BANKING
Chancellor moves to supercharge City with post-Brexit reforms
The Chancellor unveiled his so-called Edinburgh reforms on Friday promising they would “turbocharge growth” by cutting EU red tape for the financial sector. More than 30 regulatory reforms were laid out by Jeremy Hunt, including the scrapping of Solvency II capital requirements on insurance firms and easing current bank ring-fencing laws. The EU’s wide-ranging MiFID II regulatory regime will be reviewed as will how ESG ratings are regulated. The Government will also consult on a new framework to replace current disclosure rules for Packaged Retail and Insurance-based Investment Products (PRIIPS) - a move that was widely welcomed by the industry. Overall, experts said the changes represented a well-considered evolution of regulation rather than a revolution with David Postings, chief executive of UK Finance, saying they would be “a major step in ensuring the sector remains strong and internationally competitive”. Elsewhere, new remit letters were handed to the Bank of England’s Prudential Regulation Authority and Financial Conduct Authority instructing the regulators to focus on boosting the City's global influence.
Santander UK fined £108m for anti-money laundering failures
The Financial Conduct Authority has fined Santander £107.8m for failing to properly monitor over 500,000 business accounts between 2012 and 2017. “Santander’s poor management of their anti-money laundering systems and their inadequate attempts to address the problems created a prolonged and severe risk of money laundering and financial crime,” said Mark Steward, executive director of enforcement and market oversight at the FCA. In one case, a small business account was used to funnel millions of pounds to other accounts when it was only expected to receive monthly deposits of £5,000. It was recommended for closure by the bank’s anti-money laundering team in March 2014, but no action was taken until September 2015 owing to “poor processes and structures”. Mike Regnier, Santander’s chief executive, said: "We have since made significant changes to address [our weak anti-money laundering framework] by overhauling our financial crime technology, systems and processes.”
PO deposit limits a threat to small business cash service
The Post Office has complained about the limits imposed by banks on the amount of cash small businesses can deposit at local post offices. Unless the banks adopt a more conciliatory approach, the Post Office fears many small businesses will have no choice but to become cashless, further restricting the ability of households to use cash on the high street. The limits were put in place at the behest of the Financial Conduct Authority last year in an attempt to curb money laundering. But the Post Office says cash deposit limits are “a blunt instrument – taking a sledgehammer to crack a nut and impacting thousands of legitimate businesses that cannot deposit their cash takings without a long journey to a now distant bank branch.” The FCA, banks and the Post Office are due to meet on Monday in an attempt to resolve the dispute.
Triodos named most ethical bank
Shane Hickey reports in the Observer on a new study by Ethical Consumer magazine detailing which UK banking products score best on ethical grounds. The US banks Goldman Sachs and JP Morgan Chase, which have launched accounts in the UK, were given the lowest score based on tier investment in fossil fuels. Triodos was awarded the highest score and awarded a “best buy” for current and savings accounts due to its transparency and investment strategy. Ruairidh Fraser, one of the authors of the report, says banks have a huge impact through their loans and investments. "That's why it's so important for customers to know what they are doing with their money and what policies, if any, guide their choices. But our survey of the banking sector showed that this information is still very hard to find.”
Mortgage lending expected to fall 23%
New figures reveals that mortgage lending to homebuyers is expected to fall by 23% next year as the cost of living squeeze and rising interest rates make property less affordable. Figures from UK Finance indicate loans for home purchases will fall to £131bn from £171bn this year. UK Finance expects property transactions to fall 21% next year to 1m, while overall mortgage lending is set to fall 15%, taking into account the likely rise in those seeking to refinance fixed-term deals. That number is expected to reach 1.8m as deals taken during the stamp duty holiday come to an end, meanwhile the number of mortgages in arrears is expected to climb to 98,500. UK Finance researcher James Tatch said: “The mortgage market is expected to enter a period of relative weakness from next year.”
