Published: 26 June 2023
By Suzanne Evans, Director, Political Insight
Prime Minister Rishi Sunak urged homeowners and borrowers to "hold their nerve" over rising interest rates when interviewed yesterday by the BBC’s Laura Kuenssberg. "I've never said that it's not challenging. I've never said that this isn't going to be a difficult time to get through. But what I want to give people the reassurance and confidence is, that we've got a plan, the plan will work, and we will get through this," he said, three days after the Bank of England (BoE) raised interest rates to a 15-year high of 5%. He gave his full backing to BoE tactics aimed at reducing inflation, saying: "I can tell you, as prime minister, the Bank of England is doing the right thing…The Bank of England has my total support. Inflation is the enemy.” Sunak has pledged to halve inflation by the end of the year. However, the PM was criticised for his backing for the central bank’s strategy, including by some on his own side. Former Conservative Treasury Minister Andrea Leadsom accused the BoE of doing "too little, too late", as did Karen Ward, a member of chancellor Jeremy Hunt's economic advisory council, who said the Bank had "been too hesitant" in its interest rate rises so far and called on it to "create a recession" to bring inflation under control. Meanwhile, the Shadow Housing Secretary, Labour’s Lisa Nandy, called on the Government to make mandatory agreements Chancellor Jeremy Hunt made with banks last week allowing borrowers to make temporary changes to their mortgage terms to help ease the pain of rising mortgages. These include paying only the interest on mortgages and protecting borrowers' credit scores. The average two-year fixed residential mortgage is now 6.19% while the five-year rate is 5.82%. In June last year, those rates were closer to 3%. Meanwhile, Lib Dem leader Ed Davey criticised Sunak's comments as "patronising". He said: "People need help, not a prime minister instructing them to hold their nerve. Struggling homeowners will be rightly furious after watching an out of touch prime minister who has no idea of the pain caused by rising mortgage rates." The Lib Dems have called for a targeted Mortgage Protection Fund, paying grants of up to £300 a month to homeowners on the lowest incomes and those suffering from the sharpest rises in rates.
The National Residential Landlords Association (NRLA) is calling for the reintroduction of full mortgage interest relief, and for housing benefit rates to be unlocked to ease the burden of 13 consecutive interest rate rises. The trade body argues that renters will otherwise face significant disruption as squeezed landlords are forced to either hike rents or sell their properties. NRLA CEO Ben Beadle said: “85% of buy-to-let mortgages are interest only, which means they are particularly exposed to the impact of rising mortgage costs. Consecutive base rate hikes have seen landlords’ mortgage payments rise exponentially, with some increasing by almost 240% since December 2021, threatening the viability of their businesses. Analysis for the NRLA finds that 735,000 rental properties could be lost across the UK if interest rates peaked at 5%. This will exacerbate the ongoing supply and demand crisis across the private rented sector.” He added: “It makes no sense to have a tax system that discourages investment in the homes renters need, or benefit payments that fail to reassure vulnerable tenants that they will be able to afford their rents. The Chancellor must take urgent action to support the rental market by reintroducing mortgage interest relief in full and by unfreezing housing benefit rates.”
The House of Commons’ Work and Pensions Committee has called for more safeguards to ensure pension schemes can “never again” jeopardise the stability of the British economy. Pension schemes sold multibillion-pound holdings of UK government bonds in just a few days in September last year following former Prime Minister Liz Truss’ mini-budget, creating, the FT says, “a self-reinforcing doom loop that threatened to crash the gilt market until the Bank of England (BoE) intervened to restore order with a £65bn emergency support programme.” MPs on the Committee found that lax oversight had allowed systemic risks to develop within liability-driven investment schemes, (LDIs) which defined benefit pension schemes were encouraged to adopt by the Pensions Regulator (TPR). Some £1.4tn was invested in LDI strategies and used by about 60% of the UK’s 5,131 defined benefit pension schemes, representing almost 10m members. However, the aggregate value of DB pension sector assets had dropped by £591bn, or 32% to £1.23tn by the end of December, according to the Office for National Statistics (ONS). The TPR “should not have been blindsided” after a warning by the BoE about the risks of LDI as early as 2018, said Stephen Timms, chair of the committee. “Gaps in regulation and the system for managing systemic risks must now be addressed to ensure that [defined benefit] pension scheme investments never again threaten the stability of the UK economy.” The committee also said the Government should consider new restrictions on the use of LDI based on an assessment of a trustee board’s ability to understand and manage the risks involved. Timms also asked TPR to report back to the committee by October on whether pension schemes were investing in LDI strategies with enough liquid assets to withstand a sudden 2.5% jump in gilt yields, the minimum safety margin suggested by the BoE. The report also called for a pause in the proposed introduction from next April of new rules affecting the funding of defined benefit pension schemes until a full assessment of their impact was completed. The new code is expected to force such schemes to raise holdings of what it calls “low-risk assets, such as bonds,” while reducing investments in equities. However, the committee said it was concerned these rules could result in more “herding” by schemes, posing a potential risk to financial stability. The £90bn Universities Superannuation Scheme has also expressed “deep misgivings” about whether this new funding regime would discourage investment in assets that will support economic growth and the transition to net zero. TPR said it had “taken decisive action to learn lessons from the impact of last year’s economic turmoil, including to improve the data we hold. Pension trustees are acting on our latest guidance on using leveraged liability-driven investments, which clearly sets out our expectations. We continue to work closely with the Bank of England and other partners to ensure a well-functioning system.” Ministers said they welcomed the committee’s report and would respond formally in due course.
