High street banks are closing in on a deal with the Post Office that will allow them to closure thousands of branches. The government-owned Post Office, which is expected to be mutualised later in the decade, will serve the small business customers of all the main lenders from its 11,500 branches and act as the “last bank” in some rural communities, the Sunday Times said.
UK interest rates could be held at their current low level until well into 2017 due to David Cameron’s plans for a referendum on Britain’s EU membership in June or September next year. With Bank of England governor Mark Carney expected to start raising rates at that point, the risk of a British exit from the EU could potentially push a rate rise into 2017 and hurting UK growth in 2016.
Shire hopes that an $8bn dollop of cash will be the spoonful of sugar that helps it seal the deal to buy US pharmaceutical rival Baxalta, five months after its initial all-shares offer. Shire has softened Baxalta’s objections by pledging to switch as much as 40% of the £20bn takeover offer to cash, according to City sources cited by the Sunday Times, meaning the talks could be concluded in just weeks.
In other deal news, US media colossus Comcast and ITV have begun talks about a potential £11bn takeover bid for the FTSE 100 broadcaster, according to the Mail on Sunday. ITV’s 9.9% shareholder Liberty Global, although it has previously said it has not intention of making a bid itself, may not be happy with rival Comcast’s plans.
Elsewhere, gaming company Playtech has made a “behind the scenes” offer for the UK football pools. Playtech, whose billionaire founder Teddy Sagi not long ago sold his financial trading company TradeFX to the FTSE 250-listed company for £335m, has begun talks already, the Sunday Times said, with some disagreement over the pools’ £100m valuation.
Imagination Technologies will hold talks with major shareholders as calls mount for chief executive Sir Hossein Yassaie to resign. At least one institutional investor has suggested calling an extraordinary meeting to request a change of leadership if he does not step down, sources told the Sunday Times.
Half of all British non-homeowner families no longer believe they will ever be able to buy a house of their own. According to Bank of England research, a huge swathe of middle class families, roughly 4.5m households, believe home ownership is out of reach, with even a quarter of the country’s richest quintile of households believing they will never get on the ladder, the Sunday Telegraph reported.
Some of the world’s largest multi-national companies, including Coca-Cola, PepsiCo and Lockheed Martin, have been added to the UK’s little-known ministerial “buddy” scheme since May’s general election, providing privileged direct access for 83 companies to the Cabinet and other senior roles. The companies, which are selected by UK Trade & Investment (UKTI), are paired up with senior civil servants and a government minister but are told, the Sunday Telegraph said, that the minister will be their point of contact but not their champion.
The UKTI quango needs to be held more accountable to Parliament, the Institute of Chartered Accountants in England and Wales has demanded. The Mail on Sunday reported that the ICAEW has called for a step change in how export strategy is delivered and a clear line of accountability for the quango, which has a budget of about £300m and has been set a target of helping generate £1trn of annual British exports by 2020.
The government has withdrawn £1bn from expensive and superfluous state bank accounts in the past year and appointed Royal Bank of Scotland and Barclays as part of efforts to manage the public purse in a more efficiently way. Cash will be held centrally with the Exchequer and government departments will need to sit on cash when they have funds in hand that they are not spending immediately, the Sunday Telegraph said.
Carolyn Fairbairn, new director-general of the CBI, said the chancellor had not fully “understood” how Britain’s employers would be hit by the 0.5% apprenticeship levy, announced in his autumn statement last month, and that it could lead to “significant” and inevitable job losses in sectors including retailing, hospitality, care and food manufacturing. The CBI fears job losses will far exceed the Office for Budget Responsibility’s estimated 60,000 job cuts from the national living wage, George Osborne’s other big recent announcement.
Beleaguered engine-maker Rolls-Royce has suffered another setback as influential fund manager Richard Buxton, chief executive of Old Mutual Global Investors, has become the latest high-profile fund manager to sell out of the company. Buxton told the Sunday Telegraph he had been a long-standing investor in Rolls but decided to offload his stake after the company’s fifth alert in less than two years, leading him to worry about the abandonment of forward guidance and cash levels.
