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Daily News Roundup: Monday, 9th October 2023

Posted: 9th October 2023

BANKING

Metro Bank agrees capital raise and debt refinancing

Metro Bank has announced a £325m capital raise and £600m debt refinancing. The equity raise was led by Metro's largest shareholder, Spaldy Investments – which is owned by Colombian billionaire Jaime Gilinski. This follows reports that the Bank of England had approached a number of banks to gauge their interest in purchasing Metro Bank. The Bank’s Prudential Regulation Authority (PRA) reportedly approached NatWest, Lloyds and Santander. JPMorgan Chase and HSBC were also contacted, while specialist business lender Shawbrook was said to be considering a bid, having made several failed approaches earlier in the year. It is reported that the PRA was seeking bids for the whole bank rather than part of the business. Metro Bank, which last week confirmed that it was seeking to bolster its capital position, had been offered £600m capital injection from bondholders and was also considering selling off up to 40% of its mortgage book in order to shore up its balance sheet. Following news of the financing package, the PRA said it “welcomes the steps taken by Metro Bank to strengthen its capital position."

Nationwide launches first rebrand since 1980s

Nationwide Building Society has launched a branding overhaul, changing its traditional logo to a more abstract design and airing adverts with TV star Dominic West promoting its policy of keeping branches open. CEO Debbie Crosbie said the refresh was an important moment. “'It is about saying we are not owned by shareholders, we are owned by members and we are committed to our branches. We know people value face-to-face contact with their bank. We value local communities. It is important to customers to know we are there.” The mutual said it now boasts the largest network of any High Street lender with 605 branches, having overtaken Lloyds with 598. 

AUTOMOTIVE

EU to loosen new rules on EV sales

The European Union is considering plans for a three-year delay to the introduction of post-Brexit tariffs on electric vehicles shipped between the UK and the EU. EVs traded between the UK and the EU will attract a 10% tariff from next year if less than 45% of their value comes from the region. Industry leaders on both sides of the channel have warned the tariffs were likely to cost them billions and stifle electric vehicle demand. Maroš Šefčovič, European Commission vice-president, said he’s looking to solve the issue urgently and suggested Brussels would interpret “made in Europe” rules very loosely in 2024, giving carmakers more time to switch battery sourcing from Asia to Europe.

CONSTRUCTION

Leading construction companies urge PM to reinstate net zero measures

More than 100 leading construction companies, property developers, and estate agencies have written to UK Prime Minister Rishi Sunak, urging him to reinstate net zero policies or find alternatives ways of making Britain's homes affordable. The companies warn that the weakening and postponement of green policies will harm investment in housing and cause hardship for many people. The letter, signed by 114 companies including Arup, Laing O'Rourke Construction, and BNP Paribas Real Estate, highlights the need for long-term active policy support from the Government to bring forward big financial investments and recruit and train hundreds of thousands of people. The signatories also call for a comprehensive national strategy to retrofit homes and buildings and a new future homes and building standard.

FINANCIAL SERVICES

Crypto firms have three months to fall in line with new marketing rules

While the Financial Conduct Authority (FCA) has introduced tough new rules around the marketing of digital assets, registered crypto firms could be given until January 8 to introduce features which may require further technical development. The FCA says crypto asset firms’ marketing must be “clear, fair and not misleading,” labelled with prominent risk warnings and must not inappropriately incentivise people to invest. However, firms that need time to make the required back-office changes can request flexibility from the watchdog. Lucy Castledine, director of consumer investments at the FCA, said: “As a proportionate regulator, we’re giving firms that apply a little more time to get the other reforms requiring technology and business change right. We’ll maintain our close eye on firms during this extended implementation period.”

Young people turn to social media for financial advice

A new poll has found that young people are increasingly turning to social media sites rather than banks and other regulated sources for financial advice. The survey found that 25% of 18 to 24-year-olds now turn to platforms such as Instagram and TikTok for guidance and advice on financial matters, while 20% invest money based on online recommendations. Earlier this year the Financial Conduct Authority announced plans to roll out new guidance to modernise regulations surrounding the promotion of financial products online. This comes with the City watchdog looking to crack down on ‘finfluencers’ and misleading information on financial products on social media.

Takeover speculation sends Aviva share up almost 10%

Shares in Aviva, the UK's biggest insurer, rose nearly 10% after reports of potential takeover interest from international rivals. Aviva's shares jumped to 425.12p, valuing the company at £11.6bn. The insurer has attracted interest from Germany's Allianz, Canada's Intact Financial Corporation, Denmark's Tryg, and an American insurer. Aviva's CEO, Amanda Blanc, has focused on the UK, Ireland, and Canada, selling off most overseas businesses. The company posted an 8% rise in operating profit for H1 2021 and recently acquired AIG's UK protection business. The activist investor Cevian Capital sold its stake in Aviva in May, removing an obstacle to a potential takeover. Aviva's shares have risen about 20% since Blanc became CEO.

