IFAC urges Budget caution over Brexit, global risks

IFAC urges Budget caution over Brexit, global risks

The Irish Fiscal Advisory Council has urged the Government not to rely on surges in corporation tax to cover spending overruns.

In its pre-Budget statement, the economic watchdog has said the Government should be cautious because of the risks associated with Brexit and a “worsening outlook” in the rest of the world.

IFAC said Ireland’s underlying budgetary position has deteriorated since 2015.

It argued that the benefit of record corporation tax receipts and lower interest rates have been undermined by increased spending, particularly unplanned spending in areas such as health.

The council said using bumper corporation taxes to balance the books “carries significant risks”, as they are likely to prove temporary and the spending measures likely to last longer.

It said there was a case for the Government to more cautious as the risks around Brexit increase and the outlook in the rest of the world gets worse.

The council also said the Government needed to deliver on a more credible medium term plan for the public finances.

One of its ideas is to develop a so-called prudence account to save excess corporation tax receipts.

The IFAC is an independent body set up under statute to assess and comment on government fiscal policy.

IFAC Chairperson Seamus Coffey, speaking to RTÉ’s Morning Ireland, said that budgetary planning on the basis of a hard Brexit is the “most appropriate course of action”.

He said that a no-deal scenario does appear the most likely and planning for this scenario makes the most sense.

Brexit, Mr Coffey said, should not have an impact on the overall package that the Government chooses to deliver.

He explained the Government has set out a plan for budgetary measures totalling €2.8bn and the IFAC believes the Government must stick to and deliver this plan.

He added that the Government’s existing commitments total around €2.2bn, leaving €600m for discretionary measures.

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Nervous bondholders switch from Irish debt

Nervous bondholders switch from Irish debt

Investors in Ireland’s bonds are sitting on double-digit returns this year after a global debt rally and are now starting to get nervous.

In Ireland’s case, the UK’s political turmoil means a no-deal Brexit could spark worries over credit risks.

So far Irish debt has been relatively immune to Brexit, which has sent the pound and Irish stocks slumping.

“We generally see very little hard Brexit risks priced into Irish government bonds, which is a part of the market that could come under increasing pressure if we head towards a no-deal Brexit,” said Mohammed Kazmi, a portfolio manager at Union Bancaire Privee, which has lowered its exposure to Ireland and replaced it with Spain.

That chimes with views among other fund managers. Anton Nykvist of Nordea was overweight on Irish bonds until late July due to the country’s solid growth outlook and improving debt metrics. But in August Nordea also moved to sell the debt in favour of Spain.

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Sterling rebounds on data surprise, Brexit hopes

Sterling rebounds on data surprise, Brexit hopes

Sterling rebounded from early lows today and headed towards a five-week high as surprisingly strong data and growing optimism that Britain will not crash out of the European Union without a deal boosted demand for the British currency.

Against the dollar, the pound gained 0.6% to $1.235 after weakening 0.2% to $1.2233 earlier.

It hit a one-month high of $1.2353 last week.

Compared to the euro, it also gained 0.36% to 89.5 pence.

Boris Johnson last week failed to win enough support from lawmakers to call an early election and parliament also approved a bill which aims to block a no-deal Brexit at the end of October.

That would force Johnson to seek a delay to Brexit.

Sterling had a rollercoaster week during which it plunged to three-year lows before rebounding strongly as lawmakers voted to block a no-deal Brexit.

In a note published last week, strategists at Goldman Sachs raised the probability of a Brexit deal to 55% from 45% earlier and cut the likelihood of a “no deal” to 20% from 25% previously.

However there is some uncertainty on whether the EU will allow an extension, while the Daily Telegraph reported Johnson has prepared plans to legally stop any Brexit extension.

The uncertainty prompted hedge funds to unwind some of their negative bets against the British currency.

The pound also received a rare boost from surprisingly strong economic data.

Economic output in July alone was 0.3% higher than in June, the Office for National Statistics said.

This marked the biggest rise since January and topping all forecasts in a Reuters poll of economists that had pointed to a 0.1% increase.

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Construction PMI sees first rise in four months

Construction PMI sees first rise in four months

Construction activity picked up for the first time in four months in August – normally a quiet month for the industry – the latest Construction Purchasing Managers Index from Ulster Bank shows.

