All the day’s economic and financial news, as UK steel industry faces hundreds of job cuts and Mark Carney delivers another Brexit warning
- Latest: British Steel blames weak pound for ‘streamlining’
- Chairman: Redundancies will sustain our future
- Unions: It’s a body blow
Here’s our news story on the steel job cuts:
The Financial Times says most of British Steel’s planned job cuts will hit its Scunthorpe site, adding:
Under Indian steelmaker Tata the business was on the verge of collapse in 2016 but workers agreed to pension reductions and pay restraint to allow a sale.
Greybull, a family investment firm, bought the business and said it had invested £170m since.
Newsflash: Bank of England governor Mark Carney is warning that the uncertainty over Britain’s exit from the European Union has “dampened” economic growth.
Although current rates of pay growth in the UK are below pre-crisis averages, this largely reflects continued weakness in productivity growth. While that weakness may reflect the early consequences of the Fourth Industrial Revolution, other factors seem more likely to be at play. In the years following the global financial crisis, the aftereffects of that shock and the subsequent euro-area crisis exerted a drag on business investment.
More recently, uncertainty around Brexit has had an additional dampening effect. As has been the case for some time, developments regarding the United Kingdom’s withdrawal from the European Union are the most significant influences on the economic outlook. And while the impact of the Fourth Industrial Revolution may be felt over the coming decades, some of the Brexit effects on supply may be much more immediate.
British Steel’s warning about the weak pound highlights an important point: a lower currency doesn’t automatically help exporters.
Instead, a weak currency can be expensive for any firm that buys raw materials and energy from abroad.
Nic Dakin, Labour MP for Scunthorpe, has issued a statement on the job cuts:
The news that British Steel is to shed 400 jobs is devastating news to a workforce that have done everything asked of them over the last two years. They have taken a pay cut, seen their pensions change and worked hard to get British Steel on its way.
Three years on from the height of the steel crisis the Conservative Government hasn’t taken any steps to level the playing field for the UK steel industry. Despite massive goodwill from the steel sector there is still no sector deal for steel in place. And the Government is dragging its feet on improving public procurement, tackling unequal energy costs, tackling high business taxes and supporting capital investment.
The news that British Steel is to shed 400 jobs is devastating news to a workforce that have done everything asked of them over the last two years. They have taken a pay cut, seen their pensions change and worked… https://t.co/sY14dNWh3d
Roland Junck, British Steel’s executive chairman, says the job cuts will create a “sustainable future” for the company.
“We’ll further discuss our proposals, which would consider applications for voluntary redundancy, with senior union representatives. We’ll ensure this process is handled in a sensitive manner. We haven’t set any deadlines but aim to keep the period of uncertainty for our people as short as we can.
“We know this will be a worrying time for many and we’ll do everything possible to ensure our people continue to get the support they deserve, now and in the future.”
Unions says British Steel’s proposed job cuts are a “body blow” to its workforce, especially as the company actually made a profit last year:
A spokesperson for the National Trade Union Steel Coordinating Committee said:
“This announcement will come as a body blow to the workforce who have already made huge sacrifices to make the business sustainable.
“We recognise these are challenging times for UK steelmakers, and it’s high time the government stepped up and delivered for us by supporting investment in strategic steel assets.
Newsflash: British Steel is cutting up to 400 jobs — and blamed the weakness of the UK pound over the last couple of years.
The company, which runs the Scunthorpe Steelworks, says it is streamlining its operations.
“We’ve made a strong start to life as British Steel but our external environment is constantly changing. For example, raw materials are all traded in US dollars, so the weakening of the pound and euro have implications for us.
Like any business we need to be able to flex and adapt to these changes.
On Mark Carney’s no-deal warning to the cabinet…. it’s worth noting that the governor’s doomsday scenario of soaring unemployment and tumbling house prices is exactly what the BoE models in its annual bank stress tests.
The theory is that a whopping “UK-specific risk premium shock” will send the pound tumbling, driving up inflation and forcing interest rates to be hiked.
These stress tests are explicitly not designed as forecasts. They are BEYOND WORSE CASE SCENARIOS which, like caps lock sentences, are supposed to shock the city into safe balance sheet behaviour. The good news is last yr the UK banks almost all passed 3/
Yes: part of his point behind such illustrations was that Brexit could indeed be bad news for house prices etc. It could be really bad. But 35%…? Not likely. Even the Treasury’s worst case scenario for house price falls pre-referendum was literally HALF that 5/
Sterling has now gained two cents against the US dollar since Monday morning, putting it on track for its second-best week this year.
That’s partly because the dollar has been weakening this week, but also shows that the City isn’t – yet – in full-blown Brexit panic.
Boom! The pound has hit its highest level against the US dollar since the start of August.
Sterling strengthened by 0.2% to nudge $1.3138 in morning trading, as investors refused to be panicked by the BoE governor’s dire predictions to the cabinet yesterday.
Markets at this point seem quite confident that a deal can be reached, and the pound is firming.
Cable [the £/$ rate] in particular is continuing its rise, even if this appears mostly due to the temporary weakness of the US dollar, as the recovery of euro against the greenback illustrates.
In the City, housebuilders shares have dipped following Mark Carney’s warning that a no-deal Brexit could cause a housing crash.
But it’s a fairly modest reaction really; Barratt Development and Taylor Wimpey are down around 1%. That shows some nervousness, but not a panic.
Chinese statistics bureau spokesman Mao Shengyong has told reporters in Beijing that investment growth should stabilize in the months ahead, as the government expands its efforts to kick-start large projects.
Shuang Ding, an economist at Standard Chartered, is concerned that investment in China’s factories and railways has slowed sharply this year.
“If investment, especially infrastructure investment, fails to recover in September, the risk on economic growth would be very large.”
Overnight, new official data has suggested that China’s economy is feeling a chill from the dispute with the US.
Fixed-asset investment growth slowed to just 5.3% in the first eight months of the year, weaker than expected, and the lowest on record.
Trade war news: China has fired another warning shot at America as the two countries ongoing dispute rattles on.
“The Trump administration should not be mistaken that China will surrender to the U.S. demands. It has enough fuel to drive its economy even if a trade war is prolonged.”
The Wall Street Journal has it wrong, we are under no pressure to make a deal with China, they are under pressure to make a deal with us. Our markets are surging, theirs are collapsing. We will soon be taking in Billions in Tariffs & making products at home. If we meet, we meet?
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Several sources said Carney compared the outcome of a no-deal Brexit with the fallout from the 2008 financial crash.
One cabinet minister told the Guardian: “The government wouldn’t just stand by. It didn’t in 2008. He wasn’t saying it was all going to happen but I think there is a recognition that you do have to contemplate the worst-case scenario.”
Link : British Steel plans 400 job cuts and blames weak pound – business live