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Ministers split over aid for Titanic shipbuilder Harland & Wolff

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Ministers split over aid for Titanic shipbuilder Harland & Wolff

The UK government is split over a financial support package for Harland & Wolff in a row that casts uncertainty over the future of the Belfast shipbuilder behind the Titanic.

The Treasury has reservations about approving a taxpayer-backed £200mn guaranteed loan facility, while three rival ministries — Defence, Trade and Business, and the Northern Ireland Office — are all keen to press ahead, according to Whitehall officials.

Chancellor Jeremy Hunt, who must greenlight the package, has not made up his mind and is still receiving advice, with some involved in the talks claiming he is dragging his feet on the decision, three people with knowledge of the talks said. Insiders said a decision is expected in the coming days. H&W wants to borrow up to £200mn from a group of banks at a lower interest rate with the government acting as a guarantor for those loans.

Without the guarantee, the lossmaking business will need to find other sources of financing to help meet its working capital requirements and fulfil key contracts that include building three ships in a £1.6bn Royal Navy contract.

The company’s auditors last year warned the business faced “material uncertainty” unless it could source fresh financing and win additional new work.

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The group is also engaged in pay negotiations with staff and “needs the money” to meet payroll, one person with knowledge of the business said.

Report of the government split comes only days after defence secretary Grant Shapps claimed the UK was entering a “golden age” of shipbuilding, after he approved new warships as part of the UK’s increased military spending.

Two of the officials said that the government was inclined to help the Aim-listed company, which has operations in Scotland and England as well as the iconic shipyard where the Titanic was built and whose yellow cranes dominate the Belfast skyline.

One insisted that the Treasury was concerned about the specific financing mechanism proposed, but was not opposed to the principle of extending support to the 163-year-old company. Officials are weighing alternative support options in the event the chancellor blocks the guarantee scheme.

However, MPs have questioned whether it is right to use taxpayers’ money to support the struggling business at all.

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Kevan Jones, Labour MP for North Durham, on Wednesday called on the National Audit Office to investigate the matter.

“There are serious questions to answer around the use of taxpayer money in guaranteeing a multimillion pound loan to Harland & Wolff, given its current financial position,” Jones told the Financial Times.

Jones, who has previously raised concerns in parliament about the intention to offer an unprecedented 100 per cent guaranteed loan, wrote to Gareth Davies, head of the NAO, earlier this week asking the agency to look into what guarantees were in place to protect taxypayers. 

Jones said there were also questions to be asked about the “due diligence that was done on the ability of H&W to deliver on the £1.6bn contract prior to it being awarded”.

“The National Audit Office should seek answers to these questions on taxpayers’ behalf,” said Jones.

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In a statement on Wednesday, H&W said its management was “comfortable with progress on what is a complex and large transaction for all parties involved”.

H&W shares fell more than 28 per cent on Tuesday before recovering half their losses to close at £10.10, valuing the business at less than £18mn.

The company’s latest annual accounts, to the end of 2022, showed revenues of £27mn but losses of £70mn. H&W also had net debt of £82.5mn, in part thanks to high interest payments on a $100mn loan to New York-based Riverstone Credit Partners.

In December, H&W said it had “sufficient funds” to meet its working capital requirements “until the new loan facility is completed”.

Francis Tusa, analyst and editor of the Defence Analysis newsletter, said “awarding a £1.6bn contract to a company with a market value substantially below this level is not best practice”. H&W has not built a complex warship for more than two decades.

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Ministers had agreed in December to advance the loan guarantee to the next stage, so that H&W could work on financing with its bank syndicate.

The officials said the MoD, DBT and NIO want a financial package agreed swiftly to offer certainty around the future of the shipbuilding business.

The package is critical if H&W is to deliver on a £1.6bn contract to build three support ships for the Royal Navy, which it won in 2022 as part of a Spanish-led consortium. Unions have previously raised concerns that the work could migrate to Spain.

The NIO supports extending finance to Harland & Wolff, mindful of its status as an iconic Belfast-founded business that has particular significance to the unionist community, according to one of the Whitehall insiders. The government pledged in January to support the region’s shipbuilding and defence industries.

Despite the row, first reported by The Times, unions remain confident. Alan Perry, senior organiser for the GMB union in Belfast, said he was “definitely not” hearing the company was in any danger or anything “at the moment that would concern us”.

