Commercial Awareness Update 19th December by Ben Triggs

1. Christmas strikes

Workers across a range of sectors will strike over the Christmas period causing disruptions to transport and the postal service just before the holidays. Today 3,000 employees at Crown post offices will walkout over concerns over pension changes, job security and cuts. The Post Office continues to make wholesale changes to modernise its service and become more efficient. They have reduced losses from £120 four years ago to £26 million last year, and aim to break even next year. 

Meanwhile, rail strikes continue on Southern as conductors walk out for two days this week. Earlier this year Southern announced it would be down-grading the role of conductor on its services, as new trains with driver operated doors are set to be introduced. The RMT Trade Union claim the strikes are necessary to protect customer safety, as well as the jobs of their members. For those planning to travel around Christmas, there’s more bad news as British Airways cabin crew members belonging to union Unite, will strike on Christmas and Boxing day. However, both sides hope the row over pay can be solved and the strikes called off – talks are ongoing. 

These strikes will be problematic for many in the UK, but compared to times of mass-industrial action these are relatively small-scale. Before Thatcherism, the Trade Unions had much more power and it wasn’t uncommon for whole industries to strike – many of which were state owned. In 2015, fewer days were lost to strike action than any other year since records begun in 1965. The Winter of Discontent and other strike action led to 29 million working days lost to industrial action in 1979, compared to just 170,000 last year.

Questions to ask yourself… Do the unions still have too much power to strike? Could the strike action mean the public turn against the unions? Does this strike action suggest an attitude of gloom within Britain?

2. Boost for the banking sector

Last week the FTSE 100 rose above 7,000 points, as shares in leading banks made significant gains. Royal Bank of Scotland closed 4.7% up and Barclays’ share price rose by 2.4%, helped by the announcement of increasing interest rates in the US. On Wednesday the Federal Reserve announced it would hike its benchmark interest rate by 0.25% to the range of 0.5% to 0.75% - with three more increases planned for 2017. 

This is unlikely to affect customers directly, but the higher interest rates will allow banks to charge more for lending to other banks. In general, higher interest rates are good for banking as it gives them the opportunity to make more profit. It’s only the second time in a decade interest rates have gone up in America.

In other banking news, Barclays have sold their French retail banking division to private equity firm AnaCap. Barclays are selling off their assets in Europe as they aim to streamline operations. Earlier this year, the bank sold its African operation and have scaled down in Italy, Spain and the Middle East.

Questions to ask yourself…  What is the long term impact of increases in interest rates? Is this a good thing for the global economy?

3. Apple and Ireland to challenge European tax ruling

Apple and the Irish Government are set to challenge the European Commission’s ruling that the US tech giant has to pay Ireland €13 billion in back taxes. The Commission ruled the tax deal Apple did with Ireland was illegal because it allowed Apple to pay much less than other companies in the country. Apple’s European headquarters is in Ireland, where corporation tax is set at 12.5%. 

Apple are set to challenge the ruling claiming the European Commission has overlooked the advice from Irish tax experts. The Irish Government will also challenge the ruling, claiming EU regulators have interfered with national sovereignty and have misinterpreted Irish tax law. It may appear odd for Ireland to challenge something which will increase their tax receipts, but the Government maintaining a pro-business stance and maintaining good relations with Apple could be more beneficial in the long run.

Questions to ask yourself… Should countries be giving favourable tax deals to large corporations?  What are the disadvantages of Apple having their European headquarters in Ireland?

4. JustEat’s spending spree

Food delivery app JustEat has announced plans to acquire rivals Hungry House and Canadian company SkipTheDishes. They claim to have reached a deal with Hungry House’s German owners Delivery Hero to acquire their competitor for £200 million – which could rise by £40 million dependent on performance.  

JustEat has acquired a number of its competitors in 2016 as they grow their global market share. In August they bought the assets of British start up takeaway.com and have also acquired takeaway delivery services in Spain, Italy, Brazil and Mexico. JustEat reported a 59% increase in revenues to £171.6 million in the first six months of 2016.

Commercial Awareness Update 12th December by Ben Triggs

1. Murdoch bids for Sky

Ruport Murdoch owned 21st Century Fox has tabled a bid to takeover Sky. The company already owns 39.1% of the telecommunications company, with Murdoch offering £11.25 billion for the remaining stake – valuing Sky at £18.5 billion. Sky’s share price has struggled this year and many believe the company will lose out as a result of Brexit. However, with a 15% decline in the Sterling compared to the Dollar, British companies have become an attractive proposition for foreign investment. 

Fox chief executive James Murdoch was made Chairman of Sky earlier this year, leading to further speculation over a takeover. However, this has concerned many investors who want to ensure Sky’s board push to secure a higher bid from the US media giant. MPs have also raised concerned about a lack of competition in the media industry if this bid was to go ahead. The Government has a responsibility to stop monopolies in a particular industry being detrimental to the customer.

Fox has until 6th January to outline their intentions regarding the proposed takeover. This deal looks very likely to happen and Sky’s share price rose 30% last week on the announcement of the takeover bid.

Questions to ask yourself… Could it be problematic for Murdoch to own more of the British media industry? Should the government be encouraging foreign takeovers of British companies?

2. Strong week for markets

It was an excellent week for the FTSE 100 as mining and oil were the big winners in the markets. Oil prices increased by nearly 5% as the non-OPEC (Organisation of the Petroleum Exporting Countries) oil producing nations agreed a deal to limit production, leading to Royal Dutch Shell’s share price rising by 3% and BP’s 2%. It was also a good week for the British mining industry as unions are on the verge of a deal with Tata Steal to keep their Port Talbot plant open and save thousands of jobs.