Metro braced for second penalty for accounting blunder
Metro Bank has put aside £10m to pay for an expected sanction from the Financial Conduct Authority for failing to disclose an accounting blunder in 2019. This is up from an initial £5.3m the bank put aside, with a probe by the regulator expected to conclude shortly. Metro revealed in January 2019 that errors meant it was not holding enough capital and the bank had to increase its risk-weighted assets by £900m. The London-listed lender was fined £5.4m by the Bank of England’s Prudential Regulation Authority a year ago for “failing to act with due skill, care and diligence in relation to” regulatory reporting of its capital.
Starling to create 1,000 jobs in the north
Starling Bank is to embark on a recruitment drive in the north of England as it looks to open an office in Manchester. The bank will create 1,000 jobs in the areas of cybersecurity, software engineering and data science. Anne Boden, the chief executive, said: “As the world’s first industrial city, with three brilliant universities and a thriving technology scene, there was never any doubt that Manchester would house our first step into the north.”
PRIVATE EQUITY
Blackstone may slow launch of private equity fund after investor withdrawals
Blackstone could delay the launch of its Private Equity Strategies Fund amid high demand for withdrawals at two other funds in real estate and credit, aimed at a similar clientele.
INTERNATIONAL
Campaigners urge banks to do more for the planet
A report from ShareAction, which campaigns for responsible investment, has concluded that major European banks should be doing more to tackle the climate crisis, cut emissions and safeguard the world's vital natural systems. Despite all 25 banks committing their businesses to be net zero by 2050, very few banks are addressing the nature crisis, with targets for protecting and restoring biodiversity almost non-existent and limited integration of the issue in policies. The ranking puts France's BNP Paribas in top spot while Barclays and Lloyds Banking Group come out best among UK banks. Peter Uhlenbruch, director of financial sector standards at ShareAction, said the group had written to the CEO of each of the banks with advice on how they can close loopholes in their climate and biodiversity strategies. He added: “Bank executives and their boards need to step up and take responsibility for the impact their activities are having on the ecosystems of the world's oceans, forests and wildlife.”
CONSTRUCTION
Sales fall at Berkeley
Berkeley Group has reported a 2% fall in pre-tax profit to £284.8m in the six months to the end of October, although it stuck to full-year guidance of about £600m. It said sales for the half year had been ahead of the same time last year. The housebuilder revealed the number of units sold in the five weeks since the Liz Truss Government's mini-budget had dropped 25%. Berkeley has now revised its profit expectations for the next two financial years to a combined £1.05bn, down from £1.25bn in its forecast six months ago.
FINANCIAL SERVICES
Tory grandees back £10bn crypto claim against exchanges
Senior Conservative figures are behind a class action lawsuit alleging several cryptocurrency exchanges colluded to drive down the value of token called Bitcoin Satoshi Vision. Former Lord Chancellor Robert Buckland has provided legal advice to BSV Claims, which is bringing a complaint at the Competition Appeal Tribunal against Binance, Kraken, Bittylicious and Shapeshift. Lord Andrew Tyrie, the former chair of the Competition and Markets Authority, is also providing advice to the claimants. The £10bn claim has been brought by Lord Currie of Marylebone, a crossbench peer who has also chaired the competition watchdog, and represents 240,000 British owners of the cryptocurrency who lost money after its price crashed. It alleges the exchanges colluded to delist the coin as “part of an anticompetitive agreement” leading to its price falling dramatically.
Investors withdraw record levels of coins from crypto exchanges
Crypto currency investors are withdrawing record levels of assets from exchanges following the FTX disaster, leading experts to fear for their liquidity and fundraising abilities.
HEALTHCARE
Amgen close to deal to buy Horizon Therapeutics for $20bn
California-based biotech firm Amgen is close to a deal to acquire Ireland-headquartered Horizon Therapeutics after French drugmaker Sanofi SA said Sunday it was out of the running. The takeover is worth as much as $20bn and would give Amgen access to Horizon’s pipeline of drugs for rare autoimmune and inflammatory diseases.
