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Chaotic Brexit will ‘hit property market for six’

The average house price across the UK inched up in September according to a leading survey, but experts are stepping up their warnings that a chaotic Brexit will hit a weak property market ‘for six’.

Property values rose by 0.3 per cent on August, according to figures by Nationwide, to reach on average £214,922 – although that disguised significant regional disparities with the capital again experiencing falling values. Annual price growth remained stable at 2 per cent, unchanged from the August rate which was the slowest in five years.

Jonathan Samuels of property lender Octane Capital said that despite a rising average price, the property market is ‘sterile at best’.

‘The little annual house price growth there is, is being driven as much by the lack of supply as it is demand,’ he added. ‘A strong jobs market and continued low borrowing rates are keeping transactions ticking over despite pressure on household finances, interest rate uncertainty and the ever-present threat that is Brexit.

‘Few would bet against the market staying in the same supply/demand rut for the rest of the year and well into 2019. A chaotic Brexit has the potential to hit confidence and the property market for six.’

That sentiment was echoed by Jonathan Hopper of Garrington Property Finders, although he noted that, while prices in the capital are still falling and have now notched up five straight quarters of decline, the slide is slowing.

‘For London house prices, there may be light at the end of the tunnel,’ he added. ‘The only problem is no-one is yet sure if the light is a Brexit-shaped train.

‘While many regional markets are relatively insulated from Brexit concerns, in London and the South East these fears are a real threat to the market.’

Lucy Pendleton of independent estate agents James Pendleton said that people are ‘waiting to see whether the Brexit gods deliver us a very bad Brexit or just a tumultuous one’.

Like other recent surveys, the Nationwide report showed that prices in London and the outer commuter belt continued to fall, while Yorkshire and Humberside and the East Midlands saw the strongest growth in the country.

Robert Gardner, chief economist at Nationwide, said overall national growth was stable in September, but said future developments depended on how broader economic conditions evolved, especially in the labour market, but also with respect to interest rates.

The Bank of England raised interest rates to 0.75 per cent from 0.5 per cent in August, but is not expected to make the next hike until next year.

‘Subdued economic activity and ongoing pressure on household budgets is likely to continue to exert a modest drag on housing market activity and house price growth this year, though borrowing costs are likely to remain low,’ Gardner added.

‘Overall, we continue to expect house prices to rise by around 1% over the course of 2018.’

Yorkshire & Humberside was the best performing region for the first time in more than a decade with a 5.8 per cent rate of growth, while the North saw the biggest annual price fall of 1.7 per cent.

In London, prices fell by 0.7 per cent last month – the fifth quarter in a row of declines, Nationwide said.

However, if we look at the change in prices since the peak of 2007 just before the credit crunch, the picture is reversed, according to the report.

Prices in London are still over 50 per cent ahead of its 2007 figure, while Wales, Scotland and the three regions of northern England are largely unchanged over the past decade.

Nationwide found that the East Midlands continued to see ‘relatively strong growth’, with prices up 4.8 per cent year-on-year, followed by Northern Ireland, which saw a pick up in annual price growth to 4.3 per cent and was the best performing amongst the home nations.

Wales saw a slight softening in growth, with prices up 3.3 per cent year on year. Price growth also slowed in Scotland, from 3.1 per cent in the second quarter to 2.1 per cent. England was the weakest performing nation, with prices up 1.4 per cent year on year.

It comes as Theresa May announced at the weekend plans for foreign buyers to be charged a higher stamp duty rate when they buy property in the UK.

The move will be seen as an attempt to neutralise the success of Jeremy Corbyn’s drive to attract young voters with pledges to provide more affordable housing and target high earners.

Mr Murphy at the CML said: ‘Any impact that the potential introduction of additional Stamp Duty on overseas buyers on investment property is likely to be more keenly felt in the capital, however how much of a bearing it will have in real terms is potentially up for debate.’

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Pound jumps as Barnier eyes Brexit deal within weeks

The pound has jumped to a five-week high against the dollar, weighing on the FTSE 100, as chief European Union negotiator said it was ‘realistic’ to expect a Brexit deal within ‘six to eight weeks’.

The pound jumped a cent against the dollar to trade at $1.302 while the euro fell a third of a penny against sterling to 89.1p.

That weighed on the FTSE 100, which gave up the morning’s gains to trade seven points in the red at 7,271.

