October 17, 2017

Pegler’s market report – 17.10.17: A boom in offshore wind power

As published in the Brighton Argus (17.10.17) Business section under the title Pegler’s Market Report:

A boom in offshore wind power

The Government has left the door open for a bigger than expected boom in offshore wind power in the next decade to power low-carbon economic growth. Offshore wind power has emerged as a key success story in the green growth agenda and the strategy outlines plans to consider going further to support the sector by rolling out more than the 10GW capacity of offshore wind initially planned for the 2020s. The Rampion site, off the Sussex coast, will see a total of 116 turbines installed – to date there has been good progress towards the first generation of electricity later in the year or early next.

The pound fell on currency markets after EU’s chief negotiator Michel Barnier said that Brexit divorce bill talks are in a “state of deadlock”. The current ‘deadlock’ shows little signs of being broken, with both sides unwilling to budge in their stance and combative positions. As time ticks on, the chance of a hard Brexit is heightened.

Meanwhile, the Bank of England’s latest survey on consumer credit showed that the UK’s banks are heeding governor Mark Carney’s warning on “pockets of risk” in consumer credit and reining in unsecured lending. The survey showed that banks expect to tighten conditions further in the coming months but defaults on unsecured credit picked up in the third quarter.

Wholesaler Booker has defended its deal with Tesco in the wake of fresh opposition to the deal by delivering a 9pc jump in half year profits on the back of strong growth in its catering business. Booker boss Charles Wilson said that the company’s proposed £3.7bn takeover by Tesco was on track to complete by “early 2018” and it continued to be “business as usual” for the company.

Some analysts believe that traditional bricks-and-mortar estate agents like Countrywide and Foxtons are being left behind in the dust by its digital-savvy rival Purplebricks. Technology is driving productivity and pulling down costs across the sector but online agency Purplebricks appears to be leagues ahead of its rivals allowing it to double the size of its UK business this year alone. Their strategy to charge an up-front fee at less than a third of that charged by a typical agent and its launch in the US could allow the AIM-listed firm to grow rapidly beyond its current size.

The Government’s controversial plan to cap energy prices will apply to around 18 million accounts that use standard variable tariffs, at least until 2020 and possibly beyond, according to officials. Since the announcement, British Gas owner Centrica’s shares have had a tough time as investors have reduced positions.

Finally, Just Eat’s planned £200m purchase of rival Hungryhouse has been given provisional clearance by watchdogs who feel the deal will not constrain competition.

By David Pegler, Brighton Capital Management