Banks will be named and shamed by the financial watchdog after finding that less than 30pc of interest rate rises have been passed on to savers.
The Financial Conduct Authority (FCA) will publish a league table every six months of lenders’ easy access savings rates, ranking them from best to worst, and warned that it will take action if the worst offenders do not improve their offers to customers.
Under new consumer duty rules, which came into force on Monday, banks who provide the lowest interest rates in the market will be required to justify their positions by the end of August and if they are unable to do so, the FCA said it will take action.
It comes as the Bank of England is poised to raise interest rates to a fresh 15-year high on Thursday in a bid to tame stubbornly high inflation.
Following a review, the regulator found Britain’s biggest saving providers only passed through 28pc of interest rate rises to their easy access deposits between January 2022 and May this year, despite boosting rates on mortgage products.
The review also found that there is around £260bn sitting in savers’ accounts with interest rates as low as 1pc at some of Britain’s biggest banks.
Lenders have faced heavy criticism in recent months from politicians and campaigners for failing to raise rates for savers as fast as they have for mortgage products at a time when borrowers are struggling to repay their debts.
Earlier this month, the FCA held talks with executives at Britain’s biggest banks and warned them that they must accelerate rate rises on savings products.
The nine banks the FCA scrutinised were Lloyds, HSBC, NatWest, Santander, Barclays, Nationwide Building Society, TSB Bank, Virgin Money and The Co-operative Bank.
On Monday, the regulator also said it will review the timing of banks’ savings rate amendments each time the Bank of England changes its base rate and pledged to examine lenders’ processes on cash ISA switching to ensure savers get the best rates.
Sheldon Mills, head of consumers and competition at the FCA, said lenders paying the lowest rates need to provide an explanation within a month, and the FCA will take significant supervisory steps to make sure the largest firms and building societies are treating customers fairly.
He said that the City watchdog expects action on low savings rates immediately.
Mr Mills added: “[Lenders] need to ensure there is enough value being provided to customers.
“We want a competitive cash savings market that delivers better deals for savers, where interest rates are reviewed quickly following base rate changes and firms prompt savers to switch accounts paying higher rates.”
FCA analysis found only 23pc of savers had switched their account in the last six months to get a better interest rate.
Mr Mills said banks need to ensure their switching process improves, and banks need to pass on saving rates closer to, but not necessarily as high, as the Bank of England’s base rate of 5pc.
Eric Leenders at UK Finance, which represents banks, said: “Savings rates have increased recently and there are a lot of good accounts on the market – UK banks have passed through a greater proportion of interest rate rises to savers than in other countries.
“Today’s commitments build on the work firms are currently undertaking, which includes contacting millions of customers about savings options, and will help customers to better understand their savings and the options available to them.”
The issue centres around banks’ net interest margin – the difference between what lenders charge borrowers and pay savers.
After the Bank of England raised its base rate to 5pc last month, lenders moved quickly to push up the interest they charge on mortgage products, but have been criticised for being much slower in increasing the rates they offer to savers.
Banks, in particular the taxpayer-owned NatWest and its subsidiary Coutts, have come under fire in recent weeks after Nigel Farage claimed he was de-banked because of his political views.
The Treasury has tabled new rules that will force banks to give savers 90 days’ notice that their accounts will be closed. Banks will also now be required to communicate better with savers over why they are being de-banked.
Mr Mills said the FCA will look at the situation closely as part of any investigation into NatWest, but would not specifically comment on whether political pressure played a major part in the resignation of Dame Alison or Mr Flavel.
He added that the FCA believes that banks should not close accounts because of people’s political beliefs, adding that banks need to balance treating customers fairly and tackling financial crime.
The FCA’s first league table is expected to be published before the end of the year.
Nigel Farage has revealed that he is in talks with Coutts about keeping his bank account open.
The former Brexit Party leader confirmed that there had been an exchange of letters between him and senior figures at the bank, discussing the retention of his account.
It means that Coutts may consider reversing its original decision to close Farage’s account, a move that plunged the private bank’s owner, the NatWest group, into weeks of crisis.
It followed the publication of a subject access request by Farage that revealed he had been “debanked” because his political views did not align with Coutts’s inclusive values
LONDON, July 31 (Reuters) - Britain's markets watchdog is ready from Monday to jump on any firm failing to adhere to a new duty to justify charges to customers in one of the regulator's biggest reforms in decades.
Firms regulated by the Financial Conduct Authority have been required to comply with a general principle of treating customers fairly, but the agency failed to halt a number of mis-selling scandals.
The new duty is particularly significant for being more granular, requiring "good outcomes" and no "forseeable harm" for customers across products and services, price and value. The duty includes an understanding of what's being sold, and after-sales support.
"We have been tracking those who are not ready or may not be ready and we will therefore be poised to take action and deal with firms who are not compliant and causing harm to consumers," Nisha Arora, a director for consumers and competition at the FCA, told Reuters.
"Where we see fees or charges based on nothing, or products that have no value to them, or excessive fees... those are the things that will attract our attention," Arora said, adding that firms could be asked to adjust prices or change the product.