It wasn’t all good news in the markets - shares in Capita fell by 14% as the outsourcing firm issued a profit warning and said they would be selling off assets. Earlier this year the City was expected the firms profits to be £614 million for the year, but the latest announcement suggests it will only be at £515 million. It was also a bad week for Sports Direct who’s share price lost 7.5% after it was revealed their half year profits were down 57%. 

Questions to ask yourself… Why does an increase in oil prices have such a big impact on the markets? What can Sports Direct do to turn things around after a poor year?

3. Decline in ‘everyday’ biscuits

Sales in the ‘everyday’ biscuit have sharply declined in the UK, as consumers favour healthier snacks and more indulgent treats. The UK biscuit market is worth £2.4 billion, but sales in the everyday biscuit category fell by 7.1% compared to the previous year. Rich Tea, Custard Creams and Digestives were some of the hardest hit, as the premium category of biscuits made significant gains. 

People in the UK appear to be eating less biscuits, but when they do treating themselves to higher quality, more expensive treats. Healthier oat biscuits are also seeing a grow in sales, suggesting Britain is becoming more health conscious. 

Question to ask yourself… Does our biscuit eating habits reflect a more health conscious Britain?

4. The European Central Bank (ECB) takes it foot off the accelerator – just a bit

The ECB has been directly buying government bonds of European countries in an effort to reduce the interest rates that companies in those countries need to pay in order to borrow money. This works because as the ECB buys bonds, the yield (or interest rate) that those bonds offer go down (click here for an explanation). The lower interest rates feed through to loans that banks make to individuals and companies (in theory, at least). With lower borrowing costs, people and businesses are more likely to borrow, and thus spend, money – therefore boosting economic activity. The fact that the ECB is decrease support for the economy – even very moderately – is a sign that the European economy is starting to pick up a bit of steam.

5. And finally… 

Amazon launched a concept grocery store in Seattle with a revolutionary premise: no queues! Shoppers scan their smartphone on their way in, take their goods and simply walk out of the store. Sensory imaging and artificial intelligence is used to determine what the person bought – and charges their Amazon account accordingly. The program, called Amazon Go, has the potential to revolutionise retail – but also highlights how improving technology can threaten jobs (e.g. no more cashiers).

Commercial Awareness Update 5th December by Ben Triggs

1. Liberal Democrats surprise victory

Last week, Liberal Democrat candidate Sarah Olney won a surprise victory in the Richmond by-election, beating ex-Tory MP Zac Goldsmith by almost 2,000 votes. Goldsmith resigned from the Conservative Party after it was announced Heathrow was on course for a third runway and forced a by-election on the issue. However, the Liberal Democrats mobilised their supporters and turned the vote into a debate on the triggering of Article 50. During the EU Referendum, Richmond heavily supported the Remain camp and the Liberal Democrats' pro-EU stance during the by-election campaign was popular among constituents.

70% of voters in Richmond wanted to remain in the EU, but Zac Goldsmith was a vocal supporter of the Leave campaign. This is his second election defeat in 2016 after losing to Sadiq Khan in the London Mayoral election. It was also a bad day for the Labour Party whose candidate only polled 1,515 votes - down from 7,296 in 2015. 

Liberal Democrat leader Tim Farron claimed this was a rejection of Theresa May’s plan for a 'hard Brexit'. Sally Olney will take her place in the House of Commons as the Liberal Democrats' ninth MP, herself having joined politics and the party just 18 months ago.

Questions to ask yourself… Should this by-election be seen as the people rejecting a 'hard-Brexit'? What does this result say about the Labour Party’s current popularity?

2. Talk of a 'soft Brexit'

The value of the pound rose last week, as Brexit Minister David Davis admitted the Government may be willing to pay to maintain access to the EU single market after Brexit. He is the first member of May’s cabinet to openly discuss this, but Boris Johnson said this would only be a possibility at the right price. The pound reached its highest level in six weeks against both the dollar and euro, as the markets believed this announcement suggests the Government is more likely to pursue a 'soft Brexit'.

If Britain was able to do an economic deal with the EU after Brexit, it could bring more unity among the British public. There are hardline Brexiters who will believe this is a betrayal of the referendum result, but a deal to stay in the economic union could work for the majority of the public. The argument surrounding immigration and free movement of people dominated Vote Leave’s campaign and polls suggest around 70% of the population believe we should have more control of our borders. However, Vote Remain championed the economic arguments of staying in the EU and the single market. Marrying these two different stances was always going to be a difficult, but if the UK could have more control over their borders but also negotiate a deal to maintain access to the single market, it may keep both sides happy.

Questions to ask yourself… Should Britain pursue a deal to pay to stay in the single market? Should the EU be willing to do a deal with Britain on those grounds?

3. Euro falls after Renzi resignation 

The Italian Prime Minister Matteo Renzi resigned on Sunday evening after facing defeat in a constitutional referendum. The referendum proposed a broad range of changes including cuts to public spending, more streamline political processes and electoral reform – which would make it more difficult for extremist parties to gain power. It was believed a ‘Yes’ vote would provide political stability and help strengthen Italy's struggling banking system. However, it wasn't to be and the resounding ‘No’ vote casts huge uncertainty over Italian and EU politics, as well as having the potential to cause another banking crisis in Italy. 

