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Britain 'will have fastest growing economy out of G7 nations until 2050'

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Britain will have the fastest growing economy out of the G7 nations until 2050 despite enduring a Brexit-induced slowdown, according to a report from accountants PwC, with the UK economy expected to outstrip Germany, France and Italy for the next 33 years - notching up annual average growth of 1.9%, 

Chief economist John Hawksworth said growth depended on Britain remaining open to talented people from around the world, with Brexit causing "some medium-term drag".

"Our relatively positive long-term growth projection for the UK is due to favourable demographic factors and a relatively flexible economy by European standards," he added.
"However, developing successful trade and investment links with faster-growing emerging economies will be critical to achieving this, offsetting probable weaker trade links with the EU after Brexit."

Britain will see some of its power diminish by 2050, slipping from 9th to 10th place in the global economy rankings based on gross domestic product (GDP) purchasing power parity (PPP).

The UK could also slide from 5th to 9th place over the period when measuring GDP at market exchange rates, according to The World in 2050 report. It said the world economy should double in size by 2042, expanding at an average annual rate of 2.5% by 2050.

Global growth will be spearheaded by emerging markets and developing countries, with Brazil, China, India, Mexico and Russia set to expand by 3.5% over the next 34 years.
China is expected to top the GDP ranking in PPP terms by 2050, with India leapfrogging the United States into second place. The US will take third place on the rankings, while Indonesia and Brazil are expected to rise to fourth and fifth position respectively.

"We project that the world economy could more than double in size by 2050, assuming broadly growthfriendly policies (including no sustained long-term retreat into protectionism) and no major global civilisation-threatening catastrophes," Hawksworth added.

The UK economy defied expectations to expand by 0.6% for the fourth quarter of last year – the same rate as the second and third quarters of 2016. The Bank of England has now outlined a brighter outlook for UK economic growth, hiking its forecasts to 2% this year, 1.6% in 2018 and 1.7% in 2019.


Time to look good: Four presentation pitfalls you need to avoid

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By Emma Ledden

What is a great presentation? You know it when you see it, don't you? But it can be very hard to pinpoint what you're seeing. Usually we attribute a great presentation to the presenter's personality, charisma or style. It seems that great presenters have some intangible quality that is just out of reach.

The good news is once you examine what a great presenter is actually doing you realise charisma and personality is not at the heart of great presenting. The ability to create understanding for the audience, to communicate, is fundamentally what great presenters are masters of.

Today, I find presenters are so busy trying to stand out, trying to do something quirky or funny or impactful they are missing the point of presenting. I am a massive fan of a great video, a funny joke or an impactful picture but only as part of a great piece of communication and message. Great presentations are not about the elusive X Factor they are fundamentally about The Communication Factor.

To have The Communication Factor you must avoid these four presentation pitfalls

1. Having the wrong structure
Most people when they structure presentations do so using what is called deductive reasoning. Simply put, this means building up to the strongest point for the audience instead of leading with it. The main reason this is a chosen approach is presenters want to establish themselves and their credibility before they give conclusions. If you are using this presentation structure you must ask yourself if your audience is going to wait until the end to get what they need. Would you wait that long?

Here is the good news. You can transform this presentation structure in one easy step by having confidence in yourself and your message and by leading with your strongest point. You then spend the rest of the presentation building your story and credibility around that opening point.

2. Overloading the audience with too much data
Too often in presentations audiences are overloaded with too many facts and details. This is done for many reasons. The most common are the presenter:
• Feels all the information is important
• Is unable to choose what to take out and leave in so presents everything and hopes the audience gets something
• Is using the data as a crutch to fill time or showcase knowledge and expertise
Ultimately though the main reason for data overloading is the presenter hasn't focused on the audience and thought about what they actually need and want to hear.

3. Using PowerPoint the wrong way
The point of a PowerPoint slide is not to cram as many words as possible onto it and then stand up and read it to an audience. The idea of a slide is to help the audience visually understand your ideas and concepts.
PowerPoint (or any other brand of slides ) is a very powerful visual aid when used correctly. It really is. Unfortunately many presenters do not use it as a visual aid. Instead they use it as:
• Their notes
• A crutch
• A substitute for preparation
• The handout (given before, during or after the talk)
• The PowerPoint that gets circulated to the people that weren't at the talk
Using slides in the wrong way will guarantee you are branded a lackluster presenter.

4. Using too much industry jargon
The best presenters speak in plain English. I know you don't want to be seen to 'dumb things down' or speak in what you perceive to be baby talk. Dumbing down and baby talk are very different to being clear, concise and understandable. To be understood you have to stop:
• using concepts, acronyms and jargon without explanation;
• assuming levels of understanding that are simply not there;
• bombarding the audience with too many numbers with no context for those numbers;
• using ten sentences to say what could be said in two;
• talking about what you are going to talk about instead of just talking about it. You need to get to the point.

The purpose of any presentation is to create understanding. If you don't make your facts understandable you are essentially expecting your audience to:
• take on board a catalogue of data;
• assimilate the data immediately with no real context;
• reach the same conclusion you have reached.

