Construction industry starting to show signs of stress
BTG Advisory’s Gary Lee explains how the UK construction industry has been battered by Brexit, the pandemic and the war in Ukraine, the consequences of which have left firms with labour shortages and higher borrowing costs, dampening business sentiment. Signs of distress are starting to emerge, Lee continues, noting that, while output fractionally rose on a monthly basis in August, the three-month growth in output represents the slowest rate of growth for 12 months. “For those firms able to weather the months ahead, structural demand drivers are supportive for the sector in the long term. However, the sector may experience a correction before the medium-term opportunities to pick up market share and profitable contracts are presented.”
HSBC announces leadership shake-up as profits beat forecasts
HSBC reported $3.1bn (£2.74bn) in profits over the three months to September, much higher than forecast but down from $5.4bn a year ago. The lender’s revenue was boosted by the Bank of England’s repeated hiking of interest rates which drove its net interest income up more than $1bn (£884m) in September. However, the 40% slide in profits was largely the result of a hit from the sale of its French retail business and a $1.07bn provision for expected credit losses. Additionally, HSBC announced it was replacing Ewen Stevenson as chief financial officer at the end of the year. Georges Elhedery, co-head of global banking and markets, is to take over. The bank is adjusting its leadership team as part of succession plans for boss Noel Quinn.
Royal Bank of Canada plans UK commercial banking push
Royal Bank of Canada is planning a push into the UK’s commercial banking market. CEO Dave McKay said he hoped to replicate its US model where it acquired a local bank and then combined it with its wealth management business. McKay went onto confirm that RBC had no plans to move into the UK retail banking space. “It’s very hard to be a retail bank in someone else’s market. Almost all banks have pulled back from being a retail bank outside of their domestic market.”
Lenders cut cost of fixed-rate mortgages
Major lenders reduced the cost of their fixed-rate mortgage offers in the wake of Rishi Sunak's appointment as Prime Minister. Virgin Money, HSBC and Santander were among the banks to trim the cost of their fixed rate mortgages. Danni Hewson, a financial analyst at AJ Bell, told LBC News: "The markets have reacted really quite positively to not only the news that Rishi Sunak is now Prime Minister but also the fact that he is keeping Jeremy Hunt on as Chancellor."
Moody’s downgrades UK banks
Moody’s has downgraded a raft of UK banks over the Government’s “potentially weaker capacity” to support systemically important lenders. Barclays, Santander UK, HSBC, Lloyds Bank and NatWest were all downgraded from 'stable' to 'negative'.
BlackRock raises £4bn for new climate fund
BlackRock has launched a new climate infrastructure fund as it seeks to capitalise on the net zero transition. The asset manager raised $4.5bn (£3.97bn) for the fund, securing backing from public and private pension funds, sovereign wealth funds, insurance companies and family offices.
UBS profits slide as turbulent markets spook rich clients
UBS reported a lower-than-expected 24% slide in third-quarter net profit on Tuesday, with lower costs and rising interest income helping to mitigate the impact of turbulent financial markets. The bank has enjoyed strong inflows, attracting $17bn in net new fee generating assets in wealth management and $18bn of net new money in asset management.
Record number of Americans have bank accounts
A new report reveals that the number of Americans that remain unbanked has fallen from 5.4% in 2019 to 4.5% in 2021. The Federal Deposit Insurance Corp, which released the data, said the proliferation of online-only banks and an improving economy is bringing more Americans into the traditional financial system.
FCA set to clampdown on greenwashing
The Financial Conduct Authority said on Tuesday that it would roll out a package of new measures stamp out greenwashing in the investment industry. The FCA warned that while the number of sustainable products pushed by asset managers had boomed, “exaggerated, misleading or unsubstantiated claims” had damaged confidence in the products. “Consumers must be confident when products claim to be sustainable that they actually are,” said the FCA’s ESG head Sacha Sadan. “Our proposed rules will help consumers and firms build trust in this sector.” The move was welcomed in the City, with James Alexander, chief of the UK Sustainable Investment and Finance Association, stating: “Greenwashing has been consistently cited as a major challenge to the integrity, trust and growth of sustainable investment in the UK. This will boost investor confidence at this crucial time for tackling global environmental and social challenges.”
LEISURE & HOSPITALITY
Petition calls for freeze on alcohol duty
A petition which calls for the Government to support pubs and breweries by reinstating a freeze on alcohol duty and lowering business rates has been signed by over 150,000 people. The petition, launched by the Long Live the Local campaign group and backed by the British Beer and Pub Association, also calls for alcohol duty reforms that support British pubs and beer as a lower-strength product; and a reinstatement of the lower rate of VAT for food and drinks sold in pubs.
MEDIA & ENTERTAINMENT
DMGT under pressure over credit rating
The publisher of the Daily Mail, Metro and The New Scientist has offered to repurchase £40m worth of bonds from lenders as its prospects suffer in a deteriorating economic environment. Lord Rothermere’s buyout of DMGT last year made the company more vulnerable, ratings agency Fitch said, as it revised its outlook on DMGT's bonds to negative.
YouTube suffers first ever fall in advertising sales
Alphabet, the owner of YouTube and Google, saw its share price fall sharply on Tuesday after revealing the first ever decline in advertising revenues at its YouTube video streaming service. Shares fell 5.7%, wiping around $7.6bn off its value.
Twitter deal on track to close this week
Elon Musk intends to close his $44bn acquisition of Twitter on Friday following a contentious acquisition process. The news sent Twitter shares up 2.7% to $52.92, closing in on the $54.20 a share Musk agreed to pay in April.
Prices of budget food in supermarkets rises
The Office for National Statistics (ONS) has revealed that the price of budget food in supermarkets rose by 17% in the year to September. The ONS found sharp rises in the price of some household staples in supermarkets, with pasta prices rising by 60% in the year to September 2022, while tea prices went up by almost 50%. Other everyday items such as chips, bread, biscuits and milk also recorded large increases. However, some other items fell in price during the period, including orange juice and beef mince.
Sterling up and borrowing costs down after Sunak becomes PM
Sterling rose to a little over $1.14 on Tuesday, up 1.8% on the day, following the appointment of Rishi Sunak as UK Prime Minister. The yields on 30-year bonds fell to 3.67% after topping 5% following ex-chancellor Kwasi Kwarteng's unfunded tax cuts, making it cheaper for the Government to borrow money. Commenting on the market moves, Victoria Scholar, Head of Investment at Interactive Investor, said: “Some of the political uncertainty has been alleviated, helping to reignite demand for beaten up UK assets like the pound.”