Big business swamped Liverpool’s Arena and Convention Centre, turning the Labour party conference into a mini-Davos. Google, Mastercard, Ikea and Barclays paid for exhibition stands next to the main conference hall. Deliveroo and Goldman Sachs held fringe events. The parliamentary lounge sponsor was Lloyds bank.
A special business forum with Keir Starmer, shadow chancellor Rachel Reeves and shadow business secretary Jonathan Reynolds was sold out a month beforehand – 200 bigwigs snapped up tickets at a cost of £2,520 a piece. Hundreds more put their names on a waiting list in the hope that someone would drop out.
Amid the jostling, one exhibitor in particular stood out, and not just because of the green and yellow hydrogen-powered 4x4 that was parked in front of its stand. Billionaire industrialist Sir Jim Ratcliffe had dispatched a top team from his chemicals empire Ineos to the jamboree.
As the second-richest man in Britain, one of the country’s most prominent Brexiteers, biggest carbon emitters and a two-time tax exile, it is hard to think of a more unlikely Labour backer. But Ratcliffe’s delegation had serious work to do.
“It was a big team of people and they were coming and going all the time,” one delegate said.
After 10 years of cheap money and mostly friendly government, Britain’s foremost industrialist is facing spiralling interest rates and the prospect of Ed Miliband in charge of energy policy.
Having spent months battling Qatar to invest in his beloved Manchester United, rocketing costs have left Ineos facing its most serious financial squeeze since the credit crunch. Then, debts from a decade of dizzying deal-making came within a whisker of overwhelming it.
As Ratcliffe turns 71 years-old, questions over how Ineos navigates this next chapter are unavoidable for a billionaire increasingly stepping into the limelight. Will the swashbuckling dealmaker again lead it into calmer waters and a new era of growth? Or is his swelling collection of trophy assets the sign of a man preparing to hand over day-to-day running of Britain’s biggest private company?
Either way, the tycoon and the sprawling petrochemicals conglomerate that he has spent 25 years assembling are at a crossroads.
Boy’s toys
Ratcliffe has assembled an impressive collection of boy’s toys even for someone with a fortune estimated at nearly £30bn by the Sunday Times Rich List.
He has a private jet and a £130m mega-yacht complete with an underwater viewing window in its wine cellar. Ratcliffe splits his time between homes in Monaco – where he has controversially chosen to become a tax exile for the second time – Majorca, Chelsea, and Lake Geneva in Switzerland. He is radically redeveloping his beachside property in Hampshire, too, to the irritation of some neighbours.
Ratcliffe also owns the struggling fashion label Belstaff, and has started a car company from scratch. It was the Ineos Grenadier – a 4X4 that aims to replace the discontinued Land Rover Defender – on show at the Labour Party conference.
His attention has increasingly been divided by sport, too. In 2017, he bought Swiss side FC Lausanne-Sport and despite admitting to some “silly errors” – they were relegated into the second tier last year – he went on to pay £88m for French top-flight side OGC Nice in 2019.
Football is just one part of Ratcliffe’s sporting empire. The previous year he ploughed £110m into Sir Ben Ainslie’s America’s Cup campaign and several months later spent £40m buying Sky’s Tour de France cycling franchise. He has a stake in the Mercedes’ Formula One team; is a sponsor of the New Zealand All Blacks and backed Eliud Kipchoge’s sub-2hr marathon challenge.
The Ineos logo can now be found emblazoned across football shirts, athletes’ jerseys, sailing boats and racing cars. Critics have dismissed this extraordinary sports land grab as an attempt at greenwashing by an organisation whose Grangemouth oil refinery complex is estimated to be responsible for nearly a tenth of Scotland’s greenhouse gases.
Ratcliffe claims he’s nothing more than a sports fanatic making the most of his considerable wealth. Ineos colleagues toiling in the less glamorous chemical and energy industries look on with a degree of bemusement.
“We’re quite large and profitable and we can afford to allocate some of our profits to areas we enjoy,” Ratcliffe said shortly after gatecrashing the cycling world.
“It’s something of an indulgence, but we make five to six billion dollars a year and have allocated £100m-ish a year to sporting endeavours. We enjoy it…and why shouldn’t we?”
