Thousands of UK restaurants could go bust due to a higher cost of importing food and wine

(qlmbusinessnews.com via theguardian.com/UK – – Mon, 5 Dec, 2016) London, Uk – –

Higher cost of importing food and wine – due to weaker sterling – and rising wage bills could hit over 5,000 companies

Food Wine
aJ Gazmen/Flickr

Thousands of restaurant businesses in Britain could go bust because the fall in sterling since the Brexit vote has sharply raised the cost of imported food and wine, an accountancy firm has warned.

Moore Stephens says that 5,570 restaurant businesses have at least a 30% chance of insolvency in the next three years, due to inflationary pressures and stagnating disposable incomes.

The UK imports 48% of its food, according to government figures, and many restaurants rely heavily on imported food and wine. The cost of labour has also gone up, after the government raised the national minimum wage from £6.70 to £7.20 in April, with a further rise to £7.50 to take place next April.

The restaurant sector is fiercely competitive, with 200 new restaurants opening in London last year alone. This gives consumers a lot of choice and forces restaurants to cut prices or come up with special offers.

Many diners are also suffering from flatlining disposable incomes – the amount households have left to spend after tax and bills have been paid. The average gross disposable household income increased just 0.5% over the last year, from £17,872 to £17,965, Moore Stephens said, quoting official data.

Even some of the biggest restaurant companies are struggling. For example, The Restaurant Group is closing 33 outlets across the UK, including 14 Frankie & Benny’s and 11 Chiquito branches. It also plans to close its flagship Garfunkels restaurant on the Strand in London.

The company, which also owns Coast to Coast, has blamed its poor performance on unpopular new menus, higher prices and poor customer service, and vowed to listen more to its customers.

The business’s new chair Debbie Hewitt, who took over in March as part of a boardroom shake-out, has said the drop in the value of the pound following the referendum would push up the price of imported food next year but added that the company cannot afford to pass this on to customers.

There have been a growing number of warnings over dearer food prices, from Britain’s biggest supermarket, Tesco, and others, and the impact on poor families. The Bank of England, the International Monetary Fund and City economists all believe that inflation will rise to at least 3% by the end of next year, from 0.9% in October.

Mike Finch, restructuring partner at Moore Stephens, said: “It’s been a tough year for many restaurants in the face of rising costs and fierce competition. It is unrealistic to expect UK restaurant groups to avoid the impact of the fall in the pound by substituting for UK produce – they are going to face a big hit. Restaurants have to make tough decisions as to how much they try to pass on to consumers; too much and they risk losing business, too little and they lose margin.”

He said that sterling’s wild swings in the currency markets had hit small and medium-sized restaurant businesses particularly hard as they operate on tighter budgets and are less likely to negotiate long-term supply contracts. All this comes at a time when many consumers are likely to be very price conscious.

Food Wine
Uncalno Tekno/Flickr

“The high number of potential insolvencies over the next year shows just how fragile finances can be in this sector and demonstrates the importance of careful financial management,” Finch added.

“There may be further challenges to come as the UK’s trading agreements with Europe remain uncertain. Many in the restaurant industry would consider the idea of additional import tariffs on foodstuffs with horror.”

A separate report showed the strain many UK consumers are under. The number of those who have taken on more debt over the last five years has risen to 37% from 27% a year ago. The findings come from a survey of 2,008 consumers with debt, including 804 defaulters who have fallen behind with payments, by FTSE 250-listed Arrow Global, which buys and manages debt portfolios.

The most common form of personal debt is credit cards that are not paid off in full every month. The fact that credit cards have overtaken mortgages as the most frequent form of debt, alongside an increase in overdraft borrowing, suggests that the nation’s habits have changed to favour short-term borrowing. More people than ever are renting as they cannot afford to buy a home.

Almost half of borrowers (48%) have a credit card which is not cleared in full each month, compared with 39% a year ago. Almost a third have an overdraft, up from 23%, while the number of those with a mortgage has fallen to 42% from 46%.

