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Daily News Roundup: Thursday, 16th July 2020

Posted: 16th July 2020

BANKING

Credit card spending falls

Figures from UK Finance show a total of £8.7bn was spent on credit cards in the first full month of lockdown in April, half the level of April last year. This was the lowest level of spending seen since the last economic downturn, according to the trade body. As a result, outstanding balances on credit cards fell by almost £4.7bn in April 2020, the largest monthly fall in over a decade, as many people opted to make repayments rather than spend on their credit cards, UK Finance said. Separate data from the Bank of England has also shown this repayment trend. A third of credit and debit card spending was made over the internet, according to the UK Finance figures. The picture for debit cards is more complex. With shops closed, the use of these cards was down 5.1% in April compared with the same month a year ago.

Government close to creating new green investment bank

Energy minister Kwasi Kwarteng has revealed that the Government is close to creating a new state-backed green investment bank to drive the development of low carbon infrastructure. Mr Kwarteng said there had been “broad discussion within Government about how we can in effect create the Green Investment Bank 2.0”. The first green investment bank was sold to Australian investment bank Macquarie Group in 2017 for £2.3bn.

NatWest names new commercial banking COO

NatWest has announced the appointment of Solange Chamberlain as chief operating officer for its commercial banking arm. She joined the bank from Lloyds Banking Group in December 2019.

HSBC Zooms in on tech

HSBC is allowing customers to get mortgages from home via video conference calls. With access to branches restricted due to measures designed to tackle COVID-19, the bank is letting clients arrange meetings via Zoom.

PRIVATE EQUITY

Advent to buy ForeScout

Advent International has agreed to acquire ForeScout Technologies in a revised deal worth around $1.43bn, settling a legal battle after it pulled its previous bid. The cybersecurity firm had sued Advent in May for pulling out of a deal to buy the company for $1.9bn. Advent has offered $29 per ForeScout share, with ForeScout’s board unanimously recommending shareholders tender their shares in support of the deal. Advent partnered with Crosspoint Capital Partners as an adviser on the deal, which is expected to close in Q3.

INTERNATIONAL

Goldman Sachs’ trading revenues jump

Goldman Sachs saw revenues from trading jump 93% in Q2, while overall revenues hit $13.3bn in the three months to June, marking a 41% jump on Q2 2019. While the period saw a lack of merger and takeover deals amid the coronavirus crisis, trading desks helped Goldman post profit of $2.4bn. Goldman generated record quarterly investment banking revenues of $2.66bn, which included record quarterly revenues in both equity and debt underwriting, while fixed income, currency and commodities trading revenues hit $4.24bn. Goldman is planning to hand its 39,100 employees a typical pay package of £156,293 over H1, a 24% increase on the previous average.

Bank to launch digital currency

The Asia Times Mitsubishi UFJ Financial Group is planning to issue its own digital currency in H2. Initiated in 2015, the digital currency project was originally designed to run on a blockchain network and facilitate instant peer-to-peer transactions.

EU watchdog to probe German regulators after Wirecard collapse

The European Securities and Markets Authority, the EU’s financial watchdog, is to probe Germany’s supervision of Wirecard, looking at financial regulator BaFin and FREP, the body that monitors German companies’ accounts.

AUTOMOTIVE

Fiat and Peugeot rebrand merged company

Car manufacturers Fiat Chrysler and Peugeot-owner PSA Group have announced that their £50bn merger will see a new combined brand named Stellantis. The new entity’s name will not be carried on vehicles, however, with brands such as Alfa Romeo, Citroen, Dodge, Opel, Jeep, Peugeot, Maserati, Ram and Vauxhall to remain while Stellantis will be used at a corporate level.

CONSTRUCTION

McCarthy & Stone posts £25m loss

Retirement home builder McCarthy & Stone has posted a £25m loss for the first half of 2020, saying the pandemic had hit the completion of housing transactions in the six months to the end of April. The number of completed projects fell by 44% in the first half compared to the same period a year ago. Revenue was down 64% to £101m, and an underlying operating loss of £24.8m compared with a profit of £21.3m a year earlier. The firm warned of further difficulties as the pandemic continues, and added that chief operating officer for build Nigel Turner would be let go as a cost-cutting measure.