Such largesse is all the more eye-catching from the product of a council estate on the outskirts of Manchester. He claims to have learned to count by totting up the city’s chimney stacks from his bedroom window, before the family moved across the Pennines to the market town of Beverley in Yorkshire.
“There must have been a hundred,” he once reminisced to The Manchester Evening News.
Glazers not out
Ratcliffe’s latest plaything casts his sporting endeavours to date as mere hobbies, however.
It has been almost a year since the deeply unpopular Glazer family put Manchester United on the block. Ratcliffe jumped at the chance to try to buy a club he went to watch nearly every other week growing up in the small Lancashire town of Failsworth, seven miles north-east of Old Trafford on the road to Oldham.
He blames his disappointing A-level results on his obsession with football, though it didn’t stop him from reading chemical engineering at Birmingham University. He once joked that the only thing that keeps him awake at night is “Manchester United being thrashed by Manchester City.”
The auction quickly became a two-horse race between the super-wealthy Ratcliffe and the supremely wealthy Sheikh Jassim Bin Hamad JJ Al Thani, a Qatari royal with a $450bn sovereign wealth fund behind him. Yet after months of jostling and shuttle diplomacy, the Manchester boy is poised to emerged victorious. With the Glazers reluctant to sell out entirely, Ratcliffe is expected to pay £1.4bn for a 25pc stake, albeit with full control of sporting matters.
It is seen as the first step to a full takeover that would be worth nearly £6bn. Man Utd is deeply personal for Ratcliffe but he stands to achieve a boyhood dream as Ineos’s long run of untrammelled expansion slams into record-breaking energy prices and tighter lending.
Debt and lots of it
The crunch in chemicals has been vicious. The world’s largest producer BASF lopped €1bn off profit forecasts in July. Matthias Zeckert, the boss of Germany counterpart Lanxess, has compared it to “Lehman 2” after he issued a major profit warning. The fall in sales across its business was worse than the company had experienced in 2009.
Analysts warn there is little sign of a recovery in the chemicals market. The industry is reeling from a perfect storm of over-supply, the war in Ukraine, a sharp shift in spending from material goods to services, and a prolonged decline in the Chinese economy.
It is amid this bleak backdrop that turnover at Ineos’s two main chemical firms has nearly halved and profits have evaporated. In the second financial quarter, the combined revenue of Ineos Group and Ineos Quattro shrunk from €11.1bn in 2022 to €6.9bn and the two units swung from a €1.1bn profit to a €52m loss.
“The figures confirmed the widespread nature of the downturn, with ‘lower margins, higher inventory holding costs and lower volumes’ cited across a wide variety of the businesses and the geographies in which they operated,” a September report from New Normal Consulting said.
The Swiss firm also noted that the period between April and June is normally the company’s strongest quarter.
There’s an added vulnerability to Ineos when interest rates rise and sales fall. Ratcliffe has always leaned heavily on debt, and lots of it.
Ratings agencies, which assess the strength of corporate borrowers, are increasingly nervous. Fitch issued a downgrade in July, amid concerns about the rapidly growing ratio of debt to earnings, a crucial signal for lenders. At Ineos Group, it leapt from 1.7 times to 5.1 times in the year to September, according to Bloomberg data.
Rival ratings agency Moody’s followed suit that month with a downgrade of its own. It expressed reservations about the temptation for Ratcliffe and his two co-founders Andy Currie and John Reece to pay themselves handsome dividends.
The various companies in the Ineos stable have paid out an estimated £5bn to their owners since 2019 alone. Ratcliffe owns 60pc of the empire; Currie and Reece own 20pc each. Any further dividends before the backdrop has improved would build the case for another ratings cut, Moody’s warned. Lower credit ratings can themselves increase the cost of borrowing, piling on further pressure.
Fitch points out that three quarters of the debt that one of the main chemicals arms has accumulated is subject to floating interest rates, which means the cost of servicing it has soared. Interest payments will jump from €154m in 2022 to €570m this year.
Signs of tougher times are easy to find, but obtaining a comprehensive picture of Ineos’s finances is impossible. Its ultimate holding company is registered in the Isle of Man and does not publish accounts.
