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Decision makers must balance need to deter Iran with desire to strengthen a tenuous coalition and achieve their war aims in Gaza

TEL AVIV—Israel intends to punish Tehran for the drone and missile barrage that represented Iran’s first-ever direct attack on its territory, Israeli officials said, but it faces a difficult challenge of finding a way of doing so that avoids further escalation, preserves the partnership that helped fend off the assault and doesn’t derail its war aims in Gaza.

Israel’s war cabinet met Monday to discuss how and when to respond to Iran’s attack, which Tehran said was in response to the killing by Israel of a senior Iranian general at an Iranian diplomatic building in Damascus, Syria. Israel hasn’t confirmed or denied involvement.

“We are looking ahead and considering our steps. The launching of so many missiles, cruise missiles and drones into Israeli territory will be met with a response,” said the head of Israel’s military, Herzi Halevi, during a visit to an Israeli air-force base that was damaged by the Iranian attack. Halevi said that while Israel could manage alone, “with such a widespread and distant threat, we are always happy to have support,” and he singled out U.S. support.

Israel faces an increasingly delicate set of political calculations. It is already fighting on three fronts: in Gaza against Hamas, on its northern border with Hezbollah, as well as trying to quell unrest in the West Bank. Now, it is under pressure to restore deterrence with Iran, amid calls from allies to exercise restraint. Decision makers must balance the need to project strength with their desire to hold together a tenuous strategic partnership against Iran that helped it block the attack in the first place.

“The point is to respond smartly, in a way that won’t undermine the opportunity for regional and international cooperation that we created,” said Michael Oren, a former Israeli ambassador to the U.S.

President Biden has urged Israel to use caution in any response to Iran’s attack and pressed allies Sunday for a united diplomatic front in a bid to stop the hostilities from spiraling into open warfare that could engulf the Middle East and entangle the U.S.

“Together with our partners, we defeated that attack,” Biden said Monday while meeting with Iraqi Prime Minister Mohammed al-Sudani. Biden said the U.S. was “committed to Israel’s security. We’re committed to a cease-fire that will bring the hostages home and prevent the conflict from spreading beyond where it already has.”

Saturday’s attack demonstrated the importance of Israel’s relationship with the U.S. Analysts said that will likely be a key consideration as Israel weighs its next move and seeks to capitalize on the show of international support the assault triggered. In the weeks before Iran’s attack, Israel had faced weeks of criticism over the mounting death toll in Gaza and failure to agree to a cease-fire.

In light of the successful defense against Iran’s attack, Israeli military spokesman Daniel Hagari said Israel’s range of possible responses “are wider and greater.” He said Israelis could receive new safety instructions “in the coming days” similar to those that preceded the Iranian attack, suggesting an Israeli response could come soon.

John Kirby, a spokesman for the White House National Security Council, said the U.S. wasn’t involved in Israel’s decision-making about a potential response. “This is an Israeli decision to make whether and how they’ll respond to what Iran did on Saturday,” said Kirby.

Israel’s strained relationship with the Biden administration also might be playing into Iran’s thinking, said Sanam Vakil, a Middle East expert at the U.K.’s Chatham House think tank. “I think the Islamic Republic has decided that if Israel and Iran are going into an escalatory cycle, it’s better to do it now, during the Biden administration,” she said.

The head of Iran’s Islamic Revolutionary Guard Corps, Maj. Gen. Hossein Salami, said Sunday that Iran would respond to future Israeli attacks on Iran-linked targets from Iranian soil, potentially opening the door for escalatory responses from Israel. “We have decided to create a new equation and it goes this way: from now on if the Zionist regime anywhere attacks our interests, assets, figures and citizens, we will reciprocally attack it from the origin of Iran,” Salami told a state-run television station.

Operations in Gaza are also part of the Israeli calculus, including a planned offensive in the crowded southern city of Rafah, which Israel sees as crucial to eliminating Hamas and freeing dozens of hostages still held in the enclave, but that is opposed by Israel’s close allies and Arab neighbors who came to its defense on Saturday. The issue of a ground operation in Rafah, where more than a million Palestinians are sheltering, has been a key source of tension between Israel and the U.S. Israeli strikes on Rafah continued in recent days, even up to the moment the Iranian attack began late Saturday night, people living in the city said.

