profits are a gross injustice – a symptom of an economy that is putting short-term profits above people and planet. As we are seeing this summer with heatwaves, droughts and floods that are destroying lives on an unprecedented scale, these profits come with a huge climate cost.

“The UK government should be taxing these rich polluters more and helping to incentivise a fair switch to clean, renewable energy. Funds are urgently needed to support people in low-income countries, who have done the least to cause the climate crisis but have been hit the hardest, rebuild their lives. Surely it is a no brainer that the biggest and richest polluters should be the ones who pay.”

Shell’s windfall profits have not translated into higher investment in its renewable operations, says Sophie Flinders, analyst at the Common Wealth thinktank.

Shell’s payouts of $2.6bn in dividends and $3.6in share buybacks exceed even the company’s profits this quarter, with shareholders receiving bigger sums than the oil giant’s own surplus. In 2022, their CEO made £9.7m, up 53% from 2021.

In short, there’s too much money to be made in fossil fuels to place the responsibility of decarbonising energy on oil giants like Shell. These windfall profits have not translated into higher investment in Shell’s renewables. Deadly heat waves in America, wildfires across the Mediterranean and floods in the Philippines and Pakistan show that the crisis is already upon us — and that oil giants need to be consigned to the dustbin of history.

Shareholders are lining their pockets at the cost of a habitable climate. Clear, ambitious political interventions are needed to decarbonise energy and avert the worst of the climate crisis.

Ed Miliband, Labour’s Shadow Secretary of State for Climate Change and Net Zero, says energy firms are bringing in “unearned, unexpected profits” due to Russia’s invasion of Ukraine driving up gas prices.

Miliband told BBC Breakfast that the only long-term answer is to move off fossil fuels as quickly as possible, by increasing on-shore and off-shore wind and solar energy systems.

He adds:

My regret is not just that we don’t have a proper windfall tax, we don’t have a government commited to that green sprint either.

Liberal Democrat leader Sir Ed Davey has said:

“It beggars belief that after all these months this Conservative Government is still allowing energy firms to rake in extraordinary profits while millions of families struggle.”

Campaigners are warning that that UK energy system is broken, with companies such as Centrica and Shell making such large profits when households are sinking into debt.

Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said:

“These profits are a further sign of Britain’s broken energy system.

“At a time when household energy debt is spiralling to record levels and energy bills remain double what they were just a few years ago, the profits posted will be greeted with disbelief by those struggling through the crisis.

“There will of course be questions about how these profits were made, but the reality is that energy firms are operating on a playing field set by the Government.”

Heidi Chow, executive director of Debt Justice says the government must create a ‘help to repay’ scheme to assist households to clear their energy debts:

“These obscene profits have been made at the expense of millions of UK households that have been plunged into debt and arrears because of record energy prices.”

“The UK government needs to create a ‘Help to Repay’ scheme to tackle the £2bn of energy debt weighing down households. These profits show the money is there to pay for it, we just need the political leadership to put people first.”

Shares in Centrica have jumped over 4% at the start of trading in London, as traders react to its bumper profits so far this year.

They’re the top riser on the FTSE 100 leaderboard, at their highest level since February 2019 (at 129.5p).

Shell have dropped by 1.7% though, after its earnings dropped in the last quarter.

Greenpeace protest at Shell HQ

Protesters target Shell HQGreenpeace protesters erect a giant spoof billboard outside Shell’s HQ.
Greenpeace protesters erect a giant spoof billboard outside Shell’s HQ. Photograph: Chris J Ratcliffe/Greenpeace

Protesters from Greenpeace UK have erected a giant spoof advertising billboard outside Shell’s HQ this morning, calling out the company for posting profits of nearly £4bn ($5.1bn) in the April-June quarter.

The billboard links Shell’s fossil fuel-driven earnings to the devastating wildfires linked to climate change in Southern Europe, North Africa and North America.

It features an image of a Greek firefighter battling to contain a wildfire near Athens last week, is emblazoned with Shell’s logo and features the slogan “Our profit, your loss”.

Maja Darlington, campaigner at Greenpeace UK, said:

“While millions attempt to rebuild their lives after months of extreme weather has wreaked havoc from Rhodes to Rajasthan, Shell is upping oil and gas production, slashing investment in renewables and posting billions of dollars in profits. They’re partying like there’s no tomorrow and ordinary people around the world are being forced to pick up the tab.

“It is blazingly clear that global leadership is needed to end this fossil fuel free-for-all, but instead the UK government is flip-flopping on its climate commitments and further enriching the oil giants with new fossil fuel developments. It’s time for the government to find its backbone and force Shell and the rest of the industry to stop drilling and start paying for the damage they are already causing around the world.”

Shell’s CEO, Wael Sawan, was criticised by climate campaigners this month for claiming that cutting the world’s oil and gas production would be dangerous and irresponsible.

Since Sawan took over at the start of this year, Shell has abandoned plans to cut oil production each year for the rest of the decade.

Updated

IPPR: Shell puts profits and shareholders over our planet

Shell actually paid more cash to its shareholders during the last quarter than it made in profit.

The energy giant paid $2bn in dividends during April-June, and also repurchased shares worth $3.6bn through its buyback programme.

That gives total total shareholder distributions in the quarter of $5.6bn.

But this morning, we’ve learned that its profits shrank to around $5bn in Q2.

Dr George Dibb, head of the Centre for Economic Justice at progressive thinktank IPPR, is unimpressed, saying:

“Shell has proven its commitment to putting profits and shareholders over our planet. It continues to make huge amounts of money off the back of the war in Ukraine and high energy prices.

