£9bn more in accounts without interest
The amount of money held in accounts that pay no interest rose by £9.1bn in May, reaching just under £200bn. Moneyfacts analysis shows that most of the £814.6bn in easy-access accounts is with big banks that typically pay the worst rates, with the average at just 0.24%. The analysis also shows that the number of savings accounts available has dipped from by 370 to 1,398 since March and now stands at the lowest level since 2007.
City grandees call for debt plan
Katherine Griffiths in the Times reports that a group of City grandees including Lloyds chairman Lord Blackwell believe ministers should create a publicly-owned body to take on unsustainable debt lent under the state-sponsored coronavirus support schemes, which could be parcelled up and sold to private investors. Another mooted initiative would see companies paying a share of their revenues or profits over several years. Both plans, Ms Griffiths suggests, would “essentially be a banking bailout”, with the burden of bad debts taken away from financial institutions. Using the state-owned British Business Bank is an option, she offers, saying it could take small lenders’ loans as collateral to access central bank funds.
Mortgage costs at a record low but savers are hit
Mortgage rates are at a record low but average returns for savers have fallen below 1% for the first time. Two-year fixed-rate mortgage rates have dropped under 2% for the first time, according to analysis from Moneyfacts, and five-year deals are now at the lowest level on record, with a typical loan charging borrowers 2.25%. However, all savings accounts, including easy-access, fixed-rate and Isas now pay an average interest rate of less than 1%, the analysis found.
First Direct tops consumer poll
Research looking at customer service during the coronavirus crisis saw First Direct top the list of consumers’ best brands, with Starling Bank ranking third. Shopping channel QVC sat between the banks in the rankings, while John Lewis & Partners and retailer Lush made up the top five. The supermarket sector topped the list for customer service, with its score up 4% on last year’s rankings, with financial services also seeing a 4% increase that saw it ranked the next best performing sector.
Lockdown sees users turn to tech
Analysis shows that two-thirds of UK adults now rely on mobile and online banking technology to manage their money. A study shows that, since March, 90% of British adults check their accounts online while 80% transfer money and 35% withdraw investment funds over the internet. More than a fifth of fintech users have secured new financial products during the lockdown, with almost half of consumers planning to continue using tech more frequently, even as bank branches reopen.
Interest scrapped at Tesco Bank
Tesco Bank is removing interest for its 240,000 current account holders who currently earn 1% on balances of up to £3,000. A Tesco Bank spokesman says the decision was made after the Bank of England cut its base rate to 0.1%. Elsewhere, Santander 123 customers will soon see their interest drop to 0.6% after the bank reduced rates from 1.5% to 1% in May.
Britain’s credit card debt down 15%
Figures show that Britons have cut their combined credit card debt by about £10.5bn this year, marking a 15% cut in the nation's credit card balance. Analysts at Goldman Sachs expect a further 15% to be trimmed from the total this year.
Deals slowdown threatens to squeeze venture capital liquidity
The PitchBook-NVCA Venture Monitor suggests venture firms are set to complete the lowest number of sales or IPOs since 2011 this year, with 376 transactions worth $45.3bn seen in H1.
Oatly raises $200m from Blackstone-led group
A group led by private equity firm Blackstone has acquired a $200m stake in Swedish oat-milk maker Oatly. The $200m investment represents about a 10% stake Oatly, putting the firm's value at about $2bn.
US banks set aside $28bn
Three large US banks have set aside almost $28bn amid concerns about customers defaulting on loans due to the coronavirus pandemic. JPMorgan has set aside more than $10bn for losses, including nearly $9bn to build its reserves. The loan loss charges left the lender with second quarter net income of $4.7bn, or almost half what it earned a year earlier. Group-wide revenue grew 15% to almost $33bn. Citigroup, which has set aside about $7.8bn to cover potential losses, expects customers to default on nearly 3.9% of loans, up from 1.8% in 2019. It yesterday posted a net income of $1.3bn on revenue of almost $19.8bn, a 5% climb. Wells Fargo has set aside $9.5bn to cover potential coronavirus-related losses, including $8.4bn in reserves. The bank saw a $2.4bn loss in Q2, compared to $6.2bn profit in the same period in 2019. This marks its first quarterly loss since 2008.
European banks accused of propping up coal polluters
Analysis shows that European banks are helping support coal-burning polluters, with UniCredit, BNP Paribas, Barclays and Société Générale lending €7.9bn to the eight highest-emitting coal consumers since 2018.
Virgin Atlantic secures £1.2bn rescue package
Virgin Atlantic has announced a £1.2bn rescue deal after securing a £170m investment from US hedge fund Davidson Kempner and support from credit card companies. Sir Richard Branson, the airline's founder, will inject £200m, and the Virgin Group and US airline Delta, a minority investor in Virgin Atlantic, will defer £400m of fees owed through a joint venture agreement.