The duty will help the FCA tackle harms pre-emptively to stop a mis-selling scandal in the first place, she added.
"What we are asking for is not unattainable," she said.
Firms will have to demonstrate to the FCA how they are providing good outcomes, a step the watchdog hopes will improve on the low trust in financial services.
"It essentially moves the burden of proof from the regulator to prove detriment, to the firm to say you must be able to evidence good customer outcomes," said Philip Deeks, head of KPMG's regulatory insight centre.
The duty is already having an impact. Wealth manager St James's Place said last week that following a review ahead of the rule, it was changing its fee structure, denting net income by 12 million pounds in the second half of the year.
END OF THE BEGINNING
The new rule will be a major step for most firms in practice, said Jonathan Herbst, global head of financial services regulation at Norton Rose Fulbright law firm.
"Even so, everyone recognises that this is really only the end of the beginning, and there is considerable uncertainty about how it will be interpreted and enforced by the FCA," Herbst said.
The FCA, which regulates 50,000 firms, estimates it will cost a one-off 2.4 billion pounds ($3.1 billion) for firms to implement the duty, and is spending 5.3 million pounds on "embedding" it.
It says it will help ensure that banks pass on higher interest rates to savers, and provide help to those struggling to pay a mortgage.
KPMG's Deeks said the next step will be strategic revaluations by companies that could question their ability to show compliance, potentially to the point of some leaving the market.
Deeks said: "We will probably see some product simplification and some product rationalisation as well, but on the upside it should also create innovation, with new needs identified by stepping closer to customers."
($1 = 0.7770 pounds)
Reporting by Huw Jones; Editing by Conor Humphries
Nigel Farage says he has launched a website to stand up for people who have been denied bank accounts after the row over his Coutts account closure.
He said on social media he will "fight back against the big banks who have let us down", calling it a "scandal".
It comes after Mr Farage obtained a report from the bank which indicated his political views were considered as a factor in his account closure.
The row led to the resignation of two bank bosses last week.
Dame Alison Rose, chief executive of NatWest Group, quit after saying she had made a "serious error of judgment" in speaking to a BBC journalist about Mr Farage's Coutts account.
Peter Flavel, the boss of the NatWest-owned private bank for the wealthy, Coutts, also quit.
Despite facing calls to resign, NatWest chairman Sir Howard Davies, has vowed to remain in post to ensure the bank's stability.
Mr Farage said in late June his account had been shut and he had not been given a reason. He did not name the bank at the time.
The BBC initially reported Mr Farage's account was closed because he no longer met the wealth threshold for Coutts, citing a source familiar with the matter.
Launching the AccountClosed.org website via a video posted on social media, Mr Farage said: "Most people who have this happen to them feel helpless. There's no-one to speak for them.
"And I think what's emerging is a major national scandal. You can't live without a bank account in the 21st Century."
The campaign is described on the website as being for individuals and small medium businesses "who have faced unjust treatment from banks and financial services companies, particularly when their accounts have been abruptly closed and essential services withdrawn".
The law states that every person in the UK has a legal right to hold a basic bank account that gives them the ability to receive and make payments.
Legislation says a bank "must not discriminate against consumers legally resident in the United Kingdom by reason of their nationality or place of residence or by reason of sex, race, colour, ethnic or social origin, genetic features, language, religion or belief, political or any other opinion".
Former prime minister Liz Truss said she was "appalled" at the treatment of Mr Farage.
Writing in the Sunday Telegraph, she said: "The saga shows how a powerful technocracy presides over an increasingly opaque system, while elected politicians - in particular those politicians whose views do not find favour at London dinner parties - are treated with suspicion."
Nigel Farage says he plans to "build a powerful lobby group" that the Government "simply can't ignore" after revealing that 1,000 bank accounts are closed each day.
Speaking on GB News, Farage said "every option is on the table" in regards to taking legal action against NatWest after they shared his personal information.
It comes after Farage’s account with Coutts was closed earlier this month after the bank said they no longer wanted him as a customer.
Talking to Camilla Tominey, he said: "Nobody with profile who has been debanked has come forward. Two reasons, one a sense of shame, humiliation and embarrassment but secondly it would damage their prospects of getting any other bank account.
"But what I've learnt is this, it isn't just high profile people with strong opinions that are being closed down by banks that have become completely politicised in the most extraordinary way.
"What I've learned in the three weeks since I came out as it were, I've just been inundated by small businesses, by folk all round the country. People in absolute fear, terror, lives being ruined, thousands of businesses being closed.
"These are people who have done nothing wrong whatsoever."
The former Ukip leader says he wants his de-banking to be a "turning point in this whole appalling behaviour from banks".
He added: "I do not want what has happened to me to happen to anybody else. And it's clear from today's newspapers, it has been happening to an awful lot of people.
"I want this to be a turning point in this whole appalling behaviour from banks, whether it's high profile figures or people running a fish stall. What has happened within this industry is wrong.
"It's become frankly self-serving in its own interests. It's damaging Britain and I want real change."
