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Daily News Roundup: Wednesday, 7th October 2020

Posted: 7th October 2020

BANKING

BBLS losses could top £26bn, NAO says

Analysis by the National Audit Office suggests British taxpayers could lose £26bn on the Government’s Bounce Back Loan Scheme due to a lack of credit controls and exploitation by criminal gangs. The audit office forecast costs of between £15bn to £26bn based on losses of between 35% and 60%, on the assumption that lending reached £43bn. But a worse-case scenario puts defaults as high as 80% or £34bn. A government spokesman said: “Our loan schemes have provided a lifeline to thousands of businesses across the UK. We targeted this support to help those who need it most as quickly as possible and we won’t apologise for this. Any fraudulent applications can be criminally prosecuted for which penalties include imprisonment or a fine or both.”

Banking industry sounds alarm on Johnson’s housing plan

Eric Leenders, managing director of personal finance at banking trade body UK Finance, has warned against irresponsible lending after Boris Johnson promised a big increase in low-deposit mortgages for first-time buyers. The PM told the Tory party conference yesterday that he wanted to expand home ownership by giving “first-time buyers the chance to take out a long-term, fixed-rate mortgage of up to 95% of the value of the home – vastly reducing the size of the deposit.” Mr Johnson said the policy could create two million more owner-occupiers.

Struggling SMEs locked out of bounce back loans

City AM reports on the small businesses unable to get state-backed bounce back loans because lenders are turning down new customers. Just five of the 28 accredited lenders are currently accepting applications from new customers, despite Chancellor Rishi Sunak extending the deadline for applications to 30 November. David Clarke, chairman of the Fraud Advisory Panel charity, says banks are wary of fraud with lenders having now tightened checks “so much that genuine companies are being denied help which seems unfair.”

Co-op Bank searches for new CEO for the sixth time in nine years

The boss of the Co-op Bank has quit after being in the role for just two and a half years. Andrew Bester, a former Lloyds banker, said his job at the bank was largely done, noting that his "ambition was to complete the major transformation phase of the turnaround". He will leave once a successor is found.

LSE listing for Bitcoin app

Mode has begun trading on the London Stock Exchange, with the Bitcoin banking app raising £7.5m through a share placing. Executive chairman Jonathan Rowland remarked: “Mode’s admission is a vote of confidence in our business strategy and our mission to reduce fragmentation and inefficiencies across the banking, payments, investment and loyalty industries.” The company is planning to turn its focus to launching an Open Banking payments solution “that eliminates the need for cards”.

Banking lobby group names new boss

UK Finance has appointed David Postings as its new chief executive. He will take up the post from next January. Mr Postings is currently a non-executive director at UK Finance and is the former chief executive of Bibby Financial Services and Moneycorp.

INTERNATIONAL

Goldman Sachs to name no more than 60 partners this year

Goldman Sachs will reportedly name no more than 60 partners this year. However, in an effort to make its partnership more exclusive, partners will be given more financial perks. The Wall Street Journal reports that, beginning this year, partners will receive carried interest – a portion of future profits taxed at low rates – in four of Goldman’s private investment fund. Such a perk has not been available to partners in over a decade.

Hong Kong to remain a key financial hub

Experts have told the BBC they expect Hong Kong's status as a key Asian financial hub to remain intact despite new security laws imposed by Beijing and the resultant protests. The near 60 listings on Hong Kong's stock exchange support this view, with Ant Group set to float there later this month too. Tara Joseph from the American Chamber of Commerce Hong Kong told the BBC's Asia Business Report: "The flow of money that comes in and out of Hong Kong on a daily basis, that goes into mainland China and comes out, is very hard to replicate.”

AUTOMOTIVE

McLaren road tests first ‘mass market’ hybrid supercar

McLaren’s new “high performance hybrid” is undergoing final testing before it goes on sale early next year. The company’s first production electric hybrid supercar forms part of a strategy to incorporate electric power into the struggling sports car maker’s portfolio.

AVIATION

Boeing slashes expectations for global passenger jet demand by 11%

Aircraft makers face an estimated $200bn in potential revenue losses as airlines shrink fleets on the back of coronavirus, Boeing says, as it slashes expectations for passenger jet demand over the next decade by 11%.

Brussels reaffirms post-Brexit stance on airline ownership rules

The EU transport commissioner has highlighted the bloc’s requirement that airlines be effectively owned and controlled by EU nationals to continue flying post-Brexit, with UK shareholders no longer qualifying.

