Mike Ashley's Frasers Group in Debenhams rescue talks; Brexit fears hit pound – as it happened

Graeme Wearden

from on 2020-12-07 17:27 (#5BAMR)

Rolling coverage of the latest economic and financial news

Introduction: Frasers in rescue talks with Debenhams
Frasers: Hopeful jobs can be saved; but no certainty' of deal
12,000 jobs at risk across Debenham's 124 stores
Kingfisher to return 130m business rates relief
Pound hit by Brexit talks fears

7.31pm GMT

A late PS. The pound has recovered more ground after Boris Johnson and Ursula Von der Leyen agreed to meet in person later this week to discuss the Brexit negotiations.

Following a 90-minute phone conversation, the UK PM and European Commission president agreed to an 11th-hour attempt to break the impasse in the deal talks, raising hopes of agreement on a trade and security deal.

As agreed on Saturday, we took stock today of the ongoing negotiations.

We agreed that the conditions for finalising an agreement are not there, due to the remaining significant differences on three critical issues: level playing field, governance and fisheries.

5.27pm GMT

So, with the pound clawing back its losses (at least for the moment....) it's time to wrap up.

Here's today's main stories:

5.21pm GMT

Reuters has spotted that today was the FTSE 250 index's worst session in six weeks.

That pulled the mid-sized company index down from its highest level since February.

UK's domestically-exposed stock index pulled back on Monday from its highest level in 10 months on fears that Britain will stage a disorderly exit from the European Union, with banks and real estate taking a sharp beating.

The mid-cap FTSE 250 ended 1.25% lower, logging its worst day in about six weeks, as negotiators entered last ditch efforts to bridge stubborn differences over a post-Brexit trade deal to avoid a messy divorce at the end of the month.

5.15pm GMT

The pound is recovering some of its losses in late trading, after the UK appeared to offer an olive branch to Brussels.

London has confirmed that it will remove controversial clauses from its Brexit legislation which breach the Withdrawal Agreement, if discussions over implementing last year's divorce deal are successful.

Discussions [on a trade deal] continue to progress and final decisions are expected in the coming days. If the solutions being considered in those discussions are agreed, the UK government would be prepared to remove clause 44 of the UK internal market bill, concerning export declarations. The UK government would also be prepared to deactivate clauses 45 and 47, concerning state aid, such that they could be used only when consistent with the United Kingdom's rights and obligations under international law.

This move doesn't make all of the problems of getting a deal magically disappear, but it may shift the mood a bit which was getting very glum indeed

5.09pm GMT

Wednesday has emerged as the new deadline for the Brexit negotiations.

Our Brussels bureau chief Daniel Boffey explains:

The EU's chief negotiator, Michel Barnier, has set a new deadline for the Brexit negotiations, warning that the talks will not go beyond Wednesday.

During briefings to MEPs and EU ambassadors in Brussels, Barnier said the negotiation was not far from the very endgame", and talks are expected to continue into midweek but no further.

4.54pm GMT

Business leaders and unions have been heaping renewed pressure on the government to strike a last-minute Brexit agreement, saying the UK economy is ill-equipped for a disruptive no-deal scenario.

My colleague Richard Partington has the details:

Minette Batters, the president of the National Farmers' Union, said reaching a deal was critical for protecting farmers' access to the EU, which is the UK's biggest market where 70% of agricultural food exports are sold.

It is critically important that both the UK and EU continue to negotiate on a free trade agreement and prioritise securing a tariff-free, quota-free deal as soon as possible," she said.

4.51pm GMT

Worries that the UK and the EU will not agree to a trade deal has soured sentiment in the markets today, says David Madden of CMC Markets UK.

When markets closed on Friday there was a sense of cautious optimism doing the rounds as Ireland's Foreign Affairs Minister, Simon Coveney, said negotiations were at the very end'.

Over the weekend, Micheal Martin, the Irish premier, said the chance of a deal was 50-50. The situation is tense.

4.50pm GMT

After a day overshadowed by Brexit, the FTSE 100 index of blue-chip shares has closed virtually flat.

