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Daily News Roundup: Friday, 16th December 2022

Posted: 16th December 2022

BTG Advisory

UK care home sector facing acute financial strain

David Abbott of BTG Advisory warns that with the cost-of-living crisis heaping financial pressure onto Britain’s care home sector, the winter months “are set to amplify the effects of rising prices, inflationary pressures, and skilled labour shortages, stretching capacity while demand reaches seasonal highs.” He notes a recent survey cited by the Care Quality Commission which found that more than nine out of ten NHS leaders have warned of a social care workforce crisis in their local area, which they expect to get worse this winter. Mr Abbott says that while there have been many promises of reform of adult social care, “no significant structural reform has yet emerged.” Noting that many small providers will already be financially stretched with HMRC arrears and liabilities - which will become more difficult to repay as operating costs increase and revenues dwindle – he advises that HMRC offers Time to Pay Arrangements, based on the specific financial circumstances of individual businesses.


Savers lose out as banks fail to pass on rate rises

Analysis shows that savers are missing out on interest as banks have failed to pass on higher rates to their customers despite the Bank of England increasing the Bank Rate from 0.1% a year ago to the current 3.5%. Moneyfacts data shows that the average easy-access savings rate stands at 1.53% - up from 0.2% last December. However, if the full increase in the Bank Rate during the past year had been passed on to savers, easy-access accounts would be paying 3.6%. Analysis reveals that Virgin Money offers just 0.25% on its Everyday Saver account, while at the other end of the spectrum, HSBC pays 3% on balances of up to £10,000. Santander has an easy-access account that pays 0.4%, while Barclays, Lloyds and NatWest have accounts paying 0.5%. Anna Bowes, of the analyst Savings Champion, comments: “Customers are certainly not being treated fairly, but unfortunately it’s not unexpected, especially from the high street providers that are paying as little as they can get away with.”

Investors demand HSBC split

A group of Hong Kong-based small investors have urged HSBC to spin off its Asia business. The group has taken out a newspaper advert calling for a resolution to be put forward at the bank’s AGM in April, saying HSBC should restore its pre-pandemic dividend and plan for the split. The shareholders say HSBC “underperforms its peers, violates dividend commitments and ignores shareholders’ interests.” Ken Lui, founder of the Hong Kong Investor and Entrepreneur Institute, said he had contacted 500 shareholders as part of his campaign. This marks the latest push for HSBC to spin off its operations in a region where it makes most of its money. Chinese insurer Ping An, a prominent shareholder, last month called for a break-up and job cuts to reduce costs. HSBC has resisted calls for a spin-off, saying: “The conversations we’ve had with other institutional investors are that they also do not believe there is an economic case for splitting.”

Slump in deals could hit bankers’ bonuses

Investment bankers are bracing themselves for a drop in their bonuses in the wake of a slump in dealmaking. Payouts are likely to be significantly lower than last year, when variable compensation for financiers was boosted by a surge in deals. Data from financial information provider Refinitiv shows that so far in 2022, investment banking fees generated in Britain have fallen by 43% year-on-year to $5bn. This compares to the $8.9bn recorded in 2021. It has been reported that Goldman Sachs is considering cutting its bonus pool for its investment bankers by at least 40%. Rivals are also set to lower variable pay, with the bonus pool for investment bankers at JPMorgan expected to shrink by between 25% and 30%.

Lloyds appoints new COO

Lloyds has appointed Ron van Kemenade as its new chief operating officer. He will join next year from ING where he was chief technology officer and a member of its executive committee, with David Oldfield to continue in an interim role in the meantime.


German anti-money laundering chief resigns amid row over backlog

Christof Schulte, the head of the Financial Intelligence Unit, Germany's anti-money laundering authority, has resigned. His departure comes after a massive backlog of unprocessed reports of suspicious activity was uncovered.


