Here’s our full story on the Ofwat investigation of Thames Water, the UK’s biggest water company with more than 16 million customers:
Thames Water is being investigated by the water regulator for England and Wales, Ofwat, after it delayed environmental improvement schemes.
The investigation comes after the Guardian revealed that the UK’s largest water company intentionally diverted millions of pounds pledged for environmental clean-ups towards other costs, including bonuses and dividends.
Ofwat has opened an enforcement case into the company to decide whether it has breached its obligations in failing to deliver 100 out of 812 schemes it was supposed to put in place between 2020 and 2025.
These environmental measures are part of the Water Industry National Environmental Programme (Winep) and they include protecting and enhancing rivers, upgrading sewage systems to reduce spills, reducing the amount of water abstracted from rivers and improving the safety and quality of designated bathing sites.
Key events
Chinese tech stocks surf on DeepSeek wave
Chinese tech stocks are surfing on the DeepSeek wave, analysts say, with internet giant Alibaba gaining 8.5% today, and more than 45% over the past month.
The Hang Seng TECH Index in Hong Kong rose by 2.7% today, and has rallied by 25% over the past month – entering a bull market (when stock prices have gone up 20% or more from the previous low for a sustained period of time).
Shares in the Chinese carmaker BYD rose by 4.6% today and are up by nearly 30% since mid-January.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, explained that is is on the back of:
the news that the company plans to integrate software from DeepSeek in its cars and the announcement that they will offer God’s Eye – their driver assistance system – in China for free help boosting the outlook for the Chinese electric vehicle giant and narrow the gap with Tesla – which on the other hand is falling from grace on slowing sales – not only due to the slowing global appetite for electric cars but also due to Elon Musk’s involvement in world politics.
Overall, stocks in Hong Kong didn’t look this promising in a while, and there is substantial room to extend gains before retesting the 2018 and 2021 peaks. Chinese tech giants have two key advantages. 1. They have Big Tech names that have a proven track record for building game-changing technology – like Alibaba and Tencent. And 2. Chinese consumers tend to be easier to adopt new technologies allowing the technology advances to spread faster.
Does that counterweigh the political, geopolitical and trade risks? Time will tell.
Joanna Partridge
One of the UK’s biggest providers of motor finance has warned it expects to set aside up to £165m in the first half of its financial year to cover possible legal and compensation costs as a result of the car loans commission scandal.
Close Brothers said it had come up with the estimate following a “thorough assessment” of the long-running case, although it warned there was still “significant uncertainty” over the outcome of appeals and the ongoing investigation by the Financial Conduct Authority (FCA).
“The ultimate cost to the group could be materially higher or lower than the estimated provision,” the lender said in a statement to investors.
The provision comes after Close Brothers cancelled its dividend and announced plans to raise £400m to shore up its balance sheet.
Sales of annuities in the UK jumped by 20% last year to hit a ten-year high, according to the Association of British Insurers.
An annuity converts your savings into an annual pension that pays you a guaranteed income for life, or for a specified period. The bond market sell-off last month that pushed yields, or interest rates, to multi-decade highs was a boon for annuities.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, explained:
We can expect 2025 to have got off to a flying start too. After years in the doldrums, the market has been kick-started off the back of rising interest rates and soaring gilt yields and this has tempted retirees back to the market. Total annuity sales topped £7bn.
The bond market dramas at the start of the year may have been unsettling for investors, but they were a boom time for annuities. Current incomes remain just below the all-time highs experienced after the mini-budget [in September 2022].
The latest data from HL’s annuity search engine shows a 65-year-old with a £100,000 pension can get an income of up to £7,490 per year from a single life level annuity with a five-year guarantee, so interest remains high, she said.
Morrissey said the ABI data shows that more people are shopping around for the best annuity for their needs using search engines, for example. (Given that annuities cannot be unwound once bought this is vitally important). There’s also evidence that more people are taking financial advice to make sure they get the best deal.
There are also signs that people are tailoring their annuity to fit their circumstances with sales of joint life, enhanced and escalating annuities all on the rise, she added.
SoftBank falls into the red ahead of AI investments
SoftBank has fallen deep into the red, as the Japanese conglomerate prepares to ramp up investments in artificial intelligence.
