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Stakes are high for British horseracing ahead of Cheltenham

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Cheltenham Festival was last year labelled a superspreader event but pandemic restrictions mean that next week, the highlight of the British jump racing calendar will be held in front of empty stands with spectators forced to watch at home and place bets online.

In a normal year, the four-day meeting attracts 65,000 spectators a day with punters gambling hundreds of millions of pounds at the track, online and in betting shops. 

This year Cheltenham will host a few hundred trainers, jockeys and their staff, alongside a catering team of 40 rather than the usual 4,000. The local Gloucestershire economy stands to miss out on £100m, while betting shops across the country remain closed. 

“Being there next week is going to be very weird, it’ll be spooky,” said Nicky Henderson, the trainer of 68 festival winners. “It’s the biggest four days of the year . . . but the stands will be empty.”

In a normal year, Cheltenham Festival attracts 65,000 spectators a day © David Fitzgerald/Sportsfile/Getty

British racing has lost more than £300m in revenue in the pandemic, according to consultancy Oakwell Sports Advisory. The Jockey Club, which owns Cheltenham racecourse and other tracks across the UK, lost out on £90m of revenue last year, though said it has not been forced to tap the £600m state bailout for sport. 

This year Cheltenham is relying on broadcast partner ITV to help mitigate the blow of no spectators and to draw in punters.

“Betting revenue is bound to be down,” said Henderson. “That’s why television is vitally important . . . I suspect the television figures will be dramatically increased.” Cheltenham attracted a peak audience of almost 1.4m viewers in 2020 with the ITV deal worth £8m-£9m a year for racing.

Cheltenham is attracting larger TV audiences

Punters wagered roughly £500m in shops, online and at Cheltenham racecourse itself in 2020, according to Warwick Bartlett, chief executive of Global Betting and Gaming Consultants. But online will not make up for the absence of racegoers, he said, and expects that figure to drop £100m this year.

Nonetheless, he predicted that “internet gambling will be the racing and betting industries’ saviour”.


£500m


The amount bet in shops, online and at Cheltenham racecourse itself last year

An adviser to a large gambling group said that racing had performed well for betting companies during lockdown, adding that Cheltenham’s biggest punters had placed their bets “weeks, if not months ago”. 

As Cheltenham has approached, Julie Harrington, who in January took over as chief executive of the British Horseracing Authority, the sport’s national body, has warned the industry faces “existential crisis”.

After last year being blamed for accelerating the spread of covid, this month racing was under scrutiny over animal welfare after photographs of Grand National-winning trainer Gordon Elliott sitting on a dead horse went viral. 

Harrington said she was concerned about the impact of such incidents, particularly on young people, whom she described as the “owners and spectators of the future”. She sees next week’s meeting a chance to show racing at its best.

Some in the industry share her anxiety. Simon Bazalgette, former chief executive of The Jockey Club, emphasised that horse welfare should be a priority, with the best way to rebuild trust being to “deal with it strongly [and] be up front about it”. 

Concerns have been raised about animal welfare after a photograph of Grand National-winning trainer Gordon Elliott sitting on a dead horse went viral © Harry Murphy/Sportsfile/Getty

Harrington also admitted concerns over claims surrounding Sheikh Mohammed bin Rashid al-Maktoum, the billionaire ruler of Dubai and owner of the Godolphin stable. He is under scrutiny over allegations that one of his daughters is being held hostage in the emirate though his family say they are caring for her at home. Godolphin and Dubai’s government did not respond to requests for comment.

Sheikh Mohammed is one of the most important figures in horseracing. His global Godolphin operation has more than 1,000 horses, according to its website, including its 115-horse stables in Newmarket. Godolphin was the top purchaser at the past two Tattersall sales, the annual UK auction of budding racehorses, spending £35m.

“You would always be apprehensive about the impact on big participants in the sport about this kind of negative publicity,” said Bazalgette. “But I have every confidence the sport is pretty robust . . . it’s not all dependent on one owner.”

The industry has also grown nervous over the impact of an upcoming review of UK gambling law, which it hopes will include changes to “the levy”, through which horseracing groups are paid the proceeds of a tax on bookmakers’ gross profit.

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The BHA is urging reform of the levy, which generated £83m in the year ended March 2019, as it seeks to boost income in the wake of the pandemic. One option would be to tax bookmakers’ turnover rather than gross profit. The Horserace Betting Levy Board has said previously that gross profit is “difficult to forecast accurately”.

The BHA also sounded the alarm this year when the Gambling Commission, a regulator, raised the idea of affordability checks on gamblers. The BHA claimed the move could cost racing £60m a year.

“It’s been a very tough year for everybody, of course it has, but we’ve had tough years before,” said Henderson, pointing to how the foot-and-mouth outbreak in 2001 and bomb scares had disrupted racing in the past. “There’s all sorts of things that can come and bite you in the face.”



