The former chief executive of Wessex Water received a £170,000 bonus from its parent company last year despite a ban on performance-related pay after criminal pollution failures on his watch.
Colin Skellett received a total of £693,000 in pay from the water company’s Malaysian-owned parent company, YTL Utilities (UK), including the bonus, according to its accounts up to June 2025.
The bonus prompted strong criticism from the Liberal Democrats, which said it showed that the government’s bonus ban was “nowhere near strong enough”.
Wessex was banned from paying bonuses for the year after it was criminally convicted in November 2024 for a sewage pumping station failure six years earlier, which killed more than 2,000 fish and resulted in the company paying a fine of £500,000. In June the government banned bonuses covering the 2024-25 financial year for the chief executives and finance bosses of Wessex and five other companies. Wessex received another £11m fine last month over more sewage failures.
However, the water industry regulator, Ofwat, said that Skellett was able to retain the bonus under the law, because it was related to a different part of the parent company’s business. YTL is developing housing, offices and an arena in an area north of Bristol known as Brabazon.
A spokesperson for Wessex and YTL said that the bonus “entirely relates to his new role and was entirely funded by YTL. In his new role Colin is responsible for YTL UK group businesses including the development of Brabazon New Town”.
The large pay packets for water company bosses have become controversial in recent years amid widespread outrage over sewage leaking into Britain’s rivers and seas.
Wessex Water paid Skellett £157,000 for three months’ work from July to September 2024, when he stepped down as chief executive after 36 years in charge. However, Skellett stayed on as chief executive of the parent company, and continues to draw a large salary.
Despite Wessex Water describing his YTL job as a “new role”, Skellett has been a director of YTL Utilities (UK) since May 2002. In the last decade alone he has received £8.4m in pay for that job – including £3.4m in bonuses, according to the accounts for the business, which is the highest UK-registered company in the corporate structure. That is double the £4.2m he received in the same decade for his apparently separate but much more prominent job running Wessex Water Services – putting his total pay at £12.6m over 10 years.
MPs and Ofwat have already raised questions over the lack of transparency over payments to water bosses from other group companies. The Guardian in August revealed that the boss of Yorkshire Water, Nicola Shaw, had received £1.3m in undisclosed extra pay via an offshore company. Shaw was also allowed to keep the pay, after Ofwat determined it was not a performance-related bonus.
Earlier this month Shaw told the BBC that it had been a “mistake” for Yorkshire Water to hide the payments, although she would not commit to refusing the extra pay in the future.
“I do understand that we need to be transparent because people need to trust us. We’re providing the water and taking away the wastewater for them in Yorkshire and they need to trust us,” she said.
The Guardian’s reporting prompted Ofwat to consult on changes to force water companies to reveal pay from other companies in the same group from next year.
Anna Sabine, the Liberal Democrat MP for Frome and East Somerset, said: “For far too long, water company fat cats have been taking huge bonuses for pouring filthy sewage into our rivers.
“It is absolutely disgusting that the chief executive receive any kind of bonus after Wessex Water’s reckless and blatant disregard for nature, and even more disgusting that Ofwat allowed them to accept it on a technicality. The government needs to get far tougher with these water companies to end the sewage scandal, and put a full stop to bonuses until they do.”
A YTL spokesperson denied that the bonus was a “technicality”, saying it related to the nine months after Skellett stepped down from Wessex Water.
Ofwat itself is due to be abolished and replaced with a new regulator, with a government white paper setting out its new plans for the water expected in January.
A chart showing the structure of the YTL group’s companies in Jersey, Malaysia and the Cayman Islands, as well as the UK businesses that include Wessex Water.
Wessex Water was bought in 2002 by Malaysian group YTL, which was founded by the late billionaire businessman Yeoh Tion Lay. YTL, which is ultimately controlled by a company based in Jersey, bought Wessex Water from Enron, a US energy trading firm that collapsed because of an enormous fraud. Skellett stayed on as chief executive until last year.
YTL Utilities (UK) describes Wessex Water as its “principal subsidiary”. The vast majority of its £1bn revenues in the year to June came from water-related business. That included £653m from Wessex Water, and £240m from Water2Business, a joint venture with South West Water owner Pennon Group. However, YTL Utilities (UK) also made a £1.6m profit on £110m in revenues from the property development.
