Theresa May’s speech: five things we learned

The UK prime minister’s Brexit details have been vague and limited to the “Brexit means Brexit” soundbyte – until she stood up at Lancaster House and made what is expected to be the only major policy explanation before Article 50 is triggered.


1: Brexit means out of the single market

“I want to be clear – what I am proposing cannot mean membership of the single market,” May confirmed: here comes the hard Brexit.

2: And no more Customs Union

“Full Customs Union membership prevents us from negotiating our own comprehensive trade deals,” she also said. “I do not want Britain to be part of the Common Commercial Policy and I do not want us to be bound by the Common External Tariff. I do want us to have a customs agreement with the EU.”

3: Ireland will get special treatment

What to do about the UK’s only land border – with the Republic of Ireland – has been unclear to this point. “We will work to deliver a practical solution that allows the maintenance of the Common Travel Area with the Republic, while protecting the integrity of the United Kingdom’s immigration system,” May announced. “Nobody wants to return to the borders of the past, so we will make it a priority to deliver a practical solution as soon as we can.”

4: Parliament will vote on the deal

“I can confirm today the government will put the final deal… to a vote in both Houses of Parliament before it comes into force,” May announced. Brexit minister David Davis has predicted that this will be a rubber-stamp operation: “They won’t vote it down. This negotiation will succeed,” he said.

5: Reaction: the pound rises, Europe laughs and the opposition are angry

Markets like certainty, and sterling enjoyed its biggest one-day jump since 1998, to $1.23, although the FTSE dropped significantly. The political reaction, on the other hand, has been mixed. The European media was hostile, with Die Welt just one of the outlets that interpreted the speech as “leading Great Britain into isolation”. Back in the UK, Labour and the Liberal Democrats went on the attack.

Shock as UK’s ambassador to EU resigns

EU expert Sir Ivan Rogers steps down from his post months early

The Foreign Office today confirmed that Sir Ivan Rogers, the UK’s ambassador to the EU, has announced that he will resign early from his role. He was scheduled to finish his tenure in November.

“Sir Ivan Rogers has resigned a few months early as UK permanent representative to the European Union,” a spokesperson for theForeign Office  said. “Sir Ivan has taken this decision now to enable a successor to be appointed before the UK invokes article 50 by the end of March. We are grateful for his work and commitment over the last three years.

Among the expressions of shock, former deputy prime minister Nick Clegg called the resignation a “body blow” to the government’s Brexit plans.

“I worked for Ivan Rogers in the EU 20 years ago – then he worked for me and the rest of the coalition government several years later,” Clegg said. “Throughout all that time Ivan was always punctiliously objective and rigorous in all he did and all the advice he provided.

“If the reports are true that he has been hounded out by hostile Brexiteers in government, it counts as a spectacular own goal. The government needs all the help it can get from good civil servants to deliver a workable Brexit.”

Former permanent secretary Sir Nicholas MacPherson took to Twitter to express his views, calling Rogers’ resignation a “huge loss” and the “wilful&total destruction of EU expertise [sic]”.



The price of your next MacBook just went up

Brexit Bad Apple bites back at consumers

British consumers got bitten by Brexit as Apple quietly raised the cost of some of its products in the U.K. by 20 percent.

The computer-maker overnight began charging £2,999 ($3,650) for its “Mac Pro” desktop machine, the latest blow to shoppers after the decision to leave the European Union sent the pound sliding to a three-decade low.

The price hikes came days after supermarket giant Tesco battled with supplier Unilever over the cost of goods in “Marmitegate” and Microsoft also yanked prices. With inflation already accelerating at the fastest in two years, price pressures are likely to mount.

Separately, Electrolux Chief Executive Officer  Jonas Samuelson said he needs to “compensate by raising prices” by up to 10 percent. British Airways owner IAG also cut its earnings outlook for the second time since the Brexit vote in part because of sterling.

Highlighting the concerns for the economy, separate reports from Gfk, YouGov and Asda all showed consumer confidence falling and household spending power weakening as inflation accelerates. That’s a test for the Bank of England as its officials prepare to meet next week with traders not expecting an interest-rate cut.



