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Britain is seen as not just leaving the EU, but turning its back on European neighbours — though Paris must also take some blame

The political relationship between Britain and France is the worst I have known it in 40 years as a diplomat. A recent Harris Poll shows that this sour mood is now affecting public opinion in France, with only 40 per cent of respondents seeing the UK as an ally, far short of the 74 per cent for Italy and 73 per cent for Germany and Spain.

Contrast that with the mood a decade ago, when David Cameron and Nicolas Sarkozy agreed a new defence partnership, the French looked on with admiration tinged with jealousy at the London Olympics and then gave the Queen a rapturous reception on her state visit in 2014.

Brexit marked the turning point. Britain was widely seen in France as not just leaving the EU, but turning its back on its European neighbours — a perception reinforced by the Johnson government’s continuing effort to ignore Europe as it defines a new role in the world. The aftershocks of Brexit have also been felt more in France than other EU countries, from disruption at Channel ports to spats over fishing licences around the Channel Islands. There were always going to be post-Brexit frictions. But this is much more serious — a fundamental breakdown of trust between the two governments, and particularly between Emmanuel Macron and Boris Johnson.

The French were left shell-shocked by the UK’s threats to renege on the Northern Ireland protocol. Macron was exasperated by what he saw as Johnson staging a public row with him at the G7 summit in Cornwall over exporting sausages to Northern Ireland, in an attempt to shift the blame for the difficulties in implementing the Protocol. The tragic death of 27 migrants in the Channel last November should have been the moment to reconcile differences. Instead, Johnson wrote a letter to Macron full of proposals which he knew the French could not accept, and published it before it reached Macron’s desk.

The handling of the Aukus submarine deal with Australia was the last straw. For France to lose this massive contract to the US and UK was always going to be difficult. But the manner of its announcement left Macron feeling humiliated. Joe Biden publicly accepted that it had been handled clumsily and launched a full-scale damage repair exercise. Johnson did the reverse, making matters worse with his schoolboy mockery of the French President.

When No 10 then floated the idea of a new strategic alliance with France in the British press, the reaction in Paris was glacial.

The blame for this sorry state of affairs does not lie entirely in London. Macron and his ministers have also been provocative, making irresponsible threats, such as to cut off electricity to the Channel Islands. But in the past, UK-French co-operation in areas like business, culture and sport continued largely unaffected by political ructions, underpinned by the dense web of human ties. The Harris Poll is a reminder that even this cannot be taken for granted. It is not that the French are becoming hostile towards Britain, but simply indifferent. The French media take little notice of what is happening in the UK, apart from bemused coverage of the antics at Westminster. In the French presidential election campaign, none of the candidates are calling for a reset of relations with London. The real risk is that the two countries drift apart, which is why it is so stupidly short-sighted for the UK to deny the next generation of young British and French people the opportunity to live and study in each other’s country through the Erasmus scheme exchanges.

Since Britain left the EU, bilateral relations with European neighbours have become more important than ever. In his speech to the European Parliament this month, Macron said that the condition for future friendship was that the British government stood by its word. A message, perhaps, to the next prime minister?

Researchers watch for signs the virus is morphing to evade new drugs, and study combining antivirals to stay a step ahead

Researchers and U.S. health regulators worry Covid-19 will figure out a way to evade important new pills, prompting efforts to look for signs of such resistance and find combinations to thwart it.

The treatments—Paxlovid from Pfizer Inc. and molnupiravir from Merck & Co. and Ridgeback Biotherapeutics LP—are the first drugs authorized by federal health regulators that people early in the course of an infection can easily take at home to avoid severe disease.

Yet viruses are notorious for mutating in ways that allow them to bypass antivirals, especially when the drugs are given alone as is the case with the new Covid-19 pills.

That is why treatments for other viruses such as HIV and hepatitis C consist of multiple drugs. Combinations cut the risk of resistance resulting from mutations because a virus is forced to do more to survive.

The Covid-19 pills promise to keep people out of the hospital and slow the spread of the coronavirus, but resistance could jeopardize the usefulness of the drugs and deal a setback as businesses and schools press to stay open.

“We know this is likely to happen at some point, so we need to beat it to the punch and nip it in the bud before it gets out of hand and starts to take over,” said Katherine Seley-Radtke, a medicinal-chemistry professor at the University of Maryland, Baltimore County, whose lab is studying antiviral combination therapies.

Some researchers and the drugmakers, however, say the risk is low that resistance can develop to the new Covid-19 pills because they are taken over just five days, too short a time for the virus to change meaningfully.

