Tax surcharge on UK bank profits cut to 3% in Budget
Rishi Sunak confirmed during his Budget speech yesterday that the “bank surcharge” on profits would be slashed from 8% to 3% in 2023 - the same year that corporation tax rates for all businesses rise from 19% to 25%. He added that the profit threshold at which banks will start paying the top-up would rise to £100m from £25m in order to help smaller challenger banks and increase competition. David Postings, chief executive of UK Finance, said that the intervention "recognises the importance to the UK of an internationally competitive sector which supports growth, jobs and innovation across the UK". Nevertheless, he noted that banks would still pay more tax than other sectors. Anne Boden, chief executive of Starling Bank, added: "Let's be honest - a tax cut for banks is never going to win widespread support. But by reducing the bank surcharge and increasing the threshold at which banks have to pay it, the Chancellor is recognising the fact that challenger banks such as Starling are elevating standards in consumer banking." OakNorth, Tesco Bank, Secure Trust Bank and Shawbrook along with some building societies will fall out of the surcharge net as well as Starling.
Santander profits jump alongside soaring UK mortgage demand
Banco Santander reported €2.2bn of profits in the third quarter, up 24% on the same period last year. The rise was driven by soaring demand for mortgages in the UK and a solid performance in the US. The UK business accounts for a fifth of earnings. Nathan Bostock, Santander’s chief executive in the UK, said: “We have built on our position as the UK’s third largest retail mortgage provider, delivering £5.2bn of net mortgage growth in a competitive market as well as an increase in customer deposits.” Profits for the past three months were £687m, up 19% from £576m in the previous quarter. Pre-tax profits for the nine months to September 30 jumped to £1.4bn from £299m, benefitting from a £170m release of cash which had been set aside for potential Covid losses.
Deutsche Bank counts on M&A boom as trading slows
A sharp increase in revenue from advising on deals and debt issuance offset a fall in trading revenues at Deutsche Bank last quarter. Net profits were up 7% to €194m, beating analyst expectations of €135m. Meanwhile, Deutsche Bank has hired former Credit Suisse banker Saad Benani to lead its investment banking business in the Middle East and North Africa.
EU says more time needed to put in place bank capital rules
Brussels has delayed the implementation of the final phase of Basel III reforms until 2025, arguing that supervisors need longer to prepare while lenders focus on financing the post-pandemic recovery.
BP and Daimler partner to power trucks with hydrogen
BP is partnering with Daimler Truck, one of the world’s largest commercial vehicle manufacturers, to deliver lorries powered by hydrogen fuel cells to UK customers from 2025. The proposal would see the oil company develop a new network of hydrogen refuelling stations and be part of its strategy to cut its emissions to net zero by 2050.
Sunak reduces cost of domestic flights, but long-haul now costlier
The Chancellor yesterday cut air passenger duty by half to £6.50 per passenger for domestic flights from April 2023, offset by higher levies have been imposed on long-haul services. The move sparked outrage among climate change campaigners who accused Rishi Sunak of undermining the UK’s response to the climate emergency. The boss of IAG, the owner of British Airways, was equally unimpressed arguing that increasing APD on long-haul flights “will penalise Global Britain” and will “limit the airlines’ ability to invest in green technologies”.
Budget housing package criticised as ‘vague’ and underwhelming
Developers with profits over £25m will be charged a rate of 4% to help pay for unsafe cladding to be removed from high-rise buildings, Rishi Sunak said in his Budget. The Chancellor also announced £11.5bn to build up to 180,000 affordable homes, and an extra £1.8bn to bring 1,500 hectares of brownfield land into use. But Mr Sunak’s new housing package was described as “a bit of a damp squib” by David O’Leary, policy director at the Home Builders Federation, who warned the measures are unlikely to meet Boris Johnson’s target of building 300,000 homes a year due to the additional costs being faced by builders.
Financial services firms bet heavily on tech and data analytics
Research carried out by tech firm Yobota has found that banks and financial services firms plan to step up their tech investments in the coming 12 months to improve both front and back-end technology. Yobota, which surveyed 250 banking and financial services companies, found that nearly three in four financial institutions have made improving the quality of their core technologies a priority, while 65% of financial services players plan to pump more money in new technology and to diversify the kinds of tech they are currently using. Similar numbers (73%) plan to invest in better data analytics to enable more informed decisions, while 67% will invest in application programming interfaces (APIs), and 65% in payment technologies.
Lloyd's of London ups climate pledge
Lloyd's of London said on Wednesday it was committing to moving all of its operational and attributable greenhouse gas emissions to net zero by 2050 at the latest. Lloyds will also push members of the commercial insurance market to do the same. Additionally, Lloyds will set, publish and report against interim science-based targets every five years to ensure action in the near term.
