December 2016 Credit Management magazine

HEDGING YOUR BETS
NISSAN seems to be staying in Sunderland
– though it’s anybody’s guess how much
the Government had to promise it to get
that concession. What interested me about
Nissan’s announcement, though, was the
nuanced nature of its original decision –
keeping old models rolling out from its UK
plants but investing for further growth and the
production of new car models in the EU.
I think that’s a pretty good strategy for
many mid-sized exporters. If, unlike Nissan,
you don’t have privileged access to the ear
BLIMEY. No one thought President Trump
would really happen. And that puts a lot of
things up in the air; will he protect the Baltic
republics? What happens to Mexico and the
North American Free Trade Agreement? What
about Brexit in an era of US protectionism?
But in fact the big issue hasn’t changed
- when will the Fed raise interest rates? And
what will the impact be for the rest of the
world?
Bets are on a move in the short term. After
years of low and even negative interest rates,
CHEMICAL
REACTION
CHEMICALS have been doing well recently,
but suppliers to the sector need to watch out;
that success may not continue. The industry
has benefited from low feedstock prices as
the oil price has troughed, and the price of
naphtha – a key input – has fallen 60 percent
since 2013. But US firms have an advantage
over Europeans – they’re getting a shale gas
windfall too.
If oil prices rise, chemicals companies’
finances could be stretched. And that seems
likely to hurt UK and European firms more
than it will the Americans. If you’re supplying
the sector, keep tight control of your working
capital.
of the Prime Minister, perhaps you should
consider using its original strategy instead;
get your products for the EU market made
in the EU. It may cost in the short-term, but
it covers you whether we head for a ‘hard
Brexit’ or a softer Norwegian-style model.
And it’s going to be much easier to put in
place now, while we still have freedom of
movement for both labour and capital,
than it will be later. Insurance is never
cost-free – but it’s often sensible to buy it
nonetheless.
ALL BETS ARE OFF
a US move could herald the start of a new
cycle of hikes. That could lead to currency
volatility as well as to a fall in asset prices -
from the stock market to residential property.
Janet Yellen remains in place as head of the
Fed till 2018, though Trump could install new
members on the board, so policies aren’t
going to change overnight.
Keep your eyes on the economic news
and don’t be bamboozled by the political
coverage. It’s the Fed, not the President,
which will decide the future of interest rates.
DOING WHAT THE OTHERS CAN’T
NEWS IN BRIEF >
PEGLER YORKSHIRE
Pegler Yorkshire has achieved success in
Asia with its fittings, exhibiting at the big
Bangkok building trade show BMAM. Huge
infrastructure spend is coming on stream in
Asia and Pegler aims to get its fair share.
Key to Pegler’s strategy? First of all, going
to the right shows with the right products.
And secondly, having a Hong Kong office
that can provide support, as well as sales and
marketing, across the region. From Push Fit to
Xpress Press, it seems to be working.
WE ARE ALL RELATED
A lot of the coverage of Brexit and its impact
on trade has concentrated on single countries
or blocs – trade with the EU, with Canada,
or with Australia. But globalisation makes
it impossible to analyse a single trading
relationship without understanding how it
fits together with others. Euler Hermes has
produced a superb, thoughtful analysis of
global trade with its Trade Wars – The Force
Weakens – if you haven’t read it, you need to.
Though it has to be said you’ll need a high
tolerance for Star Wars references to get
through it!
CURRENCY UK
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HIGH LOW TREND
GBP/EUR 1.1657 1.1049 Up
GBP/USD 1.2429 1.2104 Up
GBP/CHF 1.2364 1.1906 Up
A lovely press release from Cobham trumpets
its success in securing a 24-month contract
to provide aviation services to Aussie miner
Blackham Resources, flying into its Wiluna
operations. You might think it’s pretty easy
to operate small planes – but the difficulty,
according to Cobham, is the lack of an airstrip.
That’s where Cobham has an advantage
with its gravel runway kit – it can fly where
other operators can’t. That’s one of the best
examples of differentiation I’ve seen – and it’s
a clear reason for Cobham’s export success.
GBP/AUD 1.6463 1.5810 Up
GBP/CAD 1.6822 1.5931 Up
GBP/JPY 135.567 126.321 Up
The recognised standard
www.cicm.com December 2016 31