On Monday, Israeli Defense Minister Yoav Gallant said he discussed preparations for the civilian evacuation of Rafah with security officials. On Sunday, Israel said Hamas had rejected a U.S. proposal for the release of hostages.

Israeli Prime Minister Benjamin Netanyahu’s right-wing base is already disgruntled that the ground operation in Rafah hasn’t taken place and doesn’t seem imminent, since Israel has pulled most of its soldiers out of Gaza. Israel is calling up two reserve brigades in the coming days for reinforcement in Gaza but will need more forces for any major operation. Now, Netanyahu’s supporters want a strong retaliation against Iran as well.

“To create deterrence in the Middle East,” Israel “has to go crazy,” Itamar Ben-Gvir, Israel’s national security minister and a voice of Israel’s hard right, said on Sunday.

Netanyahu told ministers from his Likud party that he is “determined to respond” to Iran, but that the action would be “sensible and not something irresponsible,” according to a person familiar with the matter.

Failure to act against Iran or in Rafah could further harm Netanyahu’s already diminished political support, said Chuck Freilich, a former Israeli deputy national security adviser.

“Even if he wants to show restraint on both fronts, he has to balance that,” Freilich said.

At the same time, said Freilich, Israel has an opportunity to turn the strategic partnership that helped Israel counter Iran’s offensive into something more permanent. But, he said, that would require Netanyahu to signal openness to the Biden administration’s postwar plan to combine Israel’s agreement on a path toward the establishment of a Palestinian state with Israel-Saudi normalization talks.

“It depends first and foremost on whether the prime minister is willing to say some even limited, meager yes to the Biden plan for the postwar stage in Gaza,” Freilich said.

Israeli security analysts said Israel has a range of options that it would consider as retaliation rather than major escalation, without overstretching its forces that are deployed in Gaza, on its northern border and in the West Bank. In the latest confrontation on the northern border, four Israeli soldiers were injured by an explosive Sunday night while operating dozens of yards inside Lebanese territory, according to Israeli Army Radio.

Israel’s options for retaliation against Iran include cyberattacks and targeted attacks on key state-owned sites such as Iranian oil infrastructure. Israel has in the past targeted Iranian personnel and infrastructure related to Iran’s nuclear program without taking responsibility and could do so again but more overtly, analysts said. In addition to direct strikes on Iran, analysts said Israel could respond indirectly by hitting one of Iran’s proxies in the region.

Analysts said any Israeli strike on major Iranian nuclear sites would be unlikely, since they are deep underground and doing so would require the backing and aid of Washington. The U.S. has never greenlighted an Israeli counterattack, said Oren, the former Israeli ambassador, who is also a historian. “It’s when we move from defense to counter-offense, we hemorrhage American support,” he added.

Strikes on preselected military targets inside Iran, based on extensive Israeli intelligence, are more likely, said Sima Shine, head of the Iran program at the Institute for National Security Studies. But she was skeptical that such retaliation would take place in the near term, since it would require support from Washington. If Israel retaliates, it would likely avoid Iranian civilian and economic sites, Shine said.

Israel might also choose to defer action until a later point. One option is “‘we will respond, but not immediately.’ Iran will give Israel reason to respond and retaliate in future,” said Ehud Yaari, a fellow with the Washington Institute for Near East Policy. “I think it’s very clear at this point that Israel would have to do something about Iran at some point, but not now,” he added.

The U.S., U.K. and France sought to dial down tensions after participating in Saturday’s formidable display of collective defense, urging Israel to demonstrate restraint to prevent escalation in the wider Middle East region.

“We must both be alongside Israel to ensure its security as much as possible, but call for a limit to avoid escalation,” French President Emmanuel Macron said Monday.

On Sunday, Group of Seven leaders issued a statement condemning Iran’s attack on Israel, offering solidarity to the Israelis and pressing for no further escalation in tensions in the Middle East. The statement was watered down from a first draft, with Japan, Canada and European officials wary of giving Israel too wide a berth for its response to the attacks, said a senior European diplomat involved in the discussions.

The original draft—reviewed by The Wall Street Journal—labeled Iran’s actions “reckless” and said Iran had “crossed yet another line” in destabilizing the region. It expressed “unconditional” solidarity with Israel and an “ironclad” G-7 commitment toward its security. All those phrases were omitted from the final version of the text. The language was changed on Gaza from calling for a cease-fire as soon as possible to seeking “an immediate and sustainable cease-fire.”

