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Daily News Roundup: Monday, 21st September 2020

Posted: 21st September 2020

BANKING

Banks consider debt collection agency to chase coronavirus repayments

Banks are considering the formation of a joint debt collection agency, with lenders said to be mulling the move so as to prevent reputational damage as they try to recover emergency loans handed out during the coronavirus crisis. Small businesses have borrowed more than £35bn from banks under the Bounceback Loan Scheme. With this in mind, UK Finance has commissioned a feasibility study for a "shared recoveries utility". A new debt collection body would require the approval of the Treasury, the Financial Conduct Authority and the British Business Bank, which administers the bounceback scheme. Meanwhile, Innovate Finance has written to Rishi Sunak, the Chancellor, to warn of a potential collapse in access to capital for small businesses when state-backed lending schemes end, as non-bank lenders struggle to secure finance and banks retrench as they consider the risks of bad debts from COVID-19. Separately, the Treasury has told the Business Banking Resolution Service (BBRS) - which is set to launch in mid-November - to prepare for an influx of grievances over government-backed Covid loans, according to the Guardian.

BBB chief vows to address funding gaps

The British Business Bank’s new boss Catherine Lewis La Torre has said she wants to double down on the development bank’s levelling up focus, and use the BBB to help the UK become a “science superpower”. The bank handed £8bn of finance to almost 100,000 firms in the last financial year – a 21% rise – and administered the emergency state-backed loans handed to businesses to ensure they survived the COVID-19 crisis. Ms Lewis La Torre said small business may need “bespoke solutions” and “hybrid” debt and equity rescues as they emerge from the crisis. The Telegraph notes that over 90% of finance supported by the BBB was delivered by non-traditional lenders.

HMRC may see new powers in tax evasion battle

Measures proposed in the next Finance Bill will see HMRC given powers to issue financial institution notices which force them to provide information about people’s assets. The mooted change will make it easier for HMRC to share information with foreign tax authorities, supporting efforts to tackle tax evasion. Under the current regime, consent is provided by the individual or a tax tribunal must approve the request. The proposed new powers, which would cover banks, investment advisers, fund managers, credit unions, insurance companies and credit card issuers, could come into force in 2021. UK Finance said the measures amounted to an “easy fix” to speed up tax investigations by cutting out the courts.

HSBC and Standard Chartered fear new China sanctions

HSBC and Standard Chartered are working on contingency plans in case the US rolls out sanctions against China which result in restrictions on banks serving Chinese companies and individuals. Standard Chartered chief executive Bill Winters last week said that rising tensions between the nations were “troubling” and a “tremendous preoccupation for us”.

Environmentalists urge banks to stop funding factory farmers

Campaigners have written to the International Monetary Fund along with major banks to stop investing in factory farming, arguing that the conditions of industrial livestock production "contribute to the emergence, spread and amplification” of zoonotic pathogens. Industrial farming also undermines food security, and contributes to climate change, biodiversity loss (including the loss of pollinators), deforestation and water pollution, the letter adds.

Government consults on legislation to safeguard the future of cash

The Treasury has launched a consultation with banks, regulators and the cash machine network Link on how to ensure that cash is available nationwide despite the closures of branches and cash machines. Additionally, Natalie Ceeney, a former chief executive of the Financial Ombudsman Service, will announce details this week of trials in nine locations that will look to bring banking services to customers away from branches.

Mortgage lenders asking first time buyers for 20% deposit

Mortgage lenders are asking first-time buyers to stump up at least 20% for a deposit on a house as a drought in deals strips mortgages from the market. In the past week, not one high street bank has offered mortgages for those with a 10% deposit, and brokers are warning that deals for those with a 15% deposit are disappearing.

NatWest mulls Ulster Bank closure

NatWest is considering closing part of Ulster Bank, with CEO Alison Rose calling for a review into the business. Ulster Bank has €22bn of customer deposits and made a €276m operating loss in the first half of the year.

NatWest trials carbon footprint app

NatWest customers will be given the option of monitoring the carbon footprint of their spending, with the bank set to trial a new app which will tell its personal banking customers the emissions impact of their shopping choices.

INTERNATIONAL

Bank merger to create new giant

Caixabank and Bankia, Spain’s third and fourth-largest lenders, have agreed to merge in a deal that will create the country's biggest domestic bank by assets. The €3.8bn tie-up will create a lender with a market capitalisation of more than €16bn. The bank, which will operate under the Caixabank name, hopes to make €770m in annual cost savings by 2023.

ECB to review flagship bond-buying tool in fighting Covid crisis

The European Central Bank has launched a review into its Pandemic Emergency sovereign bond-buying scheme and whether it should become a more permanent policy feature.

Traders set to don virtual reality headsets in their home offices

UBS is experimenting with technology that could transport home-based staff to the trading floor, trialling Microsoft’s HoloLenses augmented reality headsets for London-based traders.

EBRD to remain in London

The European Bank for Reconstruction and Development has repeated its commitment to London with its acting president Jürgen Rigterink citing the talent in the City and his expectation that the UK will remain very influential in the development finance area.

AVIATION

Air travel collapse risks £11bn economic loss

New research shows that the collapse in air travel between the UK and US will cost the economy £11bn this year, putting additional pressure on ministers to approve coronavirus testing at airports.

