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EQ Weekly Roundup

This week’s roundup includes news that President Trump has threatened to impose $200bn more in trade tariffs on Chinese imports, Debenhams has issued its third profit warning this year and a regulator has found water firms failed during February’s snow chaos.

Trump threatens huge new tariffs on China

US President Donald Trump has threatened to impose tariffs on an additional $200bn (£151bn) of Chinese goods in a growing trade row.

Trump said the 10% tariffs would come into effect if China ‘refuses to change its practices’.

The move would be a major escalation of the dispute. World stock markets have suffered sharp falls as a result. China responded by accusing the US of ‘blackmail’, raising fears of a full-blown trade war.

The Chinese commerce ministry said the country would take ‘qualitative’ and ‘quantitative’ measures and ‘fight back firmly’ against additional tariff measures by the US government.

Mr Trump insists that China has been unfairly benefiting from a trade imbalance with the US for years. During his 2016 election campaign, he promised to use tariffs to cut the US trade deficits.

But many economists have warned that tariffs are likely to make products more expensive for US consumers and hurt some of the businesses the administration is trying to protect, which depend on China for parts or assembly.

Debenhams issues another profit warning

Debenhams has said its full-year profits are expected to fall below expectations, the third time it has issued a profit warning this year.

The department store blamed ‘increased competitor discounting and weakness in key markets’ for the profit shortfall.

It said pre-tax profits for the full year would come in between £35m and £40m, below estimates of £50.3m.

Debenhams' latest profit warning comes despite a turnaround plan designed to cut costs and boost sales.

Chief executive Sergio Bucher pointed to ‘exceptionally difficult times in UK retail’, adding: ‘We don't see these conditions changing in the near future.’ On 19 June, Debenhams shares fell as much as 16% in early trading before recovering slightly. 

Employers’ group issues UK growth warning

The British Chambers of Commerce (BCC) has cut its UK growth forecast for 2018, warning the economy faces its weakest year since the financial crisis.

The employers' group forecast 2018 GDP growth of 1.3%, down from a previous forecast of 1.4%, and cut its forecast for 2019 from 1.5% to 1.4%.

The BCC said there was a ‘lacklustre outlook’ for consumer spending, business investment and trade and said the next few years will ‘be a testing time for business in the UK’.

Uncertainties around Brexit, interest rate rises, threats of trade wars and rising oil prices were all hurting sentiment, the BCC said.

It added: ‘The BCC urges the government to focus as much as possible on the domestic business environment, reducing the uncertainty that firms face, and take action on skills shortages and poor mobile connectivity, which lower productivity and hold UK businesses back.’ 

Water firms ‘failed’ during snow chaos

Some of the UK's biggest water companies did not support customers properly during this winter's Beast from the East snow chaos, causing ‘significant hardship’, the water service regulator (Ofwat) has said.

According to the regulator, more than 200,000 customers were left without water for more than four hours and tens of thousands were cut off for days.

It accused firms of bad planning, communication and a lack of support. Severn Trent, South East, Southern and Thames Water performed worst, it found.

Ofwat also said it was concerned the £7m of compensation paid out to customers may not have been enough and that it would review existing guidelines. Ofwat chief executive Rachel Fletcher said: ‘The freeze and rapid thaw earlier this year was forecast and was not unprecedented.

‘But too many companies were caught off guard and let people down, causing real hardship as a result. Our report shows there is no excuse for this level of failure. The industry as a whole really needs to step up to make sure the next time something like this happens, customers are much better served.’

The icy spell in late February and early March led to a big increase in the number of burst water mains and in customers' own water pipes as frozen pipes thawed.