Pound falls ahead of Theresa May Brexit speech

The pound has hit its lowest level for more than three months on reports Britain was set to quit the EU single market as part of its Brexit plans. Sterling fell below $1.20 before bouncing back slightly on Monday. The pound also dropped to a two-month low against the euro, falling more than 1% to about €1.13 in Asian trading. Analysts said traders were reacting to reports that UK Prime Minister Theresa May would use a speech on Tuesday to signal a so-called “hard Brexit”. That is a term used to imply prioritising migration controls over single market access. The pound has fallen about 20% against the dollar since June’s EU referendum, to lows last regularly seen in 1985. Much of that volatility has been due to uncertainty about the economic impact if the UK gives up its tariff-free access to the EU.

First-time home buyers in UK hit 10-year high

There were more first-time home buyers in 2016 than at any time since the start of the financial crisis, according to research by Halifax bank. It also found the average price of a first home in the UK broke through the £200,000 barrier for the first time. Meanwhile, the average first-time deposit more than doubled compared with 2007 to stand at more than £32,000. And 60% of first first-time buyers’ mortgages were for 25 years or longer, up from 36% a decade ago. The Halifax First-Time Buyer Review said the number of buyers entering the market hit 335,750 last year, up 7.3% on 2015. That is the highest level since the start of the financial crisis in 2007, and 75% higher than the all-time low of 192,300 first-time purchases seen in 2008. However, it still has some way to go to match the peak of 402,800 in 2006.

Forward Diary: 16th – 20th January 2017

Company and economic announcements planned for the week commencing 16th January 2017

Carney: Brexit risks now lower

The immediate risk posed by Brexit to the UK economy has declined, the governor of the Bank of England has told MPs. Mark Carney said that action by the Bank before and after the vote to leave the European Union had reduced the danger to the country’s financial stability. He added, however, that the overall level of risk was still “elevated”. The risk was greater for continental Europe than for the UK, he said. The governor also told members of the Treasury Select Committee that a period of transition was “highly advisable”. “If there is not such a transition put in place, in our view it will have consequences. We will work to mitigate those consequences as much as possible,” he said. Mr Carney said that the UK should concentrate on stable access to financial markets after Brexit. The financial services industry could suffer “outsize” consequences from losing only some of its access.

Sainsbury’s reports record Christmas sales of more than £1bn

Sainsbury’s has reported record Christmas sales of more than £1bn across the group. But the supermarket giant said like-for-like sales sales only rose 0.1% in the 15 weeks to 7 January. Argos, which Sainsbury’s bought last year, had strong sales over Christmas and Black Friday. But chief executive Mike Coupe said the “market remains very competitive and the impact of the devaluation of sterling remains uncertain”. The pound has been falling against the dollar and the euro since the EU referendum and there have been warnings that this will lead to higher prices this year as import costs rise. Sainsbury’s Christmas quarter sales beat expectations. Analysts had predicted a fall in like-for-like sales of 0.8%. Food sales have been buoyant for retailers over Christmas period, according to a report by the British Retail Consortium on Tuesday. And Morrisons reported its strongest Christmas sales for seven years on Tuesday.

Morrisons sees best Christmas performance for seven years

Supermarket chain Morrisons (MRW.L) has reported a 2.9% rise in like-for-like sales in the nine weeks to 1 January – its best performance for seven years. The retailer said this was achieved by improving the products on offer and by becoming more competitive. Morrisons also said it expected its annual profits to beat analysts’ expectations, with underlying profits predicted to be £330m-£340m. The consensus among market analysts was for £326m.

UK spending growth ‘at two-year high’

The final three months of last year saw the strongest quarterly growth in consumer spending in two years, according to payment card company Visa. Its research, which reflects cash and card spending, showed expenditure rising at an annual rate of 2.8% in the fourth quarter. That was the quickest quarterly growth rate since the end of 2014. The report comes ahead of trading updates this week from Marks and Spencer (MKS.L), Tesco (TSCO.L) and Morrisons (MRW.L). Last week Next (NXT.L) supplied a shock to the retail sector when it reported a disappointing Christmas trading period and warned that conditions would continue to be difficult this year. Next shares lost almost 20% in two days and the warning also hit shares in Mark and Spencer and Debenhams.