Despite being about constitutional reform, much of the rhetoric before the vote centred on Italy’s EU membership and Eurozone. Renzi is a keen supporter of the EU, but many of the opposition parties are very sceptical. The populist Five Star Movement is gaining mass support and have promised a vote on EU membership if the party win the next election, currently scheduled for 2018. The ‘No’ vote is another major blow for the EU political elite and it has rocked the markets. The Euro is down against the pound and dollar, as speculators fear a crisis in Italy as well as an increased chance of EU disintegration. 

Questions to ask yourself… Is this another sign that the EU is destined to fail? What should the EU do to reform?

4. The cost of not sleeping well

A new study has revealed sleep deprivation costs the economy £40 billion each year due to lack of productivity. Research firm Rand Europe took data from 62,000 people and claimed the UK loses 200,000 working days a year due to lack of sleep, costing 1.86% of Gross Domestic Product (GDP). There are a range of health problems associated with lack of health, with those sleeping less than six hours a night 13% more likely to die young compared to those who get seven to nine hours. 

Question to ask yourself… Should employers do more to promote the importance of sleep? In demanding jobs, is a lack of sleep inevitable?

5. A big deal for oil 

The main news of the week was that OPEC members (a group of mainly Arab oil producing countries) agreed to cut their oil production. Less supply generally means a higher price - and that was borne out: the oil price jumped almost 15% last week. It’s now back near its highest level in more than a year. That’s good news for oil companies and oil-producing regions (including parts of America), but will also likely push overall prices higher for the rest of us (e.g. for petrol). Many analysts, however, remain sceptical that OPEC members will adhere to the deal - which means we’ll have to wait until next year to see if it’s truly effective.

6. Increasing competition

Ofcom, a regulatory arm of the British government, said that it would begin the process to formally separate BT, the telecom and internet services company, from Openreach, which is the BT subsidiary that owns and operates the UK’s main broadband network. It’s an example of how the Government will occasionally step in when they feel that a market is not competitive enough due to the dominance of one (or a small number) of companies. The idea is that a more competitive market would ensure prices remain fair for people and businesses that need internet services, a.k.a. everyone! 

Commercial Awareness Update 21st November by Ben Triggs

Dollar reaches 14-year high

The US dollar jumped to a 14-year high as markets anticipate a huge spending boom by President-elect Donald Trump. Optimism in America led to the Dollar index - which measures the Dollar against a number of other currencies - reaching its highest level since mid-2002. After the initial shock of the Trump victory, the dollar dipped but has risen ever since as the markets speculate on his forthcoming presidency. The President-elect has promised public spending on infrastructure and construction - which could cost as much as $1 trillion - and experts believe this will provide a short-term boost to the economy. This public spending can also have a positive long-term impact for the US economy, but this will rely on the projects being a productive use of taxpayers money with little long-term wastage.  

A rise in interest rates is also expected to boost the value of the dollar. In the coming months, inflation is likely to rise - especially as Trump has pledged to restrict free trade - and with the current positive economic outlook, will encourage the Federal Reserve to push up interest rates. The rates are currently at 0.5% but most believe they will be increased next month.

Trump’s pro-business and spending stance did have an impact on the bond market - it’s lost $1 trillion worldwide since the US presidential election. Low-yield ‘safe’ bonds are being sold off in what many have coined the "Trump Dump", as investors pursue more lucrative investment strategies. With inflation rising, bond prices are likely to increase - the more you pay for a bond, the lower the yield (or potential earnings). Plus, Trump’s pro-business stance has encouraged investors to take money from bonds and put them in stocks - believing they will see strong returns.

Questions to ask yourself… Is a strong dollar good for the global economy? Is the market's current positivity about the Trump presidency an example of short-termism?

Click here for Finimize's more in-depth analysis.

Facebook to expand UK workforce by 50%

Last week Facebook announced it would boost its UK workforce by 50% when it opens a new London headquarters in 2017. There are plans to hire another 500 members of staff, including high-skilled engineers, marketers and salespeople. Facebook's engineers in the current London office have helped with the development of their new product, Workplace - a business platform to help internal communication flow between staff. 

After the EU Referendum there were many companies considering moving operations out of London but it remains the tech stronghold of Europe. Google has also committed to building a new headquarters in the capital which will provide 3,000 more jobs when it opens in 2020. London Mayor Sadiq Khan suggested this investment is a “sign that London is open to talent, innovation and entrepreneurship”.  

Questions to ask yourself… What makes London a tech hub? How does Britain improve technical skills among its workforce? 

Build-up to the Autumn Statement

Chancellor Philip Hammond will give his first Autumn Statement this Wednesday, as the Government will outline its plan for the economy. The Prime Minister Theresa May is keen to help out lower income households, but most of the attention will be on how Hammond aims to boost a potentially stuttering economy after Brexit. With ex-Chancellor George Osborne’s target of cutting the deficit being scrapped, this statement could spell an end to austerity. The cost of Brexit has also been a key topic this week, with forecasts suggesting it could leave a £100 billion blackhole in the budget.

What we think could be announced:

• Hammond has suggested £1.3 billion will be spent on improving roads across the UK
• The Chancellor is expected to back Osborne’s plans to cut corporation tax from 20% to 17% by 2020
• The personal allowance on income tax may be raised - it could be increased to £11,500 from today (previously scheduled for the 2017/18 tax year)
• To encourage savings, the amount people can put in ISAs before being taxed could be raised
• The idea of reducing VAT to 17.5% may be suggested, but this is unlikely to happen this tax year
• Increased tax on employees benefits - making gym memberships, private healthcare and similar more expensive for workers

Questions to ask yourself… What is the priority for the UK economy in the next six months? Should the Government continue spending and run at a deficit?

What happened in Britain?

