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British Consumer Borrowing Hits a New Low amid Brexit Concerns

Mirror News Desk



Consumer borrowing post brexit, British auto industry

Brexit and the impending impacts of not reaching a common solution as the deadline draws near, is raising some major market concerns for UK. Therefore, following the impact, British consumer borrowing fell to its slowest rate last month.

According to Bank of England, such a situation has occurred after more than three years, thrashing the new car sales down by about 5 percent. The trend of consumer spending has also been a major role player in Britain’s economy, which has seen faster-than expected growth, despite a rise in inflation.

The growth, now, according to the data collected on the year-on-year growth in unsecured consumer lending, showed the percentage fell to 7.7 percent in September from 8.2 percent in August. The figures also imply that the growth is at its weakest since June 2015.

“New consumer borrowing for car finance fell sharply, consistent with very weak car registration numbers in September, while other borrowing, such as personal loans and overdrafts, was robust,” the central bank said.

The Auto industry also reported a sharp decline in its numbers in September as new car registration dropped by 20.5 percent in the year. September is a month that usually witnesses a lot of sale because of a twice-yearly change in license plate numbers.

While, it is partly believable that such a major fall in the numbers is due to rising environmental concerns, which shows a pattern to-do-away with the diesel vehicles. However, the major reason for instability in market revolves around vicious circles of Brexit, and Theresa May’s inability to reach up on a focal point.

The numbers from the month of September do not lie and the weakened car sales also shows that consumers are cautious while borrowing, whereas lenders fear the falling credit growth.

The Bank of England has further warned that the credit growth will slow down in the month of October, following tightening of loan conditions by lenders, earlier this year.

Theresa May might have repeatedly spoken about market forces not getting affected, but the stats clearly show how uncertainty looms large in the market.


London Stock Exchange Takeover by HKEX Fails despite £32 Billion Bid

Mirror News Desk



London Stock Exchange

The Hong Kong Exchanges and Clearing Limited (HKEX) has ceased its £32 billion venture to purchase the London Stock Exchange (LSE) citing a lack of sufficient support for the deal as the main reason. With this deal withdrawn, the HKEX has also failed to create one of the world’s largest financial marketplaces.

As soon as the news of failed the merger and acquisition (M&A) between the HKEX and the prized LSE made the news, LSE registered a drop of 6 percent to close £69.94. On the other hand, HKEX shares saw a growth of 2.7 percent following the failed M&A.

Moreover, HKEX released a statement on Tuesday morning in regards with dropping the multibillion-dollar bid and said, “The board of HKEX continues to believe that a combination of [London Stock Exchange Group] and HKEX is strategically compelling and would create a world-leading market infrastructure group.

“Despite engagement with a broad set of regulators and extensive shareholder engagement, the board of HKEX is disappointed that it has been unable to engage with the management of LSEG in realising this vision, and as a consequence has decided it is not in the best interests of HKEX shareholders to pursue this proposal.” 

American banker David Schwimmer was leading the negotiations for the LSE. With failed M&A between the HKEX and the London Stock Exchange, the latter can now pursue its takeover of Refinitiv for £22 billion.

Speaking in regards to the failed M&A between HKEX and LSE, chief market analyst Michael Hewson at CMC Markets said, “In reality the HKEX deal was never a realistic possibility when set against a hostile management at the London Stock Exchange and a Chinese regulator who were lukewarm at best.”

“Even if HKEX had decided to up their offer, the deal was of questionable merit, given the problems in Hong Kong right now, along with the exchange’s management structure, which raised concerns about Chinese possible government influence.”

On the other hand, Don Robert, the chairman of the London Stock Exchange claimed that the takeover of LSE by HKEX would not have been suitable for the LSE. He reasoned that the HKEX has ties with the Hong-Kong government and has board inclined towards the Hong Kong government.

Furthermore, it won’t be claim that seeing the current turmoil of Hong Kong due to pro-democracy protests, there remains questions on territory’s future as strategic gateway for financial investment.

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Rise in Inflation and Economic Recession Expected with No-Deal Brexit

Mirror News Desk



No-Deal Brexit

No-Deal Brexit crisis that has drenched the British currency and poorly affected the economy is once again in controversy. The continuous delays in the UK’s withdrawal from the European Union, with or without a deal has brought uncertainties, as citizens have sought to doubt the government’s way of handling the entire deal.

Noticing the government’s efforts in mitigating the crisis, the critics believe that the No-Deal Brexit might take place by next year. If this happens, then there are chances that the country would be dragged into a recession and pushed for higher inflation.

