Philip Hammond sets out plan for economy post-Brexit in first major speech

Miranda Wadham
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Philip Hammond sets out plan for economy post-Brexit in first major speech

Chancellor Philip Hammond set out his priorities for Brexit on Tuesday, in his first speech since the Conservatives failed to win a majority in June’s general election.

Hammond highlighted the need to put jobs and living standards first as the UK negotiates its exit from the EU, adding that it would require “every ounce of skill and diplomacy” to get the right deal.

His comments come in the wake of allegations that the UK has already bene forced to concede on its schedule for Brexit, with the EU dictating on Monday that the divorce bill would need to be settled before negotiations turn to the future relationship.

Speaking in London, Hammond said he wanted to put the economy at the heart of negotiations, adding that no one voted for Brexit to become poorer. Hammond’s comments come alongside a speech by Mark Carney warning on the effects of Brexit on the UK economy. Mark Carney made the direct link between “weaker real income growth” and the process of leaving the European Union, adding that prices are rising and wage growth is falling meaning the average household has less money than before the vote.  

Crowd2Fund launch secured property lending with new loan product

Miranda Wadham
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Crowd2Fund launch secured property lending with new loan product
Crowd2Fund have launched a new property loan product, secured against commercial or residential property, which qualifies for inclusion within the platform’s IFISA. The new loan vehicle is targeted at businesses which own property, or directors who are willing to offer their property as security. Loans are between £100,000 and £1 million, typically last for a duration of three to five years and carry an estimated APR between 6 percent – 8 percent before fees and bad debts. The only associated fee for investors is the Repayment Fee, set at 1 percent of the value of repayments, which is collected from each repayment.

What are the benefits for investors?

Diversification

The Crowd2Fund property loan is the latest addition to the range of debt products already offered by the platform. These include standard loans, revenue loans, bonds and venture debt. The introduction of the property loan allows investors to further diversify and personalise their portfolios, according to their risk appetite and individual goals., with the option to invest as little as £100. The property loan enhances diversification opportunities by being a comparatively lower-risk vehicle than that will accompanying the higher risk products available, such as Venture Debt. Even though interest rates are lower with property secured investments, funds should be spread across different products and companies to help mitigate the risk of defaults. All businesses go through a thorough due diligence procedure. Nevertheless, all campaigns on the platform carry their own, unique risk. There have been zero defaults on the platform to date. Investors may choose to spread their investments across both secured property loans and high growth sector businesses, which carry a higher interest rate, but in which an investor might have a personal interest. Furthermore, property loans are included within the IFISA, which has an allowance of £20,000 in the 2017/8 tax year, thus enjoying the added benefit of sheltering interest repayments from tax.

Secured against a property

All businesses running a property loan campaign are required to let Crowd2Fund take a charge over their tangible assets. The value of the secured property must cover 100 percent of the total loan value. This means that if the business defaults on their loan, the property will be taken and sold to repay investors. Property loans are lower risk in comparison to unsecured loans. However, it should be noted that there is a risk that the property may not retain its original valuation and that it may take time to sell it.

Simple and transparent structure

We want the concept of property loans to be simple for businesses and investors to understand. We understand that investors may prefer to allocate their funds to a loan which is secured against bricks and mortar. The reason for this is that it is easy to understand the value of property as there is an active market in which to sell, not to mention that property belongs to an established and trusted asset class. As with a loan, businesses repay investors interest and capital on a monthly basis. This amortises over time; this means that investors are repaid the same amount of money each month, but the interest will decrease as the principle repayment increases. For example, should a repayment be £10, £5 will be interest, £5 will be principal. A second repayment will still be £10, but the interest will reduce to, say, £4.50, and the principal will increase to £5.50, and so on with each repayment. You can understand more about amortisation here. Investors are welcome to manage and track their property investments through their personal dashboard on Crowd2Fund.

