Published: 20 February 2023
By Suzanne Evans, Director, Political Insight
The Government’s failure to overhaul the country’s audit sector risks seeing Britain lose its position as a world-leading investment hub, the head of the Institute of Chartered Accountants in England & Wales (ICAEW) has warned. ICAEW CEO Michael Izza told City A.M. continued delays to the UK’s planned reshaping of the country’s audit sector could see foreign investors lose confidence in Britain as a trustworthy destination place to put their funds. “We’ve got to recognise we’re in a competitive situation,” Izza said. “We want people to be confident they can invest here”. The planned shake up of the audit industry is intended to boost audit quality, amid concerns about the trustworthiness of companies’ financial statements. They come in response to a series of high-profile audit scandals involving top British companies – including Carillion, Patisserie Valerie, and Thomas Cook – that have undermined trust in auditors’ abilities to spot red flags. The reforms, first put forward in 2018, will see Britain’s Financial Reporting Council (FRC) accounting watchdog replaced with a new, more powerful regulator – called the Audit, Reporting and Governance Authority (ARGA). The overhaul is also set to see the government take on the Big Four accounting firms – EY, PwC, KPMG, and Deloitte – with a view to increasing competition in the sector and boosting the role of smaller, challenger firms. Izza, however, warned that repeated delays to the actual implementation of the reforms could see momentum die down. “It just feels that someone needs to grab this by the scruff of the neck and move forward,” he told the newspaper, noting that the planned reforms “are pretty much ready to go”. “This is now waiting for politicians to effectively push whatever button it is they push, and slot it into the timetable,” he added.
Professor Philip Banfield, Chair of the Council of The British Medical Association (BMA) has accused the government of "reckless" behaviour, alleging Prime Minister Rishi Sunak and Health Secretary Steve Barclay are refusing to enter meaningful negotiations with the BMA, thinking they can “stay silent” and “wait it out” when it comes to unrest in the profession over pay and conditions. He made his comments at a young doctors' conference on Sunday, telling attendees they deserved better and were not expensive for the expertise and skills they provided, the BBC says. Banfield also said Sunak and Barclay are "standing on the precipice of an historic mistake," and accused the government of "guaranteeing escalation". Around 45,000 members of the BMA have been balloted on strike action, with the result of the vote expected later today. The Department of Health and Social Care said it had met with the BMA and other medical unions to discuss pay.
Ambulance staff who are members of the Unite union are on strike in Wales and several regions of England today, meaning non-life threatening calls are unlikely to be responded to. Border Force staff at the Port of Calais, Port of Dunkirk, Coquelles Channel Tunnel Terminal and the Port of Dover are also taking industrial action, affecting inbound travel to the UK.
Enquest shares fell 11% on Friday when the oil producer announced a delay to its upcoming North Sea project because of the Government's Energy Profits Levy. Chief executive Amjad Bseisu warned the levy would “have implications for our capital allocation strategy and our UK production growth ambitions,” adding that the firm was considering future plans in the UK. The 25% windfall tax was introduced by the Government last year and upped to 35% in January.
Housing investor Home REIT is set to be grilled by investors at its AGM today over the state of its finances, its dilapidated property portfolio, and the suitability of a recent takeover approach from a firm with links to its former investment advisor. The troubled former FTSE 250 firm is due to face shareholders for the first time publicly since a damning short seller report by Viceroy Research first raised concerns about its financial health in November. Top investors including Blackrock, M&G and Liontrust, as well as Viceroy, are expected to attend as the board is probed over its admission last week it had only collected 23% of total rent due and its portfolio would require some £15-20m to refurbish. It has emerged that a string of its biggest tenants are currently withholding rent in protest at the dire state of housing provided by the firm. Meanwhile, a recent takeover approach from Bluestar is in question, as it is headed by Ben Gotlieb, who is a former employee of Home REIT’s former investment advisor Alvarium. Alvarium also owns more than 25% of a Bluestar subsidiary, Bluestar Advisors. Viceroy chief Fraser Perring told City A.M. it was “laughable that parties connected or associated with Alvarium are now involved with putting a bid together via Bluestar”. “After wiping out value for investors, they appear to now want to attempt to profit by feeding off the entity we believe they impaired significantly,” he said. Home REIT also revealed last week that it had called in forensic accounting analysts at Alvarez and Marsal to scrutinise wrongdoing after City A.M. revealed the firm was investigating allegations of bribery in January. The National Crime Agency is scrutinising property deals involving Home REIT and is reportedly considering passing them on to the Financial Conduct Authority (FCA) and the National Investigation Service (NATIS), which investigates serious organised crime relating to the public sector. Community interest company (CIC) tenants of the firm, who have been left unable to support vulnerable groups, are also hoping for answers over a lack of refurbishment and rent support. “Where has all the money gone? That’s the big mystery for me,” one CIC tenant told the newspaper.