Skellett’s YTL pay packet for the last financial year was essentially unchanged from the £691,000 he received in the 2024 financial year, on top of his £313,000 total pay for Wessex Water. He received the same £170,000 bonus in 2024 – pushing his total pay for that year above £1m.
A spokesperson for the environment department said the government had imposed “the toughest enforcement framework the sector has ever seen”, and added: “For the first time, we introduced criminal liability for water bosses who cover up illegal sewage spills, and the power to ban unfair bonuses – which resulted in £4m in bonuses for 10 water bosses being blocked this summer. We expect water companies to follow both the letter and spirit of the law.”
An Ofwat spokesperson said: “The new rule on executive performance-related pay is already having a positive impact – we have blocked more than £4m of potential bonuses in 2024-25.
“Wessex Water did not award any performance-related pay for its regulated activity. The payment to its former CEO was outside the scope of the rule as it was awarded for work not related to the regulated company.
“Transparency matters for customers and the public. For next financial year we are proposing an update to water company annual reporting to include more transparent disclosures on remuneration.”
The government’s environment department was approached for comment.
In the UK, 2,940 children are waiting to be adopted with a family – with 1,430 of those waiting more than 18 months since entering care.
Adoption agency Adoption Focus said there is a shortfall of around 1,525 adoptive families.
The agency said each statistic represents a child spending yet another Christmas without the one thing they need most – belonging.
Gail was adopted at three weeks old, with no knowledge of her background and the couple said they wanted to provide a loving home to a child in need.
John said: “We adopted with a voluntary agency because they are independent not for profit organisations.
“Their focus is purely on finding the best outcome for children and they have supported us all the way.”
He said the process was comprehensive, including a four-day preparation training course, followed by a six month home study period with weekly visits from a social worker.
“Every aspect of our lives was explored. The process was very thorough, but not intrusive”, added John.
Anna Sharkey, CEO of Adoption Focus, said fewer people are coming forward to explore the adoption process due to a persistent belief that adoption is a long, difficult, and invasive process.
She said: “There’s an adoption crisis happening quietly in the background of our society and it’s not being talked about enough.
“These are children who have already experienced loss, trauma, and instability, and they deserve the chance of a permanent, loving home.”
Driven largely by tight supplies, export demand and higher prices, Irish beef farmers are finishing 2025 in a stronger position than ever before. But what does the outlook for 2026 look like?
This topic was broached by Jason Loughrey, Research Economist at Teagasc, who reviewed the performance of the Irish beef sector in 2025 and provided a forecast for 2026 at the recent Teagasc Outlook 2026 Conference.
Estimates for the 2025 season, as shared by Jason Loughrey and based on analysis with Kevin Hanrahan, Head of Rural Economy and Development Programme, show that gross margins on single suckling and cattle finishing farms are estimated to rise by 126% and 23%, respectively in 2025. The extent of the rise witnessed on cattle finishing farms was somewhat dampened by the higher prices paid for stock once finishers returned to the marketplace to restock; weanling prices increased by 70%, whereas store cattle prices climbed by 60% this year. Overall, across the cattle rearing and cattle finishing farms, net margins for 2025 are estimated to be €837/ha and €457/ha, respectively, in 2025.
Jason Loughrey
Looking ahead to next year, Jason Loughrey explained: “2025 has been a very good year, but there is always difficulty in forecasting forward.”
As a major buyer of Irish beef, he explained that assessing performance of the UK market is essential when providing a forecast for the year ahead. In 2025, this market accounted for 43% of Irish beef export volumes, followed by France at 12% and the Netherlands at 8%. Of note was that beef production had declined 4.3% in the UK in the first 10 months of 2025, while overall beef production across the EU was 3.9% lower in the EU in the January to August period 2025 versus 2024.
“UK beef production is forecast to decline by 1-2% next year. Irish finished prime cattle are expected to decline by 4%, so a continued tightness in both markets is forecast for next year,” he explained.
