October 26, 2016

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REUTERS/Francois Lenoir


At odds over Brexit, UK nations hold "frustrating" talks

By Kylie MacLellan


ritish Prime Minister

Theresa May tried to

persuade the leaders of

Scotland, Wales and

Northern Ireland on Monday to work

with her government on a common

Brexit negotiating position, but the

Scottish leader dismissed the meeting

as "deeply frustrating".

May says that while the devolved

governments of the UK's three smaller

nations should give their views on

what the terms of Brexit should be,

they must not undermine the UK's

strategy by seeking separate

settlements with the EU.

"I don't know what the UK's

negotiating position is because they

can't tell us," Scotland's First

Minister Nicola Sturgeon said after

talks at May's Downing Street office.

"I can't undermine something that

doesn't exist, it doesn't appear to me

at the moment that there is a UK

negotiating strategy," she told Sky

News television.

While England and Wales voted for

Brexit in a June referendum, Scotland

and Northern Ireland voted to remain

in the EU, setting the devolved

governments in Edinburgh and

Belfast on a collision course with the

UK's central government in London.

This could lead to a constitutional

crisis, and potentially to Scottish

independence and renewed political

tensions in Northern Ireland.

At the meeting with Sturgeon and the

Welsh and Northern Irish leaders, May

proposed setting up a new body to

give the three devolved governments,

which have varying degrees of

autonomy from London, a formal

avenue to express their views.

"Working together, the nations of the

United Kingdom will make a success

of leaving the European Union -- and

we will further strengthen our unique

and enduring union as we do so," May

said in a statement after the talks.

British Prime Minister Theresa May smiles during a meeting with Spain's acting Prime Minister Mariano Rajoy at the Moncloa Palace in

Madrid, Spain, October 13. REUTERS/Juan Medina



Nicola Sturgeon, First Minister of Scotland speaks to journalists as she leaves Number 10 Downing Street in London, Britain October 24.

REUTERS/Dylan Martinez

But Sturgeon struck a very different

tone as she emerged.

"What I'm not prepared to do ... is

stand back and watch Scotland driven

off a hard Brexit cliff edge because the

consequences in lost jobs, lost

investment and lower living standards

are too serious," she said.


The British government, which has

promised to kick off formal divorce

talks with the EU before the end of

March, has said it will negotiate a

bespoke deal on behalf of the whole

United Kingdom with the bloc's other

27 members.

Sturgeon said she would make

specific proposals over the next few

weeks to keep Scotland in the single

market even if the rest of the UK left,

and that May had said she was

prepared to listen to options.

"So far those words are not matched

by substance or actions and that is

what has got to change," Sturgeon


Sturgeon, head of the Scottish

National Party, has said her

government is preparing for all

possibilities, including independence

from the UK, after Britain leaves the

EU. She wants each of the UK's four

assemblies to get a vote on the

proposed negotiating package.

In Northern Ireland, there are fears

that Brexit could undermine a 1998

peace deal and lead to the

reintroduction of unpopular and

cumbersome controls on the border

with the Republic of Ireland, an EU

member. Northern Ireland's First

Minister Arlene Foster said the

devolved nations had to be at "the

heart of the process" so that issues

relevant to them could be tackled as

they arose.

Welsh First Minister Carwyn Jones

said it was difficult for the devolved

administrations to influence the

process when there was so much

uncertainty over what the

government was seeking.

Jones said he had argued very

strongly for "full and unfettered

access" to the EU's single market,

which is in doubt because EU leaders

say it would require Britain to

continue to accept EU freedom of

movement rules. One of the central

planks of the pro-Brexit campaign

was that exiting the EU would give

Britain greater control over

immigration and help reduce the

numbers arriving in the country.



As May debuts in Brussels, EU readies negotiating engine room

By Alastair Macdonald


hen Theresa May met

Jean-Claude Juncker in

Brussels on Friday, she

might just have heard

the sounds of carpenters working on

new offices for the European Union

executive's Brexit negotiators.

Having briefed fellow national leaders

over dinner at her debut EU summit

late on Thursday, the British prime

minister had a late lunch on Friday

with Juncker, whose executive staff,

with their counterparts in Whitehall,

will do the heavy lifting in

negotiations expected to start early

next year. After the glamour of sitting

at the European Council top table for

the first time, stepping across the

road to Juncker's European

Commission and its civil service may

have seemed more prosaic.

But despite her efforts to resolve key

conundrums of Brexit among fellow

political captains, it is below decks in

the office cubicles of the

Commission's Berlaymont building

and in similar mundane engine rooms

in London and other EU

capitals that the legal tangles of this

most complex of divorces will be


"The great leaders tend to think that

they can sort things out among their

colleagues," said a senior EU

diplomat who was in the room when

May recently met one of her

continental peers.

"But it does not always happen that

way in Brussels."

The European Union is primarily a

complex legal construct, British

officials have been telling the new

prime minister. Deft technocrats will

be needed on both sides. Grand

political gestures may accomplish



Some of those brains are starting to

assemble on the 5th floor of the

Berlaymont, far below the panoramic

dining rooms on the 13th where

Juncker hostedMay -- she laughingly

told reporters after the summit that

British Prime Minister Theresa May (L) is welcomed by European Commission

President Jean-Claude Juncker at the EC headquarters in Brussels, Belgium

October 21. REUTERS/Yves Herman

she was off to a "lunch date".

Workers are preparing rooms for

Michel Barnier and his Brexit Task


The former French foreign minister

and EU commissioner began work

three weeks ago and has started, like

May herself, by touring EU capitals

and assembling a team to coordinate

the work of hundreds of Commission

officials once the Brexit process


Security and secrecy around the Task

Force is tight.

Of 15 staff named so far on an EU

website, none is British. That seems

unlikely to change as the team grows.

In contrast to much of Brussels, team

meetings tend to be in French not

English, a tongue Barnier was known

for avoiding when, as a commissioner

until 2014 he was responsible for

regulating a City of London finance

industry wary of the EU.



A comment to Reuters from an official

familiar with the Task Force that

Barnier would like the Brexit

negotiations conducted in French

prompted intense summit speculation

over signals to London.

Barnier himself denied voicing a

preference and stressed the language

would be agreed only when talks start.

His appointment was greeted with

dismay by those who fear Barnier

retains a traditional Gaullist antipathy

toward Britain.

He insists he will play fair. And some

EU officials stress that Barnier will be

the smooth front-man for a

negotiating operation grounded in

deep technical knowledge and


Not only will Juncker, the former

Luxembourg premier, and his

ubiquitous German chief-of-staff

Martin Selmayr retain lead roles on

strategy, but Barnier's German deputy

has a key role.

