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Daily News Roundup: Friday, 4th November 2022

Posted: 4th November 2022

BANKING

Lenders should learn lessons from pandemic, says FCA

The Financial Conduct Authority (FCA) has urged firms to learn lessons from good and poor practice shown during the pandemic to help borrowers facing cost-of-living pressures. The watchdog said businesses should encourage consumers to engage earlier when facing financial difficulties; offer tailored support; highlight the availability of free debt advice; and make sure fees and charges are fair. The FCA said that while some firms are delivering good outcomes for customers, others must do better to support borrowers in financial difficulty. The regulator says it reviewed the way 65 unnamed financial businesses had dealt with troubled customers during the pandemic and that 32 of the companies "have been asked to make material and significant changes to their processes." Almost 60,000 customers of seven financial services firms are to share in £12m of compensation after the review found the businesses fell short in their treatment of borrowers. Sheldon Mills, executive director of consumers and competition at the FCA said: “While many firms did well in supporting customers in difficulties during the pandemic with our support and guidance, others sadly failed their customers.” He added that the watchdog “will take action to restrict or stop firms from lending to people if they fail to meet our requirements that consumers in financial difficulties should be treated fairly.”

Lloyds details pay rise plan

Lloyds has offered staff a minimum £2,000 pay rise, according to sources who say the bank will also introduce a new minimum full-time salary of £21,200 from April 2023. A notice published to Unite members says Lloyds has offered staff either a £2,000 pay rise or a 5% lift in salary - whichever is greater - up to a maximum of £5,000. A Lloyds spokesperson said that the terms of the pay offer would apply to all Lloyds employees if approved by union members. The pay offer equates to an increase of between 8-13% for 43,000 staff on lower paid grades, Lloyds said, adding that it also included consolidating some bonuses into base salaries for some staff. Unite said the £2,000 rate represented an average 10% pay rise for staff on lower grades, with staff at higher grades getting a 4% increase. Caren Evans, national officer for Unite, said the offer “represents a win for the workforce.” The union has recommended members accept the "unprecedented offer."

INTERNATIONAL

Morgan Stanley to cut jobs

Morgan Stanley is expected to start cutting jobs in the coming weeks, according to sources with knowledge of the plan. This comes after its dealmaking business took a hit due to rising inflation and the economic downturn. Morgan Stanley had 81,567 employees globally at the end of Q3.

Goldman cuts credit exposure to Russia

Goldman Sachs reduced its credit exposure to Russia by 9% to $205m in the third quarter. The filing also shows that the US bank set aside $2.3bn for potential legal costs, $300m more than in the second quarter.

FINANCIAL SERVICES

Ebury faces regulatory probe

Fintech firm Ebury has been ordered to open itself up to an investigation into its anti money laundering controls. The firm, which is majority owned by Santander, is the subject of a Section 166 order by the Financial Conduct Authority. This requires the company to appoint a qualified person to conduct an investigation which will be shared with the City watchdog. The inspection, which sources say relates to possible control failings over how anti money-laundering risks are managed, is reportedly being carried out by lawyers at Eversheds. An Ebury spokesperson said the firm "prides itself on very constructive and open relationships with regulators in every jurisdiction in which it operates and has never incurred any fine or sanction.”

BlackRock seeks shareholder voting rethink

Asset manager BlackRock plans to allow retail investors to vote on proxy battles for the first time. Investors will be allowed to vote on contested proposals in a pilot involving UK pooled funds in 2023. Chief executive Larry Fink said BlackRock is looking to usher in a “revolution in shareholder democracy.” In a letter to clients and global CEOs, Mr Fink said the move would “empower” investors to have a “deeper and more direct connection” to companies.

