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Never mind the optics, Theresa Mays US dash was mortifying | Jonathan Freedland

Sure, it went fine Trump managed not to drop any bombshells. But this hasty visit smacks of desperation

In normal times, youd say everything went swimmingly. Sure, the American president seemed a tad unsure how to say the name of his guest whom he greeted as Ter-raiser slightly reinforcing the White Houses earlier failure, in a briefing note, to spell the British prime ministers name correctly, dropping the h and thereby suggesting Donald Trump was about to receive Teresa May, who made her name as a porn star.

But other than that, the PM would have been delighted. In the press conference that followed their Oval Office meeting, there were no bombshells: Trump managed to get through it without insulting an entire ethnic group, trashing a democratic norm or declaring war, any of which might have diverted attention from Mays big moment. He was on best behaviour, diligently reading the script that had been written for him, attesting to the deep bond that connects Britain and the US. May received all the assurances she craved that her countrys relationship with the US remains special. Why, he even, briefly, took her hand.

However, these are not normal times. May and her team will be pleased with the optics and indeed some of the substance artfully, May got Trump to confirm, on camera, that he is 100% behind Nato but the underlying truth is that this dash to Washington was mortifying.

Read more: https://www.theguardian.com/commentisfree/2017/jan/27/never-mind-the-optics-theresa-mays-us-dash-was-mortifying


Will New York get a Brexit boost to cancel out feared ‘Trump slump’?

While European cities led by Paris and Frankfurt wage campaigns for Londons financial business, some experts predict New York could benefit most of all from the fallout of Brexit on the UK capital

New York and London function as two prongs of one global economy. Banks and other financial companies headquartered in New York usually have their second biggest offices in the British capital, and vice versa.

For years, thats made economic sense. For London-based companies, New York provides an unparalleled density of financial firms, a regulatory framework in which to do business, and access to non-European markets. London provides much of the same for New York-based companies who need access to European markets.

Unfortunately for London, at least Brexit could change all of that: an isolated UK could mean financial firms would have a hard time accessing and doing business with other European markets. And while several EU rivals, from Frankfurt to Paris to Madrid to Amsterdam, are waging campaigns for Londons financial businesses, New York with its already established financial sector and finance-friendly regulatory environment could get the majority of Brexits financial runoff, according to some experts.

And this has New Yorkers bracing for a wave of British capital that could affect not only the financial industry but the entire city, from cultural production to housing.

People financial people, consultants, bankers already started calling looking for apartments two or three months ago, says Gennady Perepada, a real estate consultant who specialises in helping foreign millionaires and billionaires buy apartments in New York. Any problem thats not in New York is good for New York.

London and New Yorks financial industry rivalry goes back decades, and the two cities jockey for the title of biggest financial centre each year. According to Z/Yen, a London-based business think tank, London currently outranks New York by just one point on their scale. The next financial centre, Singapore, is 42 points behind New York.

The
The New York Stock Exchange on Wall Street. Photograph: Spencer Platt/Getty Images

In other words, New York and London stand alone as centres for global finance, far ahead of the competition. Thats for a few simple reasons: both have a tremendous density of talent, they house large groups of ancillary financial service professionals lawyers, accountants, consultants and, most importantly, their clearing houses (the places where investors and sellers can trade in complex financial instruments) are the worlds most developed, meaning London and New York are the only places where all of the worlds major currencies can be traded.

The UK has over one million people employed in finance, says Vincenzo Scarpetta, a senior policy analyst at the think tank Open Europe. The whole city of Frankfurt, by comparison, has 725,000 inhabitants. So there are only a few global centres where the industry can really go.

Indeed, New York is such an obvious choice for capital fleeing from London post-Brexit that it seems, unlike other European cities, it hasnt had to move a finger to convince British investors to consider taking the leap.

Ive talked to CEOs who are being heavily wooed by Paris, Amsterdam, Dublin, Frankfurt. Theyve sent out delegations, had formal presentations, says Kathryn Wylde, CEO of the Partnership for New York City, which represents and lobbies for the financial industry and other corporations here. Is New York doing anything similar? No.

Wylde and others say its because New York already has more immediate advantages: a larger talent pool than any of those cities plus more English speakers, and a pre-existing regulatory system for complex financial transactions such as derivatives.

But its also because any benefit for New York will take a while to materialise, so theres no rush to woo financial firms. Wylde envisions a slow bleed from Britain, not a flood: the majority of jobs in financial services are mid-level jobs, she points out, and the expensiveness of New York makes it unlikely companies would uproot their support and administrative staff for its shores.

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Rents have already skyrocketed in New York. Photograph: Pacific Press/LightRocket via Getty Images

Instead, she says, headquarters of financial institutions that need to attract top international talent would be the ones relocating but slowly. These are long-term implications that really depend on how Brexit shakes out.

