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Leaks leave Priti Patel’s asylum plans all at sea

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Priti Patel’s plan to deter migrants from crossing the English Channel in small boats took on elements of farce this week, with revelations that officials had considered locations from Ascension Island to Papua New Guinea to house asylum seekers.

The news that some were looking to build a floating wall in the English Channel brought further claims that the UK’s home secretary was pursuing Donald Trump-style policies. Britain’s opposition Labour party called the proposals “inhumane, completely impractical and wildly expensive”.

Ms Patel was furious at the leaking of ideas from what her officials said was a “brainstorming” exercise. But questions were left hanging about why she was considering such dramatic interventions, whether they would work and who would have an interest in making her look foolish.

Ms Patel is renowned for her tough line on immigration: it is one reason Mr Johnson appointed her to run the Home Office. She has promised to make the dangerous crossings by migrants from France to Britain in inflatable boats and rafts “unviable”.

Channel crossings make up only a small proportion of more than 34,000 people who registered asylum claims in the UK in the year to June, but unofficial estimates suggest the numbers using the route have grown

The issue has become politically dangerous for Ms Patel. Nigel Farage, leader of the Brexit party, stationed himself during the summer on the white cliffs of Dover posting videos of himself on the lookout for migrants — a reminder that the Tories could yet be outflanked on the right on immigration.

On Sunday Ms Patel is expected to set out a tough line when she makes a “virtual” address to the annual Conservative party conference, a forum that traditionally enjoys nothing more than a hardline speech on issues of law, order and immigration.

A snap poll by YouGov showed 62 per cent of Conservative voters thought placing an offshore centre on Ascension Island was a “good idea”.

By the end of August about 5,000 people had arrived in dinghies, more than twice the 1,890 seen in the whole of 2019, prompting Ms Patel to instigate a pan-Whitehall attempt to resolve the issue and to reduce the “pull factor” for migrants considering the crossing.

The Foreign Office was asked to draw up a list of possible places to house asylum seekers while their claims were being processed. Ascension Island, as the FT revealed on Tuesday, was added to the list.

Ms Patel’s allies say the creation of such remote asylum processing centres was “not imminent” — indeed a disused prison on the Isle of Wight has been discussed as another alternative — while ideas for turning back boats at sea with maritime fences were being trialled.

Brexit party leader Nigel Farage stationed himself on the cliffs of Dover in the summer to highlight the growing number of migrants crossing the Channel © Will Oliver/EPA

The leaking of the proposals started a blame game, with Home Office insiders suggesting the plan was being driven by a Cabinet Office “task force” and that the Foreign Office was responsible for the global trawl of possible sites for asylum processing centres.

“Do you really think the Cabinet Office is spending its time working out how to pump waves across the Channel to France,” one official working in Michael Gove’s department told Politico, referring to another anti-migrant wheeze. “This idea is coming from brain-dead morons in the Home Office.”

Others close to Ms Patel claimed that some officials needed to be rooted out and were “the enemy within”, briefing against a home secretary whose bracing approach to immigration and enthusiasm for Brexit has upset liberal sensitivities in the civil service.

Another motive widely circulating was that some officials were still bristling at the fact that a report into alleged bullying of staff by Ms Patel, completed in April, had still not been published by prime minister Boris Johnson. Ms Patel denies the bullying claims.

Ms Patel will give details of the latest iteration of her migrant policy in her speech to the Tory conference on Sunday. Disused ferries or abandoned oil rigs have also been considered.

Colin Yeo, an immigration barrister and author specialising in asylum law, said it was “probably” lawful for the government to detain asylum seekers while their claims were processed, based on challenges mounted on previous occasions when the UK has used such facilities.

But Mr Yeo, who worked as a legal adviser at the Oakington Immigration Reception Centre, a now-closed detention facility for asylum seekers in Cambridgeshire, added: “There could be circumstances where it becomes unlawful if you put them through such an accelerated process that they didn’t have time to mount an effective case.”

He went on to question why the government would consider such options, given that asylum seekers have been placed in detention centres before and the tactic was abandoned. There has also been a steady uptick in the number of claimants being recognised as having genuine fears of persecution, with up to 73 per cent of those arriving in the year to June likely to win some kind of refugee protection, according to the latest figures.

“The number of asylum seekers is falling,” Mr Yeo said. “It’s not as if these people are running away from the government. They’re not absconding. It’s just that the Home Office doesn’t try to remove [failed asylum seekers].”