Sabine Weyand, a 22-year veteran of

EU trade negotiations who once

studied at Cambridge University, is

travelling with Barnier and appears to

have the confidence of German

Chancellor Angela Merkel's

government in Berlin, EU officials say.

the details. Belgian diplomat Didier

Seeuws, the former chief-of-staff to

Tusk's predecessor, will be his link to

Barnier and Weyand.

He can also provide a line to the lead

negotiator appointed by the

European Parliament, which must

approve any deal. Seeuws was his

spokesman when Guy Verhofstadt

was prime minister of Belgium.

British and EU officials say that May

is emulating her ill-fated predecessor

David Cameron in touring European

capitals and holding face-to-face

meetings with fellow leaders, partly

in the belief that high politics can

bypass the "Brussels bureaucrats".

It was a strategy, they say, that did

not work for Cameron.

"Everyone was smiling at him and

saying they would help, but as soon

as he left they called Brussels to say

they would not go easy on him," one

EU official said. "Now it will be the

same." May has been briefed by some

of her officials not to read too much

into "warm" bilateral talks -- no one,

they say, will tell her to her face they

won't help her, but will count on the

collective Brussels machine to blunt

her efforts to divide them.

National leaders will also keep a close

eye on Juncker and Barnier, however:

"This isn't just any old Commission

negotiation," a second

senior EU diplomat said.

"The heads of state and government

will be following this very closely."

But as with a deal to help Cameron

win June's Brexit referendum, how

Brexit turns out may be a product less

of high-stakes summitry than of

creative legal brains hidden away in

the corridors of Whitehall and the

Berlaymont. May may have heard that

herself over lunch with Juncker.


The Commission is a bete noire of

British eurosceptics, who see it as the

unelected champion of centralising

power in Brussels at the expense of

sovereign states. Diplomats say May

has told other EU leaders she wants

them and their Council chairman,

former Polish premier Donald Tusk, to

keep it in check.

But May cannot expect the

Commission, which prides itself on

being the "guardian of the treaties", to

stand back while EU law is bent out of

shape by national leaders, who in any

case also fear a sweet deal for London

could start unravelling the union.

Once May gives formal notice that

Britain is leaving -- by March, she says

-- the Council will meet at 27, minus

May, to set negotiating guidelines for

the Commission. Tusk will be arbiter

of what deal Britain is offered, but the

Council has less than a tenth of the

Commission's 33,000 staff to work on

Britain's Foreign Secretary Boris Johnson walks along Downing Street in London, Britain

October 24. REUTERS/Dylan Martinez



May defies critics to back new $22 billion Heathrow runway

By Kylie MacLellan and Sarah Young


ritain backed a $22 billion

expansion of London's

Heathrow Airport on

Tuesday, ending 25 years of

indecision with an ambitious plan to

boost global trade links following the

vote to leave the European Union.

Heathrow, Europe's busiest airport,

defeated a proposal from smaller rival

Gatwick to secure the first new fulllength

runway to be built near London

in 70 years after environmental and

political protests scuppered previous


The long-awaited decision put Prime

Minister Theresa May on a collision

course with several senior politicians

including her own foreign secretary,

Boris Johnson, and the plan is also

likely to be challenged in the courts.

But with a promise of jobs and

greater trade links after Britons

opted in June for Brexit, May is likely

to win parliament's approval,

triumphing over an issue that has

paralysed successive governments in

the past.

"After decades of delay we are

showing that we will take the big

decisions when they're the right

decisions for Britain," May said of her

Conservative government's backing

for what will be one of Europe's

biggest infrastructure projects. The

decision in favour of a third runway at

Heathrow, due to be built by 2025, is

one of May's most significant acts

since she took office in July. It follows

her approval in September of a $24

billion nuclear power plant at Hinkley


With established links around the

world, Heathrow always offered the

greatest economic potential.

However, its position to the west of

London, near several affluent suburbs

represented in parliament by

Conservative lawmakers including

Johnson, drew a powerful coalition of

opponents worried about noise and


A new runway will also require parts

of the motorway circling the capital to

be rebuilt, making it more expensive

and complex than alternative options

to extend an existing Heathrow

runway or build a new one at Gatwick,

south of London.

According to a three-year study by

Britain's independent Airports

Commission, a new runway at

Heathrow would create 70,000 new

jobs by 2050 and increase gross

domestic product by between 0.65

and 0.75 percent over the same


It will also enable Britain to keep pace

with Europe's biggest airports in Paris,

Amsterdam and Frankfurt, which have

greater capacity.


But within hours of the decision,

politicians were lining up to denounce

it. Johnson, a leading Brexit

campaigner, said the plan was

"undeliverable" and "very likely to be

stopped" while London Mayor Sadiq

Khan, alarmed by the potential

impact on air quality, said he was

exploring legal options.

Zac Goldsmith, a lawmaker in May's

Conservative Party, resigned over the

issue, meaning a by-election will be

held in his constituency near the

airport and May's already slim

majority in parliament will be

reduced. Johnson, a former London

mayor who once vowed to lie down in

front of the bulldozers to prevent a



new Heathrow runway being built,

said he worried that a third would be

followed by a fourth.

"You'd have New York, a city of

beautiful skyscrapers, Paris the city of

light, London the city of planes," he

told reporters. "Is that really what we

want for our fantastic capital city?"

Wary of being damaged by the issue,

May has allowed her ministers to

criticise the plan but not campaign

against it before a vote in parliament

in a year's time. Surveys show a

majority of lawmakers will back her.

Lawyers said opponents could delay

the decision on the 18-billion-pound

project in the courts but were unlikely

to be able to block it.

Adam Marshall, director general of

the British Chambers of Commerce,

said governments had prevaricated for

too long. "Put simply, it's about

time," he said. "Businesses will now

want assurances that the final

approval process for Heathrow's new

runway will be smooth and swift, so

that construction can begin as soon

as possible.

"The time for playing politics with our

national connectivity is over."

Heathrow is owned by Spanish

infrastructure company Ferrovial,

Qatar Holding, China Investment

Corp and other investors, and the bill

for expansion will be paid for by the

private sector, with the government

expected to pay for some of the

additional road and rail costs.

Engineering firms Arup, U.S.-

headquartered CH2M, British

construction company MACE and

construction and project

management firm Turner & Townsend

are already working on the early

stages of the project.

The government said the UK aviation

regulator would work with Heathrow

and airlines to ensure the new runway

was affordable and keep landing

charges paid by the carriers close to

current levels.

