The Times - UK (2020-11-14)

54 2GM Saturday November 14 2020 | the times

Business

5

quarter of next year, an improvement

on a previous forecast of 7.5 per cent, but

it is not likely to return to pre-virus lows

of 3.9 per cent for some time.

Samuel Tombs, at Pantheon, said:

“Covid-19 has accelerated some long-

term structural trends. Online retail

sales are likely to comprise a perma-

nently higher share of the total after the

pandemic, leading to a further reduc-

tion in employment in the physical

graded their forecasts for unemploy-

ment in response to the vaccine

announcement, they warned that the

jobless rate would remain high for some

time.

Analysts at Pantheon Macro-

economics said that the jobs slump

would not match the fallout from the

2008 financial crisis, when it peaked at

8.5 per cent. Unemployment is expect-

ed to peak at 6.5 per cent in the second

1

People have been conned out

of £1.4 billion since the start of

the first pandemic lockdown as

fraudsters cash in and police

struggle to cope. TSB, a bank that

pays back all its customers who

fall victim to fraud, has bought

laptops for police forces and

software that helps them to

analyse the activities of fraudsters.

Page 14

2

Vaccine euphoria drove

leading British shares to their

best week in eight months

even as coronavirus cases hit a

record high. The FTSE 100 index

of ondon’s leading shares climbed

by 6.9 per cent this week and the

domestically focused FTSE 250

gained 7.6 per cent, the best

performance for each since the

week starting April 5. The rally

has left hedge funds and other

short-sellers nursing paper losses

of nearly £700 million Page 53

3

Economists have forecast that

the vaccine breakthrough

could have by far the most

impact on the economy of any

event and could help to restore all

of its lost ground by the middle of

next year.

4

More than 60 high street

bosses have warned the

government that many retail

stores may never reopen if the

lockdown is extended into the

crucial Christmas trading period.

5

The Financial Conduct

Authority, the financial

regulator, has ditched

proposals to force firms to stop

charging customers fees when

they switch investment platforms,

saying that there had been a

“marked shift” away from

imposing the fees in the past year.

6

Senior executives at Carillion

acted recklessly by misleading

stock market investors over

the true state of the construction

company’s financial health in the

run-up to its collapse, the

Financial Conduct Authority, the

City regulator, has said.

7

Pensionbee, a financial

technology company that has

been dubbed “the Monzo of

pensions”, is close to appointing

bankers before a flotation in

London set to value it at

£300 million or more. Page 56

8

A review led by Dame Linda

Dobbs into whether

executives at Lloyds Banking

Group covered up the £1 billion

HBOS Reading fraud has been

delayed again, prompting dismay

among those who lost their

livelihoods to the scam. Page 57

9

Dealmakers had been warned

that change was coming in

Britain’s mergers and

acquisitions regime, but the extent

of the overhaul unveiled by Boris

Johnaon’s government this week

has raised eyebrows throughout

the City. Page 58

10

Lenders including

Natwest, Lloyds and

Metro Bank are interested

in buying Sainsbury’s Bank from

its supermarket parent. An

acquisition of the bank, which has

two million customers, could form

part of a jigsaw of potential deals

that would make a decisive impact

on Britain’s banking landscape.

Page 59

Need to know

Economic scars will show

New normal

UK household M4

money holdings

20

15

10

5

0

-5

2008 2012 2016 2020

Change, £bn per month

Business investment and

household consumption

100

90

80

70

60

50

2014 2016 2018 2020

Index Q4, 2019 = 100

Business investment

household consumption

Source:

Bank of England

The economy has been kicked from

pillar to post in recent months. After

suffering an unprecedented sucker

punch from Covid-19 and a national

lockdown in the spring, it got a much-

needed boost of adrenaline during the

summer as restrictions were eased and

consumers returned to shops, restau-

rants and bars. Then, with the economy

barely back on its feet, Covid-19 infec-

tions starting rising again and a second

lockdown was announced.

Economists have been watching the

drama unfold, tinkering with their

models in response to each twist and

turn. In the past two weeks alone, they

have had to take account of Boris

Johnson revealing a second national

lockdown, Pfizer and Biontech

announcing a big vaccine break-

through and third-quarter GDP figures

that were both record-breaking — with

the economy growing by 15.5 per cent in

the quarter — but also disappointing —

because they showed that the economy

remained 9.7 per cent smaller than it

was at the start of the year, a larger gap

than the one facing other developed

economies.

Of these recent events, the vaccine

breakthrough could have by far the

most impact. Economists have forecast

that it could help to restore the eco-

nomy’s lost ground by the middle of

next year.

Douglas McWilliams, of the Centre

for Economic and Business Research,

the consultancy, said: “We are fairly

optimistic that spending will recover

quite fast, with GDP in the second half

of 2021 pretty close to where it was at

the end of 2019.”

