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Daily News Roundup: Friday, 3rd April 2020

Posted: 3rd April 2020

BANKING

FCA suggests freezing credit card bills

The Financial Conduct Authority (FCA) has proposed the freezing of loan and credit card bills for those struggling to pay as a result of coronavirus. Interest rates on arranged overdrafts of up to £500 will also be cut to zero. The plan will be subject to a “brief consultation” by the regulator, with interim chief executive Christopher Woolard commenting: “If confirmed, this package of measures we are proposing today will help provide affected consumers with the temporary financial support they need to help them weather the storm.” Considering the mooted measures, UK Finance offered a note of caution, with CEO Stephen Jones saying: “It is critical that the FCA’s proposals do not disrupt the provision of credit to borrowers and takes account of the business models of all credit providers including those outside the mainstream market."

Loan scheme revamped

The emergency loans scheme for businesses struggling amid the coronavirus pandemic has been revamped, with Business Secretary Alok Sharma saying changes to the initiative will make it easier for smaller firms to access loans. The Treasury said it had received more than 130,000 loan enquires from firms but fewer than 1,000 had been approved. While government-backed loans for small businesses were only available to firms that had been turned down for a commercial loan from their bank, the rethink will mean applications will not be limited to businesses that have been refused a loan on commercial terms. With concern that support for firms in the middle bracket came up short, the revamped scheme will offer government-backed loans of up to £25m to firms with revenues of between £45m and £500m. Changes set out by Chancellor Rishi Sunak will also see banks banned from asking company owners to guarantee loans with their own savings or property when borrowing up to £250,000.

Banks tighten mortgage rules

Having earlier this week pulled its mortgage offering for low-deposit borrowers, Nationwide has tightened measures on mortgage applications and no longer takes bonuses and overtime pay into account. This comes as lenders move to mitigate the impact of the COVID-19 outbreak, with some pulling certain mortgages or making it tougher to secure a deal. The UK’s largest lender, Lloyds Banking Group - which owns Halifax and Scottish Widows - has capped lending at 60% of loan to value, while Barclays has put a cap on how many mortgage applications it will accept from brokers and limited high loan to value mortgages.

Banks see nearly 1m mortgage holiday requests

Banks have approved nearly one million mortgage holidays for homeowners struggling to meet their payments amid the coronavirus lockdown. With Chancellor Rishi Sunak having said homeowners in difficulties could ask for a three-month payment holiday, Lloyds has signed off 240,000 applications, while Santander has approved more than 110,000.

PRIVATE EQUITY

Small business aid could go to venture capital-backed companies

Lawmakers from both the Democrat and Republican parties have urged the US Treasury to allow venture capital-backed firms access to $350bn of rescue loans for small businesses.

INTERNATIONAL

Winters criticises coronavirus lockdowns

Bill Winters, CEO of Standard Chartered has criticised authorities’ responses to coronavirus in both the UK and US. He commented: “I find it interesting to listen to the debate now that we in the West, or in the UK, or in the US, couldn’t have done what the Chinese did because we don’t have that kind of society… Well, we are doing what the Chinese did; we’re just doing it too late.” With his firm doing most of its business in Asia, Mr Winters said there could be a rebound when the region overcomes the worst of the crisis.

EU regulator urges insurers to halt dividends and buybacks

Eiopa, the EU’s insurance and pensions regulator, has urged insurance companies to halt dividends, buybacks and bonuses due to uncertainty brought about by the coronavirus outbreak.

Online lender stops making loans to small US businesses

Online small business lender Kabbage has stopped making loans, made reductions to customer credit lines and temporarily dismissed staff as a result of the coronavirus pandemic.

AVIATION

IAG suspends 90% of flights

British Airways owner IAG has said it will now suspend 90 per cent of its flights, up from the 75 per cent previously announced, as the airline industry looks to protect itself against the coronavirus outbreak. Meanwhile, British Airways has announced that it will be furloughing over 30,000 of its staff following successful negotiations with unions such as Unite. The airline has reached a further agreement with its 4,000 pilots to take four weeks of unpaid leave in April and May.

CONSTRUCTION

Builders call for loan scheme clarity

The Federation of Master Builders says construction firms facing challenges due to the COVID-19 outbreak need clarity of the Coronavirus Business Interruption Loan Scheme. This came after a poll of almost 600 members saw 50% of those who have applied for the loan scheme have found the process either "somewhat difficult" or "very difficult". The report also shows that 10% of members who have applied have been rejected, while 84% are awaiting a response from their bank.

FINANCIAL SERVICES

Insurance warning for drivers during pandemic

Motoring lawyer Nick Freeman has advised drivers who make non-essential journeys during lockdown restrictions that doing so could result in their insurance policies being voided. He remarked: “Essential travel is largely defined as shopping for necessities, picking up medical supplies, caring for a vulnerable person and getting to and from work if you cannot do so from home,” continuing: “Anything else is not really acceptable so if you have an accident and cannot prove your journey was essential your insurance may be void.”

