BTG Advisory
Wholesale energy prices are easing but volatility remains
Mark Fry of BTG Advisory looks at energy prices, saying that while wholesale prices fell significantly over the last three months, they remain at historically high levels, “exerting pressure on corporate balance sheets and household budgets.” He notes that the energy industry is still adjusting to a massive upheaval in supply flows, with the balance between supply and demand still extremely tight. Minor changes, he warns, will continue to have a significant impact on prices throughout 2023. Mr Fry reflects that the energy industry operates in a “complex geopolitical, economic, policy and financial environment which aims to manage an overlapping set of energy priorities focused on access, affordability, security, diversification, and sustainability,” going on to say that the sector argues that short-term windfall taxation on current profits “disincentivises these vital generational commitments.”
BANKING
Business Banking Resolution Service ‘an abysmal failure’
The Business Banking Resolution Service (BBRS) has come under fire after it was found to have only made 21 adjudications. The service was supposed to provide a new way for businesses to resolve disputes with lenders, with the banking industry having suggested that more than 60,000 companies would be “in scope” of the service. As of December 31, the BBRS had a total of 905 registered cases, 512 of them historical. On top of the 21 adjudications it has made, there have been 35 “settlements directly between the parties following BBRS intervention.” Critics of the scheme, which cost the banking industry more than £30m to set up, suggests its narrow eligibility criteria has contributed to the low number of adjudications. Andy Agathangelou, founder of campaign group Transparency Task Force, has called the BBRS an “abysmal failure” that is not “fit for purpose,” while Andy Keats of the small business group SME Alliance, who was involved as an adviser in the formation of the BBRS, has criticised an apparent lack of transparency, describing it as “so opaque it’s unreal.” A BBRS spokesman said it recognises the disappointment expressed by SMEs who are not eligible, noting that it provides banking dispute resolution services for larger SMEs, “which are not covered by other bodies.”
FCA probes Barclays over anti-money laundering systems
Barclays is reportedly being investigated by the Financial Conduct Authority (FCA) over potential shortcomings in its compliance and anti-money laundering procedures. The watchdog last year asked for an independent review of the bank's systems, having identified a high volume of money laundering and 'know your customer' incidents. Sources say the FCA has written to Barclays' UK retail and wealth and corporate banking bosses requesting a Section 166 – a 'skilled persons review' which typically involves an outside party, such as a legal or accountancy firm, looking at issues raised by authorities and highlighting any areas of concern. In recent years the FCA has fined NatWest £264.8m and HSBC £63.9m for failures in their anti-money laundering controls, while Santander was handed a £107.7m penalty over improper checks at its business banking operations.
Banks given all-clear in forgery case
The National Crime Agency (NCA) has closed a review into whether UK banks forged customer and staff signatures, saying it found no “evidence of serious or organised crime, or conspiracy to commit fraud or forgery offences that warrant further investigation.” While Robert Jones, director general of the NCA’s National Economic Crime Centre, said a probe “does not support the central allegations” of systematic misconduct by lenders, “nor does the material identify dishonest intent and gain” by banks, a letter he sent to the Treasury Committee revealed that the Financial Conduct Authority’s review of the same material had uncovered inaccurate correspondence with customers. The issue stems from a campaign launched by former management consultant Julian Watts, with allegations spanning a period from 1975 to 2020 pointing to the forgery of documents including those used in small business disputes and mortgage repossessions.
Banks rake in £23bn from soaring loan and mortgage charges
The Mail on Sunday’s Patrick Tooher says banks are “creaming off” billions of pounds by increasing lending while not passing on rising interest rates to savers. He says NatWest and Lloyds earned £23bn between from soaring loan and mortgage charges in 2022, while rates they offer to savers “have been kept at derisory levels.” Jenny Ross at consumer group Which? says it is “no wonder that people feel frustrated when they see banks hiking interest rates for borrowers with mortgages, while the equivalent rise is denied to many savers.” James Daley of consumer campaign group Fairer Finance adds: “Savers will understandably be furious.”
NatWest set for second consecutive bonus boost
NatWest is planning to increase its annual bonus pool for the second consecutive year, with the taxpayer-backed bank set to pay out more than £350m in bonuses to staff. A source said that the bonus pool would be substantially higher than last year's £298m total but remain below £400m. A £2,000 cap on cash bonuses which has been in place since 2008 is set to remain.
Jupiter sells stake in Starling Bank
Jupiter Asset Management has sold its share of digital bank Starling, signing a deal with institutional investors to offload its stake.
FINANCIAL SERVICES
FCA considers widening regulatory measures on ESG and stewardship
The Financial Conduct Authority is considering introducing regulations that would see financial services companies required to include sustainability considerations in their business plans. The City watchdog said it wants to encourage an “industry-wide dialogue” on how companies can help the transition to net zero, with director of ESG Sacha Sadan saying the sector has a “vital role” to play in helping the economy adapt to a more sustainable future. Mr Sadan said that creating “positive, sustainable change isn’t just about climate change,” insisting that it is “about looking beyond and considering the wider environmental issues … as well as social and governance issues, such as diversity and inclusion, the living wage, fair taxation and supply chains.” Feedback from an FCA discussion paper targeted at banks, building societies, insurers, asset managers and investment firms will help the regulator decide whether to introduce different regulations for firms of different sizes, and if it should introduce training and certification for companies.
