Mark Kleinman’s big predictions for the Square Mile in 2019
Sir Martin Sorrell’s WPP exit, Unilever’s HQ U-turn, Melrose’s swoop for GKN: 2018 was a year full of surprises in the City. And while forecasting might be a fool’s errand, here are 10 predictions for the year ahead.
•Theresa May will decisively lose next week’s “meaningful vote” on Brexit: that’s not a punt that will win many plaudits for prescience. But after that, there is a serious risk that her Government unravels as her plan B fails to corral substantial support from across the Commons. A General Election in 2019 is as likely as not, and a Labour victory far from out of the question.
•It will be a better year for Moya Greene than for Royal Mail, the company she ran until last year, and which will issue at least two profit warnings in 2019. After becoming a non-executive director of Easyjet and Rio Tinto, Greene will join the ranks of FTSE 100 chairs this year, replacing John McAdam at United Utilities. That said, she will, at the end of the year, still be one of barely a handful of female chairs in Britain’s blue-chip share index.
•Thomas Cook will survive the year – perhaps. Booking volumes early in the new year will determine whether the venerable tour operator can avert the collapse from which it narrowly escaped eight years ago. Directors will sanction the sale of its airline in the spring as part of a financing package that will provide another medium-term stay of execution.
•During another year of turmoil for the high street, the most significant shift will come in the form of Sir Philip Green’s exit from Britain’s retail sector. The tycoon will strike a series of deals in the autumn to carve up his Top Shop-to-Dorothy Perkins empire, while injecting a substantial sum into the group’s pension scheme. A tail-between-the-legs retreat? Perhaps, but a sensible one given another tsunami of bankruptcies across the industry.
•Brexit’s impact on the City’s dealmaking fraternity will be profound, at least in the first quarter of 2019. The UK will slump down the M&A league tables as private equity sponsors and corporate chiefs alike sit on their hands amid currency volatility and economic uncertainty. The picture will look brighter after that, though, as deal activity is strengthened by a significant number of public-to-private takeovers. It won’t be enough to elevate the UK to more than half of 2018’s M&A level by value.
•Edward Bramson is not known for his shy and retiring nature, so his campaign for a board seat at Barclays will be voluble. It won’t succeed, however; with a change of chairman scheduled for the spring, the bank will do enough to persuade leading investors that Bramson’s strategy is unlikely to strengthen the Barclays investment case. Regulators will also exert quiet pressure to deter Bramson from a more aggressive proxy battle.
•Another difficult year lies in store for Britain’s struggling outsourcers, but there will not be another collapse on the scale of Carillion. Interserve, the most vulnerable major player right now, will strike a deal with creditors that will see them take control, with RMD Kwikform, its prized subsidiary, being handed to lenders. Amey will be sold by Spanish owner Ferrovial to a private equity consortium. And Mitie’s turnaround under chief executive Phil Bentley will draw interest from at least one bidder.
•Marks & Spencer, Direct Line Group, Greene King, Aviva and 3i Group will be among the blue-chip companies naming new chief executives, although few of those who depart will do so from a position of strength. In that exclusive club will be Simon Borrows, who will quit as the boss of 3i having done an exceptional job reviving its private equity investment strategy. And Paul Geddes, who departs Direct Line after a successful decade, will be rewarded with another big chief exec job outside the insurance sector.
•The Government’s target of offloading its entire stake in Royal Bank of Scotland during this parliament had barely been published last autumn before the assumptions underpinning it began to look ambitious. Events this year will reinforce that sense, with Brexit-related uncertainty preventing the shares from gaining sufficient ground to justify further disposals. There will be better news elsewhere in the Whitehall disposal programme, with UK Asset Resolution offloading the last of its remaining mortgage portfolios by the year-end.
•Equity markets will continue to fare poorly throughout the year, driven lower by repeated flare-ups in trade tensions. The FTSE 100 will close at 6,450 points, a disappointing outcome given that global economic growth figures will surprise (marginally) on the upside. Crude oil will end the year at $62 a barrel; and sterling will end the year in the doldrums, with a pound worth just $1.15.
£ Mark Kleinman is the City Editor of Sky News. @MarkKleinmanSky