My nine key predictions for the City over the 12 months ahead

 
Mark Kleinman
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It will be a tough year for Bob Dudley at the helm of BP (Source: Getty)

It's with some trepidation that I set out my predictions for the year ahead in corporate Britain, not least because the first of them might appear misguided even by the time you read this.

ONE

Tesco, which today updates the City on Christmas trading, will be the winner among the food retailing establishment’s “big four” – but in the medium term, it will prove a hollow victory for investors. Dave Lewis, the new chief executive, will fill his trolley with sufficient financial firepower from the sale of Dunnhumby and other balance sheet engineering to blitz rivals on price. That will reset margins across the sector – with a similarly depressive effect on supermarket dividends.

TWO

Prominent changes in blue chip boardrooms will include an announce­ment by Royal Mail that its chief executive, Moya Greene, is to step down after tiring of the company’s frequent impasses with its regulator. Less surprisingly, it will be all change at Standard Chartered with Naguib Kheraj succeeding Sir John Peace as chairman of the emerging markets bank. Another departure will come at Premier Foods, where Gavin Darby will hand over the reins as chief executive. Glen Moreno will retire as Pearson’s chairman after a decade in the job. And Harriet Green, the former Thomas Cook boss, will be linked with every CEO vacancy in the FTSE 350.

THREE

It will be a tough year for Bob Dudley at the helm of BP as he comes under shareholder pressure amid a deepen­ing of Russia’s political estrangement from the West. He will be working frantically behind the scenes to identify a neat exit from its relationship with Rosneft, while professing publicly that there are no such plans.

FOUR

Dudley won’t be the only chief executive facing down vocal shareholders. Activist investors will play a big role in the reshaping of several major companies, including Rolls Royce, J Sainsbury and Smith & Nephew.

FIVE

Mergers and acquisitions bankers will experience a patchy year in London. There will be a renewed flow of Indian companies snapping up British rivals, while fewer megadeals will fail to complete than last year. Tullow Oil, Dialog Semiconductor and WM Morrison will be among the recipients of unsolicited approaches, while the annuities providers Just Retirement and Partnership Assurance will agree to merge.

SIX

Qatar will seek to rival Abu Dhabi by swooping for control of a big Premier League team in one of the year’s most spectacular deals involving a sovereign investor. Don’t assume, however, that Qatar’s transfer target will be Tottenham Hotspur.

SEVEN

The safest bet of all: bonuses will fall at most of the major UK lenders, as the impact of European rules on fixed and variable pay begins to be felt alongside the declining size and performance of British investment banks. The exception will be Lloyds Banking Group, which will become embroiled in a row over variable pay after a markedly improved financial perf­ormance.

EIGHT

Another under-fire sector, energy retailing, will undergo its biggest structural overhaul for many years when the Competition and Markets Authority orders the break-up of the remaining integrated operators. At least one of the overseas owners of the “big six” gas and electricity suppliers will announce plans to put its UK business up for sale.

NINE

The FTSE-100 will end the year at 6,500 points, a mediocre performance that will reflect the UK’s uncertain political outlook, with an EU membership referendum looming large.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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