Capital Markets Corporate

February 1, 2019

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.

London Prime Property Plunges

Brexit uncertainty is weighing heavily on the capital, with transactions in the Central London housing market falling to their lowest in a decade. While prime districts saw the number of properties changing hands fall by 14% in 2018, sales of new build homes did not fare any better, dropping to their lowest since 2012. This comes despite buyers of properties worth £5m or more expecting to pay 36% less than they did in June 2014, with foreign buyers yet to take advantage of Brexit luxury property discounts. (From The Financial Times, 27 January)

Bank Data Mining Alert

The FCA is closely watching the way in which banks use customer data to sell more products. The City watchdog believes data acquisition poses a threat to competition, as Lloyds, Barclays and Royal Bank of Scotland in particular all control significant amounts of the current account market. The regulator has raised concerns that the banks controlling the most data would have a significant advantage over smaller rivals in identifying those customers to exploit when interest rates drop. (From The Times, 27 January)

Private Equity Buyouts Soar Ahead of Brexit

Activity levels in private equity buyout deals hit a 10-year high in the fourth quarter of last year, with pressure to complete agreements ahead of Brexit driving the change. According to DC Advisory, a total of 140 deals were completed in 2018 compared to 77 in 2017, an 82% increase. DC Advisory chief executive Richard Madden blamed short-term confidence and medium-term uncertainty due to Brexit as the main drivers for the PE boom. (From City AM, 24 January)

Change Your Status With A High Interest Loan

Loans that charge as much as 1,000% in interest are being advertised via Facebook. A report has found that the friendly and chatty ads can be hard to identify as commercial promotions, with fake users planting notes asking for advice on getting a loan, with the ad for a high interest loan then being posted in response. The practice flies in the face of guidance issued by the FCA and may likely cause pause from the regulator. (From The Independent, 26 January)

Tech IPOs Spark Ethical Dilemma

After years of lacklustre IPO activity, some of the tech industry’s biggest players are set to list in 2019. But this is causing discomfort for many fund managers, who have committed to responsible investing and must consider whether buying tech stock would break that mandate given the challenges some companies in this category have faced over poor governance standards. With the rise of socially responsible investing and the maturation of the impact investing sector, it seems like big tech companies will now have to convince investors they are socially responsible if they want to cash in on a primary raise. (From The Financial Times, 27 January)

Is Payments Justice Coming For Small Business?

Tides are turning as the nation’s 5.7 million small businesses finally begin to stand up to big business and demand that the SME payments sector is reformed. Driven by a host of new fintech challengers hoping to upend the status quo, could 2019 be a year of change that will help small businesses finally get paid on time?

For many years, the issue of late payments was one that most small businesses took as an unavoidable inconvenience. Working with high street brands has typically meant waiting months to be paid. But late payments have significant impacts on bottom lines with the average UK small business being owed £25,000 in late payments.

But now there is a growing crowd of dissenters. Much of the criticism has been driven by fintech challengers, who have been able to show that there is no excuse to have to wait three months to be paid for services rendered. Driven by new technology like blockchain, digital service providers are pushing for small businesses to use smart systems that act as intermediaries to ensure bills are paid sooner, and are also working with big banks to change the invoicing system.

Standing up for small businesses is smart move for fintechs – the big banks control around 90% of small business lending in the UK, so highlighting and solving an age-old problem is a sure-fire way to turn the heads of millions of small businesses tired of chasing bigger, richer businesses for what is owed to them.

The noise has been heard in Westminster, with MPs recently putting forward bills to legislate against late payments, in part driven by the embarrassment of the Carillion collapse that left many UK SMEs out of pocket. That said, both the Cabinet Office and HMRC have recently been outed as serial late payers themselves.

As small businesses become more comfortable with the idea of ripping up the status quo, problems such as late payments will stop being perceived as ‘the cost of doing business’ and instead become sticking points that move the needle away from the establishment.

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