Newsflash: UK economy returns to growth in August
The UK economy returned to growth in August, as activity picked up after a worst-than-expected slump in July.
GDP rose by 0.2% in August, the Office for National Statistics reports, which matches City expectations.
The services sector grew by 0.4% in August, the Office for National Statistics reports, but there was a contraction in the production sector and in construction.
However, July’s GDP report has been revised down to show a fall of 0.6%, worse than the 0.5% first estimated.
Key events
Back at Southwark Crown Court, Bernie Ecclestone has received a suspended sentence of 17 months for fraud.
Ecclestone was sentenced by Judge Simon Bryan, after the former Formula One boss pleaded guilty this morning to misleading Britain’s tax authority about overseas assets worth more than £400m (see earlier post).
Judge Bryan gave Ecclestone a 17-month prison sentence suspended for two years, meaning he will only go to jail if he commits another criminal offence during that time.
Kalyeena Makortoff
In a statement provided by his lawyers, Jes Staley has said he is “very disappointed” by the FCA’s decision, and that he will continue to challenge it [by referring it to the Upper Tribunal].
Staley says:
“If I had known who JE [Jeffrey Epstein] really was, there is absolutely no doubt that I wouldn’t be in the position I am in today. Prior to undertaking my former role, it was known that I had had a relationship with JE.
“I have worked tirelessly over the last 43 years and have genuinely supported many people/ social causes, where others might not have done so. I am very disappointed by the FCA’s decision and I will continue to challenge it. I will not comment any further until these proceedings are concluded.”
Barclays: Staley to lose £17.8m in bonuses
Barclays says its Remuneration Committee has concluded that Jes Staley should be ineligible for or forfeit a number of awards, following the FCA’s ruling today.
That includes his bonus for 2021, Barclays told the City in an announcement.
It also includes a series of unvested bonuses through Barclays Long-Term Incentive Plan, and other deferred bonuses and deferred compensation awards, with a total value of £17.8m.
That includes long-term share payouts that had not yet vested worth £15.7m, as well as £2.1m in deferred bonus awards from earlier years that have been clawed back.
In February 2022, Barclays said it had frozen about £22m worth of bonuses for Staley, while it waited for developments in the regulatory investigation into its former CEO, who had resigned in November 2021.
Barclays also says today that it cooperated fully with the regulatory investigation, and there are no findings against it or any of its directors or employees in the Decision Notice.
Bank of England backs FCA over Staley
The Bank of England says it supports the FCA’s action against Jes Staley.
A Prudential Regulation Authority spokesperson says:
“We support the FCA’s decision announced today against Jes Staley. It is imperative that senior managers act with integrity and are open and cooperative with the regulators”
FCA fines and bans Jes Staley over Epstein statements
Newsflash: The UK’s financial regulator has decided to fine the former CEO of Barclays, Jes Staley, £1.8m and ban him from holding a senior management or significant influence function in the financial services industry.
The FCA has found that Mr Staley recklessly approved a letter sent by Barclays to the FCA, which contained two misleading statements about the nature of his relationship with Jeffrey Epstein and the point of their last contact.
Therese Chambers, joint Executive Director of Enforcement and Market Oversight at the FCA, says:
“A CEO needs to exercise sound judgement and set an example to staff at their firm. Mr Staley failed to do this. We consider that he misled both the FCA and the Barclays Board about the nature of his relationship with Mr Epstein.
“Mr Staley is an experienced industry professional and held a prominent position within financial services. It is right to prevent him from holding a senior position in the financial services industry if we cannot rely on him to act with integrity by disclosing uncomfortable truths about his close personal relationship with Mr Epstein.”
Staley has referred the case to the UK’s Upper Tribunal for reconsideration, where he will present his case, so today’s findings are provisional.
The letter, sent by Barclays to the FCA, claimed that Staley did not have a close relationship with Epstein.
However, in emails between the two, “Mr Staley described Mr Epstein as one of his “deepest” and “most cherished” friends”, the FCA says.
The letter from Barclays to the FCA also claimed Staley ceased contact with Epstein well before he joined Barclays. However, Staley was in fact in contact with Epstein in the days leading up to his appointment as CEO being announced on 28 October 2015. Staley joined Barclays in December 2015, the FCA points out.
BoE Pill: Further interest rate rises a ‘finely balanced’ decision
Newsflash: The Bank of England’s chief economist has said that the decision of whether to raise UK interest rates higher is “finely balanced”.
