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Manufacturers 'in despair' over Brexit, as pound hits one-week low - business live Manufacturers 'in despair' over Brexit, as pound hits one-week low - business live
(about 1 hour later)
Andy Scott, associate director at risk management consultancy JCRA, says today’s Brexit developments have spooked some investors:
Theresa May formally requested an extension to the Brexit process until June 30 and ruled out a longer delay. The EU Commission said that this would be legally and politically difficult, suggesting either a short delay until May 23, or until at least the end of 2019.
“This latest differing on views comes at a time where the EU and many UK MPs are increasingly frustrated with Theresa May’s uncompromising approach to Brexit. While her spokesman says this shows the strength of her resolve and determination to deliver Brexit, it increases the risk of the UK crashing out of the EU next week (though still unlikely) and that Theresa May is forced out of Downing Street (growing more likely).
“The market became very optimistic last week, when hard Brexit risks had all but disappeared after the UK parliament rejected a no-deal outcome. This lead to Sterling reaching its highest level in almost a year. The market may have to reassess the no deal risk as without even short a pier to walk on to, the cliff edge remains a real danger! We expect GBP to remain very volatile in the remaining days until the current deadline of March 29 as the market continues to react to Brexit headlines.”
Here’s Hamish Muress, currency analyst at OFX, on the pound’s wobble (it’s still down a whole cent against the dollar).Here’s Hamish Muress, currency analyst at OFX, on the pound’s wobble (it’s still down a whole cent against the dollar).
“The pound has continued to tumble today as the conflict between the European Union and Theresa May over the length of the Brexit extension has come to the fore. Reports that the EU are already finding the date of June 30th difficult to swallow has seen investors’ confidence in Theresa May’s current approach plummet.“The pound has continued to tumble today as the conflict between the European Union and Theresa May over the length of the Brexit extension has come to the fore. Reports that the EU are already finding the date of June 30th difficult to swallow has seen investors’ confidence in Theresa May’s current approach plummet.
How likely is she to get further concessions out of the EU at this stage?How likely is she to get further concessions out of the EU at this stage?
Despite the House of Commons rejecting the notion of a ‘no deal’ Brexit last week, there is still the possibility of the UK accidentally crashing out of the EU next week, which could mean further significant losses for the pound”Despite the House of Commons rejecting the notion of a ‘no deal’ Brexit last week, there is still the possibility of the UK accidentally crashing out of the EU next week, which could mean further significant losses for the pound”
The pound began falling as some EU sources pushed back against the UK’s request for a three-month Brexit extension.The pound began falling as some EU sources pushed back against the UK’s request for a three-month Brexit extension.
For example, here’s Norbert Röttgen, the head of the German parliament’s foreign affairs committee:For example, here’s Norbert Röttgen, the head of the German parliament’s foreign affairs committee:
#May just asked #EU for short #Brexit extension. But without backing by cabinet and parliament her request is meaningless. @JunckerEU is right: EU leaders should defer decision until #UK presents an approved plan. EU cannot become accomplice of May’s internal tactical manoeuvres.#May just asked #EU for short #Brexit extension. But without backing by cabinet and parliament her request is meaningless. @JunckerEU is right: EU leaders should defer decision until #UK presents an approved plan. EU cannot become accomplice of May’s internal tactical manoeuvres.
However, Angela Merkel’s office is more positive.However, Angela Merkel’s office is more positive.
German government spokesman Steffen Seibert has welcomed the request from London, adding that a disorderly Brexit would not be in anyone’s interests.German government spokesman Steffen Seibert has welcomed the request from London, adding that a disorderly Brexit would not be in anyone’s interests.
But... there are also reports that European Commission president Jean-Claude Juncker wants the extension to only run until mid-May, not the end of June, because of EU parliamentary elections.But... there are also reports that European Commission president Jean-Claude Juncker wants the extension to only run until mid-May, not the end of June, because of EU parliamentary elections.
.@JunckerEU thinks it is good that @theresa_may sets out her thoughts ahead of #EUCO; warned her in phone call against including a date for the extension that is after #EUelections2019. #Brexit has to be complete before 23 May - otherwise #EUelections2019 have to be held in UK..@JunckerEU thinks it is good that @theresa_may sets out her thoughts ahead of #EUCO; warned her in phone call against including a date for the extension that is after #EUelections2019. #Brexit has to be complete before 23 May - otherwise #EUelections2019 have to be held in UK.
Here’s our news story about the PM’s move:Here’s our news story about the PM’s move:
Theresa May asks EU for Brexit delay until 30 JuneTheresa May asks EU for Brexit delay until 30 June
The sterling selloff is gathering pace - the pound’s now down over one cent at a one-week low around $1.316.The sterling selloff is gathering pace - the pound’s now down over one cent at a one-week low around $1.316.
