Treasury Minister Jim O’Neill resigns

Former Goldman Sachs chief economist Jim O’Neill steps down from finance ministry role

LONDON, Sept 23 (Reuters) – High-profile British Treasury Minister Jim O’Neill, a former Goldman Sachs chief economist, has resigned from his role at the country’s finance ministry, the government said on Friday.

O’Neill is a member of the unelected upper house of parliament and worked in the finance ministry as Commercial Secretary, with responsibilities including infrastructure policy and promoting Britain as a source of foreign direct investment.

The Financial Times reported in July that O’Neill could quit his post over new Prime Minister Theresa May’s approach to Chinese investment which appeared less welcoming than that of her predecessor David Cameron.

One of the areas that O’Neill worked on was the Northern Powerhouse project to improve infrastructure in northern England and which was aimed at attracting investment from China.

In his resignation letter to May, O’Neill said the case for the project to be “at the heart of British economic policy is even stronger following the referendum, and I am pleased that, despite speculation to the contrary, both appear to be commanding your personal attention.”

(Writing by William Schomberg; editing by Stephen Addison)

Copyright(c) Thomson Reuters 2016.

Is Bank of England governor planning to step down?

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

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.


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.


Senior bank official supports code of conduct for currency markets

Bank of England’s Chris Salmon believes banks and financial institutions will adhere to new code of conduct

LONDON, Sept 23 (Reuters) – Adherence to a new code of conduct for currency markets will be voluntary but signing public attestations that they are keeping to it will focus the minds of senior managers at banks and other institutions, a senior Bank of England official said on Friday. Attempts by banks to rig currency markets prompted regulators to revamp and strengthen codes of conduct for forex dealers. In a speech made to the ACI association of currency dealers in London on Wednesday, the bank’s executive director for markets, Chris Salmon, also pointed to the “supportive” nature of UK banking regulators’ new senior managers regime for implementation of the new global guidelines. But he stopped short of saying that managers would be held legally accountable for their firms keeping to the code, drawn up by a working group of the Bank for International Settlements over the past year. “A sceptic might question the prospects for the success of this initiative,” Salmon said in his speech that was released to the media on Friday. “In a market where information asymmetries have been exploited for selfish motives – what good can a voluntary code of conduct really achieve?” He laid out several reasons why he believed banks and financial institutions would keep to the code in years to come, including the UK Senior Managers and Certification Regime, soon to be extended beyond banks to all of Britain’s regulated firms. He said firms should be able to demonstrate publicly that their behaviour and practices in the FX market are in line with the Code’s principles. That might include the development of an industry kite-mark which firms would have to earn. “The widespread use of a common public attestation could be a powerful tool in this respect,” he said. “It would provide a strong signal of a firm’s commitment to following good practices and help focus the mind of the firm’s senior management who would be asked to sign the attestation.”

(Writing by Patrick Graham)

Copyright(c) Thomson Reuters 2016.


Sterling slips backwards again as week ends

Brexit worries keep pressure on sterling

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.


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

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

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.


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.

Shake up of the C-suite at Rolls Royce

Rolls-Royce named Stephen Daintith as its new finance officer

LONDON, Sept 22 (Reuters) – Rolls-Royce named Stephen Daintith as its new finance officer on Thursday as CEO Warren East completed a shake-up of his senior executive team tasked with turning around the aerospace and defence company.

Daintith, who is currently CFO at Daily Mail and General Trust, will replace David Smith in 2017, Rolls-Royce said in a statement on Thursday.

Daintith will join Rolls as East, who took the reins in July 2015, tries to streamline the company after difficulties in its aero-engine and marine businesses mean that profit is expected to halve this year.

Smith was appointed by East’s predecessor John Rishton in 2014 and will leave Rolls-Royce to pursue other business interests, the company said.

Daintith, 52, is Rolls-Royce’s second top management appointment in as many weeks, after the company said earlier in September that British high-speed rail boss Simon Kirby would be its new chief operating officer.

Shares in Rolls traded up 1.5 percent to 737 pence at 1208 GMT, recovering earlier losses of as much as 2 percent.

An analyst who declined to be named said Smith’s going was not a huge surprise. “David was never Warren’s hand-picked guy for the job. Warren’s got a massive job on his hands to transform Rolls, he needs to make sure his immediate team he’s got 110 percent confidence in them being the right people,” the analyst said.

But some analysts said that the departure of Smith, who was appointed in November 2014, was a surprise, given that he has been credited with some of the success of the turnaround so far, raising doubts about Rolls being on a more stable footing.

“It’s one of those things where people were of the view where we were getting to more of a steady state situation,” Barclays analyst Phil Buller said.

Daintith, at the Daily Mail publisher since 2011, having previously been CFO of Times publisher News International, will now be responsible for the finances of Britain’s pre-eminent engineering company.

Rolls has already started a process of preparing investors for a transition to new accounting system, IFRS 15, in 2018.

CEO East said in the statement that Daintith’s record of achievement in “change management” would be particularly relevant to Rolls-Royce.

A spokesman for Rolls-Royce said that the company was also in the process of recruiting a director of strategy and marketing and another person to strengthen its digital capabilities.

Daintith will be paid an annual salary of £680,000 pounds at Rolls-Royce plus a potential performance share award of 225 percent of his salary.

(Reporting by Sarah Young, editing by James Davey and Elaine Hardcastle)

Copyright(c) Thomson Reuters 2016.

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

Top rate-setter opposes further interest rate cuts

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.


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.”


ECB says China and Brexit pose risks to global growth

European Central Bank building in Frankfurt


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

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.