The Week Ahead: VT and BAE: no longer just ships that pass in the night

For the UK naval industry, the ships may finally come in this week. After months of negotiations and plenty of speculation, it looks as if the merger of the shipbuilding businesses of VT and BAE Systems will be consummated this week.

Talks had progressed so far that by last Friday afternoon the companies had already drawn up the press release to announce the tie-up, but they had to wait while last-minute details were worked out.

Under the proposed framework, the new entity would control VT's shipyard at Ports- mouth and the BAE sites on the Clyde. The Ministry of Defence has been pushing for the creation of a single UK shipbuilder to increase efficiencies in an industry that provides too little work to support more than one major player. Integral to the deal is the MoD's £3.8bn plan to build two new aircraft carriers, which is expected to be approved on the back of this deal. Much of the work on the mega-project will be done by the new group.

Still unclear is who the chief executive of the new venture would be.

The financial markets are expected to be jittery ahead of the Bank of England's interest rate decision on Thursday. While many economists are forecasting that the Monetary Policy Committee will leave rates unchanged at 5.25 per cent, a minority believe a hike to 5.5 per cent cannot be ruled out - if not this month then next.

Four MPC members giving evidence to the Commons Treasury Select Committee recently expressed fears about inflationary pressures from money supply growth, consumers' inflation expectations and surveys on companies' selling prices. In the medium term, the markets are pricing in a further rise to 5.75 per cent.

Purchasing managers' indices for the manufacturing and services sectors, to be released on Monday and Wednesday respectively, are expected to point to a slight slowdown in both areas in March.

The Halifax house price survey due out this week is expected to show a moderation in the month-on-month rise in prices, but a pick-up in the year-on-year rate of growth into double digits.

Mortgage bank Northern Rock is due to update the market on this year's performance on Monday. While home-loan approvals are slightly down on a six-month average, the widely predicted slump has not yet emerged.

In a quiet week for corporate reporting, Harry Potter publisher Bloomsbury puts out full-year figures on Tuesday. The results are expected to show that the old magic failed to offer immunity to setbacks in 2006 after a substantial profit warning in December and a significant reduction in analysts' forecasts.

Bloomsbury blamed lower-than-expected pre-Christmas sales and delays in reference rights sales for the alert that profits before tax for the year would fall to £5m. That compares with underlying profits of £20m in the previous year ,when sales of the hardback copy of Harry Potter and the Half Blood Prince hit record levels.

While several retail booksellers have warned that 2006 was a tricky year, analysts expect Bloomsbury's ability to identify new authors to provide a good base for the future.

Evolution Securities, the City stockbroker, will lift the curtains on its 2006 performance on Monday. The City will be keen for any details that chief executive Alex Snow can provide on the progress of the group's integration of Williams De Broë, one of the City's oldest stockbrokers, which Evolution bought last summer for £15m from ING.

The Square Mile will also be looking for further details on Mothercare's proposed £85m acquisition of Early Learning Centre-owner Chelsea Stores on Wednesday, when the babycare retailer updates the market on fourth quarter trading.

Car-parts and bike retailer Halfords is expected to show solid trading figures in Tuesday's pre-close statement. Analysts at Seymour Pierce believe there is a chance a suitor will make a bid for Halfords and they suggest full-year profits may come in ahead of the forecast £75.8m.

CALENDAR

Tomorrow 2

UK RESULTS: (final) (final) Alexon, Evolution, Havelock Europa, Hardy Oil & Gas, PowerFilm, Star Energy; (interim) Biofusion

Tuesday 3

UK RESULTS: (F) Bloomsbury Publishing, Melrose Resources, Robotic Technology Systems, Severfield-Rowen; (I) ChoicesUK

Wednesday 4

UK RESULTS: (F) Alea; (I) Air Partner

Thursday 5

UK RESULTS: Nocompanies reporting

Friday 6

UK RESULTS: Holiday. No companies reporting