Closing summary: Spotify job cuts highlight test for big tech Spotify will cut 600 jobs, adding another name to the parade of tech company names who have announced job cuts recently: Microsoft, Amazon, Salesforce and Meta have all made thousands of redundancies. And then of course there’s Twitter … For all of those tech companies investors will be looking at how far they think expected recessions will affect earnings. A big week of earnings for US companies will test how they fared during winter. Shares in Spotify have gained 3% – they were up by as much as 8.5% – after confirming plans to cut 6% of its workforce. But it comes after its shares dropped 45% over the course of the last 12 months. Spotify will incur charges of between €35m and €40m as part of the cuts, but investors are fearful of a much bigger impact from the slowing global economy, and rising interest rates also make the promise of future earnings less valuable in the present day. Victoria Scholar, head of investment at interactive investor, a platform, said: Global digital spending is suffering, and ad revenues are falling with it, prompting tech companies, which not long ago were the darlings of the stock market, to reduce labour costs in preparation for the economic downturn. Cost-of-living pressures mean consumers are looking for ways to reduce their discretionary spending on expenses such as music subscriptions and other non-essential services. Silicon Valley’s sense of invincibility spurred a period of overzealous expansion during the era of rock-bottom interest rates. But the tech sector was swiftly brought back down to Earth in 2022 on the back of rising inflation and interest rates, the fading technological boom during the pandemic-era when most of us were glued to our devices, and a slowing global economic backdrop. The result has been a raft of disappointing share price performances and an accompanying slew of job cuts. In other developments from today: A Conservative health minister, Nick Markham, has a substantial financial stake in a private health screening and Covid testing firm, raising questions about the potential for a conflict of interest. The US activist investor firm Elliott Investment Management has taken a multibillion-dollar stake in Salesforce, the business software company that owns the Slack messaging platform. Twitter is planning an advertising-free version of its subscription product, as the company attempts to raise revenue and increase demand for its premium offering. The companies running Britain’s four remaining steel blast furnaces have been offered £600m in government support to invest in lower-emissions technology. Energy companies are to be investigated by the regulator Ofgem after a sharp increase in the number of struggling households being forced on to prepayment meters. Britain’s farming union has accused the chair of Tesco of living in a “parallel universe” after he said food companies may be using inflation as an excuse to increase prices further than necessary. You can continue to follow the rest of the Guardian’s coverage from across the world: In the UK, Labour says Sunak should sack Zahawi as PM orders tax claims investigation In the US, some Democrats express frustration with Biden over classified documents In our coverage of the Russia-Ukraine war, pressure builds on Germany to make a decision on sending tanks to Kyiv Thank you for reading, and please do join us again tomorrow for more live coverage of business, economics and financial markets. JJ Earlier my collegue Alex Lawson published this handy guide to how the National Grid’s demand flexibility service works in practice. In summary, households that are eligible (those with a smart meter and a participating supplier) must reduce their consumption within the designated time period by at least 30%. The greater the reduction, the greater the discount, which is automatically applied to the bill. National Grid to pay households for energy use cuts for second day Newsflash: Households and businesses will be paid to cut their electricity use again on Tuesday as National Grid aims to reduce the strain on Great Britain’s energy network. The Electricity System Operator said on Monday that it was looking for bids from suppliers to help save up to 341 megawatts (MW) of power between 4.30pm and 6pm on Tuesday. The plan, which could still be abandoned if conditions improve, would help the grid balance supply and demand by paying people to reduce the amount of electricity they use. The service will be used live for the first time on Monday afternoon between 5-6pm. Separately, it is understood National Grid is unlikely to call three coal-fired units at power stations which were put on standby into action. On Sunday, National Grid asked Drax to start “warming” two of its coal units at its North Yorkshire site and EDF to do the same for one at its West Burton plant in Nottinghamshire to ensure supplies were available on Monday. However, those units are now unlikely to be used. Closing summary: Spotify job cuts highlight test for big tech Spotify will cut 600 jobs, adding another name to the parade of tech company names who have announced job cuts recently: Microsoft, Amazon, Salesforce and Meta have all made thousands of redundancies. And then of course there’s Twitter … For all of those tech companies investors will be looking at how far they think expected recessions will affect earnings. A big week of earnings for US companies will test how they fared during winter. Shares in Spotify have gained 3% – they were up by as much as 8.5% – after confirming plans to cut 6% of its workforce. But it comes after its shares dropped 45% over the course of the last 12 months. Spotify will incur charges of between €35m and €40m as part of the cuts, but investors are fearful of a much bigger impact from the slowing global economy, and rising interest rates also make the promise of future