The construction PMI rose to 53.7 in August from 51.4 in July.

Ulster Bank said the improvement in August reflected a better performance across the three main sub-sectors – housing, civil engineering and commercial.

The housing sector saw the sharpest increase in activity last month and it remained the strongest performing category in August.

Commercial activity also continued to grow solidly, with the Commercial PMI rising to a five-month high of 55.1 in August from 54.7 in July.

But civil engineering remains an area of weakness, however, with respondents reporting a twelfth consecutive monthly fall in activity, albeit at a reduced pace in August.

Ulster Bank’s chief economist Simon Barry said that after the sharp weakening in the pace of construction activity recorded over the previous three months, the pick-up in the August PMI is an encouraging sign that construction growth regained some momentum as the sector completed its sixth year of recovery.

But he cautioned about the sector’s near-term prospects, noting that new orders moderated further, with the August reading marking the slowest pace of new business growth in four and a half years.

He also said the ongoing cooling in order flows is underpinning slower – but still positive – growth in demand for construction workers, with the pace of job creation easing to a near six-year low in August.

“Confidence about the coming year fell sharply in August, leaving the future activity index at its lowest level since 2010,” the economist said.

“The slippage in sentiment largely reflected worries about Brexit impacts, with some firms reporting that Brexit uncertainty is impacting work pipelines due to delayed decision-making among clients,” he added.

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Business confidence sinking on Brexit concerns – IoD

Business confidence sinking on Brexit concerns – IoD

A new survey shows that business confidence has been severely impacted by the political and economic uncertainty surrounding Brexit.

The latest quarterly survey from the Institute of Directors in Ireland shows that the uncertainty evident over the past 12 months has intensified.

It also reveals that 89% of respondents think the Government should deliver a conservative Budget in October in expectation of a no-deal Brexit.

The Institute of Directors in Ireland’s survey found that business leaders’ optimism in the economy is down 31% year-on-year.

When asked how they felt about the Irish economy in the second quarter of this year compared to the same time last year, just 15% said they were “more optimistic”.

This reading had stood at 32% in the first quarter of this year.

92% of business leaders also said they believe that Brexit’s impact on the Irish economy will be negative in the short-term, up from 89% in the first quarter. 58% believe it will be negative in the long term.

There has also been a sharp decrease in business leaders anticipating opportunities for growth in the UK market, down to 20% in the second quarter from 30% in the first three months of the year.

67% of business leaders also said they were “sufficiently prepared” for Brexit, a drop of 4% on the first quarter in 2019.

Maura Quinn, CEO of IoD Ireland, said that business confidence among Irish business leaders is plummeting.

“The message is clear – Irish business leaders are worried, and they want the Irish Government to take note and deliver accordingly in next month’s Budget, which is just weeks before the current Brexit deadline,” Ms Quinn added.

Today’s survey was completed by 291 directors and business leaders who are members of the IoD in Ireland.

63% of the respondents are current board members, of which 42% are chief executives or managing directors with most of the rest in senior executive roles.

The research was carried out in the first week of July.

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Big investment banks have worst start to year since 2006

Big investment banks have worst start to year since 2006

The world’s largest investment banks have had their worst start to a year since 2006, according to the latest data published by industry analyst Coalition today.

In the first six months of 2019 investment banks reported revenues of $76.8 billion, down 11% on the previous year and the lowest first-half performance for 13 years.

Revenues fell across the board, with the deepest decline in equities trading, down 17% to $22.1 billion.

Fixed income, currencies and commodities revenues fell 9%, while investment bank advisory was down 8%.

The banks’ profitability also suffered, with operating margins sliding 500 basis points to 31%, their lowest level for four years.

Several major banks have cut jobs in their investment banking divisions in response to weak results, including Deutsche Bank., HSBC, Societe Generale and Citigroup.

Deutsche Bank plans to make the deepest cuts after announcing 18,000 jobs cuts in July, with the bulk in investment banking.

Coalition tracks Bank of America Merrill Lynch, Barclays, BNP Paribas, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JP Morgan, Morgan Stanley, Societe Generale and UBS.

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Live Register continues downward trend – CSO

Live Register continues downward trend – CSO

The number of people signing on the Live Register fell again in August to the lowest level since early 2008, the latest figures from the Central Statistics Office show.

