Business News 5th September 2017

CPA hopes to inform, with its daily bite-size business news on Tuesday 5th September 2017, filled with stories we think will interest Business people.

Markets Round up

Investors continued to flock to safe havens, with the yen, US Treasuries and gold gaining. UK & European markets dropped lower on Monday following the worsening situation with North Korea. The FTSE 100 and Euro Stoxx 50 both fell 0.4% to 7411 and 3431 respectively. The FTSE 250 fell 0.5% to 19,698 and the Euro Stoxx 600 fell 0.5% too to 374.2.  At the United Nations, the US Ambassador has called for concerted international action against North Korea. The Yen moved higher against the US dollar following the nuclear test. The US markets were closed monday for a public holiday. UK banking stocks remained under the cosh, with Barclays, RBS and Lloyds near the bottom of recent share price ranges. In Asia Japanese stocks fell (Nikkei down 0.6% to 19,386) The Hong Kong, Hang seng was flat at 27725, Chinese stocks were up (CSI up 0.3% to 3857) Korea was down (Kospi down 0.1% to 2326.6) and Australia was flat with the ASX at 5706.

UK and European stock markets have opened with a bounce this morning, recovering yesterdays losses.

Oil prices were down on Monday morning after investors shied away from crude oil markets and instead turned to safer-haven gold futures after North Korea conducted its sixth and most powerful nuclear test over the weekend. WTI was at $47.5 this morning and Brent was at $52.2.

Gold jumped to its highest in nearly a year on Monday as escalating tensions between North Korea and the United States and a weaker dollar persuaded investors to take refuge in assets perceived to be safe. It is currently sitting at $1331.6.

The pound is at 1.088 Euros and 1.292 US Dollars.


Theresa May’s big Brexit speech could happen on 21st September. A senior European lawmaker appeared to let slip the date by alluding to “an important intervention” that day by the prime minister that would push back talks. The U.K. declined to confirm any delay in negotiations, while an official familiar said no date for May’s speech has been set.

Post Brexit Trade

Prime Minister Theresa May’s cut-and-paste plans for trade deals after Brexit will begin with the Swiss and South Koreans because of how much they contribute to the U.K. economy. The Department for International Trade doesn’t have the capacity to negotiate 40 new free-trade agreements at once, so it’s focusing on rolling over deals it benefits from as a European Union member and on the ones that carry the most trade, according to a senior official at the department who declined to be identified discussing policy that hasn’t been publicly announced.

Finance chiefs’ confidence grows

A survey of UK finance directors and CFOs by ICAS and Johnston Carmichael has found they are significantly more upbeat on the economy’s prospects than immediately after last year’s EU referendum. Only 16% now expect the UK to go into recession in the next year compared to 45% in 2016, while just 17% anticipate redundancies in their company – down from 33% after the vote last June. Furthermore, 27% anticipate modest growth over the year, up 13%, while 3% predict growth at a higher rate than this. Just over half (52%) expect the economy to remain flat. The biggest threats to growth were cited as domestic political factors, followed by Brexit-related issues and skills shortages. Meanwhile, figures from the BRC and KPMG showed retail sales rose 1.3% in August, rebounding from a 0.9% fall in 2016. Separately, the construction industry suffered its weakest month in August since the June 2016 Brexit referendum, with the PMI down from 51.9 in July to 51.1. Dr Howard Archer, chief economic adviser at the EY Item Club, said it was “a poor survey that suggests the construction sector will be of little, if any, help to UK GDP growth in the third quarter”.

Manufacturers ride export wave

A report by manufacturing group EEF and BDO reveals that more manufacturers are seeing output and orders increase than at any time since 1995 as exports go from “strength to strength” on the back of the fall in the pound following the Brexit vote. Tom Lawton, head of manufacturing at BDO, said: “Despite the economic and political uncertainties manufacturers continue to be a force to be reckoned with, delivering a strong performance as well as increasing both investment and employment plans to make the most of the strengthening export opportunities available to them.” Separately, Norway’s $1trn sovereign wealth fund has advised its government to concentrate core holdings of debt into dollars, euros, and sterling, dropping Japanese and emerging market bonds altogether, in what Stephen Jen, a currency expert at EurizonSLJ Capital described as “a very significant move”.

