Digital Newspaper - 42340- 10112017 - page 10

10
BUSINESS
Friday, November 10, 2017
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com
UK house price growth stalls,
London weakest since 2009
RICS warns regions starting to follow bearish capital
LONDON: House prices in
Britain are no longer rising
and in London they are
falling at the fastest pace
since 2009, the Royal
Institution of Chartered
Surveyors (RICS) said
yesterday, citing political
worries and last week’s
interest rate hike.
RICS’s benchmark house price
index for Britain as a whole fell
more sharply than expected to
+1 in October, a level consistent
with flat price growth, down
from +6 in September.
Economists taking part in a
Reuters poll had expected a gen-
tler fall to +4.
RICS chief economist Simon
Rubinsohn said a lack of homes
on the market, political uncer-
tainty as Britain tries to negoti-
ate its exit from the EU and last
week’s first interest rate hike by
the Bank of England since 2007
were all taking their toll on the
housing market.
First-time buyers are increas-
ingly focusing on new-build
homes which are supported by
government incentives, he added.
“A stagnant second-hand mar-
ket is bad news for the wider
economy, not just in terms of
spending but also because it
restricts mobility,” Rubinsohn
said.
The survey of a housing mar-
ket that has been cooling since
the June 2016 Brexit vote
weighed on the share prices of
British construction firms, which
were mostly down 2-4 percent on
the day.
Housebuilder Redrow said
ongoing political and economic
uncertainty had caused a slow-
down in sales in recent weeks.
“The latest RICS survey shows
that housing market demand
was weakening rapidly even
before the (Bank of England)
raised interest rates last week,”
said Samuel Tombs, economist
at Pantheon Macroeconomics.
Other measures of house pric-
es have shown a slight pickup in
recent months, but RICS painted
a gloomier picture, saying most
regions were starting to see a
drop in sales, following the trend
in London.
The RICS survey is a good
guide to other measures of con-
struction industry activity.
The fall in sales mirrored a
recent slide in demand from
buyers and suggested sales would
fall over the next 12 months.
RICS’ gauge of price expecta-
tions for the next three months
fell in October to -11 from -8.
With the exception of a sharp dip
in June 2016 — the month of
the Brexit vote — this was the
weakest reading since mid-2012.
While London and the south-
east of England were seeing
house price falls, prices were still
rising in North West England,
Wales, Scotland and Northern
Ireland, RICS said.
The high price of property
means many people in Britain
are unable to afford a home of
their own, putting pressure on
the Finance Minister Philip
Hammond to encourage more
homebuilding
when
he
announces a budget plan on Nov.
22.
RICS called on Hammond to
lift a cap on borrowing by coun-
cils to fund homebuilding.
— REUTERS
The RICS benchmark house price index for Britain as a whole fell more sharply than expected in October as the property market cooled. (Reuters)
EU slashes UK
growth outlook
due to Brexit
‘uncertainty’
BRUSSELS: The EU on Thursday
slashed Britain’s growth forecast
for this year and said the slow-
down would continue through
2019 as uncertainties over Brexit
weigh on the economy.
Growth in Britain had “slowed
markedly” in 2017 and was pro-
jected to fall to 1.5 percent for the
year, the EU said in its autumn
forecast, down from 1.8 percent
in its spring forecast.
The figure puts Britain’s econ-
omy joint lowest in the bloc with
Italy, and far below both the dra-
matically upgraded euro zone
forecast of 2.2 percent growth for
2017 and the wider EU outlook of
2.3 percent.
Britain’s growth was expected
to tumble further to 1.3 percent
in 2018, the same as in the spring
forecast, and then to just 1.1 per-
cent in 2019, a new prediction, it
said.
“Economic growth in the UK
has been slowing since the start
of the year, as higher consumer
prices constrained private con-
sumption growth,” the EU fore-
cast said.
“Based on a purely technica
assumption of status quo i
terms of trading relation
between the EU27 and the UK
growth is still expected to remai
subdued over the forecast hori-
zon.”
The EU also warned that
“uncertainty continues to weig
on business investment” i
Britain.
The figures were released as
sixth round of the slow-movin
Brexit negotiations began in
Brussels.
The EU said however that i
was difficult to make a firm fore-
cast given that Brexit negotia-
tions are still stuck on divorce
terms and have not even move
on to discussing a future rela-
tionship.
“This is for forecasting pur-
poses only and has no bearing o
the talks underway in the contex
of the Article 50 process,” it said.
— AF
Burberry shares plunge on concerns
over new high-end luxury strategy
Fashion icon plans to pull back from department store sales
LONDON: Shares in British fash-
ion icon Burberry plunged as
much as 14 percent Thursday
after it said sales will stagnate for
the next two years as the company
shifts strategy to focus on the
high-end luxury market following
the departure of designer
Christopher Bailey.