In a call Saturday evening with Netanyahu, Biden said the Israelis should proceed with caution after the successful joint operation to thwart Iran’s attack.

The U.S., France and the U.K. intercepted drones headed for Israel on Saturday night, while the United Arab Emirates and Saudi Arabia, which doesn’t officially recognize Israel, agreed privately to share intelligence. Jordan, which has repeatedly called on Israel for a cease-fire in Gaza, said it would allow the use of its airspace by U.S. and other countries’ warplanes and use its own aircraft to assist in intercepting Iranian missiles and drones, Saudi and Egyptian officials said.

Brent crude has struggled to stay above $90 despite Tehran’s attacks on Israel this weekend

Despite crude oil’s combustible properties, armed conflict near large oil producers — Russia and now Iran — has not ignited a sustained rise in price. Brent crude fell on Monday, struggling to stay above $90 a barrel, after this weekend’s attack on Israel by Iran.

Why is the oil market so relaxed in the face of escalating regional tensions? The oil price may increasingly self-regulate in price terms. Higher oil prices just stoke fears of a reacceleration of broader price inflation. This would remove one of the factors behind the recent rally in equity prices. It is unlikely that commodity prices would continue to climb should central banks start to play down the prospect of interest rate cuts.

World stock prices have rallied a fifth since October, anticipating an inflection point for interest rates. That hope has already dimmed. US Federal Reserve chair Jay Powell this month hinted that the central bank would move slowly. US bond yields, anticipating problems, have risen this year. Interest rate traders anticipate less than half as many reductions by global central banks as at the beginning of the year.

As a result, equity markets are already more jittery — not a positive for oil. Since 2000 oil prices have rarely continued rising when the S&P 500 has a sustained decline. That surely would happen if oil prices soared in an all-out war between Iran and Israel. Opec+ producers could also use their almost 6mn barrels per day of spare capacity were price rises seen to threaten central banks’ next move, thinks Rystad Energy.

Traders may also be questioning the extent of Iran’s military threat. The country will not want to hurt its own oil exports. These have picked up markedly in recent years, from a low of about 400,000 b/d in the pandemic year of 2020 to about 1.4mn b/d recently, according to Richard Bronze at Energy Aspects. Almost all of that is tanked to China from the Gulf through the Strait of Hormuz.

China brokered last March’s restoration of diplomatic relations between Iran and Saudi Arabia after a seven-year dispute. Iran’s largest customer will not want to see that undone, nor does Iran wish to threaten its export revenues. Its recent failed attempt to raise the cost of its discounted oil to its Chinese customers underscores a poor negotiating position.

Yes, oil prices could well rise if further hostilities ensue. But as politicians rush to avoid further conflict, markets are already signalling their fears that central banks will keep rates higher for longer. That should help keep oil range bound in the months ahead.

Cum-ex lawsuit brought by Danish tax authority against defendants including Sanjay Shah kicks off in London

Denmark’s tax authority accused trader Sanjay Shah’s hedge fund of masterminding a “meticulously pre-planned” fraud on Monday, at the opening of a trial described by an English judge as one of the most complex to hit London’s courts.

Lawyers acting for the Danish Customs and Tax Administration (Skat) told the High Court that dozens of defendants led by Shah’s hedge fund Solo Capital Partners conducted a fraud over three years that netted them a total of about £1.44bn in dividend tax refunds.

The case is part of the sprawling “cum-ex” scandal in Europe, in which authorities in several countries claim to have been duped into refunding withholding taxes on dividends that had never been paid in the first place.

The civil case is being heard at the same time as a criminal trial against Shah in Denmark that began last month, after he was extradited from Dubai to face charges. Danish prosecutors have alleged that Shah, who is also a defendant in the High Court case, was the mastermind of a scheme that received more than DKr9bn ($1.3bn) in such refunds. He has denied wrongdoing.

Investors based outside Denmark who hold shares in Danish companies are subject to 27 per cent withholding tax on dividend payouts, and can apply for a tax rebate in some circumstances.

Skat argues the defendants did not hold shares in the Danish companies and so their applications for refunds over the period, between 2012 and 2015, were unlawful. The defendants include other traders and businesses, most of which have a low profile.