Ratcliffe can point to several financial factors in Ineos’s favour. It has billions of cash in the bank, some of its debts are hedged against vicious rate swings and no big, immediate repayments looming. The bond markets remain fairly relaxed too but echoes of the financial crisis when an over-stretched Ineos came close to going bankrupt are impossible to ignore.
Insiders say the hard-won lessons of that crisis have not been forgotten.
A near-miss
Without the debt markets, Ineos wouldn’t be where it is today. Ratcliffe has said there’s “a bit of the Industrial Revolution in my DNA” but the more modern corporate borrowing that investment bankers euphemistically call “leverage” can also claim parentage.
Ratcliffe was in his 30s when he was lured to the private equity giant Advent International from fabric-maker Courtaulds with the promise of “a fancy car” and a trebling of his salary. It was his introduction to the high-octane world of debt-fuelled deal-making where returns are amplified by borrowing big. He struck out alone in 1992, buying BP’s chemicals arm for £40m and remortgaging his house to raise some of the funds.
After floating the company, Ratcliffe returned to buy a refinery it owned in Antwerp, Belgium that he thought was misunderstood and undervalued by shareholders and analysts. He financed the 1998 purchase with a concoction of bonds, his own money and backing from Advent.
Ineos was born and Ratcliffe went on to hoover up more than 20 unloved and forgotten industrial assets languishing within much bigger corporations such as ICI, BP and BASF over the next decade, repeatedly tapping a wide universe of banks for large loans, and the corporate bond markets for equally huge sums along the way. Newly-acquired businesses are subjected to heavy but unflinching cost-cutting.
One city figure remembers Ratcliffe working from his Hampshire estate in the early days. Meetings were held in a converted pig shed, he says. “It was a nice pig shed but it was still a pig shed” and a far cry from the Knightsbridge headquarters next to Harrods that Ineos inhabits today.
The company remained largely under the radar until the audacious takeover of BP’s Innovene arm in 2005.
The £9bn deal, financed entirely by debt, catapulted Ratcliffe into the big time, trebling the size of the business at a stroke. “It was a colossal bet and a deal was agreed without even visiting many of its sites,” Ineos boasts on its website.
But the deal came within a whisker of toppling it. Borrowings leapt from €600m to nearly €8bn overnight. The global financial crisis and subsequent economic downturn hit Ineos like a tsunami.
Profits halved and when Lyondell Basell, a rival, filed for bankruptcy in the US, Ineos’s lenders turned on Ratcliffe. A breach of its borrowing terms provided a pretext to move in.
“They became rapacious,” Ratcliffe lamented years later.
After cutting capital expenditure, imposing a pay freeze, banning travel and axing jobs, Ineos still needed to save hundreds of millions of pounds more. When then-Chancellor Gordon Brown turned down a request for a VAT deferral, Ratcliffe moved Ineos lock, stock and barrel to Switzerland where it remained until 2016.
The move saved £400m in tax a year but a debt restructuring eventually hammered out with 300 banks, bond investors and hedge funds that had bought in at bombed out prices cost Ineos €800m in fees.
In total 26,000 people work for Ineos at almost 200 sites in nearly 30 countries. The 60m tons of chemicals it makes each year go into almost everything we use, from antibiotics, toothpaste and clean water to insulation and food packaging.
It generated £53bn of turnover last year. If Ineos was a publicly-traded company, it would be valued at around £70bn, insiders believe, putting it comfortably among the top ten largest constituents of the FTSE-100 – above the miner Rio Tinto, roughly level with Guinness and Johnnie Walker maker Diageo, yet still some way below BP.
Ratcliffe and his lieutenants make much of the autonomy handed to those in charge of its many divisions. Yet, Fitch points out the way it is run is also a potential weakness. “[The] corporate governance limitations are a lack of independent directors, a three-person private shareholding structure and key person risk as well as limited transparency.”
One former adviser says there is sometimes a reluctance to use outside consultants.
Ratcliffe declined to give an interview to The Telegraph but a senior figure inside the company rejected suggestions that Ineos could run into trouble again. “They’ve massively internalised what happened last time and have made sure it won’t happen again,” he says.
