Time for a quick recap
UK consumers’ confidence in the economic outlook has fallen to the lowest level since July 2016. Market research group GfK blamed Brexit uncertainty, which is turning the ‘season of goodwill’ into ‘the season of uncertainty’.
Bank of England governor Mark Carney has warned that the UK isn’t ready for Brexit. With more than half of firms yet to active contingency plans, it’s important there is a transition period, Carney says.
Carney also defended the Bank’s latest Brexit analysis, which predicts a huge economic crisis if Britain leaves the EU without a deal next March.
Brewer Greene King says Brexit fatigue is driving some people to the pub. Its sales and profits have risen.
Brexit is also driving some people away. Net EU migration has fallen to its lowest level in six years.
It’s also been a dramatic day in Germany. Deutsche Bank has been raided, as part of a probe into money-laundering, and Bayer has just announced a swathe of job cuts.
That’s probably all for today....
Updated
Is the US labor market cooling?
New figures show that the number of Americans who filing new claims for unemployment benefits last week hit a six-month high, up 10,000 at 234,000.
That might be a blip due to Thanksgiving, or it may show some weakness in the economy....
*U.S. INITIAL JOBLESS CLAIMS AT 234,000 LAST WEEK
— Michael Hewson 🇬🇧 (@mhewson_CMC) November 29, 2018
Newsflash: German pharmaceutical and life sciences group Bayer is planning to slash 12,000 jobs -- or over a tenth of its workforce -- as part of a restructuring.
This is literally in the 7th paragraph of @Bayer news release this afternoon. Did they think we wouldn't notice the 12,000 layoffs if they put it far down enough? pic.twitter.com/605IPD2krq
— Peter Spiegel (@SpiegelPeter) November 29, 2018
Howard Archer of the EY Item Club is concerned by the drop in consumer confidence:
#GfK survey worryingly not only shows #UK #consumer confidence dropping appreciably in November to 11-month low but at -13 (down from -10 in Oct), index is at equal lowest level since end of 2013. Not what #retailers will want to see with critical #Christmas shopping period here https://t.co/n4H9QEqpEP
— Howard Archer (@HowardArcherUK) November 29, 2018
UK economic confidence hits lowest since July 2016
Newsflash: Britons are the most pessimistic about economic prospects since the Brexit vote.
That’s according to market research group GfK.
Its latest healthcheck shows that expectations for the General Economic Situation over the next 12 months has fallen, to -32 on its index. That’s the lowest level since July 2016 -- when the UK was digesting the implications of the EU referendum.
GfK also found that UK consumer confidence has fallen to its lowest level in December 2017, down from -10 to -13 on its monthly scale.
Joe Staton, client strategy director at GfK, says consumers are nervous about Brexit, and reluctant to make major purchases.
The next few weeks are highly unlikely to inject any festive cheer, especially if Theresa May’s Brexit deal doesn’t win backing from MPs.
The denouement to more than two years of bewildering Brexit wheeler-dealing looks like it will be enacted precisely when many consumers would prefer to be thinking of a well-earned Christmas break, filled with family get-togethers, warmth and festivity.
Brexit appears to be turning this year’s ‘season of goodwill’ into ‘the season of uncertainty’.
UK #consumer morale hits lowest since Dec 2017, according to GfK (an embargo was broken somewhere)#Confidence in economic prospects joint-weakest in 5 years. pic.twitter.com/84kcWdlEC2
— Andy Bruce (@BruceReuters) November 29, 2018
Updated
Donald Trump is tweeting some tough words on trade....and suggesting he doesn’t know how his own tariffs work.
Billions of Dollars are pouring into the coffers of the U.S.A. because of the Tariffs being charged to China, and there is a long way to go. If companies don’t want to pay Tariffs, build in the U.S.A. Otherwise, lets just make our Country richer than ever before!
— Donald J. Trump (@realDonaldTrump) November 29, 2018
Factcheck: The US tariffs on Chinese goods aren’t paid by China, they’re paid by the companies importing products from China. So they’re either passed onto US consumers in higher prices, or swallowed by the company from its profits.
So the only dollars “pouring into the coffers of the U.S.A” are coming from the U.S.A itself.
Having said that.....the recent depreciation of the yuan will have made Chinese goods cheaper, cushioning the blow.
The nonstop chatter about Brexit is driving many Brits to the pub for a pint, according to UK chain Greene King.
Greene King (the company behind Old Speckled Hen and Abbot Ale), posted a 3.2% jump in pre-tax profits for the 24 weeks to October 14th.
The World Cup was a factor, as was the warm weather. But chief executive officer Rooney Anand believes that fatigue over the EU is also significant:
“People are bored from Brexit and that’s actually translating to pubs benefiting, our like to like sales are up 2.9%, so not all consumer facing businesses are suffering in the run up to Brexit.
