BoE tells banks to prepare for negative rates
The Bank of England has written to lenders and insurers, asking them to prepare in case it decides to reduce the base interest rate to below zero. The Bank’s deputy governor of prudential regulation, Sam Woods, says banks should be ready for such a move but insisted that the request should not be taken as an indication that negative rates are set to be implemented. He wrote: “The Prudential Regulation Authority will now engage with PRA-authorised firms on their development of tactical solutions, with the aim of having firms put themselves in a position to be able to implement a negative Bank rate at any point after six months”. Mr Woods’ request is intended to give banks time to make the changes to systems so they could deal with negative rates, with a number of lenders having warned that doing so could take several months. In December, executives from HSBC and Santander warned the Treasury Committee that their systems were not yet ready for negative rates.
NatWest to adopt Mastercard
NatWest has become the latest bank to adopt Mastercard, which has prior agreements with Santander UK, First Direct and Monzo. The move will divert around 16m consumer and business customers away from Visa. Mastercard said in a statement that, once card conversions were complete, the company would account for around one in three of all consumer debit cards in the UK. The agreement will include all factions of the NatWest Group, including RBS, Ulster Bank and Coutts.
SPAC looks to raise $1bn in IPO
A KKR-backed special purpose acquisition company (SPAC) is aiming to raise around $1bn in its IPO, a regulatory filing shows. KKR Acquisition Holdings plans to sell 100m units, comprising shares and warrants, priced at $10 apiece. Revinitiv data shows that SPACs raised $24.26bn in January, 20 times more than the same period in 2020 and 30% of the $79bn raised by SPACs in the whole of 2020.
Deutsche Bank posts profit for 2020
Deutsche Bank has posted a net profit €113m for 2020 following nearly €6bn of net losses in 2019. The German bank was boosted by a 17% rise in fixed-income trading revenue to €1.38bn. Deutsche Bank also met its cost-cutting targets for the twelfth consecutive quarter. It reduced its adjusted cost target down €3.3bn to €19.5bn, in part driven by cutting 8% of its workforce. The lender’s private bank added €100m to its revenues due to a combination of higher fees and other repricing initiatives.
New car sales at lowest since 1970
New figures from the Society for Motor Manufacturers and Traders (SMMT) show that just 90,000 new cars were sold in January, the worst start to a year for the UK auto industry since 1970. The SMMT said registrations dropped 39.5% last month, with 90,249 cars sold in total - nearly 60,000 fewer registrations than in January 2020. Meanwhile, electric vehicle sales accounted for 14% of all sales in January – higher than diesel’s 12% market share.
Rolls-Royce to sell gas and diesel subsidiary
Rolls-Royce is to sell its gas and diesel subsidiary Bergen Engines to Russian firm TMH for £132.5m. CEO Warren East said the move “is a part of our ongoing portfolio evaluation to create a simpler, more focused group and contributes towards our target to generate at least £2bn from disposals.”
Barratt to resume dividend payments
Barratt Developments is to resume dividend payments after posting record completions. Barratt reported that first half year home completions were up 9.2% to 9,077. Revenue increased 10.1% to £2.49bn, and profit before tax was up 1.7% to £430.2m Barratt said it incurred an additional £56.3m in costs related to legacy developments. Meanwhile, CEO David Thomas says he would support a tax on developers to help cover the cost of the cladding scandal and ensure that buildings meet changes to regulations rolled out since the Grenfell Tower fire.
Construction output declines in January
The IHS Markit/Cips purchasing managers (PMI) index shows construction output declined for the first time in eight months in January. The PMI for construction scored 49.2 in January, with any score below the 50-mark indicating contraction. The reading was a sharp drop from December, when a score of 54.6 was recorded, and was far lower than analysts’ 52.9 forecast.
Pension scam probe sees regulators criticised
The Pensions Regulator has been accused of failing to protect vulnerable savers, with the Government, HMRC and Financial Conduct Authority (FCA) also criticised in a high-profile investigation. MPs last year launched an investigation into pension scams, with the probe looking into what could be done by public bodies to tackle scams and prevent them. Among industry responses to the investigation, financial planner Philip Milton said the “system’s failure to act and quickly enough” was a key concern, while pensions consultant Bob Ward cited a lack of cooperation between authorities. The Premier FX Liquidation Committee, which represents victims of a ponzi scheme that was operated by a fully FCA authorised company, said the City watchdog is “facilitating fraud and pensions scams by default and is too close to the City institutions to be effective.” Pensions campaigner Sue Flood warned of “systemic failures” at regulatory bodies which have “facilitated victims’ losses.”
Investment in responsible funds triples
Demand for responsible investment funds rose sharply in 2020, according to figures from the Investment Association. Net retail sales of funds that follow responsible strategies trebled to £10bn last year, from £3.2bn in 2019. Kate Marshall, acting head of investment analysis at Hargreaves Lansdown, said: “Responsible investment funds are demanding plenty of attention, with more and more investors investing in line with their ethical credentials.”