One in 10 debt defaulters who fall behind on repayments never catch up.

The latest Bank of England figures showed credit-card borrowing reached an all-time high of £66.2bn in October.

Arrow Global has arranged an industry roundtable this Friday to discuss what the industry can do to support debt defaulters. Tom Drury, the firm’s chief executive, said: “Consumer credit is vital for the smooth-functioning of the economy, but it is clear that British consumers are taking on a heavy debt burden at the moment that is not going to be sustainable for some.

“The low interest rate environment means that debt is cheap, but that doesn’t help consumers who have struggled with their monthly budgeting or suffered from a shock event like losing their job. When borrowers do fall behind on repayments, it is vital that they get all the support they need to rehabilitate their debt.”

By Julia Kollewe

Fantastic Beasts and Where To Find Them – 1 December 2016 Box Office Figures

(qlmbusinessnews.com via boxofficemojo.com – – Sat, 3 Dec, 2016) London, Uk – –

Fantastic Beasts and Where To Find Them

Domestic Total as of Dec. 1, 2016: $164,962,403
Distributor: Warner Bros. Release Date: November 18, 2016
Genre: Fantasy Runtime: 2 hrs. 20 min.
MPAA Rating: PG-13 Production Budget: $180 million

Scientist and entrepreneur Ruopeng Liu turning science fiction into reality

Chinese scientist and entrepreneur Ruopeng Liu is turning science fiction into reality. From cutting edge computing to space-faring technology, there’s no project too far-fetched. He’s been dubbed China’s Elon Musk and now: he wants to take you to the edge of the atmosphere.

Brexit to Have Little Impact on UK Christmas Spending Habits

(qlmbusinessnews.com via telegraph.co.uk – – Fri, 2 Dec, 2016) London, Uk – –

Christmas Shopping
Carmel/flickr.com

 

Britain's vote to leave the European Union has had no effect on the majority of shoppers Christmas spending plans, according to fresh figures.

The average UK adult expects to spend £280 on Christmas gifts this year, according to a survey by PwC of 2,000 shoppers across the country.

More than two-thirds of adults surveyed (67pc) said that Brexit had no impact on their spending habits.

“We’ve seen UK consumers respond robustly to this year’s political uncertainty and sterling weakness, as evidenced by the post-referendum retail sales figures,” said Madeleine Thomson, retail and consumer leader at PwC.

Regionally, Londoners, said that Brexit will have the most impact on Christmas spending, with 44pc in total feeling that it would have either a slight or considerable impact.

However, Yorkshire and Humber had the highest percentage of people who felt that Brexit would have no impact at all on their Christmas spending.

Scotland has the highest expected festive spend with £328.66 while the East Midlands has the lowest at £241.47.

Meanwhile, around 4pc of polled Brits said they don’t buy presents at all, with 64pc saying they did not celebrate Christmas, and a quarter said they did not have anyone to give gifts to.

Following on from the Black Friday shift to online shopping, over half of adults surveyed said they would buy gift online this Christmas. Online sales reached a record £1.23bn on Black Friday, up 12.2pc on the same day in 2015, according to retail analysts at IMRG. A number of retailers also took the step to discount early meaning that online sales for the week also rose to £6.5bn.

Earlier this week John Lewis reported its biggest ever week of sales with a 6.5pc lift to £200m.

However, the high street suffered from a 7pc dip in footfall as the spending shifted online. #

By Ashley Armstrong

True Benefits of Shared Office Space

Qlm referencing: (qlmbusinessnews.com via telegraph.co.uk – – Fri, 2 Dec, 2016) London, Uk – –

Shared Office
doryfour/flickr.com

From pooling resources to using a hive mind: co-workspaces can prove fruitful for enterprises.

If running a small business sometimes feels like a lonely pursuit, shared working spaces could be for you. From networking opportunities to joining forces with university research teams, there are many advantages to communal working.

Kelly Molson found the Cambridge Business Lounge to be invaluable when she first moved to the city and set up her design agency, Rubber Cheese.

