BANKING
Challenger bank lending to SMEs hits record high
Data from the Government-backed British Business Bank shows that lending to small firms by challenger and specialist banks hit a record high in 2022. The report shows that smaller banks lent £35.5bn to SMEs last year, giving challenger and specialist banks a 55% share of the market. This exceeds the 51% market share smaller lenders achieved in 2021. While the sector’s biggest banks - Barclays, Lloyds, HSBC, NatWest and Santander – have traditionally dominated smaller business lending, challengers such as TSB and Metro Bank and specialists like Shawbrook Bank and Paragon Bank have taken a growing share of business customers. Gross bank lending to smaller businesses reached £65.1bn in 2022, up from the £57.7bn seen in 2021.
Mortgage rates expected to increase again
Lenders are beginning to raise their mortgage rates again, with brokers warning of an end to falling mortgage rates in the near-term. Andrew Montlake, a mortgage broker at Coreco, said: “Anyone waiting to see interest rates get suddenly much cheaper before buying could well be disappointed and, as things stand, it looks better to lock into a rate sooner rather than later.” Richard Campo, founder of brokers Rose Capital Partners, suggests that if the base rate rises again, the five-year fixed rates below 4% seen in the current market may not be around for long, suggesting rates will settle between 4% and 4.5% in the long run.
CONSTRUCTION
CMA launches probe into the building and rental sectors
The Competition and Markets Authority (CMA) has announced a probe into the building and rental sectors. The move could see housing tenants given extra protections and housebuilders forced to change their practices. The CMA says it plans look at four areas in the house building sector: build quality, land management, innovation, and oversight by local authorities.
FINANCIAL SERVICES
FCA on alert over health of fintech firm
The Financial Conduct Authority (FCA) is on alert for an emergency restructuring of Railsr, with the City watchdog monitoring the situation at the payments fintech. This comes amid reports that Railsr is progressing plans to sell its regulated operations to third parties following the termination of takeover talks with payments technology business Flutterwave. While it is possible that the entire business would be sold through a solvent transaction, insiders say an administration of Railsr's parent company is one of the options that has been under consideration. The business has been facing cashflow issues in recent months and its annual accounts have not been filed by Companies House. They are now overdue by over two months, meaning the company is set to face fines.
Third FTX executive admits charges in fraud case
Former FTX executive Nishad Singh has pleaded guilty to criminal charges in the US. The former director of engineering at FTX has agreed to co-operate with an investigation into Sam Bankman-Fried, founder of the now-bankrupt cryptocurrency exchange. Mr Singh, who said that he had known by mid-2022 that Alameda Research, Mr Bankman-Fried’s hedge fund, was borrowing FTX customer funds and that customers were not aware, says he is “unbelievably sorry” for his role in the scandal. Mr Bankman-Fried has pleaded not guilty to eight criminal charges. Prosecutors say that he stole FTX customer funds to plug losses at Alameda. Caroline Ellison, who was Alameda’s chief executive, and Gary Wang, who was FTX’s chief technology officer, have already pleaded guilty to criminal charges.
Cunliffe: Britcoin could ‘open a new frontier’ in payments
Jon Cunliffe, the deputy governor at the Bank of England, says a central bank digital currency (CBDC) could “open a new frontier” in payments. Addressing MPs at a Treasury Committee hearing, he said: “We can configure payments to an extent now, but it’s quite clunky and they’re quite blunt instruments, whereas programmable money would enable much more differentiation and variation.” The Bank’s deputy governor suggested that a digital pound – which has been dubbed ‘Britcoin’ - could potentially make the financial system more stable and deliver “huge benefits for the economy and for society.” Mr Cunliffe said that despite risks associated with CBDCs, a digital pound has “financial stability benefits,” noting that it “provides another payments system in terms of resilience but it also means if we have to deal with failed banks again, there’s another asset people can go into.”
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REAL ESTATE
Average house price up £50k since 2020
House prices have soared almost £50,000 on average since the beginning of the pandemic, according to new data from Halifax. The 20.4% rise since the start of 2020 compares to a 7.8% increase in the three previous years. Average house prices have increased by £48,620 between January 2020 and December 2022 - from £237,895 to £286,515. Wales saw the strongest house price growth, rising by 29.3%. In cash terms, the South East of England saw the biggest jump, at £69,224. Detached homes grew in value more than all other property types, rising from £359,725 to £453,070 in the three year period.
