Forget Brexit, get spending

FUNNy what a little sunshine and a soaring stock market can do to change the mind, isn’t it? JP Morgan and Bovis are just two of the latest companies to say that a post-Brexit Britain is not so bad after all.

JP Morgan was one of the leaders of the Project Fear campaign, along with US banks such as Goldman Sachs. Jamie Dimon, JP’s boss, was one of the most vocal Remainers, even visiting his Bournemouth staff to warn them that a vote to leave the European Union could lead to a loss of 4,000 jobs out of 16,000.

So the optimism of Viswas Raghavan, Morgan’s deputy chief executive for Europe and the Middle East, is a big deal. He is now saying it’s too early to tell whether the 4,000 jobs will be shifted away from the UK or not, adding it is JP’s intent ‘to maintain a large presence here’. Did anyone ever doubt it?

Bovis Homes was another to report cheerful news on the housing front with profits up and a record number of homes sold in the first six months. Bovis boss David Ritchie shrugged off any Brexit effect, saying it was too early to tell and that so far sales prospects are looking resilient. That means good.

They are not alone. There have been many signs of confidence since the vote. Wells Fargo is going ahead with a £300m London office, Japan’s SoftBank bid £24bn for ARM, and UK drug giants, GlaxoSmithKline and AstraZeneca, confirmed big investment plans.

GSK announced it will spend £275m updating three manufacturing sites in Scotland, County Durham and Hertfordshire, bringing hundreds of jobs to the sites over the next few years. GSK’s boss Sir Andrew Witty even admitted the UK is still an attractive location to do business because of its skilled workers and competitive tax system.

AstraZeneca followed quickly, confirming its £330m investment at the global HQ for research and development in Cambridge. AZ chief Pascal Soriot went further, adding there is no better place to do science than at Cambridge – a place that’s been great for the last 800 years and will be good for the next 800 years.

Witty and Soriot’s comments were cringeworthy to say the least because only a few weeks before they were among the Remain cheerleaders who warned that Brexit would bring Armageddon. It’s time businessmen – and women – learnt to be a little more careful with their warnings: the boy crying wolf and all that. But let’s not be too hard on them. It’s great news they are investing for the longterm. Business investment is crucial to the health of the economy as it boosts productivity, creates jobs and raises living standards.

Now the task is working out how to persuade British – and European – companies to invest more on future projects and expansion; and this has nothing to do with Brexit. Business investment levels have been on the floor since the great financial crash and have barely recovered. It’s estimated that UK and European companies have between them $2trillion in cash. This money needs to be put to work.

Saving Santander

SPEAKING of savings, Santander’s decision to halve its interest rate to 1.5pc on its popular 123 account is another blow to savers.

More than half a million customers have opened up the bank’s high interest current account since it was launched four years ago. Savers have done rather well too; those with £20,000 on balance have been earning £600 in interest. That will drop to £240 a year once fees are deducted.

While I have every sympathy with them, it’s more important to have low interest rates to help the economy to recover, create jobs and help the young onto the mortgage ladder.

Andy Haldane, the Bank of England’s chief economist, is right when he says the Bank’s decision to cut rates to a historic lows was important to allow companies to plan future investment and grow.

But the Bank’s monetary policy will only work if the high street banks – including Santander – do follow through and cut interest rates on lending to SMEs. The business lending market is still one of the murkier parts of high street banking where it is almost impossible to get a clear guidance on what the banks are charging. If the Bank – and the authorities – want to speed up the recovery they should demand transparency.

Pension dividend

THE LCP’s annual Accounting for Pensions report, published today, shows the combined pension deficit of the 56 companies in the FTSE100 that disclosed a deficit in 2015 was £42.3bn. yet those same companies paid dividends totalling £53bn; some 25pc higher.

LCP also reports that FTSE100 companies pay around five times as much in dividends as they do in contributions to their defined benefit pension schemes: some of the dividends will of course go to pensioners via their pension schemes. Even so the big discrepancy is alarming, particularly in the light of the BHS collapse and the potential sale of Tata Steel, both with under-funded pension schemes.

Companies with big deficits are bound to come under pressure from the Pensions Regulator to look again at their dividend policy following the select committee’s report into BHS, and of course Sir Philip Green’s generous dividend payment to his wife, Tina.

About time too.