High Street Christmas sales figures fail to sparkle

High Street sales fell in December for the fourth year in a row, as shoppers shifted more Christmas shopping online. Sales were 0.1% lower than in December 2015, according to BDO’s High Street Sales Tracker, with consumers spending more on home wares but less on fashion. However, online sales were 19% higher than a year earlier. And the tills in High Street stores rang loudly in the week up to Christmas Day – sales rose 11.7% compared with the same week in 2015. BDO said retailers benefited from Christmas day falling on a Sunday. Online orders saw an even steeper rise for the week to 25 December, up 51.1%. Online sales make up about 15% of all retail spending. During the first three weeks of December fewer shoppers visited the High Street, retail parks and shopping centres. But they returned in the final week leading up to Christmas day, splashing out on items for the home as well as “lifestyle” items such as bicycles and seasonal products such as wrapping paper and Christmas cards. Some of December’s spending may also have been brought forward to November by sales offers around Black Friday. BDO reported higher year-on-year in-store sales for October and November.

Forward Diary: 9th – 13th January 2017

Company and economic announcements planned for the week commencing 9th January 2017

Fuel prices hit 18-month high, after Opec production cuts

The price of petrol and diesel in the UK has risen to its highest since July 2015, following a three-pence-a-litre increase in December alone. The average cost of unleaded petrol hit 117.23p at the end of the month, with diesel reaching 119.63p, the RAC said. The wholesale price of both fuels has risen significantly, following the production cuts announced by Opec. Brent crude jumped by 10% on 30 November, the day the cartel announced a cut of 1.2 million barrels a day. As a result, the oil price is now double what it was a year ago, rising from a low of $27.88 in January 2016 to more than $55 this month. The fall in the value of sterling since the Brexit vote has also increased UK fuel prices, as oil is priced in dollars.

Executive pay: ‘Fat Cat Wednesday’ highlighted

Top bosses will have earned more by midday on Wednesday than typical workers earn in the entire year, the High Pay Centre think tank has said. Branding it “Fat Cat Wednesday”, it says that is the time executives will pass the average UK salary of £28,200. High Pay Centre director Stefan Stern said it was an important reminder of the unfair pay gap in the UK. The government is considering plans to make firms reveal the pay gap between chief executives and average workers.

Train fares rise by an average of 2.3%

Rail passengers are facing higher fares across the UK as average price increases of 2.3% are introduced on the first weekday of the new year. The increase covers regulated fares, including season tickets, and unregulated, such as off-peak tickets. Campaigners said the rise was a “kick in the teeth” for passengers after months of widespread strike disruption. The government said it was delivering the biggest rail modernisation programme for more than a century. The increase in fares came as a strike by conductors on Southern Rail entered its third day, as a long-running row about the role of guards on new trains continued. The RMT union began the 72-hour walkout on New Year’s Eve, while another strike is set for 9 January.

Forward Diary: 2nd – 6th January 2017

Company and economic announcements planned for the week commencing 2nd January 2017

Deutsche Bank agrees $7.2bn penalty with US regulators

Germany’s Deutsche Bank says it has agreed a $7.2bn (£5.9bn) payment to US authorities over an investigation into mortgage-backed securities. The sum, which needs final approval, is far lower than the $14bn the US had asked the bank to pay in September. That looming fine had caused concerns that a failure of the bank could pose a risk to the global financial system. The sale of residential mortgage-backed securities played a significant role in the 2008 financial crisis. Several banks in the US have been subject to investigations over allegations of giving mortgages to unqualified borrowers, then repackaging those loans as safe investments and selling the risk on to others. The inquiries related to deals done between 2005 and 2007. Meanwhile, Credit Suisse has said it has agreed a $5.28bn deal to settle its own dispute with US authorities over mortgage-backed securities. The Swiss bank will pay US authorities $2.48bn, and will also give consumers $2.8bn in compensation over the next five years.

