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Apple has an innovation gap. Will its new CEO fill it?

The tech titan that once urged consumers to ‘think different’ may itself be ripe for disruption in the AI age

In early 2025, Apple software engineers were working around the clock to deliver the company’s next trick. 

The previous June, software chief Craig Federighi had walked onstage at the company’s annual developer conference to unveil an overhauled Siri voice assistant that would act like a true companion, using AI to carry out tasks on command. 

What the audience gathered in the Cupertino sunshine cheering Federighi’s demonstration did not know was that the new personalised AI agent did not yet exist.

The Siri team had been given just nine months to deliver. And as the spring 2025 deadline approached, progress was not good. Federighi circulated a bug report listing queries he had put to the new Siri, with red crosses next to each failed response, according to people familiar with the document.

“Internally, Apple called the project ‘Endgame’ because executives realised that if it didn’t ship, it was the end,” says one executive. A final item on Federighi’s list, the person adds, was “something to the effect of ‘Hey Siri, is OpenAI better than Siri?’” 

The miss resulted in a $250mn class action settlement over false advertising and the departure of several top executives, including longtime AI chief John Giannandrea. 

It was a chastening moment for a company that built its reputation — and vast financial success — on taking new technology, perfecting it and marrying it with consumer-friendly innovations.

In the 2000s, Apple reinvented the entire consumer electronics industry with a series of era-defining products. Today the group is a $4.5tn, 50-year-old behemoth that relies on selling an ever-expanding suite of services, mostly via a product unveiled two decades ago: the iPhone.

Following the debacle over the voice assistant, and other indicators that the pace of innovation is not what it was, the question is whether the group that once urged consumers to “think different” is itself now ripe for disruption in the age of AI. 

It is John Ternus, an engineer steeped in the leadership culture of Apple co-founder Steve Jobs, who must address this challenge. The 51-year-old will take over as chief executive from Tim Cook in September as the company looks to generate new excitement about its products and move into ambitious new categories such as AI pins — wearable voice-controlled devices — and robotic tabletop arms.

“It’s about making things that are sublime, to create what Steve called an ‘insanely great’ moment,” says a former colleague who worked with both Jobs and Ternus.

“It’s too easy to say Apple doesn’t do anything any more; they are constantly delivering best-in-class products,” the person adds. “But people are asking to feel something.”

Jobs, Ternus and the innovation era

Few companies have been shaped by the personality of their leader as much as Apple. Jobs placed design purity at the heart of the company, driving its engineers to develop whole new manufacturing techniques to create aesthetically pleasing, beautifully engineered versions of existing products such as PCs and smartphones.

Ternus belongs to a dwindling generation of engineers still at Apple who were part of the extraordinary era of innovation between 2000 and 2010 that brought the iPod, the iPhone, the MacBook and the iPad. 

Jobs and design chief Sir Jony Ive defined Apple’s devices by reimagining the materials they should be made from and the ways in which users should interact with them. Both processes placed huge pressure on Apple’s engineers, as Ternus soon discovered.

Around five years into his quarter-century career at Apple, he was made lead engineer on a project to reinvent the iMac. Apple’s PC, the first major collaboration between Jobs and Ive, had wowed consumers at its 1998 launch with its unconventional bubble design and playful colours, but was due another upgrade.

The vision was to use a single flat piece of metal encasing a flat screen and the computer’s circuit boards, doing away with the separate bulky unit traditionally associated with PCs. While the original iMac was assembled in California, Apple was increasingly relying on factories in Asia to make its products at scale and at lower cost — a process led by Cook, then operations chief.

Ternus flew to China, where Taiwan’s Foxconn was being lined up to make the device. “It was the first time we did such a metal bezel piece, and we didn’t really know how to do it — there were a lot of new ideas in it,” recalls one former colleague.

But Ternus and his team cracked the challenge, adapting metalworking techniques that had formerly been the preserve of industries such as aerospace to create a desktop computer with a large flat screen squeezed into what seemed an impossibly flat chassis. It launched in 2007, and its minimalistic aluminium and glass aesthetic still defines the iMac today. 

Ternus’s power is his “atypical clarity”, says another former colleague. “It’s not just the ability to have a really broad understanding of the many component parts of the products, but also his powers of recall, and now his understanding of the company-wide context” that will allow him to reimagine the next generation of Apple products.