The government also proposed legally

binding noise targets to provide

respite for local residents while

Heathrow will need to meet air quality

rules as a condition of planning


"Heathrow stands ready to work with

government, businesses, airlines and

our local communities to deliver an

airport that is fair, affordable and

secures the benefits of expansion for

the whole of the UK," the airport said.

A British Airways passenger plane prepares to land at the new Terminal 5 at Heathrow Airport in London. REUTERS/Luke MacGregor



Hammond assails "hard Brexit" camp, vows to protect economy

By William James and David Milliken


inance minister Philip

Hammond pushed back

against the prospect of a

"hard Brexit" on Wednesday,

accusing cabinet rivals of undermining

Britain's EU exit negotiations and

stressing that migration controls must

not harm the economy.

Hammond also sought to ease

concern among investors that the

government may want to influence

monetary policy after a spat between

Bank of England Governor Mark

Carney and Prime Minister Theresa

May who has criticised the BoE's low

interest rates.

The June 23 Brexit decision has posed

a tough challenge for British

policymakers who say they must heed

the call from voters to tighten border

controls, something which could

reduce access to the EU's single

market and hurt the economy.

Newspapers have reported a splitin

Prime Minister Theresa May's cabinet,

with Hammond at odds withministers

pushing to prioritise controls on

migration over economic concerns.

Hammond said May needed a range

of options to strengthen her

negotiating hand with the EU and he

would make sure she knew the cost of

all those alternatives.

"Those that are undermining the

effort are those that are seeking to

close down that negotiating space,

seeking to arrive at hard decisions

that we don't need to make at this

stage," he told a parliamentary


"I think that it would be far more

helpful to this debate if we were able

to conduct these internal discussions

privately without leaks to


Britain is due to enter a two-year

negotiating period to decide the terms

of its exit from the bloc by the

end of March.

Nearly four months after the vote,

sterling is 17 percent below its prereferendum

levels against the dollar.

Its latest falls were triggered by

concerns that May favoured a hard

Brexit. But the pound rose as

Hammond spoke and market

analysts said it was significant that

he had struck a "softer" tone than


"It gives the markets a glimmer of

hope that the UK may not target a

'hard' Brexit," Kathleen Brooks, a

Research Director at City Index, said.

Hammond said any steps to reduce

net migration would protect "the vital

interests of our economy", citing the

financial sector as a high priority. He

said he did not expect highly skilled

workers to be targeted in any


"I cannot conceive of any

circumstances in which we would be

using those controls to prevent

banks, companies moving highly,

qualified highly skilled people

between different parts of their

businesses," he said. "That's essential

for the smooth operation of our


Earlier this week, the prime minister's

spokeswoman said May has full

confidence in Hammond - who

campaigned to keep Britain in the EU

- and wants to hear different views on

how to make a success of leaving the


Treasury sources have denied reports

that Hammond was seeking to

obstruct the exit process and that he

was on the brink of resigning his post.

Asked about those reports,

Hammond said it was no secret there

were different views on how to

approach the Brexit talks.


The EU votetriggered the deepest

political and financial turmoil in

Britain since World War Two and the

REUTERS/Toby Melville

biggest ever one-day fall in sterling

against the dollar.

There have also been signs of friction

between the government and the

Bank of England since the


Bank of England Governor Carney on

Friday hit back at criticism from May

that low interest rates hurt the

poorest households, saying he would

not "take instruction" from politicians

on how to do his job.

Asked about May's comments,

Hammond said nothing had changed:

"Monetary policy is independently

determined. That will continue to be

the case." "My understanding is that

what the prime minister was trying to

say is that we recognise that monetary

policy, which is an important tool of

macroeconomic policy, has a

distributional impact," he said.

"To the extent that the government

believes that distributional impact

needs to be addressed or corrected we

also have tools available to do that."



UK banks fear public, politicians set against them on Brexit

By Anjuli Davies, William James and

Andrew MacAskill


or decades, Britain's bankers

have relied on their industry's

outsized status in the

economy to find a receptive

ear in government.

But in the aftermath of the country's

vote to leave the European Union, the

sector that generates about a tenth of

national economic output is grappling

with an uncomfortable new reality

where economics doesn't always

trump politics.

June's vote to quit the EU has

triggered a change in leadership and

tone in the British government with

new Prime Minister Theresa pledging

an industrial revival and to build "an

economy that works for everyone" -

setting nerves jangling in the City of

London global financial hub.

Reuters spoke to several senior

bankers from big British and

international banks based in the city,

including some involved in discussions

with the government over Brexit.

Many said their warnings about the

impact of a so-called hard Brexit –

where they lose their access to the

European single market – were being

met with scepticism by the

government and accusations from

some eurosceptic lawmakers that they

were undermining the message that

Britain can thrive outside the EU.

"It's almost as if we were back in the

1940s and we were looking for fifth

columnists all over the place because

people are trying to do Britain down,"

said Ronald Kent of the British

Bankers' Association (BBA). The term

"fifth column" refers to a group of

people that acts secretly against the

state to assist an external enemy.

The head of the BBA, Anthony

Browne, said on Sunday that the

public and political debate was

"taking us in the wrong direction" and

that big international banks were

preparing to move some operations

out of Britain in early 2017.

The government has pledged to

execute Brexit following a vote to

leave the European Union that was

driven in part by a desire to curb

immigration and was regarded as a

repudiation of a London elite,

including a banking sector still the

subject of lingering public anger over

its role in the financial crisis.

While finance minister Philip

Hammond and his ministerial

colleagues have been keen to assert

the financial industry is of great

importance, officials say privately the

Brexit deal will have to work for the

country as a whole - and means the

banking industry cannot expect

special treatment.

"There is no question of prioritising

the financial sector, or any other

sector in those talks – it's not fair to

talk in terms of special cases," said

one source with knowledge of the

government's approach to the

negotiations with Brussels.

The finance ministry referred a request

for comment for this story to remarks

made by Hammond to a

parliamentary committee last week.

He said addressing the Brexit

challenges faced by the financial

industry was a very high priority for

the government.


Some government officials have said

that the industry could be over-stating

the importance of issues such as

"passporting" - the system by which

they can carry out certain activities

across the EU but be regulated just in

A UBS employee works in the UBS "fintech lab" at Canary Wharf in London,

Britain, October 19. REUTERS/Hannah McKay



one country. Financial services

minister Simon Kirby told a

parliamentary committee hearing last

week that the finance ministry was

looking into the passports used by

businesses for various financial


"Some of those passports are

redundant or unused," he said.

