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Narrowly missing triple dip cuts chances of new capital injection

money-uk

25 Apr 2013 | Torrie Callander, Global Reach Partners

THE UK HAS avoided the dreaded triple-dip recession with a positive GDP release earlier today. Markets had expected growth of 0.1% in Q1 and were pleasantly surprised when 0.3% was confirmed, a figure that will give the Pound support in the coming months.

Sterling has had a difficult year, falling by around 9% in the first two or three months of 2013. The weakness of the currency was based largely on expectations for further quantitative easing from the BoE - the money printing process designed to stimulate liquidity. Today's data has decreased the likelihood of a new QE injection and sterling has been the major benefactor.

What does this mean for UK businesses?
This is positive news for the British importer, particularly those buying in US Dollars and Euros. The GBP/USD rate has been as low as 1.4850 this year and now sits above the 1.54 level. The outlook for the Pound over the next 12 months is much improved now and importers will find their costs fall.

Exporters however are seeing their goods become more expensive to overseas buyers, with scope for further moves against them. Many exporters are looking at long term hedging strategies to protect them from further pain. This is a wise move and one that more exporters should be considering.

Overall of course, this is good news for the UK economy. There are signs of light at the end of the tunnel and British business can take solace from a good start to the year. Lets hope there is much more good news to come.

Torrie Callander is a corporate dealer at Global Reach Partners

Global Reach Partners is running a complimentary workshop in the City of London on14 May that will looking at the main currency challenges facing UK companies

 

 

Living by Thatcher's old adage

Margaret Thatcher and Ronald Reagan

17 Apr 2013 | Mark Lumsdon-Taylor, Hadlow College

THE END OF THE WEEK and Friday night seems to be the evening of choice for civic receptions. The main topic of conversation last week was no surprise......The legacy of the Iron lady. It was pertinent given most of the guests were public servants in one form or another. Whatever your opinion of her politics, you can't argue that Margaret Thatcher had more courage in her convictions (aka balls) than most men who've been in her position since.

I had just turned 15 when Baroness Thatcher left Downing Street and the country was very different in 1990 to when she took office in 1979 but two of her guiding principles hold true even today; 'live within your means' and 'pay your bills on time'. The public sector more than ever is required to live by that adage. Public investment must generate an RoI for the economy and the question is always: "how many jobs will we create and is it sustainable?" Thatcher, whatever your personal political view, opened up the public sector to the world of efficiency and commerce .

Commerciality in the public sector is driven by strong leadership. There is now a greater number of female finance directors and CFO's than ever before. Baroness Thatcher not only broke the preconception that women could not succeed in positions of power, but shattered it into millions of pieces. She remains the only woman to make it to the top job, and she stayed there for eleven and a half years. It is shown that many companies with better gender equality often produce stronger financial results. Is there a lesson here?

This is my first blog and I look forward to contributing further to the public sector perspective on finance and how I believe it is inextricably linked into the future of our country. And in the words of the Iron Lady herself in her last address at the despatch box..."I'm enjoying this".

Mark Lumsdon-Taylor is finance director at Hadlow College

Fuelling growth through incentivising investment

bp-refuelling-pumps

05 Apr 2013 | Tim Ward, QCA

MARKETS ARE BUILT ON CONFIDENCE. Once confidence starts to grow, positive momentum takes hold.

I talk a lot about the engines of growth - our small and mid-size quoted companies - needing fuel. It's seemed over the last few years that everyone agrees with this concept but government has done very little about it.

And then rather like London buses two initiatives arrive in short order. In the Autumn Statement the chancellor announced that AIM and ISDX shares (also known as growth market shares) will be included in ISAs following consultation. The consultation on how to implement this change came out in March just before the Budget.

This has been followed in the Budget by the announcement that the 0.5% stamp duty tax will be removed on the trading of shares on growth markets from April 2014. Together with the London Stock Exchange and other industry bodies, we have been campaigning for the removal of stamp duty on trades in AIM and ISDX shares. This measure will help to increase liquidity and investment in small and mid-size quoted companies - vital engines of growth for the UK economy.