The UK economy got some good news last week as data showed that prices for everyday consumer goods and services (like rent, groceries, clothing, etc.) weren’t increasing as much as feared. Also, retail sales (e.g. stuff sold in stores) grew by 7% versus a year ago - the strongest increase in 14 years. Economists continue to warn that prices will rise next year (as the weak pound makes imported goods more expensive), which will mean people won’t be able to buy as much stuff. But the pain has been delayed for longer than most economists were expecting.

And finally… 

Snap Inc., the owner of popular social media app Snapchat, officially began the process to become a publicly traded company (i.e. to have its shares traded on a stock exchange via an IPO). At a rumoured valuation of $25-35 billion, it would be the biggest US tech IPO since Facebook in 2012. The IPO is expected to take place in the first half of next year.

Autumn Statement 2016: What happened

The Autumn Statement for 2016 was announced yesterday (Wednesday 23^rd November) and as a follow-up to last week’s post about what to expect, we will be running through the anticipated areas of development, what happened in regards to them, and how the Statement and its proposals will have an impact.

Office for Budget Responsibility (OBR):

As noted in our previous post, the OBR had a particularly challenging task of predicting the British economy due to the uncertainty surrounding Brexit.

The OBR predictions for the growth of the UK economy are as follows:

Year	Growth (%)
2016	2.1
2017	1.4
2018	1.7
2019	2.1
2020	2.1
2021	2.0

The OBR also forecast the amount borrowed in the coming years as follows:

Year	Amount borrowed (£bn)
2017-18	59
2018-19	46.5
2019-20	20.7
2020-21	17.2

In regards to the challenges they faced, the OBR provided a counterfactual based on what the predictions would have been had there been no referendum in June. They found that as a direct result of the referendum result, we are borrowing £3.5bn more this year, £10bn more next year and £15.6bn more in 2018-19, than we would have been without the referendum.

Public borrowing and spending:

In the Budget given by George Osbourne in May, the forecast for the financial stability of the government until 2021 was £122bn more optimistic than that given by Hammond. As a result, public expenditure will fall from 45% in 2010 to 40% this year, although certain budgets (such as defence, pensions and health services) will be protected.  

National debt is also predicted to rise to alarming levels next year (from 84.2% of GDP to 90.2%), and the total amount borrowed is expected to reach just under £2 trillion by 2021. While an increase in the amount of public borrowing was foreseen, the scale of the increase has led to concern among some economists.

Investment:

There were many calls for investment in certain areas, and Philip Hammond announced which sectors would be the focus of public investment.

Infrastructure:

As the Former Secretary of State for Transport, a high level of investment in transport and infrastructure was expected from the current Chancellor. Hammond announced an investment of £1.3bn in English local transport networks – while this decision was largely praised, some have noted its relative significance given it represents 0.08% of GDP. Hammond also expressed his plans to invest £1bn in digital infrastructure, including 5G technology and £2bn per year by 2020 into R+D funding. The above are part of the government’s goals to have invested £23bn in innovation and infrastructure by 2021. 

This extra funding for those in these sectors will be much welcomed due to the significant demand by citizens for improved roads and railways.

Housing:

There has been a notable demand in the past few years for more affordable housing in the UK. Hammond stated this afternoon his intention to invest £2.3bn into a housing infrastructure fund in order to create 100,000 new homes in high-demand areas, alongside another £1.4bn into a fund to build 40,000 affordable homes.

He also announced plans to implement a large-scale regional pilot for the Right-to-Buy schemes and a ban on upfront fees by letting agents, to be effective as soon as possible. The rest of the UK will follow Scotland’s precedent on this matter, where the fees are shifted to the landlords, who have significantly higher bargaining power than prospective tenants.

These changes in the housing industry should help increase the number of homeowners in the UK.

Taxation and pay:

It was revealed that the income tax thresholds will be raised in April 2017 (from £11,000 to £11,500) and again in 2020 (to £12,500) and that the higher rate income tax threshold will be increased to £50,000 by the end of Parliament. Furthermore, the national living wage will see a rise of 30p to £7.50 in April, which is smaller than the rise that was predicted in the March Budget.

While fuel duty has been frozen for a 7^th year, saving the average driver up to £350 annually, insurance premium taxes will be raised 2% to 12% in 2017. We can also expect to see the introduction of a sugar tax on soft drinks in 2018.

In terms of corporation tax, while there was some indication by the Prime Minister that the nation would see a further slash of tax to 15%, the Chancellor has stuck to his intentions and kept the tax level for the coming year at 17%, as was announced in March.  

Hammond intends on raising £32bn by cracking down on tax avoidance schemes.

Other:

Exports:

While there was little clarification on a Brexit strategy, some comfort has been offered to those that are concerned about a decrease in exports to the EU following Britain’s departure. The UK Export Finance funds will be doubled, a change that has been deemed as “vital for small businesses to reach new markets [especially] in the wake of Brexit” by the Chairman for the Federation of Small Businesses, Mike Cherry.

Salary sacrifice schemes:

The salary sacrifice schemes that allow employees to accept benefits in lieu of pay will be restricted, meaning that income will increase for a number of people, resulting in more taxes flowing to the State budget.

The Autumn Statement is somewhat indicative of a stable and strong post-Brexit economy; however, this is dependent on large amounts of borrowing to sustain the immediate aftermath of the referendum. The demand for investment in infrastructure was satisfied and, overall, the changes made will increase the amount of money in the pockets of the general population. However, the lack of clarity regarding Britain’s goals and strategy for leaving the EU leaves a lot to speculation – and the fulfilment of these proposals will be dependent on the terms on which the nation leaves the EU.