Following a Facebook advertisement, she found a mix of professionals from a variety of industries, the opportunity to run and take part in workshops, and spaces for networking, meetings and quiet time. It was affordable and had good biscuits.

Ms Molson says: “The owners are incredibly supportive and made a big effort to get to know me and why I was using the centre. Every time I worked there, they were able to introduce me to new people that they thought I’d get on well with, and potentially could work with too.”

Make the most of networking opportunities

“One introduction led to co-founding a networking group, Grub Club Cambridge, which has been incredible. I’ve met amazing people, gained new clients, raised my profile in the city, been a judge for the Cambridge Food & Drink awards, been interviewed on BBC radio and made fab new friends,” she recalls.

Ms Molson advises asking questions of co-workers and taking an interest in their activities. “I’ve met new suppliers, friends and new clients sitting right next to me, along with a valuable support network.”

Barnaby Lashbrooke, founder of virtual assistant platform, Time etc, is a big believer. When his company evolved to a model more reliant on remote workers, he offered his unused office space free of charge to start-ups and entrepreneurs in Birmingham.

Mr Lashbrooke says: “It's nice to be in a position where we can give something back. I'd have loved someone to offer me a free co-working space when I was 18 and running my first business from my very cramped bedroom at home, as it does get lonely at times.”

He’s in no doubt that working alongside new people can be highly motivating. “Entrepreneurs tend to be inspiring, go-getting types that are good to have around.

Think about collaboration, not just your own needs

“You can get so much out of shared office space if you view it as a community of people rather than simply a service available to your business. The knowledge and ideas stored in that community can be the difference between your start-up succeeding or not,” he says.

Some communal working spaces are open to all, while others are tailored towards specific needs. Hubble, an online marketplace for finding and renting office space in London, offers sector-specific shared working spaces.

Varun Bhanot, head of business development, explains: “The hope is that these companies help each other, and benefit from the perks of the environment such as access to industry resources, workshops and talks by thought leaders in their industry.”

He has advice for making the most of your working arrangement. “Shared spaces are designed to engineer fruitful networking and ‘collisions’. Take advantage of those around you, as the chances are they are working on a similar problem to yours, or your company might be a solution they are looking for.

“Spend time in breakout and communal areas. Go to events in the space, or host your own. The best thing about shared space is that there is already a captive audience which is likely to want to listen to your pitch or useful advice.

He also suggests approaching companies about pooling resources. This can go far beyond comestibles such as the milk and coffee, there can be an opportunity to share printing, whiteboards, TVs and meeting room space. It could work out most cost-effective for all the companies to pitch in.

Give yourself room to grow

Mr Bhanot’s key factors in choosing your perfect working space include scalability: is more space available when your company grows? Are there enough meeting rooms so you can book time whenever you need it? Also look for local amenities, such as coffee shops and bars which are great for out-of-the-office meetings with colleagues and clients. And don’t forget the perks, such as weekly fruit drops and pet-friendly areas.

Universities can provide a wealth of resources to SMEs. Lancaster University has business hubs dedicated to technology, the environment and chemistry. Among its £35m investment is the new Collaborative Technology Access Programme, which gives businesses access to a suite of cutting-edge instrumentation and facilities worth almost £7m.

Companies can relocate their entire company, or just their research and development staff, onto campus, or take a hot desk or lab space as and when required.

Dr Mark Rushforth, head of business partnerships and enterprise at Lancaster University’s Faculty of Science and Technology, says: “Renting offices and integrating all or part of a business onto the campus enables faster business growth by providing easier access to our research, knowledge, events, training and facilities. Company staff, academics and research groups are able to interact on a day-to-day basis, co-design new opportunities and have direct access to knowledge exchange staff.”

Each business is allocated a relationship manager, who acts as a link between businesses and academics, facilitating joint research projects and ventures. Companies can also benefit from student placements, access to international markets through a collaborative working scheme, and access to other campus facilities such as libraries and sports centres.