As of now Prime Minister Boris Johnson has been playing a tough role in getting the country out of the Brexit crisis on its withdrawal date i.e. October 31. But the failed negotiations indicate towards the fact that the withdrawal deadline that has already been extended twice, would once again drag the UK for another three months’ extension.

The MPs have recently passed a law asking Johnson to seek an extension to the Brexit deadline if he fails to pass a deal in Parliament or get MPs to approve a no-deal Brexit by October 19.

The critics believe that post the deal’s extension, if the UK leaves the EU without a deal on January 31, it could lead to a 0.2 percent contraction in the output in 2020. It might also follow an election that sees Johnson’s Conservatives winning the most seats and forming a government.

To begin with, the present uncertainties already have a huge impact on the British economy, which has led to a continued downfall of Pound Sterling. Though the government has been aiming for progresses, the never-ending obstacles are still in their way.  

Previously, the prime minister played an important role in suspending the Parliament amid the Brexit negotiations, a move which was condemned as “unlawful” by the Supreme Court. Saying that it was hindering the MPs duties in the run-up to the Brexit deadline on October 31, the court revoked the Parliament’s five-week suspension.

The new predictions by Bloomberg show that the UK’s crashing out of the EU with a No-Deal Brexit in January would deliver a huge blow to the economy. Despite that, they believe that it wouldn’t have as severe impact as compared to the government’s decision of moving out without a deal on October 31

Moreover, the Bank of England’s (BoE) Michael Saunders said that the Brexit uncertainty that has marked the weakening of the UK’s economy over recent quarters, could trigger interest rate cut. The drop in the pound, along with an increase in tariffs, will lift inflation to 2.8 percent.

In a similar context, the British multinational investment bank Barclays said that there is a wide range of potential paths for the economy. If the UK secures a deal, it would definitely help investment and economy.

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Ex Head Aivar Rehe of Estonia’s Danske Bank Found Dead amid Scandal Inquiries

Mirror News Desk



Danske Bank

Last updated on October 3rd, 2019

The former head of one of the Danske Bank branches, which has been involved with world’s largest money laundering scandal, was found dead on Wednesday.

Headquartered in Copenhagen, Danske is also a major retail bank in the northern European region with over 5 million retail customers. The death of the ex-boss of Danske Bank’s Estonian branch raises huge questions on police’s handling of the case as Aivar Rehe’s role was central to the scandal inquiry.

Aivar Rehe worked as a boss in the Estonian branch between 2007 and 2015. While Rehe was in charge of the Danske Bank’s Estonian branch, a suspicious payment totalling 200 billion euros ($220 billion) were moved from the bank. In all, Rehe became one of the people, who were being questioned as a witness during an investigation by Estonian prosecutors, while the case was opened in December 2018 against 10 former bank employees.

According to a report filed with the police, Rehe and his whereabouts remained missing since he left his home in Estonia’s capital, Tallinn, on Monday. As he was only questioned as a witness and not the suspect in the continuing investigation related to Danske Bank’s scandal, his all of a sudden death has further complicated the investigations related to Estonian operations in the entire Europe.

Not only that, Denmark’s largest lender is under investigation in several countries, including United States, Denmark, Britain and Estonia, where the governments have been checking whether the Estonian branch failed to alert authorities about suspicious transactions.

Now that one of the important witnesses is no more, it is more of a challenge for the investigators to resolve the mystery. Since, Rehe’s corpse that was found near his house on Wednesday, does not have any signs of violence or that of an accident in it, the police said that there would not be any investigation on his death.

What has more complicated the situation are Frankfurt prosecutors’ comments who claim to have raided the Deutsche Bank’s headquarters in the German financial capital in search of information related to Danske Bank, in the name of attempting to cooperate with them.   

The Danske Bank officials extending their condolences to Rehe’s family, said, “We are sad to receive the news that the former chief of our Estonian brand, Aivar Rehe, is dead. Or thoughts go out to the family.” However, what lies in the citizens’ mind is a suspicious question of could Rehe’s death in any way be related with the huge money laundering scandal, while they wait for more revealing in the case.

The entire scandal once again puts questions on the reliability of the Danske Bank, which has millions of retail customers in the entire Europe.

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KPMG Warns No-deal Brexit will Cause Biggest Crash in Housing Prices

Mirror News Desk



no-deal Brexit

According to the leading accountancy firm KPMG, if Britain undergoes a no-deal Brexit on October 31, the housing markets of London and Northern Ireland might come crashing down. KPMG asserted that following the no-deal, the house price crash might vary from 5.4 percent to 7.5 percent.

