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The Bank of England has warned that high interest rates are threatening to cause havoc in the £6.5tn private equity sector, with dire consequences for the wider economy. Nathanael Benjamin, the Bank's executive director for financial stability strategy and risk, cautioned that recent developments in the industry could disrupt funding to real economy companies and inflict significant losses on systemic institutions. The Bank's financial policy committee is conducting a closer review of private equity risks and will publish its findings in June. Private equity firms now face more expensive funding costs and the risk of credit losses in the future. Opportunities for private equity firms to offload companies through stock market flotations have also dried up, increasing borrowing across the sector. Michael Moore, chief executive of the British Private Equity and Venture Capital Association, said: “The private capital industry stands ready to detail how it has played a vital role in the UK economy for over 40 years, showing its resilience through different economic cycles.”

 

The Times

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The House of Lords Financial Services Regulation Committee has urged the Financial Conduct Authority (FCA) to halt plans to name firms under investigation. Committee chair Lord Forsyth of Drumlean said: “The FCA’s plan to announce the opening of new enforcement investigations could have a highly negative impact on firms subsequently cleared following a potentially lengthy investigation.” He added: “Despite having done nothing wrong, those firms, and individuals associated with them, risk having their reputations tarnished. This could also unnecessarily distort the market.” City Minister Bim Afolami said the Treasury is "engaging with both the FCA and industry as the proposals are developed, in particular to ensure that any potential impacts on competitiveness are properly considered."

 

Financial Times

FT Adviser

Financial Conduct Authority (FCA) chief executive Nikhil Rathi says working with big tech firms is a “priority” as the watchdog looks to explore whether access to data could mean improved products, more competitive prices and greater options for consumers and businesses. Mr Rathi, who described the FCA as “outcomes focused . . . pro-innovation and technology neutral,” said: “Leading a co-ordinated and effective effort to make the most of the opportunities of big tech – whilst having an open conversation about the risks and what can and cannot be mitigated – will continue to be a priority.” The FCA said that if it deems technology companies’ data useful, it will “incentivise” sharing through Open Banking. The City watchdog added that if it finds there are risks from not sharing, it will suggest regulations to the Competition and Markets Authority via the Digital Markets, Competition and Consumers Bill.

 

City AM

The UK privacy regulator, the Information Commissioner's Office (ICO), has expressed concerns over Google's proposed cookie replacement technology, Privacy Sandbox. According to a draft report reviewed by the Wall Street Journal, the ICO stated that Privacy Sandbox has vulnerabilities that can compromise user privacy and anonymity. Google plans to phase out third-party cookies by the second half of 2024. The UK's Competition and Markets Authority (CMA) is investigating Google's plan, fearing it may hinder competition in digital advertising. The ICO is urging Google to make changes and has shared its concerns with the CMA. The CMA has promised to consider the ICO's recommendations. Neither the ICO, CMA, nor Google have responded to requests for comment.

 

Reuters

The Competition and Market Authority (CMA) has won a legal challenge over domestic search warrants. The competition watchdog took a judicial review against the Competition Appeal Tribunal (CAT) to the High Court after it refused to grant the CMA permission for warrants as part of an investigation into a cartel. While the CAT granted the warrants authorising the CMA to search three business premises, it refused a warrant regarding a domestic property. With the High Court ruling in favour of the competition watchdog, CMA chief executive Sarah Cardell said the CAT’s original judgment “risked seriously undermining our ability to enforce effectively against illegal cartels.”

 

City AM

The German prosecutor leading the €10bn cum-ex tax scandal probe, Anne Brorhilker, is quitting her role due to a lack of political backing and weak law enforcement. Brorhilker criticised the German system for allowing powerful players to escape punishment, stating that defendants can often buy their way out of prosecution. She has decided to join Finanzwende, a political action group monitoring the financial industry, in order to address the root of the problem. The cum-ex scandal involved a tax-driven trading strategy that allowed multiple investors to claim refunds on a tax that was only paid once. Brorhilker's efforts to bring those responsible to justice have targeted international investment banks. However, she faced criticism and had to defend herself against her own state justice minister.

 

Bloomberg

Grindr is facing legal action from hundreds of users who claim that the dating app shared their highly sensitive personal information, including HIV status, with advertising companies. Law firm Austen Hays is filing a claim in London's high court, alleging that Grindr breached British data protection laws. The claim will focus on the alleged sharing of personal information with two advertising companies, which may have sold the data to other businesses. Grindr changed its consent mechanisms in April 2020, so newer users are unlikely to be able to join the claim. Grindr previously faced fines in Norway for violating data protection regulations. 

 

The Guardian

Chrysalis Investments, a former investor in Revolution Beauty, has accused the cosmetics company of “deceit.” Chrysalis took a £45m stake in the firm in 2021, but sold the shares in 2022 for just £5.7m after their value collapsed. The former investor is making a claim of £39m against Revolution, plus a further claim of £6.2m for “consequential losses,” having accused the firm of “deceit, negligent misstatement and/or misrepresentation” at the time of the share purchase. Revolution Beauty said it strongly contests the allegations. It is noted that Revolution Beauty's shares were suspended from trading for nine months in 2022 after auditors refused to sign off on its accounts. 

 

Daily Mail

The Daily Telegraph

The number of companies delisting from London's Alternative Investment Market (AIM) has jumped by 62% year-on-year, with research from UHY Hacker Young showing that 76 companies delisted in the last year. The reasons for delisting included high compliance costs, low share prices, and financial stress or insolvency. Colin Wright, partner and group chair at UHY Hacker Young, said: "The London Stock Exchange has taken a number of steps in recent years to improve the quality of AIM listings, however, it is worth keeping those measures under regular review to see how much value investors really think they provide.” Marcus Stuttard, the head of AIM and UK primary markets at the London Stock Exchange Group, said: “AIM continues to be a pre-eminent global growth market and the most active in Europe. That position is not taken for granted and the comprehensive reform agenda currently under way will build on the existing strengths of the UK's capital markets including AIM.”