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A government spokesperson said: “We continue to engage with Harland and Wolff with the export development guarantee. Due to commercial sensitivities, it would not be appropriate to comment further until the outcome of the process is confirmed.”

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Israeli tanks enter central Rafah

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Israeli tanks enter central Rafah

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Israel stepped up its military offensive in Rafah on Tuesday, sending tanks into the heart of Gaza’s southernmost city despite growing international condemnation of the operation.

In the wake of a lethal Israeli air strike over the weekend that killed dozens of civilians, Israel pressed farther towards Rafah’s centre with military vehicles taking positions near the Awda roundabout, according to eyewitnesses.

At least five Israeli military combat brigades were operating by Tuesday in Rafah and the adjoining frontier with Egypt, called the Philadelphi corridor, pushing westwards into more densely populated areas of the city.

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The scale of the military deployment suggests Israel is mounting its most significant operation inside Gaza for several months.

Israel considers Rafah Hamas’s last stronghold in Gaza and launched its assault earlier this month despite widespread international concern for the 1.4mn Palestinians that had sought refuge in the city.

Humanitarian organisations have warned about the risks to civilians of an operation in Rafah, where hundreds of thousands of Palestinians are sheltering, but the US state department on Tuesday said it did not believe Israel’s offensive amounted to a full-scale military assault that would cross any red lines set by President Joe Biden.

Matthew Miller, a state department spokesperson, said the US judged Israel’s operations to be on a more limited scale than its previous operations in Khan Younis and Gaza City. “This so far is a different type of military operation,” he added.

“We will continue to emphasise to Israel their obligation to comply fully with international humanitarian law, minimise the impact of their operations on civilians, and maximise the flow of humanitarian assistance to those in need,” Miller said.

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According to the UN, about 1mn people have fled Rafah ahead of advancing Israeli troops, to what Israel describes as humanitarian “safe zones”, but which international aid groups have criticised as lacking basic infrastructure and supplies.

“Many citizens are trapped in the middle of the city,” said one Palestinian in the area.

Local officials in the Rafah governorate said later in the day that 21 people were killed, and dozens injured, by Israeli fire in an encampment of tents for the displaced in the city’s western outskirts.

The Financial Times could not immediately establish more details relating to the incident. Israel’s military denied any such attack: “Contrary to the reports from the last few hours, the [Israel Defense Forces] did not strike in the humanitarian area in Al-Mawasi.”

A woman reacts as Palestinians inspect tents on Tuesday after an Israeli army operation on an area in Rafah previously designated by the army as safe for displaced Palestinians © Haitham Imad/EPA-EFE/Shutterstock

The report came just two days after an Israeli air strike killed at least 45 people in another camp for displaced people in the north-western Tal as-Sultan neighbourhood.

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Miller said the US had expressed its “deep concern” to Israel over the incident and added that Washington was waiting for the results of the full Israeli investigation into the incident.

He noted that the IDF’s preliminary conclusions were that the strike hit 1.7km away from the area where civilians were seeking refuge.

Israeli leaders have made clear that nothing will stop the Rafah offensive, which is a bid to dismantle the last four standing Hamas battalions in the territory as well as to rescue Israeli hostages that the IDF says are being held in the area.

The IDF has also seized at least 50 per cent of the 14km-long Philadelphi corridor, according to one Israeli official. IDF infantry and combat engineers have been working to locate and destroy tunnels connecting Gaza to Egypt’s Sinai peninsula, which Hamas has allegedly used for years to smuggle weapons and commercial goods.

IDF spokesperson Daniel Hagari said the military was working “in a precise way, more accurate, more safe and sometimes slower” than past operations in the strip over the past seven months of war.

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Hagari added that the military investigation was ongoing into the exact cause of the massive fires that raged through the makeshift shelters in Rafah over the weekend after an Israeli strike killed two senior Hamas operatives in a nearby compound.

According to Hagari, a preliminary Israeli military investigation has found that the strike, which deployed two relatively small 17kg munitions, hit only the targeted compound. But he said “another something” caused a second compound nearby to ignite.

“Our munition alone could not have ignited a fire of this size,” Hagari added, while emphasising that the camp was almost 200 metres away from the attack site. Israeli Prime Minister Benjamin Netanyahu on Monday called it a “tragic mistake”.

Martin Griffiths, the UN’s aid chief, said “no place is safe in Gaza”, as he described the attack at the weekend as an “abomination”.

