Retail investors lose faith in ESG funds, withdrawing £2.44bn in the past five months

Retail investors are fleeing from environment, social and governance (ESG) funds according to new data from the Investment Association, which says some £448m has been pulled in August, the fifth consecutive month of withdrawals, taking the total withdrawn in that period to £2.44bn Laith Khalaf, head of investment analysis at AJ Bell said that after the initial “goldrush” when bumper cash flowed into ESG funds, those funds are now having to fight hard for cash like all other sectors. “It feels like the ESG party is running out of steam,” he added. “Part of the explanation for the ESG slowdown is likely to be the cyclical nature of fund flows. Three years ago ESG was everywhere, fund groups were launching new products and marketing them like crazy, and the saturation point was probably found pretty quickly.” Dzmitry Lipski, head of fund research at Interactive Investor, one of the UK’s largest investment platforms, said the data posed questions about underperforming ESG funds. “We must address the elephant in the room – it is no secret that, in the short-term, sustainable funds have struggled in the recent harsh investment landscape,” he said, adding: “The issue of potential greenwashing has made careful research all the more crucial”. A separate study reported her earlier this week by communications agency MHP found that just 1% of investors say ESG is one of their top concerns when making investment decisions.

The fact families have spent almost all of the £200bn in extra cash they saved during lockdowns is a “clear sign” of an economic slowdown, according to the Bank of England’s deputy governor Ben Broadbent. Broadbent told a conference hosted by the European Central Bank in Frankfurt that discretionary spending and big ticket purchases such as furniture and consumer electronics had also “weakened quite a lot” in another sign that higher interest rates were starting to bite, along with “the beginnings of at least some rise in unemployment”, which has climbed from 3.5% a year ago to 4.3% now. Broadbent said he still expected the average rate paid by mortgage holders to keep rising as more families come to the end of fixed-rate deals. The central bank has estimated millions of households are likely to see mortgage payments rise by an average of £220 by 2026, with around a million facing monthly payment increases of £500 or more.

Nearly two-thirds of bosses believe workers will return to the office five days a week within the next three years, according to a survey of more than 1,300 CEOs of the world’s largest businesses, of whom 150 are in the UK. The KPMG CEO Outlook survey found 64% of leaders globally, and 63% of those in the UK, predicted a full return to in-office working by 2026.

Annual average house prices fell for the fifth consecutive month, by 4.7% in the year to September, according to the Halifax house price index. Previously, the Halifax said prices had declined by 4.5% in the year to August.

A slump in house building across the UK in September triggered the biggest fall in construction activity since May 2020, early in the Covid pandemic, according to a closely watched survey. The latest S&P Global/CIPS construction purchasing managers’ index showed a score of 45.0 in September, a steep drop from 50.8 in August. A score above 50 indicates that output has grown. Engineering and infrastructure projects also suffered a sharp fall in activity that was partly blamed on the government pausing work on the HS2 rail link in the summer, before PM Rishi Sunak’s decision at the Conservative party conference to cancel construction of the leg between Birmingham and Manchester.

In fresh HS2 news, it has now been revealed the high speed rail line will not be extended to London Euston unless enough private investment is secured for the project. Without that, it will only run from Birmingham to Old Oak Common in the capital's western suburbs, the BBC has learned, meaning passengers travelling to central London would have to change trains. The Department for Transport (DfT) told the newscaster that to "get the best possible value for the British taxpayer", the Government would "ensure that funding is underpinned by contributions from those people and businesses its development supports" and by leveraging "private sector investment". It wanted Euston station to "be open and running trains as soon as possible", and that its "rescoped approach" would save £6.5bn, it added. A spokesperson said there was "already support and interest from the private sector", and that ministers had held discussions with key partners. “It is simply wrong to talk down the scale and benefits of this regeneration," the spokesperson added.

Electric vehicle sales fell by more than 14% last month, The Society of Motor Manufacturers and Traders (SMMT) says. “With tougher electric vehicle (EV) targets for manufacturers coming into force next year, we need to accelerate the transition, encouraging all motorists to make the switch,” SMMT CEO Mike Hawes said, and called for Government initiatives to encourage sales. “This means adding carrots to the stick – creating private purchase incentives aligned with business benefits, equalising on-street charging VAT with off-street domestic rates and mandating charge point rollout in line with how electric vehicle sales are now to be dictated.”

Treasury officials were in talks with the Bank of England last night after Metro Bank’s shares plunged by more than a quarter as the lender announced proposals to raise up to £600m to boost its balance sheet. A Treasury source told the Telegraph that officials were “monitoring the situation” and were in contact with Threadneedle Street, however the newspaper understands that there has not been any engagement between Treasury officials and Metro’s board or executives. Robert Sharpe, Metro’s chairman, met with the Prudential Regulation Authority (PRA) yesterday morning as shares in the London-listed challenger bank fell by as much as 35%, valuing the company at around £63m.  Gary Greenwood, a banking analyst at Shore Capital, told the Telegraph the meeting suggested the PRA regulator has “serious concerns about the ongoing viability of the business”. However, a Metro spokesman said the meeting was a “longstanding, standard catch-up with the PRA”. That is not, however what the Financial Times and City AM are saying; both claim Sharpe was summoned to the meeting and that he and CEO Daniel Frumpkin have had a similar request from the Financial Conduct Authority (FCA). Metro Bank, which has about 2.7m customers, became the first new lender to open on Britain's high streets in over 100 years when it launched in 2010.

