Business news 11 March 2022
James Salmon, Operations Director.
UK & Ukraine. Evraz shares suspended after UK imposes sanctions on Abramovich. Global trade. UK GDP. FSB demands Sunak act for enterprise. And more business news.
UK & Ukraine
The UK has promised to make it easier for Ukrainian refugees to enter the country, following negative responses to current policies If Ukrainians have a passport, they will no longer need to visit a visa centre abroad. Also, the government imposed sanctions on Roman Abramovich, the Russian oligarch who own Chelsea football club, freezing all his assets. Although the football club has been granted a licence to continue to operate in a reduced capacity and the sale can continue so long as the Oligarch sees none of the proceeds. No need to wait for a VAR decision on that! Sanctions were also imposed on six other Russian businessmen, including the bosses of two Russian energy companies, Rosneft and Gazprom.
Evraz shares suspended after UK imposes sanctions on Abramovich
Shares in London-listed steel company Evraz fell by as much as 14% yesterday after Roman Abramovich, its largest shareholder, was sanctioned. Trading in the shares was suspended by the Financial Conduct Authority “in order to protect investors pending clarification of the impact of the UK sanctions”. The UK Government claimed Abramovich had been “involved in destabilising Ukraine and undermining and threatening the territorial integrity, sovereignty and independence of Ukraine via Evraz” while Evraz had also likely been supplying steel to construct Russian tanks. Evraz denied this, stating: “The company confirms that it supplies long steel to infrastructure and construction sectors only.” JPMorgan and Morgan Stanley have ended their relationships with Evraz while the company’s auditor, EY, said that while it could not comment on specific clients, “we are evaluating existing and new mandates in light of new sanctions”.
Global trade
It may be too late to buy that coveted Russian tablet or car! Joe Biden is calling for an end of normal trade relations with Russia, leading to increased tariffs on Russian imports. Meanwhile, Russia announced an export ban for more than 200 products including agricultural, electrical, medical and technological equipment, in response to sanctions over the invasion of Ukraine. It stopped short of blocking sales of its all important energy (oil and gas) and other raw materials, the country’s biggest contribution to global trade.
Markets
Markets declined Thursday as cease-fire talks between Russia and Ukraine yielded little progress and inflation readings reached a 40-year high. In Asia, Nikkei closed down -2.05%. Hong Kong HSI is down -1.69%. China Shanghai SSE is down -0.22%. Singapore Strait Times is up 0.22%. Overnight, DOW dropped -0.34%. S&P 500 dropped -0.43%. NASDAQ dropped -0.95%.
GDP
The UK Economy bounced back in January as the effects of the Omicron variant began to ease, official figures show. The economy grew by 0.8% in the month, compared with a 0.2% fall in December, the Office for National Statistics said. Wholesaling, retailing, restaurants and takeaways all performed well, it said. While supply chain issues continued to dog some sectors, construction and manufacturing both grew, it added.
FSB demands Sunak act for enterprise
A survey of 2,000 independent retailers through Not On Amazon’s (NOA)’s Facebook group found 93% thought Chancellor Rishi Sunak is not doing enough to support them, while just under 90% are finding it harder to make ends meet. The chair of the Federation of Small Businesses (FSB) Martin McTague said: “After being left out of support for households struggling with surging energy bills, small firms now face the prospect of NICs and dividend tax hikes in less than four weeks, just at the moment when Covid support measures end, and business rates bills land. Last month, the Chancellor outlined his vision for a new culture of enterprise. He should use his Spring Statement as the moment to turn wise words into action.”
Sunak must borrow billions or see incomes squeezed
The Institute for Fiscal Studies (IFS) has said decisions taken by the Chancellor in his Spring Statement will reveal whether he believes the Government should be protecting consumers from external events or not. With the cost of living soaring, Rishi Sunak will have to decide whether to cut spending or borrow more to fund increases in public sector pay, which has taken a hit of £1,750 on average due to inflation. Mr Sunak must also decide whether to allow defence spending to fall over the next three years, or to borrow to boost it, says IFS director Paul Johnson, and if the Chancellor is to protect consumers from rising energy prices, he will have to find an additional £10bn just to cover half the increase in costs. However, the Guardian reports that Treasury sources stress that the Government cannot protect the public from what is a global crisis – and underline the fact that the public finances are weaker than at the start of the pandemic, when Sunak took radical steps to protect jobs.
Oil price relief but threat to households remains
Petrol is forecast to hit £1.80 a litre before falling back down after the United Arab Emirates signalled it would push other oil exporting nations to boost production. However, if oil consuming nations cut into their strategic reserves as an additional measure to tamp prices, this could make the market even more sensitive to additional supply disruptions, pushing prices up again. This could mean even higher inflation for households. Capital Economics recently hiked its forecast for consumer price inflation, predicting that higher energy bills will push the cost-of-living gauge to 7.3% in October. KPMG has inflation peaking as high as 10%. Elsewhere, RSM economist Thomas Pugh predicts that UK GDP “growth [this year] could be between 0.75 and 1 percentage point lower than it otherwise would have been” were it not for higher gas prices.
What cost sanctions retaliation?
Russia is considering cutting off gas supplies to Europe in retaliation against America’s ban on Russian oil and the suspension of Nord Stream 2. Yael Selfin, chief economist at KPMG, estimates that a full stop to Russian gas would force down eurozone GDP by 2% while the price of oil could hit a new record of $185 per barrel, JPMorgan analysts say. Daniel Yergin at IHS Markit says the situation “could be the worst crisis since the Arab oil embargo and the Iranian revolution in the 1970s”, which caused recessions globally.
Nowhere to hide from inflation
With possible shortages of fertiliser on the way due to the Russia/Ukraine conflict, the price of a loaf of bread, averaging £1.30 at Tesco and Sainsbury’s, could go up by 25p per loaf, according to Thomas Pugh, an economist at RSM. Market researchers Kantar say food prices jumped by 4.3% in February while Clive Black, an equity analyst at Shore Capital Markets, asserts that inflation will happen across the board. “Inflation is coming out of our ears, left, right and centre. We haven’t seen anything like this since the Seventies,” he says.
Industry
UK Industrial Production growth was 0.7% month-on-month in January, primarily driven by 0.8% growth in manufacturing. This follows growth of 0.3% in December 2021
Oil
The Oil Price was firmer in early morning trading Friday, with Brent crude rising more than 2% towards $112 per barrel.
Goldman Sachs and JPMorgan withdraw from Russia
Goldman Sachs became the first Wall Street bank to announce the imminent closure of its Russia business on Thursday, followed swiftly by JPMorgan Chase. Both said they were winding down their business in Russia in compliance with regulatory and licensing requirements. Western Union has also said it will be suspending its operations in Russia in light of the conflict in Ukraine. New York-listed Marsh McLennan, the world’s biggest insurance broker, also announced it would exit Russia, stating that ownership of its Russian businesses will be transferred to local management that will be independently operated. The move comes after the Big Four accountancy and consultancy firms said they will withdraw from the country.
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.