Year: 2016

The US’ job growth imbalance

Posted on by Helen

A new study published by Georgetown University has shown that the post-recession employment recovery in the US has been heavily skewed towards those with at least some university-level education.

According to the report, entitled America’s Divided Recovery: College Haves and Have-Nots, of the 11.6 million jobs created since the beginning of the post-recession recovery, 11.5 million went to workers with some post-high school education. The study showed that graduate degree holders gained 3.8 million jobs, while bachelor and associate degree holders gained 4.6 million and 3.1 million jobs respectively. At the same time, those with only a high school diploma gained just 80,000 jobs.

This pattern of job recovery has also led to a new landmark in the make up of employment in the US economy. As the report notes: “In 2016, for the first time, workers with a bachelor’s degree or higher are a larger proportion of the workforce (36 percent) than those with a high school diploma or less (34 percent).” At the same time, those “with more than a high school diploma but less than a bachelor’s degree, who are typically employed in middle-skill occupations, comprise the remaining 30 percent of the workforce”.

Increasingly, some form of post-high school education is needed to get ahead in the US economy

Employment imbalance
Part of this skewed job recovery is cyclical. As the report notes: “Two of the industries that blue-collar workers with lower education levels historically depended upon for jobs – construction and manufacturing – were especially hard hit in the Great Recession and have not yet fully recovered all the job losses they sustained.” Employment in construction is still 1.6 million jobs below its 2007 level, while manufacturing has one million fewer jobs.

The authors of the report suggest this imbalance in job gains is also indicative of a longer structural change in the nature of the US economy. As the report’s press release summarises: “Production industries, such as manufacturing, construction and natural resources, shifted from employing nearly half of the workforce in 1947 to only 19 percent in 2016.”

At the same time: “Industries that employ managerial and professional workers, such as healthcare, business, financial, education and government services, accounted for 28 percent of the workforce in 1947 and have grown to encompass 46 percent of the workforce today.” These sectors typically require workers with post-high school education qualifications.

Increasingly, some form of post-high school education is needed to get ahead in the US economy. “The modern economy continues to leave Americans without a college education behind”, Anthony P Carnevale, Director of the Georgetown Centre and lead author of the report, was quoted as saying in the report’s press release.

Tamara Jayasundera, Senior Economist at the Georgetown Centre and a co-author of the report, noted in the press release: “While it’s reassuring to see the economy back on track, we can’t ignore this tale of two countries with vastly different economic realities for those with and without a college education… Fewer pathways to the middle class for those with less education will continue to reshape the labour market and American culture as we know it.”

The industries hit hardest by Brexit

Posted on by Helen

Industries across the UK were not prepared for Brexit. Following the ‘leave’ result, they were forced to quickly rethink future strategies to avoid a sudden a drop in investment and revenue. International markets and investors panicked as the pound fell to its lowest level in 30 years, twice the amount it fell during the UK’s 2008 recession.

While it is likely that most industries’ finances will stabilise prior to rebuilding connections with foreign and domestic investors, the following sectors are at a higher risk of facing financial difficulties.

Automotive industry
There has been a surge in British car manufacturing over the last 10 years, but it is likely Brexit will put any short-term gains on hold.

The UK’s automotive industry produces an average of 1.6 million cars each year. A total of 77 percent are exported abroad, of which 58 percent are sent to EU countries.

Toyota issued its response to the referendum last week, stating: “Back in 1992, Toyota chose the UK for its first major manufacturing operations in Europe because of the availability of skilled workforce and the presence of a strong network of suppliers.” The manufacturer went on to say, “We are committed to our people and investments, so we are concerned that leaving would create additional business challenges. As a result we believe continued British membership of the EU is best for our operations and their long term competitiveness”.

UK-based low-cost airline EasyJet saw a 20 percent drop in its share price following the Brexit vote

Airline sector
Following the ‘leave’ vote, UK-based airlines will have to rethink their European routes, in keeping with EU laws and regulations. They will also have to recalculate fares and routes, taking into account the cost of visas.