The Footsie gained 5 points or 0.08% to 6555 points, having hit a new nine-month high earlier in the session.

4.19pm GMT

Singapore is the new Switzerland, at least for the global elite.

A global leadership summit is of crucial importance to address how we can recover together,"

The Special Annual Meeting 2021 will be a place for leaders from business, government and civil society to meet in person for the first time since the start of the global pandemic. Public-private cooperation is needed more than ever to rebuild trust and address the fault lines that emerged in 2020."

While this decision is pandemic-related, it also sends a clear signal to the West: Go east if you want to feel the political-economic heartbeat of the future. https://t.co/ZApqelEGkD

3.47pm GMT

Thomas Pugh, UK Economist at Capital Economics, reckons the prospects of a UK-EU free trade deal have dropped from 60%, to probably closer to 50:50 now".

Even if the thorny issue of fishing quotas is resolved, he thinks the question of a level-playing field, and the deal's governance, are arguably more complicated to work out than fishing".

That's partly because leaving the EU's Single Market and Customs Union makes this Brexit a relatively hard" one. But it's mostly because a lot of arrangements are now in place.

Indeed, the Withdrawal Agreement laid down the terms of the break-up, both the UK and the EU have made progress in granting financial services equivalence and the UK has replicated the bulk of the trade deals it had with non-EU countries via the EU.

Brexit is going to get a lot of airtime over the next few hours, days and weeks. But most of the coverage about a deal or no deal misses five key points.https://t.co/8yDWd74oAX

2.37pm GMT

The US stock market is open, and the Dow Jones industrial average has dipped slightly from last week's record.

The Dow is down 67 points, or 0.2%, at 30,151.

1.44pm GMT

Wall Street is set for a soft open today, having ended last week at record highs.

US Opening Calls:#DOW 30121 -0.31%#SPX 3688 -0.31%#NASDAQ 12530 +0.02%#RUSSELL 1885 -0.20%#FANG 5848 -0.12%#IGOpeningCall

1.36pm GMT

A quick recap of the main events.

Mike Ashley's Frasers Group is in rescue talks with the administrators of Debenhams. A deal could potentially save some of the 12,000 jobs at risk across the retailer - although Frasers warns that there's no certainty' of agreement.

12.55pm GMT

Here's our news story on Mike Ashley's possible Debenham's rescue:

12.54pm GMT

Fashion chain Ted Baker has added to the high street's woes, reporting widening first-half losses and saying it had laid off 953 people after Covid-19 lockdowns and other restrictions.

There is material risk to our future profit if the UK is not successful in signing new trade agreements with the EU and other markets in which we operate

12.44pm GMT

Back in the markets, the pound is still sharply lower, down over one and a half cents at $1.327.

That's a slight recovery on this morning's slump, but still puts sterling on track for its worst day in three months.

NEW: Phone call between @BorisJohnson and @vonderleyen will take place at 1600UK/1700CET

Brexit talks are at loggerheads. With the EU summit starting Thursday and the UK government intent on pressing ahead with two key pieces of legislation in the commons that run counter to the Withdrawal Agreement before that, it could be a fraught few days.

Whether the EU side would allow this last window of opportunity to be used by extending the talks beyond Monday in such a scenario remains an open question.

11.31am GMT

UK house prices are rising at their fastest pace in over four years as the pandemic drives some families to move into larger houses away from the city.

Mortgage lender Halifax has reported that prices jumped 7.6% in the last year, lifting the average price to just over 253,000. That's the strongest annual growth since June 2016.

With mortgage approvals at a 13-year high, the current market continues to be shaped by a desire for more space, the move from urban to rural locations and indications of a trend for more home working in the future.

As the March deadline for the stamp duty holiday approaches, properties sold to home-movers recorded a much higher rate of annual house price inflation (+7.9%) than first-time buyers (+5.8%).

It is interesting to note that the stamp duty saving of 2,500 on a home costing 250,000 is now far outweighed by the average increase in property prices since July.

