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Daily News Roundup: Monday, 4th January 2021

Posted: 4th January 2021

BANKING

British Business Bank cracks down on coronavirus loan fraud

The British Business Bank (BBB) has launched a fraud crackdown amid fears thousands of companies have wrongly claimed emergency coronavirus support loans. The BBB has hired consultants to analyse transactions and will also utilise other compliance and risk experts. It has also set up regular meetings with banking executives, trade body UK Finance and fraud prevention service Cifas as it looks to tackle deceitful claims. The BBB, which is responsible for overseeing the state-backed lending programmes rolled out to help firms navigate the pandemic, has warned that the initiatives have been a target for criminals, telling MPs on the Public Accounts Committee in November that it had already detected over £1bn of fraudulent loan requests.

Banks want contactless payment limit increased

Banks have called for the limit on contactless payments to be increased from £45 to £100. An EU-wide rule set by the European Commission limited contactless transactions to a maximum of €50, or £45, but with Britain now detached from the bloc, it need no longer adhere to the rule. UK Finance, alongside card processing networks, has proposed the increased cap to the Treasury, although it would require the green light from the Financial Conduct Authority. UK Finance says 62% of debit card transactions and 46% of credit card transactions in the UK now utilise the contactless function.

Investment banks generate record fees

Investment banks generated a record $124.5bn in fees in 2020, earning $42.9bn underwriting debt – a 25% increase – while fees for underwriting IPOs rose 90% to $13bn and overall equity underwriting revenues hit $32bn. The UK alone has now generated more than £1bn worth of investment banking fees every quarter of the year for the past four years. Fees earned from debt underwriting in the UK totalled £1.2bn in 2020, a 28% increase on 2019 and the highest since Refinitiv's records began in 2000.

Skeoch to conduct review of banking regulations

Keith Skeoch, the former CEO of Standard Life Aberdeen, has been appointed by the Treasury to lead a review of banking regulations. Sources say the review will complement efforts by the Bank of England to create lighter touch regulation for smaller banks post-Brexit. The review will examine banks' investments in risky financial products. It will also look at how efforts to separate retail customers' deposits from riskier investment banking activities have impacted high street lending.

Fintechs call for banking transparency

The Coalition for a Digital Economy, an advocacy group that represents a number of UK fintech firms, has urged the Financial Conduct Authority to end banking institutions’ dominance over the use of consumer data, saying this would increase competition in the savings, credit, mortgages and pensions markets. Calling for a more market-led approach to open finance, the group - which includes TransferWise and Seedrs – proposes a more transparent open banking environment with a market-led, principles-based regulatory framework.

Firms claim £68.2bn in emergency loans

Businesses have been handed a combined £68.2bn in emergency coronavirus loans. Analysis shows that banks have lent a total of £24.6bn to 83,293 firms under the Coronavirus Business Interruption Loan Scheme and the Coronavirus Large Business Interruption Loan Scheme. Lenders have also handed out £43.5bn in Bounce Back loans to more than 1.4m smaller businesses.

Fewer buyers turn to Bank of Mum and Dad

The so-called Bank of Mum and Dad helped fewer buyers snap up a home last year, with 28% of first-time buyers receiving help from family or friends in the 2019/20 financial year, down from 34% the year before and 39% three years ago. Despite the decline in support, the number of first-time buyers in England increased by 100,000 from 2018/19 to hit 827,000 in 2019/20. The average deposit was up to £42,433 from £42,361 the previous year.

Lenders to launch wave of green products

The FT says leading British banks have been criticised over their response to global warming but are increasingly moving toward climate-change products and tightening lending standards.

Cashless shift could reduce branches

Analysis suggests that the coming year could see further bank branch closures as consumers continue a shift toward online banking and contactless payments. Research shows that nearly a third of UK consumers have stopped using cash since the initial coronavirus lockdown, with nearly four in 10 not visiting a bank branch since.

Clydesdale loosens lending conditions

Clydesdale Bank is to once again accept 60% of a borrower's bonus, commission and overtime income on top of basic salary when working out how much it will lend. The bank will accept only "sustainable overtime and bonus" income and borrowers must prove that they get the money regularly and will need two years' worth of payslips.

First farmer bank in 100 years to open

Oxbury Bank, which claims to be the first agricultural bank to open in nearly 100 years, is preparing to launch after receiving a £15m investment. Oxbury, which received its banking licence in January 2020, plans to open on January 11 and has ambitions to hold an 8% share of all farm lending within five years.

Santander rules out TSB bid

Santander has reportedly ruled itself out of the race to acquire TSB from Spanish rival Sabadell, with the bank said to be focusing on growing existing brands rather than snapping up rivals.

