Afternoon summary
Afternoon summary
Time for a recap – here are today’s main stories:
Updated
UK banks to reimburse fraud victims under new rules, regulator confirms
Banks will be required to reimburse fraud victims who have been tricked into sending money to scammers under rules to come into force next year, a regulator has confirmed.
The requirements for banks and other payment companies unveiled by the Payments Systems Regulator (PSR) are designed to ensure more consumers will get a refund if they fall victim to the phenomenon, known as authorised push payment fraud.
APP scams happen when someone is tricked into making a payment to criminals posing as a legitimate organisation such as a bank, HM Revenue and Customs or the police. Scammers may also pretend to be selling goods or services that do not exist.
Losses from APP fraud reached almost £500m over the last year, according to the latest figures from UK Finance.
British Airways, Boots and the BBC have been hit with an ultimatum to begin ransom negotiations from a cybercrime group after employees’ personal data was stolen in a hacking attack.
Following reports that the cybercrime group which exploited a flaw in MOVEit software is now demanding a ransom, my colleagues Dan Milmo and Alex Hern have written this explainer.
On Wednesday it emerged that the gang behind a piece of ransomware known as Clop had posted the demand to its darkweb site, where stolen data is typically released if payments are not made by the victims.
The group – who signed their darkweb message “friendly clop” – exploited a piece of business infrastructure called MOVEit, software used to securely transfer files around internal networks, to attack the organisations.
The GMB union has called for a public inquiry into sewage dumping and the “gross mismanagement” of the water industry
At GMB’s annual congress in Brighton, the union said investment in infrastructure and waste management needed to be thoroughly scrutinised amid public outrage over water companies’ pollution records.
Cliff Roney, a water industry worker attending the congress, said:
We need the government to look at the wider picture for clean, safe water. This is not just about sewage pollution it is also about our waterways, coastlines and water systems dying.
Along with massive investment, for real change to happen the regulators and government must work together in partnership with the industry. No more apologies, just real action for improvement.”
He added:
Do we want the next generation of children playing on the beach to build sandcastles, or poocastles?
Water companies were criticised last month as it emerged a £10bn pledge to invest in England’s sewage system would be paid for by customers.
Updated
Mortgage lending in the UK dropped to the lowest level since spring 2020 in the first quarter of the year, according to new figures.
This means that lending during the first three months of the year to both first-time buyers and those moving house slumped to the lowest level for three years, since the period where the housing market was mostly closed during the first national Covid lockdown, according to banking industry body UK Finance.
The organisation found that, excluding the pandemic housing market closure, lending to first-time buyers hit its lowest level since 2015, while the level of lending to house movers tumbled to levels not seen since the depths of the financial crisis in 2009.
The figures come amid signs that the UK housing market is showing increasing signs of stress, as house prices posted their first annual fall for a decade in May, according to Halifax, and as consumers struggle with rising interest and mortgage rates.
In response to these challenges, buyers looking to get on the housing ladder are increasingly taking out lengthy loans of 30 years and over, UK Finance found, in a bid to make their monthly payments more manageable.
This has been a long-term trend, seen since 2010, but UK Finance found that the growth in borrowing longer term accelerated rapidly during 2022 as interest rates began to rise.
The move is seen as an attempt by stretched house buyers to spread out the cost over a longer period and without putting pressure on their month-to-month finances.
However, it means that they will pay significantly more interest over the lifetime of a mortgage, if it ran to full term, which could leave them loaded with debt into later age.
UK Finance have given an example:
A customer borrowing £200,000 over 33 years at a typical market rate today would lower their monthly payment by around £143, compared to borrowing over 25 years.
However, over the longer term they could end up paying around £50,000 more in interest.
UK Finance notes that the growth in longer-term borrowing has begun to level off this year, which they think could be sign that the use of this option to increase affordability and meet requirements may have reached a limit.
Daily and Sunday Telegraph to be put up for sale
The future ownership of the Daily and Sunday Telegraph is unclear, after the Barclay family lost control of their crown jewel media assets
The move follows a row between the newspaper group’s parent company and its lender, Lloyds Banking Group.
Lloyds is understood to have appointed the restructuring and advisory group AlixPartners as official receivers to seize the shares owned by the Barclay family in the holding company that ultimately controls the national newspapers and Spectator magazine.
As my colleague Mark Sweney reports, the bank has taken the action after becoming frustrated at the repayment of a loan amounting to hundreds of millions of pounds.
According to multiple sources, the lender now intends to remove Barclay family-appointed board members and will take the move to auction the titles.
Lloyds, which has reportedly appointed the firm Lazard and is eyeing the appointment of one other investment bank as advisers, now wants to move swiftly to set up an auction for the Telegraph and Spectator assets.
