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BREXIT – A POSITIVE NEWS STORY FOR UK PLC

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BREXIT

– Andrew Mitchell, Group Investment Director for Godwin Capital

 

It is fair to say that Brexit dominated headlines in the final few years of the 2010s.

After the UK made the historic decision to forge its own future outside of the European Union [EU], many people and businesses were naturally concerned as to what the future might hold.

For example, the property sector saw some buyers and sellers alike put their plans on hold ahead of the Brexit vote in light of a few sensationalised media claims that a no-deal scenario would increase mortgage payments, and lead to distressed sales and falling house prices.

This was in spite of a poll of over 2,000 people conducted by property investment firm Good Move, which concluded that three-quarters of the British public had overestimated the impact that Brexit has had on house prices. This was subsequently proven by figures from the Office for National Statistics (ONS) which revealed that the cost of a home rose by 2.2% in the year to November 2019.

There have also been a number of good news revelations that strengthen the UK government’s narrative that Brexit will benefit the UK. Further research by the ONS has shown that the rate of employment has reached a record high and currently stands at 76.3%, with the unemployment rate at its lowest since 1974. Even the UK’s latest GDP figures covering July to September 2019 are estimated to have increased by 0.4%, revised upwards by 0.1 percentage points from the first quarterly estimate.

A positive anticipation of the benefits that Brexit will bring appears to be forming in the heart of British business. This is evidenced by more than a third of FTSE 350 company secretaries surveyed by the Financial Times that stated their belief that the UK economy will continue to improve — the highest level since 2015, and up from just 7 per cent last summer.

Findings such as these give an indication of how strongly the British economy is performing but it is also important to look at what is occurring in the UK’s major industries.

 

PROPERTY’S IN EXCELLENT HEALTH

Following the outcome of the 2019 General Election, the forecast for the UK’s property sector and the Pound is looking decidedly more positive for the next 12 months. Many commentators have attributed this to Boris Johnson’s success in bringing about Brexit on 31st January.

Yet even before the election, November 2019 saw the highest-ever average house price of £235,298 according to the latest figures from the UK’s Land Registry, while December 2019 saw the highest number of property transactions since before the referendum, with sales up 6.8% year-on-year. Moreover, a total of ten UK cities have demonstrated a double-figure price growth following the Brexit vote, with Birmingham and the Midlands leading the way. Figures such as these help to paint a clearer picture of the UK’s property market, how it is set for growth in 2020, and the potential that investors from around the world are recognising in it.

 

UK EMPLOYMENT IS AT A RECORD HIGH

In February, figures from the Office for National Statistics saw the unemployment rate remain at its lowest since 1974, while the number of UK nationals in employment grew by over 2.3 million since 2010 to reach just over 29 million. The total number in work climbed to just below 33 million.

In January, the Department for Work and Pensions (DWP) also announced that for the 22nd consecutive month, wage growth has outpaced inflation and a total of 3.1 million more people are now in higher skilled work. Of those to have benefitted from the UK’s thriving jobs market, women come out on top with 317,000 more having entered work in the past year alone. Combined with UK PLCs’ growing confidence, we should expect to see a stronger jobs market in 2020 and beyond.

 

UK MANUFACTURING IS THRIVING

As it stands, the UK is the eighth largest industrial nation in the world. If current growth trends continue, the UK is expected to break into the top five by 2021. In the UK, manufacturing accounts for 11% of GVA, 44% of total exports, 70% of business R&D, and directly employs 2.6 million people.

Manufacturing output has grown faster than at any point in the previous 10 months during February 2020, with growth expectations in the private sector edging up, according to IHS Markit’s flash purchasing managers index. The recent return to growth signalled by the manufacturing sectors gives a clear indication that the economy is on the rise and suggests that increased confidence is translating into higher business activity and greater spending by clients.

 

CONCLUSION

Brexit is still in its infancy but it is clear that the UK is weathering negative predictions and the general mood of the country is buoyant and hopeful for the future. The government is already in talks with nations such as the US, China and Australia, who are all eager to take advantage of the UK’s new independent trading position. China for example is eager to be a key investor in HS2, the UK’s largest infrastructure project, as well as the UK’s 5G network. It is clear then that the UK is being recognised as a key investment target for foreign governments and therefore very much “open for business”. It is to be expected that the road to becoming an independent sovereign nation will incur a few bumps along the way, but the UK has always punched above its weight and Brexit will be no different.

