Marijana No Comments

Can the chancellor protect the UK economy from coronavirus?

You have to feel sympathy for Rishi Sunak.

Suddenly appointed as chancellor after the unexpected resignation of Sajid Javid, he found himself with just weeks to put together the first Budget of the Boris Johnson era.

Any chance he could simply copy Javid’s homework was then dashed when the former chancellor gave the Times chapter and verse on his original plans.

And then, even as Sunak was putting pen to paper, the coronavirus outbreak suddenly became the only show in town.

Sunak’s job, as chancellor, is not just to find the money to help the health service cope with the outbreak, or to fund emergency work on a vaccine. It is to minimise the damage to the economy.

The problem is that no one knows how bad things will get. A short, sharp shock, from which we swiftly recover? A downturn on a par with — or even exceeding — that of 2008? You can find both views being expounded, with greater or lesser confidence.

So how best to prepare? Discussing this at the Centre for Policy Studies think tank, we kept coming back to our previous work on preparing for a no-deal Brexit.

Both involve what economists call a “supply shock”, in which certain goods become either more expensive or outright unavailable.

But the real economic damage comes if the supply shock turns into a demand shock: if that disruption to trading flows and product availability leads people and businesses to take fright, hoard cash, and stop spending, causing Britain’s economic engine to sputter to a halt.

That is why many of the remedies that we proposed for a no-deal Brexit, in the form of a limited stimulus package to support business and consumers, are similar to those being discussed now. Indeed, the government has been open about its no-deal planning being repurposed to tackle this latest crisis.

But the problem now is far more real than the no-deal panic ever was. People are already changing their behaviour, in ways large and small. Working from home. Petitioning for schools to close. Hoarding loo roll.

If you’re running a restaurant or a theatre, your takings will be dropping vertiginously. Air travel has been particularly hard hit: if airlines didn’t have to put flights in the air to keep their landing slots, we’d be seeing an awful lot more cancellations.

And then, of course, there are the countless businesses which are finding out how surprisingly dependent they are on the Chinese supply chain. One irate bride-to-be tells me that wedding dress deliveries are backlogged for weeks.

The government, therefore, has two intertwined priorities. The first is to ensure that consumers and businesses retain the confidence to keep spending and working.

This, of course, will be affected by how severe the coronavirus epidemic becomes: if the streets of London start resembling a zombie movie, no amount of upbeat Bank of England announcements about monetary easing are going to be of much use.

The second is to ensure that businesses do not go to the wall, leading people to lose their jobs through no fault of their own. In our just-in-time world, many firms are operating without the reserves — whether in terms of products or cash — to make it through a prolonged shutdown.

Small businesses are particularly vulnerable. That is why we urged the chancellor yesterday to make sure that credit is available to tide such companies over, along with other measures.

It was striking — and alarming — to see Rupert Harrison, George Osborne’s key lieutenant at the Treasury, warn that the measures taken in the wake of the 2008 crisis, such as the Funding for Lending scheme, might not be enough this time.

If things get worse, more will need to be done. Giving companies relief on business rates or employee national insurance contributions could be one way to ease the pressure.

It is true that the British state is already too interventionist, in all sorts of ways. But in a situation like this, the priority is to get the country — and the economy — through the worst of it.

With luck, things will blow over sooner than we currently fear. But luck isn’t something we can count on. Instead, we need the government — and especially the Treasury — to display a combination of flexibility, sensitivity, and a willingness to respond quickly to events.

This Budget will tell us how the government intends to protect the economy from the coronavirus. But it will be far from the last word on the topic.

By Robert Colvile

Source: City AM

Marijana No Comments

UK small businesses gloomy about coronavirus and Brexit

Worries over the impact of Brexit and coronavirus mean more than 70 per cent of the UK’s small and medium-sized businesses do not expect the country’s economy to grow during the rest of 2020, according to new survey data.

The pessimism about growth means firms 57 per cent of firms are unlikely to invest in growing their business in the next quarter, according to the small business confidence index, which was launched today by business banking platform Tide.

The UK economy has picked up in 2020 after the December General Election and the “phase one” US-China trade deal both provided some certainty to firms.

However, Britain faces the difficult task of striking a comprehensive free-trade agreement with the European Union by the end of the year, and is currently reckoning with the spread of coronavirus.

Both of these factors have led to pessimism among the UK’s smaller businesses, according to the Tide survey, which was carried out by Yougov at the end of February.