The Barclays paid £665m for the Telegraph Media Group (TMG), the parent of the newspapers, in 2004.
Woking council declares bankruptcy, amid £1.2bn deficit
Woking council has declared that it is effectively bankrupt, after admitting a risky investment spree involving hotels and skyscrapers overseen by its former Conservative administration had left it facing a deficit of £1.2bn.
The Surrey council, the most heavily indebted local authority in England, said it had issued a section 114 notice on Wednesday in response to “unprecedented financial challenges” facing the town.
A section 114 notice is effectively an admission that a council does not have the resources to meet current expenditure. It becomes the latest English council to run into trouble after ploughing cash into risky commercial investments after other recent failures at Thurrock, Croydon and Slough.
Woking said that against its available core funding of £16m in the 2023-24 financial year, the council faced a deficit of £1.2bn.
“These challenges are so significant that the council cannot simply deal with them on its own,” said Ann-Marie Barker, the Liberal Democrat leader of the council, who took over from the former Tory administration after it was voted out in local elections last year.
You can read the rest of Richard’s report about Woking here:
Financial markets could fall sharply if stubbornly high inflation forces central banks into further aggressive increases in interest rates, a leading international body has warned.
The Paris-based Organisation for Economic Co-operation and Development (OECD) has said that the UK is at particular risk due to high government borrowing following the pandemic and Ukraine war.
The OECD has warned that ever-higher borrowing costs could put the global financial system under severe stress and send share and bond prices tumbling, as it expressed concern in its half-yearly update that the full impact of tougher policy was yet to be felt.
While slightly upgrading its growth forecasts for 2023, the OECD – which has 38 rich-country members – said the upturn remained tentative and the risks were skewed to the downside.
Helped by falling energy prices, the OECD said it now expected growth across its member states of 1.4% this year, up from 0.8% in its last economic outlook. Its UK growth forecast has been revised up from -0.4% to 0.3%.
“Global economic developments have begun to improve, but the upturn remains fragile,” the OECD said as it predicted that global growth would ease from 3.3% in 2022 to 2.7% in 2023 before rising slightly to 2.9% in 2024.
You can read the rest of Larry’s article here:
Security guards at London’s Heathrow airport to strike for 31 days from 24 June: Unite
Security guards at London’s Heathrow airport will strike for 31 days over pay over the summer, says Unite
The union has announced that over 2,000 security officers will start strike action on Saturday 24 June.
Members of Unite are embroiled in a long-running dispute over pay which has led to previous industrial action.
Security officers completed a three-day strike in late May.
Heathrow has previously told passengers that it was doing everything it could to minimise strike disruption on some of the airport’s busiest days and said it was working on plans to “protect journeys” during the strikes.
Unite members have previously held 15 days of strike action, including over the busy Easter period.
Unite said that security officers based at Heathrow’s terminal three will join their colleagues from terminal five (where British Airways is based) and campus security for the first time, after voting last week for strike action. Campus security are responsible for checking all personnel and vehicles which go airside, ie after security checks.
Unite is predicting that the involvement of workers from terminal three will see airlines including Virgin, Emirates, Qatar, United, American and Delta facing the prospect of disruption, delays and cancellations over the summer.
British Airways is affected by the strike by security officers based at terminal five.
Unite general secretary Sharon Graham said:
Unite is putting Heathrow on notice that strike action at the airport will continue until it makes a fair pay offer to its workers. Make no mistake, our members will receive the union’s unflinching support in this dispute.
Unite said that workers had rejected what they called a “below inflation pay offer of 10.1%”, while noting that the higher rate of inflation, RPI, is currently 11.4%.
The UK’s annual inflation rate fell to 8.7% in April, the biggest fall since the cost of living crisis began, according to consumer prices index (CPI) figures Office for National Statistics. However, the pace of food price rises remains elevated at one of the highest levels in 45 years.
Updated
Summer is starting with a spring in its step at Zara-owner Inditex, as shoppers splashed out on fashion for the warmer months
The Spanish company said this morning that sales of its spring-summer collection surged by 16% over the past month.
As a result, the world’s biggest fast-fashion company – which also owns brands including Massimo Dutti and Pull&Bear – reported a 54% rise in its net profit for the first quarter, which climbed to €1.2bn (£1bn). This beat analysts’ expectations of around €980m.
This profit comes despite the firm facing higher wage costs, and following the closure of its sizeable Russian business.
Inditex had over 500 stores in Russia prior to the country’s invasion of Ukraine, but closed these in March 2022. Last October it agreed to sell the unit to Daher Group, based in the UAE.
The company has raised the prices of its products, and has also introduced an inflation-beating 20% rise in average wages for its shop workers in Spain. However, analysis has shown that its strategy to keep its prices for clothing and other goods higher in countries outside of the eurozone – including the US, Mexico and Saudi Arabia.