A 40-page dossier revealed Coutts chiefs made a concerted effort to “exit” him as a customer as they didn’t believe Farage aligned with their views.
He said: "I want to see a cultural change but Government and Parliament needs to go through the legislation, this simply isn't working. It's not just ruining lives in Britain, it's damaging businesses in Britain.
"The information we've got out today is that 1000 bank accounts a day are being closed, a day. Every single day a thousand people whether it's their personal or business accounts are being closed down.
"There are tens and thousands of people out there, maybe more, who are being wronged by the banks whose lives have been ruined, they have had no-one to speak for them.
"They've been suffering in silence and that's why I've launched this website today accountclosed.org if you've been closed down, if you've been suspended then come and tell me who you are, help me to help you."
The COVID pandemic is long gone, but we are still being stalked by the virus.
Boots reports that sales of COVID tests have jumped by more than a third this month as people suffer more coughs, sore throats and headaches.
And users of the ZOE health app are also reporting more COVID symptoms.
Data for 29 July shows that 789,695 people across the UK are estimated to have symptomatic COVID.
Rates are currently highest in the South West of England with between 931 and 1,628 daily new cases per million people - with Wales not far behind with between 591 and 1,755 new reports a day per million people.
In Yorkshire and the Humber, rates are at their lowest with somewhere between 328 and 1,088 new cases a day per million people.
These are huge ranges, so there is uncertainty about the actual number.
More from UK
The Government no longer funds the more reliable and comprehensive infection survey run by the Office for National Statistics.
Nevertheless, the ZOE data does show a 30% rise in daily cases since the start of July.
But they are still well below the peaks of the pandemic. The ZOE data shows there were more than 3.8 million daily new cases as Omicron surged last spring.
The recent rise also shows a small increase in people admitted to hospital with COVID.
The latest data from the Government dashboard shows 677 patients in England had a positive test in the week to 21 July, up from 465 at the end of June.
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3:28
'Pandemic planning was inadequate'
Again, that's well below the Omicron peak of 9,618.
Still, the UK Health Protection Agency says it is keeping an eye on the figures.
So what's going on? Surely we were rid of the virus long ago?
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With less virus circulating it is many months since many people will have been infected.
And it is even longer ago that most had a dose of the vaccine.
Last autumn, everyone over 50 was urged to have a booster.
But uptake was just 40% in people in their early 50s in England and likely to be similar in the rest of the UK.
In those in their late 50s, it was 52%.
It's only when you get to the over 75s, the group most at risk of serious infection, that uptake climbed above 80%.
The over-75s were also eligible for a booster in the spring of this year, with 70% taking up the offer. So their protection is likely to be holding up.
Image:Nurses wearing PPE in St George's Hospital in Tooting, south-west London
But protection in the rest of the population is falling off.
COVID is here to stay.
It's far milder now than it was, with no sign of a troubling new variant in more than 18 months.
But rates will go on rising and falling, just like so many other respiratory infections.
The City minister has said it would not be “helpful” for the NatWest chairman to quit as a result of the crisis over Nigel Farage’s Coutts bank account.
Andrew Griffith said Sir Howard Davies’ resignation would not alleviate the situation, with NatWest having already lost its chief executive, Dame Alison Rose, and Peter Flavel, the head of Coutts, its private banking arm.
On Thursday, Rishi Sunak declined to offer Davies his backing. However, on Friday evening, Griffith said on BBC Radio 4’s Any Questions: “I don’t think that Sir Howard Davies going now would be helpful.”
Davies is due to leave next year, with his departure having been announced before the row erupted. Griffith said: “Alison was the chief executive responsible for the day-to-day conduct of that organisation. Sir Howard is the chairman of the board. He’s already going; they’re looking for a new chairman … The important thing is there’s an independent investigation. I want to find out what was going on.”
The banking group has been under intense pressure in recent days after it emerged that an account with Coutts belonging to Farage, the former Ukip leader, had been closed without explanation.
Farage claimed it was because of his political views, while a BBC report cited an anonymous source as suggesting it had more to do with his personal finances. He later obtained internal documents that demonstrated the bank had taken into consideration both what it termed as his “xenophobic, chauvinistic and racist views” and its belief that he had fallen “below commercial criteria for some time”.
The BBC faced criticism for its reporting and apologised to Farage. Rose admitted being the broadcaster’s source and, despite initial backing from Davies to stay in her job, resigned in the early hours of Wednesday after the prime minister and the chancellor, Jeremy Hunt, intervened.
The row over the issue highlighted other cases that had received significantly less publicity. On Thursday, the chair of Finsbury Park mosque, Mohammed Kozbar, claimed there was a “double standard” in the treatment of his organisation, compared with that of Farage.
Almost a decade ago, three Muslim organisations – including the north London mosque – had their HSBC bank accounts shut. There was little public acknowledgment or support at the time, Kozbar said, leaving him frustrated that British Muslims struggling with this problem have been left to do so alone.
It also emerged that the True and Fair party, led by the anti-Brexit campaigner Gina Miller, had been told this month by Monzo that its bank account would close in September. Miller said if new political parties could not access banking services, “we don’t have a functioning democracy” and that it was a “bigger issue” than the closure of Farage’s bank account.
