Infrastructure bank to launch in spring
Rishi Sunak yesterday announced that a national infrastructure bank based in the north of England will be launched in the spring. The institution will replace some of the activities of the European Investment Bank (EIB) after Brexit. The new bank will back projects that support the country's 'levelling up' and net-zero targets, will "provide more targeted support for UK projects" than the EIB did. Rain Newton-Smith, the CBI's chief economist, said the bank "has the potential to crowd in private finance", which will be "crucial" to boosting the economy. But representatives of institutional investors urged the Chancellor to allow them to contribute to infrastructure investment too. Allen Twyning, head of debt origination at Pension Insurance Corporation (PIC), said: "Our expectation is that institutional investors like PIC will have tens of billions of pounds to invest in the UK’s infrastructure over the next 10 years. It is crucial therefore that any national infrastructure bank works alongside us and our peers. This was a major criticism that was levelled at the EIB, which effectively froze out institutional investors."
Taxpayer faces £40bn bill for emergency loans
The Office for Budget Responsibility (OBR) has warned that between £30bn and £40bn will be lost to soured coronavirus loans, an increase on earlier predictions. The figures come as banking industry chiefs warn that billions of pounds of Government money is being lost to fraudsters. Virgin Money chief executive David Duffy said yesterday that his bank had decided to only hand out Bounce Back loans to existing customers in order to reduce fraud. Meanwhile, the Government-backed British Business Bank (BBB) estimates that 5% to 20%of the large businesses who have borrowed under CLBILS could default on their debt. The BBB also expects 10% to 25% of smaller CBILS borrowers and 35% to 60% of Bounce Back borrowers will become unable to pay back their debt.
Virgin Money announces over £500m in toxic debt provision
Virgin Money has revealed that it has set aside £501m to cover toxic debt, with full-year profits falling 77% compared to the year earlier period to £124m. The lender noted that its second half had been affected by the "unprecedented deterioration in the economic environment," with the bank making a loss of £141m for the year on a statutory basis. Shares were down over 5% in morning trading to 138p on the news, valuing the firm at £2.1bn.
Indonesia woos US private equity for new sovereign wealth fund
Indonesia has approached US private equity firms including Blackstone and Carlyle to take part in a new sovereign wealth fund seeking to raise up to $15bn.
EU banks urged to set aside extra cash for loan losses
The European Central Bank has announced that lenders in the bloc are likely to have to set aside more cash to cover loan losses, with the organisation’s vice president Luis de Guindos commenting: “Bank profitability is expected to remain weak. Provisions have increased but look optimistic in some cases.” The ECB’s latest financial stability report cautioned that lenders faced a potential risk from the significant increase in company indebtedness.
Bill Browder threatens legal action over Swiss bank accounts linked to Magnitsky scandal
Bill Browder has threatened Credit Suisse and UBS with legal action for breaching US sanctions if they unfreeze accounts belonging to three Russian clients accused of committing fraud against his company.
Fraud investigation hits Lookers results
An investigation into car dealership Lookers which uncovered cash expenses fraud has led to a £25.5m hit to the chain. Lookers reported a £45.5m pre-tax loss in 2019, compared to a £41.9m profit in the year earlier period. Executive chairman Phil White remarked: "The last 12 months have been extremely challenging for Lookers with the ongoing impact of COVID-19 and the accounting issues. Significant restructuring activity has been necessary to ensure we lay the right foundations for the future.”
EU refuses to relax rules on swaps and derivatives trading
The European Securities and Markets Authority (ESMA) is refusing to relax rules on the trading of swaps and derivatives post-Brexit, meaning UK branches of European banks will have to comply with both British and European rules after the Brexit transition ends. Michael McKee, partner at City law firm DLA Piper, said: “ESMA’s guidance regarding the derivatives trading obligation will lead to market fragmentation with some business moving to centres within the EU although most business is still likely to be done in the UK.” ESMA noted that the European Commission had the power to grant equivalence in this area – a point echoed by the UK Financial Conduct Authority, which said on Wednesday that “we will also not be adjusting our approach at this time” and that “mutual equivalence would be the best way to avoid market disruption”.
Capital raising in UK at highest level in 10 years
Analysis by investment bank Goodbody has revealed that the coronavirus pandemic has seen UK firms raise the most money on public markets in 10 years, with listed companies raising over £26bn from the London Stock Exchange’s main and AIM markets this year. Piers Coombs, head of Goodbody in the UK, commented: “In recent years, a rise of passive funds and a trend towards de-equitisation has taken the focus away from the vital role active investors play in keeping equity capital markets healthy for listed companies. This year has firmly reversed that trend. And through institutional and retail investors giving their backing to companies at this difficult time, thousands of jobs have been protected and businesses can plan for the future.”
