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Long-term changes in social attitudes combine with the decline of mainstream parties to open a door for the far right

What kind of crisis?

For an incisive summary of how France has trapped itself in political deadlock since last June’s European parliament elections, there’s no better place to start than Blanche Leridon’s analysis for the Paris-based Institut Montaigne.

She concludes:

We may feel that we are witnessing a major political moment. But in reality, what we are observing is a significant erosion, a political deconsolidation of considerable scale.

She identifies three elements of this process: stalemate of political action, erosion of engagement and belief in politics, and the risk of democratic stagnation.

Mistrust, weariness and sullenness

Leridon’s argument finds support in the regular surveys of public attitudes that are carried out by researchers at Sciences Po university in Paris.

In the most recent survey, published last February, they asked people in France, Germany, Italy and Poland to describe their state of mind. (The findings are available here.)

The French responses stand out. It was the only country where the top three moods were méfiance (mistrust, 38 per cent), lassitude (weariness, 36 per cent) and morosité (sullenness, 26 per cent).

Compare that with Poland, where only 20 per cent of respondents cited mistrust, 11 per cent weariness and 3 per cent sullenness.

Perhaps Poles have been energised by their strong economic performance since the end of communism in 1989, by the election of a new government in 2023, and by the need to be on the alert because of the war in neighbouring Ukraine?

Faith in politics and public institutions

According to the Sciences Po survey, France also registered the least trust in politics. Among the four countries polled, only 30 per cent of French respondents expressed such trust, compared with 33 per cent in Italy, 45 per cent in Germany and 54 per cent in Poland.

In France, trust in the government, National Assembly (parliament’s lower chamber) and presidency was especially low.

Other surveys have reached similar conclusions. In this one, reported last August by Le Monde newspaper, every major French political figure, from the radical left to the mainstream centre and the far right, had more unfavourable than favourable ratings.

Brice Teinturier, deputy director of the Ipsos pollsters in France, commented:

“The perception of political leaders is appalling.”

Meanwhile, in this OECD survey, published last July, we see that only 34 per cent of French people expressed high or moderately high trust in their national government.

It’s worth emphasising, however, that some European countries were even lower than France in this table of trust. These included Greece, Latvia, Portugal, Slovakia, Slovenia, the UK and, bottom of the list at a mere 19 per cent, the Czech Republic.

In other words, even if many French people seem to be unhappy or disillusioned at the moment, they are not entirely alone. The reality is that much of Europe is characterised by waning faith in politicians and political institutions.

Political parties and French voters

What impact does this mood have on the Fifth Republic’s political parties and voters?

The snap elections that President Emmanuel Macron called after the far-right’s victory in last year’s EU polls resulted, broadly speaking, in a three-way split between the left, centre and far right.

Writing for the London-based Chatham House think-tank, Sébastien Maillard comments:

Public opinion appears weary of endless political squabbles. In such a gloomy mood, it seems not at all guaranteed that possible new parliamentary elections next summer would bring a fresh majority able to overcome the present stalemate.

The Socialists fade away

However, the decline of the mainstream centre-right and centre-left parties that had held sway since the Fifth Republic’s creation in 1958 has longer-term causes.

Take the Socialist party (PS), on which Philippe Marlière wrote a particularly good analysis in September for The Political Quarterly. He observes:

The 2017 election marked the end of a long phase of political domination, which relied on the PS’s ability to appeal to various social classes. First, working-class support was on the wane from the 1990s. By the 2010s, a third of them voted for the far-right Front National and many had simply stopped voting. The party still had around 170,000 members in 2012. Today, there are barely 40,000 …

The dwindling number of PS members had another negative effect: it became what Angelo Panebianco labelled an “electoral-professional party” — that is, a publicly funded party, media-driven rather than based on a mass membership and with its electoral performance its main objective.

The rise of the far right

Similarly, the rise of the far-right Front National, now known as Rassemblement National (RN), owes much to long-term social change and its impact on public attitudes.

In this essay for Geopolitical Intelligence Services, Emmanuel Martin says:

. . . economic and social concerns raised by the far-right party are shared by a growing part of the French population that demands more national sovereignty.

From the start of the 1970s, a major source of voter discontent in France has been immigration and its related economic and cultural integration challenges.

In a survey published in October by the Elabe pollsters, 61 per cent of respondents said there were too many immigrants in France, and 69 per cent said French immigration policies were too lax.

