BTG Advisory
Omicron variant threatens the labour market recovery
David Abbott of BTG Advisory warns that the emergence of the Omicron Covid-19 variant threatens the positive momentum that has been building in the labour market. He points to data suggesting that only a small proportion of the 1.14m furloughed workers were made redundant when the scheme expired, while soon-to-be-published data for November is expected to show further positive employment trends. However, he adds, “the latest pandemic curveball may blunt the positive momentum.” Mr Abbott says that if Omicron proves to be highly transmissible and vaccine-resistant, it poses “obvious risks to the outlook for GDP and employment.” He goes on to dissect recent employment data and says the figures offer “encouraging signs” for the labour market and are validation of the success of the Coronavirus Job Retention Scheme. “Labour markets have been stress tested over the past almost two years and it is unlikely they would be in as resilient shape as they are now without the furlough scheme,” he adds.
BANKING
HSBC boss: Costs will climb if Brexit fragments the financial market
HSBC chief executive Noel Quinn has warned banks and their clients could face higher costs if Brexit splits the European financial market, saying there is a real “risk of fragmentation increasing costs” in the banking sector. The European Central Bank has been pushing banks to move staff out of London and into Europe, tightening rules on moving staff and capital to the EU. Brussels took a more relaxed position on allowing banks to flow into the bloc during the pandemic, and Mr Quinn said he is “hopeful the temporary arrangements will become more permanent.” He said he thinks “there is some optimism on that” but added: “That’s not for me to make a judgment call on, that’s for politicians and regulators.”
Banks fined for forex cartel
European Union antitrust regulators have fined four banks a total of €344m for rigging the foreign exchange spot trading market. The European Commission hit HSBC with the highest penalty, at €174.3m, while Barclays was fined €54.3m and NatWest €32.5m. Credit Suisse was also fined, with the second largest penalty of the four, at €83.3m. UBS was spared a €94m fine because it blew the whistle on the cartel, according to the European Commission.
Covid concerns see party plans scaled back
A number of big businesses are holding smaller Christmas parties this year, opting for gatherings within departments rather than company-wide events. This comes amid uncertainty over the Omicron coronavirus variant. NatWest has urged employees to take a lateral flow test before attending team events, while insurer Aviva has also asked staff to take a Covid test on the morning of their Christmas parties, which are understood to be taking place within teams.
INTERNATIONAL
Bank of Ireland fined for breaching IT regulations
Bank of Ireland has been fined €24.5m for breaching regulations over its IT systems. Ireland's Central Bank said the fine was for failures to have a robust framework in place to ensure continuity of service in the event of a significant IT disruption. The five breaches of regulations took place between 2008 and 2019. "Bank of Ireland fully acknowledges, and sincerely apologises for, each of these breaches which should not have arisen," the lender said. It added that to "comprehensively" address these breaches, it had invested heavily in IT service continuity, completing an extensive group-wide programme of work between 2015 and 2019.
Credit Suisse chair pledges to overhaul bankers’ pay
Credit Suisse chair António Horta-Osório says he will overhaul the bank’s pay policy, with a new pay structure to include incentives based on risk management metrics and longer-term rewards.
UBS chief Ralph Hamers signals global digital wealth push
Ralph Hamers, chief executive of UBS, said the Swiss bank will roll out a new digital wealth management service across the world, starting in the US as early as next year, in a bid to capture more affluent customers.
FINANCIAL SERVICES
City watchdog reworks rules to reduce barriers to listing
The Financial Conduct Authority (FCA) is changing its listing rules, boosting incentives for innovative founder-led companies to list on UK markets. The City regulator is introducing a “targeted form” of dual class share structures within the UK's premium listing segment. The FCA is also reducing the minimum proportion of shares in free float and easily tradeable on the market from 25% to 10%, while the minimum market capitalisation threshold for both the premium and standard listing segments of the stock exchange is increasing from £700,000 to £30m. The FCA said the measures “aim to reduce barriers to companies listing in the UK and encourage private companies to consider listing at an earlier stage, while still retaining high standards for investors.” Clare Cole, the FCA’s director of market oversight, said: “These changes ensure the UK’s markets maintain their reputation for dynamism, helping support the new types of companies seeking the investment that drives economic growth and by giving investors more choice with appropriate protection.” The changes, which come into force today, follow a five month consultation on proposed changes to the primary market regime that were put forward by Lord Jonathan Hill in the UK Listing Review.
Goldman fund to vote against companies that have too little diversity
The investment division of Goldman Sachs says it will vote against publicly-traded firms if they do not improve diversity at the senior level. Goldman Sachs Asset Management (GSAM) wants all companies on the FTSE 100 and S&P 500 to have at least one director from an ethnic minority background as of March 2022. It also expects global publicly-traded businesses with at least ten board members to have at least two women around the table. Failure to meet these targets will see GSAM vote against the nominating committee of the firm’s board. Heather Miner, the chief operating officer of GSAM, said: “These latest enhancements to our voting policy will keep Goldman Sachs Asset Management at the forefront of driving greater diversity and inclusion on boards around the world.”
