UK corporates doubt EFSF’S ability to restore confidence in eurozone

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Please see below a press release from Investec Corporate & Institutional Treasury on how an overwhelming majority of senior executives representing UK corporates do not believe that the European Financial Stability Facility will be sufficient in securing confidence in Eurozone sovereign debt markets, according to a survey of senior executives at a client briefing. Sir Howard Davies attended the briefing and commented on the findings below. The survey further revealed how: • 93% of executives surveyed are concerned (37% were ‘very concerned’) about the potential risks posed to their businesses by the Eurozone crisis • 60% expect their firms to grow over the next 12 months • 47% predict organic growth while 13% are planning to grow through acquisition • When asked to identify how the Government could help their business to grow, 52% of respondents thought that immigration rules should be eased while 14% thought that additional incentives should be given to banks to lend capital to businesses • 38% of executives intend to grow their business over the next year by expanding into new markets. • 24% have already put in place a hedging strategy to protect themselves against further currency volatility • 53% felt that the euro would be down on sterling over the next 12 months • Yet 23% of executives planning to use FX option products more over the next 12 months

UK corporates doubt EFSF’S ability to restore confidence in eurozone

  •     83% of senior executives doubt the EFSF will secure confidence in Eurozone sovereign debt markets
  •     60% predict their business will grow despite Eurozone ‘drag’
  •     52% cite easing immigration rules as key to supporting business growth
  •     Only 3% felt the euro would be higher against sterling in 12 months’ time
  •     38% are considering expanding into new markets to grow their business

An overwhelming majority (83%) of senior executives representing UK corporates do not believe that the European Financial Stability Facility (“EFSF”) will be sufficient in securing confidence in Eurozone sovereign debt markets, according to a survey1 of senior executives at a client briefing hosted by Investec Corporate & Institutional Treasury (‘Investec’), part of Investec Bank plc.

Despite the fact that a staggering 93% of executives surveyed are concerned (37% were ‘very concerned’) about the potential risks posed to their businesses by the Eurozone crisis, three fifths (60%) expect their firms to grow over the next 12 months. Nearly half (47%) predict organic growth while around one in 10 (13%) are planning to grow through acquisition.

When asked to identify how the Government could help their business to grow, over half (52%) of respondents thought that immigration rules should be eased while 14% thought that additional incentives should be given to banks to lend capital to businesses.

The research showed that nearly four in ten (38%) executives intend to grow their business over the next year by expanding into new markets. Furthermore, a quarter (24%) have already put in place a hedging strategy to protect themselves against further currency volatility. The overall majority of executives (53%) in attendance felt that the euro would be down on sterling over the next 12 months, but that the current high market volatility could provide excellent opportunities in FX markets with nearly 1 in 4 (23%) planning to use FX option products more over the next 12 months.

Commenting on the Eurozone crisis at the Investec briefing, Sir Howard Davies, former deputy governor of the Bank of England and former executive Chairman of the FSA said: “I remain pessimistic about the Eurozone’s ability to produce a comprehensive solution to the crisis that everyone is hoping for. We should not let the current focus on the EFSF detract from the need to ensure that Eurozone banks remain sufficiently capitalised. If Greece can be isolated from the rest of the Eurozone, the implications for UK companies and the wider economy should not be as damaging as some are predicting. Without ring-fencing Italy and Spain, the results could be catastrophic.

Commenting on which of the main global currencies is likely to outperform, Sir Howard added: “It’s easier to produce a case for why the euro, sterling, dollar and yen will all continue to be weak. I predict the dollar will strengthen modestly as the US economy isn’t quite as flat as many people feared.”

Phil Shaw, Chief Economist for Investec in London commented: “It is critical that European leaders act quickly and decisively to stabilise Euro area sovereign debt markets and steer the global economy away from the threat of another recession. Even if they are successful, huge challenges remain in addressing the longer-term structural flaws in the Eurozone.”

James Arnold, Investec Corporate & Institutional Treasury said: “With so much uncertainty lingering around the Eurozone, our clients know it is essential to protect their business from unexpected and adverse currency fluctuations. This is all the more pressing considering that a majority of clients have exposure to the Eurozone area. At Investec, we feel that it’s paramount to keep our clients informed of the risks that lie ahead. We always give them our own market views, but also feel it’s important to give them direct access to some of the best economic minds in the business. This provides them with the necessary insight and intelligence to effectively plan for the year ahead; a year that will clearly be hard for many.”

Investec Corporate & Institutional Treasury provide bespoke products and solutions which are typically reserved by other banks for their larger clients but are still appropriate for businesses of all sizes to take advantage of and understand. These are combined with the level of service and client relationship for which Investec is well renowned.

Investec Bank plc is a subsidiary of the Investec group which is an international specialist bank and asset manager http://www.investec.com/infocus.

1 50 senior executives from a range of UK businesses were surveyed at a business seminar on 19 October 2011. The majority of those senior executives were CEO’s, CFO’s, FD’s and Directors; the average turnover of those companies in attendance was £166m.

For further information
Investec Capital Markets
Alex Wilson                                         Tel: 020 7597 4471

Citigate Dewe Rogerson
Alistair Kellie                                         Tel: 020 7282 2850
Jamie Brownlee                         Tel: 020 7282 2858
Notes to editors
Investec Corporate & Institutional Treasury is part of Investec Capital Markets, a division of Investec Bank plc. Investec Bank plc is authorised and regulated by the Financial Services Authority.

Investec have recently won Best Structured Products Provider in the Investment Life and Pensions Moneyfacts Awards 2011. Investec were also highly commended for best Structured Products services.

Investec is an international specialist banking group that provides a diverse range of financial products and services to a niche client base in three principal markets, the United Kingdom, South Africa and Australia as well as certain other countries. The group was established in 1974 and currently has approximately 7,000 employees.

Investec focuses on delivering distinctive profitable solutions for its clients in six core areas of activity namely, Asset Management, Wealth and Investment, Property Activities, Private Banking, Investment Banking and Capital Markets.

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Charlotte Pascal
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