British firms suffer Brexit impact, as ECB's Draghi warns on US protectionism – as it happened
Half of UK bosses report that their firms are suffering from the vote to leave the EU; ECB's Draghi worried by US administration comments
- Draghi - last thing we need is relaxation of regulations
- SURVEY: 58% of UK bosses report negative impact from Brexit already
- Firms particularly worried about labour shortages, says poll
- Price rises looming; Ryanir profits hit
- German factories have strong December
- 1p off a pint to fight Brexit costs?
- Coming up: MPs hold inquiry into Gig economy (and fiery Vauxhalls)
6.05pm GMT
Worries about the forthcoming elections in France and Germany helped send European markets lower, with ECB president Mario Draghi's dovish comments on monetary policy dented the euro. The FTSE 100 outperformed, helped by the performance of precious metal miners as investors sought havens such as gold. The final scores showed:
5.29pm GMT
ECB president Mario Draghi used his latest appearance at the European parliament to maintain that, contrary to US claims, Germany and the central bank were not currency manipulators. He also said the idea of rowing back on financial regulation - another proposal from the Trump administration - was "worrisome." Bloomberg's take on it:
Mario Draghi took the Trump administration to task, rebutting recent assertions that Germany is a currency manipulator and warning against the rollback of post-crisis financial regulation.
Speaking at a hearing of European lawmakers in Brussels on Monday, the European Central Bank president responded to the charge by U.S. National Trade Council Director Peter Navarro and others that Germany is using a "grossly undervalued" euro to gain an unfair trade advantage.
4.23pm GMT
Commenting on Mario Draghi's appearance at the European parliament Howard Archer, chief European and UK cconomist at IHS Global Insight, said:
Mario Draghi does not look like a man intending to change tack on monetary policy any time soon. He stuck like glue to the current ECB script.Indeed, the ECB seemingly retains an easing bias in its policy stance despite the recent jump in Eurozone inflation to 1.8% in January (and improved GDP growth of 0.5% quarter-on-quarter in the fourth quarter of 2016).
The only potential change of ECB monetary policy that Mr. Draghi mentioned in his testimony to the European parliament was that the size and/or duration of the bank's monthly asset purchase program could be increased if inflation developments become less favourable or monetary conditions less helpful to a sustainable achievement of the inflation target. There was no mention of the ECB reducing its asset purchase programme following December's adjustments....
4.18pm GMT
On Greece, Draghi said there had been many changes made in Greece, significant progress had been made.
He added that the conclusion of the second review depended on a number of factors: for a positive assessment of debt sustainability, there should be a 3.5% primary surplus for a long period of time, that is one point of negotiation; the second point concerns the closing of fiscal gap for 2018; the third point concerns a certain set of structural reforms - labour market reform, judiciary, energy. I would add one, the non performing loan handling, to give renewed strength of the banking system.
4.01pm GMT
For inflation to be 2%, it will have to be higher in Germany (since it will be lower elsewhere). So what level would you like to see?
Inflation differentials are not a new thing. Our objective is defined as the inflation rate for whole eurozone not individual countries.
3.57pm GMT
On Greece, Draghi said:
Draghi: in order for Greece to be included in QE a) Greek debt must be sustainable & b) review must be completed. https://t.co/zn1G8XAvRy
What we all already know but some don't want to admit: there are low chances of this happening. Nothing to see here. https://t.co/STWUfMVRv6
3.46pm GMT
Back with Draghi at the European Parliament.
Question on when the ECB will exit its current monetary policy programme.
3.31pm GMT
Speaking of the euro, analysts at JP Morgan have said the single currency could fall by up to 10% if Marine Le Pen wins the French presidential election.
3.28pm GMT
On the euro's moves during Draghi's testimony, financial analyst Connor Campbell at Spreadex said:
The ECB chief reiterated that while the Eurozone's headline inflation may have picked up, the underlying CPI readings remains muted, meaning that for the time being the region is still in need of the stimulus being pumped into it every month. This was received poorly by the euro, which sank by half a percent against the dollar, giving up much of the growth it managed at the end of January; against the pound, however, the currency actually saw its losses shrink to just 0.1%, down from the 0.3% it had seen earlier in the session. Interestingly it wasn't just the euro perturbed by Draghi's statement; both the DAX and CAC fell around 1% as the day went on, though admittedly the German and, especially, French indices may also be troubled by the launch of Marine Le Pen's presidential campaign.
