Experts warn over branch closures
Experts have voiced concern over an impending wave of bank branch closures, with cash machine network Link revealing that 90 branches will close between now and August 31. David Beard, founder and CEO of comparison site Lendingexpert, has warned banks and building societies that it is crucial they continue to provide good customer service despite the closures. He said: “I hope they'll plough the money saved into better online and telephone banking experiences for their customers.” Consumer expert Martyn James has warned that the closure of bank branches “really does have an impact on everyone from smaller businesses to older or more vulnerable people,” adding: “Bank branches matter because they contain staff with links to the community who have wide ranging knowledge about a range of financial matters.” Overall, more than 300 branches will shut down this year, analysis shows, with Lloyds, HSBC, Barclays and NatWest among those closing sites.
SRB targets 'too-big-to-fail' banks
The EU’s Single Resolution Board (SRB) – its body for dismantling failed banks – plans to increase pressure on lenders to bolster their defences over the coming months so that none remain "too big to fail" by January 2024. The SRB said that the shortfall in special debt issuance by banks to replenish burnt-out capital is down to €32.6bn - 0.45% of the total risk exposure. SRB chair Elke Koenig said: “We have seen good progress by all banks, spearheaded by the largest banks. At the same time, we also see clearly the areas that require further attention in 2022 and 2023.” Last month, the Bank of England said it was satisfied that major lenders in Britain had taken steps to ensure they were no longer too big to fail in any future crisis. Governor Andrew Bailey this week said: “We do not believe that the failure of these institutions would now onwards require public money, and that, to me, is the critical plank of the too-big-to-fail policy.”
US inflation surges
US inflation climbed to 9.1% last month, according to data published by the US Bureau of Labor Statistics. This represents the fastest increase since November 1981 and an increase on the 8.6% consumer price growth recorded in May. Grocery prices were up 12.2% compared with a year ago, with this marking the steepest climb since 1979, while rents rose 5.8%, new car prices were up 11.4%, and air fares increased by 34%. Michael Pearce, senior US economist at Capital Economics, said the US Federal Reserve is likely to increase rates at its next meeting, saying the spike in inflation “nails on another 75 basis hike at the July meeting.”
Credit Suisse delays real estate fund float
Credit Suisse has postponed the initial public offering of its 1a Immo PK real estate fund, citing current market turbulence. The bank said “the market for real estate funds is currently going through a phase of high volatility and strongly fluctuating trading volumes, so that a successful IPO in the fourth quarter of 2022 cannot be guaranteed.”
New Zealand benchmark rate hits 2.5%
New Zealand's central bank has lifted its benchmark interest rate by half a percentage point to 2.5% as it attempts to curb inflation. This is the third time this year that the Central Bank of New Zealand has lifted the cash rate by 50 basis points, following hikes in April and May, while there was a quarter percentage point rise in February. The bank has forecast that the rate will peak at 4% late next year.
Bank of Canada confirms 100bp rate hike
The Bank of Canada has announced a full-percentage-point increase to its policy rate, citing "higher and more persistent" inflation and the increased risk of price gains becoming entrenched. This was steeper than the 75-basis point increase economists and money markets had forecast.
Countryside chairman quits
The chairman of Countryside Partnerships has left the housebuilder abruptly. John Martin, who has been leading the business since chief executive Iain McPherson agreed to step aside in January after a poor trading update, has resigned “with immediate effect.” The firm is trying to find a permanent chief executive as well as a buyer for the business. Sam Cullen, a real estate analyst at broker Peel Hunt, said Mr Martin’s sudden exit “clearly points to a material disagreement on strategy/price” between him and the rest of the board.
MPs ask for feedback on cryptoassets and regulation
The Treasury Committee has launched an inquiry into cryptoassets, with MPs asking for industry views on the role of the products in the UK. The committee has asked whether cryptocurrencies are likely to replace traditional currencies and what opportunities and risks the use of cryptoassets pose for the economy. It will also look at regulation of cryptoassets, asking whether the Government and regulators are suitably well-equipped. The committee is considering whether regulation could benefit crypto asset start-ups by improving trust in the assets, and how distributed ledger technology could impact financial institutions. Treasury Committee chair Mel Stride said: “Cryptoassets have the potential to bring new and innovative changes to the UK financial system, the economy and broader society,” adding: “However, there are also significant concerns around their use to launder funds, purchase illegal products, and evade international sanctions.”
UK venture funding falls in Q2
UK venture capital funding slumped in the second quarter, with investments falling amid rising interest rates and the prospect of a recession. Analysis by CB Insights shows total cash injected by venture firms in the UK fell to $7.1bn across 478 deals between April and June, down from a record high of $9bn in Q1. Analysts at CB Insights said: “As investors scaled back, funding shrank across all major regions in Q2, including the US and Asia with a 25% quarter-on-quarter drop each.” They added: “While the US drove almost half of all funding ($52.9bn), Q2 marked its lowest funding amount since 2020. In contrast, Europe-based start-ups only saw a 13% dip in total funding quarter-on-quarter.” The report shows early stage start-up funding stayed comparatively buoyant in Q2, making up 64% of deals globally and 67% in the UK.