earnings less valuable in the present day. Victoria Scholar, head of investment at interactive investor, a platform, said: Global digital spending is suffering, and ad revenues are falling with it, prompting tech companies, which not long ago were the darlings of the stock market, to reduce labour costs in preparation for the economic downturn. Cost-of-living pressures mean consumers are looking for ways to reduce their discretionary spending on expenses such as music subscriptions and other non-essential services. Silicon Valley’s sense of invincibility spurred a period of overzealous expansion during the era of rock-bottom interest rates. But the tech sector was swiftly brought back down to Earth in 2022 on the back of rising inflation and interest rates, the fading technological boom during the pandemic-era when most of us were glued to our devices, and a slowing global economic backdrop. The result has been a raft of disappointing share price performances and an accompanying slew of job cuts. In other developments from today: A Conservative health minister, Nick Markham, has a substantial financial stake in a private health screening and Covid testing firm, raising questions about the potential for a conflict of interest. The US activist investor firm Elliott Investment Management has taken a multibillion-dollar stake in Salesforce, the business software company that owns the Slack messaging platform. Twitter is planning an advertising-free version of its subscription product, as the company attempts to raise revenue and increase demand for its premium offering. The companies running Britain’s four remaining steel blast furnaces have been offered £600m in government support to invest in lower-emissions technology. Energy companies are to be investigated by the regulator Ofgem after a sharp increase in the number of struggling households being forced on to prepayment meters. Britain’s farming union has accused the chair of Tesco of living in a “parallel universe” after he said food companies may be using inflation as an excuse to increase prices further than necessary. You can continue to follow the rest of the Guardian’s coverage from across the world: In the UK, Labour says Sunak should sack Zahawi as PM orders tax claims investigation In the US, some Democrats express frustration with Biden over classified documents In our coverage of the Russia-Ukraine war, pressure builds on Germany to make a decision on sending tanks to Kyiv Thank you for reading, and please do join us again tomorrow for more live coverage of business, economics and financial markets. JJ In the US shares have opened strongly – helped by a jump in Salesforce’s share price. Salesforce has increased because of the disclosure of a stake from activist investor Elliot Management. That might spell tough times ahead for executives at Salesforce, but their record means investors believe that higher profits could follow. The tech-focused Nasdaq has gained 1%, while the S&P 500 benchmark is up 0.5% and the Dow Jones is up 0.2%. It looks like those coal plants that were fired up have now been stood down – National Grid does not think they will be needed after all this evening. Reuters reports: Britain’s National Grid has stood down plans to fire up coal plants on Monday evening which it had asked operators on Sunday to get ready in case high power demand meant they needed to provide extra electricity. A spokesman for National Grid, which is responsible for ensuring the country’s electricity supply, said by telephone on Monday the supply picture had improved since it issued the notice. Spotify to cut about 600 jobs in latest sign of tech struggles Music streaming company Spotify has announced it will cut the jobs of about 6% of its workforce, or about 600 workers, the latest in a series of big technology companies to announce redundancies. Chief executive Daniel Ek wrote in a message to employees that the Swedish company was restructuring to promote “speed”. As part of the restructuring influential content head Dawn Ostroff will leave the business. Big technology companies in the US have already announced tens of thousands of job cuts after a year in which their stock market value plummeted amid rising interest rates. Microsoft is cutting 10,000 jobs, Amazon will cut 18,000, Salesforce is cutting about 8,000, and Meta is cutting about 11,000. Ek said that Spotify’s operational spending grew twice as fast as revenue in 2022, meaning it needed to cut back. Of the redundancies, Ek wrote: While I believe this decision is right for Spotify, I understand that with our historic focus on growth, many of you will view this as a shift in our culture. But as we evolve and grow as a business, so must our way of working while still staying true to our core values. As you are well aware, over the last few months we’ve made a considerable effort to rein-in costs, but it simply hasn’t been enough. Like many other leaders, I hoped to sustain the strong tailwinds from the pandemic and believed that our broad global business and lower risk to the impact of a slowdown in ads would insulate us. In hindsight, I was too ambitious in investing ahead of our revenue growth. Households to be paid for cutting energy this afternoon amid colder weather Today for the first time National Grid will pay households to cut back their energy use. It could – hopefully – be a forerunner of a smarter, more efficient energy system. The system will swing into action for the first time between 5pm and 6pm – although only those who have actually received smart meters will be able to benefit. Alex Lawson, the Guardian’s energy correspondent, has more details of the scheme: The scheme is only open to businesses and households with a smart meter whose supplier or aggregator is one of the 26 firms (including most of the big ones) to have signed up. More than 1m households and businesses have signed up to participate