Burberry plans to pull back
from department stores, starting
in the US, and remodel its own
shops to enhance “luxury ser-
vice.” The company said it is
responding to a changing market
in which the luxury consumer
now “demands innovation, cura-
tion and excitement.”
Investors were more focused on
the cost of the strategy shift, with
Burberry saying revenue will
remain “broadly stable” for the
next two fiscal years and restruc-
turing costs will rise by £51 mil-
lion ($67 million). Burberry
shares fell 9.1 percent in midday
trading in London.
“The market is now being asked
to back him in a ‘no pain, no gain’
strategy shift,” Steve Clayton, a
fund manager at Hargreaves
Lansdown in London, said of the
CEO, Marco Gobbetti.
“Early evidence suggests
(Gobbetti) has not carried the
crowd with him.” Bailey,
Burberry’s chief creative officer,
said on Oct. 31 that he plans to
leave the company in 2018, end-
ing a 17-year stint in which he
helped transform the brand into a
global luxury icon. He previously
stepped down as CEO after strug-
gling to reinvigorate sagging sales
in the company’s key Asian mar-
kets.
Bailey’s ideas influenced all of
the company’s operations, from
the fashions on the runway to the
mood in the stores and a shift
toward online marketing.
He banked on Britishness and
incorporated it into the look and
feel of the offering.
He turned a company that once
made trench coats for World War I
officers and tents for arctic explor-
ers into the producer of must-have
styles for the likes of Kim
Kardashian and Cara Delevingne.
He also championed the digital
marketplace with innovations
such as allowing shoppers to
immediately buy online what they
saw on fashion show catwalks.
But that didn’t stop Burberry
from suffering a sharp fall in sales
in Asia, where slower economic
growth and a Chinese government
crackdown on luxury gifts hurt
the brand’s sales under his watch.
Investors looked to Gobbetti to
jumpstart the company.
“To win with this consumer, we
must sharpen our brand position-
ing,” the company said in its strat-
egy statement. “This will require
us to change our approach to
product, communication and cus-
tomer experience. Building on our
strong foundations, we will estab-
lish our position firmly in luxury
enabling us to deliver sustainable
long-term value.”
— AP
A woman stands in front of a Burberry shop at a shopping mall in Jakarta. Shares in the
British fashion icon plunged Thursday after it said sales will stagnate for the next two years.
(Reuters)
Britain to
provide Saudi
Aramco with
$2bn credit
guarantees
Move points to London’s
hopes to secure prize
listing ahead of rivals in
New York and Hong Kong
LONDON: Britain will provide $2
billion in credit guarantees to
Saudi Aramco so it can buy
British goods and services more
easily, but denied it was part of
efforts to persuade the energy
giant to list its shares in London.
The loan agreement comes as
London Stock Exchange, with
backing from British Prime
Minister Theresa May, competes
to host part of Saudi Aramco’s
initial public offering (IPO),
which is expected to be the big-
gest float ever.
“This builds on previous sup-
port for UK exports as part of
Saudi Aramco joint venture proj-
ects,” the government said in a
statement on Thursday, while a
spokesman for Britain’s finance
ministry said the guarantees
were not part of the country’s
attempt to secure the IPO for
London.
Saudi officials have said
domestic and international
exchanges, including New York,
London, Tokyo and Hong Kong,
have been considered for a par-
tial listing of the state-run firm.
Britain’s financial regulator
has proposed new rules to allow
sovereign-controlled entities
such as Saudi Aramco to have
their own ‘premium listing’ cate-
gory while being exempt from
requirements such as how much
of a company has to be floated.
The British government an
the City of London are keen to
win the listing as a boost to th
country’s capital markets just a
Britain is preparing to leave the
EU.
However, some fund managers
oppose the proposals, which they
say would erode the rights of
minority investors.
“(Britain’s government) guar-
anteeing a loan to Aramco would
be a further lurch in descent t
mercantilism,” Nick Macpherson
who was a top civil servant at th
finance ministry until last yea
and is now chairman of C. Hoar
and Co. private bank, said on
Twitter.
Crown Prince Mohammed bi
Salman said last month that the
IPO, part of an ambitious plan to
diversify the Saudi econom
beyond oil, was on track to go
ahead in 2018.
The $2 billion facility is being
finalized by UK Export Finance, a
ministerial department which
works to increase British exports
by providing finance to overseas
buyers of the country’s goods and
services.
— REUTER
Growth in Britain has
‘slowed markedly’ in 2017
and is projected to fall
to 1.5 percent for the year
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