Demand for alternative assets set to rise
Demand for alternative assets is set to soar by 46% over the next 12 months, with rising inflation expected to drive up investor interest. A survey of 580 investors across the UK and Europe by alternative investment platform AssetTribe saw 53% say their appetite for alternative investments would grow over the next year. Some 62% of investors flagged the high rate of inflation as the leading reason for their interest in alternative assets, with the same proportion pointing to an increasing need to diversify existing portfolios and 53% citing higher possible returns. Real estate was cited as the most popular alternative asset, at 75%.
FCA: Only 16% of advisers are women
Financial Conduct Authority (FCA) records show that just 16% of regulated financial advisers in the UK are women. In response to a Freedom of Information request, the regulator revealed the number of advisers on its books by title as it does not record the gender of individuals. The data shows that 35,066 are listed under ‘Mr’, while 6,936 were listed under ‘Mrs’, ‘Miss’ and ‘Ms’. There were also 147 advisers with other, non-gender specific titles, such as ‘Director’, ‘Doctor’ and ‘Principal’, and 272 titles which were left blank. These were omitted from the percentage calculations and represent less than 1% of all advisers registered with the City watchdog. The data covers both those certified by authorised firms and those working as appointed representatives.
LEISURE & HOSPITALITY
JD Wetherspoon expected to report £30m losses
JD Wetherspoon has reported that like-for-like sales fell by 0.4% in the fourth quarter of the year, compared with 2019 levels, helped by an 8% drop in sales of draught ales, lagers and ciders, which the company said was due to customers having less to spend on drink because of inflation. The group said it is now expecting losses of around £30m for the year to the end of July after investing to attract and retain workers.
Costa Coffee CEO to step down
Jill McDonald is to step down from her position as Costa Coffee CEO to take up the role at McDonald’s international operated markets team. She will depart the coffee business at the end of this month and take up her new role on September 5.
MEDIA & ENTERTAINMENT
CMA probes sport broadcasters
The Competition and Markets Authority (CMA) has launched an investigation into potential cartel-like behaviour by sports broadcasters, saying it has “reasonable grounds” to suspect that BT, ITV, Sky and IMG Media might have broken competition rules. The CMA said the probe “relates to the purchase by such companies of freelance services which support the production and broadcasting of sports content in the UK.” It is investigating the broadcasters under Section 25 of the Competition Act but has not yet decided if there is enough evidence to take further action.
Demand cools but house prices climb
Property professionals saw fewer new inquiries from house hunters in June, but house prices continued to increase, according to the Royal Institution of Chartered Surveyors (RICS). More than a quarter (27%) of professionals reported a fall in interest from potential buyers, with this marking the third month in a row that interest from new buyers slipped. Despite the decline in demand, 65% of professionals saw an increase in prices, with this driven by a lack of available properties for buyers. The RICS poll saw 37% of respondents say they foresee prices continuing to climb over the next 12 months. RICS chief economist Simon Rubinsohn said: “Although buyer inquiries have predictably slipped a little of late, this needs to be placed in the context of the healthy level of demand in previous months.”
CMA launches investigation into Morrisons takeover of McColl’s
The Competition and Markets Authority has confirmed it will launch a formal phase one investigation into Morrisons’ takeover of McColl’s. It said the probe will consider “whether the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.” Morrisons acquired McColl’s in a £190m rescue deal in May after the convenience chain collapsed into administration.
UK economy returns to growth
The UK economy unexpectedly returned to growth in May, with Office for National Statistics (ONS) data showing GDP rose by 0.5% following a revised 0.2% decline in April. Economists had expected zero growth amid concern over the impact from the cost of living crisis. The ONS figures show industrial output rose 0.9% month-on-month, with this driven by strength in the manufacturing sector, while the construction industry grew by 1.5%. Consumer-facing services fell by 0.1%, with this an improvement on the 0.8% decline recorded in April. Darren Morgan, director for economic statistics at the ONS, said the economy “rebounded” in May, noting that that there was “growth across all main sectors.” Institute of Directors chief economist Kitty Ussher said the figures were reassuring for business leaders while David Bharier, head of research at the British Chambers of Commerce, said May's growth was "welcome news", but "masks serious underlying issues of growing imbalances within the economy." Paul Dales, chief UK economist at Capital Economics, warned: “With real household disposable incomes set to fall further in the third quarter, a recession is still a real risk.”
Brits £9k worse off than those in comparable countries
A report by the Resolution Foundation think-tank and the London School of Economics suggests British families are almost £9,000 worse off than those in comparable countries. Researchers say a "toxic combination" of low growth, low productivity and inequality mean the average UK household is £8,800 worse off compared to families in countries including France, Germany and Australia. The poorest households are at an even greater disadvantage, with their incomes 40% behind such nations, the study found. The report, Stagnation nation: Navigating a route to a fairer and more prosperous Britain, says: “While the top 10% of households in Britain are richer than those in many other European countries, middle-income British households are not.”