Laurence Rabinowitz KC, representing Skat, told the High Court on Monday that the defendants “received no dividends from those companies, had no liability to tax in Denmark and suffered no withholding of tax”.

He said the largest such scheme was “masterminded” by Shah’s fund, and the refunds were “facilitated by meticulously pre-planned and co-ordinated trading, which was specifically designed to involve no delivery of any shares or cash at any time”.

Shah’s lawyers, led by Nigel Jones KC, said in written arguments that the “complexity of the trade does not prove dishonesty”. Shah “held a positive, honest belief that the trades were valid”, they added.

The civil proceedings in London follow a lengthy legal battle over jurisdiction. The UK Supreme Court rejected Solo’s attempt to block the case being heard in England last year, setting the stage for the High Court trial.

The case was described by a judge at an earlier stage of proceedings as “one of the largest and most complex pieces of litigation to be heard in the Commercial Court”. Skat has presented documents to the court running to about 250,000 pages, according to Shah’s legal team.

Shah is facing up to 12 years in prison in Denmark if found guilty in that criminal case. He told the Danish court last month that his hedge fund merely exploited a legal loophole and did nothing wrong.

“It was like a ballet,” he said of the co-ordinated trading his firm and others undertook to obtain the tax refunds.

Two former British employees of Shah’s fund, Anthony Patterson and Guenther Klar, were given prison sentences of eight and six years, respectively, by Danish courts earlier this year for their roles in the scheme.

It's the worst-kept secret in artificial intelligence.

Many of the AI chatbots developed by startups were likely made using data from OpenAI and other firms, even though these startups are trying to undercut OpenAI, according to developers and founders. This practice has resulted in a startling competitive dynamic: Developers are charging their customers a fraction of what GPT-4 costs, and yet these low-cost services can mimic GPT-4 on some tasks.

• Many startups are using OpenAI data to develop chatbots

• This practice breaches OpenAI rules

• Investors may not want to back startups doing so

Startups are not disclosing their use of OpenAI’s tech in their development. And such behavior puts the startups at risk because OpenAI, like other leading AI firms such as Anthropic and Google, technically forbids such behavior. Still, OpenAI CEO Sam Altman told a group of startup founders last summer that it was OK for smaller founders to use the company’s tech this way, according to a person who attended the meeting.

While Altman’s answer came as a relief to some of the founders in attendance, OpenAI could always change its mind if the practice hurts its growth. Flooding the market with AI that’s good enough for most customers could deprive OpenAI and other vendors of revenue. A proliferation of AI trained on similar sources could also make it harder for individual providers to stand out from the pack.

The practice works like this: Developers pay OpenAI for access to its most advanced model, GPT-4. They then ask the model a bunch of questions, such as “What’s the problem in this line of code?” They use the answers, along with the questions, to train their own competing models, such as ones that can debug computer code.

This tactic has been gathering steam for months. Daniel Han, a co-founder at Unsloth AI, which helps developers make conversational AI, estimated that around half of his customers generate some data from GPT-4 or from Anthropic’s Claude model and use it to improve their own models. Many firms also obtain such data from ShareGPT, a site where developers post the answers they’ve generated using OpenAI’s models. OpenAI declined to comment.

The smaller developers’ models are usually based on popular open-source ones that are freely available from Meta Platforms or Mistral AI, but they can be substantially improved by incorporating answers from OpenAI’s models. Some developers are using a service called OpenPipe to automate this process, Han said.

“This is what happens in a new ecosystem where there’s not a clear set of rules established,” said Matt Murphy, managing director at Menlo Ventures, which has invested in Anthropic, an OpenAI rival. “How are you going to be better than everyone else if you’re all using the same data?”

Risk-Reward Equation

For some companies, the risk of breaking explicit or unspoken rules might be worth it. In the hypercompetitive world of generative AI, gaining access to high-quality data for training or refining models is critical.

But it isn’t clear how long OpenAI, Google, Anthropic and other big developers will allow smaller rivals to effectively copy their AI in an effort to catch up. And some investors may not feel comfortable backing companies they view as cutting corners or developing technology indistinguishable from that of competitors—because they used similar training data.

“The quality and origins of training data for AI models is becoming one of the most important hot spots,” said Radical Ventures partner Rob Toews. “No one knows for sure how this will play out, but any AI startup that is not being thoughtful and strategic about [where their data is coming from] is falling behind.”