Access your capital by selling to others on The Exchange

Property loans can be bought and sold on the Exchange. Selling your property loan means investors are able to access their capital by selling it to others. This makes investors’ investments more liquid, whilst giving investors the opportunity to sell at marginal profits. Additionally, utilising the Exchange will give investors further opportunity to diversify their portfolios by purchasing additional loans. Chris Hancock, Crowd2Fund CEO, explains: “The launch of our property loan gives investors access to an asset class which has performed steadily over time and is easy to understand. These asset-backed loans are likely to be popular with P2P crowdfunding investors new to the market due to the perception of them being less risky than standard loans, which do not have security taken out on them.” The first property backed loan on the platform is set to be a £300,000 campaign for Mark Marengo, a Savile Row tailor focused on exporting sharp-cut tail

Scottish MB Aerospace signs “milestone” $10bn deal with US firm

Miranda Wadham
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Scottish MB Aerospace signs “milestone” $10bn deal with US firm

Scottish engineering firm MB Aerospace has signed a $1 billion deal with US firm Pratt & Whitney, in what its CEO has called a “milestone opportunity” for the firm.

The ten-year agreement is to provide flight engine parts to the US company, which is a division of United Technologies Corporation.

MB Aerospace said it would recruit 160 new staff as part of the agreement, on top of the 1,600 people it already employs across the UK, the US and Poland. Chief executive Craig Gallagher said: “We are hugely respectful of the trust placed in us by United Technologies and Pratt & Whitney to support their programs. “MB Aerospace and UTC already possess a strong working relationship across Pratt & Whitney’s installed base programs, and this contract represents a milestone opportunity for our world class teams to support UTC. “The MB Aerospace group has already invested more than $50m in machining technology, facilities expansion and in the last year has recruited an additional 100 new full-time employees in support of this growth and ahead of the agreement of this exciting contract.” A majority stake in the Motherwell-based firm was taken by Blackstone private equity in 2013. MB Aerospace concluded a series of deals over 2016, including the acquisitions of a Polish coatings firm, a Devon-based factory and US firm Norbert Industries.

Investment sectors in the limelight – and those waiting in the wings

Miranda Wadham
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Investment sectors in the limelight – and those waiting in the wings
The tech sector seems to dominate the media attention given to start-ups. The term ‘unicorn’, a privately owned business valued at more than a billion dollars, was born in Silicon Valley. The global superstars of the start-up world are often the tech companies for which there are few barriers to world domination. But there are also other sectors raising cash from adventurous investors. The UK film industry has seen an increase in financial backing from independent sponsors alongside the support given by successive governments, including £200 million raised under the Enterprise Investment Scheme (EIS) in the past year. For UK-based investors who are new to the film industry, EIS helps make investment in a high risk industry more accessible. By providing 30 per cent upfront income tax relief, the investor receives 30p back for every pound that is put in. Then there are further reliefs for those with capital gains tax liabilities and if the investment is not successful there are further loss reliefs. All these tax advantages go a long way to mitigating the risks of an early stage start-up. The film industry has been particularly popular for EIS investors as the government further supports the industry in the UK with the film production tax credit; a system that provides filmmakers with 20 per cent of costs back as a rebate. All this helps to support British films successes such as Mr Turner and Testament of Youth. Or The Kings Speech and Slum Dog Millionaire, which both gained private financial investment before scooping up Academy Awards and BAFTA’s. Beyond the movies there are other sectors that are surprisingly popular with the early stage investors; in fact, there has been an explosion of interest in the previously staid world of mattresses. Eve Sleep raised £375k in early 2015 (at a valuation of £891k). Then a further £22 million at progressively higher valuations over the next 2 years. They have just completed an IPO and now have a market capitalisation of £132 million. One of their main competitors has also raised £17.5 million of early stage money over the last 2 years. Is this what constitutes investors putting money under the mattress in our turbulent times? Unfortunately, there are other sectors that are out of fashion – but where there may be good value. The less glamourous manufacturing industry is facing a six-year low in investment. While manufacturing accounts for around 10 percent of the UK economy, Brexit has resulted in yet more uncertainty for manufacturers but a less valuable sterling makes products more affordable to an international client base, and with global sales accounting for two-thirds of manufacturing business; investing in UK manufacturing could reap rewards. There are other sectors, such as medical devices, healthcare services and biotech, that are receiving high levels of government support, have an enviable record of UK talent and where an ageing population will continue to create demand on wider healthcare expenditure. A hazard for would be early stage investors, particularly with tech investments, are that there are many innovative solutions that are desperately looking for a problem to solve. That is why my business focuses on consumer stuff – the products and services we buy and the way that we buy them. Whilst also thinking about the strength of team and the business model, we get excited about products or services laser targeted at a particular consumer pain or gain. We still see plenty of opportunity with real things – such as products that end up on supermarket shelves and casual dining experiences that can scale up to become well known chains. Because these types of businesses are relatively less capital intensive, they are also well placed to take advantage of the Seed Enterprise Investment Scheme (SEIS) – established in 2012 as an extension of EIS. A company may raise their first £150k of equity investment under SEIS and investors can benefit from tax reliefs even more generous than under EIS. Income tax relief of 50% of the investment means the risk is halved as soon as an SEIS investment is made. Then there are other CGT reliefs, inheritance tax relief and loss relief should the investment fail. Gain on the investment is free from all capital gains tax after being held for three years. The SEIS scheme makes it easier for the earliest stage businesses to raise enough cash to create the proof points for further investment and it mitigates the risks for investors for what is clearly a high risk/high return investment. Matthew Cushen is an innovation consultant, entrepreneur and successful angel investor. He is Co-founder of Worth Capital. The Start-Up Series SEIS Fund One, created by Worth Capital and managed by Amersham Investment Management, is a £2.1 million fund investing in 12 monthly winners of the Start-Ups Series, along with 2 other discretionary investments. The minimum investment is £10,000. Find out more here: www.worthcapital.uk

