Chancellor unlikely to create toxic loan vehicle
The Telegraph reports that Chancellor Rishi Sunak is set to ignore calls to create a state-backed organisation that would refinance toxic business loans handed out as part of coronavirus support initiatives. Proposals put together by a taskforce led by trade body TheCityUK would see the Government take responsibility for debts, easing the burden on banks. Lloyds chairman Norman Blackwell has warned that bankers will be expected to do "everything they can" to recover toxic coronavirus loans, with firms possibly put into administration or assets being sold off. Lord Blackwell suggested that “the best thing” for firms that remained viable would be to “take the loans off the banks, pay out their guarantee and put them in a vehicle which will over time try and recoup money from the companies."
Uncertainty sees cut in borrowing level
Barclays has reduced the amount it will lend via mortgages, cutting the total a borrower can receive as a multiple of their income. The shift means that buyers can now only get a mortgage 4.49 times their annual salary, down from 5.5 times. Nicholas Morrey, of mortgage broker John Charcol, said lenders are concerned about the stability of borrowers’ incomes as a result of the coronavirus crisis and the impact on jobs. Jonathan Harris, of mortgage broker Forensic Property Finance, believes the cut will hit sales, saying: “If people cannot borrow as much, the property market will slow down." Meanwhile, HSBC has pulled its mortgages for first-time buyers with small deposits because it could not cope with demand. It was the only big lender to offer 10% deposit mortgages throughout the COVID-19 pandemic.
CBI calls for infrastructure bank after Brexit
With the UK likely to lose access to the European Investment Bank as a consequence of Brexit, the CBI has urged the Government to set up an infrastructure bank to channel private sector cash into transport, broadband, housing and green energy projects.
Monzo limits fee-free cash withdrawals
Monzo has capped the amount of cash that customers can withdraw without incurring a fee at £250 amid concern over the digital bank’s financial health. Customers will be charged a 3% fee for withdrawals over this amount.
Tax hikes would damage City of London, warns private equity veteran
City veteran Jon Moulton has warned that tax rises proposed by the Treasury would only benefit rival financial centres such as New York or Singapore, as London-based entrepreneurs with in-demand skills would be lured abroad.
Private equity firms pay for staff COVID-19 tests and taxis
Blackstone and Advent International are both providing staff with coronavirus tests and asking employees not to use public transport as they prepare to return to their desks after months of remote working.
Flight watchers spark deal speculation
The boss of Toronto-based Brookfield Asset Management, Bruce Flatt, has reportedly flown into the UK, sparking speculation in the City that he is eyeing private equity deals for British companies.
Female-managed US funds outperform all-male rivals
Analysis by Goldman Sachs indicates that all-women and mixed-gender US fund teams outperformed all-male portfolio management teams so far this year.
Malaysia drops criminal charges against Goldman Sachs
Malaysia has dropped criminal charges against Goldman Sachs following a fraud involving 1MDB, the country’s sovereign wealth fund. Goldman Sachs agreed to pay $3.9bn to Malaysia to settle a probe into its alleged role in the scandal which saw Goldman Sachs units accused of misleading investors over $6.5bn in bond sales they helped organise. The US Department of Justice estimates that around $4.5bn was misappropriated from 1MDB between 2009 and 2014, including some of the funds that Goldman Sachs helped raise.
Banks work with fintechs to counter ‘deepfake’ fraud
HSBC’s US retail unit is the latest bank to partner with tech firm Mitek to combat fraud through deepfake videos that are used to impersonate clients.
New car sales fall in August
Society for Motor Manufacturers and Traders (SMMT) figures show new car sales fell 5.8% in August, with just over 87,000 models sold. This follows an 11% jump in July, the first full month of trading since dealerships reopened after the coronavirus lockdowns. Across 2020 so far, new registrations are down by 39.7%.
Johnson given a week to save aviation
The bosses of the UK’s 20 biggest airports have warned Boris Johnson that he risks “irreparable damage” to the economy unless he moves to replace quarantine with COVID-19 testing in the next week. In a letter to the Prime Minister and the Chancellor, the signatories give Mr Johnson seven days to make the change as part of a series of measures to prevent the loss of up to 110,000 aviation and allied industry jobs.
Ryanair poised for clash with investors over executive pay
ISS has recommended investors vote against Ryanair’s non-binding pay report, with the airline awarding CEO Michael O’Leary a €450,000 bonus despite furloughing staff and utilising the Covid Corporate Financing Facility.
Construction activity slows in August
The construction sector saw output slowdown in August. The IHS Markit/CIPS construction purchasing managers’ index (PMI) hit a reading of 54.6 last month, compared to 58.1 in July. Any reading above 50 represents an expansion in business activity. Large scale construction projects were halted as firms remain cautious in the current coronavirus climate. Construction companies noted economic uncertainty and a wait-and-see approach among clients had limited new work, while supply chain disruption continued to impact the industry.
