By Amanda Ferguson and Clodagh Kilcoyne
BALLYMENA, Northern Ireland (Reuters) – Irwin Armstrong, a former chair of Boris Johnson’s Conservative Party in Northern Ireland, has a simple message for the British Prime Minister when it comes to the province’s unique post-Brexit trade rules: Don’t ruin a good thing.
The founder of rapid test diagnostics maker CIGA Healthcare, who campaigned for Britain to leave the European Union six years ago, has described the so-called Northern Ireland Protocol as a gamechanger for manufacturing businesses like his.
Under the protocol, part of Britain’s withdrawal agreement from the EU, Northern Ireland effectively remained in the EU’s single market for goods as the rest of the United Kingdom (UK) departed last year.
Since then, CIGA has won business from British exporters tied up in paperwork, expanded into new EU markets and doubled sales across the open border with EU-member Ireland.
“My message to Boris Johnson on the protocol is ‘sort out what needs to be sorted out and leave the rest alone’,” Armstrong said at his Ballymena factory, calling the arrangements “a win-win-win situation”.
The protocol is far from universally popular, however.
Its aim was to avoid a land border with the Irish Republic that many would see as contravening the spirit of a peace deal 24 years ago that ended three decades of violence between mainly Catholic nationalists seeking unity with Ireland and Protestant unionists wanting to remain part of the UK.
But the perception that, by placing an effective border in the Irish Sea, the protocol is eroding Northern Ireland’s place in the UK has sparked anger among many pro-British unionists, which Britain says is also undermining the 1998 peace pact.
Johnson has pledged to do away with large swathes of the protocol within months if he cannot convince the EU to remove checks on goods moving into Northern Ireland from the rest of the UK.
Northern Irish business groups have urged London not to act unilaterally, fearing the trade war it could unleash with the EU will take away the newfound competitive advantages firms such as Armstrong’s enjoy. They want both sides instead to agree to ease the checks affecting other more consumer-facing firms.
Pre-protocol it took Lynas Foodservice, a major supplier of food in Northern Ireland, seven days to order a product like mozzarella cheese from their usual British supplier. Now it can take up to 14 and require eight different pieces of paperwork.
Longer lead times mean the Coleraine-based wholesaler has to hold more working capital – 11 million pounds versus 10 million before. With British suppliers also charging more per pallet for the hassle at their end, costs are being passed on to retailers.
Lynas has stopped trading with 13 of the around 200 British suppliers it previously relied on, and is sourcing more goods from Ireland and shipping others through Dublin to avoid some of the bureaucratic trade hurdles.
“I’m okay in a business of 650 staff to add that cost and work with our customers but I think for a lot of smaller businesses it’s definitely been more difficult,” Managing Director Andrew Lynas said.
Recent data showing that, alongside London, Northern Ireland is the only region in the UK where economic growth has surpassed pre-pandemic levels have led to some suggestions of a protocol-fuelled economic bounce.
Ulster Bank Chief Economist for Northern Ireland, Richard Ramsey, says it is not that straightforward as the economy went into the COVID-19 pandemic in a weaker state than the rest of the UK and benefited disproportionately from record government spending with one-in-four people employed in the public service.
“The protocol is presented as almost binary, it’s either extremely good or it is terrible and needs to be done away with,” Ramsey said. “The reality is there are good parts and there are a lot of grey areas which are still to be ironed out.”
For now this has created a two-speed economy, he says, with sectors such as food manufacturing and pharmaceuticals booming at a time when economic surveys for May suggest the cost of living crisis is hitting Northern Ireland harder than most UK regions.
In the small town of Maghera, Crushing Screening Parts (CSP) owner Michael McGrath says the “good parts” of the protocol are directly responsible for a 32% year-on-year jump in revenues and plans to further add to his staff of eight.
Glancing at a screen showing potential customers from Poland and Germany are browsing the CSP website, which emphasises the benefits of the protocol in capital letters, McGrath says he can deliver a part to them by the next morning while it can take a rival British supplier at least two to three days.
As a result, the proportion of sales the maker of spare parts for the quarry sector has going to the EU have more than trebled to 33%. For McGrath the solution to the protocol riddle lies in the famous words of Bill Clinton 30 years ago: “It’s the economy stupid”.
“For Northern Ireland to be successful, it’s all about the economy,” he said. “The economy can really do well if the protocol is implemented correctly and to a level that we can all live with it.”
(Additional reporting and writing by Padraic Halpin; Editing by Alex Richardson)
Morgan Stanley: bear market rally to continue
One of Wall Street’s best-known bears, Michael Wilson, thinks the S&P 500 will rise another 7% before turning down, so the bear market rally will continue for now, writes Market Watch.