The technology group tumbled to a 369.2bn yen (£1.9bn) loss in its third quarter, partly due to losses in its tech-heavy investment vehicles, Vision Funds. SoftBank invests in companies that it thinks have long-term potential, including start-ups so its financial performance can vary widely.
Its founder and chief executive, Masayoshi Son, is betting big on artificial intelligence (AI). Last month he appeared with US president Donald Trump, Sam Altman of OpenAI and Larry Ellison of Oracle in Washington, to announce an investment of up to $500bn into an AI project called Stargate that aims to build a network of data centres across the US.
Investors want to know more about SoftBank’s AI investments, and how it’s going to fund them.
The Japanese group plans to put $15bn to $20bn into Stargate initially, which could rise to $500bn over the next four years.
SoftBank also intends to invest between $15bn and $25bn in OpenAI as part of a wider funding round that could lead to the creator of ChatGPT raising as much as $40bn.
Vitality has become the first health insurer in the UK to offer customers discounted weight loss treatments for up to a year through its health cover.
The UK’s third-largest health insurer behind Bupa and Axa, with 1.9 million members, said it would offer discounts of up to 20% for medications such as Wegovy and Mounjaro – which are popular but pricey – to members, based on their body mass index (BMI) and weight-related health conditions.
Members can apply by completing their health profile through the Vitality app. If members have a BMI of 35 or over, they can apply for the new medication pathway, which includes coaching with a dietitian and discounted anti-obesity medications for up to 12 months based on their health risks.
The market is booming amid a new wave of anti-obesity drugs, called GLP-1s after the gut hormone that they mimic to suppress appetite. Injected by users once a week, they are effective in helping people lose weight and have also shown other health benefits in studies, such as reducing the risk of heart attacks and kidney disease.
However, they come with a high price tag. The price of Wegovy, made by Denmark’s Novo Nordisk, starts at £139 for a month’s supply in the UK at online pharmacy prices, going up to £269 for higher doses. Wegovy, approved for use by the NHS in 2023, has been shown to achieve up to a 15% reduction in body weight after one year.
Last year, Mounjaro, made by the US drug firm Eli Lilly, became the second obesity treatment to be approved for use on the NHS in the UK. It costs from £139 a month at online pharmacies, and showed weight loss of about 20% in clinical trials. At a maximum dose, the annual cost is about £1,435.
The use of anti-obesity drugs aims to build on Vitality’s existing weight loss programme, which uses reward-based incentives to encourage customers to adopt a healthier lifestyle through better diet and more exercise, with nearly half (48%) of enrolled members reaching their targets of about 5% weight loss. This can lead to a lower insurance excess, as well as other rewards.
Aberdeen in Scotland is the most affordable city for single people to buy a home in Great Britain, analysis of national property data shows, with the average one- or two-bedroom home valued at just under £120,000.
Monthly mortgage payments in the city came in at £510 a month – about 16% of the area’s average monthly salary – for such a property valued at £119,350, according to research from the property website Zoopla.
Liverpool was named the most affordable city for single homebuyers in England, with average mortgage payments making up 18% of monthly salaries, or £540.
The average UK property price rose by 0.7% in January to a new record of £299,138 after dropping 0.2% in December, according to Halifax, one of the country’s biggest mortgage lenders. The jump came as many first-time buyers rushed to complete deals before a stamp duty increase, which is due to come in this spring.
Here’s our full story on the Ofwat investigation of Thames Water, the UK’s biggest water company with more than 16 million customers:
Thames Water is being investigated by the water regulator for England and Wales, Ofwat, after it delayed environmental improvement schemes.
The investigation comes after the Guardian revealed that the UK’s largest water company intentionally diverted millions of pounds pledged for environmental clean-ups towards other costs, including bonuses and dividends.
Ofwat has opened an enforcement case into the company to decide whether it has breached its obligations in failing to deliver 100 out of 812 schemes it was supposed to put in place between 2020 and 2025.
These environmental measures are part of the Water Industry National Environmental Programme (Winep) and they include protecting and enhancing rivers, upgrading sewage systems to reduce spills, reducing the amount of water abstracted from rivers and improving the safety and quality of designated bathing sites.