 

City AM

The Guardian

Manufacturers are missing out on billions of investment potential due to economic and political uncertainty, increased costs, and lack of access to finance, according to a report by Make UK. The report reveals that one in four manufacturing companies would increase their investment if access to finance was improved. The report highlights the importance of access to finance for investment plans in areas such as capital equipment, automation, energy efficiency, and cyber security. However, more than half of the surveyed companies were unaware of the public sources of finance and government schemes available to them. Make UK estimates that manufacturers are missing out on up to £10bn of investment potential.

 

The i

Millions of ferry passengers at Dover are facing increased costs as the port launches a hiring spree to cope with new post-Brexit fingerprint checks. The port is recruiting additional staff ahead of EU rules that will require most Britons to supply fingerprints and facial images to travel to France from October. The extra costs involved are expected to be passed on to passengers in the form of higher fares. Overall spending in preparation for the change has exceeded £10m.

 

The Daily Telegraph

Smart motorway technology, designed to keep broken-down drivers safe, is failing nearly once a day due to power outages. In the six months leading up to February 2024, there were 174 power outages that affected vital smart motorway safety equipment, including radar sensors and overhead gantry signs. Over a 17-month period, smart motorway technology failed more than 400 times. Despite ongoing safety concerns, National Highways maintains that smart motorways are statistically some of the safest roads.

 

BBC News

The Daily Telegraph

Asda's finance chief, Michael Gleeson, has apologised for a botched IT upgrade that resulted in payroll issues for thousands of workers. The supermarket switched away from IT systems used by its previous owner, Walmart, causing underpayments and overpayments to employees.

 

The Daily Telegraph

Carpetright has become the latest victim of a cyber-attack. The company's network was taken offline after being targeted by mystery hackers who sent malware to gain unauthorised access. The attack disrupted hundreds of customer orders and phone lines are yet to be reinstated. Carpetright insists that the virus was isolated before any data was stolen. A recent survey revealed that half of British businesses have experienced a cyber-attack in the past year, marking the largest single-year increase ever recorded. Carpetright is currently testing and resetting systems to address the incident.

 

The Sun

Petra Hielkema, the chair of the EU’s insurance regulator, has said urgent action is needed to protect Europe from climate risk amid concerns that some areas could be rendered uninsurable.

 

Financial Times

Office for National Statistics (ONS) data shows that the UK’s trade balance – how much the UK exports versus how much it imports – has widened from 0.2% of GDP in 2010 to -2.2% in Q4 2023. This comes despite exports from the services sector growing by 3.8% a year between 2010 and 2019. The ONS data also shows a widening trade deficit with the EU, from -1.1% of GDP in 2010 to -4.5% at the end of last year. Weakness in goods exports has been a driving factor in the worsening trade balance with the bloc. The ONS report says: “After narrowing markedly during the pandemic period, the UK’s trade deficit with the EU appears to have resumed its previous pattern of gradual widening seen over the previous decade.”

 

City AM

Just a few years ago, Western financial firms were expanding in China to take advantage of its booming economy. However, as doubts grow about China's economic recovery and its markets lag global peers, these firms are now facing a hit on their earnings and scaling back their ambitions. Fidelity International Ltd, Morgan Stanley, and Legal & General are among the companies that have cut China-focused jobs or shelved expansion plans. The souring of China's allure for Western financial firms comes at a time when Beijing is trying to attract more foreign capital. The decline in China-related deals and revenues has led to staff reductions and lower revenues for investment banks. Despite the challenges, many firms are expected to continue operating in China, betting on the country's economic rebound.

 

Reuters

Layoffs under UBS's cost-cutting program, following its takeover of Credit Suisse, will occur in five waves starting in June. The plan aims to eliminate around one in 12 of UBS's Swiss jobs and cut costs by over $10bn. Analysts estimate that between 30,000 and 35,000 jobs could be lost globally. A source described as an insider predicts that 50%-60% of former Credit Suisse staff will be laid off over the five rounds. The subsequent rounds are scheduled for August, September, October, and November, with planned savings of 12 billion Swiss francs ($13.2bn). UBS was not immediately available for comment.

 

Reuters

More than 70% of managers support Labour's proposed changes to employment law, including flexible working and family-friendly policies, according to a survey by the Chartered Management Institute (CMI). The survey also revealed that 80% of managers believe workers' rights should be a top priority in national policies. Despite warnings from business groups, many managers believe that the proposed changes can positively affect workplace productivity. Rupert Soames, president of the Confederation of British Industry, has urged Labour to soften its proposals, but Anthony Painter, director of policy at the CMI, suggests that some City bosses who oppose the plans may want to check in with their own management teams. Labour has pledged to bring in its "new deal for working people" within 100 days of winning power. It includes a ban on zero-hours contracts and "fire and rehire" practices, as well as ensuring workers have rights such as sick pay and parental leave from the first day of employment. Other proposals include the "right to switch off" to protect employees' work-life balance.

 

The i

Climate change is driving a crisis in workers' mental health, according to a report by the International Labour Organisation (ILO). The report highlights that extreme weather, climate change-induced disasters, and exposure to excessive heat are contributing to anxiety, depression, and post-traumatic stress disorder among workers. The ILO said that workers may experience distress related to financial and workload problems, as well as loss of hope for the future of their community. The report also notes that climate change risks are worsening the financial situations of some workers, particularly farmers and fishermen, while also flagging that climate change will impact seasonal and transient farm workers, leading to increased stress.

 

The Daily Telegraph