Sterling reaction to May confirming short delay feels like market finally waking up to the fact that the risk of no deal by accident has increased substantially this week. pic.twitter.com/lsUQqUquFoSterling reaction to May confirming short delay feels like market finally waking up to the fact that the risk of no deal by accident has increased substantially this week. pic.twitter.com/lsUQqUquFo
Here’s my colleague Philip Inman on the slowdown in the UK housing market:Here’s my colleague Philip Inman on the slowdown in the UK housing market:
House prices grew at the slowest rate since 2013 in January, according to official figures that signalled the UK was heading later this year for the first fall in property values since the financial crash.House prices grew at the slowest rate since 2013 in January, according to official figures that signalled the UK was heading later this year for the first fall in property values since the financial crash.
Average house prices in the UK increased by 1.7% in the year to January 2019, down from 2.2% in December 2018 and 5.1% in October 2017, the Office for National Statistics said.Average house prices in the UK increased by 1.7% in the year to January 2019, down from 2.2% in December 2018 and 5.1% in October 2017, the Office for National Statistics said.
If the trajectory of sliding prices over the past two years continues, the UK is expected to suffer its first fall in prices since the post-crash property slump of 2011 before the end of this year.If the trajectory of sliding prices over the past two years continues, the UK is expected to suffer its first fall in prices since the post-crash property slump of 2011 before the end of this year.
House price growth at six-year low and inflation rises to 1.9%House price growth at six-year low and inflation rises to 1.9%
The pound is dropping further, as Theresa May tells MPs that she is seeking to extend Brexit until 30 June.The pound is dropping further, as Theresa May tells MPs that she is seeking to extend Brexit until 30 June.
Sterling has now lost almost three quarters of a cent, dipping below $1.32..Sterling has now lost almost three quarters of a cent, dipping below $1.32..
That suggests traders are disappointed the government isn’t seeking a longer extension, and concerned that Britain could yet crash out of the EU.That suggests traders are disappointed the government isn’t seeking a longer extension, and concerned that Britain could yet crash out of the EU.
Here’s the letter which the PM has sent to Donald Tusk.Here’s the letter which the PM has sent to Donald Tusk.
Theresa May's letter to Donald Tusk #pmqs pic.twitter.com/sN2UZKeDWsTheresa May's letter to Donald Tusk #pmqs pic.twitter.com/sN2UZKeDWs
Our Politics Live blog has all the details:Our Politics Live blog has all the details:
PMQs: May says she doesn't want a long Brexit delay as No 10 releases letter to EU – Politics livePMQs: May says she doesn't want a long Brexit delay as No 10 releases letter to EU – Politics live
The CBI’s monthly survey of UK factories shows how activity and output has slowed in the last few months.The CBI’s monthly survey of UK factories shows how activity and output has slowed in the last few months.
But as you can see, industry actually held up well after the EU referendum -- partly due to the weaker pound helping exports.But as you can see, industry actually held up well after the EU referendum -- partly due to the weaker pound helping exports.
Nicole Sykes of the CBI explains why UK bosses are in despair over Brexit:Nicole Sykes of the CBI explains why UK bosses are in despair over Brexit:
Honestly, spare a thought for all those people within businesses having to dial into the weekly global team call, fly out to Germany each month for board meetings or compile fortnightly briefing packs for Japan and having to explain all of this *points at UK politics*Honestly, spare a thought for all those people within businesses having to dial into the weekly global team call, fly out to Germany each month for board meetings or compile fortnightly briefing packs for Japan and having to explain all of this *points at UK politics*
The CBI has also asked UK firms about Brexit -- and many confirmed that they’ve been hoarding raw materials and components.The CBI has also asked UK firms about Brexit -- and many confirmed that they’ve been hoarding raw materials and components.
A quarter of respondents to this month’s industrial trends report reported stockbuilding, with others mentioning depressed investment and demand due to uncertainty, and the difficulty in obtaining export orders.A quarter of respondents to this month’s industrial trends report reported stockbuilding, with others mentioning depressed investment and demand due to uncertainty, and the difficulty in obtaining export orders.
Tom Crotty, group director of chemicals firm INEOS, says UK factories are suffering from the prolonged Brexit crisis.Tom Crotty, group director of chemicals firm INEOS, says UK factories are suffering from the prolonged Brexit crisis.
“Manufacturers are in despair at the unacceptable failure of politicians to end the Brexit impasse. Every day that goes by without a resolution results in more businesses putting off investment and stockpiling goods in order to soften the blow from a potentially disastrous “no deal” Brexit scenario.“Manufacturers are in despair at the unacceptable failure of politicians to end the Brexit impasse. Every day that goes by without a resolution results in more businesses putting off investment and stockpiling goods in order to soften the blow from a potentially disastrous “no deal” Brexit scenario.
“It is crucial that Brexit uncertainty is lifted as a matter of urgency. Only then can manufacturers begin to move forward and shift our attention on to resolving the long-term challenges facing the sector – such as solving our skills challenge and raising productivity.”“It is crucial that Brexit uncertainty is lifted as a matter of urgency. Only then can manufacturers begin to move forward and shift our attention on to resolving the long-term challenges facing the sector – such as solving our skills challenge and raising productivity.”