Munich Re reduces investment in Admiral
German reinsurer Munich Re slashed its holding in Admiral from over 10% to 6%, sending the FTSE 100 insurer’s shares down 6% on Wednesday.
Scientist joins GSK board
GlaxoSmithKline has raised its full-year profit forecast after beating expectations in the third quarter. The FTSE 100 pharmaceutical giant said it was now expecting adjusted earnings to fall between 2% and 4% for the year. The group also revealed it will be adding Harry Dietz, a professor of genetics medicine at Johns Hopkins University, to its board next January. The move is designed to appease activist investors Elliott Management and Bluebell, who have warned that GSK needs more scientific names on its board.
Merck signs licensing agreement to broaden generic manufacturing of COVID-19 pill
US drugmaker Merck & Co has entered a licensing agreement with the United Nations-backed Medicines Patent Pool (MPP) to allow more companies to make generic versions of its experimental oral antiviral COVID-19 treatment.
LEISURE & HOSPITALITY
UK drinks trade welcomes alcohol duty overhaul in Budget
The Chancellor announced the most radical changes to alcohol duty for 140 years on Wednesday stating: “Our new system will be designed around a common sense principle: the stronger the drink, the higher the rate.” From February 2023, taxes on low-strength wines, such as rosé and prosecco, beers and ciders will be lowered while the cost of higher-strength beverages will rise. Alcohol duties will be frozen for a year from February 2022 – a move described by the Wine & Spirit Trade Association as a “huge relief”. The British Beer and Pub Association also welcomed the freeze, but pointed out that the overall beer duty rate in the UK remains among the highest in Europe. A cut in duty rates for draught beer and cider will shave 3p off a pint while a 28% duty premium on sparkling wines will be scrapped.
CMA could extend probe into Admiral's pubs deal
The Competition and Markets Authority has raised concerns about Admiral Taverns' £222m plan to buy around 700 pubs from Hawthorn Leisure, stating that on current information the merger could result in a "substantial lessening of competition". Unless the companies offer something to allay these fears, the CMA said that it could continue its investigation by opening a phase 2 probe.
GB food manufacturers 'significantly reduce sales to Northern Ireland'
An industry survey suggests GB food manufacturers have significantly reduced sales to Northern Ireland as a result of the Protocol. The Food and Drink Federation survey found that large business sales volumes to Northern Ireland were down by an average of 10% this year.
UK manufacturing lobby knocks ‘piecemeal’ approach to investment
UK manufacturers have said the Chancellor’s decision in Wednesday’s Budget to extend the £1m annual investment allowance by 15 months fails to provide incentives to businesses with a five- to 10-year planning cycle.
New rules will encourage foreign companies to bring HQ to UK
The Business Department, the Treasury and HMRC are consulting on new rules that will make it easier for foreign companies to shift their headquarters to Britain. Officials hope the reforms will boost investment and bring more work for law firms, accountants and consultants.
Business rates discount announced
The Chancellor revealed on Wednesday that a new 50% business rates discount will apply in the retail, hospitality, and leisure sectors, with eligible businesses able to claim a discount on their bills, up to a maximum of £110,000. This will cost £1.7bn. From 2023, there will be revaluations every three years, a 12-month rate holiday on property improvements, and relief for business owners who install solar panels. The business rates multiplier, which is already frozen, will have its freeze extended until April 2023 costing some £4.6bn. Retail and hospitality executives said the freeze in the multiplier was welcome but the cash cap of £110,000 per business on the discount meant many large companies would miss out. The High Street also criticised the decision not to immediately bring in an online sales tax, but Treasury documents stated that ministers will “continue to explore the arguments for and against” such a policy.
Growth forecast encouraging amid inflation fears
The Office of Budget Responsibility forecast on Wednesday that the UK economy will grow by 6.5% this year, far higher than the 4% predicted in its March forecast. This will be followed by 6% growth in 2022 but far lower growth of 2.1% is expected in 2023,. Growth of 1.3% is expected in 2024, and 1.6% in 2025. Unemployment is expected to peak at 5.2% next year, lower than 11.9% previously predicted, while wages have grown in real terms by 3.4% since February 2020. Meanwhile, borrowing as a percentage of GDP is forecast to fall from 7.9% this year to 3.3% next year. As a percentage of GDP, borrowing will then fall in the following four years to 1.5%. The OBR went on to warn that inflation would rise much faster than it previously estimated, hitting 4% this year as a result of restricted supply chains and global energy prices. Rishi Sunak acknowledged the “challenging backdrop of inflation” and warned pressures would take months to ease.
‘Meme’ coin seeks to tap crypto craze with London ad barrage
A major advertising campaign launched on London’s public transport system in a bid to “legitimise” the Floki digital coin is likely to intensify regulators’ focus on crypto ads, reports the FT.