Forecasting events in the City is frequently a fool’s errand but one thing’s clear from the first week of 2016: it is going to be a tough year for much of corporate Britain. Here’s where I think most of the action will be.
1. Among the first big decisions of the year will be delivered when HSBC announces whether it is shifting its headquarters from the UK. George Osborne will be watching closely, and I would not be surprised if he ends up bitterly disappointed as – despite his brazen manipulation of bank taxes – Europe’s largest bank confounds expectations by returning to Hong Kong.
2. Six years focused on surviving the most tumultuous period in BP’s history will culminate in Bob Dudley informing the oil company’s board that he intends to step down as its chief executive. After the “near-death” experience of the 2010 Gulf of Mexico crisis and the continued carnage in the oil industry triggered by tumbling crude prices, few will begrudge him the decision to hand over the reins.
3. 2015’s M&A boom will continue into this year. Among the major UK-based targets will be RSA Insurance, which will strike a deal with either Allianz or AXA after last year’s aborted talks with Zurich; Elsewhere, Smith & Nephew, the medical devices manufacturer; and Reckitt Benckiser, the consumer goods group could buddy up. Meanwhile, Sainsbury’s will find itself on the receiving end of a takeover bid which has the backing of Qatar, its biggest shareholder – regardless of the outcome of its strange approach to Home Retail Group that has made headlines this week.
4. Consolidation among challenger banks will excite the City but do little to alter the competitive dynamics of the sector. The Co-operative Bank will be swept up by Virgin Money, and RBS will agree a deal to sell Williams & Glyn to Santander UK. Clydesdale will trade well below book value when it floats in the spring. A profound sense of deja vu will prevail.
5. Britain will vote narrowly to remain in the European Union, but the business community will be able to claim little influence over the outcome after another dysfunctional campaign.
6. Lloyds Banking Group will be returned entirely to private ownership, paving the way for the banking giant’s chief executive, Antonio Horta-Osorio, to step down in 2017. His counterpart at RBS, Ross McEwan, will fare less well, with an eye-watering settlement for mis-selling mortgage-backed securities preventing the chancellor from selling more shares until the second half of the year.
7. Regulatory bodies will face more swingeing criticism as competition watchdogs face renewed attacks from the smaller banks and energy companies over tepid reforms to both sectors. All eyes, though, will be on the choice of Martin Wheatley’s successor at the Financial Conduct Authority: my money says it won’t be the acting boss, Tracey McDermott.
8. Conservative candidate Zac Goldsmith will win the London Mayoral election. David Cameron will eventually back the construction of a third runway at Heathrow Airport, but legal challenges will instantly kick Britain’s most important infrastructure project back into the Hillingdon reeds. The business community will complain bitterly – cue another dose of deja vu.
9. John Kingman will win the battle to become the second-most powerful man at the Treasury when he replaces Sir Nick Macpherson as its permanent secretary. Sharon White, the Ofcom chief executive, won’t apply for the role, while Tom Scholar’s current responsibilities overseeing EU reform negotiations will make it too tricky to move him ahead of the In/Out referendum.
10. Investors hoping for a significant recovery in commodities markets will be disappointed. Brent Crude prices will tread water for most of the year, finishing at $52-a-barrel. Meanwhile, the FTSE 100 will end the year at 6300. As I said, a tough year.