"Actually getting to a situation where

you can assess the impact is not quite

as straightforward as you think."

Several bankers said they were

surprised by the ruling Conservative

Party conference this month, when

May appeared to move towards a hard

Brexit stance by signalling that

curbing immigration would take

precedence over single market access.

"Undoubtedly, things have changed

for financial services," said one senior

executive at an international bank,

who declined to be named due to the

sensitivity of the matter, adding that

there had been a "sea change" in how

banks are viewed by the government.

Another banker told Reuters that

although the mantra so far has been

that there would be no "special

status" for any industry group, they

and other banking executives had

sensed a more conciliatory tone from

the government when dealing with

carmaker Nissan this month - in

contrast to the harder line they

perceive as being taken with the

financial sector.

The largely foreign-owned car

industry was a strong supporter of

continued membership of the

European Union ahead of the June 23

vote, benefiting from unfettered

access to the world's biggest trading

bloc and its standardised regulations.

Nissan CEO Carlos Ghosn said on

Oct. 14, after meeting the prime

minister in London, that he was

confident Britain would remain a

competitive place to do business.

David Davis, the minister in charge of

Britain's exit from the EU, said last

week he was determined to secure

the best possible terms of trade for

the financial services sector.


The financial industry, which pays

about 60-67 billion pounds in annual

taxes, could lose up to 38 billion

pounds in revenue in the event of a

hard Brexit, and 75,000 jobs could

disappear in Britain, according to a

report commissioned by industry

group TheCityUK.

But there are signs that a four-month

lobbying blitz by some of the world's

largest banks has backfired.

Officials say the banks have failed to

appreciate the sheer scale of the

government information-gathering

exercise as it tries to determine its


The finance ministry is doing a sector

-by-sector analysis of the different

Brexit scenarios on revenues,

employment and tax receipts to

inform Britain's negotiations with

Brussels. One source complained

that London financial services firms

had presented a disparate list of

demands and then quickly become

impatient that their views were not

being listened to. There is also a

sense among officials that the

industry's warnings have not panned

out in the past, several banking and

government sources have said.

After the financial crisis many banks

threatened to move operations

overseas because of a wave of higher

taxes and regulation.

At the turn of the century, some

financial sector executives also

warned the failure to join the euro

would lead to a withering in London's

role as a hub for global business.

"The government is underestimating

the impact this time. This is not an

idle threat," said one banker, who has

held talks with government officials.

Banks including HSBC, JPMorgan and

UBS have already warned that they

could move thousands of jobs from

Britain. Government sources, while

acknowledging the huge importance

of the financial services sector to the

economy, say talk of a mass exodus is


"The feedback from Wall Street was

that any move to Paris would happen

'over their (global banks') dead

bodies'," said the source with

knowledge of the government's

approach, speaking on condition of


"And Frankfurt simply isn't big

enough to handle it (being a global

financial hub)."

Some eurosceptic lawmakers have

suggested that a "soft Brexit", where

Britain might retain some access to

the single market in return for a

degree of free movement of people

from the bloc, would thwart the

democratic will of voters.

"Bank lobbyists are going down the

wrong route on Brexit. They just seem

to be whining," Conservative Party

lawmaker Jacob Rees-Mogg told

Reuters. "They don't like the fact that

they've been overruled by the people

who voted."



Banks preparing to leave over Brexit: banking body chief executive

By Anjuli Davies, William James and

Andrew MacAskill


ig international banks are

preparing to move some of

their operations out of

Britain in early 2017 due to

the uncertainty over the country's

future relationship with the European

Union, a top banking official said.

Writing in the Observer newspaper,

Anthony Browne, the chief executive

of lobby group the British Bankers'

Association, said the public and

political debate was "taking us in the

wrong direction" and businesses could

not wait until the last minute.

"Most international banks now have

project teams working out which

operations they need to move to

ensure they can continue serving

customers, the date by which this

must happen, and how best to do it,"

said Browne.

"Their hands are quivering over the

relocate button. Many smaller banks

plan to start relocations before

Christmas; bigger banks are expected

to start in the first quarter of next


Many of the world's major banks have

their European headquarters in

Britain, where the financial sector

employs more than two million people

and makes up almost 12 percent of

the economy.

Banks in London depend on a

European "passport" to serve clients

across the 28-country European Union

from one base and lenders worry that

this right will end after Brexit.

Browne said while finance minister

Philip Hammond and Brexit minister

David Davis were "making the right

noises", he was concerned that some

high-profile Brexit supporters believed

banks did not need passporting and

could rely on so-called equivalence,

under which the EU can allow access

to its markets for countries whose

regulations are similar to the bloc's.

"The EU's equivalence regime is a

poor shadow of passporting, it only

covers a narrow range of services,

can be withdrawn at virtually no

notice, and will probably mean the

UK will have to accept rules it has no

influence over," he said.

"For most banks, equivalence won’t

prevent them from relocating their


Banks have already said they are

making contingency plans to move

some of their operations to

continental Europe if Britain does not

negotiate access to the EU single

market after Brexit.

Prime Minister Theresa May has said

she will trigger formal talks to leave

the EU by the end of March 2017 after

Britain voted to leave in a referendum

last June. She has said she will fight to

retain access to the single market but

several EU leaders have insisted that

will depend on Britain accepting free

movement of workers from the EU - a

condition Britain has vowed to curtail.

Commuters walk past the Bank of England in London, Britain October 7.

REUTERS/Peter Nicholls



UK firms' confidence halves after Brexit, London region suffers - survey

By Andy Bruce and Peter Hobson


he number of British firms

who are confident about the

economy halved after the

Brexit vote, with larger firms

and those in regions which voted to

stay in the EU more downbeat than

those in areas that backed Leave, a

survey showed.

A quarter of employers thought

domestic economic conditions would

improve in July, August and the first

half of September, down from 48

percent in between March and May,

according to the survey by the

Recruitment and Employment


Overall hiring intentions were broadly

flat, but there was a marked regional

difference in hiring intentions.

In the South East, including London,

77 percent of employers expected to

increase or hold existing temporary

staff in the next quarter, while the

figure was 98 percent for the North.

"Whilst it is still too soon to draw

conclusions about the impact of the

decision to leave the EU, the data

suggests that London is feeling the

brunt of the referendum result," said

REC Chief Executive Kevin Green.

"Businesses in the financial sector in

particular are looking at the political

and economic environment with

some trepidation."

Large companies of more than 250

employees were also less likely to

take on new permanent staff than

smaller enterprises, which tend to be

less likely to be exporters.