Morgan Sindall in £250m development deal
Construction company Morgan Sindall has received £252m from private landlord Get Living to complete the Lewisham Gateway redevelopment project. The first phase of the £375m project is near completion. The development will feature 649 rentable properties and a combined 50,000 sq ft of shops, restaurants and office spaces.
Principality CEO calls for improved diversity
Julie-Ann Haines, the first female CEO of the Principality Building Society, has called for greater diversity in financial services, saying that the sector has “a long way to go.” She said: “I recognise that I have a platform as the first female CEO to really make some changes, not just in my organisation, but to set the tone." A recent Financial Conduct Authority report found that 17% of the most senior roles in the sector in the UK were held by women, with little improvement seen over the previous 15 years.
McKinsey told Wirecard to fortify controls before collapse
Consultancy McKinsey reportedly warned scandal-hit Wirecard it needed to address an absence of controls in 2019, urging it to consider measures including appointing a group compliance officer.
Ashmore assets rise on back of emerging markets rally
Emerging markets fund manager Ashmore increased its asset pool by 9% in the second quarter as buoyant equity markets helped it to partially reverse losses sustained during a market sell-off in March.
LEISURE AND HOSPITALITY
Consumers may not see hospitality VAT cut
The Guardian reports that some organisations will not pass a reduction in VAT for tourism and hospitality sectors onto customers. Chancellor Rishi Sunak last week announced that the tax would be cut from 20% to 5% from July 15 until January 12 2021 for restaurants, cafes, hotels and attractions such as zoos and cinemas.
China threat Lockheed Martin over Taiwan arms sales
China is set to sanction Lockheed Martin for its role in providing weapons to the contested state of Taiwan. Chinese foreign ministry spokesman Zhao Lijian urged the US to stop selling arms to Taiwan in the interests of regional stability. “In order to safeguard the country’s interests, China has decided to take necessary steps, and put sanctions on the main contractor for this sale, Lockheed Martin”, he said.
MEDIA AND ENTERTAINMENT
Mobile providers told to remove Huawei 5G kit
The UK government’s Digital Secretary Oliver Dowden has announced that the UK's mobile providers are being banned from buying new Huawei 5G equipment after December 31, and they must also remove all the Chinese firm's 5G kit from their networks by 2027. It follows sanctions imposed by Washington, which claims the firm poses a national security threat - something Huawei denies. Mr Dowden said the move would delay the country's 5G rollout by a year. He added that the cumulative cost of this, and earlier restrictions announced against Huawei earlier in the year, would be up to £2bn.
A third of audits fall short of expected standards
One in three audits by top firms failed to meet the expected standards last year, according to the Financial Reporting Council (FRC). The proportion of audits found by the FRC to require improvement or significant improvement increased to 33% from 23% a year ago, although the Telegraph says this may partly reflect the regulator’s decision to focus on higher risk audits and the wider scope of this year’s inspections. The FRC plans to step up its proactive supervision of firms and boost the number of quality inspections it carries out in 2020/21.
Commercial property sales increase
New figures show that the investors spent £1.3bn on commercial property in the UK during June. While this is 54% down on the £2.8bn spent in June 2019, it marks a 42% increase on the £755m spent in May and suggests the market may be stabilising amid the coronavirus crisis. Analysis shows that February saw sales of £8.4bn but, as the pandemic started to have an impact, sales slipped to £3.5bn in March and £859m in April. The Telegraph notes that Q2 was the weakest quarter on record for UK investment, while sales during H1 are thought to be 43% below the five-year average.
DFS to cut jobs as revenue falls
DFS has reported that revenues fell by £271m to £725m in the year to the end of June after suspending deliveries for most of its final quarter due to lock-down restrictions. The retailer will report a loss before tax of between £56m and £58m for the period. DFS also confirmed it will cut jobs as part of a restructuring programme, which will take place at subsidiaries Dwell and Sofa Workshop.
Economy sees slower than expected rebound
Data from the Office for National Statistics (ONS) show that the economy rebounded more slowly than expected in May, growing just 1.8% from the previous month when economists had expected an increase of around 5% on the back of lockdown measures easing. The increase recorded in May follows a record 20.4% fall in April and a decline of 6.9% seen in March. The ONS figures show that the economy is now 24.5% smaller than it was in February and has shrunk 19.1% in the three months to May compared with the previous three-month period. Revealing the figures, the ONS warned that the economy is "in the doldrums".
OBR in debt warning
The Office for Budget Responsibility (OBR) has warned that the UK must raise taxes or cut spending as borrowing soars on the back of the coronavirus crisis, noting that the economy faces a decline of 12.4% in 2020. The OBR said the Government is on course to borrow £372bn this year to pay for the shortfall between tax revenues and public spending, with the UK's total debt pile set to hit 104.1% of GDP. It warns that without tax rises or spending cuts, debt could climb to more than 400% of GDP by 2070. The OBR’s Fiscal Sustainability Report suggests the economy will not get back to its pre-crisis level until the end of 2022, while unemployment is likely to rise to a record 12% by the end of 2020, falling back to 10.1% in 2021.