Dr Rushforth adds: “Ask questions, share ideas, get involved, test new employees through student placements, tap into everything you can. There’s a lot of support out there.”

By Tim Aldred

Rental Limits to be Enforced by Airbnb

Airbnb announced for the first time that it would enforce a legal limit on the number of nights a year a host in London and Amsterdam can rent out a home. Thursday's announcement, coupled with several deals made over the past year, shows the company has started to offer more compromises to make peace with cities.

Rolls-Royce Holdings Plc to Cut 800 Posts

(qlmbusinessnews.com via bloomberg.com – – Thu, 1 Dec, 2016) London, Uk – –

Rolls Royce
Cedric Ramirez/flickr.com

Rolls-Royce Holdings Plc will cut 800 more posts at its marine-equipment and ship-design unit, or about 17 percent of the remaining workforce, as the lower price of crude hurts demand for oil-industry exploration and service vessels.

Restructuring steps will include a further simplification of the unit’s structure, including a “streamlining” of senior management, plus unspecified cost-reduction initiatives, London-based Rolls-Royce said Thursday.

The measures will cost about 20 million pounds ($25 million), split between this year and next, and should deliver annualized savings of up to 50 million pounds from mid-2017, according to a statement.

Rolls, best known for its aircraft engines, has already cut more than 1,000 jobs at its marine operation since 2016, with the division currently employing 4,800 people across 34 countries, including 1,900 in Norway, where it is based.

The offshore market is showing no sign of recovery, with the outlook bleaker as the backlog shrinks, Chief Executive Officer Warren East said Nov. 16. The marine arm has already shut or sold 12 of its 27 sites, and is looking at cutting more locations and shifting some production to emerging economies.

Rolls-Royce’s aviation business has also been hit by a slump in sales of business and regional jets, lower utilization of older wide-body planes and a slowdown in A330 engine deliveries as Airbus Group SE switches to an upgraded model. East has said the company is on course to deliver savings close to 200 million pounds by the end of 2017.

The marine division currently supplies gear including propellers, rudders and propulsion equipment for offshore vessels, oil and gas platforms, freighters, cruise liners, ferries, trawlers, luxury yachts and naval craft, as well as designing entire ships. While the unit markets engines, they’re made by the power systems arm, which has also laid off staff.

As part of the changes Rolls plans to establish a services hub and research center for new propulsion products in Ulsteinvik, Norway.

By Christopher Jasper

Mark Carney – EU Should Offer Transitional Period to Banks and Finance Firms to Adapt to Brexit

(qlmbusinessnews.com via telegraph.co.uk – – Wed, 30 Nov, 2016) London, Uk – –

Bank Of England
James Stringer/Flickr

The European Union desperately needs finance from Britain and will face severe knocks to its economy if member nations do not agree to a transitional period to give banks and finance firms time to adapt to Brexit, Mark Carney has warned.

The Governor of the Bank of England wants a smooth changeover when Britain leaves the EU, to give companies time to adapt to the new setup, and avoid any wrenching change in the economy or in the financial markets.

That means Britain would not necessarily switch overnight from one regime to another when leaving the EU, which is expected to take place in early 2019.

“Banks located in the UK supply over half of debt and equity issuance by continental firms, and account for over three-quarters of foreign exchange and derivatives activity in the EU,” Mr Carney said.

“If these UK-based firms have to adjust their activities in a short time frame, there could be a greater risk of disruption to services provided to the European real economy, some of which could spill back to the UK economy through trade and financial linkages.”

“These activities are crucial for firms in the European real economy, and it is absolutely in the interests of the EU that there is an orderly transition and there is continual access to those services.”

The Governor has been criticised for his interventions on Brexit in the past, facing accusations that he wanted the UK to remain in the EU and tried to sway the debate.

Presenting the Bank of England’s financial stability report, he sought this time to align himself with Theresa May.

“As the Prime Minister has said, it is preferable that the process is as smooth and orderly as possible,” he said.