“Given the signals from the marketplace, we are forecasting a 5% increase in finished cattle prices over the average price received in 2025, along with a 3% increase in store cattle prices, while total costs are expected to increase by 1%. Overall, this is forecast to result in gross margins increasing on finishing cattle farms by 16%.
“Considering the risks faced by finishers, we would probably expect some reversal in weanling prices relative to what we have observed this year. Taking that into account, along with a 1% increase in the total cost of production, we’re forecasting a decrease in average gross margin of about 5% on cattle rearing farms,” Jason Loughrey explained.
Provided the output prices and costs align with the forecast, he added: “We are looking at margins well above historical averages and probably some convergence between the margins witnessed between single suckling and cattle finishing enterprises.
“While single suckling was well ahead of cattle finishing this year on the average margin, you’re probably looking at some narrowing of the gap in 2026.”
For the year ahead, Teagasc economists are forecasting an average net margin of €767/ha on single suckling farms and €616/ha on cattle finishing farms.
For further insights and information, view the full Situation and Outlook for Irish Agriculture 2026 here.
The growing wealth and enhanced spending power of the over-50s is poised to accelerate a range of investment opportunities across multiple sectors in the U.K., according to investors.
Market pros say this age group — dubbed the “Grey Pound” or “Silver Spenders” — is gaining greater control over its assets. With greater wealth and more discretionary income, a larger chunk of this demographic is increasingly seen as the new “idle rich.”
Dan Coatsworth, head of markets at AJ Bell, said that the over-50s were an increasingly influential demographic within the consumer space.
“Those still working might be well advanced in their career, paid off their mortgage, and have lots of disposable cash. They might have worked hard for decades and feel like they deserve to splash the cash,” Coatsworth told CNBC.
“Those in retirement might be in the generation that received generous defined benefit pension schemes and collect a tidy sum to fund an extravagant lifestyle,” he added.
Coatsworth said the group wants to protect as much of their wealth as they can from taxation, which means seeking advice on tax, investments, and general financial planning.
Compounding assets
Alyx Wood, co-founder and chief investment officer at Kernow Asset Management, said there was a clear subset of winners and losers within this cohort.
Day-to-day life for “a lot of” them is still “quite tough and normal,” but there are others who are “just absolutely nailing it in terms of compounding their assets,” he said.
This latter wealthier segment is developing an appetite for luxury goods “that they’ve never had before,” as well as for “higher-end” wealth management and insurance services.
These customers are increasingly seeking out “content, story, getting involved, a purpose” that extends beyond traditional passive returns, Wood added.
Hiscox.
He highlighted names like insurance group Hiscox and privately-owned wealth managers Evelyn Partners as potential winners as older consumers turn to certain premium wealth management and insurance products.
“The banks are trying to buy back into the wealth management industry,” said Wood, pointing to the reported interest in Evelyn Partners from NatWest Group and Barclays as private equity owners Permira and Warburg Pincus seek to exit. “I expect you’ll see a few of those.”
Wood, a contrarian stock picker whose hedge fund specializes in U.K. equities, last month outlined a major position on Saga plc at the annual Sohn London investment conference, which he said was also partly a wager on the strength of the “Silver Pound.”
He said people living their “Saga years,” a reference to the travel and insurance brand that focuses on the over-50s, will account for about 60% of all U.K. consumer spending by 2030.
Saga — which makes up about 10% of Kernow’s portfolio — is a “materially undervalued” business, whose share price could surge over 400% in the next few years, Wood added.
‘The list goes on’
Wood said that Pets At Home, the London-listed specialist retailer of pet food, toys, and accessories, was another name facing near-term pressures that could ultimately emerge as a beneficiary of the trend, as older consumers buy more for their pets and spend less on their children.
“Experiences and material goods will rank highly on their list of places to spend money – such as holidays, nice meals, fancy cars, home renovations, beauty products, wellness,” Coatsworth said of the cohort. “The list goes on.”
Pets At Home.
Coatsworth also said that the healthcare sector was a likely winner, as an ageing population will mean rising demand for medicine and treatment.
“Private care homes, retirement villages and property investors with medical providers as tenants are among the winners from this trend,” Coatsworth told CNBC via email.