HIV is more likely to develop resistance against treatment consisting of a single drug, the researchers say, because it is more prone to mutations when it replicates than the pandemic coronavirus. Another factor: the course of treatment is much longer for a chronic disease than an acute infection.

Pfizer and Merck researchers said they didn’t see resistance develop during the clinical trials evaluating the pills. The company researchers also said each of the pills has characteristics that cut the risk of resistance, though they are looking for any signs.

Viruses are pieces of genetic code wrapped in protein sheathing. They can survive and prosper only by infecting cells, whose machinery they hijack to replicate and spread.

As a virus makes copies of itself, it can mutate to evade treatments that seek to eliminate it. The genetic changes tend to happen while the virus is replicating early in the course of the disease, which is also when antiviral drugs are usually most effective.

The Food and Drug Administration asked Pfizer and Merck-Ridgeback to monitor for resistance and to submit monthly reports on their findings as a condition of authorizing the new pills.

The FDA also said it may require the drugmakers to assess whether their drugs hold up against any variants of interest, and must provide drug samples to the government for its own evaluations.

“As with any virus, SARS-CoV-2 being no exception, there is a potential for the emergence of resistance that can impact existing therapies,” the agency said. “As such, the FDA put mechanisms in place as part of the authorizations to help the agency understand the potential impact of variants on these products.”

Independent researchers say the pandemic virus might be more likely to develop resistance to Paxlovid than to molnupiravir because of the different ways the pills work to stop the virus from replicating.

Paxlovid, known by its brand name, stops the virus by blocking an enzyme—called protease—involved in replication.

Molnupiravir, which is in a different class of antivirals, stops the virus from multiplying by fooling an enzyme it needs to replicate, called polymerase, into inserting errors into the genome of the coronavirus, thereby short-circuiting the process.

Molnupiravir’s structure, resembling genetic molecules, is harder for the virus to work around, Dr. Seley-Radtke said.

Viruses have developed resistance to both kinds of drugs, independent researchers say, though it may take longer to emerge for molnupiravir’s class.

“I’ve been in the antiviral field for 35 years, and there is no drug that I know of that’s resistance-proof,” said John Mellors, an infectious-disease specialist at the University of Pittsburgh.

Using a combination of drugs could help head off attempts by the virus to break through and evade treatment, by attacking the virus at different steps in its effort to replicate.

“View it like Swiss cheese,” said Carl Dieffenbach, director of the AIDS division at the National Institute of Allergy and Infectious Disease, who works on Covid-19 antiviral development. “Swiss cheese has holes in it, and if you had overlapping slices of Swiss cheese, nothing could get through.”

The National Institutes of Health wants to test combination Covid-19 therapies when a number of drug options are available, said Dr. Dieffenbach.

Pfizer is working on potential new Covid-19 antivirals and trying to see what combinations might work, if needed, said Annaliesa Anderson, who led Pfizer’s research of Paxlovid.

Research from the company published last year in the journal Nature showed an infused version of Paxlovid worked well with remdesivir, an antiviral from Gilead Sciences Inc. currently cleared for use in hospitalized patients.

“So far we’re not seeing anything that concerns us, but we’re carrying on looking to see, you know, whether or not there is an Achilles’ heel within the strategy that we have,” Dr. Anderson said.

Merck is looking at combining molnupiravir with other drugs, including remdesivir, also known as Veklury, said Daria Hazuda, Merck’s vice president of infectious-disease discovery.

That combination would be attractive, Dr. Hazuda said, because resistance mutations associated with Veklury are more susceptible to molnupiravir, making it more effective.

Veklury was just authorized for use in nonhospitalized patients. Yet it would be tough for people to take at home with molnupiravir because it is given as an infusion over three days.

An oral version of Veklury will begin early-stage testing this quarter, but even if trials prove successful it wouldn’t be available until next year at earliest, Gilead Chief Executive Daniel O’Day said.

Merck scientists haven’t looked at whether molnupiravir could work safely with Paxlovid, although the drugmaker is also developing its own protease inhibitor, Dr. Hazuda said.

“I always say we should never bet against the virus,” she said.

There may eventually be more antiviral drugs that could be tested in combination with either Paxlovid or molnupiravir, including one from Shionogi & Co. that the Japanese company says could start a late-stage trial soon and have results later this year.

The Biden administration is investing $3 billion toward Covid-19 antiviral development and manufacturing.

There are 18 Covid-19 trials aiming to enroll more than 100 people for testing combinations of antivirals, none involving Paxlovid or molnupiravir, according to a Jan. 7 analysis from Airfinity in London.

