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UK and China trade relations championed by investment minister visit

International Trade Minister Graham Stuart MP travels to China today, to bolster the trade relationship between the UK and China post-Brexit.

Beginning his visit in the Chinese capital Beijing, the Minister will meet with key representatives in the Chinese government in the Ministry of Commerce and officials at the Chinese National Development and Reform Commission (NDRC), to promote the UK-China economic relationship and champion British business in the region.

While in China, he will meet with dozens of potential investors, hosting roundtables with Chinese life sciences, education, infrastructure and financial services businesses, to promote the strengths of the UK as an investment destination and encourage stronger trade ties between the two countries.

The visit will see Minister Stuart lead a 200-strong delegation of UK business leaders representing sectors such as tech, manufacturing, transport and education to the Smart China Expo in Chongqing , where he will champion the UK’s global leadership in smart technology, and attend the UK’s flagship pavilion at the Horticulture Expo in Beijing, where the UK is showcasing its leadership in clean energy and sustainable development.

The 10-day visit comes as trade and investment with China reaches record levels, bilateral trade between the 2 countries has more than doubled over the past 10 years, with the latest statistics showing trade has succeeded the £70bn mark for the first time during the last financial year.

Over the last decade, China has been the 3rd biggest contributor to the overall increase in British exports, beaten only by Germany and the USA.

Speaking ahead of his visit, the Minister for Investment Graham Stuart said:

China is a world-leading economy and the UK’s largest trading partner outside of Europe and North America, holding unparalleled opportunities for UK businesses.

Britain is committed to strengthening the UK-China trading relationship to ensure UK firms are poised to seize the opportunities the region offers as our trading relationship continues to blossom.

I hope my visit will be instrumental to winning investments into the UK , while opening up new opportunities for UK firms and fostering greater partnerships between our two great nations.

The Minister’s visit follows on from the UK-China 10th Economic and Financial Dialogue (EFD) which took place in London in June this year.

The EFD saw the former Chancellor, Philip Hammond, and Chinese Vice Premier, Hu Chunhua, launch the London-Shanghai Stock Connect UK, which allowed listed companies to sell their shares in China for the first time, alongside the announcement of £500 million worth of commercial deals and partnerships.

Minister Stuart’s visit is expected to secure a number of commercial deals and new partnerships between British and Chinese businesses.

Boris Johnson moves to mend relationship with UK business

Prime Minister Boris Johnson has moved to rebuild his relationship with the business community by hiring Sky executive Andrew Griffiths as part of his Number 10 team.

A source close to Griffiths said Johnson’s appointment of the Sky veteran – who most recently served as the broadcasting giant’s chief operating officer – was “a clear sign of intent” that the former mayor of London wants to build fresh links with the City and businesses across the UK.

Advisory Excellence understands that Griffiths, who joins the new government as Johnson’s top business adviser, first discussed the position with the incoming PM to weeks ago and felt that the new Tory leader “was the real deal.”

One source said Griffiths is “an operator, not a policy wonk” and he “will want to get things done.” Sources in Johnson’s camp have told Advisory Excellence that there will be a “beefing-up” of the Downing Street business team but it’s understood that Theresa May’s business adviser, Jimmy McLoughlin, will be staying on to assist with the transition.

Johnson ruptured his business-friendly reputation following the EU referendum when he was caught saying “f*** business” in reaction to corporate groups lobbying for a softer Brexit.

However, the relationship may already be thawing with most business groups giving a cautious welcome to the incoming resident of Number 10 yesterday.

TheCityUK congratulated Johnson on his convincing win but warned against a no-deal outcome with Brussels.“He becomes Prime Minister at a pivotal time in our country’s history.

He must now move swiftly to set out his plans for the road ahead. Ongoing Brexit uncertainty is depressing business activity, but the financial and related professional services industry remains very clear that a no-deal Brexit is still the worst of all outcomes,” it said..

