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Friday
8 July 2016
BUSINESS, POLITICS & CULTURE www.bloombergbriefs.com
Mayor of London@MayorofLondon
Hate crime will not be tolerated on London's transport or anywhere in our city. Please report it #WeStandTogetherhttps://t.co/yhjY3VgWNFDetails
TALKING POINTS
Virgin Galactic to Restart Spaceship Virgin Galactic, the commercial Tests:
space company founded by billionaire Richard Branson, is set to resume test flights next month in a new spaceship that replaces the craft that crashed in a fatal accident two years ago. The company is due to complete ground tests in August and move to testing the vessel in the skies while attached to an aircraft, according to Jonathan Firth, vice president at Virgin Galactic. The spaceship, named Unity, is scheduled to
— begin the final stage of testing independent, fully powered flights — next year. Branson is vying with Amazon.com founder Jeff Bezos’s Blue Origin to be the first to ferry private adventurers to the edge of space in reusable craft.
Mayor Pledges to Tackle Hate Crime: The Mayor of London Sadiq Khan has promised to tackle the problem of hate crime on the capital's transport network. There has been an increase in reports of racist abuse in London since the EU vote last month, according to a statement from the mayor's office. Khan also tweeted his support for the #WeStandTogether campaign which is being adopted by police forces across London to encourage those that see or are subject to abuse to report it to the police.
PM Pledges NATO Troops in Post-Brexit Show of Might BY ALEX MORALES AND ISOBEL FINKEL
Prime Minister David Cameron heads to his first post-Brexit NATO summit pledging thousands of troops and arguing that Britain is still relevant to its continental allies even as it prepares to extricate itself from its 43-year membership in the European Union.
British commitments at the two-day summit in Warsaw starting today will include the deployment of a 500-strong battalion to Estonia, a company of 150 soldiers to Poland and a promise of 3,000 troops to lead a quick-reaction force next year, a government official told reporters in London. At a working dinner on Friday evening, Cameron will give a warning to Russia that the alliance is prepared to defend its allies against any aggression, the official said.
“Actions speak louder than words and the U.K. is proud to be taking the lead role, deploying troops across Eastern Europe,” Cameron said in an e-mailed statement. His sentiments were echoed by NATO Secretary General Jens Stoltenberg, who said in remarks to open the two-day summit that Brexit won’t alter the U.K.’s standing in the 28-member bloc.
After voters backed leaving the EU in last month’s referendum, Cameron and his ministers have been at pains to stress that the country won’t retreat into isolationism.
Even though Cameron attends the summit as a lame-duck prime minister, having announced his intention to step down in the wake of the Brexit vote and overshadowed at home by a contest to choose his successor, his Defense Secretary Michael Fallon suggested this morning that the retreat from the EU increases the importance of the UK's other multi-national commitments.
“The decision to leave the European Union does not mean Britain is turning its back on the world, on the contrary we will be working harder with our key allies,” he told BBC Radio 4’s “Today” show. “We’ll be doing more in NATO to compensate for our withdrawal from the European Union.”
Deutsche Boerse Said to Push Frankfurt in LSE PitchBY JOHN DETRIXHE AND AARON KIRCHFELD
Deutsche Boerse’s chief executive officer plans to pitch the takeover of London Stock Exchange Group as Frankfurt’s only chance to win a key euro-denominated business, according to people familiar with his discussions.
Carsten Kengeter’s renewed push to win over German officials and investors comes amid a post-Brexit tussle between European leaders over which city should become the new center for clearing euro-denominated trades. The majority of euro clearing currently happens in London, but the U.K.’s eventual departure from the European Union has put that business up for grabs. Cities such as Paris are wrangling to win it.
The city that dominates euro clearing could attract the other major currencies, said one of the people, who asked not to be identified because the discussions are private.
German officials have objected to the prospect of Deutsche Boerse moving the headquarters of its holding company to London as part of the tie-up. Kengeter’s pitch suggests there is a bigger issue: the deal could be key to protecting Frankfurt’s existing clearing business.
Management at Deutsche Boerse and LSE both understand the need to find a compromise on the new holding company’s location, separate people familiar have said. That may entail establishing the headquarters outside the U.K. to obtain approval for the merger, or even creating dual holding companies. Such a move would only come after Deutsche Boerse’s tender offer succeeds and the deal is completed, the people said.
POLITICS
Source: Jasper Juinen/Bloomberg
Prime Minister David Cameron
8 July 2016 Bloomberg Brief London 2
POLITICS
"I am absolutely confident the U.K. and European Union will work together in a pragmatic and cooperative fashion to ensure the U.K.’s transition is orderly and smooth. Nobody has an interest in protracted, adversarial negotiations."
– U.S. President Barack Obama told reporters in
Warsaw today before a summit of NATO leaders.