After Rose’s resignation, Davies said she had been pushed out due to political pressure. He said he believed offering her his backing was a “rational decision to make at the time” but added: “The political reaction to that, was such that Alison and I then concluded, and the board supported the view, that her position was then untenable.”
The bank has appointed the law firm Travers Smith to lead an independent review into how it handled the Farage case, including Coutts’ policies in relation to customer account closures.
NatWest Group announced its financial results on Friday, revealing its operating pre-tax profit hit £3.6bn in the six months to the end of June, up £1bn from the same time a year ago.
Train passengers are facing another day of disruption as up to 20,000 rail workers in the RMT union walk out for the second Saturday in a row.
It is part of a long-running dispute about pay, jobs and working conditions.
About half of the usual services are expected to run across the network, and some will finish earlier than usual.
The RMT says it is waiting to be invited back to the negotiating table. The government says the union should put an existing offer to RMT members.
With many schools across the UK on their six-week summer holidays, the strike could disrupt family holiday travel.
Cricket fans travelling to the fifth Ashes Test at The Oval in London may also face delays.
At London's Euston railway station, some travellers told the BBC they had some sympathy for rail workers, as others spoke of their frustration as they tried to make alternative plans.
The operators affected are based in England, but some run services into Wales and Scotland. They include:
Avanti West Coast
C2C
Chiltern Railways
CrossCountry
East Midlands Railway
GTR, which operates Southern, Thameslink, Great Northern and Gatwick Express
Great Western Railway
Greater Anglia, which includes Stansted Express
LNER
Northern Trains
Southeastern
South Western Railway
TransPennine Express
West Midlands Trains
Kate Nicholls, from the trade body UK Hospitality, said trade "falls off a cliff" in towns and city centres across the UK every day there is a rail strike.
She estimated that around £340m worth of sales in the UK had been lost over the past week during three strike days and a drivers' overtime ban.
Saturday's action is the last strike in the diary and unions have to give at least 14 days' notice of any further strike action.
However, next week Aslef, the train drivers' union, has an overtime ban scheduled, which will also affect services.
Asked when the industrial action was going to end, the RMT's general secretary Mick Lynch said: "We don't know. We've got a government who won't negotiate."
He told BBC's Breakfast show that workers had not had a pay rise for four years, but that the more pressing issue was job cuts.
"They've given me statutory notices for 2,300 of our members leaving the industry. They are then going to move on to catering and engineering and other workers in the industry so the immediate thing is job security," he said.
"When we've concluded those things, we would like a pay rise that addresses the cost of living crisis," he said, but declined to put a figure on it. "There are a lot of issues to deal with but they can be resolved fairly sensibly if they come to the table with good will."
Josh Coe, from the Rail Delivery Group, which represents the 14 affected train companies, said: "We've been negotiating with the leaders of the RMT now for over a year and it's a real shame that the offer we made to them worth 13% in terms of an increase in pay for the lowest paid is not being put to their membership which would have brought this industrial dispute to an end."
A Department for Transport spokesperson said: "The government has met the rail unions, listened to them and facilitated improved offers on pay and reform.
"The union leaders should put these fair and reasonable offers to their members so this dispute can be resolved."
The RMT's senior assistant general secretary Eddie Dempsey said this morning that the union had already held a "mass consultation" with its members on the offer, "and they gave us their view which was that they wanted to reject the offer and see an improvement".
The union was therefore "not going to put an offer to our members that we've already rejected", he said.
If nothing changes, the RMT could schedule more strikes until November, when it would have to re-ballot members.
The average salary of rail workers in 2022 was £45,919, according to the Office for National Statistics (ONS).
Excluding drivers - who tend to be members of the Aslef union, not RMT - its estimate is £39,518.
However, the RMT union said that figure was too high because it did not include rail cleaning staff.
How will the rail strikes affect your journey? What alternative forms of transport are you using? Share your experiences by emailing haveyoursay@bbc.co.uk.
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Howard Davies has apologised for the uncertainty created by recent events but insisted that “My intention is to continue to lead the board”.
Speaking to reporters this morning, Davies says NatWest’s board met yesterday and agreed to the terms of reference for an independent review into the handling of Nigel Farage’s accounts at Coutts.
This review will examine the way in which information about that issue has been handled within the bank. The terms of reference of that review will be released today and the finding will be released “in due course”, says Davies.
He adds:
“My intention is to continue to lead the board and ensure that the bank remains sound and stable and able to support our 19 million customers”.
NatWest’s chair has said he will not quit over the row about the closure of Nigel Farage’s account.
Sir Howard Davies said he would continue to chair NatWest’s board to provide “stability” after the resignations of Dame Alison Rose, and the boss of Coutts, this week.
Davies also told reporters that political pressure had meant Rose could not continue, and that the bank had lost a ‘great leader’ in the early hours on Wednesday when she stepped down.
He was speaking after NatWest beat City expectations this morning, by posting operating profits of £3.6bn for the first half of this year.
