U.K. Economy Could Contract by 25% in Q2 By Investing.com


© Reuters.

By Peter Nurse 

Investing.com — The U.K. economy could contract by as much as 25% in the second quarter, according to the National Institute of Economic and Social Research.

Britain’s oldest independent economic research institute called the economic slowdown a “once in a century event”, which could now see growth decline by 5% in the first quarter of 2020 and, if a lockdown continues, by around 15% to 25% in the second quarter.

“The UK economy is now almost certain to experience a major contraction in the second quarter of the year. The forceful impact of COVID-19 and the global lockdown has thrust the economy into unknown territory where we could see GDP declining at a record quarterly rate,” said Kemar Whyte, senior economist at the institute.

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Bank of England agrees to finance UK government if markets turn sour By Reuters


© Reuters. FILE PHOTO: The spread of the coronavirus disease (COVID-19) in London

By David Milliken

LONDON (Reuters) – The Bank of England has agreed temporarily to lend money to the government to fight the spread of COVID-19 if funds cannot immediately be raised from debt markets, reviving a measure last widely used during the 2008 financial crisis.

Prime Minister Boris Johnson’s government has made historic spending and tax cut pledges to try to shield companies and workers from potentially the biggest downturn in over a century, ramping up its borrowing plans by tens of billions of pounds.

It typically borrows money direct from financial markets through bond issuance and this week investors showed a strong appetite to buy more than 10 billion pounds ($12.4 billion) of gilts, some at record-low yields.

But markets were far choppier last month, before the BoE said it would buy 200 billion pounds of debt, mostly government bonds. Thursday’s announcement allows the government to borrow billions of pounds direct from its overdraft with the BoE.

“As a temporary measure, this will provide a short-term source of additional liquidity to the government if needed to smooth its cashflows and support the orderly functioning of markets, through the period of disruption from COVID-19,” the BoE said in a joint statement with the finance ministry.

The BoE said any government borrowing from its Ways and Means facility would be repaid by the end of the year.

BoE Governor Andrew Bailey has previously said the BoE will not engage in “monetary financing” – the permanent funding of government spending, linked to hyperinflation in post-World War One Germany and more recently in Zimbabwe.

Bailey defended the BoE’s existing quantitative easing as a way to keep inflation on target and said action to ensure smooth market functioning was also within the BoE’s remit.

The government’s overdraft at the BoE currently has borrowing of 400 million pounds, and usage previously peaked at 19.9 billion pounds in 2008.

“The government will continue to use the markets as its primary source of financing, and its response to COVID-19 will be fully funded by additional borrowing through normal debt management operations,” Thursday’s joint statement said.

British government bond markets opened little changed after the announcement.

RECORD DEBT ISSUANCE

The government’s Debt Management Office is due to publish updated debt issuance plans on April 23, and some economists predict the budget deficit this financial year could rise above 10% of GDP, its highest since World War Two.

Market strategists at Citi estimate the government may need to sell a record 285 billion pounds of bonds this year to finance new spending and refinance maturing debt, almost double what the DMO sold last year.

Philip Shaw, an economist with Investec, said lending by the BoE would only count as monetary financing if the government does not swiftly repay any borrowing as agreed.

It was not immediately clear if the facility would purely be used if markets seize up, or if the government intends to borrow from the BoE to smooth the path of bond issuance over the course of the next 12 months.

Britain had little trouble raising funds from markets during the last financial crisis.

But Shaw said the government’s need to fund programmes such as one to pay 80% of the wages of workers at risk of being laid off, as well as the deferral of some tax revenues, meant its short-term cash needs would be hard to predict.

Bond issuance plans are normally set out three months in advance, though the DMO acted more rapidly last month to announce a record 45 billion pounds of debt issuance for April, the first month of the new financial year.

“It’s the lumpiness and the scale of the outlays,” Shaw said. “The likely motivation for this move is really to give the government as much flexibility as possible and actually give it the cash that it needs to combat the economic effects of the coronavirus,” he said.

(Additonal reporting by Kate Holton; editing by Guy Faulconbridge and Nick Macfie)



Deutsche Bank sees UK GDP shrinking 6.5% in 2020; warns of downside risk By Reuters


© Reuters. The spread of the coronavirus disease (COVID-19) in London

(Reuters) – Deutsche Bank (DE:) said on Monday it expected Britain’s economy to shrink 6.5% in 2020 in what it suggested could be the biggest recession for a century.

