The Dutch bank ING and two Chinese state-owned lenders could play a crucial role in deciding the fate of beleaguered Thames Water, it has emerged.

The banks are expected to agree an extension on a £190m loan to the parent company of Britain’s biggest water supplier, which is due to be repaid at the end of this month.

You can read the full story here:

In other finance news today:

• Trade groups have warned that consumers could see a rise in food prices after the UK government announced the introduction of post-Brexit charges on imports of EU food and plant products later this month.

• The gender pay gap among UK staff at Goldman Sachs has hit its highest level in six years, raising concerns about a lack of women among the bank’s most senior ranks.

• Rio Tinto is facing a likely lawsuit in an English court brought by the UK-based law firm Leigh Day on behalf of people living in villages near a mine in Madagascar.

• Holidaymakers will continue to face limits on the amount of liquid they can carry on flights out of the UK this summer after the government extended the deadline for airports to install new security scanners by a year.

• Despite record levels of shoplifting in its food stores, the Co-op increased profits in its grocery business last year as it signed up 1 million new members and invested more than £90m in cutting prices, including introducing special discounts for members.

• UK rail passengers are bracing for travel disruption as train drivers bring some routes on the national network to a halt in a wave of strikes, but two days of similar action on the London Underground have been called off.

You can continue to follow our live coverage from around the world:

In the UK, Rishi Sunak is criticised for saying border security more important than staying in European court of human rights

In the US, Joe Biden is to speak to Netanyahu amid reports US president is furious over Gaza aid convoy strike

In our coverage of the Middle East crisis, Israel says investigation into its airstrike that killed aid workers in Gaza will take weeks

In our coverage of the Russia-Ukraine war, Volodymyr Zelenskiy reiterates calls for stronger air defences as his foreign minister asks Nato for Patriot missiles

Thank you for joining us today. Please click again tomorrow morning to see out this shortened Easter work week. JJ

American packaging company International Paper has said it would cut £93m in annual costs in a proposed takeover of British rival DS Smith – which suggests that job cuts may be considered.

International Paper’s £5.7bn bid is trying to gatecrash an agreed £5.1bn deal between DS Smith and British rival Mondi. It said it had made “significant progress […] in reciprocal due diligence”.

The company said that it would keep a “European headquarters” at DS Smith’s current offices in Paddington, London, but that the group would be headquartered in Memphis, Tennessee.

It would also pursue a secondary listing of International Paper shares in London, in a move to try to prevent objections from British investors.

It said those cuts would make “overhead synergies by reducing duplicative corporate and business overhead expenses”. However, it said that DS Smith’s North American manufacturing locations and International Paper’s European manufacturing locations “would continue their respective operations”. It did not mention any factory closures.

Businesses in mergers often cut shared services such as corporate functions like payroll or office supplies, although International Paper did not detail what would be cut. It said the rest of the £376m in savings would come from “operational efficiencies” as well as using its newfound size to get better deals from suppliers.

Mondi shares had fallen 2.8% in morning trading, but they have recovered since International Paper’s statement to top the FTSE 100 with a 4% gain. (Perhaps Mondi investors think they would be better off not getting into a bidding war with International Paper?)

DS Smith shares also rose by 2.4% as investors hope for a juicy premium.

Another update on Thames Water’s lenders: two Chinese state-owned banks are among the companies that are owed £190m by the UK’s biggest water company, the Financial Times has reported.

The FT reported that Chinese state-owned Bank of China, and Industrial and Commercial Bank of China (ICBC) were lenders, as well as Allied Irish Banks and Dutch lender ING, citing people familiar with the matter.

The debts mean that the two Chinese state-owned companies could end up as shareholders of Thames Water if its parent company is unable to repay the loan.

Fitch Ratings, an influential debt rating agency, on Thursday said it had downgraded the debt of Thames Water’s parent company.

Fitch wrote that even if the lenders do agree to extend Kemble Water Finance Limited’s debts, it would probably still constitute a default. What happens after that would depend on the terms of the debt – and what security the lenders demanded in exchange for the money.

Fitch said:

With Kemble’s shareholders not injecting the £500m of equity into Thames Water Utilities Limited expected for end-March 2024, and Kemble considering it not possible currently to fulfil upcoming interest payments, we believe that a downgrade to [restricted default] has become highly likely. Even assuming that lenders will agree to amend and extend the £190m loan due on 30 April 2024, this agreement would probably constitute a distressed debt exchange under our criteria.

An interesting story on the future of web search: Google is considering charging users for its AI search abilities, according to the Financial Times.

We may have all got used to having all of the world’s information available basically for free, but AI may change that calculation.