Heineken lifts European shares to new record high
European shares extended gains to hit a fresh record high, buoyed by strong results from brewer Heineken.
The pan-European Stoxx 600 index rose by 0.2% after hitting a record close yesterday. Germany’s Dax also rose by 0.2% to an all-time high of 22,083.
Heineken shares leapt by nearly 12% after the Amsterdam-based brewing giant reported better-than-expected profits, launched a share buyback and predicted more growth this year, bringing cheer to the beverage sector.
Markets are waiting for US inflation data for January, which could have some bearing on the outlook for interest rate cuts in America, and Federal Reserve chair Jerome Powell’s second day of testimony before Congress.
Yesterday, his main comment was that the Fed doesn’t need to be in a hurry to cut rates, and told the Senate banking committee in his semi-annual testimony:
If the economy remains strong and inflation does not continue to move sustainably toward 2%, we can maintain policy restraint for longer. If the labor market were to weaken unexpectedly or inflation were to fall more quickly than anticipated, we can ease policy accordingly.
Barratt Redrow shares jump on upbeat outlook
Barratt Redrow, the merged housebuilding group, is the top riser on the FTSE 100 index, with the shares rallying nearly 7% after it released upbeat results.
The index is flat, though, while other European stock markets have recorded modest gains of between 0.2% (Germany, Italy) and 0.4% (France).
Barratt recently took over Redrow to form a company that aims to build 22,000 homes annually in the coming years. In the six months to 29 December, they constructed a total of 6,846 homes, up nearly 11% from a year earlier, and now expect to deliver completions of between 16,800 and 17,200 this year.
David Thomas, chief executive of Barratt Redrow, said:
The integration of Redrow is progressing well and we are on track to deliver at least £100m of cost synergies, £10m ahead of the original target.
As the economic, political and lending environments have stabilised, there has been some recovery in customer demand and we have seen solid reservation activity since the start of January, building a strong forward sales position. As a result, we now expect our full year adjusted profit before tax will be towards the upper end of market expectations.
Investec analyst Aynsley Lammin said the housebuilder’s targets for completions and operating margins “look very realistic and achievable”.
A solid set of interim results with a positive message post the deal and on the medium-term outlook.
Brussels considers temporary gas price cap – report
The European Commission in Brussels is reportedly considering imposing a temporary cap on EU gas prices after they hit record levels.
European natural gas prices rose to the highest levels in more than two years this week, because of low temperatures and a lack of wind that has held back renewable energy generation. They are between three and four times higher than in the US.
Brussels is considering new powers to temporarily limit gas prices as part of discussions about a “clean industrial deal” policy document to be presented next month, the Financial Times reported, citing three people with knowledge of the talks.
The strategy paper is expected to set out ways to shore up the EU’s heavy industries as businesses grapple with challenges including Donald Trump’s new trade tariffs and the EU’s green energy transition.
Talks around mechanisms to cap prices, though still at an early stage, have drawn a backlash from industry groups which warn against damaging “trust” in the European market. Eleven groups including Europex, the association of European energy exchanges, and AFME, the financial markets lobby group, sent a letter to commission president Ursula von der Leyen yesterday, seen by the Financial Times.
It said:
We believe this measure, if announced, could have far-reaching negative consequences for the stability of European energy markets and the security of supply across the continent.
Coca-Cola may use more plastic bottles in US because of Trump tariffs
Joanna Partridge
Coca-Cola has said it may have to sell more of its drinks in plastic bottles in the United States, if Donald Trump’s tariffs raise the cost of aluminium cans.
It follows Trump’s introduction of 25% tariffs on foreign steel and aluminium entering the US, which could push up the prices of canned food and drink.
Coca-Cola’s chief executive, James Quincey, said the company imports aluminium for its drinks cans from Canada, meaning it is looking for ways to mitigate any price rises resulting from the tariffs. He told investors:
As it relates to our strategies around ensuring affordability and ensuring consumer demand, if one package suffers some increase in input costs, we continue to have other packaging offerings that will allow us to compete in the affordability space.
For example, if aluminium cans become more expensive, we can put more emphasis on PET [plastic] bottles, et cetera.
The Coca-Cola boss, however, also sought to play down the potential impact of tariffs on the business, saying that packaging only accounts for a small part of total costs.