Estranged couples in England and Wales will be able to file ‘no-fault’ claims from April

Lawyers in England and Wales are preparing for a rise in divorce cases this spring as estranged couples turn to new legislation allowing them to end their marriage without having to blame each other.

The Divorce, Dissolution and Separation bill will come into effect in April and has been hailed as the biggest shake-up in divorce law for 50 years.

Couples will be able to cite the irretrievable breakdown of a marriage as the sole ground for divorce, avoiding the need for one party to attribute fault to the other.

The government had originally intended the legislation to be up and running by autumn 2021, but updates to court IT systems and legal procedure rules led to delays.

The bill, originally passed in June 2020, will allow tens of thousands of couples to separate cleanly without the need to put responsibility for the breakdown on one party, or to stay trapped for years in unhappy marriages.

Parting couples must under current law either live apart for a substantial period of time or show one party is “at fault” because of adultery, desertion, or “unreasonable behaviour” in order to part legally.

If one party does not give consent, the couple must live separately for five years before a divorce can proceed.

Nigel Shepherd, a consultant at law firm Mills & Reeve and former president of Resolution, the family lawyers association, said many couples were waiting to lodge petitions.

“At the moment if people want to do things amicably lawyers have to say, ‘one of you will have to blame the other’, which makes people aghast,” he said.

Simon Blain, partner at law firm Forster, agreed, saying: “Some people are definitely preferring to wait. They don’t want to start off by making allegations against their other half.”

The “blame game” has been embedded in the divorce system in England and Wales since the 1973 Matrimonial Causes Act.

Charmaine Hast, head of the family department at Wedlake Bell, said the change in law was likely to lead to a greater number of less wealthy spouses drafting their own divorce petitions online.

“Many representing themselves have wanted to avoid the particularity of having to deal with the allegations of unreasonable behaviour and adultery,” she said. “And by doing so unnecessarily raising the temperature at a time when sensitivity is, in my view, of paramount importance.”

Tini Owens from Worcestershire highlighted the unfairness of the 1973 law when she lost her Supreme Court divorce appeal in 2018.

Tini, then aged 68, protested that her estranged 80-year-old husband Hugh had contested her petition after 40 years of marriage, saying he thought they had a “few years” left to enjoy together.

She had hoped to be the first spouse to divorce under the new legislation but instead gained her divorce under existing rules after the couple had separated for five years.

Simon Beccle, partner at law firm Payne Hicks Beach, who acted for Tini Owens, said his client was disappointed with the delay, but she hoped that “no one will ever again have to go through the ghastly, unhappy and expensive process she did”.

Demand for separation is on the rise. There were 107,599 divorces of opposite-sex couples in England and Wales in 2019, up 18 per cent from 90,871 in 2018, according to the latest data from the Office for National Statistics.

However, the ONS said the increase reflected a processing backlog at divorce centres in 2018, partly due to staffing shortages, which is likely to have translated into a higher number of completed divorces in 2019. Contested divorces accounted for less than 2 per cent of annual cases.

A number of other jurisdictions, such as Australia, Canada and some US states, already have no-fault divorce laws — but many others do not, such as Singapore the United Arab Emirates and 33 US states.

In 2017, an academic report entitled Finding Fault? by Liz Trinder, a professor at Exeter University, found that around 48 per cent of divorces in 2015 were granted because of “unreasonable behaviour”.

She found in other jurisdictions notably France and Scotland, the use of “fault” in divorce proceedings was a tenth of that in England and Wales.

The Ministry of Justice declined to comment but has previously said that the new divorce law will reduce conflict and avoid family break ups harming children.

Chris Philp, the then courts minister, said in a written answer to the Commons in June that the delays in implementing the new legislation were because of the need for rigorous testing of the new system.

“While this delay is unfortunate it is essential that we take the time to get this right,” he said.

Seven wine and dine destinations for winter and beyond

Debt placements total more than $9bn for firms including Vista and Warburg Pincus

A succession of private equity firms are going public. But another group has been raising capital more discreetly — by selling record amounts of debt.

The industry’s biggest privately held firms raised at least $9bn through debt sales last year to invest in their own buyout funds, finance growth or pay dividends to partners, according to industry executives and records obtained by the Financial Times. They include Warburg Pincus, Bain Capital, General Atlantic and Vista Equity Partners.

Private equity firms have traditionally funded their leveraged buyout deals by taking loans against a target company’s assets. But debt taken on by buyout firms themselves, as opposed to their portfolio companies, marks a shift from the past. They have more commonly raised cash by selling minority equity stakes to private investors or through an initial public offering, as TPG did at a valuation of $10bn this month.