Europe’s hopes of a return to growth in 2026 rest largely on Germany’s €1tn debt-funded spending drive on infrastructure and defence, according to a Financial Times survey.
Yet the 88 economists polled are split over whether Berlin’s fiscal push will deliver a “European renaissance” or fade amid entrenched structural weaknesses and geopolitical uncertainty.
With its largest economy stuck in recession since late 2022, Europe needed a return of “animal spirits” to power a recovery driven by domestic demand, said Nick Kounis, chief economist at ABN Amro.
Eurozone growth is expected to slow by 0.2 percentage points next year to 1.2 per cent in 2026, before picking up to 1.4 per cent in 2027, according to the FT survey. The forecast broadly matches the European Central Bank’s latest staff projections.
Last year’s prediction of 0.9 per cent growth for 2025 proved too downbeat, after the bloc’s economy expanded by 1.4 per cent. Concerns voiced by economists in last year’s FT poll that the ECB had been too slow to cut rates now appear misplaced. “Overall we have been positively surprised about growth resilience in 2025,” said Pia Fromlet, an economist at SEB.
But economists were unsure “whether the fiscal impulse can translate into durable domestic momentum rather than merely cushioning external shocks”, said Léa Dauphas, chief economist at TAC Economics. TD Securities analyst James Rossiter predicts a “tug of war” between geopolitical uncertainty and expansive fiscal policy.
Optimists expect that underlying resilience will be reinforced by fiscal stimulus next year. Jan von Gerich, chief strategist at Nordea and among the most bullish respondents with a 2026 growth forecast of 1.5 per cent, said “private consumption has a lot of potential to surprise to the upside”.
Reijo Heiskanen, chief economist at Finnish lender OP Pohjola, is even more sanguine, predicting a “comeback of [Europe’s] North”.
While views on growth are split, there is broad consensus that the ECB has brought inflation back under control. A large majority of economists expect it to meet its medium-term 2 per cent target in 2027, after undershooting slightly at 1.9 per cent in 2026.
Three-quarters of respondents expect the ECB to keep its key deposit facility rate unchanged at 2 per cent through the end of 2026. By the end of 2027, economists on average foresee a single rate rise to 2.25 per cent.
Looking ahead, growth would “hinge less on monetary policy and more on fiscal execution, confidence and progress on structural reforms”, said Sabrina Khanniche, an economist at Pictet Asset Management.
But not everyone is convinced that Berlin can deliver. “Increased government spending will mechanically lift German growth, but the key question is whether or not it translates into a broader recovery,” said Henry Cook, an economist at MUFG Bank.
Sceptics warn that billions of euros in new borrowing could end up funding welfare and other current spending rather than fresh investment, while the money allocated to defence might have only a limited impact on growth.
“The optimism that greeted Friedrich Merz’s announcement earlier this year has faded in recent months,” said Ben Blanchard, an analyst at Absolute Strategy Research.
“Anyone expecting a significant bounce in Germany’s economic fortunes in 2026 is likely to be disappointed,” warned Aberdeen economist Felix Feather.
At the same time, large parts of Europe’s industrial base are under mounting pressure from US President Donald Trump’s 15 per cent tariff rate and intensifying competition from Chinese rivals, leaving consumers rattled and reluctant to spend.
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While US tariffs “so far have not had a meaningful negative impact on Eurozone growth”, said HSBC euro area economist Fabio Balboni, “we might only have seen the tip of the iceberg”. A narrow majority of poll respondents believe that more than half of the overall negative impact from the tariffs has already materialised.
Apolline Menut, economist at French asset manager Carmignac, warned about the fierce competition from Chinese exporters threatening to “further hollow out” EU industry. The bloc as a whole and individual governments were pursuing a “too-little-too-late approach” to deal with an intensifying “China shock”, she said.
A bursting of what some economists describe as an “AI bubble” in American equity markets could also weigh on Europe’s growth. “A sharp correction in US tech valuations remains the biggest global risk,” warned Christian Schulz, chief economist at Allianz Global Investors.
Steep falls in US equities and the dollar would “reverberate also through Europe”, potentially pushing up borrowing costs for governments and companies.