11.08am GMT

AJ Bell investment director Russ Mould warns that some store closures are inevitable even if Mike Ashley pulls off a late deal for Debenhams.

Mould also predicts that Ashley will push for rent cuts - as Debenhams collapse was partly caused by being trapped in expensive, long-term leases by its former private equity owners:

To no great surprise retail kingpin Mike Ashley's Frasers Group is in for Debenhams at the 11^th hour.

Ashley has been the great dealmaker of the high street in recent years and after JD Sports pulled out of its own deal for the department store it felt almost inevitable he would throw his hat into the ring.

The queues outside Debenhams since lockdown was lifted in England suggest the wider Debenhams name still resonates with shoppers although there was also likely an element of opportunistic bargain hunters inspired what they expected to be a big closing down sale.

If the brand had that much appeal Debenhams arguably wouldn't be in the mess it is now. It failed to adapt to the changing retail landscape and was left looking sluggish by its rivals.

10.46am GMT

The organisers of the Paris Air Show, the biggest event in the global aviation calendar, have announced its cancellation in 2021 because of the coronavirus pandemic.

We are obviously disappointed not to be able to hold the 2021 edition of the Paris Air Show. After many months of all trade show activities being suspended throughout the world, the entire international aerospace and defence community was very much looking forward to being able to meet.

We have already started work to ensure that the 2023 edition celebrates the resurgence of the aerospace industry on an international scale.

10.24am GMT

The pound's weakness has helped to push the FTSE 100 up to a new nine-month high.

The blue-chip index of top shares in London is up 18 points or 0.3% at 6,568 points, the highest since early March.

10.04am GMT

Shares in UK-focused companies are also falling this morning, as Brexit worries ripple through the City.

Housebuilders Berkeley Group (-6.3%), Persimmon (-5%) and Barratt Development (-4.4%) are the leading fallers on the FTSE 100.

9.57am GMT

Here's Ranko Berich, head of market analysis at Monex Europe, on the pound's weakness this morning:

Sterling remains firmly on the Brexit headline merry-go-round, and this morning is selling off after assorted anonymously sourced reports indicating that the threat of no-deal Brexit is looming large in the market's mind for the umpteenth time.

The Sun newspaper - hardly an impartial outlet on this topic - is reporting that Boris Johnson is set to walk away from trade negotiations as early as this morning. The UK may indeed be just about to withdraw from negotiations, but equally, this morning's Sun story could also be part of a bid by Boris Johnson to sell an incoming deal as a hard-won breakthrough, or indeed a negotiating tactic. For now, the added uncertainty has been enough to send sterling reeling to its lowest levels against the euro since October, and significantly raise bets in fixed income markets for negative rates from the Bank of England.

9.47am GMT

Ricardo Evangelista, senior analyst at ActivTrades, says the markets are getting anxious about the Brexit trade deal talks...

The Pound is under pressure versus both the euro and the dollar, losing more than 1% to both currencies during early Monday trading.

The markets are showing signs of nervousness, as the talks between the EU and the UK continue with both camps' positions remaining far apart on the issue of the so-called level playing field. As time begins to run out, the base case scenario for the majority of investors is still that an agreement will be reached before time runs out.

9.45am GMT

The pound has also dropped sharply against the euro this morning.

Sterling's down 1.2% at 1.095, its lowest in over six weeks.

9.39am GMT

Sterling has slumped this morning amid fears that Britain and the European Union will fail to reach a free trade deal.

The pound has tumbled by two cents against the US dollar to $1.323, a hefty slide, as negotiators began a last effort to overcome their differences on several key issues.

The diplomat, who was at the briefing, said Barnier told the envoys that differences between the EU and London persisted on the three main issues that have long divided them, and that the ball was now in British Prime Minister Boris Johnson's court.

BREAKING: Ireland's foreign minister Simon Coveney says EU chief negotiator Michel Barnier has given a very gloomy, downbeat" assessment of the prospects for a deal to EU ambassadors

Coveney told @rtenews "there really was no progress made yesterday, so we've got to try to make a breakthrough at some point today"

9.20am GMT

Games Workshop continues to defy the crisis on the high street.