“It is preferable that firms know as much as possible about the desired end point [of the Brexit negotiations] and as much as poss as soon as possible about the potential path to that end point.”

That should mean businesses on both sides of the Channel are able to prepare for Brexit when it takes place, minimising any disruption.

“[Finance] firms are making contingency plans for a variety of potential outcomes, as we’d expect them to do. As supervisor, we have direct line of sight to those contingencies, and we know exactly what they currently intend to do under any circumstance,” said Mr Carney.

He believes that the average bank would need less than two years to implement its contingency plans for Brexit, once it knows exactly what it is preparing for.

That sets the scene for a much shorter transition period than the five to 10 years sometimes proposed by finance bosses and lobbyists.
China is the biggest risk to financial stability

Other risks to financial stability identified by the Bank of England include the buildup of debt in China, the potential for Donald Trump’s spending plans to cause the US economy to overheat, political risks in the eurozone, and the increase in household debt in the UK.

“The most significant risks to UK financial stability are global,” said Mr Carney.

“China’s non-financial sector debt has risen…. to 260pc of GDP. This is extraordinary leverage for an advanced, let alone emerging, economy.”

That is an increase from 160pc of GDP at the time of the financial crisis, and the Bank of England fears it leaves China “vulnerable to external shocks”.

Donald Trump could destabilise markets

One such shock could be a sharp rise in US interest rates, potentially prompted by President-elect Donald Trump’s plans to slash taxes and hike government spending.

“A significant fiscal stimulus at a time when the US economy is increasingly operating at close to full capacity … the consequence of that has been an increase in US market rates, the first elements of so-called snap-back risk, and a strengthening of the US dollar,” said Mr Carney.
Snap-back risk is a central banking term for a sharp jump in interest rates, rather than the slow and steady change which officials hope will take place in the coming years.

Higher rates would be expected to push up the dollar and encourage flows of capital from emerging markets and into the US, potentially hitting growth in those markets and creating financial instability.

Britons at risk from debt binge

In the UK the Bank of England noted that households are starting to increase borrowing, for the first time since the financial crisis.

Households’ debt as a proportion of their incomes has fallen by around 20 percentage points since the credit crunch.

That is now increasing, in part because higher house prices mean homeowners need bigger mortgages, but also because credit card debt is on the up.

“The good thing is households and businesses, young families looking to buy a home, can get access to credit, and get it on quite competitive terms,” said Mr Carney, arguing that the low interest rates which encourage this “are necessary for the economy, given the headwinds the economy is facing.”

But he said the Bank of England also has to make sure those loans are being given out responsibly: “We have tools that can help ensure the underwriting standards are responsible, that [the loans] are going to people who are likely to be able to pay off those debts. It doesn't do anybody a favour – the individual, the bank or the economy as a whole – if we slip into a position where that discipline is lost.”

By Tim Wallace

Brexit worries fade as British firms plan to take on more worker

(qlmbusinessnews.com via telegraph.co.uk – – Tue, 29 Nov, 2016) London, Uk – –

Union Jack
Mikey/flickr.com

Businesses plan to hire more workers into the new year, as service sector employers’ worries in the summer after the EU referendum turn to cautious optimism.

Their longer-term plans are more uncertain, however, leading to investment cutbacks, a survey of service sector members of the Confederation of British Industry (CBI) has found, with spending on vehicles and machinery reduced.

Consumer companies are the most positive about their financial prospects, with households remaining upbeat since the Brexit vote and spending more in the shops.

The CBI found the proportion of consumer companies reporting above-normal business volumes outweighed those reporting low business levels by a margin of 22 percentage points. Firms are also increasingly optimistic about the coming months.

Companies serving other businesses, particularly in professional services markets, are less positive, however. A net balance of 10pc said business levels are below normal, and a balance of 17pc are pessimistic on the overall business environment. Companies in both sectors expect to keep on hiring workers, however, at an accelerating pace.

