Mark Kleinman: My bold predictions for 2023 in the City – from Natwest to Spurs
After the political and economic events of 2022, the idea of being able to predict anything with confidence seems even more outlandish than usual. Nevertheless, with the UK economy precariously balanced less than two years before a general election, these seem – in early January – to be sensible bets for UK plc in 2023.
Britain’s economy will endure another torrid year, with recession lasting for nearly three-quarters of it and house prices sliding sharply, particularly in the second and third quarters. After a bright start to 2023, the FTSE-100 will also have a sluggish 12 months, ending the year at 7450. A string of economic pledges by a Labour opposition which looks increasingly destined for government as Rishi Sunak struggles to unite Conservative factions may also unnerve financial markets – though not to the same extent as Kwasi Kwarteng’s infamous mini-Budget.
Moribund in 2022, the London IPO market will fare better this year – but only just. Consumer industry floats will continue to be thin on the ground, leading the owners of businesses such as Burger King UK to turn to alternatives in the form of secondary sales to new private equity backers. ARM Holdings, the chip designer, will also opt against a UK listing despite the efforts of Rishi Sunak to persuade SoftBank chief Masayoshi Son to commit to a dual New York-London share sale.
Ministers will commit hundreds of millions of pounds of public money to bail out Britain’s steel industry – again. Dressed up as an effort to decarbonise the sector, Grant Shapps will hail the funding for British Steel and Tata Steel as a boost for skilled industrial jobs – but Sanjeev Gupta’s Liberty Steel will miss out on taxpayer support, raising fresh questions about the fate of thousands of jobs.
Executive pay reform will once again soar to the top of the agenda in Westminster and the City, as a string of lavish CEO remuneration packages at companies which have barely outperformed their peer groups sparks renewed fury amid the cost-of-living crisis. Labour will seek to exploit Cabinet dithering over the issue by proposing to make all shareholder pay votes binding, but by the end of the year, the government will have also committed to consulting on such a move.
In the end, Murdoch’s voting rights will prevail
Rupert Murdoch will succeed in reuniting the two wings of his media empire – News Corp and Fox – but only just. A private equity consortium will test independent investors’ resolve by tabling an offer for a large chunk of Fox’s assets, sparking a full-blown battle between institutional fund managers and the media tycoon. In the end, his will – and voting rights – will prevail.
Royal Mail’s clumsily named parent company, International Distribution Services, will be broken up and taken over. A strategic buyer will emerge for its parcels business, GLS, with the historic letters division being acquired by private equity buyers following fraught negotiations with ministers and Ofcom, the industry regulator. Protests from union bosses against the deal will be to no avail, with only short-term guarantees extracted relating to future employment levels.
The Americanisation of English football’s elite division will continue – in both the men’s and women’s game. Manchester United will be sold by the Glazer family to fellow US investors, but at a steep discount to some of the wilder valuations being mooted. Tottenham Hotspur will also fall under American ownership, while the Women’s Super League will see a US-based private equity firm trump interest from Bridgepoint with an offer to acquire a sizeable stake in its commercial rights.
It will be a grim year for corporate insolvencies – and a bumper one for insolvency practitioners. The high street will provide its conventional setting for retail sector casualties, but more notable will be the collapse of one of the biggest names in online fashion retailing. Continued inflationary pressures – particularly in the form of higher energy prices – will cause the demise of the largest number of small and medium-sized businesses for decades.
Vodafone, Unilever, Informa, Legal & General, Barclays: expect change at the top of a disproportionate number of Britain’s biggest companies as boards seek to exert a firmer operational grip on out-of-control cost bases. Some FTSE stalwarts, like Vodafone and Unilever, will come under intense shareholder pressure to look outside for new chief executives, although they will both find their chosen candidates elsewhere in London-listed companies. Meanwhile, activists will also agitate for new blood at companies including ITV and Smith & Nephew, but with limited success.
Taxpayers will be well on their way towards the exit from NatWest Group by the end of the year, ending 2023 owning less than 30% of the shares. A series of drip-fed disposals during the year will continue to crystallise heavy losses for the government, but Dame Alison Rose, the newly honoured chief executive of the bank, will surprise many by unveiling at least one genuinely sizeable acquisition.
Mark Kleinman is City editor at Sky News and writes a fortnightly column for City A.M.