BANKING
Banks boosted as Government cuts surcharge
The Government is to cut the surcharge on bank profits to 3%, reducing the additional tax from 8% in a bid to keep the UK’s finance industry competitive. The move, which Chancellor Jeremy Hunt announced in his Autumn Statement, comes with financial bosses having voiced concerns that keeping the surcharge on UK lenders elevated would dampen the appeal of the City and reduce investment. The threshold for the surcharge will also be raised from £25m to £100m, meaning that smaller banks with fewer profits will no longer have to pay the charge at all. Shares in Britain’s biggest lenders surged on news of the surcharge being cut, with Lloyd’s Banking Group rising beyond 3%, NatWest closing the day up nearly 2.5% and Barclays rising by 1.5%. Despite the cut to the surcharge, the overall tax rate on lenders will rise from 27% to 28% in April as the corporation tax rate is set to jump to 25%.
Investec announces £350m share buyback
Banking and wealth management group Investec is to buy back up to £350m of shares and increase its dividend payout on the back of an 18.9% jump in revenues in the first half of the year. Funds under management at the firm fell 7.6% to £59bn, which it said reflected the “year to date decline in global markets”, despite investors adding £202m to its funds in the period. Investec’s core loan book grew 7.1% annualised to £31bn, up from £29.9bn, as corporate lending and residential mortgage lending in the UK jumped.
INTERNATIONAL
German regulator questions Adler's accounts
German financial regulator BaFin has found more errors in the accounts of real estate group Adler. BaFin said Adler wrongly consolidated ADO Properties SA in its 2019 accounts, inflating its balance sheet by €3.9bn and earnings by €543m. Adler has been seeking to regain investor confidence following a short-seller’s allegations of systemic fraud. While a review did not find evidence of systemic fraud, it also did not disprove some of the allegations.
Blackstone to buy majority stake in Indian IT firm
US investment fund Blackstone is to buy a 52% stake in India's R Systems International from the IT services company's promoters for $359m.
FINANCIAL SERVICES
Treasury to reform Solvency II
In documents published alongside the Autumn Statement, Chancellor Jeremy Hunt has confirmed that officials will push ahead with reforming Solvency II regulations for the insurance sector. The Treasury will reduce the risk margin buffer by 65% for life insurers and 30% for general insurers. However, it has overruled the Bank of England's suggestion that the 'matching adjustment', which hands a benefit to life insurers who invest in assets which pay out at the right time to cover future liabilities, be tightened.
Binance CEO: Industry leaders should set standards
Changpeng Zhao, chief executive of cryptocurrency exchange Binance, has pledged to release an audit into the firm in the wake of concerns over the sector following the collapse of rival platform FTX. Mr Zhao, who has called for a full investigation into FTX's demise, also suggested that while improved regulation may ease the crypto sector's problems, senior industry figures should set standards. He said that while regulation is a “key component … more importantly the industry players should act by leading by example.” He added: “The tricky part is, how do you strike the balance where you encourage innovation ... and try to protect consumers?"
FCA wants to reduce FSCS levy
Financial Conduct Authority (FCA) Nikhil Rathi says one of the aims of the consumer duty is to bring down the cost of the Financial Services Compensation Scheme levy. Speaking at a UK Finance event, he said the FCA also wants to reduce the number of complaints going to the Financial Ombudsman Service. Mr Rathi said that meeting these targets and embedding the consumer duty are also in the interests of businesses. He added that “after some heavy lifting upfront, it should also mean fewer reactive rules created by us in the coming years.”
LEISURE & HOSPITALITY
Business rates relief worth £14bn
Chancellor Jeremy Hunt has unveiled new measures to help businesses and shops. The measures include freezing the business rates multiplier for another year, meaning that rates will no longer be increased in line with inflation from April. Mr Hunt said that a revaluation of business rates would go ahead as planned next year but that he would “soften the blow” with £13.6bn worth of tax cuts over the next five years. He said that nearly two-thirds of properties “will not pay a penny more next year and thousands of pubs, restaurants and small high street shops will benefit.” Freezing of the business rates multiplier will save businesses £9.3bn over five years, while an extension of a rates discount for retail, leisure and hospitality businesses is worth £2.1bn.