Manchester United fans will hope the same caution applies to Ratcliffe’s running of the club. The debt burden from the Glazers’ 17-year ownership is at the heart of the schism between the terraces and the boardroom, which Ratcliffe will be desperate to repair.
Ineos executives highlight that this is a company that generated between €9.5bn and €10bn of pre-tax earnings at the group level last year.
They point to its ownership of several large gas fields in the North Sea, which have acted as a strong hedge to the slowdown in chemicals as energy prices have gone through the roof, albeit not enough to offset the crushing costs borne by its chemicals operations, as well. It has a team of traders that will have sought to capitalise on the extreme volatility in energy markets.
A spokesperson said: “Ineos is one of Britain’s most successful private businesses and we are in an extremely strong position despite the general downturn in international markets, which of course is not limited to chemicals.”
“We remain focused on continuing our growth” with “further large-scale deals” expected soon, he said.
Net zero challenge
For more than 100 years, residents of Grangemouth on the Firth of Forth have lived in the shadow of the petrochemical complex of the same name. Intermittent flaring from the refinery turns the sky a bright orange and can be seen as far as 20 miles away.
“It felt like I was sleeping with my bedroom light on,” one resident said after an incident in 2021.
Not for the first time, what happens to one of the UK’s biggest polluters will have a significant bearing on the future of Ineos. Grangemouth has been the setting for some of the most fierce trade union battles in recent memory, earning Ratcliffe the nickname “Dr. No”. The Bond villain nickname was given to him by union chiefs because of his refusal to compromise.
It is set to become a political flashpoint again. In Liverpool, Andrew Gardner, the chairman of Petroineos, which runs the refinery, warned Keir Starmer in a face-to-face meeting that it could face closure if Labour implemented its pledge to block future North Sea oil and gas projects.
Gardner wants to turn the natural gas it pumps off the coast of Scotland through the Forties Pipeline System into hydrogen, powering the entire complex with minimal emissions and preserving jobs and manufacturing.
“This is a critical time because parts of society want to outsource manufacturing, outsource jobs and import carbon,” Gardner says. “The best way is to absolutely turn that on its head.”
Yet hydrogen is highly speculative. It cuts to the heart of the scale of reinvention facing Ratcliffe as Ineos attempts to meet net zero requirements.
Industry figures insist those that created the old energy system are best-placed to create tomorrow’s because they possess the scientific know-how and engineering prowess. Critics say it should be left to a new generation of renewables specialists unencumbered by existing fossil fuel assets.
With Labour promising to scrap preferential tax treatment – rich UK residents whose permanent home is considered to be abroad – Ineos may struggle to find a sympathetic ear.
The company returned to Britain in 2016 to much fanfare.
“It’s where we started and it’s where our hearts lie,” Ratcliffe declared at a homecoming event but the celebratory mood soured when he shifted his own personal tax affairs offshore again, this time to Monaco. He had reportedly paid £110m in taxes the previous year, making him the UK’s third largest individual taxpayer.
The move jarred – not only was he an outspoken supporter of Brexit but he’d been knighted for “services to business and investment” only months earlier. There was anger on the honours committee – it was “an immediate red card” says one former member.
Ratcliffe’s remark that he “might live a bit longer in a warmer climate” is unlikely to have helped his cause.
Insatiable appetite
A hardback copy of Grit, Rigour & Humour: The Ineos Story will set you back £25 if you can find it in Waterstones. Billed as a “no holds barred” book despite being penned by no less than seven payrolled journalists and authors, it was published in May to mark the company’s 25th anniversary. But the publication’s valedictory vibe was always bound to start retirement rumours.
Ratcliffe turned 71 on Wednesday. Questions of succession are batted away by the Ineos faithful.
They point to a video on the company’s in-house TV channel where its three founders discuss the low turnover of staff. “We have a rule, which is that you’re not allowed to retire unless we allow you to,” Ratcliffe jokes.
His own appetite for more deals, more money and more status has shown no sign of satisfaction. Ratcliffe’s empire has been built on debt and improving badly run businesses, and so Manchester Utd hardly changes his recipe for success.
Yet viewed against the shifting backdrop for Ineos the club presents a new test for a man with plenty on his plate.
Additional reporting by Jonathan Leake
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2023-10-21 09:00:00Z
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