Accessibility links

June 26, 2018

Pegler’s market report – 26.06.18: House of Fraser hang on in there


in Insights Press Releases

As published in the Brighton Argus (26.06.18) Business section under the title Pegler’s Market Report:

House of Fraser hang on in there

House of Fraser has escaped collapse after creditors rubber-stamped a resurrection plan that will put 6,000 jobs in jeopardy and result in more than half of its stores being closed. Closures will affect up to 2,000 House of Fraser staff and a further 4,000 across brands and concessions.

The department store chain has secured approval for a Company Voluntary Arrangement (CVA), a lifeline designed to drive down rents and close sites that has been sought by a raft of troubled retailers this year. The move will see 31 of its 59 stores in the UK and Ireland shut, including its flagship store on London’s Oxford Street, while rents will be slashed on 10 sites.

Plane-maker Airbus has warned it could pull out of the UK if Britain bows out of the EU without a trade deal. The pan-European manufacturer, which employs about 15,000 staff directly in Britain, signalled its frustration at political infighting which is delaying deals on critical areas such as aviation regulation and customs rules.

Airbus’s plants in the UK build wings and landing gear for the company’s airliners, and also carry out advanced design work. Without an agreement on aviation certification rules, parts built in the UK after Brexit may not be certified, meaning aircraft could end up grounded.

CYBG and Virgin Money’s £1.7bn all-share tie-up is the latest in a wave of challenger bank consolidation deals amid climbing costs and fierce competition. Industry experts generally gave the deal the thumbs up highlighting that the cost savings could significantly improve profitability and added that the combined entity will make it a national competitor to its larger rivals.

Trade war fears increased this week with the US president threatening new tariffs on $200bn of Chinese imports, and European Union tariffs coming into force on €2.8bn of US goods. Mr Trump has threatened to slap 20pc tariffs on EU cars entering the US, knocking shares in European car-makers back into the red and briefly dampening the global rebound on markets.

The US president tweeted that he would impose the new measures if the EU’s “tariffs and barriers are not soon broken down”. The warning threatened to derail a global market recovery but most investors brushed aside the latest escalation in the war of words between the US and its major trading partners.

Meanwhile, the pound touched a low for the year of $1.31 ahead of the Bank of England’s interest rate meeting. The BoE kept the base rate at 0.5pc. But expectations for an August rate rise increased on news that BoE chief economist Andy Haldane was among those who had voted for a rise this week.

Markets priced in a 68pc chance of a rate rise in August, up from 48pc previously.

Later in the week we have an update on house prices, which were 0.2pc lower in May than in April. We also have revised data on UK Consumer Confidence and UK GDP.

By David Pegler, Brighton Capital Management