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FOUR IN FIVE MID-MARKET BUSINESSES DETERMINED TO GROW DESPITE BREXIT – BUT FACE FINANCE ENVIRONMENT UNFIT FOR PURPOSE

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FOUR IN FIVE MID-MARKET BUSINESSES DETERMINED TO GROW DESPITE BREXIT - BUT FACE FINANCE ENVIRONMENT UNFIT FOR PURPOSE
  • 83% of mid-market firms plan to increase turnover this financial year, by an average of 22%.
  • Of those that plan to grow, 62% would bet their house on meeting target.
  • But 66% believe the mid-market will be disproportionately affected by economic uncertainty.
  • Access to single market “critical” for 60% of the UK’s mid-market firms – 61% fear consequences of no EU agreement.
  • 56% of leaders concerned mid-market finance is “not fit for purpose” and 58% believe their company can’t achieve full potential without better long term funding.
  • New report from national law firm Mills & Reeve highlights the defiant ambition of the mid-market despite serious challenges, and demands for sustainable growth finance.

Mid-market businesses remain ambitious and confident in their growth prospects despite an unstable economic landscape, the impact of Brexit and an unsupportive funding environment, according to new research from national law firm Mills & Reeve. The study, Defying Gravity – based on the opinions of 500 leaders of medium-sized businesses in the UK – reveals that 83% of mid-market businesses plan to increase turnover in this financial year (2017/2018) by an average of 22%, and two thirds of leaders aiming to grow (62%) are willing to bet their house on meeting this target. This is not unrealistic, with the new research also revealing that two thirds (66%) of medium-sized businesses grew turnover last year, at an impressive average of 20%. However, mid-market businesses face serious challenges to growth. Three fifths (59%) of mid-market business leaders do not believe that the economy is strong and stable.

Two thirds (64%) of mid-market boards are concerned that there is now a real risk of recession, and that economic uncertainty will disproportionately affect the mid-market (66%). With single market access “critical” for three fifths (60%) of mid-market businesses, Brexit looms large on leaders’ list of concerns. Three in five (61%) mid-market leaders are concerned that the UK failing to reach an agreement with the EU would cause “significant damage” to their business, and 60% are concerned that regions outside London will be disproportionately affected by Brexit. More than half (55%) of leaders are concerned that implementation of Brexit is a serious threat to their ability to recruit both specialist and low cost talent. The external funding needed to supercharge growth is also found to be lacking: almost three in five mid-market leaders (58%) say that their company can’t achieve its growth potential without better long-term finance options. More than half (56%) of business leaders stated that mid-market finance is not “fit for purpose”, with two thirds (63%) believing that the UK funding environment is great for start-ups, but not for mid-market firms.

Claire Clarke, managing partner at Mills & Reeve, comments: “Despite very real challenges, it is encouraging to see mid-market leaders remaining defiantly ambitious about growth, determined to beat market conditions and to hold their position as the driving force of the British economy. “But these businesses are being hindered in their efforts to realise their ambitions. Accessing growth finance suited to mid-market needs is a significant challenge, and the unstable economic and political landscape is causing some businesses to refrain from making the investment necessary to grow.” The findings are released today ahead of a series of reports from Mills & Reeve championing the mid-market and exploring the current challenges faced by business leaders. The research goes on to reveal a perceived lack of support from Government, with two thirds (65%) of medium-sized business leaders frustrated that the Government “keeps presenting obstacles to mid-market growth”.

Three-quarters (74%) cite a lack of targeted policy support, with 61% concerned that Brexit will distract Government from supporting regional development and infrastructure. Jayne Hussey, head of mid-market at Mills & Reeve, adds: “The mid-market is the unsung powerhouse of the UK economy, and we are hopeful that medium-sized businesses can continue to overcome the barriers to growth formed by uncertainty. The events of the recent past may have rocked the nation’s confidence, but the resilience, strength and ambition of mid-market business leaders appears to remain intact.” Defying Gravity follows Full Scale Ahead, a 2015 study that explored paths to growth for mid-market businesses and the question of whether to scale or sell. For more information and to download the full Defying Gravity report, visit www.wearedefyinggravity.co.uk

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Oil prices steady as lockdowns curb U.S. stimulus optimism

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Oil prices steady as lockdowns curb U.S. stimulus optimism 1

By Noah Browning

LONDON (Reuters) – Oil prices were steady on Monday as support from U.S. stimulus plans and jitters about supplies competed with worries about demand due to renewed lockdowns to prevent the coronavirus from spreading.

Brent crude futures for March rose 7 cents, or 0.1%, to $55.48 a barrel by 1210 GMT. U.S. West Texas Intermediate crude for March was up 5 cents, or 0.1%, at $52.32.

“Sentiment was buoyed by expectations for a blockbuster coronavirus relief package … (but) the tug of war between stimulus optimism and virus woes is set to continue,” said Stephen Brennock of broker PVM.

U.S. lawmakers are set to lock horns over the size of a $1.9 trillion pandemic relief package proposed by new President Joe Biden, financial stimulus that would support the economy and fuel demand.

European nations, major consumers, have imposed tough restrictions to halt the spread of the virus, while China reported a rise in new COVID-19 cases, casting a pall over demand prospects in the world’s largest energy consumer.

Barclays raised its 2021 oil price forecasts, but said rising cases in China could contribute to near-term pullbacks.

“Even though the pandemic is not yet slowing down, oil prices have good reasons to start the week with gains,” said Bjornar Tonhaugen from Rystad Energy.

Supply concerns have offered some support. Indonesia said its coast guard seized an Iranian-flagged tanker over suspected illegal fuel transfers, raising the prospect of more tensions in the oil-exporting Gulf.