Blackrock climate contract criticised by EU ombudsman
The European Commission has been censured after EU ombudsman Emily O’Reilly urged it to consider strengthening its conflict of interest provisions. The ombudsman stated: “An application by a company to carry out a study meant to feed into policy that will regulate that company’s business interests should have resulted in significantly more critical scrutiny by the Commission,” following the hiring of asset management firm Blackrock by the Commission to produce a study on plans to improve the financial credentials of the financial sector. This decision had been criticised given Blackrock’s status as one of the world’s biggest investors in fossil fuels.
Brewin Dolphin reports profit rise
Brewin Dolphin has reported pre-tax profit for the year ending 30 September of £78.2m - up from £75m in 2019 - with the wealth manager’s total funds under management increasing to £47.6bn for the year, up from £45bn a year earlier.
LEISURE & HOSPITALITY
New Southampton cruise terminal to open next year
A fifth dedicated cruise terminal in Southampton is due to open early next June under a partnership between Associated British Ports (ABP), MSC Cruises and Norwegian Cruise Line Holdings (NCLH), in a development which is being seen as a vote of confidence in the sector.
Deliveroo appoints first board chair
Former Premier League acting chair Claudia Arney has been appointed as the first board chair at Deliveroo ahead of its going public in 2021, with Goldman Sachs and JP Morgan reportedly appointed to advise on the move.
Ennismore and Accor announce merger plans
London hotel chain Hoxton’s owner Ennismore has announced plans to merge with Ibis, Novotel and Mercure parent firm Accor.
De La Rue reportedly in talks over ‘health passport’
Clive Vacher, chief executive of passport maker De La Rue, has said the firm is working on plans to develop immunity certificates for travellers as the coronavirus pandemic continues. This comes as “substantial improvement” in the firm’s half-year results was reported, with operating profits of £15.3m, compared to £2.2m in the year-earlier period. Meanwhile net debt was down to £21.6m from £170.7m.
MEDIA & ENTERTAINMENT
Future offers nearly £600m for GoCompare
Publisher Future has made a £594m offer for price comparison website GoCompare, with shares in the company behind titles such as Marie Claire, Country Life and Classic Rock down 13% to around £17 on the news.
Netflix to increase UK production spending by half
The success of British-made shows including The Crown and Sex Education has spurred Netflix to hike production spending in the UK by 50% - from £500m to £750m.
Simon & Schuster acquisition close for Bertelsmann
Bertelsmann is reported to be close to acquiring US publisher Simon & Schuster, having tabled a bid of over $2bn (£1.5bn). A successful acquisition by Bertelsmann would lead to its control of 70% of the literary and general fiction publishing market in the US.
Sky and Entertainment One confirm agreement on film broadcasts
Sky and Entertainment One have announced a long-term deal covering nearly 200 movies from the latter firm’s library, which will become available to Sky Cinema customers at no extra cost.
GardaWorld bid ‘should be rejected’ – G4S
G4S has urged shareholders to reject the latest bid for the private security firm from Canadian rival GardaWorld, with G4S chairman John Connolly stating: "G4S has a bright future as an independent company with significant value upside for shareholders... we urge shareholders to take no action in relation to GardaWorld’s offer." This follows the firm’s rejection of a £3.3bn takeover bid from Allied Universal earlier this month.
Salesforce in talks to buy Slack in huge cloud software deal
Salesforce is in talks to buy the work messaging app Slack in a move the FT says would strengthen chief executive Marc Benioff’s hand in battle with Microsoft. Salesforce has been among the big winners of the coronavirus pandemic due to a surge in cloud software spending. Microsoft’s Teams was built as a rival to Slack which has failed to capitalise on the work from home culture which has sprung from the pandemic.
Kingfisher acquires France's NeedHelp
Kingfisher has acquired European home improvement service marketplace NeedHelp for about €10m in cash, boosting its digital capabilities and extending the range of services it can offer customers. "Along with developing NeedHelp's business in Europe with existing and new retail partners, Kingfisher also plans to roll out the platform in the UK and Poland," Kingfisher said.
Sunak warns of ‘economic emergency’ as borrowing hits record £394bn
The Chancellor yesterday warned that the economic emergency made manifest by the coronavirus pandemic has only just begun and that there will be lasting damage to growth and jobs. The Office for Budget Responsibility (OBR) predicts that GDP will plummet by 11.3% this year and not return to its pre-crisis size until the end of 2022. Unemployment will hit 7.5% by the middle of next year with 2.6m people out of work. The UK is expected to borrow £393.5bn this financial year to help pay for economic relief measures. Borrowing is also forecast to remain above £100bn-a-year - or 4% of the size of the UK economy - in five years’ time. The head of the OBR, Richard Hughes, warned that Rishi Sunak will need to find £20bn to £30bn in spending cuts or tax rises if he wants to balance revenues and day-to-day spending, and stop debt rising by the end of this parliament.
UK local councils banned from making risky property bets
The Treasury announced on Wednesday that local authorities would be banned from accessing the Public Works Loan Board as a source of cheap finance to fund risky property investments.