Equity funds suffer outflows in January
Figures from Calastone show that equity funds saw net inflows fall by 97.5% month-on-month in January to £64.6m. Edward Glyn, Calastone’s head of global markets, said: “The euphoria that characterised the huge inflows to equity funds in the last few weeks of 2020, including even unloved traditional active funds, dissipated with the cold light of the post-holiday hangover.” UK equities saw outflows of £179m, the eighth consecutive month in which investors had fled UK equities.
Savers overcharged £125m in pension tax
Savers have overpaid a collective £125m in pension tax over the course of 2020 after withdrawing money under the pension freedom rules. Close to £26m was reclaimed from HMRC in the last three months of 2020. Over-55s have reclaimed £693m in overpaid pension tax since pension freedoms were introduced in April 2015.
LEISURE AND HOSPITALITY
Nightclubs on verge of ‘extinction’
The Night Time Industries Association (NTIA) has warned that the UK clubbing scene is on the brink of “extinction” with a majority of nightclubs unlikely to survive beyond February without further government support. A report from NTIA, which surveyed more than 100 nightclubs, found that half of the venues claimed to be in more than three months’ rent arrears, while 88% were two months behind. Furthermore, 86% of the surveyed nightclubs have been forced to make redundancies during the pandemic, with more than 65% of those laying off over 60% of their workforce in 2020.
MEDIA AND ENTERTAINMENT
Chinese broadcaster has UK licence revoked
Ofcom has withdrawn China’s state-owned broadcaster right to broadcast in the UK following an investigation. The media regulator said the owner of China Global Television Network does not have control over its day to day output and is a distributor rather than a provider.
Nokia hit by US contract
Nokia has said that growth has been hampered by the firm losing part of the Verizon 5G contract in the US to Samsung. Revenue fell 5% to €6.57bn during the quarter, but beat a consensus figure of €6.42bn. Quarterly underlying earnings fell to €0.14 per share from €0.15 a year ago, beating the €0.11 consensus.
Directors liable for accounting failures in overhaul of audit rules
A proposed overhaul of the audit industry could see directors banned or hit with large fines for errors in their companies’ accounts. Plans to make directors personally liable for the accuracy of financial statements are set to be included in a Government consultation and follow independent reviews of audit and regulation, as well as a number of financial scandals. The consultation, which is set to focus on reform of corporate governance, audit firms and regulation, is expected to grant the Financial Reporting Council powers to enforce a formal split between the audit and consulting arms of big accountancy firms.
Stamp duty holiday sees tax-free sales jump 127%
HMRC data for England and Northern Ireland show that almost a quarter of a million homebuyers paid no property tax in Q4, while the stamp duty holiday saw a surge in sales. Figures show that home sales rose by 16% in the October-December quarter when compared to the same period in 2019. On a quarter-by-quarter basis, transactions were up 44% on Q3. Of the sales recorded in Q4, 218,300 were entirely tax-free – a 127% jump on Q4 2019’s tax free transactions. Year-on-year, residential stamp duty receipts fell 22% in Q4, with a 33% increase on Q3’s total. Richard Donnell of property website Zoopla said: “More people have saved on stamp duty, but more sales of high value property have reduced the hit on tax revenues.”
Dune review could see CVA
Shoe retailer Dune has appointed advisers to help it review strategic options, specifically in relation to its property portfolio, a move that could see it opt for a CVA as it looks to trim costs. With lockdown measures hitting business for much of the past year, founder and CEO Daniel Rubin said: “We've had constructive dialogue with our landlords since the start of the pandemic, but we now need to engage with them further if we are to safeguard our future.”
JD Sports targets more deals after raising £464m
JD Sports has raised £464m through the placing of new shares to finance its expansion and capitalise on further acquisition opportunities. The sportswear retailer has announces plans to buy DTLR Villa for $495m to grow its presence in the US market.
BoE: Vaccines will drive rapid recovery
The Bank of England (BoE) expects the UK’s coronavirus vaccination programme to drive a rapid rebound of the economy later this year, with Bank economists predicting a 4.2% dip in Q1 before an upturn in economic activity. Governor Andrew Bailey said the Bank thinks the inoculation drive will “support a sustained recovery throughout the rest of the year”. The BoE also said it expects GDP to recover to pre-pandemic levels by the first quarter of 2022. It lowered its growth forecast for 2021 as a whole to 5% from November’s 7.25%, but raised its forecast for 2022 to 7.25% from 6.25%. Despite optimism that a recovery is on the horizon, the Bank said it could introduce negative interest rates if the recovery falters. Monetary Policy Committee members voted unanimously to keep the official interest rate at a record low of 0.1%, with the Bank also opting to leave its quantitative easing bond-buying programme unchanged at £895bn.