Greene King isn’t immune to the issue, though. It has begun contingency plans for a no-deal Brexit (unlike half of all businesses, according to Mark Carney).
That includes:
- Working closely with its supply chain partners to safeguard the supply of goods to
- its pubs and breweries
- Supporting employees who are non-UK EU nationals through “this period of uncertainty.”
Deutsche Bank has confirmed it has been raided by the police, and that it relates to the Panama Papers (the expose of offshore tax avoidance)
Es ist richtig, dass die Polizei aktuell an verschiedenen Standorten unserer Bank in Deutschland ermittelt. Es geht um einen Sachverhalt mit Bezug auf Panama Papers. Wir werden mit den Behörden vollumfassend kooperieren.
— Deutsche Bank (@DeutscheBankAG) November 29, 2018
The economics team at Royal Bank of Canada have made a valiant attempt at mapping the various Brexit scenarios.
The big crunch is the parliamentary vote on 11th December - current forecast suggest the government could lose by over 100 votes (but there’s plenty of time for arm-twisting yet).
But as you’ll see, even the smoothest Brexit means lower growth than staying in the EU....
Over in parliament, prime minister Theresa May has denied that chancellor Philip Hammond and Bank of England governor Mark Carney are trashing the future of the country as part of a ‘propaganda’ exercise.
That is not what is happening, the PM insists.
Theresa May rejects charge from anti-EU figures (channeled through Bernard Jenkin at #LiaisonCommittee) that dire economic analyses of #Brexit impacts are "propaganda".
— Emilio Casalicchio (@e_casalicchio) November 29, 2018
Our politics liveblog has full details of the PM’s appearance before the Liason Committee (the heads of various parliamentary committees):
Back in the UK, migration from the EU has slumped to its lowest level in six year.
This will worry British companies reliant on overseas staff to fill skills shortages.
The Offie for National Statistics has reported that 74,000 more EU citizens came to the UK than left, in the year to June 2018.
That’s the lowest estimate for EU net migration since 2012 and the lowest immigration level since 2014.
The ONS also found that non-EU net migration was the highest since 2004, with 248,000 more non-EU citizens arriving than leaving the UK.
Dr Phillip Lee MP, who resigned from the government over its Brexit strategy this year, warns that UK public services will suffer.
“This is a Brexodus. We’re seeing EU nationals leaving public service on a scale never before witnessed in this country.
“EU nationals are the pillar which support fundamental public services in this country. We cannot sit back and watch vital public services like our NHS be damaged by Brexit. That’s not what Leave voters were promised in 2016.
“There’s a clear case for the people being given the final say over Brexit, with the option to compare what we currently have with the hope of a deal being offered by this government.”
Deutsche Bank raided in money-laundering probe
While Mark Carney was speaking on Radio 4, police were piling into the headquarters of German’s largest lender, Deutsche Bank.
According to local reports,prosecutors are searching Deutsche Bank premises including its headquarters in Frankfurt as part of a money laundering probe
Bloomberg says some 170 officials and police were involved in the raids, adding:
A probe into the so-called Panama Papers exposed evidence Deutsche Bank helped clients set up off-shore accounts, prosecutors said.
Deutsche Bank allegedly failed to report suspected money laundering when criminally obtained funds were transferred to accounts with the bank, the statement says.
Deutsche Bank’s shares have fallen 3%, making them the worst-performing stock on Germany’s DAX index.
Updated
Snap summary: Carney walks tightrope in Brexit storm
For a man apparently peddling ‘Project Hysteria’, Mark Carney sounded remarkable reasonable on the Today programme.
It helps that the UK banking sector passed the BoE’s stress tests yesterday -- meaning at least one part of the economy can handle a disorderly Brexit in March.
Unfortunately, as Carney pointed out, the rest of the country isn’t in such good shape.
The Bank is clearly deeply worried that more than half British firms haven’t taken precautions for a no-deal -- either because they can’t face it, or because they face insurmountable obstacles if there are suddenly new customs checks and long delays at the ports.
This has left Carney walking a tricky balancing act -- arguing for a transition arrangement in one breath, and insisting it’s not up to him to say what flavour of Brexit is best in the other.
As Carney puts it:
“It is in the interests of the country to have some time to transition to whatever relationship there is.
Carney verged close to the limit of central bank independence at one point, when he seemed to suggest that Britain might need to extend the implementation period (in the current withdrawal agreement) to give the UK enough time to prepare.
That would not please Brexit-supporting MPs, who want a clean break as soon as possible.
And what about the BoE’s apocalyptic predictions that Britain might suffer the worst economic carnage (Carney-age?) in decades?
The governor seems to suggest we treat it cautiously:
It’s not what’s most likely to happen but what could happen if everything goes wrong.
