UK personal insolvencies hit seven-year high; US consumer confidence slumps - business live

Over in Greece, the government has made a foray back into the financial markets by auctioning a new five-year bond, reports Helena Smith in Athens.

The bond, the first since Athens exited its bailout programme last August, is critical to testing investor confidence at a time when tapping markets has proven to be more difficult than expected – partly because of market tumult prompted by Italy but mostly because of the country’s debt-to GDP ratio, at 185% the highest in Europe.

Friday’s landmark accord resolving the long-running name row with Macedonia has punched a hole in that uncertainty, analysts say, pushing up bond yields.

The sale was expected to raise between €2bn and €3bn, with a projected yield of 3.75% to 3.875%, sources say. The paper will mature in April 2024.

And the sale appears to have gone better than expected -- Athens has raised €2.5bn, at a yield of just 3.6%. That could reassure investors that Greece can finance itself, rather than needing fresh financial help.

Just in: The US government shutdown has had a chilling impact on consumer morale.

The consumer confidence index, calculated by America’s Conference Board, has slumped to just 120.2 this month -- down from 126.6 in December.

Economist had expected a much smaller decline, to 124.9.

That’s a pretty clear sign that the month-long deadlock between the White House and Congress, which left hundreds of thousands of Federal workers unpaid, has hurt the economy.

That’s a bad sign for growth. The only hope is that confidence might pick up, now that Trump has blinked and agreed to reopen the government.

Here’s my colleague Phillip Inman on the jump in insolvencies:

A jump in personal insolvencies in the fourth quarter of 2018 sent the total number of people going bust last year in England and Wales to the highest level since 2011.

Individual insolvencies rocketed by 34.7% compared with the previous quarter to 34,108, taking the total number for the year up by just over 16% to 115,299, according to figures from the Insolvency Service.

A rise in company insolvencies to 4,725 in the last quarter, spurred by the collapse of hundreds of construction and retail businesses, sent the number of company insolvencies last year to 17,439, the highest level since 2014....

More here:

The number of companies hitting financial trouble have also risen.

Corporate insolvencies jumped by 9.3% in the fourth quarter of 2018 to 4,725 companies.

John Cullen, business recovery partner at accountancy firm, Menzies LLP, fears more businesses will enter insolvency this year.

“The recent dip in consumer confidence is beginning to impact spending behaviour and this is having an effect across the economy. Retailers have been particularly badly affected and many are still saddled by historic rental agreements, which are undermining their profitability. Other sectors of the economy are also affected, among them the construction and hospitality & leisure industries.

“Despite the low rate of unemployment, the current climate of Brexit uncertainty and political instability, is unsettling for consumers, and this is creating exceptionally challenging trading conditions for many businesses.

“Corporate insolvencies are likely to continue to rise in 2019.”

Boom! The number of UK individuals falling into insolvency has hit a seven-year high.

In total, 115,299 people became insolvent after failing to repay their debts in 2018, up 16% year on year. That’s the third annual increase in a row and the highest since 2011 (after the great recession).

It’s the latest sign that the cost of living squeeze is forcing some families to the brink.

The increase was mainly driven by a record number of individual voluntary arrangements (IVAs) - a formal agreement between debtor and creditor to repay part of an outstanding debt over a fixed schedule.

The Insolvency Service says the number of IVAs jumped by almost 20% last year, meaning that roughly 1 in 400 adults was declared insolvent in 2018.

Richard Haymes, Head of Financial Difficulties at TDX Group, fears people are signing up to IVAs too lightly.

Research we’ve conducted reveals major misperceptions around the consequences of personal insolvency. Nearly three in ten people don’t realise that entering personal insolvency could affect their access to rental accommodation, over a quarter (26%) of people don’t know it may affect their eligibility for a bank account, and nearly one in five (19%) Brits think it wouldn’t influence their ability to access a mortgage.

“The survey also shows people don’t realise the impact on their access to other everyday services, for example three in five (60%) Brits believe there would be no issues in accessing utility services such as electricity, gas, or TV and broadband services.

“There’s wholesale confusion concerning the consequences of personal insolvency. Entering into an IVA is recorded on your credit report for six years and can make it hard for you to be approved for rental agreements, a mortgage or bank account, as well as other services like utilities. It’s never a decision to be taken lightly.

In the City, the FTSE 100 has jumped by almost 80 points this morning to 6825, recovering Monday’s losses.

Russ Mould, investment director at AJ Bell, says:

The latest machinations in the House of Commons over Brexit will take place tonight. With sterling still volatile against this backdrop, the FTSE 100 was on the march, recovering some of the losses seen in recent days to trade more than 1% higher early on.

“The index is being powered by heavyweight tobacco stocks British American Tobacco and Imperial Brands which have relatively little exposure to the UK’s looming exit from the EU.

Sterling is hovering around $1.316, as traders wait to see which - if any - Brexit amendments are passed tonight.

Investment platform Hargreaves Lansdown has suffered from the recent market volatility, and anxiety over Brexit.

It’s reported a 6% drop in assets under administration since 30 June 2018 to £85.9 billion, and a 24% decline in net new business, even though its client base grew by 45,000 to 1,136,000 active clients.

Hargreaves Lansdown grew into a FTSE 100-listed company by making it easy to invest in ISAs and trade shares through its Vantage service.

CEO Chris Hill says the company is going through difficult times:

“The diversified nature of Hargreaves Lansdown has enabled us to continue growing despite a period of geopolitical uncertainty, market volatility and weak investor confidence.