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Analysis

Rising inflation complicates Brazil’s Covid-19 crisis

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After seven months in lockdown, Michele Marques received some unwelcome news when she returned to work: while she was away the prices of almost all the products she uses as a hairdresser had soared.

“A box of gloves rose 200 per cent. Colouring products increased at least 100 per cent,” said the 37-year-old from São Paulo, underlining how costs were rising while her revenue had collapsed. “I had to raise the price of my services, too.”

It is a dynamic that is playing out across Brazil, adding an extra layer of complexity to the country’s coronavirus crisis, which has already claimed the lives of almost 350,000 individuals and pushed hospital services to the brink.

With much of Latin America’s largest economy being shuttered, inflation is surging to its highest level in years, fuelling a silent scourge of hunger among poorer citizens that has run in parallel to the Covid-19 pandemic.

“The high price of staple foods — rice and beans, for example — has led to the disappearance of these items from the table of millions of Brazilians,” said Ana Maria Segall, a researcher at the Brazilian Research Network on Food and Nutritional Sovereignty and Security. In the 12 months to the end of March, the price of rice increased 64 per cent and black beans 51 per cent.

“In Brazil currently food inflation has penalised the very poorest, preventing them from having adequate access to food and in many situations leading to hunger,” she said, adding that rising unemployment and the curtailment of social programmes were also contributing factors.

Volunteers hand out food in São Paulo © Alexandre Schneider/Getty Images

Less than half of Brazil’s population of 212m now has access to adequate food all the time, with 19m people, or 9 per cent of its inhabitants, facing hunger, according to a recent report by Segall’s group.

“I’m doing some odd jobs, but it’s not enough to keep us going,” said Jonathan, a 28-year-old who lost his job in the kitchen of a Chinese restaurant in São Paulo when the pandemic began. He said he now struggles to provide enough food for his three young children and pregnant wife.

On a 12-month basis, inflation in June is expected to surpass 8 per cent, far above earlier estimates. In the 12 months to March, food prices jumped 18.5 per cent, while the price of agricultural commodities in local currency surged 55 per cent and the cost of fuel increased almost 92 per cent.

Line chart of Percentage increase over past 12 months showing The price of rice in Brazil is soaring

The developments pose a fresh challenge to President Jair Bolsonaro, who is already under fire for his handling of the Covid-19 pandemic. Across Brazil’s biggest cities, graffiti has sprung up labelling the populist leader “Bolsocaro” — a portmanteau of his name and the Portuguese word for expensive.

The rising prices are also likely to provide useful ammunition to leftist former president Luiz Inácio Lula da Silva, who returned to the political fray last month and may challenge Bolsonaro in elections next year.

“Bolsonaro is to blame for the increase in food prices, he is to blame for everything. They have to remove this guy,” said Maria Izabel de Jesus, a retiree from São Paulo.

Armando Castelar, a researcher at the Brazilian Institute of Economics, said the government had underestimated inflation both in terms of the numbers and also “how much a concern it should be”.

He attributed the rising prices to the devaluation of the Brazilian currency, triggered in part by the stimulus packages passed by the US government — which helped to bolster the dollar and led to higher Treasury yields — and the brighter economic outlook outside Latin America.

“You have a situation where commodity prices are going up because the global economy is going to grow a lot this year. With the growth in the US, interest rates are going up and the dollar is strengthening. This puts a lot of pressure on the exchange rate in Brazil and emerging markets in general,” he said.

As the spectre of inflation loomed last month, the Brazilian central bank raised its key interest rate by 75 basis points, higher than the half-percentage point many economists had expected. A further rate rise is expected next month.

“The central bank acted correctly, but it cannot stop there. It is important not to be too lenient in dealing with this,” said Castelar.

Silvia Matos, a co-ordinator at the Brazilian Economy Institute, also pointed to Brazil’s weakening currency as a contributing factor to inflation. But she said the slide in the real was triggered by investor concerns over Brazil’s deteriorating public finances.

Following the creation of two separate stimulus packages to mitigate the impact of Covid-19, government debt has risen to about 90 per cent of gross domestic product, a high level for an emerging market economy.

The rollout of the second of these packages began this month, with 45m Brazilians set to receive $50 a month for four months.

Critics said, however, these stipends were not nearly enough to keep people both fed and at home in lockdown.

“It is essential that the emergency aid is of a greater value, so that people do not leave the house but no one also stays at home starving,” said Marcelo Freixo, a federal lawmaker with the leftwing PSOL party.

“We need to reduce the circulation of the disease. Brazil is already experiencing 4,000 deaths per day. We will reach 500,000 total deaths by the middle of the year.”

Matos says that inflation had hit poorer citizens much harder than middle-class and rich Brazilians because a larger portion of their income was dedicated to food, the price of which has increased substantially.

“The only thing that could help right now is to get out of this pandemic,” she said.

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Can CVC pull off a $20bn ‘deal of the century’ at Toshiba?

