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Daily News Roundup: Thursday, 2nd February 2023

Posted: 2nd February 2023


NatWest chief under pressure over savings rates

NatWest boss Alison Rose is under pressure to answer MPs' questions on the banks' savings rates, having turned down a request to appear in front of the Treasury Select Committee. While Ms Rose has opted not to appear as MPs quiz bank bosses about issues including why returns on savings accounts have not kept pace with the Bank of England's interest rate rises, Barclays’ UK boss Matt Hammerstein, Charlie Nunn of Lloyds, and Ian Stuart, the UK boss of HSBC, have all agreed to give evidence. NatWest will instead be represented by David Lindberg, its head of retail banking. Committee chair Harriett Baldwin said: “I am very keen that all the major banks’ top executives appear before our committee. I am particularly keen that it should not be an all-male panel, because we want to send a message to younger women in banking that they can reach the very top.” Committee member and Conservative MP Anthony Browne, who was formerly head of the British Bankers Association, said: “It is vital that the bosses of the UK's largest banks answer questions from MPs on the record and in public. Our constituents expect nothing less.” A NatWest spokesman said: "As the chief executive of our retail bank, serving 16m customers, David Lindberg is directly responsible for these critical consumer issues and is an appropriate representative for NatWest Group at the hearing." Moneyfacts data shows that the average easy access savings account currently pays an interest rate of 1.73%, up from 0.2% in December 2021. In the same period, the Bank of England has increased interest rates from a record low of 0.1% to 3.5%. The interest rate on an average five year fixed-rate mortgage deal has climbed from 2.64% to 5.2%.

Virgin Money sees customer boom

Virgin Money’s customer base continued to grow in the first quarter of its financial year, with around 27,000 new personal current accounts – a 44% increase on last year. The company also opened around 9,000 new business current accounts, a 92% year-on-year spike. Overall deposits increased 1.2% in the period and mortgage lending grew at 0.4% despite a slower market in the quarter. The value of customer loans increased by 0.7% to £72.6bn in Q1. CEO David Duffy said: “We’ve had a positive first quarter with continued good progress on digitisation and growth in lending across the business as more customers choose Virgin Money.”


Federal Reserve eases rate increase

The Federal Reserve has raised its target interest rate by a quarter of a percentage point, with the 0.25% increase taking its benchmark rate to a range of 4.5%-4.75%. This marks the highest rate since 2007 but the increases is the smallest since March. Despite signs that price increases in the US are slowing, Fed officials said they expect rates to increase further. Federal Reserve chairman Jerome Powell said: “The job is not fully done … While recent developments are encouraging we will need substantially more evidence to be confident that inflation is on a sustained downward path."


Ministers set out crypto regulation plans

The Government has published proposals for crypto-asset regulation, promising a "robust" approach to digital assets. Officials plan to use existing regulations for the industry, rather than creating a bespoke regime, saying this will allow crypto to benefit from the "confidence, credibility and regulatory clarity" of the existing system for financial services, as set out in the UK's Financial Services and Markets Act 2000.” The Treasury says its proposals will: set out rules on crypto-asset promotions which are fair, clear and not misleading; enhance data-reporting requirements, including with regulators; implement new regulations to prevent ‘pump and dump’, where the value of a crypto asset is artificially inflated before being sold. Economic Secretary to the Treasury Andrew Griffith said the Government remains committed to enabling crypto, but stressed the need to "protect consumers who are embracing this new technology." Varun Paul, former head of fintech at the Bank of England, described the plans as a "positive step," adding that turmoil in the sector means there is a need for "clear rules." Binance, the world's biggest crypto exchange, also welcomed the Treasury's plans, saying regulation "helps to support innovation and is essential to establishing trust."

Unite urges FCA to increase staff pay

Union Unite says that unless the Financial Conduct Authority (FCA) offers its staff a better pay package, it risks becoming unable to deliver in the public interest. The City watchdog has been in dispute with its workers over pay and conditions. Unite says the regulator has refused to discuss pay and morale with workers, leading to unhappiness and departures in the past 18 months. The union has warned that this has pushed the FCA towards “breaking point.” In a letter to FCA chief executive Nikhil Rathi, Unite regional officer Steve O’Donnell said that without “significant investment in your staff,” more will leave, “and the FCA stands at the precipice of crisis.” The FCA says that the number of departures reflects the typical turnover of an employer of its size, noting that while around 650 staff left the business last year, it hired more than 1,130.

Architects of financial rules question direction of reforms

Two of the architects of the UK’s financial regulations have questioned elements of mooted reforms. John Vickers, chair of the Independent Commission on Banking, has voiced doubt over giving financial regulators a mandate to promote the UK’s competitiveness, questioning whether it was “a wise path to take.” He argued that it was better to focus on the wider economy rather than give the financial sector “special treatment.” Mr Vickers said the focus should be the competitiveness of the economy as a whole, arguing that “for that objective we need very strong and sound financial institutions.” “It is better to stick to the objectives the regulators already have,” he added. Meanwhile, Keith Skeoch, chair of the Independent Panel on Ring-fencing and Proprietary Trading, identified the speed at which financial innovations are adopted as a key issue regarding competitiveness, saying: “When you look back, too much was adopted too quickly and lightly regulated which caused the problems of the last 20 to 30 years.” Mr Vickers and Mr Skeoch also said proposed changes to Solvency II, which would reduce capital buffers on insurance companies, would increase risk in the financial sector.

