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Daily News Roundup: Thursday, 14th October 2021

Posted: 14th October 2021

BANKING

Chancellor urged to scrap bank tax

TheCityUK has called on Chancellor Rishi Sunak to scrap the bank surcharge, saying doing so would reinforce the UK’s leading role as a global finance hub and make it more attractive amid competition from global rivals. The removal of the 8% levy on banks’ profits has been proposed as part of Britain’s post-Brexit overhaul of its financial services sector, with Mr Sunak earlier this year announcing a review of the surcharge to make sure that “rates of UK taxation are competitive with major competitors.” Miles Celic, chief executive at TheCityUK, said: “The future of the UK’s status as a world-leading international financial centre rests on a vision based on openness, competitiveness and connectivity.” The lobby group also called for an overhaul of the UK’s tax system to attract more businesses to Britain.

Bank of England ends closed-door policymaker briefings with banks

The Bank of England will no longer hold off-the-record briefings between policymakers and individual private sector firms, with Monetary Policy Committee (MPC) members banned from having private discussions with bankers. The move is designed to improve the transparency of the Bank's market intelligence gathering operations. The Bank will still hold regular off-record briefings with a group of economists from private finance firms following its quarterly Monetary Policy Report, with these meetings attended by individuals from a wide range of institutions rather than individual banks. A Bank of England spokesman has confirmed that the Bank will no longer be holding MPC roundtables.

PRIVATE EQUITY

Kravis, Roberts and private equity’s record

With Henry Kravis and George Roberts stepping down as co-heads of KKR, the FT looks at their legacy in a $4trn industry which it says they helped create.

INTERNATIONAL

JP Morgan boosts quarterly profits

JPMorgan has seen a 24% increase in net income to $11.69bn in the latest quarter, with revenue up 1% to $29.65bn. Revenue at the bank’s consumer and community division fell 3% to $12.52bn, while sales in its corporate and investment bank rose 7% to $12.4bn, with a 30% jump in banking revenue. The quarter saw JPMorgan release $2.1bn from reserves set aside last year for pandemic-related loan losses that did not materialise. CEO Jamie Dimon welcomed the results that came “despite the dampening effect of the Delta variant and supply chain disruptions”. He also said the recent launch of its Chase digital bank in Britain as evidence that JPMorgan is making investments “that will drive our firm’s future prospects and position it to grow and prosper for decades”.

Hotel group sues Deutsche Bank for €500m

Deutsche Bank faces a €500m lawsuit from Spanish hotel group Palladium over alleged mis-selling of financial products. The hotel group says bankers sold products knowing that the hotel executives "did not have any (or any significant) experience in dealing with complex financial derivative transactions". Deutsche said the claim is “without foundation”, adding that Palladium “is a sophisticated investor with extensive experience of using derivatives."

Standard Chartered to back Atome’s BNPL push

Standard Chartered is to provide $500m in financing to help Singapore-based fintech Atome expand its buy now, pay later services. The bank has also acquired a strategic stake in Atome, the consumer unit of Advance Intelligence Group.

CONSTRUCTION

Barratt builds not hit by supply chain issues

Barratt Developments, Britain’s biggest housebuilder, has seen forward sales for the past three months exceed pre-pandemic levels, having not experienced significant disruption amid supply chain and labour issues that have hit other parts of the economy. The firm said it was still on track to complete between 17,000 and 17,250 homes in the current financial year, which ends next June. The company's order book has expanded to £3.9bn from £3.6bn a year ago while the average house sale cost crept up to £344,300 from £331,400. The firm estimates that the cost of building will increase by between 4% and 5% during the current financial year.

FINANCIAL SERVICES

Cunliffe: Digital currencies could spark financial meltdown

Sir Jon Cunliffe, a deputy governor of the Bank of England, says cryptocurrencies need to be regulated as a “matter of urgency” due to the “plausible” risk of a collapse in the market. He warned: “As the financial crisis showed us, you don’t have to account for a large proportion of the financial sector to trigger financial stability problems”. He went on to suggests that a collapse is “certainly a plausible scenario”, pointing to “the lack of intrinsic value and consequent price volatility, the probability of contagion between cryptoassets, the cyber and operational vulnerabilities and, of course, the power of herd behaviour.” Charles Kerrigan, a fintech partner with the law firm CMS, said Sir Jon is “quite right that this is an urgent issue.” “The industry is not by and large against regulation. But this technological revolution won't wait for the regulators,” he warned.