How top CFOs plan to get through Brexit

Deloitte’s Q3 survey hints at strategies for battling Brexit woes

Yesterday Deloitte published their Q3 survey of 124 Chief Financial Officers in the UK, and the results point to strategies to shore up against potential Brexit-related issues.

The majority of firms are planning to cut back on capital expenditure and hiring. The top priorities mentioned are reducing costs (47%) and increasing cash flow (42%).

There are still some more comfortable with risk – 18% of CFOs still believed that now is a good time for more balance sheet risk, at the time the survey was conducted in mid-September. And 19% are planning M&A activity.

While 51% expect employment to decline, 40% see flat jobs growth and 9% predict job gains.

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Stay calm, say investment strategists after sterling nosedive

The pound is pounded but investors urged to avoid knee-jerk reactions

The pound might have been taking a pounding in recent days, but investors should avoid knee-jerk responses, warns a leading analyst at one of the world’s largest independent financial advisory organisations.

tom-elliott-hi-res-webTom Elliott, International Investment Strategist at deVere Group, is speaking out following sterling’s nosedive of 6 per cent in two minutes in an overnight ‘flash crash’ late last week.  On Friday morning, at its nadir, the pound was being traded at $1.1841, which is its lowest since 1985.

Mr Elliott observes: “Currency markets are reacting to three things.

“First, the realisation that British Prime Minister, Theresa May, has opted for a risky ‘hard’ Brexit strategy.

“Speeches at the Conservative Party conference last week suggested that the UK government will be willing to sacrifice membership of the single market, and possibly the E.U’s free trade area, in order to ‘take back control’ of immigration and end ‘meddling from Brussels’ on a range of issues.

“A hard Brexit carries a much greater risk of economic dislocation as investment plans are put on hold by UK businesses, and by foreign ones considering investment in the UK, as they wait to see what tariffs and conditions will apply to UK/EU trade once the Brexit negotiations are completed. Consumer confidence may weaken, with purchases of big-ticket items put off if consumers fear a slowing economy and a rise in unemployment. A weaker economy usually is bad news for a currency.

He continues: “Second, the UK runs the largest current account deficit in the developed world.

“The UK current account deficit (which is the total of these) is -5.4% of GDP (£162bn). It is-2.6% for the U.S, and +3.2% for the eurozone. This means the UK relies on foreigners to buy their debt, equity, buildings, factories and so on to the tune of £162bn each year in order for the books to balance. There is a real risk that with slower growth and Brexit uncertainty increased, these inflows shrink. Then sterling must fall in order to bring the current account deficit and matching inflows into balance.”

He goes on to say: “And third, there is the possibility of higher U.S. interest rates and possibly lower ones in Britain.

“Interest rate trends currently favour the dollar over other currencies, as the Federal Reserve is clearly itching to raise rates. Slower growth in the UK as a result of a hard Brexit may lead to the Bank of England cutting interest rates again, down to zero.   A widening interest rate differential against the dollar will lead to a weaker pound, everything else being equal.”

Mr Elliott concludes: “What should investors do? For the moment: Sit still and avoid knee-jerk responses. Recent economic data from the UK has been stronger than had been expected in the wake of the 23 June referendum. Doom and gloom forecasters may continue to be proved wrong as a hard Brexit is negotiated.”

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Weaker pound may not lead to higher food prices, Sainsbury’s says

CEO says commodity price falls may offset sterling drop, as underlying sales fall for second straight quarter


LONDON, Sept 28 (Reuters) – Sterling’s fall since Britain’s vote to leave the European Union will not necessarily lead to higher grocery prices, as it could be offset by lower commodities prices and stiff competition, the country’s No.2 supermarket group Sainsbury’s said on Wednesday.

Britain’s grocery sector has seen more than two years of falling prices as German discounters Aldi and Lidl have led a price war, forcing a fight back from the “big four” players – market leader Tesco, Sainsbury’s, Asda and Morrisons. Deflation in commodities has also been a major factor driving prices lower.

Most analysts and economists believe grocery prices are set to rise after a 10 percent drop in sterling following the “Brexit” vote, which makes importing goods more expensive.