“The risk of a financial crisis of some sort that spills over into the US economy and the financial sectors and economies of other countries is high and rising,” said John Llewellyn, former OECD chief economist and partner at advisory firm Independent Economics.
But some economists sketch more optimistic scenarios, including an end to the war in Ukraine — or at least a durable ceasefire. If a peace deal were “credible and not unfavourable to Ukraine”, it could “significantly reduce geopolitical uncertainty and improve confidence”, argued Christophe Boucher, chief investment officer at ABN AMRO Investment Solutions.
In that scenario, energy prices could fall while investment and exports rise. Combined with fiscal stimulus from government spending programmes and a potential reversal of households’ high saving rates, this could even trigger a “virtuous cycle” and a “European renaissance”, said Reinhard Cluse, an economist at UBS.
Additional reporting by Alexander Vladkov in Frankfurt
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Lloyds Banking Group is shutting an invoice financing service for small business customers as the UK’s biggest lenders pivot to focus on more lucrative corporate clients.
The UK’s biggest high street bank will close its invoice factoring service by the end of the year, according to two people familiar with the matter, in a blow to small enterprise customers operating on thin margins.
The move to end the service, under which Lloyds buys unpaid invoices from small businesses in return for the right to receive the payments from their customers, follows similar closures by other top lenders.
It comes as businesses confront rising costs after increases in the minimum wage and successive tax-raising budgets by chancellor Rachel Reeves.
“As cost pressures rise across employment, business rates and energy — and as interest rates fall — banks should take a more generous position to help small business owners access working capital,” said Craig Beaumont, executive director at the Federation of Small Businesses.
Invoice factoring is the process of selling outstanding customer invoices to a bank or finance firm at a discount in return for cash upfront. The service is generally used by smaller companies to smooth their cash flow and free up resources by outsourcing payment collection to an external agent.
Banks had initially moved into factoring in the hope of drawing small business customers and then cross-selling other more lucrative products.
But running a factoring business profitably can be difficult as it tends to be used by small and medium-sized enterprises, which do not generate significant profits for banks, while cross-selling has been limited, according to people in the industry.
Lloyds, which says its corporate purpose is “helping Britain prosper”, is the latest of the UK’s big four lenders to scale back its SME factoring as the banks focus on larger, more profitable corporate clients.
NatWest and Barclays closed their factoring businesses several years ago, according to people familiar with the matter. Meanwhile HSBC tightened its criteria for the service, limiting it to customers with more than £1mn in annual turnover.
Many small businesses rely on invoice financing products because of a wider problem with late payment by suppliers, said Beaumont.
Nathaniel Southworth, managing director of the North Yorkshire toy distributor KAP Toys, said he had used factoring facilities from several high street banks but that over the years lenders have imposed more stringent criteria around revenues and profits, which excluded firms like his.
“The mindset of traditional banks is that they would like a company’s finances to be nice, uniform and easily predictable,” he said. “I would love that to be the case as well. But the reality of business is it’s quite rarely like that and I think sometimes smaller businesses can feel shut out.”
Lloyds declined to comment. One person close to the bank said the invoice factoring division was modest in size and that Lloyds would continue to provide other similar services to customers to ensure they would not face significant disruption. The person added that the bank was growing its SME lending business and that its factoring products were used by less than 1 per cent of its SME customers.
HSBC said it was “committed to supporting small businesses . . . including helping them access the most cost-effective lending products for their needs”.
A person close to Barclays said the bank continued to offer other invoice financing services. A person close to NatWest said that its factoring unit had fewer than 1,000 customers by the time it closed in 2021 because of falling demand.
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
An internal family conflict is roiling McCain Foods, the world’s largest producer of frozen french fries, as the daughter of its co-founder seeks a payout of more than C$1bn (US $725mn) to leave the privately held group.
Three decades after McCain Foods’ founders fought a bitter succession battle over the company, the next generation is now locked in a new dispute over the global empire, a top supplier to McDonald’s with annual revenue of C$16bn.
Eleanor McCain, a 56-year-old Toronto musician, wants to sell her stake to focus on “philanthropy and for portfolio diversification and estate-planning purposes”, her spokesperson said in a statement to the Financial Times.
