Business News 11th October 2017

CPA’s daily bite-size summary of the business news on Tuesday 10th October 2017, filled with stories to inform and interest business people.

Market Round up

The FTSE 100 closed yesterday, inching closer toward its all-time highs, closing up 0.4% at 7538, the biggest news on the index was Whitbread which said today it has acquired the remaining 49% stake in its Costa Coffee joint venture in South China for £35 million. If the company was to expand into China this really could see the company recover the losses seen since the highs in 2015. On the FTSE250, which climbed 0.2% to 20,146.3 the biggest riser was Domino’s Pizza, which had a positive third quarter trading update, although analysts were mixed on the pizza delivery chain’s like-for-like sales progression, the stock price was undeterred closing up 8.9%.

European stocks dipped following a slightly weaker session in the US as stocks tired from a streak of record highs, with the Euro Stoxx 50 down 0.3% at 3598.8 and Spanish stocks leading the fall, down 0.9% with all eyes on the Catalans. However strong results from luxury group LVMH helped support stocks across the consumer goods sector.

Over in the U.S. earning season of the major banks kicks off with Citigroup Inc., JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo Co. all reporting this week. The S&P 500 0.23% closed higher at 2550.64 while the Nasdaq rose 0.11% to 6587.25, with the Dow finishing at its 47th record for 2017 at 22830.68, as optimism appeared to grow ahead of the start of the earnings season.

In Asia the month long rally continued with Japan’s Nikkei making a fresh run at its best close since 1996, up 0.3% at 20,881. The chinese CSI 300 was also up 0.3% while the Korean KOSPI climbed 1%

Oil rose to above $56 a barrel for Brent ($56.8) while WTI hit $51.1 , supported by Saudi Arabian export cuts in November and comments from OPEC and trading companies that the market is rebalancing after years of oversupply.

Gold touched its highest in nearly two weeks on Tuesday and is at 1289.6 this morning, supported by a softer dollar and geopolitical tensions in Spain and North Korea, though gains were capped by expectations of another U.S. interest rate increase.

The pound is at 1.116 Euros and 1.319 US dollars.

UK

UK GDP

Britain’s economic growth accelerated slightly in the third quarter, one of the country’s top research centres said. According to the National Institute of Economic and Social Research, the rate of growth in the UK’s gross domestic product picked up from a 0.3% clip over the three months to June to 0.4% for the quarter ended in September. Looking ahead, NIESR also forecast stronger growth in the backhalf of 2017 and a rebalancing towards international trade on the back of a weaker pound and stronger economies overseas.

Jenkins: AI will shape the future of financial services

Former Barclays CEO Anthony Jenkins has warned that the heyday enjoyed by big banks in the lead-up to the financial crisis will never return as the rise in artificial intelligence (AI) threatens some of their services. Discussing how AI will shape the future of financial services, Mr Jenkins said there could be a big societal, consumer and corporate payoff from AI technology as inefficient systems speed up – but the changes are “unfortunately not so good for the banks”. Mr Jenkins, who last year set up 10X Future Technologies, added that it can be hard for big banks and fintech firms to work together because “it’s like a mouse trying to dance with an elephant” – both hold such different perspectives. However financial regulators could benefit significantly from the use of AI, he said, noting that 40,000 people in Canary Wharf currently work in compliance “making sure a bank is doing what it is supposed to be doing”.

SMEs dodge the most tax

Figures from HMRC show that SMEs are responsible for 51% of the £5.2bn “tax gap” between what is owed and what is paid. The Revenue divided small companies that avoid tax into four categories: the “unthinking evader” who engages in habitual “low-level evasion”, “invested evaders”, who see tax evasion as an “unfortunate financial necessity”, “lifestyle evaders” – seeking a better way of life, and “systematic evaders”, who engage in more complex schemes and consider their misconduct as “integral to the business model”. All four categories were found to believe that they had little chance of being caught and few had “any understanding of the potential scale of financial penalties”, HMRC said.

Over-65s enjoying pension freedoms

The Association of British Travel Agents (Abta) has suggested that pension freedoms have contributed to a rise in the over-65s going on holiday. Older people take an average of 4.1 trips a year, compared to 3.6 for 18-to 24-year-olds. In 2015, it was the 18-24s who took the most holidays, averaging 4.6 a year. Elsewhere, the Mail reports that savers risk paying too much to switch their pension pots into drawdown plans. The FCA says 94% of the plans are sold to pension companies’ existing customers. The paper’s Dan Hyde says savers should shop around and talk to a financial adviser.

GCHQ provides cyber tips for SMEs

GCHQ has published a new guide to help SMEs prepare for cyber-attacks. Research shows that almost half of small businesses were hit by a cyber security breach or attack in the past year, the Mirror notes. Alison Whitney, at GCHQ’s National Cyber Security Centre, which compiled the tips, said: “Protecting against mal-ware… should be as second nature to a small firm as locking the doors at night.”

Hammond: Realism required to tackle Brexit challenges

Chancellor Philip Hammond has said he will not be making funds available for “no-deal” preparations in the Budget as it would be irresponsible to do so without more proof Brexit talks will collapse. In an article for the Times, Mr Hammond says Britain will leave the EU in March 2019, and the UK will also leave its customs union and its single market. However, he adds that he has a duty to be “realistic” about the economy and that the “immediate priority must be to remove uncertainty”.

