China’s economy grew by 6.9% in 2017 according to official data – the fastest pace in two years. The figure comfortably beats Beijing’s official growth target of about 6.5%. China is a key driver of the global economy and so the better-than-expected data is likely to cheer investors around the world.But many China watchers are sceptical about the country’s GDP numbers and believe growth is much weaker than the official data suggests. The numbers released on Thursday showed that in the last three months of 2017, the economy grew at an annual rate of 6.8% – slightly higher than analysts had been expecting. A crackdown on risky debt together with an effort to reduce factory pollution dampened growth during the period.
Nestle is selling its US sweets and chocolate business to Ferrero Group for 2.7bn Swiss Francs ($2.8bn; £2bn). The Swiss food giant said it was offloading brands such as Crunch, Nerds, Runts and Butterfinger to focus on other products. Italy’s Ferrero, which makes Nutella spread, Tic Tac and Ferrero Rocher, will become the US’s third biggest confectionery maker. The deal is expected to go through by March this year. Ferrero said the brands would give it “substantially greater scale” and “a broader offering of high-quality products” for US customers.
A third of the lowest-income households in Britain have loans and credit card debts that outstrip the assets they hold, research has found. This debt can become a problem to repay, even if the total amount borrowed is relatively low. The Institute for Fiscal Studies (IFS) analysed official figures to estimate the extent of unmanageable debt. Unsecured borrowing, such as loans, overdrafts and credit cards, has been rising by nearly 10% a year in the UK. The IFS found that a quarter of very low-income households have high debt repayments or are behind on bills or repayments. Helen Barnard, from the Joseph Rowntree Foundation, which commissioned the report, said: “The government, regulators and lenders need to not only look at increasing access to affordable credit, but also at the financial pressures that can lead families to take on debt in order to get by.” The report found that about half of British households have some unsecured debt. Some 43% of this is loans from banks and other financial institutions, with credit and store card debt (25%) and hire purchase debt (21%) the other major contributors. The majority of this debt could be paid off, the report found. “More than 60% of unsecured debt is held by households with above-average incomes, and more than half of households with unsecured debts have more than enough financial assets to pay them off,” it said.
Construction giant Carillion (CLLN.L) is to take steps to go into liquidation, threatening thousands of jobs. The move came after discussions between Carillion, its lenders and the government failed to reach a deal to save the company. However, the government will provide funding to maintain the public services run by Carillion. The firm is involved in major projects like the HS2 high-speed rail line, as well as managing schools and prisons. Carillion is the UK’s second largest construction company and has 43,000 staff worldwide – 20,000 in the UK. It is not clear yet how those staff will be affected. Some of Carillion’s contracts will be taken on by other firms and some could be renationalised.
The government will meet Carillion and the Pensions Regulator on Friday to discuss the giant services and construction company’s deficit. Carillion, which is one of the government’s biggest contractors, is struggling under £1.5bn of debt, including a pension shortfall of £587m. The company held talks with its lenders and advisers in London on Wednesday. However, no announcement has been made on a business plan to secure its future. Carillion is the UK’s second largest construction company and employs 43,000 people globally. It has been awarded contracts to build part of £56bn High Speed 2 railway, including the first phase of the line which will run between London and Birmingham and is scheduled to open in 2026. Carillion also manages nearly 900 schools, provides services to the NHS and works with National Grid.
South Korea is planning a law to ban cryptocurrencies such as Bitcoin being traded through its exchanges. The justice minister said virtual currencies were causing the government “great concern”. Meanwhile, several Seoul cryptocurrency exchanges have been raided this week in a probe into alleged tax evasion. Bitcoin and others lost about 10% of their value on Thursday – but it is hard to gauge how much of that was the result of events in South Korea. Given the low levels of trading and relatively small number of people holding virtual currencies, wild price swings have become the norm, leading to an argument that paying too much attention to price rises and falls is a fairly futile exercise. Digital currencies such as Bitcoin have surged in value over the past year – driving a huge demand. That has led to concerns about gambling addiction as inexperienced investors try to ride the wave. “There are great concerns regarding virtual currencies and the justice ministry is basically preparing a bill to ban cryptocurrency trading through exchanges,” said Justice Minister Park Sang-ki. It is understood the department is preparing legislation that would allow the exchanges to be shut down. The crackdown in South Korea by authorities included a raid on the country’s second largest virtual currency operator, Bithumb. “We were asked by the tax officials to disclose paperwork and things yesterday,” an official at the firm told Reuters, requesting anonymity. The government had already said in December that it would apply more scrutiny to the exchanges, including moves to curb anonymous trading.
