Friday 18 May 2018
UK plc is firing like a rocket as the FTSE hits a new all-time high reflecting record profits and near peak revenues. Positive data is abound. Employment is up (again), as is investment and mergers & acquisitions. No surprise the government is happy to help leverage British exports to the United Arab Emirates, knowing it will get its export credit back, while the MoD looks to build its own global positioning system to rival the EU’s faulty Galileo project.
Yesterday the FTSE share index closed at an all time high of 7787 points, a whopping 53 jump on the previous day. The previous high was recorded in January (7778). The stock market’s resurgence, following jitters over President Trump’s trade war, the tortuous Brexit negotiations and the harsh weather at the beginning of the year has confounded prevailing negativity among commentators – a Reuters poll in February predicted the FTSE would not hit record levels again for another two years. “The death of the bull market has been greatly exaggerated, not for the first time in recent history,” said a senior analyst at Hargreaves Lansdowne who cited a delayed rise in the interest rate, rising oil prices and a strong dollar against a lower-priced pound (thanks to Brexit) as contributing factors. Improved figures in retail and utilities have also boosted investor confidence.
…In line with the FTSE’s performance, the UK’s top 350 firms, which are similarly spread across the global economy, reported an increase in total profits in 2017, up to £153.8bn, beating the previous record reached in 2011 by 0.2%. Revenues also grew by a staggering fifth, £1.3tn, just short of 2012’s all-time peak.
Growth in mergers and acquisitions is increasing at its fastest ever pace with the total value of deals at the beginning of May this year surpassing the total for the first half of 2017, £1.3bn. “Companies have strong balance sheets matched with robust debt markets. This means those that did not do major deals in the last couple of years are eager to and don’t want to be left behind industry-wide transformations,” said Iain Macmillan of Deloitte who compiled the data. The outlook is very encouraging for Brexit Britain. Investors are sitting on piles of cash and looking for new pathways to big returns. The primary beneficiary is innovation, an area where Britain has considerable pedigree.
Month on month the story repeats itself. According to the ONS, from October 2017 to March of this year, employment rose and unemployment fell. The UK workforce has grown to 32.4m, up 197,000 on the previous six months. The proportion of 16-64 year-olds in work also grew from74.8% to 75.6%, the highest since 1971 when these records first began. Furthermore, the number of unemployed people actively seeking work dropped by 46,000 to 1.42 million.
For a tidy example of the Treasury’s deliberate dampening of Brexit optimism, look no further: in July 2016, just after the referendum the Treasury estimated total investment in the UK economy would fall by 3.5%, instead in 2017 investment grew by 4%, the fastest rate in the G7. The spending is evenly divided between business, government investment and housebuilding, but construction is the big winner across the board. Half of the increase was directed at new buildings (2.1%), mainly office blocks reflecting the dominance of services in the UK economy. These construction projects are separate to housing (1.7%). Spending on new machinery was marginal (0.1%), encouraging given that manufacturing only accounts for 10% of output and is expected to up spending in 2018.
The export finance arm of Liam Fox’s international trade department will help leverage more than £100m in investment for Dubai’s new world trade centre. British businesses will account for more than half of the services and supplies provided for the new Emirati enterprise. Meanwhile, a deal has been struck with project management and engineering firm Atkins International to help expand its global supply chain and boost British exports.
With Britain’s exclusion from the EU’s costly Galileo navigation system all but confirmed, the Ministry of Defence has initiated preliminary work on a £3bn British version. In recent weeks, Remainers have rejoiced at the potential loss in revenue for the many UK firms operating in the space sector that provide services to the EU. Now the government is looking to fill the void with an improved satellite system to rival the EU’s. This is what Brexit is all about, better services delivered by British industry.
Theresa May’s feeble decision to stay in the Customs Union to resolve the Irish border issue, but also to retain fast-paced roll-on roll-off trade at ports inter-linked with the EU Single Market like Dover (Calais) and Holyhead (Dublin), make for sad reading for Britain’s container ports dealing with the ever-expanding rest of the world as well as much EU trade. These ports, like Felixstowe which deals with more than 8,000 lorries a year have assured the government they will be able to deal with increased circulation post-Brexit. “As an industry, we’re ready and prepared,” said Charles Hammond, chief executive Forth Ports, which has invested heavily in inspection facilities. We’ve got the flexibility and capacity to adapt,” added Mr Hammond.