QUOTED
AROUND WESTMINSTER
Corbyn Challenges Labour MPs in Opposition leader Bid to End Revolt:
Jeremy Corbyn challenged his detractors to stand a candidate against him as he sought to end a revolt that’s forced him to share spokesman roles among a dwindling group of supporters in Parliament. Labour Party MPs in the House of Commons have the support required to trigger a leadership election but have held off declaring their candidate following a surge in new party members supporting Corbyn. The leader has cited his election in September by a majority of the membership as a mandate to stay in the job. MPs “need to respect the democracy of our party and the views of Labour’s membership, which has increased by more than 100,000 to over half a million in the past fortnight alone,” Corbyn said today in an article for the Guardian newspaper. “Those who want to challenge my leadership are free to do so in a democratic contest, in which I will be a candidate.”
AROUND EUROPE
Merkel’s Rating Reaches High: German Chancellor Angela Merkel’s approval rating rose to the highest since September as she pledges to hold the European Union together after the U.K. voted to leave. The poll for ARD television points to a surge in German support for the EU as the outcome of the Brexit referendum sinks in. Asked whether Germany mostly benefits from the union, 52 percent agreed, an increase of 13 percentage points from just before the UK ballot, according to the Infratest Dimap poll.
Leadership Fight Pits May Against Untested LeadsomBY ALEX MORALES AND ROBERT HUTTON
The all-female battle to be the next prime minister pits a known quantity in Home Secretary Theresa May, supported by the bulk of Conservative MPs, against the controversial newcomer energy minister, Andrea Leadsom, whose pro-Brexit credentials could create an upset.
The fight to succeed David Cameron and manage the country’s transition out the European Union is taking place against a backdrop of gyrating markets, with the pound trading near its lowest in more than three decades. Ministers are scrambling to recalibrate Britain’s relationship with the world, with Chancellor of the Exchequer George Osborne in China and Business Secretary Sajid Javid in India to negotiate trade.
The more experienced May, 59, won more than double her younger rival’s votes in a ballot among 330 Conservative MPs who are more pro-EU than the grassroots. The question now is whether May can maintain her commanding lead among the 150,000 members who have the final say.
They constitute a “a very distinctive slice of Britain,” John Curtice, professor of politics at Strathclyde University, told the BBC.
A private poll commissioned by Leave.EU, one of the groups that campaigned for Brexit, suggested the home secretary may not be a shoo-in. It found Leadsom was favoured by 56 percent of its Conservative supporters, compared with 44 percent for May. The group, whose private poll on referendum day correctly predicted the eventual outcome, didn’t provide a sample size.
Whoever wins, Britain is set to have its second female prime minister in more than a quarter of a century. The victor will be announced on Sept. 9.
U.K. to Add 300 Staff to Negotiate Post-Brexit Trade TiesBY CHARLOTTE RYAN
The U.K. government plans to add as many as 300 specialist staff to its trade team in an effort to build new relationships outside the European Union, Business Secretary Sajid Javid said.
Javid announced the plans ahead of a trade visit to India today. He will meet officials in New Delhi to push for an agreement between the two countries by the time Britain officially leaves the EU. Chancellor of the Exchequer George Osborne is due to visit China this month to press his commitment to a “golden era” in relations with the country.
"Following the referendum result, my absolute priority is making sure the U.K. has the tools it needs to continue to compete on the global stage," Javid said in a statement. "Over the coming months, I will be conducting similar meetings with other key trade partners, outlining the government’s vision for what the U.K.’s future trade relationships might look like."
Prime Minister David Cameron is stepping down in September, leaving the task of leading negotiations to take Britain out of the EU to his successor, who will be either Home Secretary Theresa May or Energy Minister Andrea Leadsom. She will have to decide when to trigger the formal start of two years of exit negotiations with the EU, manage the trade-offs involved and lead efforts to establish new commercial relationships with countries around the world.
BUSINESS
Source: Simon Dawson/Bloomberg
Leadsom (l), May (r)
Chris Ratcliffe/Bloomberg
Sajid Javid, U.K. business secretary
8 July 2016 Bloomberg Brief London 3
BUSINESSAROUND THE CITY
HSBC Faces Rise in Foreign HSBC Currency Account Requests:
Holdings has been inundated with foreign-currency account applications as British customers rush to protect their savings, spooked by the post-Brexit rout in the pound. Those who’ve requested the accounts, which allow customers to hold their cash in foreign currencies for overseas trips or to cover international payments, are being told the waiting time is 10 to 15 days, according to Jenna Brown, a spokeswoman for the bank. That’s opposed to five working days advertised on the bank’s website.
