Starmer fights for political survival

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0:18Good morning from the Financial Times. Today is Monday, May 11th, and this is your FT News Briefing. We've got a few updates on the situation in the Strait of Hormuz. And despite warnings of jet fuel shortages, some airlines are not upping their ticket prices. Plus, Britain's prime minister will step up to the podium today as calls for him to resign get louder. This is being billed as the speech of Starmer's career after the absolutely dismal results for the ruling Labour Party in the local elections. I'm Victoria Craig, and here's the news you need to start your day.

1:04We've been talking for months about how oil tankers have been stuck in the Gulf. That's because the Strait of Hormuz has been effectively shut since the U.S.-Israeli war on Iran began back in February. But just yesterday, a Qatari gas shipment made it through. It's bound for Pakistan and is the first from Qatar to make it through the strait with Iran's sign-off since the war started. The tanker's lonely journey through the waterway comes as European oil majors are reaping billions of dollars from the energy market turmoil. Analysts estimate that Shell, BP, and Total Energy is raked in as much as$4.75 billion from volatile price swings.

1:42But as these oil giants earn a windfall from the war, Asian nations are forced to look at oil and gas alternatives. namely coal. Shipments of the carbon-intensive fuel typically slow down by this time in the year as the heating season nears an end. But analysts estimate that global coal imports in May are expected to be the third highest monthly figure on record.

2:08One of the big questions around the energy crisis is how soaring fuel prices will impact the summer travel season. Industry insiders say airlines and their customers are locked in a confidence game over whether there will even be flights available to take people to their destinations. Despite that, and surprisingly, some airlines are cutting prices instead of raising them. Peter Campbell covers the global transport industry for the FT and joins me now. Hi, Peter. Hey. So I think price cuts really are the opposite of what I was expecting to read in your latest story. Just walk me through what's happening here.

2:43So the picture is quite complicated. There's a number of different things going on. Flights between Europe and Asia at the moment are very expensive. That is because no one can travel through the Gulf. But in Europe in particular, something funny is happening, and that is on short haul, predominantly on classic holiday destinations like Italy and Spain. Some of the prices are coming down. And that is because a lot of jet fuel comes through the Strait of Hormuz, there are concerns that if it remains closed, there are going to be some places that will just not have enough come the middle of summer.

3:17And so consumers, holidaymakers reading this, are understandably worried about whether there will be flights in the summer and so are pushing back, booking their holidays. And so what you've seen from some of the budget airlines, particularly in Europe, is that they have started to drop prices in order to try and encourage people to book now. All right, so it sounds like there are some deals to be had. But on the other end of the spectrum, our colleagues reported last week that the EU has told airlines that they need to continue to reimburse passengers for any flight cancellations that are caused by these high energy prices.

3:52I'm just curious, Peter, what are the airlines pushing for on this regulatory front? Do they want to see looser regulations, in a sense, to help deal with this issue? So airlines struggle to make money at the best of times. And what they say at the moment is, you know, we're in extraordinary circumstances. Our fuel costs are doubled. We need some sort of help from governments and regulators to help us get through this crisis. That's all true. But in reality, what is also going on is there are lots and lots of rules that govern whenever you fly, how many bags you can take on the plane, where that plane can refuel, issues around compensation if the plane is running late.

4:29The airlines hate quite a lot of those rules and are channeling the old political maxim, you should never let a crisis go to waste in asking the regulators to push back these things. And to be fair, both the UK and the EU have given some ground in this already. So, you know, the airlines have got certainly some of what they want in this, but it's very much been as a result of a pretty coordinated lobbying effort from them. One thing I've been wondering in all of these weeks of talking about this looming jet fuel shortage is that, you know, we keep hearing there's just six weeks left or so of supply.

5:04What happens after that? Could we actually see an entire industry that is completely unable to operate at some point if this war continues? I've been looking at this and trying to work out what is actually going on. It is true that the industry perennially has six weeks of visibility, and so only ever has six weeks of visibility. But there does seem to be things going on at the moment that indicate that it might not be quite as bad as everybody thinks. I was talking to British Airways on Friday, and they have enough fuel to last them for the entire summer. Air France was saying last week that they had assurances that there were enough stockpiles of fuel at many of their home airports to last them for months and months to come.

