Brexit shockwaves hit British jobs, banks, automobiles

Shoppers walk past stores on New Bond Street in London, Britain July 9, 2016.

REUTERS/PETER NICHOLLS/FILE PHOTO

BY GILES ELGOOD AND COSTAS PITAS-Thu Jul 28, 2016

Shockwaves from Britain's vote to leave the European Union rocked the economy on Thursday, with thousands of jobs lost at one of the country's biggest banks, big extra costs for Ford, and consumer confidence plunging.

Preparing for a Brexit-related slowdown, Lloyds Banking Group (LLOY.L) said it would cut a further 3,000 jobs. One of Britain's biggest car dealerships, Inchcape, predicted growth in new car registrations would fall.

Ford (F.N) Chief Financial Officer Bob Shanks said a weaker British pound following the June 23 Brexit vote had cost the company about $60 million in the second quarter

The 2016 impact of Brexit on Ford, which has 30 percent of its European sales in Britain, was expected to be $200 million, and each year until Britain leaves the EU would cost it $400 million to $500 million. Speaking in Detroit, Shanks said all options were on the table for cost cuts in Europe, although Ford was not ready to announce any plant shutdowns.

A month after the referendum, the latest signs of an economic slowdown are likely to fuel expectations of action by the Bank of England on Aug. 4, when many economists believe it will cut interest rates and might start buying bonds again to pump money into the financial system.

"The public are still absorbing the EU referendum result but it is clear that consumer confidence has taken a significant and clear dive," said Stephen Harmston of the YouGov polling organization.

Lloyds, Britain's largest retail bank, said it aims to save 400 million pounds ($530 million) by the end of 2017 by axing the additional jobs on top of 4,000 positions it has already said it would cut from its 75,000-strong workforce. It would close an additional 200 branches.

"Following the EU referendum the outlook for the UK economy is uncertain and, while the precise impact is dependent upon a number of factors including EU negotiations and political and economic events, a deceleration of growth seems likely," it said.

The economy grew fairly robustly in the run-up to the vote but economists expect businesses and consumers to cut back after the referendum shock, although a dive in the pound has helped some companies which make most of their earnings aboard.

Rolls-Royce (RR.L) shares rose sharply after it forecast profits would improve in the second half of the year, helped by a pick-up in deliveries of large aero engines.

Drinks group Diageo, reporting higher sales, said it had not so far seen any impact from Brexit. The company is the world's biggest maker of Scotch whisky, which is mostly exported and would benefit from sterling's weakness.

Another winner was Merlin Entertainments (MERL.L), which runs tourist attractions such as Madame Tussauds waxworks and Legoland and expects to benefit from the lower pound attracting more foreign visitors to its British sites.

But travel company Thomas Cook (TCG.L) cut its profit target as the weak pound, together with attacks in Europe and a failed coup in Turkey, persuaded British customers to change their holiday plans abroad.

An index of British consumer confidence plunged nearly five points to 106.6 in July - matching its biggest fall in six years and hitting its lowest level since 2013, polling firm YouGov and the Centre for Economics and Business Research (CEBR) said.

People are particularly worried about what will happen to the value of their homes, the survey found.

The European Commission’s consumer confidence gauge for Britain suffered its biggest monthly drop in July since January 1991, hitting its lowest level since June 2013.

House price growth edged up in July but the data might not yet reflect any impact from the referendum because of a lag, mortgage lender Nationwide said.

Britain's biggest lettings and estate agency company, Countrywide Plc (CWD.L), issued a profit warning, saying that commercial and London residential transactions had stalled after the Brexit vote.

Economists say spending by consumers offers the best hope that Britain can avoid a Brexit-related recession. But retailers said sales fell sharply after the referendum, according to a survey published on Wednesday.

French advertising company JCDecaux (JCDX.PA) said it would reduce investments in Britain, citing uncertainty about the Brexit impact on the economy and advertising revenues.

BUILDERS, RETAILERS UNDER COSH

In construction, growth in activity slowed after the vote, the Royal Institution of Chartered Surveyors said.

Contributors to a RICS survey predicted a 1 percent rise in workloads over the next 12 months, down from growth of 2.8 percent that they had foreseen in the first quarter.

Britain's property market has been one of the worst hit sectors since the referendum with shares in housebuilders plunging while investors pulled out cash from commercial funds, forcing many to be suspended.

Construction firms cut back their forecasts for hiring, mirroring moves by British retailers who reported the fastest fall in full-time equivalent employment in two years in the second quarter, as the referendum approached.

But a survey by the British Retail Consortium showed 93 percent of retailers intended to keep staffing levels unchanged in the next three months, compared with 83 percent in the second quarter of last year.

A third survey published on Thursday showed pay awards in Britain stuck in a slow gear. Median pay settlements in the three months to the end of June were worth 1.8 percent for a third month in a row, after a two-year run when increases of 2 percent had become normal, according to XpertHR, an online human resources firm.

"It remains to be seen how the uncertainty around the impact of the Brexit vote will feed through to pay settlements, but we are likely to see pay awards remaining subdued for many months to come," XpertHR's Sheila Attwood said.

In a boost for the British government's drive to encourage investment post-Brexit, French state-owned utility EDF gave the go-ahead on Thursday to an 18 billion pound ($24 billion) nuclear power project in southwest England.

(Additional reporting by Andrew MacAskill, Lawrence White and Bernie Woodall; writing by Giles Elgood,; editing by William Schomberg, Guy Faulconbridge, David Stamp and Peter Graff)