Published: 12 July 2023
By Suzanne Evans, Director, Political Insight
The Bank of England (BoE) said yesterday that Britain's economy is so far proving resilient to the run of higher interest rates and there is “no reason for alarm,” adding it will take time for the full impact of the rate rises to feed through. In a half-yearly ‘stress test’ of the health of the country’s financial system, it gave Britain's eight largest banks - Barclays, Lloyds, HSBC, NatWest, Santander UK, Standard Chartered, Nationwide Building Society and Virgin Money – a clean bill of health. All eight, which provide 75% of lending, have enough capital to cope with higher rates and ride out economic stress deeper than the 2008 financial crisis, the BoE claimed, saying: "Major UK banks' capital and liquidity positions remain robust and profitability has increased, which enables them both to improve their capital positions and to support their customers".
“Zombie” firms in Britain will be wiped out by rising interest rates, Begbies Traynor executive chairman Ric Traynor has told Bloomberg. The leading insolvency expert said the debt-riddled firms will not survive, having only been kept alive thanks to years of cheap borrowing costs. “Over the next 18 months, we'll see virtually all of them finally come to an end,” he said. Begbies Traynor recently reported an 11% rise in annual revenues to £121.8m because of an increase in the number of insolvency cases.
The typical interest rate available on a two-year fixed residential mortgage has climbed to a 15-year high, according to Moneyfacts, to stand at 6.66%. Some 800,000 households are expected to need to refinance onto more expensive mortgages in the second half of 2023, and a further 1.6m in 2024. The BoE says the typical mortgage holder refinancing later this year will pay an extra £220 a month and that, by the end of 2026, nearly 1m households would be paying at least £500 a month more.
Chancellor Jeremy Hunt has reportedly ordered ministers to find between £2bn and £3bn in savings so he can give public sector workers a 6% pay rise. The Financial Times claimed yesterday that he and Prime Minister Rishi Sunak agreed to discuss the response to the various pay review bodies’ recommendations after looking at new data, with Hunt saying he will not borrow more money to fund pay rises. The Treasury did not immediately respond to a Reuters request for comment, however the BBC reports that speaking on the way to a Nato summit in Lithuania last night, Sunak said "no final decision has been made" on pay rises for public sector workers.
Meanwhile, Sunak is said to be convening a new council of business advisers. Sky News reports 10 Downing Street issued invitations to business leaders last week, with a first meeting scheduled for next week. The identities of the potential members were unclear yesterday, Sky said.
The government said yesterday it plans to scrap some EU rules that require short sellers to publicly disclose their trades on UK companies. A short position is a bet that a company's stock price will decline. Currently, funds must tell the Financial Conduct Authority (FCA) when they have borrowed 0.1% of a company's outstanding stock in order to short it. Now, that threshold will increase to 0.2% of the stock.
Environment Secretary Therese Coffey issued a statement this morning saying the Government is to remove the current £250,000 limit on fines that can be issued by environmental regulators on polluters, and increase the number of offences that fall under their scope. "Polluters must always pay. We are scrapping the cap on civil penalties and significantly broadening their scope to target a much wider range of offences – from breaches of storm overflow permits to the reckless disposal of hazardous waste," she said in a statement. She added that all those who hold environmental permits - including in the energy, water and waste sectors – could still in serious cases be pursued in the courts. All future fines and penalties would be reinvested in the government's new Water Restoration Fund.
Government proposals to block landlords from renting out properties unless they meet net zero targets have been branded “draconian” by a landlords group, who say the costs massively outweigh benefits. Under the plans, by 2028, homes will be required to have an energy performance certificate (EPC) rating of C or above, with landlords also facing fines of up to £30,000 if they fail to comply. Speaking exclusively to City A.M., Jonathan Rolande from the National Association of Property Buyers intimated that the only reason Ministers are imposing the targets is because they are pointless, and so without targets no landlord would bother. “Floor insulation in a small two bedroom house would cost £4000 to £6000 and save £36 a year,” he said, adding, so “there is very little return on the money spent”. Landlords can’t really ask for more rent because the walls are insulated and tenants save very little on fuel bills with almost all energy-saving measures…Green targets are driving this, not a traditional business case. It will soon be time for landlords to decide whether they stay in the sector or quit now, before things get even more expensive”. Landlords, already squeezed via the removal of tax breaks and eviction red tape, “fear being squeezed out of some of the few remaining lucrative parts of the market,” Rolande said, while warning that “businesses are also facing the pressure, as similar regulations are introduced for commercial properties”.
Irish budget airline Ryanair has pulled out of the Aviation Council, an advisory group launched by the UK Government in February to support its aviation strategy. Chaired by Aviation Minister Baroness Vere and Gatwick Airport’s CEO Stewart Wingate, the body includes major airline bosses and representatives from the travel industry and is supposed to “ensure that the UK retains one of the strongest and most successful aviation sectors in the world”. However, in a statement issued yesterday afternoon, Ryanair CEO Michael O’Leary said its concerns had repeatedly been ignored over the past six months, and that “there has been no action, no delivery, and no improvement in UK aviation.” The Council has “become a useless talking shop for Baroness Vere, Govt bureaucrats and the CAA to waffle on about reform while delivering none,” he said, and urged Baroness Vere should disband the “useless council,” instead of wasting her time. O’Leary has previously described Baroness Vere as “not the brightest sandwich in the picnic basket”.