Coronavirus, which has now infected more than 270 people in the UK, is currently a major concern for businesses. More than half are concerned their business income will fall over the next quarter, while 57 per cent are unlikely to be above to invest in growing their business in the coming months.

The survey data came just days before chancellor Rishi Sunak is set to unveil his Budget on Wednesday.

The government had hoped it would focus on its agenda to “level up” spending – particularly on infrastructure – around the country, but it is now likely to focus on measures to deal with coronavirus.

Tide chief executive Oliver Prill said the government must “invest in our entrepreneurs and SMEs [small and medium-sized entrepreneurs]” and said he “hopes to see this reflected in the Budget announcement”.

By Harry Robertson

Source: City AM

Marijana No Comments

Experts flag impact of Brexit and coronavirus on UK economy

BREXIT-related factors are still being flagged by UK companies as a cause of lost business from overseas, a senior economist has declared.

Chris Williamson, chief business economist at IHS Markit, underlined this drag as he noted the Chartered Institute of Procurement & Supply’s services, manufacturing and construction surveys pointed so far to UK economic growth of 0.2 per cent in the first quarter.

The latest services survey from CIPS, compiled by IHS Markit and published yesterday, showed a slowdown in growth in this key sector in February. The services business activity index fell from 53.9 in January to 53.2 on a seasonally adjusted basis but remained above the 50 no-change mark.

Some services companies flagged an impact on bookings from overseas visitors resulting from the COVID-19 coronavirus outbreak. They also highlighted delays to new projects among clients in Asia.

CIPS said: “There were a number of reports citing a negative impact on sales from the coronavirus outbreak, particularly to clients in overseas markets.”

In spite of the coronavirus outbreak, the survey shows UK services companies’ overall optimism about prospects for increased business activity on a 12-month horizon rose in February to its highest since March 2015.

Highlighting the continuing influence of Brexit, Mr Williamson said: “While Brexit-related worries have moderated significantly since late last year, Brexit uncertainty continues to dampen sentiment, with firms concerned about upcoming EU trade negotiations. Moreover, analysis of reasons cited by companies for changes in export orders indicates that Brexit-related factors continue to be seen as a cause of lost overseas business on balance.”

The UK left the EU on January 31, and is now attempting to secure a future comprehensive free-trade deal with the bloc before the transition period ends on December 31.

Howard Archer, chief economic adviser to the EY ITEM Club, noted the think-tank had trimmed its forecast of first-quarter UK growth from 0.4% to 0.3% because of some anticipated negative impact from the coronavirus outbreak.

This projected 0.3% quarterly growth rate, although weak by historical standards, would be an improvement from stagnation in the final three months of last year.

Mr Archer noted the effect on activity from this outbreak was likely to be “significantly more marked” in the second quarter, but expressed hopes it would be temporary.

He said: “A particular concern for the economy is business willingness to commit to investment is likely to have taken a renewed hit from the hit to the domestic and global economies from coronavirus and it may remain limited further out due to significant concerns and uncertainties over the UK-EU relationship.”

By Ian McConnell

Source: Herald Scotland

Marijana No Comments

UK house prices: Brexit clouds lift, but coronavirus threat looms

UK house prices rose 2.8 per cent in February compared to the same month last year, Halifax data showed today.

Homes’ values increased 0.3 per cent month on month and 2.9 per cent on a quarterly basis, Halifax’s House Price Index found.

That left the average UK house price at £240,677 in February.

But while the threat of Brexit uncertainty has faded for now, the new risk of a spiking number of coronavirus cases loomed over UK house prices.

Russell Galley, managing director of Halifax, said: “The UK housing market has remained steady heading into early spring.

“Much like we saw in January, the increases seen in February reflect the continued improvement of key market indicators.

“The sustained level of buyer and seller activity is strong compared to recent years, with positive employment conditions and a competitive mortgage market continuing to support demand.

“Looking ahead, there are a number of risks, including the potential impact of coronavirus, which continue to exert pressure on the economy and we wait to see how these will affect housing market sentiment later in the year.”

Brexit clouds lift from UK housing market

Read more: Brexit trade talks: Michel Barnier cites ‘serious differences’ between EU and UK stances

Property experts concurred that Brexit uncertainty has mostly ended after Nationwide’s data also showed a healthy bump in UK house prices in February.

