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Online retailer reports more than doubling of profits

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British online fashion retailer Boohoo.com celebrates strong revenue growth

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LONDON, Sept 27 (Reuters) – British online fashion retailer Boohoo.com on Tuesday upgraded its sales guidance for the third time in three months as it reported a more than doubling of first-half profit on the back of strong revenue growth driven by new customers.

The firm, which designs, sources and sells own-brand clothing, shoes and accessories online to a core market of 16-24 year-olds in Britain and globally, said on Tuesday it now expected revenue growth for the full year of 30-35 percent.

In August the group had upgraded its forecast to 28-33 percent.

Boohoo floated at 50 pence a share in 2014 but the stock was hammered after a profit warning in January last year. Its shares have since recovered strongly, closing Monday at 97.8 pence, valuing the business at 1.1 billion pounds.

For the six months to Aug. 31 Boohoo made core earnings of 16.5 million pounds ($21.4 million), up 117 percent, on revenue up 40 percent to 127.3 million pounds, reflecting a 28 percent rise in active customers to 4.5 million.

Gross margin fell 480 basis points to 55.3 percent, mainly reflecting planned price cuts and promotions.

Boohoo said comparative sales numbers for the second half are tougher than for the first. Significant investment in marketing and in IT is also planned for the second half.

It forecast a core earnings margin for the full year of about 11 percent.

($1 = 0.7696 pounds)

(Reporting by James Davey, Editing by Paul Sandle)

Copyright(c) Thomson Reuters 2016.

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Mortgage approvals hit 19-month low

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British banks approved 36,997 mortgages for house purchases last month, down from 37,672 in July

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LONDON, Sept 26 (Reuters) – Britain’s housing market showed signs of slowing in August with the number of mortgages approved by banks falling to its lowest level since January 2015 and analysts said they expected further weakness ahead as Brexit uncertainty dampens demand next year. British banks approved 36,997 mortgages for house purchases last month, down from 37,672 in July and 21 percent lower than in August 2015, the British Bankers’ Association said on Monday. The figures extended a slowdown which began at the start of this year ahead of the introduction of a new tax on homes bought by landlords in April and Britain’s referendum decision to leave the European Union in June. “The outlook for stagnation in households’ real incomes next year, as inflation picks up and hiring slows sharply, points to a prolonged period of weakness in mortgage lending ahead,” Samuel Tombs, an economist at Pantheon Macroeconomics, said. A rise of 1.5 percent in the average mortgage value in August pointed to a slowdown in house price growth over coming months, Tombs said. Howard Archer, an economist at IHS Global Insight, said house prices would likely be flat until the end of 2016 and fall by 3 percent in 2017 as the start of talks over Britain’s exit from the EU exacerbated uncertainty about the economic outlook. The BBA said growth in net credit card lending slowed in August, rising by 136 million pounds compared with an increase of 290 million pounds in July. But consumer borrowing overall remained strong with personal loans and overdrafts rising by a net 343 million pounds, the biggest increase since May, underscoring how consumers appear to have taken the Brexit vote in their stride. The data was collected after the Bank of England cut interest rates to a new record low of 0.25 percent on Aug. 4. The BBA figures do not include lending by mutually owned building societies, which accounts for around third of mortgages. The next release of the more comprehensive Bank of England lending data is due on Thursday.

(Reporting by Peter Hobson; editing by William Schomberg)

Copyright(c) Thomson Reuters 2016.

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Sterling trading near a five-week low

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Sterling continues to fall after Johnson’s “divorce” comments last week

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LONDON, Sept 26 (Reuters) – Sterling was weaker on Monday, trading near a five-week low, as lingering worries over Britain’s exit from the European Union drove investors to sell the currency that has steadily lost ground in the past three straight weeks.

Sterling was knocked down late on Thursday after British Foreign Secretary Boris Johnson said he expected formal divorce proceedings between Britain and the EU to begin early next year, and that two years may not be needed to negotiate a deal.

It continued to fall through Friday, losing more than 1 percent to touch $1.2915 – just over a cent higher than the three-decade low of $1.2798 that sterling hit in July, in the wake of June’s shock vote for Brexit.

On Monday, it was down 0.2 percent at $1.2947 despite a subdued greenback. Against the euro, the pound was down 0.2 percent at 86.72 pence, having hit a five-week low of 86.78 pence earlier in the day.

“The comments from Johnson around the timeframe for Article 50 to be invoked and that the Brexit negotiations do not need to take two years have had a detrimental impact on sterling,” said Jameel Ahmad, chief market analyst at FXTM.