The bank said the economy had likely contracted 1.9% in the first quarter and predicted a record 13% drop in the April-June period on a quarter-on-quarter basis.

While Deutsche saw UK growth rebounding swifty, it warned of “downside risks”, hinging on the duration of the economic lockdown.

“For now, we expect growth of COVID-19 cases to peak by around mid-April. Should this prove optimistic, the hit to the economy will likely be more acute than anticipated,” the bank added in a research note.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

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UK construction activity falls in March at fastest rate since 2009


© Reuters. FILE PHOTO: Workers are seen as the sun sets behind a construction site in London

By David Milliken

LONDON (Reuters) – Britain’s construction sector saw the sharpest fall in activity since the financial crisis last month, a survey showed on Monday, despite facing much less pressure than other industries to shut down operations due to the coronavirus.

The figures from financial data provider IHS Markit and the Chartered Institute of Procurement and Supply (CIPS) also confirmed data last week that showed the British private sector as a whole is contracting at its fastest rate in more than 20 years.

The construction Purchasing Managers’ Index (PMI) tumbled to 39.3 in March from 52.6 in February, its lowest since April 2009 and well below economists’ average forecast of 44.0.

The 13-point monthly fall was the largest since the survey began in 1997, and the index looks likely to worsen.

“The sector is stuck in quicksand and sinking further,” Duncan Brock, group director at CIPS, said.

Britain’s government has not required general construction work to stop to slow the spread of coronavirus – in contrast to its order for most shops and restaurants to close to the public, and for workers in other sectors to stay home if possible.

Nonetheless, IHS Markit said building companies reported stoppages last month as they sought to comply with guidance to keep workers 2 metres apart where safe to do so, as well as a big fall in new orders.

“Survey respondents widely commented on doubts about the feasibility of continuing with existing projects as well as starting new work,” IHS Markit economist Tim Moore said.

“Construction supply chains instead are set to largely focus on the provision of essential activities such as infrastructure maintenance, safety-critical remedial work and support for public services in the weeks ahead,” he added.

Last week, IHS Markit’s composite PMI for the manufacturing and services sectors fell to its lowest on record at 36.0 for March, and Monday’s all-sector version including the construction industry was also a record low at 36.3.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



EU clears 50 billion pound UK ‘umbrella’ scheme to support economy By Reuters


© Reuters. FILE PHOTO: European Union flags fly outside the European Commission headquarters in Brussels

BRUSSELS (Reuters) – The European Commission said on Monday it had approved a 50 billion pound ($61.5 billion) British “umbrella” scheme to support companies affected by coronavirus outbreak.

The approval is in line with modified EU rules allowing a temporary and limited amount of aid to businesses facing a sudden shortage of liquidity. The British aid would take the form of grants, equity injections, tax advantages and loans.

Britain left the European Union at the end of January, but continues to be subject to EU rules for a transition period set to last until the end of 2020.

With the coronavirus lockdown ravaging European economies, the bloc has stepped up calls for London to extend that time to allow the sides to agree on a new trade partnership after talks came to a virtual halt as capitals switched focus to fighting the pandemic.($1 = 0.8135 pounds)

British Prime Minister Boris Johnson, who has previously repeatedly ruled out such a possibility, was in hospital in London for tests on Monday suffering persistent coronavirus symptoms.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



UK Export Finance expands exporter protection against non-payment By Reuters



LONDON (Reuters) – Britain is expanding the scope of its export insurance policy to cover exporters against the risk of non-payment if customers become insolvent.

UK Export Finance, a government department, on Friday said it has expanded the policy to cover transactions with the European Union, Australia, Canada, Iceland, Japan, New Zealand, Norway, Switzerland and the United States.

The scheme is designed to help companies concerned about the impact of the coronavirus to export with confidence, offering insurance that can cover up to 95% of the value of an export contract.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



Pound Under Pressure as U.K. Services Suffer Worst Month Ever By Investing.com


© Reuters.

By Yasin Ebrahim 

Investing.com – The pound continued its selloff against the dollar on Friday, as the U.K. services sector suffered its worst month on record, exacerbating fears about the strength of the economy at a time when business activity has ground to a halt following a nationwide lockdown last week.

fell 1.15% to $1.2249 after hitting a high of $1.2411 on the day.

