BANKING
Payment holiday could hit future borrowing
Measures aimed at helping homeowners have attracted criticism as it emerged that taking a payment holiday on mortgages or other forms of debt could affect someone’s ability to borrow money in future. The Financial Conduct Authority previously advised lenders to help people struggling financially by temporarily halting payments on loans and mortgages for up to three months. Borrowers had been told this would not affect their credit score, but Money Saving Expert has highlighted that some lenders take other factors into account when deciding whether to grant borrowing and interest still builds up during a payment holiday, leaving borrowers with a larger bill to pay afterwards.
Backlog delaying first-time buyers’ plans
Despite mortgage lenders including Halifax and HSBC saying they planned to resume physical valuations as soon as Monday after the Government said it would allow property transactions to resume, Aaron Strutt of mortgage broker Trinity Financial said some lenders would have tens of thousands of existing cases to deal with before new customers could be processed. He cautioned: “Banks will start to slowly lower their deposit requirements but they need to get through the valuation backlog first.” Yorkshire Building Society has however announced that it will offer loans to buyers with a 15% deposit from today, having restricted loans to customers with a 25% deposit at the start of the pandemic.
City firms begin to move back in
Financial services firms and banks in the City of London, including JP Morgan, are working on ways to return staff to offices as coronavirus lockdown restrictions are eased. Meanwhile, Morgan Stanley and Goldman Sachs are among investment banks advising UK staff to continue to work from home, even as employees elsewhere in the world return to the workplace. Royal Bank of Scotland said: “We are not planning any changes to how employees have been working for the last eight weeks and are advising our staff not to come into our premises unless they have already been doing so.”
Mortgage rates at record lows
Finance experts at Moneyfacts have reported that the average two-year fixed mortgage rate is now at a record low of 2.09%, with the Bank of England reducing base rate to a record low of 0.1%. Eleanor Williams of Moneyfacts stated: “Looking at products often favoured by first-time buyers, at 90% loan-to-value, the number of products available has dropped by 270 and 243 for two and five-year fixed rate options respectively. First-time buyers are therefore likely to feel the effect of the current circumstances even more keenly than most.”
PRIVATE EQUITY
3i to pay dividend despite COVID-19 hit
3i will pay its 2020 dividend as planned despite a collapse in profit caused by the coronavirus crisis. Its total return fell to just £253m, representing a profit of 3% on opening shareholders’ funds with this down from £1.3bn, or 18%, in March 2019. The company said its portfolio had been on track before the outbreak of COVID-19, which hit the value of its investments in travel, retail and automotive companies.
INTERNATIONAL
Deutsche Bank’s US operations criticised by New York Fed
The Federal Reserve Bank of New York has rebuked Deutsche Bank due to concerns linked to its US operations, saying it remains at the second-worst grade on its rating scale.
World Bank names Latin America VP
Carlos Felipe Jaramillo has been named as the World Bank's vice president for the Latin America and the Caribbean Region. He will oversee the bank's relations with 31 countries.
AVIATION
Virgin Atlantic holds rescue package talks
Virgin Atlantic has held talks with investors including Deutsche Bank as it seeks a £750m rescue package to help navigate a path through the coronavirus crisis. The airline is seeking support after the pandemic prompted a collapse in passenger numbers as countries rolled out lockdowns. Virgin Atlantic has already announced plans to make 3,150 staff redundant. Other potential rescue partners which this week held a virtual conference with Virgin Atlantic included Apollo Global Management, Centerbridge, Cerberus, Greybull, Lansdowne Partners, Northill Capital and TowerBrook Capital.
Ryanair seating policy could change under new directives
New EU guidance on flying procedures after coronavirus lockdown restrictions are lifted could see an end to Ryanair’s seat allocation policy, which makes over £2bn a year for the airline. The European Commission has advised a raft of changes to airline operating procedures, many of which are likely to be opposed by the Irish carrier which made 31.7% of its entire revenue in 2018 from optional charges.
Job losses announced at Qatar Airways
A fifth of Qatar Airways’ workforce is to be made redundant, with over 9,000 positions at the airline to be cut. Chief executive Akbar Al Baker said: “For me to let them go is really painful, but we have no other alternative." He also noted that airlines have a duty to disinfect aircraft and provide employees with protection against coronavirus. Rival Etihad has also recently announced "sizeable redundancies."
IATA issues update on post-virus travel
The International Air Transport Association (IATA)’s Chief Economist, Brian Pearce, has warned that: “COVID’s effects on air travel are certainly going to last a number of years with no quick rebound to 2019 levels.” The body issued its weekly update yesterday, forecasting that revenue passenger-kilometres would fall to less than 4bn per year in 2020 from 8bn per year in 2019.