 

Business

SVEA BANK ACQUIRES AREX’S FINTECH OPERATION IN FINLAND

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AREX Markets, the data-driven FinTech company that drives financing costs down for SMEs and enables them to get paid quicker, has announced the sale of its Finland operations to Swedish payment and financing institution Svea Bank.

With the deal, Svea will further strengthen its position as a corporate financier, as AREX’s c.1200 Finnish customers and partnerships in the areas of financial management and financial management software will be transferred to the bank’s portfolio. The Finnish operation of AREX has financed over EUR 500M worth of invoices.

AREX’s Spanish and UK operations remain unaffected and remain focused on building embeddable financing products for third party platforms. Customers in Finland have been informed of their transition, and their contracts and service details will port across to Svea.

Svea is reshaping the playing field of corporate finance in Finland, and taking on the operations of AREX in the region is a natural step to strengthen their own business and at the same time offer AREX’s partners and customers an easy path to a wider range of services than before.

“Over the years, Svea has grown a lot also through business transactions, therefore acquiring AREX’s business operations in Finland was a good and natural solution for us. In addition, the deal is pleasant for us at Svea because the focus of our activities is to help partners and customers succeed – offering AREX’s partners and customers a wider range of services is exactly that,” says Pasi Väre, country manager of Svea in Finland.

The deal also brings new opportunities for AREX to focus on the UK and Europe in its roll out of embeddable financing products, which can be white-labelled by neobanks, ERPs and accounting software alike. The business is seeking to bridge the liquidity gap faced by most small businesses in the face of a recessive economic climate.

UK SME’s can continue to access AREX’s core invoice financing product through the Xero marketplace.

“For us at AREX, this is a great step: we are developing a stronger presence in the field of embedded finance, which is underpinned by our sophisticated marketplace software, our strongest point,” says AREX’s CEO, Airto Vienola.

“For the AREX team it was extremely important that we find the best possible corporate financier to take care of the business’ customers and partnerships in Finland. Svea convinced us with their customer and partner-centric approach”, adds AREX’s co-founder Perttu Jalkanen.

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ICICI Lombard and AU Small Finance Bank announce Bancassurance tie-up

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ICICI Lombard General Insurance, India’s leading private sector non-life insurance company, is entering into a Bancassurance tie-up with AU Small Finance Bank. The partnership will provide the Bank’s diverse customers access to the insurer’s portfolio and enhance penetration across India.

AU Bank is rapidly expanding its distribution footprints across India and this tie-up between two giants in their respective industries will aim to further enrich its general insurance offering with agile, digital & paperless solutions offered by ICICI Lombard. The entire suite of products will be offered across 980+ banking touchpoints spread over 20 states & 2 union territories. The customer centric products will provide long-term financial security to customers and their families. With both organizations believing in offering the best to the customers through innovation and consistency, this partnership would offer customers the best of both worlds.

Speaking about the partnership Mr. Sanjeev Mantri, Executive Director, of ICICI Lombard said, ““At ICICI Lombard, we are in constant endeavour to provide consumers and businesses effective risk management solutions based on their evolving needs. As an industry leader, we are excited to partner with AU Small Finance Bank – India’s largest small finance bank, in providing customers a comprehensive product portfolio. This partnership will help further strengthen our distribution and unravel growth opportunities through the bank’s wide network. With our extensive range of customised solutions for risk management we are confident that we will be able to address varied customer segments across India.”

Highlighting the key aspects of this strategic partnership, Mr. Uttam Tibrewal, Executive Director, AU Small Finance Bank, said, “AU Small Finance Bank always prides in providing customer centric solutions and services. Expanding our bouquet of financial services and customer value proposition, we wanted to associate with additional general insurance partner to add value to our existing range of products & services while helping our customers plan for better financial security. We welcome ICICI Lombard as our valued insurance partner who, we believe, has the ability and experience to understand customers’ needs and offer them customized need-based solutions and provide seamless services. I am sure, the customer-friendly products of ICICI Lombard, combined with our extensive presence and robust technological capabilities, will be the right mix to increase insurance penetration.”

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