However, Martin argues that the discontent extends well beyond immigration:

The French population’s sense of loss of national sovereignty is also related to Europe and globalisation . . . there is a feeling that . . . European integration was forced on to French citizens in an anti-democratic manner …

There is some truth that globalisation has shaken things up for the French, causing the deindustrialisation process and trade deficits. However, globalisation could have been viewed as an opportunity to thrive, had the French accepted . . . reforms and adapted.

Premature forecasts

If France’s next presidential election were held now, rather than in 2027 as scheduled, opinion polls suggest there is every chance that far-right leader Marine Le Pen would “romp to victory”, as Paul Taylor put it in a recent column for the Guardian.

However, she could be banned from running for the presidency if found guilty in a trial in which she is accused of embezzling European parliament funds in a fake jobs scheme.

Moreover, Taylor cautions:

“ . . . it must be said that these are only snapshots of a politically paralysed country in a grumpy mood, not an infallible barometer.”

France’s political future depends on how this “grumpy mood” — another way of translating morosité, the term used in the Sciences Po survey — expresses itself in elections.

Could it be that RN’s electoral programme will not be convincing enough for voters even in a grumpy mood?

In this report for the European Center for Populism Studies, Gilles Ivaldi contends that an important factor in RN’s failure to win last year’s legislative elections was its incoherent policies:

“The election was punctuated with hesitations and U-turns on some of the party’s key economic and immigration policies, such as lowering the retirement age back to 60 and restricting access to public jobs for people with dual citizenship.”

‘To dream a little’

On the other hand, the sheer desire of millions of French voters for something different, coupled with their grumpiness, may work one day to RN’s advantage.

Political scientist Jean-Yves Camus, quoted in this FT report from Paris, captured this point well:

They’re surfing on something a lot of people do not seem to understand, that there is something irrational in the vote for the RN …

The question is not so much about which is the most competent [party] . . . people want to be able to dream a little, to be told things can change.

More growth, more losses for DAZN

Speaking of lossmaking enterprises, DAZN is set to post its annual results at Companies House next week, but we’ve been given a sneak peek.

The UK-based sports streamer enjoyed a healthy increase in revenue to $2.9bn in 2023, up from $2.2bn a year earlier. Shay Segev, DAZN chief executive, said most of its top ten markets are now profitable. Its recent deal to acquire Foxtel for $2.1bn resulted in Rupert Murdoch becoming the company’s second-biggest shareholder at a valuation of close to $10bn

But that’s about where the good news ends. Losses at the group widened to $1.4bn from $1.2bn a year earlier. Company insiders say DAZN now has around 300mn monthly customers, but only 20mn are paying subscribers. Sir Leonard Blavatnik, DAZN’s controlling shareholder, pumped another $800mn into the business in 2023, taking his total outlay to $6.7bn.

DAZN has been in aggressive expansion mode for a while now, and shows no sign of slowing down. Aside from the Foxtel acquisition, it has also agreed to pay $1bn for global rights to Fifa’s new Club World Cup. It has future rights commitments of more than $9bn.

Segev expects revenue this year to be around $6bn, more than double that of 2023. The goal remains to become the “Spotify of sport”, and build a $200bn enterprise. He declined to comment on a widely-expected investment in the company by the Saudi state. “We will need to see what happens,” he said.

Many sport executives will be crossing their fingers that his bullish projections come good and that the company stops burning through cash.

Although DAZN’s foothold in the UK and US is largely related to boxing, the streamer’s fortunes increasingly underpin the health of European football. It is now the main broadcaster for the beleaguered French football league, as well as an important player in Spain, Italy and Germany.

Football has a long and frankly miserable track record of aggressive new media players seeking to shake up the status quo, only to run out of money and leave the sport facing a painful financial hangover. Many are now banking on Blavatnik staying the course.

Revenue still rules in football

It’s a been a rather tempestuous week for the sporting empire of Sir Jim Ratcliffe. Following a 3-1 home defeat to Brighton last weekend, Manchester United manager Ruben Amorim labelled his team “the worst” in the club’s history. United now sit 13th in the Premier League, closer to relegation than the Champions League.

Amorim’s appointment was a key moment in Ratcliffe’s stewardship of the club. Since buying a minority stake last year, the UK chemicals billionaire has overseen a mass clearout of senior executives and cut headcount by 250 people. This is now his operation, and things are not going to plan.