UK-based low-cost airline EasyJet saw a 20 percent drop in its share price following the Brexit vote, and has since discussed moving its headquarters overseas to an EU country.

Pharmaceutical industry
A lot of UK-based pharmaceutical companies carry out their research and business overseas, which could cause logistical issues in the long term. However, the biggest uncertainty facing the industry is the impact on the regulatory processes and market authorisation of drugs in the UK.

The European Medicines Agency is responsible for the centralised authorisation of medicines valid in all EU countries, and although the UK also has its own authorisation process, it currently follows the EU’s drug regulations. The EU’s authorisation allows for the early approval of some drugs, providing faster access than the UK’s own process would.

Financial services sector
Shares in British banks were hit hard in light of the leave vote, causing loans to surge and a slump in investment banking revenues. Regulators have warned that banks must consider restructuring their operations and carrying out added assessments.

The hardest hit in the sector were Lloyds, Barclays and the Royal Bank of Scotland, which each suffered share price slides of more than 30 percent at the market open. However, trade began gradually recovered to 20 percent by the afternoon.

All four sectors will have to rely on maintaining strong relations with the EU and its member states in order to uphold stable trade deals with European countries, despite the outcome of the EU referendum.

Brexit could break UK’s ties with Asia

Posted on by Helen

The UK was not alone in responding to Brexit with a mass selloff: a similar situation is currently ongoing in Asia, acting as a testament to the close ties shared between the two locations. In the immediate aftermath of the vote, where the FTSE 100 ended the day at a 3.2 percent loss, stocks in Tokyo were down 7.2 percent. While the Topix has partially recovered in the days since, the index is still some way short of its pre-Brexit high.

In the UK, as in Asia, investors were unprepared for the ‘leave’ result, and were all too willing to pull their investments as a result of the vote. The MSCI Asia Pacific index sunk 4.3 percent in Friday afternoon trading, while at the same time Japanese shares and Hong Kong equities were down 7.7 and 4.3 percent respectively. The Chinese renminbi sunk to its lowest level against the dollar since 2011, while the yen soared to its highest level since November of 2013.

All things considered, the panic in Asia was not dissimilar to the situation in the UK. Ever since, policymakers in Japan and beyond have seized the opportunity to tighten monetary policy.

In the UK, as in Asia, investors were unprepared for the ‘leave’ result, and were all too willing to pull their investments as a result of the vote

For the time being at least, the referendum result is secondary to the slowdown in China, and the Asian market’s worst decline in five years looks unlikely to stabilise until the heat dies down. “All told, we suspect that a Brexit would have only limited impact on Emerging Asia, and that the main risks to the region lie elsewhere, with the potential for a sharp slowdown in China or a messy unwinding of the debt bubbles that have built up in a number of economies at the top of the list”, according to Daniel Martin, Senior Asia Economist at Capital Economics.

As much as Asian markets have rebounded in the days since, the situation for companies with strong links to the UK remains uncertain. Toyota last week issued a formal complaint against the ‘unauthorised use’ of its logo in the vote leave campaign, and Nissan echoed its intention to not partake in any campaign pushing for an EU exit. Of the cars Toyota manufactures in the UK, three quarters of the 90 percent it exports go to the EU. The carmaker warned previously that a vote to leave could result in a 10 percent duty on UK-made cars, and the repercussions for the UK will be all-important considering the advanced role Asia is set to play in the near future.

India and China, for example, are on course to increase their combined share of global GDP by 17 percent by 2030, and the continent as a whole looks like it will occupy a 52 percent share of the whole by the century’s midpoint. The damage that the ‘leave’ vote could inflict on the relationship between the UK and Asia, therefore, could severely handicap economic growth for both parties.