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Proposed management buyout looks like an improbable win for the Japanese conglomerate’s embattled CEO



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‘We’re running towards a cliff edge’: UK electric bus makers face survive-or-die moment

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The commute on the number 43 bus past the Bank of England between London Bridge and Friern Barnet highlights the critical challenge facing the UK bus industry.

The sleek double-decker is one of the capital’s 450 electric buses, but no more than a third of the seats are full during midweek rush hour as the industry struggles with the collapse in passenger numbers.

For the producers of electric and hydrogen vehicles, the coronavirus crisis came just at the wrong time as they prepared to overhaul Britain’s fleet of 38,200 buses and take advantage of diesel falling out of favour.

The ambition to transform the market to green powertrains remains — but now the primary concern is how it can stagger back to health after passenger numbers dived more than 80 per cent at one point during the crisis last year.

“We’re running towards a cliff edge, if we don’t start getting orders,” said Andy Palmer, chair of Leeds-based bus maker Switch Mobility and former Aston Martin chief executive. “The key point is speed. The industry needs to get back on its feet and manufacture at scale.”

To get those orders, manufacturers need government help, which ministers recognised with a promise of £5bn for buses and other transport in early 2020.

Boris Johnson
Boris Johnson’s national bus strategy is the biggest transformation of the sector since deregulation in 1986 © Steve Parsons/Pool/AFP/Getty

This was narrowed down in England’s national bus strategy — the biggest transformation since the sector was deregulated in 1986 — to £3bn in March, specifically for buses and the reaffirming of support for building 4,000 low-emission vehicles.

As part of this strategy, the government launched the tender for the first tranche to support 500 buses at the end of March.

Still, some operators worry government money may be as slow in arriving as some of the country’s buses, undermining their desire to pump money into the electric sector.

“It’s only through making profits that we can invest,” said David Brown, chief executive of Newcastle-based Go-Ahead. He points out that electric buses cost twice as much upfront as diesel.

It means the big operators, which include National Express, Stagecoach and FirstGroup as well as Go-Ahead, need the subsidies soon if they are going to invest in orders for battery-powered vehicles.

Paul Davies, president of the UK’s largest bus and coach manufacturer Alexander Dennis Limited, ADL, said orders were about 1,000 units lower than expected in 2020, almost half of pre-pandemic expectations.

Other groups needed intervention to survive. Northern Ireland-based Wrightbus was on the verge of collapse before being rescued by businessman Jo Bamford, the heir to JCB, Britain’s construction equipment manufacturer, known for its yellow diggers.

Bamford, however, is upbeat, saying orders for electric buses will come, helped by moves towards low-emission street regulations in cities and operators such as National Express committing to a zero-emission bus fleet by 2030.

But, even on optimistic forecasts, the UK’s three main electric bus manufacturers — ADL, Switch and Wrightbus — face big challenges from overseas rivals.

China’s Yutong Bus, the world’s largest producer, is way ahead of them, having sold 15,300 low-emission buses globally last year.

Its sights are also firmly set on exporting globally, selling 130 buses in the UK in the past 12 months and receiving an order in March for 55 more from Scotland’s McGill’s Buses.

ADL is attempting to meet this challenge by joining forces with Chinese battery maker BYD, while Bamford has turned to hydrogen as a way to get an edge. He owns Ryse, a hydrogen fuelling company.

A Yutong bus
Leicester’s E12 electric buses, built by China’s Yutong Bus

“When someone has 73 per cent market share [of the global automotive electric battery market], it’s difficult to knock them off their perch,” he said, explaining his bet on hydrogen.

That bet was given a boost in March with a £11.2m government subsidy to create a hydrogen technology centre in Northern Ireland, where Bamford’s Wrightbus is based.

Even with government backing, the challenges for UK producers remain great, with groups such as Yutong on its third-generation of fuel cell buses in China, according to its UK boss Ian Downie.

In contrast, Britain’s biggest producer ADL is still on its second-generation and, like Wrightbus, which says it is constantly updating its technology, is reliant on fuel cells from Canada’s Ballard.

The UK government could also run into trouble with the World Trade Organization if it explicitly advocates supporting local procurement, said a person familiar with Department for Transport discussions on the policy.

On top of this, the British groups face a challenge from Arrival, which listed in the US in March through a special purpose acquisition company and is backed by South Korea’s Hyundai. It aims to start producing buses from its “microfactory” by the end of the year.

In the view of Palmer at Switch, the UK groups will need to develop overseas markets to achieve the economies of scale to make profits.

“Can you survive on the basis of the UK alone? Our conclusion is you can’t,” said the chair of Switch, which is owned by Indian auto group Ashok Leyland. He pointed to India’s ambition to order 7,000 low-emissions buses by the end of its 2022 fiscal year that could benefit Switch.

However, before looking to expand overseas, the UK’s manufacturers need to get through the pandemic, which still hangs ominously over the sector, clouding its outlook.

The government must help UK groups “get us over this valley of death” to ensure their survival, said Nigel Base, commercial vehicle manager at lobby group the Society of Motor Manufacturers and Traders.



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