Tuesday 29 July 2014

GlaxoSmithKline, Tesco and update on Britain's economy

Earnings news at GlaxoSmithKline (GSK), unsettled investors and the share price dropped to levels not seen in over a year. Having earlier told the market to expect an increase of as much as 8% the company warned its earnings are more likely to be flat this year. Like many other global companies, Britain’s biggest drugmaker has been hurt by the strong pound, which was partly responsible for its recent disappointing second quarter results. GSK employs over 97,000 people in over 100 countries and has a sizeable operation in Worthing.

Another global company and large employer in Sussex that came back on the ‘radar screen’ was Tesco. It shares have also fallen to a year low on news of the departure of their chief executive and yet another profit warning. Apparently Tesco’s participation in the year’s supermarket price war has proved ineffective, with the group remaining 6% more expensive than Asda on branded products. The failure of the company’s ‘Build a Better Tesco’ UK strategy 3 years on from its launch was another reason for the CEO’s exit.

Britain’s economy is now bigger than it was at its pre-financial crisis peak, after official data showed gross domestic product increased by 0.8% in the second quarter of the year. It may not always feel like it but our economy is growing faster than those of every other developed country, which has recently been confirmed by the International Monetary Fund, who upgraded their forecast from UK growth to 3.2% this year and 2.7% in 2015, describing the numbers as an ‘upside surprise’. However, the IMF warned in its quarterly World Economic Outlook that the crisis in Ukraine and continued unrest in the Middle East risked creating an oil price spike that could destabilise the global economy.

Back to a bit of local news and good cheer – it was a pleasure supporting the Juice 107.2 Appeal and their ‘Biggest Breakfast’ event. Thank you to all those Sussex coffee shops and restaurants that kindly helped to make the morning a great success.

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