Chancellor announces new support measures, with BBLS coming to an end
Mark Fry of BTG Advisory looks at the dissolution of the Government’s Bounce Back Loan Scheme (BBLS). Chancellor Rishi Sunak announced the move in yesterday’s Budget as he outlined new support measures, with the Recovery Loan Scheme (RLS) set to replace government guarantee schemes rolled out to support businesses through the pandemic. Mr Sunak said fiscal support offered by the Treasury amid the coronavirus outbreak amounts to £407bn – the largest peacetime support package for the UK economy on record. Mr Fry notes that BTG Advisory will, in the coming days, analyse the implications of the 2021 Budget for SMEs and large corporates, including the broader environment for financing and market for M&A activity.
Lenders back loan support plan
Britain's biggest mortgage lenders have backed a Government scheme to help people get on the property ladder, with Lloyds, NatWest, Santander, Barclays and HSBC among the banks agreeing to offer 95% mortgages to creditworthy customers from next month. The initiative will see the Government guarantee part of the loan, compensating the bank in the event of repossessions. Chancellor Rishi Sunak said that while several lenders will be offering the 95% deals from next month, “more, including Virgin Money, will follow shortly after.” "This is a policy that gives people who can't afford a big deposit the chance to buy their own home," Mr Sunak added. Rightmove’s Tim Bannister said the availability of 5% deposit deals “could help some buyers bring their plans forward, especially if they managed to save more than they were expecting to while in the various lockdowns.” He added that it serves as a “helping hand to people who have been struggling to trade up because of the much bigger deposit needed.” While primarily designed to help first-time buyers, the scheme is available to existing homeowners. It applies to purchases worth up to £600,000 and will be available until the end of 2022.
Tax rethink for banks on the cards
The Government is due to roll back a surcharge on banks' corporation tax to help to boost the sector's competitiveness, with a review of tax on banks coming in the autumn. The move could see banks brought closer in line with other sectors where corporation tax will rise to 25% from 2023. Without reform, banks could face a rate of around 33%. A spokeswoman for the Building Societies Association said: "We look forward to the review of the 8% bank surcharge, which is paid by the largest building societies in addition to banks. "
Infrastructure bank to lend and invest £1.5bn a year
The UK's new infrastructure bank will offer annual loans and investment worth two thirds less than its EU predecessor, the Office for Budget Responsibility (OBR) has said. The Treasury has placed a cap on the bank's capital over the next five years amounting to £12bn in actual liabilities, to finance loans and equity, and a further £1bn in contingent liabilities, in the form of guarantees. The bank, which is expected to support at least £40bn of total investment in infrastructure, is forecast to lend and invest around £1.5bn a year compared with the European Investment Bank, which lent an average of £5bn a year to UK projects in the five years to 2016.
Banking set to finance new recovery scheme
The Telegraph says major banks are expected to sign up to deliver a new taxpayer-backed business lending scheme that will replace the Government’s pandemic loan programmes. The Recovery Loan Scheme will give companies of access to between £25,000 and £10m, with the taxpayer covering the cost for 80% of banks' losses if borrowers fail to repay. The Treasury said the new scheme, which will support larger loans than either of its two main predecessors – the Bounce Back Loan Scheme and the Coronavirus Business Interruption Loan Scheme - will run from April 6 until the end of the year, adding that the dates are subject to review.
Wyelands Bank ordered to repay savers
Wyelands Bank has been told by regulators to refund all of its retail customers. Owner Sanjeev Gupta’s GFG Alliance business has come under scrutiny after its main financial backer Greensill Capital lost the support of two asset managers that had underpinned its supply chain financing model. The Prudential Regulation Authority has been "engaging closely" with Wyelands Bank and has "required it to operationalise an orderly repayment of its deposits".