Inditex’s market value rose over €100bn for the first time last week.
Its shares were trading around 6% higher on Wednesday morning.
Turkish lira plunges to record low amid selloff
Turkish lira plunges to record low amid selloff
It’s shaping up to be another torrid day of trading for the Turkish lira in the wake of the election.
The currency has plunged 7% this morning – the lira’s biggest daily selloff since the historic crash in 2021.
The lira has come under pressure ever since the re-election of Recep Tayyip Erdoğan on 28 May.
It touched a record low of around 23.16 against the dollar this morning, taking the currency’s losses so far this year to more than 19%.
The losses came as Erdogan’s new government appears to be loosening stabilising measures as it pivots to more orthodox economic policies.
Erdoğan has named the widely-respected economist and fomer deputy prime minister Mehmet Şimşek as finance minister, thought to signpost a potential new direction for Erdoğan’s rule, after his previous five-year term was marked by an increasingly unorthodox economic policy.
For much of this year, the Turkish authorities have used up tens of billions of dollars in reserves as they have got involved in currency markets in a bid to hold the lira steady.
Analysts have said that the lira’s continued gradual depreciation will lead to improved market conditions and stem the decline in the central bank’s reserves.
Some expect the lira to weaken further to reach somewhere between 25 – 28 against the dollar.
Erdoğan has called himself an “enemy” of interest rates in the past and previously put pressure on the central bank to cut rates. It slashed its policy rate from 19% to 8.5% in 2021 in a bid to boost growth and investment. However, this unleashed a crisis in the lira in December 2021, and last year sent inflation soaring to a 24-year high above 85%.
Turkey watchers are waiting to see who Erdoğan will pick as his central bank governor. In the past, previous governors were fired following changes of policy.
Major British companies which were victims of a hack have been threatened by the criminal cyber gang behind the attack
The Clop group, thought to be based in Russia, has warned major British companies employing more than 100,000 staff to email them before 14 June, or stolen data will be published.
The BBC, whose employees were victims in the hack, said the Clop group made the threat in broken English on the dark web.
The payrolls of other firms including British Airways, Boots, Aer Lingus, Nova Scotia Government and the University of Rochester were targeted in the hack.
It came after the gang broke into a piece of popular business software called MOVEit and used that access to get into the databases of potentially hundreds of other companies.
On Wednesday, the BBC reported that Clop had posted:
This is announcement to educate companies who use Progress MOVEit product that chance is that we download a lot of your data as part of exceptional exploit.
The post also urged organisations hit by the hack to email the gang to begin negotiations on the crew’s darknet portal, the broadcaster said.
Earlier this week, the UK’s leading payroll provider Zellis said eight of its customers have been impacted by the “global issue”, which may have exposed personal information, including names, addresses, and banking details.
Boots has confirmed that it told its staff about the data vulnerability, and added that this had affected many companies around the world.
British Airways, which has around 34,000 people employed in the UK, also confirmed it was one of the companies to be caught up in the cyber attack.
British Airways and Zellis have both reported the incident to the Information Commissioner’s Office (ICO), the firm said.
You can read more background to the cyber attack here:
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Diageo has announced that its boss Ivan Menezes has died following a brief illness
The announcement came just two days after the world’s biggest spirits company – maker of brands including Smirnoff vodka, Johnnie Walker whisky, Tanqueray gin and Guinness – said that its CEO-designate Debra Crew was taking over the job on an interim basis.
The company said on Monday that long-time chief executive Menezes, who was set to retire at the end of this month, was receiving treatment in hospital for conditions including a stomach ulcer.
Photograph: Maja Smiejkowska/Reuters
52-year-old Crew was appointed to replace Menezes in March, making her one of only a handful of women to lead a FTSE 100 company.
A former US military intelligence officer, Crew had been expected to join the board as an executive director on 1 July. She was appointed operating chief last year, and had been president of Diageo North America, its largest market, and global supply from 2020.
House owners or prospective buyers are set to face higher borrowing costs, as mortgage rates continue to climb
UK lenders have been raising rates and pulling mortgage deals for the last couple of weeks, in a volatile and turbulent mortgage market, amid growing concerns over future interest rate rises.
Halifax Intermediaries has told brokers that it is upping fixed rates today, which are expected to increase by 0.82 percentage points.
Meanwhile TSB has said it is hiking rates by up to 0.75%.
The latest increases come just days after almost 800 residential and buy-to-let mortgage deals were pulled by UK banks and building societies.
Reactions to the news from Halifax that UK house prices experienced their first annual fall in 11 years are coming in
Tom Bill, head of UK residential research at estate agent Knight Frank, said:
This is unlikely to be the last national house price index to fall into negative territory this year. Mortgage rates will keep edging up as wage growth keeps core inflation stubbornly high and we expect prices to fall by around 5% this year.