Revolut leads on app downloads

Revolut outdid its peers in regard to growth of its app last year, recording 5.8m downloads in 2020 while Monzo saw 2.4m and Starling Bank logged 1.3m.

Barclays in legal battle over 'debt pledge'

Barclays has launched a $130m legal claim against Bavaguthu Raghuram Shetty, founder of Finablr, with the claim linked to a personal guarantee Mr Shetty is alleged to have given on debts at part of the collapsed foreign exchange business.

PRIVATE EQUITY

UK tech firms attract record VC funding

According to data from Dealroom, UK technology companies attracted a record $15bn in venture capital funding in 2020. The firms raised more money from VC investors than the rest of Europe combined. The investments helped to create seven unicorn firms valued at more than $1bn. Oxford overtook Cambridge to take the number two spot in terms of VC investment in tech firms behind London.

INTERNATIONAL

Commerzbank to book €610m restructuring charge

Commerzbank is to book €610m in restructuring charges in the fourth quarter, having reached agreement with staff on previously announced headcount reductions. In 2019 it announced it would reduce headcount in a series of overhaul measures, with the charge for Q4 covering 2,300 full-time positions

Europe’s banks fear investor flight after dividend bans

European bank share prices were down about a quarter in 2020, with industry executives concerned that investor flight will mean lenders find it harder to raise capital in future times of stress.

AUTOMOTIVE

Carmakers applaud parts arrangement

Britain’s carmakers have welcomed a key concession in the UK-EU trade deal that allows manufacturers to use a large number of parts from outside the bloc. Cars with conventional petrol and diesel engines can have up to 45% non-EU and UK parts and qualify for lower tariffs, while electric vehicles can have a higher level. This will be decreased gradually, allowing manufacturers time to find other suppliers to comply with rules of origin.

Nissan to reduce European presence

Nissan is reportedly planning to reduce its presence in Europe and outsource the sales and manufacturing of its cars to alliance partner Renault.

AVIATION

Vote ban for airlines’ UK investors

British shareholders of Ryanair and Wizz Air have been banned from voting at the companies’ general meetings, with the airlines confirming that ordinary shares held by UK citizens have been converted into restricted shares following the Brexit transition deadline. This ensures that they remain majority EU owned and controlled, enabling them to retain their EU licences.

Aerospace industry wanes

The UK risks falling behind Germany in global aerospace rankings after suffering at least 15,000 job losses this year as a result of the pandemic. Data from trade body ADS suggests weaker support schemes from the UK Government compared with those of France or Germany put Britain’s ranking at risk.

FINANCIAL SERVICES

City watchdog relaxes derivative trading rules

The Financial Conduct Authority has relaxed rules on cross-border derivative trading, allowing many UK trading floors to deal in derivatives at EU venues as long as they are working for clients in the bloc. The move, designed to ease concern over disruption to the trading market amid the UK’s exit from the EU, is a temporary one and will be reviewed by the watchdog by the end of March. The Telegraph says the changes, which affect London-based branches of European investment banks and brokers, may be seen as a precursor to a more detailed agreement with the EU on financial services. It notes that Prime Minister Boris Johnson has said his Brexit deal “perhaps does not go as far as we would like” on financial services. Announcing the change to its rules, the FCA said it “remains open to co-operation with EU authorities on ways of avoiding conflicting obligations”.

Officials seek City Brexit deal

Officials will this week launch talks designed to secure a Brexit deal for the City by March, with City Minister John Glen and Katharine Braddick, director general of financial services at the Treasury, set to play key roles in drawing up a memorandum of understanding with the EU. The Treasury will engage with bodies including UK Finance, with senior officials from the Bank of England expected to hold talks with financial lobby groups.

Board member pay jumps

The UK's largest listed financial firms have handed their board members an almost 80% pay rise since 2009, prompting shareholder advisers and high-pay campaigners to call for greater transparency on director fees. Median pay for the three highest earning non-executive directors in each of the FTSE 100's 17 financial firms surged from £90,700 in 2009 to £162,000 in 2019. The largest increases have been at Lloyds Banking Group, the London Stock Exchange Group, and Hargreaves Lansdown.

City gearing up for wave of flotations in 2021

City dealmakers are preparing for a wave of flotations in 2021 as companies which have delayed their IPOs due to the pandemic and uncertainty over Brexit decide to press ahead with their plans. Alex Ham, co-chief executive of Numis, said: “We're seeing a real pick up in both founders and owners starting to explore what IPO options are available.”

Covid crisis opens chasm between hedge fund winners and losers

The difference in performance between top and bottom hedge funds has widened considerably since the pandemic began, with the top 10 recording their best year since 2009.

