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UK GDP grows to beat predictions

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Gross domestic product grew by just over half a percent in the fourth quarter of 2016, according to figures released today by the Office of National Statistics.

The result edges out the 0.5% predicted by some economists, as well as fears of a post-Brexit slump. “The initial ONS data show the economy ended 2016 with steady growth of 0.6% for the third consecutive quarter,” explained ONS Head of GDP Darren Morgan.

“Strong consumer spending supported the expansion of the dominant services sector and although manufacturing bounced back from a weaker third quarter, both it and construction remained broadly unchanged over the year as a whole.”

Chancellor of the Exchequer Philip Hammond welcomed the news in the context of Brexit. “Every major sector of the economy grew last year, which is further evidence of the fundamental strength and resilience of the UK economy,” he said.

“There may be uncertainty ahead as we adjust to a new relationship with Europe, but we are ready to seize the opportunities to create a competitive economy that works for all.”

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Parliament to vote on Article 50, Supreme Court rules

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The Supreme Court has handed down its ruling on the government’s Article 50 obligations, with Parliament being given a vote to trigger the Brexit process.

The 11-judge court’s majority ruling was led by its president, Lord Neuberger, and has established that “the change in the law required to implement the referendum’s outcome must be made in the only way permitted by the UK constitution, namely by legislation,” the judges said in the summary of their judgement.

“The Supreme Court holds that an act of parliament is required to authorise ministers to give notice of the decision of the UK to withdraw from the European Union.” The Scottish, Welsh and Northern Irish devolved assemblies will not be given a say in matters.

Attorney general Jeremy Wright said that the government is “disappointed” but will comply, while Downing Street reacted: “The British people voted to leave the EU, and the government will deliver on their verdict – triggering Article 50, as planned, by the end of March. Today’s ruling does nothing to change that.”

Labour leader Jeremy Corbyn says that his party will work to amend the Article 50 Bill but not block it, while the Lib Dems will not vote for it without a referendum on the final deal.

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Britain “open for business” says May at Davos

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UK Prime Minister Theresa May addressed trade, globalisation and Brexit at Davos this morning in a keynote World Economic Forum speech.

May, who set out a Brexit strategy for the first time earlier this week, used the opportunity to speak in more general terms about the issues of the day – particularly globalisation and the UK’s place in the world.

“The United Kingdom – a country that has so often been at the forefront of economic and social change – will step up to a new leadership role as the strongest and most forceful advocate for business, free markets and free trade anywhere in the world,” she said.

May also said that the Brexit vote was a choice on the part of voters “to build a truly global Britain” and said that critics and said that international critics have failed to understand voters’ motivation.

She also focused on the pressures facing international institutions. “I believe strongly in a rules based global order. The establishment of the institutions that give effect to it in the mid twentieth century was a crucial foundation for much of the growing peace and prosperity the world has enjoyed since. And the tragic history of the first half of the last century reminds us of the cost of those institutions’ absence,” she said.

May said that Britain is “open for business” but set out a need for better corporate governance and social responsibility if globalisation is to attract popular support. “That is why I have talked a great deal about our country delivering yet higher standards of corporate governance, to help make the UK the best place to invest of any major economy.

“That means several things,” she said. “It means businesses paying their fair share of tax, recognising their obligations and duties to their employees and supply chains, and trading in the right way; companies genuinely investing in – and becoming part of – the communities and nations in which they operate, and abiding by the responsibilities that implies; and all of us taking steps towards addressing executive pay and accountability to shareholders.”

The prime minister concluded by referring to “that great Conservative principle – change in order to conserve”. “I am determined to make sure that centre-ground, mainstream politics can respond to the concerns people have today. I am determined to stand up for free markets, free trade and globalisation, but also to show how these forces can work for everyone,” she said.

This year’s Davos conference concludes tomorrow.

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Murdoch Sky takeover gains momentum

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Deal agreed by 21st Century Fox valued at £11.7bn

Media mogul Rupert Murdoch’s bid to take over Sky via his 21st Century Fox has reached another milestone, with terms being agreed by both sides.

The proposed deal, if completed, will see 21st Century Fox offering £10.75 per share to Sky shareholders, in an acquisition that is expected to complete by the end of 2017 according to the American company’s Nasdaq statement.

“As the founding shareholder of Sky, we are proud to have participated in its growth and development,” 21st Century Fox said. “The strategic rationale for this combination is clear. It creates a global leader in content creation and distribution, enhances our sports and entertainment scale, and gives us unique and leading direct-to-consumer capabilities and technologies. It adds the strength of the Sky brand to our portfolio, including the Fox, National Geographic and Star brands.”

The deal is valued at £11.7bn in order to acquire the 61% of Sky not yet owned by 21st Century Fox. It has already sparked intense political debate, five years on from the phone-hacking scandal that ended Murdoch’s previous attempt to fully acquire the broadcaster.

Sky’s deputy chairman, Martin Gilbert, added detail to the proposal. “The Independent Committee, which was formed with the express purpose of protecting independent shareholders’ interests in relation to the proposal from 21st Century Fox, has given full consideration to the fundamental value and prospects for the Sky Group,” he explained.

“While the Independent Committee remains confident in Sky’s long-term prospects, as laid out in detail at our recent investor day in October, we, supported by our advisers, believe 21st Century Fox’s offer at a 40% premium to the undisturbed share price will accelerate and de-risk the delivery of future value for all Sky Shareholders. As a result, the Independent Committee unanimously agreed that we have a proposal that we can put to Sky shareholders and recommend.

