Afternoon summary
Time to recap, at the end of a dramatic week.
NatWest’s chair has said he will not quit over the row about the closure of Nigel Farage’s account.
Sir Howard Davies said he would continue to chair NatWest’s board to provide “stability” after the resignations of Dame Alison Rose, and the boss of Coutts, this week.
Davies also told reporters that political pressure had meant Rose could not continue, and that the bank had lost a ‘great leader’ in the early hours on Wednesday when she stepped down.
He was speaking after NatWest beat City expectations this morning, by posting operating profits of £3.6bn for the first half of this year.
The bank will pay £500m in dividends to its shareholders, meaning a £190m payday for UK taxpapers:
NatWest cut its forecast for its net interest margin (the gap between what it charges borrowers and pays savers); a sign that some people have been running down their savings or moving them to more lucrative accounts.
Farage has backed campaigner Gina Miller after Monzo ruled her True and Fair party’s bank account would close in September.
This is just plain wrong at every level. I stand with @thatginamiller. https://t.co/cK1GcCRjcE
— Nigel Farage (@Nigel_Farage) July 28, 2023
The number of firms falling into insolvency in England and Wales surged to the highest level for 14 years in the past quarter, according to Government figures.
The high court has dismissed a legal challenge by five Conservative-led councils against the expansion of London’s ultra-low emission zone (Ulez).
AstraZeneca has beaten profit forecasts, helped by strong sales of its anti-cancer drugs.
In the US, the PCE measure of inflation has fallen, as price pressures ease across the Atlantic, raising hopes of a soft-landing for the American economy.
The Bank of England has engaged Ben Bernanke, the former chair of the US Federal Reserve, to lead a review of forecasting at the UK central bank.
Former Chair of the Federal Reserve of the United States, Dr Ben Bernanke rolls up his sleeves after agreeing to lead a review into the Bank’s forecasting and related processes... https://t.co/Lzfa49YknG pic.twitter.com/BfCPDPUCew
— Emma Fildes (@emmafildes) July 28, 2023
International Airlines Group, which owns British Airways, has announced record profits for the first half of 2023, with air fares up almost 10% on last year.
Several big lenders including Nationwide, HSBC and TSB have cut rates on their fixed mortgage deals in a sign that home loan costs may be close to peaking after surging to nearly 7%.
Rising insolvencies: What the experts say
Here’s some reaction to the jump in company insolvencies in England and Wales in the last quarter, to the highest in 14 yers.
Samantha Keen, UK Turnaround and Restructuring Strategy Partner at EY-Parthenon, says:
“Quarterly company insolvencies reached over 6,300 for the first time since 2009 in Q2 as many businesses struggled to contend with a sustained mix of pressures.
“Although company insolvencies have been steadily increasing over the last 18 months, largely driven by Creditors’ Voluntary Liquidations (CVLs), in Q2 there was a significant uplift in the number of compulsory liquidations which rose 67% year-on-year.
“The current low-growth, high-inflation and relatively high interest rate environment has meant many businesses have faced building pressure over the last 12 months which is now translating into distress.
Jeremy Whiteson, restructuring and insolvency partner at Fladgate, says:
The increase in CVLs may reflect that many business have been ground down by a series of economic challenges which have hit in waves and eroded their businesses, leaving their owners with nothing to save - the pandemic, Brexit, labour shortages, the economic effects of the Ukraine conflict (leading to increased food and food costs) and now, rising interest rates. However, the increased costs of administrations, where additional regulation, aimed at protecting creditors by requiring more extensive reporting and consultation- may also have had the unintended consequence of putting these procedures beyond the reach of many businesses.
However, troubled companies with continuing business also seems to have been affected. Administrations (at 409) were a 30% increase on the preceding quarter (when there were 314) and a 34% increase on Q2 2022. This is the highest number since the beginning of the pandemic. CVAs were up even more. At 56 this was a 47% increase on the preceding quarter and a 75% increase on Q2 2022.
And here’s Lucy Fulmer, Director and Head of Creditor Markets at PwC:
“The high number of compulsory liquidations in Q2 of this year is striking - 637 compared to 382 in the same quarter last year. This is driven by an increase in winding up petitions - formal applications from creditors to shut down companies - which our data shows have more than doubled to 2,400 in the first half of this year compared to the same period last year. A lot of this increase can be attributed to HMRC returning to pre-pandemic levels of enforcement action.
“Consumer sentiment also remains a concern, particularly in the retail, food service and leisure industries, whilst the construction sector is grappling with credit risk brought about by inflationary pressure, labour shortages and increasing interest rates. The hospitality and leisure sector made up 17% of insolvencies in H1 2023, and increased by 38% compared to H1 2022. However, with the start of the summer holidays and energy prices falling, we hope to see the sector begin to recover as the year progresses.”