The British Chamber of Commerce was also quick to send its regards, but again warned about the consequences of crashing out of the bloc. The message to Boris Johnson from business communities around the UK couldn’t be simpler: the time for campaigning is over — and we need you to get down to business.

Companies need to know, in concrete terms, what your government will do to avoid a messy, disorderly Brexit on 31 October – which would bring pain to communities across the UK and disruption to our trade around the world.

Business lobby group the CBI echoed other calls for a pro-business Brexit deal, but also on support for infrastructure projects to boost businesses across the country.

Johnson has previously voiced opposition two of the country’s most ambitious infrastructure projects: Heathrow airport expansion and the High Speed 2 (HS2) rail project.

An HS2 Ltd Spokesperson said: “We look forward to working with the new Prime Minister to ensure that HS2 will transform the British economy and is value for money for the taxpayer”.

Meanwhile, Heathrow boss John Holland-Kaye said the airport’s third runway, which Johnson opposed, will be “a critical part of any new prime minister’s agenda”.

“As we leave the EU we’re going to need to have the trading links that only Heathrow can bring and that is why we are cracking on with it.”

The pound dropped to $1.247, after the membership ballot result naming Johnson as leader was announced. As Michael Brown, senior analyst at Caxton FX explains, this was largely due to the fact that the likelihood of Johnson victory had already been priced in.

“With such an outcome having been largely expected, sterling’s immediate reaction has been muted as the news was already priced in,” he said. “However, focus will quickly switch to the next steps – namely, Cabinet appointments and the Brexit plan. The latter will be of more importance for markets, with sterling set to remain under pressure should Boris continue his ‘do or die’ Halloween Brexit stance.”

In the run-up to the announcement a number of businesses had been nervous about the prospect of a Johnson premiership, due to the former London mayor’s insistence that he would take the UK out of the EU with or without a deal by the 31 October.

No-deal vote boosts pound sterling

British Pound exchange rates remain under pressure with Brexit uncertainty continuing to loom large. However, against the US Dollar, Sterling found something of a reprieve yesterday after disappointing house building statistics were published across the Atlantic. With Theresa May now in her last week of office, concern over the potential for political chaos under her successor is likely to keep a lid on any upside for the Pound. The Australian Dollar also performed notably well overnight, gaining ground over Sterling (AUD/GBP) after Australian employment data suggested the Reserve Bank of Australia (RBA) may have done enough for now in terms of interest rate cuts.

The Pound has continued to climb against the Euro and US Dollar in Thursday’s trading session. MPs backed an amendment that could prevent Conservative Party frontrunner Boris Johnson from shutting down Parliament to pass a no-deal Brexit in October.

Moving into Friday morning’s trading, the Pound is in a relatively tight range, trending slightly lower against the US Dollar, Euro, and Australian Dollar. UK Public Finances data will be out later in the session, along with the University of Michigan US Consumer Sentiment stat.

Weak US Housing Data Offers Cable (GBP/USD) Some Temporary Respite

The Pound to US Dollar exchange rate (GBP/USD) found a little respite yesterday following the release of some significantly worse-than-expected US Building Permits data. Despite falling mortgage rates across the Atlantic, applications to build new houses fell for a second straight month to the lowest level in two years. Land and labour shortages are said to be behind the move, so this may prove sufficient deflect some concern away from the reading which has previously been seen as an indicator of recession. However, the news was sufficient to help drag Cable back from its test of two-year lows, at least for now.

UK Political Uncertainty Keeps Pound Exchange Rate in Check

Markets may have priced in Brexit uncertainty, but it seems as if the impending political chaos starting next week, once a new Conservative Party leader is announced and new Prime Minister appointed, may still need to be priced in. Parliament is, however, strengthening its resolve to ensure it cannot be suspended to allow a no-deal Brexit to be forced through. The House of Lords voted yesterday to provide further safeguards here and the bill will return to the House of Commons today for a second reading. The Pound to Euro exchange rate (GBP/EUR) remains close to six-week lows, but anything that points towards another general election being necessary in the Autumn has the scope to see further selling here.