Bank of Japan keeps monetary policy steady but raises outlook on consumption

Miranda Wadham
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Bank of Japan keeps monetary policy steady but raises outlook on consumption
The Bank of Japan kept monetary policy steady on Friday and confirmed that its economy was picking up momentum, after several years of weak economic figures. The Bank also upgraded its assessment of private consumption for the first time in six months, but added that its extensive stimulus programme would remain in place for the near future as inflation lags well below the Bank’s target. “There’s some distance to achieving 2 percent inflation, so it’s inappropriate to say now specifically how we will exit our ultra-loose monetary policy, and how that could affect the BOJ’s financial health,” the Bank’s governor Haruhiko Kuroda told a news conference. “We will debate an exit strategy only after 2 percent inflation is achieved and price growth stays there stably.” The Japanese economy has been flagging for several years, falling into recession three times since the financial crisis. Last year the Bank of Japan announced a dramatic stimulus programme designed to boost economic growth, with recent figures showing that it may be beginning to pay off.

Rolls-Royce shares up after CEO maintains current outlook

Miranda Wadham
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Rolls-Royce shares up after CEO maintains current outlook
Troubled aero-engineer Rolls-Royce (LON:RR) maintained its underlying outlook for the year on Friday, confirming that all businesses were performing in line with expectations. Chief Executive Warren East commented on the group’s performance on Friday, saying that whilst he was pleased with the start of the year, there was still more to do to deliver. “As expected, near term cash flow performance remains challenging as we continue to invest in transforming and growing the business to benefit future years,” he said. The aircraft engine maker, who have issued several profit warnings over the last couple of years and enrolled in a strict cost-cutting programme, warned back in February that 2017 earnings will only be modestly better than a year earlier. Underlying free cash flow, which was £100 million last year, is expected to be around the same for 2017. Rolls-Royce (LON:RR) shares are trading higher on the announcement, currently up 1.96 percent at 912.00 (1043GMT).