In New York, however, nearly every industry is tied into finance, and the industries most closely associated with it such as real estate are already feeling impacts post-Brexit, albeit at a low level.

Money-seeking New York or London will now fall in New York instead, says Will Silverman, managing director of investment sales at Hodges Ward Elliott, a commercial real estate investment firm based in London which recently opened offices in New York. But its probably actually less impactful than people thought it would be, especially if Brexit takes forever, and is walked back at all.

Still, some New Yorkers are worried about what global market fluctuations will do to the city. New Yorks theatre scene, for example, is heavily reliant on British and other foreign capital.

Whenever theres a global event, investors and consumers freeze up and stop reaching for their wallets, says Ken Davenport, a long-time Broadway producer. But there hasnt been a freeze yet, and he says that even with Brexit, people need to be entertained, so hes not too worried.

Im more worried about what Brexit will do to the West End than to Broadway, he adds.

The biggest concern, it seems, comes from New Yorks most vulnerable, who have been increasingly destabilised by the citys globalised economy. Rents in New York have skyrocketed in the last decade, and that means any new wave of capital fleeing Britain and entering New York could put further pressure on previously poor neighbourhoods already feeling a housing crunch, leading to even more evictions and rent increases.

In Brooklyn for example, many condo projects rely on billions of dollars from foreign investors seeking to place their money in economies more stable than those of their home countries. If the UKs economy destabilises because of Brexit, there could be even more capital finding its way into buildings in vulnerable neighbourhoods.

A lot of the rent-stabilised buildings here are being bought up by foreign investors, says Imani Henry, an anti-gentrification activist in the Flatbush neighbourhood of Brooklyn. Theyre being wooed with citizenship and tax breaks, and meanwhile we have entire blocks of businesses closing because of high rents.

Ironically, for those nervous about the effects of Brexit, Donald Trump may yet prove their saving grace. His election as the 45th US president may destabilise its economy enough to overwhelm any effect that capital from the UK could have on New York.

If the UK has excluded itself from the world economy, New York will gain. That was my first thought, until Trump was elected, says Richard Florida, director of cities at the Martin Prosperity Institute at the University of Toronto. Trump is worse for the global economy than Brexit, so they kind of balance each other out.

Follow Guardian Cities on Twitter and Facebook to join the discussion

Read more: https://www.theguardian.com/cities/2017/jan/24/new-york-brexit-boost-trump-slump-fears-financial-business


One month after the referendum, are predictions of Brexit blight coming true?

Though the Leave vote hit share values hard, many have recovered. But other sectors of the economy will be counting the cost for years

The overall impact of the historic referendum that saw the UK unexpectedly vote to leave the European Union has so far, in the space of a month, been less severe than some of the more apocalyptic warnings had suggested. But there have been winners and losers across the economy.

The pound

Sterling went on a rollercoaster ride on referendum night, ending up down 8% against the dollar as the results confirmed a victory for the Leave camp. Since then, its decline has continued and the pound is now at levels not seen since 1985, having lost about 12% against the US currency. Compared with the euro, the pound has fallen by 9% since the vote and is at a three-year low making holidays in euroland more expensive.

The decline comes as investors worry about weakness in the UK economy and the prospect of interest rate cuts to boost demand. This month the Bank of England left rates on hold but said most members of its monetary policy committee expected a cut in August if the economy did not improve.

The weak pound is a boon to exporters but will make imported goods more expensive. On Thursday, Unilever the business behind brands including Dove, Flora, Bertolli, Hellmans and Persil became the first major food and consumer goods company to warn that companies were likely to pass on increased costs to customers.

Stock markets

Markets were caught by surprise by the Leave result and a record $2tn was wiped off the value of global shares. But since then, there has been something of a recovery, particularly for the FTSE 100, which has regained all lost ground and more, and is currently at 11-month highs. However, the leading UK index is chock-full of companies with international operations, which are less exposed to any slump in the UK economy, and which earn in dollars, thus gaining from the new lower exchange rate.

The weak pound has also raised the prospect of UK-listed companies being snapped up by foreign rivals because suddenly they look cheap. Just last week chip designer ARM agreed to be taken over by Japans SoftBank for 24bn, while South African retailer Steinhoff has agreed to buy Poundland. Analysts believe more deals will follow.

Markets have also been lifted by bargain hunters who believed valuations had fallen too far, as well as by the quick resolution to the political crisis threatening to engulf the government following Theresa Mays appointment as prime minister.

However, the mid-cap FTSE 250, which is more exposed to the UK economy than the 100 index, has yet to reach the level it was sitting at before the referendum result, despite recovering more than 13% from its lows. It is now down 2% from its pre-Brexit level.

Housing market

There has been a spate of profit warnings from estate agents, and many are making gloomy forecasts for the rest of the year. Agents in some upmarket parts of London have reported a bounce in interest from overseas buyers keen to take advantage of weak sterling, but for the mainstream market there are signs both interest and price growth have cooled.