Director of estate agent Benham and Reeves, Marc von Grundherr, welcomed it as a new sign of the UK property market’s health.

“The UK property market has awoken from its politically induced slumber and is firing on most, if not all cylinders so far this year,” he said.

“With the burden of Brexit lifted, the jobs market strong and borrowing rates at near record lows, there is renewed vigour in UK bricks and mortar,” Jonathan Samuels, CEO of property lender, Octane Capital, said.

“The strong January mortgage approvals data published earlier this week shows many buyers have turned a corner psychologically.”

Lucy Pendleton, founder director of independent estate agents James Pendleton, added: “It’s no surprise to see continued healthy price growth like this. Demand and supply have both been rebounding recently but, so far, the number of new buyers is definitely outpacing the return of sellers.”

Coronavirus threatens UK house prices

But observers also warned that the threat of a worldwide coronavirus outbreak could conspire to land a fresh blow on the UK housing market.

“We’ve seen the dark clouds of Brexit-inspired uncertainty hang over the market for some time causing a drop in price growth and transactions,” Stone Real Estate founder Michael Stone.

“However, just as they finally start to make way for blue skies and buoyant price growth, there could be another storm front rolling in in the form of the threat from the coronavirus.”

Stone warned that new builds abroad “have all but ceased” and travel restrictions have stopped developers from attracting foreign investors.

“If this persists for a notable length of time the very real possibility is a reduction in foreign investment and a negative impact on house prices,” he said.

Benham and Reeves boss von Grundherr said his last survey found 17 per cent of people have put house buying and selling plans on hold due to the coronavirus.

“If this hesitation were to spread as rapidly as the cause itself, we could see current growing momentum peter out as market activity stalls once again.”

Pendleton also warned of the impact of the coronavirus outbreak. She said the estate agent saw its first sale fall through after an events industry worker pulled out of a purchase with his job at risk.

“The hope is this will remain an isolated case but the impact of the virus will become clearer in March,” she said.

“For now, with valuations still rising and competition for certain properties still fierce, buyers have begun to put in offers on multiple properties in a bid to secure an option before stalling over exchange of contracts in case something better comes along. This could create an unappealing log jam and put more completions at risk if Covid-19 starts to become a major factor.”

Buyers wait for Budget 2020 and rate cut

But von Grundherr added “the vast majority” of buyers are unfazed and a spending Budget and an interest rate cut could help bolster UK house prices.

“The worst thing that could happen to the property market is for it to fall into the same old cycle of boom and bust,” Samuels warned.

“The two key threats to the property market at present are the impact of the coronavirus if things escalate and a negative, even rancorous, outcome from our trade negotiations with the EU.

“What we want to see during 2020 is a rise in transactions, increased liquidity and steady and sustainable price growth.”

By Joe Curtis

Source: City AM

Marijana No Comments

Post-Brexit UK-US trade deal could boost economy by 0.16%, Government predicts

A post-Brexit trade deal with the US is estimated as having the potential to grow the UK economy by 0.16%, according to the Government’s negotiating objectives.

The £3.4 billion yearly increase outlined in the document published on Monday was predicted under the best-case scenario where the UK eliminates import tariffs with the States.

But if only “substantial tariff liberalisation” is achieved, then the increase estimated in 15 years was put at 0.07%, or £1.6 billion, in the Governments’ preliminary assessment.

The NHS is not, and never will be, for sale to the private sector, whether overseas or domestic

Government negotiating objectives document

Critics pointed towards estimates of a potentially larger hit to the economy caused by Brexit, and warned the blow will “pale in comparison to the benefits”.

Prime Minister Boris Johnson has committed to obtaining a Canada-style deal with the EU, which previous Treasury analysis suggested could shrink the UK economy by 4.9%.

The best scenario outlined on Monday was where a “deeper trade agreement” with “full tariff liberalisation” and a 50% reduction in non-tariff measures is struck.

Under this, real wages for workers were expected by the Department for International Trade (DIT) to increase by 0.2%, or £1.8 billion.

The scenario predicting a smaller boost to the economy was based on a 25% reduction of non-tariff measures and a “substantial tariff liberalisation”.

Labour’s shadow trade secretary Barry Gardiner said “we stand to lose more than we gain” under the Government’s proposals, which he said are “likely to cost us dearly”.

“The Government used to talk about ‘the sunlit uplands’ of their plans for the future. Well these uplands look pretty rocky and there’s not much sun,” he added.