London, with its concentration of

large international firms and

financial services, stands out as

particularly affected by worries about

Britain's new relationship with the


A survey published by Lloyds Bank

last month showed business

confidence in July slumped in areas

that voted to remain in the EU, while

REUTERS/Kevin Coombs

it bucked the countrywide trend to

increase in Wales and other leavevoting


House prices in September were weak

in remain-voting London while they

increased for the rest of the country.

The REC survey of 600 employers was

conducted by telephone from July 1 to

Sept. 12.

A general view shows a Tate & Lyle refinery by the river Thames in east London, Britain October 10. REUTERS/Peter Nicholls



UK will ensure stability of financial sector: Brexit minister

By William James and Huw Jones


he British government will do

whatever is needed to ensure

the stability of the financial

services sector and markets

during the process of negotiating

Britain's exit from the European

Union, Brexit minister David Davis

said on Thursday.

Britain's vote to leave the EU has

rattled financial institutions based in

London, raising the issue of whether

they will have to relocate some or all

of their operations to maintain access

to the bloc's single market.

That has raised concerns that

financial stability could be

undermined, with regulators in Britain

and Europe liaising over how to

minimise this risk.

Addressing those concerns, Davis told

lawmakers the financial sector, often

referred to as the City of London,

would be of "great importance" in the

Brexit negotiations.

"We have to treat as absolutely

central to what we do maintaining the

stability of both the City, but also the

European financial markets ... we will

therefore do anything necessary," he

said in parliament.

Banks have warned about a "cliff

edge" effect, meaning disruptions to

links between banks in London and

their corporate customers on the

continent and legal uncertainty over

existing and new financial contracts.

When asked about a possible

transitional arrangement designed to

cover such a gap between Britain

completing its exit talks and agreeing

a new trade deal with the bloc --

something the financial sector is

lobbying for -- he said all options

were being examined.

"In the financial sector, as in other

sectors, at the point of exit from the

European Union, the standards, all

the conventions, all of the regulations

will be identical, so the transition

should be capable of being

managed very cleanly," Davis said.

Andreas Dombret, an executive board

member of Germany's central bank,

the Bundesbank, said he did not

expect financial stability in Europe to

be undermined in the medium to

long term due to Brexit.

There could be some short-term

disruptions, however.

"In a transition period, there could

well be a time when things become

more costly and when not all

products are available all the time

with the same sort of competition,"

Dombret told reporters in London.


With immigration controls high on

the government's list of priorities,

banks in London are also worried

about not being able to continue

hiring foreign workers after Brexit.

But Davis said it would not be in

Britain's national interest to restrict

the free movement of highly talented


"Clearly it is not going to be in the

national interest to restrict the

movement of talent, the free

movement of brainpower. You can be

very, very confident that we will not

be limiting highly intelligent, highly

capable people's access," Davis told


Separately, the City of London, which

administers the "Square Mile",

Europe's biggest financial centre,

published a report it commissioned

from consultants PwC which proposed

a system of "regional visas" to allow

sectors like finance, healthcare and

agriculture to selectively hire foreign


"This is not a London solution to a

national problem, but actually

something that can support growth

outside of the capital across a wide

variety of sectors," City of London

policy chief Mark Boleat said.

Just over 30 percent of the Square

Mile's staff come from abroad, with 12

percent from Europe, the City of

London said.

The PwC report outlined two possible

models for discussion -- regional visas

that would be governed jointly by

local authorities and business, and

another that would be governed by a

UK government agency.

"We'll certainly take into account

representations from London and

from other devolved areas, but clearly

we need to come up with a policy that

works for the whole of the UK," said

Robin Walker, a junior minister in the

Brexit department, when asked about

the regional visa proposal.

Britain's Secretary of State for Exiting the European Union David Davies speaks

at the annual Conservative Party Conference in Birmingham, Britain, October 2.

REUTERS/Toby Melville



Carney: Cannot ignore "fairly substantial" sterling drop

By David Milliken and William Schomberg


ank of England Governor

Mark Carney said on

Tuesday that there were

limits to the central bank's

ability to ignore the effect of sterling's

slide on inflation, as policymakers

consider whether to cut interest rates

next week.

Carney also told lawmakers that

political criticism would not influence

his decision on whether to extend his

time at the BoE, but warned that any

interference with its independence

would hurt the currency and push up

government borrowing costs.

The pound slumped on Tuesday to its

lowest level since the Oct. 7 'flash

crash' but recovered some of its losses

as Carney spoke to a committee in

Britain's upper house of parliament.

"There are limits to the willingness of

the Monetary Policy Committee to

look through an overshoot of

inflation," he said, describing the

depreciation of sterling in recent

weeks as "fairly substantial".

The BoE would "undoubtedly" take

sterling's weakness into account at its

rate-setting meeting next week, he


In early September the central bank

said it was likely to cut rates again

this year if the economy slowed as it

expected. But sterling's weakness and

unexpectedly robust economic data

have prompted most economists to

rule out a Nov. 3 rate cut.

"Tactically it feels like they are going

to hold off in November because of

the currency concerns," RBS

economist Ross Walker said, adding

the tone from the BoE about the fall

in the value of the pound had become

a "little bit edgier".

Sterling slid 13 percent against the

U.S. dollar in the days after Britain

voted to leave the European Union in

June. It lost a further 5 percent earlier

this month after Prime Minister

Theresa May suggested a tough line

on the Brexit talks.

"Sterling starts to really move as it

becomes clearer the timing of the

A shop cash register is seen with both Sterling and Euro currency in the till at the

border town of Pettigo, Ireland October 14. REUTERS/Clodagh Kilcoyne

Article 50 triggering (to start Brexit

talks), and the market's perception -

and I really underscore it's the

market's perception - of what the

potential relationship will be

between the United Kingdom and

Europe," Carney said.

He said "that perception may well be

mistaken" and the BoE had to judge

how long sterling weakness was

likely to last as it tried to work out its

implications for inflation.

"It is important to say that that

judgement is a judgement about the

optimal trade-off," he said, adding

that in the longer-term - around

three years away - he expected

inflation to fall sharply as the impact

of the slide in sterling faded.


Supporters of Britain leaving the EU

are upset with Carney over the tone

he struck in the run-up to June's

referendum when the central bank

assessed the risks of leaving the bloc.

Carney said he would not be swayed

by political concerns as he weighs up

whether to extend his stay at the

British central bank beyond his

scheduled departure in 2018.

"I want to find some time to reflect on

it," Carney told members of the

House of Lords, when asked about

the factors that he was considering as

he weighed up how long to stay at the


Carney, a Canadian, is due to say

before the end of the year whether he

will take up an option to stay at the

BoE until 2021.