“These are very low probabilities — this type of worst-case scenario.”
Predictably, there’s a mixed reaction to Mark Carney’s latest comments.
James Duddridge, Conservative MP for Rochford and Southend, isn’t a fan -- arguing that the governor is failing to be impartial.
Carney doubles down on Project Hysteria. Timing is highly political. Discrediting the independence of the role. He should resign and stand as an MP if he wants to take a political view.
— James Duddridge MP (@JamesDuddridge) November 29, 2018
Some Today listeners were more impressed, though:
“Our job is not to hope for the best but to prepare for the worst,” For the record this is what Mark Carney actually said this morning on @BBCRadio4 No 'project hysteria' as reported by @Telegraph #BrexitDeal #brexit https://t.co/JwbRDKEKh7
— Suzanne FisherMurray (@sfishermurray) November 29, 2018
#MarkCarney is a class Act. Refuses to rise to Humphrys’ bait on @BBCr4today . Avoids the disgraceful personalization of debate by Mogg, keeps it calm, plays a straight bat. But makes it clear that #Brexit is idiocy. Time for a #peoplesvote to put grown ups back in charge
— cricketfan (@batanball) November 29, 2018
Here’s an audio clip of Mark Carney warning that many UK firms simply aren’t ready for what Brexit may throw at them:
Is Britain ready for Brexit? Bank of England governor Mark Carney says: "All the industries, all the infrastructure of the country... as best as we can tell, the answer is no" #r4today https://t.co/Jd73S7lHEn pic.twitter.com/UB4a8y8ybM
— BBC Radio 4 Today (@BBCr4today) November 29, 2018
Update: to be clear, Carney is talking about firms not being ready for a no-deal Brexit.
Updated
Carney: We need to get prepared for Brexit
Q: Are you worried that if Brexit goes belly up, people might blame you for sounding so incredibly gloomy and scaring everyone?
No, Mary Carney replies, returning to his key point -- that Britain needs to be ready for Brexit (and it’s not yet)
The issue is preparedness. The thing that people don’t need to worry about is the financial system - it will be there for them.
They can focus on what’s more important.
[reminder: Britain’s biggest lenders all passed the Bank’s 2018 stress tests yesterday, meaning they could survive a disorderly Brexit]
Carney ends his interview by insisting that the Bank is only a sideshow in the Brexit drama.
The financial system is just a servant of the economy, and it’s been far too centre state for far too long.
What happens to this economy, [those] very important decisions are being made by others.
That’s the end of the interview. I’ll wrap up some reaction now.
Updated
Q: What is so good about Theresa May’s Brexit deal?
Mark Carney plays a straight, technocratic bat, saying it’s not up to him to choose between various options:
Brexit is a unique situation, where there’s a potentially substantial change in the trading relationship with our largest trading partner. In that situation, the central bank’s job is to make sure the financial system is prepared, the governor says.
Carney: Britain needs a Brexit transition period
Q: 10 years ago, Congress voted down the US bailout, the markets plunged, and then they quickly passed it (this is the TARP drama of 2008). Could that happen again?
Carney insists he won’t speculate on what might happen in parliament.
But he repeats that Britain’s economy needs more time to get ready for life outside the EU, saying:
Parliament will determine the type of Brexit, and the path we take to get there.
It is advisable to have a transition to whatever form of Brexit parliament chooses
Updated
Q: So the reality is that we’re not ready, so what happens when MPs vote down Theresa May’s Brexit deal on December 11?
Carney declines to discuss hypothetical scenarios (!), but repeats that a lot of work still needs to be done to prepare for a no-deal Brexit.
“Best as we can tell”, the country’s businesses and infrastructure aren’t ready yet.
Carney says there needs to be an objective view taken about how much time is needed, in an implementation period after Brexit.
He points out that the deal agreed last weekend allows the implementation period to be extended
Q: Is that a good idea?
From a financial system perspective, an 18-24 month period is sufficient, Carney replies (ie, the base case in the Withdrawal Agreement).
For the economy as a whole... it’s up for others to say, he adds.
Updated
It is sensible to take a “sober, objective view” about how much time we need to get to where we’re going with Brexit, Carney adds.
Updated
Carney: We're not trying to scare anyone
Q: But your critics say you are playing politics, trying to scare people....Andrew Sentance, a former Bank policymaker, says your analysis is ‘highly speculative and extreme’.
Carney denies it, saying:
We have a broad responsibility to get the system ready for whatever happens, and we’ve been doing it since the referendum.
Parliament demanded this analysis, but it is analysis with a purpose - to get the financial system ready for whatever form of Brexit the country takes.
Q: Aren’t you trying to scare people into accepting the sort of Brexit you want?
I don’t have a preference, Carney insists.
But he does agree that the Bank “prefers a transition” period (as under Theresa May’s plan)
It is in the interest of the country to have some time to transition to whatever relationship there is.