After the Dow Jones, S&P 500 and Nasdaq Composite joined their strongest weekly gains since at least May last Friday, Wilson, who is chief strategist and head of U.S. equity markets at Morgan Stanley (NYSE:MS), told clients that there could be another 5% to 7% before the downward trajectory of U.S. stocks resumes during the latest bear market recovery.
Wilson has held a bearish view of the stock market for about 2 years and correctly predicted a sell-off this year.
Wilson explained in a research note sent out to clients on Monday that a pullback in the 38-50% drop in the stock market this year “would not seem like something unnatural, not consistent with the previous bear market rally.”
While growth concerns have triggered a sell-off in commodities and lowered inflation expectations, the fact that the U.S. economy is already slowing and heading toward recession means that any market rally is likely to be short-lived, and U.S. stocks are likely to eventually fall.
Wilson mentioned in the note that the bear market is not over yet, although it may appear otherwise in the next few weeks as the market takes the rate cut as a sign that the Fed can still manage a “soft landing” and prevent a meaningful revision to earnings forecasts.
U.S. stocks rose last week as investors now hope the slowing economy and falling commodity prices may inspire the Fed to raise interest rates less sharply. Federal funds futures, a derivative used by investors to bet on the pace of the Fed’s monetary policy changes, estimate with a high probability that the Fed will be forced to start cutting interest rates again as soon as next summer.
They also consider the lower peak in the federal funds rate: it will peak around 3.5% at the end of 2022 instead of 3.75% just a couple of weeks ago. Wilson also pointed out the drop in Treasury yields: the 10-year Treasury bond yield went from 3.230% to a low of 3.07% on Friday before rebonding again on Monday.
Wilson expects the S&P 500 index to fall to around 3,400 points if the U.S. Federal Reserve manages to get a “soft landing” for the economy — which Fed Chairman Jerome Powell said last week would be “a very difficult thing to do.”
Wilson expects that if the U.S. economy plunges into recession, the S&P 500 index will fall to around 3,000 points. In any case, Wilson believes that U.S. stocks are still highly valued because the risk premium — that is, the measure of compensation that investors receive for the extra risk of owning stocks instead of bonds — remains about 300 basis points higher than the 10-year Treasury bond yield, which is considered a “risk-free rate.”
Easing chip shortages to help Volkswagen in H2 – CEO
© Reuters. FILE PHOTO: Volkswagen logo is pictured at the 2022 New York International Auto Show, in Manhattan, New York City, U.S., April 13, 2022. REUTERS/Brendan McDermid/File Photo
BERLIN (Reuters) – Volkswagen (ETR:VOWG_p) sees a strong second half of 2022 and expects progress in catching up with rival Tesla (NASDAQ:TSLA) as easing chip shortages start to offset supply chain bottlenecks and rising costs, the carmaker’s CEO said on Tuesday.
“We are earning more than ever,” Chief Executive Herbert Diess said at a works meeting, adding Volkswagen is ramping up electric vehicle volumes in its biggest markets in Germany and China thanks to easing semiconductor shortages.
This should allow the carmaker to narrow the Volkswagen-Tesla gap this year and meet its goal of becoming market leader by 2025 if it seizes the moment while the U.S. electric car maker burns cash on large investments, the CEO said.
“Elon (Musk) has to ramp up two highly complex factories in Austin and Gruenheide at the same time – as well as expand production in Shanghai. That’s going to take strength out of him,” Diess said.
Reliance Chairman Mukesh Ambani steps down as director of telecom arm
© Reuters. FILE PHOTO: Mukesh Ambani, Chairman and Managing Director of Reliance Industries, arrives to address the company’s annual general meeting in Mumbai, India July 5, 2018. REUTERS/Francis Mascarenhas
BENGALURU (Reuters) – Reliance Industries Chairman Mukesh Ambani has stepped down as director of Reliance Jio Infocomm Ltd, the conglomerate’s telecom arm said on Tuesday.
Reliance Jio said https://refini.tv/3Nrs773 it has appointed Mukesh’s son and non-executive director Akash Ambani as the chairman of its board. Akash has been involved with the telecom unit since its launch in late 2016, where he started as a director.
India’s telecoms sector had been upended after the entry of Jio, which triggered a price war that forced some rivals out of the market and turned profits into losses.
Jio, which started out offering mobile teleservices, has been aggressively investing in services like internet broadband and forging ties with handset makers to launch low-cost smartphones and providing 5G services.
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