Monthly Archives: January 2016

Points of View: A volatile week in global stock markets

This has been a particularly unpredictable week for global stock markets, with renewed levels of volatility gripping investors. The FTSE 100, for example, dipped from a Tuesday peak of just over 5900 points to a Wednesday trough of around 5640 points before heading all the way back up by the end of the week.

So what caused this volatility?  The initial weakness early in the week was once more down to falling commodity prices and corresponding concerns about a China-led global slowdown.  Brent crude oil, for example, slumped below $30 a barrel amid comments from the International Energy Agency that the oil market could “drown in oversupply”. The subsequent market surge was driven by a rebounding oil price and hopes that central banks would provided extra stimulus.  Specifically, European Central Bank (ECB) president Mario Draghi signalled that his central bank was prepared to cut rates and expand its quantitative easing programme in an attempt to boost the Eurozone economy.

Our own view is that the recent stock market falls seem to have been driven by a loss of financial confidence rather than weakening economic conditions. This gives us some assurance that further weakness is unlikely as the most painful bear markets are usually accompanied by a recession. Clearly there is a danger that the falls in equity markets could lead to further dip in sentiment, resulting in a self-fulfilling fall in activity and then recession. However, central banks are acutely aware of this and will take action to provide more support if necessary. Global growth will continue in the long term and, whilst stock market lows are hard to time, history has always shown large drawdowns to be a buying opportunity in hindsight.


Tax-Free Childcare – Help for Bouncing Babies

The UK is bucking the trend from most of Europe and experiencing a baby boom, and with all these new arrivals the Government has announced changes to the existing scheme, aiming to provide wider access to childcare savings for working parents. The scheme launch is Autumn 2017.

The scheme will allow parents to buy vouchers online to pay for childcare, the Government will add 20p for every 80p that the parent contributes, up to a limit of £10,000. If a parent claims £10,000, he or she will pay £8,000 and receive a £2,000 Government subsidy.

Tax Free Childcare Vouchers will be available to pay for childcare for children up to 12 years old, however the age restriction will be phased in over the first year: at launch only under-5s will qualify but by the end of the year it will apply to all under-12s.

The scheme will work in quarterly entitlement periods – once eligible, parents will continue to be entitled to support for three months, regardless of any change in circumstances.

Unlike the current employer scheme, both parents in the household must be working at least sixteen hours per week (this is also the case for single parent families) and each earning just over an average of £100 per week to be considered as eligible. Additionally the new Government scheme is open to self-employed parents unlike the employer scheme currently in place.

Those whose income exceeds £100,000 per annum or parents who receive support through tax credits or universal credit will not qualify for the scheme.

Will the new scheme affect my existing Vouchers for my little “Johnny and Melissa”

All working parents in receipt of Childcare Vouchers from their employers’ scheme before the introduction of the new scheme will continue to receive these vouchers with the same financial benefits.  After Autumn 2017 the scheme will be frozen to new entrants.

‘Should I stay or should I go’ for new scheme?

Depending on your circumstances you could be better off in the existing employer supported scheme. For instance if you:

  • are claiming vouchers for children between the ages of 13 – 15
  • are earning in excess of £100,000 per annum
  • have only one parent in the family working
  • work less than 16 hours per week or
  • require regular assistance updating your account, making payments to your childcare provider or adding new childcare providers to your account (the government scheme does not offer any helpline or contact email address for queries on the scheme)

you may want to consider enrolling or remaining in the current scheme.

To find out more please visit or contact Ayesha Ping on 01223 720 221 or email

Stocks in Focus: Tate & Lyle

This week I am looking at Tate & Lyle following a Capital Markets Day it hosted last week for investors and analysts. Management used the day to shed greater light on the “in-transition” state of the business. Historically, Tate & Lyle has derived the majority of its revenue from the processing of corn into bulk ingredients (BI), including sweeteners and cattle feed.  However, management are transitioning the business such that it has an ever greater focus on its specialised food ingredients (SFI) division, which develops sweeteners, texturants and health ingredients that help its customers to produce distinctive products.

The BI division has lower barriers to entry, lower margins and is not growing as fast as SFI.  It is also more commoditised and therefore a lower quality contributor to Tate & Lyle’s earnings.  Recently Tate & Lyle sold its European based sweetener joint venture Eaststarch.  Since this sale, 90% of its bulk ingredients will be based in North America, where it has stronger market positions.  However, beyond optimising the less attractive BI business, management also needs to push growth in the SFI business.

Globally, SFI market volume is growing at 4-5% annually.  Tate & Lyle aim to beat this benchmark through innovative new product development.  As the SFI division grows, overall margins expand and the quality of income improves.  Thus far, the company has transitioned from SFI contributing 32% of earnings in the 2009/10 financial year to 47% last financial year. Looking forward, the company targets 70% by 2020 – an ambitious target that would surely be well-received by investors if achieved.