3.26pm GMT
Question about the future of clearing post-Brexit.
Draghi says its too early to take a stance on the regulatory framework necessary [for clearing] when the UK leaves the EU.
3.19pm GMT
The US Federal Reserve has raised rates, should it be a model for others? What is the situation with relations with the Federal Reserve and the US (in the light of the letter from the new US administration to the Fed about putting America first)?
Draghi says he cannot comment on other regulators but adds, if I was sent a similar letter, I would say we all benefit from having a central bank, and regulators, with the input of public consultations. This has produced extremely valuable results, with much more robust financial system. Given such interlinkage today we especially need this. But are the central banks, the supervisors etc the ones who have the final say. No, it is always the legislators who have ultimate say.
3.11pm GMT
In a question about the future of the euro and whether it is reversible, Draghi says it is not.
3.06pm GMT
Question referring to whether the euro is being manipulated, as Donald Trump's trade advisor last week accused Germany of doing.
Draghi responds by quoting a US document: In 2016, the US treasury said Germany does not manipulate its currency, since it does not fit the criteria.
Draghi rebuts Germany currency manipulation charge, saying the #ECB has not intervened in currency markets since 2011.
ECB's Draghi: ECB Is Not An FX Manipulator
2.49pm GMT
Question from Netherlands: is ECB monetary policy data driven not date driven (similar to the Fed)?
Draghi says we need an inflation rate which satisfies the four conditions needed. Suppose we withdraw our support, what will happen. Will inflation drop or continue its convergence to target. If second, we can start withdrawing support.
2.41pm GMT
What should be Europe's strategy in light of US comments last week (ie, the proposal from Donald Trump to row back Dodd-Frank banking regulations).
Draghi says again, it is still early to say. But looking at the historical experience, what were the main reasons for the financial crisis? ....A combination of too expansive monetary policy and a dismantling of financial regulations. Now we have expansive monetary policy, so the last thing we need at this point is a relaxation of regulations.
2.34pm GMT
And after a little applause, the questions. There are signs of global trade moving from liberalism to protectionism in some important countries, how do you see these risks?
Draghi says it is too early to say, we would look with worry about potential announcements about protectionist measures. The EU was created on the foundation of free trade, on the four freedoms. We will judge when we see what has been announced.
2.25pm GMT
Draghi says he sees no signs of asset bubbles:
Currently, we do not see compelling evidence at the euro area level of stretched asset valuations. Both corporate bond spreads and equity prices appear to be broadly in line with fundamentals.
Similarly, real estate price growth remains moderate in the area as a whole, although significant cross-country heterogeneity is observable. This assessment is corroborated by the fact that credit growth is still modest, which suggests that asset price developments are not accompanied by increasing leverage.
2.13pm GMT
Following the release of Draghi's comments, the euro has hit a one week low against the dollar. Draghi noted that the ECB was prepared to increase its asset purchase programme if necessary in terms of both size and duration.
2.06pm GMT
Draghi concludes by repeating his call for political reforms:
As I argued last week in Ljubljana, and as the crisis has shown, the benefits of the single currency can only be fully reaped if we have policies and institutions at national and European level that ensure it works for everyone.
In the run-up to the launch of the euro, there was a strong commitment to advancing along the path of institutional and economic convergence. The crisis showed that this commitment cannot be relaxed. In fact, it remains fully relevant today as we seek to strengthen EMU and the EU in the face of current uncertainties and in preparation for future challenges.
2.03pm GMT
There have been signs of inflationary pressures in the eurozone, prompting speculation that the ECB might have to rein in its stimulus measures. But Draghi said:
Our December decisions strike a balance between our growing confidence that the euro area's economic prospects are firming up, and - at the same time - the lack of a clear sign of sustained convergence of inflation rates towards the desired level.
On the one hand, the evidence suggests that the acute deflation risks have disappeared and that inflation is set to pick up over the coming years. And contrary to a widespread perception, euro area economic conditions have also been steadily improving. Euro area GDP growth has been solid in every quarter since the beginning of 2015, averaging 1.9 percent in annualised terms. Compared to 2013, there are 3.5 million fewer unemployed in the euro area, a decrease by more than 18%. And in the last quarter, the recovery has been broadening across sectors and across countries. Indeed, the dispersion of value added growth across euro area countries and sectors has declined sharply and stands close to its lowest level since the introduction of the euro.