The onus is never on the audience, it is always on the speaker to keep the listener engaged and ensure they understand and leave with the key messages. Great presenters are created, not born. Don't let yourself down when you stand up to speak.

Emma Ledden is author of The Presentation Book
https://www.amazon.co.uk/Presentation-Book-Create-Deliver-

 

LSE chief tells MPs that UK financial sector could lose 232,000 jobs over Brexit uncertainty

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Xavier Rolet, chief executive of the London Stock Exchange Group (LSE), has warned that London's financial sector faces losing 232,000 jobs without certainty over Britain's Brexit deal.

Speaking to MPs on the Treasury Select Committee, Rolet said that a five-year transitional Brexit deal was necessary to protect the UK's financial industry and that the projected two years of Brexit negotiation was too short. "What is required to maintain stability is nothing less than a grandfathering of the existing conditions of trade, for a limited period of time," said Rolet.

Rolet warned that many tens of thousands of jobs might move from the UK to other places in the EU as firms, especially foreign ones, currently based in the UK will want to continue doing business with the rest of Europe under existing EU rules.

"Without a clear path to continued operation of our global businesses our customers simply would not wait," he said. "I'm not just talking about the clearing jobs themselves which number into the few thousands but the very large array of ancillary functions, whether it's syndication, trading, treasury management, middle office, back office, risk management, software, which range into far more than just a few thousand or tens of thousands of jobs. They would then start migrating."

The figures come from a report produced by professional services firm EY for the LSE which, according to Rolet, found that "as far as the entire United Kingdom is concerned, 232,000 jobs would be at risk or likely to be lost".

Rolet warned that the EU was already singling out the UK to disrupt its euro-clearing operation in a way that does not affect other countries, such as the United States or Japan. "I think it is to no surprise that almost a few days after the outcome of the referendum was known, one of the leaders of the continental European countries, out of the blue, claimed not manufacturing, not agricultural products, not wine and cheese-based industries, start-ups or fintech, but focused on clearing as he thought of the business to claim back," he said.

Rolet's comments came on the same day as Douglas Flint, group chairman of HSBC, said the bank may take "pre-emptive action" to move jobs to France, the Netherlands or Ireland before the Article 50 process is complete, but would wait longer before "pushing the button" on the move. Flint said the "ecosystem in London is a bit like a Jenga tower - you don't know if you pull one small piece out whether nothing will happen or it will have a dramatic impact."

He explained: "If you have already established an operation in the EU you can take your time to decide whether or not to move quickly more leisurely, seeing how the negotiations flow. But a bank like us with operations all over the EU including a significant full-service bank in France, you can take even longer to decide when to push the button. Nobody wants to push the button because the best outcome for everybody is the preservation of the status quo insofar as is possible."

Other banks have also issued stark warnings over Brexit, claiming thousands of jobs would shift to rival financial centres across Europe and the United States if Britain loses the right to sell financial services to the EU. JP Morgan said 4,000 jobs would leave the UK and Goldman Sachs threatened to move 2,000 roles if Britain loses passporting rights.

Following the hearing, Treasury Committee chairman Andrew Tyrie said: "The unanimity among these leading City figures about the need for a three-year 'standstill' at the end of the Article 50 process is significant. They argued that without such an arrangement, major banks and other financial services firms will take pre-emptive action at a cost - perhaps large - to the sector and the wider economy.

"They also made other important points. Preserving the access arrangements provided currently by passporting is an important objective. Accepting the loss of one part of the financial services industry, such as euro clearing, could have unintended and disruptive consequences for the UK and the EU."

The financial impact of pension schemes: how to tackle your year-end deficit

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By Adam Poulson, Head of Corporate Consulting (North), Barnett Waddingham

While 2016 was a year marked by plenty of surprises, the worsening in pension scheme deficits was unfortunately all too familiar for many scheme sponsors. However, for those firms carrying out accounting disclosures for the December year end, there are options to lessen the pain.

Funding positions have deteriorated

Our research indicates that the funding position for a typical defined benefit (DB) pension scheme as measured on the balance sheet has deteriorated from 90% funded to around 85% funded since 31 December 2015. This is despite the FTSE 100 total return index being up 19% over the year.

The impact of an increased accounting deficit can be severe. In October 2016, Carclo plc announced that the rise in its pension deficit (as measured by IAS19) meant that it was no longer able to pay its interim dividend, resulting in a 20% fall in its share price. An extreme case maybe, but pension scheme deficits are expected to weigh heavy on corporate balance sheets for the 2016 year end.

So what can be done in the short term?

Although the valuation of deficits for accounting standards such as FRS102 and IAS19 is somewhat prescriptive, there may be straight-forward yet effective measures that can be taken. Indeed, there remains a considerable scope to review the assumptions used this year end.

These assumptions are the responsibility of the company's directors – while consistency from one year to the next remains a key principle of accounting disclosures, it is also important that adequate scrutiny of the key assumptions is carried out each year. This could lead to material improvements in the disclosed deficit.

