Back in the UK, the takeover battle for Virgin Money is over -- putting hundreds of jobs at risk.
Clydesdale and Yorkshire Bank Group (CYBG) has sealed a £1.7bn deal to merge with Virgin, turning two small challenger banks into one larger one. The move could be a blow to the North East economy, where Virgin owns many of Northern Rock’s assets.
My colleague Julia Kollowe explains:
Clydesdale and Yorkshire Bank Group (CYBG) and Virgin Money have agreed to create the UK’s sixth-largest bank, with 6 million personal and small business customers and total lending of £70bn.
The banks expect to make £120m of annual savings by by 2021 by reducing overlap between their operations. This will result in a 16% reduction in the combined group’s 9,500-strong workforce that CYBG hopes to achieve by attrition – that is, when people leave they will not be replaced. It declined to say how many of the combined group’s 250 branches will be closed.
However, the plan is to retain Virgin Money’s head office in Gosforth, Newcastle, for at least three years.
More here:
Markets hit by trade war worries
European stock markets have started the week on the back foot, as fears of a global trade war intensify.
The Stoxx 600 index, which tracks Europe’s largest companies, has dropped by 0.5% after America and China imposed tit-for-tat tariffs on Friday.
Chinese media have launched a stinging attack on Trump, calling his government “selfish” and “rude” for imposing new charges on imports from China
China’s Global Times said Beijing had no choice but to retaliate:
“It reinforces the difference in images of the two countries: one challenges the foundation of global trade through sudden attacks; and one that is prepared to defend itself in a trade war that it cannot avoid.”
Rebecca O’Keeffe, Head of Investment at interactive investor, says markets are finally beginning to wake up to the risks of a global trade war.
The negotiating style of President Trump had allowed investors to assume that his threats were hyperbole and part of his unique diplomatic style, and that he would step away from the brink rather than risk undermining the positive impact his previous policies have had on the stock market.
However, the US decision to press forward and take on China makes the risks far more pronounced and the real danger is that the Chinese retaliation may start a chain reaction that is difficult to stop – especially as Trump likes to have the last word.
The current position on tariffs is unlikely to cause a full-blown rout for markets, but the prospect of further escalation and reprisals could cause considerable damage to the global economy, increasing the risks and anxiety.
In another sign of economic weakness, London house prices have fallen for the 10th month in a row.
Rightmove reports that asking prices in the capital are down 0.9% compared with May, and are 1.0% lower than a year ago. That’s the 10th monthly fall in a row, as the once-hot London property market continues to cool.
London is particularly vulnerable to the threat of a ‘hard Brexit’, as tens of thousands of financial jobs could be lost.
Prices have dropped particularly sharply in the centre over the last 12 months (although the average property is still priced north of £1.3m).
Property prices in the north are still rising, though, helping to push the national asking price up by 0.4% this month.
Lack of supply in Northern areas is helping to keep prices up, says Miles Shipside, Rightmove director and housing market analyst:
“The reduction in property choice for buyers in the north compared to a year ago is a result of property for sale being snapped up, meaning it’s more of a sellers’ market there.
In marked contrast the jump in buyer choice in southern regions shows there are signs of a sellers’ market in some areas.”
The BCC’s gloomy forecasts could actually be too optimistic, if the Brexit process ends messily or if Donald Trump manages to create a full-blown trade war.
Suren Thiru, head of economics at the British Chambers of Commerce, explains that the UK is vulnerable to external shocks:
“While Brexit uncertainty and the weakness in sterling have weighed on overall UK growth, it is the failure to deal with the longstanding structural issues from weak productivity to the deep imbalances in the UK economy that continue to undermine the UK’s growth potential.
“The risks to the outlook are on the downside. A messy departure from the EU would likely slow UK GDP growth further over the medium term. The prospect of an escalating trade war is now a key downside risk to our forecast as it could mean much weaker export and business investment growth than implied by the current forecast.
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