PayPal to cut 2,000 jobs

PayPal has announced plans to scrap 2,000 full-time roles, with the digital payments company set to trim about 7% of its workforce amid a “challenging macro-economic environment.”


Stonegate may call time on 800 pubs

Stonegate, Britain's biggest pub company, is looking at the possibility of selling between 700 and 800 pubs from its 4,492-strong estate as it considers ways of cutting its £3bn debt.


Manufacturing activity falls but optimism is up

A survey of purchasing managers in the manufacturing sector shows that while activity fell in January as factories reported job losses and new orders fell, the pace of decline slowed and optimism rose. The monthly index by S&P Global rose from an 18-month low of 45.3 in December to 47 in January on a scale where reading above 50 indicates growth in activity. While Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said January’s survey “brings some hope that the downturn in the manufacturing sector is slowing down,” Fhaheen Khan, economist at manufacturing industry group Make UK, said factories were set to be on a “downward path” for the rest of the year.


House prices fall for a fifth month in a row

Data from Nationwide shows that house prices fell for the fifth consecutive month in January. The price of the average property was £258,297 last month, with this down by 0.6% on December. Year-on-year price growth slowed to 1.1%, down from 2.8% in December. Robert Gardner, chief economist at Nationwide, said the affordability of mortgages is set to "remain challenging" in the short term due to higher interest rates. Pantheon Macroeconomics economist Gabriella Dickens said Nationwide's figures show that house prices are “continuing to buckle under the pressure of elevated mortgage rates, squeezed real incomes and weak consumers' confidence."

Tracker mortgages to cost £4,600 more than in 2021

Homeowners on tracker mortgages can expect to spend £4,600 more on their repayments this year compared with 2021 if the Bank of England raises its base rate tomorrow. If the predictions are correct, more than 1.6 million households on tracker and standard variable rate (SVR) mortgages will see an immediate impact on their repayments. Data from UK Finance shows that around 715,000 households on tracker mortgages will see their monthly payments increase by an average of £48.99 if the base rate goes up to 4%. An average household on a tracker mortgage would therefore pay £4,585.92 more per year than in 2021. Meanwhile, roughly 895,000 households on SVR mortgages will see their payments increase by an average of £30.81 per month if the Bank of England raises its rate to 4%.

NatWest: stamp duty rebate could fund green home improvements

NatWest has suggested that the Government should offer new homeowners a rebate on stamp duty to fund energy efficiency plans measures. Lloyd Cochrane, head of mortgages at the bank, said a property purchase should be used as a “moment to incentivise” retrofitting homes with new insulation, suggesting a rebate that would allow households to reclaim the cost of their retrofit against stamp duty in a two year window after the purchase.


Premier League’s January spending passes £800m

Premier League clubs spent a record £815m in the January transfer window. The biggest spenders were Chelsea, with the club responsible for 37% of the total and the biggest purchase – the British record £106.8m deal for Argentinian midfielder Enzo Fernandez from Benfica.


Interest rates set to rise again

The Bank of England is expected to opt for its tenth consecutive interest rate increase when the Monetary Policy Committee votes today, with analysts forecasting that the base rate will increase from 3.5% to 4%. Deutsche Bank believes the 0.5% increase will mark the MPC’s final “forceful” hike in the tightening cycle, while Societe Generale Global Economics expects another 0.5 percentage point increase in March. Investec Economics believes the MPC will take rates to 3.75% today before peaking at 4% in March, with Philip Shaw, the firm’s chief economist, saying: “Recent weeks have ushered in a greater sense of economic optimism.” AJ Bell analyst Laith Khalaf said changes in the economic climate since the last MPC meeting will make officials “think twice about pushing rates up too much.”

Brexit 'costing the UK economy £100bn a year'

Brexit has caused a £100bn-a-year loss in output, leaving Britain’s economy 4% smaller than it would have been inside the bloc, according to Bloomberg Economics. The analysis showed that since officially leaving the European Union, three-years ago this week, UK-based investment has grown 19% less than the G7 average and the economy has forfeited 4% worth of growth.


MPs investigate BoE's gilts sell-off

MPs will investigate what impact the Bank of England’s decision to shrink its £800bn balance sheet will have on inflation, the economy and financial stability. The Commons Treasury Select Committee will explore the Bank’s decision to embark on quantitative tightening (QT) after more than a decade of loose monetary policy. Last year the Bank became the first in the world to start selling gilts back to investors to reduce the size of a balance sheet that grew to over £830bn. The US Federal Reserve and European Central Bank started similar exercises but will rely on maturing bonds to fall off the balance sheet instead. MPs will gather evidence from central banks, economists and academics to assess how QT is working and whether bond sales pose a risk to the taxpayer. The Treasury faces losses of tens of billions on the value of the bonds.

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