Oil prices recover slightly but remain near 2017 lows

Miranda Wadham
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Oil prices recover slightly but remain near 2017 lows
Oil prices moved up from their recent lows on Friday, but excess supply continues to put downward pressure on the market. The price of oil has risen towards the end of the week, from 2017 lows achieved at the beginning of June after soaring US output negated the effects of an OPEC agreement. WTI Crude is currently up 0.65 percent at $44.75 per barrel, with Brent Crude up 0.92 percent at $47.35. Tamas Varga, analyst at brokerage PVM Oil Associates, commented: “The market took a breather yesterday and is trying to recover somewhat this morning. It is by no means bullish.” Both oil benchmarks are around 13 percent lower than where they were trading in late May, when producers led by the Organization of the Petroleum Exporting Countries (OPEC) extended a pledge to cut production by 1.8 million barrels per day (bpd) by an extra nine months. Since then, however, rising US output has had a negative effect on prices, dampening the investor optimism that pushed up prices in the wake of the OPEC meeting.

Major retailers see shares fall after DFS profit warning

Miranda Wadham
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Major retailers see shares fall after DFS profit warning
Shares in FTSE 100 retailers had a difficult morning on Thursday, after investors were spooked by a profit warning from furniture giant DFS (LON:DFS). In a trading statement, DFS adjusted their EBITDA forecast for the full year downwards, to a range of between £82 million – £87 million. The new estimates, well below previous forecasts by analysts, were attributed to a decline in footfall as a result of UK economic uncertainty. Shares in other major retailers also fell on the back of the news, with Next, Marks & Spencer, Kingfisher and Tesco some of the FTSE 100’s biggest fallers. FTSE 250 retailers, including Dunelm, AO, Card Factory and Ocado are also down, with fello furniture retailer Dunelm trading 6.2 percent lower. In a trading update, DFS said: “The trading environment has however recently weakened beyond our expectation, with significant declines in store footfall leading to a material reduction in customer orders” “We believe these demand effects are market-wide, in line with industry indicators, and are linked to customer uncertainty regarding the general election and the uncertain macroeconomic environment.” DFS are currently trading down 20.85 percent at 199.47 (1125GMT).

Fashion retailer Quiz announces flotation on AIM market

Miranda Wadham
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Fashion retailer Quiz announces flotation on AIM market
‘Fast fashion’ retailer Quiz announced plans to float on the AIM market on Thursday, in an IPO expected to be worth around £200 million. Scottish-based Quiz, who recently signed JD Sports chief executive Peter Cowgill as chairman, are hoping to list on London’s junior market in order to boost expansion and allow its founders to cash out part of their stake in the company. Should the company IPO at its expected £200 million, chief executive and founder Tarak Ramzan is likely to take home around £100 million. Quiz currently has 73 stores in the UK as well as 167 concessions in department stores such as Debenhams and House of Fraser. Last year the retailer made an operating profit of £10.3 million, with revenues jumping by 21 percent to £89.8 million. Ramzan said: “Quiz is a strong and distinctive omni-channel fashion brand with a clear customer and product focus. “Fast fashion is in Quiz’s DNA and our ‘just in time’ model ensures that we are always responding in real time to new trends as they emerge. “I am very confident that we have a well-invested infrastructure, a fantastic team and a clear strategy to accelerate further the growth of the Quiz brand across all channels and markets.”

Gold falls as markets prepare for US Fed to hike rates

Miranda Wadham
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Gold falls as markets prepare for US Fed to hike rates
The US Federal Reserve is expected to raise interest rates at its meeting on Wednesday, despite weaker than expected inflation rates. The Federal Open Market Committee is expected to raise the fed funds target rate by a quarter of a point, from 1 to 1.25 percent. The move is to come despite inflation still coming in under the Fed’s preferred rate, with the PCE deflator falling to 1.5 percent from 1.8 percent earlier in 2017. The Fed began their policy tightening programme in December 2015, after more than a decade of flat rates, but investors are growing increasingly doubtful policymakers will be able to stick to their anticipated pace of tightening of three interest rate rises this year and next as the economy begins to flag. “I don’t think inflation coming off is going to alter the current upward trajectory for rates right now,” said Chris Rupkey, chief financial economist at MUFG Union Bank. “I don’t think we’re going to take one or two rate hikes off the table for the next one or two years. I think they’re going to stick with the game plan.” Gold prices fell for the fifth day straight on Tuesday as investors anticipate the hike, marking its longest string of losses since the nine-session period ended March 10 according to FactSet data.
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