MEDIA & ENTERTAINMENT

Musk to shed Twitter jobs

Elon Musk will begin mass layoffs at Twitter today, reducing the size of the workforce at the social media platform he snapped up for $44bn last week. An email to staff said: “In an effort to place Twitter on a healthy path, we will go through the difficult process of reducing our global workforce on Friday.” It is reported that as well as announcing redundancies affecting 3,700 staff, Mr Musk will today confirm that employees must return to the office from Monday.

REAL ESTATE

House prices could fall 30%

Chris Rhodes, chief finance officer at Nationwide Building Society, has told the Treasury Committee that house prices could fall by almost a third in the worst-case scenario. He added that the best case is “slowly increasing house prices,” while noting that these represent “two extremes which are tail probabilities.” Mr Rhodes said the “weighted average” is around 8% to 10% but insisted that it was “not a forecast.” Nationwide data shows that house prices fell by 0.9% month-on-month in October to an average of £268,282, while annual growth slowed to 7.2% in October from 9.5% in September.

RETAIL

Sainsbury’s profits fall

Sainsbury’s has reported an 8% fall in first-half profits to £340m as it said it had invested in keeping prices as low as possible, with food price inflation in its stores running at “comfortably less” than the 10%-plus reported for the wider market. Sainsbury's said sales across the business had climbed 4.4% to £16.4bn in the six months ending in September.

Nickolds joins CurrentBody

Paula Nickolds, the former boss of John Lewis, has been appointed as non-executive chairwoman of CurrentBody, an online business selling salon-style beauty technology.

ECONOMY

UK set for longest ever recession, says BoE

The Bank of England has warned the UK is facing its longest recession, with a projected eight quarters of falling GDP. The Bank has warned that the economy has entered a "challenging" downturn. GDP is forecast to fall 0.75% in the second half of 2022 and remain in recession through 2023 and the first half of 2024. Inflation is expected to peak at 11% and unemployment, which is currently at 3.5%, is forecast to hit 6.5%. This came as the Bank’s Monetary Policy Committee lifted interest rates from 2.25% to 3% as it looks to tame soaring inflation. The 0.75 percentage point rise, which is the Bank's eighth increase since December and the steepest since 1989, takes borrowing costs to their highest level in 14 years. Chancellor Jeremy Hunt said the Government’s priority is to rein in inflation, saying the Bank has “taken action in line with their objective to return inflation to target.”

Raising rates ‘a blunt instrument’ - BCC

David Bharier, head of research at the British Chambers of Commerce, has warned that increasing interest rates is “a very blunt instrument” to control inflation which is largely fuelled by global factors. Calling on ministers to set out “a long-term plan that stabilises the economy and focuses on growth,” Mr Bharier said that with the Chancellor and Prime Minister signalling that the Autumn Statement is set to deliver spending cuts and tax rises, “businesses will be extremely worried about what the future holds.” Kitty Ussher, chief economist at the Institute of Directors, pointed to data showing that business leaders think inflation has yet to peak - while many think it may do so in early 2023. She added that yesterday’s interest rate rise is “therefore the least worst option to anchor inflation expectations firmly at a lower level in the interests of overall macroeconomic stability.” Alpesh Paleja, lead economist at the CBI, said: “With monetary policy focused on tackling inflation, the Government’s immediate priority should be to reinforce markets’ faith in the UK’s hard-won reputation for stability — but fiscal sustainability and growth shouldn’t be an either/or choice.”

OTHER

Services PMI shrinks as customers reduce spending

Activity in Britain’s services sector contracted last month, shrinking for the first time since the start of the third lockdown in January 2021, according to the S&P Global UK services PMI. The index fell to 48.8 in October, below the threshold of 50 which signifies growth but ahead of an initial flash reading of 47.5. The sector, which accounts for 80% of the economy, warned of shrinking demand and greater risk aversion among customers amid heightened political and economic uncertainty. Firms also saw higher costs on the back of rising energy bills and wage pressures. The composite PMI, which combines the services and manufacturing surveys, fell to 48.2 in October from 49.1, the lowest reading since January 2021.

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