EasyJet lands Tui executive

EasyJet has announced that Kenton Jarvis, the chief executive and business improvement director at rival Tui, will replace outgoing finance chief Andrew Findlay. Before previous roles at Airtours Holidays and Adidas, Mr Jarvis qualified as a chartered accountant.

FINANCIAL SERVICES

FCA tells insurers to pay out on pandemic claims as soon as possible

Following a High Court ruling on whether coronavirus-related losses are covered by business interruption insurance, the Financial Conduct Authority has told insurers to make payouts as swiftly as possible in cases where the ruling suggests policyholders are covered. Chris Woolard, interim chief executive of the regulator, has written to insurance firms, with a Dear CEO letter warning them against delays. Noting that some areas of the ruling may be subject to an appeal, firms have been told they should be ready to pay once the appeal is concluded. Mr Woolard said where insurers fail to meet the FCA’s expectations, the watchdog “will use the full range of our regulatory tools and powers to ensure they do so”.

Investec to cut jobs

Investec is set to cut 210 jobs at its London headquarters as the banking and wealth management firm warned that profits could fall by up to 60% in the first half of the year. The bank's assets under management rose by 14% to £51.4bn for the period, while loans declined by 1.3% to £24.6bn.

Fund managers alarmed over EU push to lure London jobs

Radical proposals from the European Securities and Markets Authority to adjust delegation rights to force more City business into the EU are being fought by UK asset managers.

LEISURE AND HOSPITALITY

Hospitality industry warns against more lockdowns

A surge in COVID-19 cases has prompted speculation that minsters could close or reduce trading hours of pubs, restaurants and other outlets. However, industry bosses have warned that the move would lead to “devastation” of the hospitality sector, and called on greater Government support after the furlough scheme ends on October 31.

Spending data shows success of Eat Out initiative

Diners spent 14% more in restaurants during the first week of September, compared to the same week a year earlier, as August’s Eat Out to Help Out scheme buoyed consumer confidence in eating out. Lloyds Bank card spending data also shows that the proportion of transactions completed in-store rather than online rose, with just half of spending being made in-store at the height of lockdown in April, rising to 67% in August.

MANUFACTURING

Manufacturers slash investment

Research by trade group MakeUK shows manufacturing companies’ spending plans dropped to a balance of minus 32% in the third quarter, down from minus 26% in the previous period. Pre-Covid investment intentions were running at plus 20% in the first quarter of 2020.

Rolls-Royce in talks with sovereign wealth funds to raise £2.5bn

Rolls-Royce is in talks with Singapore’s GIC and other sovereign wealth funds about a plan to raise around £2.5bn from investors next month.

MEDIA AND ENTERTAINMENT

Pearson sees investor revolt over CEO package

Publisher Pearson has seen a third of its shareholders revolt against a £7.4m payout to new CEO Andy Bird. Advisory groups ISS and Glass Lewis suggested shareholders should vote against the “excessive” rewards, which include a multimillion pound signing-on bonus and a monthly contribution towards the rent of an apartment in New York. Despite the warnings, 67% of investors backed the plan.

REAL ESTATE

City centres see tenant exodus

Private rents in some parts of London have fallen by up to 20% in the wave of the coronavirus outbreak. With renters quitting the capital, fewer international students seeking accommodation near places of education and firms putting relocation plans on hold, the dip in demand has resulted in an oversupply that means rents have come down in some areas. While average rents in London are down by around 4% on a year ago - and 6% or 7% in prime areas - agents say rents in and around the Barbican have fallen by 20%, while rents in Bloomsbury and Clerkenwell are down by around 10%.

RETAIL

Retail sales up 0.8% in August

Figures from the ONS show that retail sales were up 0.8% in August, meaning sales volumes are 4% higher than they were in February. The increase for August marks a dip on the 3.6% recorded in July. With online sales up 46.8% on the level seen before the coronavirus lockdown, Jonathan Athow, deputy national statistician for economic statistics at the ONS, said: “Overall, the switch to greater online sales means the high street remains under pressure.”

ECONOMY

Sunak to extend business support loans as COVID-19 spread worsens

The UK Chancellor, Rishi Sunak, is set to extend the Treasury’s UK-wide programme of business support loans to help companies affected by the coronavirus pandemic. Mr Sunak is this week expected to unveil plans to extend the Treasury’s four loan schemes, which have already backed £53bn in lending to companies through government guarantees.

BoE economist: Rebound faster than anticipated

Bank of England chief economist Andy Haldane says the economy is recovering faster than anyone had expected from the coronavirus crisis. He says that while the economy is 12% smaller than at the start of the year, GDP had recovered around half of its pandemic-related losses by July. This, he adds, represents a rebound that has gone “further and faster” than had been anticipated.

OTHER

Small business recovery stalls

NatWest’s small business purchasing managers’ index shows the recovery among small firms slowed in August, with the lender saying there is a “widening gap” between big businesses and smaller firms. The index, on which a figure above 50 indicates expansion, fell to 50.6 in August, down from a two-year high of 53.3 in July. Stephen Blackman, NatWest’s principal economist, said small firms have been hit by a “mix of sector, place and distribution”. He added: “We know small firms tend to favour services, which have been slower to recover. But larger firms are also more likely to operate in national and even international markets, where places of uneven demand tend to average out.”

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