Tim Cook: more money than ever

Cook’s tenure as chief executive of Apple established a model that was radically different from the design-centric company that existed under Jobs, who died in October 2011.

In financial terms, it has been one of the greatest success stories in business history. Apple now rakes in sales of over $1bn a day. Its services business alone, driven by the App Store and Apple Pay, generates more revenue than Netflix, Spotify and Adobe combined, with a margin of around 75 per cent. Under Cook, the company has returned around $1tn to shareholders through dividends and buybacks. 

Nearly two decades since the product launched, Apple shipped well over 200mn iPhones in 2025 and the device still accounts for about half of Apple’s $400bn of annual sales, with high product margins underpinned by the highly efficient, Asia-based supply chain also created by Cook. 

Apple’s astonishing profitability is sustained by an annual cadence of new iPhones, each iteration featuring largely incremental improvements on the one before. Research and development spending as a proportion of revenue went from 8 per cent at its height in 2001 to a 2 per cent low in 2012 as the iPhone boom began, meaning that for a while Apple was spending proportionally far less than its Big Tech peers. 

But as the profits piled up, the team behind Apple’s original products began drifting away, with some citing fatigue with the gruelling schedule of annual iPhone releases. Ive left in 2019, luring multiple colleagues to his new start-up that would later join OpenAI.

Cook abandoned Jobs’ practice of daily visits to Apple’s design studio, where the different strands of Apple’s leadership would plan out the next blockbuster product together. 

“The way we operated under Steve, we felt like pirates,” says another former executive. “Then suddenly you don’t have a pirate ship to steer, you have a naval ship . . . less free-spirited, less nimble and a bit more procedural.”

The result was a marked slowdown in launches of genuinely new products. Wearables such as AirPods and the Watch emerged during Cook’s tenure, along with the HomePod. But the Apple Car was abandoned after expensive years-long development and 2024’s Vision Pro headset proved a flop.

There are others indications that Cook’s model cannot deliver the growth it once did. Apple’s 2.5bn-device base is showing signs of becoming saturated and product revenue has flattened after a boost during the pandemic.

Upgrade cycles for the iPhone — the time that elapses between consumers buying one device and then trading it in for a new one — are lengthening. Last year’s iPhone 17 generated record sales, but Counterpoint Research attributes this largely to consumers who purchased smartphones during the Covid-19 boom buying new devices.

The company, which declined to comment for this article, is contending with increasing competition in China, where local rivals can offer devices that look almost identical to the iPhone using the same domestic contractors Cook recruited over two decades. 

That China-dominated supply chain is also looking more vulnerable in an era of mounting trade tensions between Washington and Beijing. Efforts to diversify it, mostly by building production capacity in India, are already under way and are likely to intensify under Ternus.

By the company’s own admission the margins around its App Store, which levies commissions of up to 30 per cent, are at risk of erosion even before AI disrupts its software ecosystem.

“Regulators around the world are watching this case to determine what commission rate Apple may charge,” the company warned as it unsuccessfully petitioned the US Supreme Court to pause a legal injunction over the fees brought by Epic Games. Meanwhile the US Department of Justice is suing Apple over an alleged monopoly in smartphones. 

“To be bullish on Apple here, you need to believe they can extend App Store tax and tolling to agentic AI,” says Nicholas Rodelli, director of legal research at investment research firm CFRA.

But he adds that the company is “over-reliant on the tax-taking model”, describes its App Store policies as “unsustainable” and estimates that Apple faces an 8 to 9 per cent reduction in earnings power if this model is unwound by legal challenges.

The hope expressed by Apple insiders is that Ternus will refocus the company on more radical product development through his deep understanding of hardware, and the software — including AI — that can operate on it.

“I think there’s a good chance Ternus will reinvigorate [the innovation culture of] ‘old Apple’,” says one former executive. “The pieces are all in place for a new chapter.”

Erik Woodring at Morgan Stanley describes him as “a product guy who has played a pretty critical role in delivering a number of different platforms over the years”. His task, Woodring adds, is to create a portfolio of devices that are specifically built around AI.

That would mark a return to the Jobs-era philosophy of developing integrated hardware and software to create an often radically different user experience, rather than simply bolting new features on to existing devices, as it has done with AI to date.

It was this approach that gave the world the multitouch screen on the iPhone, replacing a physical keyboard with an interface that could be navigated by a toddler.