LEISURE & HOSPITALITY

JD Wetherspoon reports first full year profit since pandemic

JD Wetherspoon has reported its first full year profit since the pandemic, with profits reaching £42.6m in the 12 months to the end of July. Sales rose 10.6% to a record £1.9bn. Chairman Tim Martin warned of the threat of further lockdowns and restrictions to the hospitality industry. The company had previously experienced three consecutive annual losses, totaling £230m. Analysts believe that Wetherspoon's low prices will continue to appeal to consumers who are tightening their belts. However, despite the positive update, the pressure on profits remains evident due to inflationary costs. Wetherspoon's shares have jumped nearly 50% this year but are still below pre-pandemic levels.

MANUFACTURING

Manufacturers call for overhaul of business tax and regulation

Manufacturers are urging the Chancellor to reform the UK's "uncompetitive" business tax and regulatory system in his Autumn Statement. Business group Make UK said many aspects of the system are "not fit for purpose" and has called for an overhaul as part of an industrial strategy. A survey by Make UK found that 44% of UK firms believe the tax and regulation system is unfavourable, with more than 25% saying it is worse than that of the country's main competitors. Manufacturers said frequent changes to business incentives and research and development credits in recent years had hampered businesses' investment plans. Make UK is urging Jeremy Hunt to limit himself to a single annual fiscal statement from now on. Fhaheen Khan, senior economist at Make UK, said: "Manufacturers are clear that many aspects of the current tax and regulatory system are not fit for purpose and are failing to promote vital investment in skills, capital and green growth." 

MEDIA & ENTERTAINMENT

Snapchat faces potential shutdown of AI chatbot in UK

The UK's information watchdog has issued a preliminary enforcement notice against Snapchat, suggesting a "worrying failure" by the company over potential privacy risks, particularly to children. The notice may require Snapchat to stop processing data related to its AI chatbot, My AI. The Information Commissioner's Office (ICO) highlighted the need for an adequate risk assessment before launching AI products. If a final enforcement notice is adopted, Snapchat may not be able to offer the My AI function to UK users until the risk assessment is carried out. The ICO's provisional findings indicate a failure by Snapchat to identify and assess privacy risks to children and other users.

REAL ESTATE

UK house prices more resilient than expected

Falls in house prices will continue into next year, according to Halifax, although the rate of reduction has slowed. The mortgage lender said that property prices were 4.7% lower in September than a year earlier. Prices were down 0.4% on the previous month, but that was a much shallower drop than previously. “Borrowing costs are the primary factor, given the impact of higher interest rates on mortgage affordability,” said Kim Kinnaird, director, Halifax Mortgages. “Against this backdrop, homeowners inevitably become more realistic about their target selling price, reflecting what has increasingly become a buyer’s market.”

RETAIL

Retailers struggle as sales growth stagnates

September proved to be another tricky month for retailers, with growth up just 0.2% on last year. Clothing retailers saw sales fall 3.4% during the month, hit by hot weather and the cost of living crunch. In-store sales declined by 5%, marking the 14th consecutive month of lower sales growth than inflation. Helen Dickinson, chief executive of the British Retail Consortium, called for a freeze to business rates to support retailers in the run-up to Christmas.

ECONOMY

UK businesses hesitant to invest due to EU trade barriers and high rates

UK businesses are holding back on making large investments in machinery and new technology due to trade barriers with the EU and high interest rates, according to a survey by the British Chambers of Commerce. The survey found that the majority of respondents had frozen or reduced their investment plans, with only 23% considering new injections of cash. The survey also revealed that investment in UK businesses has remained stagnant for the past six years, with the number of firms increasing investment never exceeding 28%. The survey highlights the tough trading conditions faced by businesses, including inflation, labour shortages, global trade barriers, and interest rate rises. Uncertainty surrounding government infrastructure plans and the threat of further customs checks at the EU border are also impacting investment.

Lagarde confident over 2% inflation target

European Central Bank (ECB) president Christine Lagarde says she is confident that the ECB will meet its target of getting inflation back down to 2%. In an interview published in French paper La Tribune Dimanche, she said: “The key ECB interest rates have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to the target.” Ms Lagarde added that the fact that inflation was "currently falling significantly" was among reasons she is not pessimistic regarding the short-term economic outlook. The ECB last month raised its key interest rate to a record high of 4%.

OTHER

Labour plans to recover Covid fraud cash

If elected, Labour plans to appoint an anti-corruption commissioner to recoup billions of pounds lost to fraud and waste during the pandemic. Shadow Chancellor Rachel Reeves will today set out the plan in her speech to Labour's conference. She will say that just 2% of fraudulent Covid grants have been recouped, with the party expected to put the cost of pandemic-related fraud to the taxpayer at £7.2bn. Ms Reeves will promise to appoint a commissioner with the “mandate to do what it takes to chase those who have ripped off the taxpayer.” The commissioner will be granted the power to take cases to court and "claw back every penny of taxpayers money that they can." They will, Ms Reeves will announce, examine contracts line by line and would have to update parliament on their progress in clawing back money. Labour's proposal would bring together HMRC, the Serious Fraud Office and the National Crime Agency. Labour would review sentencing on fraud and corruption conducted against UK public services, as well as reform public procurement rules to include a strong “debarment and exclusion” regime for those complicit in fraud against the state. Jolyon Maugham, the founder of the Good Law Project campaign group, said: “If you’re serious about looking after public money … you want those billions back. Recovering them starts with political will. Until now that has been sorely lacking – so this is a very positive development.”

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