His sailing operation has also run into choppy waters. On Thursday, Ineos announced that its America’s Cup team was parting ways with legendary British sailor Sir Ben Ainslie after failing to “find agreement on terms to move forward”. Ainslie responded soon after, saying he was “astounded” and threatened legal action.

Having built a sprawling sports business that also includes interests in Formula One, cycling and rugby, it looks like Ineos and Ratcliffe will be battling on several fronts in the coming weeks and months.

This week we’re having a look at the financial picture among European football’s top clubs, and run through the numbers at DAZN after another year of heavy losses. Do read on — Josh Noble, sports editor

VIPs and sponsors power growth for football elite

It’s that time of the year when Deloitte releases its annual appraisal of the elite football business, and the headline figures look pretty rosy.

The main takeaways from the 2023/24 season are quite straightforward: match day income is where the growth is, while for several top teams commercial revenue has become more important than TV money. Total revenue across the richest 30 clubs in football rose 6 per cent to a new record. So far, so good.

Real Madrid, ranked top in the wealth rich list again, became the first club to breach €1bn in annual revenue. Match day income more than doubled last season to €248mn, thanks in large part to the €1.3bn revamp of the Santiago Bernabéu. Aside from adding seats, the renovation has increased the club’s premium hospitality offering, and opened up a range of non-football events — from NFL games to Taylor Swifts concerts. Many others are trying to follow suit.

Real’s commercial income surged to €482mn, compared to €316mn for broadcast, helping the club achieve topline revenue growth of 26 per cent.

Several other teams booked big jumps in revenue too, with Arsenal, Newcastle and Aston Villa all enjoying steep increases.

But, as always with the Deloitte report, there’s one key metric missing from the data: profits. Even after breaking the €1bn mark, Real managed to eke out a profit of just €15.6mn — and that’s excluding any spending related to the stadium.

City, ranked second in the Money League, also booked profits, but made a loss on an operational basis. United made record losses of £113mn, and a number of others are expected to do the same when they report in the coming weeks. Football is great at earning money, but even better at spending it.

Perhaps none of that matters. Football finance regulation is undergoing a shift — moving from a model that punishes losses to one that, in effect, rewards revenue. So juicing income is, for now, the name of the game. Investors see football as a valuation play, and asking prices are still based on revenue not profit.

But at some point, you have to think, would-be owners will start asking more pointed questions about what a successful business model looks like.

‘Leveraged to the hilt’: PE-backed firms hit by wave of bankruptcies

High interest rates and thrifty consumers pushed record number of portfolio companies into bankruptcy last year

Higher interest rates and lower consumer spending are squeezing debt-laden companies backed by private equity groups, forcing them to either restructure through bankruptcy or buy time to recover via out-of-court settlements with creditors.

The stress on private equity-backed companies shows up starkest in a recent study by S&P Global Market Intelligence, which shows that a record number of 110 private equity and venture capital-backed companies filed for bankruptcy in 2024.

These failures, concentrated in the consumer and healthcare sectors, show how even as the US unemployment rate remains low and the S&P 500 ploughs ever higher, certain corners of corporate America are hurting, with many companies struggling to survive under the pressure of high interest rates, lower consumer spending and crippling stacks of debt.

“I think the initial reason why companies file for bankruptcy when they’ve been a subject of an acquisition by private equity, is there’s too much debt,” said Lawrence Kotler, a law partner that focuses on bankruptcy at Duane Morris. “Everything is leveraged to the hilt.”

High interest rates took a toll across the US corporate landscape last year, with bankruptcies hitting their highest level since the financial crisis. But PE and VC-backed companies have been particularly hard hit, with portfolio companies comprising a rising — and record — share of corporate bankruptcies, according to S&P data.

The data, which dates back to 2010, includes private companies with majority private equity ownership and it also includes some publicly traded companies with minority strategic investments by private equity shops.

A narrower analysis by FTI Consulting focused on larger private equity filings does not show a similar rise, but notes the out-of-court tactics suppressing the number of private equity-related bankruptcies in recent years.

Overwhelming debt loads were made tougher to shoulder by the Federal Reserve’s rate hikes, which directly affected the cost of paying back floating-rate loans taken out by private equity-sponsored portfolio companies. Those high interest rates have now remained elevated for nearly three years, and the odds of relief in the form of aggressive cuts have diminished.

The software company ConvergeOne, taken private by CVC Capital Partners in 2019, exemplifies the trouble facing private equity portfolio companies.