Financial services in staff shortage warning

Over a fifth of financial services firms have warned that staff shortages are limiting investment in the sector, according to a report by the Confederation of British Industry. Almost three quarters of financial services companies are actively recruiting new staff to tackle the skills shortage gap, while 78% of firms say upskilling existing staff is a high priority for the sector. Claire Tunley, chief executive at the Financial Services Skills Commission, said: “As the adoption of technology and automation accelerates, firms will have to continue to grow and adapt the skills of their workforce to meet changing needs”. Reflecting on the report, Emma Reynolds, managing director of financial services industry body TheCityUK, said: “In such a competitive market, ensuring the UK’s process for attracting global talent is quick, efficient and workable is key – especially where there are domestic skills shortages.”

Howden snaps up Aston Lark

Employee-owned insurance broker Howden has agreed a deal with Goldman Sachs and Bowman to buy Aston Lark. The deal, thought to be worth more than £1bn, will give Howden access to Aston Lark's complex commercial and private client base.

LEISURE & HOSPITALITY

Marston's sales surpass pre-pandemic levels

Pub group Marston's has reported that final quarter sales surpassed pre-pandemic levels as customers took advantage of lockdown rules relaxing. Sales at the company grew by 2% in the three months to October 2, compared with 2019 levels, which was also partly attributed to temporary cuts in VAT. When taking into account the period between April 12 - when pubs in England reopened - and the end of the company's financial year, sales were at 94% of 2019 levels, with drink sales at 95% and food at 90%. Over the whole year, total sales reached £402m, which is 78% of the previous year's figure.

REAL ESTATE

House prices and rents set to rise, say surveyors

House prices and rents are on an upward trend amid a “striking” imbalance between demand and supply, according to the Royal Institution of Chartered Surveyors (Rics). Analysis shows that the number of newly agreed house sales fell for the third month in a row in September, with a net balance of 15% of property professionals reporting a decline rather than an increase in sales. The Rics poll saw 68% of surveyors report house prices rising rather than falling in September while a net balance of 35% reported a fall in properties coming to market. The survey saw 70% of surveyors voice a belief that prices will continue to grow over the next 12 months. In the lettings market, 62% reported an increase in the number of people looking for a rental property in September, with a balance of 21% seeing a decline in new landlord instructions. This imbalance is expected to drive rents higher.

RETAIL

UK food industry seeks greater scrutiny of private equity-owned supermarkets

Food industry leaders have called for stronger oversight of private equity-owned supermarket groups following the recent acquisitions of Morrisons and Asda. 

Halfords hires new finance boss

Jo Hartley has been hired as the new executive director and finance chief at bike retailer Halfords, where she will join from the role of chief financial officer of Virgin Active. She will replace Loraine Woodhouse in April 2022. 

ECONOMY

Economy expands in August

Figures from the Office for National Statistics (ONS) show that the economy grew by 0.4% in August, with the economy boosted as bars, restaurants and festivals benefited from the first full month without coronavirus restrictions in England. Activity in accommodation and food services rose by 10.3% in August, while the manufacturing sector expanded by 0.5%. The report also revealed that retail sales fell amid shortages of some products and with consumers switching more of their spending from goods to services. Output in the construction sector fell by 0.2% in August after a 1% drop in July. Overall, the economy remained 0.8% below its pre-pandemic level in August. The ONS also noted that economic growth fell by 0.1% in July compared with initial estimates of 0.1% growth. Claire Walker, co-executive director at the British Chambers of Commerce, said the ONS data “paints a picture of a slow-down in the UK's economic recovery after a very strong second quarter.” While the Bank of England has predicted that the UK economy will grow by 2.1% in the three months to September, Samuel Tombs, chief UK economist at Pantheon Macroeconomics, believes the Bank is likely to trim its forecast for the third quarter to 1.5%.

OTHER

Lockdown savings drained

Three quarters of UK adults are worried about rising living costs, with the sandwich generation of 45-64-year-olds the most anxious. Some 35% feel more anxious about the future compared with before the pandemic, rising to 42% among people aged 45-54. The data comes from Aviva, who said one in five people have spent extra savings made in lockdown. 

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