Apple’s new take on AI could precipitate similar shifts — but it will require an appetite for disruption. A truly capable voice assistant could change the look and feel of an iPhone by drastically reducing the need for on-screen icons, for instance, and dilute the high-margin App Store model of users manually downloading apps and making individual purchases.

In late 2024, Apple acknowledged this for the first time in its legal disclosures, warning that “new products, services and technologies may replace or supersede existing offerings and may produce lower revenues and lower profit margins”.

Apple’s AI challenges

The launch of ChatGPT in 2022 showed how quickly the imagination of consumers could be captured by AI chatbots.

For Apple, the promise of a genuinely smart and intuitive voice assistant, able to carry out tasks across the device using AI models, is that it would push consumers to buy new iPhones.

But the problem of developing such a tool does not play to Apple’s traditional hardware strengths. “There is a vulnerability there for Apple,” says one former executive. “I have the biggest trust that from a hardware point of view they can build the most beautiful, highest-quality products, but in a way it’s about the ‘brain’ of the device now.”

A former employee who worked on the Siri upgrade adds that “at the end of the day, Apple is an advanced hardware company that builds ‘good enough’ software”.

The person says the company simply does not have the frontier AI models of its competitors, while its commitment to privacy prevents it from mining the critical data from users that would help it build them. At the start of this year, it agreed with Google to use its Gemini models as the backbone for more advanced AI features.

The way to make a “small” model that would work locally on an iPhone-size device “is to start with a big model”, explains Anastasios Angelopoulos, chief executive of Arena, an open platform for evaluating AI models. “You take a frontier model and progressively distil it until you have a small model that has 3bn parameters and is very close to the same performance.”

Ternus inherits an AI team at Apple that, like its design team, has seen steep attrition in a hugely competitive market. The company’s top software interface designer, Alan Dye, also left in December.

Meta and OpenAI, which have been among the most aggressive poachers, are positioning themselves as AI-powered consumer hardware competitors to Apple and have ambitions to control the AI ecosystem from end to end — the very philosophy Steve Jobs pioneered. 

When Cook unveils the much-delayed AI-powered Siri at Apple’s Worldwide Developer Conference on June 8, part of his intention will be to give Ternus a blockbuster new AI feature to go with the foldable iPhone that Apple is due to unveil in September.

But Morgan Stanley’s Woodring says that, given the link-up with Google, Siri’s AI functionality will be heavily dictated by Gemini’s capabilities. “The debate is no longer, ‘Do you have the models to support your AI initiatives?’” 

Apple needs to demonstrate “one to three clear uses” for its AI voice assistant, Woodring adds, with features compelling enough to persuade existing users to buy a new device. The longer-term aim is to outline a clear path to generating fresh revenue from AI software in the way Apple currently does from iCloud.

The outgoing chief executive is also opening the door for his successor to start spending heavily on talent and AI research; the group is already growing headcount and last month dropped its longtime commitment to balancing cash and debt. Research and development spending for the year to March reached $40bn, an increase of about 23 per cent. 

Ternus will have a mandate to reshape the senior leadership team in his own image too, given that several top executives are already approaching retirement.

“If I were John, I’d be wondering how to assemble a team of warriors who are up for the challenge and look like a bunch of crazy dreamers,” as in the early days of the company, says one former colleague.

In one sense at least, Ternus will be picking up where Jobs left off. “When Jobs acquired Siri [in 2010] he was asked why he was getting into the search business,” recalls one former executive.

“And he said something like ‘I’m not — I’m getting into the AI business’.”

There are more important things to consider when moving countries than tax

Relocating to a low-tax jurisdiction often involves unforeseen legal, emotional and social costs

Lunching in late February with clients who had announced they were leaving the UK was hard, particularly because one of the couple had had a life-threatening illness and the other seemed very reluctant to go. They told me that the principal drivers were tax and fear of the direction of travel of the current government. I did not see it as my job to deter them from departing, but I did see it as my responsibility to challenge their decision and their choice of destination.

Most clients identify tax as the most important consideration when weighing up a move, smitten by the allure of no tax or low tax. But, for me, there are two fundamental questions: can you see yourselves living your life, not just existing, in your chosen jurisdiction? And, contrarily, are you prepared to live your life constrained by the UK’s tax rules? Or, as I put it to my clients, when you have had a brush with death, why abandon family, friends and home to save tax?

