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The Financial Reporting Council (FRC) issued a record number of fines to audit firms whose work it judged inadequate in 2023. The watchdog handed out penalties totalling £33.2m last year, exceeding the previous record of £32.8m, which was set in 2022. Including charges to cover the costs of the FRC’s investigations, audit firms paid £40.4m in penalties in 2023. The biggest fine handed out last year, the £21m penalty for KPMG over failures in its audits of Carillion, was the largest ever issued by the accounting regulator. Of the five investigations that the FRC concluded last year, four of them involved KPMG. It is noted that the FRC has been increasing the severity of its fines in an effort to improve audit quality after the collapse of several high-profile businesses. A report released in 2023 shows that 77% of the audits it inspected were deemed either good or needing only limited improvements. This was up from 75% in 2022 and 71% in 2021. The FRC, which is awaiting government approval to transform into the Audit, Reporting and Governance Authority, has more than doubled its headcount to almost 500 over the past six years.

 

The Times

The CEO of Muddy Waters Research, Carson Block, has cautioned against the London Stock Exchange engaging in a "race to the bottom" with New York. Block advises London to maintain its reputation as the "cleanest" stock market in the world, rather than loosening rules to attract listings. Fears are growing over the declining relevance of the London Stock Exchange, with a decrease in new listings and companies leaving the market. Block criticises the US stock market's "lie to me" culture – whereby founders promise more than their companies can deliver – and warns that a vibrant stock market would do little to help the UK's real economy. "When you have equity bubbles it redistributes to people who are lucky, as opposed to good. It takes from the many and distributes to the few, but those few aren't generally the more capable people," he says.

 

The Sunday Telegraph

The Financial Reporting Council (FRC) has demoted Grant Thornton from its top tier of audit supervision. It comes after the UK’s sixth-largest accounting firm removed more than 70% of its public interest clients between 2016 and 2022, including listed companies and insurers. The watchdog will now only conduct inspections of the firm’s public interest entity (PIE) audits every three years, rather than annually. Sarah Rapson, the FRC’s executive director for supervision, said the decision is not a reflection of Grant Thornton’s audit quality but reflects the firm's smaller share of the PIE market. Tier one now consists of the Big Four of Deloitte, EY, KPMG and PwC, as well as BDO and Mazars.

 

Financial Times

City AM

Laboratory leaks and accidents have risen 50% in Britain since COVID-19 emerged, an investigation by the Telegraph has found. Freedom of Information requests revealed that dangerous viruses and bacteria are being stored close to large populations, potentially placing citizens at risk. The rise in lab accidents raises concerns about the origin of COVID-19 and the potential for future pandemics. Experts are calling for tightened regulation of laboratories to prevent research-related incidents. The Global Biolabs Report 2023 shows that the UK scores well on biosafety oversight, but accidents still occur regularly. Dr David Harper, former chief scientist and director general for health improvement and protection in the UK Department of Health, calls for greater transparency and improved governance in laboratory biocontainment.

 

The Daily Telegraph

The Conservative Way Forward low-tax campaign group has accused the Office for Budget Responsibility (OBR) of making errors that have influenced policy, and urged the government to ensure that its official forecaster is not "holding back the country's recovery." The group has urged Chancellor Jeremy Hunt to fix the OBR’s "systemic issues . . . as a matter of urgency” before the Budget on March 6. In a letter to Mr Hunt, signatories including former cabinet ministers Dame Priti Patel, Sir Jacob Rees-Mogg and Sir Iain Duncan Smith said that since the OBR was created in 2010, the combined total of errors in its growth forecasts has exceeded £500bn, with those for government borrowing “wide of reality” by over £600bn. The OBR said: “The accuracy of our real GDP forecasts is similar to external forecasters," adding that it is "recognised as one of the most transparent official economic forecasters in the world.”

