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Daily News Roundup: Tuesday, 19th October 2021

Posted: 19th October 2021

BANKING

Zopa hits unicorn status with £220m funding round

Digital bank Zopa has raised £220m in a funding round ahead of plans to list in London next year, with the deal led by SoftBank. Sources close to the deal said it would value Zopa at £750m, placing it among UK-based fintech unicorns such as Revolut that have secured valuations of at least $1bn. Zopa has raised £160m since it gained a banking licence, taking total backing to £380m. Launched in 2005, it has financed £6bn loans through its online service and since setting up as a bank in June 2020, it has attracted £675m in deposits. Zopa, which has half a million customers, said the new funds will be used to provide regulatory capital to support an expansion of lending. Chief executive Jaidev Janardana said the funding round, which included participation from Chimera Capital and existing investors including IAG Capital, had raised more than expected. Lord Grimstone of Boscobel, the Minister for Investment, said: “Softbank’s investment in Zopa’s digital banking platform is a testament to the UK’s enduring strength as a global hub for investment.”

PRIVATE EQUITY

Private equity firms going green as investors avoid climate risky investments

Analysis shows that more than half of private equity firms in the UK now adhere to the United Nations Principles for Responsible Investment, the world’s most-recognised set of ESG principles, with the rate hitting 55% compared to 49% a year ago. The report also shows that more than half of private equity firms have angled their investment strategies towards ESG measures, with companies increasingly having to prove to investors that they take the issue seriously. However, 34% of private equity businesses have yet to outline their own ESG commitments.

INTERNATIONAL

UniCredit sounding out market over leasing unit

Italy's UniCredit has invited expressions of interest from investors for its leasing business to gauge market appetite as it weighs a potential sale. Sources say UniCredit is looking to gather investors' valuations with no decision on the sale as of yet.

FINANCIAL SERVICES

EU hints at extension to euro-clearing equivalence deal

Mairead McGuinness, the EU’s head of financial services, has hinted at a possible extension to the post-Brexit deal which allows banks from the bloc to access clearing houses in the City. Saying that Brussels would prefer to avoid a “cliff edge” situation, she said: “We have to make sure that there is no instability in the short-term, but we also have to look at our long-term interests.” A temporary equivalence deal between the UK and EU means City exchanges and clearing houses run by the London Stock Exchange and ICE can work on euro-denominated deals. A carry-over deal where pre-Brexit rules still apply to the euro clearing market is due to run out by June 31 next year. City A.M. says that while industry officials expect the EU to grant the City a temporary extension, with high volume interest rate and credit default swaps in euros is likely to be excluded – meaning clearing would have to move to the bloc.

FCA refers 950 pension advice clients to FSCS

The Financial Conduct Authority (FCA) has written to 950 defined benefit pension transfer advice customers to tell them they may be entitled to compensation, with letters issued to customers of firms in liquidation where reviews have identified that some customers were given unsuitable advice. Recipients have been told how they can make a claim to the Financial Services Compensation Scheme. Earlier this year, the regulator identified nearly 60 advice firms who it said should carry out past business reviews on their pension transfer advice, with the City watchdog expected to continue reviewing firms’ DB advice until at least spring 2022. The latest batch of letters mean the FCA has now written to 3,591 DB transfer advice customers this year.

Schroders sees AUM rise

Schroders has reported that its assets under management rose to £716.9bn in the third quarter of the year, mainly driven by inflows to its joint ventures. The division grew by more than £13bn, from £98bn to £111.4bn, in the three months to the end of September.

AmEx employees offered flexibility

American Express will allow employees to work from anywhere they want for up to four weeks a year. A memo from CEO Stephen Squeri said this would include the 15 days when employees are allowed to work outside their country. AmEx has divided employees into hybrid, onsite and fully virtual categories. Most of the hybrid model staff must work from the office two days a week, while onsite workers will attend for four to five days. Employees in the fully virtual category can work from home.

HEALTHCARE

Activist investors in stereo calls for GSK shake-up

Alex Ralph in the Times looks at activist hedge fund Bluebell Capital Partners and its call for a shake-up at GlaxoSmithKline. Bluebell recently wrote to GSK chairman Sir Jonathan Symonds calling for new leadership at the pharmaceutical firm. Mr Ralph says that although Bluebell denies it is acting in union with larger activist investor Elliott Management in its investment in GSK, “the two investors are close and are calling for similar changes.” With GSK preparing to separate its consumer healthcare division into a separately listed company, both Elliott and Bluebell have publicly urged GSK to consider a sale of the division instead. They have also called for CEO Dame Emma Walmsley to reapply for her job under a refreshed board.

