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Daily News Roundup: Thursday, 25th June 2020

Posted: 25th June 2020

BANKING

COVID debt defaults could trigger another financial crisis – Lord King

Mervyn King, a former governor of the Bank of England, has warned that a new financial crisis could be triggered by the weight of state and corporate debt. Lord King told the Telegraph's Planet Normal podcast: "I think the immediate concern facing us over the next few years is that the very high levels of debt we entered the COVID-19 crisis with are going to be exacerbated by even higher levels of debt. So I think we can expect to see many defaults over the next few years as businesses struggle and many governments in various parts of the world will also struggle to repay their debts. So defaults could be the trigger of another financial crisis down the road." He went on to say that banks in Europe and China were fragile: "I think banks are going to realise they will experience significant losses, not so much on the loans they've made since the COVID-19 crisis became evident, but on pre-existing loans that looked very safe when they were made, but now look a lot more dubious."

Samsung to launch digital payment card

Samsung has announced that its users will soon be able to link all their bank and loyalty cards to a single digital card on their phone. The Samsung Pay Card will allow users to control their money and view all their spending from a single place.

PRIVATE EQUITY

UK small business investment soars to £8.5bn

  1. British Business Bank's annual Small Business Equity Tracker report shows investment in UK tech businesses rose by 27% last year to hit £4bn – the highest level for eight years. The study found that 52% of deals took place outside of London, with the south west of England, Scotland and Northern Ireland showing a strong increase in 2019, rising by 34%, 26% and 24%, respectively. Meanwhile, equity investments into UK "growth stage" companies rose by 39% to £5.3bn. Keith Morgan, chief executive of the British Business Bank, said: "The UK's small business equity finance market saw a record year in 2019 with investment amounts soaring to £8.5bn. This was a clear sign of investor confidence in UK smaller businesses located across the country and their potential for growth as well as the strong fundamentals of the UK economy as a place to start and grow a business.” Matt Adey, director of economics at the British Business Bank told City AM that there had been “a fair bit of activity in April and there were still deals being done even in May,” despite the coronavirus lockdown.

INTERNATIONAL

EU delays reform to futures market by a year

The European Securities and Markets Authority has delayed the introduction of Mifid II rules just two weeks before they were due to come into force with the industry unable to meet the deadline.

Credit Suisse reviews funds that finance SoftBank technology bets

A review has been launched into a series of Credit Suisse funds that bet on the debt of struggling start-ups backed by Japanese technology conglomerate SoftBank.

AUTOMOTIVE

Ford to install private 5G network at UK battery workshop

Ford’s electric vehicle battery workshop in Dunton, Essex, will be the first automotive centre in the UK to be upgraded to a 5G network after the car giant signed a deal with Vodafone.

AVIATION

EasyJet launches £450m rights issue

Budget airline easyJet has launched a £450m rights issue, equivalent to 15% of its current share capital, to shore up its cash reserves. The company has already raised £1.7bn in additional funding during the coronavirus crisis and expects to have a cash balance of more than £3bn after the placing, which need shareholder approval. EasyJet reported a pre-tax loss of £353m, compared with £272m in the same period in 2018-19.

Billionaire backs Lufthansa bailout

Lufthansa’s largest shareholder, billionaire Heinz Hermann Thiele, has finally backed the German government’s bailout of the airline that will give the state a 20% stake following speculation he would seek to block the deal. Thiele had complained the rescue would give the government a steep discount on its shares.

Swissport jobs at risk

Swissport has revealed planned cost-cutting measures involving the loss of over 4,500 jobs in the UK. The airport ground handling company has begun a consultation process expected to lead to 4,556 staff members, representing over half of its 8,500-strong UK workforce, losing their jobs.

London City Airport Amsterdam route to reopen next month

KLM is to resume flights to and from London City Airport and Amsterdam on July 13, reopening the airport’s most popular route.

CONSTRUCTION

National Express boss appointed to head Persimmon

Dean Finch, chief executive of transport operator National Express, is to succeed David Jenkinson at the head of housebuilder Persimmon. Roger Devlin, the firm’s chairman, commented: “The board believes that Dean is a great fit for Persimmon and is well qualified to lead the business into the next phase.”

Crest Nicholson reports first-half loss of £51m

Crest Nicholson has reported a £51m loss in the first half of the year, with the housebuilder seeking to axe some 130 jobs in a bid to make cost savings. Operating profit was down 162.1% from a profit of £70.8m in 2019 to a loss of £44m.

FINANCIAL SERVICES

NN Group vows to improve returns after Elliott intervention

Dutch insurer NN Group has met some of the demands made by activist investor Elliott, pledging to invest in riskier assets and improve returns by buying back shares more regularly.

Former Wirecard boss released from custody as firm negotiates with lenders

Markus Braun, former boss of German payments firm Wirecard, has been released from custody after paying his bail of €5m. He was arrested yesterday on suspicion of falsifying the accounts at the firm, which is now holding emergency talks with lenders. Meanwhile, authorities in the Philippines are looking for former COO Jan Marsalek as part of a broader probe into the payments group.

LEISURE & HOSPITALITY

Diageo announces $100m fund for pubs and bars

Diageo has announced a $100m recovery fund intended to help pubs and bars to reopen after coronavirus lockdown restrictions are lifted. The “Raising the Bar” scheme is to focus on major hospitality centres such as London, Edinburgh, Dublin and Belfast. Diageo chief executive Ivan Menezes stated: “We are calling on governments around the world to provide long-term recovery packages to help the hospitality sector.”

Wetherspoons puts new pubs on hold

JD Wetherspoon has put all new pub projects on hold as it raised £141m from a share placing after securing a £48.3m loan through the state-backed coronavirus large business interruption scheme and approved by its existing lending banks.

MANUFACTURING

Tata Steel could secure rescue package under ‘Project Birch’

Tata Steel could secure a £500m state bailout which would safeguard the firm’s 8,000 staff in the UK, as part of “Project Birch”, the government’s rescue scheme for businesses seen as critical to the economy.

RETAIL

Naked profit from online wine boom

Online wine retailer Naked Wines saw an 81% increase in sales in April and May as Britons and Americans stocked up on alcohol during the lockdown. In the US, online sales now account for more than 20% of the total market compared with 5% before the pandemic. Orders from new customers in the UK were stopped last month following a surge in stockpiling.

ECONOMY

IMF warns of $12trn hit from coronavirus

The International Monetary Fund has said the global economy will suffer from a $12trn slump as a result of the lockdowns put in place to stem the spread of the coronavirus. The IMF said it would take two years for world output to return to pre-2019 levels. In the meantime, we can expect the global economy to contract by 4.9% this year, worse that the 3% fall forecast in the Spring. The UK economy was on course to shrink by 10.2% in 2020, the fund said. The United States is expected to contract by 8% this year. The IMF had estimated a contraction of 5.9% in April. Similarly, the fund also downgraded its forecasts for the euro zone, with the economy now seen shrinking by 10.2% in 2020.

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