June 27, 2017

Pegler’s market report – 27.06.17: A year on from the Brexit decision – economic impact (so far)

As published in the Brighton Argus (27.06.17) Business section under the title Pegler’s Market Report:

A year on from the Brexit decision – economic impact (so far)

It is now over a year since the UK voted to leave the European Union after a bitter campaign in which the Remain camp consistently promised Brexit would bring economic doom. In his Treasury assessment of the impact of leaving the EU, George Osborne claimed that a vote to leave would “cause an immediate and profound economic shock” with the effect being “to push the UK into recession and lead to a sharp rise in unemployment”. Growth would be affected and lending rates would go sky high. In short, the former Chancellor said that a Leave vote would push the country into economic meltdown. Fortunately, he was wrong, well at least so far.

The first quarter of 2017 saw the economy grow by 0.2pc, which, although low, marks the 17th consecutive quarter of growth in the UK. It makes it the third longest period of consecutive growth that the UK has experienced since 1955 and means it has now been nearly eight years since the last recession. The latest forecasts indicate that this growth is expected to continue with the Confederation of British Industry (CBI) estimating growth of between 0.3pc and 0.4pc in every quarter until the end of 2018.

Allied Irish Banks (AIB) raised €3bn (£2.6bn) for Ireland in a stock market float that valued the once-stricken lender at €12bn and marked one of the biggest listings in London in recent years. The Irish government sold a 25pc stake to investors priced at €4.40 a share in a deal that has been hailed as a milestone for the country’s recovery from the financial crisis and an important test of investor appetite for Irish banking stocks.

AIB was bailed-out to the tune of €20.8bn in 2010, handing the government a 99.9pc stake, as Ireland’s banking system teetered on the brink of collapse following the nation’s property crash. Ireland itself was then forced into a €67.5bn EU rescue because it could not afford to prop up its banks without help from Brussels. AIB has a branch in Brighton.

Simon Aurora, the boss of B&M Bargains, the discount retailer, has enjoyed a bumper bonus following a jump in profits which has led to his payday doubling compared to the year before. Earlier this month the Aurora family cashed in nearly £230m of shares after cutting their stake in the business to 15pc from about 21pc in a share placing. The family’s wealth is now estimated to be worth almost £2bn as B&M’s share price has soared by a third since listing three years ago. Last year B&M profits jumped by £182.9m in the year to March, while sales inched 3.1pc higher to £2.4bn as it continued its rapid expansion programme. You can find B&M stores in Crawley and Bognor Regis.

By David Pegler, Brighton Capital Management