Looking ahead, risks to the euro area outlook remain tilted to the downside and relate predominantly to global factors. Our current monetary policy stance foresees that, if the inflation outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council is prepared to increase the asset purchase programme in terms of size and/or duration.
2.01pm GMT
As European Bank president Mario Draghi appears before the European parliament, his speech has been released here.
1.57pm GMT
Time for a quick recap.
Unfortunately, it looks like business in this country is already feeling the pain of the economic upheaval of leaving the EU, with 58% of Captains of Industry stating that their business has suffered negatively since the referendum. According to respondents there is no sign that this is likely to ease this year, with two thirds saying they thought their business situation would get worse in the next 12 months.
58% of FTSE500 CEOs say #brexit had negative effect on business already - expect it to be worse in 1yr, better in 5 https://t.co/amx37FfPOr pic.twitter.com/0WnOyLOvTd
95% of FTSE500 CEOs think their business can adapt to #brexit - but only 27% believe it will mean less regulation https://t.co/amx37FfPOr pic.twitter.com/rle0zG3MFQ
60% of FTSE500 CEOs say keeping recruitment of EU staff easy is their main ask from #brexit - going to be tricky... https://t.co/amx37FfPOr pic.twitter.com/cn8UhxraBb
1.03pm GMT
Firms are right to worry that the Brexit vote will hurt their businesses over the next couple of years, argues Mihir Kapadia, CEO of Sun Global Investments, a wealth manager.
He says:
Though it is a little disheartening, the reality is that Brexit is already having a filtered down effect on the UK market. While we are yet to receive clarity on the long term effect, businesses appear worried about the changing landscape ahead primarily on concerns over access to skilled labour and the single market.
The weakening pound has benefited British exports and the stocks of those companies where exports are significant part of earnings. However, the other side of this is costlier imports and therefore higher inflationary pressures, businesses and consumers will have a tough time finding common ground until further clarity emerges on the market dynamics."
12.44pm GMT
The possibility of a Brexit or Trump-style shock in France's presidential elections this spring are reverberating through the financial markets today.
Investors are selling French government debt, and seeking safety in German bonds instead.
Marine Le Pen's election manifesto has put the jitters on French bonds https://t.co/J01esaa15n pic.twitter.com/vRwEKfMYvi
Related: Marine Le Pen promises liberation from the EU with France-first policies
12.17pm GMT
Back to Hilary Benn's Brexit discussion....where the Labour MP criticised government ministers for undermining the UK's standing through their divisive rhetoric.
My colleague Rajeev Syal reports that Benn singled out comments on overseas students and doctors:
The former shadow foreign secretary said the Conservative party's annual conference was an "absolute disaster" because senior politicians portrayed an image of the UK that was insular and aggressive towards foreigners.
Indicating that such language could influence negotiations with the EU, Benn said making pronouncements about what the government would achieve from its discussions would harden attitudes towards the UK among European politicians and officials.
Related: Senior MPs accused of damaging UK with divisive rhetoric
11.42am GMT
I mentioned earlier that many UK business leaders see securing a free trade deal with Europe as a top priority.
The best option might be a deal that gives Britain tariff-free access to the customs union, but not full membership, argues Neil Williams, chief economist at Hermes Investment Management.
Turkey and Canada have enjoyed customs-union access with the EU without membership. Canada's in 2016 came after seven years of negotiation. And, needing sign-off by all EU states, it was stalled by the Belgian region of Wallonia!
Chancellor Hammond's threat that without access, much lower UK corporate tax rates will be needed to maintain FDI and competitiveness (which risks a European 'chase to the bottom') looks an early stick to achieving similar privileges.
First, the deal when struck will need Parliamentary approval, and then be subject to a 'phasing in' period (Mr Hammond has suggested two years) to allow firms, consumers and officials to adjust to the new arrangements. A second independence referendum in pro-EU Scotland, though not precluding Brexit, could also provide an extra hurdle to completing it before the General Election scheduled for May 2020.
