ALEX BRUMMER: Why we can be sure of Shell


Why we can be sure of Shell – Labour ought to think how proposed tax raids sit with its efforts to win over City and commerce, says ALEX BRUMMER

The knee-jerk response to soaring Shell third-quarter profits and the prospect of £34.5billion income for 2022 is to tax the oil major until the pips squeak. 

Shell is not moving anywhere. So upping the average tax level of 65 per cent in these turbulent fiscal times is an easy hit for Labour and the LibDems, who like to claim they invented the windfall tax. 

A sure sign: The knee-jerk response to soaring Shell third-quarter profits and the prospect of £34.5billion income for 2022 is to tax the oil major until the pips squeak

There are critics who argue that the only reason that Shell escaped a more ruthless tax hit is because Liz Truss once worked there. But so did LibDem grandee Vince Cable, who is a former chief economist. 

Shell’s chief executive-in-waiting Wael Sawan could resolve the perceived problem by devoting a far higher proportion of income to renewables or alternatively buying into a UK green pioneer, such as SSE. 

It is not averse to buying FTSE 100 assets as we saw when current boss Ben van Beurden bought BG Group in 2016.

In an era when 86 per cent of the private sector workforce is enrolled in pension funds of one kind or another, there are reasons to be thankful for Shell. 

The distribution to shareholders so far this year, in the shape of dividend pay-outs and share buybacks, is £22.4billion. In a period when pension funds are under severe pressure as a result of the liability-driven investment scandal, rising oil company capital values and dividends at Big Oil look to be a blessing in disguise. 

Labour ought to think carefully how its proposed tax raids sit with its efforts to win over City and commerce with a coffee morning offensive.

Euro catch-up 

Christine Lagarde and the European Central Bank have been holding the line against higher interest rates for a long time. Now they are doubling down with a second three-quarter of a percentage point rise in as many months, moving from zero to 1.5 per cent. 

Crushing inflation, which is standing at 9.9 per cent across the eurozone, 10 per cent in Germany and 12 per cent in the Netherlands, is now a priority. Frankfurt has decided that the 19 countries in the eurozone don’t need a UK-style bond drama. 

So the ECB also wants to retire its bank bail-out scheme, which has provided £1.72trillion of cheap money to the region’s banks. The impact of the change on Italian and Greek lenders, in particular, could be contaminating. 

On successive days, we have seen the Bank of Canada leaning back from tightening with a smaller-than-expected 0.5 per cent hike and a signal that it is close to the end of its tightening cycle. In contrast, Lagarde concedes there is more to come from the ECB, recession notwithstanding. 

In the US, the Federal Reserve may regard the 2.6 per cent pick-up in GDP in the third quarter, after two negative periods, as the green light for the next three-quarter percentage point rise to 4 per cent. 

Much of the bounce back is largely technical and a result of a narrowing trade deficit because of slowing consumer demand. 

Logic points to a similar three-quarter of a percentage point rise by the Bank of England next week. 

But we should never underestimate the timidity of the Bank’s interest rate setting Monetary Policy Committee.

Brand loyalty 

Unilever doesn’t much like the suggestion that fast moving consumer goods firms should share more of their margin with consumers, and less with shareholders. 

Its input costs soared by £3.6billion over the last year. In spite of a record 12.5 per cent price increase in the latest quarter, margins have shrunk from 18.2 per cent to 16.2 per cent in recent times. 

Chief executive Alan Jope tells me consumers across the globe are as keen on the Persil-to-Ben & Jerry’s group’s key brands as ever. There is little evidence of trading down in any of key markets, including the UK. 

If anything, customer habits are changing, with South African’s preference to save on multi-packs and smaller-sized products finding favour in other emerging markets. 

The popularity of known beauty and food brands suggests that not all consumers are hurting as much as the gloomsters think. 

Giving back 

A valiant friend who works with Citizens Advice reports increased levels of stress among indebted clients. 

Good to see Amanda Blanc and Aviva responding to a need by pledging £7m to Citizens Advice and a further £2m to Money Advice Trust’s Business Debtline service for small firms over the next two years. 

Helping with life’s little dramas. 

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