What seemed unthinkable days ago is happening: a major Eurozone bank plans to acquire another in a different member state. UniCredit, Italy’s second lender, says it holds contingent derivative instruments which would give it effective control of Commerzbank, the second-biggest bank in Germany by market capitalisation (“The trouble with UniCredit’s interest in Commerzbank”, Opinion, September 30).

The two banks are a good match. After years of draconian clean-up and restructuring, UniCredit recently outperformed most European peers by net returns and market valuation. Now worth twice what Commerzbank is worth, it is an internationally diversified group, experienced in restructuring itself and other banks. It already owns an important mortgage unit in Germany, which would generate synergies. Commerzbank, by contrast, with a cost ratio well above UniCredit’s and profits about a tenth of the size, may benefit from some internal cure. Both banks have sound capital and liquidity positions.

In its recent report on European competitiveness, Mario Draghi called for banking integration in the Eurozone, even suggesting special legislation is needed to bring it about. This deal would mark a remarkable step in the right direction.

But within Germany, it is fiercely opposed by the political establishment and trade unions, fearing loss of control and job cuts.

At the time of writing, the only obstacle seems to be authorisation by the European Central Bank, on prudential grounds. Its supervisory board, chaired by former Bundesbank vice-president Claudia Buch, includes top officials from the Bundesbank and BaFin, Germany’s financial watchdog. All of them are bound by statute to act independently in the sole interest of the EU bloc and not take instructions from governments or any other bodies.

The UniCredit-Commerzbank deal is a test case for the ECB, which will reverberate into the future, and be a golden opportunity for its supervisory board to uphold its independence.

Ignazio Angeloni
Senior Policy Fellow, SAFE, Goethe University Frankfurt; Non-resident Fellow, Institute for European Policymaking, Bocconi University, Milan, Italy

Milo Brett’s letter suggesting that the NHS budget could be enhanced by subsidising no-alcohol drinks (Letters, September 25) and thus reduce alcohol -related treatments in the NHS is wishful thinking.

Roughly 35 per cent of the cost of a litre of petrol and 50 per cent of a litre of Gordons gin goes to tax yet that levy does not seem to deter the James Bond wannabes from driving fast cars and drinking martinis. Subsidising mocktails and electric cars seems unlikely to fuel mass take-up.

Peter Breese
Lauzerte, France

Mark Carney’s warning about stranded assets in commercial real estate is timely (Report, October 3), but his considerations should not be limited to offices, as many residential property portfolios face similar challenges.

The stop-start nature of policymaking has severely damaged investor confidence and limited investment in the sector. Our own research shows that 45 per cent of large real estate companies in the UK lack access to sufficient private capital for net zero measures. This shortfall extends beyond commercial properties to residential buildings, hampering progress overall.

Carney’s assertion that he’s “sanguine about commercial real estate risks in the financial sector” overlooks a more significant concern: the impact of stranded assets on savers. As pension funds and individual investors face potential losses from devalued properties, the financial stability of millions could be at risk.

To address these challenges comprehensively, the UK should relaunch a green jobs task force to co-ordinate efforts across the built environment sector to retrofit and install heat pumps at pace. The consumer price inflation CPI plus 1 per cent rent cap agreement has gone some way to ensuring housing associations have certainty of income, but more must be done to ensure the works get under way and properties do not devalue. A social housing retrofit scheme such as that introduced in the Netherlands (known as Energiesprong) could allow landlords to borrow for retrofits based on forecasted future energy bill savings.

The transition to net zero presents both risks and opportunities. By taking decisive action now, we can mitigate the risks of stranded assets while creating a more resilient and sustainable property sector that benefits both the economy and individual savers.

James Alexander
Chief Executive Officer, UK Sustainable Investment and Finance Association, London EC2, UK

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A cross-industry coalition of businesses has urged the UK prime minister to make financial education compulsory in all English schools, adding pressure on the government to ensure children are taught how money works from an early age.

Financial education was added to the curriculum for local authority-run secondary schools in 2014, but it is largely incorporated in non-core subjects, such as citizenship. The subject is optional for academies and free schools.

In an open letter, the Financial Education Council (FEC), a subcommittee of The Investing and Saving Alliance (TISA), said implementation of the subject “remains inconsistent and its impact limited.”

The call to boost personal financial education comes as the Labour government consults on a proposed overhaul of the school curriculum. A review is being led by Becky Francis, chief executive of the Education Endowment Foundation charity.

The letter has been signed by groups including L&G, Schroders, GoHenry, NatWest Cushon, Rathbones, Foresters and Bank of Ireland.

The businesses said they backed recommendations made earlier this year by the House of Commons education select committee, who asked ministers to review the contents of the current maths curriculum to expand “the provision and relevance” of financial education. 

The crossparty group of MPs called on the government to make the “personal and societal elements” of financial education compulsory at both primary and secondary school level.

Campaigners have warned that confidence in basic numeracy is at a low level among young people, which only compounds pressure on them during a cost of living crisis.

Several charities, including the Financial Times’ Financial Literacy and Inclusion Campaign, have pressed the government for better financial education.

Carol Knight, TISA CEO said: “There is clear evidence that the delivery of effective financial education during childhood is of great benefit both from an individual and a societal perspective: helping to increase financial inclusion, financial confidence and, ultimately, increase economic growth.

“For these reasons, TISA is calling on the prime minister to add financial education to the curriculum so that all children can benefit from a high-quality and effective financial education.” 

A Department for Education spokesperson said financial education already forms a compulsory part of the national curriculum covering personal budgeting, calculating interest, financial products and services, and how public money is raised and spent.