Our quarterly QCA/BDO Small and Mid-Cap Sentiment Index in November 2012 showed that including AIM and ISDX shares in ISAs and removing stamp duty on trading in small and mid-size quoted company shares were two of the five most popular fiscal measures that would have the greatest positive impact on companies were it announced in the 2013 Budget.

It is important to note that the stamp duty change is not due to take effect until the next tax year - in April 2014. Between then and now, there will be a consultation from HM Treasury on the move. Our understanding is that the consultation will not be about whether to remove stamp duty on AIM and ISDX shares, but instead how to implement it. For example, there may need to be some changes to the CREST settlement system.

All of a sudden the fuel gauges have started to flicker. Both measures will take time to come up to speed, but they are nevertheless very welcome. They will create momentum in trading. With increasing trading volumes, we should start to see an overall improvement in the valuations of growing companies. This will enable these companies to approach their investors and raise finance with more confidence. With more finance we should see more jobs and the creation of long-term value for shareholders.

Confidence creates more confidence; it's contagious. So - in the nicest possible way - perhaps we should be a Contagion Nation as well as an Aspiration Nation.

Tim Ward is chief executive of the Quoted Companies Alliance

Qu'est-ce que c'est? What leadership language do you speak?

Talking Heads

22 Mar 2013 | Stuart Pickles, AimHigherLeadership.com

SPEAKING A FOREIGN LANGUAGE is difficult, but many people achieve it. Those that do will say that it's just a matter of hunkering down and getting into the head and the world of someone from a different culture.

What's interesting is that even within our own culture and official language, there are in fact many different languages being spoken. This is not a joke about regional dialects, it is about the importance of different psychological types, and how they respond to different ways of using our own language.

According to Jung's psychological theory, a rational introvert will be more easily persuaded by language which gives a cool, calm, fact based assessment. A more intuitive extrovert will be turned off by this, but will be motivated by language which expresses an inspiring visual demonstration of possibilities. Some people are more motivated by language of opportunity, whilst others will be motivated more by words that talk about necessity. There are many similar variations of language based on how people prefer to communicate.

The surprising reality is that many people do not modify their language according to who they are speaking to. They just speak their language, the language which works for them, the way of speaking which they prefer. None of this is new, we all know people who talk in a way that always just seems to grate, and we know how limited their ability is to influence our way of thinking.

But how many of us have a conscious awareness of how we are coming across to people who we want to influence? How much do we adapt our choice of words and phrases to match what might match how they prefer to communicate? And how much more important is this when you are leading people, hoping and expecting people to follow you, working effectively in a team and influencing multiple stakeholder groups?

The solution is not as difficult as learning a foreign language, but it does take a purposeful and structured approach to understanding how people communicate. Many organisations now invest in psychological assessment tools to help leaders develop a greater awareness of their communication preferences and how to modify their language for different audiences, whilst remaining totally authentic.

With focused leadership coaching support, leaders can make a step change in their effectiveness to influence their key stakeholders, engage their teams and really fulfil their potential as leaders.

As a leader, what languages do you and your team speak? And what results are you getting?

Stuart Pickles is the former FD of Foster's EMEA. He now runs AimHigherLeadership.com and is blogging regularly for Financial Director

Image credit: Shutterstock

Cyprus rejection sends EU back to the drawing board

cyprus-map

21 Mar 2013 | Torrie Callander, Global Reach Partners

OVER THE WEEKEND the news broke that eurozone finance ministers had agreed a €10Bn (£92bn) bailout for Cyprus - but with conditions attached. Cyprus had to raise some money on its own.

Many ideas were bounced around and it was suggested that the best method of raising funds quickly was to impose an immediate tax on all deposits held. This was overwhelmingly rejected by the Cypriot parliament on Tuesday and failed to receive a single MP's backing. This sent ministers back to the drawing board in search of a plan B.

The impact of this situation is much more significant than it appears - notwithstanding the controversial one-off tax raid on local and expatriates bank savings accounts. The precedent is set. If any EU nation comes "cap in hand" for a bailout from the European Central Bank (ECB), they will met with strict terms and conditions.

What does this mean for the euro?