However, Bill doesn’t believe that today’s figures mark UK house prices “falling off a cliff”.
He added:
This isn’t the global financial crisis part two for house prices and any decline will be kept in check by rising wages, low unemployment, cash sales, record-high levels of housing equity, longer mortgages and savings amassed during the pandemic. The UK housing market is coming back down to earth after a strong three years, not falling off a cliff.
Jeremy Leaf, an estate agent based in north London, and a former RICS residential chairman, said:
Halifax, like the Nationwide figures, exclude cash sales and reflect activity from a few months ago. However, they do confirm recent trends that tentative market recovery is being threatened by the prospect of more interest rate rises and stubbornly high inflation.
Leaf added that Halifax’s market survey shows that “prices are still considerably above where they were two years ago so cash and equity-rich buyers in particular are recognising the opportunities.”
Despite the recent slide in house prices, they are still £25,000 above the level seen two years ago, according to Sarah Coles, head of personal finance at broker Hargreaves Lansdown.
Unfortunately for sellers, this reflects the weakness that had crept into the market before the impact of higher rates had been passed onto Halifax customers – which is happening today. It means the pain is unlikely to be over yet.
Coles also cautions that the market now expects interest rates to stay higher for longer, pushing up fixed rate mortgage prices.
This is far from over. … Today Halifax will push up rates on its two-and five-year fixed rate deals, which is likely to depress prices even further in the coming months.
UK house prices post annual fall for the first time in over a decade: Halifax
Introduction:
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Kicking things off this Wednesday is the latest house price index from Halifax, and it adds to the gloomier picture building around the UK housing market.
UK house prices posted their first annual drop since December 2012, the building society found, as the average property price fell by 1% last month, compared with May last year. This is despite average house prices remaining flat in May, following a 0.4% decline in April.
This takes the cost of a typical UK home to £286,532, slightly below the £286,662 seen in April.
However, not all homes are viewed equally, and detached properties are continuing to post modest house price growth.
The latest figures from Halifax chime in with last week’s figures from Nationwide building society, which found that house prices fell at an annual rate of 3.4% in May, representing the sharpest fall since July 2009, when the British economy was grappling with the fallout from the 2008 financial crisis.
It comes amid signs that the UK housing market is showing growing signs of stress, amid rising interest and mortgage rates.
Mortgage lending collapsed to the lowest collapsing to the lowest monthly level on record, and property valuations falling at the fastest annual rate in almost 14 years.
Figures from the Bank of England last week showed mortgage lending collapsed to the lowest monthly level on record, amid property valuations falling at the fastest annual rate in almost 14 years.
More news about the state of the UK’s housing market is also due out later today.
Record numbers of first-time buyers are taking out lengthy loans of around 30 years, in a bid to make their monthly payments more manageable, data from trade body UK Finance is expected to show when it is released later on.
Just under a fifth (19%) of all loans taken out by first-time buyers in March were for 35 years or longer, while more than half took a loan of over 30 years.
The data is expected to show that this is the highest proportion since records began in 2005, and more than double the 9% rate in December 2021, when the Bank of England started raising interest rates from a low of 0.1%.
The move is seen as an attempt by stretched house buyers to spread out the cost over a longer period, however it means that over the lifetime of a mortgage they will pay significantly more interest and could be burdened with debt into their retirement.
Away from the housing market, a criminal cyber gang – which is linked to Russia - appears to have issued an ultimatum to victims of a hack which affected companies including British Airways, Boots and the BBC.
The organisations are investigating the potential theft of personal details of staff after the hack, which targeted software called MOVEit used by Zellis, a payroll provider.
The Clop group posted a notice on the dark web, which cautioned those hit by the MOVEit hack to email them before 14 June – otherwise it threatened to publish the stolen data.
Staff at BA have reportedly been informed that compromised payroll data included names, addresses, national insurance numbers and banking details.
The BBC has confirmed that it has also been affected, but the broadcaster has said it does not believe that the breach includes staff bank details.
A blog post, written in poor English, has been seen by the BBC. It reported that the posts reads: “This is announcement to educate companies who use Progress MOVEit product that chance is that we download a lot of your data as part of exceptional exploit.”
The post then calls on affected organisations to email the gang to begin negotiations.
Employers have been urged not to pay any kind of ransom demanded by the hackers.
The agenda
0700 BST: Halifax UK house price index
0800 BST: OECD releases its economic outlook
14.15 BST: Hearing of UK parliament’s Treasury Committee with insurers, discussing excess profits, competitiveness within the industry, and the regulatory environment
UK Finance household finance review for Q1
Updated
