BoE: Corporates are not ready for non-deal Brexit

It is likely that the UK corporate sector is in general not yet well equipped to cope with a ‘no-deal’ Brexit. This conclusion is in the Bank of England´s analysis of the Brexit situation in the UK economy (EU withdrawal scenarios & monetary & financial stability). The analysis was published  28th November 2018.

– It is unclear how comprehensive contingency planning by companies for a ‘no-deal’ Brexit is. While a growing proportion of contacts say they have prepared plans, only some of those plans have begun to be implemented. It is likely that the corporate sector is in general not yet well equipped to cope with a ‘no-deal’ Brexit, the Bank of England says.

A Confederation of British Industry (CBI) survey found that 41% of companies had carried out some of their contingency plans, but only 2% of businesses had carried out all of them.

These plans often involve stockpiling of goods imported from the EU. A CBI survey suggests that nearly 44% of businesses are planning to stockpile goods in the future, while 15% have already done so.

According to the survey, it is expected that the Brexit would mean 34 billion pounds additional import  to UK before the Brexit day, the 29th March 2019. One of the reasons for this, is the analysis of the delayed customs and transport for goods.

 

Business

Brexit insight: Marine planning vital for low-carbon energy

The UK decision to leave the European Union has caused questions related to the issues on the UK coastal line and the economic development in the area.  According to the UK Goverment, the Brexit deal means that the UK will have its own, independent fishery policy in the future.  This indicates also that UK will no longer be part of the European Marine Spatial Planning process – but will stay in the Unclos, which is an UN convetion on the Law of Seas.

The Unclos is important part of the governance in the seas, while aquaculture origins and other natural resources in the global Seas are governed by this. The goverments have agreed for example of the so called Exclusive Economic Zone (EEZ) -areas, which indicate the ownership of the country in the seas. And under these nautical miles the country has the full owership to the natural resources.

What does this mean in practice? It means that the countries, in which the UK has the EEZ-border (Iceland, Denmark, Germany, Netherlands, Belgium, France and Faroe Islands) must work together more closely in the economic issues if the EU Marine Spatial Planning is not any more in use and if the UK will not be part in the EU Marine Strategy Framework Directive.

UK MSP

This is also important while the UK Marine is importat part of the country´s energy policy and energy mix. But also the UK´s energy supply and distribution. This includes the country´s oil and gas sector ,companies like BP (BP) and  Royal Dutch Shell (RDSA) , but also the growing new energy sector, the renewables. According to the national oil and gas industry, capital investments in the UK offshore oil and gas industry were 5.6 billion pounds in 2017.

This low carbon energy related to mitigating the Climate Change and energy security in general include for example offshore wind, wave and tide energy. According to the UK Marine Policy Statement, it is anticipated that the amount of wave and tidal energy will increase markedly up to and beyond 2020.

The low carbon energy sector is also a major employer in the offshore and in the coastal line.  According to Oxford Economics, it is assumed that each 1MW
of installed capacity adds 0.29 direct and 0.16 indirect jobs.  The employment growth in the coastal towns has been better than average, says the UK Statistical office.

Currently there are 12 offshore wind farms in the UK, with the largest offshore wind farm in the world located off Kent.

In addition to the renewables, the coastal line is imporant economic factor for example to construction, port operations, aquaculture, tourism, water and waste management and telecommunications.

-Aquaculture is the process of farming or culturing aquatic
organisms. The majority of marine aquaculture is currently related to
Atlantic salmon and shellfish.  The majority (99%) of existing UK marine based finfish aquaculture activity is located in Scotland, which is the largest producer of
farmed salmon in the EU, and the second largest in the world,
although aquaculture activity is increasing in other areas of the
UK, the UK Marine planning organization says.

The Brexit vote on next week Tuesday in the UK Parliament will give the independece of the UK fishery policy according to the PM Theresa May. It also means that in the future, UK will have to negotiate with its EEZ-border partners more in direct dialog in order to sustain and manage the economic, environmental, social and governance issues related to the area.  The oceans and seas are getting their true meaning for the socioeconomic development for a nation.