Liberal Democrat international trade spokeswoman Sarah Olney accused the PM of being “seemingly hellbent on risking UK prosperity”.

“Boris Johnson has repeatedly claimed that negative impacts of Brexit will pale in comparison to the benefits,” she said.

“But today’s analysis is clear: the gains from the best-case trade deal with Donald Trump will not come close to outweighing what we expect to lose from leaving the EU.”

Treasury analysis predicted that a trade deal with the EU similar to Canada’s would damage the UK economy by 4.9% of GDP by 2035, compared with remaining in the bloc.

Leaving without a trade deal in place was estimated in the November 2018 study at having a 7.6% blow.

Labour MP David Lammy, a prominent Remain voice in the party, cited the analysis and said: “In what planet does this boost wages or create jobs for anyone except the Tory Cabinet?”

Meanwhile, the UK spelled out in the 184-page document that the NHS will not be on the table during free trade agreement talks with Washington.

UK negotiators would work to ensure that measures are in place to prevent hikes in medicine prices for the NHS, as the Government said the service “will not be on the table”.

“The NHS is not, and never will be, for sale to the private sector, whether overseas or domestic,” the document said.

The Government acknowledged public concerns about US meat, particularly chlorine-washed chicken and hormone-fed beef.

And the document committed negotiators to “ensure high standards” and protections were maintained for consumers and workers, while “not compromising” on environmental, animal welfare and food standards.

Trade Secretary Liz Truss maintained a tough stance ahead of the negotiations, warning the UK will “strike (a) hard bargain” and is prepared to “walk away if we need to”.

The PM had pledged to “drive a hard bargain to boost British industry” in the talks, which will take place alongside negotiations with the EU.

Talks in Brussels got under way on Monday when the PM’s Europe adviser David Frost met EU chief negotiator Michel Barnier.

Negotiations with Washington were expected to last a number of years and, though no start date had been set, they were anticipated to get under way by the end of the month.

Source: Express & Star

Marijana No Comments

Pound sinks as Boris Johnson warns of hard Brexit

The pound has sunk in early trading today ahead of a Boris Johnson speech in which the Prime Minister is expected to demand a looser trade deal with the EU that could spell a hard Brexit.

Sterling fell over one per cent against the dollar to $1.3069 ahead of the Prime Minister’s speech. Johnson is set to start UK-EU trade deal negotiations today with the aim of securing a Canada-style free trade deal.

What does an Australia-style trade deal mean?

But if they fail to secure a deal by December 2020, Johnson will say he will fall back on a hard Brexit. That would see the UK trade on World Trade Organization (WTO) terms.

While a Canada-style deal would enable tariff-free and quote-free trade on goods, a WTO-style deal would buck City expectations of tighter alignment with the EU.

Instead, the model would look similar to Australia’s own arrangements, defaulting on WTO terms with the potential for sector-specific side-deals. That includes the potential for significant new tariffs and other barriers to trade.

“It would appear that the currency has taken a look at what comes next Brexit-wise … and had a bit of a wobble,” Spreadex financial analyst Connor Campbell said.

“Its fears aren’t unfounded. They are based on the details of a speech Boris Johnson is set to deliver to businesspeople and ambassadors. [It will state] that the UK will refuse close alignment with EU rules and reject the jurisdiction of European courts.”

Pound ‘vulnerable’ to hard Brexit strategy

Sterling sank as much as one per cent against the dollar to hit $1.3064 shortly after 10am.

Then it extended its fall to tumble 1.25 per cent against the dollar to $1.3035 in the afternoon.

Even a nine-month high in the UK manufacturing sector could not limit the pound’s fall.

Economists warned the pound was at risk as a result of Johnson’s latest Brexit strategy. Kit Juckes, of Societe Generale, said: “Brexiteer politicians are moving from celebrating the exit to sounding bold as the trade talk verbal jousts begin. With positioning data still suggesting an excessively long speculative position in the market, sterling is vulnerable.”

London Capital Group’s head of research, Jasper Lawler, added: “If the main purpose of Boris Johnson’s speech is to get across the idea that the UK does not plan to align with EU rules, the pound could come under renewed pressure.

Foreign secretary Dominic Raab previewed the UK’s stance last weekend. He said: “We are taking back control of our laws, so we are not going to have high alignment with the EU, legislative alignment with their rules.”