The analysis made by the firm also reflected the probable chances of depreciation of 10 percent to 20 percent in housing prices, if the reaction towards a no-deal is more than expected.

Following the G7 Summit in August, Johnson shifted the responsibility of no-deal Brexit over his European Council counterparts.

KPMG, after assessing the highly exposed condition of the market, released the statement in lieu of the series of warnings regarding the no-deal Brexit. The firm also said that if Britain is unable to strike a new withdrawal agreement with Brussels by October 31, the house prices would slash down across various regions of Britain over next year.

Chief economist of the firm at UK, Yael Selfin, in lieu of the firm’s statement said, “A no-deal Brexit will see households’ finances more under strain, with any rises in earnings likely to be more subdued and higher inflation depressing their purchasing power even further.”

“Add to that a rising unemployment rate and an overall decline in confidence as a result of the initial disruption, [and] you can see why people would hold off making any major financial commitments, which would trigger a larger correction in house prices.”

One of the Big Four, KPMG, also claimed that if Boris Johnson successfully strikes a withdrawal deal with the EU and avoids a no-deal Brexit by the set deadline, the slash in house prices can be avoided. Instead, there would be a steady growth in housing prices ranging from 1.3 percent to 2.4 percent across London in 2020.

Last year, the Bank of England formulated a hard-Brexit scenario and claimed that it can lead to the depreciation of a maximum of 35 percent in the housing market, although the interest rates will continuously change.

Chairing the Housing division of the UK at KPMG, Jan Crosby claimed that no-deal Brexit might lead to a steep crash in the housing prices and further affect the sales. He explained the reason as alerted owners who are waiting for the risk surrounding the market to end.

He further said that this move will “make government housing delivery targets impossible to achieve and slow new building across the sector.”

Even though the chances for a no-deal Brexit are relatively higher than Britain leaving the EU with a deal, the MPs at House of Commons still have a week to pass the legislature to block a no-deal, after returning from the summer break. With every section of the market claiming that a no-deal Brexit would be bad for the growth of the UK, will Johnson be able to strike a withdrawal deal, preventing Britain from the downfall?

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Brexit Deal: Causes and Effects on British Economy and Currency

Mirror News Desk



Brexit Deal

The controversial Brexit Deal has become more of a challenge for the British economy. Boris Johnson, who was recently appointed as the prime minister, is more determined to take the UK out of the EU by October 31 with or without a Brexit deal. But the real deal here is that the entire country would indulge in a huge economic shock with the UK’s withdrawal from the EU.

Unlike the prime minister’s previous statements that the Brexit deal would result in “massive economic opportunity”, many independent economists claimed that the entire scenario would negatively impact the British economy. Economist and Governor of the Bank of England Mark Carney, also agreed to the fact that a no-deal Brexit would lead to an “instantaneous shock”.

Carney further added, “You actually have businesses that are no longer economic.”

For the first time in the last seven years, the UK economy, while revolving around the Brexit deal, shrunk in the second quarter.

Moreover, the gross domestic product also fell 0.2 percent in the three months to June. When looked on the first quarter, the output was boosted by British manufacturing companies, who ramped up the production to supply to the overseas customers.

One of the main reasons behind these were the fears of border disruption after a no-deal Brexit on March 29, which was the original date of the UK’s withdrawal from the EU. During the second quarter output, the carmakers’ shutting down their plants in April because of the Brexit turbulence led to the downfall.

It appears that the business services and finance throughout the country would stagnate in the near future.

Observing the existing downfall of Pound Sterling since the Brexit referendum, many political leaders have been making every possible effort, stopping Boris Johnson from pursuing a no-deal Brexit.

Since the 2016 Brexit referendum, the British currency has fallen 10 percent. Though it was relatively stable against the currencies of the UK’s trading partners for some time, it started sliding again in May post Theresa May’s plans of quitting from the prime minister’s office.

With Pound’s slowing down to seven percent in May, the analysts believe that it might lead to situations of inflation as many companies have become reluctant to commit to capital spending amid Brexit uncertainty. As a result, business investment fell throughout in 2018. Sudden surge in the first quarter resulted in huge decline in the second quarter.

The main area of concern is that the investments’ decision is poorly affecting the global trade that has lowered the growth rates. The persistent weakness in the UK productivity along with unemployment closing to a 45-year low at 3.9 percent has further contributed to the crisis amid delays of making Brexit deal a complete success.

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