"It is entirely personal, and no one

should read anything into that

decision in terms of government

policy, actual, imagined, potential,

past, etc.," he said. "This is a role that

requires total attention, devotion, and

I intend to give it for as long as I can.

But those are the only factors."

Carney said he did not think Prime

Minister May was proposing a change

in the way monetary policy is set when

she talked about the "bad sideeffects"

of low interest rates.

But he has come in for criticism from

other members of the ruling

Conservative Party, most recently

Michael Gove, a defeated party

leadership contender, who said on

Friday that Carney was so sensitive to

criticism that he reminded him of

emperors in mediaeval China who had

challengers flayed alive.

Carney said investors would demand

a higher return for holding British

assets, including government bonds,

if the central bank's independence

was called into question.



For British bank start-up, Brexit has silver lining: more loans

By Guy Faulconbridge and Sinead Cruise


ishi Khosla didn't vote for

Brexit, but he says it has

proven a boon for his new

start-up bank.

OakNorth was just nine months old,

with a new loan book of 100 million

pounds, when Britain voted in June to

leave the European Union.

As sterling and stocks around the

world tumbled in the hours after the

vote, he gathered his staff to go over

every loan in the book and in the

pipeline. They decided to tweak the

terms of just two deals -- and, instead

of retreating, keep lending.

Since then, OakNorth has doubled its

loan book to 200 million pounds, with

another 60 million awaiting final


"Brexit is something that has actually

had a massively positive impact on

the business," Khosla, chief executive

officer of OakNorth, told Reuters at

his offices in London's Mayfair area.

Thanks in part to the surge in

business, his new bank broke even in

August, seven months earlier than


The conventional wisdom is that

leaving the European Union, by

hurting Britain's economy, will doubly

hurt its banks, and that small banks

with potentially greater exposure to

weaker loans will be hurt more than

big ones.

But for some in the tiny but rapidly

growing sector of start-ups known as

"challenger banks", Brexit could offer

more opportunities to find business. If

tightening conditions force big banks

to retreat from lending, smaller banks

may have a bigger role to play.

"The big banks are very constrained in

what they can do. Yes, they have

cheap funding but they also need to

get loans through model-driven credit

approval processes," Khosla said.

"They don’t have people in branches

making credit decisions anymore. You

throw it into a computer programme

and it gives you a green light or not.

But we have people making those


Britain's start-up challenger banks

were born after the 2008 financial

crisis, when the Bank of England

lowered the capital requirements to

set up new banks. Since then, the

upstarts have yet to be tested by a

major economic crisis, and some

analysts who study the sector have

been pessimistic.

"The impact of the EU referendum

result- slower volumes, delayed

operating leverage, lower margins,

asset quality issues- are likely to be

more pronounced in the Challenger

Bank sector than the incumbents,"

Citi said in a recent note.

Share prices at some of the largest

start-up lenders have been hit badly

in 2016, despite strong first-half

lending and deposit growth at the

likes of Virgin Money, Shawbrook,

Aldermore and newly-listed Metro

Bank. Nevertheless, British banks are

still busy writing loans. While the

outlook for Britain's housing market

remains uncertain, data published on

Thursday by the Council of Mortgage

Lenders estimated gross lending of

63.6 billion pounds in the third

quarter of the year, up 11 percent on

the previous quarter and up 4 percent

on the corresponding period in 2015.


Most of Britain's small banks are

publicly listed and therefore restricted

from revealing how their balance

sheets have fared since the Brexit vote

until they release their third quarter

results, which are due in coming days.

But before the vote they were growing


Metro Bank more than doubled the

size of its loan book in the year to June

30, to 4.6 billion pounds from 2.2

billion. Shawbrook's net loan growth

for the first half of 253 million pounds

was up 28 percent annualised.

Aldermore reported 21 percent growth

Rishi Khosla, co-founder and Chief Executive Officer of OakNorth Bank poses

during an interview with Reuters at his office in central London, Britain October

20. REUTERS/Dylan Martinez



in lending on an annualised basis in

the first half of the year. It cut savings

rates for the second time in seven

months in October, as deposit growth

surged faster than it could find

lending opportunities.

For institutional fund managers,

representing hundreds of millions of

pounds in potential investment in the

sector, the main concern is that startup

banks can achieve meaningful

business or mortgage lending growth

only by taking on risky borrowers

shunned by more established lenders.

Khosla at OakNorth acknowledges

that keeping a tight grip on credit risk

is “the most important thing” for a

new entrant, but denies the model

automatically requires taking

excessive risk.

He describes his clients as

established borrowers, "people who

have actually built a business and

who are now looking to scale that


“We don’t lend to start-ups. These

are midmarket companies with

revenues of 10-100 million pounds,”

he said. As an example, he says

OakNorth loaned 19 million pound to

Leon, a growing fast-food chain with

dozens of restaurants, shortly after

the Brexit vote.

Still, investing in the small bank

sector is mostly a highly-leveraged

bet on the fundamentals of the

British economy, analysts at Barclays

said in a note earlier this month,

although they said "comfortable

capital ratios and low valuation

multiples should provide significant


Khosla, 41, a former investment

banker who worked at ABN Amro, GE

Capital and the venture capital

businesses of steel baron Lakshmi

Mittal, still expects Brexit to damage

the British economy. But he does not

think that will kill off small banks.

"There is a high probability that the

UK will go into a recession. Do I think

the economy will stop? No. The

economy will still run. It will still turn

so there will still be opportunities."


The current account deficit and what it means for Brexit


ritain has long relied on

foreigners to fund a big

deficit in its balance of

payments, a risk that has

been heightened by the country's

decision to leave the European Union.

Investors have pushed down the value

of the pound and demanded higher

returns on government bonds

because they fear that Britain's

economic prospects will diminish.

They are particularly worried by

comments from Prime Minister

Theresa May who has emphasised

that she wants to control migration

flows from the EU, something that

could limit the country's access to the

bloc's single market.

The current account deficit is actually

expected to narrow from recent record

levels, thanks to the sharp fall in

sterling since June's referendum.

But the shortfall, and concerns

among investors about it, will

probably remain big enough to be a

constraint on the government as it

prepares for the Brexit process.

Below is an explanation of why Britain

has such a big current account

problem and what is likely to happen

to it.


The current account deficit is largely a


measure of a country's trade deficit

and the difference in money that

flows out of the country to foreign

investors compared with money

flowing in.