and most suppliers have closed the scheme to new participants. Consumers are likely to use various methods to save power during the period – including making sure none of their devices are charging, or pushing back meal times. A household’s power use will be compared with their normal usage for that time of day, and they will receive about £3 for every kilowatt hour saved. Several companies are working on introducing more flexibility into the energy system. One big hope is the advent of electric cars – essentially a big, rechargeable battery on wheels. When they are plugged in to a house owners could in the future be able to sell back energy from the car’s battery to the grid at peak times. Car owners could then charge the vehicle overnight, when prices are cheaper. That would lower peak generation demand, and also make use of wind and solar power when it is abundant but demand is lower, such as windy nights or sunny mornings. That seven-month high for sterling this morning is looking like a brief encounter. The pound is now trading at $1.2359, down 0.3% for the day. That’s down almost a cent on the morning high of $1.2447. UK government offers £600m to British Steel and Tata for green upgrades The UK government has offered £600m in support for Britain’s four remaining steel blast furnaces to invest in lower-emissions technology. Chancellor Jeremy Hunt is expected to announce the support of £300m each for British Steel and Tata Steel as soon as this week, although the timing will depend on the companies accepting the offers. The BBC first reported the government offer of support to both companies. The steel industry is one of the most difficult to decarbonise because of the huge energy requirements and the use of coking coal in iron smelting, a process which emits carbon dioxide directly. British Steel, owned by China’s Jingye, and Indian-owned Tata Steel are both looking at how to upgrade their plants to electric arc furnaces, which heat recycled metal using electricity that can in theory come from zero-emissions source. The British Steel and Tata plants employ thousands of workers with two furnaces each at Scunthorpe in Lincolnshire, and Port Talbot in South Wales respectively. British Steel has been in talks with the government over support since the autumn to help it with the increased costs of carbon credits as well as much higher energy prices following Russia’s full-on invasion of Ukraine 11 months ago. Tata, meanwhile, has been in talks over the longer-term future of the Port Talbot site for several years. It is understood any government support would be conditional on the companies also committing to investing in the plants themselves, and will be tied to environmental investments in order to comply with state aid rules. Tata Group’s chairman, Natarajan Chandrasekaran, last summer said Port Talbot would require £3bn – including £1.5bn from the government, to keep the site operational. Industry sources question whether that much would be required to upgrade two blast furnaces, although £300m would probably only cover the costs of upgrading one. British Steel is also thought to be looking at the possibility of carbon capture and storage for one of the blast furnaces as Scunthorpe, a method of emissions reduction that would retain the UK’s ability to continue primary steel production rather than relying on recycled scrap. The steel industry has been crying out for support to decarbonise for several years. Labour has committed to spending £3bn to upgrade the UK’s steel industry. Charlotte Brumpton-Childs, national officer for GMB, one of the unions representing steelworkers, said: Any investment in the UK’s beleaguered steel industry is welcome. But ultimately this is a sticking plaster – it does nothing to address the wider issues in the industry; catastrophic energy costs and a grossly uneven international trading environment. The pub group Fuller, Smith & Turner has issued a profit warning, blaming months of train strikes for a £4m slump in sales including a plunge in festive season trade. Fuller’s, which has more than 400 pubs mainly in London and south-east England, said that since the start of October industrial action on the rail network had cost the business £4m in sales. As a consequence, the group said that profits will now come in below market expectations when it reports results for the year to April in the summer. Sales for the crucial four-week Christmas and new year period were up 38% on the previous year, when the hospitality industry was crippled by restrictions relating to spread of the Omicron variant. However, Fuller’s said the run of strikes by various rail unions in December and January meant sales were down 5% on pre-Covid trading for the same period in 2019. Sterling hits seven-month high against US dollar Sterling has notched a gain today against the US dollar: it is up by 0.16% to about $1.2413. But, more notably, earlier in the session the rate briefly touched $1.2447, its highest level in seven months. You can see from this chart just how far the exchange rate has come back since the dark days (for the UK government at least) of nearing pound-dollar parity. That vertiginous drop in the pound’s value in September will forever be labelled “Truss and Kwarteng”, after the UK’s shortest-serving prime minister and her chancellor, who only avoided the ignominy of being shortest in that job because another died in office. Since they were chucked out, UK financial markets have at least calmed, and there are some signs from economic data that have suggested the economic position is not quite as bad as first feared, while other indicators have suggested the Bank of England may not need to raise interest rates quite so quickly. The world’s best-performing hedge fund earned $16bn – you read that correctly – in profits for investors last year, the biggest dollar gain in history. Ken Griffin’s Citadel, which