Italy and Spain are still in economic trouble. Their borrowing costs may have stabilized last year with the announcement of the European Stability Mechanism, but this stability is now under threat again. If the borrowing costs get too high, they will need help from the ECB. But will they get slapped with the same obligations as Cyprus? If so, it would be a much bigger issue compared to the Cypriot situation. This has spooked the market and the euro has fallen from its two year high against the pound. Investors are watching closely to see what deal is struck in Cyprus as an indicator for future euro stability.

Rising inflation, weak growth, upcoming German elections and an overvalued euro are all starting to weigh heavily on the eurozone economy once again. The charts show that the GBP/EUR rate has now bounced off a five year strong support level. Has the euro seen its highs? In the short term, I think so.

Torrie Callander is a corporate dealer at Global Reach Partners

Exporters queue up as QE is put off again

dads-army-global-broker-map-take2-ukcentred2

12 Mar 2013 | Torrie Callander, Global Reach Partners

SO THE Bank of England voted against further Quantitative Easing and Sir Mervyn King was out voted for the fourth time in his tenure as Governor. All the talk about negative interest rates proved to be nothing more than that, with rates being kept on hold yet again. This surprised those in the market many of whom expected a fresh round of money printing. The Pound was the immediate benefactor, rising by half a cent on the Dollar within minutes of the announcement.

What is next for Sterling?

The Pound has been one of the biggest losers in the currency markets so far this year driven lower by consistently negative data releases from the manufacturing and construction sectors, a credit rating downgrade and expectations for QE. This has been great news for UK exporters who have been significantly more competitive as the Pound has weakened.

For British importers however, it has been a different story. The sudden drop in the value of Sterling saw many caught off guard and unprotected. The speed of the fall was certainly unexpected and many Sterling sellers sat on their hands expecting retracement that never came.

Today's announcement should give some balance to the equation. One of the drivers of Sterling weakness was the expectation of further QE. Now that this has been put off for at least another month the market - and the Pound - can breathe. This may afford importers the chance to sell Sterling slightly higher up the range in the coming weeks and they would be wise to seize the opportunity.

However, in the next three to four months, the Pound will remain under pressure. Until we see sustained growth in the UK economy there will be little to support the currency. The threat of QE will continue to loom, especially with a new BoE governor taking over in June. The remaining ratings agencies will be scrutinising the AAA rating and investors will be reluctant to hold Sterling.

Exporters should make hay while the sun shines, while importers should be considering hedging measures that protect their budget exchange rates.

Torrie Callander, corporate dealer, at Global Reach Partners

Sterling hammered in wake of downgrade

Ocado's stunted listing compounds UK's faltering IPO market

11 Mar 2013 | Mark Ackroyd, Global Reach Partners

IT HAS BEEN on cards for a while but the UK losing its AAA credit rating has still shocked the market, particularly in its timing. Rumours of a downgrade were rife and the pound has struggled recently as a result. Sterling has depreciated by 8% against the US dollar since December 2012 and as much as 11.5% versus the euro since October last year but the most common view was that a credit rating downgrade was most likely to follow the UK's Q1 GDP figure which is released in April. The GDP release is likely to confirm that we will have entered a triple dip recession, when put in this context a rating downgrade is no surprise.

The downgrade compounds the recent flow of bad news from the UK and brings both political uncertainty and monetary policy concerns. The chancellor has hung his hat on the UK's prized AAA credit rating. Strict austerity measures have been implemented in order to get the UK out of debt and keep rating agencies at bay. Moody's downgrade shows a clear failure to do so and undermines government policy moving forward. Where do they go from here? The BoE have already doubted the UK's return from recession and with current policy clearly not working there is now debate over further QE, interest rate cuts and purchasing corporate bonds.

What is the result of all this uncertainty on the pound? The downgrade from AAA and the prospect of sluggish growth continuing for years has ensured that the news has been awash with stories of the pound's ‘slump to parity with the euro' and forecasts of GBP/USD down at 1.40 before the end of the year. The prospect of GBP weakness across the board is, understandably, concerning UK importers. Support levels have been broken and the pound is showing signs of being the ugliest of the ugly sisters for some time. UK businesses have been actively looking to protect themselves from further downside risk.

