Industry and mining
A motor industry executive recently said the issues facing the industry were:
"Green, green and green." Brussels is forcing through big cuts in C02
exhaust emissions with the threat of hefty fines. Any firm offering low-emission
and low-consumption models will also have a competitive advantage.
Manufacturing is also focusing hard on environmental issues. In November a
CBI report by business leaders warned that Britain had to act quickly to cut the
UK's own emissions of greenhouse gases but also to ensure Britain got its share
of business in a low-carbon economy.
Manufacturing must also grapple with high energy prices, a weak dollar
against sterling, and the uncertainties generated by the credit crunch, which
could damage confidence.
Cost will be a major issue in mining as labour and equipment charges rise,
yet commodity prices could weaken, hitting margins. The weak dollar will have an
impact as costs are in other currencies but profits are reported in dollars.
Consolidation will feature: BHP Billiton and Rio Tinto might finally get
together; Xstrata could be taken over by Anglo American or Brazil's Vale.
Mergers and takeovers will increase as smaller firms struggle to raise cash due
to the credit crunch. Demand in China and India is likely to prop up commodity
prices.
Energy
As oil jumped half a dollar to $96.45 a barrel yesterday after a year of
similar spikes, 2008 may be the year when it breaks through the $100 mark.
Surging demand from China and India has kept up the physical side of the market,
while scares have done the rest, whether that be fear of export shortages from
Iraq or the threat of a US attack on Iran.
Crude rose 57% in 2007 but some was due to the fall in the dollar. In euro
terms, the oil price rose barely 40% over the year. Few would rule out a further
slump in the greenback, or conflict in the Middle East or in key suppliers such
as Nigeria. The demand side depends on wider forces, such as whether the credit
crunch will deepen and push the US into recession, plus whether China and India
can keep up their storming growth.
It is likely to be another year of recovery for nuclear power with the
British government poised to give the green light to new atomic plants. It will
also be another good year for UK renewables with a number of new wind-power
projects coming on stream.
Retail and leisure
Most retailers expect spending to slow. The B&Q group Kingfisher, Dixons'
and Curry's owner DSG, and the fashion chain Next have warned of falling
confidence. The credit squeeze, rising council taxes, utility bills, food prices
and mortgage repayments will cut spending even if interest rates fall further. A
sustained property downturn will be bad news for retailers selling homewares and
home improvements. Broker Kaupthing says: "This is the start, not the end,
of a slowdown in retail spending."
Some retail executives may have a tough year. The billionaire Mike Ashley
reckons he is now building bridges with investors but has a huge task to rebuild
trust and Sports Direct is still one of the UK's most unpleasant places to shop.
Debenhams' Rob Templeman and Trevor Bish-Jones of Woolworths face an uphill
task. The latter, analysts say, makes all the right management moves but still
ends up a loser because Woolworths, as a retail concept, is past its sell-by
date. Last year's mild winter was blamed for unsold stock but sales might get a
boost as a cold January is forecast.
Scottish & Newcastle, the last big UK brewer, has rebuffed two break-up
proposals from unwanted predators Carlsberg and Heineken. They have until
January 21 to make a firm offer. The gem in S&N is its 50% share of BBH, a
fast-growing eastern European brewer that is a market leader in Russia with
Baltika, left. The twist is that S&N's partner at BBH is Carlsberg. S&N
says its actions have put the BBH partnership beyond repair and a divorce at BBH
is likely.
Technology and Media
Convergence - of media, technology and telecoms - is the buzzword after the
first converged device, the iPhone, showed that mixing media with internet
access, voice calls and texting can work.
We should see similar touch-screen phones this year as the internet finally
goes mobile. Google is expected to make more noise this year about its mobile
handset alliance and Android suite of mobile technology, which it hopes will
open up the mobile web to developers in the same way that the web has opened up
to everyone. Nokia's Ovi mobile content platform has attracted Vodafone's
interest and the launch of its all-you-can-eat music service later this year
will be keenly watched by a music industry worried about iTunes' dominance.
In social networking, Facebook may face the backlash that greeted MySpace
last year and so the text-message micro-blogging site Twitter, the
community-based online news site Digg and LinkedIn, a social networking site for
professionals, have all been touted as potential buyout targets for 2008.
More broadband operators will provide TV over phone lines, with Orange due to
launch its IPTV soon. Mobile phone companies will also push new "femtocell"
technology- a low-power mobile phone base station in your house that increases
in-home mobile phone coverage and allows free calls from a mobile handset over
broadband.
The telecoms and media regulator Ofcom will continue reviewing the pay-TV
market and will launch an inquiry into the mobile phone industry. The cost of
calls should fall if the regulator finally gets to grips with the complex world
of mobile termination rates.
Pharmaceuticals
Big Pharma faces another turbulent year of patent expiries, slowing sales
growth and fewer approvals. Revenues will be affected by product withdrawals or
safety scares from 2007. Switzerland's Novartis will be hit by the suspension in
the US of its irritable bowel syndrome drug Zelnorm. GlaxoSmithKline (GSK) will
suffer lower sales of its diabetes drug Avandia after May's safety scare.
Safety will be a key issue as the US food and drug administration focuses on
the risks of drugs. Last year saw fewer approvals in the US, and this is likely
to continue. Fewer potential blockbuster drugs are expected and approvals of new
chemical entities may be concentrated in specialist areas such as oncology.
Firms will continue to cut costs, which could mean more job losses.
There is still a danger that avian flu, above, may become a pandemic. This
would benefit firms such as GSK and Sanofi Aventis, which have vaccines. Another
factor will be the US presidential election as issues such as pricing and
therapeutic substitution, where a pharmacist gives a different chemical entity
from the same class of prescribed drug, come to the fore.
Transport
British Airways and Heathrow's owner BAA - criticised for poor standards and
their role in global warming last year - will be hoping that problems with lost
bags and security queues do not continue at Heathrow's new Terminal 5.
Three days after the terminal opens on March 27, transatlantic air travel
will be liberalised when the Open Skies agreement comes into force. The
lucrative route between Heathrow and New York-JFK will be opened up to
newcomers, presenting BA and Virgin Atlantic with a new set of challenges.
BAA faces a tough year as it prepares for a ruling from the regulator, the
Civil Aviation Authority, on landing fees at its airports. It has been warned to
expect an annual profits shortfall of about £150m under the new regime, which
will affect refinancing its £9.3bn debt burden. BAA has also warned that a new
third runway at Heathrow, which could get the go-ahead by mid-2008, could be at
risk from the CAA's pricing proposals.
The oil price pushed the business-class airline MAXjet into bankruptcy last
week and it will be a major concern for all transport companies in 2008. Airline
costs will come under pressure and the industry's global profit margin of just
1.1% will be squeezed.
Bus and rail firms such as FirstGroup and Stagecoach also face higher fuel
costs but their main concern will be the economy and how it affects demand. Both
have agreed to pay the government at least £1bn over the course of their First
Great Western and South West Trains franchises, which rely on commuters for much
of their revenues
related articles:
http://www.guardian.co.uk/business
http://www.contracostatimes.com/search/ci_7622830.
