UK firms face lending squeeze; IMF chief warns against no-deal Brexit - as it happened
Rolling coverage of the latest business and economic news, as sterling is volatile after EU and UK agree new Brexit deal
- Latest: IMF chief says no-deal would hurt GDP
- Pound jumps as Brexit deal 'agreed'
- Deutsche Bank: MPs probably won't approve deal
Earlier:
- UK firms face funding squeeze
- Demand also down as firms remain cautious
- Default rates are rising....
- Introduction: NatWest offering 8.2bn in Brexit funding help
5.04pm BST
After a choppy session, the FTSE 100 index of blue-chip shares has closed 0.2% higher at 7,182 points, up 14 points.
Top risers included firms with a high exposure to the UK economy, including TUI (+2.3%), J Sainsbury (+1.8%) and Next (+1.6%).
4.46pm BST
Seema Shah, Chief Strategist at Principal Global Investors, has some predictions about where the pound might go next:
Negative positioning suggests that, if the deal passes on Saturday, you could see another climb in the pound to around $1.35-$1.40.
A return to the pre-referendum $1.50 remains unlikely - after all, the endless negotiations and haze of uncertainty of the past three years has taken its toll on the UK economy. The UK will still likely endure some economic pain on leaving the EU, even with a deal.
4.42pm BST
Labour's shadow Brexit secretary, Sir Keir Starmer, is unhappy that this new Brexit deal means a more distant economic relationship with the EU:
This inevitably means there will be new trade barriers with the EU and additional checks at borders. The PD is explicit about this. And the Johnson deal makes it easier for a Tory Government to cut rights and standards. 5/
3.46pm BST
Even if Johnson's deal is passed on Saturday (unlikely, but not impossible), the City won't know its long-term relationship with the EU.
Jonas Lindqvist, Head of Product Strategy for Principal Trading at trading platform Itiviti, explains:
"The champagne may well be on ice in Number 10 having reached a 'new deal', but the long-term effects of Brexit on European market infrastructure are still unknown.
Agreeing the terms of exit, which still has to go through the House of Commons, is simply transitioning from one political relationship to another. What firms are really craving is intricate details into exactly how trading on European financial markets will function.
3.38pm BST
Ricardo Evangelista, senior analyst at ActivTrades, says the DUP's opposition has punctured the pound's rally.
A roller-coaster day for the pound with it almost reaching $1.30 following the announcement of a Brexit deal between the EU and the UK only to then lose all of the day's gains in the aftermath of the refusal by the Northern Irish Democratic Unionist Party to back such an agreement.
It is widely assumed that without the support of the of DUP the deal is condemned to be voted down by parliament, as the hard Brexit wings of the Conservative Party made their support conditional to the deal being accepted by the DUP. In practical terms this means that a new extension to the exit date is now more likely. As a consequence the pound erased earlier gains and is now unlikely to test the $1.30 resistance level again, at least not until there is another clear solution within sight.
3.27pm BST
Kristalina Georgieva has also warned that the difference between a Brexit deal and no deal was "quite dramatic".
The IMF has estimated that leaving without a deal would cost the U.K. between 3.5% and 5% of GDP, and knock 0.5% off EU GDP as well.
"That's quite significant."
"A lot of that impact has already been absorbed because anticipation of the U.K. leaving has been built over the past 3 years."
3.23pm BST
More comments from the IMF's new chief:
First major press conference for @KGeorgieva as IMF MD. She quotes a Pushkin poem: "The breath of autumn begins to ice the roadway." It's an analogy for the state of the global economy pic.twitter.com/5wYupRiDk5
IMF MD @KGeorgieva: "Of course, trade is good for jobs, growth and poverty reduction. But trade is also great for peace. Research shows when countries trade they don't fight as much. If we want a peaceful and prosperous future we have to work on trade."
3.05pm BST
Kristalina Georgieva, the new managing director of the IMF, is also pleased that the UK and EU have reached a new Brexit deal.
"This is good news. This is welcome. Just like the pound which jumped, when I saw the news I jumped.
I would very much like to see an agreement being reached"
3.02pm BST
I wouldn't dare predict how Brexit will play out. But City analysts have to calculate these things.
And Oliver Harvey, macro strategist at Deutsche Bank, has estimated that there's a 55% chance that MPs will reject this new Brexit deal on Saturday.
