BANKING
Paragon numbers show ‘startling’ growth of challengers
The Mail’s Ed Magnus looks at Paragon Bank, saying that having reached £10bn in customer savings deposits just eight years after launching its first savings account, it highlights the “startling” growth of some of the UK’s challenger banks. Paragon’s savings director, Derek Sprawling, who has been with the bank since the beginning having joined from Virgin Money in 2014, says: “Aside from the big American banks, I don't think there is a challenger bank that has gone from £0 to £10bn in eight years.” He adds: “We always knew we were going to be this big because we were doing the right things from day one.” Mr Magnus notes CACI data showing that there is currently more than £300bn in accounts offering rates of 0.1% or less. He comments: “With so much cash languishing in savings accounts paying next to nothing, challenger banks like Paragon have led the way in offering savers a reasonable return on their savings.” He highlights that Paragon is looking to attract younger savers, noting that it has been busy building a network of partnerships with the likes of Monzo and Revolut as well as savings platforms such as Raisin UK and Hargreaves Lansdown's Active Savings.
INTERNATIONAL
Credit Suisse appoints sustainability framework head
Credit Suisse has appointed James Purcell as head of sustainability framework. This comes with the lender taking steps to improve shareholder value after a series of scandals tied to its management and operations. Mr Purcell most recently served as group head of sustainable, thematic and impact investments at Quintet Private Bank and has held similar roles at UBS Wealth Management.
FINANCIAL SERVICES
Watchdog accused of ignoring investment scheme warnings
The Financial Conduct Authority (FCA) has been accused of failing to act on warnings about Blackmore Bond, a property investment scheme that lost around £45m of investors' money when it fell into administration in April 2020. A report for the BBC’s Panorama saw claims that the FCA could have acted sooner and may have tried to cover up the fact it did not. According to the programme, concerns were raised about the scheme with the FCA in both 2017 and 2018. The FCA insists it is “not true” that it failed to act and said it took “action where we could,” adding that its powers were “limited” due to Blackmore not being a regulated firm. MP Kevin Hollinrake, a member of the House of Commons' Treasury Committee, said: “I'd like to say this is a one-off case. But the reality is we have seen a succession of cases like this where the FCA has failed. And it's failed here again.” He added that there is a need for a “root-and-branch” investigation into the matter. Baroness Susan Kramer has also called for a probe, saying there is the need for an investigation equivalent to the Dame Gloster report into collapsed mini-bond issuer London Capital & Finance.
Advisers warn FCA on equity release ‘blind spot’
Advisers say the Financial Conduct Authority (FCA) needs to change how it regulates equity release products. It is not equity release products themselves that are prompting concern, with the industry instead worried about the quality of the advice given alongside their purchase. The FCA flagged concern over unsuitable equity release advice two years ago, with a review finding that advisers were not always able to show their recommendations were suitable for clients. It was also shown that the reasons behind consumers looking at the products were not always challenged appropriately. Tom McPhail, director of public affairs at consultancy The Lang Cat, said that although regulation which focuses on the quality of the advice given is important, more focus needs to be put on the advice not given. He argues that the FCA should regulate equity release separately to the mortgage market, saying ministers and the City watchdog “have a massive blind spot when it comes to making best use of housing wealth.” Kevin Bailey, managing director at Wessex Investment Management, feels the FCA has been “reactive to too much” that has happened in financial services in recent years.
One in three investors 'vulnerable'
One in three of all investors fall into the Financial Conduct Authority’s (FCA) definition of vulnerable, according to research from Boring Money. FCA guidance determines vulnerable customers as those who need special consideration due to health, life events, financial resilience, and capability. Boring Money surveyed 4,500 people and found that a fifth of all investors classified themselves as vulnerable; 27% said that their confidence about investing out of ten is two or less; and 34% have reported vulnerability on the regulator’s stated criteria. An FCA poll in 2020 found that the pandemic raised the number of vulnerable adults in the UK to almost 28m.