But other family members do not accept her valuation of her stake, although negotiations remain ongoing, according to a person familiar with the governance structure.
It is the latest flashpoint in an intergenerational conflict involving multiple branches of rich and influential siblings and cousins, who remain scarred by a costly court battle that tore the family apart in the 1990s.
Dimitry Anastakis, a professor at the University of Toronto’s Rotman School, described it as “one of the deepest schisms in Canadian business history”.
Eleanor’s father, Wallace McCain, who co-founded McCain Foods in 1957 with his brother Harrison, built a global frozen food company that made them one of the richest families in the country.
“One in every four fries in the world is a McCain Foods fry,” according to the company website.
The brothers’ “brutal” clash over strategy and control triggered a three-year court fight that ultimately saw Harrison’s side win. Legal costs exceeded C$20mn, and members of the Wallace branch later went on to take control of Maple Leaf Foods, he said.
While Eleanor McCain has no role in the daily running of McCain Foods, her brother Scott McCain is chair of the company.
McCain Foods is governed through a two-tier structure, with a family holding company overseeing a separate operating board that includes independent directors.
It was designed to insulate management from family disputes but is “somewhat complicated”, according to a company history.
That structure must now determine how Eleanor McCain’s stake is valued, or risk another lengthy court battle.
“To effect an exit, Ms McCain is not demanding anything. She is simply exercising her unrestricted right to sell her shares, the exact same right available to all other shareholders in the company,” the statement said. “(Eleanor) has consistently engaged constructively, in good faith, and would like to conclude this matter in a fair, timely and confidential fashion.”
A friend of Eleanor McCain, who spoke on the condition of anonymity, said her desire to exit raised complicated questions about the family business structure. “There’s a lot of emotion, this business was co-founded by her dad,” the friend said. “It is a big thing to walk away from.”
McCain secured the contract to supply McDonald’s continental European and UK restaurants with McCain-made fries in 1977. But success and fortune also brought challenges for the family.
Court battles over the years have revealed details of their lavish lifestyle and fortune, including net worth in the hundreds of millions of dollars, multiple homes and boats and eye-popping bills for private school tuition, landscaping, yoga and pilates coaching.
Eleanor McCain’s divorce from her husband Jeff Melanson in December 2017 generated scrutiny during a two-year legal fight over whether he had “tricked her” into marrying him.
Court documents showed her net worth was C$365.8mn when she sought an annulment of the marriage, to avoid paying the C$5mn agreed in their prenuptial agreement.
Another family friend of Eleanor, who also spoke on condition of anonymity, told the Financial Times no one wants a repeat of the past where the buyout ends up in a messy public court battle, adding he hoped “it can be resolved without too many lawyers”.
Tony Maiorino, director of the Royal Bank of Canada’s family office services, said family-run businesses often end up in disputes over equity, leadership and vision if proper governance structures are not in place.
“You’re in a situation where there’s an opportunity for that complexity to lead to poor outcomes,” he said.
A representative of the McCain family declined to comment.
Chinese offerings of asset-backed securities have hit a record high this year as cash-strapped local governments struggle to plug fiscal holes.
The number of deals in China involving sales of ABS — financial instruments based on the revenue streams of an underlying pool of assets such as property rentals or leases — reached 2,386 as of December 24, surpassing the previous record set in 2021, according to data provider Wind.
The rise in deals this year was driven by authorities at the provincial level and below, said a Chinese broker who advises companies on ABS issuance.
The value of new ABS deals in the country has totalled $2.3tn, the highest in four years, the Wind data shows.
Highly indebted local governments hope the sales will help solve liquidity problems stemming from a weakened economy and property market crisis and raise money for new investments to help them meet central government growth targets.
But the rush to securitise assets — some of which appear to have highly uncertain underlying value — is itself fuelling questions about the long-term sustainability of Chinese local government finances.
Such is the need for liquidity that one local leader, Li Dianxun, governor of central Hubei province, has coined the slogan: “Turn every possible state-owned resource into an asset, every possible state-owned asset into a security, and leverage all possible state-owned funds.”