The bank will pay £500m in dividends to its shareholders, meaning a £190m payday for UK taxpapers:
NatWest cut its forecast for its net interest margin (the gap between what it charges borrowers and pays savers); a sign that some people have been running down their savings or moving them to more lucrative accounts.
Farage has backed campaigner Gina Miller after Monzo ruled her True and Fair party’s bank account would close in September.
The number of firms falling into insolvency in England and Wales surged to the highest level for 14 years in the past quarter, according to Government figures.
The high court has dismissed a legal challenge by five Conservative-led councils against the expansion of London’s ultra-low emission zone (Ulez).
In the US, the PCE measure of inflation has fallen, as price pressures ease across the Atlantic, raising hopes of a soft-landing for the American economy.
The Bank of England has engaged Ben Bernanke, the former chair of the US Federal Reserve, to lead a review of forecasting at the UK central bank.
International Airlines Group, which owns British Airways, has announced record profits for the first half of 2023, with air fares up almost 10% on last year.
Several big lenders including Nationwide, HSBC and TSB have cut rates on their fixed mortgage deals in a sign that home loan costs may be close to peaking after surging to nearly 7%.
Samantha Keen, UK Turnaround and Restructuring Strategy Partner at EY-Parthenon, says:
“Quarterly company insolvencies reached over 6,300 for the first time since 2009 in Q2 as many businesses struggled to contend with a sustained mix of pressures.
“Although company insolvencies have been steadily increasing over the last 18 months, largely driven by Creditors’ Voluntary Liquidations (CVLs), in Q2 there was a significant uplift in the number of compulsory liquidations which rose 67% year-on-year.
“The current low-growth, high-inflation and relatively high interest rate environment has meant many businesses have faced building pressure over the last 12 months which is now translating into distress.
Jeremy Whiteson, restructuring and insolvency partner at Fladgate, says:
The increase in CVLs may reflect that many business have been ground down by a series of economic challenges which have hit in waves and eroded their businesses, leaving their owners with nothing to save - the pandemic, Brexit, labour shortages, the economic effects of the Ukraine conflict (leading to increased food and food costs) and now, rising interest rates. However, the increased costs of administrations, where additional regulation, aimed at protecting creditors by requiring more extensive reporting and consultation- may also have had the unintended consequence of putting these procedures beyond the reach of many businesses.
However, troubled companies with continuing business also seems to have been affected. Administrations (at 409) were a 30% increase on the preceding quarter (when there were 314) and a 34% increase on Q2 2022. This is the highest number since the beginning of the pandemic. CVAs were up even more. At 56 this was a 47% increase on the preceding quarter and a 75% increase on Q2 2022.
And here’s Lucy Fulmer, Director and Head of Creditor Markets at PwC:
“The high number of compulsory liquidations in Q2 of this year is striking - 637 compared to 382 in the same quarter last year. This is driven by an increase in winding up petitions - formal applications from creditors to shut down companies - which our data shows have more than doubled to 2,400 in the first half of this year compared to the same period last year. A lot of this increase can be attributed to HMRC returning to pre-pandemic levels of enforcement action.
“Consumer sentiment also remains a concern, particularly in the retail, food service and leisure industries, whilst the construction sector is grappling with credit risk brought about by inflationary pressure, labour shortages and increasing interest rates. The hospitality and leisure sector made up 17% of insolvencies in H1 2023, and increased by 38% compared to H1 2022. However, with the start of the summer holidays and energy prices falling, we hope to see the sector begin to recover as the year progresses.”
Elsewhere in the banking sector, several big lenders including Nationwide, HSBC and TSB have cut rates on their fixed mortgage deals.
It’s a sign that home loan costs may be close to peaking after surging to nearly 7%.
The reductions follow data last week that showed inflation fell further than expected in June, helping to calm financial markets and trim expectations of the number of interest rate rises still required to tame inflation.
Can Howard Davies cling onto the top job on the NatWest board until 2024?
Our financial editor, Nils Pratley, thinks not – even though Davies himself hoped to hang on until July 2024, before the Farage bank row blew up.
Nils writes:
Davies has probably escaped the need for an instant resignation only by virtue of the fact that he was going anyway. Plan A, which pre-dates the Coutts fiasco, was for him to leave by July next year for the conventional reason that his nine-year term will be up at that point. An obvious strategy now would be to accelerate the timetable and get out as soon as is practical.
Since the search for a new chair has already been running for a few weeks, it should not take ages to find a new face, even if the pool of likely volunteers may have shrunk over the past week. One suspects Davies will want to be out in the autumn, or at least to have named his successor by then. And it will be amazing if he’s still there by Christmas. Under a new chair the necessary broader overhaul of the boardroom after the incompetence of the past month can begin.
The row over access to UK bank accounts is creating some unlikely alliances.
Nigel Farage has thrown his backing behind anti-Brexit campaigner GinaMiller, after it emerged this morning that Monzo bank is to close the bank account of Miller’s True and Fair party.
Farage says he stands with Miller, who famously challenged the UK government in 2016 over its authority to trigger the process of leaving the European Union without parliamentary approval.