Company and economic announcements planned for the week commencing 15th January 2018
The World Bank says global economic growth is likely to speed up this year, after a stronger than expected 2017. The bank’s new forecast is that the world economy will expand by 3.1% this year before slowing slightly. It will be the first time since the financial crisis that growth is operating at its full potential. However, the report warns the upswing will be short term, with gains in improving living standards and reducing poverty levels at risk long term. For the immediate future, the bank sees a reasonably upbeat prospect. The bank’s president Jim Yong Kim said: “The broad-based recovery in global growth is encouraging”. The forecast is better than what the bank was expecting in its previous assessment last June. Among the large economies, the up-rating is especially marked for the eurozone, though the bank still thinks it will slow somewhat this year, but by less than its previous forecast.
Samsung Electronics expects to deliver record profits for the last three months of 2017, but the estimate missed analyst expectations. The world’s biggest memory chip maker forecast operating earnings of 15.1 trillion won ($14.1bn; £10.4bn) – up 64% from a year earlier. But while chip prices boosted margins, a stronger won weighed on the figures. The record guidance comes despite a corruption scandal engulfing top leadership at the South Korean firm. The operating profit forecast is slightly below the 15.9 trillion won estimated by analysts surveyed by Reuters.
Carillion, the troubled services and construction group, will reveal a new business plan this week in a bid to avoid collapse. The company, one of the government’s biggest contractors, has issued a series of profit warnings in recent months. The turmoil has sent its shares tumbling by 90% since July. The HS2 contractor said it was in discussions about ways of reducing debt and obtaining new funding. A business plan due to be presented to creditors and other stakeholders on Wednesday will form the basis of a “proposal to restore Carillion’s balance sheet”, a spokesperson said. The company employs about 43,000 people worldwide and provides services to half the UK’s prisons, as well as hundreds of hospitals and schools. Analysts estimate Carillion has debts including pensions of about £1.5bn, while its market capitalisation is just £81m. However, the company’s banks, which include Santander UK, HSBC and Barclays, are understood to be reluctant to lend it any more cash. That could force Carillion to seek some form of government support if its banks do turn off the cash taps. Given the number of public sector contracts it holds, some analysts think it is “too big to fail” and that ministers may be forced to step in. Last week the Wolverhampton-based company said it was being investigated by the Financial Conduct Authority over the “timeliness and content” of its stock market announcements from December 2016 to July last year. The state date for new chief executive Andrew Davies has been brought forward to 22 January. In September Carillion revealed a huge loss of £1.1bn for the six months to 30 June on revenues that were flat at just under £2.5bn.
New car sales fell for the first time in six years last year with demand for diesel cars plunging by almost a fifth. In total, there were around 2.5 million cars registered, according to industry body the Society of Motor Manufacturers and Traders (SMMT). The figure was down 5.6% from 2016, while diesel sales fell 17% as higher taxes and pollution fears hit demand. SMMT chief executive Mike Hawes said he expected car sales to continue to drop this year, predicting a 5 to 7% fall. The figures are preliminary, with final numbers for the year due to be published later.
Company and economic announcements planned for the week commencing 8th January 2018
Tech firms are working to fix bugs that could allow hackers to steal personal data from computer systems. Google researchers said there were “serious security flaws” in chips made by Intel, AMD and ARM, affecting devices which use them. The industry has been aware of the problem for months and hoped to solve it before details were made public. The UK’s National Cyber Security Centre (NCSC) said there was no evidence that the vulnerability had been exploited. Some fixes, in the form of things like software updates, have been introduced or will be available in the next few days, said Intel, which provides chips to about 80% of desktop computers and 90% of laptops worldwide.
The US has blocked the $1.2bn (£880m) sale of money transfer firm Moneygram to China’s Ant Financial, the digital payments arm of Alibaba. It is the highest profile Chinese deal to be rejected by Washington since Donald Trump came to power. Regulators overseeing foreign investments in the US had refused to support the takeover, the firms said. The geopolitical environment had “changed considerably” since the merger was announced last year, they added. The collapse is a blow to the ambitions of Alibaba’s billionaire executive chairman Jack Ma, who had promised President Trump that he would create a million US jobs. Alibaba, which owns Ant Financial together with Alibaba executives, saw the US market as a way to expand overseas in the face of fierce domestic competition form the likes of Tencent’s WeChat. But in a joint statement on Tuesday, Ant Financial and Moneygram said they had abandoned the deal “following the inability of the companies to obtain the required approval for the transaction from the Committee on Foreign Investment in the United States, despite extensive efforts to address the Committee’s concerns.” Reports suggest the committee had cited security concerns over the takeover. Moneygram chief executive Alex Holmes said he was “disappointed” by the outcome and noted the “geopolitical environment has changed considerably” in the year since the deal was announced.