To fund the deficit, a country needs to

borrow or attract investment from


The current account deficit hit a

record high of 7 percent of gross

domestic product in the last three

months of 2015. It has fallen back

since then, but it is still the biggest

among leading rich economies at

nearly 6 percent of GDP.

Bank of England Governor Mark

Carney said earlier this year that a

vote for Brexit could test the

"kindness of strangers". Some of the

blame lies with Britain's weak export

performance. But the main driver of

the deficit in recent years has in fact

been Britain's relatively strong

economic performance compared

with most of its peers.

Higher interest rates on British

government bonds and better returns

on shares have meant that more

money has gone to foreign investors

than has come into the country from

British investments abroad.



The good news for the government is

that investment outflows look likely to

slow after the value of the pound

tumbled by nearly 20 percent against

the U.S. dollar and almost as much

against the euro since the referendum

decision in June.

That makes the returns on investment

in Britain less attractive to foreigners

in currencies other than the pound. It

will also boost the value of dividends

and bond payments into the country,

as measured in sterling.

The weaker pound could help British

exporters and make imports more

expensive, easing another drag on the


However, Britain's economy looks set

to slow sharply next year meaning the

government is likely to sell more debt

than it was previously planning. At the

same time, households might also rely

more on borrowing because an

expected rise in inflation in 2017 will

hit their spending power.



The International Monetary Fund said

this month it expects Britain's current

account deficit to narrow from 5.9

percent of GDP in 2016 to 3.8 percent

by 2021, which would still be the

highest among rich economies.

Economists at Goldman Sachs said on

Tuesday that sterling might still be 10

percent too expensive to narrow the

current account to more manageable


Similarly, Nomura has said the decline

in sterling might only be two thirds of

the way to reaching the kind of level

that makes British assets attractive



Sixty years ago, London learned the

hard way the vulnerabilities of relying

on external financing.

The United States used its influence

at the IMF - which was considering

emergency assistance for Britain -

and its own status as a creditor to

force London into abandoning a

military attempt to seize the Suez

Canal from Egypt.

Things are different now, not least

because Britain's pound is free to

move up or down, giving it a safety

valve to cope with changes in the way

it manages its economy.

But the current account deficit

remains a significant constraint on

some of the big decisions facing the


Finance minister Philip Hammond

will have to tread a fine line on Nov.

23 when he announces Britain's first

budget plans since the referendum.

He has said any extra infrastructure

spending would be moderate and has

shown he is aware that investors

might take fright at anything more

ambitious, given the still weak state of

Britain's public finances.

A recent sharp rise in British

government bond yields, albeit from

record low levels, has served as a

reminder of the power of markets to

keep the government on its toes as it

prepares to negotiate Britain's future

ties with the EU.

"The interplay gets nasty if you start to

see a significant section of

government bonds being sold," said

David Page, senior economist at Axa

Investment Managers. "The best way

of insuring against that is clarity from

the government, which isn't

necessarily something we are likely to



Carney faces up to pressure from prices and politics

By David Milliken


wo of the biggest bugbears

for any central banker -

political pressure and an

impending surge in inflation

- now loom larger over Bank of

England Governor Mark Carney than

at any time since he took over the

central bank.

After rushing to stabilise Britain's

economy in the weeks after June's

vote to leave the European Union,

including the BoE's first rate cut since

2009, Carney faces a more nuanced

but no easier task next week, when he

will explain the Bank's latest thinking

on the impact of the Brexit vote.

A further cut in rates on Nov. 3, which

was signalled by the Bank as recently

as September, now looks unlikely

because the economy seems to be

slowing less than the BoE feared.

Moreover, a renewed lurch down in

sterling to a fresh 31-year low against

the dollar will push the central bank

to jack up its inflation forecast to show

a bigger overshoot of its price target

than any time since it gained

independence in 1997.

However, Carney will probably keep

alive the prospect of further monetary

Bank of England Governor Mark Carney speaks at the Future Forum in Birmingham Town Hall, in

Britain, October 14. REUTERS/Chris Radburn

stimulus in case of weaker growth,

even after Prime Minister Theresa

May issued the government's

sharpest criticism of BoE action since

the financial crisis.

"They may not cut rates in November,

but I don't think that takes a rate cut -

eventually - off the table," said

Jeremy Lawson, chief economist at

fund manager Standard Life

Investments. "Things are still fragile

and there are plenty of opportunities

when growth could weaken."

Added to the mix is uncertainty about

Carney's future. Hand-picked as

governor four years ago by the nowfired

finance minister George

Osborne, Carney has said he will

announce by the end of the year if he

will take up an option to stay an extra

three years at the BoE or leave as

planned in mid-2018.




Many supporters of Britain's exit from

the EU strongly objected to Carney's

warnings of the economic risks of

Brexit in the run-up to the


Then, earlier this month, Prime

Minister May said low interest rates

had "bad side effects" for savers, even

if it had been needed as emergency

medicine after the global financial


Whether this was intended as a shot

across the BoE's bows is unclear.

Carney himself has acknowledged

ultra-loose monetary policy

redistributes wealth in a way the

government may want to tackle. But

the Canadian also felt it necessary to

say he would not "take instruction"

over policy.

Carney will probably try to steer the

focus away from politics and back to

the economy next week when he will

acknowledge the more muted

immediate Brexit hit to the economy

than the BoE initially expected.

When it cut rates to a record-low

0.25 percent, restarted its bondbuying

programme and took other

stimulus measures in August, the

Bank said it expected to cut rates

again this year if the economy

developed in line with its forecasts.

Despite the economy proving more

resilient than expected to the

immediate Brexit shock, some BoE

policymakers may still think the

medium-term outlook is dark enough

for a further rate cut to 0.1 percent.

Surveys have suggested a fall in

business investment, one of the main

channels through which the BoE

expects the Brexit vote to crimp

future economic expansion - though

there will be a lack of hard data in

time for November's decision.

Another factor which may encourage

policymakers to hold off include

finance minister Philip Hammond's

Nov. 23 mid-year statement - though

the signs are he will wait until the

main annual budget in March before

making big changes.

The other big challenge to a rate cut is

the fragility of sterling. This has fallen

8 percent since August, making an

upward revision to the BoE's inflation

medium-term forecast almost

inevitable, unless the central bank

takes a distinctly more gloomy view of

Britain's economic prospects.

In August, the BoE forecast inflation

would hit its 2 percent target in

around a year and then overshoot to

2.4 percent for the following two

years, while growth would slow to 0.8

percent next year before recovering to

1.7 percent in 2018.

That said, the BoE typically views

currency-driven overshoots in inflation

as temporary and tolerable, as it did

with even sharper spikes in inflation in

the years after the financial crisis.