A return to food price inflation, in moderation, would be welcomed by investors in grocery stocks as it boosts sales and profit margins. But Sainsbury’s Chief Executive Mike Coupe said the situation was not clear cut.

“You could argue there are some inflationary pressures as a result of currency changes but equally there are some deflationary pressures because of commodity price movements,” he told reporters after Sainsbury’s reported a drop in underlying sales for the second straight quarter.

“If you look at the northern hemisphere harvests this year, they’ve been good again and that is probably going to put some deflationary pressures in the market,” he said.

“It’s still too early to tell how they will play out.”

Coupe also said the market was the most competitive he had known in his 30-plus years in the sector with rivals continuing to push through tactical price reductions.

He said Sainsbury’s’ prices “have never been sharper” versus the discounters.

On Monday, Aldi said it would continue to cut prices to ensure it was the cheapest player.


Sainsbury’s, which this month completed a 1.4 billion pounds ($1.8 billion) takeover of Argos-owner Home Retail, said sales at stores open over a year fell 1.1 percent, excluding fuel, in the 16 weeks to Sept. 24, its fiscal second quarter – slightly better than analysts’ average forecast of down 1.2 percent but worse than a first quarter fall of 0.8 percent.

The decline was driven by deflation of about 1 percent as the firm cut prices on targeted products, such as a 33 percent reduction to 2.50 pounds for an own-label pack of 46 nappies.

However, Sainsbury’s highlighted like-for-like transaction growth across all sales channels – supermarkets, convenience stores and online – and volume growth. It said it remained confident it would continue to outperform major rivals.

Shares in the firm, already down 9 percent over the last six months, fell as much as 3.5 percent on the cautious outlook.

Sainsbury’s has both lowered and simplified its prices, reducing the number of promotions and removing most “multi-buy” deals. It has also worked to improve the quality and range of its own-brand food and general merchandise products, while investing in the growth areas of online and convenience stores.

While the firm has proved more resilient to the discounters than others, it has still reported two straight years of profit decline and analysts forecast a third for the 2016-17 year.

“We see the gradual recovery of Tesco UK as a cause for real concern for Sainsbury’s in terms of the scope for greater direct competitor attrition,” said Shore Capital analyst Clive Black, who put his “hold” rating on the firm’s shares under review.

Other analysts believe Sainsbury’s is vulnerable to a possible major step-up in price cuts from Asda and could be distracted by the integration of general merchandise chain Argos.

In its second quarter to Aug. 27, Argos achieved total sales growth of 3.0 percent and like-for-like growth of 2.3 percent.

($1 = 0.7682 pounds)

(Editing by Paul Sandle and Mark Potter)


Scotland threatens to push for another referendum if there is a “hard Brexit”

Scottish minister worries hard Brexit imminent after negotiation meetings

PARIS, Sept 26 (Reuters) – Britain appears to be heading for a “hard Brexit” under which links to the European Union would be reduced to little more than trade agreements, Scotland’s external affairs minister Fiona Hyslop said on Monday, citing “mood music” from recent talks.

Pro-EU Scotland’s Brexit representative, Michael Russell, has had the first of a series of meetings with British Brexit minister David Davis, Hyslop told Reuters.

The talks are part of efforts to establish a common United Kingdom position for divorce discussions with the country’s European Union partners, as British Prime Minister Theresa May has promised.

Russell will be lobbying for a “soft” exit “that looks as much like remaining in the EU as possible,” ideally including continued free movement of capital and labour, she said.

“They’ve met within the last 10 days. The process for those internal negotiations is currently being established,” Hyslop told Reuters in Paris after a meeting with France’s European Affairs Minister Harlem Desir.

“I’m worried just now that the UK looks as if it’s heading to a hard Brexit. However those internal discussions with Scotland, Wales and Northern Ireland have only just started, so we will try and shift that position,” she said.

“That’s the mood music,” she added, “but (British Prime Minister) Theresa May is keeping everything very close to her chest and is very much determining the UK position,” Hyslop said.