That bodes well for Britain’s wider economy, where unemployment is currently at an 11-year low and has fallen since the EU referendum in June, defying fears of an immediate slump.

The CBI’s chief economist, Rain Newton-Smith, said: “Employment growth remains strong and service sector firms are looking to hire in the months ahead. Many firms still plan to invest in IT, but uncertainty over future demand could act as a restraint.

“The Autumn Statement will have offered some comfort to businesses as the Government looks to build on the UK’s economic strengths, with an industrial strategy that helps deliver growth across the country.”

By Tim Wallace

 

UK urges to be careful with its plans to raise the National Living Wage:OECD

(qlmbusinessnews.com via bbc.co.uk/news – – Mon, 28 Nov, 2016) London, Uk – –

UK public finances
London Skyline/Megan Trace/flickr.com

The UK should be careful with its plans to raise the National Living Wage, according to the Organisation for Economic Co-operation and Development.

The OECD said “caution” was needed in the roll-out of the policy, given its possible impact on employment.

In the Autumn Statement, Chancellor Philip Hammond pledged to raise the wage to £7.50 an hour next April.

The OECD also forecast that the UK would have one of the lowest growth rates among G20 countries by 2018.

The National Living Wage was introduced by Chancellor George Osborne in his Budget in July 2015.

It came into effect in April this year, and was set at a rate of £7.20 an hour for workers aged 25 and over, with the aim of increasing it to £9 an hour by 2020.

Pay rise
The UK's Office for Budget Responsibility estimated it would give a pay rise to 1.3 million workers this year.

The OECD said the UK's labour market had been “resilient”, although job creation had moderated recently.

“Real wages have been growing at a time of low inflation, but the fall of the exchange rate has started to increase price pressures,” it said.

“Caution is needed with the implementation of the policy to raise the National Living Wage to 60% of median hourly earnings by 2020.

“The effects on employment need to be carefully assessed before any further increases are adopted, especially as growth slows and labour markets weaken.”

The organisation's stance echoes the widespread claims of business organisations in the 1990s that the introduction of the UK's national minimum wage – which started in 1999 – would lead to widespread job losses.

Those fears proved to be groundless, with the number of people in employment rising from 27 million then to nearly 32 million now.

The OECD says the world economy has been stuck in a low growth trap for five years. It says government spending and tax policies could be used to provide a boost.

The report expects action on these lines from the administration of President-elect Donald Trump in the United States and predicts that will result in a modest boost beyond US borders.

It also suggests that other countries could afford to take similar steps.
But the OECD says that any benefit could be offset if countries resort to measures that restrict trade to protect their own industries.

Brexit ‘unpredictability'
The OECD predicts that the UK's economy will grow by 1% in 2018, slower than both Germany (1.7%) and France (1.6%).

However, the organisation has raised its UK growth forecasts for this year and 2017.

It now predicts the UK's economy will expand by 2% this year, compared with an earlier forecast of 1.8%, while in 2017 it has lifted the growth forecast to 1.2% from 1.0%.

The OECD said the upward revision was specifically because of Bank of England action and the depreciation in sterling since the Brexit vote.

Looking ahead, the organisation warned that the UK's unemployment rate could rise to more than 5% because of weaker growth.

It also predicted a sharp rise in inflation as the pound's slide against the dollar and euro starts to be reflected in prices in the shops.

“The unpredictability of the exit process from the European Union is a major downside risk for the economy,” it said.

The OECD's forecast for growth in the US has risen since the election of Donald Trump as the country's next President.

It revised its prediction for 2016 up to 1.5% from 1.4%, and next year's estimate to 2.3% from 2.1%. In 2018 it is forecasting 3% growth.

 

Sky Plc About to jump into the U.K. Wireless Market

 

(qlmbusinessnews.com via bloomberg.com – – Mon, 28 Nov, 2016) London, Uk – –

Sky Plc is about to jump into the U.K. wireless market, betting that even as a latecomer it can pry customers away from the four established competitors by harnessing its powerful entertainment brand and millions of existing subscribers.