For one thing, AI answers are significantly more costly to run on servers than standard calculations. That means more energy: a financial and environmental cost.

But they could also be very attractive for certain “power users” – people with specific needs who might be willing to pay a premium to get enhanced abilities. The FT reported:

Google is looking at options including adding certain AI-powered search features to its premium subscription services, which already offer access to its new Gemini AI assistant in Gmail and Docs, according to three people with knowledge of its plans.

Of course, AI answers will need to address some of the (quite significant) teething problems such as “hallucinations” – not ideal for finding good information. And the FT report flags that if Google gives answers directly it could undermine click-throughs – the source of its hundreds of billions of dollars of ad revenues.

And companies in the information economy might well put up barriers to Google’s search crawlers if they fear their content is being relied upon without fair remuneration. The New York Times has already taken action against Google’s rival, Microsoft and ChatGPT maker OpenAI, for alleged copyright infringement.

A Google spokesperson told the FT:

For years, we’ve been reinventing search to help people access information in the way that’s most natural to them. With our generative AI experiments in search, we’ve already served billions of queries, and we’re seeing positive search query growth in all of our major markets. We’re continuing to rapidly improve the product to serve new user needs. We don’t have anything to announce right now.

The UK car industry recorded its strongest March sales since 2019, before the coronavirus pandemic, as companies kept replacing their fleets.

Sales of battery electric vehicle (BEV) registration volumes were at their highest ever recorded levels, but market share fell by one percentage point from the same month last year, down to 15.2%. Battery cars remain more expensive than petrol and diesel equivalents, although a wave of cheaper Chinese cars is expected to change that in the coming months.

March sales are particularly important because of the issuance of new number plates, which means that some buyers hold off for vehicles that will retain their residual prices slightly longer.

New car sales rose 10.4% in March compared with the same month last year, according to the Society of Motor Manufacturers and Traders, a lobby group. 317,786 new cars were sold with a ‘24 plate.

However, that was still 30.6% below pre-pandemic levels.

The SMMT said that fleet buyers were making up for lost time during the years of disrupted supply during the pandemic, but added that registrations by private buyers fell by 7.7%. The lobby group cited a “challenging economic backdrop of low growth, weak consumer confidence and high interest rates” for the decline.

Mike Hawes, the SMMT’s chief executive, said:

Market growth continues, fuelled by fleets investing after two tough years of constrained supply. A sluggish private market and shrinking EV market share, however, show the challenge ahead. Manufacturers are providing compelling offers, but they can’t single-handedly fund the transition indefinitely.

Government support for private consumers – not just business and fleets – would send a positive message and deliver a faster, fairer transition on time and on target.

Amazon has announced it is cutting hundreds of jobs in its cloud unit, Amazon Web Services (AWS), some of them affected by a decision to ditch its “just walk out” shops.

The stores gave customers the uncanny experience of walking out of shops with their items without scanning them or approaching a cashier (whether human or computer). However, while it seemed to be completely automated, it actually relied on human reviewers in India watching video and manually tagging items.

Industry publication Geekwire reported that AWS’s cuts will include several hundred jobs in its sales, marketing, and global services organisation, and a few hundred jobs on its physical stores technology team, citing executives’ emails to staff. The technology had been offered to retailer clients, but no businesses outside Amazon had agreed to take the technology on.

An AWS spokesperson said, in a statement to news organisations:

These decisions are difficult but necessary as we continue to invest, hire, and optimize resources to deliver innovation for our customers.

The firm also said “it will continue to hire and grow, especially in core areas of our business”, adding that there are thousands of jobs available and it is working to find internal opportunities for employees whose roles are affected.

The Co-op’s grocery chain increased profits as it signed up 1 million new members last year after investing more than £70m in cutting prices last year including introducing special discounts for members.

Profits rose 11% year-on-year to £154m despite a 6.4% fall in sales to £7.3bn driven by the sale of the Co-op’s petrol forecourt chain to Asda. Underlying sales rose 4.3%, excluding the impact of that deal, although that was still well behind the pace of grocery inflation.

Shirine Khoury-Haq, the chief executive of the Co-operative Group, said the Co-op had faced “challenging trading conditions, volatile markets and ongoing financial headwinds” in the past year “but would now “continue to move our Co-op into a position of growth, with our member-owners firmly at the heart of all we do.”

UK services sector output was slower than first thought in March, but still expanded, according to the purchasing managers’ index.

The final services PMI reading came in at 53.1 points, lower than the initial 53.4 reading, according to data company S&P Global. But anything above 50 points indicates an expansion.

