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Business leaders call for calm to ride out market volatility

12:58 21 January 2016

A stock investor covers his eyes at a brokerage house in Fuyang in central China

A stock investor covers his eyes at a brokerage house in Fuyang in central China's Anhui province Wednesday, July 8, 2015. China announced a flurry of new moves Wednesday to halt a stock market slide. The government told state companies and executives to buy shares, raised the amount of equities insurance companies can hold and promised more credit to finance trading. (Chinatopix via AP) CHINA OUT

Tumbling stock markets may have sent shivers down the spines of investors around the world, but East Anglian business leaders remained pragmatic despite the volatile start to the year.

Market report

The London market saw £52bn wiped off top flight shares, as oil prices tumbled sending the market close to four-year lows.

The FTSE 100 Index fell more than 3pc, or 203.2 points, to 5,673.6 as the price of Brent Crude dipped below $27.50 a barrel yesterday.

It was the market’s lowest level since November 2012.Oil prices have collapsed by more than 70pc since their peak of around $115 a barrel in summer 2014, as large producers such as Saudi Arabia maintain production levels, putting US shale rivals under pressure. Global markets also slumped with New York’s Dow Jones Industrial Average falling more than 2pc in early trading, while Germany’s Dax and the Cac 40 in France were around 3pc lower. The London market has seen over £160bn wiped off the value of top flight shares in the first three weeks of the year due to slowing growth in China and falling oil prices.

Tumbling stock markets may have sent shivers down the spines of investors around the world, but East Anglian business leaders remained pragmatic despite the volatile start to the year.

As oil prices slipped below $28 (£19.75) a barrel and concerns grew over China’s slowing growth, stock markets around the world slumped, with the FTSE 100 down 3.5pc –wiping £52bn off the value of its businesses and raising fears among those whose savings depend upon it.

But despite straying into bear market territory, experts have urged a measured response and pointed out falling commodity prices could present opportunities for manufacturers.

Today, global markets see calmer trading after FTSE’s £52bn beating

Richard Ross, director of financial advisers Chadwick’s, reassured savers and investors that they were not facing a “second financial crisis”.

“If it is a balanced portfolio you would have lost about 3-4pc since the beginning of the year,” he said.

“Typically markets recover about 18 months to two years. If you had a balanced portfolio you would have made that last year.”

The lifting of sanctions from Iran – expected to drive oil prices even lower – would also present opportunities for businesses, he added.

But it could mean further pain for the region’s energy sector, which has already been hit with hundreds of job losses and the closure of high-profile firms including AKD Engineering and Red7Marine last year.

Simon Gray, chief executive of the East of England Energy Group, admitted the volatile markets were “a cause for concern” and repeated calls for government support for the sector, particularly in keeping skills in the region.

He said the mantra of “lower for longer” on oil prices was sinking in with businesses, but that the region’s strength in gas offered some insulation against the price drop.

“Businesses that rewrote their business plans based on an oil price of $60 a barrel have rewritten them for $30 a barrel and are now doing it again for $20 a barrel. Clearly that impacts on Great Yarmouth and Lowestoft,” he said.

“But the price of gas hasn’t fallen at the same rate that oil has fallen. We would like to see the decoupling of gas from oil in fiscal policy.”

He said there would be an opportunity for gas to fill the gap as the UK moved from coal-fired power stations to nuclear, but that refreshing and maintaining workforce skills would be key.

“Hopefully wind and nuclear can take up some of the slack [in jobs]. We must keep people’s skills current – that way they will be match-fit to go straight into jobs.

“The markets are volatile at the moment, but these things are all cyclical. Gas and oil are finite resources and by its very nature, the price will go up again.”

Toby Wilson, Norwich-based director at Grant Thornton, said there would be a limited direct impact on Norfolk businesses in the short term, but added: “There is a potential for a reduction of available capital for future investment.”

He said any effect from China on exports would depend on the company. “You may be exporting a particular product or service that you have certainty of demand and that the payment will go ahead,” he added. “If it is things like commodities you are going to struggle.”

Adam Couch, chief executive of Watton-based pork producer Cranswick, said the change was unlikely to have an immediate affect on exports to China.

“We have a strong position generally, and see no changes to that in the short term,” he added.

But he urged the government to do more to open up markets to exporters.

How is your business being affected? Email business editor Mark Shields on mark.shields@archant.co.uk or call 01603 772426.

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