A slow departure
Negotiations between the UK government and the EU limped along during 2017. The reliance of the Conservative government on the Democratic Unionist Party for its majority proved a stumbling block, particularly due to the latter’s refusal to compromise on maintaining Northern Ireland’s regulatory union with the rest of the UK. However, there was finally some progress made after EU leaders agreed talks could move to the second phase and a future trade deal agreed. With London as a major financial centre, the terms of sale of financial services will likely be high on the agenda.
Risky gains
Bitcoin rises
Bitcoin moved even further into the public consciousness, after rising to almost $16,000 by the end of December – up from £1,000 at the start of the year. However, the cryptocurrency continued to divide opinion, particularly due to concerns about price volatility. Chicago-based exchange CBOE began offering Bitcoin futures this month, seen as lending some legitimacy to the cryptocurrency. However, the Israeli Securities Agency said it would bar companies trading in Bitcoin from operating on the Tel Aviv stock exchange and investigate how to regulate the digital currency because of concerns about volatile prices.
Rolet out
Trouble at LSE
Activist investors continued to be a thorn in the side of several boards of UK-listed companies this year. The highest-profile spat was arguably efforts by The Children’s Investment Fund (TCI) to oust London Stock Exchange (LSE) chairman Donald Brydon and extend the tenure of chief executive Xavier Rolet. Mr Rolet stepped down a year earlier than planned in November, in an attempt to avoid further bad publicity for the group. However, TCI – which has a 5 per cent stake in LSE – failed to garner enough support at an extraordinary general meeting to force Mr Brydon to step down ahead of his planned 2019 departure date.
Inflation woes
Retailers suffer
Inflation was the buzzword for UK retailers in 2017, with a weak pound increasing import costs and weighing on profits. Companies including DFS (DFS), Debenhams (DEB) and Dixons Carphone (DC.) have suffered heavy falls in their share prices this year, as their margins and profits have come under pressure. What’s more, the increasing cost of living and stagnating wage growth have also dampened consumer demand. However, inflation is expected to moderate to around 2.4 per cent by the end of 2018, according to the Bank of England.
Airlines misfortune
Capacity bites
It was a fraught year for the airline industry as overcapacity continued to bite. However, one airline’s difficulty is another’s fortune. As Air Berlin and Monarch went into administration, budget airlines EasyJet (EZJ) and Ryanair (RYA) stood to benefit from some of the capacity being removed from the market. However, the latter had its fair share of problems elsewhere. Pilots in Germany staged a walkout in a dispute over pay and working hours. The threat of further strikes over the Christmas period forced boss Michael O’Leary to make a U-turn and recognise pilots’ unions in six countries.
Trump's tax reforms
US tech gains
In what was seen as a boon for the US president, Donald Trump managed to pass a bill for his controversial tax reforms, paving the way for tax cuts for some of the largest multinational companies.The reforms are intended to help such companies repatriate their earnings – currently held offshore – at vastly reduced tax rates. Digital heavyweights including Apple (US:AAPL) and Alphabet (US:GOOGL), the owner of Google, stand to benefit hugely from the reforms – which are being called a “corporate handout” by critics.
Opec's worth
Oil gains
Opec proved its influence over the oil market during 2017, with the price of Brent Crude hanging around $60 a barrel despite the fact that US shale production has surged and global crude inventories are expected to rise. In December the world’s largest oil states flew into Vienna, held a few meetings, and eventually extended the existing deal to strike 1.8m barrels from global daily production – that was set to end in March – throughout next year.
British Gas owner Centrica (CNA) and insurer Direct Line (DIR) are expected to produce the highest dividend yields among FTSE 100 companies next year. However, dividend cover by earnings is expected to remain thin for both, at 1.24 and 1.12 times respectively. The FTSE 100 is forecast to pay out £88.5bn in dividends in 2018, according to AJ Bell. That’s a 7 per cent increase on the final forecast payout for 2017 and equates to an average yield of 4.3 per cent.
