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No ‘rationalisation’ at Vauxhall, says Business Secretary

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UK Business Secretary Greg Clarke has claimed that GM-owned carmaker Vauxhall’s UK future is secure.

“There is some way to go in discussions between GM and PSA but I was reassured by GM’s intention, communicated to me, to build on the success of these operations rather than rationalise them,” he said having met General Motors president Dan Ammann amid reports of a sale of Vauxhall and Opel to the parent company of Peugeot and Citroen.

“We will continue to be in close contact with GM and PSA in the days and weeks ahead,” said Clark.

GM was more cautious in its announcement: “While we have no definitive news to report at this time, we can affirm that our objective in exploring opportunities with PSA Group is to build on the success of Opel Vauxhall and to put the business and the operations in the strongest possible position for the future. We look forward to engaging with our stakeholders as part of these ongoing discussions,” it said.

The proposed deal is facing union opposition and political uncertainty, with details of the plan still thin after news of takeover talks emerged earlier this week.

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IFS predicts more spending cuts and low growth

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The Institute for Fiscal Studies has announced its Green Budget, with predictions and analysis highly critical of the UK economy.

The London-based think tank predicts that sharp spending cuts are due to arrive before the next election, with tax rising to a greater proportion of national income than has been seen since the mid-1980s: the IFS says that spending cuts and tax rises will continue into the 2020s.

The report was compiled with analysis from Oxford Economics, which expects a “relatively disappointing” 1.6% GDP growth this year, and 1.3% growth in 2018, with wages almost static.

“For all the focus on Brexit the public finances in the next few years look set to be defined by the spending cuts announced by George Osborne,” explained IFS director Paul Johnson. “Cuts to day-to-day public service spending are due to accelerate while the tax burden continues to rise. Even so, the new chancellor may not find it all that easy to meet his target of eliminating the budget deficit in the next parliament. Even on central forecasts that is going to require extending austerity towards the mid-2020s. If the economy does less well than hoped then we may see yet another set of fiscal rules consigned to the dustbin.”

Andrew Goodwin, Oxford Economics’ lead UK economist, said that the UK economy has thus-far achieved solid growth – but that it has been almost entirely reliant on the consumer. “With spending power set to come under significant pressure from higher inflation and the welfare squeeze, the consumer will not be able to keep contributing more than its fair share. Exports should be a bright spot, but overall a slowdown in GDP growth appears likely.”

“If the government is able to agree a transitional arrangement with the EU and make progress on a free-trade agreement then the impact of Brexit is likely to be fairly modest within our forecast horizon of 2021. However, the negative effects of leaving the single market and the customs union are likely to become clearer over time and we estimate that the new trading arrangements could reduce UK GDP by around 3% by 2030, compared with remaining in the EU. Should we fail to secure a free-trade agreement then the outcome is likely to be worse still.”

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Shell in major North Sea oilfield selloff

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Petrochemicals giant Shell has agreed to sell off a major tranche of its North Sea oilfield holdings to private-equity firm Chryasor in a deal valued at $3.8bn.

The deal, which is expected to close in the second half of the year, involves the sale of the Buzzard, Beryl, Bressay, Elgin-Franklin, J-Block,  Greater Armada cluster, Everest, Lomond and Erskine holdings, plus a 10% stake in Schiehallion.

The holding to be sold represents 115 thousand barrels of oil equivalent per day (kboe/d), with the Shell’s total North Sea production last year coming in at 211 kboe/d. “Following completion, Shell will retain a significant, more focused and strengthened presence in the UK North Sea, with production from the Schiehallion redevelopment and Clair Ridge project expected to come onstream,” the company said in a statement.

“Shell has a long and proud history in the UK North Sea, to which we remain committed,” said the company’s upstream director, Andy Brown. “This deal complements the great strides we have made over the last two years in improving the competitiveness of our UK upstream business.

“We believe this deal is a vote of confidence in the UK North Sea and offers proof that the industry’s increasing competitiveness, and improvements to the fiscal and regulatory regime, are starting to produce positive results. It will deliver value to Shell, Chrysaor and the UK as a whole, enabling us to continue to strengthen and optimise our UK portfolio and providing a springboard for Chrysaor to bring new investment and growth into the basin.

“It also contributes to the UK’s goal of maximising economic recovery of oil and gas from the UK North Sea, which will continue to be a source of energy, and revenue, for the country for many years to come.”

The deal will see around 400 staff move from Shell to Chryasor in a deal that is subject to partner and regulatory approvals.

“This deal shows the clear momentum behind Shell’s global, value-driven $30bn divestment programme,” said CFO Simon Henry. “It builds on recent upstream divestments in the Gulf of Mexico and Canada. It is also consistent with Shell’s strategy to high-grade and simplify our portfolio following the acquisition of BG, to ensure the company represents a world-class investment case.