BREXIT: DEUTSCHE BANK SEES 55% CHANCE TO JOHNSON'S DEAL NOT RATIFIED ON SATURDAY
Some opinion polls suggest a substantial Conservative lead while others show a smaller lead. In general, however, the Conservatives' polling performance has improved since Mr Johnson became leader. Importantly, and as discussed above, only one scenario would reintroduce the risk of a no deal Brexit: that of the Conservatives forming a minority government with the support of the Brexit Party/DUP.
2.20pm BST
David Malpass, the World Bank president, says a Brexit deal will be good for poor countries because it will end the uncertainty that has led to slower growth.
"Uncertainty affects development because part of the slowdown in the developing world is related to the slowdown in the developed world. Europe has slowed significantly. If there was more certainty that would be very helpful."
2.17pm BST
Even by recent standards, this has been a very volatile day for the pound.
It's traded in a range of nearly two and half cents against the US dollar today, as hopes of a Brexit breakthrough surged, then subsided.
The pound is now back to precisely where it was before news of the Brexit deal emerged. Here it is vs US$ pic.twitter.com/SfCeB5iXqO
$GBPUSD daily range: 1.2750-1.2990. Last spotted at 1.2802. https://t.co/esp7Jae3F4
2.10pm BST
The pound has also fallen back against the euro.
Having hit a five-month high this morning, sterling is now down three-quarters of a eurocent at a1.151.
"we have a deal - oh no wait, we still need approval by the House of Commons" #BrexitDeal pic.twitter.com/aiMAUzMVUr
1.57pm BST
Passing a Brexit deal would be "constructive" for the UK's credit rating, says S&P.
The credit rating agency currently has a 'negative' rating on Britain, essentially a threat to downgrade the country - potentially pushing up borrowing costs.
"This is constructive news, also for the rating,"
Ultimately [the rating] it is going to come down to how the economy performs."
1.24pm BST
The City's Brexit optimism is now firmly fizzling out, as the DUP insists it won't back Johnson's deal.
The pound has dropped steadily in recent minutes, and is now back below $1.28, down almost half a cent today (and two cents below its peak this morning).
Cable falls below 1.28 handle#GBP -0.53% against other currencies#GBPUSD 1.27956 -0.29%#EURGBP 0.86853 +0.68%#GBPAUD 1.87566 -1.21%#GBPJPY 139.085 -0.36%#GBPCAD 1.6858 -0.49%#GBPCHF 1.26582 -0.87%#GBPEUR 1.15137 -0.67% pic.twitter.com/nLqhxumV4J
#BREAKING N. Ireland's DUP says 'unable to support' PM Johnson's draft Brexit deal pic.twitter.com/Fb4cAoiheK
1.23pm BST
1.00pm BST
One important point. Boris Johnson's new Brexit deal is based on a looser relationship with the EU than Theresa May's ill-fated Withdrawal Agreement.
Michael Gove, Chancellor of the Duchy of Lancaster, just described it as 'Canada plus plus plus". That effectively means a free trade agreement (FTA) with less need to conform to EU regulations, but also potentially less access - or more barriers - to EU markets.
If we're moving towards a fudged NI backstop Brexit deal with a standard UK free trade agreement, thread on the economic effects
tl:dr Johnson's is a much HARDER Brexit than May's
- UK government thinks this will end up making us ALL 2,250 A YEAR POORER
Read on for why
1/ pic.twitter.com/jPsAdh2Rtm
12.45pm BST
Brexit hopes are lifting equities across Europe, pushing the pan-European Stoxx 600 up by 0.3% at lunchtime (although this isn't a day for long lunches!).
12.22pm BST
Not for the first time, Brexit optimism is fading a little.
The pound has lost some of its early gains, and now back below $1.29 - as MPs assess whether they'll give their approval to this new deal.
"It's just not Brexit"
Brexit Party leader Nigel Farage says "we will never be able to properly break free of the EU if we sign up to this" new deal, and he would rather have an extension and a general election https://t.co/aLG0rsfXAg pic.twitter.com/4DLuw0a884
Boris deal sounds better than the WA. End free movement, end ECJ supremacy over UK law, backstop ditched, & can do free trade agreements. I want to read the detail before making up my mind. But well done Boris for getting this far & doing what others said was impossible
BREXIT: UK PRO-BREXIT LAWMAKER DUNCAN SMITH SAYS THERE ARE SOME ISSUES WITH THE POLITICAL DECLARATION || SAYS I RESERVE MY POSITION ON WHETHER TO VOTE FOR THE DEAL || SAYS WE ARE CONCERNED WITH DUP'S POSITION
12.12pm BST
Paul Dales of Capital Economics predicts further sterling gains, if parliament votes through this new Brexit deal.