We know from our contacts with business that less than half of the businesses in this country have intiated their contingency plans for a no-deal Brexit.
Q: But a company boss, maybe the CEO of Nissan, could hear your apocalyptic scenarios and say ‘my god, I’ve got to get out of here’?
Carney says company bosses are also responsible for preparing for the worst case scenarios.
They understand what the Bank is saying, and they won’t misinterpret it.
Carney interviewed on Radio 4
Mark Carney’s interview with John Humphrys is on the Today Programme now.
Q: What’s the difference between a forecast and a scenario?
The governor says its the Bank’s job to look at what could go wrong with Brexit - tariffs, problems at the ports, financial markets fall.
It then puts these “very negative” outcomes into a scenario, to determine what would happen to the banking sector, and then ensure the banks have more than enough capital to absorb those losses.
Then we know, they know, and the public knows, that they’re able to cope.
As Carney puts it:
It’s not what’s most likely to happen. It’s what could happen if everything goes wrong, and we use that to help make sure things go better.
Mark Carney insisted several times yesterday that his Brexit analysis was a scenario, not a forecast (although this fine distinction gets lost).
Our economics editor Larry Elliott explains:
The Bank is not actually saying that the economy is going to shrink by 8% in a single year. For that to occur, three conditions would need to be fulfilled: the UK would need to leave the EU without a deal next spring; that departure would come as a bolt from the blue; and it would prompt punitive action from Brussels. “It is what could happen,” Carney said, “not what’s most likely to happen.”
But even so, this could be a final attempt to spook MPs into backing Theresa May’s Brexit deal, Larry adds:
In the weeks leading up to the EU referendum in June 2016, both the Bank and the Treasury issued warnings of the bad things that would happen in the event of a vote to leave, none of which came true. This time the constituency is much smaller: the 600-odd MPs who will vote on May’s EU agreement early next month. It looks like the last roll of the dice.
Mark Carney’s Brexit analysis is all over the UK front pages today.
The Telegraph leads the coverage of the criticism of the governor, saying he has unleashed ‘Project Hysteria’.
“Mark Carney has been accused of undermining the Bank of England’s ‘independence and credibility’ after publishing an analysis of the economic impacts of no deal so bleak it has been dubbed ‘project hysteria’.”
Here’s a full round-up:
Introduction: Bank of England under fire over Brexit forecasts
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Mark Carney, governor of the Bank of England, is in the eye of a political storm today after warning that a no-deal Brexit could plunge Britain into the worst recession since the second world war.
Analysis released last night warned that the economy will shrink by an eye-watering 8%, house prices would plunge by a third, sterling would slump to parity with the US dollar, and interest rates will soar if Britain left the EU without a deal.
Carney’s message was clear - the economy would suffer badly from a no-deal scenario, and many companies simply aren’t ready.
“Evidence from surveys and other UK authorities suggests that the country is not yet fully prepared for a cliff-edge Brexit.”
In sharp contrast, the Bank also provided Theresa May with some support -- arguing that her deal would be better for economic growth.
However, it also predicted that GDP would have been at least 1% higher in five years’ time if the UK had voted to remain; a boost to those pushing for a People’s Vote on the final deal.
Carney’s critics (and he’s attracted a few since joining the Bank in 2013), have accused him of undermining the Bank’s independence and credibility.
One (alas unnamed) minister has told the Daily Telegraph that the analysis is “mad, bonkers and b------s” (I don’t think the ‘b’ is for Brexit...)
Eurosceptic Jacob Rees-Mogg went particularly low, dubbing Carney a failed second-tier Canadian politician -- a jibe that attracted some stinging rebukes over his attempts to overthrow Theresa May.
Carney worked at 13 years at Goldman Sachs, Ex Governor Bank of Canada, G7 Minister, Chair of financial stability board, member of the Group of 30 an international body of leading financiers and academics. Studied at Harvard, St Peters&Nuffield Oxford, Jacob cannot count to 48 😳 https://t.co/HnGj7UDsRa
— Angela Rayner (@AngelaRayner) November 28, 2018
Justice secretary David Gauke has also weighed in:
Of course, people can disagree with BoE view. But to dismiss possibility that it may be broadly right seems like an act of faith not reason. https://t.co/y6z723kxFU
— David Gauke (@DavidGauke) November 28, 2018
Anyway, Carney can defend himself - and he’ll have to this morning. He’s due on Radio 4’s Today programme shortly to discuss the Bank’s forecasts.
The agenda
- 8.10am GMT: Mark Carney interviewed on Radio 4
- 10am GMT: Eurozone consumer confidence released
- 1.30pm GMT: US personal consumption stats
- 7pm GMT: Minutes of the US Federal Reserve’s November meeting
Updated