London City Airport’s plan to expand its passenger capacity from 5m to 9m and lengthen flying hours has been voted down by Newham Council because of concerns over noise pollution and the “environmental impact of the airport on those living nearby”. The vote against by Councillors was unanimous. A spokesperson for Newham Council said its concerns “were shared by a number of other boroughs who also submitted objections to the proposals.” Cllr Nate Higgins – speaking on behalf of the Green party – described the airport as a “blight” on residents and “an inexcusable misuse of land in such a densely populated London borough.” London City said it was “disappointed with the decision” which it claims would have created almost 2,200 jobs and contributed an “additional £702m in GVA to London’s economy”. The airport has announced its intention to appeal Newham’s refusal, hence the application will now be referred to the GLA for a final decision.
Postal workers have voted to accept a three-year pay deal offered by their employer Royal Mail, hopefully ending a long dispute that was costing the company around £1m a month and led to the pending departure of CEO Simon Thompson. Some 76% voted in favour of the pay agreement, which included a 10% salary increase and a one-off lump sum of £500 in a ballot that recorded a 67% turnout, the Communication Workers Union (CWU) said. More than 115,000 postal workers held a total of 18 days of nationwide strikes between September and December last year.
A new global company being launched later this year by French motor giant Renault and Chinese carmaker Geely is set to have its headquarters in the UK. The two are planning to invest up to €7bn (£5.96bn) to develop low-emission petrol, diesel and hybrid engines, and employ about 19,000 workers at its 17 engine factories and five research and development hubs.
There will be more ships carrying liquefied natural gas (LNG) than oil supertankers within the next five years, according to the latest findings from Global Data and reported by City A.M. It is expecting a sustained “gold rush” for LNG following Russia’s invasion of Ukraine, with demand increasing 60% year on year in 2022, as Europe scrambled to top up energy supplies ahead of winter and stave off blackouts. As it stands, 635 LNG tankers operate worldwide currently, and energy companies have planned for a further 524 by 2028. That makes a total of 1,159, 187 more than the number of oil tankers expected to be in circulation in the same year.
Global demand for all forms of energy is forecast to rise by 23% by 2045, OPEC Secretary General Haitham Al Ghais told a Nigerian oil and gas conference yesterday. Oil executives and officials from the Organization of the Petroleum Exporting Countries (OPEC) have repeatedly made the case for continued investment in oil, warning that prices will otherwise spike higher, City A.M. says.
Utilities firm Pennon Group has bought three new renewable energy generation projects as part of its long-term sustainable growth strategy. The FTSE 250 company said the three projects, located in Buckinghamshire, Aberdeenshire, and Cumbria, were expected to generate more than 95 GWh of electricity annually from solar photovoltaic (PV) sources. "The acquisition and expected build costs for the three projects total £85m," the Pennon board said in its statement, adding that it anticipated the projects will commence generation during 2025.
Legal services company DWF has revealed it was in talks with London-based Inflexion Private Equity Partners regarding a possible buyout. In a statement to the London Stock Exchange, DWF said it was in talks for a deal worth around £342m.
Sosandar has confirmed its first annual profit, with pre-tax earnings coming in at £2.2m last year following a £600,000 loss in the previous 12 months, the Daily Mail said yesterday. The online women's fashion retailer's sales momentum has continued into the new year, with revenues up 10% on the previous year to £11.4m in the three months to 30 June.
Activist investor Irenic Capital Management is reportedly calling for Restaurant Group chairman Ken Hanna to resign because of alleged corporate governance failures and policy violations. According to letters seen by Bloomberg, Irenic Capital, which holds a stake of about 3%, is saying Hanna has shown "partiality against certain shareholders" because he refused to consider adding an independent director nominated by "the activist community," saying that wouldn’t be appropriate or acceptable to "longstanding shareholders". "Mr. Hanna's comments make clear that some shareholders - 'longstanding' - are more equal than others," Irenic Capital wrote in the 23rd June letter, alleging that Hanna therefore violated a London Stock Exchange requirement that a listed company should treat all holders of a class of listed securities the same.
Revolution Beauty (RB) CEO Bob Holt could be removed from his post as part of a compromise deal to broker peace with online fashion retailer Boohoo, according to a London Stock Exchange filing released yesterday. Boohoo, which owns 26.6% of RB, does not believe the current board has the right retail, e-commerce or consumer brands experience to deliver shareholder value, and ousted Holt at the recent RB AGM, however he was reappointed just hours later. Then yesterday, RB published notice of an extraordinary general meeting (EGM) requisitioned by Boohoo, with resolutions including Holt's removal as a director.
The co-founder of investment app Nutmeg, Nick Hungerford, has died at the age of 43 having been diagnosed with a rare form of bone cancer in 2019. Hungerford set up Nutmeg in 2011, and the digital asset manager was sold to JP Morgan in 2021 for £700m and incorporated into its Chase brand. “We are deeply saddened to share the news of Nick’s death,” his charity, Elizabeth’s Smile, said in a statement today. Elizabeth’s Smile was set up a few months ago by Hungerford and provides resources for children who lose a parent.
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