FINANCIAL TIMES
Hello and welcome to our weekly intelligence briefing for boards, where we help directors keep up to speed on the macro trends affecting businesses across the world, and corporate governance news.

We hope you enjoy it and, as always, you can find the latest stories and resources on FT.com/Board.
 
Each day FT Leader writers on the Editorial Board meet to discuss the topics to be considered for Leader columns. Here are the issues that dominated this week:

The Bank of England's ongoing battle to clear up the mess in gilt markets triggered by the government's unfunded "mini" Budget reached dramatic new heights this week.

Our editorial board was critical of mixed messages from the BoE - private reassurance that the temporary bond-buying programme could continue, but tough talk in public from governor Andrew Bailey and his lieutenants.

But further flare-ups will remain a risk as long as the original sin is not addressed: "Restoring confidence in the sustainability of UK finances will require a more substantive rowing back by the government from its promised tax cuts, particularly as [Prime Minister Liz] Truss also rules out spending cuts."

We also bemoaned the growing concern about China's economic slowdown, even as President Xi Jinping cements his political control of the country.

"China’s economic growth rate this year is set to fall behind the rest of Asia for the first time since 1990. This forecast by the World Bank, if it materialises, not only signals a cooling in global wealth creation. With President Xi Jinping set to be anointed to a third term by a Communist party congress starting next weekend, it also challenges Beijing to find new sources of propulsion for the world’s second-largest economy."

To round out our leader writers' trio of economic analysis we will turn at the end of the week to the topic of the global outlook as presented by the IMF in Washington DC. It's fair to expect a pessimistic assessment.
 
Bank of England plays chicken

The UK’s central bank is digging in, insisting that it will stick to Friday’s deadline to end its emergency £65bn gilt-buying scheme. The Bank of England said temporary and targeted purchases of UK government gilts would end on October 14, which led to a rush to sell. That sent long-term borrowing costs soaring.

On Wednesday, the BoE’s bond buying escalated, with $4.4bn of gilts bought from investors. It was fighting a renewed sell-off after its vow to end the programme unsettled markets.

The latest flurry of sales comes after BoE governor Andrew Bailey warned pension funds had “three days left” before support ended. Pension funds are scrambling to shore up their liquidity buffers.

But BoE officials briefed lenders in private that it was prepared to extend the programme if volatility flared again. Bailey is playing a game of chicken with markets, says Chris Giles.

The BoE has rushed to contain the fallout from chancellor Kwasi Kwarteng’s tax-cut package, part of his September 23 “mini” Budget, which sent sterling and the gilt market into volatile territory and triggered a liquidity crisis for pension funds.

But there is little sign the central bank will use all of its $65bn capacity; the scale of buying has remained relatively modest, even as chaos in the gilt market reignited on Monday.

Our explainer sets out how the bond-buying programme works, and examines whether the BoE will be able to end the programme on schedule, even if it wants to do so.

Fallout for Truss

The BoE says “ lessons must be learned” from the crisis. So where does all this leave Liz Truss, the UK prime minister who took office less than six weeks ago?

The political fallout has been damaging. Truss insists she will not cut public spending to fund the debt-funded tax cuts that blew a hole in the public finances, despite the IMF warning to governments this week to rein in spending or risk investors’ mistrust.

But she also insists she will not scrap those tax cuts, including a £17bn plan to reverse an increase in corporation tax.

Restive Tory MPs are pushing for a rewrite of the “mini” Budget, including the reversal of a £17bn plan to cut corporation tax.

Robert Shrimsley argues that Truss’s government, which spent its campaign denouncing the economic establishment, is now cleving to the very institutions it blames for the UK’s decline.

Her political future now depends on them, but her reset may not be enough. Investors are treating the UK as an outlier among western economies. Among G7 nations, only Italy’s 10-year Treasuries have a higher yield.

Truss is also at cross-purposes with business, argues Helen Thomas. The government is serving up an outdated version of what companies want.

