Barratt; Hargreaves Lansdowne; UK banks: Business news in brief, 8 September 2016

Britain's biggest housebuilder defies Brexit predictions, Hargreave Lansdown boss steps down, UK banks call for transitional trade arrangements with EU

Barratt Homes' new development in Aldgate, central London - the housebuilder posted strong results

Housebuilder Barratt shrugs off Brexit with sales rise

Barratt Developments, Britain's biggest housebuilder, defied predictions of a Brexit market freeze on Wednesday, saying sales had risen since the vote to leave the European Union.

Shares in the country’s biggest housebuilder plunged after the referendum result on expectations that the market would be hit by uncertainty, but with a long-term lack of supply of new housing demand has instead grown following the initial shock.

Barratt’s confidence echoed that of smaller rival Redrow, which on Tuesday said that sales had climbed 8 per cent since 30 June, and Persimmon which last month said that reservations of new homes had jumped.

But trading in northern and central England was stronger than in the south of the country around the capital, Barratt noted, reflecting a cautious update from high-end London-focused housebuilder Berkeley on Tuesday.

Overall, David Thomas, Barratt chief executive, said it was business as usual after the company said that forward sales of houses since 30 June were up 4.1 per cent over a year ago. “It [Brexit] is just no longer a point of discussion [between sales representatives and customers],” he said.

“There’s strong consumer demand, good mortgage lending and that’s allowing us to build and sell plenty of homes.”

Growth in demand for its houses could also benefit from an interest rate cut in Britain on 4 August, which Thomas said was still filtering through into banks’ mortgage offers.

“There’s probably not very much of that in our figures so far but clearly it’s got to be positive,” he said.

For its 2016-2017 financial year, Barratt is expecting modest growth in the number of houses it sells, having reported a 21 per cent rise in pretax profit to £682.3m for the 12 months ended 30 June 2016.

Reuters

Hargreaves Lansdown boss steps down

Hargreaves Lansdowne provides broking services for investors (Getty)

The chief executive of financial services group Hargreaves Lansdown has announced plans to step down after seven years at the helm, as the company posted a 10 per cent rise in annual profits.

Ian Gorham will leave by the end of September next year, with group financial officer Chris Hill set to take on the post. Mr Hill will become deputy chief executive from next month.

Mr Gorham will have clocked up more than seven years in charge of the group by the time he hands over the reins, having taken over from the group’s founder, Peter Hargreaves, in 2010.

He said it was the “correct time for natural succession” and added he was confident the group would go from “strength to strength”.

Paul McGinnis, an analyst at Shore Capital Markets, praised Mr Gorham for an “outstanding job” at the group and said he would be a “tough act to follow”.

Details of the change at the top came as the firm unveiled a solid set of figures, with pre-tax profits rising 10 per cent to £218.9m in the year to 30 June.

Hargreaves, which runs the popular Vantage investment platform, said it notched up a record £61.7bn in assets under administration, while it attracted another 100,000 clients, taking its total to an all-time high of 836,000.

Its performance came despite a “considerably depressed stock market” over the year, which it said had been masked by a post-Brexit vote rally.

The group said profit growth would have been even higher were it not for disappointing stock market trading, with the FTSE All-Share Index on average 5.1 per cent lower over the year, and “subdued” investor confidence.

PA

Reuters

UK banks call for transitional trade arrangements after Brexit

Britain should negotiate transition arrangements with the European Union to avoid “cliff edge” disruption to financial markets when the country leaves the bloc, a top banking official said on Wednesday.

Once Britain has begun formal talks to withdraw from the EU by triggering Article 50, the country will leave two years later, even if no new trade deals have been agreed, unless every EU member state agrees to extend the negotiation period.

Anthony Browne, chief executive of the British Bankers’ Association, said lenders were in a wait-and-see mode now but unless a transition framework is put in place banks would soon have to decide whether to move operations to Europe, as such shifts could take several years to implement.

“We think there should be some form of transitional arrangements,” Mr Browne told a House of Lords committee.

Much is at stake both for London and Government coffers. Financial services generate more than £60bn a year in tax, with £15bn of that from foreign banks in London that depend on an EU passport to sell financial services across the region, Mr Browne said.

But the Brexit vote has forced firms to rethink their business strategy, which until now has depended on having the EU passport. Banks are making contingency plans on how they can still serve customers across Europe, if Britain ends up losing those rights.

