Our Weekly Newsletter
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.
Cash refusal “creeping into UK economy”
More than a third (34%) of people said they had been unable to pay with cash at least once since March when trying to buy something, according to Which?, signalling that the UK is shifting towards a cashless society. Expert Natalie Ceeney, who wrote the Access to Cash Review, has called for ministers to urgently legislate to protect the viability of cash, with many businesses turning cashless due to the ease of digital banking. Which? highlighted that the lack of cash access was a problem for those reliant on it, including people with certain health conditions or without computer access. (From BBC, 19 January 2021)
Stock market bubble bursting ‘poses biggest risk to global economy’
Soaring stock valuations pose the biggest threat to the global economy, according to both business and political leaders. Ahead of the World Economic Forum’s virtual Davos event next week, the WEF’s annual Global Risks Report found that an asset price bubble is the most significant risk in the next three to five years, amid fears the recent stock price rally has stretched valuations too far. It came as a survey of investors by Deutsche Bank found that bitcoin and US tech stocks are seen as the biggest bubble risks. (From The Telegraph, 19 January 2021)
More than half of savers recommended to transfer out of DB pensions
Financial advisers recommended tens of thousands of savers to transfer out of final-salary pensions, according to data from the Financial Conduct Authority. 49,456 people were recommended to transfer or convert their defined benefit pension scheme, representing 57% of all people who received pension transfer advice between 2018 and 2020. The high level of transfer recommendations could be driven by firms using a contingent charging model to incentivise advisers – this model reimburses advisers only if a customer transfers their pension. (From FT, 18 January 2021)
Europe-focused PE funds reel in US and Asian competitors
European-focused private equity managers topped the fundraising table in 2020. In contrast, fundraising in the US and Asia has slowed, possibly driven by differing degrees of the coronavirus pandemic in each region. Fundraising growth for Europe-focused private equity vehicles had been markedly lower than the North American market for funds over the past several years. That trend reversed in last year, as funds focused on Europe raised $141.6bn, a 30% increase from 2019’s total. (From Private Equity News, 18 January 2021)
UK dividends unlikely to recover until 2025
UK dividends are unlikely to recover to pre-pandemic levels until 2025 at the very earliest after the coronavirus crisis wiped away eight years of shareholder pay-out growth. The protracted downturn in pay-outs is likely to be driven by long-term economic scarring resulting from the disruption caused by the coronavirus pandemic. Firms may maintain low dividends in an effort to conserve cash amid significantly reduced demand attributable to households reeling in consumption to offset income hits. (From FT Adviser, 20 January 2021)