The UK anticipates post-Brexit trade deals

Posted on by Helen

Multiple international businesses have pulled out of UK investments in the immediate aftermath of last week’s shock ‘leave’ result. While the UK remains in a state of uncertainty, what’s certain is a new trade deal with international and EU markets will not come into effect for at least two years.

The EU Trade Commissioner, Cecilia Malmstrom, told the BBC that the UK cannot begin discussing trade deals until it has officially left the EU, following an estimated two-year process under Article 50 of EU law: “There are two negotiations. First you exit, and then you negotiate the new relationship, whatever that is.”

Once the Brexit process is complete, UK trade will be carried out based on World Trade Organisation rules – that is, until a new trade relationship with the EU can be agreed upon.

A recent trade deal between Canada and the EU took seven years to negotiate, which gives an indication of how the long the UK should expect the process to take

The long road ahead
A recent trade deal between Canada and the EU took seven years to negotiate, which gives an indication of how the long the UK should expect the process to take. Once a deal is settled, it can then take up to two years for it to come into effect.

However, there is widespread concern that the UK is not prepared to do business under World Trade Organisation regulations, which restrict the circumstances under which countries favour one another in trade.

EU officials have said the UK’s best option is to mirror a Norway-style single market, following EU rules and regulations and therefore avoiding a similar situation to Canada. British businesses are already compliant with EU rules and regulations, and a single market could potentially speed up the negotiation process.

The leave vote shocked the nation, not to mention the remaining 27 members of the EU. As a consequence, the pound plunged to a 30-year low – twice the amount seen during the UK’s 2008 recession – and the UK lost billions of pounds in investment within the first few hours of Brexit.

Political turmoil among the Tory party and its candidates has added to the UK’s uncertain state, following the resignation of Prime Minister David Cameron, with consumer sentiment worsening further still.

Nonetheless, the market is now beginning to stabilise, pointing to a more optimistic future for international trade. With stable leadership, the UK could regain the trust of international markets within the next two years and confidently enter a post-Brexit world intact.

Brexit – one week on

Posted on by Helen

A week on from the EU referendum, and we’re still no closer to understanding the long-term implications of Brexit for the UK and European economies. In business and in politics the situation is in a state of constant flux, and what’s clear now is that it’ll likely be months – or even years – before the true scale of the impact shifts into focus.

Markets were understandably chaotic in the immediate aftermath of the vote. Few expected that the majority of the UK population would vote ‘leave’, and so the pound plunged to a 30-year low as a result. Nevertheless, after an initial bout of panic, the market is now beginning to steady.

Government bond prices have nudged higher and the FTSE 100 sits just above pre-Brexit levels, buoyed by a weaker currency, rising commodity prices and central bank reassurances. Speaking to Bloomberg, Alan Higgins, the London-based Chief Investment Officer at Coutts & Co, was of the opinion that “life goes on for most of these companies”. The FTSE 250, meanwhile, is still some way short of its pre-Brexit (relative) highs, and so the difference between the two indexes suggests that investors feel the impact of Brexit on the global economy will be muted.

Few expected that the majority of the UK population would vote ‘leave’, and so the pound plunged to a 30-year
low as a result

The impact on consumer confidence, however, is telling. According to YouGov and the Centre for Economics and Business Research, consumer sentiment has slumped to its lowest level in over two years, not helped by UK Prime Minister David Cameron’s resignation in the hours after the result emerged. Those keeping tabs on the numbers are of the opinion that this pessimism will continue at least until the Brexit negotiations are underway.

Expecting the worst
On the jobs front, financial firms have been most vocal about potential losses. What’s clear is that the capital’s hiring market is headed for a prolonged slowdown, and while the environment was already tough, and the vote means the situation has only gotten worse. JP Morgan’s Jamie Dimon said the firm could slash as many as 4,000 jobs in the UK, whereas HSBC’s Stuart Gulliver said 1,000 investment banking jobs could move to Paris. For now at least, the impact on big city firms is purely speculative, and again the scale of the losses rests on negotiations with the rest of Europe.