- Ellie Dobbyne

Commercial Awareness update 7th November

1. Parliament to vote on triggering Article 50

Last week the High Court ruled that the Government couldn’t trigger Article 50 and start the process of formally leaving the EU without consulting Parliament. The campaign was led by London-based investment manager Gina Miller, who claims she doesn’t want to challenge Brexit but wants the legal process to be carried out correctly. As the result of EU Referendum is only advisory and not binding, the successful argument put to the High Court stated that leaving the EU would effectively overturn at least one act of Parliament, which is unconstitutional. The ruling reiterated the sovereignty of Parliament and its need to be consulted on these matters.

The Government has confirmed it will challenge the ruling in the Supreme Court. Even though unlikely, there’s a chance it will end up going to the European Court of Justice, currently the highest court in Britain.

Will it impact on Brexit?

Many have suggested this is the wealthy elite challenging the outcome of the Referendum but it would be extremely difficult for Parliament to outright reject Brexit. They are there to enact the people’s will so going against the Referendum result would be considered highly undemocratic. It’s likely to mean Britain gets a softer Brexit than the Government is currently gunning for. A majority of MPs are pro-EU, therefore the strategy for Brexit is likely to be diluted because the Government will have to submit a proposal that MPs wouldn't revolt against.  

A potential outcome of the ruling is an early general election taking place sometime next year. Theresa May will set out the Government’s plan for Brexit and if she has trouble passing it through Parliament, she could call an election to gain a fresh mandate from the people for her strategy. The Conservatives have opened up a 14 point lead over the Labour Party in the polls, so it could be a good time to have an election.  

What happened to the markets?

On the announcement of the High Court ruling, the pound rose against the dollar and confidence in the markets increased, as most speculators believe the decision decreases the chances of a hard Brexit - therefore Britain would maintain reasonable access to the single market. The pound rose to a four-week high against the dollar and even if Theresa May still pursues a hard Brexit, this ruling will make her fully clarify her position before negotiations start, which businesses are keen for. 

Questions to ask yourself... Should wealthy individuals get involved in legal processes? Should referendum results be legally binding?

2. America set to vote for a new President

On Tuesday, the American people will go to the polls to decide on whether Democrat Hillary Clinton or Republican Donald Trump will be their 45th President. After months of debates, rallies and speculation, 120 million Americans are expected to vote in this landmark election. Clinton has a lead in the polls but Trump is making headway in some key swing states. 

Not sure what’s going on? Here’s our guide to the American election.

The result is expected to be announced very early Wednesday morning, so keep an eye on global stock exchanges and currency markets this week because there’s likely to be volatility whatever the result. 

Questions to ask yourself... What would happen to markets if Trump wins? Is it fair that a few swing states will effectively decide the result of the election?

3. What happened to the British economy?

The Bank of England held one of its regular meetings last week. The main takeaways were that it said the economic fallout from the Brexit vote hasn’t been as bad as it anticipated. However, it also predicted that inflation (a.k.a. the rate at which the price of things increase) would likely rise significantly next year. This would hit people’s wallets as things get more expensive – meaning they’ll buy less stuff (which, of course, is bad for retailers that sell things to consumers). In short, the UK economy is doing better than thought, but it’s far from out of the woods yet.

There was some slightly concerning news for the UK housing market as an important survey suggested that, on average, prices didn’t rise between September and October (although prices are still about 4% higher than they were a year ago). The fear is that the uncertainty created by the Brexit vote, and the hit to people’s wallet’s discussed above, will weigh on house prices in the coming year.

Questions to ask yourself... What are the biggest long-term risks of Brexit for the British economy? Is a decrease in housing prices universally bad for the British economy?

4. The oil price is having a rough time

The oil price fell back to levels last seen about six weeks ago. The problem is that a supposedly big deal between a cooperative of oil-producing countries (a.k.a. OPEC) to limit production looks like it’s in jeopardy (and if they were to limit supply, it would be good for the oil price). As the oil producers struggle to agree on the details the oil price is falling - which hurts the stock prices of energy companies and currencies of countries that produce lots of oil (among other things). 

5. And finally… 

Facebook’s stock sold off as it signaled it would stop increasing the number of ads in your newsfeed and shift its focus to video (though investors aren’t sure the shift will be successful). Its strategy further threatens traditional media companies, who are already competing with increasingly popular streaming services such as Netflix.

Autumn Statement 2016: What to expect

The Autumn Statement is due to be delivered by Philip Hammond next Tuesday (November 23rd), and there has been a lot of speculation over what UK citizens can expect. The Autumn Statement is an annual report by the Chancellor updating the public on the country's taxation and spending plans. The future of Britain’s relationship with the EU and the weakening of the GBP reinforces the importance of this year’s Statement. 

Challenges for the OBR: 

The Office for Budget Responsibility (OBR) provides independent economic forecasts for the next 5 years of the UK economy. They are expected to release a forecast on Tuesday, soon after the Autumn Statement. 

This year will prove particularly challenging to the OBR given the level of uncertainty surrounding government policy, especially regarding Brexit strategy. The OBR, however, will be showing its workings to shed light on how they calculated their predicted figures despite this lack of political and economic foreseeability.  

Brexit: 

The BBC interviewed several business owners across the UK and asked them what they would like to see Mr Hammond address in the Statement. All their responses include more clarity regarding Britain’s position in terms of a Brexit agreement, a thought that most the UK public can empathise with. Furthermore, in the infrastructure industry, business owners would like confirmation of access to the single market as they fear they would struggle to find skilled labourers without access to EU workers. The Prime Minister, Theresa May, has expressed support for free trade agreements, and this may lead to the Statement indicating plans to reach an agreement to facilitate access to the single market. 