IMF cuts UK growth forecast and warns Brexit is starting to bite

The IMF has confirmed a cut to its long-term forecast for annual UK growth from 1.9% to 1.7% and said negative effects of Brexit were beginning to show. The Fund said it is expecting growth for the global economy to rise from 3.6% this year to 3.7% in 2018.

Meanwhile, the OBR has said UK productivity has grown by just 0.2% a year for the past five years and the trend is only expected to improve slightly. The review, published yesterday, revealed that productivity has grown by only 0.2% a year for the past five years – a much lower figure than the forecast of 1.6% that was predicted back in March. “We anticipate significantly reducing our assumption for potential productivity growth over the next five years in our forthcoming November 2017 [forecast],” said OBR’s spokesperson yesterday.

UK’s trade gap widened in August

Despite exports to EU countries rising 4.1%, by £1.7bn, the UK’s trade deficit widened by almost £3bn to £10bn in the three months to August. Exports to non-EU countries declined 8.8%, or £4bn, driven by machinery and manufacturing equipment.

UK third in cashless rankings

According to research by Forex Bonuses, the UK is the third most cashless society in the world, behind Canada and Sweden. The rankings were based on the percentage of payments made with a cashless method, and the number of debit cards held with contactless functionality.

Energy Cap

A price cap on energy bills proposed by the prime minister last week is unlikely to take effect before winter. Theresa May had promised to revive a plan to cap charges for an extra 12 million consumers. Howewer, Ofgem said it would ensure that all consumers on standard variable tariffs would be protected as soon as possible “if legislation is in place”. Until then a more limited price cap will be extended to another one million low income households, Ofgem said. Restrictions on the cost of gas and electricity for those with pre-payment meters already saves some four million households about £80 a year.

Brexit

Just as it looked like she’d won a reprieve, Theresa May said the unthinkable. Risking the wrath of her Tory colleagues and shredding the Brexit credentials she has spent more than a year building, she told a radio talk show that if there were another referendum she’d have to think about how she’d vote.

“I voted Remain, for good reasons at the time but circumstances move on,” she said on LBC Radio. “I’m being open and honest with you—what I did last time round was I looked at everything and came to a judgment, and I’d do exactly the same this time round—but we’re not having another referendum and that’s absolutely crucial.”

She was savaged on Twitter, not least by ex-UKIP leader Nigel Farage—another LBC host— who said she wasn’t the right person to deliver Brexit.

But that’s not all: May’s deputy Damian Green then said he thought the U.K. would be better off inside the bloc. Both insisted there would be no second referendum, so it’s all academic.

Any suggestion the prime minister’s heart is not in Brexit could be fatal to her chances of surviving another coup attempt from her restless party. Still, the comments will be welcomed by companies and politicians who want Britain to stay in the single market, or even abandon the process of leaving.

Equifax

Equifax doubled the number of U.K. consumers affected by a massive hack. Some 693,665 consumers were affected, the company said. It previously claimed fewer than 400,000 British consumers were hit. Overall, 15.2 million client records in Britain were compromised, Sky News reported, citing the company.

International

Catalonia

Spain’s cabinet holds an emergency session Wednesday to discuss next steps after Catalonia’s president offered talks with Madrid while claiming a mandate to trigger secession. Regional lawmakers signed a document they called a Declaration of Indepdendence, but delayed its implementation, AP reported. Carles Puigdemont took “irresponsibility to the absolute extreme” with a “deferred declaration of independence,” a spokesman for PM Mariano Rajoy said.

Trump

President Trump will tweak his tax plan within a few weeks, he said, dismissing fears that his feud with Senator Bob Corker will hurt its chances. The comments came after he mocked the height of the Tennessee Republican, who said he won’t vote for any bill that adds to the deficit. House Ways and Means Chairman Kevin Brady said the group will release a tax bill “very soon” after Congress adopts a budget resolution this month.

ECB

The ECB’s Peter Praet speaks on monetary policy under the heading of “European Exit Strategies” on Wednesday afternoon in New York. Elsewhere, today’s Spanish CPI will probably confirm inflation slowed to a 1.9% year-on-year pace in the lead up to the Oct. 1 illegal referendum. U.K. home prices for September are due at midnight in London.

Waste food into beer

A third of all food produced globally is wasted every year, with bread a major culprit. That fact spurred Tristram Stuart to come up with the idea of using surplus bread to produce beer. The Briton has been able to fight food waste, while making a fine brew in Toast Ale. The Brussels Beer Project launched in the U.K. in 2016 and now offers three varieties: a lager called Much Kneaded; Bloomin’ Lovely, a session IPA; and Purebread, a pale ale.

Flushing Gold

A golden opportunity is going to waste in Switzerland’s water, scientists say. Every year, an estimated 43 kilograms (95 pounds) of the precious metal, worth about $1.8 million, passes through Swiss sewers as a result of the nation’s gold-refining activity, the Swiss Federal Institute of Aquatic Science and Technology said. About 3,000 kilos of silver, worth $1.7 million, also washes away, probably residue from chemical and medical companies. Recycling, anyone?