Housebuilders accused of misleading buyers over leaseholds
The Competition and Markets Authority has accused four of the UK's biggest housebuilders of misleading leasehold buyers and of potential mis-selling in the housing market. The watchdog has written to Barratt Developments, Countryside Properties, Persimmon and Taylor Wimpey after finding "troubling evidence of potentially unfair terms". The CMA said it was “concerned that leasehold homeowners may have been unfairly treated and that buyers may have been misled by developers”, including by signing up to ground rents that doubled every 10 years. The CMA is also probing the potential use of unfair sales tactics, including unnecessarily short deadlines to complete purchases.
LCF directors sued over alleged fraud
Thirteen people are being sued in connection with an alleged fraud at London Capital & Finance, where its administrator claims almost 60% of investors’ cash was channelled to executives. The investment firm collapsed last year when the Financial Conduct Authority said it was misleadingly promoting high-risk bonds. The scandal is the subject of an investigation by the Serious Fraud Office, while a separate regulatory probe is looking at LCF's accounting firms.
Visa probed over competition complaints
The European Commission is investigating Visa over its rules on electronic money providers following allegations that the payments group has behaved in an anti-competitive way. Industry insiders also suggest regulators are concerned that fintechs are making it difficult for Visa to check for money laundering and fraud through their desire to offer ultra-speedy payments to customers.
Pensionbee “delighted” at growth
Fintech company Pensionbee has tripled its customer numbers to 100,000 and assets under administration to £1bn in the past 20 months with directors now hinting at a possible flotation or partial sale. Net operating losses before exceptional items increased from £3.41m last time to £6.86m in the year to December 2019 following a marketing push.
Investors act on tax shift fears
Harry Brennan in the Telegraph says wealthy individuals are selling off investment portfolios and second homes in fear of tax increases the Chancellor is said to be lining up for his autumn Budget, while others are pumping cash into pensions to take advantage of tax breaks and low rates before changes come into force.
Insurance customers unaware of payments to middlemen
The Sunday Times reports that millions of people are unknowingly paying commission for private medical cover and other insurance. Britain’s biggest insurers, such as Aviva and Legal & General, pay brokers, financial advisers and comparison websites out of the fees they receive from their customers. But the Sunday Times notes the payments are not routinely disclosed, and an insurer is not obliged to reveal them if a customer asks.
Bitcoin banking app set for £40m float
Bitcoin app Mode is expected to confirm plans for a £40m float next month with hopes of raising £7.5m. The company, which is backed by entrepreneur Jonathan Rowland, provides online payments services and lets users buy and sell Bitcoin.
Chancellor must act to avoid permanent loss of skills
Make UK has warned of the permanent loss of manufacturing skills if the furlough scheme is not extended for at-risk industrial sectors. The lobby group said that business had improved since the worst of the pandemic, but 61% of companies were still reporting a decrease in sales compared with last year and 50.7% a fall in orders. Almost 70% of respondents had at least one employee furloughed.
Government piecing together steel industry rescue
The UK Treasury has hired Credit Suisse to advise on talks with Tata Steel, which has been lobbying for millions in Government support. The consultancy McKinsey has also been brought in to draw up a blueprint for the wider steel industry.
Demand for high-end homes leaps in August
The number of £1m-plus homes sold subject to contract in August was more than double that of the same month last year, suggesting a strong post-lockdown recovery in higher-value housing.
BoE policymaker: Further QE may be needed to hit inflation target
Senior Bank of England (BoE) policymaker Michael Saunders has warned an economic recovery could stall, pushing the Bank to increase quantitative easing measures. Mr Saunders, who votes on interest rates as a member of the Bank's Monetary Policy Committee, voiced concern that the end of the furlough scheme will drive an increase in unemployment, while the initial boost from lockdown measures being eased could subside. While the economic rebound has recently exceeded BoE expectations, Mr Saunders said: “I would be cautious about extrapolating much from this apparent outperformance.” He also said he suspects that government support measures - such as the job retention scheme, tax payment deferrals, and mortgage holidays - “turned out to be more powerful than expected in supporting household incomes and spending.” Mr Saunders thinks it is “quite likely” that additional monetary easing will be required for inflation to see a “sustained return” to the 2% target.
Stress test reveals potential blow to borrowing cost
Stress tests by the Treasury show that if the interest rate were to increase from 0.2% to 1%, the Government's borrowing costs would be driven up by between £30bn and £40bn a year. The Telegraph says the analysis is likely to prompt calls for the Bank of England to continue with quantitative easing, which is currently only guaranteed until the end of the year.