Corporation tax:

Before his dismissal, Former-Chancellor, George Osbourne, expressed plans to further reduce the corporation tax from 17% to 15%. This was intended to retain London’s status as the home to a significant number of large businesses following Britain’s decision to leave the EU. The threat of Brexit saw several companies threaten to move their headquarters to other countries, such as Ireland – where their 12.5% corporation tax and position as an EU Member State is desirable. However, Hammond has suggested that he has no intention of further reducing corporation tax, which was 20% before the Budget earlier this year. This may indicate the Chancellor’s faith in a strong post-Brexit Britain. 

National debt:

Differing from his predecessor again, Hammond has indicated that the nation may seek to borrow in order to survive an inevitable post-Brexit depression, before it regains its strength. Spectators will be looking at whether this increase in borrowing will lead to a move away from the Party’s policy of austerity. 

Investment:

There have been strong hints towards an increase in funding for infrastructure in the coming year, which was requested frequently by those interviewed by the BBC. The increased demand for better quality roads and railways has pushed the possibility of investment into this area, which will be well received by many. 

There has also been a lot of demand for investment into healthcare, particularly the NHS and mental health services. This has proved a highly controversial area for the government and Leave campaigners following the well-publicised bus scandal, in which the Leave campaign mislead the public that it would invest in the NHS with the money no longer going to the EU. 

What’s to come in the Autumn Statement is very much speculative, but what is certain is that the nature of the plans for the UK budget will rely heavily on Hammond’s faith in a post-Brexit Britain. The UEACA Society will be making a follow-up post next week summarising the Statement and its implications for the future of Britain.

- Ellie Dobbyne

Your Commercial Awareness update 24th October 2016 by Ben Triggs

1. London banks contemplate relocation

The head of the British Banking Association (BBA) has claimed large banks could start leaving London for fear of Britain’s future relationship with the EU after Brexit. Anthony Browne said “their hands are quivering over the relocate button”, suggesting plans are already in place to move significant parts of these firm's operation to Europe within the next few months. Frankfurt, Paris, Dublin and other European cities have been busy pitching their town to City bankers.

One of the key benefits of the EU’s single market for banks is 'passporting' - this allows banks to sell their services freely in all parts of the EU without establishing a local office. If Britain is to pursue a hard Brexit, there is no guarantee this privilege will be maintained and this could potentially cripple the UK’s banking industry. As a result, leading banks have started drawing up plans to move away from the British capital - it’s suggested Goldman Sachs could move 2,000 employees from London to a location within the EU.

Many suggest Browne’s comments were aimed at putting pressure on the Conservative Government to clarify their position on Brexit and the tactics for upcoming negotiations. London is a very popular city among bankers and a financial hub - it is a big decision to move away. 

Questions to ask yourself… Is it possible for Britain to maintain the same access to the single market outside the EU? Who loses out if top banks move to other parts of Europe?

2. "Pound still not cheap" - Goldman Sachs

Goldman Sachs has claimed the pound is still overvalued, despite falling 15% since Britain voted to leave the EU. The investment bank claims sterling is still 10% overvalued and will drop further over the next few months. At the time of writing, the pound was worth $1.22 but many believe it will fall as low as $1.15 by the end of the year. However many argue the pound is actually very cheap

This broad range of opinion is largely due to standard valuation methods being unable to account for the impact of an event like the EU Referendum. Standard models, like GSDEER (Goldman Sachs Dynamic Equilibrium Exchange), estimate fair value for a currency, which are effectively long-term moving averages - predicting the effect of a trend once it has already started. However this cannot account for the impact of short-term shock caused by something like the leave vote. 

It was suggested last week that most brands are going to raise their prices by at least 5% due to the increase in import costs caused by a fall in the value of the pound. Microsoft has revealed they will raise prices by up to 22% due to the weak pound, which will have a big impact on business as well as the Government.

Questions to ask yourself… What needs to happen for the pound to start rising in value again? Which industries are benefiting from the lower value of the pound? 

3. Record high employment

The number of people employed in the UK reached almost 32 million in August, figures from the Office of National Statistics (ONS) revealed last week. The number of 16 to 65 year olds in employment or full-time education held at 74.5%, despite fears surrounding the job marker after the leave vote. There was also a rise in wages - from 2.1% in the previous month to 2.3%. This was welcome news for the British economy but there's reason for caution as income in real terms is likely to decrease in the coming months due to rises in inflation.

A study by the British Chamber of Commerce (BCC) found employers were increasingly worried about the future and planned to scale back future hiring. Figures from the last three months show a slight increase in people registering for unemployment and it’s predicted this will get worse as the impact of the leave vote takes full effect. If job creation is stunted due to fears about the future, it will have a long term effect on the economy and youth unemployment.   

Questions to ask yourself… What can the British Government do to encourage job creation? How will curbing free movement of people impact the job market?

4. Morgan Stanley’s record profits

Morgan Stanley has announced third quarter profits which beat expectations, boosted by a sharp increase in bond trading. Net income rose to $1.6 billion from $1 billion in the previous quarter, with income from bond trading almost doubling. The asset management firm has restructured its bond trading division, cutting costs and around 25% of their workforce, which also led to increased profits. Revenue rose 15% to $8.91 billion, which easily beat analysts prediction of $8.17 billion for the quarter.

The previous quarter was surprisingly strong for US banks across the sector. An increase in bond trading was sparked by Britain’s decision to leave the EU and anxiety about monetary policy around the world. On Wall Street, new capital rules had previously slashed trading profits and led to major banks cutting staff, but the most recent quarter saw activity bounce back. 