Matthew Rycroft, Ms Patel’s chief official at the Home Office, told MPs on Thursday that Britain would comply with international law in any proposals it drew up. “Everything is on the table,” he said.



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‘It has never been like this’: US house price spiral worries policymakers

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House prices are rising in many major economies. This FT series explores whether these increases are sustainable.

A decade ago, the average house in Ohio’s leafy state capital Columbus would sit on the market for almost 100 days before being sold. Today, a similar property sells in just 10 days.

“It has never been like this,” said Michael Jones, a real estate agent at Coldwell Banker Realty with more than 20 years’ experience in central Ohio. “It’s unprecedented.”

US policymakers are becoming increasingly concerned about the rising price of housing for both homeowners and renters, as the broadest global house price boom for at least two decades drives up living costs.

“Today, it is harder to find an affordable home in America than at any point since the 2008 financial crisis,” Marcia Fudge, US housing and urban development secretary, said at a recent congressional hearing.

Nationally, house prices in May were 16.6 per cent higher than the year before, according to the latest S&P CoreLogic Case-Shiller index update — the biggest jump in more than 30 years of data and up from 14.8 per cent in April.

“A month ago, I described April’s performance as ‘truly extraordinary’, and [now] I find myself running out of superlatives,” said Craig Lazzara, global head of index investment strategy at S&P Dow Jones Indices.

The pace of price growth and sales has been particularly fast in smaller cities, suburban enclaves and towns.

Columbus’s housing market has exploded since the start of the pandemic, as historically low interest rates, remote working, increased demand for larger homes and a relatively limited supply of houses for sale sparked a feeding frenzy among prospective homebuyers and a windfall for sellers.

Line chart of S&P CoreLogic Case-Shiller national home price index (year-on-year % change) showing US housing market booms again

Homes in Columbus sold more quickly than in any other large metropolitan US area, according to Zillow, the property website. Almost three-quarters of Columbus properties were under contract in less than a week in April. Other fast-moving areas included Denver, Colorado, and Salt Lake City, Utah.

The fierce competition means many properties are selling at a significant premium to their listing price, favouring those on higher incomes or younger first-time buyers whose parents are willing to stump up the cash required to win a bidding war.

FT Series: Global house prices — raising the roof

House prices are rising in many major economies — but is it sustainable?

Part 1: How the pandemic has triggered the broadest global house price boom in more than two decades

Part 2: Buyers flock to smaller US cities, renewing policymakers’ concerns about affordability and risk

COMING SOON:

Part 3: Netherlands grapples with the social consequences of rapidly rising house prices

Part 4: Why Berlin’s renters want to expropriate their homes from Germany’s publicly listed landlords

Part 5: Should house prices count in inflation data, and what can central banks do about the economic effects?

Columbus’s average sale price has jumped 15.8 per cent in the past year, according to Columbus Realtors, the local industry body of which Jones is president.

“People say to me, ‘Don’t you love this market?’” he said at a recent open house for an almost 6,000 square foot family home with a listing price of just under $1m in a residential neighbourhood east of downtown Columbus.

“I say, ‘Not especially, because I represent buyers and sellers alike’,” he added. “Somebody is a loser here.”

Other places have experienced even more frenetic sales. Median home prices in Austin, Texas, have risen 40 per cent year on year, according to online real estate brokerage Redfin. Buyers have also flocked to Phoenix, Arizona, where prices are almost 30 per cent higher in the same period. In Detroit, Michigan, they have risen 56 per cent.

Suburban enclaves and smaller towns have also benefited. Redfin reported last month that median home prices in “car-dependent” US areas had surged at twice the pace of those in “transit-accessible” cities since the start of the pandemic — with the former gaining 33 per cent while the latter increased 16 per cent.

Across the 30 largest metropolitan areas in the US, Columbus, along with St Louis, Missouri, and Tampa, Florida, logged some of the biggest net increases in people arriving in the area, according to an analysis of US Postal Service records of mailing address changes by commercial real estate and investment firm CBRE.

Most moves came from the “surrounding area”, defined as a few hours’ drive from the householder’s previous address, the analysis suggested.

The house price spiral is feeding into the rental market too. According to Apartment List, a listings website, national median rent has risen 11.4 per cent so far this year, more than three times the average increase in the same period in the previous three years.

“The high cost of housing keeps millions of families up every night,” Fudge warned. “They wonder if they can afford to keep a roof over their head — and still manage to keep their lights on, to pay for their prescriptions, to put food on their tables.”