FINANCIAL SERVICES

FCA extends payment holidays on high-cost credit

The Financial Conduct Authority (FCA) has told firms to extend payment freezes due to end this month until October 31, meaning customers unable to keep up with high-cost credit payments amid the coronavirus crisis do not have to pay anything until November. Firms must offer payment deferrals or reduce payments, with people yet to request a payment holiday able to do so until October 31. The FCA said that taking up the option of payment freezes or partial payment freezes should not affect credit ratings. The extension covers all aspects of high-cost credit including motor finance and rent-to own, buy-now pay-later schemes and pawnbrokers. The City watchdog’s Christopher Woolard said the measures “ensure that people who are still facing temporary payment difficulties because of this pandemic continue to have access to the help they need."

LEISURE AND HOSPITALITY

Don’t let Amazon invest in Deliveroo, rivals urge

Rival food takeaway groups have claimed that the Competition and Markets Authority’s decision to give a green light to Amazon’s investment in Deliveroo is “incomplete and unsafe” and that it paves the way for the American ecommerce powerhouse to include the service in its Prime membership scheme. Domino’s Pizza said that the Competition and Markets Authority had misapplied the key test of whether Amazon’s purchase of a 16% stake would create a substantial lessening of competition, while Just Eat raised concerns that Deliveroo could be included in the online giant’s £7.99-a-month Prime service, to the detriment of competitors.

A quarter dine out since lockdown ends

A poll by Lloyds Bank suggests that almost one in four people in England have dined out since the lockdown eased on July 4. This jumps to a third for people in London.

MANUFACTURING

Brexit warning from manufacturers

Manufacturing lobby group Make UK has warned that industrial areas in the north of England, the Midlands and Wales could be at most risk of severe economic damage if no Brexit deal is agreed, pointing to a “triple whammy” for firms dependent on Europe and manufacturing, with COVID-19 also hitting the regions.

MEDIA AND ENTERTAINMENT

Guardian to cut jobs

Guardian Media Group is to cut 180 jobs in both its editorial and commercial departments, after revenue plummeted more than £25m during the COVID-19 pandemic. The job cuts will reduce the Guardian’s overall workforce by 12%. Group revenue remained mostly flat before the pandemic dipping slightly from £224.5m last year to £223.5m in 2020. Group EBITDA slumped from a £3.7m loss last year to losses of £9.3m in the 12 months to March. GMG reported an overall loss of £36.8m for the year.

REAL ESTATE

Property prices could slip 2.4%

A forecast from the Office for Budget Responsibility suggests that the fallout from the coronavirus crisis could see property prices fall 2.4% this year and a further 11.7% in 2021. This would see the value of the average British home, which currently stands at £230,000, fall to £200,000. Russell Galley of Halifax commented: “Average house prices fell by 0.1% in June as the UK property market continued to emerge from lockdown.” He added that while this marks a small decrease, it is “notable as the first time since 2010 … that prices have fallen for four months in a row.”

Revenue is up at Big Yellow

Revenues increased 2.3% to £31.8m in the three months ending in June at self-storage firm Big Yellow despite a fall in demand due to the pandemic. The company said it had seen a rise in demand from both businesses and individual customers as lockdown restrictions were eased from mid-May. Total activity in June was down 15% year-on-year, but business client activity grew 28% on the year before.

RETAIL

Next’s secret success

Next has won the race to take over Victoria's Secret in Britain after its UK arm went bust, beating 30 bidders to be chosen as the preferred franchise partner. Victoria's Secret's UK arm was going through a 'light touch' administration process, allowing it to keep trading while putting off its debts.

ECONOMY

Inflation up 0.6% in June

Data from the Office for National Statistics (ONS) shows that the inflation rate rose to 0.6% in June, with the Consumer Prices Index rising from May's four-year low of 0.5% as lockdown measures began to ease. Despite the increase recorded last month, inflation remains below the Bank of England's 2% target. The ONS said it is possible that prices have been influenced by the coronavirus lockdown “changing the timing of demand and the availability of some items”. Jeremy Thomson-Cook, chief economist at Equals, said the increase in the rate was "a positive sign", but

BoE policymaker: ‘Incomplete’ V-shaped recovery likely

Bank of England rate-setter Silvana Tenreyro believes the UK economy is likely to go through an “interrupted or incomplete” V-shaped recovery. Ms Tenreyro, a member of the Bank’s monetary policy committee, told a London School of Economics webinar that the economic recovery will depend on coronavirus cases being brought under control, both nationally and globally, adding that if case numbers fall, her “central forecast is for GDP to follow an interrupted or incomplete V-shaped trajectory, with the first quarterly step-up in the third quarter”. Ms Tenreyro highlighted two factors likely to slow the recovery, saying higher unemployment could hit consumer demand, while “voluntary or mandated social distancing” would hit both supply and demand if it continued for a prolonged period.

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