If you are considering relocating to a new jurisdiction, there are plenty of questions to ask that are not tax-based. The lawyer will focus on the structure of legal relationships, the economist on geopolitics and the generalist on whether this is a lifestyle you will enjoy. Moving is costly both in financial terms and also emotionally so should be carefully analysed.

With my lawyer hat on, I note that many of the countries on the desirable low-tax or no-tax list have very different regimes governing, among other things, relationships, matrimonial property, divorce and loss of capacity. These topics may not be top of clients’ minds, but they are crucial for a successful move.

What does “marriage” mean in the new jurisdiction? Many countries (but not all) now permit same-sex marriages or civil law partnerships. Some, such as Portugal, recognise de facto partnerships, which are very different from the UK, where “common-law marriage” does not exist, a widespread misconception. De facto marriage confers rights on partners that would not be recognised in the UK — an unwelcome surprise to an unmarried couple if the relationship unravels after the move.

Similarly, there is no concept of community property for married couples in the UK. If they move from the UK to Switzerland, a community-property country, they need to check what the impact is on their assets and they should probably execute a postnuptial agreement to ensure the status quo is preserved.

What happens if you lose mental capacity? As populations in the west grow older, more families are having to deal with parents losing decision-making capacity. The position in the UK can be managed by clients executing lasting powers of attorney for property and financial affairs and for health and welfare. It is similar in Switzerland, but this is not the case in many other civil law countries, where there is no such instrument.

What happens to assets on death? Most civil law countries have a regime we call forced heirship: the children have fixed rights and to that extent parents cannot disinherit them. The EU introduced legislation that mitigates this feature by permitting the deceased’s law of nationality to govern their estate, but the person making the will has to elect for this to happen — it does not happen automatically.

By contrast, Irish law guarantees a surviving spouse a fixed share of the estate. We had a client who owned a landed estate there and we were advised his wife would be entitled to a one-third share on his death. She had to renounce her legal right to that share so that the overall estate plan could be fulfilled.

Finally, and in my view, most importantly, can you see yourself living there? What is it that makes your life joyful and will you find it in your chosen jurisdiction? My passion is theatre, ballet and opera. I am told London has more than 230 theatres. Where else could compete?

One client on a Zoom call 18 months into his relocation complained he was miserable because none of the local population were interested in forming new friendships. He had cracked the language and endeavoured to mix but without a dog or a child it was hard to make connections. No one was interested in the arrival in their community of yet another expat. I was blamed because he claimed I had forced him to leave the UK. I had not!

My lunch guests left the UK before the end of the tax year on April 6. They had done their due diligence and set great store by the lifestyle offered by their new home. But they are now condemned to a life of day-counting.

Bond Street’s loss is Sloane Street’s gain in London’s luxury retail landscape

Amid a decline in tourist spending in Mayfair, the high number of wealthy local shoppers is luring fashion brands to Chelsea

It’s a sunny spring Wednesday afternoon and Chelsea’s Pavilion Road is buzzing. Groups of twenty-somethings clad in preppy gear catch up over drinks, stylish mums with kids in tow browse the cheesemonger, friends enjoy ice cream cones while strolling down the mews road.

It’s a picture perfect scene of affluent Londoners at leisure that is quintessentially Chelsea. It is also what is driving many independent fashion brands to open up shop on the glossiest thoroughfare in the wealthy west London neighbourhood: Sloane Street. 

“I never thought we were going to end up in Chelsea,” says Alice Temperley, founder of the eponymous brand. Temperley had a flagship store in Mayfair’s Bruton Street that closed in 2020. When, in 2024, she reopened a London location, Temperley picked the southern end of Sloane Street. “There are restaurants, bars, it’s a very nice sociable shopping experience,” she says by way of explanation.

Since 2024, labels including Veronica Beard, Toteme, Jessica McCormack, Zimmermann, Roksanda, Erdem, Ulla Johnson, DeMellier and Ami have followed Temperley in opening or announcing upcoming openings on or near Sloane Street — a marked move away from Bond Street and Mayfair.

Chelsea, Sloane Street and King’s Road have a long association with fashion, from the Swinging Sixties to the punk avant-garde of the 1970s to the Sloane Rangers of the 1980s. But while the area has always been attractive for retailers, the appeal of the south end of Sloane Street has recently been boosted by several factors, including landlord Cadogan Estates’ funding of a makeover of the street and nearby Sloane Square through a £60mn investment.