Fixed-fee estate agent Purplebricks put itself up for sale on Friday, telling investors in a trading update: “The board recognise that the potential of the group may be better realised under an alternative ownership structure”. The announcement caused its shares on the London Stock Exchange to fall almost another 20% - at 8.20p, they are now almost 60% down on their year high, and a million miles away from their £5 peak in 2017, the Daily Mail reports. Purplebricks said a recent turnaround plan aimed at focusing investment in key regions where it is still profitable ended up costing it more than it expected, and disrupted sales instead of boosting them. New instructions also came in lower than expected in its third quarter, forcing the firm to lower its full-year forecasts, saying its adjusted underlying loss would now come in between £15m and £20m, larger than the previously expected loss of between £8.8m and £11.3m. No doubt the agent will have been further hampered by the downturn in the property market in recent months.
Reuters reports that Jim Ratcliffe's chemicals company INEOS has confirmed it is bidding to buy Manchester United Football Club, and that US hedge fund Elliott Investment Management, having ruled itself out of a full takeover, is nevertheless prepared to finance a takeover. British billionaire Ratcliffe is a life-long United fan. On Thursday, the Daily Telegraph reported that Saudi Arabia has also submitted a bid, as has Sheikh Jassim Bin Hamad Al Thani, a son of Qatar's former prime minister. United is the fourth-richest soccer club in the world, according to analysis by Deloitte.
According to Sky News, Santander Asset Management is one of a small number of parties in talks to buy the £14bn private equity unit of London-listed fund manager abrdn. Sources told the broadcaster a £250m deal was expected to be struck in the next couple of months that could value the division at around £250m.
KPMG's UK business has settled a £1.3bn legal battle with the liquidators of collapsed outsourcer Carillion. The consulting giant was sued in the High Court last year by the Official Receiver, part of the Government's Insolvency Service, over its botched audits of Carillion, the Daily Mail reports. The liquidators claimed Carillion had been insolvent for more than two years before it collapsed in January 2018 and KPMG had missed 'red flags' resulting in the group's accounts being misstated. The legal claim also alleged KPMG failed to maintain independence while conducting the audits, breaching its professional and ethical obligations. They sought damages including around £210m in dividends paid by Carillion to investors between 2014 and 2017, as well as professional fees worth £31m. They were also chasing over £1bn in losses incurred as the group continued to trade despite the misstated accounts. This month KPMG increased the size of its provision for future fines and legal claims from £144m to £179m. KPMG's UK boss Jon Holt said: “I am pleased that we have been able to resolve this claim”.
Morrisons put up prices by almost a fifth in the past year, more than any other major grocer, and double the rise at Sainsbury's. A shopping basket at the Bradford-based supermarket cost £75 this month, an 18% increase from a year earlier, according to The Grocer magazine. The same basket of 33 everyday products cost £70 at Sainsbury's, having increased 9% from a year earlier. Tesco's basket cost £74, a 13% increase, while Asda was the cheapest at £67.15, up 11%. Among Morrisons' price hikes were on tubs of New Covent Garden leek and potato soup, which are now more than twice as costly as a year ago, at £2.20 for 560g. It also raised the price of 750g boxes of Jordans granola by 80 per cent to £3.59, and Filippo Berrio olive oil by 50 per cent to £5.99. The findings vindicate critics of Morrisons' sale – to US private equity group Clayton, Dubilier & Rice two years ago – who warned it would lead to higher prices, the BBC says.
From next week, the Co-op supermarket will remove best before dates from more than 150 fresh products, including apples, broccoli, carrots, onions, oranges, potatoes and tomatoes from its 2,500 UK grocery stores. Instead, the chain will instead use encrypted codes allowing workers in stores to keep track of how long produce has been on the shelf. Sainsbury's and Asda made similar moves last year.
UK-based craft beer maker Brewdog is expanding in China after partnering with brewing giant Budweiser. Brewdog also says it plans to open more bars in the world's second largest economy. China is the world's largest market for beer, but sales there currently account for less than 1% of Brewdog's overall sales.
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