Insurer rules force customers to pay up-front
Affordability checks by insurance firms mean an increasing number of people who prefer to pay for their home or car insurance by monthly direct debit are being told they must pay for their cover up-front. The checks are a regulatory requirement stemming from the fact that someone who pays for cover in monthly instalments is in effect taking out a loan with the insurer. This means an affordability check must be carried out before the loan is approved. The AA, which said it would not be “appropriate to offer a customer credit if it was not affordable for them,” says only one in every 200 customers failed credit checks at renewal. Commenting on the matter, the Association of British Insurers said insurers “have to follow the same rules as all lenders,” while the Financial Conduct Authority said: “As the cost-of-living crisis rises, we have reminded firms of their responsibility to treat customers fairly and consider what further support they can offer, as access to insurance is vital.”
Randell: Cryptocurrencies ‘given halo effect’ by Treasury
Former Financial Conduct Authority (FCA) chairman Charles Randell has accused the Treasury of being more interested in serving the interests of the crypto industry than in protecting consumers. Suggesting that trading in crypto currencies is like “digital roulette” and that the only certainty was that “the house will win,” Mr Randell warned that the Treasury is in danger of conferring a “halo effect” on crypto trading with its plans to regulate the sector, arguing that the Government was starting from “the false premise” that crypto speculation was a “financial service” with benefits to society. In a submission to the Treasury’s call for evidence, Mr Randell wrote: “It is disappointing that the consultation chooses to focus on the interests of the speculative crypto industry in avoiding ‘disproportionate or overly burdensome regulation’ without mentioning the extent of consumer harm that regulation is there to prevent.”
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HEALTHCARE
Novo Nordisk apologises for code breach
Lars Fruergaard Jørgensen, CEO of Novo Nordisk, said the pharma company "sincerely apologises" for failing to disclose its sponsorship of webinars and e-training courses that promoted one of its drugs.
LEISURE & HOSPITALITY
More pubs calling time as costs climb and sales slide
The number of pubs and bars going bust soared last year, with the sector hit by rising costs and falling sales. Analysis shows 512 pubs and bars collapsed into administration in 2022, with this marking an 83% year-on-year increase.
MEDIA & ENTERTAINMENT
Activist investor takes Spotify stake
Activist investor ValueAct has taken a stake in audio streaming company Spotify. ValueAct, which distinguishes itself from other activist investors by staying behind the scenes and rarely presenting its investment ideas publicly, has focused its investments in Japan in recent years but has also made investments in US companies including Microsoft and Citigroup, as well as last year snapping up a stake in The New York Times Company.
News Corp to cut 1,250 jobs
Rupert Murdoch’s News Corp has announced plans cut 1,250 jobs - around 5% of its workforce - after inflation hit profits at the publishing company. News Corp saw revenues fall by 7% year-on-year to $2.52bn in the three months to December 31.
PROFESSIONAL SERVICES
Ince delays results again
Legal services business Ince Group has further delayed publication of its 2022 figures, with last year's annual report now five months late. The interim report on its results for the year to March 2023 is also overdue. A statement from company executives said that "substantial progress" had been made on the figures, which were "in the final stages of quality control." They added that they required "approximately" another fortnight, with the results to be released “as soon as possible thereafter." Trading in Ince’s shares has been suspended since early January after the company's auditors raised concerns.
REAL ESTATE
Mortgage deal numbers hit six-month high
Mortgage availability has hit a six-month high, with data from Moneyfacts showing that the number of residential mortgages on the market surged to 4,341 at the start of February. Data shows that the total has since climbed by a further 150 to hit 4,491. This marks a high not seen since August, with September’s controversial mini-Budget having unsettled markets and seen the withdrawal of many deals. While the average rate for a two-year fixed-rate mortgage surged from 4.7% to a peak of 6.65% in October, some lenders are now offering fixed-rate mortgages at rates lower than the 4% Bank Rate. On February 10, the average two-year fixed rate dropped to 5.36%. The average five-year fix has fallen from 6.51% in October to 5.08%.
RETAIL
Arcadia staff rescued in Aviva pension bail-out
Approximately 8,800 members of Arcadia Group's pension schemes have had their benefits secured following a deal between Aviva and trustees. The buy-in deal will guarantee pension scheme members' incomes, with an initial payment of £850m.
ECONOMY
Recession avoided but economy ‘not out of the woods’
Office for National Statistics (ONS) data shows that the UK narrowly avoided falling into recession in 2022, with the economy flat in Q4. This comes despite a 0.5% month-on-month fall in economic output during December, with the decline partly attributed to strikes across the public sector. Chancellor Jeremy Hunt said the figures showed "underlying resilience," but went on to warn: "However, we are not out of the woods yet, particularly when it comes to inflation.” While the Bank of England still expects the UK to enter recession this year, it believes it will be shorter and shallower than previously forecast. As well as posting Q4 data, the ONS has revised up its Q3 figures, saying that the economy shrank by 0.2%, having previously estimated a fall of 0.3%. The ONS data also shows that the UK economy was 4% bigger in 2022 than in 2021. Reflecting on the ONS figures, Labour’s shadow Chancellor Rachel Reeves said they show the economy "is stuck in the slow lane," while Liberal Democrat MP Sarah Olney said: "Britain is dangling on over the edge of a recession after months of economic vandalism and chaos in government,” going on to blame minister who have “ botched budgets, failed to tackle inflation and have no plan for growth."
OTHER
Credit card fraud hits record high
Fake credit card applications have hit a record high, with research by credit score provider Experian showing that around one in 150 UK applications was fraudulent last year. Fraud accelerated as the year went on, with fake applications jumping by 18% in Q4. A UK Finance report shows there were 34,114 cases of card ID theft in the first half of 2022, double the same period in 2021. Experian also reported a spike in the number of people lying on loan applications to try to get better terms. The Financial Conduct Authority has warned that Britain is in the midst of a fraud epidemic and Eduardo Castro, managing director for Experian, said: “The fraud epidemic is an ongoing, evolving battle, with fraudsters always looking at new ways to dupe victims."