Business News 19th June 2017

We hope you enjoy reading the business news compiled by the Credit Protection Association on Monday 19th June 2017 for its members and visitors.

Brexit negotiations start

Negotiations between the European Union and the UK over the country’s exit from the bloc are set to begin, even as Prime Minister Theresa May grapples with the fallout from an election that cost her party its parliamentary majority. Negotiators from the two sides agreed to go ahead with the originally planned start date of 19th June despite the snap election called by May backfiring, leaving her with a minority government and questions over that government’s ability to begin the talks. Brexit talks in Brussels will focus on the status of expats, the UK’s “divorce bill” and the Northern Irish border, rather than on future trade relations with the European Union, it has been confirmed.The European Commission said the one-day meeting between its chief negotiator Michel Barnier and Brexit Secretary David Davis will take place “as part of the sequenced approach to the talks” set out by the EU, which require progress to be made on withdrawal arrangements before any talks on trade can begin. There was no immediate response from Davis’s Department for Exiting the EU on whether this meant the UK has given up on its hopes for parallel talks to take place simultaneously on withdrawal and trade.

Hammond confirms UK will leave EU customs union and single market

Chancellor Philip Hammond quashed speculation that he would pressure Theresa May to abandon plans for a hard Brexit. Mr Hammond told the BBC’s Andrew Marr Show that the UK would be leaving both the single market and the customs union. The key question he said, is what is put in place to ensure British goods can continue to flow without tariffs and without delays and bureaucracy. Mr Hammond’s position will likely irritate business leaders who had hoped the Chancellor would press the need to maintain single market access, while his warning over a “cliff-edge” scenario will anger hardcore Eurosceptics who see a default to WTO rules as the only credible option. However, his comments do present a united government stance on Brexit as David Davis heads off to Brussels for the start of negotiations.

The Daily Telegraph, Business, Page: 3 Financial Times, Page: 1 Daily Mail, Page: 14 Daily Express Independent i, Page: 40

Tata Steel

Tata Steel could pay more than £500m into its UK pension scheme as part of a deal with regulators that involves the Pension Protection Fund taking a stake in the business. The Indian-owned company needs to find a solution to its pension scheme to secure the future of its UK operations, which employs 8,000 workers and includes the Port Talbot steelworks in south Wales. Tata Steel is trying to hive off its historic liabilities before merging its European steel operations with German company ThyssenKrupp.

French Election

French president Emmanuele Macron’s upstart centrist movement and his allies won a comfortable majority in legislative elections at the weekend albeit with a record low turnout of voters, a stark reminder that a large minority of French are opposed to his plans. Macron’s En Marche! and his centre-right allies from MoDem made off with about 360 seats in the country’s parliament. Although less than the 400 seats that some polls had projected he was still set to enjoy a comfortable majority of about 70 seats.

Globalisation pays

Theresa May has been warned that a return to protectionist trade policies could cost the UK economy 3.7% of GDP by 2035. Analysts at Zurich said that embracing radical new free trade and globalisation arrangements would in contrast add another 3.6% to the UK economy in the coming 20 years. Meanwhile the Bank of International Settlements has also pushed the globalisation concept, declaring it has contributed to higher living standards worldwide and boosted income growth.

The Daily Telegraph, Business, Page: 1, 8

Confidence ebbs away from small firms

The Federation of Small Businesses has said small companies are reporting weakening confidence as rising prices and fears about the health of the domestic economy begin to bite. Some 52% of smaller employers see a slowdown in the UK economy as a barrier to growth. The FSB added that operating costs for SMEs are now at their highest level in four years.

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The Times, Page: 49 Yorkshire Post, Page: 15

Traditional SME lending primed for an overhaul

The Times’ James Hurley profiles PayPal’s SME lending division PayPal Working Capital, which has supplied more than £400m of credit to 22,000 British companies since the service was launched in 2014. PayPal said it was filling a funding gap that traditional lenders are failing to service, and that it had identified a link between its application process being so easy and areas of the country slightly more affected by bank closures. Mark Brant, managing director of PayPal UK, said the company would challenge traditional lenders further by expanding the service. But new banking rules will from next year allow customers to share their transaction history with any provider, which could make lending decisions virtually instantaneous, says alt-fi expert Andrew Davis – heralding the era of so-called “open banking.”

The Times, Page: 48

EU to force intermediaries to reveal cross-border financial schemes

Leaked legislative proposals from Brussels show that banks, accountants and law firms that facilitate cross-border tax schemes will be forced to automatically disclose any new cross-border tax schemes offered to clients to their local tax authority within five working days. The European Commission plans will require one intermediary to take responsibility for disclosure where there are several in the chain, and for clients to be responsible where all intermediaries in the chain are based outside European member states. EU member states will be obliged to share details of the tax schemes. The ultimate objective is to “design a mechanism […] that will dissuade intermediaries from designing and marketing such arrangements,” according to the Commission. However, the rules would not apply to the UK if it leaves the single market, says the Guardian’s Juliette Garside.

The Guardian, Page: 22

Higher taxes and end to council spending cuts mooted

In an interview with the BBC’s Andrew Marr programme, Chancellor Philip Hammond has hinted that taxes could increase in order to end an era of austerity that has left the public “weary”. He said that the Conservatives had never pledged not to raise “some taxes”, and suggested that planned cuts to council budgets worth £3bn might be halted, and any re-examination will be detailed in his autumn Budget. There was also a promise that the Government will look at plans it has for cutting winter fuel allowances and scrapping the triple lock on pensions.

The Daily Telegraph, Page: 6 Financial Times Daily Mail, Page: 101

Tech-savvy millennial entrepreneurs steal a march on their parents

Research commissioned by HSBC Private Bank has found that entrepreneurs in their 20s are generating higher turnover and employ more staff than their peers in the over-50s age group.

Financial Times

Asian Markets

Asian Shares inched higher in morning session, with a weaker yen supporting Japanese shares, and ahead of Brexit negotiations between the UK and the European Union.

U.S. Markets

U.S. Shares were in the green as the U.S.30 notched its 21st record of 2017 led by a late-stage rise in energy shares, as Amazon announced plans to buy Whole Foods.

Fridays UK market

It was a volatile afternoon for Tesco’s and certainly an interesting afternoon for the rest of the retail sector after transatlantic behemoth Amazon released that it is going to acquire Whole Foods for $42 per share in an acquisition worth $13.7bn. This certainly had a ripple effect with J Sainsbury’s, Tescos and Marks and Spencer’s populating the UK100 fallers. This was a stark change for Tesco’s who started the day in the green after a positive trading statement. However, speculation on Amazons’ logistical advantage has certainly upset the apple cart. in other sectors European and U.K. shares were higher as investors digested news of more money for Greece and focused on wider political events and data releases.

Oil

Oil prices dipped, weighed down by a continuing expansion in U.S. drilling that has helped to maintain high global supplies despite an OPEC-led initiative to cut production to tighten the market.

Gold

Gold edged lower to touch a near four-week low as the dollar held firm, with the market waiting on comments from a top U.S. Federal Reserve official after last week’s soft economic data.