Speaking in Marrakech, where the IMF and the World Bank are holding their annual meeting, Huw Pill pointed out that much of the Bank’s earlier rate hikes have yet to “come though” and affect the real economy.
Pill, a member of the Bank’s Monetary Policy Committee, said:
“We have done a lot over the last two years. A lot of that policy is still to come through.
“Whether we’ve done enough – or whether we have more to do – I think is becoming a more finely balanced issue.
But we will do what we need to do in order to have inflation at 2% on a lasting basis.”
The BoE has raised interest rate 14 times since December 2021, to a 15-year high of 5.25%.
As reported at 6.49am, Pill’s fellow MPC member Swati Dhingra believes that only a quarter of the impact of those rate rises has actually been felt.
Dhingra told the BBC:
“The economy’s already flatlined. And we think only about 20% or 25% of the impact of the interest rate hikes have been fed through to the economy.
FTSE 100 hits three-week high
City traders are shrugging off concerns that the UK economy could fall into recession later this year.
The FTSE 100 index has jumped by 65 points this morning, or 0.85%, to 7685 points.
Gold producer Endeavour Mining (+2.6%, oil giant BP (+2.6%) and mining giant Rio Tinto (+2.1%) are the top risers.
Markets are continuing to hope that central bankers are close to ending their cycle of interest rate increases.
The latest US inflation report, due at 1.30pm UK time, will influence whether the Federal Reserve keeps hiking, or stops.
Victoria Scholar, head of investment at interactive investor, says,
“European markets continue their upward climb this morning driven by basic resources as well as oil and gas. Oil prices are also trading higher but remain sharply below recent highs. This has lifted BP and Shell towards the top of the FTSE 100…
After US annual PPI rose by 2.2% in September, above expectations for 1.6%, all eyes are on US CPI figures today for clues into the outlook for inflation and the Fed’s next move. Minutes from the central bank’s latest meetings [released last night] suggested that interest rates look set to remain high for ‘some time.’”
Ex-Formula One boss Bernie Ecclestone has pleaded guilty to fraud
Newsflash: Ex-Formula One boss Bernie Ecclestone has pleaded guilty in a London court on Thursday to one count of fraud for making dishonest representation to Britain’s tax authority.
The 92-year-old appeared at Southwark Crown Court and pleaded to one count of fraud by false representation, just over a month before he was due to stand trial.
Reuters reports:
Prosecutors said Ecclestone made untrue or misleading representations to HM Revenue and Customers at a July 2015 meeting, when he said he “established only a single trust” in favour of his daughters.
Ecclestone, accompanied by his wife Fabiana, spoke only to confirm his name and to enter his plea.
Back in July 2022, Ecclestone was accused of fraud after an investigation by UK tax authorities allegedly found undeclared assets worth more than £400m overseas.
In August 2022 he pled not guilty.
UK lenders expect rise in loan defaults
More UK households defaulted on their secured loans, such as mortgages, in the April-June quarter, and the situation is expected to worsen in the July-September quarter.
The Bank of England’s latest credit conditions report, just released, shows that losses and default rates on secured loans to households increased in Q2, and were expected to increase in Q3.
That suggests that the increase in UK interest rates, which began in December 2021, have left some households unable to meet their mortgage payments or car financing packages.
Lenders also reported that they restricted the availability of secured credit to households in Q2, and expect to cut back further in Q3.
The 2023 Credit Conditions Survey – Q3 shows demand for lending continue to wane & is expected to remain lacklustre over winter, as mortgage buyers tread carefully, watching for further movement on rates & prices before purchasing. @bankofengland pic.twitter.com/b8EJ7F2PH6
— Emma Fildes (@emmafildes) October 12, 2023
Hina Bhudia, partner at Knight Frank Finance, said:
“Demand for mortgages is set to decline over the coming three months. Transaction activity in the property market is slowing and many borrowers are still rolling off sub-2% deals and are eager to put off refinancing where they are able to do so.
“Borrowers that do act are generally opting for trackers. For many people, the risk that monthly payments increase in the event of another interest rate hike is worth taking if it gives them the opportunity to see cuts in their monthly outgoings next year. Typical two year trackers at 75% LTV are still above 5.50%, while retail bank tracker products sit a little over 1% above the base rate.
Lenders also reported that overall demand for unsecured lending increased in April-June, and was expected to increase slightly in Q3.
That may show that consumers are relying on credit cards to pay bills. The Bank of England explains:
Within the overall figure, demand for credit card lending and other unsecured lending both increased in Q2. Credit card lending was expected to increase further in Q3 and other unsecured lending was expected to remain unchanged.