The works included widening pavements and adding new greenery, street furniture and better lighting to encourage shoppers to walk Sloane Street’s full length. Hugh Seaborn, Cadogan Estates chief executive, reports that in the first two and a half months of 2026, footfall was up 9.3 per cent and trade increased 6 per cent compared with the same period in 2025. Seaborn explains that retail partners “were seeking an enhanced environment within which to trade, and that’s what we delivered”.

Beyond Cadogan’s improvements, brands are being lured to Sloane Street by the presence of reliable and wealthy local consumers. Since the pandemic, and the drop in international travel that came with it, brands have been working on reducing their dependence on tourist spending, which in the UK capital was also hit by the abolition of the VAT Retail Export Scheme in 2021.

Labels are now focusing on finding meaningful ways to nurture links with consumers on their home turf. In this context, Chelsea has become an important target for retail expansion in London, more so than other comparable high-end locations, such as Bond Street, where the bulk of footfall is represented by international visitors rather than residents. Notting Hill’s Westbourne Grove is another west London locale that has received a glossy fillip from new international boutique openings.

“Our customer lives there. So whether she is taking the tube to work, or she is dropping her child off school, or she is having lunch on Pavilion Road, she is in that area multiple times per week,” says Stephanie Unwin, president of US brand Veronica Beard, which opened its second London store in Sloane Street in 2024. The first one, in Mayfair’s Bruton Street, is not “necessarily in her path unless she is working in that area”, Unwin adds.

For Australian resort brand Zimmermann, which also opened a second London location on Sloane Street in February, the appeal was to have a “local store for a lot of our customers”, says co-founder and chief operating officer Simone Zimmermann. “Sloane Street is a community, is a home.”

At €7,327 per square foot per year, a store in Slone Street is also considerably more affordable than one in Bond Street, which comes at €19,228 per square foot, according to data from estate agent Savills. The West End shopping destination, which at the end of 2025 was the world’s most expensive location for retailers, is out of reach for most of the aspirational, independent brands that have recently flocked to Sloane Street. Many of Bond Street’s vast flagships often appear to be empty of customers, too.

“If you are going to Bond Street you have to spend a fortune,” says Temperley, highlighting the street’s high property rates but also the need to renovate more dated stores. For Nicolas Santi-Weil, chief executive of French brand Ami, which opened a store on Sloane Street in May, the advantageous financials played a part in the decision as well as the opportunity to work with a “clear” space and agreeing on a one-and-a half-year lease that can be extended. 

“We thought, it’s a good way to try this neighbourhood,” he says. “At first we were more looking in Mayfair, but then this opportunity came up. The agent showed us how many brands were opening. There is a huge footfall and we know we work pretty well when the footfall is high, so we decided to give it a try.”

Many of the new openings have focused on the southern end of Sloane Street, sitting between King’s Road, which is dominated by high-street retailers, and the northern end, which is preferred by high-end labels such as Chanel, Hermès and Brunello Cucinelli. Because of the location, and the brands’ price point, these stores have the opportunity to capture both demographics.

“It’s like a bridge between luxury and lower-priced brands, so for us it was a really important location. Both customers are our customers,” says Mireia Llusia-Lindh, founder of handbag brand DeMellier, which is opening a store in Sloane Square in the autumn.

“A lot of our competitors are in Regent Street or Covent Garden, but Chelsea felt very British, very London, very elevated,” she adds. “Besides, it doesn’t get more iconic than Sloane Square.”

Nordex CEO José Luis Blanco says region’s ‘supply chain independence’ must be protected

The boss of one of Europe’s biggest wind turbine makers has called for “non-western” rivals to be blocked from selling in the EU in a warning about the perceived threat posed by Chinese technology to the bloc’s security and industrial future.

José Luis Blanco, chief executive of Hamburg-based Nordex, said the EU had not gone far enough with proposed regulations requiring projects that receive public support to use equipment made in the bloc and exclude “high-risk” suppliers. Many renewables projects fell outside the rules, he said.

“We believe the western-origin principle should therefore apply to all new wind capacity connecting to European grids, not only publicly supported projects,” Blanco told the FT, adding that “non-western” turbine makers should be designated as high risk under cyber security rules.

