Banks face a 33% corporation tax rate
The banking surcharge means banks face the prospect of a 33% corporation tax rate after Jeremy Hunt announced the reversal of mini-Budget tax cuts. Lenders reportedly took part in talks with the Treasury yesterday after the new Chancellor made no mention of the surcharge, which had been due to fall when corporation tax rose, in his announcement. The surcharge, put in place after the 2008 financial crisis, tags an additional 8% on top of banks’ corporate tax bill. Mr Hunt made no mention of the surcharge as he detailed a series of U-turns on policies outlined by predecessor Kwasi Kwarteng, including the decision that will mean corporation tax does not stay at 19%. With banks potentially set to see a tax rate of 33% as the surcharge adds 8% to the impending 25% corporation tax rate, a Treasury spokesman said officials are “acutely aware” of the pressure this could place on lenders.
No U-turn on bankers' bonus cap?
A plan to remove a cap on bankers' bonuses appears to have survived the reversal of mini-Budget policies, with the decision to lift the cap not mentioned as several other measures were unwound by Chancellor Jeremy Hunt. City bosses had long called for an end to EU-wide bonus rules which cap bonuses at twice an employee's salary, arguing they lead to higher base pay that pushes up banks' fixed costs, while critics have argued that uncapped bonuses lead to the kind of excessive risk taking that drove the financial crisis. Mr Hunt’s predecessor, Kwasi Kwarteng, last month announced that the cap would be lifted as part of a shake-up of City rules to boost the economy.
Bank of America profits fall
Bank of America's (BofA) profits fell by 8% in the third quarter as the bank set aside cash to cover potential loan losses. The bank earned $7.08bn last quarter, compared to a profit of $7.69bn in the same period a year earlier. BofA put $378m into its loan-loss reserves in the period. The bank's net interest income grew by 24% to $13.8bn in the quarter. CEO Brian Moynihan said: “Our US consumer clients remained resilient with strong, although slower-growing, spending levels and still maintained elevated deposit amounts.”
Credit Suisse pays $495m in US fraud settlement
Credit Suisse has paid $495m to settle a legal case in the US over its mortgage-linked investments business. The latest case, brought by the New Jersey attorney general, alleged that Credit Suisse had “misled investors and engaged in fraud or deceit” in connection with the sale of the investment products. The bank has already paid out large sums to resolve similar claims, including $5.3bn in a case brought by the US Department of Justice. Meanwhile, a source has claimed that investment bank chief Christian Meissner will be leaving the Swiss bank once it has announced a strategic overhaul.
SEC must clarify which NFTs will be regulated, says commissioner
Securities and Exchange Commission commissioner Hester Peirce says US regulators should detail which NFTs could qualify as securities and be regulated, urging the SEC to publish more information on the market.
Hill announces departure from Hargreaves Lansdown
The chief executive of Hargreaves Lansdown has announced he will stand down, as investors continue to flee the investment platform and the company faces a multi-million pound lawsuit over its promotion of funds run by Neil Woodford. Chris Hill said he will step down by November next year.
British staff at US hedge fund earn £1.3m
US activist hedge fund Elliott Management last year paid the 106 staff at its British business a combined £137m after the division saw a return to profit as revenue rose 16% to £194.6m. This marks an increase on the £113.3m wage bill recorded in 2020 and equates to almost £1.3m per person.
Rees-Mogg in support talks with steel giants
Business Secretary Jacob Rees-Mogg is in talks with the biggest players in the steel industry in a bid to secure the sector's long-term future. This comes after China’s Jingye Group, the owner of British Steel, warned the Government that its two blast furnaces at its Scunthorpe steelworks were unlikely to be viable without state aid. Mr Rees-Mogg has written to Jingye to express a willingness to negotiate over the company's request. While the Department for Business, Energy and Industrial Strategy declined to comment on the content of Mr Rees-Mogg's letter, a spokesman said: "We are working across the steel sector on achieving their sustainable and competitive long-term future." Tata Steel, the biggest player in the UK steel sector, has also requested financial help from the Government.
MEDIA & ENTERTAINMENT
Irenic Capital wants News Corp to split units
Activist investor Irenic Capital Management wants News Corp, in which it has a $150m stake, to split its media and online real estate units, according to sources familiar with the matter. This comes after Rupert Murdoch proposed reuniting his media empire by combining News Corp and Fox Corp, with the firms having formed special committees to evaluate the proposal. Irenic has sought a meeting with News Corp, with the investor said to be prepared to oppose a deal if it undervalues the company.
Home-buyer demand stalls after rates rise
The average price of a home hit a record high of £371,158 in October but demand has stalled as a result of surging mortgage rates, according to Rightmove. Across Britain, the average asking price on a home increased by £3,398. Price rises in London lagged behind the rest of the country for much of the past two years but Rightmove's data suggests that they are now growing fastest there. Rightmove said that buyer demand is still up by 20% compared with 2019 levels but has been 15% lower in the past two weeks than in the same fortnight last year.