Low-earning households are being urged to start saving money now in time for next Christmas. The debt charity The Money Advice Trust (MAT) is advising consumers who struggle with savings to budget for the year ahead. One idea, it says, is to join a credit union. An internet survey conducted for the MAT also suggests that more people will struggle with their finances this January than was the case last year. Some 16% of people questioned said they were likely – or very likely – to fall behind with their finances in January, as a result of Christmas spending. That amounts to 7.9 million people, the MAT said, and compares with 11% in a similar poll last year. The majority – 68% – said they would cope sufficiently during the month.
Disasters in 2017 caused losses of $306bn (£229bn), according to estimates from insurance giant Swiss Re. The figure represents a 63% jump from last year, and is well above the average of the past decade. The Americas was hardest hit, with hurricanes in the Caribbean and southern US, earthquakes in Mexico and wildfires in California. Despite the rise in the financial cost of disasters, there was no significant increase in the loss of lives. Swiss Re said more than 11,000 people died or went missing in disaster events in 2017, which is similar to 2016’s figure.
Company and economic announcements planned for the fortnight commencing 25th December 2017
The Bank of England is to unveil plans allowing European banks to operate in the UK as normal post-Brexit. The BBC has learned that banks offering wholesale finance – money and services provided to businesses and each other – would operate under existing rules. It would apply even in a “no deal” scenario, the Bank is due to announce later on Wednesday. It means EU banks operating through branches can continue without creating subsidiaries – an expensive process. The difference between branches and subsidiaries is something all of us might have hoped not to care about ever but it is significant – so please bear with me. Branches offer an easy way for banks to move money around their international operations, but present the risk that in the event of a financial crisis, funds are quickly repatriated to the foreign bank’s headquarters – leaving customers of the UK branch out of pocket. Subsidiaries are forced to hold their own shock-absorbing capital which can’t cut and run – they essentially become UK companies. Changing from a branch to a subsidiary could cost billions for a bank like Deutsche Bank, for example, which employs 9,000 people in the UK. Currently, banks based anywhere in the EU can sell services to anywhere else in the EU thanks to an instrument known a financial services passport.
Investors are meeting in London on Tuesday to decide the fate of household goods giant Steinhoff. The firm owns 6,500 retail outlets in 30 countries, including the UK’s Poundland and furniture chains Bensons and Harveys. After revelations of accounting irregularities, Steinhoff’s shares collapsed and executives resigned. Now, shareholders must decide whether to keep Steinhoff afloat or sell off assets to recoup some money. One person in the spotlight is Christo Wiese – Steinhoff’s former chair and its largest shareholder. He’s one of South Africa’s richest businessmen – and one of its most respected, with a reputation for having something of a Midas touch. Mr Wiese holds a stake in investment firm Brait SE, which is a majority shareholder in several other UK businesses including Virgin Active and fashion retailer New Look. But since the scandal emerged earlier this month, the fall in the value of his investments has wiped out a large chunk of his net worth.
A think tank is proposing a post-Brexit trading deal based on the UK and the EU sharing each other’s markets. It would see the UK and EU continuing the regulatory alignment that exists today, and the formation of a new customs union similar to the existing one, the centre-left IPPR said. It would allow tariff-free trade, and the UK to benefit from EU trade deals. IPPR director Tom Kibasi said it “honours the referendum result” while securing Britain’s economic interests. The group said that the EU would also benefit from the scale of the UK’s economy in future trade negotiations. The group believes that a new shared market model would aim to keep the benefits of single market while allowing divergence from EU rules over time. The proposal would mean no interruption to the UK’s trade with the EU and avoid a hard border between Northern Ireland and the Republic of Ireland, the report says.
Japan has imposed fresh sanctions against North Korea as it seeks to ramp up pressure on Pyongyang over its nuclear and missile programmes. Chief cabinet secretary Yoshihide Suga said the assets of another 19 entities and individuals would be frozen. More than 210 organisations and people from countries including China and Russia will now be targeted. Businesses on the blacklist include banks, coal and minerals traders, and transport firms. The widening of sanctions comes ahead of a meeting of the UN Security Council to be held on Friday.
Company and economic announcements planned for the week commencing 18th December 2017
An influential group of MPs has urged Britain and the European Union to agree a “status quo” transition period following Britain’s departure from the EU. The Treasury Select Committee said that the temporary arrangement should be agreed as quickly as possible to ease business concerns over a “no deal” Brexit. The committee’s report said it “strongly supported” the prime minister’s push for a comprehensive free trade deal which would keep borders as “frictionless” as possible. But it said in order to reach that point, an implementation period would be necessary where the European Court of Justice (ECJ) was likely to retain supremacy over UK laws. “An agreement between the UK and EU27 on ‘standstill’ transitional arrangements is now urgent,” said Nicky Morgan, the Conservative chairwoman of the committee who campaigned for Remain before the referendum. “The consequences of failing to reach an agreement are dramatic and damaging.”