With Chinese companies the only big turbine makers outside the US and Europe, his call marked the latest sign of concern about reliance on the nation’s technology, whose presence in the telecommunications and automotive sectors has already sparked alarm.

“It’s about supply chain independence and technology independence,” said Blanco. “The key issue is not where servers are located, but who controls the software and access to the systems.”

China’s turbine suppliers have been taking market share from their US and European rivals by offering lower-cost products and faster delivery, prompting accusations that they receive unfair state support.

José Manuel Entrecanales, chief executive of Nordex’s largest shareholder, the Spain-based conglomerate Acciona, said during the same interview: “[With] critical infrastructure, you have to be aware that accepting the competition of not-liberal-democracy-type players is a dangerous game.”

Chinese manufacturers’ strength in renewable energy supply chains has led to previous calls for protectionist measures across Europe, with the UK recently blocking China-based Ming Yang in its offshore wind sector on national security risk grounds.

The EU this month said it would block public funding for Chinese inverters, a crucial technology used to control solar panels and wind turbines, with a spokesperson citing a “pressing” threat to critical infrastructure. Earlier this year, it launched a probe into turbine maker Goldwind over potential unfair subsidies.

But increased protectionism is likely to raise questions about the bloc’s commitment to competition. It could make Europe’s green energy projects more expensive, while provoking retaliation from China, which supplies hardware to Nordex and other turbine makers in the region.

The complaints come even as European companies such as Nordex, Vestas and Siemens Gamesa dominate the regional market with more than 90 per cent of sales. Nordex last year made almost 84 per cent of its €7.5bn revenue in Europe. 

The groups have been facing increased competition from rivals such as Goldwind and Windey, backed by Beijing, and privately owned Ming Yang. That has triggered fears in Europe of a repeat of the disappearance of most of its solar panel manufacturing sector, which left the bloc reliant on imports.  

Entrecanales said: “We’ve probably lost the race in solar PV, we are probably close to losing the race or [are] very far behind in storage.”

Wind was probably the only big climate change technology in which Europe was “racing with some capability” of being competitive, he added.

The China Chamber of Commerce to the EU said a “discriminatory approach” would undermine fair competition and the principles underpinning the region’s single market.

Suppliers should be judged on “objective criteria such as safety, quality and performance — rather than being excluded on the basis of nationality or ownership”, it added.

The European Commission said it had already taken “important steps” to improve cyber security in wind turbines and that “high-risk suppliers” would be excluded from auctions for renewable energy projects when proposed legislation comes into effect.

Regulatory loosening has allowed countries’ banks to expand balance sheets while EU and Swiss rivals are constrained

Regulatory loosening has allowed top American and British banks to expand their balance sheets by $1.3tn in the past two quarters, new research shows, widening a gap with their more constrained EU and Swiss rivals.

Deregulation by Washington and London will enable big US and UK banks to grow their assets by a total of $2.9tn while greater capital requirements for seven of the EU’s biggest banks will squeeze their balance sheet capacity by €1.3tn, according to research by consultancy Alvarez & Marsal.

US regulators have ushered in a wave of bank deregulation since Donald Trump became president last year, watering down many of the rules imposed after the 2008 financial crash that forced banks to raise bigger loss-absorbing buffers.

Reforms will free up capacity for eight of the biggest Wall Street lenders — JPMorgan Chase, Bank of America, Citigroup, Goldman Sachs, Wells Fargo, Morgan Stanley, BNY and State Street — to expand their balance sheets by $2.5tn, or 15 per cent, roughly equivalent to adding another Citigroup.

In the UK, three big British banks are set to benefit from a $12bn reduction in their capital requirements, the research found, enabling them to grow their assets by $400bn. 

HSBC, Barclays and Standard Chartered, the three most international UK lenders, have already responded by growing their assets $200bn in the past two quarters.

“Global regulators are taking different paths in bank capital reform,” said Fernando de la Mora, co-head of financial services at Alvarez & Marsal. “The US is going fast and furious. The UK is following, maybe at a slower pace than anticipated, but we will see more.”

Seven of the top EU lenders — BNP Paribas, Deutsche Bank, Santander, Crédit Agricole, BPCE, Société Générale and ING — are set to have their combined capital requirements raised by €39bn in a sign of how the post-financial crisis regulatory consensus is fracturing.

EU banks still hope to persuade policymakers to dilute capital requirements and executives are pressing the European Commission to provide relief.