REAL ESTATE
Stamp duty cut to end in 2025
Chancellor Jeremy Hunt has announced that stamp duty cuts announced in predecessor Kwasi Kwarteng’s mini-Budget will remain in place but only until 2025. In September it was announced that the threshold at which stamp duty applies was lifted from £125,000 to £250,000, while the threshold for first-time buyers increased from £300,000 to £425,000. Mr Hunt said that he will “sunset the measure” as of March 31, 2025, “creating an incentive to support the housing market … by boosting transactions during the period the economy most needs it.” Richard Donnell, Zoopla’s executive director of research, said the reversal of the changes “signifies a real need to reform stamp duty,” arguing that the levy is “starting to resemble income tax where it’s the top tax bands generating the greatest receipts.”
OBR: House prices set to fall 9% over two years
The Office for Budget Responsibility (OBR) says the economic downturn and higher mortgage rates will drive a fall in property values, forecasting that the average price will drop by 9% between Q4 2022 and Q3 2024. It also expects average interest rates on the stock of outstanding mortgages to peak at 5% in the second half of 2024. The OBR noted that there is significant uncertainty over its forecast, “given the sensitivity of house prices to mortgage rates and the recent volatility in the bond yields that drive pricing in the mortgage market.”
RETAIL
Lidl profits soar
Lidl has revealed that its British sales rose by 1.5% to £7.8bn in the year to the end of February. Pre-tax profits soared 319% to £41.1m. Lidl also saw a surge in non-retail income, such as selling advertising and renting out property and recycling.
ECONOMY
Autumn Statement brings tax increases and spending cuts
Chancellor Jeremy Hunt has announced a series of tax rises and spending cuts in his Autumn Statement. He revealed: the 45% additional rate of income tax will be paid on earnings over £125,140, instead of £150,000; income tax personal allowance and higher rate thresholds will be frozen until April 2028; National Insurance and inheritance tax thresholds will also remain frozen until 2028; tax-free allowances for dividend and capital gains tax will be cut next year and in 2024; and local councils in England will be able to increase council tax by a higher percentage. The Chancellor also increased the windfall tax on oil and gas firms from 25% to 35% and extended it until March 2028, while also announcing a 45% tax on companies that generate electricity. The household energy price cap will be extended for a year, although typical bills will be capped at £3,000 a year instead of £2,500. Mr Hunt also said the minimum wage for those over 23 will increase to £10.42 an hour from April, while state pension payments and means-tested and disability benefits will increase by 10.1%, in line with inflation. On Government spending, the NHS budget in England will increase by £3.3bn a year for the next two years, while spending on schools will rise by £2.3bn. The Chancellor also announced £13.6bn of support to help firms with business rates over the next five years, including freezes and reliefs.
Disposable incomes set for record fall
The Office for Budget Responsibility (OBR) calculates that household disposable incomes are heading for their biggest fall on record. It said that when adjusted for inflation, incomes will fall by 7.1% between 2021/22 and 2022/23, taking incomes back to the rate seen in 2013. The OBR noted that current levels will not be recovered for another six years. The Government’s independent fiscal watchdog said that real household disposable incomes per person would drop by 4.3% in 2022/23, with this the largest dip since official records began in 1956/57. That is set to be followed by the second largest fall, with a decline of 2.8% expected in 2023/24. The OBR also expects unemployment to rise from 3.5% to peak at 4.9% in Q3 2024.
Hunt: Budget will ensure a ‘shallower’ recession
With the Office for Budget Responsibility (OBR) saying the country is in recession, Chancellor Jeremy Hunt has said £24bn in tax rises and £30bn of spending cuts set out in his Autumn Statement mean the downturn will be less severe. The OBR forecasts that the UK economy will shrink by 1.4% next year. It also expects inflation to be 9.1% this year and 7.4% next year. Detailing the OBR analysis, Mr Hunt said the economy is forecast to grow by 4.2% this year, with GDP then slipping by 1.3% in 2023 before rising by 1.3%, 2.6%, and 2.7% in the following three years. Mr Hunt told MPs that he has had to make difficult decisions to ensure a “shallower downturn.” He said that with just under half of the £55bn consolidation coming from tax and just over half from spending, “this is a balanced plan for stability.”