Published: 28 May 2021
By Suzanne Evans, Director, Political Insight
Chancellor Rishi Sunak yesterday told a Treasury select committee hearing that former PM David Cameron's involvement with finance firm Greensill Capital "was not relevant” and that all requests from businesses for economic support were dealt with "on merit". Sunak added that it was "entirely right" that officials should have considered any proposal, including those from the former prime minister, to help businesses given the scale of the impact of Covid-19. Earlier this month, the Treasury released two text messages sent by Mr Sunak on his private phone to Mr Cameron telling the ex-PM that the request for access to government-backed loans by finance firm Greensill Capital, where Cameron worked as an adviser, was being examined. Greensill filed for insolvency in March and was run by Lex Greensill - a former adviser to Mr Cameron during his time in Number 10. Mr Cameron denies having broken any codes of conduct or government rules. Greensill is now the subject of an official investigation by the Serious Fraud Office.
Treasury officials have told MPs that they ‘don’t know’ what the cost of covid will be to the taxpayer as ‘it is too early to tell,’ and the question is ‘riddled with challenges.’ Tom Scholar, permanent secretary to the Treasury said: “In terms of cost to business, jobs and incomes and then ultimately tax receipts and the public purse… that’s the figure that’s unknown and we will be debating it for some years to come”. He added that the National Audit Office (NAO) May 2021 figure of a £372bn commitment in total “is a good and reliable snapshot based on what we know now” but does not take into account demand-driven programmes such as COVID testing and vaccination where cost will depend on take-up. Another major factor, he said, will be the extent to which businesses are able to pay back loans: the NAO estimates that of £92bn in loans guaranteed by the government and the Bank of England, £26bn are likely to be written off. Another challenge Treasury officials pointed out was deciding exactly what is a COVID related cost, giving examples of Universal Credit and the NHS, as it was difficult to track individually what was covid driven in terms of expenditure in these areas.
Small and medium-sized companies (SMEs) have warned the UK Trade and Business Commission they are facing an "existential threat" to jobs and business from Brexit red tape. Suren Thiru, head of economics at the British Chamber of Commerce said: "The long-term structural issues of the (current) deal that means that exporting to the EU may not be viable for some businesses longer term." Lee Jones, managing director of chemical supplier Fluorochem, said: “We’ve investigated every possible solution… In a nutshell if nothing is resolved this year, because we cannot afford to sit around and wait for things to potentially come up in twelve months or two years, we will relocate…It is impossible to remain competitive in Europe by shipping from the UK using the current methods... It’s an absolutely crazy system." A call has gone out from small businesses want a new minister in the Department for International Trade to help them navigate challenges following Britain's withdrawal from the EU.
The Society of Motor Manufacturers and Traders says that while car production for the UK market declined 3.1% in the first four months of 2021, car exports have risen 22.5%, meaning some 83% of cars made in the UK were shipped overseas. So far, the EU "remains by far the most important destination for British cars," the body said, taking 52.1% of all exports, followed by the US (17.4%) and China (7.4%). The UK made 68,306 cars in April, a big jump from just 197 cars made in April 2020, when Covid restrictions halted manufacturing. However, the performance was 3.8% below April 2019's output, before the pandemic hit.
NatWest has put an ‘urgent’ cryptocurrency scam alert on its app, after a record number of reports of fraud between January and March 2021. “If you’ve been contacted by a ‘trader’ promising big profits and offering to help you invest in cryptocurrency, this is a scam,” the bank said. “Always have control of your cryptocurrency wallet. If you didn’t set the wallet up yourself or can’t access the money in the wallet…you should stop making payments immediately.” The bank also warned customers that they could “lose all of your money” without following the advice. "We have prevented millions of pounds from being sent to crypto-criminals who are exploiting the high levels of interest in the currency…consumers should always be alert, especially to the use of fake websites and bogus celebrity endorsements," said Jason Costain, NatWest's head of fraud prevention. He also advised checking that cryptocurrency sellers are registered with the Financial Conduct Authority before trading with them.
HSBC is to sell its US retail banking operations after four decades in the business. The bank has agreed to sell 80 branches on the east coast of the US to Citizens Bank along with $9.2bn of deposits and $2.2bn of loans for an undisclosed sum. Cathay Bank will buy HSBC's west coast retail banking operation comprising 10 branches, $1bn of deposits and $0.8bn of loans. HSBC will keep 20-25 of its 148 branches to serve wealthy clients and wind down the remaining 35-40 sites. Sharecast News reports that the move marks the end of HSBC's ambitions in the US mass market, which started when it bought Marine Midland in 1980 and culminated in the disastrous acquisition of subprime lender Household in 2003 for almost $15bn. Household's bad debts during the financial crisis hammered HSBC and would have wiped out a smaller bank.
UK-based pharma GlaxoSmithKline say their 'sotrovimab' product has received emergency use approval in the United States for the treatment of Covid-19. Sotrovimab is an investigational single-dose monoclonal antibody which has been allowed for the treatment of those at high risk of progression to severe disease, including hospitalisation or death. GSK also announced that it has also started a global phase 3 study of its Covid-19 vaccine candidate with Sanofi.