Switzerland, however, is tightening its banking rules more aggressively. Swiss authorities are locked in dispute with the country’s biggest lender UBS over a proposal to raise its capital requirements by $20bn, which would reduce its asset capacity by $400bn.

US banks have continued to gain market share in wholesale banking since the start of last year, growing their fixed income and equity trading revenues 5 per cent faster than their European rivals in that period, Alvarez & Marsal said.

Goldman Sachs has been the biggest beneficiary, with a 3 percentage point drop in its capital needs, the research found. In the first quarter, Goldman seized on this to slash its core equity tier one capital from 15.1 per cent to 13.3 per cent. Its total assets rose 8 per cent to $1.95tn.

There are further signs US deregulation is achieving one of its stated goals by boosting banks’ ability to trade more government debt. Net Treasury inventories held by the big US banks rose to about $550bn this year, up from less than $400bn last year, according to FT calculations.

“Almost all the money the US banks made in profits, they distributed to their shareholders,” de la Mora said. “But they were still able to deploy more capital to their businesses by expanding their balance sheets, by doing more lending and increasing capital markets activities.” 

Extension of emissions trading scheme opposed by flag carriers

Major European airlines are each exposed to a hit of at least an additional €1.5bn in costs if Brussels extends carbon pricing to flights leaving the EU, based on analysis of a proposal to curb greenhouse emissions.

The FT reported earlier this month that the EU was considering extending its emissions trading system (ETS) to cover flights departing from the bloc, as it revises the system that underpins Europe’s push to decarbonise its industries.

But the move would probably add to costs as airlines grapple with challenges, including high jet fuel prices, and could stoke trade tensions with the US.

Projections from Transition Metrics, a consultancy advising investors on carbon pricing, show it would most affect flag carriers Lufthansa, British Airways parent IAG Group and Air France-KLM, with extra costs of €1.8bn, €1.7bn and €1.5bn respectively in 2027, leading to total costs of more than €2bn for each airline.

These outlays would amount to about 44 per cent of Lufthansa’s 2025 earnings, 23 per cent for IAG Group and 30 per cent for Air France-KLM, according to the projections.

Jan Ahrens, managing director of Transition Metrics, estimated that full ETS coverage would add €100 to a Frankfurt-Beijing ticket if carbon costs were passed on to passengers.

“These costs are not trivial, they’re material,” he said. “The companies have a problem now because they don’t know how to hedge their 2027 compliance. Ticket sales for long-haul [flights] start now for 2027.”

The calculations are based on the airlines’ current carbon emissions and a projected carbon price of €120 per tonne — well above the forward price of €78.06 per tonne for 2027. Transition Metrics said this was realistic if the full extension of the ETS was undertaken.

The ETS seeks to drive green investment by requiring companies to buy or hold allowances to cover their CO₂ emissions, creating a financial incentive to decarbonise.

It presently applies only to intra-EU flights. This means that continental operators such as Ryanair, EasyJet and Wizz Air face far greater carbon costs than long-haul rivals.

But officials are considering extending this further to all flights departing the bloc, after international efforts to cut airline emissions have floundered.

An international scheme to offset carbon emissions from flights — the Carbon Offsetting and Reduction Scheme for International Aviation (Corsia) — lacks the formal backing of countries that are the biggest emitters, including the US, India and China. It is based on voluntary participation by governments, whose airlines must then comply.

The Commission is assessing its effectiveness before deciding to extend the scope of ETS to departing flights, Polona Gregorin, a climate official, told a stakeholder event this month.

One senior official said the “jury was out on [Corsia’s] effectiveness . . . the track record has not been meeting what everyone thinks the gold standard would be”.

In 2012, when the EU last considered extending the emissions trading scheme, it sparked fierce opposition from the US and China, and the Obama administration signed a bill exempting US airlines.

The executive director of the Aerospace, Security and Defence group, Vincent de Vroey, warned of a repeat, telling the stakeholder event that “we will again have a trade war that will be even worse”.

Lufthansa and IAG Group did not respond to requests for comment. Trade body Airlines for Europe said the EU should instead focus on strengthening Corsia.

Air France said in a recent paper it “firmly opposes any extension” to departing flights that would make it less competitive against non-EU carriers and “risk triggering retaliation from third countries”. Its own calculations for 2030 forecast an additional cost of €950mn compared with the current scope.