Questions to ask yourself… What would typically cause an increase in bond trading? Should investment banks be regulated more by the authorities?

5. MPs vote on Green's knighthood

Last week, MPs unanimously agreed on a motion to strip former BHS boss, Sir Philip Green of his knighthood. Politicians branded him the unacceptable face of British capitalism and an asset stripper after his role in the fall of BHS - creating a £571 million pension deficit and leaving 11,000 unemployed. Green is said to have paid himself and his family huge dividends while in charge of BHS, before selling it on the verge of collapse for £1.00. A parliamentary report claims his actions directly led to the department store's collapse, which could have been avoided. The billionaire has said he would attempt to deal with the pension deficit but there has been no concrete plan or payment put forward by Green to date.

The motion is non-binding and any final decision will be taken by the Honours Forfeiture Committee. However, after the motion in Parliament it's highly unlikely Green will keep his knighthood. 

Question to ask yourself… Should MPs have the power to remove knighthoods? How will stripping Green of his title impact his business ventures?

Your Commercial Awareness update 24th October 2016 by Ben Triggs

1. London banks contemplate relocation

The head of the British Banking Association (BBA) has claimed large banks could start leaving London for fear of Britain’s future relationship with the EU after Brexit. Anthony Browne said “their hands are quivering over the relocate button”, suggesting plans are already in place to move significant parts of these firm's operation to Europe within the next few months. Frankfurt, Paris, Dublin and other European cities have been busy pitching their town to City bankers.

One of the key benefits of the EU’s single market for banks is 'passporting' - this allows banks to sell their services freely in all parts of the EU without establishing a local office. If Britain is to pursue a hard Brexit, there is no guarantee this privilege will be maintained and this could potentially cripple the UK’s banking industry. As a result, leading banks have started drawing up plans to move away from the British capital - it’s suggested Goldman Sachs could move 2,000 employees from London to a location within the EU.

Many suggest Browne’s comments were aimed at putting pressure on the Conservative Government to clarify their position on Brexit and the tactics for upcoming negotiations. London is a very popular city among bankers and a financial hub - it is a big decision to move away. 

Questions to ask yourself… Is it possible for Britain to maintain the same access to the single market outside the EU? Who loses out if top banks move to other parts of Europe?

2. "Pound still not cheap" - Goldman Sachs

Goldman Sachs has claimed the pound is still overvalued, despite falling 15% since Britain voted to leave the EU. The investment bank claims sterling is still 10% overvalued and will drop further over the next few months. At the time of writing, the pound was worth $1.22 but many believe it will fall as low as $1.15 by the end of the year. However many argue the pound is actually very cheap

This broad range of opinion is largely due to standard valuation methods being unable to account for the impact of an event like the EU Referendum. Standard models, like GSDEER (Goldman Sachs Dynamic Equilibrium Exchange), estimate fair value for a currency, which are effectively long-term moving averages - predicting the effect of a trend once it has already started. However this cannot account for the impact of short-term shock caused by something like the leave vote. 

It was suggested last week that most brands are going to raise their prices by at least 5% due to the increase in import costs caused by a fall in the value of the pound. Microsoft has revealed they will raise prices by up to 22% due to the weak pound, which will have a big impact on business as well as the Government.

Questions to ask yourself… What needs to happen for the pound to start rising in value again? Which industries are benefiting from the lower value of the pound? 

3. Record high employment

The number of people employed in the UK reached almost 32 million in August, figures from the Office of National Statistics (ONS) revealed last week. The number of 16 to 65 year olds in employment or full-time education held at 74.5%, despite fears surrounding the job marker after the leave vote. There was also a rise in wages - from 2.1% in the previous month to 2.3%. This was welcome news for the British economy but there's reason for caution as income in real terms is likely to decrease in the coming months due to rises in inflation.

A study by the British Chamber of Commerce (BCC) found employers were increasingly worried about the future and planned to scale back future hiring. Figures from the last three months show a slight increase in people registering for unemployment and it’s predicted this will get worse as the impact of the leave vote takes full effect. If job creation is stunted due to fears about the future, it will have a long term effect on the economy and youth unemployment.   

Questions to ask yourself… What can the British Government do to encourage job creation? How will curbing free movement of people impact the job market?

4. Morgan Stanley’s record profits

Morgan Stanley has announced third quarter profits which beat expectations, boosted by a sharp increase in bond trading. Net income rose to $1.6 billion from $1 billion in the previous quarter, with income from bond trading almost doubling. The asset management firm has restructured its bond trading division, cutting costs and around 25% of their workforce, which also led to increased profits. Revenue rose 15% to $8.91 billion, which easily beat analysts prediction of $8.17 billion for the quarter.

The previous quarter was surprisingly strong for US banks across the sector. An increase in bond trading was sparked by Britain’s decision to leave the EU and anxiety about monetary policy around the world. On Wall Street, new capital rules had previously slashed trading profits and led to major banks cutting staff, but the most recent quarter saw activity bounce back. 

Questions to ask yourself… What would typically cause an increase in bond trading? Should investment banks be regulated more by the authorities?

5. MPs vote on Green's knighthood

Last week, MPs unanimously agreed on a motion to strip former BHS boss, Sir Philip Green of his knighthood. Politicians branded him the unacceptable face of British capitalism and an asset stripper after his role in the fall of BHS - creating a £571 million pension deficit and leaving 11,000 unemployed. Green is said to have paid himself and his family huge dividends while in charge of BHS, before selling it on the verge of collapse for £1.00. A parliamentary report claims his actions directly led to the department store's collapse, which could have been avoided. The billionaire has said he would attempt to deal with the pension deficit but there has been no concrete plan or payment put forward by Green to date.

