Brexit breakthrough
Is the smoke of the phoney war over Brexit finally clearing? This week the EU’s chief negotiator Michel Barnier and his UK counterpart David Davis were all smiles at a joint press conference announcing a draft deal for a 21-month transition period after Brexit is formally triggered next March, easing concerns that a hard Brexit would be the only result if talks remained deadlocked. During the transition period, the UK would probably have to abide by EU rules but have no say in decision-making among the bloc. Areas where agreement has yet to be made include the Northern Irish border, data protection and intellectual property – but at least there is clarity on a financial settlement and the rights of citizens affected by the divorce.
Ringing in the changes
BT pension deal
Telecoms giant BT looks to be close to resolving a headache that has plagued the business for more than a decade. Management and the union representing most of BT’s workforce, the CWU, appear close to a deal that will see many of the BT Pension Scheme’s 20,000 members shift from a defined-benefit to a defined-contribution scheme, sweetened with extra payments to compensate them for losing the certainty of their final pensions payments. BT will also launch a hybrid scheme for workers at the lower end of the pay scale. BT’s pension deficit stood at £7.9bn at the end of December and has acted as a drag on corporate ambitions for years.
Bookies boosted
FOBT hope
Bookmakers breathed a sigh of relief this week when the Gambling Commission, the industry’s regulator, failed to recommend the strongest possible line against fixed-odds betting terminals (FOBTs). These machines are installed in pretty much all bookies’ shops and have been the subject of campaigners' ire due to the allegations that the machines, which allow bets of up to £100 a time, are highly addictive. The gambling commission’s submission in response to a review by the Department for Digital, Culture, Media and Sport into FOBTs suggested the most popular games have a limit of £30 or less, which is a preferable outcome to the bookies given the government review was looking at possibly cutting maximum bets to as low as £2.
High-street hat trick
Concerns rise
Some of the oldest names on the UK high street are struggling. Shares in three retailers from different strands of the sector were in focus this week on disappointing news. Suit hire and retail specialist Moss Bros warned that profits would be ‘materially lower’ than expectations in its second warning this year, leaving its shares one-third lower. Meanwhile, childrenswear specialist Mothercare said it has had to get breathing space from lenders on its financial covenants as trading continues to struggle, while carpet retailer Carpetright has had to seek a loan from Meditor European Master Fund “to assist with short-term capital requirements”, although this soothed investors’ concerned and sent its shares higher.
Frozen food
Beast from the east hits
Online grocery shopping is great, until deliveries cannot be fulfilled as Ocado is finding out after the ‘Beast from the East’, which sent the country into deep freeze last month, wiped £1.5m off profits in the first quarter. Three of the company’s delivery depots were cut off by the icy weather and management took the decision to hold back on orders as deliveries became increasingly difficult. The result was a 1 per cent hit to sales and the business incurred extra costs as it had to lay on extra vans and drivers, cancel deliveries and give away unused perishables to food banks. Despite a hit at the end of the period, sales over the 13 weeks to 4 March rose by 11.7 per cent.
Risers and fallers
| NEX GROUP | 36.01 |
| FENNER | 29.93 |
| HIKMA PHARMACEUTICALS | 27.52 |
| HAMMERSON | 18.88 |
| COMPUTACENTER | 13.9 |
| MICRO FOCUS INTL. | -49.85 |
| SPORTECH | -45.5 |
| CARPETRIGHT | -31.3 |
| MOTHERCARE | -21.5 |
| SOPHOS GROUP | -20.19 |
Week to 20 March 2018
Tightening times
Looser wallets?
Wagers on an interest rate rise in the UK in May have risen after the latest bout of economic data showed consumer prices index (CPI) inflation beginning to recede and wages picking up. Wages rose by 2.6 per cent excluding bonuses in the three months to January as unemployment fell to a new low, while inflation as measured by the CPI dipped to 2.7 per cent in its latest reading, down from 3 per cent. These are conditions which, combined, would make the prospect of the UK following the US in raising interest rates more palatable for central bankers.
Pensions power weakened
Regulator reduced
Pensions are becoming an increasingly prevalent factor in takeover situations. Witness the high profile GKN’s pension scheme has been given in its takeover battle with Melrose. But this week the government shelved plans to allow the Pensions Regulator to step in and block takeover plans if it felt any such deal could place the target’s pension scheme in jeopardy. Following consultation the government has decided that allowing such powers could potentially ‘stifle legitimate business activity’ and it will retain the existing framework whereby businesses can ask the regulator to green light a deal but are not compelled to do so.