Market Demand Remains Strong, Hammerson Says: Hammerson, the specialist retail real estate company, said demand for its properties in the U.K. remained strong after Britain’s voted to leave the European Union last month. ”We’ve seen no let-up in leasing demand — there is a healthy level of leasing activity,” Chief Executive Officer David Atkins said in an interview today. ”We continue to have satisfactory demand on the disposals we have in train.”
MARKETS
Consumer Sentiment Dives Most Since 1994 on BrexitBY LUCY MEAKIN
U.K. consumer confidence plunged the most in 21 years, the latest sign that Britons’ vote to leave the European Union is harming the nation’s outlook.
Gfk’s core index slid to minus 9 in a special post-referendum survey conducted from June 30 to July 5, from minus 1 earlier in June. That’s the biggest slide since December 1994 when increases in tax, interest rates and job insecurity weighed on spending. While confidence among respondents who said they voted to remain in the EU dropped to minus 13, the decline was tempered by a lesser slide of minus 5 among those who said they opted to leave.
Anxiety is growing as investors and households try to gauge the economic ramifications of the June 23 decision. With both major political parties engaged in heated leadership battles and the politicians who campaigned to leave slow to put forward plans of what a post-Brexit relationship with the EU will look like, the exit strategy may remain unknown for months to come.
“During this period of uncertainty, we’ve seen a very significant drop in confidence,” said Joe Staton, head of market dynamics at GfK. “Every one of our key measures has fallen, with the biggest decrease occurring in the outlook for the general economic situation in the next 12 months.”
Source: Bloomberg. Change since previous close.
Homebuilders Post-Brexit Slump 'Overdone,' Says UBS
The immediate slump in U.K. homebuilders' share prices after the country voted on 23 June to leave the EU was "overdone," according to a note today from UBS. The bank said current prices are an "attractive entry point over our forecast horizon", adding that the sector is better placed to absorb a downturn compared to 2008 due to strong balance sheets. The Bloomberg U.K. Homebuilder Index was up yesterday for the first time this week. Halifax June data this week showed a 1.3 percent month-on-month increase in house prices. While there are some signs for optimism, the industry outlook remains uncertain with Barclays cutting its homebuilder ratings . (Chart normalized as of 1/6/2016.)yesterday
— Blanche Gatt, Bloomberg News, with assistance from Rebecca Spong, Bloomberg Briefs
Consumer Jitters
8 July 2016 Bloomberg Brief London 4
OUT OF OFFICE
8 July 2016 Bloomberg Brief London 5
OUT OF OFFICE
On Savile Row, One Suit Becomes Two as Clients Hunt for Bargains BY JOHN AINGER
Few things are as quintessentially British as a bespoke suit from London’s Savile Row, so how better to benefit from the U.K.'s economic turmoil than getting two for a bargain.
On a stroll down the fashionable Mayfair street, the mixed blessings of Britain’s vote to leave the European Union are on display: American customers are buying more, taking advantage of sterling’s tumble against the dollar, while local clients are skittish, fearing for their jobs in industries such as finance and banking.
“What has changed is one suit has become two suits,” said Simon Cundey, managing director of tailor shop Henry Poole, in reference to U.S.-based customers, who comprise about 40 percent of sales. “We’ve even had customers just lay down deposits for suits, and they will be over here for July and August choosing them. That’s how good it is for the business.”
The outlook for British clients, who account for about 30 percent of sales, is “going to be interesting,” said Cundey, whose shop, founded in 1806, cut the very first dinner jacket. “My fear is that, as my business is made up of a lot of property financiers, legal and banking, we may have a job situation over the next few years.”
Savile Row, home to Britain’s best tailors for nearly 300 years, illustrates the upsides and downsides that various industries are balancing in the wake of the EU vote. A few blocks down on Jermyn Street, where the discerning gentleman buys his shirts, outlets are using a similar strategy to lure overseas buyers. Hilditch & Key, which counts Karl Lagerfeld among its customers, sent out an e-mail that urged overseas customers to take advantage of the strong dollar against the pound.
U.K. retailers need tourists to pick up the slack for local
shoppers who have proven skittish since the referendum vote. That’s resulted in a 3.6 percent sales decline across all U.K. merchants in June, the worst result for that month in more than a decade, according to advisory firm BDO. Visitors from Asia and other regions are already descending on Oxford Street, providing a much-needed shot in the arm for U.K. luxury companies like Burberry Group. Some will wind their way over to nearby Savile Row as well.
“Sometimes we’ve got lots of U.S. clients who are just browsing, but actually this time they are buying,” said Mahesh Habugoda, a retail manager at tailor Ozwald Boateng. “If someone’s buying a suit, they might buy two shirts, and throw in an extra tie.”
Bloomberg Brief: LondonJennifer Rossa
Managing Editor
Emma Ross-Thomas
Bloomberg News London
Bureau Chief
Rebecca Spong
London Brief Editor
Paul Smith
Briefs Editor
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