Chancellor criticised over VAT-free shopping U-turn
Leaders in the retail and tourism sectors have questioned the Chancellor’s decision to scrap VAT-free shopping for overseas visitors, saying the move will slow the return of international visitors and result in lost tax revenues. Former Chancellor Kwasi Kwarteng had promised to reintroduce a tax break for tourists which gave overseas visitors a refund of the 20% VAT paid on goods bought in the UK when returning home. However, new Chancellor Jeremy Hunt has reversed the decision. Paul Barnes, head of the Association of International Retail, said the move “will come as a hammer blow to UK tourism and the High Street,” while the British Retail Consortium said it was “disappointed” by the decision.
Matalan secures deadline extension for £350m debt payment
Matalan has announced that its debt payments have been kicked back several months, buying the high street retailer more time to find cash. Matalan has faced a turbulent couple of years due to the Covid pandemic, followed by inflationary pressures this year. Now the discount clothes retailer has said that a January deadline to refinance £350m of debt has been pushed back to July.
Made moves forward with buyout bids
Online furniture retailer Made has received several approaches after it put itself up for sale having run into liquidity problems. Made said it had received a number of “non-binding indicative proposals” for the company and has now “invited a select number of parties” to progress towards firm offers by the end of October.
Wasps go into administration
Rugby club Wasps have made 167 players and staff redundant after becoming the Premiership's second club to go into administration inside 21 days.
Chancellor reverses two-thirds of mini-Budget tax cuts
Chancellor Jeremy Hunt has announced that the Government will reverse "almost all" of the tax cuts set out in last month's controversial mini-Budget. He said the measure, which aims to calm investors and steady markets, would bring in £32bn by 2026/27 and restore "economic stability." Mr Hunt announced that the savings will be made by keeping plans to raise corporation tax to 25%, keeping the basic rate of income tax at 20p, rather than cutting it to 19p next year, keeping a planned increase to the tax on dividends, scrapping changes to IR35 rules for freelance workers, cancelling plans to offer tax-free shopping to tourists, and allowing alcohol duties to rise instead of being frozen. The Chancellor also announced that support for household energy bills will remain in place until April, when a review of the scheme will look to see if cost savings can be made. Some elements of the mini-Budget did survive, however, with National Insurance and stamp duty both reduced. Outlining the need for the U-turn on the mini-Budget, economists had warned that the original plans announced by Mr Hunt’s predecessor, Kwasi Kwarteng, would have left a black hole in the public finances. The Institute for Fiscal Studies think-tank calculated that the Government would have to spend £60bn a year less by 2026/27, even taking into account an earlier U-turn over the top rate of income tax.
Tax U-turn saves £20bn on debt costs
The Chancellor has saved Britain billions on interest payments after his decision to reverse tax cuts triggered a record drop in borrowing costs. If the lower cost of debt is sustained, the lower borrowing costs will cut the country's interest bill by £20bn over the next five years. Debt interest will be £7bn lower in 2026 alone, according to the Institute for Fiscal Studies (IFS). Combined with the £32bn that Jeremy Hunt has saved the Treasury by abandoning reversing part of the mini-Budget, it means the Chancellor has filled around two-thirds of the £60bn black hole in the country's finances. However, the tax burden will be at its highest level since 1950 and Paul Johnson, director of the IFS, said: “Fiscal credibility is hard won but easily lost,” warning that while Mr Hunt’s announcements are “big, welcome, clear steps in the right direction, they “won’t be enough, by themselves, to plug the gap in the Government’s fiscal plans.”
No cuts without ‘detrimental’ hit to services, experts warn
Experts have warned that there is no real “fat” for new Chancellor Jeremy Hunt to cut as he seeks to make savings and balance the books. A report from the Institute for Government and the Chartered Institute of Public Finance and Accountancy (CIPFA), warns that Mr Hunt could find very little to trim from budgets that will not have further detrimental impacts on public services. The report, which analyses the spending, staffing, activities and performance of nine separate public services, found that the performance of public services will not have returned to pre-pandemic levels by the time of the next election in around two years. It also reveals that the projected 3.4% per year average increase in budgets, set out in the 2021 spending review, has effectively fallen to 1.5% due to inflation and increased pay awards.
Hunt refuses to commit to triple lock
The Chancellor has refused to confirm that the state pension triple lock will be protected. When asked in the House of Commons to reaffirm the Government’s commitment to the policy which protects retirees from inflation, Mr Hunt said he would not make “any commitments to individual policies,” adding that “every decision we make will be made through the prism of what matters to the most vulnerable.” The triple lock – which sees the state pension increase in line with the highest out of inflation, wage growth or 2.5% - was frozen last year due to pandemic support measures but Prime Minister Liz Truss committed to reinstating the policy in her leadership campaign. Under the triple lock, the current high rate of inflation would see a record increase in the state pension. Rebecca O’Connor of broker Interactive Investor warned: “We have seen U-turns on the triple lock before and we cannot rule them out again.”