FCA takes action over unprotected investments
The Financial Conduct Authority (FCA) has removed permissions from a firm in a connected group of companies offering unprotected investments. The City watchdog has removed permissions from Grosvenor Associates, a credit broker firm it authorised in March, over concerns about investments it may have been offering. It said the firm was linked to Marvell Enterprises, a credit broker it removed the permissions of last month after authorising the firm in January. The FCA said Marvell “appeared to have been carrying out investment activities for which it did not have permission”, adding that consumers “may have been misled about the scope of Marvell’s permissions and the protection afforded to their investments.” The regulator also said Marvell and Grosvenor "may be connected" to two other firms it has taken action against - Sentor Solutions Commercial and Cavendish Incorporated.
Interactive Investor sold to Abrdn for £1.5bn
Abrdn has struck a £1.5bn deal to buy the online investment platform Interactive Investor, in its third major digital investment this year. Interactive Investor, which has 400,000 customers and is widely regarded as the biggest challenger to Hargreaves Lansdown, will operate within Abrdn as a standalone company and brand. Interactive Investor’s chief executive Richard Wilson remain in his role. Stephen Bird, chief executive of Abrdn, said: “Abrdn's scale, resources, and shared vision will enable Interactive Investor to grow confidently and expand its leadership position in the UK's attractive savings and wealth market.”
Majority of Britons doubt government pension capabilities
Research suggests the vast majority of the UK’s over-40s have no confidence in the Government’s handling of pension policy. A survey of almost 1,300 people by My Pension Expert revealed 87% were concerned about the government’s capabilities over retirement saving policy and support. More than half oppose the temporary suspension of the state pension triple lock, while the same proportion is also concerned about the government cutting pension benefits, such as the annual saving allowance or pension tax relief, in the next 12 months.
LEISURE & HOSPITALITY
Deliveroo CEO sells shares to meet tax liabilities
Will Shu, the co-founder and chief executive of Deliveroo, has sold £47m of shares in the food delivery company to meet his tax liabilities. The firm's chief financial officer, Adam Miller, also sold shares to satisfy a tax bill. As part of the conditions attached to their stakes in the business, both Mr Shu and Mr Miller were required to sell the shares to settle tax liabilities. The sale took place using exemptions to a lock-up on the executives' shares following its IPO earlier this year, which stops original shareholders selling stock within a year of the float.
ECONOMY
Household wealth climbs 8.4% in a year
Household wealth in Britain has risen by 8.4% over the last year, hitting £11.2trn. This marks the highest total since the Office for National Statistics (ONS) started tracking the figures in 1995. The increase was driven by a 7.3% increase in house prices, with values up as the stamp duty holiday prompted a surge in activity across the property market. The household wealth total was also given a boost as pension pots, combined with insurance schemes, exceeded £4trn for the first time last year. The ONS notes that government support schemes and the shift toward remote working enabled many people to set aside the money not spent during lockdowns. This saw household wealth remain strong compared to previous recessions, with it highlighted that household wealth fell 10% during the 2008 financial crisis.
Experts predict interest rate rise
City analysts expect the Bank of England (BoE) to increase interest rates for the first time in three years this month. Despite uncertainty over the Omicron coronavirus strain, experts at Goldman Sachs believe the economy in a strong position to withstand any fresh wave of infections triggered by the new variant. The bank’s baseline scenario suggests the UK economy “will hold up relatively well during the fourth wave, given high vaccine take-up and a successful booster programme.” Goldman analysts said: “As a result, we still believe that a 15 basis points BoE hike is more likely than not at the December meeting.” Goldman also expects the Bank to increase rates – currently at a record low of 0.1% - again in May 2022, taking them to 0.75% by the end of next year.
Firms expect inflation to climb
A survey published by Bank of England shows that businesses are struggling to find staff and expect higher inflation in the year ahead. The Bank's monthly Decision Maker Panel survey of nearly 3,000 businesses saw 85% of firms say they are finding it harder than normal to recruit new employees, with 58% saying it is proving much harder. On inflation, the firms quizzed expect the rate to be at 4.2% in a year, with this up from 3.9% in the October survey.
Flexible working can boost economy by £55bn
Analysis suggests that flexible working could boost the economy by £55bn. The Flexonomics report also reveals that refusals to accommodate flexible working cost business £2bn a year.
OTHER
£28bn in Covid loans paid out before anti-fraud measures started
A report from the National Audit Office (NAO) says the Government only put basic anti-fraud checks on the Bounce Back Loan Scheme (BBLS) for small firms once more than £28bn had already been paid out. Checks to ensure that a company was not applying for more than one bounce back loan were not put in place until June 2020, a month after the scheme was launched. By this point 61% of the money that was to be lent under the scheme had already been paid out to businesses. Further counter-fraud activities did not begin until September 2020, the NAO report shows. Counter-fraud activity was "implemented too slowly", which resulted in "high levels of estimated fraud", it said. Meg Hillier, chair of the Commons Public Accounts Committee, said the report showed that counter-fraud measures had been “too little, too late”.