We are delighted with the global team performance in the first half given the back drop of major projects and some government restrictions.

What pulled Games Workshop shares out of their rut was the arrival of Kevin Rountree as chief executive in 2015. The company had previously been at war with its best customers, firing off reams of cease-and-desist letters to internet fan sites for breach of copyright.

Mr Rountree rebuilt bridges with the community, having recognised the marketing value of social media.

9.13am GMT

Professor John Colley, associate dean of Warwick Business School, says Mike Ashley will be hoping to take the profitable parts of Debenhams, through these last-minute rescue talks.

Mike Ashley has learnt the best way to buy a business is out of administration as there is no debt and all contracts can be renegotiated. This is ideal as his real strength is negotiating efficient and low cost supply chains.

Administrations also mean the buyer can take the profitable parts and leave the rest. For Debenhams, Mike has waited for last shout' - that is the announcement of liquidation - to get the best deal. The good news is it is likely some stores and jobs will be retained.

8.46am GMT

In other retail news, DIY chain Kingfisher has joined the ranks of companies repaying their business rates relief.

Kingfisher is in a sound financial position with continuing positive trading momentum, due to both strong consumer demand and the benefits of our strategy.

We are pleased that we are in a position to do this, and hope that the money can now be redeployed by the government and local authorities where it is needed most."

8.28am GMT

Retail analyst Nick Bubb says it's extraordinary" that Mike Ashley is still pursuing his dream of buying the bankrupt Debenhams".

If Ashley did pull it off, Debenhams would join House of Fraser, Sports Direct, Game Group, Evans Cycles and Jack Wills within the Frasers empire.

8.05am GMT

Bloomberg has a good take on Mike Ashley's last-ditch bid to buy Debenhams:

Debenhams has 124 stores, all rented, and if a deal is completed Frasers could operate them on a 12-month license while determining how many stores could be saved, said a person familiar with the matter, who declined to be identified as the matter is confidential. Debenhams declined to comment on the talks with Frasers Group.

The person said any deal with Frasers would have to be better than the liquidation value of Debenhams and negotiations with FRP Advisory, the administrator that has been in control of the department store since April, were likely to centre on a value of around 280m.

We have found that Debenhams has been overly reliant on Arcadia for many years," said Chris Wootton, financial director of Frasers, in an emailed statement.

As well as no end in sight to the outdated business rates regime which unduly punishes the likes of Debenhams, it may may this a bridge too far for the Frasers Group."

7.42am GMT

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Could Mike Ashley save Debenhams from liquidation?

The Company confirms that it is in negotiations with the administrators of Debenhams' UK business regarding a potential rescue transaction for Debenhams' UK operations.

Whilst Frasers Group hopes that a rescue package can be put in place and jobs saved, time is short and the position is further complicated by the recent administration of the Arcadia Group, Debenhams' biggest concession holder. There is no certainty that any transaction will take place, particularly if discussions cannot be concluded swiftly

The Frasers Group tycoon has revived his interest in taking over the struggling department store chain at the eleventh hour. The move could save Debenhams from liquidation: the 242-year-old group had seemed set to disappear from the high street for good after JD Sports withdrew from the running to buy it from administrators last Tuesday.

Ashley's group, which owns Sports Direct, and advisers to Debenhams are trying to thrash out a deal that could value the chain at more than 200m, depending on how much stock is left. Frasers would operate Debenhams' 124 stores under 12-month licences.

(There) is a fantastic business inside it, probably 70 stores, and a very good website which I'm sure someone will be buying, so I don't think all these jobs are going.

NEW: Mike Ashley's Frasers Group confirms in negotiations with the administrators of Debenhams about a potential rescue deal

Frasers Group hopes that a rescue package can be put in place and jobs saved, time is short and further complicated by the administration of Arcadia"

"There is no certainty that any transaction will take place, particularly if discussions cannot be concluded swiftly."

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