 

Yahoo! News

Financial Times

Reuters

Within days, the Securities and Exchange Commission (SEC) is due to decide on whether to approve exchange traded funds (ETFs) backed by bitcoin. BlackRock, Fidelity and Invesco are among the asset managers to have applied to launch bitcoin ETFs in moves crypto fans say could be transformative in legitimising the asset. Anatoly Crachilov, founder of the London-based Nickel Digital Asset Management, says a go-ahead from the SEC would spur interest from institutional investors everywhere, including pension fund managers. The Times points out that the Financial Conduct Authority (FCA) has issued multiple warnings about crypto, saying buyers should be prepared to lose all their money. Jason Hollands, corporate affairs director at Evelyn Partners, the wealth manager, said: “I doubt we will see crypto-currency ETFs authorised for retail investors by the FCA any time soon.”

 

The Times

Energy firms will again be able to force-fit prepayment meters in customers’ homes, having committed to strict new rules to protect the vulnerable. Ofgem has confirmed that three companies - EDF, Octopus and Scottish Power - have been signed off as compliant with legal changes made after concerns were raised about aggressive debt collection in the industry. The new rules allow the companies to collect debts by force-fitting prepayment meters but ban them from doing this in the homes of people deemed to be vulnerable. If the firms break the rules they face enforcement action and unlimited fines. Tim Jarvis, director-general for markets at Ofgem, said: “We’ve made clear that suppliers must exhaust all other options before considering forced installation of a prepayment meter.”

 

The Times

Geopolitical risks have become a top concern for companies, surpassing climate and cyber security risks, according to analyst Tom Inchley. Institutional investors are increasingly scrutinising firms' ability to manage geopolitical risks. The integrated nature of global trade, finance, and supply chains has made it difficult for businesses operating internationally to avoid economic fallout from conflict hotspots. Inchley suggests that companies may need to seek geopolitical expertise to navigate these risks effectively.

 

FT Adviser

A report by investment bank Lazard reveals a 7% increase in campaigns by activist investors globally last year, with Europe and Asia Pacific seeing record levels of activity.

 

Financial Times

Former Barclays CEO Bob Diamond has called on the company to take radical action with its investment banking arm, which has faced criticism for being too small. While Barclays' current CEO, CS Venkatakrishnan, has pledged to keep the investment banking unit, Mr Diamond believes that the bank should either invest more in the division or sell it off. Meanwhile, Mr Diamond, who now heads Atlas Merchant Capital, has also criticised the UK government for over-regulating the banking sector, claiming that it has led to smaller, less productive banks with lower returns and tax payments. He has also revealed that his firm had approached Metro Bank with an offer to take it private, but was rejected.

 

The Sunday Times

Interest rate rises, inflation, and skills and labour shortages all contributed to a sharp increase in company insolvencies in 2023. A total of 30,199 UK businesses were involved in some kind of insolvency action in 2023 – 52% higher than in 2021. Some of those insolvencies are likely to have been companies which would have failed earlier, but were kept afloat by government assistance during the pandemic. “For the companies that were doing well, Covid really hurt them, but for the ones that were struggling anyway, it probably gave them a bit of breathing space to get them back where they needed to be,” said Drew Fahiya, Creditsafe's data director. The question that remains is whether or not insolvencies will return to pre-pandemic levels soon. Tina McKenzie, policy chair at the Federation of Small Businesses, said: “There's always a lag between economic troubles and a rise in insolvencies, as businesses throw everything they have at attempts to keep going before having to call it a day. With growth sluggish at best in 2023, we may well see an impact on small firms' finances this year, even if the economic outlook improves.”

 

The Observer

Every council in England is at risk of bankruptcy within the next three years unless major structural reform or additional funding is provided, according to senior local government experts and council bosses. The Local Government Association has warned that the current financial model for local government is broken. A recent survey by the LGA found that one in five council leaders believe bankruptcy is likely in the next financial year.

 

Yorkshire Post

Nottingham City Council has been ordered by the Information Commissioner's Office (ICO) to publish a report on how it manages its finances. The council had refused to disclose the report, which was compiled by accountants Ernst and Young, following an appeal by the Local Democracy Reporting Service (LDRS). The report revealed significant misspending of £51m in the council's Housing Revenue Account in 2021 and found that the council's financial management was "not fit for purpose." The ICO ruled that the public interest outweighed the council's concerns about further activity being impacted by full disclosure. The council, which declared itself effectively bankrupt in November, will comply with the ruling.