Capital Economics is forecasting that

it will take an extra six months, but its

prediction that output will recover to

pre-pandemic levels in 2022 is a year

earlier than its pre-vaccine estimate.

Economists are drawing confidence

from the likelihood that the latest lock-

down is likely to be the last if a vaccine

is made available by next spring. This

will clear the way for a surge in con-

sumer spending, similar to that over the

summer when people returned to

shops, restaurants and pubs.

Consumer spending should rebound

strongly because many people, mainly

in higher-income households, have

become richer as a result of being

constrained to their homes during the

pandemic. The Bank of England

believes that the household savings

ratio, which measures the proportion of

disposable income that is saved rather

than spent, will climb above 15 per cent

this year. This is more than twice as

high as normal.

Although the vaccine has lit the path,

the return to normality will not be

straightforward. The economy has

endured permanent damage as a result

of the coronavirus, which will restrict

its ability to recover. Businesses have

already gone bust and hundreds of

thousands of people have lost their jobs.

Even when the worst is over, businesses

will struggle to increase investment

because many will be saddled with high

levels of debt. The Bank of England

estimates that by the end of 2023 the

scarring effect of the pandemic will

leave the economy’s supply capacity

1.75 per cent smaller than it would have

been otherwise.

Many owners of small businesses are

still focusing on staying afloat through

the winter rather than any potential

boost from a vaccine next year. Andrea

Edwards, 54, who runs restaurants in

Liverpool, said: “While it sounds

encouraging, it won’t be available to the

general public for a while. I’m not

hanging my hat on a vaccine. Not at all.”

Ms Edwards said that she was

working on adapting her business

models in anticipation that the lock-

down would continue. “We’re doing

curbside pick-ups so people don’t have

to get out of their cars,” she said. “We’re

just using our initiative to keep money

coming in so we can secure our future.

We’re not giving up.”

Paul Dales, at Capital Economics,

said that it would take five years for the

economy to reach the level where it

would have been had the pandemic

never happened. “Even if a vaccine

allows life for most people to return to

‘normal’ next year, the economic legacy

of the crisis will be around for longer,”

he said.

The economy is also undergoing

significant structural changes, which

could cause substantial dislocation

over the next few years. If remote work-

ing continues, for example, then inner

city cafés, sandwich shops and dry

cleaners might never recover.

The process of adapting will be

painful, as businesses will close down

and workers will have to transition to

new roles. Although economists down-

The post-Covid outlook

has improved sharply

but some damage will

be permanent, writes

Gurpreet Narwan

FCA drops plan to stop switching fees

The financial regulator has ditched

proposals to force companies to stop

charging customers fees when they

switch investment platforms.

The Financial Conduct Authority

said that there had been a “marked

shift” away from imposing the fees in

the past year, but it warned that it would

reconsider taking action if firms started

to reintroduce the charges.

The guidance was part of an update

by the FCA yesterday on several

projects in the first indication of the

priorities of Nikhil Rathi, its new chief

executive. Mr Rathi, 41, is thought to be

clearing the decks in several areas in

order to focus on measures to help con-

sumers to cope with the financial strain

of the pandemic and the end of the

Brexit transition period.

The FCA is also dropping plans to

create a single interest rate for cash

savings as a way to stop loyal customers

being penalised while frequent

switchers chase better rates.

However, it will press ahead with

plans to make home and car insurance

fairer for customers who tend not to

switch by making it harder for firms to

repeatedly raise prices. It said in Sep-

tember that it was considering meas-

ures — including ensuring that cus-

tomers are charged no more to renew a

policy than if they were buying one as a

new customer — in an effort to stamp

out uneven pricing.

The statement on investment plat-

forms comes after the FCA said in

March last year that it wanted to ad-

dress barriers to competition from exit

fees when people tried to switch to dif-

ferent platforms. It calculated that 7 per

cent of consumers had tried to switch

but had failed because of hurdles in-

cluding exit fees and the complexity of

the process.

After several delays to the consulta-

tion, the FCA said yesterday that it was

scrapping the review altogether, in part

because “at least two major platforms

announced they would no longer be

charging exit fees”.

Interactive Investor and Hargreaves

Lansdown have scrapped the fees.

Richard Wilson, 54, Interactive’s

chief executive, said he was “bewil-

dered” by the FCA’s move, and added:

“Exit fees are a recipe for rip-offs and a

genuine barrier to consumers seeking

better value for money. They should

have been banned.”

Carillion

accused of

misleading

investors

Senior executives at Carillion acted

recklessly by misleading stock market

investors over the true state of the con-

struction company’s financial health in

the run-up to its collapse, the City regu-

lator has said.

The Financial Conduct Authority

said that it was planning to take action

against some former executive direc-

tors of the company for breaches of its

rules and principles. The FCA has a

range of sanctions it could impose,

including fines. The watchdog also said

Ben Martin Senior City Correspondent

Nikhil Rathi seems

to be ready to

focus on other

challenges

Katherine Griffiths Banking Editor