The resulting deal is unlikely to be as lucrative as some in the ‘leave’ camp promised. Likewise, the situation is not as gloomy as some on the ‘remain’ side warned. The bigger issue here is whether the EU can stand up to the challenge of political unrest and keep other nations from following the UK’s example. Fortunately for the UK, policymakers have carved out some exemptions from EU rules, the most notable being its absence from the 19-country eurozone and 26-nation Schengen Area, which should cushion the fall. The departure of France, on the other hand, where anti-EU sentiment is rife, would prove much more costly for the national economy.

For now, frustrated voters can do little more than hope for a smooth negotiating process between EU leaders and whichever Tory candidate is selected to follow David Cameron. It’s clear now that the EU’s overreach on issues that affected British citizens was the straw that broke the camel’s back, but whether life outside the EU will be any different, or indeed any better, remains to be seen.

Bank of America

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United StatesBank of AmericaBank of America provided approximately $53bn in low-carbon financing between 2007 and 2013, and plans to boost that amount to an incredible $125bn by 2025. The bank was one of a handful of major American companies committed to energy efficiency and renewable energy that were highlighted at the White House American Business Act on Climate Pledge event.

Alternative Bank Schweiz

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SwitzerlandAlternative Bank SchweizAs a market leader in ethical banking, ABS continues to implement social and environmental standards that are as innovative as they are influential. In addition to its key focus on transparency, Alternative Bank Schweiz also offers loans and astute financial advice in areas such as ecological housing, organic agriculture and renewable energy.

Santander

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SpainSantanderFor Santander, adhering to sustainable principles and profitable business practice are not in conflict with one another. For the Spanish bank, being able to operate in a community means having to take into account its social and environmental progress. To this end, it has a sustainable, customer-focused business model, geared towards securing stable profits.

Triodos Bank

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United KingdomTriodos BankBased in the Netherlands but with offices in the UK, Triodos has for years ranked among the world’s most sustainable banks. Its commitment is to make money work for positive social, environmental and cultural change, and promotes itself as “100 percent transparent”: the bank only invests in sustainable companies and publishes details of all organisations it lends to and invests in.

Arab National Bank

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Saudi ArabiaArab National BankArab National Bank was established in Saudi Arabia in 1978. Headquartered in the Saudi capital of Riyadh, it is now among the 15 largest banks in the Middle East, and provides a full range of both conventional and Shari’ah-compliant retail, commercial and investment banking services, in addition to heavy equipment leasing, home finance and bancassurance.

Ayeyarwady Bank

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MyanmarAyeyarwady BankIn terms of its sustainability strategy and efforts, Ayeyarwady Bank is setting new trends in Myanmar’s financial industry, including being the first to commit to the United Nations Global Compact initiative. Ayeyarwady Bank is also a big supporter of the country’s healthcare sector, having jointly donated the Yankin Children’s Hospital.

Infonavit

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MexicoInfonavitThe part played by Infonavit in Mexico’s economic transformation is without compare, and the bank has done a great deal to ensure any and all investments are in keeping with the highest international standards. Most notable of all perhaps is the bank’s role in encouraging housing solutions that promise to improve quality of life and financial prosperity.

Standard Chartered

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Hong KongStandard CharteredStandard Chartered’s Hong Kong division does not in any way shy away from its obligations to society and the environment. The bank’s Hong Kong operations stretch back 150 years, and abide by three core sustainability principles: a commitment to sustainable economic growth, to being a responsible company, and to investing in communities.

Crédit Agricole

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FranceCrédit AgricoleCrédit Agricole’s sustainable banking team has, since 2010, actively encouraged investment in sustainable financial services and led the charge in promoting sustainable banking. One area in which the bank has thrived is in impact investment, where leading figures have developed a strategy that considers financial, social and environmental objectives.