There are parallels, however, between what startups are doing with OpenAI data and what OpenAI and other leading AI developers have done in training their own models. For instance, OpenAI’s chief technology officer, Mira Murati, last month stumbled in answering questions about whether her colleagues used data from Google-owned YouTube and Meta Platforms–owned Facebook and Instagram to train Sora, which produces AI-generated video.

It wouldn’t be surprising if OpenAI did use such data. A recent report from The New York Times describes how the model developer created a speech recognition tool, Whisper, to transcribe YouTube videos to improve its GPT-4 model. The Information previously reported that the company secretly used YouTube data to train its prior AI models. Earlier this month, YouTube CEO Neal Mohan said he wouldn’t be OK with OpenAI using YouTube videos to develop models like Sora.

That has led to accusations from news publishers and some authors that AI developers are using copyrighted material for training purposes. The New York Times Co. sued OpenAI and its biggest backer, Microsoft, last December, alleging that they had unlawfully copied Times news articles as they trained models. The lawsuit alleged that OpenAI’s chatbots “can generate output that recites Times content verbatim.”

OpenAI argued in response that it has tried to strike partnerships with news publishers and its training practices are permitted under a U.S. copyright principle called “fair use.”

Still, OpenAI and Google have both struck multimillion-dollar licensing deals with publishers including Axel Springer and bigger deals with major sites like Reddit.

Not every AI developer operates this way. Databricks, which sells software tools for managing data and utilizing AI, did not rely on the work of competitors in developing a powerful open-source large language model, according to Jonathan Frankle, the company’s chief scientist. And Anthropic similarly doesn’t train its LLMs on outputs from other models, said a spokesperson.

The History of Training Data

Developers who quietly rely on other AI services to develop their models could end up in an embarrassing situation if that dependence is later revealed. For instance, Paris-based Mistral and Beijing-based 01.AI used Meta’s open-source AI, Llama 2, to create their own AI and didn’t disclose that fact until it inadvertently leaked. While Meta’s licensing terms allow such usage, the startups’ tardy disclosures about the practice didn’t play well with some app developers who felt the companies had been disingenuous. Both companies had raised hundreds of millions in funding and held themselves up as the OpenAI of their country.

Even large technology incumbents haven’t been able to resist the temptation of using others’ work. Examples include Google’s transcription of YouTube videos and Meta’s hiring of African contractors to summarize copyrighted books to train AI models on, according to the Times report. Adobe trained its software for image generation, Firefly, on AI-generated photos from startup Midjourney, according to a recent Bloomberg report. And last year, a senior AI engineer at Google quit in protest after he raised concerns about the company’s use of data from OpenAI’s ChatGPT to train Google’s own models, The Information reported. (Google stopped the practice, and the engineer later returned to Google after a stint at OpenAI.)

In many cases, the rapid pace of AI development and growing competitive pressure force developers to turn to controversial sources of training data, such as copyrighted content or LLMs, that they otherwise might not use, said Sharon Zhou, CEO at Lamini, a startup that helps developers train their own models.

Investors “need to see progress so fast in this space,” Zhou said. “What else are you going to do?”

As more companies develop models that derive partly from other models, it may become difficult to differentiate them. That could eat away at the competitive advantages of leaders such as OpenAI and force them to compete on price, especially as companies increasingly opt for cheaper, “good enough” LLMs rather than the most advanced and expensive models.

One alternative could come in the form of synthetic data, which companies generate with their own AI models rather than scraping human-made content from the internet or other sources. Google and Meta, for instance, have said they used synthetic data to build models that can solve geometry problems or produce computer code. Because AI produces this type of data, it avoids many of the legal questions that come with using human-generated content.

In the meantime, scores of AI startups are gaining access to private data from industries such as healthcare and law firms to develop models for specific uses. Models from companies like OpenAI can’t easily reproduce such models, said Ash Kulkarni, CEO of search analytics company Elastic.

IWC’s chief executive says it will keep leaning into its environmental message. But the watchmaker has scrapped a flagship sustainability report, and sustainability was less of a focus overall at this year’s Watches and Wonders Geneva.

GENEVA – What impact is sustainability having on luxury watch sales? According to industry studies, consumers are more concerned about the environmental impact of a watch than ever before. Deloitte’s Swiss Watch Industry Study, published in October, recorded that 43 per cent of industry executives surveyed said investing in sustainability was one of their “strongest priorities” for this year.