Päivi Härkönen, co-founder, EarthRate

Sources: EU Marine Spatial Platform, UK Marine Management Organization, EU Marine Strategy Framework Directive, Unclos, UK Oil and Gas, UK Goverment, UK Parliament
Business Research and Insights

Stocks down in Wall Street – crude oil up

Stocks continued their downward trend in Wall Street on Friday. The S&P 500 -index ended down by 2,33% and Dow Jones -index 2,24 % . The tech-intensive Nasdaq ended down 3,05%. Concerns over the global trade, oil prises and slower growth in US jobs in November were the topics.

The crude oil surged nearly 6 % as the Opec agreed more than expected production cuts. The Opec members agreed to cut the production by 1,2 million barrels a day.

This week for the stocks markets have been very volatile and the uncertainty over the Brexit vote in the British Parliament on the 11th December, global trade talks between the US-China and the moneraty policies in different continents have been the major news affecting the market sentiment.

According to Bloomberg News, the investment bank JP Morgan estimates that the US stocks can surge 17 % next year. The bank says the estimate is based on the fact that hedge funds hold fewer stocks than normal and returning to average holding would mean 500 billion dollars into US equities.

In Europe, the stock markets ended mixed. In London, the FTSE 100 -index was up 1,10 % to 6778, in Frankfurt the stocks declined sligthly by 0,21 % to 10788 and in Paris the CAC 40-index ended up by 0,68 % to 4813.

In Asia the stocks were also mixed. In Tokio, Japan, the stocks ended up 0,82 % to 21 687 points, but in Hong Kong the Hang Seng index ended down 0,35 % to 26063.

During one month period only the Hong Kong and Shanghai stock exchanges have been on positive trend. The other markets are in red ranging from the New York Nasdaq – 7,95 % to Tokio Nikkei -2,45%.

The euro was up 0,04 % to 1,13 US-dollars, but the UK sterling was down by 0,43 % to 1,272 US-dollars.

 

Business Finance

Wall Street down – trade talks and yield in focus

Wall Street fell sharply onTuesday due to the new concers over the US China trade talks and the Treasury yield curve.

According to markets, the Treasury 10-year yield curve, which indicates the coming recession, was one of the market concerns and the 10-yield hit its lowest value since September. The demand for longer-dated Treasuries rose.

Also President Donald Trump said on Tuesday that if the countries cannot solve the trade issues and differences, he is a “tariff man”.

Dow Jones fell 2,66 % and was 25 138 points. S&P 500 index fell 2,17 % to 2729 points and Nasdaq dropped 3,21 % and ended at 7202.

In Europe the decline was modest. In London the FTSE100  fell 0,56 % to 7022 points and German Dax-index 1,14 % to 11 335. In Paris the CAC40 -index ended down 0,82 % and was 5012. In Asia the stock markets were mixed and for example in Hong Kong the stocks rose 0,29 % , but in Tokyo the markets fell 2,39 %.

The UK Parliament was having Brexit discussions and the Parliament voted about the legal advice related to the topic. The outcome was that the Goverment will have to publish the full disclosure of the Brexit legal advice.

Euro and sterling ended slightly down and euro was 1,1341 dollars and sterling 1,2716 dollars.

The US stock and bond markets will be closed on Wednesday.

Business Finance

Global markets up on Monday -busy week ahead

The stock markets ended up on the Monday trading in Asia, Europe and Wall Street. According to the markets, one of the biggest reasons for the positive trend was the agreed US China tradewar situation with the new 90 days negotiations timetable.

Dow Jones -index was up 1,13 % to 25 826, S&P 500 index was up 1,09 % to 2790 points and Nasdaq 1,51 % to 7441 points.  In Paris CAC 40-index increased 1 % 5053 points and in Frankufrt the Dax-index ended up 1,85 % to 11 465 points. In London the FTSE all shares index was up 1,04 % to 3863 points.

In Asia the Shanghai index was up 2,57 % to 2654 points and HangSeng in Hong Kong + 2,55 % to 27 182 points.