Borrowing avoids dilution of ownership and offers tax advantages by deferring some capital gains. The private debt placements do not require registration with the US Securities and Exchange Commission.

“If as a general partnership I want capital for any reason, there are lots of options besides needing to go public,” said Saul D Goodman, head of alternative asset management banking at Evercore.

Several firms said they had taken on new debt ahead of the Federal Reserve’s expected interest rate increases. Many can borrow for a decade or longer at about 3 per cent to invest in their own buyout funds that have historically returned 16 per cent annually, according to a Bain & Co calculation of the industry’s long-term average return.

The firms earn the difference.

“It helps them raise money without it coming out of pocket,” said Joseph Lombardo, head of the private equity general partnership advisory practice at investment bank Houlihan Lokey. “They can make money on the cost of borrowing being less than their expected return.”

The deals can also help firms manage the torrent of cash pouring into the private equity industry.

In 2021, a record $1.2tn in deals were struck and a further $300bn raised in new cash to invest in corporate buyouts, according to PitchBook. But the inflows can create a cash crunch. Pension fund investors ask private equity firms to commit at least 2 per cent of each fund, commitments that can exceed $400m as the industry’s largest funds swell beyond $20bn in size.

“It’s easier to make a commitment of 3 per cent when you have a $100m fund, versus a $20bn fund,” Lombardo said.

The largest such debt offerings were $1.5bn deals done by Warburg Pincus in September and Boston-based Bain Capital in February. Global Infrastructure Partners sold $1bn in debt in November.

In October, Vista Equity Partners borrowed $930m using a private placement of debt it sold to a group of US insurers, raising cash at low rates that the firm will invest in its funds alongside its limited partner investors, according to documents obtained by the FT and sources familiar with the previously unreported offering. The debt carried a AA- rating from Kroll and fixed interest rates hovering at about 3 per cent for borrowings stretching from 10-15 years.

Vista’s first such debt deal came a year after its founder, Robert Smith, settled a criminal investigation in October 2020 with the US Department of Justice in which he admitted to evading $43m in taxes.

Other debt sales below $1bn in size included US-based private equity investors General Atlantic, Stone Point Capital and Audax Group, credit manager GoldenTree Asset Management and real assets investor I Squared Capital, which used some of its $300m in proceeds to pay a dividend to partners.

Insurers and asset managers such as AIG, MetLife, Voya, Allianz, Prudential and Legal & General are among dozens of lenders now willing to lend on advantageous terms with minimal covenants.

Athene, the insurance arm of private equity group Apollo Global Management, has also become a huge lender. It was one of the lenders that bought $1bn in debt sold by Global Infrastructure Partners for between 10 and 20 years that carried coupons ranging from 2.7 to 3.25 per cent.

The market may cool as rates rise. When Warburg Pincus closed its $1.5bn debt offering in late September, the 10-year Treasury yield was just 1.37 per cent. It has since risen by about half a percentage point.

The activity, however, shows that even privately held firms are being treated by debt buyers as A-rated corporations.

“What people have realised is there is staying power in private equity businesses beyond their founders or key men,” said Lombardo of Houlihan Lokey. “It is almost impossible to knock a strong-performing private credit or private equity fund out of business in two or three years.”

Microsoft’s Activision tie-up comes as merger rules are under review

In the year since Joe Biden became US president, his competition enforcers have talked a lot about getting tough on Big Tech and oligopolies but they have taken relatively few concrete actions.

Fans of Lina Khan, the Federal Trade Commission chair, defend her apparent inactivity by saying she has been taking time to study the agency. Critics ask why the FTC and the Department of Justice, which share responsibility for antitrust enforcement, are sitting on their hands at a time when mergers and acquisitions are smashing records, topping $5tn globally last year and $2.6tn in the US alone.

Microsoft has now served up a juicy challenge with the largest acquisition in its history — a $75bn deal for video game maker Activision Blizzard. The announcement came hours before a pre-planned FTC and DoJ news conference last week where the watchdogs promised to rewrite merger rules to crack down on abusive combinations.

This deal merits close scrutiny by US regulators: Microsoft, Nintendo and Sony dominate the market for gaming consoles, and investors were so concerned about the impact of the tie-up that they sent Sony shares down 13 per cent.

Still, the watchdogs should not prejudge the answer. This is a vertical merger involving a platform and a distributor, an area where the law is particularly complex. The Trump administration’s 2019 effort to block AT&T’s purchase of Time Warner flopped completely, and Khan’s FTC last year withdrew its vertical merger guidelines.

