Another day, another “confirmation” that the government plans to build the Sizewell C nuclear power plant in Suffolk – surely the “most announced” project in UK infrastructure history. The latest update, though, contained a genuine sign of seriousness: the Chinese are being paid to go away.
China General Nuclear (CGN), a state-backed firm, owned a 20% stake in the fledgling project and had, in effect, a right to subscribe to maintain its holding through the various funding rounds – just as it did at Hinkley Point C in Somerset. In practice, any form of Chinese involvement in Sizewell has been impossible for at least a year.
First, because David Cameron’s misguided “golden era” of coziness with Beijing is over, as Rishi Sunak said earlier this week. Second, because the mere presence of a Chinese firm would scare away many of the private investors, especially US ones, that the government is relying upon to fund Sizewell’s construction phase; in turn, the costs of funding for the project might have ballooned.
In its usual less-than-straightforward way, the government declined to say how much of its £679m fresh funding for Sizewell (giving the UK state a 50% stake now) will be directed at buying out CGN. But, if £100m-ish is correct, the negotiating outcome could be called reasonable – or, at least, pragmatic. We have no idea what CGN has spent so far, but a 20% stake in an unbuilt Sizewell clearly has some value. The bottom line is that CGN had to be cleared out to get beyond the planning stage.
The point at which the project will be truly “confirmed” is when other investors have committed the hard equity capital to fund construction. That moment is still a year away and the job probably involves finding £8bn-ish to allow an even greater sum to be borrowed on top. It is not a small task. And the cost of equity and cost of borrowing will be the critical numbers in terms of value for money for bill-payers. But Sizewell – for better or worse – is starting to look credible.
EasyJet not quite out of the turbulence
There’s nothing like a strong summer to excite easyJet’s management and, sure enough, chief executive Johan Lundgren was dancing down the aisle as he unveiled numbers for the last financial year. “EasyJet has achieved a record bounce back this summer with a performance which underlines that our transformation is delivering,” he declared. The July-September period, in which profits were £674m on a flattering operating measure, delivered “the highest-ever earnings for a single quarter”.
Very good, but one good quarter followed about 10 rotten ones. EasyJet still produced a headline loss for the year of £178m – its third loss-making year in a row. The pandemic is to blame, obviously, but there is a lesson here in not chalking up a turnaround before it has become permanent. Lundgren was guilty of premature optimism in the spring; weeks of airport chaos and cancelled flights followed.
There is a stronger case now that a corner has been turned, but you can’t blame the stock market for being wary; easyJet’s shares were 550p as recently as late April but are now 383p. Cost of living pressures will bite properly next year and all airlines are now facing a period of higher prices for aviation fuel. While peak holiday weeks such as Christmas are reported to be back to normal levels of demand, Lundgren also said that “visibility over bookings in the second half [post-April] remains low”. EasyJet is improving, but it hasn’t reached comfortable cruising altitude.
Shining a light on the mini-budget
It’s ancient history now, but Kwasi Kwarteng’s mini-budget was even more chaotic than we knew already. That, at least, was the gist of the testimony of Andrew Bailey, governor of the Bank of England, to a House of Lords select committee on Tuesday.
Normal form requires the Treasury to brief the Bank about the contents of a big fiscal announcement, but Bailey clearly didn’t get a full picture. “I’m afraid there were parts of it we had no idea what was in it,” he said. Why? “I don’t think Treasury officials were clear what was going to be in it.” The timing of these interactions with Threadneedle Street, note, was the day before Kwarteng’s big announcement.
One gets an impression of the former chancellor wavering until the 11th hour about whether to adopt radical measures such as scrapping the 45p additional rate of income tax. One could say it is almost unbelievable – except that it is an entirely plausible version of events.