MANUFACTURING
Manufacturers expected to fall into deep recession
The latest Make UK Manufacturing Outlook survey predicts a slump for manufacturers next year due to rising costs and weakening consumer demand. Industrial output shrank by 4.4% over the past year, reflecting the boost to manufacturing in 2021 as the world emerged from pandemic curbs, rather than particular weakness. But the rising cost of supplies, tighter fiscal and monetary policy and a slowdown in consumer demand will lead to a further decline of 3.2% in 2023, according to the survey. Make UK expects overall GDP to fall by 0.9% next year after expected growth of 4.4% in 2022. Meanwhile, the S&P Global/CIPS purchasing managers’ index for November showed that the manufacturing sector was in sharp contraction as factories produced less, exported less, employed fewer people and suffered a reduction in orders for new work.
MEDIA & ENTERTAINMENT
Britain could lose access to WhatsApp over encryption rights
WhatsApp has indicated that it would be willing to shut the service down in Britain if the Government required it to provide access to encrypted messages to the police and security services. The Online Safety Bill includes powers to enable law enforcement to access encrypted messages on services such as WhatsApp. Ministers will have the power to force internet providers to block apps from operating in the UK if they fail to obey the new regulations. But Will Cathcart, head of WhatsApp at Meta, which also owns Facebook and Instagram, said he was prepared to see the app blocked for British users rather than weaken its security.
REAL ESTATE
House prices suffer largest fall in four years
Rightmove has revealed that the average asking price for a newly listed property fell by nearly £8,000 this month as sellers sought to attract hesitant buyers squeezed by the soaring cost of living. The online property portal found that asking prices across the UK for newly listed properties dropped by 2.1% in December, equivalent to £7,862, which represents the largest monthly drop in four years. Tim Bannister, Rightmove's director of property science said: “It‘s an understandable short-term reaction to the economic turmoil and unexpectedly rapid mortgage rate rises and reduction in availability of mortgage products that we saw in late September and October, before things began to settle down.”
RETAIL
Superdry founder considers private equity buyout
Superdry founder Julian Dunkerton has held discussions with private equity firms over a potential buyout of the retailer after growing disillusioned with its share price performance. Shares in Superdry closed on Friday at 105½p, down 60% in a year valuing the business at just £86m. The Sunday Times reports that talks have taken place this year over a potential deal that would involve Dunkerton, who owns 23.9%, rolling his stake into a new private vehicle. However, a source close to Superdry said that Dunkerton is understood to be wary of any deal that would increase the retailer's debt load amid a grim economic backdrop.
ECONOMY
Policymakers increasingly divided over how to tame inflation
Economists are predicting that the Bank of England’s Monetary Policy Committee will vote for a 0.5% interest rate rise on Thursday, down from the 0.75% hike decided at the last meeting. This would push the base rate from 3% to 3.5% in December. However, analysts suspect there could be the first ever four-way split between MPC members on slowing the increases, with a recession and an ultra-tight jobs market coming up against widespread strikes that could lead to wage growth - further stoking inflation, causing a policymaking headache. Roger Bootle, the chairman of Capital Economics, writes in the Telegraph that he believes rate rises have much further to go for inflation to be brought under control. New figures on GDP and jobs will come from the ONS today and inflation data are due on Wednesday. Markets expect a 0.4% rise in growth for October and inflation coming down from 11.1% to 10.9%, signalling that it has passed its peak.
Hunt chills spending with tax raid
Experts say Jeremy Hunt’s Autumn Statement tax raid will only worsen the recession with consumers now less likely to spend. Rich Shepherd from market research firm Mintel says. “A couple of years ago we were all locked down because of Covid. Now, we're going to be effectively locked down because we can't afford to go out.” Consumer spending was weak going in to the Autumn Statement, but David Bharier, head of research at the British Chambers of Commerce, says businesses now feel the chilling effect of the Chancellor’s policies is hitting them hard. Capital Economics predicts retail sales will fall by 0.5% in the final three months of the year – that would be the worst performance in nearly a decade and a half.