“Most lobby groups were not calling for a reversal of the hike to corporation tax, nor the removal of the cap on bankers’ bonuses,” she writes. “No one was asking for the axing of the top rate of tax, and few see the benefit in ever more drastic pledges to exorcise EU rules.”

The mood in the Conservative party is mutinous. “I just don’t see a way out of this,” says one ex-minister.

Biden on collision course with Saudis

The US president has vowed to rethink relations with Saudi Arabia, after the Opec+ cartel of oil-producing countries cut oil production last week.

In an interview with CNN, Joe Biden warned Riyadh would face “consequences” for defying Washington.

Opec+ is cutting production by 2mn barrels a day, infuriating the Biden administration as it prepares for mid-term elections in November against a backdrop of soaring energy prices triggered by Russia’s invasion of Ukraine. The Fed’s monetary policy is likely to tighten further in a bid to bring prices under control.

Russia is escalating its offensive: President Vladimir Putin ordered missile strikes across Ukraine cities this week in retaliation for the attack on the Kerch bridge linking Russia to the annexed Ukrainian peninsula of Crimea.

Meanwhile, western governments are scrambling to secure supplies and keep costs down. The EU wants to force member states to nominate energy companies to join a region-wide platform for joint gas purchases in an effort to lower prices.

In the UK, investors are demanding clarity on the UK government’s energy windfall tax on low carbon electricity generators. The government said this week it plans to impose a limit on revenues to raise “billions of pounds” to offset its £150bn energy support package for consumers and businesses. But it failed to fix a level for the cap, which comes into force in less than three months.

Energy prices are contributing to the cost of living crisis. Hundreds of people across the world responded to an FT callout to reveal what sacrifices they are making to cope with the squeeze on incomes.

From delaying marriages and starting families to selling unwanted items on eBay, find out how FT readers are coping.

Best of business news

Whistleblowers have accused EY of whitewashing suspicions of money laundering and tax evasion at Leonteq, a French fintech company and a longstanding client. Leonteq denies the claims. But FT reporters Dan McCrum, Victor Mallet and Leila Abboud heard a version of events that suggest the whistleblowers were right.

Twitter is reviewing its policies on permanent user bans, though it is unlikely to reverse its decision to block Donald Trump, the former US president, for life. But the social media platform is bringing its content moderation closer to Elon Musk’s vision, regardless of whether the Tesla chief becomes its owner or not.

In the UK, three major safety and competition regulators say they are struggling to adapt to their post-Brexit roles, which leaves consumers and companies facing “greater risks and costs”, according to an influential group of MPs. The Food Standards Agency is among those reporting risks, with abattoir staffing “hand to mouth” and surveillance of disease threats increasingly difficult.

And CVC Capital Partners, Europe’s largest private equity firm, is planning an IPO. The firm has made tens of billions of euros buying stakes in household-name brands, from Debenhams to Formula One to the maker of PG Tips tea.

Now, the firm with €133bn in assets looks likely to join larger rivals such as Blackstone, KKR and Carlyle with a stock market listing.
 
 
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Join me, Martin Wolf, Sir Win Bischoff, chair of JP Morgan Securities and Wendy Carlin, professor of economics at University College London, at the FT’s offices in London on Wednesday 19 October at 6.30pm for a live panel discussion on the inflation crisis and lessons from the 1970s. This session will explore the inflation crisis and what the 'Great Inflation' of the 1970s can teach us about the economy and the market today. How close are the parallels between today's economic climate and the 1970s? What are the critical differences and what can we learn from the mistakes?

The panel will also discuss how business leaders should prepare to mitigate the worst effects of an economic downturn. Register for the event here.

FT Board Director’s virtual peer-to-peer workshop on multi-generational and multicultural organisations will take place on 8 November. Join us to find out how and why organisations become culturally and generationally adept, and the advantage it affords them. Register for the event here.
 
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