Discount rate – the company should first and foremost ensure it understands the current approach to deriving the discount rate. This will facilitate a review of the process to see if there are marginal adjustments that can be justified. These may be as simple as reviewing the granular financial data for the chosen bond curve to exclude non-corporate entities, such a University bond which currently drag down the discount rate.

For the typical scheme, an increase in the discount rate of just 0.1% pa would reduce the overall pension liability value by around 2%.

Inflation – there may be scope to adjust the inflation assumption, for example by making appropriate allowance for pricing anomalies in the inflation-linked government bond market, the so called inflation risk premium.

For the typical scheme, a decrease in the inflation assumption of just 0.1% pa would reduce the overall pension liability value by 1to 2%.

Demographic assumptions – whereas the measurement of liabilities carried out by trustees for ongoing scheme funding requires a deliberate margin of prudence, the accounting disclosures are 'best estimate'. In other words, the assumptions used for longevity or cash commutation may be relaxed accordingly.

For the typical scheme, using best estimate assumptions for longevity and tax free cash take up can reduce the liability value by 3% to 6%.

Options in the longer term

The assumptions used at any point in time will not determine the long-term cost of a pension scheme. To help with tackling key risks and reducing this cost burden, there are some worthwhile alternatives to simply continuing to plug volatile deficits with cash contributions, such as giving members the option to take benefits in a different format, including:

• taking all as cash
• drawing down benefits flexibly
• restructuring the level of pension increases

Employers should expect to engage with members and trustees to realise an embedded process up to and after normal retirement – this will meet members' needs as well as leading to long-term savings for the company.

 

barnett-waddingham.co.uk

 

Markets are muted after Italy referendum but instability simmers under the surface

By Chris Parry, Senior Lecturer in A​ccounting and Finance, and Surraya Rowe, Finance Lecturer, Cardiff Metropolitan University

After staking his career on the promise that he would either "change Italy or change jobs", Matteo Renzi has resigned as prime minister. With 60% of the popular vote going against his political reforms in a referendum that became all about Renzi's future, he was left with no choice but resignation. And, following hot on the heels of political upheavals in the UK and US, markets reacted accordingly.

The initial financial shock waves have not been too bad. Milan's stock market, the FTSE MIB, fell and the euro dipped to lows against the US dollar that were last seen at the height of Greece's economic crisis (US$1.0505). The euro has since rebounded, as have European stocks more broadly. By banning opinion polls two weeks before the referendum, Renzi left Italian markets confused and the FTSE MIB rose in the build-up to the vote. This accentuated the sharp falls when the "No" victory was delivered.

Arguably the rejection of Renzi's reforms does not signal too much uncertainty. After all, it means sticking with the status quo and not overhauling a political system that has managed for the last 60-odd years.

So Renzi resigns and Italy's president, Sergio Mattarella, will nominate a successor. They are unlikely to look very different to their technocratic predecessor, but it is only a matter of time before a general election is called and then we'll jump on the panic merry-go-round once again.

Meanwhile, uncertainty simmers below the surface – and market stability should be enjoyed while it can. The last few months have shown the world how uncomfortable uncertainty is. Whether it's what Brexit actually means (and whether it will be "hard" or "soft") or concern over what a Trump presidency will actually look like, financial markets have made it clear that they don't like not knowing.

Italy's problem is its banks. A victory for Renzi might have helped a little in the short-term. But the country remains plagued by nearly €400 billion of non-performing debts that are largely held by retail investors. The situation is not helped by a moribund economy which has too weak an SME sector to drive demand for performing loans.

Monte dei Paschi – Italy's third largest bank – is the current poster child of this failing system. It needs to raise €5 billion and sell off €28 billion of bad loans to stay afloat – albeit still leaking badly. It was part of the way through a complex plan negotiated by Renzi with the EU to raise these funds, but the referendum and Renzi's resignation throws this into question.

If Monte dei Paschi fails, things will start to get nasty. This would likely lead to a loss of market confidence in Italy's wider banking system and could trigger a series of market failures.

This would be incredibly bad news for Italians. The term "retail investor" means you and me – individuals who invest as bond holders in the Italian banks rather than save with them. Under EU rules introduced after the financial crisis and designed to prevent taxpayers bailing out failing banks, bond holders need to "bail-in" (lose some of their money) before the taxpayer "bails out".

In France and Germany, that's great. There, big institutional investors hold the majority of loans, so if a bank needs rescuing, they'd lose out before the taxpayer. In Italy, however, it's the retail investors that must bail in. This means ordinary people losing 10-20% of their savings invested in bank bonds, before taking part in the second stage of the rescue as taxpayers. A real double whammy.

There will likely be a fudge – for now – to maintain unity within the EU during this critical period. But the problem won't be solved. Italy is the third largest economy in Europe and by any measure its economy is in trouble.

The Italian people were focused on what was best for them from a political standpoint, but they could end up paying the price if their banking system fails as a result. And the uncertainty regarding their future leaders means that the outside world can only estimate whether the future of the eurozone is in jeopardy. If the anti-euro Five Star Movement continues to gain ground, it could mean full-blown crisis.


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