The motion is non-binding and any final decision will be taken by the Honours Forfeiture Committee. However, after the motion in Parliament it's highly unlikely Green will keep his knighthood. 

Question to ask yourself… Should MPs have the power to remove knighthoods? How will stripping Green of his title impact his business ventures?

Your Commercial Awareness update 17th October 2016 by Ben Triggs

1. 'Hard Brexit' could cost £66 billion

A leaked document from the Treasury shows Britain could lose up to £66 billion each year in tax receipts 15 years after a ‘hard Brexit’. The papers were circulated to MPs in April after a controversial study into the impact of leaving the EU by then Chancellor George Osborne. It also suggested that leaving the single market would cause Britain’s Gross Domestic Product (GDP) to drop 9.5% over the next 15 years, compared to staying in the EU. There was widespread criticism at the time of publication, but it’s believed the Treasury stand by their predictions today. 

The debate between MPs seeking a 'soft Brexit' and those after a 'hard Brexit' has intensified in the past week, as more pressure is being put on Theresa May to give the House of Commons a vote on the Brexit negotiation strategy. Even within the Conservative Party, pro-Remainers are calling for a vote to legitimise the Government policy on Brexit. Labour MPs are putting forward an Opposition Day motion which calls for MPs to be able to scrutinise a plan before Article 50 is triggered, which many ‘rebel’ Tory MPs are contemplating backing.

Commentators suggest the Theresa May government will topple if they try to force through a negotiation strategy without the scrutiny of elected representatives in the House of Commons. 

Questions to ask yourself… Should the Government have to consult Parliament if there has been a referendum on the issue? Why would Brexit potentially lead to lower tax receipts?

2. Marmite-gate

Last week Tesco stopped stocking Marmite and other Unilever products in a row over price hikes. Tesco refused to accept Unilever’s price increase of around 10%, set due to the falling value of the pound and the impact it was having on importing goods and ingredients to make their products. Tesco boycotted 100s of Unilever’s products, including Marmite, Pot Noodle and Domestos, and withdrew them from their website. The likelihood was these increases would be passed onto the customer and Tesco believes Unilever's reaction to exchange rate changes was excessive. Many commentators actually suggest the falling price of the pound actually benefits Unilever overall because they can export their goods abroad much cheaper. After a two day stand-off with the leading supermarket, a compromise was reached and Unilever’s products are now fully available.

Bank of England Governor, Mark Carney has claimed inflation will rise due to the lower value of the pound. In recent times, there has been very low inflation but analysts believe it will rise to 3% by the end of next year. The Government target is 2%, but Carney is happy to miss that target if it means continued economic prosperity and high employment. Food and fuel prices are going to be the key components of inflation as it will become more expensive import them from abroad. Fuel prices have already risen since Brexit and are expected to rise again by 5p per litre after another poor week for the pound. 

The pound lost 2% last Tuesday alone and finished the week at around $1.21. The weak pound is making a number of people nervous but a former International Monetary Fund (IMF) chief has described it as ‘desirable’, suggesting the UK is rebalancing “remarkably well” and the pound losing value is a necessary part of this rebalance.

Questions to ask yourself… Who benefits if inflation increases? What will make the pound gain value again?

3. A second Scottish independence vote?

Nicola Sturgeon has started the process for a potential second referendum on Scottish independence by submitting a first proposal for consultation. At the Scottish National Party (SNP) conference, she expressed her desire to give the Scottish people an independence vote before the UK formally leaves the EU in 2019. The SNP believes if the UK goes for a hard Brexit, Scotland should have the opportunity to remain in the single market by voting for independence. The British government suggest they would reject a proposal for Scotland to get a second referendum as the issue was laid to rest by the first in 2014.

This isn't the only problem for Sturgeon - the polls currently suggest the Leave vote has not swayed enough people towards Scottish independence. In the first referendum 55% voted for Scotland to remain in the UK and it would require a large swing to change the result.

Questions to ask yourself… Is it undemocratic to have a second vote on the same issue so close to the first? Would the EU welcome an independent Scotland?

4. CMS, Nabarro and Olswang set to merge

Partners at law firms CMS Cameron McKenna, Nabarro and Olswang have agreed to a merger, which is expected to take place in May next year. Trading under the name CMS Cameron McKenna Nabarro Olswang (or CMS for short), they will become the sixth biggest law firm in the UK, with a total revenue of just under £1 billion globally. Law firms are trying to broaden their service and break into new markets and this merger aims to accelerate this process, allowing them to compete with Magic Circle firms. The new firm will have offices in 36 countries and employ 4,500 lawyers. As the law market becomes increasingly global, City law firms have struggled to stay as competitive - this merger aims to counter this.

The role of technology is having a greater impact on the law sector, with firms aiming to become more efficient with modern tech. After the merger, CMS plans to invest more in artificial intelligence which is increasing the amount of automation for routine work in the sector. 

Questions to ask yourself… What are the potential disadvantages of this merger for the firms involved? Will this start a trend of small law firms seeking mergers?

5. Update on last week

Last week we discussed the potential of a spring 2017 Initial Public Offering (IPO) for Snap Inc. - the company that owns Snapchat - worth $25 billion (read more just here). This week, Snapchat’s founder Evan Spiegel is said to have appointed both Goldman Sachs and Morgan Stanley to lead this operation. 

Questions to ask question… What are the advantages of floating a company on the stock exchange?