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Daily News Roundup: Thursday, 15th June 2023

Posted: 15th June 2023


Smaller firms struggling to raise finance

Equity finance provision for SMEs fell sharply in the second half of 2022, according to the British Business Bank (BBB). The BBB said 2022 was a tale of “two halves”, with a record level of investment in businesses in the first two quarters followed by a decline driven by concerns about potential overvaluations and a lack of sale opportunities, as well as rising interest rates and inflation. The analysis shows there was a 47% decline in investment in the second half of the year compared with the first. This has carried into 2023, with a 28% drop in investment in Q1 compared with Q4 2022. Overall, equity finance for UK SMEs in 2022 was down 11% compared with the previous year, hitting £16.7bn, while the number of deals declined by 7%. BBB chief executive Louis Taylor said: “As fund managers have reduced their activity to compensate for rapid capital deployment over the previous 18 months, there are signs that businesses are now finding it increasingly difficult to raise the finance they need to fund their growth.”

TSB urges Meta to address fraud risk

TSB has called on Meta to take greater measures to protect consumers from fraud. Industry analysis suggests that consumers could lose up to £250m from Meta platforms in 2023 unless the Facebook owner takes action. TSB analysis earlier this year showed that fraud instigated through content on Meta accounts for 80% of fraud cases within the bank’s three biggest fraud categories, while Lloyds found that two-thirds of all online shopping scams affecting UK consumers start on Meta-owned platforms, with someone falling victim to a scam every seven minutes. Paul Davis, director of fraud prevention at TSB, said: “Meta needs to face up to its responsibility: it has a duty of care to the millions of customers who use its platforms.” In a letter to Meta, TSB chief executive Robin Bulloch said the tech firm should introduce a secure payment mechanism and stop unregulated firms advertising on Facebook and Instagram.

No Britcoin without a Parliamentary vote

Lawmakers say a digital pound – the so-called Britcoin - should not be introduced without parliamentary scrutiny. Lord Forsyth told the House of Lords that the notion that the Treasury and the Bank of England could introduce a central bank digital currency (CBDC) “without having proper parliamentary scrutiny… is utterly ridiculous.” He added that it is “very important that we have parliamentary accountability.” The Bank has suggested that a CBDC is “likely to be needed in future” as digital payments become increasingly important in the economy. Chair of the economic affairs committee Lord Bridges said: “We cannot and we must not” leave the digital pound “to be passed by statutory instrument one wet Wednesday afternoon,” saying this would be "an absolute disaster.”

Borrowers at the end of 2-year fixes face £360 bill hike

More than 100,000 homeowners whose two-year fixed rate mortgages are ending this month face paying an average of around £360 a month more. Moneyfacts data shows that the average two-year fixed rate has more than doubled from 2.59% in June 2021 to 5.90% currently. Monthly repayments on an average house for a two-year rate taken out today would be £1,326, with this up £363 from £963 two years ago. Financial Conduct Authority figures show that 116,000 borrowers are due to come off fixed rate deals this month.


US holds interest rates steady

The Federal Reserve has announced it will hold interest rates steady, maintaining the target for its benchmark rate at 5%-5.25%. This marks the first time the US central bank has opted against a rise in more than a year, having increased rates ten times since March 2022. The Fed said it was holding rates steady so it can assess the impact of its previous hikes.

CoCos make a comeback

European banks have issued the first euro-denominated CoCo bonds since the collapse of Credit Suisse in March. BBVA and Bank of Cyprus this week issued around €1.2bn (£1bn) bonds between them. Contingent Convertibles are a bond which is converted into equity if a bank falls below a certain, pre-decided strength or capital limit.

Citigroup job cuts set to hit 5,000 in first half of 2023

Citigroup will have cut 5,000 jobs by the end of H1, with most of the job losses coming in investment banking and trading following a slump in dealmaking.

Reserve Bank to reimburse underpaid staff

Nearly 1,200 Reserve Bank of Australia staff have been underpaid over a seven-year period, with 1,173 current and former employees owed a combined A$1.15m. A review found that the central bank was incorrectly calculating annual leave, long service leave and rostered days payments for some employees.


Toyota investors reject climate challenge

Investors in Toyota have rejected a shareholder challenge on its climate policy, supporting the company's management.


Treasury Committee questions FCA supervision of Odey

The Treasury Select Committee has written to the Financial Conduct Authority (FCA) to question its supervision of Odey Asset Management (OAM) and its founder Crispin Odey. The letter, which was signed by committee chair Harriett Baldwin, follows allegations of sexual misconduct by Mr Odey. Ms Baldwin said: “Culture in financial services and the experiences of women in the industry are ongoing concerns of the Treasury Committee." She has asked the FCA to respond to a series of questions on the "nature and intensity" of its supervision and engagement with OAM over the last five years. The committee has also asked the City watchdog how many individuals it has investigated for sexual harassment across the industry since December 2019, when it became responsible for supervising the conduct of senior managers. A spokesman for the FCA said: “We understand the committee’s interest in this and we’ll of course reply shortly.” FCA executives are set to be quizzed over their role in investigating OAM when they face the committee in person next month. 


Second activist investor reveals stake in gambling group 888

HG Vora Capital Management, an activist investor with a history of pushing for change at gambling companies, has taken a 5.5% stake in 888, prompting predictions of a shake-up.


Experts fear small landlord exodus

Experts have warned that higher buy-to-let mortgage rates are likely to drive more and more smaller landlords out of the market. The average buy-to-let five-year fix is now hitting 6.09%, compared to 5.55% for residential borrowers. An average two-year fix for a BTL landlord sat at 3.59% a year ago, according to Moneyfacts, with the average rate now at 6.1%. Chris Norris, policy and campaigns director at the National Residential Landlord Association, said that while the organisation was not seeing an “exodus” from the private rented sector, it had seen a significant increase in the proportion of members saying they either have sold, or plan to sell, properties. In Q1, around 25% of landlords with three or fewer properties said they planned to sell at least one in the next 12 months.


Economy returns to growth

Office for National Statistics (ONS) data shows that the economy returned to growth in April, with a 0.2% increase. This marks an improvement on the 0.3% fall recorded in March. The ONS report also shows that the economy expanded by 0.1% in the three months to April. ONS director of economic statistics Darren Morgan said GDP “bounced back after a weak March.” Kitty Ussher, chief economist at the Institute of Directors, said April's GDP data “shows a recovery in consumer-facing services compared to March.” “This suggests that households responded to the improving weather in April by raising their levels of discretionary spending – even in the face of rising costs,” she added. With analysts suggesting that the Bank of England is likely to further hike interest rates, Chancellor Jeremy Hunt said: “High growth needs low inflation, so we must stick relentlessly to our plan to halve the rate this year to protect family budgets.” He added that the Bank has “no alternative” but to keep raising borrowing costs to curb price increases. Ruth Gregory, deputy chief economist at Capital Economics, said: “We think interest rates need to rise further to quash inflation, from 4.5% now to a peak of 5.25%.” 


Bank of England urged to investigate interest rate forecasts

MPs have called on the Bank of England to investigate the models it uses to forecast inflation. This comes with some critics arguing that the Bank underestimated the strength of price rises when setting interest rates. Harriett Baldwin, chairwoman of the Commons Treasury Committee, has written to David Roberts, chair of the Bank’s court, asking him to “consider commissioning the Bank’s independent evaluation office to undertake urgent work assessing the current effectiveness of the Bank’s forecasting platform.” She added: “The work should also look at the transparency of the forecasting process and whether external challenge is sufficiently enabled.”

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