Schroders demands executives take pay cuts and ‘share the pain’

Schroders has, in a public letter to British firms, said boards should review chief executive remuneration, urging them to prioritise employees, customers and suppliers during the coronavirus crisis. Schroders’ UK equity boss Sue Noffke and global head of stewardship Jessica Ground, who signed the letter, said: “Where companies seek additional capital we would expect their board to suspend dividends and reconsider management’s remuneration. We would expect management to share in some of the pain.”

Regulators urge UK savers to ‘keep calm’ during coronavirus volatility

The Financial Conduct Authority and the Pensions Regulator, in conjunction with the Money and Pensions Service, have urged savers not to rush decisions over pension investments as COVID-19 disrupts stock markets.

LEISURE & HOSPITALITY

Carnival raises equity as virus disruption hits

Shares in cruise ship owner Carnival were down more than 8% as the company said the costs of raising new equity had been higher than expected during disruption caused by coronavirus. Some $6.25bn was raised by issuing new debt and equity, as the firm priced $4bn in bonds maturing in 2023, some $1bn more than originally planned, with a yield of 11.5%.

MEDIA & ENTERTAINMENT

Dividend scrapped and redundancies on cards at M&C Saatchi

As coronavirus begins to take its toll on advertising agency M&C Saatchi, the firm’s 2019 dividend has been abandoned and salaries for senior staff members have been cut by 20%. The company is also seeking to secure government support to furlough employees in the UK, US and Australia, with redundancies remaining a possibility.

Media outlets warned not to peddle 5G theories

British broadcasters have been warned that they face sanctions from the media regulator if they give airtime to false health advice about coronavirus, including conspiracy theories that the pandemic is linked to the rollout of 5G networks.

PROFESSIONAL SERVICES

Slowdown in hiring sees Hays plan $248m equity raise

An emergency £200m ($248.36m) issue of shares has been announced by recruiter Hays, with a collapse in fees expected due to the coronavirus restrictions on Thursday and what it described as a “very material deceleration in client and candidate activity.”

REAL ESTATE

Property market ‘grinding to a halt’

Figures from Nationwide show that house prices rose 3% year-on-year in March, outdoing the 2.3% increase recorded in February, On a month-by-month basis, UK house prices were up 0.8% in March, compared with a 0.3% climb in February. The analysis shows that the average house price in the UK hit £219,583 in March. Nationwide notes that the figures gauge the period just before the coronavirus outbreak started to impact the market, with the bank saying housing market activity is “grinding to a halt” as Government requests to stay at home prevent in-person viewings.

BlackRock and Schroders latest to freeze property funds

The coronavirus is causing UK property funds to suspend trading, with the total amount locked in reaching over £20bn as vehicles managed by BlackRock and Schroders announced a freeze.

Softbank abandons WeWork share move

Japanese investment firm SoftBank has called off plans to buy $3bn worth of additional shares in office-space rental venture WeWork, though it remains committed to its $5bn bailout of the company.

RETAIL

Retail sees record sales dip

The coronavirus pandemic has prompted a record decline in retail sales in the UK, with the fall driven by the closure of non-essential stores and a slide in footfall as the Government rolled out restrictions on movement. Analysis shows that like-for-like sales at physical stores fell by a record 34.1% in March, while for combined in-store and online like-for-like sales there was a 17.9% fall. Online like-for-like sales increased by 13.7%, with shoppers turning to e-commerce platforms as physical stores locked their doors.

ECONOMY

Coronavirus set to trigger deep recession

Ratings agency Fitch has predicted a deep global recession in 2020 following the coronavirus outbreak. It expects worldwide economic activity to decline 1.9% in 2020, with US GDP to slip 3.3% while the eurozone will see a 4.2% decline and UK GDP will fall 3.9%. Brian Coulton, Fitch’s chief economist, said: “The forecast fall in global GDP for the year as a whole is on a par with the global financial crisis but the immediate hit to activity and jobs in the first half of this year will be worse.” Meanwhile, Bank of America economists have warned that an impending recession is set to be the “deepest on record”.

OTHER

Businesses need liquidity to utilise insolvency measures

Mark Fry says that while a three-month temporary suspension of wrongful trading provisions is designed to support otherwise solvent firms that face immediate distress in the wake of the COVID-19 outbreak, companies require the money to pay their obligations throughout the insolvency moratorium to take full advantage of the measures. He says that with the Government giving directors breathing space to make difficult decisions without the risk of personal liability, firms must use the time thoughtfully and utilise professional advice where needed. Mr Fry says moves to preserve cash and reprioritise liabilities – such as furloughing staff – are to be expected as trading conditions are abruptly halted, with firms pushed toward such steps by the need to improve liquidity. Considering support measures rolled out by the Government, he argues that they will only be effective for firms with sufficient cash reserves or a debt buffer that can be utilised until Government loans and grants are accessible. With the coronavirus crisis driving a rapid change in the business environment and outlook, he says existing strategies may no longer be fit for purpose and urges companies to get in touch to see how BTG Advisory can help control risk and navigate the uncertainty the pandemic brings.

BTG Advisory

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