was paid $16bn, moved into the top spot ahead of Bridgewater, which earned $6.2bn, according to data from investment firm LCH Investments. Hedge funds are generally defined by their ability to make long or short investments and use complex products like derivatives and borrowed money to maximise their profits. When they manage billions of dollars, like Citadel, they can make billions themselves. From Reuters: Citadel, which was founded by Griffin in 1990, saw its flagship Wellington portfolio gain 38% last year while its fixed income fund was up 33%, according to a person familiar with the numbers. That performance made for enormous returns: it charged investors roughly $12bn in expenses and performance fees, the Financial Times reported. But the gain for the 20 top hedge fund managers was $22.4bn in 2022, which was actually the smallest gain since 2016, according to the LCH data. That was because of some almighty losses for equity funds who had relied on big technology stocks for their returns. The Financial Times reported that Tiger Global was a big loser – in fact, it was the biggest loser in hedge fund history, according to the LCH data: It was one of the highest-profile casualties when markets reversed, making $18bn of losses across its funds last year […] According to LCH, this ranks as the biggest annual loss in hedge fund history. LCH’s research does not include Tiger’s private equity business. Tiger Global declined to comment. London black cab maker to receive investment from Chinese owner The maker of London’s black cabs, the London Electric Vehicle Company (LEVC), is due to receive significant new investment from its Chinese owner, Geely. LEVC executives told Reuters in an interview that the company would become a high-volume, all-electric brand with a range of commercial and passenger vehicles. It currently makes a hybrid vehicle with 64 miles of battery range and a petrol “range extender” – a small internal combustion engine that recharges the battery. Alex Nan, LEVC’s chief executive, said: We need a developed product portfolio. We need to make big investments in terms of the technology and infrastructure. Geely will make consistent investments into LEVC because this is a very unique project. LEVC has struggled in recent years. In October it cut 140 jobs, blaming the pandemic, disruption to supply chains and “significant global economic challenges”. “Geely fully supports the new transition strategy laid out by LEVC’s board and executive team,” Geely said in a statement. LEVC currently has the capacity to build 3,000 taxis a year running on a single shift at its Coventry factory. Another LEVC executive said that could easily be increased to 20,000 and the plant had room to expand, Reuters reported. Here are the other snaps from across Europe’s stock markets, via Reuters: EUROPE’S STOXX 600 UP 0.2% EURO ZONE BLUE CHIPS UP 0.4% FRANCE’S CAC 40 UP 0.3% SPAIN’S IBEXUP 0.1% GERMANY’S DAX UP 0.3% The UK’s FTSE 100 benchmark index is off to a positive start this week. It’s up 0.2% at 7,786 points. Remember, the FTSE 100 is not too far off its all-time high. That is mainly thanks to its contingent of banks and oil companies, who have benefited in the past 12 months while growth stocks like technology companies have faltered. Central bank tightening is behind that: higher interest rates make the present value of future income lower. The numbers to watch out for: the FTSE’s record intraday high of 7,903 points was set in May 2018, before closing at 7844.07. We’ll be on watch if it approaches that record this week. CBI: UK needs to match US and EU green spending Good morning, and welcome to our live coverage of business, economics and financial markets. The head of the Confederation of British Industry (CBI) will today say the UK is falling behind the US and EU in developing the green economy, according to a biting assessment of the government’s failure to invest. Tony Danker, the CBI’s director-general, will call for the government to aim for faster growth, with low-carbon technologies a key focus, in a speech today (Monday) at University College London. The US and Europe are “outspending and outsmarting us” on green growth, Danker said. The White House under President Joe Biden has passed the Inflation Reduction Act, which will direct $369bn (£298bn) toward investing in renewable energy and reducing America’s planet-heating emissions, while the EU is considering ramping up its already considerable spending in response. Danker (who formerly worked for the publisher of the Guardian) said: We’re behind the Germans on heat-pumps, insulation and building retrofits, the French on EV charging infrastructure, and the US on operational carbon capture and storage projects – despite the UK’s North Sea advantage. We’re lagging all three on hydrogen funding. While our competitors across Europe, Asia and the US are making their move, and going hell for leather, we seem to be second guessing ourselves and hoping for the best. It’s time for us to take those hard decisions, generating the forward momentum not only to limit recession this year but also get us really growing next. On a related (if shorter-term) note: the UK’s National Grid will today start paying some customers to use less energy, the first time it has used the new demand flexibility service. The service has been trialled but not run in a live situation before. It will run from 5pm to 6pm on Monday, its Electricity Supply Operator arm said. The cold weather also means that National Grid has asked coal-fired power stations to heat up to be ready to meet peak demand (around the early evening as people start heating their homes and food). National Grid said: “These are precautionary measures to maintain the buffer of spare capacity we need.” The agenda 9:30am GMT: UK foreign direct investment involving UK companies (2021) 9:30am GMT: UK national balance sheet estimates (2022)