Another throw of the dice

January 2019

January ended without any resolution to the question of Brexit. With only two months left before the deadline of 29 March, investors faced up to the possibility of no deal. Following votes on a range of amendments, including the thorny issue of the Irish backstop, Prime Minister Theresa May confirmed that she would attempt to reopen negotiations with Brussels.

  • The UK Government survived its first no-confidence vote since 1979
  • UK businesses warned about the possible impact of a no-deal Brexit on food supplies and prices
  • UK retailers suffered their worst December for a decade

To view the series of market updates through January, click here.


January ended without any resolution to the question of Brexit. With only two months left before the deadline of 29 March, investors faced up to the possibility of no deal. Despite this uncertainty, the FTSE 100 Index rose by 3.6% during January, while the FTSE 250 Index climbed by 6.9%.

“The backstop is part and parcel of the Withdrawal Agreement” (Michel Barnier)

Prime Minister Theresa May finally held the “meaningful vote” on the Brexit deal agreed with the EU; however, the deal was resoundingly rejected by the House of Commons as MPs voted it down by 432 to 202 – an unprecedented defeat. The Government subsequently survived its first no-confidence vote since 1979. Following votes on a range of amendments, including the thorny issue of the Irish backstop, Mrs May confirmed that she would attempt to reopen negotiations with Brussels. The Confederation of British Industry (CBI) described the move as “a real throw of the dice” and, far from prompting UK businesses to halt their no-deal planning, it might even have accelerated it. Meanwhile, the EU’s chief Brexit negotiator Michel Barnier stated: “The backstop is part and parcel of the Withdrawal Agreement and it will not be renegotiated”.

Alongside the chief executives of several leading supermarkets and fast-food outlets, the British Retail Consortium (BRC) sent a letter to MPs outlining the risks posed by a no-deal Brexit. In particular, the letter warned that almost one-third of food eaten in the UK comes from the EU; moreover, as only 10% of the UK’s food imports are currently subject to tariffs, a reversion to World Trade Organisation (WTO) rules would drive up import costs and therefore prices.

UK retailers suffered their worst December for ten years, according to the BRC, which reported zero annualised growth in retail sales. Motoring and cycling retailer Halfords issued a profit warning in January, while fashion retailer Quiz issued its second profit warning in three months. Sales dropped at M&S over Christmas; the company blamed deteriorating consumer confidence, mild weather, Black Friday, and widespread discounting by competitors for the decline. Supermarket retailer Sainsbury’s also reported a decline in sales over the Christmas period; however, Tesco bucked the trend, revealing “strong” Christmas trading, while online clothing retailer Boohoo upgraded its revenue growth. Although Next enjoyed robust online sales during the crucial Christmas period, sales fell at its stores, and the company downgraded its full-year profit forecast.

 

 

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