Defying Brexit gloom
AmOnG the weakest of the arguments deployed by the ‘remain’ campaign is to suggest that if Britain were outside the comfort zone of the EU inward investment would freeze over, we would be cut off to global commerce and UK plc would postpone corporate investment. Sure, some surveys done by organised business groups suggest such outcomes. But I cannot but be struck by how much activity there is despite all the warnings.
Suffice it to say despite the huge downsides of a Deutsche Boerse takeover of the London Stock Exchange (see below) both sides have made it clear that they will press ahead irrespective of Brexit.
They are not alone. In a transaction which underlined London’s significance as a global financial centre, American data group IHS launched into a £9bn merger with British-based financial information service markit and decided, without hesitation, to make their home in London. So no fear of Brexit risk there either.
The sudden break out of affection for debtridden Premier Foods is another case of inward investment gathering a head of steam. American spice rack royalty mcCormick & Co opened the door with a badly-seasoned offer only to find that Japan’s nissin has staged a dawn raid snapping up 17.3pc of the stock. It seems that mr Kipling and Bisto gravy still have allure.
The reservations from long-suffering shareholders Standard Life and Paulson & Co are largely about a failure to engage with the Americans, not whether injecting capital into the UK at this time would be a profound mistake.
In the same spirit one of the largest enterprises on the Dublin stock exchange – the paper and cardboard group Smurfit Kappa – disclosed this week that it was moving its quote to the LSE in the hope of gaining more liquidity and attracting greater institutional and index investment in its shares. It is another case of the pulling power of the City for euroland enterprises.
Across the broader economy it is also clear investment is not being strangled. Rolls-Royce revealed that despite some local difficulties it is to create some 350 jobs at its Derby headquarters amid some speculation that they might have gone to Germany. Vacuum and appliance maker Dyson signalled it is committed to £1bn of research and development mainly in Britain.
And in the troubled steel sector, Greybull moved closer to the rescue of the Scunthorpe steel plant being abandoned by Tata.
One could go on. But the message is crystal clear. Even in the current overheated political atmosphere, commerce is not stopping, the prospects for the City look as bright as ever and all-comers are still arriving. So much for Brexit blight.
LSE hearings
SEVERAL weeks after Deutsche Boerse revealed itself to be a suitor for the London Stock Exchange, the Treasury Select Committee of the Commons looks as if it is finally gearing up for some hearings. In the run up to the Easter break it was largely distracted by organ- ising and taking evidence from the Chancellor George Osborne and Boris Johnson on the impact of Brexit.
We can now disclose that the powerful chairman of the select committee, Andrew Tyrie, has received requests for hearings on several issues and believes that the case for looking at future regulation of the exchanges, and in particular their capital strength, has merit.
He has commissioned work and will doubtless be asking the main regulators the Financial Conduct Authority and the Bank of England for some evidence.
The LSE-DB deal is far too important to be left to City investment bankers and the Goldman Sachs diaspora of nominated chief executive Carsten Kengeter and Xavier Rolet to sort out alone. Kengeter may also have some ‘fit and proper’ questions to answer given his alleged connection to UBS Libor rigging problems.
Boosting growth
WHEn it comes to economic thinking the Bank of England has become something of a powerhouse. It is one of the legacies of Lord (mervyn) King’s period after he searched the globe looking for economists with PhDs because of the paucity of candidates from British universities.
One of the biggest issues facing policymakers at present is what do you do to get economies moving when central banks have exhausted their toolkits of negative interest rates, printing money and credit easing by buying up private sector paper such as mortgages.
Three Bank boffins look to have come up with an answer. They find that simple supply side actions such as a cut in payroll taxes, in Britain’s case national insurance, could well be expansionary.
If that is the case the Chancellor’s apprenticeship levy could potentially be just another ill thought out stealth tax. Oh dear.