The £2bn-plus London flotation being cooked up by pub food delivery giant Brakes will take place in the new year, reported the Sunday Telegraph. The food service group, which supplies food and ingredients for meals to pubs, restaurants, schools and hospitals across the UK and Europe, is expected to being its the final run-up to a listing in the first weeks of January with a valuation that will propel it into the FTSE-250.
Mining giant BHP Billiton will join its peers and cut its dividend in the new year, due to the recent rapid drop in oil prices coming on the back of the commodities weakness that has hit the rest of its business . BHP is a big oil producer, noted the Sunday Times, with fields and pipelines in Australia, the Gulf of Mexico, Algeria, Pakistan and Trinidad and Tobago.
Gold miner Petropavlovsk could be forced to repay the debts of 35%-owned former iron ore subsidiary IRC, which has been forced to go cap in hand to its Chinese lenders due to issues with a supplier. Petropavlovsk, whose founder Peter Hambro’s son Jay is chairman of Hong Kong-listed IRC, has guaranteed IRC’s $340m loans, the Sunday Times noted.
PimlicoPlumbers, the UK’s biggest plumbing company, has reported record half-year results thanks to homeowners taking advantage of the government’s relaxation of planning laws. Boss Charlie Mullins told the Mail on Sunday: “Traditionally things don’t take off until December, but our monthly sales records were smashed when we hit £2.63 million in November. Much of this is people putting in new bathrooms and kitchens, even taking advantage of more flexible planning regulations to extend the odd room to create a little more space.”
Shares in Concha should be sold, said the Sunday Times‘ Inside the City column. The cash shell’s shares have plunged after chairman Chris Akers failed to seal the deal on a “specific global opportunity”, with nine months of talks coming to an end last Thursday. The share price now values the company at less than £10m, with £5.7m cash in the bank.
On Tuesday the AIM-listed shell company, which has made two investments since listing though both have gone ‘pear shaped’, is due to release final results for the year. The board should share their plans on how the cash will be used after the ending of these long-running talks and may also explain why no annual report has been published since 2013.
Shares in Sigma Capital Group are worth buying, said Midas in the Mail on Sunday. The share of owner-occupied property has fallen from 69% to around 63% since 2001. Added to the rental accommodation mix of social housing and individual landlords is a new trend for purpose-built rental homes owned by companies, including Sigma since it changed direction to focus on urban regeneration and rental accommodation in 2011.
Sigma has partnerships with housebuilders Countryside Properties and Keepmoat Homes and with Shepherd Direct’s Central Lettings arm, as well as securing £200m funding from the Kuwaiti-backed London-based Gatehouse Bank to build a minimum of 2,000 homes and up to 10,000 more before the end of 2020. Sigma has built close to 350 houses so far, with a focus on family homes to attract long-term tenants, and almost 1200 more are planned for the end of 2016, with a further round of 550 internally funded homes the year after. Profits of £1.5m are forecast this year, more than quadrupling the year after.
Questor in the Telegraph examines exchange traded funds (ETFs) as an investment option for retail investors. ETFs are branded as a simple low-cost investment option for those that want exposure to specific asset classes, but while their shares can be traded on exchanges, the fund’s underlying assets can range from corporate bonds to commodities like gold. While ETFs normally issue shares to satisfy demand, when hedge fund want to take a short position in the ETF then it needs to borrow the shares from someone, market makers sometimes match the two trades and the ETF does not need to buy the underlying assets, leaving the retail investor on the other side of a hedge fund trade.
If the hedge fund collapses it can cause trouble for the ETF and those ETFs that use derivatives can also run into trouble if the financial institution issuing the derivative runs into trouble. While ETFs have closely tracked the prices of the underlying assets and offering liquidity to retail investors this year, volatile markets will test these financial products.
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