“The Curriculum and Assessment Review led by Becky Francis recently launched a call for evidence and we encourage experts, teachers, parents and key organisations like the Financial Education Council to respond to help shape their recommendations to government,” the spokesperson added.

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Proposals to split Britain’s electricity market so that prices differ by region risk pushing up manufacturers’ costs and deterring investment, some of the UK’s largest trade groups have warned the government. 

UK Steel, Make UK, RenewableUK and the Global Infrastructure Investor Association have written to ministers saying they are worried that the proposals, developed by the Conservative government, could “increase the risks of de-industrialisation”.

“We are clear that splitting Great Britain into several regional price zones would undermine investment in low-carbon energy and risks penalising the UK’s energy-intensive industries with higher electricity costs,” they said in the letter sent on Friday and seen by the Financial Times.

The message comes at a sensitive time for the new Labour government, which is trying to demonstrate the UK’s attractiveness to investors ahead of its global investment summit on October 14. The recipients included energy secretary Ed Miliband and Jonathan Reynolds, business secretary.

The proposed reforms are part of sweeping potential changes to the electricity market first advanced in 2022, to adapt to the shift to renewable sources of generation such as intermittent wind and solar power. Labour, which is making a big push on renewable energy, has yet to outline its position on them.

Currently Britain has a single national wholesale electricity price. The proposals include an option to split the market so that wholesale prices differ by region, depending on supply and demand.

Proponents argue this could make the market more efficient and keep system costs down by encouraging consumers to use electricity when it is abundant nearby, rather than letting it go to waste, as frequently happens.

Guy Newey, chief executive of Energy Systems Catapult, the innovation centre, said the market needed “urgent reform”, adding: “Zonal pricing is already common in a huge number of international markets and has driven down costs for consumers.”

Ultimately, supporters argue the move could encourage industry to shift to areas with abundant renewable supply, such as parts of Scotland, while developers could expand in areas less well supplied with renewable electricity, as they could get higher prices.

However the trade groups are concerned that the proposals would risk higher prices for industries that consume large quantities of electricity, such as steel, glass and ceramics. They would also add to the risks faced by renewable developers, they said.

“A miles-wide steel plant simply cannot up and leave to get access to lower power prices elsewhere,” added Frank Aaskov, director of energy and climate change policy at UK Steel, in comments separate to the letter. 

“This is before we consider the billions invested in operations, let alone the workers who could get left behind.”

Relatively high electricity costs have long been a source of complaint for industry, which is moving away from fossil fuels. Both Tata Steel and British Steel are closing coal-fired blast furnaces in the UK and moving to electric arc furnaces.

Jon Phillips, chief executive of the Global Infrastructure Investor Association, noted that global investors “seek long-term, low-risk investments that generate steady returns”.

He added: “The introduction of zonal pricing . . . risks undermining the government’s ambitions to attract more international investment into the UK. It’s important that energy policy provides the long-term stability that investors seek.”

A UK government spokesperson said it was reviewing responses to the consultation on the issue and would “ensure that any reform options taken forward focus on protecting bill payers and encouraging investment”.

“Our new industrial strategy will deliver long-term, sustainable growth right across the UK by supporting our industries and driving private investment into our economy,” they added.

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UK businesses have put hiring on hold because of uncertainty over the government’s plans on tax, industrial strategy and workers’ rights, a closely watched survey showed on Monday.

Recruiters placed fewer people in jobs in September, in a continuation of a market slowdown that has lasted two years, the monthly report from KPMG and the Recruitment & Employment Confederation showed. Meanwhile growth in starting salaries was at its weakest since February 2021.

Jon Holt, UK senior partner at KPMG, said businesses had put the brakes on recruitment in the run-up to the Budget to “wait for clarity on future taxation, business and economic policy”.

Recruitment agencies responding to the survey said they had placed fewer people in permanent positions that month because “unclear government policy” had made their clients cautious.

An index measuring permanent placements rose from 44.6 in August to 44.9 in September, but remained well below the reading of 50 that would signal stable activity. Meanwhile a decline in temporary billings gathered pace.

The figures are the latest sign that confidence in the UK economy has been rattled by ministers’ warnings that tough decisions on tax, benefits and spending would be needed in the Budget to balance the books.

A separate survey published last month showed the prospect of a painful Budget had also hit households’ morale, with consumer confidence dropping sharply in September, even though the Bank of England’s August interest rate cut was starting to feed through to mortgage rates.

Since then, chancellor Rachel Reeves has been seeking to convey a more upbeat message, telling the Financial Times last week that the Budget would be about investment, and not about fresh public sector austerity.

“The government needs to continue to give chief executives confidence in the UK’s macroeconomic conditions and the country’s route to stronger growth,” said Holt.

Recruiters polled by KPMG and the REC have been reporting falling demand for staff for more than a year. In September, the drop in demand for permanent roles was sharpest in retail, construction and in the technology sector. The only significant growth in demand was for medical, nursing and care workers.

Because of the drop in demand, businesses that struggled to fill vacancies a year ago are now finding there are far more candidates looking for work, the survey indicated — some recently made redundant.

The KPMG/REC survey is closely watched by policymakers at present, because ongoing problems with the Office for National Statistics’ labour force survey mean there is no reliable gauge of unemployment.  

REC chief executive Neil Carberry said any further move by the BoE to cut interest rates would boost business, but that “eyes are also on the government” to set a clear industrial strategy and give employers more certainty over its plans for sweeping reforms to employment law.