A stronger pound tends to weigh on the UK blue-chip index, whose stocks rely on overseas markets for around three-quarters of their earnings.

‘Once again a Brexit-inspired movement from the pound came to dominate an otherwise quiet afternoon session,’ said Connor Campbell, analyst at Spreadex.

‘If one person can shift sterling at the moment it is Michel Barnier. The currency is desperate for any signs of good news from the EU’s chief negotiator.’

Banks have jumped to the top of the FTSE 100 amid investor hopes that Italy will avoid a clash with European Union rules as the country prepares its 2019 budget.

The UK blue-chip index rose 24 points, or 0.3%, to 7,301, with lenders leading the way.

Royal Bank of Scotland (RBS) was up 2.2% at 250.4p, Barclays (BARC) added 1.4% to 177p and Lloyds (LLOY) rose 1.3% to 59.5p.

Bank stocks were among the beneficiaries of reassurances from Italy’s government that the upcoming budget would respect EU fiscal rules.

Investors had fretted that the government, featuring the anti-establishment Five Star movement and far-right League, would push for higher spending in their first budget.

But economy minister Giovanni Tria said yesterday measures such as a minimum income, pension reforms and tax cuts, would be implemented ‘gradually’.

Banks were joined at the top of the index by Morrisons (MRW), as analysts at HSBC raised their rating on the supermarket to ‘buy’ from ‘hold’.

On the FTSE 250, shares in RPC (RPC) soared 17.2% to 801p as the plastics group said it was in talks over a possible sale to private equity investors Apollo Global Management and Bain Capital.

‘The next month will be pivotal for RPC,’ said Peel Hunt analyst Harry Phillips.

‘If there is no bid, the bears will take hold, while if there is a bid we expect it to come at a healthy premium to Friday’s close of 684p.’

Among ‘small-cap’ stocks, Debenhams (DEB) tumbled 10.6% to a record low of 11.5p on reports the embattled retailer had asked KPMG advisers to assess its options.

Reports claimed possible measures included a company voluntary agreement, a form of insolvency proceedings that can be used to close stores and renegotiate rents.

In response to the reports, chairman Ian Cheshire said the board ‘continues to work with its advisers on longer term options, which include strengthening our balance sheet and reviewing non-core assets’.

‘This activity is in order to maximise value for shareholders and protect other stakeholders, including our employees.’

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Theresa May pledges Africa investment boost after Brexit

In a speech in Cape Town, Theresa May pledged £4bn in support for African economies, to create jobs for young people.

She also pledged a “fundamental shift” in aid spending to focus on long-term economic and security challenges rather than short-term poverty reduction.

She will also visit Nigeria and Kenya during the three-day trade mission.

On her way to South Africa, the prime minister played down warnings from the chancellor about the economic damage a no-deal Brexit could cause.

Talking to journalists on board RAF Voyager on Tuesday morning, Mrs May reiterated that she believed a no-deal Brexit was still better than a bad deal – adding no-deal “wouldn’t be the end of the world”.

Last week Chancellor Philip Hammond warned in a letter that a no-deal Brexit could damage the economy.

Mrs May’s trip – which will see her meet the presidents of all three countries – aims to deepen economic and trade ties with growing African economies ahead of Britain leaving the EU in 2019.

Arriving in South Africa on Tuesday morning, Mrs May said she wanted the UK to overtake the US to become the G7’s biggest investor in Africa by 2022.

She promised to continue existing economic links based on the UK’s EU membership – including an EU-wide partnership with the Southern African Customs Union and Mozambique – after Brexit next year.

Promising an extra £4bn in direct UK government investment – which she expects to be matched by the private sector – she said while the UK could not match the “economic might” of some foreign investors – such as China or the US – it offered long-term opportunities of the “highest quality and breadth”.

She defended the UK’s aid spending in Africa, a target of criticism from some Tory MPs, saying it had “worked” to give millions of children and women an education and immunise millions against deadly diseases.

But she said she was “unashamed” that it had to work in the UK’s own interest and pledged a new approach in future, focusing on helping British private sector companies invest in fast-growing countries like Cote D’Ivoire and Senegal while “bolstering states under threat” from Islamist extremism such as Chad, Mali and Niger.

