Capital Markets Corporate

February 15, 2019

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.

Prison for Pension Execs

Executives who “recklessly mismanage pension funds” could be charged with jail sentences of up to seven years, in a move that’s been welcomed by the MPs and prominent industry figures. The suggested law, which comes following the recent pension scandals witnessed at BHS and Carillion, may even be applied retrospectively once passed. (From The Guardian, 10 February)

Probate Stealth Tax

Probate fees – paid to secure legal control over a deceased person’s estate – could rise significantly from April. Currently, families pay a flat fee of £215, but could soon be charged up to £6,000 depending on the value of the estate. The new regulation is classified as a “fee” by the Government instead of a tax – meaning the changes could avoid full parliamentary scrutiny. (From Financial Times, 8 February)

Interest Mastermind

Getting a decent return on cash savings is quite a feat, given rates of more than 1% are rare in today’s low-rate environment. A retired software engineer, however, has managed to beat the system by setting up a matrix of current and savings accounts that earn him a total of almost 5% on his £30,000 savings. He may have had to open 30 accounts to do it – but the returns are arguably worth the effort. (From The Times, 10 February)

Banks Step Up Efforts to Spot Financial Abuse

In the latest effort to help victims of financial abuse, the trade body UK Finance has published guidelines outlining the support people can get from their bank. Yet many banks are still not ready to implement measures to help identify victims of financial abuse – such as special training – despite committing to the new rules. (From The Times, February 10)

Firms Covered for Terror Attacks

Firms affected by terror attacks will now be able to get insurance to cover financial losses following a move to close a legal loophole. This means that businesses forcibly closed after attacks will be able to reclaim losses even if they have not been directly damaged by a bomb. The scheme, called Pool re, is financed by insurance firms while also being underpinned by the Treasury. (From BBC, 12 February)

Small Businesses Bear the Brunt of Brexit  

The ‘B’ word may not have officially happened yet, but small and medium sized enterprises (SMEs) are already feeling its ill-effects.

Lending to SMEs shrank from £700m in 2017 to £500m last year, according to a report from the British Business Bank. With many already feeling the pinch, the report suggests more than a third of small businesses expect Brexit to make it more difficult to access finance.

SMEs account for more than 99% of private sector businesses and over half the sector’s annual turnover, so their success is key for the nation’s healthy economic performance. Yet despite this, there is little sign of any Government-led support to offer small businesses a lifeline at this critical junction.

Efforts from banks to co-ordinate emergency funding programmes for small businesses in the event of a no-deal Brexit, for example, are said to have been roundly ignored by Treasury officials.

It comes as no surprise then, that small business confidence is at its lowest level since 2011. So what can be done to improve the fortunes of struggling small businesses?

Avoiding being battered by Brexit lies partly in preparation. A recent poll of small businesses suggests only 4% have implemented any change in advance of the EU exit, with 80% taking no active steps to prepare. While a “wait-and-see” approach is understandable given the lack of clarity on Brexit plans, facing up to key questions – such as which aspects of a business might be impacted and whether an EU presence is required under the new regime – could save considerable difficulty later down the line.

There is also an opportunity for the financial services sector to step up and do more to champion small business finance. Fintech companies are already using new technology and smart systems to speed up payments to SMEs, a process that can currently take several months.

Better availability of alternative forms of funding, such as peer-to-peer lending or asset finance, could help SMEs sidestep difficulties in obtaining finance from major banking institutions post-Brexit. Financial management tools and apps, for example, can also support cash-flow management, a major priority for many small businesses.

For the financial sector’s most innovative and agile businesses, there is a major opportunity to provide some much-needed support. Small business champions are needed now more than ever to keep this vital part of the economy ticking over and create better conditions to help more SMEs succeed.

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