CONSTRUCTION
Builders get back to work as restrictions lift
Housebuilder Persimmon has announced that sales offices in England will reopen from tomorrow, while Taylor Wimpey is to reopen show homes and sales centres, after the government removed coronavirus lockdown restrictions. Redrow executive chairman John Tutte said those buying and selling houses would benefit from the move, commenting: “This will allow existing customers already midway through the process to recommence their property transaction and for new customers to make appointments to view and reserve a new home.” MJ Gleeson has said that all its furloughed staff would return to work by the end of July.
Countryside operating profits damaged by pandemic
Countryside Properties has reported operating profit down around £29m for the six months to 31 March, as a result of lost home and land sales due to the coronavirus pandemic.
FINANCIAL SERVICES
Lloyd's of London: Insurance claims to be biggest since 9/11
Insurance market Lloyd's of London has said it expects coronavirus-related claims to cost it £2.5bn to £3.5bn, which would be the biggest payout since the September 11 attacks in the US in 2001. Lloyd's chief executive John Neal said it could be two years “before everyone really gets their arms around the true cost of this pandemic". He added: “We estimate that government borrowing could be as much as $10trn globally to protect the economy for the losses that we've seen”. Lloyds said the estimated 2020 underwriting losses covered by the industry as a result of COVID-19 are approximately $107bn, adding that the industry will also experience falls in investment portfolios of an estimated $96bn.
Insurers told to cut premiums and admin fees
The Financial Conduct Authority (FCA) has told insurers to ease the burden of high premiums for those struggling with payments during the COVID-19 lockdown, saying firms should reduce premiums, offer payment holidays or waive exit fees in measures being rolled out next week that will last for three months. The FCA said insurers must reassess the risk profile of customers, offer cheaper products, cancel certain add-ons and waive charges and admin fees for any policy changes. Sheldon Mills, of the FCA, said: “Many insurers have already taken some of the actions we are suggesting. The measures … will provide urgent support to those that need it.”
Prudential sees Asian sales hit as result of pandemic
Sales of new insurance policies in Prudential’s Asian operations have fallen 24% due to coronavirus lockdown restrictions in the region. Chief executive Mike Wells commented: "While we cannot say with certainty how the COVID-19 impact will impact the global economy and hence how Prudential might be impacted, we believe we are well positioned over the long term both to weather the disruption caused by the pandemic, and to support our customers and communities in the recovery to come."
Just Group solvency ratio down as virus effects felt
Just Group has reported a fall in its solvency ratio after interest rates around the world fell as a result of the economic effects of coronavirus. The specialist pension provider told investors its Solvency II coverage ratio was down three points to 138% at the end of last month.
LEISURE AND HOSPITALITY
Marston's announces liquidity boost as uncertainty continues
Pub chain Marston’s has announced that it secured an extra £70m of liquidity, as a result of an increase to its financing facility, ongoing government support and continuing sales to supermarkets.
MEDIA AND ENTERTAINMENT
BT plots Openreach stake sale
BT has reportedly started talks to sell a stake in Openreach, which runs the UK’s broadband network. The sale would bankroll an extension of BT’s full-fibre network. The FT reports that Australian bank Macquarie and a sovereign wealth fund are among those to have held talks with BT over a possible deal.
BBC considering axing BBC Four
The BBC is considering shutting down its BBC Four channel amid a cost-cutting drive. Some of the channel’s budget could be diverted to BBC Three in a bid to attract 16- to 34-year-olds, according to reports.
RETAIL
WH Smith reports 85% sales fall across entire business
WH Smith has reported a 85% fall in company-wide sales for last month, with railway station, airport and hospital store sales down 91%, and down 74% at high street branches. The firm reported a 7% rise in group sales to £747m in the six months to February, with group pre-tax profits falling back 3% to £63m.
SPORT
Rugby clubs could face severe sanctions if salary cap breached
Recommendations made by former Government minister Lord Myners CBE in the wake of a comprehensive, independent review include a suggestion that Gallagher Premiership rugby teams be stripped of their titles if found guilty of exceeding salary cap regulations in future.
ECONOMY
Government’s coronavirus bill hits £123.2bn
Analysis by the Office for Budget Responsibility (OBR) shows that the cost of the Government's efforts to combat the coronavirus pandemic has risen to £123.2bn. This is an increase on the previous estimate of £103.7bn, while the OBR’s pre-coronavirus estimate for borrowing stood at £55bn. Borrowing for this year is calculated to be £298bn, with this up £26bn on a forecast made a month ago, with an extension of the furlough scheme the main contributor to the increase. Annual borrowing is expected to equal 15.2% of the UK economy. This would be the highest proportion since the 21% recorded at the end of World War Two.
OTHER
Half of businesses reveal cash shortage fears
Figures from the Office for National Statistics reveal that almost half of UK businesses are concerned that they will run out of cash in less than six months, with a survey of over 5,000 firms finding that a quarter said they were unsure about their level of reserves. Some 4% reported having no reserves at all, with VAT deferrals, business rates holidays and state-backed loan schemes from the Treasury proving insufficient to prop up every business.