The prospect of a new battery factory in Northumberland has suffered yet another setback: the offices of the buyer of the former Britishvolt site were raided by Australian police over the weekend, as part of a tax fraud investigation. The companies involved, Scale Facilitation and SaniteX, are owned by Australian entrepreneur David Collard. Recharge Industries, which announced it would buy Britishvolt following its collapse, is a subsidiary of Scale Facilitation. It has yet to pay for the site. The BBC reports that sources close to Collard, who is a former partner at accountancy giant PwC, said that the tax raid was due to a misunderstanding of the interaction between US and Australian tax filings and that all parties were co-operating. Britishvolt had planned to build a £4bn plant to make batteries for electric vehicles and create around 3,000 skilled jobs, but it ran out of money in January, when it failed to meet conditions laid down in order to receive promised Government funding. Recharge is said to be hopeful the deal to develop the £4bn site can proceed.
Aston Martin is entering a strategic supply agreement with Lucid Group to manufacture ‘high performance’ electric vehicles. Under the term of the deal, Lucid will become a 3.7% shareholder in Aston Martin. Roberto Fedeli, chief technology officer of Aston Martin, said: 'Combined with our internal development, this (the agreement) will allow us to create a single bespoke BEV platform suitable for all future Aston Martin products.'
Cineworld shares are to be suspended as the embattled British cinema chain prepares to file for administration in the UK next month. However, the world's second largest operator, which owns Picturehouse, Regal, Planet and Cinema City, told investors this morning that its cinemas will continue to remain open as usual. The group filed for Chapter 11 bankruptcy in the US last year to restructure its roughly $5billion (£3.9billion) debt pile in a move that will wipe out shareholders.
London-listed GSK stock received a boost on Friday after the pharmaceutical company said it had agreed to settle a lawsuit over its Zantac heartburn treatment. The FTSE 100 company said it had reached a confidential deal with California-based James Goetz, who said he developed bladder cancer as a result of taking the drug. The jury trial was due to start at the end of July. GSK did not admit any liability in the settlement, and said the move reflected the company's desire to avoid distraction related to protracted litigation. It added that it would vigorously defend itself in any other Zantac allegations.
Sir Rocco Forte has told the Daily Mail he has ripped up plans to pump money into the UK economy by opening a series of boutique hotels in regional tourist centres, such as Oxford, Bath and the Cotswolds in favour of investment overseas where he “can get a good return”. The 87-year-old, who owns a chain of luxury hotels which include Brown's in London's Mayfair and The Balmoral Hotel in Edinburgh, criticised the Government's lack of economic direction and its failure to reap the benefits of Brexit. The Government was “moving very, very slowly” to slash red tape, he said, adding: “The deregulation we could have had – that would have actually helped to move the economy – hasn't happened”. Earlier in the year, more than 320 leaders signed an open letter organised by Forte calling for a return of a VAT-free shopping scheme for international visitors. The letter argued this “would be a win for both business and the taxpayer.” At the time, he accused both the Prime Minister and the Chancellor of 'not looking at the longer term picture' on the economic benefits of ditching the levy.
HSBC is to move out of its iconic Canary Wharf HQ into a much smaller office in the centre of the city, according to a memo seen by Reuters. Europe's largest bank told staff its preferred option was to move to the redeveloped former offices of telecoms firm BT, a development known as Panorama St Paul's. The bank began a review to assess its "best future location in London" last year, ahead of its lease expiring at the 45-floor tower at 8 Canada Square in early 2027.
Siemens Energy, one of the world's largest wind turbine manufacturers, withdrew its profit forecast for the 2023 fiscal year on Friday, after warning it may need to spend more than €1bn to fix technical problems with the machines. A technical review unveiled a "substantial" increase in failure rates of turbine components, the company said. The announcement sent shares in the firm sharply lower – at one point the Frankfurt-listed stock had plunged by 34%.
Deutsche Bank has told clients it can no longer guarantee full access to Russian stocks that belong to them, having uncovered a shortfall in the shares that back the depositary receipts (DRs) the bank had issued before the Ukraine invasion. Deutsche attributed the shortfall to a decision by Moscow to allow investors to convert some of the DRs into local stock, Reuters reports. The conversion was carried out without the German bank's "involvement or oversight" and Deutsche was unable to reconcile the company shares with the depositary receipts. DRs are certificates issued by a bank representing shares in a foreign company traded on a local stock exchange. Shares affected include those in national airline Aeroflot, construction firm LSR Group, mining and steel firm Mechel, and Novolipetsk Steel.
PwC Australia is selling its government business for A$1 (50p). The sale follows a scandal in which a former PwC Australia partner advising the Australian government leaked drafts of corporate tax avoidance laws to colleagues, who used the classified information to pitch to potential clients, between 2014 and 2017. PwC Australia has also appointed a new CEO. The changes will allow the firm "to move forward with predictability and focus," it said in a statement.
Why Media is an award-winning design, marketing, digital communications and PR agency offering tailored solutions to companies on a global scale. We have extensive experience in delivering design and marketing services to a spectrum of companies including professional services, property companies, financial institutions and shopping centres. We have offices in London UK, Hertford UK, Finestrat ES & Brescia IT.
Marketing Contact
Name: Claire White
E-Mail: claire@whymedia.com
Telephone: 01992 586 507