Second, the UK is relying on a cooperative sign-off by its 27 EU peers. The only real precedent we have is Greenland's exit in 1985. This was a 'soft' exit, but it took three years. We, larger and 44 years entwined in the EU, will need longer.
11.39am GMT
UK MPs will get down to the nitty-gritty of Brexit today, as they debate the government's bill allowing ministers to trigger article 50.
Our political correspondent Peter Walker explains:
This is the period when amendments are debated, and there are many dozens of them tabled. Today is more focused on amendments connected to process, with the more fundamental ones - notably on the rights of EU citizens in the UK, and whether parliament gets a final say over the eventual Brexit deal - coming tomorrow.
But today should see signs of whether any Conservative MPs are mustering a rebellion on either of those issues, especially now the government has indicated it is not minded to back down unilaterally.
Related: May to meet Netanyahu ahead of Brexit debate in Commons - live updates
UK PM Spokeswoman: Govt Will Not Allow Attempts To Keep Britain Inside The EU - RTRS
11.20am GMT
The 5.2% surge in German factory orders in December shows that Europe's economy entered this year in good spirits, argues Marc Ostwald of ADM Investor Services:
This underlines that domestic demand in Germany and the Eurozone as a whole looks considerably more robust than many forecasters are assuming, and with such solid momentum going into Q1, the consensus 1.4% y/y forecast for 2017 German GDP looks to be under-clubbed, 1.7%/1.8% looks more likely and 2.0% is a distinct possibility.
11.05am GMT
The slide in the pound since the Brexit vote has been a blow to Britain's beer industry.
Related: 1p off a pint? Camra pushes for beer duty cut in March budget
10.38am GMT
A leaked report has shown that Britons won't benefit from a new clampdown on mobile phone roaming costs within the EU once Brexit has been implemented.
Our Brussels bureau chief Daniel Boffey explains:
British tourists will have to pay mobile phone operators' roaming charges when they travel in the EU after Brexit, according to the European parliament committee that helped pioneer the legislation.
Despite a ban on the practice, holidaymakers and business travellers will face hefty bills if they use their phone within the EU from 2019, unless the British government strikes a favourable deal with the union.
UK tourists face mobile phone roaming charges post-Brexit, paper says https://t.co/zW0zzAMDIh
10.18am GMT
Hilary Benn, the Labour MP who chairs parliament's Brexit select committee, has been discussing Britain's exit for the EU at an event organised by the Institute for Government.
Sophie Gaston of Demos has been tweeting:
Hilary Benn: "Govt consulting widely, which is good. But nobody knows how views will be ranked or if they'll be addressed at all" #IfGBrexit pic.twitter.com/IviMcjADZf
"Can't imagine what deal would be worse than no deal. It's the view of business & I think truly the view of Govt": @hilarybennmp #ifgbrexit
Hilary Benn: "Under protectionist #Trump, what will America want to buy from the UK? Free trade will not miraculously appear." #IFGBrexit
Hilary Benn: "When my father was dying, almost all who helped care for him were born outside of the UK. Who will look after us?" #IFGBrexit
Benn: we can have a migration target but still be welcoming - the country needs a debate on sector needs (eg: care, farming) #ifgBrexit
Benn: Benn: 'we are closing in on ourselves as a nation - and this is not what Britain is' #ifgbrexit
Benn: if you don't shout about what is important, government will struggle to hear it at the moment #ifgbrexit
10.04am GMT
Britain's auto industry didn't suffer any obvious Brexit impact last month, but a slowdown may be coming.
After record growth in 2016, some cooling is anticipated over the coming months, but provided interest rates remain low and the economy stable, the market is in a good position to withstand its short-term challenges."
Consumers seem certain to find their purchasing power being increasingly diluted during 2017. Furthermore, a likely weakening economy and more uncertain outlook may well make businesses more circumspect in their car purchases - perhaps taking longer to replace fleets.
Meanwhile, the sharp weakening of the pound makes it more difficult for car dealers to offer attractive deals on imported cars - with the result that some car manufacturers have raised prices and more increases seem inevitable during 2017 .
Related: UK electric vehicle boom drives new car sales to 12-year high
9.45am GMT
Michael O'Leary was one of the loudest business voices backing the Remain campaign (in vain) last year.