Just in: UK factory growth has hit its lowest rate in almost a year.Just in: UK factory growth has hit its lowest rate in almost a year.
Manufacturing output growth in the quarter to March was at its weakest since May 2018, according to the latest monthly CBI Industrial Trends Survey.Manufacturing output growth in the quarter to March was at its weakest since May 2018, according to the latest monthly CBI Industrial Trends Survey.
Manufacturers reported that order books weakened a little - although exports picked up.Manufacturers reported that order books weakened a little - although exports picked up.
The CBI says:The CBI says:
Output volumes expanded in 11 out of 17 sub-sectors, with growth driven predominantly by the food, drink, & tobacco, chemicals, and metal manufacture sub-sectors. Meanwhile, the mechanical engineering, paper, printing & media, and motor vehicles & transport equipment sub-sectors were the main drags on growth.Output volumes expanded in 11 out of 17 sub-sectors, with growth driven predominantly by the food, drink, & tobacco, chemicals, and metal manufacture sub-sectors. Meanwhile, the mechanical engineering, paper, printing & media, and motor vehicles & transport equipment sub-sectors were the main drags on growth.
The small pick-up in inflation raises the chances of a UK interest rate rise before Christmas.
So argues Yael Selfin, Chief Economist at KPMG UK:
She says:
“Solid wage growth and minimal spare capacity could encourage the Bank of England to raise rates once more by November this year to 1%.
“Strong services inflation compared to goods inflation point at the simmering inflationary pressures as a result of rising wages and the record tight UK labour market.
”Our expectations are for inflation to average around the Bank of England’s 2% target this year but to rise further in 2020, putting pressure on them to act more aggressively than markets currently anticipate.
Potential first-time buyers will be pleased to hear that house price growth is cooling.
But after several years of housing inflation, homes will still be unaffordable to many....
House price growth has slowed recently but increases in house prices have still substantially outpaced increases in earnings since 2011 pic.twitter.com/uUqCP2B3UL
This yawning gap between house prices and earnings is largest in London, and has only closed very slightly recently as house price growth in the capital has stalled. pic.twitter.com/VGywGqvxXI
House prices could suffer sharp falls if Britain crashes out of the EU without a deal, predicts economist Howard Archer.
He writes:
A longer delay to Brexit could very well see house prices stagnate over 2019 or fall slightly due to persistent uncertainty
If the UK ultimately leaves the EU without an approved Brexit “deal”, house prices could fall by around 5% in 2019 amid heightened uncertainty and weakened economic activity
Brexit uncertainty is hurting London’s housing market too, says Mark Harris, chief executive of mortgage broker SPF Private Clients:
London continues to see the largest annual price fall as those worried about the Brexit fallout err on the side of caution.
That said, the year has got off to a remarkably good start on the lending front despite ongoing political uncertainty. Clearly, some people have had enough with situations they can’t control and are getting on with their lives
John Goodall, CEO of buy-to-let specialist Landbay, reckons potential buyers are fleeing London in search of cheaper houses.
“House price growth is off to a very slow start for the year, echoing December’s stagnant figures and reaching the lowest annual rate since June 2013. However, problems with affordability and supply remain.
At a regional level, price rises in London continue to lag behind the likes of the East Midlands and East Anglia, a sign that demand in the capital is cooling as many buyers migrate away in search of something more affordable.
The rise in UK inflation is a small blow to households, as it erodes real wages (reminder, basic pay is rising by 3.4%).
This chart shows how food and alcohol were the main culprits. According to the ONS, bread, cereal and vegetables all pushed inflation up.
Computer games (part of the recreation category) also pushed the cost of living higher.
As you can see, London’s housing market is a lot weaker than the rest of the country:
There’s also clear signs of a slowdown in recent months:
Newsflash: UK house price inflation has slowed, partly due to another fall in prices in the capital.
The Office for National Statistics says that house prices were 1.7% higher in January than a year ago, the weakest house prices inflation since June 2013.
In London, prices shrank by 1.6% - the biggest annual decline since September 2009 when Britain was struggling out of the last recession.
The ONS says:
Over the past two and a half years, there has been a slowdown in UK house price growth, driven mainly by a slowdown in the south and east of England.
The lowest annual growth was in London, where prices fell by 1.6% over the year to January 2019, down from a decrease of 0.7% in December 2018. This was followed by the East of England where prices fell 0.2% over the year.
It appears that rising food and alcohol costs helped to push UK inflation up from January’s two-year low.
The Office for National Statistics says:
Rising prices for food, alcohol and tobacco, and across a range of recreational and cultural goods produced the largest upward contributions to change in the rate between January and February 2019.
The largest, offsetting, downward contribution came from clothing and footwear, with prices rising between January and February 2019 but by less than between the same two months a year ago.
Breaking: UK inflation has risen slightly.
The Consumer Prices Index rose by 1.9% in the 12 months to February, up from 1.8% in January, and higher than the City expected.
The broader (and somewhat discredited) Retail Prices Index rose by 2.5% year-on-year.
More to follow....