NatWest stake sale delayed
NatWest will not return to private ownership until 2026, almost two decades after a taxpayer bailout during the financial crisis. The Treasury has nudged back a target date for selling the state's 62% stake by a year. The Government began the process of returning the bank to the private sector in 2015, selling £2bn of shares and cutting its stake from 79%.
Limit on contactless payments to rise
Chancellor Rishi Sunak has announced that the limit on contactless spending will increase to £100. Pinsent Masons partner and payments expert Angus McFadyen has cautioned that fraud could increase as a result, saying: “The industry will need to actively monitor for this and have efficient systems in place for better detection.”
German regulator files complaint against Greensill Bank
Germany’s financial watchdog BaFin has reportedly filed a criminal complaint over suspected balance sheet manipulation at Greensill Bank. A probe by BaFin found irregularities over how the bank had booked certain assets, with the watchdog ordering a forensic investigation last year. The probe found that Greensill had booked claims for transactions that had not yet occurred but which were accounted for as if they had been.
JPMorgan will not force staff to get vaccines
Jamie Dimon, the CEO of JPMorgan, says the bank will not force its employees to get coronavirus vaccinations if they want to return to the office. He added that he thinks “we may see some companies do it”, adding: “I could see an airline doing it or a hotel company doing it.”
Persimmon sees profits fall as pandemic continues
Persimmon has seen profits decrease by about 25%, reporting profit of £783.8m over the last 12 months, down from £1.04bn in the year earlier period. Chief executive Dean Finch commented: “Persimmon delivered a robust performance in 2020 despite the challenges presented by the pandemic.”
Investors push back against UK listings overhaul
Several fund managers have questioned proposals set out in Lord Hill’s report on the City’s stock market listings regime, saying certain elements risk “watering down” investor protections. Meanwhile. International Corporate Governance Network policy director George Dallas has voiced concern over dual-class share structures, saying they “purposely water down shareholder rights” and warns of a “regulatory race to the bottom”.
UK fintech bosses warn new rules will stifle start-ups
Executives in the sector have warned that tougher Financial Conduct Authority rules holding fintech firms to stricter risk-management standards could stifle the sustainability of smaller companies and prevent start-ups from launching. The FT’s Chris Nuttall looks at tighter regulation of fintech firms, noting that experts say new rules are likely to drive up costs in an already low-margin sector.
Hiscox reports pre-tax loss after business interruption cover dispute
Hiscox has reported a pre-tax loss of $268.5m for last year, compared with a profit of $53.1m in 2019. This comes after the Lloyd’s of London insurer was involved in disputes last year with firms over whether their business interruption cover applied during the coronavirus pandemic.
Prudential to spin off US unit
With its main Asian business boosting operating profit 4% in 2020, Prudential is preparing to spin off its US unit, as it reported overall adjusted operating profit from continuing operations of $5.5bn.
QBE names new CEO
Australian insurer QBE has appointed Andrew Horton as its next chief executive. Mr Horton, who worked in banking for 15 years at ING, NatWest and Lloyds Bank, will join QBE after 13 years running UK-listed insurer Beazley. He will be replaced at Beazley by Adrian Cox, the chief underwriting officer.
LEISURE AND HOSPITALITY
Hospitality sees VAT cut extended
The 5% reduced rate of VAT for the hospitality sector will continue for another six months, the Chancellor has announced. As part of a new raft of measures to help the hospitality sector recover from the pandemic Rishi Sunak told the House of Commons the reduced rate would be extended until September 30. He also announced there will be an interim rate of 12.5% for another six months until April 2022. In total the move will see VAT cut by around £5bn.
MEDIA AND ENTERTAINMENT
New Scientist acquired by DMGT
Science and technology magazine New Scientist has been acquired by the Daily Mail and General Trust, publisher of the Daily Mail in a £70m cash deal.
Page Group sees 90% fall in full-year profit
Some 80% of recruitment companies are predicting a fall in full-year income in 2020-2021, with Page Group reporting a nearly 90% decrease in full-year profits. The firm saw pre-tax profits for the year ended 31 December 2020 of £15.5m, down from £144.2m in 2019.
