Brexit anxiety grips UK businesses

Bloomberg

UK companies are fretting over the prospect of a no-deal departure from the European Union, with the government on the brink of collapse and Brexit negotiations likely delayed into the new year.
Facing defeat on her Brexit accord, Prime Minister Theresa May this week postponed a vote on the plan. The delay in the Brexit vote means British businesses are planning with even less certainty, said David Kershaw, the chief executive officer of advertising agency M&C Saatchi. With a huge range of possible political outcomes, his clients are left in the lurch, “still pondering what kind of Brexit, or indeed not,” there will be as they draw up budgets for 2019, he said before the confidence vote was triggered.
Ever since Britons shocked the world by voting to quit the EU in 2016, companies from Airbus SE to Jaguar Land Rover Automotive Plc have been demanding clarity on the UK’s future relationship with the bloc. Many businesses backed Theresa May’s deal, one of the few interest groups to do so, and she used that support to try to persuade lawmakers that the agreement best protects the economy. That pitch failed, and — less than four months before Brexit — May pulled a vote on the deal.
May’s plan is to pursue greater assurances from the EU that the so-called Northern Ireland backstop — fallback arrangements to prevent a hard border from emerging — won’t become permanent. “The more time is wasted, the more investment is lost for the UK,” said Hardie. “If there’s no solution by the new year, for some businesses that will be the final straw to implement their contingency plans.”
A number of companies across industries — from pharma to retail to manufacturing — have already begun stockpiling goods to avoid delays to trade if the UK crashes out of the bloc. Jet-engine maker Rolls-Royce Holdings Plc said on Wednesday that it’s stockpiling parts in case of customs checks that could slow component deliveries.
May’s government told supermarkets to keep as much stock as possible in warehouses around the country, leading retail giants such as Tesco Plc, J Sainsbury Plc, Walmart Inc’s Asda and Wm Morrison Supermarkets Plc to ask suppliers to ramp up production on concern their shelves will be half-empty if there’s no deal.
Media companies are also taking action. Comcast Corp’s NBC Universal International Networks has recently applied for Bavarian licenses for six international channels. US broadcaster Discovery is laying groundwork to move some operations to the Netherlands in case of a no-deal Brexit. The last-minute nature of the negotiations could ultimately affect which countries are chosen for services, with Luxembourg much quicker at issuing licenses than Ireland, for example.
Manchester Airports Group said it will fund applications by EU workers to stay in the UK after Brexit, following on from news that London Heathrow airport would do the same. MAG, which owns London’s low-cost Stansted terminal, as well as the Manchester hub in northern England, will cover the 65-pound ($81) cost of the paperwork “to give reassurance and comfort to valued colleagues,” it said in a statement. The company employs more than 400 people born in EU-27 countries.

Brexit risks add to UK credit market stress
Bloomberg

Growing Brexit risks are magnifying stresses for UK credit investors — hurting bank bonds, sending investors scurrying for safety and slamming the door on new debt sales.
Brexit’s been a headwind through the year but in recent weeks it’s been joined by a sudden repricing of credit across Europe and the US, triggered by tighter monetary conditions. Borrowing costs have soared and there’s been a wave of sell-offs of riskier company debt.
Some of these bond-price drops have been endured by UK companies. Debt securities of Thomas Cook Group Plc and PizzaExpress Ltd are among those trading at record lows.
There hasn’t been a sterling bond sale in the corporate market since TSB Bank cancelled a covered bond on November 15. Three UK-focussed leveraged-finance transactions were cancelled in the past couple of weeks. Given the high level of uncertainty in sterling bonds, “portfolio managers are reluctant to participate in the primary market,” said Nicolas Trindade, a portfolio manager at Axa Investment Managers UK Ltd in London. “In order to come to the market now, a corporate will have to offer a high premium, so some treasurers would prefer to wait.”
Sterling investors have been fleeing short-dated riskier debt and shifting into longer-maturity, low-risk debt. That’s boosted 30-year UK government bonds and other multi-decade securities.