The analysis of whether to block the deal must also consider that consoles are not the only way to play games. There are other distribution systems, including streaming, smartphones and PCs, and lots of content producers. In that broader context, the Microsoft-Activision combination looks far less powerful. Regulators have a tough task as they consider this rapidly evolving market and try to predict the competitive forces that will shape it.

Watchdogs failed to realise the potential impact of Facebook’s purchases of Instagram in 2012 and WhatsApp in 2014 and waved them through. They now regret those decisions so much that the FTC is suing to undo them. They should not allow that mistake to be repeated. Retrospective enforcement years later would be the worst outcome because it cannot fully undo the harm to competition and U-turns sow confusion in the marketplace. The contrast between the US approach to mergers up to now and the stricter line pursued by the EU and UK has only added to the uncertainty.

Biden has promised to reshape US policy and take a broader view of consumer harm that looks beyond higher prices. Congress is also moving this way: the Senate Judiciary committee last week voted to advance a bipartisan bill designed to stop platform companies from giving preferential treatment to their own products and services.

The US government is already on a collision course with the biggest companies in Silicon Valley. Google and Facebook owner Meta are already fighting federal antitrust lawsuits, and Apple chief executive Tim Cook personally lobbied against the Senate bill.

The Microsoft-Activision tie-up is the right moment for the FTC and DoJ to spell out what they think tough merger scrutiny really means. If they opt to let the deal go through, the government should clearly explain why and what kinds of acquisitions would not pass muster. They must also ensure any conditions are properly enforceable. If the watchdogs conclude that the tie-up would be anti-competitive, they should press ahead without fear. As Khan said last week, “You lose all the shots you don’t take.”

Arrival of Nelson Peltz’s company comes as UK consumer giant under pressure from investors after failed £50bn bid

Nelson Peltz’s activist hedge fund Trian Partners has built a stake in Unilever, ratcheting up the pressure on the FTSE 100 company after its abortive pursuit of GlaxoSmithKline’s consumer health business.

People with direct knowledge of the matter told the FT that the $8.5bn New York-based hedge fund had taken a position in the UK group’s shares, adding to the challenges of chief executive Alan Jope.

The Unilever boss is already facing simmering shareholder discontent after its £50bn attempted takeover of the GSK business. He now must contend with a fierce activist fund known for demanding strategic and governance changes from companies.

The people with knowledge of the stake building did not provide details on its size or when precisely it began.

The revelation comes after a tumultuous week for Unilever in which it was forced to acquiesce to shareholder demands that it halt its pursuit of GSK’s consumer health business after three failed bids.

The investor revolt last week drove Unilever’s share price down by as much as 11 per cent. It recovered part of the losses after the company said it would not raise its offer any further.

Attention has shifted to the performance of Jope, who has been chief executive for three years at the company best known for brands such as Dove soap and Hellmann’s mayonnaise.

Investors have called on him to deliver stronger results but he must now do so with a shareholder base that has signalled its wariness over using dealmaking to shift the company’s assets towards higher growth products.

Excluding dividends, shares in Unilever — the third-biggest company in the UK with a £94bn market capitalisation — have dropped 17.7 per cent over the past year and risen just 13.7 per cent over the past five years.

Unilever marks the latest position in the consumer goods sector for Trian, which was founded in 2005 by Peltz, Ed Garden and Peter May. It has previously targeted groups including Mondelez International, Procter & Gamble and Sysco.

Peltz stepped down from the board of P&G last year, four years after acquiring a stake and battling over its strategy. P&G’s shares rose about 85 per cent during that time and the US group simplified its business structure in 2018.

Unilever has signalled it may also be willing to simplify itself, promising this week to unveil a new “operating model that will drive greater agility”.

Trian and Unilever declined to comment.

In a scathing “post mortem” on Unilever’s failed bid for GSK Consumer Health, top-15 investor Terry Smith last week attacked the company’s long-term performance and added: “Unilever management’s response to its poor performance has been to utter meaningless platitudes to which it has now attempted to add major M&A activity. What could possibly go wrong?”

Analyst Bruno Monteyne at Bernstein last year flagged Unilever as a potential next project for Peltz, saying: “There are parallels from PepsiCo, where he (unsuccessfully) attempted to force a demerger of the snacks and beverages sides of the business.

“Some might argue that Unilever would benefit from selling off its foods and refreshment division and its low growth categories.”

While Peltz’s campaigns have not always been successful, he has helped to shape some of the consumer sector’s largest companies. He failed to persuade PepsiCo to acquire Oreo maker Mondelez, but played a role in Kraft’s acquisition of Cadbury and subsequent spin-off of the chocolate maker and other snacks brands in the form of Mondelez.