Miller warned this morning that “we don’t have a functioning democracy” if new political parties cannot access banking services.
More than 1,000 Manchester Stagecoach drivers have voted overwhelmingly for industrial action, the Unite union has announced.
Strike action will take place on 11, 12, 13 and 14 August, and will “severely” affect bus services across the whole of Manchester, Unite says.
The drivers have rejected an offer of 4% from June 2023 with a further 4% cent in December, which Unite points out is below the RPI inflation rate of 10.7% (although it pretty much matches June’s CPI inflation reading of 7.9%).
America is continuing to win its battle against inflationary pressures.
The US PCE price index, which tracks cost changes, rose by 3% in the year to June, data just released shows, down from 3.8% in May.
That matches the official reading for consumer price inflation in June, which dropped to 3% this month too – nearer to the 2% target.
Prices for goods decreased by 0.6% while prices for services increased 4.9%.
Food prices increased 4.6% while energy prices tumbled 18.9% compared to a year earlier.
Core PCE, which excludes food and energy, rose by 4.1% from one year ago. This measure is closely watched by the Federal Reserve.
Newsflash: Dr Ben Bernanke, the former head of America’s central bank, the Federal Reserve, is to lead a review into the Bank of England’s forecasting.
The BoE says the review will aim to “develop and strengthen” the Bank’s support for the Monetary Policy Committee’s approach to forecasting and monetary policy making in times of uncertainty.
This follows criticism that the Bank failed to predict the surge in inflation over the last year or two, meaning it was too slow to tighten monetary policy by raising interest rates.
“Forecasts are an important tool for central banks to assess the economic outlook.
But it is right to review the design and use of forecasts and their role in policymaking, in light of major economic shocks. So I am delighted to be leading this work for the Bank.”
A month ago, the Bank’s chief economist, Huw Pill, said the Bank’s forecasting models became become “unworkable” in the current crisis, as they failed to fully appreciate the the interaction of high energy prices and a tight jobs market.
In the energy sector, profits at oil giant ExxonMobil have halved, following the drop in crude prices.
America’s biggest oil company has reported a net income of $7.9bn for the second quarter, down from the record $17.9bn profit it posted in Q2 2022.
The number of people across England and Wales registering for “breathing space” from their debts jumped by 26% in the second quarter of this year compared with the same period in 2022, according to the Insolvency Service.
Some 21,232 breathing space registrations were recorded in the second quarter of 2023.
Within the total, 20,919 were standard registrations and 313 were mental health breathing space registrations.
A standard breathing space is available to people with problem debt and gives legal protections from creditor action for up to 60 days.
A mental health crisis breathing space is available to someone who is receiving mental health crisis treatment. It lasts as long as the person’s mental health crisis treatment, plus 30 days.
Here’s our news story about Howard Davies’ plan to remain NatWest chair to provide the bank with stability, and the bank’s hiring of external lawyers to investigate the closure of Nigel Farage’s Coutts accounts.
It explains:
Davies, who was already due to retire from his post in summer 2024, told journalists on Friday morning that the search for his successor would continue in a “completely normal” manner, despite the prime minister failing to publicly back him a day earlier.
“My intention is to continue to lead the board,” Davies said.
“My understanding is that we do have the support of our main shareholder and of the regulators, for us to continue to steer this bank forward,” he said, referring to the government’s 38.5% stake, a hangover from its 2008 state bailout.
Pharmaceuticals group AstraZeneca has, like NatWest, beaten profit expectations this morning, despite a tailing off in revenues from Covid-19.
AstraZeneca reported a 25% rise in core earnings per share for the second quarter of the year. Revenues rose 4% to $22.3bn, despite a decline of $2.2bn from Covid-19 medicines.
AstraZeneca reported no sales of Vaxzevria, its Covid-19 vaccine, in the second quarter.
Instead, its blockbuster cancer drugs lifted sales, with oncology revenues up 22% thanks to a “strong performance across key medicines and regions”.
AstraZeneca chief executive Pascal Soriot told reporters this morning that the company was “very encouraged” by interim data from the trial of a key lung cancer drug, called datopotamab deruxtecan.
At the start of July, AstraZeneca’s shares fell 8% after the firm said it was too soon to say with statistical significance if patients taking datopotamab deruxtecan would also live longer. Investors were disappointed then that the company did not say the data was “clinically meaningful”.
Today, AstraZeneca’s shares are up 4%.
2023 has been a pretty profitable year for the banks, although there are now signs that the windfall from higher interest rates is fading…
Howard Davies has apologised for the uncertainty created by recent events but insisted that “My intention is to continue to lead the board”.
Speaking to reporters this morning, Davies says NatWest’s board met yesterday and agreed to the terms of reference for an independent review into the handling of Nigel Farage’s accounts at Coutts.
This review will examine the way in which information about that issue has been handled within the bank. The terms of reference of that review will be released today and the finding will be released “in due course”, says Davies.
He adds:
“My intention is to continue to lead the board and ensure that the bank remains sound and stable and able to support our 19 million customers”.