“This emerging campaign reflects the surging need for local governments to address mounting debt and fiscal pressures,” said Yubin Fu, vice-president and senior analyst at Moody’s Ratings.
China’s local governments have been under pressure since the Covid-19 pandemic, which devastated their finances. A crackdown by the central government in Beijing on property developer leverage has also hit land sales that were previously a crucial source of revenue for provincial and city authorities.
Local governments’ official debt plus borrowings by their off-balance sheet financing vehicles — which raise money and build infrastructure on their behalf — soared to about 84 per cent of GDP in 2024 from 62 per cent in 2019, according to IMF figures released last year.
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Beijing has helped settle local government financing vehicles’ maturing debt and improve liquidity conditions through a $1.4tn debt swap scheme, but liabilities associated with these vehicles remain vast at about $10tn, analysts say.
“Beijing wants to press the local governments to monetise their state assets to make them more efficient,” said Robin Xing, chief China economist with Morgan Stanley. “A lot of local governments do have state assets, but many of these are not running in the most efficient way to make money.”
Repackaging these holdings as asset-backed securities is attractive to local authorities, since it can bring forward the income they are expected to generate in the future while retaining state ownership.
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Hubei’s Li spearheaded efforts to convert idle assets into cash in his previous role as deputy governor of neighbouring Hunan province. Under his leadership, Hunan began repurposing spaces under bridges and other unused properties as public amenities such as parking areas and sports grounds.
From 2022 to 2024, Li’s programme contributed nearly 11 per cent of Hunan’s total fiscal revenues, according to official data.
By the end of last year, Hubei had compiled an inventory of state assets that could possibly be securitised worth Rmb21.5tn ($3.06tn). Southern Guangdong province and central Anhui have also compiled inventories.
While local authority ABSs offer investors — mainly government-backed institutions such as banks, wealth management funds and securities traders — an implicit state guarantee, analysts have raised concerns about the quality of the underlying assets.
“All the high-quality assets were largely sold or securitised early on, leaving mostly lower-quality assets. With local government finances under pressure, authorities are exploring every possible avenue to reduce debt,” said the Chinese broker.
The government-owned public transport group in Hubei’s capital Wuhan, for instance, early this year sold a first Rmb600mn tranche of a planned total of Rmb4bn in securities backed by assets of the company that operates all regular bus routes in the city.
But the bus company is making a net loss, which deepened to Rmb821mn in the first half of 2025 from Rmb13mn for all of last year. The 10-year notes are already trading 5 per cent below their face value.
Another Wuhan state-owned group sold asset-backed securities based on a previously struggling property development, the Hongshan AI Building, for Rmb300mn last year. The group claimed that by adding unspecified artificial intelligence features it had changed the tower from a building with 30 per cent occupancy to an AI centre with three times as many tenants — including 60 AI companies.
When the Financial Times visited the address, office workers in the building said they could not identify new features that made it particularly suited to AI.
The tenants included several state-owned companies that had been relocated to the Hongshan building from other parts of a surrounding industrial park. There was also a tech company whose staff were mostly engaged in censoring posts on Kuaishou, a short-video online platform, work that is generally regarded as low-skilled.
In another case, the Wuhan city government-owned Bishui Group turned a former underground flood chamber into a wedding centre — the kind of move that fits Li’s programme of “turning every possible state-owned resource into an asset”.
The facility includes a “Monet Park” by the riverside for banquets and a Tang Dynasty-style reception hall underground.
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Analysts said that for local governments, tapping the ABS market offers a new funding channel as China’s slow domestic economy makes it ever more difficult to raise money.
But there is also a risk that if low-quality projects are securitised, they could become another source of financial vulnerability for local governments that Beijing has spent huge sums bailing out.
At the Hubei marriage facility, for instance, there were no customers in sight in the vast facility during a recent visit. Marriages in Hubei are falling, reflecting a broader demographic decline across the country.
“The peak time was before 2022,” said a photographer from the wedding photo studio. “Now after Covid and weak consumption, people are less inclined to spend lavishly on weddings.”
Data visualisation by Haohsiang Ko in Hong Kong. With additional contributions from Cheng Leng and Tina Hu in Beijing