Hill also warns that Brexit is deterring some clients from investing:

Brexit is on the horizon, and until certainty is reached, it will continue to impact markets and consumer confidence. Financial decision making becomes trickier and clients can become reluctant to invest more in volatile markets and prefer to sit on the side-lines.

Perhaps he should have a word with Peter Hargreaves, company co-founder, who was a big backer of the Leave campaign in 2016.

Nicholas Hyett, Equity Analyst at Hargreaves Lansdown, says Royal Mail’s letters business is contracting at a worrying rate:

“The continuing collapse in letter volumes is the big news in these numbers. Royal Mail’s gone out of its way to say that’s down to wider uncertainty, and the introduction of new privacy laws under GDPR, rather an uptick in companies using email rather than paper.

Whatever the cause, we suspect those mailings are gone for good.

Michael Hewson of CMC Markets says investors are unimpressed by Royal Mail’s performance, adding:

Management don’t appear to have a coherent plan to deal with an ever rising cost base at a time when growth prospects remain cloudy.

Ouch. Shares in Royal Mail have hit a record low after it delivered more bad news to shareholders.

Royal Mail warned that its letters business is declining faster than expected, due to ‘business uncertainty’ and the move away from paper to electronic messages.

Letter volumes have fallen 6% in the last nine months, wiping out the benefits of a 6% jump in parcels volumes.

CEO Rico Back also blamed the UK’s new data protection rules (GDPR) for the drop in letters:

“Due to our letters performance to date, we expect addressed letter volume declines, excluding elections, to be in the range of 7-8% for 2018-19.

While the rate of e-substitution remains in line with our expectations, business uncertainty is impacting letter volumes.

Royal Mail also trimmed its earnings targets for 2018-19. It now expects “group operating profit before transformation costs” of £500-530m, down from £500-£550m announced in last October’s profits warning.

This sent shares down 1% to 255p in early trading, an all-time low. The government sold Royal Mail off at 330p per share in 2013, and they hit 631p last May.

The criminal charges launched against Huawei could scupper this week’s US-China trade talks, City analysts reckon.

Jasper Lawler of London Capital Group says:

Sentiment was already on shaky ground this week over concerns of global growth. The move by the US justice department accusing Huawei with bank fraud and conspiring to steal trade secrets from US firm T mobile Inc is not helping.

The timing of the move is important. With trade due to start tomorrow, this is a fairly hostile message that the US is sending out. The overriding fear is that this move will negatively impact trade talks, making a deal even less likely.

Konstantinos Anthis, Head of Research at ADSS, adds:

The lack of progress in the US-China trade talks and the potential extradition of Huawei’s CFO from Canada to the US on criminal charges highlight a complex geopolitical landscape.

At the same time, rumours that President Trump will not hesitate shutting down the US government again in February as he tries to get funding for his wall with Mexico create further challenges for the US economy, keeping equity traders on the side-lines.

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Hopes of a breakthrough in the US-China trade talks have taken a resounding knock, after American authorities hit technology firm Huawei with a string of criminal charges.

The US Justice Department has charged Huawei of bank fraud, obstruction of justice, and conspiracy to launder money related to allegations that it conspired to violate Iranian sanctions. Chief financial officer Meng Wanzhou has also been charged, and faces extradition to the US.

Meng and Huawei are accused of using a subsidiary, Skycom Technologies, to do business with sanctioned Iran - a breach of the International Emergency Economic Powers Act (IEEPA). US officials believe Huawei committed fraud by lying to banks, thus misrepresenting their relationship with Skycom.

Huawei is also accused of stealing a robotic technology from the US carrier T-Mobile. Acting Attorney General Matthew Whitaker said Huawei had made a “concerted effort” to steal this smartphone-testing system.

The company denies the charges, pointing that that it has already reached a civil settlement with T-Mobile over ‘Tippy’.

FBI director Christopher Wray said the charges followed years of investigative work, and suggested that Huawei shouldn’t be welcome in the US at all.

Wray declared:

“These cases make clear that, as a country, we must consider carefully the risk that companies like Huawei pose if we allow them into our telecommunications infrastructure. The FBI does not—and will not—tolerate businesses that violate our laws, obstruct our justice, and jeopardize our national security.”

China has swiftly hit back, calling the charges unfair and immoral.

The move comes just days before a Chinese delegation led by Vice Premier Liu He arrived in Washington for crucial trade talks. Unless an agreement is reached in the next month, Donald Trump will hike the tariff on thousands of Chinese products from 10% to 25%, potentially hurting trade and adding to the economic slowdown.

Also coming up today

The pound could be volatile tonight, as MPs vote on a series of Brexit amendments - including Graham Brady’s plan to remove the Irish backstop, and Yvette Cooper’s move to rule out No-Deal and force a delay to Brexit.

Parliament’s Treasury committee will also put Brexit under the microscope; they’ll hear from John Glen MP, Economic Secretary to the Treasury, Andrew Bailey, CEO of the Financial Conduct Authority, and deputy Bank of England governor Sam Woods this morning.

Plus, new US housing and consumer data will show how America’s economy is faring in the face of the trade war.

The agenda

• 9.15am GMT: Treasury committee hearing on the UK’s economic relationship with the EU
  
• 2pm GMT: Case-Shiller index of US house prices for November
  
• 3pm GMT: US consumer confidence for January