The future of financial services is set to be a hot topic in the UK-EU trade deal talks. UK firms’ access to European markets will be key, amid other issues like fishing rights.

Johnson could walk away from EU trade talks if the sides cannot reach a deal, and pursue a hard Brexit instead.

But he said negotiations over the Canada-style model and Australia-style model were not a choice between “deal or no deal”. Instead he said: “In either case, I have no doubt that Britain will prosper.”

FTSE 100 enjoys boost at sterling’s expense

The pound’s fall boosted the FTSE 100, which recovered some of Friday’s deep losses. By 10.30am, the index was up 0.5 per cent at 7,324 points.

That contrasted heavily with China’s nine per cent drop as the Shanghai Stock Exchange returned after an extended break.

“Ultimately the coronavirus has been very damaging for anyone with money invested in the markets via their pension or investment accounts,” AJ Bell investment director Russ Mould said.

“However, markets outside of Asia on Monday showed signs of stabilisation.”

“The FTSE 100 was flat at 7,285, somewhat helped by the pound weakening against the dollar, down 0.6% to $1.3130. That’s generally good for companies whose shares are priced in pounds but who earn in foreign currencies including the dollar.

“In terms of the sectors suffering as Shanghai’s market reopened, worst hit were telecommunications, industrials, tech and consumer cyclicals.”

Pound gives up Bank of England gains

Sterling shed gains made last week after the Bank of England voted to hold interest rates.

Neil Wilson, chief markets analyst at Markets.com, said the pound’s slide shows traders are again entertaining the risk of a no-deal Brexit.

“No deal is not the base case by any means but the EU and UK look in very different places right now,” he said.

“It’s going to be a very long and rocky road to get there and the shape of the deal will hinge on some important concessions on both sides. The British government has come out swinging over the weekend with plenty of fighting talk. But they’re up against a tough opponent.”

“We are left at present at something of an impasse before the talks even begin.”

Ranko Berich, head of market analysis at Monex Europe, added that sterling’s drop feels like Groundhog Day.

But the difference is Johnson is being wary of being seen as inflexible, he added.

“On the whole, although Barnier and Boris have indeed set out markedly different visions for trade relations, the UK Prime Minister was careful not to emphasise any of the sort of red lines that sunk his predecessor’s negotiations with the EU.”

By Joe Curtis

Source: City AM

Marijana No Comments

50% of UK firms believe Brexit will Boost business

51% of UK businesses believe geopolitical tensions, including Brexit, will have a positive effect on their business in 2020, according to new research released today by trade finance provider Stenn.

The study, which spoke to 250 senior executives at medium-large sized businesses in the UK conducted prior to the December general election, revealed that despite the prolonged uncertainty, businesses remain upbeat with 29% believing this positive effect will be ‘significant’.

While it’s unlikely a UK-EU trade deal will be in place until the end of the year, 56% of firms believe their company’s import business will grow in 2020, on average by 9%.

Similarly, in terms of exporting services, 57% of UK firms believe revenue will grow this year, on average by 11%.

Breaking this down, 15% of firms believe their export business will grow 11-15% in revenue, and 11% expect a growth of between 21 and 25%.

“The UK is on the cusp of leaving the EU and as we edge closer to the January 31st exit date the country is in an unprecedented stage,” says Dr. Kerstin Braun, President of Stenn Group. “As 2019 was marked by business uncertainty, 2020 will be the year that companies forge ahead with new growth strategies.

Looking across industries, growth for imports and exports is felt highest across financial and professional services.

The study showed 29% of firms in this sector believe their import of services will grow up to 25% in revenue this year, and a further 20% believe it will grow 26-50%.

“The general election provided businesses with much needed clarity surrounding Brexit and it’s wholly encouraging that even prior to the result, businesses have been feeling positive about the impact it will have. Businesses have been given the assurance they need to plan ahead to a post-Brexit era,” says Braun.

When looking at exports, 30% of financial and professional services firms also believe their export business will grow up to 25% in revenue, and 27% predict it will grow 26-50%.

In the manufacturing industry, 41% of senior executives believe their import business will grow up to 25% this year, and 32% believe their export business will also grow between 1-25%.

By comparison, just 12% of wholesalers predict the same high growth of between 26-50% in their import business, and 15% expect equal growth in export. Wholesalers are divided on whether their export business will grow or shrink between 1-25% this year (both 27%).