Some 62 percent of Scottish voters opted to remain in the EU in the June 23 referendum, in which 52 percent of Britons overall voted to leave.

Russell and his fellow representatives from Wales and Northern Ireland have no power of veto in their talks with Davis, Britain’s Secretary of State for Exiting the European Union.

However, Scotland has threatened to push for a referendum on independence if the Brexit terms are not to its liking.

A ‘hard Brexit’ would be entirely unacceptable, Hyslop added.

“We’re looking to either influence the UK position or have a position that recognises the differences within the UK, including Scotland. But we have also said that if required we are prepared to look at a referendum on independence again.

That’s not our starting point, but it’s there should it be needed.”

Britain’s vote to quit the EU has sent shockwaves through the country and the EU, where it is one of the three main economies. Economists are concerned the divorce will hurt economic growth and pro-EU politicians fear it will weaken the union.

May has repeatedly said that Article 50 will not be triggered before the end of the year, and that Britain will not get a bad deal.

Although Scots had decided in a 2014 referendum on independence to remain in the United Kingdon, Scottish First Minister Nicola Sturgeon has said the Brexit vote meant that the country was now being taken out of the EU against its will and this could justify a second referendum.

(Reporting by Andrew Callus; editing by Michel Rose)

Copyright(c) Thomson Reuters 2016.


Majority of UK CEOs confident about growth prospects

A KPMG survey finds 86 percent of CEOs optimistic about growth prospects


LONDON, Sept 26 (Reuters) – Three-quarters of British company bosses are considering moving operations abroad following the vote to leave the European Union, according to a survey published on Monday.

The KPMG survey of 100 UK chief executives, from companies with revenues between 100 million pounds and 1 billion pounds ($130 million-$1.30 billion), found 86 percent were confident about their company’s growth prospects and 69 percent were confident about the British economy’s growth prospects over the next three years.

However, 76 percent said they were considering moving either their headquarters or their operations outside Britain because of the June 23 “Brexit” vote.

“CEOs are reacting to the prevailing uncertainty with contingency planning,” said Simon Collins, KPMG UK chairman.

“Over half believe the UK’s ability to do business will be disrupted once we Brexit and therefore, for many CEOs, it is important that they plan different scenarios to hedge against future disruption.”

The June vote has created uncertainty over Britain’s future economic and trade relationship with the European Union.

John Nelson, chairman of Lloyd’s of London, told Reuters last week that the insurance market would be ready to move some of its business to the EU as soon as Britain invoked Article 50 of the EU’s Lisbon Treaty, which triggers the start of exit from the bloc.

Aides to Prime Minister Theresa May have suggested she hopes to trigger Article 50 early next year, opening the way for up to two years of negotiations.

Asked what would encourage businesses to continue investing in Britain following the Brexit vote, the majority of CEOs surveyed by KPMG ranked certainty over trade terms as the most important.

Only one CEO said a timetable for triggering the formal divorce process and the subsequent exit was the most important factor.

KPMG said 72 percent of the CEOs surveyed had voted to remain in the EU.

The Brexit vote has hit the British currency, with sterling skidding to a five-week low close against the dollar on Friday, but a Reuters poll this month found Britain is expected to narrowly dodge a mild recession that was widely predicted after the referendum.

More than 20 European business associations and companies interviewed by Reuters said they backed their governments’ position that Britain’s banking sector can only enjoy EU market access post-Brexit if the country still follows the bloc’s rules.

($1 = 0.7708 pounds)

(Reporting by Kylie MacLellan; Editing by Adrian Croft)

Copyright(c) Thomson Reuters 2016.


May rebuffed calls to play bigger role in EU referendum campaign

Image courtesy of DonkeyHotey


Two new books shed light behind the scenes of the lead up to the Brexit vote

LIVERPOOL, England, Sept 25 (Reuters) – Prime Minister Theresa May repeatedly failed to back her predecessor David Cameron in his fight to keep Britain in the European Union and hampered his attempts to rein in migration, according to extracts from two books about the referendum.

May, who served as interior minister under Cameron and succeeded him as prime minister when he resigned after Britain’s vote to leave the EU, backed staying in the bloc but was largely absent from the campaign.