Forward Diary: 26th – 30th December 2016

Company and economic announcements planned for the week commencing 26th December 2016

Broadband boost for remotest parts of UK

The government has said £440m has been found so about 600,000 more premises can gain access to superfast broadband. The cash comes from “efficiency savings” and money returned by BT as part of the government’s flagship broadband rollout scheme. Culture Secretary Karen Bradley said the funds would help to bring faster speeds to homes and businesses in some of the most remote parts of the UK. Experts said it was not all “new money” but would still be welcomed. The cash will be made up of £150m in cost savings and the rest in the form of returned subsidies from BT, the government said. Under a 2010 deal, the government paid BT to roll out superfast broadband in hard-to-reach areas where providers had said it was not cost-effective to install broadband infrastructure. As part of the agreement, if more than 20% of premises in those areas bought superfast broadband, BT had to repay some of the subsidy. On average, the take-up has been 30.6%, leading to a forecast repayment of £292m, the Department for Culture, Media and Sport said.

CBI calls for barrier-free trade with EU after Brexit

UK firms need to continue to have “barrier-free” access to European Union markets after Brexit, the CBI business lobby group has warned. It said UK companies should not be subjected to trade tariffs, with only “minimal” other barriers in place. In a report, it also called for a migration system that allowed firms to obtain the skills and labour they need. The government said it was committed to delivering the best possible access to European markets for UK businesses. The CBI reiterated its call for a “smooth exit” from the EU, avoiding a “cliff edge” break.

Lloyds Bank buys MBNA credit card firm for £1.9bn

Lloyds Banking Group (LLOY.L) is to buy credit card firm MBNA from Bank of America in a £1.9bn deal. Lloyds chief executive Antonio Horta-Osorio said MBNA would be a “good fit” with the bank’s current credit card business. The bank, which is nearly 7% state-owned, said its share of the UK credit card market would increase from about 15% to 26% after the transaction.

Thousands of workers set to strike in Christmas week

Thousands of workers will launch a wave of strikes this week, hitting postal services, rail companies and airlines in the run-up to Christmas. About 3,000 staff at hundreds of Crown post offices are expected to walk out on Monday, Tuesday and Saturday. The action marks an escalation of their dispute over pension changes, job security and closures. Meanwhile the rail strike at Southern continues with conductors beginning two-day action. Kevin Gilliland, Post Office group network and sales director, said fewer than 300 branches would be affected, with “business as usual in almost all of our network”. On Wednesday and Thursday, workers who supply many sub-post offices with cash will join the action. There are fears the situation could escalate if unofficial action is taken by Royal Mail workers who refuse to cross picket lines. A Royal Mail spokesman said: “There will be little or no impact on Royal Mail as a result of the CWU strike at the Post Office. Deliveries will carry on as normal and the last posting dates for Christmas remain unchanged.”

Sky and 21st Century Fox agree £18.5bn takeover deal

Broadcaster Sky and 21st Century Fox have reached agreement on the terms of a takeover deal. Rupert Murdoch’s 21st Century Fox will pay £11.7bn for the 61% stake it does not already own. Sky shareholders will receive £10.75 in cash for each share, valuing the entire company at £18.5bn. The deal comes amid concerns that Rupert Murdoch, who also owns the Sun and the Times newspapers, will have excessive influence over UK media. Karen Bradley, the Culture Secretary, will have 10 days to decide whether the Fox bid raises public interest concerns, in this case media plurality, starting from when the companies notify the competition authority. She has the power to ask Ofcom, the media watchdog, to examine the deal.

Forward Diary: 19th – 23rd December 2016

Company and economic announcements planned for the week commencing 19th December 2016

‘One billion’ affected by Yahoo hack

Yahoo has said more than one billion user accounts may have been affected in a hacking attack dating back to 2013. The internet giant said it appeared separate from a 2014 breach disclosed in September, when Yahoo revealed 500 million accounts had been accessed. Yahoo said names, phone numbers, passwords and email addresses were stolen, but not bank and payment data. The company, which is being taken over by Verizon, said it was working closely with the police and authorities. Yahoo said in a statement that it “believes an unauthorized third party, in August 2013, stole data associated with more than one billion user accounts.” The breach “is likely distinct from the incident the company disclosed on September 22, 2016”. However, the three-year-old hack was uncovered as part of continuing investigations by authorities and security experts into the 2014 breach, Yahoo said. Account users were urged to change their passwords and security questions.

