AJ Bell: Bad day for markets, NS&I reputation bruised
“Investors look like they’re fed up with the hot and cold messages around Iran peace talks,” says Dan Coatsworth, head of markets at AJ Bell.
Summing up the day, Coatsworth says:
“The fact the Vix fear index jumped 6% and oil prices rose by 5% would suggest recent market optimism about a resolution in the Middle East is fading fast.
“Stock markets fell around the world as investors expressed their frustration. A gloomy economic outlook report from the OECD didn’t help matters, flagging the impact of the Middle East crisis on inflation. Investors will have already been aware of the risk of costs going up but seeing it in black and white in the OECD report brought home the severity of the situation.”
And on the NS&I scandal, he adds:
“NS&I effectively competes with the banks as a savings brand and is extremely popular with individuals up and down the country.
“News that thousands of bereaved families faced delays accessing their relatives’ Premium Bonds will be bruising for its reputation.
“Trust is incredibly important in financial services and savers might not look so fondly at NS&I following operational failures in the business.”
Closing post
Time to recap…
The boss of National Savings and Investments has been forced out after it emerged that long-running operational errors at the bank had left it owing bereaved families close to £500m.
The state-backed savings institution is in discussions with the Treasury to repay about 37,500 people who collectively have £470m in deposits trapped in the bank.
The government has parachuted in a new chief executive and promised that those affected would be paid compensation “where appropriate”.
The pensions minister, Torsten Bell, told the House of Commons on Thursday that NS&I’s chief executive, Dax Harkins, had been replaced on an interim basis by Jim Harra, who led HM Revenue and Customs for more than five years before leaving in 2025.
Bell told MPs that people’s savings were “100% safe and they are guaranteed by the government”, and insisted there was “no need for individuals to waste money on a claims management company or solicitor”.
He said:
“I want to reassure people that the onus is not on them but on NS&I to act, to contact estate representatives and to reconnect beneficiaries with the money they are due.”
In other news:
European stock markets have dropped, and oil has risen, as the Middle East conflict continues.
Diesel has hit its highest level since Christmas 2022 in the UK.
The boss of Next has said clothing prices could rise by 4% to 10% if conflict in the Middle East extends into the autumn and factories are hit by higher fuel and fabric costs.
The conflict in the Middle East will damage the UK’s economy more than any other industrialised nation, according to analysis by the Organisation for Economic Cooperation and Development (OECD), which warned over rising inflation.