The final composite PMI measure (combining services with manufacturing and construction) suggested that the UK’s economic recession is due to finish – a development that would be welcomed by Rishi Sunak’s government as he weighs when to call a general election.

The eurozone economy returned to growth for the first time since May 2023 thanks to stronger-than-expected output from the services sector, according to the closely followed purchasing managers’ index (PMI).

The eurozone services PMI rose to 51.5 for March, up from 50.2 in February, and the highest in nine months, according to S&P Global, which runs the survey. That was higher than the 51.1 expected by economists polled by Reuters.

But it was not all good news by any means. The two largest euro economies – Germany and France – are still in contractionary territory. S&P Global said:

Spain and Italy provided the greatest boosts, with their growth rates accelerating to the strongest for nearly a year. Combined with a solid expansion in the Irish economy, these upturns more than offset sustained (but weaker) contractions in output across the two largest economies of the eurozone, Germany and France.

Vodafone and Three UK face the prospect of an in-depth investigation by the UK’s Competition and Markets Authority (CMA) over their plan to merge UK operations after they offered no undertakings to the regulator.

The CMA had announced last month that an in-depth investigation was likely, unless the companies offered satisfactory undertakings to avert it.

The in-depth investigation will come as little surprise, given the controversy surrounding a plan that would reduce the number of UK telecoms networks from four to three.

The deal will bring 27 million customers under a single network provider, leapfrogging EE, owned by BT, and Virgin Media O2, owned by Spain’s Telefónica and the US-listed company Liberty Global.

The initial “Phase 1” investigation found concerns that the transaction could lead to higher prices for customers and lower investment in UK mobile networks. Phase 2 will look at this in more detail, and will try to work out if these concerns can be addressed.

Good morning, and welcome to our live coverage of business, economics and financial markets.

Business groups have described the imposition of steep fees for individual food imports into the UK as a “hammer blow” for small restaurants, cafes and delis.

The UK government has revealed that importers of animal products from the EU will pay £29 per type of item – such as an individual pack of cheese or sausage. The charges will be capped at £145 per shipment, and will start on 30 April, with additional checks in October.

The government has repeatedly delayed the introduction of sanitary checks on meat, dairy and the majority of plants from the EU, fearing that businesses were not prepared for the changes.

Business groups are not at all happy with the newly announced fees.

William Bain, head of trade policy at the British Chambers of Commerce, called for the UK government to U-turn on imposing the fees, which he said would risk higher food prices. He said:

This is an extremely disappointing decision by Defra on the common usage charge. The level of import charges shows scant regard to the interests of both businesses and consumers.

A flat rate fee for bringing most animal and plant products into the UK is a hammer blow for small- and medium-sized importers. It’s also deeply concerning for retailers, cafes and restaurants.

Phil Pluck, leader of food logistics lobby group the Cold Chain Federation, said:

Ultimately, this will increase business costs and food prices and potentially lower choices for the shopper.

According to the government, the additional costs of the border checks and new certification requirements could add another £330m a year to business costs. Bigger businesses will be able to spread the costs over a lorry load, but it could make things much more difficult for smaller businesses such as restaurants or delis who tend to import some specialist products in small batches. (Individuals on the Dover ferry or Eurostar train will be exempt.)

You can read more about deli owners’ concerns here:

Oil prices near $90 a barrel

Oil prices have risen as traders weighed the Opec+ cartel’s decision to press member countries to cut production and the continuing strength of the US economy.

The price of a barrel of Brent crude oil for June delivery, the global benchmark, rose to a high of $89.71 on Thursday morning, after nearly touching $90 on Wednesday. West Texas Intermediate, the North American benchmark, hit a high of $85.79.

Prices have been sustained in recent months by concerns that the Israel-Hamas war could spill over into nearby countries and affect oil supply, while Russia’s full-scale invasion of Ukraine has also meant higher prices in some parts of the world because of sanctions.

Analysts at Deutsche Bank, led by Henry Allen, said that oil price increases could give central banks “signs of concern about inflation, as oil prices closed at their highest levels since October”. They wrote that oil price increases are “filtering through into consumer prices as well, and the AAA’s daily average of US gasoline prices was up to $3.549/gallon as of Tuesday, which is also its highest since October”.

The agenda

• 9am BST: Eurozone HCOB services purchasing managers’ index (PMI) (March; previous: 50.2 points; consensus: 51.1)

• 9:30am BST: UK S&P Global services PMI (March; prev.: 53.8 points; cons.: 53.4)

• 1:30pm BST: US balance of trade (February; prev.: -$67.4bn; cons.: -$67.3bn)

• 1:30pm BST: US initial jobless claims (30 March; prev.: 210,000; cons.: 214,000)