Remote working boom fuels demand for suburban and rural areas

Industry experts say the pace of price growth is set to slow as supply begins to catch up with demand.

The number of existing-home sales rose 1.4 per cent month on month in June, according to the National Association of Realtors. Lawrence Yun, chief economist at the industry body, said supply had “modestly improved in recent months due to more housing starts and existing homeowners listing their homes, all of which has resulted in an uptick in sales”.

Real estate experts and economists surveyed by Zillow expect price growth to peak this year and then ebb.

“At a broad level, home prices are in no danger of a decline due to tight inventory conditions, but I do expect prices to appreciate at a slower pace by the end of the year,” Yun said.

Daryl Fairweather, chief economist at Redfin, said “homes that would have gotten 20 offers are now getting only two or three”.

But she added that while “we are already seeing demand start to stagnate”, prices were not coming down significantly — suggesting that policymakers’ concerns about affordability are likely to persist.

Federal Reserve chair Jay Powell recently said that today’s trend looked distinctly different to the one a decade ago that pre-empted what was at the time the worst recession since the Great Depression — but he called the problem of housing affordability “a big one”.

“Housing prices are moving up across the country at a high rate,” he told a congressional committee last month.

Although he acknowledged that it was “not being driven by the kind of reckless, irresponsible lending that led to the housing bubble that led to the last financial crisis”, he warned that it “makes it more difficult for entry-level buyers to get into the housing market, so that is a concern”.



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Square’s $29bn bet on Afterpay heralds future for ‘buy now, pay later’ trend

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Jack Dorsey’s biggest gamble to date has sent ripples around the fintech and banking world, with investors betting that Square’s $29bn all-stock deal to acquire Afterpay signals the “buy now, pay later” trend has staying power.

BNPL relies on an emerging thesis that millennials and Gen Z consumers distrust traditional credit, but still want to borrow money to buy goods. Afterpay allows shoppers to split the cost of goods into four instalments with no interest — but a late fee if payments are missed.

“We think we’re in the early days of the opportunity facing us,” said Square’s chief financial officer Amrita Ahuja, speaking to the Financial Times. “From a buy now, pay later perspective, we see, with online payments alone, a large and growing opportunity representing $10tn in payments volume by 2024.”

The deal sees Square join an increasingly crowded space, alongside big players such as Sweden’s Klarna, Silicon Valley-based Affirm and PayPal, with Apple also exploring the market. The sector also faces a brewing regulatory battle, as legislators question an industry that lends money in an instant, often without a traditional credit check to ensure a consumer will be able to pay off their debt.

“This decade is going to be the upheaval of the banking industry,” Klarna’s chief executive Sebastian Siemiatkowski, said on CNBC on Monday. “I’m a little bit surprised to see consolidation happening this early, at this level, but at the same point in time I think this is directionally what we’re going to see.”

Column chart of By downloads (% of total) showing Top US mobile payment solution apps

BNPL has exploded in popularity over the past year thanks to the coronavirus pandemic-driven boom in online shopping, but industry executives said it had shown strong growth well before the pandemic, alongside a broader trend for more flexible financing among traditional lenders.

Leading into 2020, banks including JPMorgan Chase, American Express and Citigroup each launched flexible payment options tied to existing credit cards as an answer to point-of-sale financing.

The past 18 months have seen a meaningful uptick in the number of retailers willing to adopt the extra financing option. “There’s a little bit of FOMO setting in,” said Brendan Coughlin from Citizens Financial Group.

Afterpay was among the pioneers in BNPL. It was founded by Sydney neighbours Nick Molnar and Anthony Eisen in 2014, and today facilitates global annual sales of $15.6bn.

The company went public on the Australian Securities Exchange in 2016 at a valuation of A$165m (US$122m). In May 2020, Chinese tech giant Tencent paid about A$300m for a 5 per cent stake in the Australian group, which was by then worth about A$8bn.

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The Afterpay tie-up will enable Square to offer BNPL services to its millions of merchants, who processed payments worth $38.8bn in its most recent quarter, while also tapping into Afterpay’s clients, which include Amazon and Target.

The company will also integrate Afterpay into its Cash App, which has about 70m users and is slowly being built out as a one-stop financial services shop for payments, cryptocurrency, saving and investing.

“All of a sudden, you’ve got probably the most compelling super app outside of China,” said DA Davidson’s Chris Brendler, who is an investor in both companies.