“A development that always benefits prices is the market turbulence that conflicts create,” Tonhaugen added.

Libyan oil guards halted exports from several main ports in a pay dispute on Monday.

Output from Kazakhstan’s giant Tengiz field was disrupted by a power outage on Jan. 17.

(Editing by David Goodman and Edmund Blair)

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Dollar steadies; euro hurt by vaccine delays and German business morale slump

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Dollar steadies; euro hurt by vaccine delays and German business morale slump 2

By Elizabeth Howcroft

LONDON (Reuters) – The dollar steadied, the euro slipped and riskier currencies remained strong on Monday, as currency markets were torn between optimism about U.S. stimulus plans, and the reality of slow vaccine rollout and the economic impact of lockdowns in Europe.

Market sentiment had turned more cautious at the end of last week as European economic data showed that lockdown restrictions to limit the spread of the virus hurt business activity, dragging stocks lower.

The safe-haven dollar declined gradually overnight, and riskier currencies strengthened. It then recovered some losses after European markets opened, and was at 90.224 against a basket of currencies at 1152 GMT, flat on the day.

On one hand, market sentiment is supported by hopes for President Joe Biden’s $1.9 trillion fiscal stimulus plans, as well as the expectation that central banks will continue to provide liquidity.

But, in Europe, the extent of the risk appetite was limited by a lack of progress in rolling out the COVID-19 vaccine as well the economic impact of lockdown measures.

German business morale slumped to a six-month low in January, surprising market participants who had expected the survey to show a rise.

“It’s very much a case of hopes for the future against the reality of the first quarter of this year which is going to still prove to be fairly troubled,” said Jeremy Stretch, head of G10 FX strategy at CIBC Capital Markets.

“For now at least, the optimism that we’re hoping for has been somewhat delayed and that has taken a little bit of steam out of the euro and just put a little bit of support back in the dollar but ultimately I think it is still a case of those high-beta commodity currencies, reflation currencies, will continue to perform well,” he said.

Analysts expect a broad dollar decline during 2021. The net speculative short position on the dollar grew to its largest in ten years in the week to Jan. 19, according to weekly futures data from CFTC released on Friday.

The U.S. Federal Reserve meets on Wednesday and Fed Chair Jerome Powell is expected to signal that he has no plans to wind back the Fed’s massive stimulus any time soon – news which could push the dollar down further.

“The process of tapering QE is likely to be a gradual process which could last throughout 2022, and then potentially be followed by the first rate hikes later in 2023,” wrote MUFG currency analyst Lee Hardman.

“In these circumstances, we continue to believe that it is premature to expect the US dollar to rebound now in anticipation of policy tightening ahead, and still see scope for further weakness this year,” he said.

The euro was down around 0.1% against the dollar, at $1.2153 at 1207 GMT. At the European Central Bank meeting last week, President Christine Lagarde said the bank was closely watching the euro. The euro surged 9% last year versus the dollar and reached new two and a half year highs earlier in January.

But despite this verbal intervention, traders remain bullish on the euro, expecting the bar for a rate cut to be high.

Elsewhere, the Australian dollar, which is seen as a liquid proxy for risk, was up 0.2% at 0.7726 versus the U.S. dollar at 1208 GMT.

The New Zealand dollar was up 0.5%, while the commodity-driven Norwegian crown was up 0.2% the euro.

The safe-haven Japanese yen was flat on the day at 103.815 versus the U.S. dollar.

Graphic: USD, https://fingfx.thomsonreuters.com/gfx/mkt/qmypmyjdxpr/USD.png

(Reporting by Elizabeth Howcroft, editing by Ed Osmond and Chizu Nomiyama)

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Hong Kong’s Cathay Pacific warns of capacity cuts, higher cash burn

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Hong Kong's Cathay Pacific warns of capacity cuts, higher cash burn 3

(Reuters) – Cathay Pacific Airways Ltd on Monday warned passenger capacity could be cut by about 60% and monthly cash burn may rise if Hong Kong installs new measures that require flight crew to quarantine for two weeks.

Hong Kong’s flagship carrier said the expected move will increase cash burn by about HK$300 million ($38.70 million) to HK$400 million per month, on top of current HK$1 billion to HK$1.5 billion levels.

Hong Kong is set to require flight crew entering the Asian financial hub for more than two hours to quarantine in a hotel for two weeks, the South China Morning Post reported last week, citing sources.

“The new measure will have a significant impact on our ability to service our passenger and cargo markets,” Cathay said in a statement, adding that expected curbs will also reduce its cargo capacity by 25%.

The airline, in an internal memo seen by Reuters, requested for volunteers among its crew who could fly for three weeks, followed by two weeks of quarantine and 14 days free of duty, adding it will be a temporary measure and not all its flight will require such an operation.

“We continue to engage with key stakeholders in the Hong Kong Government,” the memo said.

In an emailed response to Reuters, a Hong Kong government spokesperson said: “In the light of the evolving pandemic situation locally and internationally, the Government will keep reviewing and refining the arrangements applicable to different categories of exempted persons, including air crew, with reference to all relevant considerations.”

Separately, a company spokeswoman said the airline could not detail the impact on vaccine transport specifically in terms of cargo shipments.

The aviation industry has been hit hard by the COVID-19 pandemic as many countries imposed travel restrictions to contain its spread.

In December, Cathay’s passenger numbers fell by 98.7% compared to a year earlier, though cargo carriage was down by a smaller 32.3%.

(Reporting by Shriya Ramakrishnan in Bengaluru; Additional reporting by Jamie Freed in Sydney and Twinnie Siu in Hong Kong; Editing by Bernard Orr, Arun Koyyur and Mark Potter)

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