CONSTRUCTION

Strong housing market fuels UK construction industry rebound

The IHS UK purchasing managers’ index for construction reached 56.8 last month from 54.6 in August, indicating that most businesses in the sector have reported a rebound in activity.

FINANCIAL SERVICES

Rishi Sunak consults on powers to block listings

The Chancellor is understood to be preparing to launch a consultation on new powers to block companies from listing on the London Stock Exchange on national security grounds. According to the plans, a listing could be blocked if there was reasonable suspicion that a hostile foreign state was seeking to deliberately undermine the reputation of the LSE or it was judged to potentially help a foreign state to more easily access state and commercial secrets. Meanwhile, research by BAE Systems reveals bankers at eight in ten financial institutions admitted that measures to combat money laundering were inadequate and nearly half were unable to identify human trafficking activity.

FCA bans sale of crypto-derivatives to retail customers

The City watchdog has banned the sale of derivatives and exchange-traded notes related to some crypto-assets to retail customers. The Financial Conduct Authority said such products cannot be reliably valued for a number of reasons, meaning retail consumers “might suffer harm from sudden and unexpected losses if they invest in these products”. The ban will come into effect from January 6th.

Auditors ‘uncertain’ over viability of Seedrs

Auditors have said there is "significant doubt" over the ability of Seedrs, the equity crowdfunding platform, to continue trading for the next 12 months, primarily because of fears over the impact of COVID-19. They said that there is "material uncertainty" over the company's status as a going concern without additional capital being raised. The platform announced merger plans with rival Crowdcube on Monday, the day before its 2019 accounts were published.

FCA takes action on fraud related to pandemic

The Financial Conduct Authority has introduced new sandbox services targeting companies that can innovate new products which can “detect and prevent fraud and scams, support the financial resilience of vulnerable consumers and improve access to finance for SMEs.”

HEALTHCARE

EU fast-tracks process for Pfizer and BioNTech’s COVID-19 vaccine

The approval process for a coronavirus vaccine being developed by BioNTech and Pfizer is to be speeded up by the European Medicines Agency, with some 1.3bn doses expected next year.

GSK treatment trial to move forward

A GlaxoSmithKline trial of an experimental coronavirus antibody treatment is to progress to the next level after no safety concerns were raised by volunteers.

LEISURE & HOSPITALITY

Pubs and restaurants face mass job losses

The head of UK Hospitality has warned that pubs and restaurants face a jobs "cliff edge" in October when furlough support is replaced by the less generous Jobs Support Scheme. Kate Nicholls said industry research had anticipated 560,000 cuts by the end of 2020, but she now feared far more. Ms Nicholls told the Treasury Select Committee the lobby group now anticipates far higher job losses “due to local restrictions, the national constraints on events, working from home and the curfew.” Meanwhile, the CBI has said Chancellor Rishi Sunak might need to offer more job support to “certain sectors and certain businesses” if the number of coronavirus cases continues to rise.

MEDIA & ENTERTAINMENT

New BBC chairman could be former government communications director

Former Downing Street communications director Sir Robbie Gibb is believed to be favourite in the contest to become the BBC’s next chairman.

RETAIL

Ikea plans 50 store openings

Ikea plans to open a record number of stores this year after demand rocketed following the end of lockdowns. The Swedish company and its franchisees will open 50 stores worldwide - including in the UK - adding to the 445 stores currently run by the brand.

ECONOMY

Finance bosses issue warning over zombie companies

Oliver Baete, the CEO of Allianz, has warned that government loans are camouflaging the underlying economic effects of the pandemic. Speaking at the Wall Street Journal’s CEO Council, he said: “We have a lot of zombie companies now that are just surviving because they are getting government money, we have a lot of jobs around furlough or part time that will be lost, certainly in 2021..” Baete went on to say that households were proving more resilient than many thought and that government spending needed to shift from consumption to investment following the COVID-19 pandemic. Speaking at the same event, Santander executive chairman Ana Botin added that it was important not to withdraw stimulus or support too early but “companies that deserve to be alive” should be supported.

IMF chief warns of hard recovery

International Monetary Fund Managing Director Kristalina Georgieva said on Tuesday that governments must continue with fiscal and monetary support or risk their economies crashing again. The IMF will make a small upward revision to its global economic output forecasts next week, Georgieva said, adding: “My key message is this: The global economy is coming back from the depths of this crisis. But this calamity is far from over. All countries are now facing what I would call ‘the long ascent’ - a difficult climb that will be long, uneven, and uncertain. And prone to setbacks.”

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