Square’s gross payment volume

Investors appear convinced. Despite the deal coming at a 30 per cent premium to Afterpay’s most recent stock price, the news sent Square’s share price up 10 per cent by Monday’s close.

“This is certainly a bull market deal,” said Andrew Atherton, managing director at Union Square Advisors. “People are rewarding Jack Dorsey for being bold and for making a big bet.”

Square’s entry into BNPL comes as the sector is becoming increasingly competitive.

Klarna increased its valuation from $11bn in September 2020 to $46bn in June of this year, making it the most valuable standalone company in the industry.

Shares in Affirm, the US online lender led by PayPal co-founder Max Levchin, rose 15 per cent on Monday following news of the Afterpay deal. Affirm, which went public in January and is now valued at $17bn, recently expanded its partnership with Shopify to offer BNPL services to the ecommerce platform’s US merchants.

PayPal first moved into BNPL back in 2008 when its then-parent eBay bought Bill Me Later. A year ago, PayPal launched Pay in 4, a six-week instalment offering that is free for both consumers and merchants, alongside its longer-term PayPal Credit service.

Earlier this year, Apple was recruiting staff for its payments division with experience in BNPL, as it looks to expand Apple Pay and its Wallet app. Bloomberg reported last month that the iPhone maker was working with Goldman Sachs to develop an Apple Pay Later service.

Industry executives warn, however, that the more crowded market could erode the businesses’ margins, while flustered consumers may also be put off by the rapidly growing number of checkout options.

“The current state of affairs, where you have seven buttons when you go to checkout, I don’t think is a sustainable state of affairs,” said one consumer finance executive at a top US bank. “I think we are in an interim period.”

A bigger threat still is the sector’s immature and inconsistent regulatory environment.

“It’s what everyone is calling the Wild West,” said Alyson Clarke, an analyst at Forrester. “There is no onus on them to make sure that you are of financial health to be able to repay that loan.”

Some companies do a “soft” credit check that briefly examines a person’s position but “not as much as they should be doing if they are lending you money”, Clarke said. “Afterpay doesn’t do any of that.”

A survey of Australian consumers, compiled by the country’s financial regulator in 2020, suggested 21 per cent of BNPL users missed a payment in the previous 12 months. Almost half of them were aged 18 to 29. Morgan Stanley analysts have estimated Afterpay makes about $70m a year on late fees.

The UK’s financial regulator has said BNPL players should be forced to adhere to its credit rules as a “matter of urgency”. In the US, a government consumer protection agency issued guidance urging caution around “tempting” BNPL deals.

In a hint at further possible tensions, Capital One in December became the first major credit card company to block its customers from using its cards to pay off BNPL purchases, calling the practice “risky for customers and the banks that serve them”, according to Reuters.

Afterpay board member Dana Stalder said the company welcomed regulation. “Buy now, pay later is just a friendlier consumer product,” he said. “Consumers understand that, they’re not dumb. This is why they are voting with their feet.”

Additional reporting by Richard Milne



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UK pushes floating wind farms in drive to meet climate targets

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In waters 15km south-east of Aberdeen, renewable energy companies are preparing to celebrate yet another landmark in the drive to end Britain’s reliance on fossil fuels.

Five wind turbines, each taller than the Gherkin building in the City of London, fixed to 3,000-tonne buoyant platforms have been towed to the UK North Sea from Rotterdam where they will form part of the Kincardine array, the world’s biggest “floating” offshore wind farm.

Wind farm developers have dabbled since the 2000s with floating technology to overcome the limitations of conventional offshore turbines. These are mounted on structures fixed to the seabed and are difficult to install beyond depths of 60m, which makes them unsuitable for waters further from shore where wind speeds are higher.

Floating projects, which are anchored to the seabed by mooring lines, are rapidly moving from the fringes to the mainstream as countries turn to the technology to help meet challenging climate targets.

Britain was the first country to install a floating offshore wind farm off the coast of Peterhead, Scotland in 2017. But existing floating projects are modest in size. The Kincardine array has an electricity generation capacity of 50MW compared to 3.6GW for the world’s largest conventional offshore wind farm.

Map showing the location of Kincardine offshore floating wind farm, offshore from Aberdeen on Scotland's east coast

Now the bigger wind developers are stepping up a gear with plans to build more schemes on a larger scale.

