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Daily News Roundup: Monday, 17th December 2018

Posted: 17th December 2018

UK banks pay nearly double the tax of the rest of FTSE 100

The UK’s five largest banks paid an effective tax rate of 42% last year - almost twice as much as the 23% paid by the FTSE 100 as a whole, Thomson Reuters has found. Customer markets chief operating officer Brian Peccarelli said: “The huge difference in effective tax rates not only between sectors but also between companies in the same sectors highlights how critical paying the right amount of tax can be. Looking ahead, the Trump tax reforms and Brexit suggest that corporation tax rates could become a large area of competition between countries to attract corporates.”

Cashless society could lead to financial exclusion for 8m

A new report, to be published this week, will warn that the rush to a cashless society could lead to widespread financial exclusion. The Access to Cash Review will reportedly claim that 8m people are in danger of being “left behind” as the banks move away from cash and towards payment by cards and mobile phones. Those most at risk are said to be people living in rural communities, where bank branches are being withdrawn, and the elderly who are more comfortable using cash, the indebted and the poor. The Bank of England has said that “an unmanaged decline in cash use could create financial inclusion challenges and limit choice for people and businesses”.

Half of new mortgages close to risk limit, Bank warns

New figures from the Bank of England show record numbers of mortgage borrowers are taking on dangerously high levels of debt to get on the housing ladder. A record 47% of mortgages in the third quarter of 2018 went to customers on ‘high loan to income multiples’. For a couple, this means borrowing more than three times their annual income, and for a single buyer, borrowing four times their earnings. Meanwhile, the Times reports that lawyers, accountants and doctors who have deposits of as little as 10% are being offered the chance to borrow up to six times their income.

New rules introduced to protect scam victims

The FCA is introducing new rules to protect victims of bank scams. Under the changes, the bank receiving money from a victim of this type of scheme, known as authorised push payment (APP) fraud, must take on the victim’s complaint if one is made about their handling of the situation. Currently, the bank sending the money - but not the receiving bank - must handle these complaints in line with FCA rules. The banking industry recorded almost 44,000 cases of APP fraud in 2017, with victims losing £236m. The average loss was almost £5,400.

Compensation scheme deemed “flawed”

A compensation scheme set up by Lloyds Banking Group for SMEs whose owners were ruined by a banking fraud at the Reading branch of HBOS has been labelled “defective”, based on flawed “methodology”, and “partial” to the bank’s interests. Legal advice prepared by Jonathan Laidlaw, QC, contends that the scheme is "unlikely to provide just redress" and that the level of compensation “gives rise to a real sense of injustice”.

Barclays promotes 85 executives

Barclays has promoted 85 executives in the international division that houses its investment bank to the rank of managing director. The promotions represent an increase from the 74 elevated last year and 60 in 2016.

PRIVATE EQUITY

UK toppled as Europe’s biggest private equity market

The UK has been toppled by the Netherlands as Europe’s biggest private equity market. Deal value in the UK totalled €21.4bn in the year to December 7. The Netherlands recorded €23.5bn.

INTERNATIONAL

Spanish banks step up sales of bad loans and distressed property

Banco Sabadell has announced the sale of its real estate services business, while Bankia has confirmed that it is negotiating the disposal of a basket of toxic loans and real estate assets.

BNP’s Polish arm to cut 2,200 jobs

BGZ BNP has announced plans to cut 2,200 jobs over the next two years, in an attempt to reduce costs following its takeover of Raiffeisen Bank International’s Polish business.

Tough fourth quarter casts shadow over Wall St bonuses

Bonus pools at Wall Street banks are expected to be lower in the fourth quarter, as earnings have been hit by worries about China growth, trade wars and Brexit.

EU bank watchdog warns e-money firms not all ready for cliff-edge Brexit

The European Banking Authority has warned that smaller financial institutions and e-money firms are failing to fully prepare for a cliff-edge Brexit.

Ireland’s AIB names Colin Hunt as new CEO

Allied Irish Banks has named Colin Hunt as its new CEO following the surprise departure of Bernard Byrne.

AUTOMOTIVE

Jaguar Land Rover set to cut thousands of jobs in new year

The FT reports that Jaguar Land Rover will cut up to 5,000 thousands jobs early in the year as part of a £2.5bn turnaround plan. The firm has already cut 1,000 temporary contract workers at its Solihull plant and has also reduced working hours for some staff at its Wolverhampton factory in the run-up to Christmas.

AVIATION

Boeing opens first 737 completion plant in China

Boeing has delivered its first 737 airliner from its new factory in China - a debut that comes amid a 90-day truce in the US-China trade war. The completion site in in Zhoushan, where workers install interiors to 737s built in Seattle for sale in the Chinese market, is part of the US aerospace company's plan to strengthen ties to what will soon be the world's largest aviation market.

Air Berlin administrator sues Etihad for up to €2bn

The administrator for Air Berlin is suing Etihad Airways for up to €2bn over its role in the collapse of the German carrier. Etihad was the main shareholder in Air Berlin.

