Shell’s plan to take over BG is still in the pipeline

Despite the plunging oil price, no one wants to rock the boat with the powerful Anglo-Dutch firm

It’s nine months since Shell announced it was buying BG Group in an agreed £47bn deal and almost everything has changed. Back in April, the oil price appeared to be recovering from its fall below $50 a barrel but the price has since plunged below $30. The International Energy Agency warned last week it could fall further in a world “awash” with oil.

Shell and BG shareholders vote on the takeover this week but, despite the industry’s dire state, they will approve the deal, now worth £35bn to reflect Shell’s depressed share price. This is partly due to faith in the ability of Shell’s chief executive, Ben van Beurden, to make it work. It’s also because most big shareholders don’t want to rock the boat in public with a company as powerful as Shell. Only Standard Life has broken ranks by declaring it would vote against.

Big oil mergers in the past were defensive measures to bulk up when markets were bad, but the Shell-BG combo was meant to be more strategic. Van Beurden took over two years ago with a reputation as a cost cutter and he will need to display that ability. His task has been made easier by Helge Lund, BG’s boss, who only worked a few weeks before his chairman agreed the deal with Shell. BG’s results last week were good and Lund will at least have earned some of the £25m he is expected to get when he leaves.

A big week of numbers for the British economy

After the chancellor’s new year warning of a cocktail of threats to the economy and an alarming start to 2016 in the markets, Thursday’s GDP figure will get more attention than usual.

The first estimate for the fourth quarter of 2015 will appear in the same week as two CBI sector surveys. Monday’s industrial trends figures could make gloomy reading, with manufacturing expected to suffer from the slowdown in China and continued weakness in the eurozone.

On the same day as the GDP announcement, the CBI’s distributive trades survey, which charts retail activity, could give an indication of whether consumers were starting to worry about bad economic signals at the end of 2015. Last week’s official retail sales figures showed tills rang less in December than they have for six years.

Economists had pencilled in growth of 0.5% for the fourth quarter after a figure of 0.4% the previous quarter, a Reuters poll carried out before the retail sales figures revealed. But because the UK relies so heavily on consumer spending, some scribblers are now preparing for a weaker number. There may be trouble ahead.

Dixons hopes for a Christmas camel

Dixons Carphone reports on Christmas trading this week but people should already have a rough idea of how things went. The electricals retailer published a trading statement a week or so before Christmas and reported its busiest day ever on the Black Friday discount day in late November.

Seb James, the ebullient chief executive, said trading had dipped after Black Friday but argued this was part of a new pattern resembling two humps of a camel. He predicted record Boxing Day sales during the post-Christmas second hump.

If James’s confidence is borne out, the owner of Currys, PC World and Carphone Warehouse will be one of the winners from a tough Christmas for Britain’s retailers. It will be interesting to see what sold, given that Argos, one of the losers, suffered falling demand for tablets and white goods while AO World, the online retailer, sold lots of white goods, TVs and kitchen gadgets.

Dixons probably gained at Argos’s expense because its rival had problems with its website, whereas Dixons’s seems to have held up during the festive onslaught. Televisions, NutriBullets and fitness trackers were selling well when old Etonian James – a friend of David Cameron and one of Britain’s poshest bosses – last updated the market.


Sean Farrell

The GuardianTramp

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