There are major happenings during this week. For example in London, the Parliament is having debate about the Brexit deal before the vote on next Monday the 11th. On Wednesday there will be the US national day of late President George H. W Bush.

Federal Reserve´s  Vice Chairman Richard Clarida said in the Bloomberg interview on Monday that the US economy is in good shape and that the outlook is solid.

Finance Business

BoE: No-Brexit deal would sink property prises

According to the Bank of England the no-Brexit deal would have major severe impact on the British economy and financial markets. The Central Bank published its scenarios, not forcasts in London today. The scenarios illustrate what could happen, but not necessarily what is most likely to happen.

The bank have made different scenarios related to the Brexit-decision and according to the study in the situation with no-Brexit deal (with many severe delays at the UK boarders and loss of confidence in the financial markets) it would mean that the British economy would be hit like the oil shock in the 1970´s.

The gross domestic product would decline by 8 percent and unemployment would rise to 7,5 percent. House prises would decrease by 30 percent and the commercial property prises would sink by 48 percent. Inflation could be 6 percent. Sterling could loose 25 percent of its value and for example the UK Goverment Bond yield could rise by 100 bps.

The most reliance industry sectors on EU trade would be oil & gas, chemicals & pharma, finance and cars/transportation.

On the other hand, the Bank of England also published its financial stability report on the same day and according to the central bank “the UK banking system is strong enough to continue to serve the UK households and businesses even in the event of a disorderly Brexit.”

BoE wrote that since the financial crisis, major UK banks have substantially reduced their reliance on wholesale funding.

–  At group level, they hold more than £1 trillion of high-quality liquid assets. They are able to withstand more than three months of stress in wholesale funding markets.
As a result of supervisory actions and their own prudent risk management, major banks have aligned the currency of their liquid assets to that of their maturing wholesale funding. They can now withstand many months without access to foreign exchange markets, the study finds.

– In addition, banks have pre-positioned collateral at the Bank of England that would allow them to borrow a further 300 billion. The Bank is able to lend in all major currencies. The Bank, other UK authorities and financial companies have engaged in extensive contingency planning, the bank says.

The UK Parliament is having the Brexit-vote on the 11th December.

Business Finance

Brexit: May on tour – vote day the 11th Dec

kuva-1

The British Prime Minister Theresa May has been on tour in order to engage with the Brexit-deal. Today she has been in the Northern Ireland and Wales as part of her campaign. Her message is the same as was released on Sunday in the EU leaders meeting in Brussels.

The main argument still is that this is part of the national interest and the second point is that this is the only Brexit deal, there is not going to be a better one.

The voting day has been confirmed and it is the 11th of December, that is on Tuesday. So, there is excatly 14 days before the vote in Westminister in London. The Bank of England and Goverment  are going to publish their analysis of the economic impact of the Brexit-deal. According to Reuters, this information should be ready tomorrow,  on Wednesday this week.

The financial markets were mixed today. For example the German Dax-index ended down 0,40 percent to 11309,11 points and in Paris the stocks were down 0,24 percent-  the CAC 40 -index ended at 4983,15 points. In London the FTSE 100 -index ended down 0,27 percent and was 7016,85 points.

In Wall Street the stocks were also mixed – Dow Jones -index was up 0,18 percent at 24685,55 points and  S&P 500 -index was up 0,09 percent to 2675,87 points. Nasdaq-index had declined by 0,22 percent and was 7066,08 points.

This week will be important G20 meeting in Argentina and  according to Financial Times the US- China tradetalks have not performed  as good as expected so far. The question of the US- UK tradetalks in post Brexit-time is also one of the topics.

One of the big news today was the General Motors layoffs in the US. The car company announced its plans to cut production at several sites and to lay off more than 14.000 workers. The stock of GM (GM) was down 3,55 percent to 36,32 dollars. President Donald Trump tweeted that he will consider cutting all GM subsidies because of the plans. “including the electric cars”, he tweeted according to CNBC.

The euro was down by 0,30 percent to 1,129 US-dollars and the sterling was down by 0,76 percent to 1,2730 US-dollars.

 

 

 

 

 

Business Finance