CONSTRUCTION

Interserve plans to offload construction unit to lenders

According to Sky News, Interserve has been exploring the possibility of offloading RWD Kwikform – one of its construction units – to the company’s lenders. Analysts value the unit at between £250m and £300m. One City source commented: “It would make the rest of the company, if it stayed listed, a much cleaner story for stock market investors.”

Pressure mounts on Laing O’Rourke

The Times claims that pressure is mounting on construction firm Laing O’Rourke as its banking partners delay signing off on a crucial refinancing. The contractor is reportedly two months late in filing its UK accounts amid increased scrutiny from lenders and accountants.

UK outsourcers at risk of financial contagion

In the wake of the collapse of Carillion, the FT’s Gill Plimmer examines how other outsourcers, such as Interserve, are struggling to stay afloat. Robert Lea adds in the Times that all the leading players in the construction and services sector are at risk of failure.

Financial pressures haunt Battersea power station regeneration plan

Contractors working on the Battersea power station have told the FT that the regeneration project is “months behind schedule”, which is expected to push mounting costs even higher.

FINANCIAL SERVICES

Brexit will bring more European fund managers to UK

Research by State Street indicates non-UK asset managers are considering opening offices in Britain for the first time as a result of Brexit with one in three believing the UK’s exit from the EU will result in more M&A activity while a quarter foresee more European-based operators opening offices in Britain. Brian Allis of State Street commented: “It is reassuring to see that, however negative the outlook for the UK fund industry may be right now, investors still want to maintain and grow their presence locally.”

Fund chiefs concerned about markets

Major fund managers have warned that central banks could push markets to “breaking point” next year, with the removal of post-crisis stimuli stunting the global economy. Goldman Sachs Asset Management believes that “tighter financial conditions” and the waning impact of Donald Trump’s fiscal stimulus will weigh on future growth. Meanwhile, Hermes Investment Management has predicted that a 10-year stocks bull run and a three-decade bonds bull market will come to an end next year.

‘Zero’ risk from Brexit, says TransferWise chairman

Fintech group TransferWise faces zero risk from Brexit, according to its chairman and co-founder Taavet Hinrikus. Financial passporting will be retained by opening an office in the EU, said Mr Hinrikus, whose only concern was the ability to attract staff to work at the business’ UK office.

EU stress tests show some insurers could face trouble if rates were to jump

Stress tests from Eiopa, the EU’s insurance and pensions regulator, have found that a handful of European insurance firms would face serious trouble if interest rates suddenly increased.

LSE names new boss

The London Stock Exchange has named Experian’s Don Robert as its next chairman. He will join the group as a non-executive director at the start of January, and succeed Donald Brydon at the end of the annual general meeting in May.

TP Icap sues over deal

TP Icap has launched legal action against Nex Group accusing it of breaching the terms of a £1.3bn deal when it bought the voice-broking business of Icap. In court documents, TP Icap accuses Nex, the remaining part of Icap, of breaking deal warranties that promised the voice-broking business was not exposed to any significant litigation.

New plans to protect loyal customers

The Competition and Markets Authority is planning to outline what action it intends to take to stamp out the practice of longstanding customers being penalised for their loyalty. The CMA will call for the Government to intervene, requesting that regulators take action to stop the discrimination against loyal customers, or even launch a so-called “market investigation”.

LEISURE AND HOSPITALITY

LVMH to buy hotel group Belmond in $3.2bn takeover

LVMH has agreed to buy the luxury hotel chain Belmond in a $3.2bn deal. The acquisition gives LVMH control of 46 hotels, restaurants and luxury trains and cruises across 24 countries.

Zizzi owner looks east

Azzurri Group, the owner of the Zizzi and Ask Italian brands, is looking to expand in China as the UK market becomes more saturated. Azzurri is opening a branch of Zizzi in Shanghai – which is expected to be the first of several in China.

MANUFACTURING

Dealmaker Sanjeev Gupta makes an approach for UK’s Stemcor

GFG Alliance, which is headed by Sanjeev Gupta, has made an approach to buy independent steel trader Stemcor from investors, including Apollo.

REAL ESTATE

UK property taxes more than double OECD average

The Organisation for Economic Co-operation and Development (OECD) has said Britain has the second-highest property taxes in the world, with business rates, council taxes and stamp duty making up £1 of every £8 collected by the Treasury. The Chancellor raked in £85.4bn from property taxes in 2017-2018 - up £25bn since 2010-2011. UK property taxes are more than double the average among OECD member states and are topped only by the US.

Property loses its lustre with overseas landlords

Overseas landlords are abandoning Britain’s property market, as slower growth and a tighter tax regime combined with a fall in sterling begins to weigh down on investment returns.

RETAIL

Sainsbury and Asda win extension plea

After being refused an extension by the CMA, Sainsbury’s and Asda have been granted additional time to respond to evidence brought against their merger plans by the Competition Appeal Tribunal following a judicial review. The tribunal ruled that “the timetable for responding to materials and attending a main party hearing were both unfair”.

ECONOMY

Financial system unprepared for another crash

David Lipton, the deputy head of the IMF, has warned that the financial system is unprepared for another downturn. He said that more than a decade on from the last crash in the global banking system, “crisis prevention is incomplete”.

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