Why Did it Move? Pound to Australian Dollar (GBP/AUD) Exchange Rate

The Pound to Australian Dollar exchange rate (GBP/AUD) fell last night despite a decidedly mixed employment report from Canberra. However, upward revisions to May’s data and solid growth in terms of full-time jobs appear to have been sufficient to convince markets that the Reserve Bank of Australia (RBA) doesn’t need to jump in with another rate cut just yet. Having traded as high as 1.7760 yesterday, the cross now sits almost a cent lower at 1.7670.

Small businesses struggling to expand due to Brexit uncertainty

More than seven in 10 firms in a survey by the Federation of Small Business (FSB) said they did not expect to raise capital spending in the next quarter, the highest figure in two years.

The FSB says the current standstill over Britain’s path to Brexit has left small firms “hamstrung” and struggling to expand, hire and increase productivity.

The FSB survey also suggests growing caution among lenders as signs stack up of a slowdown in the UK economy.

More than four in 10 of its member firms said new credit was “unaffordable,” the highest in more than four years.

Lending to consumers also increased at its smallest annual rate in more than five years in May, according to separate data from the Bank of England.

In the manufacturing sector, a key index of UK performance slid to a six-year low on Monday, as a survey highlighted sinking output and employment levels.

Mike Cherry, national chair of the FSB, said: “It’s impossible for small business owners to invest for the future when we don’t know what the future holds.

“Lifting productivity among the smaller firms that make-up 99% of our business community is a must. But until we have the political certainty that enables us to take risks and innovate, achieving that goal will remain elusive.”

He also took aim at Conservative leadership rivals Boris Johnson and Jeremy Hunt, who have talked up their willingness to lead Britain out of the EU without a deal.

“We urgently need to see both prime ministerial candidates spell out their plans for supporting small firms and securing a pro-business Brexit – one that encompasses a comprehensive deal and a substantial transition period,” he said.

“Fast and loose talk about accepting a chaotic no-deal Brexit in four months’ time is not helpful.”

He said it was “understandable” lenders were more cautious, suggesting they were continuing to offer credit but were upping premiums to cover perceived increases in risk.

UK signs free trade agreement with South Korea

Great Britain has secured its first post-Brexit trade deal after signing an in-principle free trade agreement with South Korea.

The agreement, which International Trade Secretary Liam Fox signed with his South Korean counterpart Yoo Myung-hee in Seoul, seeks to maintain existing trade arrangements with the country after Brexit.

The Financial Times says it “comes amid growing uncertainty over bilateral trade conditions after the UK leaves the world’s single largest economic bloc”. The BBC adds that the agreement is “designed to provide stability under a no-deal Brexit”.

The Korea Times explains that there have been “concerns” that South Korean companies “may no longer enjoy the benefits” of current arrangements if the UK crashes out without a deal.

Great Britain and South Korea will largely maintain the trade terms that are in the current deal between Seoul and Brussels, which took effect in July 2011.

The Ministry of Trade, Industry and Energy said in a statement that the deal includes keeping zero-tariffs on South Korean exports such as auto parts and automobiles.

After the talks, Britain and South Korea also vowed to expand cooperation in emerging technologies such as hydrogen and nuclear energy.

Seoul’s trade minister Yoo Myung-hee said: “The deal is significant as it eased uncertainties sparked by Brexit, amid the already challenging environment for exports on the escalating trade row between Washington and Beijing.”

The two countries plan to ratify the deal before October 31st, the new deadline for Brexit.

Although the UK is South Korea’s second-largest trading partner among the EU members, it is its 18th-largest trading partner, accounting for less than 2% of South Korea’s overall trade.

Last year, South Korea’s exports to the UK were worth $6.36bn. The Asian country exports mostly cars and ships to Britain. Going the other way, the UK exports crude oil and automobiles to South Korea.

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