He told clients:
If a deal is passed, then we suspect that the pound could rise further from $1.29 now to about $1.35 and a reduction in uncertainty would result in a gradual rebound in business investment boosting GDP growth from 1.3% this year to around 1.5% next year and to about 2.2% in 2020.
11.53am BST
Business leaders are expressing some relief that the UK and EU have reached a Brexit deal, despite uncertainty over what it is...and whether it will pass.
Jonathan Geldart, Director General of the Institute of Directors, says there is "guarded relief" at this breakthrough -- and called on MPs to avoid a no-deal Brexit:
"Business, particularly in Northern Ireland, will want to examine the detail more fully before coming to a firm view, but they will be pleased that UK and EU leaders have made steps toward common ground.
"As MPs study the draft deal, they must keep firmly in mind the damage a disorderly exit could cause businesses large and small. A further extension offers no guarantees of avoiding this outcome, but if a passable deal is in touching distance then politicians on all sides should be pragmatic about giving us the time to get there.
If the deal is passed - focus needs to turn quickly to the future relationship and ensuring that lessons are learnt from the experience of the last three years.
"Many small businesses are just about surviving - not only do they desperately need certainty but they also need the Government to get back to business and focus on meeting the many domestic challenges that have fallen behind Brexit."
11.43am BST
News of a Brexit deal has sent shares in some UK-focused companies sharply higher.
The FTSE 250, which is a good barometer of the UK economy, has jumped by 0.6% to a new one-year high.
11.25am BST
The pound is sitting proudly over $1.29 right now, but it could plunge on Monday if parliament rejects this new Brexit deal when MPs meet on Saturday.
Craig Erlam of trading firm OANDA says sterling could face more shocks:
Anyone hoping that the process will be straightforward now is kidding themselves. With Labour whipping for a second referendum on the deal and the Lib Dems unlikely to support anything, there is still a good chance we're heading for an extension and election, in order to get this over the line. Nothing in Brexit is ever simple.
It's going to be a wild weekend which will make the market open next week all the more unpredictable. If the deal gets through Parliament, the pound could perform extremely well at the start of next week, despite having already rebounded more than 8% from the lows a month ago.
11.03am BST
Important Brexit news: Brussels and London say they've agreed the terms of a deal for the UK to leave the European Union.
EC chief Jean-Claude Juncker and UK prime minister Boris Johnson have both announced that an agreement has been reached -- putting the ball back into parliament's court.
Where there is a will, there is a #deal - we have one! It's a fair and balanced agreement for the EU and the UK and it is testament to our commitment to find solutions. I recommend that #EUCO endorses this deal. pic.twitter.com/7AfKyCZ6k9
We've got a great new deal that takes back control - now Parliament should get Brexit done on Saturday so we can move on to other priorities like the cost of living, the NHS, violent crime and our environment #GetBrexitDone #TakeBackControl
DUP: "Read our statement. It hasn't changed." #Brexit
10.56am BST
British consumers are still spending, despite Brexit uncertainty, but there are signs of a slowdown...
Retail spending only rose by 0.6% in July-September, the Office for National Statistics reports, compared to April-June.
Good News! UK Retail Sales "The year-on-year growth rate shows that the quantity bought in September 2019 increased by 3.1%, " #GBP #GDP
With declining high street footfall and continued Brexit uncertainty weighing on some consumers minds, retailers continue to brace themselves for a tough Christmas.
"Whatever the political and economic outcome, retailers and leisure operators need to keep their heads held high and hold their nerve, and focus not just on discounting but on continuing to get the basics right."
10.27am BST
Michael Biemann, CEO of digital property lender Selina Finance, is concerned that default rates on unsecured loans are rising, according to the Bank of England this morning.
"It's a concern that default rates on credit cards and loans rose in the third quarter, and equally worrying that lenders expect even more people to start having problems with their repayments in the upcoming quarter.
With money so cheap, there is a lot of debt out there and the worry is that for some people it is starting to prove too much, and at just the wrong time as we enter a potentially tough period for the economy.....
Default rates to businesses of all sizes also rose between July and September, with lenders expecting this trend to accelerate further in the final three months of the year.
While there are many reasons why businesses start to struggle, the impact of Brexit uncertainty cannot be ignored and is likely to be the deciding factor in the current cycle."