“We have also warned that a military operation in Rafah would lead to a slaughter,” he said. “Whether the attack [at the weekend] was a war crime or a ‘tragic mistake’, for the people of Gaza, there is no debate.”

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Pope Francis apologizes for using slur referring to gay men

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Pope Francis apologizes for using slur referring to gay men

Pope Francis leaves a mass on World Children’s Day at St Peter’s Basilica in the Vatican on May 26.

Filippo Monteforte/AFP via Getty Images


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Filippo Monteforte/AFP via Getty Images

Pope Francis has issued an apology for using a derogatory term referring to gay men during a closed-door discussion among bishops earlier this month.

“The Pope never intended to offend or express himself in homophobic terms,” director of the Vatican press office Matteo Bruni said, “and he apologies to those who felt offended by the use of the term.”

During the meeting with Italian bishops at the Vatican last week, there was discussion of whether to admit gay men to Catholic seminaries in preparation for the priesthood.

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Italian media reported that multiple people present at the meeting disclosed that Francis opposed the idea, saying there was already too much “frociaggine” in seminaries. Frociaggine is a highly offensive slang term in Italian referring to gay men and gay male culture.

The controversy is the latest in a series of moves that many LGBTQ Catholics view as sending mixed messages. Earlier this year, the Vatican issued a document titled Infinite Dignity referring to what it called “sex change” and “gender theory” as grave threats.

But late last year, Pope Francis issued guidance that allowed priests to bless people in same-sex relationships, although not to bless the relationship itself.

The Catholic Church’s official teaching on the matter is that homosexuality is intrinsically disordered and that sexual activity between people of the same sex is a grave sin.

Still, Bruni said on Tuesday, “As [Francis] has stated on many occasions, ‘There is room for everyone in the Church.’ ”

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Fintech N26 says regulatory action cost it ‘billions’ in lost growth

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Fintech N26 says regulatory action cost it ‘billions’ in lost growth

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Years of regulatory action against German fintech N26 for its poor anti-money laundering controls may have cost the business billions of euros, co-founder Valentin Stalf told the Financial Times, as authorities finally remove a cap on its growth.

Financial regulator BaFin in 2021 ordered online-only bank N26 to limit its new client sign-ups to 50,000 a month, compared with the average 170,000 a month it was taking on at the time. The cap was increased to 60,000 last year and it will be removed from June, according to N26. BaFin declined to comment.

The regulator disclosed last week that it had fined the bank €9.2mn for the persistent late filing of suspicious activity reports in 2022. This followed an earlier fine of €4.25mn in 2021 for similar problems in previous years. An independent monitor that oversees N26’s anti-money laundering controls on behalf of BaFin will remain in place, according to people familiar with the situation.

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N26 said on Tuesday that the direct costs of the saga added up to €100mn, including spending on its control functions and monitoring systems, and the fines. But co-founder Valentin Stalf told the FT that the indirect costs were much higher.

“The impact on N26 surely amounts to billions of euros because it lowered the company’s valuation as we were unable to grow,” he said. In its most recent funding round in 2021 — before BaFin announced it was taking action — N26 was valued at €7.7bn.

Valentin Stalf: ‘The impact on N26 surely amounts to billions of euros because it lowered the company’s valuation as we were unable to grow’ © Noam Galai/Getty Images for TechCrunch

Stalf said he was “pleased about the trust of our regulators” and stressed that the bank’s priorities had changed since 2021, meaning it would not return to its earlier expansion spree.

“Our key priority won’t be growth but profitability of clients and attractiveness of market,” he told the FT, adding that N26 wanted to create “a sustainable portfolio of clients which is profitable in the long run”.

He stressed that the business would “of course” grow from June, but declined to give a specific expansion target.

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Business dynamics were also in its favour he claimed, saying N26 had “very strong demand” for its digital banking services and that “the market has not been carved-up by our competitors over the past two and a half years”.

N26 was on track to become profitable in the second half of this year, he said. Last year, it halved its losses to €100mn and reported a 27 per cent increase in revenues to more than €300mn. This year, it was hoping to increase revenues by up to 35 per cent, according to Stalf.

The business was founded in 2013 and has 8mn customers in 24 European countries, but in the past few years it has pulled back from some of its international expansion plans, exiting the UK, the US and Brazil.

It started out offering current accounts but has recently moved into brokerage services and savings accounts.

Stalf said N26 “did learn a lot over the past two and a half years from the close co-operation with the regulator” and that this experience would be “helpful for our next steps towards an IPO”.

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