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Daily News Roundup: Wednesday, 4th May 2022

Posted: 4th May 2022

BANKING

Bankers' pay growth outpaces other sectors

Institute for Fiscal Studies analysis shows that bankers’ pay has risen more than twice as much as other workers since before the pandemic. Bumper bonuses for big earners meant average pay for those in finance is 31% above the level recorded in December 2019, with this outpacing the 14% increase for workers across all sectors. The report shows that while pay in the sector largely tracked other industries between 2014 and 2019, since October last year pay growth in the finance sector has "dramatically pulled ahead of the rest of the economy". Xiaowei Xu of the IFS said: “Pay growth was concentrated among the highest earners in the sector.” It was found that of the top 1% higher earners, 30% work in finance.

Trader made error in 'flash crash', says Citigroup

Citigroup has said that one of its traders made an error when inputting a transaction that saw major European share indexes plunge on Monday, with the mistake prompting a flash crash - an extremely fast fall in the price of one or more assets. Sweden's benchmark Stockholm OMX 30 share index was one of the hardest hit, falling by 8% at one point. The error sent the wider pan-European STOXX 600 benchmark more than 2% down before Citi made a correction.

Halifax jumps gun with its announcement of rate hike

Halifax has apologised after sending emails to customers in error claiming the Bank of England base rate had changed. The emails were sent ahead of the Bank's interest rate decision tomorrow, with Halifax and Lloyds Bank customers affected. The emails explained the differences between variable and fixed-rate mortgages, as well as the support available to customers having difficulties with repayments. A Lloyds Banking Group spokesman said the email was issued in error and had been prepared "so that in the event of a rise, we could quickly advise customers and help them."

Banks enlisted to boost take-up of skills scheme for small businesses

High street banks are being asked to help promote the Government’s Help to Grow scheme, an initiative designed to raise productivity among SMEs by offering a 90% discount on management training courses.

PRIVATE EQUITY

CD&R in petrol stations offer over Morrisons

The Competitions and Markets Authority is expected to approve the acquisition of Morrisons by Clayton, Dubilier and Rice after the US private equity group offered to sell 87 petrol stations. The CMA is set to approve the acquisition by June 9, following a consultation that will close on May 17.

INTERNATIONAL

SEC expands crypto markets unit

The US Securities and Exchange Commission is to beef up its efforts to curb fraudulent activity in the crypto sector, adding 20 positions to its enforcement unit. The securities regulator confirmed that the division will be renamed the Crypto Assets and Cyber Unit and will have a total of 50 employees.

RBA raises rates down under

The Reserve Bank of Australia has announced a bigger-than-expected 0.25% increase in interest rates, with this the first official rise since 2010. Australian banks Commonwealth, Westpac, NAB and ANZ all announced their variable home loan interest rates will increase by 0.25%, in line with the official cash rate rise.

BNP Paribas sees revenues and profits rise

France’s BNP Paribas reported better than expected Q1 revenues and profits. Total revenue was up 11.7% year-on-year to €13.2bn, while net income climbed to €2.1bn, marking an increase of 19.2%. Revenue in fixed-income, currency and commodities trading rose by 47.9%, while equity trading revenue soared 60.9%.

CONSTRUCTION

Trade association warns of construction slowdown

Construction activity is headed for a drastic slowdown, according to the Construction Products Association (CPA). The trade association said surging inflation, labour shortages and supply chain disruptions have hit growth in the sector. Construction is forecast to see 2.8% growth in output, far short of the 4.3% growth the CPA expected three months ago. While strong demand offers a positive short-term outlook, the CPA has warned that tougher times are ahead.

FINANCIAL SERVICES

Advice firms call for action on consolidation

Amid increasing consolidation, a group of advice firms have urged regulators and lenders to act to make it easier for them to remain independent. A survey by boutique investment consultancy Albemarle Street Partners saw 49 advisers – 71.4% of whom were business owners – point to issues which make remaining independent difficult, including capital adequacy, a lack of lending options, and “disproportionate” fees for small firms. It was found that 84% of the advisers have been approached by buyers over the past year, with most seeing three or more approaches. On possible reforms, George Goward, managing director of George Square Financial Management, urged the Financial Conduct Authority to consider making it “easier to borrow,” while Simon Dickerson, a director at Medical and Financial, would like to see a reduction in the Financial Service Compensation Scheme levy.

MANUFACTURING

Manufacturers see costs climb and optimism dip

UK factories are hiking prices at a record pace, with three in five manufactures saying they have passed higher costs onto customers, according to the latest PMI survey by S&P Global. It found that cost inflation across the sector was the second-highest in 30 years in April. The rise in costs has made business less confident, with optimism among firms falling to a 16-month low. The S&P Global/CIPS UK Manufacturing PMI rose to 55.8 in April, up from 55.2 in March on an index where a reading above 50 indicates growth.

MEDIA & ENTERTAINMENT

Activist investor asks Hasbro to sell Entertainment One unit

Activist investor Ancora Holdings wants toymaker Hasbro to explore a full or partial sale of its Entertainment One unit to cut debt. Hasbro bought Entertainment One for about $4bn in 2019. Ancora, which has a stake of around 1% in Hasbro, says divesting the business can yield up to $2bn and deliver tax benefits. It has also urged it to replace longstanding directors on the board. This comes a week after activist investor Alta Fox Capital Management looked to oust Hasbro's chairman and two other directors and drive a spin-off of its Wizards of Coast unit.

REAL ESTATE

4m homes pushed into higher stamp duty bracket since the pandemic started

Soaring house prices have pushed more than 4m homes into a higher stamp duty bracket since the start of the pandemic, according to Zoopla. A total of 4.3m homes now attract a higher grade of stamp duty compared to March 2020. Zoopla analysis shows that the average value of a home in Britain has risen by £29,000 - or 13% - since the beginning of the pandemic, with an 8.3% spike in the last year alone. HMRC data shows that stamp duty receipts in England and Northern Ireland reached £18.6bn in the year to March, a rise of £6.1bn on the previous year.

RETAIL

BRC: Shop price inflation reaches record highs

Figures from the British Retail Consortium show that shop prices have risen from 2.1% in March to 2.7% in April, which is the fastest rate of growth since 2011. The price of food items rose from 3.3% to 3.5%, which is the highest figure on the BRC index since March 2013. Meanwhile, non-food items saw their fastest rate of growth since the BRC's records began in 2006, climbing to 2.2% in April, from 1.5% in March. This comes amid soaring costs of energy and commodities, such as wheat and oil, which drove up costs for many producers.

McColl’s accounts cannot be signed off by auditors

Convenience store business McColl's is set to have its shares suspended from the London Stock Exchange after revealing that it would be unable to get its accounts signed off by auditors in time. The group said it will not be in a position to publish its annual report by the end of May, as originally intended. Shares are set to be suspended from June 1, once discussions with regulators conclude. Under stock market rules, listed companies must publish results within six months or risk having shares suspended.

ECONOMY

Central banks set to target inflation with rate rises

Central banks are set to hike interest rates in a bid to tackle soaring inflation, with the Bank of England and US Federal Reserve expected to put rates up this week. The Reserve Bank of Australia yesterday increased rates from 0.1% to 0.35%, marking the country’s first rise in interest rates for 11 years. With the Australian increase steeper than expected, the Standard says it has prompted discussion over whether the Bank of England could put rates up by 0.5 percentage points rather than 0.25%. Deutsche Bank economist Sanjay Raja said forecasts from the Bank's Monetary Policy Committee “suggest only a modest level of tightening needed to bring the economy back into equilibrium,” with the Bank expected to increase rates from 0.75% to 1%.

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