The Live Register total recorded a monthly decrease of 1,500 – down 0.8% – last month, which brought the seasonally adjusted total to 188,500.

The CSO said that on a seasonally adjusted basis, the Live Register showed a monthly decrease of 0.5% in the number of men signing on in August, while the number of women reduced by 1.3%.

Figures earlier this week from the CSO showed that the monthly rate of unemployment fell to 5.2% in August, down from 5.3% in July.

The Live Register is not designed to measure unemployment as it includes part-time workers – those who work up to three days a week – as well as seasonal and casual workers entitled to Jobseeker’s Benefit (JB) or Jobseeker’s Allowance (JA).

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84% of Irish consumers own a smartphone – ComReg

84% of Irish consumers own a smartphone – ComReg

A new survey from ComReg shows that 84% of the population here own a smartphone, with two thirds of these using Google’s Android operating system, while the remainder are using Apple’s iOS.

The survey was released ahead of ComReg’s national conference on the Digital Society tomorrow.

It also reveals that half of Irish consumers are bill pay customers, with an average monthly spend of €42, including the cost of their handset. Pre-pay customers are spending €21 a month on average.

Meanwhile, Irish consumers are spending more time online compared to 2017, with accessing social media being the most common online activity.

ComReg said that 62% of consumers here are now using 4G, an increase of 20 percentage points from

The survey also noted that Samsung Galaxy and Apple’s iPhone handset are the most popular amongst consumers, with younger consumers opting to replace their handsets more frequently than older consumers.

ComReg’s conference will address topics relating to consumer protection, innovation and regulation of the digital economy.

Attendees will hear from a range of speakers, including Minister Richard Bruton, representatives from the European Commission and spokespersons for Google and Facebook.

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ECB President hopeful supports bank’s current stance

ECB President hopeful supports bank’s current stance

The nominee to be the next President of the European Central Bank, Christine Lagarde, has said she supports the current stance of the ECB.

The ECB maintains that “a highly accommodative policy stance is warranted for a prolonged period of time in order to bring inflation back to below or close to 2%.”

Ms Lagarde was speaking before the European Parliament’s Economic and Monetary Affairs Committee today.

Her appointment to the ECB must be approved by the Parliament and MEPs are due vote on whether to approve her nomination later this month.

Responding to a question on the impact of negative deposit rates on savers, Ms Lagarde said she wants people of the euro area to understand why decisions are being made.

She said with the “threats on the horizon” a more accommodative monetary policy is justified.

Ms Lagarde also said that during the financial crisis “everyone had to transgress the rules for the public good – we made sure there was no meltdown or bank run to protect depositors and savers.”

This all points to a continuation of the ECB’s low interest policies if – as is expected – Christine Lagarde’s nomination is approved.

The current ECB President, Mario Draghi, steps down at the end of October.

Christine Lagarde has been the Managing Director of the IMF since 2011. Before that, she was the Finance Minister of France.

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Number of bankruptcies increase here – ISI

Number of bankruptcies increase here – ISI

New figures published today show that so far this year, a total of 183 people were adjudicated bankrupt in Ireland.

The figures from the Insolvency Service of Ireland show that 2,323 people were adjudicated bankrupt from January 2014 to December 2018.

This compares to a total of 225 cases in the years from 2000 to 2013 – an average of 16 cases a year.

Christopher Lehane, the Official Assignee in Bankruptcy at the ISI said that, thankfully, the stigma formerly attached to bankruptcy is substantially gone.

He said the public now realise that those who can pay, do pay in bankruptcy and there is a robust regime to ensure that happens.

“From a debtor’s perspective they need to appreciate that while their credit rating is affected until they deal with their debts, in the norm after one year of bankruptcy, their debts are gone and they can start repairing their credit history. Bankruptcy works,” he added.

Bankruptcy is a formal, High Court process for people in debt over €20,000.

Before a person considers applying for bankruptcy, they must first have explored the alternative solutions to bankruptcy, which are contained in the Personal Insolvency Act 2012.

The Insolvency Service of Ireland encourages anyone with serious debt issues to contact a Personal Insolvency Practitioner.

All of the debt solutions overseen by the ISI, including bankruptcy, are designed to get a person back on track financially.

“If you enter into any of them, you will be solvent at the end of the process,” the ISI said.

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