 

BBC News

Nottinghamshire Live

A former director of NMC Health has agreed a settlement of more than $1m with administrators of the collapsed company. Alvarez & Marsal has entered into a confidential agreement with the unnamed director as part of its investigation into the downfall of the private healthcare company. At its peak in 2018, NMC was valued at £8.6bn on the London Stock Exchange, but the company was plunged into crisis the following year when Muddy Waters, a short-seller, issued a damning report that raised accounting and governance issues. Unsecured creditors are facing a shortfall of up to about $4.7bn but the administrator has filed High Court claims against NMC's founder Bavaguthu Raghuram Shetty, its former chief executive and Bank of Baroda - and separately against EY, NMC's former external auditor.

 

The Times

Former Black Sheep Brewery shareholders are demanding answers over the controversial sale of the company. The sale, which took place via a pre-pack administration deal, has left shareholders in the dark about multiple issues. A progress report by administrators Teneo revealed that taxpayers and creditors are likely to lose out on around £4m. Shareholders are questioning why the company was placed into administration and sold just a few months later, despite previous accounts stating that the company was a going concern. The administrators have refused to disclose any company documents from that period, prompting shareholders to urge local MPs, including Prime Minister Rishi Sunak, who represents the Richmond constituency, to intervene and investigate the sale.

 

Yorkshire Post

The jobs market in the UK became more competitive at the end of last year, with a decline in job vacancies and an increase in the number of available workers. Hiring activity for both permanent and temporary roles fell in December, while the number of job vacancies decreased for the third time in four months, according to data from KPMG and the Recruitment & Employment Confederation. The decline in hiring was accompanied by a fall in customer numbers and consumer spending, posing challenges for businesses. Despite easing inflation, businesses still faced high costs and concerns about borrowing costs and access to bank lending. Justine Andrew, head of education, skills and productivity at KPMG UK, said: "It's a muted end to the year for the labour market, which, despite some loosening during 2023, continues to be tight. For those lucky enough to start a new role, there was another sharp increase in starting salaries due to competition for skilled workers. But the rise wasn't as high as those seen in recent months as businesses face pressure on their budgets."

 

The Times

The Financial Conduct Authority (FCA) has reported that its staff pension fund has gone from a surplus of £56.8m to a deficit of £46.5m in the year to March 2023. The decline is attributed to the extreme market movements caused by bond yield swings and the need to meet liability-driven investment collateral calls. The FCA's defined-benefit scheme, which guarantees an inflation-protected income, was closed to new members in 2010. While the scheme's liabilities have decreased, its assets have dropped significantly, resulting in an overall annual deficit. The FCA is following the guidance of The Pensions Regulator to close the deficit over time and is currently ahead of schedule.

 

The Times

The City regulator is facing a legal challenge over a £230m compensation deal for Woodford investors. The scheme of arrangement means that investors will no longer be able to sue Link or complain about it to the Financial Ombudsman Service (FOS). But legal filings claim this means the compensation package drives "a coach and horses through statutory rights" of investors and may therefore be unlawful. Bob Blackman, a Tory MP and chairman of the all-party parliamentary group on personal banking and fairer financial services, said: "Forcibly removing the FOS and [Financial Services Compensation Scheme] protections after the event for retail investors will set a dangerous precedent which may damage confidence in the entire UK finance industry."

 

The Times

The Times

US private equity group Carlyle has accused London Southend Airport of breaching a loan agreement made in 2021, putting a proposed sale of the airport in jeopardy. Carlyle injected £125m in return for a 30% stake, but says the airport overspent during its recovery from Covid, breaching the agreement. London Southend, owned by Esken, formerly Stobart Group, denies the claims. The airport has struggled back to its feet after the pandemic battered passenger numbers and recently welcomed Italian start-up Aeroitalia, which will soon operate direct flights from Southend to Milan Bergamo.

 

The Sunday Telegraph

The Sun