BANKING
BoE expects rates will need to rise further
A deputy governor at the Bank of England told a conference on Thursday that interest rates may need to be cut if households and businesses come under greater financial pressure than expected. Sir Dave Ramsden said that although his preference is “towards further tightening” to bring inflation under control, it may be appropriate for the Bank to cut rates if the UK’s recession proves persistent. Separately, the Bank’s chief economist Huw Pill dismissed suggestions the Bank should pay less interest on lenders’ reserves at the central bank arguing that, although this would reduce the cost of covering losses on the QE programme, it would suck money out of the banking system. Gertjan Vlieghe, an economic adviser to the Government, said if ministers want to claw back losses from the Bank’s bond buying scheme they should force banks to pay more tax.
MPs to probe scam compensation proposals
Proposals from the Payment Systems Regulator to force banks and building societies to pay back victims of scams will be scrutinised by MPs amid concerns lenders may sabotage the plans with misleading delays. “While the regulator’s proposals are certainly a positive move in the right direction, questions remain, particularly around the interaction between the regulator and the industry body, Pay.UK,” said Harriett Baldwin MP, Chair of the Sub-Committee on Financial Services Regulations. “We are worried that banks could attempt to delay reimbursing their customers.”
Atom Bank flotation postponed after £30m fundraising
Durham-based online lender Atom Bank is delaying its flotation by at least two years. Having previously pencilled in 2022 or 2023, CEO Mark Mullen now says the bank is now aiming for a “liquidity event” in 2024 or 2025. The move comes after raised another £30m, giving it a post-deal valuation of £460m.
Small businesses that tapped UK Covid loans face having names made public
Campaign group Spotlight on Corruption has brought a case that could see the British Business Bank forced to disclose the names of small businesses that took UK Government-backed emergency pandemic loans.
StanChart begins search for new CFO
Standard Chartered has begun the search for a successor to its finance chief Andy Halford who is to step down next year. Mr Halford has been at Standard Chartered for nearly a decade.
PRIVATE EQUITY
Female-led venture firm launches £30m seed fund
London-based investment firm Pact has revealed its first £30m seed fund as it looks to inject cash into early-stage start-ups across Europe. The female-led venture capital investor said it would be focussing on companies tackling issues like financial exclusion, poor personal and professional well-being, and climate destruction. City AM notes how venture capital funding has slowed recently pointing to a fall from £8bn of investment into UK firms in Q2 to £4bn in Q3.
INTERNATIONAL
ECB vows to continue to raise interest rates
Minutes from the European Central Bank’s October governing council meeting show policymakers believe monetary tightening will need to continue even in the event of a downturn. The ECB raised rates by 75 basis points in October but officials argued that a shallow or technical recession was unlikely to keep inflation in check given its recent momentum and the risk that price increases would be difficult to reverse. Meanwhile, addressing a conference in London on Thursday, Isabel Schnabel, executive board member at the ECB, said the impact of government support measures meant the ECB would have “to raise rates further, probably into restrictive territory” to bring eurozone inflation back down to its 2% target.
Spain pushes ahead with windfall tax on banks and energy groups
Lawmakers in Spain have approved a windfall tax bill that will raise a total of €3bn from big banks over the next two years. The bill will now go to the Senate.
AUTOMOTIVE
Rise in car output, but it may not last
Figures from the Society of Motor Manufacturers and Traders show car production rose in October. But the improvement may be short-lived, experts say, with the recession likely to tamp demand. Some 69,524 vehicles rolled off assembly lines last month, a rise of nearly 4,800, or 7%, on the same month last year. That increase brings the total for the year to 721,000, down 10% year-on-year. Mike Hawes, chief executive of the SMMT, said: "Getting the sector back on track in 2023 is a priority, given the jobs, exports and economic contribution the automotive industry sustains. UK carmakers are doing all they can to ramp up production of the latest electrified vehicles and help to deliver net zero but more favourable conditions for investment are needed urgently, especially in affordable and sustainable energy."
FINANCIAL SERVICES
HSBC follows BlackRock with downgrade to ‘lighter green’ ETFs
HSBC Asset Management has followed the example of BlackRock and Invesco and downgraded the classifications of Paris-aligned exchange traded funds under the EU’s Sustainable Finance Disclosure Regulation.
PCP car loans: an accident waiting to happen?
The FT’s Claer Barrett reports on how some finance companies are trying to offer greater flexibility to customers facing financial difficulties, with some able to renegotiate interest rates on PCP payments.
MANUFACTURING
Manufacturers report rise in output
The latest CBI industrial trends survey reports a rise in manufacturing output for the three months to November. However, respondents expected output to fall in the three months to February by 10%. Anna Leach, the CBI’s deputy chief economist, said: “The rise in manufacturing output this month appears to be at least partly driven by improvements to supply chains.” Julian Jessop at the Institute of Economic Affairs said the CBI’s latest survey gave “some glimmers of light”.
REAL ESTATE
High mortgage rates drive rental demand
Property portal Rightmove has reported a rise in first-time buyers abandoning home purchases in favour of renting as mortgage rates hover around 6%, driving up demand for rental homes. "It's completely understandable why some buyers, particularly some first-time buyers, are waiting for some more financial certainty," Tim Bannister, property expert at Rightmove said. "Now that there are signs that mortgage rates are settling down, the indicators are that they will stabilise at a higher level than previous buyers had been used to."
RETAIL
Primark reveals £140m investment in stores
Primark has reinforced its commitment to the high street by investing £140m into its stores over the next two years. The retailer is taking over a Debenhams in Bury St Edmunds, Suffolk, and developing sites in Salisbury, Wilts, Teesside Park, Thornaby-on-Tees and Craigavon in Northern Ireland.
Mothercare hires new CEO
Mothercare has appointed Dan Le Vesconte as its new CEO, as the baby clothes seller attempts to recover from a torrid pandemic. Le Vesconte joins from fashion firm Abercrombie & Fitch, where he was group vice president for its European markets.
ECONOMY
Exodus from workforce could force BoE to raise interest rates
The Bank of England’s chief economist Huw Pill has warned that the surge in people leaving the workforce could force the Bank to further increase interest rates. “Rising inactivity among the working age population represents an adverse supply shock, which adds to the difficult shorter-term trade-offs facing monetary policy,” he said. However, Pill said there were some signs the labour market was beginning to “turn” as the economy falls into recession, including a stabilisation of jobs vacancies from historically high levels. “That will weigh against domestic inflationary pressure and ease the threat of inflation persistence,” he said. Elsewhere, former Bank of England chief economist and now chief executive of the Royal Society of Arts, Andy Haldane, writes in the FT on how the UK’s adverse health trends are contributing to the flatlining of UK productivity. To slow this damage, much greater support for preventive health measures is needed.
Sterling climbs to three-month high
The pound strengthened to its highest level against the US dollar in three months on Thursday, driven up by a combination of the US Federal Reserve signalling it will slow its aggressive interest rate hike cycle and a near reversal of the mini-Budget introduced by ex-PM Liz Truss’s chancellor Kwasi Kwarteng. Sterling climbed 0.7% against the dollar to $1.21.