Capital Markets Corporate

October 22, 2020

Our Weekly Newsletter

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Across Instinctif Partners’ Financial Services team, we are always keeping an eye on the key developments taking place across the sector to evaluate their impact on the many businesses we work with. Here we share our picks of the week’s most interesting news, and our expert views.

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UK borrowing jumps in September as Covid support continues 
As the Covid-19 crisis continues, UK government borrowing reached £36.1bn in September, an increase of £28.4bn from last year and the third highest figure since records began in 1993, according to the Office for National Statistics. The extra money was needed to support the economy, pay furlough wages and financially help businesses amid the pandemic. In addition, the national debt is now 103.5% of the size of the UK’s economy, as measured in gross domestic product, the largest percentage since 1960. (From BBC, 21 October 2020)

UK dividends down 49% on last year  
The amount of cash paid out in UK dividends was down 49% in the third quarter of 2020 compared with last year, according to Link Group’s dividend monitor. Dividends stood at £18bn in the three months to September, the lowest level since 2010, with approximately two-thirds of companies having cut or cancelled their payments, totalling a £14.5bn loss. This follows firms voluntarily reducing their dividends to form a cash buffer against the economic impact of the pandemic, and the government mandating that any firm using a support scheme should not be paying out funds to shareholders. (From FT Adviser, 21 October 2020)

Younger workers could raid pensions to fund house purchases 
Plans to allow young workers struggling to get on to the property ladder to tap their pensions to help fund a housing deposit are being mooted by the UK pension minister. Under current rules, people cannot access their retirement savings until they are at least 55. Guy Opperman, pensions minister, has suggested allowing younger workers – often first-time buyers – to withdraw capital from their pension pot to help get them on the housing ladder. Detractors have noted that the plans could inflate house prices, making it even harder for first-time buyers to purchase a property and leave thousands with retirement income shortfalls. (From FT, 12 October 2020)

High street shops to offer cashback without purchase 
The Treasury has proposed allowing high street shops to offer cashback without consumers needing to make a purchase. The plans have been drawn up in response to a sharp fall in demand for cash amid the coronavirus pandemic. Consumers are increasingly using contactless payments to reduce the risk of contracting Covid-19, to pay for items quicker and keep track of money more easily. Large proportions of the population still rely on cash to manage their finances, particularly the elderly. The plans are intended to increase the number of outlets offering cash withdrawal services to offset physical bank branch closures. (From The Guardian, 15 October 2020)

Private equity makes slow progress on ESG promises 
Private equity firms are apparently making little progress on publicly disclosing their ESG credentials. Research from accountancy firm, BDO, reveals 63% of British buyout firms say they have taken ESG into account in their businesses, but just 29% of them publicly disclose their policies and progress in this area. The findings come as investors intensify their scrutiny of firms’ adherence to sustainability practices. Firms failing to response to demands to improve their ESG credentials risk experiencing an outflow of investor capital. (From Private Equity News, 19 October 2020)

 

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