On Friday, LSL, Britains second-biggest estate agent group owner of Your Move and Marsh & Parsons among others said business had slowed since the vote and warned that its annual profits would be significantly lower than anticipated. London-focused Foxtons issued a similar warning in late June.

Forecasts for the rest of the year are for falling interest from buyers and price drops, particularly in the most expensive parts of the market. French bank Socit Gnrale said last week that a price correction of even 40-50% in the most expensive London boroughs could be possible.

The Royal Institution of Chartered Surveyors (Rics) says its members expect sales to slump over the summer, because buyer inquiries fell significantly in June. Ricss findings were cited by the Bank of England when it announced that it was revising down its forecast for price rises.

Housebuilders

Shares in housebuilders lost around 40% of their value in the immediate aftermath of the Brexit vote, with investors worried that an economic slowdown in the UK would hit their business, despite the country seeing record low interest rates.

There has been some recovery since then, but the companies have failed to regain all their losses. Barratt Developments, Britains biggest housebuilder, is still down around 28%, and it has said that it may build fewer homes because of the current uncertainty.

Even before the vote, upmarket rival Berkeley had warned in June of a 20% drop in reservations of new homes.

Barratt
Barratts share price is down 28%. Photograph: Bloomberg via Getty Images

Commercial property

The commercial property market was already stalling in the months running up to the referendum as investors put plans on hold to await the result. The UKs decision to leave the EU has not encouraged them back.

Rics said last week that there had been a significant drop in confidence and demand among investors and tenants since the vote. Both rent and capital value expectations are now in negative territory, it reported, adding that office and retail properties have been hardest hit.

Funds invested in commercial property were forced to close their doors for a while, as panicked savers tried to withdraw their cash. Those barring withdrawals included funds run by Standard Life, M&G Investments and Aviva Investors. Last week, they started to reopen for business, but some investors who want to get their money out will take a hit. Aberdeen Asset Management, for example, is adjusting payments downwards by 7%.

Banks

The banking sector has been hard hit by the Brexit fallout, thanks to a combination of low interest rates, worries about future access to European financial markets and the prospect of a general downturn.

With expectations of another rate cut in August, the banks are braced for more strain on their stretched balance sheets, at the same time as the economy is slowing and the risk of bad debts is increasing.

Moreover, so-called passporting arrangements, under which banks can sell financial products throughout Europe even though the UK is not part of the single currency, could come under threat after Brexit.

Banks most exposed to the UK market have been hardest hit, with Lloyds Banking Group and Royal Bank of Scotland down 25% and challenger bank Virgin Money falling 35%.

Profit warnings

Estate agents have been the only businesses to issue profit warnings following the Brexit vote. However, British Airways owner International Airlines Group was quick off the mark to say the uncertainty would hit demand, closely following by easyJet. Last week, the budget airline added that the fall in the pound had cost it 40m.

Other travel companies are also suffering as, along with increased concerns about terror attacks, they face the prospect of UK holidaymakers ditching more expensive overseas trips and staying at home.

But executives at Heathrow airport said on Friday that the Leave vote had been good for business, with the falling pound encouraging international visitors to spend more in its shops, as well as making it easier to raise money from foreign investors.

FIRST SIGNS OF ECONOMIC IMPACT

The first real sign that Brexit is having an impact on the economy emerged last Friday, with a Markit survey showing business activity in services and manufacturing shrinking in July at its fastest rate since the global financial crisis in 2009. The data suggested that UK GDP could contract by 0.4% in the third quarter, according to Markit.

Until then, the data had been equivocal. The International Monetary Fund, which before the referendum had warned of possible recession if the Leave campaign won, cut its forecast for UK growth in 2017 by 0.9% points to 1.3% from its April estimate. But that is still similar to its forecasts for Germany and France.

A report from the Bank of Englands regional agents last week showed that a majority of firms were not planning to mothball investment or change their hiring plans.

The latest job figures looked upbeat: showing unemployment at its lowest level for more than a decade, with 31.7 million people in work in the three months to the end of May 176,000 more than for the three months to February 2016.

On the high street, however, the volume of retail sales fell by 0.9% between May and June. This compared to a rise of the same amount in the previous three months, and showed the effect of falling consumer confidence in the run-up to and immediate aftermath of the EU vote.

This was backed up by a survey from the British Retail Consortium and KPMG showing retail sales in the three months before the vote at their weakest for seven years, while market research group GfK recorded the biggest slide in consumer confidence for 21 years in a one-off poll following the referendum.

Inflation is on the rise, with official figures showing that dearer air fares and driving costs helped to push the consumer price index up by 0.5% in the year ending in June, up from 0.3% previously.

With higher prices on the way after the Brexit vote, inflation could breach its 2% target during 2017.

Read more: https://www.theguardian.com/business/2016/jul/23/brexit-one-month-after-referendum-blight-predictions


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