Investors worry that an exit from the single market will drag the UK into a recession and blow out Britain’s ballooning current account deficit, already amongst the highest in the developed world at around 5 percent of gross domestic product. A wider current account deficit tends to lead to a lower currency.

On Thursday, Britain will release second quarter current account deficit data and forecasts are for a slight narrowing the gap.

“The current account data may underline once again that a demand side economic rebound increases external funding risks should the supply side of the British economy weaken from here,” Morgan Stanley said in a morning note.

“This may happen should Brexit talks not focus on the UK maintaining full market excess to the EU. Slower business investment tends to hit an economy with a delay given the multiple months’ lag between business investment and execution.”

Sterling had gained around 5 percent from its July low as of early September, as data showed the economy holding up relatively well after the Brexit vote. But after parliament returned from its summer recess, Brexit worries have come back into investors’ radar and has weighed on sentiment.

(Reporting by Anirban Nag. Editing by Toby Chopra)

Copyright(c) Thomson Reuters 2016.

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Majority of UK CEOs confident about growth prospects

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

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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.

Record visitor numbers recorded in July

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UK sees record visitor numbers in July after EU exit vote

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LONDON, Sept 23 (Reuters) – Britain saw a record number of foreign visitors in July while spending by British tourists abroad fell for the first time in more than a year, according to the first figures since the country voted to leave the European Union. With their spending power helped by a slump in the pound after the Brexit referendum, some 3.8 million foreigners visited Britain in July, the Office for National Statistics said. It was the highest monthly total on record and 2 percent more than a year earlier. Sterling’s sharp fall against the dollar, euro and other currencies since the June 23 referendum is expected to boost the UK’s appeal as a tourist destination and encourage more Britons to holiday at home. “We have an immediate and real opportunity to promote Britain as a great value destination, particularly in our long-haul high-spending markets such as China and the U.S.,” said Sally Balcombe, the chief executive of Visit Britain. Visit Britain, a public body which promotes tourism, was not immediately able to comment on how much of July’s gain in visitor numbers was linked to the weaker currency. London’s West End shopping district has reported increased spending by shoppers from around the world since the referendum. Visit Britain said 2015 had been a record year for tourism to Britain with 36.1 million visits, 5 percent up on 2014, and spending 1 percent higher at 22.1 billion pounds. July and August are the busiest months for tourism to Britain and July’s 3.8 million foreign visitors spent 2.53 billion pounds, 4 percent more than in 2015. Britons made 7.0 million trips abroad in July, 3 percent more than a year earlier. But on a seasonally adjusted basis, spending was down by 1 percent, the first year-on-year decline since February 2015. On Wednesday, the Bank of England said it had received reports from businesses of a greater number of British people holidaying at home, and an increase in foreign visitor numbers. The increase in spending by tourists in Britain could be bad news for other countries. According to tax-free shopping firm Global Blue, tourist spending on luxury goods in Britain in August rose by 36 percent while in France it fell by 20 percent.

(Reporting by David Milliken; Editing by William Schomberg/Mark Heinrich)

Copyright(c) Thomson Reuters 2016.

 

Is Bank of England governor planning to step down?

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Canadian Mark Carney to announce before year end whether he will step down or extend his stay

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LONDON, Sept 23 (Reuters) – Mark Carney has been taking the big decisions for Britain’s economy for the past three years, but his next one will be much more personal.

The Canadian has said he intends to say before the end of this year whether he will stick to his original plan to step down as Bank of England governor in less than two years’ time, or extend his stay until 2021.

Above all, he will have to decide whether he wants to stay for the task of steering Britain’s economy through what is likely to be a period of upheaval as it leaves the European Union and begins life outside the bloc.

Some think that is the kind of job that Carney – who was hailed by the man who hired him, former British finance minister George Osborne, as the “outstanding central banker of his generation” – would relish.

When his move from the Bank of Canada to the BoE was announced in 2012, Caney said he was “going to where the challenges are greatest” at a time when Britain was still suffering from the hangover of the global financial crisis.

Richard Barwell, a former BoE economist, said the even bigger challenge of Brexit would appeal to Carney’s sense of ambition. “He wants to be in the spotlight and on the world stage,” Barwell, who now works at BNP Paribas, said.

Even if he privately has doubts about staying, Carney might find it hard to leave London after five years, given the expected Brexit shock to the economy. “Walking away at time of crisis might not be seen as the done thing,” Barwell said.

When Carney agreed to come to London, he secured an agreement from Osborne that he would run the BoE between 2013 and 2018, with an option to serve out a full eight-year term if he wanted to take it up.

Carney, the father of four school-age children, said then that he had personal and professional reasons for staying for five years rather than eight.

