Plenty of City minds are in overdrive at present. They like to stay on top of things, preferably ahead, it’s how they make their money.
They’re trying to make sense of the current crisis. Rather, to phrase that another way, they’re trying to figure if it’s as bad as is being claimed or if it's a blip that will shortly correct itself.
The usual indicators are difficult to read. The Prime Minister has chosen this moment to go on holiday, to allegedly paint like Winston Churchill while catching the end of the summer sun in Marbella. Yes, but that’s the way Boris Johnson is.
The image management subtext is clear. Even if his house were burning down, he would still be sitting finishing the end of a classical text or, as is his wont, putting the final touches to one of those cardboard model buses he likes to make.
Manufacturers are screaming that soaring energy prices will kibosh production and decimate the economy.
But the government, seemingly, is content to allow them to suffer and is not prepared to come up with a meaningful rescue plan.
Business counting long-term cost of Covid
Yes, but that’s because, having spent a colossal amount on keeping the wheels spinning during Covid, there is no public money available, not on the scale that would be required here.
Who knows how long the cost increases will last – this may not be a short-term phenomenon but one that will last a while, pushing the level of bailout required even higher.
This, too, is without labour shortages causing problems, the lack of delivery drivers and other workers, and the difficulties of trading with the EU caused by the Brexit bureaucracy.
And did someone mention the pandemic? Is it going away for good, or are we in a holding pattern until a vaccine-defying variant emerges?
Meanwhile there is the apparent emergence of a white knight. The Indian-born tycoon Sanjeev Gupta, who recently held a spectacular 50th birthday celebration on Mykonos, has pumped £50 million ($68.1m) into firing up his Liberty Steel factories in Rotherham and Stocksbridge in South Yorkshire.
Talk about contrarian. It’s difficult to assess who is more doom-defying: Johnson or Gupta.
The City likes those who go against the flow. After all, they are the ones who frequently appear on the other side, having made a substantial bet and won.
This, however, is something else. There’s Gupta partying like there’s no tomorrow on a Greek island, the metals tycoon’s helicopter (call sign M-INES) ferrying guests back and forth.
At the same time: his main source of finance, Greensill Capital, has collapsed; Gupta’s GFG Alliance conglomerate owes more than $5bn, much of it to Greensill; creditors are circling and legal battles are under way; he’s split with Jay Hambro, his long-time right hand; US private equity firm American Industrial Partners, which is holding debt secured on GFG plants in France and Belgium is declaring it has seized control of a Gupta jewel, GFG’s French aluminium smelter.
Liberty is the UK’s third-biggest steelmaker, employing 3,000 people in precisely the sort of areas that Johnson’s Conservatives are keen to woo. Gupta has put in £50m, thanks to the refinancing of his Australian business.
Gupta’s people are maintaining the Mykonos extravaganza was paid for by his wealthy industrialist father. OK. Second, he remains committed to the future of steel and to the UK, despite the Serious Fraud Office move which he intends to fight.
The two Liberty Steel plants can begin producing again. Their employees have been on furlough for months. But what if it goes wrong, if £50m is not enough, what then? Here they are, about to recommence working exactly as production may be curtailed due to spiralling energy prices.
It was only six months ago that GFG’s request for a £170m emergency loan from the government was rejected. GFG wanted the money to replace cash lent by Greensill.
The reasons given for the refusal were that ministers were concerned about the complex structure of GFG; that they were fearful the UK taxpayer could end up funding another, overseas part of Gupta’s empire; and the £42m cost of a house bought by Gupta and his wife in August 2020 would absorb a chunk of the £170m.
Then, the government let it be known there was a package in place should Liberty Steel pack up completely.
Businesses face up to survival of the fittest
That was back in March. An awful lot has happened since. The government is today facing storms on several fronts and as last week’s Tory party conference highlighted, against that backdrop favours a script that says businesses must sink or swim. This is an administration that is setting its face against involvement anywhere.
We’ve got used to previous leaders jumping in at the first sign of trouble. But as Johnson has made clear that is not going to happen – the business community must sort out its own problems.
It’s not only about a lack of Exchequer cash. Partly, it’s ideology.
This is a regime led by a libertarian, instinctively hands-off premier.
It’s a government, too, that is heavily influenced by focus groups. If the private polling they conduct says the public believes business should stand on its own feet, that its bosses pay themselves fortunes so they can sort out their own problems, so be it.
Where does that leave a contingency for the demise of Liberty Steel? It’s not clear. What is known is that Johnson is on a sun-lounger, while Gupta has just returned from the beach. All must be well with them both, except it isn’t.