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United-Kingdom: Brexit is coming, investments are waning…

1/10/2020

In the UK, the prospect of Brexit has hindered foreign direct investments.

TRANSCRIPT // United-Kingdom: Brexit is coming, investments are waning… : January 2020

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Brexit update 1/24/2020
On 31 January 2020, the United Kingdom will officially leave the European Union and all of its constituent institutions. Brexit will therefore happen in law if not in fact, as, during a so-called ‘transition’ period set to end on 31 December 2020, the British economy will remain a full part of the single market and the European customs union. Goods, services and capital will continue to move freely into and out of the EU, which will continue to have legal and regulatory authority. True separation will only come at the end of this period, once the framework of the future relationship has been settled. As has been the case for some time now, this final step does not look easy to achieve.
The UK: heading for the door 12/20/2019
The UK’s general election on 12 December gave Prime Minister Boris Johnson’s Conservative Party a substantial majority in the House of Commons. The way is now clear for ratification of the Withdrawal Agreement (Brexit) by the UK and the European Union, and this will come into force after the 31 January 2020 at the latest. There will then follow a transitional period, during which the UK and EU will have to determine the framework of their future relationship. However, at just eleven months long, this period threatens to be too short to implement the clean break sought by Mr Johnson. Unless it is to fall back on WTO rules, the UK will only be able to disentangle its links with the EU through a long and delicate process. In effect, Brexit is only at the beginning.
How major banks have returned to profit 11/8/2019
The financial crisis of 2008 left its mark on the macroeconomic, regulatory and legal environments in the United Kingdom. It was followed by a long period of consolidation in the banking sector. Although the major British banks have managed to improve their performances recently, they are now faced with fresh challenges, starting with the uncertainty surrounding Brexit. For the banks, this uncertainty will not be resolved immediately by the conclusion of the Brexit as they will still need to adjust to the loss of their European passporting rights and potentially to address a contraction in demand in their domestic market.
United Kingdom: credit bank supports bank's activities at the price of a slight increase in risk 11/8/2019
The outstanding amount of mortgages granted to households continues to grow at a relatively dynamic pace in a context of rather low interest rates, which is accompanied by a slight increase in risk. The latter seems however for the moment mastered. 
Brexit update 10/10/2019
As we approach 31 October 2019, the latest deadline for the British exit from the European Union (Brexit), who can say where the UK is heading? Probably not the Prime Minister itself, Boris Johnson, who lost his majority in the House of Commons in an attempt to suspend discussions and fuelled scepticism among his European partners by presenting a take it or leave it ‘compromise’ on the Irish backstop that is hardly applicable nor acceptable. This would leave the Brexit end-point with no deal, although this has been prohibited by a law, or the more likely, but by no means guaranteed, outcome of a new extension accompanied by an early general election.
United Kingdom: Credit risks increase on banks’ balance sheets 7/24/2019
The share of residential loans to individuals whose value at the origination represents more than 90% of the value of the property acquired continued to grow in the first quarter of 2019. This credit category then represented 4.5% of outstanding home loans compared with 4.4% in the previous quarter and 3.3% a year earlier. The increase in their weight in the first quarter of 2019 prolongs the trend observed since the low point reached at the end of 2009. It also goes hand in hand with the increase in the proportion of real estate loans whose value represents between 75% and 90% of the value of housing. The growing financial constraint of households is otherwise illustrated by the increase in the proportion of loans with a high loan to income ratio. The erosion of the margins of credit institutions concerned with preserving volumes and their market shares, has marginally contributed to this by keeping, despite the two increases in the base rate of the Bank of England (BoE) occurred since October 2017, the amount borrowed at a high level, in constant monthly payments.
Brexit update 7/10/2019
Brexit has been behind thirty-seven resignations from the government responsible for managing the process, the latest being that of Prime Minister Theresa May herself. Having failed three times to get the Withdrawal Agreement through Parliament, she had little choice but to ask for an extension of the Article 50 period and then in the end to resign. The two candidates to take her place are the current Foreign Secretary, Jeremy Hunt, and his predecessor, Boris Johnson. Whilst Mr Johnson claims he can negotiate a changed deal and trigger Brexit from 31 October 2019 (the latest deadline), Mr Hunt plans to seek more time in order to renegotiate to allow for an orderly exit.
United Kingdom: Private sector loans drive growth in bank balance sheets 6/12/2019
The Bank of England's (BoE) aggregate balance sheet statistics for the Monetary and Financial Institutions (MFIs) provide a macroeconomic picture of the UK banking system. They illustrate the contraction of bank balance sheets until December 2015 (-19% compared to January 2010). This was mainly the result of the decline in outstanding loans to the resident non-financial private sector, whose debt was returning to more sustainable levels. Non-resident claims and interbank transactions also contributed to the decline in bank balance sheets. The trend has reversed since 2016 (+ 19% between December 2015 and March 2019), but the balance sheet of the UK banking sector has not yet returned to its 2010 size in terms of value or as a percentage of GDP (GBP 4,122 bn or 195% of GDP in March 2019 vs. GBP 4,288 bn or 279% of GDP in January 2010). The recovery is driven by the recovery of outstanding vis-à-vis the resident non-financial private sector (+ 17% after -20% between 2010 and 2015), and for non-residents (+ 21% after - 15%). The interbank market remained at a low level, partly driven by the BoE's operations* (+ 68% after + 49%). *such as quantitative easing or term funding scheme implemented by the BoE to inject liquidities
United Kingdom: Three questions about Brexit 6/11/2019
The deadline for Brexit has been extended to 31 October. However, it is far from certain that this delay will be for any help in getting out of the impasse.

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