HEALTHCARE
Politan takes stake in Masimo
Activist investor Politan Capital Management has disclosed an 8.4% stake in medical device maker Masimo. Politan, which said it acquired the stake as the shares were undervalued and represented an attractive investment opportunity, plans to engage with Masimo's board and management to discuss the company's business and strategic plans. It added that this will include talks on the possibility of changes to the executive suite and board.
REAL ESTATE
Rise in repossessions is 'calm before the storm'
The number of homeowner property repossessions increased by 5% in the second quarter of the year compared with the first. Some 630 mortgaged repossessions took place, UK Finance said. Buy-to-let repossessions fell by 8%, with 350 cases recorded in the second quarter. UK Finance said that due to repossession activity previously being impacted by the pandemic, cases taking place now are, “therefore, almost exclusively historic cases”. In Q2, some 74,540 homeowner mortgages were in arrears representing 2.5% or more of the outstanding balance, 2% down on the previous quarter. There were 5,640 buy-to-let mortgages in arrears of 2.5% or more of the outstanding balance – 4% fewer compared with the previous quarter. But Equifax UK warned: “This is the calm before the storm. As we're already seeing rising arrears in unsecured loans and credit cards, we expect to see the mortgage market follow close behind.”
Mortgage transactions expected to slip 6%
Mortgage activity is forecast to drop 6% in 2022 as rising inflation and interest rates put pressure on potential buyers. Data from brokers Henry Dannell show that the housing market has dipped from the highs of 2021, where the end of lockdown and stamp duty holiday drove activity. The report shows Monetary Financial Institutions (MFI) processed almost 1.5m mortgage transactions last year, an increase of 17%. With rates climbing, MFI activity is predicted to decline and a 16.5% fall in specialist lending is forecast – with this following a 19% surge since 2020. Henry Dannell director Geoff Garrett said that amid the cost of living crisis and aggressive interest rate hikes, “we can safely expect a significant decline in activity for both MFIs and specialist lenders.”
RETAIL
Grocery price rises to cost shoppers £500 more per year
Shoppers can expect their supermarket bills to rise by about £533 this year as inflation in supermarkets hits its highest level in more than a decade. Data suggests prices at supermarkets are 11.6% higher this month than they were in August last year, according to the latest figures from the consultancy Kantar. The rise in the price of items ranging from fresh foods to clothing is adding about £10.25 a week to the average weekly shop. Rising prices have also resulted in more shoppers switching to discount supermarkets. Lidl is the fastest-growing grocer, with sales up by 17.9% over the past three months, pushing up its market share to 7%. Aldi has grown its market share by 0.9 percentage points to 9.1%. Together with Lidl, it has gained 1.8%, or £2.3bn, of grocery sales in Britain in the past year.
ECONOMY
Real pay falls while unemployment rate holds at 3.8%.
Office for National Statistics (ONS) figures show that average wages rose 4.7% between April and June. However, this was outpaced by inflation, which has soared to 9.4%. This means the real value of pay fell by 3% in the second quarter. Growth in average total pay including bonuses was 5.1%, but with inflation taken into account, in real terms it fell by 2.5%. The ONS report also reveals a gap between public and private sector wage growth. While private sector wages are up 5.9%, pay in the public sector saw growth of just 1.8%. Reflecting on the ONS data, Nye Cominetti, a senior economist at the Resolution Foundation, warned: “The scale of this pay pain is even deeper than official figures suggest too, as pay growth estimates are still artificially boosted by the effects of the furlough scheme last year.” Meanwhile, separate ONS data shows that the number of vacancies dropped by 19,800 to 1.274m between May and July. The unemployment rate held at 3.8%, while the number of workers on payrolls rose by 73,000 between June and July to 29.7m.
OTHER
Whistleblowers play key role in furlough fraud fight
Analysis shows that HMRC has received 13,775 whistleblower reports over furlough scheme fraud as people report their employers and ex-employers. While the sheer number of furlough claims at the height of the pandemic – and the need to make the payments immediately – made it difficult for HMRC to spot fraudulent claims, it has since added a significant amount of resource to its investigation teams. HMRC is now stepping up its enforcement activity with a view to recovery, issuing penalties and pursuing prosecution or directors disqualifications where appropriate.