Week in Review: Post-Brexit teething problems weigh on UK shares

FTSE NEWS

The FTSE 100 ended the day flat on Thursday (11 February), with some experts blaming post-Brexit trade friction with the European Union for the lacklustre performance of British shares. The index finished up just 0.07% at 6,528.72.

• Rightmove publishes house price data for February on Monday (15 February).
• On Tuesday (16 February), the Institute for Fiscal Studies is giving a virtual briefing on the new tax measures it thinks the Chancellor could introduce in next month’s Budget.
• The Office for National Statistics (ONS) publishes inflation data for January on Wednesday (17 February).
• On Thursday (18 February), the Bank of England releases an update as to how much larger firms have drawn from its coronavirus support fund.
• The ONS publishes the latest monthly retail sales data on Friday (19 February).

SECTOR IN FOCUS

Housebuilders are in disagreement about how to pay to fix the nation’s cladding crisis.

Last week, David Thomas, the chief executive of housebuilder Barratt Developments plc (BDEV), called for a levy on developers to pay for the crisis.

Hundreds of thousands of flat owners have learnt that they live in buildings with unsafe cladding since the Grenfell fire tragedy in 2017.

The Government estimates it will cost £15bn to remove and replace unsafe cladding on high-rise blocks of flats and has this week pledged an additional £3.5bn to help fix the problem.

But, as things stand, flat owners are being left to stump up for most of the cost of replacing old cladding in many cases.

Thomas believes the remediation costs should be paid for by a tax on developers, like the one he leads. However, that is not a view shared by his peers.

The Home Builders Federation, which acts on behalf of developers, this week called for a “fair solution” that involves “all parties involved in the design, construction, inspection and current ownership of buildings”.

This may be an issue that rumbles on for some time.

ECONOMIC UPDATE

Both the UK and the EU have been keen to point fingers at one another over the past few years, arguing that the other will be worse off after Brexit.

The problem was, neither side really produced any numbers to back up their claims.

However, now the European Commission (EC), the executive branch of the EU, has done so.

It believes the UK will suffer an economic hit from Brexit four times greater than that of the bloc.

According to its estimates, the UK’s exit from the EU will cost the bloc 0.5% of growth over the next two years. This compares to 2.25% for the UK, the EC predicts.

Why? Partly because the Brexit deal struck at the end of last year only covers goods, whereas the bulk of the UK’s income comes from services, such as banking and insurance and such.

While many people agree Brexit will be economically damaging to both sides, clearly the UK and EU each have an agenda when it comes to Brexit.

On the one hand, the UK wants to be seen to be making a success of its divorce from the bloc, while the EU is keen to show other members that they’re better off in the club.

So it might be wise to take any forecasts produced by either side with a large pinch of salt.

FUND WATCH

Asian stock markets dominate the best performers list so far this year. FSSA Asia Focus B GBP Acc (GB00BWNGXJ86) gives you exposure to fast growing emerging Asian economies such as China and India, as well as developed economies such as Japan. It has an ongoing charge of 0.9% and has returned nearly 139% in five years.

COMPANY ANNOUNCEMENTS

17 February – Analysts are optimistic about the outlook for Rio Tinto plc (RIO) on the back of a predicted increase in iron ore prices. Swiss broker Credit Suisse predicts a 40-60% uplift in the mining and metals giant’s earnings over the next three years as a result. Rio reports its full-year results on Wednesday (17 February).

19 February – With record-low interest rates squeezing margins and the potential for a spike in bad loans due to coronavirus, conditions are tough for banks at the moment. NatWest Group plc (NWG) announced in October that it had swung back into profit in the third quarter but at the time chief executive Alison Rose warned that “challenging times lie ahead”. It reports its full-year results on Friday (19 February).