Walt Disney is close to confirming a deal to buy 21st Century Fox’s entertainment assets for about $60bn, reports say. The sale would include the 20th Century Fox film studio and the Sky and Star satellite broadcasters in the UK, Europe and Asia. Disney was left as the front runner after Comcast, the NBC owner, dropped out of the race on Monday. The Financial Times said talks about the price were continuing on Tuesday. CNBC reported that Fox and Disney were on a “glide path” for an announcement on Thursday, according to people familiar with the negotiations. The Murdoch family was said to favour a deal with Disney because it would rather be paid in the entertainment giant’s shares than Comcast stock. A deal with Disney could also face fewer US regulatory hurdles, although it is extremely unlikely to be waved through.
Nearly all the possible trading relationships between Britain and the European Union following Brexit would be less favourable than staying in the European Union, according to an influential US think tank. The Rand Corporation study said the worst option would be a “no deal”. That would leave the UK economy 4.9% poorer by 2029. “No deal” would also have a negative effect on the EU economy, but it would be “relatively minor”. The report said that even a “soft Brexit” involving staying in the free market would not be as positive economically as staying in the EU. Rand plays a significant role in America, with half of its funding coming from the US government. In Europe it has advised the UK government on policy issues such as mental health, as well as the European Parliament and the European Commission.
Bitcoin has begun trading on a major exchange for the first time. It launched on the CBOE Futures Exchange in Chicago at 23:00 GMT Sunday, allowing investors to bet on whether Bitcoin prices will rise or fall. In the lead-up to its futures debut, the value of the digital currency has surged. Bitcoin’s introduction to the CBOE has been seen by some as a step towards legitimising the currency. The move is expected to be followed next week by a rival listing on the Chicago Mercantile Exchange. Anticipation of the first mainstream listings have helped the controversial currency soar past $10,000 and then over $17,000 on Thursday before retreating. Bitcoin was trading at about $15,230 on Monday, according to Coindesk.com.
More clarity on the Brexit transition is needed to stop companies proceeding with contingency plans despite the progress announced on Friday, the CBI has warned. Paul Drechsler, president of the business lobby group, said companies had begun triggering plans months ago. However, more detail could help suspend further action by firms, he said. Sterling was trading higher at just under $1.35 and €1.15 after the announcement in Brussels on Friday. The CBI chief also called for “unconditionality” about the status of EU citizens living in the UK. “It’s an important political milestone, but clarity on transition is the most important thing from a business point of view at this stage,” Mr Drechsler told BBC Radio 4’s Today programme. The Institute of Directors echoed the CBI call for certainty on the rights of EU citizens. Stephen Martin, IoD director-general, said companies urgently needed certainty about the future of EU staff in the UK. “We have grounds to hope now that our members will be able to send their employees off for the Christmas break feeling more comfortable about their status here,” he said. “We look forward to further clarity about what the UK’s objectives are for that new relationship, as well as a firm commitment on transition in the very near future.”
Company and economic announcements planned for the week commencing 11th December 2017
Bitcoin crossed $14,000 (£10,460; €11,870) on Thursday, surging $2,000 in less than 24 hours. The cryptocurrency began the year below $1,000 but continues its sharp rise despite warnings of a dangerous bubble. Bitcoin hit the latest milestone during early trading in Asia, according to the website Coindesk.com. The new record high comes just days before the launch of bitcoin futures on two exchanges, including the world’s largest futures exchange, CME. Spread betting firm CMC Markets said the rise had all the symptoms of a bubble market, warning “there is no way to know when the bubble will burst”.
The European Union has published its first blacklist of tax havens, naming 17 territories including Saint Lucia, Barbados and South Korea. A “watchlist” of 47 countries promising to change their tax rules to meet EU standards has also been issued. The “grey list” includes several with UK links, including Hong Kong, Jersey, Bermuda and the Cayman Islands, as well as Switzerland and Turkey. Both lists have been criticised as omitting the most notorious tax havens. The lists follow the leaking of the Panama Papers and the Paradise Papers, revealing how companies and individuals hid their wealth from tax authorities around the world in offshore accounts. EU tax commissioner Pierre Moscovici said the blacklist represented “substantial progress”, adding: “Its very existence is an important step forward. But because it is the first EU list, it remains an insufficient response to the scale of tax evasion worldwide.”