“Importantly, the value here represents a profit against the book values of the assets, and a breakeven oil price above that for the BG acquisition.”

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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.”

UK among least corrupt countries, according to global watchdog

The UK has emerged as the tenth least corrupt country in the world, according to the latest Transparency International report.

The tenth place ranking, which the UK shares with Germany and Luxembourg, comes as the three countries have been awarded a score of 81. Regular high-achiever Denmark, which heads the list again, has a score of 90.

“In too many countries, people are deprived of their most basic needs and go to bed hungry every night because of corruption, while the powerful and corrupt enjoy lavish lifestyles with impunity,” said Transparency International chair José Ugaz.

Further down the list, the US occupies 18th position, Ireland 19th, France 23rd and Russia 131st. Bottom of the table is Somalia, with a score of just 10. The global average is 43, and there is a strong link between corruption and inequality.

“The interplay of corruption and inequality also feeds populism,” Transparency International reports. “When traditional politicians fail to tackle corruption, people grow cynical. Increasingly, people are turning to populist leaders who promise to break the cycle of corruption and privilege. Yet this is likely to exacerbate – rather than resolve – the tensions that fed the populist surge in the first place.”

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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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Theresa May’s speech: five things we learned

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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.

How many of your staff want to be their own boss?

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A new report suggests 10% of Britons want to start their own business this year

Research commissioned by cloud accounting software firm FreeAgent found that 10% of respondents plan to start their own business in 2017. With 31.76 million people currently working in the UK, according to recent Office for National Statistics (ONS) figures released in Decemberthat means 3.2 million more Brits are expected to become their own boss by 2018.

Even more employees dream of being their own boss on a longer time scale, with 54% saying they would like to go out on their own at some point in their career.

More females seem to have been bitten by the entrepreneurship bug, with 11% of women, versus 8% of men, wishing to be business owners, with female respondents citing a need for a better work/life balance as their motivation, while  27% of women, in comparison with 16% of men, are in pursuit of fitting work around their family commitments.

Male respondents were more focused on increased earning potential; increased earnings is one of the key drivers for setting up their own business for 41% of men, in comparison with 34% of women.

Other reasons for striking out alone included wanting to choose what work they do (51%), earning more money (37%), following their passion (36%) and having a greater sense of achievement (35%).

Age also appears to be a factor, with the 18-24 age category more keen to be self-employed; 67% of respondents in this age group wish to work for themselves, the largest percentage of any generation.

Ed Molyneux, CEO and co-founder of FreeAgent, said: “Starting your own business can be an extremely rewarding, if daunting, move for people to make with their career – and it’s clear from our research that a significant number of British workers are considering taking this leap into self-employment in 2017.

“However, while it’s very pleasing to see so many would-be entrepreneurs thinking about going solo, it’s important for any new business owner to make sure they are fully prepared before they start up. One of the main reasons that new businesses fail is because they cannot maintain a healthy cash flow, so drawing up a detailed business plan and staying on top of your finances is key if you want to make your venture a success.”

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UK supermarkets report positive Christmas trading results

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There is good news for Tesco, M&S and Morrisons as Christmas sales figures and Kantar market share data have been released.

Tesco has reported a 0.7% rise in the UK, as CEO Dave Lewis explained: “We are very encouraged by the sustained strong progress that we are making across the group. In the UK, we saw our eighth consecutive quarter of volume growth and delivered a third successful Christmas.

“Our fresh food ranges proved particularly popular, outperforming the market with great quality, innovative new products and even more affordable prices.”

Marks and Spencer is also celebrating, as its sales for the 13 weeks to the end of the year have risen by 4.5% in the UK; 1.3% on a like-for-like basis. I am pleased with the customer response we have seen to the changes we are making in line with our plan for the business,” said CEO Steve Rowe.

In Clothing & Home, better ranges, better availability and better prices helped to improve our performance in a difficult marketplace. We also continued to substantially reduce discounting, including over Black Friday.

Our Food business continues to grow market share, with customers recognising our product as special and different. Our Simply Food store pipeline remains strong.

As we look forward, our Q4 reported numbers will be adversely affected by sale timing and a later Easter.”

Morrisons and Sainsbury’s have also reported better-than-expected news for the period.

Meanwhile, analysts Kantar have revealed the latest market share for the supermarket sector, headed again by Tesco (28.2%, down 0.1%), Sainsbury’s (16.7%, down 0.3%) and Asda (16.2%, down 15.5%).

Year-on-year market growth has been helped by comparisons to a weaker Christmas in 2015, but sales were also buoyed by strong consumer appetite for festive celebration after a turbulent year, explained Fraser McKevitt, head of retail and consumer insight. “Shoppers spent £480 million more at the tills than in 2015, leading to record sales for the Christmas period.”