MPs call for break-up of high street banks
The All-Party Parliamentary Group (APPG) for challenger banks and building societies has called for major high street banks to be broken up, arguing that they are too powerful and stifling competition. Following a two-year inquiry into competition in the UK banking sector, the APPG said it found "evidence of many poor practices by the major banks such as back-book price gouging, where institutions profited from predatory pricing models, luring in customers on good deals before exploiting customer inertia to profit from them." It added that a lack of competition meant big banks were able to "exploit more vulnerable customers". Metro Bank boss Daniel Frumkin comments: “It isn't the scale of the big banks that limits the ability of mid-tier banks or building societies to compete," arguing that disproportionate regulations are hitting growth potential. The Guardian notes analysis from 2018 showing that HSBC, Barclays, Lloyds, NatWest, Santander and Nationwide hold around 87% of the retail banking market.
90% home loans trickle back
First-time buyers’ hopes of getting on to the property ladder have been boosted as banks have started to relaunch 90% mortgages. Moneyfacts analysis shows that the number of 90% loans available fell from 779 in March to 56 at the start of November but with smaller lenders testing the water in recent weeks, larger lenders including TSB and Yorkshire Building Society have started to expand their offerings, with 80 deals requiring a 10% deposit now available. Mark Harris of mortgage broker SPF Private Clients said Accord Mortgages, Atom Bank, Bank of Ireland, TSB and Yorkshire Building Society had all launched 90% loans in recent days. He added: “However, the lack of availability means borrowers have seen small deposit rates rise … A year ago, 90% two-year fixes were available with rates below 2% but now the equivalent loans cost well over 3%."
Sabadell considers TSB's future after BBVA deal scrapped
Banco Sabadell has said it will consider options for its UK bank TSB after failing to agree a price for a merger with Spanish rival BBVA. Goldman Sachs has been given a mandate to pursue a sale, according to Reuters. The Mail on Sunday reports that private equity firms have approached Sabadell about buying TSB, noting that other UK banks are also private equity targets, with Cerberus in takeover talks with the Co-operative Bank.
Big banks have Starling in their sights
JP Morgan Chase and Lloyds have expressed interest in buying Starling Bank with the former said to be keen on bolstering its customer base as it prepares to launch its consumer bank in the UK. Lloyds is understood to be interested in the digital challenger bank’s technology.
Virgin Money to rethink the working day
Virgin Money will not return to the traditional working day following the success of home working during the coronavirus pandemic, with CEO David Duffy saying the level of flexibility will be different for each role. Elsewhere, Deutsche Bank is considering letting all staff permanently work from home two days a week, while Standard Chartered has told staff they can work when and where they want. Lloyds is experimenting with different ways to use its offices, while HSBC has said it is considering permanent changes.
Monzo accused of excessive notifications
Monzo has been accused of "spamming" customers with phone notifications to promote its new £180-a-year metal bank cards. The banking start-up said it is “completely normal to tell customers who've opted into marketing updates about new products and features.”
Amazon backs charity’s support for small firms
Amazon has signed up as a donor to the Tide Charity, a partnership between Tide and the Federation of Small Businesses which will provide grants of £1,000 to businesses hit hard by the pandemic.
AA shareholder rejects £219m price tag as 'derisory'
The AA's biggest shareholder has rejected a takeover of the breakdown company, calling the 35p-per-share deal proposed by private equity firms Towerbrook Capital and Warburg Pincus “derisory”. Albert Bridge Capital chief investment officer Drew Dickson said the deal “fundamentally undervalues” the AA. While Albert Bridge, which holds a near 20% stake in the AA, has rejected the offer, US hedge fund Davidson Kempner, which holds 16%, supports the deal. Any takeover deal requires 75% shareholder approval.
HSBC mulls exit from US retail banking
HSBC is reportedly considering a total exit from retail banking in the US, with senior management expected to present the plan to the bank’s board in the coming weeks. HSBC managers are also said to be planning to recommend trimming HSBC’s investment bank client roster to focus on international clients, particularly those with Asian and Middle Eastern links.
Europe takes steps to tackle banks’ bad loans
The European Commission is planning proposals that would make it easier for EU banks to offload bad loans, with analysts expecting a surge in insolvencies once coronavirus support programmes conclude.
GM plans to apply for a banking charter
The finance arm of General Motors is planning to apply for a banking charter that would allow it to hold deposits and expand its auto-finance business.
New testing rules a boost to Gatwick
Stewart Wingate, the CEO of Gatwick, has said the introduction of shorter quarantine times from mid-December was boosting travel, and the combination of testing and a COVID-19 vaccine means he is optimistic holidays can restart next year. “We are seeing already an uptick in flights, so we should expect to see about 100 flights per day by the time we get to the middle of December, and across the Christmas period,” he told Reuters.
Crisis set to hit FDI
Analysis suggests that foreign direct investment (FDI) in the UK's financial services industry is set to slow over the next 12 months, with the impact of the coronavirus crisis on the global economy affecting investment plans. Only 10% of global financial services companies plan to establish or expand operations in Britain in the next year, down from 45% in April. It was also shown that 20% of financial services firms are planning a substantial decrease in investment in the UK over the next 12 months due to the pandemic, with 28% planning a minor cut and 18% putting plans on hold. Just under a quarter of respondents (23%) expect no change to their investment plans, while 10% plan to increase investment. In regard to long-term investment, 53% of financial services companies surveyed expect the UK to be more attractive for FDI in three years’ time - up from 40% earlier in the year and 17% in 2019.