Treasury Committee approves FCA chair despite 'inexperience'

The Treasury Select Committee has approved the appointment of Ashely Alder as chair of the Financial Conduct Authority (FCA), despite highlighting his apparent lack of experience in certain areas. The committee, which held a pre-appointment hearing to scrutinise Mr Alder’s selection, said: “His apparent inexperience of consumer regulation and UK financial services suggests that it will be important that his knowledge of these areas be developed quickly so that he can become fully effective in his new role.” Mr Alder, who has been chief executive officer of Hong Kong’s regulator, the Securities and Futures Commission, since 2011, will begin as FCA chair on February 20. Mr Alder said he does not intend to take on any other commitments, saying that despite being advertised as a part-time job, the position will require “more commitment than that.”

FCA narrows dividend-stripping investigation

A Financial Conduct Authority (FCA) probe into a trading scheme that claimed multiple tax rebates on dividend payments is now focused on nine companies and three individuals. The City watchdog has been part of the cross-border cum-ex inquiry for seven years and although Britain was not impacted by cum-ex trading, lawyers and authorities say much of the structuring and organising of the scheme took place in London. The FCA had been working with European authorities to investigate "substantial and suspected abusive share trading" in London markets that allegedly supported dividend stripping tax avoidance schemes in Denmark, Germany, France and Italy. The FCA, which does not have the power to investigate tax fraud, but can investigate civil and criminal market abuse, has so far fined three small brokerages a combined £2.9m. It has closed inquiries into eight individuals due to a lack of evidence and discontinued an investigation into one company.


Estate agents see increase in below asking price sales

Almost three quarters of estate agents saw the majority of their property sales agreed below the asking price in November, according to research from industry body NAEA Propertymark. A poll saw 72% of branches say a majority of their sales were for less than the price the client was seeking, up from 69% in October and 24% in November 2021. The report also showed a decline in competition for homes, with an average of seven buyers for every new property compared to a high of eleven. The number of new buyers registering per member branch fell to 52 in November, down from a high of 86 in August. The average number of sales agreed per branch dropped to six in November, from 10 in September. It was also found that the average number of viewings per property fell to 2.6, while new instructions were down on average to eight per member branch. However, the average number of properties available to buy per branch rose slightly to 33. Propertymark chief executive Nathan Emerson said: “The sales market is firmly back in the hands of buyers who have been on the back foot for 18 months. More property is available but the competition between those looking has cooled substantially.”


High street shopper numbers plunge amid cold weather

New figures have revealed that high streets across the UK saw shopper numbers slump early this week due to rail strikes and cold winter weather. The data showed that UK retail destinations saw footfall decline by 8.6% from Monday to Wednesday compared to the same days last week. The decline was particularly noticeable in high streets, where footfall dropped 15.1%. Meanwhile, retail parks saw higher shopper numbers as people opted to travel to out-of-town locations instead.


Interest rates raised to 14-year high

The Bank of England has raised interest rates to the highest level for 14 years as it looks to tackle inflation. Although inflation fell from 11.1% in October to 10.7% in November, it remains more than five times higher than the Bank's 2% target. The Bank’s Monetary Policy Committee (MPC) voted to hike rates to 3.5% from 3%, with this the ninth consecutive increase. The 50 basis point rise was less severe than the hike seen in October, when the MPC opted to up the rate by 75 points – the steepest increase in 33 years. While six members of the nine-strong MPC backed the 0.5% increase, two said rates should remain unchanged and one called for another 0.75% increase. Bank of England Governor Andrew Bailey said that while he is aware that high interest rates “have a real impact on people's lives,” by increasing rates “we can bring inflation down sooner." He added that the dip in inflation seen in November was the "first glimmer" that soaring price rises were starting to come down but added that there was still "a long way to go." Reflecting on the rate increase, Paul Dales, chief UK economist at Capital Economics, said he expects rates to peak at 4.5% next year. Meanwhile, the Bank has said it believes the economy will perform better than expected between October and December, shrinking by 0.1% in Q4 rather than the previously predicted 0.3%.


Consumer confidence climbs but remains at record low

GfK’s consumer confidence index increased by just 2 points to minus 42 in December compared with November. This represents a record eighth month in a row that the measure of financial optimism gave a reading of -40 or worse on an index where a minus score represents negative confidence. Britons' confidence in their personal finances is at the lowest level on record. Respondents rated their personal financial situation at -28 points, 23 points lower than in December 2021, while the gauge of confidence in the UK's overall economic situation sat at -66 points, 27 points lower than a year ago.

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