LEISURE & HOSPITALITY

CMA launches probe into Teletext Holidays

The Competition and Markets Authority (CMA) has launched court action against Teletext Holidays over failings in refunding customers for package holidays cancelled due to the pandemic. CMA chief executive Andrea Coscelli said the watchdog is requesting a court order to make sure Teletext Holidays immediately pays back the money it still owes to customers and refunds people within 14 days, going forward. He added: “Companies must abide by consumer protection law and treat their customers fairly.”

BrewDog flotation could be delayed until 2023

Craft brewer BrewDog has suggested that its planned £2.1bn floatation may not happen until 2023, amid uncertainty in the sector. The company's CEO and co-founder, James Watt, denied that the delay was related to accusations from a group of former employees that there had been a "culture of fear" within the company. Advisers and banks are said to have recommended that a delay would be prudent given pandemic-related issues facing the hospitality industry.

REAL ESTATE

Price gap between most and least expensive towns hits £1m

The gap between the average house price in England’s most and least expensive towns is just over £1m, data from the Office for National Statistics (ONS) shows. In 2020 the median average price of homes in Ferryhill, County Durham was £39,000, making it the cheapest town for homebuyers. At the other end of the scale, homes in Northwood, which borders Hertfordshire and London, saw a median average price of £1.05m. In Wales, the gap goes from £60,000 in Ferndale, Rhondda Cynon Taf, to the £291,000 recorded in Dinas Powys in the Vale of Glamorgan. The ONS said the average house price in England and Wales in 2020 was £250,000, with England’s average at £259,000, while Wales had a typical price of £170,000.

RETAIL

THG founder gives up ‘golden share’

THG founder and chief executive Matthew Moulding has confirmed plans to give up his ‘golden share’, a perk that allows him to block any takeover of the business. The company said the changes are part of a move to gain a premium listing on the London Stock Exchange, with the golden share blocking a premium listing under current rules. As it looks toward applying to the premium segment of the LSE in 2022, the firm will also launch a review of its corporate governance structure, with sources suggesting the company could potentially seek to appoint a non-executive chairman. Andrew Ross, an analyst at Barclays, said the removal of Mr Moulding’s special share and the plan to move to the main market were both “positive steps to addressing a complex governance structure”.

ECONOMY

Ex-BoE adviser: Rate rise to control inflation would be a 'disaster'

Former Bank of England (BoE) adviser David Blanchflower has warned that lifting interest rates to tackle inflation could be a “disaster”, saying that price rises are almost certainly temporary. He told BBC Radio 4's Today programme that it was “very early days” to be looking at interest rate rises, saying that while Bank officials may opt to push ahead with an increase, he thinks it would be “a very foolish thing to do.” Offering that the UK has so far only had a “little bit of inflation”, Mr Blanchflower said: “We have had a couple of months of growth of inflation but it looks terribly temporary.” He also said that if the Bank does decide to alter rates, they would have to reverse the decision “pretty quickly”. His comments came after BoE governor Andrew Bailey expressed concern about inflation and said the Monetary Policy Committee “will have to act and must do so if we see a risk, particularly to medium-term inflation”.

OTHER

City generates nearly £100bn in taxes

Research by lobby group TheCityUK reveals that the City generated nearly £100bn in taxes last year, with it found that for every £100 in taxes, the financial, legal and accountancy sectors contribute nearly £13. The report shows that the accountancy and legal sectors alone yielded £20.5bn in taxes for the public coffers, a 5.4% increase on two years ago. The growth of these sectors has consistently outpaced the rest of the economy’s growth, with legal and accounting’s gross value added, a measure of output, rising 27.8% between 2011 and 2020 compared to 5.3% for the wider UK economy. Anjalika Bardalai, chief economist and head of research at TheCityUK, said: “The relative resilience of the legal and accounting sub-sector make it well-placed to make a strong contribution to the UK’s post-pandemic economic recovery.” The analysis shows that 755,800 people (2.3% of the UK workforce) are employed in the legal and accounting sectors, with partners estimated to be paying £5bn in taxes.

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