"I don't see the more dovish core of

the committee being too concerned

about the inflation outlook," Lawson



BoE to hold rates; staying in EU best for trade: economists

By Jonathan Cable


he Bank of England is not

now expected to ease policy

until early 2017, according to

economists in a Reuters poll

who almost unanimously said staying

in the European Union would be the

best for the UK's long-term trading


Britain voted to leave the EU on June

23 and while the economy has so far

fared better than expected, sterling

has collapsed to levels not seen in

over three decades.

That is likely to push the Bank to ramp

up its inflation forecasts when it

publishes its quarterly review on Nov.

3 although the BoE typically views

currency-driven overshoots in inflation

as temporary and tries to look beyond

them. Around three quarters of the 60

economists polled by Reuters in the

past few days, most of whom expect

BoE Governor Mark Carney to stay in

the job after mid-2018, said Bank

Rate would be left at its current

record low of 0.25 percent next month

and at the December policy review.

"We expect the Bank of England to

revise up both growth and inflation in

this set of forecasts, undermining the

case for further easing," Liz Martins,

at HSBC, said.

In an Oct. 13 poll the median had

predicted a 15 basis point cut before

year-end but the latest Reuters poll

said that cut now wouldn't come until

early next year.

A reduction to 0.1 percent is probably

the lowest the Bank would go,

according to most economists in the

poll, although a few said it could trim

Bank Rate to 0.05 percent.

"Given Mark Carney's repeated

assurance that he does not want to

see UK rates follow other central

banks into negative territory, the cut

to 'just above the lower

bound' (range) represents the last

drop of fuel in the tank, at least for

interest rates," Martins said.

None of the economists polled

expected any change next month to

the quantitative easing programme




the Bank restarted less than two

months after the surprise referendum


More than 90 percent of respondents

said there would be no top-up before

the end of 2018 - the forecast horizon

in the poll - to the 435 billion pounds

($532 billion) of Gilts or the 10 billion

pounds of corporate bonds the Bank

has said it would purchase.

Carney, who was governor of the Bank

of Canada before joining the BoE, is

due to announce in the coming weeks

whether he plans to extend his fiveyear

stay at the Bank as governor,

which is due to end in mid-2018, by a

further three years. Prime Minister

Theresa May issued the government's

sharpest criticism of the BoE since the

financial crisis earlier this month and

many supporters of Britain's exit from

the EU strongly objected to Carney's

warnings of the economic risks of

Brexit in the run-up to the

referendum. May highlighted the

"bad side-effects" for savers of the

BoE's near-zero rates and said a

change had to come. Carney hit back

at the criticism, saying he would not

"take instruction" from politicians on

how to do his job.

A firm majority, 28 of 36 economists

who answered an additional question

said they expected Carney to stay on

after mid-2018.

"If he were to decide not to stay until

2021 recent events would raise

suspicions that the role of governor is

subject to a greater degree of

politicisation than hitherto believed,"

said Peter Dixon at Commerzbank.


Britain's economy probably grew 0.3

percent last quarter, official figures

are expected to show on Thursday.

While better than the mild recession

forecast before the referendum based

on a vote to leave the EU, it is still

less than half the second quarter's

growth rate. Next year growth is

expected to be just 0.8 percent.

Negotiations on Britain's EU divorce

agreement have yet to begin and

many suspect May is leaning towards

a "hard Brexit" - giving up trying to

remain in the EU's single market in

order to impose controls on

immigration. Such a move could

hinder trade, particularly in services,

and hurt foreign investment.

All but one of the 43 economists who

answered an additional question said

the best for the UK's long-term

trading relationship with the EU

would be to remain a member,

something May has ruled out.

The respondent, just over half of

whom are based in Britain, were also

almost united in saying the worst

outcome would be a standalone

World Trade Organisation


The economists were split as to

whether membership of the European

Economic Area or a negotiated

bilateral agreement was the second or

third best option of the four.



Factories see stronger investment and exports, patchy orders - CBI

By David Milliken


ritish manufacturers'

investment intentions

recovered over the past

quarter as sterling's slide

brightened export prospects, but skills

shortages and rising costs are a

growing worry, industry figures

showed on Monday.

The Confederation of British Industry

said businesses believed that

sterling's slump of more than 15

percent since Britain voted to leave

the European Union in June had

boosted their export competitiveness

to its highest in years.

But there were longer-run worries

about skills shortages as the

government set out plans to restrict

migration from the European Union,

and separate monthly figures from the

CBI showed the biggest drop in

factory orders since February.

"Manufacturers are optimistic about

export prospects and export orders

are growing, following the fall in

sterling," CBI chief economist Rain

Newton-Smith said.

"However, the weaker pound is also

feeding through to costs, which are

rising briskly and may well spill over

into higher consumer prices in the

months ahead," she added.

The CBI's quarterly survey of 459

manufacturers was conducted

between Sept. 26 and Oct. 13, and in

the absence of any official data, offers

some signs that business investment

is proving more solid than the Bank of

England feared.

"Uncertainty created by the Brexit

vote is weighing on the manufacturing

sector but the fall in the pound will

help manufacturers deal with this

uncertainty," Capital Economics

A worker at perforating company Bion carries a piece of perforated metal at the

factory in Reading, Britain September 22. REUTERS/Peter Nicholls

analyst Scott Bowman said.

Quarterly business sentiment

rebounded sharply after falling to its

lowest since 2009 in July.

The BoE has identified business

investment as the main initial

channel through which the mediumterm

uncertainty created by the vote

to leave the EU would hurt the


In contrast to some earlier surveys,

the CBI figures show business

investment intentions rebounded in

October to above their long-run

average, though they remained

below the multi-year highs seen at

the start of the year.

The central bank meets next week to

update its quarterly forecasts and

decide whether to cut interest rates

again. It will have official figures on

how fast the economy as a whole

grew, but investment data is not due

until late November.

Businesses said sterling's fall had

pushed their competitiveness both

inside and outside the EU to its

highest since 2009, but their

domestic competitiveness was at a

record low. Cost growth shot up to its

highest since April 2013, and concerns

about skills shortages were the

highest on record. "Manufacturers will

be looking to the government to

implement a new migration system

that meets the needs of business

while responding to clearly-stated

public concerns. Maintaining a

preferential route between the UK and

the EU ... will be important," Newton-

Smith said. Prime Minister Theresa

May has said imposing controls on

currently unrestricted migration from

the EU will be one of her top goals

when she starts talks to remove

Britain from the bloc early next year.

Compiled by the Publishing Team. Write to us at

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