The software group, known for its cloud and cyber security products and now called C1, went on a buying spree in the years following its last takeover, taking on debt to snap up seven companies just before interest rates started to rise.

In the end, the debt proved too much to sustain. Last spring, ConvergeOne filed for bankruptcy with just $21mn in the bank, and $1.8bn in debt. CVC declined to comment, and ConvergeOne did not respond to a request for comment.

“Consumers search for ways to find value when inflation bites,” said Mike Best, a high yield portfolio manager at Barings. “The market is littered with bankruptcies in the consumer products and retail sectors,” he added.

While most private equity-backed companies fail from a combination of too much debt and operational troubles, some cases stir up acerbic allegations. One prime case: Instant Brands, which makes the popular Instant Pot pressure cookers, has emerged as one of those hotly contested corporate failures.

In 2019, Cornell Capital bought Instant Brands for just over $600mn. By 2023, the kitchen appliances maker had filed for bankruptcy. Shortly after the company sought court protection, creditors accused Cornell of siphoning large amounts of cash from the company’s coffers.

Creditors sued Cornell Capital and certain executives in November for having “plundered the portfolio company” by taking out a $345mn dividend for its investors, which the complaint alleges left Instant Brands insolvent.

A trial over the allegations is scheduled to start later this year. A spokesperson for Cornell Capital in a statement called the lawsuit’s allegations “baseless attacks” and disputed that the dividend recapitalisation led to Instant Brands’ bankruptcy, instead citing “uncontrollable macroeconomic events.”

Meanwhile, out-of-court manoeuvres to stave off insolvency, commonly called liability management exercises or LMEs, have shot up as companies seek to avoid Chapter 11.

“Private equity sponsors have a heightened interest in LMEs,” David Meyer, head of law firm Vinson and Elkins’ restructuring and reorganisation group, said in an interview. “The primary focus is: how can we address a situation out of court?”

While popular, the solution rarely lasts. Just under half of respondents to an AlixPartners survey from October described liability management exercises as successful. Only 3 per cent said they turned out to be permanent fixes.

Despite efforts to stave off insolvency, some companies have earned the dubious distinction of entering “Chapter 22” or “Chapter 33” proceedings, a sobriquet indicating their second or third successive bankruptcy.

One of the most recent such cases is Joann, an Ohio-based fabrics and sewing supplies retailer with hundreds of locations, thousands of employees and two separate bankruptcy filings in the past year.

Joann was taken private for $1.6bn in 2011 by private equity firm Leonard Green and Partners. The firm then took Joann public in 2021 while remaining its largest shareholder.

Business boomed in 2020 thanks to the popularity of crocheting and other crafts during Covid-19 lockdowns. But sales slowed as the pandemic ebbed, higher rates more than doubled the company’s interest payments and supply chain issues snarled its inventory — even as 96 per cent of its stores were cash flow positive, according to filings.

The company filed for bankruptcy in March. It emerged a month later after slashing half of its $1bn in debt, but ultimately returned to Chapter 11 earlier this month, this time blaming the difficulty to keep vendors shipping products. Joann and Leonard Green did not respond to requests for comment.

“The tide has gone out, and a lot of boats are rocking over,” said Jerrold Bregman, a partner at BG Law. Private equity companies prefer to sell or float their holdings at a profit, he added. “Typically, all they’re looking to do is get to a liquidity event and make some money.”

Company says it is exploring strategic options but there is no guarantee an agreement will be reached

UK retailer WHSmith is in talks to sell its high street chain more than two centuries after it opened its first shop in London.

The company, which has been focusing on its outlets in airports, hospitals and train stations in recent years, confirmed on Saturday that it was “exploring potential strategic options”, including an outright sale of about 500 stores.

WHSmith, a high street stalwart known for its stationery and books, is in talks with several prospective buyers and a deal could be reached in the coming months, according to a person familiar with the process.

However, the retailer cautioned “there can be no certainty that any agreement will be reached”.

Over the past decade WHSmith has become an international travel retailer through acquisitions such as a $400mn deal to buy Marshall Retail Group in the US in 2019 and paying £155mn for InMotion, another US retailer of technology products, in 2018.

The move, which was first reported by Sky News, marks a watershed moment in the history of the UK high street.

WHSmith was established in 1792 as a family-run newsagent, and a few decades later it opened the first travel retail store in London’s Euston station in 1848.

Its high street division, albeit profitable and cash generative, has had to adapt to a changing retail landscape characterised by a shift to online shopping and increasing day-to-day business costs.