Large asset managers boost staffing in EU by 38% since 2015

According to figures compiled by the FT, big asset managers have expanded their combined workforces in the EU by 38% over the past five years.

MANUFACTURING

UK and EU agree one-year grace period on rules of origin forms

Companies exporting goods between Britain and the EU have been granted a 12-month waiver for rules of origin declaration forms, with this easing some of the red tape manufacturers face following Brexit.

MEDIA & ENTERTAINMENT

Facebook closes Irish holding companies

Facebook is winding up three of its Irish holding companies and returning its intellectual property to the US. The move comes after the US Internal Revenue Service took Facebook to court claiming it owed more than $9bn linked to its 2010 decision to shift profits to Ireland. The company's main Irish subsidiary paid $101m in tax while recording profits of more than $15bn in 2018.

PROFESSIONAL SERVICES

More talks required to secure mutual recognition of qualifications

The Government will have to return to talks with the EU to ensure professional qualifications are recognised in the EU after Brexit. Sam Lowe, senior research fellow at the Centre for European Reform, says the framework going forward is one “that allows for qualification bodies in the EU and the UK to put forward a proposal for mutual recognition to exist in the future.”

Climate change prompts concern over clients

David Wighton in the Times says leaders at many professional firms are increasingly concluding that they cannot afford to be neutral about their clients’ behaviour, with climate change a particular concern. He says that banks have been leading the way and accountants, lawyers and consultants are now “wrestling” with whether they should have rules related to clients’ practices.

REAL ESTATE

House prices up 7.3% in 2020

Figures from Nationwide show that UK house prices climbed 7.3% in 2020, with this a six-year high for price growth. The data also shows that prices were 0.8% higher in December than November, with the average property valued at £230,920. Analysis shows that prices in December were 5.3% up on the average seen at the start of the coronavirus crisis in March. Meanwhile, the Sunday Telegraph looks at the movement house prices may see in 2021. While Capital Economics and the Centre for Economics and Business Research both predict a 5% drop over the coming 12 months, Halifax expects prices to slip between 2% and 5%.

Islington leads on price growth

Figures from Halifax show that London’s Islington has seen the fastest house price growth over 2020, with the value of the average property climbing 13.4% to £727,922. Across London, average prices rose by 6%, with the capital seeing nine regions in the top twenty for price growth. Outside London, Leeds was in second place overall, recording a 11.3% rise, followed by Wolverhampton, with a 9.5% increase. At the opposite end of the scale, Paisley in Scotland saw the typical house price decline by 1.7% to £138,036. The average rise across the UK was 10.6%.

RETAIL

Consumers shopped locally at Christmas

Research by Capital One reveals that 44% of adults did more Christmas shopping locally than in previous years. Their average spend on closer-to-home shops and services amounted to £251 per person, which equates to £5.1bn across the country. The survey found that 55% of those questioned said they had changed their shopping habits to support local stores, while young adults aged 18 to 24 were the keenest to shop locally (55%), compared with 36% of over-55s.

ECONOMY

Britain becomes the world's fifth-largest economy

Analysis by the Centre for Economic and Business Research (CEBR) shows that the UK has become the world's fifth-largest economy once again, leapfrogging India despite a cumulative fall in GDP of 21.2% in the first half of 2020. The CEBR predicts annual growth of 4% for the UK until 2025 after which it will fall to 1.8% annually until 2030. It also predicts that China will overtake the US to world’s largest economy by 2028. Meanwhile, the CEBR expects the UK economy to grow at its fastest rate since the Second World War this year, saying national income could rise by 8% in 2021 as Britons start to spend the £200bn that has been saved during the coronavirus crisis. Elsewhere, the Resolution Foundation has warned that the latest round of coronavirus restrictions could see the economy 6% smaller by Easter than the Office for Budget Responsibility forecast a month ago.

UK economy set to be one of the last to recover from pandemic

A majority of economists believe UK GDP will not hit pre-pandemic levels until at least H2 2022, lagging behind international peers as unemployment, weak business investment and Brexit slow the recovery. NatWest chairman Howard Davies and Commerzbank’s Peter Dixon say the UK will not recover fully until 2023, while JPMorgan’s Allan Monks expects GDP to recover in 2022.

Corporate debt pile threatens economic recovery

Experts say the level of debt built up by companies during the pandemic threatens to undermine the economic recovery. Corporate debts to banks rose from £486bn before the pandemic to a peak of almost £545bn in May. George Dibb at the Institute for Public Policy Research says with cashflow down by £180bn this year and companies’ reserves standing at £90bn, it leaves a £90bn black hole which “urgently needs addressing”.

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