“While a Brexit trade deal probably won’t be agreed until the end of the year, businesses largely remain confident that both their import and export business activity will grow in 2020,” says Braun. “We know UK firms are looking to non-EU markets.

According to government data, as of October, exports to non-EU countries were growing twice as fast than those to the bloc, largely driven in part by the US and China, with total trade with the USA surpassing £200 billion for the first time.

The UK’s non-EU export business grew by 4.2% in October, in comparison to a rise of 1.6% to EU member countries.

“Some of this rebound will be the result of the expected upswing in global trade, but we can strongly say that UK companies are ready to get back to business,” says Braun.

Source: Pound Sterling Live

Marijana No Comments

UK braced for weak growth and further interest rate cuts in 2020

Consensus forecasts show UK economic growth of around 1.1% in 2020, down from 1.3% last year, with Britain likely to remain trapped in a low interest rate environment post-Brexit, according to Dr John Ashcroft.

Consensus forecasts show UK economic growth of around 1.1% in 2020, down from 1.3% last year, leaving Britain likely to remain trapped in a low interest rate environment post-Brexit, according to Dr John Ashcroft, author of The Saturday Economist.

‘Further talk of one interest rate cut in the UK and further cuts in the US as growth slows (possibly below 2% this year) suggest long rates will remain under pressure,’ Ashcroft said.

‘We remain trapped on Planet ZIRP [Zero interest-rate policy].’

UK Chancellor reassures firms about ‘no alignment’ with EU rules post-Brexit

Business leaders were eager for clarification after the UK Chancellor Sajid Javid said that there would be ‘no alignment’ with EU regulations in a post-Brexit trade deal with the EU last week.

‘Manufacturers like common standards on products and components in many markets,’ Ashcroft wrote in a blog post. ‘Common standards guarantee quality, generate lower unit costs, economies of scale and improve productivity.’

‘The Chancellor claimed the Treasury would not lend support to manufacturers favouring EU rules,’ he added. ‘That just does not make sense.’

However, the Chancellor has since toned down his rhetoric, which initially shocked British industry, with Javid clarifying that divergence from EU rules will only occur if it is in the UK’s economic interest.

FTSE 100 bogged down by uncertainty

The blue-chip index has had a mixed start to the new year, with it climbing more than 130 points in the first half of January, only to see those early gains eroded, with it tumbling a little over 2% this week.

The FTSE remains bogged by uncertainty on economic growth and the direction of sterling, according to Ashcroft.

A clear direction on Brexit with a planned exit at the end of the January this year saw the pound bounce to test the $1.34 level only to fall back to $1.31.

‘A test and proof of the $1.30 level may now continue for some time,’ Ashcroft added.

The FTSE 100 is trading at 7628 as of 10:15 (GMT) on Friday.

By Aaran Fronda

Source: IG

Marijana No Comments

Business leaders call for clarity on post-Brexit trade talks

UK business leaders have urged Boris Johnson to spell out his plans for post-Brexit trade talks with the European Union.

A new poll for the Institute of Directors (IoD) found that just 35 per cent of firms believe the existing Withdrawal Agreement between the UK and the EU gives them the “certainty needed to make planning and investment decisions”.

Meanwhile a majority of businesses – 55 per cent – said they would “only be able to make planning and investment decisions with certainty when we understand our future relationship with the EU”.

The findings come after Chancellor Sajid Javid angered some business groups by warning companies that there will be no alignment with the EU after Brexit – and calling on firms to instead “adjust” to new regulations.

He told the Financial Times: “There will not be alignment, we will not be a rule taker, we will not be in the single market and we will not be in the customs union – and we will do this by the end of the year.

“There will be an impact on businesses one way or the other, some will benefit, some won’t.”

But Allie Renison, head of Europe and trade policy at the IoD, said: “To give businesses any chance of being ready for the new relationship by the end of 2020, the Government needs to be as clear as possible about what its intended destination is.

“With directors clear that negotiations with the EU are the priority right now, clarity is crucial for so many companies.

“Just calling it a free trade agreement gives no indication of the balance between alignment and divergence, which is essential for firms to do any kind of advance planning. Directors need to know what the Government’s priorities for market access are for the EU.”

More than 60 per cent of the 952 company directors surveyed by the IoD meanwhile said striking a post-Brexit deal with the EU was “more important” to their company than agreeing a pact with the United States.