Denmark’s Orsted, Germany’s RWE, Norway’s Equinor along with the UK’s ScottishPower and Royal Dutch Shell are some of companies on a long list of bidders vying to build floating schemes in an auction of seabed rights for about 10GW of offshore wind projects in Scottish waters. The bidding round closed in mid-July with the winners expected to be announced in early 2022.

The UK is separately examining an auction exclusively for floating wind in the Celtic Sea, the area of the Atlantic Ocean west of the Bristol Channel and the approaches to the English Channel and south of the Republic of Ireland.

Developers expect the costs of floating projects to fall rapidly as more projects are deployed. In 2018 floating wind costs were estimated at more than €200 per megawatt hour, nearly double the cost of nuclear power in the UK.

The Offshore Renewable Energy Catapult, a UK technology and research centre, is hopeful developers will be able to build “subsidy free” floating projects at prices below forecast wholesale electricity costs in auctions as early as 2029. Conventional offshore wind developers reached this inflection point in a UK government auction in 2019.

A Norwegian flag flies from a boat near the assembly site of offshore floating wind turbines in the Hywind pilot park, operated by Equinor
Norway’s Equinor is among the companies competing to build floating turbines in Scottish waters © Carina Johansen/Bloomberg

UK prime minister Boris Johnson, who is hosting the UN’s COP26 climate summit later this year, has set a 1GW floating target out of a total 40GW offshore wind goal by 2030. He has underlined the importance of accessing the “windiest parts of our seas” as part of the UK’s goal to cut carbon emissions to net zero by 2050. 

Other countries including France, Norway, Spain, the US and Japan are pursuing the technology, which experts said would particularly appeal to countries with limited access to shallow waters, or where the geology of the seabed makes it impossible to install conventional “fixed-bottom” turbines.

WindEurope, an industry body, predicts one-third of all offshore wind turbines installed in Europe by 2050 could be floating.

Countries pursuing floating wind are interested in it “not just as an opportunity to deliver net-zero targets. It has a real potential to be a driver of economic growth as well,” said Ralph Torr, a programme manager at the Offshore Renewable Energy Catapult.

Much like how the UK supply chain has lost out to foreign companies in the construction of conventional wind offshore farms — despite Britain having more than anywhere else in the world — there are concerns the mistakes will be repeated for floating technology. Manufacturing work for the Kincardine project was carried out in Spain and Portugal and the turbines and foundations assembled in Rotterdam.

An offshore wind turbine off the coast of Fukushima, Japan
A wind turbine off the coast of the town of Naraha in Japan’s Fukushima prefecture. Japan is one of the countries pursuing floating technology © Yoshikazu Tsuno/AFP/Getty Images

Competition with other markets was already high as they all tried to gain a “first-mover advantage”, said Torr, who warned the UK government’s 1GW floating wind target by 2030 was not “going to unlock huge investment in the supply chain or infrastructure because it’s [just] a handful of projects”.

The Offshore Renewable Energy Catapult and developers are urging the government to commit to a second target in 2040 for floating wind, which they believe would provide confidence to industry to invest in the necessary facilities in Britain.

“Because floating [wind] becomes economic in the 2030s, it’d be much better to understand what the longer term pipeline is,” said Tom Glover, UK country chair at RWE. He added that in the Scottish seabed rights auction, developers had to “provide a commitment and an ambition for Scottish content”, which should benefit the local supply chain.

Wind developers are conscious that UK suppliers need time to gear up. Christoph Harwood, director of policy and strategy at Simply Blue Energy, which is developing a 96MW floating scheme off the coast of Pembroke in Wales, said projects that were larger than the earliest floating schemes but were not yet at a full commercial scale would be important in that process.

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“If the UK supply chain is to benefit from floating wind, don’t rush into 1GW projects, take some stepping stones towards them,” he said.

Tim Cornelius, chief executive of the Global Energy Group, which carries out offshore wind assembly work at the Port of Nigg on the Cromarty Firth in north-east Scotland, said the size of floating wind turbines offered opportunities to UK suppliers. 

The floating turbines are much bigger than their conventional offshore counterparts so need to be built closer to their point of installation, which precludes using the lowest cost manufacturers in China and the Middle East.

The floating turbines require “an astonishing amount” of deepwater quayside space at ports, Cornelius explained. His company is looking at creating an artificial island for quaysides in the Cromarty Firth in Scotland, which he says would require a “material investment but is entirely justifiable as long as developers are prepared to commit”.

But he warned that “as it currently stands, the [UK] supply chain isn’t in a position to be able to support the aspirations of the [floating offshore wind] industry”.

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