Meanwhile, a Sky News exclusive claims Metro Bank has kicked off talks about the sale of a £3bn chunk of its mortgage book as part of an increasingly urgent attempt to shore up its fragile balance sheet. Those sounded out by the London-listed high street lender include Lloyds Banking Group and NatWest Group, according to City sources. Selling the mortgage assets would reduce its earnings but also sharply reduce the amount of capital it is forced to hold. It is unclear whether Lloyds and NatWest were interested in acquiring the loan-book or what price they would be prepared to pay, Sky News City Editor Mark Kleinmann writes. In a statement confirming its exploration of strategic options, Metro Bank said: "The company is evaluating the merits of a range of options, including a combination of equity issuance, debt issuance and/or refinancing and asset sales. No decision has been made on whether to proceed with any of these options."

According to Sky News, British Airways (BA) has struck a deal with pilots’ union BALPA, which could avert threats of strike action. The broadcaster claims the agreement will see BA pilots receive a 4% pay rise this year, backdated to June, followed by further uplifts of 1.5% in December, 2.5% next June, a further 2% six months later. These rises will then be followed by another 0.5% rise in March 2025, 2.5% in June 2025, and another 2.5% in June 2026. Pilots will also receive a one-off payment of £1,000 this November, according to a source close to the talks, and participate in a new reward scheme based on BA's operating profit performance, which could trigger bonuses worth thousands of pounds. The three-and-a-half year deal is expected to be put to pilots today, ahead of a BALPA members’ ballot on the deal. The next pilot pay review will take place in January 2027.

British pub chain JD Wetherspoon has swung to a full-year profit after sales rose by over a tenth. The company reported a pre-tax profit of £42.6m for the 12 months ended 30 July, compared with a loss of £30.4m a year earlier. Revenues rose 10.6% to £1.93bn, up from £1.74bn the previous year, while like-for-like sales jumped 12.7%. Bar sales were up 9% over the year; food sales jumped 17.7%; slow/fruit machine sales surged 26.4%; and hotel room revenues were up 11.8%. However, in the nine weeks to 1 October, overall like-for-like growth for the company had eased to 9.9% from 11.5% reported in the fourth quarter. Chairman Tim Martin said the company "continues to perform well".

Richard Howson, the former CEO of collapsed outsourcing giant Carillion, has been banned from being a director for eight years. Howson led Carillion between 2012 and 2017, but failed to disclose crucial information about major contracts to the firm's auditors, thereby causing misleading stock market announcements. In a statement, the Insolvency Service said it had accepted a disqualification undertaking from Howson. Carillion held scores of government contracts, from building hospitals to managing schools, and employed around 20,000 people in the UK, but debts mounted and in 2017 it issued three profit warnings in five months, including writing down more than £1bn from the value of its contracts. Carillion went into compulsory liquidation in January 2018. Howson is the latest executive to be banned: previous finance directors Zafar Khan and Richard Adam were barred for 11 and 12 years earlier this year. Litigation against former chair Philip Green and director Keith Cochrane - who replaced Howson in the months preceding Carillion's collapse – is ongoing, with a trial set to commence the week beginning 16^th October.

A British electric lorry company that makes vehicles for Royal Mail has been thrown into crisis after a deal to move the company to the US fell through amid allegations of contractual breaches, The Telegraph reports. Essex-based Tevva Motors had been due to shift its headquarters to Arizona and float on Wall Street under a deal with US-listed ElectraMeccanica (EM) but EM has terminated the deal due to “multiple incurable breaches of the arrangement agreement by Tevva, including failures by Tevva to disclose to ElectraMeccanica material information about Tevva”. It said Tevva, founded by Asher Bennett, will be forced to repay a $6m (£5m) loan that had been agreed to keep the company afloat while the deal went through, leaving Tevva scrambling to raise new cash. Bennett, who has been dubbed the “Elon Musk of Essex” is the brother of former Israeli prime minister Naftali Bennett. “We are deeply disappointed by ElectraMeccanica’s abrupt decision to terminate the proposed merger agreement. We are considering our position and until we have done so will not be making further comment,” a spokesman said.

Bentley Motors is recruiting the highest number of trainees in its 104-year history with 164 apprentice, graduate and industrial placement opportunities available at the British marque's Crewe factory.

Rolls-Royce Motor Cars’ CEO Torsten Müller-Ötvös is to retire at the end of November, after 14-years at the helm. He will then be replaced by BMW UK’s CEO Chris Brownridge. Annual sales have surged fivefold during Müller-Ötvös’ tenure, and the average price of a Rolls-Royce has doubled to £432,000. Commenting, Müller-Ötvös said: “Leading Rolls-Royce for almost 14 years has been the greatest privilege and pleasure of my professional life”.