Homeowners cut asking prices as market cools
House sellers are taking 4.5% off their original asking prices to achieve a sale, according to data collected by Zoopla. It shows that the average home has been discounted by £14,100, with more than four in 10 homes listed on the website currently having had their asking prices reduced. The discounts reflect the market adjusting to the reduction in buying power, as higher mortgage rates affect affordability, according to the platform.
House prices set to fall but unlikely to crash
UK property prices will fall less than previously expected in 2023, according to analysts polled by Reuters. A survey of 19 housing market experts suggests house prices will fall by 2.4% this year. This marks an improvement on the 4.7% decline predicted in November’s survey. The experts expect the average price to rise by 1 % in 2024 and 3.5% in 2025. The survey also predicts that average rental prices will go up by 5% this year and in 2024, followed by a 3.3% increase in 2025.
RETAIL
High Street chain closures slow
Chain stores are closing at their slowest rate for eight years, new research shows. While a total of 11,530 outlets shut across in 2022 – representing an average of 32 closures a day – this marks an improvement compared with the previous three years. Comparing openings to closures, 2022 saw 3,627 net closures. This was far below the 10,059 seen in 2021 and the 9,877 recorded in 2020.
Ocado losses soar to £500m
Ocado has reported a £500.8m pre-tax loss for the year to November 27, increasing by £323.9m compared with the year before. The company reported that underlying losses, on earnings before interest, taxes, depreciation and amortisation, were £74.1m, compared with a profit of £61m the year before. Group revenue remained broadly flat at £2.5bn, an increase of 0.6% during the same period.
1,400 jobs hit as Sainsbury's closes Argos depots
Sainsbury's is planning to close two Argos depots in a move that will impact more than 1,400 jobs. The firm, which is integrating its Sainsbury's and Argos operations to cut costs, plans to shut an Argos warehouse in Basildon, Essex, and a depot in Heywood, Greater Manchester by 2026.
ECONOMY
Recession uncertainty hits optimism
Analysis by Lloyds shows that optimism among businesses in London dipped in February, with uncertainty over whether the economy will fall into recession having an impact on confidence. Optimism among the capital’s companies has dipped 19 points to 18%, according to the bank’s business barometer, with this coming in slightly lower than the 21% national average. While London firms’ confidence in the UK economy has declined by 34 points to -1%, optimism in their own business prospects fell four points to 37%. Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: “Business confidence has lost a little momentum this month, following the strong gains seen recently,” adding: “While inflation appears to be tapering, pressures on consumers will need to ease further to help make it a more stable environment for businesses to operate.” On hiring intentions, the UK-wide business barometer saw the rate rise for the third consecutive month, with 43% of firms anticipating an increase in their workforce. The proportion planning to reduce headcount was static at 23%, meaning the net balance was up three points at 20%.
Grocery price inflation hits record high
Grocery prices have risen by a record 17.1% year-on-year, with milk, eggs and margarine among the items driving the increase. Research shows that in the four weeks to February 19, prices increased at the highest rate since records began in 2008. The increase means consumers’ annual bills will be £811 higher, on average. Meanwhile, an index by the British Retail Consortium and NielsenIQ shows that non-food inflation rose to a record 5.3% in February. Overall inflation in shop prices rose to 8.4% in February, up from 8% in January.
OTHER
Small firms flag cost-of-living struggles
A poll by Santander has revealed the biggest challenges for small firms, with rising energy costs (61%), higher material costs (47%), and customers spending less (41%) the most commonly cited concerns. The survey saw 65% of SMEs say the cost-of-living crisis has made it harder to run their enterprise. Of the 750 retailers polled, 44% have taken steps outside of their comfort zone to keep their business viable – including 27% taking out a bank loan. More than a fifth (21%) have used buy now, pay later schemes to purchase business supplies, while 29% have negotiated better deals with suppliers. John Baldwin, head of commercial banking at Santander UK, noted that small businesses have faced “a series of unprecedented events … starting with the pandemic in 2020, through to the rising cost of living now.”