Prospects for Sky’s mobile offer remain hard to pin down for analysts. Their forecasts for the company’s share of the 15.2 billion-pound ($18.9 billion) U.K. market range from as little as 1 percent to 10 percent, which would bring it close to CK Hutchison Holdings Ltd.’s Three U.K., now the No. 4 player.

The outlook for Sky’s offer remains clouded by a lack of details, including pricing. Guy Peddy, an analyst at Macquarie Bank Ltd. in London, originally estimated Sky could capture about 2 million customers by mid-2021. He’s raised that figure by more than 50 percent to 3.12 million, saying this week in a report that the opportunity is bigger than he thought and the offer is more sophisticated. “Wireless risks for the existing operators are understated,” he wrote.

The type of customer Sky attracts is as important as the number. That’s because its biggest rival, BT Group Plc, has been busy establishing itself on Sky’s home turf in pay-TV. The former U.K. phone monopoly this year expanded its slate of Premier League soccer matches, long a Sky stronghold, and acquired mobile operator EE. That gave it a “quad-play” lineup of fixed and mobile phones, broadband and television. By adding a mobile offering, Sky has a chance to retaliate.

‘Substantial’ Potential

“The fact that they will be entering the quad-play space after BT/EE means that competition for similar customers could be intense by the time they come to market,” Ameet Patel, an analyst at Northern Trust Securities LLP in London, said in an e-mail. EE and Sky will be fighting for a broadly similar subscriber base of “higher-value, more data-hungry users,” Patel said.

Sky says it sees “substantial” potential for the cellular service. What little it has revealed suggests that the company, whose biggest investor is Rupert Murdoch’s 21st Century Fox Inc., is confident it can poach mobile customers from its rivals by bundling services across platforms. Existing Sky customers who indicate their interest in the mobile product online are told it will be “the smart network for your smart phone.”

Sky’s experience delivering content to mobile platforms means the new service is a natural extension, Sky Chief Executive Officer Jeremy Darroch said last week at an investor conference in Barcelona. Sky will first focus on signing up its existing customers, who currently get their mobile service from a range of providers, he said.

“It’s a market where I think we’ve got the right skills to be successful,” Darroch said. Sky’s success with broadband and its high-definition TV service show the company is good at marketing new products, he said. “Our ability to upsell that scale is very, very strong.”

EE’s Share

EE had a 29 percent share of U.K. retail mobile subscriptions at the end of 2015, according to industry watchdog Ofcom. It was followed by Telefonica SA’s O2 with 27 percent, Vodafone Group Plc with 19 percent and Three with 11 percent.

Representatives for EE, Three and the Vodafone declined to comment. A Telefonica spokesman said the company will benefit from the traffic generated by Sky because the pay-TV provider is buying space on O2’s network for its mobile offering.

Sky built its pay-TV business on ownership of premium programming like top-flight soccer, rather than discounting, so analysts don’t expect it to try to undercut rivals on price in pursuit of volume. Still, its entry into an already crowded U.K. mobile market will intensify competition.

Some analysts underestimated the growth of Sky’s broadband business. After more than a decade of investments, including the acquisition of Telefonica’s U.K. fixed-line business, Sky has become the second-largest internet provider in the U.K. after BT. Its market share rose to 23 percent in 2015 from 15 percent in 2010, according to Ofcom.

BT mobile subscribers that don’t get broadband from the carrier may already pay for Sky services and may be the most likely candidates for switching to its cellular offering, said Allan Nichols, an analyst at Morningstar Inc. in Amsterdam.

Broadband Success

“They’ve been way more successful with their broadband than I ever thought they would,” he said.

Research suggests two-thirds of Sky customers would consider the company’s mobile offering, Stephen van Rooyen, chief executive officer of the U.K. and Ireland business, said at a capital markets day last month. They’ve been able to register since October.

“We’ve long had our eyes on the size of the prize,” he said. “The mobile market is huge.

By Rebecca Penty  and Kasper Viita