I think we’re in danger of exaggerating the impact of the 25% increase in the aluminium price relative to the total system.
It’s not insignificant, but it’s not going to radically change a multibillion dollar U.S. business, and packaging is only a small component of the total cost structure.
Trump imposed tariffs on foreign steel and aluminium imports in 2018 during his first term in office, although many aluminium can makers won exemptions from penalties. This time, he has insisted that the tariffs will be enforced “without exceptions or exemptions”.
Banks to lobby Reeves on hiring foreign talent
When the UK chancellor, Rachel Reeves, meets with the bosses of Britain’s biggest banks later today to discuss the government’s growth agenda, they will use the opportunity to lobby for a relaxation of rules that hamper the hiring of highly-skilled foreign workers.
The meeting is expected to focus on visas, regulation and tax. The City of London has joined others calling for a more open approach to migration to attract foreign talent.
Miles Celic, chief executive of TheCityUK lobby group, told the Financial Times:
The UK is in a contest for high-quality talent.
It’s important to continue to reduce red tape around bringing high-quality individuals to the UK.
This comes at a time when Sir Keir Starmer’s government is under pressure from the right-wing party Reform UK and has promised to cut migration.
Reeves and Jonathan Reynolds, the business secretary, are busy drawing up an industrial strategy covering eight sectors, including financial services, as part of the government’s growth agenda.
Several sectors, from banking to tech and life sciences, want to be able to recruit top talent from abroad. One official told the FT that “there are big issues around skills and visas”.
Last week, the House of Lords science and technology committee said the UK was committing “an act of self harm” that undermines efforts to attract STEM talent to the UK. It said high visa fees and an inflexible immigration system make it hard to attract science students and early career researchers.
They are seeking residencies in other countries, which means the UK could fall behind in fields such as artificial intelligence.
Introduction: Ofwat to investigate Thames Water over environmental clean-up delays
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Ofwat has opened an enforcement case into Thames Water to investigate whether its delayed delivery of environmental clean-ups means that the company has breached its obligations.
Thames Water committed to deliver 812 schemes as part of the water industry national environmental programme between 2020 and 2025.
However, the company alerted Ofwat and the Environment Agency that it will be unlikely to deliver more than 100 of these projects on time, by 31 March.
Lynn Parker, senior director for enforcement at Ofwat, the regulator for England and Wales, said:
Customers have paid for Thames Water to carry out these essential environmental schemes. We take any indication that water companies are not meeting their legal obligations very seriously. Therefore, we have launched an investigation to understand whether the delayed delivery of environmental schemes means that Thames Water has breached its obligations.
If we find reason to act, we will use our full range of powers to hold Thames to account for any failures and will require them to put things right.
The Guardian reported in late December that Thames Water intentionally diverted millions of pounds pledged for environmental clean-ups towards other costs including bonuses and dividends.
Later today, the chancellor Rachel Reeves is due to meet with the bosses of Britain’s biggest banks, including the chief executives of Barclays, HSBC, Nationwide, Lloyds, NatWest and Santander, to discuss the government’s growth ambitions.
And at lunchtime (UK time), we’ll get the latest US inflation figures, which are expected to show price pressures were steady last month at an annual rate of 2.9%, while the core rate (which strips out volatile food and energy costs) is forecast to have dipped to 3.1% from 3.2%.
Economists at Deutsche Bank led by Jim Reid said:
Today’s report is getting a decent amount of attention, in part because last January’s report saw a strong upside surprise, so the fear is we could get another new year uptick that upsets market expectations for the Fed to still cut [interest rates this year.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said:
A set of softer-than-expected inflation numbers could help sooth inflation worries and encourage a deeper retreat in the US dollar and a further advance across the major peers. While a stronger-than-expected set of inflation figures could fuel worries, back a further rise in US [bond] yields and the dollar, and weigh on risk appetite.
The Agenda
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10am GMT: European Central Bank member Frank Elderson speech
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1.30pm GMT: US Consumer price index for January (forecast: 2.9%; previous: 2.9%)
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3pm GMT: US Federal Reserve chair Jerome Powell gives testimony
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3pm GMT: Bank of England policymaker Megan Greene speaks at IoD