The two books come as May faces the complex task of leading negotiations over Britain’s EU divorce, having divulged little on her intended strategy.

Extracts from a book by Sunday Times political editor Tim Shipman said that May refused to support Cameron in seeking to take a harder line on immigration in his deal with Brussels to reform Britain’s relationship with the EU.

May told Cameron that he should not press ahead with demands for an “emergency brake” to limit the number of EU migrants coming to Britain because Germany would not back it, the newspaper reported.

A separate book written by Cameron’s former head of communications Craig Oliver details more than 10 occasions when May declined to back Cameron during the referendum campaign.

Cameron’s team dubbed her “Submarine May” for disappearing when she was needed, Oliver said.

“Her sphinx-like approach is becoming difficult, with the press questioning which way she will jump,” Oliver wrote in the book, extracts of which were published in the Mail on Sunday newspaper.

Oliver said that Cameron had asked May to back his plan to crack down on migrants coming to Britain to claim social security payments but she issued a statement describing it simply as “the basis for a deal”.

The author also said that Boris Johnson – a leading “out” campaigner and now foreign minister – “wobbled” over backing a Brexit and told Cameron that he would be supporting the leave campaign only nine minutes before announcing it to the media.

In his text message to Cameron, Boris made clear he did not expect to win, saying Brexit would be “crushed”, Oliver said.

(By Kylie MacLellan. Editing by David Goodman)

Copyright(c) Thomson Reuters 2016.


DEBATE: Three months on from Brexit, has it benefitted UK business?

Accountancy software firm heads Ed Molyneux of FreeAgent and Lee Murphy of Pandle debate whether the Brexit vote was a big blow to business


Ed Molyneux, co-founder and CEO of FreeAgent says: “Following the referendum result I believed that ‘Brexit’ would be a big blow to the UK’s micro-business sector and I still believe this to be the case.”

“In the run up to the vote, the overwhelming majority of micro-business owners and freelancers were in favour of the UK remaining in the EU because they didn’t think a ‘Brexit’ would be beneficial for their own businesses or the economy in general.”

“Three months on from the vote, micro-businesses, which comprise around 95% of the UK’s total number of companies, have seen no immediate advantages from Britain’s decision to leave the EU. These businesses are actually in a state of limbo instead, as they are in for a lengthy period of uncertainty while negotiations take place over the terms of the UK’s exit.”

“I would urge the government to be as swift as possible in providing updates about how these discussions are progressing, and give every business owners in the UK clear, up-to-date information about what the effects of Brexit, whenever it does happen, will be on important issues such as trade and tax. British micro-businesses cannot be kept in the dark, given their immense contribution to the economy.”


“Despite the fallout from Brexit many European businesses are still looking to set up shop in the UK,” counters Lee Murphy, owner of Pandle.

“Undoubtedly a few European business owners have been apprehensive about setting up in the UK because of Brexit, but as a firm we’re still taking on a lot of European clients. I believe the impact of the UK leaving the EU will be even less severe in the long term as it’s very unlikely that the EU would prevent reasonably free trade with the UK as it’s the biggest importer of European goods – at around 16% of all European exports.”

“British SMEs are resilient, and in recent years exports from the UK to non-EU countries have grown at a much faster rate than UK goods exports to the EU states. In fact, since 2007 we’ve seen exports of goods to non-EU countries rise by 54%, whilst goods exports to EU countries rose only by 15%.”

“At the moment trade agreements cannot be made with the UK directly, but rather with the EU as a whole. So post-Brexit, it’s likely the UK will make trade deals with preferred partners on terms which UK businesses can benefit from.”

“It’s important that, three months on from Brexit, small businesses don’t lose faith in the British economy and continue to prosper – as they have, and always will.”

“At the moment trade agreements cannot be made with the UK directly, but rather with the EU as a whole. So post-Brexit, it’s likely the UK will make trade deals with preferred partners on terms which UK businesses can benefit from.”

“It’s important that, three months on from Brexit, small businesses don’t lose faith in the British economy, and continue to prosper – as they have, and always will.”