He quickly began an overhaul of the 322 year-old BoE, making its monetary policy and bank supervision work more closely, addressing one of the key lessons of the financial crisis.

But in January, Carney left the door open to a longer term, saying he would decide by the end of this year whether he would seek to stay until 2021.

Commentators were quick to link the change in tone to the diminished prospects of a switch into politics for Carney in his native Canada, where Justin Trudeau had just been elected as the country’s new, young prime minister.

Under the terms of his appointment, Carney can choose to serve out the full eight years without the approval of Britain’s new finance minister Philip Hammond who, in any case, has said spoken highly of the BoE’s smooth response to the Brexit shock and said Carney was doing “an excellent job.”

Chris Philp, a Conservative lawmaker who sits on the Treasury Committee in parliament, which oversees the work of the BoE, said he wanted to see Carney stay until 2021.

“He has done a good job at the Bank since his appointment, and the relatively smooth passage – so far – post-Brexit vote is in part attributable to him. I would like to see him stay longer,” Philp said.

BREXIT BLUES?

The lack of an obvious next move for Carney could be a factor that persuades him to stay longer in London.

In fact, one suitably big job – running the International Monetary Fund – is due to become available only in 2021, which would coincide with the end of a full eight-year term for Carney at the BoE.

However, some observers think that June’s Brexit vote has made it more likely that he will decide to leave the BoE in June 2018, as originally planned.

Before the referendum, Carney made it clear he thought leaving the EU would be bad for Britain’s economy, angering some Brexit campaigners, and last week he described the day after the “Leave” victory as his toughest.

Former finance minister Nigel Lawson kept up the attacks on Thursday, saying Carney’s involvement in the debate had been “disgraceful” and he should quit. But most of his critics have toned down their attacks since the vote.

With the economy now expected to slow sharply in the next few years because of the uncertainty caused by Britain’s planned departure from the EU, the BoE is facing the prospect of a potentially long exercise in damage control.

At the same time, the ability of the BoE to come up with a lot more stimulus for the economy looks limited.

Interest rates stand at nearly zero and Carney has repeatedly said he does not favour cutting them into negative territory although it does have the option of ramping up its 435 billion-pound bond-buying programme even further.

In another potential disappointment for Carney, Brexit will also diminish Britain’s influence over EU rule-making in the financial services industry, a subject close to his heart.

“Does he really want to preside over an additional three years of decline? Probably not,” an observer of Carney said.

(By William Schomberg. Additional reporting by William James; Editing by Jeremy Gaunt)

Copyright(c) Thomson Reuters 2016.

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Sterling slips backwards again as week ends

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Brexit worries keep pressure on sterling

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LONDON, Sept 23 (Reuters) – Sterling slipped back towards $1.30 on Friday, ending the week in much the same place as it started, with worries over Britain’s exit from the European Union keeping pressure on the currency.

The pound had jumped back over $1.31 on Thursday, after Bank of England policymaker Kristen Forbes said she saw no case for a further cut in interest rates, after the Bank slashed them to a record low of 0.25 percent last month.

But it slipped later in the day and continued to struggle on Friday, after British Foreign Secretary Boris Johnson said he expected the formal divorce proceedings between Britain and the EU to begin early next year, and that two years may not be needed to negotiate a deal.

Sterling hit a three-decade low below $1.28 in the wake of Britain’s shock Brexit vote but had climbed about 5 percent as of early September as data showed the economy holding up relatively well.

After parliament returned from its summer recess, however, bringing Brexit back into the headlines, worries about the fallout have weighed on sentiment and the currency alike.

“What we’ve always said is that with no news on Brexit, sterling is able to recover somewhat, but the uncertainties are still there,” said Commerzbank currency strategist Esther Reichelt. “We’ll have to see whether the economy maintains this positive sentiment when we’re proceeding with Brexit.”

Reichelt added, however, that some hard facts – rather than worries or uncertainties – would be needed in order to justify a break below July’s $1.2798 low.

Sterling fell 0.6 percent on Friday to $1.3005, leaving it flat on the week. It also slipped 0.6 percent to 86.17 pence per euro, 0.3 percent weaker than at the start of the week.

“It almost feels like (sterling) is finding an even tighter trading range in what is an already tight trading range,” said Western Union’s head of corporate treasury sales, Tobias Davis.

(By Jemima Kelly. Editing by Hugh Lawson)

Copyright(c) Thomson Reuters 2016.