5:50Now, if the war continues and the strait remains closed for months and months, then you do get to a situation where strategic reserves will run dry. But at the moment, on the information everyone has, they think there might be some pockets of disruption. No one thinks it's going to be an industry or region-wide disaster. Peter Campbell covers the global transport industry for us at the FT. Thanks so much for your time, Peter. Thank you very much.

6:21The economic disruption from the war in Iran could prompt the Federal Reserve to raise interest rates. That's the view from the chief investment officer at bond giant PIMCO. Dan Iveson told the FT that the surge in energy prices from the Strait of Hormuz closure poses new challenges for the U.S. Central Bank, which has struggled to bring inflation down in recent years to its 2 percent target. Last month, the Fed kept rates on hold for the third straight meeting, but hinted that its next move could be a cut. Iverson said that would be, quote, counterproductive given the burst of inflation the war is igniting.

6:56The Fed's preferred inflation gauge hit 3.5 % in March, the highest level in nearly three years.

7:08Britain's Prime Minister Keir Starmer is fighting for political survival as he faces growing calls to resign. That's after disastrous local election results at the end of last week, in which his Labor Party lost hundreds of seats and its share of the national vote plunged to just 17%, according to the latest BBC projections. In a bid to quell the unrest in the party, Starmer is due to make a speech later today laying out his values. Lucy Fisher will be listening keenly to that speech. She covers Whitehall for the FT and hosts our Political Fix podcast. Hi, Lucy. Hi there. So what are we expecting from Starmer's speech today?

7:46This is being billed as the speech of Starmer's career. After the absolutely dismal results for the ruling Labour Party in the local elections, we've got swirling speculation in Westminster about whether a challenger might launch a coup attempt against him. And therefore Downing Street knows that they have to try and reset Starmer's administration and give faith to his MPs and ministers that he can turn the government around and restore the public's faith in his own leadership. So we are expecting him to talk a lot about Europe and make a big play on closer relations with the EU. It's obviously 10 years this summer since the Brexit referendum.

8:28And I think that will be the main play from this speech. Whether it's enough, it remains to be seen. And it's not, we should mention, just Starmer that voters are upset with. Labour's main rival, the Conservative Party, also did not fare well in those local elections last week. And instead, they heavily favoured third parties. What's going on with voters? What was it about those third parties that they liked? I think these elections marked the death knell for the two-party system that has been dominant in England for decades. I think there's a sense in the UK that living standards have been stagnant for so long, essentially, since the financial crash of 2008, 2009.

9:09So I think there's a sense that after 14 years of conservative-led rule ended in 2024, there were high hopes that the new Labour regime could really get things done. that has stalled. And I think there is a willingness now among the public to roll the dice and try something fresh with one of these third parties that have, you know, shot up in the polls in recent months. Okay, so Starmer is going to try to get things back on track for Labour today. And then in a very pomp and pageantry event on Wednesday, we have what's called the King's Speech in Parliament. And Lucy, for those who are not familiar with this, just walk us through what that is and why it does actually relate to this political conversation we're having here?

9:49Well, it's a very good question. And it does, I think, confuse some people why they see the monarch standing in Parliament and reading out the legislative agenda should make clear that Buckingham Palace, the royal family, have nothing to do with actually formulating the package of bills that we're going to see introduced in Parliament. Rather, it's just part of the tradition that they read out the list of legislation that the government puts together. And again, this is going to be a key moment for Starmer on Wednesday too, I think this King's speech in large part needs to convince the public that, you know, these are measures that tie together into a coherent vision and really quell the sort of despair of restive MPs in the Labour Party that Starmer can deliver and start to make a difference, or else MPs who will be worrying about whether they'll hang on to their own seats might start to think again about whether the leadership needs to be changed.

10:41Lucy, will either one of these speeches, do you think, actually go a long way toward helping satisfy these Labour MPs, these Labour voters? Do you think Starmer will stay in power or is this going to be a situation that could change day by day? Well, look, I think inertia is underpriced when it comes to Starmer's future, but that's not necessarily anything to do with him. I think it could be the case that we see no action taking place. But that's in part because many of the Labour MPs who aren't happy about the direction of the party and the government can't agree on who should replace him. And in that scenario, you know, they might decide it's better not to act.

11:19So that's another reason that you might hear slightly phony praise for Starmer or people briefing that, you know, he's done enough to keep the show on the road for now. No lack of political drama then to digest this week. Lucy Fisher covers Whitehall for the FT and hosts our Political Fix podcast. Lucy, thanks so much for your time. Thanks for having me, Victoria.

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