10.14am BST
Economist Rupert Seggins is also concerned by today's data:
BoE survey showing that corporate default rates have been increasing over the past 2 years, corporate credit availability has been diminishing for the past 1.5 years (especially for real estate), companies' demand for credit fell in Q3, the result of which appears to be... https://t.co/IbzWCL0zGd
10.14am BST
The drop in business lending shows that UK companies are cutting back on investment, says Andy Bruce of Reuters:
UK lenders expect see business loans drying up like at no time since the financial crisis, new @bankofengland survey shows pic.twitter.com/uS2kwhARdG
Biggest negative net balance of lenders who think capex will drive demand for business loans in the coming months since 2009, according to the BoE
This index has linked alright with GFCF over the years pic.twitter.com/w8DqqkxL2C
10.09am BST
Worryingly, the Bank of England has found that more companies and individuals defaulted on their loans in the third quarter in 2019 -- and the situation is likely to get worse.
Its credit conditions survey found that:
9.45am BST
Newsflash: Banks are planning to offer FEWER loans to businesses in the next few months, despite NatWest's offer of more lending this morning.
UK lenders' expectations of the availability of business loans has fallen sharply, to the lowest level since the financial crisis.
The overall availability of credit to the corporate sector was reported to have remained unchanged in Q3, and this was the case for small, medium and large businesses (Chart 2). The overall availability of credit to the corporate sector was expected to decrease in Q4.
9.28am BST
Bloomberg has written about the support available to UK businesses facing Brexit worries:
Royal Bank of Scotland Group Plc is running Brexit clinics in the hope of soothing concerns that small and mid-sized businesses aren't ready for what awaits them.
RBS's NatWest bank is holding meetings across the country, coaching businesses on how to face disruption to trade, workers or data flows once the U.K. leaves the European Union, it said in a press release on Thursday. The bank is also making 8.2bn ($10.5 billion) in loans available to support small businesses during Brexit, up from the 6bn pounds it previously announced.
#RBS runs Brexit Clinics to Avoid Crunch Time For Small Businesses https://t.co/5NV5l4cWPC
9.16am BST
Building supplies group Grafton has issued a profits warning, blaming weaker demand in the UK (among other issues).
The company, which sells bricks, timber, cement, roof tiles, paint and bathroom fittings, told shareholders it has suffered "a softening in activity" in recent weeks.
Volumes in the UK merchanting business were affected by weak underlying demand fundamentals as households deferred discretionary spending on home improvement projects against the backdrop of increased economic uncertainty.
8.58am BST
WH Smith, the high street and travel hub retailer, has been stockpiling products in case of Brexit disruption.
The Group is prepared for Brexit and has put in place contingency plans to manage the impact, including increasing the stock of convenience products.
8.43am BST
Brexit uncertainty has sent the pound lurching around this morning.
Sterling tumbled back from last night's five-month high, after the DUP party rejected the deal being drawn up between Boris Johnson and the European Union.
Brexit talks seem to have foundered - because as I mentioned yesterday - DUP cannot accept VAT proposals for Northern Ireland. No legal text for EU leaders to agree today therefore pic.twitter.com/1pvWqrl1fV
8.29am BST
The UK government has welcomed NatWest's 2.2bn boost for firms struggling with Brexit.
Small business minister Kelly Tolhurst says:
"Financial support from banks is often crucial to the success of an SME. So it is great to see NatWest reaffirming support for their business customers through our new SME Finance Charter.
"NatWest's commitments of continued and proactive support will give their SME customers the confidence they need ahead of Brexit on 31 October and beyond - with opportunities to thrive, grow and scale up in new markets."
8.17am BST
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
"Through its on-going Brexit Customer Outreach Programme, NatWest has identified several thousand customers who may be the most impacted by the Brexit uncertainties, and has committed to proactively contacting those customers to help with their needs."
"During a time of such uncertainty, it is imperative that we do all we can to support our customers. Our business customers are extremely busy, and there is a lot to do. This is why we wanted to go to them offering our support in a proactive way.
We are very much open for business and want to be the bank that supports the UK's businesses through this uncertain time."
#GBPUSD rose to hit $1.2870 yesterday, as hopes rise with regards to the #Brexit. The pair has dropped back below the 1.28 to 1.2758. The #EU summit begins today and will greatly affect #sterling.#fx #forex #trading #trader #forextrading #forextrader #forexmarket #daytrading pic.twitter.com/D8CqIWRwnT
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