And yet, it felt like sustainability was less of a focus at this year’s Watches and Wonders Geneva, which ends Monday, compared to previous editions.

Even the brand that has championed sustainability in watchmaking over the past two decades appears to be going quiet on it: IWC, which had led the charge on the topic since being certified as carbon neutral in 2007, did not publish its annual sustainability report this year.

In a November report rating Swiss watch brands’ sustainability performance, the WWF underscored that the industry was still lagging on key topics like transparency, traceability and accountability for the social and environmental impact of mining. Still, it ranked IWC as the company with the most “ambitious” sustainability profile due to its more detailed annual reporting and advances in manufacturing. Not producing a report will be seen by the WWF as a backward step.

Asked why IWC, which is part of the Richemont Group, had backtracked on its commitment to transparent reporting, the company’s chief executive Chris Grainger-Herr said the company would now provide information on its environmental impact to the group. “We’re part of an ESG [environment, social and governance] framework within the group and we’ve started to report that at group level,” he said.

Less transparency — its impact will now be mixed with data on all the brands in the group — won’t mean less progress, Grainger-Herr said. “Our ambition is to continuously improve on all of the major [sustainability] factors.” Still, in the absence of reporting, such claims become more difficult to verify.

Grainger-Herr also said a partnership with the supermodel Gisele Bündchen, who acts as an advisor to IWC’s sustainability committee and has starred in nature-themed campaigns for the brand, would continue. “Yes, we work with her as closely as possible,” he said. He also confirmed sustainability would remain a key marketing pillar for the brand. The sustainability section of the company’s website did not appear to have been updated since 2022, however.

Research suggests sustainability matters to luxury watch buyers. In its study, Deloitte reported that 48 percent of watch buyers said sustainability was one of the most important factors behind a luxury watch purchase, and that similarly, 41 percent of pre-owned watch buyers were motivated by sustainability, second only to considerations of price.

Still, the report also found that sustainability ranks as the fourth most powerful driver behind a watch purchase — following brand image, design and price. And there’s often a gap between what customers say and what they actually buy.

One industry expert suggested IWC would be smart to move away from sustainability messaging, and to leave reporting to the group. “Choosing sustainability gives IWC an angle of communication, but not values or vision,” said Oliver Müller, founder of the Swiss consultancy LuxeConsult. “At the moment, the brand lacks purpose, even though the product and marketing mix is well executed.”

IWC’s sustainability efforts have earned clout within the industry on a key topic, as well as accolades from groups like WWF — but this doesn’t appear to have reinvigorated sales.

Richemont keeps a close guard on the financial results of its brands, and Grainger-Herr declined to comment on IWC’s performance. But according to a Morgan Stanley report estimating the size of Swiss watch brands (of which Müller is a co-author) IWC’s revenues dipped from 908 million Swiss francs ($996 million) in 2022 to 726 million Swiss francs last year.

“The brand suffers from a high price positioning compared with direct competitors, mainly Breitling and Omega,” said Müller. “The proportion of clients buying a watch at this price point, only or mainly because of a brand’s sustainability performance is, unfortunately, very low.”

Industry-Wide Focus

Schaffhausen-based IWC has been the flag-bearer for more sustainable practices in Swiss watchmaking since its carbon-neutral certification almost two decades ago. In 2018, it opened a state-of-the-art $43 million factory that draws energy from solar panels and water for cooling and heating from groundwater sources. It has also partnered with entrepreneurial start-ups such as Boom Supersonic, an aviation company looking to decarbonise supersonic air travel. On reviewing its activities, the WWF had concluded IWC is Switzerland’s most sustainable luxury watch company.

Swiss watch brands including Breitling and Oris have also emphasised sustainability commitments in recent years. The start-up watch company ID Genève has generated buzz for building its product and marketing strategy around circularity, the principle of re-using existing materials and eliminating waste throughout products’ life cycles. However, it’s unclear whether their efforts will really translate to customer demand at scale. Reports of IWC’s falling revenues last year came amidst a fast-growing market in which the broader Swiss watch industry reported record export values (up 7.6 percent to 26.7 billion Swiss francs).