Meanwhile, incredibly, Shell is now paying more out to its shareholders in dividends and buybacks than it makes in profit, clearly prioritising these transfers over investing a net zero future. If fossil fuel firms refuse to invest in decarbonisation then it’s right for the UK government, like the USA and Canada, to tax share buybacks to support greater public investment in the transition to net zero.”

TUC: government has let energy companies 'laugh all the way to the bank'

The TUC has blasted the UK government for - it says - allowing energy companies to “laugh all the way to the bank”.

Following this morning’s jump in profits at Centrica, TUC General Secretary Paul Nowak said:

“While families across Britain have struggled to pay their bills, energy companies have been allowed to laugh all the way to the bank.

“The government could have imposed a proper windfall tax on excess profits. But instead it has chosen to leave billions on the table.

“This was a political choice that has benefited shareholders instead of hard-pressed households. Big oil and gas have gotten away with treating the public like a cash machine.

“Our failing energy retail companies should be brought into public ownership. That’s the way to bring down bills and invest in home improvements.”

Updated

Shell profits drop, but more cash funneled to shareholders

Energy giant Shell has reported a drop in profits, down from its bumper results a year ago, due to the drop in energy prices this year.

Adjusted earnings at Shell roughly halved year-on-year in the second quarter of 2023, but that still left the company with profits of $5bn (£3.86bn), down from $9.6bn in January-March and almost $11.5bn a year ago.

Shell says the fall reflected lower profits from liquified natural gas (LNG), lower realised oil and gas prices, lower refining margins, and lower volumes.

Brent crude has traded between $70 and $90 a barrel this year, down from 2022 when it was as high as $139 and never lower than $75.

Despite this slowdown in profits, Shell has hiked its dividend by 15%.

It has also announced a new share buyback programme of $3bn, which follows the $4bn it announced in its first-quarter results, as it continued to funnel spare cash to shareholders.

Subject to Board approval, another share buyback programme of at least $2.5bn is expected to be announced at the third quarter 2023 results announcement, Shell adds.

Updated

British Gas reports record £969m profit after price cap increase

British Gas has reported its highest ever first-half profits of almost £1bn after the energy watchdog let it claw back more money from household bills.

The UK’s biggest energy supplier reported profits of £969m for the first six months of 2023, up nearly 900% from £98m in the same period last year.

The profit boom is largely thanks to a tweak to the regulator Ofgem’s energy price cap that allows the supplier to recoup some of the costs of supplying its 10 million customers during the energy crisis.

The supplier’s historic profit highs are likely to anger consumer groups that have campaigned against the supplier’s treatment of vulnerable energy customers as record energy market prices forced millions into fuel poverty.

Introduction: Centrica profits surge

Good morning and welcome to our rolling coverage of business, the financial markets, and the world economy.

Energy group Centrica has posted a surge in earnings this morning as the owner of British Gas continues to profit from rising energy prices.

Centrica made a statutory operating profit of £6.5bn for the first six months of this year, up from a £1.1bn loss in 2022.

The figures were boosted a near 900% surge in profits at British Gas, which made £969m in January-June during the cost of living crisis, up from £98m a year ago.

British Gas’s profit boom is largely thanks to a tweak to the regulator Ofgem’s energy price cap that allows the supplier to recoup some of the costs of supplying its 10 million customers during the energy crisis, our energy correspondent Jillian Ambrose explains.

Centrica’s overall profits were swelled by £4.7bn from unwinding “unrealised losses from UK energy supply hedging positions at the end of 2022”.

Without that, it made an adjusted profit of £2.1bn, up from a £1.3bn loss a year ago, a figure that will reignite calls for wider windfall taxes on the sector.

As well as selling energy to consumers through British Gas, Centrica also produces it through gas and oil exploration and production assets, and a 20% interest in the operational UK nuclear power generation fleet.

Centrica chief executive. Chris O’Shea, who faced anger over his £4.5m pay packet earlier this year, says:

“Nothing is more important than delivering for our customers - its why we are here. Today’s results allow us to increase our customer support package to more than £100m, and the new green investment strategy we’ve announced will see us invest several billion pounds in the energy transition, creating thousands of new well-paid jobs.

Our robust balance sheet has allowed us to invest heavily in the UK and Ireland’s energy security and will make sure that our customers have cleaner energy at the right price.

Also coming up today

The European Central Bank is expected to raise eurozone interest rates at its latest meeting today, a day after the Federal Reserve lifted US borrowing costs to the highest in over two decades.

We also learn how the US economy fared in the second quarter of the year, when new GDP figures are released.

And NatWest remains under pressure in the row over the closure of Nigel Farage’s bank account, following the resignation of Dame Alison Rose as CEO early yesterday morning.

The prime minister and the chancellor have been accused of “damaging UK plc” and failing to follow due process amid concern over anonymous briefings that triggered the early-hours resignation of NatWest boss Dame Alison Rose.

“There is a real sense of disquiet that political pressure has led to a midnight exit for such an important banking CEO,” an official at the City regulator, the Financial Conduct Authority, told the Guardian.

“They should have allowed due process.”

The agenda

  • 11am BST: CBI distributive trades survey of UK retailers

  • 1.15pm BST: European Central Bank interest rate decision

  • 1.30pm BST: US durable goods orders for June

  • 1.45pm BST: European Central Bank press conference

  • 3pm BST: US pending home sales for June

Updated

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