Stamp duty holiday to continue
The stamp duty holiday has been extended by six months until the end of September, an extension that includes a tapering of support, with the nil-rate band gradually lowering from June. The extension applies to all transactions in England and Northern Ireland, meaning buy-to-let investors will continue to benefit from the tax savings. The deadline for buyers to take advantage of the higher £500,000 nil-rate band has been extended by three months. This means that buyers can save up to £15,000 in tax if they can complete their sales by June 30. After this date, the nil-rate band will drop to £250,000 until September 30, with the maximum tax savings falling to £2,500 during this period. From October 1, the nil-rate band will fall back to its original level of £125,000.
OBR: Stamp duty holiday will lift prices
The Office for Budget Responsibility (OBR) expects the extension of the stamp holiday to “result in some additional transactions and raise house prices a little” – but added that house prices will fall back again as pressure on the labour market increases. While house prices are forecast to climb 5.1% over 2021 and then slip 1.7% in 2022, the OBR expects growth of 0.8% in 2023, 3.9% in 2024 and 4.3% in 2025. The analysis suggests that house prices will be 13.5% higher at the beginning of 2025 than they were at the start of 2020. A November report from the OBR predicted that growth in the period would be around 11.4%.
Prices fall in February
The British Retail Consortium-Nielsen shop price index shows that prices were down 2.4% last month, coming in below the 12 and six-month average price decreases of 1.7% and 1.8% respectively. The decline in February was steeper than the 2.2% dip recorded in January, with a 3.9% slip in non-food prices a contributing factor. British Retail Consortium chief executive Helen Dickinson said Brexit-related costs and food inflation remained steady thanks to competition between grocers during the pandemic but said consumers could face higher prices in the future due to rising global food prices, shipping costs and Brexit red tape.
Budget sets out pandemic recovery plan
Chancellor Rishi Sunak yesterday unveiled his Budget, setting out how the country will recover from the coronavirus pandemic. He said that the headline rate of corporation tax will rise from 19% to 25% from 2023, with a rate of 19% for firms seeing profits under £250,000. As of April, there will be a freeze on the amount of money employees earn before paying income tax at £12,570, with this to continue until 2025/26. The level at which employees start paying the higher rate of tax will be frozen at £50,270. Mr Sunak revealed that the furlough scheme, which was due to end in April, will be extended to the end of September. The business rates holiday has been extended for another three months and will now run until the end of June. Retail, hospitality and personal care businesses are to be offered support in the form of the new restart grant in a package worth £5bn.
Vaccines to drive economic recovery, says OBR
The Office for Budget Responsibility (OBR) says the UK’s coronavirus vaccine programme will help drive a "swifter and more sustained" economic recovery, with the Government’s independent forecaster saying it expects growth of 4% this year and 7.3% in 2022. The latter would mark the highest growth rate since official records began and see the economy hit its pre-pandemic level by the middle of next year - six months earlier than previously estimated. The OBR analysis noted that British households have built up savings of around £180bn in the past year, with it forecasting that around a quarter could be spent once coronavirus-related restrictions are lifted, pointing to a potential "degree of euphoria" among consumers. It also warned that economic uncertainty remained "considerable". The OBR also said unemployment is set to peak at 6.5%, considerably lower than the 11.9% expected last July.
BoE given green remit
The Chancellor has told the Bank of England to take account of the impact of its decisions on climate change, a move that could see it reduce its purchases of corporate debt from fossil fuel companies and other industries that contribute the most to carbon emissions. Rishi Sunak said the new remit will "reflect the importance of environmental sustainability and the transition to net zero". Karen Ward at JPMorgan commented: "As investors, we should not underestimate the impact this could have on the already strong momentum behind sustainable investing.” She added: “This could tilt the preference of the central bank's asset purchases and involve considerable regulatory change to encourage private capital to do likewise."