“We have [demand for sustainability] on an anecdotal level, but it’s not something that I can measure empirically,” Grainger-Herr said. “We see that this is one important driver, understanding that a product is made as responsibly as it can be and that the brand is striving to improve what it does on that front continuously.”

Deloitte’s study indicated the appetite for sustainability in a luxury watch was more pronounced among young buyers. “They make very conscious decisions about products they purchase,” said Christian Knoop, IWC’s creative director. “They’re interested in lasting value and in authentic brands. We have to work on our credibility, and sustainability and improvement in sourcing materials, in production methods and in environmental measures for buildings are all part of that.”

At Watches and Wonders Geneva this week, IWC has introduced a collection of Portugieser models that invoked sustainability through timeless design rather than buzz-words like traceability. One high-end piece featured a new complication the brand is calling an “Eternal Calendar,” which it says could keep track of the date until the year 3999 and the phases of the moon for 45 million years assuming it’s kept wound and maintained. The origins of the design go back to the 1930s.

“It’s important in the design process to create a design that is meant to last and not to just play into the latest fashion,” Knoop said.

The law may yet dictate watch brands’ approach to sustainability. Last year, Switzerland passed the Swiss Climate and Innovation Act, the goal of which is for Switzerland to become climate neutral by 2050.

Asked by The Business of Fashion whether the Swiss watch industry would be caught out by the act, Cyrille Vigneron, chief executive of Cartier — another of the industry’s ESG front-runners — said that while manufacturing processes inside the country were “quite ok”, upstream issues in the supply chain or downstream impacts like the environmental cost of global distribution remained common.

And he issued a warning. “Where Swiss watchmaking is not really ready is for transparency,” he said.

US buyout firm has plans to build a vast data centre to tap growing demand for computing power

Blackstone is close to acquiring the former Britishvolt industrial site in the north of England, with plans to build one of Europe’s largest data centres as the artificial intelligence boom drives demand for computing power. 

Northumberland County Council is in talks with the US private equity firm about the 95-hectare coastal property near Blyth that could ultimately see Blackstone invest as much as £10bn in the area, according to council papers released on Monday.

Council leader Glen Sanderson said the project “offers a huge boost to the regeneration and renaissance of the local area”.

Britishvolt’s plan to build a “gigafactory” for electric vehicle batteries on the site of a former power station had been symbolic of the UK’s efforts to compete in high-tech automotive manufacturing, before the company collapsed last year. 

The land is in the hands of Britishvolt’s receivers, but the local government has the right to buy back the land under certain conditions. 

The council will next week meet to consider handing the US private equity firm long-term control of the site in exchange for up to £110mn in funding for local development. Blackstone would also pay £20mn to acquire the land.

If successful, it is hoped that the project could attract billions in investment to build one of Europe’s largest data centres and create about 4,000 jobs, the council said. 

The deal would mark an end to the effort to find another company to back an EV battery factory on the site, or an alternative plan to make it a major manufacturing centre.

Jaguar Land Rover owner Tata Motors previously expressed interest in the site, the FT reported last year, as well as other carmakers and wind turbine makers.

The bid for the site from Blackstone underscores the intense interest among property investors and tech companies to invest in data centres. The rise of artificial intelligence is expected to vastly increase the need for these facilities. 

Blackstone acquired US data centre group QTS for $10bn in 2021, which would manage the project. Rival Brookfield has also invested heavily in these high-tech facilities.

“Blackstone and QTS have the capital, expertise and record required to deliver on growing demand for data centre infrastructure,” the firm said.

However, there is no guarantee that the data centre project will go ahead, even if Blackstone secures the land. The US investor’s plans are contingent on securing planning permission, electricity supply, and sufficient internet connectivity at the site — and gauging customer demand.

The Blyth site benefits from access to renewable power and the infrastructure necessary to bring enough electricity to run a data centre of that size. Difficulty in securing electricity is one of the major stumbling blocks for data centre investments. 

“The data centre construction boom continues globally, with supply struggling to keep up with record demand,” Green Street analyst David Guarino wrote in a note on Monday. “As in most of the world, in Europe, power is the critical limitation on expansion.” 

Blackstone would probably look to lure the likes of Microsoft, Google, Amazon or Meta as a tenant for the site. A future tenant would need to invest billions of its own into the computer hardware inside the centre. The council said this investment could be an additional £5bn-10bn.