Brussels raises doubts over City access
Diplomats were told in a behind-closed-doors meeting in Brussels that the British Government’s failure to offer assurances over the future regulatory outlook for the City of London after January 1 was holding up decisions on equivalence. Additionally, the UK had not revealed what new regulators would be established, making understanding of future policy more difficult. Chris Chapman, a partner at law firm Mayer Brown, points out that the equivalence mechanism is seen by some as protectionist and that even if it was granted, the EU can unilaterally revoke it, providing Brussels with leverage on an ongoing basis.
Surge in pay-later deals stokes fears of debt crisis
A surge in buy-now-pay-later deals during the pandemic has prompted fears of a looming debt crisis among the young and unemployed. Deals offered by firms such as Klarna let people spread the cost of payment over up to three months but are not regulated as consumer credit by the Financial Conduct Authority. Providers therefore do not have to display rates of interest, shoppers do not have to be given refunds if something goes wrong, and they cannot complain to the Financial Ombudsman Service.
Facebook readies Libra for January launch
Facebook is set to launch its crypto-currency Libra in January with the digital coin expected to be backed by the US dollar instead of a basket of currencies as originally planned. Facebook has lost a number of high-profile backers and last year the Bank of England was among central banks warning that Libra could threaten monetary stability and become a vehicle for money laundering.
Schroders British trust raises third of target ahead of IPO
Schroders has raised £75m for its British Opportunities Trust - just a third of the fund house’s original target amid what it said was a “very challenging market”. The fund plans to invest in public and private British companies.
Barclays plans to ramp up investor platform
Barclays intends to grow its DIY platform Smart Investor to create a rival to Hargreaves Lansdown. Finance boss Tushar Morzaria has said Barclays is aiming to lure customers of the FTSE100 giant. Smart Investor has seen 230% growth in customers this year as savings rates were cut to new lows over the summer.
LEISURE & HOSPITALITY
Travelodge chief to quit after loss of hotels
Peter Gowers, the CEO of Travelodge, will leave at the end of the year. His resignation comes as the group revealed it had lost 17 hotels to rivals after several landlords switched to rival brands as a result of its recent CVA.
MEDIA & ENTERTAINMENT
Netflix to declare revenues to HMRC
Netflix is to start declaring the revenues it makes from British subscribers to UK tax authorities, a change that is likely to increase the amount it pays in UK corporation tax. Netflix’s UK-generated revenue has gone through accounts at its European headquarters in the Netherlands since the streaming service launched in Britain in 2012. Netflix received a €57,000 tax rebate from the UK government in 2018, despite making £700m from UK subscribers, and declared just €48m in UK revenues in 2018.
Arcadia could owe suppliers £250m
There is concern that Sir Philip Green’s retail empire Arcadia, which is on the brink of collapse and could appoint administrators as early as today, may go bust owing over half a billion pounds to pension scheme members and suppliers. Insurance firm Nimbla estimates that around £250m worth of invoices from suppliers could go unpaid should Arcadia collapse, while Arcadia’s pension fund has a black hole of as much as £350m. Stephen Timms, chair of the Work and Pensions Select Committee, says he will write to The Pensions Regulator “to underline the importance of securing the interests of pension scheme members.” While Arcadia’s pension scheme is eligible to enter the Pension Protection Fund, the value of members' retirement pots could shrink by up to a quarter.
CVC close to taking £300m Six Nations stake
Scottish Rugby chief executive Mark Dodson has stated that a £300m deal for CVC to take a 17% stake in the Six Nations is expected to be completed by the end of next month.
CEBR: Tiers will cost £900m a day
Analysis by the Centre for Economic and Business Research suggests the latest round of coronavirus restrictions will cost the UK £900m a day. The report says the tiers being rolled out across England this week will see the country's GDP fall by 13% compared to December 2019, a decline of more than £20bn over the month. The forecast reflects the fact that 31% of England's economy will be placed in Tier 3, while 68% will be in Tier 2. Elsewhere, Andrew Goodwin, chief UK economist at Oxford Economics, said it expects GDP to fall by almost 3% in the fourth quarter. Saying that the tier system “should be less damaging” to activity than November’s lockdown, he added: “Therefore, we should see a modest recovery in activity when we switch from lockdown to the tiered system.”
Capital Economics upbeat about vaccine impact on economy
Capital Economics has posted bullish economic forecasts for the UK, saying “game-changer” vaccines will wipe out the damage of coronavirus by the middle of the decade, meaning tax rises will be unnecessary.
BoE sees ‘cash paradox’
The Bank of England has seen a "cash paradox", with the amount of cash in circulation increasing massively despite a fall in cash machine withdrawals since March. Data from the Bank shows that the value of notes and coins in circulation has risen by £7.9bn since the start of the pandemic to more than £78bn – while cash machine withdrawals have fallen by as many as 2.9m a day. Officials believe people stockpiled cash at the start of the first lockdown in case of an emergency, while some of the missing money may be from businesses unable to deposit takings in banks and Post Offices because of queues and restricted opening hours.