“What we would like ... is to have as full bilateral access to the European market as close as possible to what we have at the moment,” Mr Browne said.

EU leaders have already said they would only grant Britain full access in return for the continued free flow of EU citizens to the country, while the Government insists migration will be curbed following Brexit.

Reuters

Suppliers in Thanksgiving dash after Hanjin collapse

Suppliers to companies from Nike to Marks and Spencer are scrambling to ensure their T-shirts and trainers reach buyers in time for the year-end holiday season, after the collapse of Hanjin Shipping left an estimated $14bn worth of goods adrift.

Esquel Group, a Hong Kong-based manufacturer for fashion brands including Nike, Hugo Boss and Ralph Lauren, is now hiring truckers to move four stranded containers of raw materials to its factories near Ho Chi Minh City as soon as they can be retrieved from ports in China. “Our production lines are waiting,” said Kent Teh, who runs Esquel’s Vietnam business. “We potentially have to take airfreight to deliver the garment items to clients in the US and UK.”

Liaoning Shidai Wanheng Co, a Chinese fabrics importer and a supplier to Marks & Spencer, has also made alternative arrangements for shipments that were scheduled with Hanjin.

Besides clothing, handbags, televisions and microwave ovens are among goods stranded at sea after Korea’s largest shipping company filed for bankruptcy protection last week.

On Tuesday a US court provided a temporary reprieve, which may help vessels call on ports such as Los Angeles without the fear of getting impounded. Any major bottlenecks ahead of Christmas could put a dent in the two-month shopping season, which netted some $626bn (£470bn) of sales last year in the US

Bloomberg

Mortgage rates at record lows after BoE stimulus

UK mortgage rates fell to record lows in August, a sign that the Bank of England’s stimulus measures are taking effect.

The average rate on a home loan fixed for two years with a 25 per cent deposit declined to 1.66 per cent from 1.71 per cent in July, the central bank said in London on Wednesday. That’s the lowest since the BoE began collecting the data in 1995.

The figures provide evidence that the Bank’s decision to cut its key rate to 0.25 per cent on 4 August is being passed on by lenders, after some banks initially declined to confirm they were going to reduce mortgage rates. While Governor Mark Carney said institutions had “no excuse” not to pass on the reduction to customers, banks are finding it harder to offset the impact of record-low interest rates as their margins are squeezed.

Bloomberg

Volkswagen in electric car talks

German car maker Volkswagen says it is in talks about forming a joint venture to develop electric vehicles with China's Anhui Jianghuai Automobile, or JAC.

Volkswagen said on Wednesday that the two companies had signed a memorandum of understanding to evaluate the possibility of joining forces to make zero-emission cars. Volkswagen is making a new push into electric vehicles, saying it will come up with 30 new models over the next 10 years.

The new emphasis on emission-free cars comes after the company's reputation was damaged by a scandal over diesel vehicles rigged to cheat on emissions testing. Electric vehicles so far are not a major part of the global car market. But companies are working on them in hopes that battery range will improve, and to meet tougher emissions standards.

Bloomberg

Poundland backs £610m takeover by Steinhoff

Shareholders in single price retailer Poundland on Wednesday approved a £610m takeover by South African retailer Steinhoff.

The proposed transaction, recommended by Poundland's board last month, was backed by its investors at both a court meeting and a general meeting at the retailer’s head office in Willenhall. The transaction is scheduled to complete on 16 September.

The deal’s approval follows the involvement of activist US hedge fund Elliott Capital which held almost 25 per cent of Poundland ahead of the vote.

Reuters

Dell set to complete largest tech deal ever

Dell Technologies wrapped up the acquisition of EMC in the largest technology deal in history, positioning the company to use its size to invest in new areas and fend off competition from the cloud and other rivals.

The combination creates a $74bn (£55bn) business that serves 98 per cent of Fortune 500 companies, Dell said in a statement on Wednesday. It also takes EMC out of the glare of the public markets since Dell is closely held.

The tie-up, valued at about $67bn (£50bn) when it was first announced almost a year ago, brings together the leading provider of key storage products and one of the top makers of servers and personal computers as both companies grapple with rising interest in cloud-based services from rivals such as Amazon, Microsoft and Google.

Bloomberg