• Property, bank sectors race to curb Brexit fallout

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    LONDON: Britain’s referendum vote to quit the European Union is starting to bite hard, with the property sector fast losing investor confidence and banks offered a helping hand to boost lending.

    Data meanwhile has shown the British economy taking a knock already in the run-up to Brexit, with business confidence hitting a 3.5-year low in June, according to a Markit purchasing managers’ index released this week.

    REAL ESTATE: Financial groups have suspended trading in commercial property funds after Brexit uncertainty caused investors to rush to withdraw their money following the result of the June 23 vote.

    M&G Investments, Aviva Investors and Standard Life Investments have all suspended funds since the start of the week and against a backdrop of a tumbling share prices for property builders and as the pound slides to more than three-decade lows against the dollar.

    “The prospect of a weaker currency, property concerns, decimated bond yields and households battening down the hatches paints a fairly fraught picture of where the UK could go from here,” Rebecca O’Keeffe, head of investment at stockbroker Interactive Investor, said Wednesday.

    London’s upmarket estate agency Foxtons has meanwhile warned that profits would be hit this year as a direct result of Brexit. Office occupancy could suffer also should Britain fall into recession, as many experts have warned, or if banks and other businesses look to move staff abroad.

    BANKS: The Bank of England on Tuesday relaxed commercial banks’ capital requirements to encourage lending to businesses and households and stimulate economic growth, as it warned that risks to financial stability were materialising.

    BoE governor Mark Carney has meanwhile indicated that the central bank could cut its key interest rate to a new record-low level under 0.50 percent as early as this month—while it may decide also to pump out more cash stimulus as a result of Brexit.

    Ratings agencies have in the past fortnight axed their top credit ratings for Britain, which could hinder the country’s ability to borrow at the best rates on markets, as the government jettisoned its target for a budget surplus by 2020.

    Banks have also suffered heavy share price falls, as following Brexit, Britain risks no longer being considered as the gateway to Europe for US and Asian banks, while thousands of jobs are at risk of being relocated abroad.

    London’s financial sector alone employs more than one million staff, while it handles one fifth of the world’s financial transactions.

    Regulatory changes could, meanwhile, see a reduction in British banks’ access to financial services in the EU’s other 27 member countries should changes occur to the so-called EU bank passport.

    CARMAKERS: New car sales dipped 0.8 percent year-on-year in June—the first drop since and only second decline since February 2012— industry body SMMT said Wednesday.

    “There is widespread suspicion—including at the Bank of England—that heightened uncertainty following the vote to leave the European Union will particularly hit sales of big-ticket items such as cars and houses,” it said in a statement.

    Major carmakers, including Nissan and Toyota, voiced fierce opposition to Brexit ahead of the vote, pointing to the fact that most of their British production is exported to Europe and beyond.

    AIRLINES: Since the result, British Airways owner IAG and British no-frills airline EasyJet have posted profit-warnings.

    AFP

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