UK Construction

Markit’s purchasing managers’ index for the construction sector fell to 51.1 in August, down from 51.9 in July and way below the 52 analysts had expected. The figure was its lowest since August last year, but showed activity was still increasing: any figure above 50 indicates growth. The figures indicated signs of a“sustained soft patch ahead”, with new business volumes falling for the
second month in a row, while uncertainty in the economy led to reduced business investment. Hiring fell to its slowest since July 2016, and new order volumes also fell, for the second month in a row, although the rate of contraction wasslower than in August. UK construction companies indicated that lacklustre growth conditions persisted during August,”s aid Tim Moore, associate director at IHS Markit. “

Labour accuse Tories of tax avoidance failure

Labour has claimed that tax avoidance has cost the UK economy nearly £13bn in five years, but the party says that the true figure could be much higher as it does not cover international tax arrangements. Shadow chief secretary to the Treasury Peter Dowd commented: “Tax avoidance is a scourge on society that undermines public trust and deprives our public services of the funds they desperately need, but the Conservatives have consistently failed to tackle it. The Tory Government is tinkering around the edges and trumpeting new gimmicks while creating new tax loopholes that allow the wealthy and super-rich to avoid paying their fair share.” A Treasury spokeswoman responded: “The UK has one of the lowest tax gaps in the world and we continue to take action to ensure everyone pays the tax they owe.”

The Independent, Page: 15

Public sector contractors in mass exodus due to IR35 changes

Contractors are leaving the public sector en masse due to April’s changes to IR35 rules, according to ContractorCalculator. The findings of their survey of 1,500 contractors reveals 76% of public sector departments have lost top talent due to the reforms, with the talent drain causing 71% of projects to be delayed or cancelled. Dave Chaplin, CEO and founder of ContractorCalculator, said HMRC was warned this would happen and cautioned against a roll-out of the rules to the private sector. But HMRC disputed the survey’s findings, saying they were “based on an unrepresentative sample.”

Funding pain for entrepreneurs

NatWest’s entrepreneurship monitor shows the number of people wanting to start their own business has fallen to a five-year low of 14%, down from 39% before the vote to leave the EU. The figures are a sign of economic uncertainty, says NatWest’s Alison Rose, but David Petrie, head of corporate finance at the ICAEW adds that the “most serious systematic problem is funding innovative companies that need cash up front.” He adds: “We can find money where companies are already profitable, or the technology is proven, but when developing exciting new technology – whether pioneering medicines or cutting-edge engineering – there is a serious gap.”

The Times, Page: 47

Reduced start-up activity hits Scotland’s economic prosperity

Scotland’s tax regime is blamed for the region slipping in the UK rankings for economic prosperity. Start-ups added fewer jobs to the economy than in any other part of the UK, the UK Prosperity Map produced by Barclays Wealth and Investments found, putting Scotland in ninth ahead of Wales, Yorkshire and the Humber and North East, down two places on the previous year. Conservative shadow economy secretary Dean Lockhart said: “This is merely the latest indicator which shows Scotland’s economy suffering under the SNP. The Nationalists have run an anti-business government, made Scotland the highest-taxed part of the UK and presided over a chaotic business rates regime.”

The Scotsman, Page: 6

Sadiq Khan calls for control of stamp duty receipts

London mayor Sadiq Khan has called on the Chancellor to grant him control over the capital’s £3.4bn stamp duty income so he can tackle the housing crisis. Mr Khan said that without control of the receipts it would be like trying to turn things around “with one hand tied behind our backs.” However, Andrew Boff, the Conservative deputy chair of the London assembly’s housing committee, said the cash call was “a distraction from the fact that he has built so few homes.”

The Guardian

UK Pensions

BRITAIN has slipped to sixth place in the geographical rankings of the world’s largest pension funds. Total assets held by the world’s top 300 schemes swelled by 6.1 per cent in 2016 to $15.7 trillion (£12.1trillion). The US maintained the top spot but the UK was overtaken by Canada, according to research by Willis Towers Watson. In terms of countries, Japan was in second place, followed by the Netherlands. Norway, which only has one pension fund compared with 134 in the US, was in fourth place.

Eurozone Investors

UNEXPECTED optimism was in the air for Eurozone investors this month, as a survey from research group Sentix yesterday showed an improvement in investor sentiment.The Eurozone index rose to 28.2 points from 27.7 last month, exceeding a Reuters consensus forecast of 27.4. Part of the improvement was due to a pick-up in both Germany and the US, reversing August’s falls.

Artificial Intelligence

Elon Musk has spoken on one of his favorite topics: Artificial Intelligence. The billionaire entrepreneur said in a tweet he thinks the rush for AI superiority at a national level will cause World War III. That was in response to comments from Russia’s Vladimir Putin, who said the country with the best AI will be “the ruler of the world.” The idea isn’t exactly new for the Tesla founder, who often opines about AI as a threat to humanity. Maybe that’s why he’s rushing off to Mars.

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