Activist investor Elliott Management will not call for GlaxoSmithKline to sell its vaccines and pharmaceuticals business, according to The Times, which also claims Elliott has no plans to demand cuts to GSK's £5bn research and development budget and will support the company staying in the UK. Elliott, known for shaking up companies it invests in, took a major stake in GSK in April. The investor has declined to comment publicly on its plans for GSK. The UK government is reported to be concerned about Elliott's investment in one of Britain's biggest drug companies. GSK, run by CEO Emma Walmsley, is planning to split into two businesses - biopharma and consumer healthcare.
Uber has struck a landmark deal with the GMB union to allow 70,000 drivers to become members. It is the first time a company like Uber has recognised a trade union in the UK and the first time a company such as Uber has entered into a collective bargaining agreement, marking a huge shift from Uber's position just a few years ago, Yahoo Finance reports.Trade union representatives will have a presence in Uber's driver support hubs and both sides will meet quarterly to discuss driver issues and concerns. Mick Rix, a national officer for GMB, said: "This ground-breaking deal between GMB and Uber could be the first step to a fairer working life for millions of people. History has been made.”
Half-year profits at the Daily Mail and General Trust have nearly halved because of the impact of lockdowns. Pre-tax profits plunged to £42 million in the six months to March 31, down from £77 million a year ago. The group attributes a 95% drop across its events business because of restrictions, and consumer media sales were also 10% lower. Although the firm said performance across MailOnline and its Daily Mail and Mail on Sunday titles was “solid,” with a drop of only 5% in revenue, performance was hit at Metro, its free commuter newspaper, which is heavily dependent on ad, and saw revenues plummet 72% over the half-year. MailOnline grew 9%. The Mail said it is planning two major physical events in September, but it expects trading in the division to remain “very challenging”.
The Daily Mail and General Trust is set to benefit from a return of eight times on its investment in online car firm Cazoo. The Trust has an approximate 20% stake in Cazoo, having invested £117m in the firm, and is now set to receive a windfall of $1.35bn from its initial public offering on the New York Stock Exchange.
UK mattress firm Dreams is to be bought by US bedding company Tempur Sealy International in a deal worth £340m. Dream’s current owners Sun European Partners paid £35m for the company after it collapsed into administration in 2013. As part of the agreement, Dreams, which has around 2,000 employees in Britain and makes all of its own-brand mattresses at its factory in Oldbury, will keep its current management team in place, led by chief executive Mike Logue. Dreams sells approximately 11,500 mattresses, bases and headboards per week, both in its 200 physical stores and online, and last year recorded sales of £327m, its sixth consecutive year of growth. The transaction is expected to close in the third quarter of this year.
Pets at Home has posted annual revenue of £1bn for the first time, a rise of 8.7%, off the back of a pet-ownership boom during lockdowns, when some two million people bought new pets. However, underlying pre-tax profits came in at £87.5m, a fall of 6.4% compared to the year prior, because of the costs of implementing covid rules and the repayment of around £30m in business rates relief.
Tate & Lyle has reported a 6% rise in adjusted annual profits driven by double-digit growth in its food and beverage division. The company said yesterday that pre-tax profits for the year to March 31 rose to £335m from £331m a year earlier. On a statutory basis, profits fell 4% to £283m. Revenue was up 1% to £2.8bn. Food and beverages profits were up 12% to £177m.
JD Group boss Peter Cowgill has been handed nearly £6m in bonuses since February last year despite his companies accepting more than £100m in government support. JD Sports, Millets, Black Leisure, and a string of overseas sportswear chains, accepted £86.1m in furlough payments for staff and an estimated £38m in business rates relief last year. Although Cowgill took a voluntary 75% cut in his basic pay – which fell to £700,000 – and reduced his annual bonus from £1.7m to £1.3m, he still banked £3m last year from a special bonus, and The Guardian says he is believed to have been paid an additional £1.5m already in February this year. Annual profits at the firm exceeded £420m. The retailer has already been criticised for restarting dividend payments to shareholders while refusing to repay government pandemic financial support.
PayPoint has revealed while presenting its annual accounts that it has set aside £12.5 million to cover any potential fallout should an Ofgem investigation rule against the company. Ofgem is investigating whether, between 2009 and 2018, PayPoint dominated the market for prepayment energy customers and impaired the ability of rivals to compete. PayPoint has 27,000 sites where energy customers with pre-payment meters can go to top up their accounts, mostly in local supermarkets or newsagents. Paypoint said: “We are considering Ofgem’s provisional views … and based on the range of potential outcomes in such proceedings, we believe there will likely be a future outflow of funds in the next financial year…This estimated provision is not an admission of liability in relation to Ofgem’s provisional views.” Revenue at PayPoint fell 11.5% to £127.7 million in the period, and pre-tax profit fell more than 61% to £19.4 million, in part due to the provisions set aside relating to Ofgem.
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