The senior commission official said the EU had to “acknowledge the complicated geopolitics” of the move but also said the fact aviation emissions had not fallen as in other transport sectors over the past 20 years required a response.

Streaming app strikes deal with Universal allowing subscribers to create ‘controlled’ covers and remixes

Spotify co-chief executive Alex Norström has defended the company’s expansion into AI-generated music, arguing that “controlled” products offer a better alternative to the unregulated AI “slop” already spreading online.

“There’s a lot of rogue attempts at this,” Norström said in an interview with the FT, referring to tools to make music with AI. He said Spotify wants to be “the one that’s legal” and “the one that’s controlled”.

On Thursday, the company struck a deal with Universal Music that will allow subscribers to create AI-generated covers and remixes of songs from participating artists.

The tool — which will cost extra money — would allow “one song to become 10,000 songs” inside Spotify’s app, Norström told investors, as part of a raft of announcements that sent the stock up 18 per cent. The companies have not disclosed how much the feature will cost on top of a standard Spotify subscription.

While Universal has previously reached AI deals with smaller start-ups, Spotify is the first major streaming platform to launch a commercial AI music product with label backing. The agreement marks a significant moment for the music industry, with the dominant streaming service now openly embracing AI-generated music.

Speaking to the FT, Norström acknowledged there was a growing backlash from artists and listeners over “AI slop” flooding digital platforms.

“There’s some negativity out there about AI, for sure,” he said. “I think it’s reasonable because some of it is misaligned AI.” 

But Norström argued Spotify’s licensing agreements, recommendation systems and artist verification tools would help distinguish its approach.

He said Spotify and Universal Music had spent time negotiating the agreement through “several discussions”. “We had to kind of find our way there,” he said, describing the deal as a “win-win situation” for Spotify, artists and rightsholders.

Norström said Spotify wanted to avoid the kind of AI-driven experiences that “make you feel good in the moment” but ultimately leave users feeling they had “wasted” their time.

The deal comes at a sensitive moment, as creative industries fear that AI could undermine human work. Last week producer Jack Antonoff slammed what he called the “new ways you can fake making art”. 

In the US, unease over AI has intensified in recent months, with protests erupting over new data centres and students booing references to artificial intelligence at university commencement ceremonies.

Spotify last month introduced a verification badge intended to distinguish human artists from AI-generated content after “we heard the industry”, Norström said.

“There’s a lot of AI slop out there. I mean, fraud and abuse, we’ve been fighting forever,” he added.

Universal, the largest record label, which is home to artists including Taylor Swift, Kendrick Lamar and Lady Gaga, has licensed its music to several AI groups in recent months, including Udio, Klay Vision and Stability AI. 

Despite growing competition from start-ups, Norström argued Spotify’s scale and industry relationships gave it an advantage.

“Compared to a start-up . . . our investment per subscriber is essentially going to be minuscule,” he said. “Scale begets scale here . . . winners win more.

DLA Piper’s mega-dreams

DLA Piper handles more corporate deals than any other law firm globally, but they are often the smaller, less glamorous transactions overlooked by Wall Street.

The firm, with its nearly 5,000 lawyers across 40 countries, is making its biggest push to break into the elite of law firms advising on headline megadeals.

It is adding West Coast-based technology dealmaker Michael Dorf to its ranks of partners, who will join from A&O Shearman in the coming days, DD reveals.

This comes on the heels of former Goodwin Procter partner Amanda Gill joining DLA earlier this month.

The roster of corporate dealmakers is being assembled by DLA’s new public company M&A chair Viktor Sapezhnikov, who joined from corporate law powerhouse Wachtell Lipton late last year.

Some $2tn of deals have been recorded globally this year, according to LSEG. It is DLA’s ambition to advise on a larger share of them. 

Re-engineering a law firm to compete for advisory roles on large deals has proved a mixed success for DLA’s rivals. A&O has struggled since the merger combining Allen & Overy and Shearman Sterling, while UK law firm Freshfields and capital markets powerhouse Latham & Watkins have soared up the M&A league tables in recent years.

Since arriving at DLA, Sapezhnikov has steered chipmaker Silicon Labs’ $7.5bn sale to Texas Instruments and Trump Media & Technology Group’s $6bn merger with nuclear fusion company TAE Technologies alongside 28-year DLA veteran John Gilluly.