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Hinkley Point nuclear power plant contracts not enough to save UK steelmakers

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Survival of the British steel industry needs more infrastructure projects, amid worries that Chinese-backed Hinkly Point project will be supplied by Chinese steelmakers

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LONDON, Sept 22 (Reuters) – UK steelmakers will likely get lucrative deals to supply the 18 billion pound nuclear power plant at Hinkley Point, not enough though to secure the future of Britain’s troubled steel sector, industry experts say.

UK steel firms are slowly emerging from a crisis that has seen some 5,000 jobs, or a fifth of the workforce, axed since last October, thanks primarily to rising steel prices and a falling pound making exports more competitive.

Britain approved the controversial, China-backed Hinkley Point project last Thursday, firing optimism its construction will also help arrest the steel sector’s decline.

But to ensure its ultimate survival, the industry needs more infrastructure projects that use British steel, lower energy costs and crucially, more measures to prevent dumped or subsidised steel from the likes of China from entering the country.

“It’s good (news) … but I don’t think a Hinkley Point can sustain British steelmaking for the next decade,” Ben Orhan, senior economist at consultants His, said.

EDF, the French utility that will build Hinkley Point C in southwest England, has said more than 60 percent of the project’s construction spend will go to British companies.

Wales-based Express Reinforcements was named preferred bidder to supply Hinkley Point with 200,000 tonnes of reinforcing steel, which it will source from Celsa Steel UK.

This is 25 times more steel than was used in London’s Olympic Stadium and is worth some $84 million, according to Reuters calculations.

EDF declined to comment on Hinkley Point’s total steel needs, but even if, as some experts expect, the project will require at least a million tonnes of steel, this will be spread over nearly a decade.

That is a fraction of the 10.8 million tonnes of steel produced last year in the UK, according to the World Steel Association.

TRADE DEFENCES

EDF also declined to comment on whether Chinese steelmakers will supply the project, though some worry this might be the case given Hinkley Point is backed by $8 billion worth of Chinese funding.

The European Union has ramped up trade defences in steel over the past couple of years. It currently has 37 anti-dumping and anti-subsidy measures in place for steel products, 15 of them concerning China.

Since April, UK government rules mandate that all public sector projects must consider the social and environmental impact of the steel they source, and cannot just opt for the most cost-effective bidder.

“This is the first major project announced since the (government) procurement rules changed. As such it is the first test for government,” Gareth Stace, head of industry group UK Steel, said.

The UK government was not immediately available to comment on how it will enforce its rules as regards Hinkley Point.

EDF has said the largest forgings, used in the nuclear reactors, will be procured overseas as UK steelmakers do not produce them.

An industry source said French engineering group Areva and a Japanese firm will supply the forgings. EDF has a controlling stake in Areva NP, the group’s reactor business.

Areva was not immediately available to comment.

Tata Steel UK, Britain’s largest steelmaker, said it has the capacity to supply much of the high-quality steel required for Hinkley Point.

“We hope the wider value of using local supply for projects like this is fully taken into account,” a Tata spokesman said.

The UK’s Liberty House Group said it will look to supply products like plates for Hinkley, while British Steel, owned by Greybull Capital, makes construction steel ‘sections’ and is expected to bid. It was not immediately available to comment.

EDF estimates it will need 600,000 embedment plates and about 50,000 tonnes of structural sections.

“Whenever something big comes up people get excited but we need a multitude of infrastructure projects,” a UK-based steel industry source said. “No one project is ever going to solve an industry’s problem.”

(By Maytaal Angel. Additional reporting by Susanna Twidale; editing by Pratima Desai and Susan Thomas)

Copyright(c) Thomson Reuters 2016.

Bank of England’s Forbes sees no case for further rate cut

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Top rate-setter opposes further interest rate cuts

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LONDON, Sept 22 (Reuters) – Bank of England policymaker Kristin Forbes said she did not yet see a case for a further interest rate cut to help Britain’s economy after June’s vote to leave the European Union, putting her at odds with the majority of her fellow rate-setters.

Forbes, an external member of the BoE’s Monetary Policy Committee, last month voted in favour of a cut in rates to a record low 0.25 percent but opposed restarting purchases of government bonds.

Last week the BoE said the economy appeared to be slowing less rapidly in the short term than it expected in August, but it also said most policymakers still thought the longer-term outlook warranted another rate cut later this year.

In a speech due to be delivered on Thursday, Forbes said she believed August’s rate cut and measures to support bank lending were probably sufficient for now.

“The initial effect on the UK economy of the referendum has been less stormy than many expected,” she said. “Looking forward, I am not yet convinced that additional monetary easing
will be necessary to support the economy,” she added.

(Writing by David Milliken; editing by William Schomberg)

Copyright(c) Thomson Reuters 2016.