“The Independent Committee also notes 21st Century Fox’s track record in growing businesses and its ability to continue the development of Sky across Europe, in a world where entertainment and distribution are converging. 21st Century Fox’s ownership will support the delivery of Sky’s strategy and long-term growth, ensuring that it remains at the forefront of Europe’s creative industries.”

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7 things you need to know about Singles’ Day

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The Chinese retail event is set to go global as western brands want a piece of the massive sales

Set to become the new Black Friday, or Cyber Monday, the Singles’ Day retail event is gathering pace in China with huge sparks in retail sales. It’s going to go global; here’s what you need to know:

  1. Originating in Nanjing University in 1993 Singles’ Day was originally celebrated at various universities in the Chinese city during the 1990s. The date, 11/11, was chosen as the 1 is symbolic of singledom.
  2. Alibaba Group launched the retail event in 2009 and trademarked the Chinese characters for ‘Double 1′ in December 2012. The Singles’ Day retail event encourages single people to treat themselves.
  3. Dom Joseph, CEO of Captify, the leading insights-driven advertising technology company, predicts UK retailers will seize the opportunity to make Singles’ Day a global retail event. He says, “Top British brands, who have already jumped into the online retail market in China for Singles’ Day, such as Marks & Spencer, have seen huge sales surges and are already reaping the rewards that the day offers.”
  4. Sports stars David Beckham and Kobe Bryant attended the countdown to today’s event, although headline act Katy Perry pulled out at the last minute citing a “family” issue.
  5. Today (11/11/16) Alibaba’s sales have already surpassed $5 billion in the first hour. In a live microblog, Alibaba’s chief executive Daniel Zhang said, “Back in 2013, 35 billion yuan ($5.14 billion) was our one-day gross merchandise volume, now we can achieve it in one hour.”
  6. So far this year, 83% of Alibaba’s sales were from mobile devices.
  7. Gross merchandise volume (GMV) from this year’s event is forecast to come in at $20 billion, up from last year’s $13.36 billion.

 

What’s really keeping corporate treasurers awake at night?

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A new report from the Economist Intelligence Unit reveals the top concerns of treasurers worldwide

Against a challenging macroeconomic and regulatory backdrop, corporate treasury is expanding its company-wide responsibilities, according to Managing risk in challenging economic times, a white paper published today (October 12th) by The Economist Intelligence Unit (EIU) and sponsored by Deutsche Bank. The report builds on a survey of 150 corporate treasurers and 150 CFOs. Respondents were drawn from across the world, with 100 in the Americas, 100 in Europe, the Middle East and Africa, and 100 in Asia-Pacific.

GLOBAL GROWTH

Four in ten survey respondents list global economic growth among the top three most serious macro risks. More than half (55%) acknowledge that their function struggles to keep abreast of the rapidly changing macroeconomic environment. The difficult macroeconomic climate notwithstanding, 80% still hold fair or large amounts of excess cash. Hence, “expanding or modifying investment strategies for excess cash” is the preferred way to adapt treasury management strategies in light of low or negative interest rates in many markets.

LOW INTEREST RATES

Low interest rates are one long-term consequence of the financial crisis; the wave of financial regulation is another. Almost 40% think the workload resulting from regulation will remain unchanged over the next 12 months, and another 40% expect that it will actually increase.

CYBER RISK

More than seven in ten respondents say the adoption of new technologies is gaining momentum in their company’s treasury department. However, interviews conducted for the white paper reveal that treasurers are reluctant to embrace new technologies. Almost seven in ten survey respondents are concerned about cyberattacks, for example.

Martin Koehring, the white paper’s editor, said: “The macroeconomic, regulatory and technological challenges are not just shaping the outlook of corporate treasurers—they are also changing how the function is interacting with the rest of the business. Our white paper confirms that partnering with the business has increased in areas such as mergers & acquisitions and working-capital management. Encouragingly, more than eight in ten CFOs say that leadership teams now increasingly consult corporate treasurers on strategic questions.”

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ECB says China and Brexit pose risks to global growth

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Big emerging market economies and Britain’s decision to leave the EU set to affect global growth

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FRANKFURT, Sept 22 (Reuters) – Global growth is likely to accelerate next year but the outlook is fraught with risks, particularly from big emerging market economies including China, and Britain’s decision to leave the EU, the European Central Bank said on Thursday.

Global growth will motor along but the recovery will be gradual and uneven with heightened uncertainty, even as the United States, the world’s biggest economy, is expected to recover, the ECB said in a regular economic bulletin.

“A key downside risk is a stronger slowdown in emerging markets, including China,” it said. “A tightening of financing conditions and an increase in political uncertainty could exacerbate existing macroeconomic imbalances, denting confidence and resulting in an unexpectedly strong slowdown.

The bulletin was largely consistent with the outlook presented at the ECB’s September rate meeting. “Policy uncertainty surrounding the economic transition in China could lead to an increase in global financial volatility,” the ECB said. “Continued emphasis on rebalancing the economy – including reductions in overcapacity in some heavy industries and action to address non-performing loans – is expected to result in a decline in the pace of economic growth,” it added.

Although Brexit has so far had limited impact and some analysts have lifted their gloomy forecasts, the ECB warned that the worst may not be over. “The economic implications of the United Kingdom leaving the European Union could be worse than expected, increasing uncertainty and negatively affecting trade, business confidence and investment,” it said. Although monetary and fiscal accommodation should support the British economy, the institutional and political uncertainty surrounding the negotiations are expected to dampen domestic demand, particularly investment, even if the short-term impact has been modest, the bank said.

Reporting by Balazs Koranyi.

Copyright(c) Thomson Reuters 2016.

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