NatWest’s chair has said he will not quit over the row about the closure of Nigel Farage’s account.
Sir Howard Davies said he would continue to chair NatWest’s board to provide “stability” after the resignations of Dame Alison Rose, and the boss of Coutts, this week.
Davies also told reporters that political pressure had meant Rose could not continue, and that the bank had lost a ‘great leader’ in the early hours on Wednesday when she stepped down.
He was speaking after NatWest beat City expectations this morning, by posting operating profits of £3.6bn for the first half of this year.
The bank will pay £500m in dividends to its shareholders, meaning a £190m payday for UK taxpapers:
NatWest cut its forecast for its net interest margin (the gap between what it charges borrowers and pays savers); a sign that some people have been running down their savings or moving them to more lucrative accounts.
Farage has backed campaigner Gina Miller after Monzo ruled her True and Fair party’s bank account would close in September.
The number of firms falling into insolvency in England and Wales surged to the highest level for 14 years in the past quarter, according to Government figures.
The high court has dismissed a legal challenge by five Conservative-led councils against the expansion of London’s ultra-low emission zone (Ulez).
In the US, the PCE measure of inflation has fallen, as price pressures ease across the Atlantic, raising hopes of a soft-landing for the American economy.
The Bank of England has engaged Ben Bernanke, the former chair of the US Federal Reserve, to lead a review of forecasting at the UK central bank.
International Airlines Group, which owns British Airways, has announced record profits for the first half of 2023, with air fares up almost 10% on last year.
Several big lenders including Nationwide, HSBC and TSB have cut rates on their fixed mortgage deals in a sign that home loan costs may be close to peaking after surging to nearly 7%.
Samantha Keen, UK Turnaround and Restructuring Strategy Partner at EY-Parthenon, says:
“Quarterly company insolvencies reached over 6,300 for the first time since 2009 in Q2 as many businesses struggled to contend with a sustained mix of pressures.
“Although company insolvencies have been steadily increasing over the last 18 months, largely driven by Creditors’ Voluntary Liquidations (CVLs), in Q2 there was a significant uplift in the number of compulsory liquidations which rose 67% year-on-year.
“The current low-growth, high-inflation and relatively high interest rate environment has meant many businesses have faced building pressure over the last 12 months which is now translating into distress.
Jeremy Whiteson, restructuring and insolvency partner at Fladgate, says:
The increase in CVLs may reflect that many business have been ground down by a series of economic challenges which have hit in waves and eroded their businesses, leaving their owners with nothing to save - the pandemic, Brexit, labour shortages, the economic effects of the Ukraine conflict (leading to increased food and food costs) and now, rising interest rates. However, the increased costs of administrations, where additional regulation, aimed at protecting creditors by requiring more extensive reporting and consultation- may also have had the unintended consequence of putting these procedures beyond the reach of many businesses.
However, troubled companies with continuing business also seems to have been affected. Administrations (at 409) were a 30% increase on the preceding quarter (when there were 314) and a 34% increase on Q2 2022. This is the highest number since the beginning of the pandemic. CVAs were up even more. At 56 this was a 47% increase on the preceding quarter and a 75% increase on Q2 2022.
And here’s Lucy Fulmer, Director and Head of Creditor Markets at PwC:
“The high number of compulsory liquidations in Q2 of this year is striking - 637 compared to 382 in the same quarter last year. This is driven by an increase in winding up petitions - formal applications from creditors to shut down companies - which our data shows have more than doubled to 2,400 in the first half of this year compared to the same period last year. A lot of this increase can be attributed to HMRC returning to pre-pandemic levels of enforcement action.
“Consumer sentiment also remains a concern, particularly in the retail, food service and leisure industries, whilst the construction sector is grappling with credit risk brought about by inflationary pressure, labour shortages and increasing interest rates. The hospitality and leisure sector made up 17% of insolvencies in H1 2023, and increased by 38% compared to H1 2022. However, with the start of the summer holidays and energy prices falling, we hope to see the sector begin to recover as the year progresses.”
Elsewhere in the banking sector, several big lenders including Nationwide, HSBC and TSB have cut rates on their fixed mortgage deals.
It’s a sign that home loan costs may be close to peaking after surging to nearly 7%.
The reductions follow data last week that showed inflation fell further than expected in June, helping to calm financial markets and trim expectations of the number of interest rate rises still required to tame inflation.
Can Howard Davies cling onto the top job on the NatWest board until 2024?
Our financial editor, Nils Pratley, thinks not – even though Davies himself hoped to hang on until July 2024, before the Farage bank row blew up.
Nils writes:
Davies has probably escaped the need for an instant resignation only by virtue of the fact that he was going anyway. Plan A, which pre-dates the Coutts fiasco, was for him to leave by July next year for the conventional reason that his nine-year term will be up at that point. An obvious strategy now would be to accelerate the timetable and get out as soon as is practical.