Just a fifth (20 per cent) said a deal with the US and other countries outside of the EU was “important” to their firm.

The Times reported on Tuesday that Johnson will attempt to increase his influence in trade talks by publishing plans for parallel discussions with the EU and the US in the coming weeks.

According to the paper, the Prime Minister will deliver a speech and publish a series of documents after Britain leaves the EU on 31 January setting out Britain’s formal negotiating mandate for both sets of talks.

A third batch of papers will meanwhile outline plans for agreements with other countries.

Under the terms of the current Withdrawal Agreement, the UK will enter a transition period after it leaves on 31 January, during which time it will stay broadly aligned with EU rules and standards.

Johnson has vowed not to extend that period beyond the end of this year.

Number 10 said: “We are free to begin discussions with countries around the world from February 1. We are ready to begin discussions with the EU from February 1.

“The EU have various processes to go through before they are ready to sit down and have those discussions with us. The EU have agreed formally to complete this process by December 2020, that is what we would expect to be achieved.”

The European Commission, meanwhile, will not sit down to agree its negotiation demands until 25 February.

Spokesman Eric Mamer said: “This, we know, will take some time, which is why we have said we will start negotiations as quickly as we can, but it will certainly not be before the end of February, beginning of March.

“This is not a slowing down or speeding up of the process.

“This is simply the nature of the institutional process and the consultations that need to take place before the negotiation directives can be formally adopted.”

By Matt Honeycombe-Foster

Source: HOLYROOD

Marijana No Comments

UK economy sees worst growth since 2012

The UK economy grew at its slowest rate since 2012 in November, meaning an interest rate cut from the Bank of England (BoE) could be on the cards soon.

UK GDP grew at 0.6% in the 12 months to November, the Office for National Statistics said today (13 January), down from 1% in October, representing the slowest annual growth rate for more than seven years.

The figures come after Monetary Policy Committee member Gertjan Vlieghe told the Financial Times he would “need to see an imminent and significant improvement in the UK data to justify waiting a little longer” to cut rates.

Sterling continued its decline on the news, with a 0.6% decline on Monday (13 January) seeing the currency drop below $1.30 once more. That buoyed the stockmarket, though, with the blue-chip FTSE 100 index rising 0.5% and FTSE 250 advancing 1%.

The economy declined by 0.3% in November alone, well below consensus expectations of zero month-on-month growth.

This was likely due to businesses bringing activity forward to before the 31 October Brexit deadline, said Andrew Wishart, UK economist at Capital Economics.

Upwards revisions of 0.2% and 0.1% to September and October’s figures respectively left growth in the three months to November at 0.1%, meanwhile.

However, November’s sharp decline “nonetheless leaves the economy on course to contract by 0.1% in Q4 as a whole”, Wishart said.

Rob Kent-Smith, head of GDP at the ONS, said growth in construction was offset by “weakening services and another lacklustre performance from manufacturing”.

“Long term, the economy continues to slow, with growth in the economy compared with the same time last year at its lowest since the spring of 2012,” he added.

Interest rate cut more likely

The figures fuelled speculation an interest rate cut could be closer than previously thought, particularly allied with Vlieghe’s comment.

Last week, both BoE Governor Mark Carney and fellow MPC member Silvana Tenreyro spoke positively about the possibility of a rate cut sooner rather than later.

Michael Saunders, one of two who voted for a cut at the last meeting, is set to speak on Wednesday.

Matthew Cady, investment strategist at Brooks Macdonald, said markets are currently pricing in close to a 50/50 chance of a 25 basis point cut to the UK’s current 0.75% Bank Rate.

“The weaker GDP print today puts beyond doubt that the next Bank of England meeting at the end of January is going to be a ‘live’ meeting,” said Cady.

With the BoE having already cut both growth and inflation forecasts and the next Brexit deadline of 31 January looming, Cady said “UK investors will need this monetary and fiscal support to fall back on, and any disappointment here could be difficult for markets to swallow”.

However, Wishart said a weak UK economy is “old news”, meaning today’s GDP figures “won’t seal an interest rate cut”, despite noting “it will be a close call”.

“In normal times, the MPC would already have cut rates. But it held off to see if the general election produced a revival in sentiment,” Wishart said.

“What really matters is what happens in the data for January. At the moment, we think the MPC may hold off from cutting rates.”

By David Brenchley

Source: Professional Adviser