Mark Ackroyd is senior commercial dealer at Global Reach Partners

Psyched in the workplace: Let the anger out

angry-man-phone

11 Mar 2013 | Gavin Hinks

THERE'S A LOT of negotiating going on at the moment. The US and EU are entering trade talks. David Cameron wants powers back from Brussels and the UK has, according to press reports, desperately tried to soften the blow of new European curbs on bankers' pay - with little success. A lot of smoke filled rooms, filled with people trying to win concessions and, essentially, get their own way (there's no such thing as a smoke filled room anymore, surely?).

But how do you do that effectively? How do you persuade people to listen? In these instances it's worth turning to the psychologists for some insight, and one bit of work which might help is research which looked at what happens if you "fake" anger during negotiations.

Academics looked at this because past research had concluded that anger in a negotiation tended to get you what you wanted. The explanation being that counterparties were likely to conclude that you were tough and unlikely to bow to pressure. Conclusion? Just blow your top and the day, trade deal or price on widgets was likely to be yours.

So, some psych boffins from Canada and the Netherlands[1] designed an experiment which looked at what happens during negotiations for a used car. They persuaded actors to help. During the negotiation the actors were instructed to remain emotionally neutral, or fake anger (right up their street) or dig deeper and deliver some "deep acted anger", or what the psychologists thought closely approximated to the real thing. The actors then haggled over the car with undergraduate students. Some quite nuanced results emerged.

Fake anger tended to be met with a tougher negotiating stance from the undergrads. In short putting on a face wasn't of much benefit. "These findings provide initial evidence that surface acting anger does not have the favourable consequences that were identified in past research on the effects of showing anger, and that surface acting anger instead carries costs for negotiators," they conclude. This was especially the case if talks went into a second round. However, genuine anger, they discovered, "elicits concessions".

"The strategic management of anger has important consequences for the behaviour of parties during negotiation, and, we suspect, for social behaviour in general," they say.

The team has caveats, not least that a neutral emotional position may come across as detached, steely poise that frankly that people find persuasive, especially when they're able to compare it to fake anger. Also, the genuine anger experiment was conducted using video footage. It may be that people watching film concentrate more on emotional reactions than they do when face to face.

But the issue may just be trust. People don't like fakery so they toughen up in the face of faux anger. Likewise, when the anger appears real, they soften their stance.

Recently I came across another note on persuasion. Psyblog[2], written by Jeremy Dean, author of Making Habits, Breaking Habits, points out that a truck load of research has concluded that simply saying to someone that they are "free" to choose could be one of the most influential persuasion techniques going. A review of 42 studies by Christopher J Carpenter[3] demonstrated that this was a useful approach to getting your own way. Dean says: "By reaffirming their freedom you are indirectly saying to them: I am not threatening your right to say no. You have a free choice."

It made me wonder whether it could be even more effective if combined with some genuine vexation. Which had me conjuring unlikely images of David Cameron loosing it with euro politicians and declaring: "You're free to choose but, frankly, I'm livid." And then miraculously they all say he was right all along (it's only an image in my head).

Cameron doesn't come across as someone prone to displays of emotion, especially in negotiations. I imagine he would prefer to be seen as a somewhat cool, reserved character in line with the British stereotype of the stiff upper lip, what the Europeans like to call our "phlegmatism" (there's more than a little truth in this). Which means, as negotiators we are not overly given to angry outbursts. Perhaps, if we really want a deal with Europe, or you want to seal that big acquisition, or protect bankers' pay we need a little more emotion.

Gavin Hinks is a freelance journalist and writes the Profits and Loss blog at http://profitsandloss.blogspot.co.uk/


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[1] The Consequences of Faking Anger in Negotiations: Stephane Cote, Ivona Hideg and Gerben A. van Kleef, Journal of Experimental Social Psychology, Vol 49, pp453-463, (2013)
[2] Read the PsyBlog at http://www.spring.org.uk
[3] A Meta-Analysis of the Effectiveness of the "But you are free" Compliance-gaining Technique, Christopher J Carpenter, Communication Studies, Vol 64 Issue 1, (2013)

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