IHS’s Markit’s , which measures the change in monthly sector activity, fell to reading of 34.5, the worst ever recorded.

With restaurants, pubs and other businesses set to remain in lockdown in the coming weeks, many fear the worst is yet to come, particularly as the Covid-19 pandemic in the U.K. shows little sign of slowing.

Offering a sliver of optimism, Health Secretary Matt Hancock tentatively suggested infections in Britain could peak on April 12, Sky reported.

“I defer to the scientists on the exact predictions, I’m not going to steer you away from that. That is one perfectly possible outcome,” Hancock reportedly said, when asked about reports that the death rate could peak on April 12.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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UK firms fall deeper into record-breaking slump: March PMIs By Reuters


© Reuters. FILE PHOTO: The sun rises behind The Shard and the financial district as a cyclist rides through Richmond Park in London

LONDON (Reuters) – A record-breaking slump among Britain’s services and manufacturing firms deepened in late March with much of the economy in a shutdown to slow the spread of coronavirus, a survey showed on Friday.

The final composite Purchasing Managers’ Index covering the two sectors fell to 36.0 from a preliminary “flash” reading of 37.1 and 53.0 in February, data firm IHS Markit and the Chartered Institute of Procurement and Supply said.

Britain’s dominant services industry suffered its biggest slump by far since the survey began in 1996, and its index sank to 34.5 from February’s 53.2, weaker than the flash reading of 35.7.

The survey data were collected March 12-27, covering the period after Prime Minister Boris Johnson ordered the closure of bars, restaurants, gyms and other services businesses to slow the coronavirus outbreak on March 20.

“There were numerous reports from survey respondents that placing staff on furlough had helped to mitigate more widespread job losses in March,” Tim Moore, economics director at IHS Markit, said.

With policymakers around the world scrambling to cushion their economies from the coronavirus shock, Britain’s government offered to pay 80% of the wages of workers who are temporarily laid off by companies.

“However, employment levels across the service sector still dropped at the fastest pace for more than a decade, reflecting some forced redundancies and the non-replacement of departing staff amid widespread hiring freezes,” Moore said.

The survey showed the biggest drop in new work among services firms and the bleakest business expectations in more than 20 years of data collection.

Technology services were the only area to signal a rise in business activity – possibly reflecting the stay-at-home order for many people – but new workloads for tech firms dropped more quickly in this category than at any time since 2011.

A final PMI for Britain’s manufacturing sector, published on Wednesday, showed factory output shrank at the fastest pace since the euro zone debt crisis in March.

Economists expect a slump of 10% or more in Britain’s economic output in the second quarter, far worse than during the global financial crisis, but say a sharp recovery is possible once the coronavirus outbreak peaks and fades.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



Invesco to sell all unquoted holdings in UK equities portfolios


LONDON (Reuters) – Invesco said on Tuesday it would sell all the unquoted companies currently held in its UK equities portfolios and has marked down their value by 60% as a result of recent coronavirus-fueled market falls.

The U.S.-based manager said it would reinvest the money in publicly listed companies, valuations of which have been hit hard in recent weeks as fears about a global recession gripped markets.

Reporting by Simon Jessop; editing by Carolyn Cohn



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UK companies were worried about outlook even before lockdown: CBI By Reuters


© Reuters. FILE PHOTO: People look out onto the Canary Wharf district as they walk through Greenwich Park in London

LONDON (Reuters) – British companies in key sectors were already bracing for the biggest hit to business since 2009 even before last week’s shutdown of the much of the economy as the government moved to slow the spread of coronavirus, an employers’ group said.

Surveys conducted in the first half of March showed consumer services firms, such as restaurants, bars and cinemas, were the most pessimistic, the Confederation of British Industry (CBI) said on Sunday.

A measure of their expectations for business volumes in the next three months showed a balance of -47%.

The balance for manufacturers stood at -20% while the retail sector’s sales expectations fell to -31%, it said.

“Expectations of a sharp fall in activity give some sign of what is to come,” Alpesh Paleja, the CBI’s lead economist, said.

“With strict social distancing measures still to be reflected in our data, the picture is only likely to deteriorate from here.”

On the other hand, business and professional services firms expected growth in the coming quarter.

The CBI data is compiled from surveys of manufacturing and retail sectors, which it publishes separately, and a gauge of the services sector.

The balances represent the difference in percentage points between the share of firms answering that output is, or is likely to be, up or down.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.