At the same time, many established chains such as Debenhams and Topshop have disappeared from the high street.

WHSmith’s travel business now has more than 1,200 stores across 32 countries, and it accounts for three-quarters of the group’s revenue and 85 per cent of its trading profit. 

Pricing power is shifting toward airlines and other companies that provide services consumers crave

Get ready to pay more for airline tickets.

U.S. airlines are charging higher fares and signaling that business and leisure travel demand should remain strong this year. It is the latest sign of how companies are expecting consumers to pay more for services and items deemed desirable.

“The U.S. consumer is financially healthy and continues to prioritize spending on experiences,” Delta Air Lines DAL -0.40%decrease; red down pointing triangle Chief Executive Ed Bastian said this month.

Prices for the cheapest U.S. flights are up 12% this month from a year earlier, according to Hopper, a flight comparison and booking app.

Other companies offering in-demand services are also betting that higher prices won’t turn off consumers.

Netflix said Tuesday it would raise prices for U.S. subscribers, expecting that households will be willing to absorb the higher fees despite several increases in recent years. The price of a premium subscription, which had already jumped more than 25% from $17.99 a month in 2021, increased another $2 a month.

Analysts expect steady demand also will allow hotels and cruise companies to drive prices higher.

At the same time, some makers of consumer goods and staples are finding a rockier reception to price increases.

“On the services side, you’ll have a little bit more pricing power than on the goods side,” said Ryan Sweet, chief U.S. economist at Oxford Economics. “We’re still experiencing a little bit of a hangover from all the stuff that we bought here during the pandemic.”

Airfares plunged in the early months of the Covid-19 pandemic, only to soar in 2022, when airlines couldn’t add flights quickly enough to keep up with the frenzied urge to travel. Then prices tumbled when airlines expanded service and flooded into popular routes. Now airlines are constraining supply and lifting prices.

Airlines expect those higher prices to lift their financial results. Revenue at the largest U.S. airlines is forecast to hit new highs this year.

“We’re encouraged by the setup as we head into 2025,” Andrew Harrison, Alaska Airlines’s chief commercial officer, told investors Thursday. “Things are looking really good as we sit here today.”

Airlines are regaining pricing power after a glut of cheap seats weighed on domestic fares. Last summer, ticket prices slid at a time of year when they typically reach their apex. That trend made it harder for carriers to cover their own rising costs, including those associated with labor contracts they signed in recent years.

Instead of trying to fill seats at cut-rate prices, carriers slowed their growth, or in some cases shrank, to preserve profits.

Spirit Airlines, which filed in November for Chapter 11 bankruptcy, ended the year flying 20% less than it did in the final months of 2023. Southwest Airlines, facing pressure from an activist investor agitating for the airline to produce bigger profits, has pledged to moderate growth in the coming years.

Other factors including delayed plane deliveries are also keeping airlines from expanding more aggressively. In the first quarter, U.S. airlines are planning to increase domestic flying capacity by 1.6% from a year earlier, according to data from Cirium, a slowdown from the 3.5% growth rate in last year’s first quarter.

Andrew Nocella, chief commercial officer at United Airlines, said this month that domestic pricing is improving because of accelerating business travel and its competitors’ cutbacks on unprofitable flying. There are fewer fare sales, and discounts aren’t as steep, he said.

The airfare component of the consumer-price index rose 3.9% in December from the prior month on a seasonally adjusted basis—its fifth consecutive monthly gain.

Inflation-weary travelers are feeling the pinch, even as high-income households continue to shell out for flights and clamor for higher-end experiences.

In a survey of more than 5,000 travelers last year, Atmosphere Research Group found that a quarter of respondents reported annual income between $50,000 and $75,000, down from 28% a year prior.

“These are the people being hit the hardest by the higher cost of everyday living,” said Atmosphere President Henry Harteveldt. “People with the most limited incomes are not able to afford to travel like they once were.”

Discount airlines that have long catered to those customers are adjusting their business models to attract more consumers willing to pay up for extras. Most fliers are continuing to spend, airlines have said, and carriers including Frontier Airlines, Spirit, JetBlue and Southwest are hoping to appeal to them with roomier seats, or bundles that also include such amenities as better snacks and earlier boarding.

“We’re not worried about where fares are at—we think the consumers are willing to pay for a really good product,” said Devon May, chief financial officer at American Airlines. Fares “continue to be a bargain relative to a lot of other consumer goods or services,” he said.