Since the search for a new chair has already been running for a few weeks, it should not take ages to find a new face, even if the pool of likely volunteers may have shrunk over the past week. One suspects Davies will want to be out in the autumn, or at least to have named his successor by then. And it will be amazing if he’s still there by Christmas. Under a new chair the necessary broader overhaul of the boardroom after the incompetence of the past month can begin.
The row over access to UK bank accounts is creating some unlikely alliances.
Nigel Farage has thrown his backing behind anti-Brexit campaigner GinaMiller, after it emerged this morning that Monzo bank is to close the bank account of Miller’s True and Fair party.
Farage says he stands with Miller, who famously challenged the UK government in 2016 over its authority to trigger the process of leaving the European Union without parliamentary approval.
Miller warned this morning that “we don’t have a functioning democracy” if new political parties cannot access banking services.
More than 1,000 Manchester Stagecoach drivers have voted overwhelmingly for industrial action, the Unite union has announced.
Strike action will take place on 11, 12, 13 and 14 August, and will “severely” affect bus services across the whole of Manchester, Unite says.
The drivers have rejected an offer of 4% from June 2023 with a further 4% cent in December, which Unite points out is below the RPI inflation rate of 10.7% (although it pretty much matches June’s CPI inflation reading of 7.9%).
America is continuing to win its battle against inflationary pressures.
The US PCE price index, which tracks cost changes, rose by 3% in the year to June, data just released shows, down from 3.8% in May.
That matches the official reading for consumer price inflation in June, which dropped to 3% this month too – nearer to the 2% target.
Prices for goods decreased by 0.6% while prices for services increased 4.9%.
Food prices increased 4.6% while energy prices tumbled 18.9% compared to a year earlier.
Core PCE, which excludes food and energy, rose by 4.1% from one year ago. This measure is closely watched by the Federal Reserve.
Newsflash: Dr Ben Bernanke, the former head of America’s central bank, the Federal Reserve, is to lead a review into the Bank of England’s forecasting.
The BoE says the review will aim to “develop and strengthen” the Bank’s support for the Monetary Policy Committee’s approach to forecasting and monetary policy making in times of uncertainty.
This follows criticism that the Bank failed to predict the surge in inflation over the last year or two, meaning it was too slow to tighten monetary policy by raising interest rates.
“Forecasts are an important tool for central banks to assess the economic outlook.
But it is right to review the design and use of forecasts and their role in policymaking, in light of major economic shocks. So I am delighted to be leading this work for the Bank.”
A month ago, the Bank’s chief economist, Huw Pill, said the Bank’s forecasting models became become “unworkable” in the current crisis, as they failed to fully appreciate the the interaction of high energy prices and a tight jobs market.
In the energy sector, profits at oil giant ExxonMobil have halved, following the drop in crude prices.
America’s biggest oil company has reported a net income of $7.9bn for the second quarter, down from the record $17.9bn profit it posted in Q2 2022.
The number of people across England and Wales registering for “breathing space” from their debts jumped by 26% in the second quarter of this year compared with the same period in 2022, according to the Insolvency Service.
Some 21,232 breathing space registrations were recorded in the second quarter of 2023.
Within the total, 20,919 were standard registrations and 313 were mental health breathing space registrations.
A standard breathing space is available to people with problem debt and gives legal protections from creditor action for up to 60 days.
A mental health crisis breathing space is available to someone who is receiving mental health crisis treatment. It lasts as long as the person’s mental health crisis treatment, plus 30 days.
Here’s our news story about Howard Davies’ plan to remain NatWest chair to provide the bank with stability, and the bank’s hiring of external lawyers to investigate the closure of Nigel Farage’s Coutts accounts.
It explains:
Davies, who was already due to retire from his post in summer 2024, told journalists on Friday morning that the search for his successor would continue in a “completely normal” manner, despite the prime minister failing to publicly back him a day earlier.
“My intention is to continue to lead the board,” Davies said.
“My understanding is that we do have the support of our main shareholder and of the regulators, for us to continue to steer this bank forward,” he said, referring to the government’s 38.5% stake, a hangover from its 2008 state bailout.
Pharmaceuticals group AstraZeneca has, like NatWest, beaten profit expectations this morning, despite a tailing off in revenues from Covid-19.
AstraZeneca reported a 25% rise in core earnings per share for the second quarter of the year. Revenues rose 4% to $22.3bn, despite a decline of $2.2bn from Covid-19 medicines.
AstraZeneca reported no sales of Vaxzevria, its Covid-19 vaccine, in the second quarter.
Instead, its blockbuster cancer drugs lifted sales, with oncology revenues up 22% thanks to a “strong performance across key medicines and regions”.
AstraZeneca chief executive Pascal Soriot told reporters this morning that the company was “very encouraged” by interim data from the trial of a key lung cancer drug, called datopotamab deruxtecan.
At the start of July, AstraZeneca’s shares fell 8% after the firm said it was too soon to say with statistical significance if patients taking datopotamab deruxtecan would also live longer. Investors were disappointed then that the company did not say the data was “clinically meaningful”.
Today, AstraZeneca’s shares are up 4%.
2023 has been a pretty profitable year for the banks, although there are now signs that the windfall from higher interest rates is fading…
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