“True partnerships are not about one party doing unto another, but states, governments, businesses and individuals working together in a responsible way to achieve common goals,” she said.

The UK’s overseas aid budget totalled £13.9bn in 2017, an increase of £555m in 2016.

UK direct investment in Africa was £42.7bn in 2016, compared with £44.3bn from the US, £38bn from France and £31bn from China, according to data from the United Nations Conference on Trade and Development.

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Goldman Sachs commits to UK despite Brexit

Investment bank Goldman Sachs has agreed to sell and leaseback its new headquarters in a boost for London as Britain leaves the EU.

Goldman Sachs is selling its Plumtree Court office to Korea’s National Pension Service in a deal valued at £1.16bn. It plans to lease the building for 25 years, although it has an option to leave or stay after 20 years.

Doubts about the future of the new headquarters had been lingering as the investment bank’s chief executive had called for a second referendum.

The US banking giant has 6,000 employees in London based across three sites and hopes to move in the middle of next year. The 10-storey, 826,000 sq ft site can accommodate up to 8,000 people.

Richard Gnodde, chief executive of Goldman Sachs International, said: “The development of Plumtree Court and our signing of a long-term lease demonstrates our continued commitment to London and our European operations more broadly.”

Chief executive Lloyd Blankfein, who will leave the Wall Street behemoth in October, had cast doubt on the investment banks status in the country.

The company has said it plans to move a few hundred staff members to Frankfurt and Paris, without giving an exact number.

Mr Blankfein tweeted he’ll be spending more time in Frankfurt last October.

And a few days later, he wrote: “In London. GS still investing in our new Euro headquarters here. Expecting/hoping to fill it up, but so much outside our control. #Brexit”.

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EU is ‘a difficult place for business’, says Pippa Malmgren

Pippa Malmgren, who is a leading US economic adviser, has ripped into business scaremongering around the Brexit uncertainty.

Dr Malmgren, who also serves as an adviser to the UK Department of International Trade, pointed out that foreign investment in the UK is still rising despite Project Fear.

She added that Britain is far better place to do business than Europe, where taxes and regulatory red-tape are an economic barrier to investment.

These remarks follows news that the pound has fallen to its lowest level against the dollar and the euro this year.

At the same time, Britain’s economy rebounded in the second quarter this year despite Brexit uncertainty according to Office for National Statistics figures.

Dr Malmgren, who previously served in the White House under George W Bush, discussed the British economy in light of the growing risk of a no deal Brexit.

The businesswoman told Bloomberg: “The key thing to remember is that many of the investors are saying I may not like the uncertainty of Brexit, but it is not easy to make money on the continent.

“It is not an either-or situation. Foreign direct investment in the UK is still rising.

“The huge irony is that the weaker the sterling is, the more competitive the UK is.”

She added: “Money is a lot like water and it will move where it faces the least resistance.

“Unless the UK raises its taxes and regulatory red tape above the EU, then capital will continue to flow into the UK.

“More so still if the sterling is weaker.

“This idea that the City of London has to be smaller if there is no deal after Brexit simply doesn’t add up.”

The growing possibility that talks between the UK and Brussels will break down in the coming months has sparked economic fears.

Despite this, long-term investment in Britain by foreign businesses stood at £1.564 trillion, which is £12 billion or 0.8 percent higher than in 2016.

The world’s fifth-biggest economy relied on the services industry for growth in the second quarter.

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German businesses reluctant to invest in UK over Brexit uncertainty

German business leaders have issued a strongly worded statement warning they are reluctant to invest in Britain because of Brexit uncertainty.

The intervention from German Industry UK (GIUK), which represents firms including carmakers BMW and Mercedes-Benz as well as the Lufthansa airline, came as the UK’s largest carmaker, Jaguar Land Rover (JLR), said a bad Brexit deal would put £80bn of investment and 40,000 jobs at risk.

Amid mounting anxiety from some of the UK’s largest manufacturers, politicians from both sides of the House of Commons lined up to criticise the government’s attitude towards business concerns during Brexit negotiations.

The Liberal Democrat leader, Vince Cable, accused the government of treating major employers with “complete contempt” by failing to listen to their concerns. Cable said he knew JLR boss Ralf Speth from his tenure as business secretary and that the German boss of the carmaker was “not bluffing” when he said on Wednesday that the firm’s place in the UK would be untenable in the event of a hard Brexit.