While it appears that we are heading for a "hard" Brexit, there is still significant uncertainty in relation to what exactly this will entail. This uncertainty will continue to represent a challenge for our business for the remainder of the 2017 financial year, and 2018.
We expect Sterling to remain volatile for some time and we may see a slowdown in economic growth in both the UK and Europe as we move closer to Brexit.
9.29am GMT
Here's some reaction to this morning's survey showing that more than half UK firms are suffering from the Brexit vote, from Robin Bew of the Economist Intelligence Unit:
#Brexit poll says firms already suffering despite good economy? Interesting they're more worried about labour movement than trade
More than half of British business leaders believe the vote to leave the European Union has had a negative impact on their companies but most firms are confident they can survive the change, according to a survey on Monday.
Britain's economy has performed more strongly than expected since the Brexit vote last June, but an Ipsos Mori survey of more than 100 of the country's top 500 firms found that 58 percent felt the vote to leave had taken a toll.
9.10am GMT
Management consultancy firm Bain and Company has put out an interesting report on Brexit today.
It predicts that Britain's pharmaceutical and aerospace sectors could get a 200m boost from leaving the EU, as WTO rules protect them from tariffs. That would allow them to get the benefit of the weak pound, without also suffering new export penalties.
8.50am GMT
UK firms could struggle to find enough skilled workers after Brexit, according to a report from consultancy firm Mercer.
It has found that Britain's working population will grow slowly from 2020, or even contract, due to the ageing population and the prospect of fewer migrants entering the UK.
"Both the government and businesses have a Herculean task ahead of them in determining how we respond to the changing shape of our society. We hope that our modelling is a wake-up call to the business community. There is a tremendous opportunity for far-sighted organisations to begin determining and implementing clear plans in response. If they do not act now, they could potentially find they do not have their share of the people and skills they need in future. The solution lies in analysis, automation and accessibility. Companies should analyse and understand the make-up of their workforce.
They should look to increase retention of current staff and be accessible: employing sectors of UK society that might be under-represented in the workforce - women, disabled, the long-term unemployed. They should also be investing heavily in automation where possible as well as improving employee productivity, through training and skills."
8.30am GMT
There's no sign of Brexit damage in the latest manufacturing figures from Germany.
HUGE BEAT!: German DecFactory Orders: 5.2% MoM vs 0.5%e vs -3.6% Dec (Rev-); 8.1% YoY vs 4.1%e vs 2.0% Dec (Rev-)https://t.co/ES7w5rKKdR
Buoyant news on #German #manufacturing sector as industrial orders jump 5.2% m/m in Dec, largest increase since Jul 2014 (1)
Good #Germany morning! German manufacturing factory orders rise 8.1% YoY, the fastest pace since July 20011! pic.twitter.com/njJ6mLcd1Q
8.19am GMT
The Brexit vote is also going to drive up prices in the shops this year.
A majority of firms surveyed by the British Chambers of Commerce are planning to hike prices in 2017, due to the slump in the pound last year.
"The depreciation of Sterling in recent months has been the main tangible impact that firms have had to grapple with since the EU referendum vote.
"Our research shows that the falling pound has been a double-edged sword for many UK businesses. Nearly as many exporters say the low pound is damaging them as benefiting them. For firms that import, it's now more expensive, and companies may find themselves locked into contracts with suppliers and unable to be responsive to currency fluctuations.
Majority of firms say they will hike prices after pound slump https://t.co/9tDc4gT8qr
8.05am GMT
More than half of Britain's biggest companies are now suffering from the public vote to leave the European Union last June.
A new survey of business leaders found that 58% said the Brexit vote was already having a negative impact on their firm. Just 11% said it had helped business.
According to respondents there is no sign that this is likely to ease this year, with two thirds saying they thought their business situation would get worse in the next 12 months.
FT UK:Brexit already having negative effect, say big business leaders #tomorrowspaperstoday pic.twitter.com/XPU2TB4HKk
7.50am GMT
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
The new week kicks off with lots of economic data, two important UK select committee hearings, and the prospect of more drama in Europe.
Related: Hermes driver among 'incredibly brave' workers to appear before MPs
Vauxhall chiefs face grilling over Zafira fires ahead of car-maker's results https://t.co/M3mO7Fqhbl pic.twitter.com/e5OoOfuZQy
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