Abandon net migration target, says CBI

The employers group, the CBI, is calling on the government to abandon an immigration target which was set by David Cameron and which then proved part of his undoing. Net migration measures the number of people coming to Britain, minus the number of people leaving. Given that it’s pretty hard to control the number of people leaving, it’s arguably a dangerous thing on which to pin your political career. But that’s what the former prime minister did when he pledged to get the number down to the “tens of thousands” from over 300,000 a year. David Cameron failed, and unease about the number of people arriving from the EU was the defining issue of the referendum. The message was clear: without control of our borders we have no chance of ever controlling net migration. The rest is now history.

Trump delays announcement on his business empire

Donald Trump has delayed an announcement on how he plans to separate his business empire interests from his role as US president. The US president-elect had been due to hold a rare press conference on Thursday to discuss how he would deal with perceived conflicts of interest. Mr Trump’s spokesperson said the announcement would now come in January. Meanwhile, Mr Trump said he was appointing Goldman Sachs President Gary Cohn as his “top economic adviser”. Mr Cohn will head the the White House National Economic Council, a position that will make him one of the most influential voices on economic decisions in the White House.

UK ‘s current GDP growth rate won’t last, warns business body

“The business as usual” approach taken by many firms following the Brexit vote has helped boost UK growth this year, but it will not last, the British Chambers of Commerce (BCC) has warned. The business body expects GDP to grow by 2.1% this year, up from the 1.8% it forecast just three months ago. But uncertainty over the UK’s EU relationship and higher inflation will “dampen medium term growth,” it said. It expects the UK’s economy to grow by 1.1% next year, and by 1.4% in 2018. A separate report on business conditions from accountancy and services group BDO found business output rose for the first time in November after 17 months of decline. It said this suggested that “for now” the UK economy had stabilised “in a lower gear” than it had been running at before the referendum. However, it said, business optimism was continuing to fall, and it expected “a bumpy road ahead in 2017 for British businesses and the economy”.

Food industry warns of higher prices without EU workers

The UK faces higher food prices without continued access to EU workers, 30 food and drink associations have warned. In a letter published in the Guardian, they argue that EU workers play an important role in the supply chain and some are already starting to leave. It called on the government to offer “unambiguous reassurance” about their right to remain. Nearly four million people are employed in everything from harvesting to production to selling food and drink. In food manufacturing just under a third of workers are from the EU. “Workers from the EU, some of whom are already leaving the UK, play a significant role in delivering affordable and high-quality food and drink,” the letter said. “The government should offer unambiguous reassurance to EU workers throughout our supply chain about their right to remain. For the longer term, it is important to recognise that these workers are highly flexible and provide an essential reservoir of skilled, semi-skilled and unskilled labour.”

Forward Diary: 12th – 16th December 2016

Company and economic announcements planned for the week commencing 12th December 2016

Sports Direct sees sharp fall in profits

Sports Direct (SPD.L) has reported a big drop in half-year profits after being hit by the fall in the pound. The retailer, which has been heavily criticised for the treatment of some of its workers, said underlying pre-tax profits fell 57% to £71,6m. Chief executive Mike Ashley said the past six months had been “tough for our people and performance”. The company said it was continuing in its efforts to become the “Selfridges” of sports retail.

Housing crisis ‘creates in-work poverty’

Poverty among people who are working has risen despite a recovery in the UK economy, a study has suggested. High rental housing costs mean an estimated 3.8 million workers – one in eight – are in poverty, according to the Joseph Rowntree Foundation (JRF). It said in-work poverty was up by 1.1 million since 2010-11, and 55% of those in poverty were in working families. People with less than 60% of median income are classified as poor. Overall poverty was down, the government said. Its figures suggested poverty numbers had been falling compared to six years ago. “Since 2010, the number of people living in poverty has fallen by 300,000 but we know there is more to do. We are increasing the National Living Wage and taking millions of people out of income tax, to make sure it always pays to be in work,” a government spokesman said.

Carney warns about popular disillusion with capitalism

The Bank of England Governor Mark Carney has warned that people will turn their backs on free and open markets unless something is done to help those left behind by the financial crisis. In a speech, he said: “Globalisation is associated with low wages, insecure employment, stateless corporations and striking inequalities.” In many advanced economies there are “staggering wealth inequalities,” he added. Mr Carney was speaking in Liverpool. He told his audience that politicians and central bankers must act to ensure people do not lose faith in the current system. “Turning our backs on open markets would be a tragedy, but it is a possibility,” he said. “It can only be averted by confronting the underlying reasons for this risk upfront.”