The shadow business secretary, Rebecca Long-Bailey, warned that Tory infighting over the nature of the UK’s departure from the European Union was putting jobs and investment at risk.

“They cannot continue to spar with each other and play ideological games whilst British jobs and industries are being pushed off the edge of a cliff,” she said.

The cabinet is due to meet at Chequers on Friday in an effort to thrash out disagreements among ministers about the right Brexit plan to pursue.

Just 24 hours before the summit, representatives of German firms employing 400,000 people in the UK joined JLR in issuing a dire warning about the impact of ongoing uncertainty. GIUK, whose members also include the train and bus operator Arriva – owned by the Germany’s state-owned rail company – and the steel producer ThyssenKrupp, said it needed “certainty and clarity about the way forward sooner rather than later”.

Bernd Atenstaedt, the chairman and chief executive of GIUK, said: “There is some reluctance from German business to invest in the UK with projects on hold because of the uncertainty about the future and, with only nine months left before the UK leaves the EU, time is running out.”

GIUK said German business would like continued free access without tariff and non-tariff barriers – such as customs checks – for exports to the UK, plus continued free access to the EU for exports from the UK, which is one of Germany’s most important export markets.

Atenstaedt told the Guardian that many GIUK members would not go as far as aerospace company Airbus, which has threatened to cut back their operations in the UK in the event of a hard Brexit.

JLR, the UK’s largest automotive business, this week became the latest manufacturing powerhouse to say it could be forced to withdraw investment from Britain in the event of a hard Brexit.

The warning sparked renewed criticism of the government’s attitude to industry, just days after the foreign secretary, Boris Johnson, was reported to have said “fuck business” when asked about employers’ Brexit concerns.

Cable said: “I got to know Ralf Speth well enough to know that he’s not bluffing when he says JLR’s position is that a hard Brexit would make the company’s position in the UK untenable.

“The Conservatives should listen. But there’s no evidence that they are willing to treat major employers with anything other than complete contempt.”

A spokesperson for the prime minister said the government took the views of the business community seriously. The spokesperson added: “We also know the importance of providing certainty as we leave the EU. We’re looking forward to providing further details in the white paper. But I would also make the point that we have already successfully negotiated an implementation period, so firms will be able to trade on the same terms as now until the end of 2020.”

Conservative MP Owen Paterson attracted criticism after brushing off JLR’s concerns in an appearance on the Radio 4 Today programme, claiming the company would be in a “wonderful position” and could buy car parts more cheaply.

Labour MP Alison McGovern, whose Wirral South constituency includes Vauxhall’s Ellesmere Port plant, said Paterson did not understand the automotive industry, particularly its use of “just-in-time” supply chains that require precision timing.

“It is quite stunning that Owen Paterson thinks himself better placed to comment on Jaguar Land Rover’s future than their own CEO. Perhaps even more striking is his obvious total ignorance of the just-in-time supply chains which make the car industry profitable and the fact that it is not tariffs but non-tariff barriers which would be the major obstacle to manufacturers in a no-deal Brexit.

“People in manufacturing towns across Merseyside, the north and the Midlands know all too well what it feels like when Tories show they just don’t care about our communities and our families’ livelihoods and they will not stand for it.”

A senior figure at one manufacturing trade body with strong ties to the automotive sector said: “I don’t think we’d dignify Owen Paterson’s remarks with a response because they’re not worth anything.”

Maria Eagle, whose Garston and Halewood constituency includes JLR’s Halewood plant, said the company was rightly concerned about the “appalling effects of the extreme Tory hard Brexit supported by half the cabinet and a hard-line cabal of Brexit extremists”.

She said: “It’s about time this appalling government put the interests of the people of this country above their own manoeuvring to stay in office. Otherwise, our manufacturing industry faces total destruction.”

The EEF manufacturers’ trade body said: “This is not just an issue for big companies, however, but those SMEs who are also heavily exposed in the major supply chains and, as yet, are unable to know what scenario they are planning for. Time is now running out to secure the frictionless and tariff-free relationship we need with the EU if there are not to be serious consequences right across UK industry.”

Meanwhile, a survey by Scottish Engineering has found that just 1% of its members were positive about Brexit. Its chief executive, Paul Sheerin, said the organisation was worried about “a deeply concerning stance to business coming from parts of the UK government”.