Scott Bozinis, CEO at InfoTrack UK, explores the changes we have seen in the property market and the path ahead post-pandemic.
21 June 2021: it is a date already engrained into the minds of people across the UK. It is the day when Boris Johnson hopes to lift all forms of lockdown and social distancing measures; it is the day life is due to return to normal.
In many respects, however, life will not return to normal – at least, not the normal we knew before the pandemic. Certainly, when it comes to the ways businesses operate and industries function, irreversible changes have taken place, meaning the long-term outlook is not one of returning to the past but preparing for a future defined by new processes. The most prominent of these is the adoption of new technology.
The property sector is a prime example of this. From estate agents and conveyancers through to homebuyers and sellers, the industry is in the midst of many interesting trends which look set to shape the year ahead.
The need for technology will only get stronger
Technology has been embedded in our lives for many, many years. However, when COVID-19 began to spread rapidly in early 2020, forcing offices to shut and people to remain in their homes, there was a further leap from the physical world to the digital.
In the property industry, lockdowns and social distancing rules have caused many headaches. It is, after all, an industry that has traditionally been slow to embrace technology, instead remaining reliant on offline processes and masses of paperwork, particularly when it comes to the transfer of property from one person (or organisation) to another.
In the property industry, lockdowns and social distancing rules have caused many headaches.
In a very short space of time, businesses throughout the property sector had to adapt; digital transformation strategies were greatly accelerated, and entirely new practices were adopted almost overnight. This is especially true when we look at the way in which people buy property, with virtual house viewings, e-signatures on documentation and new compliance requirements quickly becoming the norm.
But it is the conveyancing space that has perhaps been the greatest beneficiary of the sudden rush to embrace technology. With buyers, sellers, agents and solicitors all involved in a property transaction, the conveyancing process has historically been blighted by inefficiencies in coordinating activities, providing updates to stakeholders and securing all the necessary documentation. However, when this process is put through a single digital platform, it becomes exponentially easier, saving time, money and stress for all parties. What’s more, the risks of human error are also removed.
In short, the pandemic has underlined what was already becoming clear to many businesses: technology can provide both competitive advantage and significant efficiency gains. When it comes to conveyancing, technology enables firms to streamline the entire process, automating cumbersome and time-consuming manual tasks so that skilled employees can instead focus on delivering a better service to clients.
There might be a timeline for the easing of lockdown measures in the months ahead, but the property sector’s reliance on technology will not recede in line with these changes. Faced with no alternative, firms have found better ways of working by using digital tools. These tools will not only help them through the limitations of lockdowns but ensure they are better positioned to win more business in the future and maintain higher caseloads.
Will there be an exodus away from British cities?
Away from the fundamental, technology-driven changes that have taken place behind the scenes, the property market could also be facing another notable shift over the coming year. It could be about to witness a significant change in demands from homebuyers, which will have ramifications on businesses in this sector.
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COVID-19 has, in the short-term at least, sparked an “exodus” from cities. Unable to enjoy the vibrancy of life they are used to (pubs, bars, restaurants, shops, theatres, museums and galleries all being closed), data shows that urban homeowners have been selling up in their droves so they can move into rural areas.
For example, Londoners bought 73,950 homes outside of the city in 2020, a four-year high, according to Hamptons International. Meanwhile, during June and July last year, the number of city residents enquiring about village properties via property portal Rightmove rose by 126% when compared with 2019.
Will this trend continue throughout 2021? Only time will tell. The reopening of leisure, retail and hospitality businesses may reignite the appeal of city living – or maybe the desire for more spacious properties and greener surroundings will win out.
Either way, it is an important trend for businesses in the property space to monitor. It will, of course, have an impact on house prices and may affect the areas in which they operate.
Tax reforms are on the horizon
Public debt has spiralled as a result of the pandemic, with the Government having little choice but to borrow eye-watering sums of money. This debt will need to be brought under control in the years ahead, making tax hikes almost inevitable.
There are some we already know about: as of April 2021, for instance, non-UK residents that purchase properties in England and Northern Ireland will be subjected to a 2% SDLT surcharge. Coupled with the impact of Brexit, this may result in fewer overseas buyers looking to invest in UK property.
For now, the extension of the stamp duty holiday, as announced in the Spring Budget, will ensure the property markets in England and Northern Ireland remain hives of activity. However, buyers, sellers and property businesses must monitor prospective reforms closely.
Public debt has spiralled as a result of the pandemic, with the Government having little choice but to borrow eye-watering sums of money.
One thing is for certain: even as the virus abates, the transformation of the property industry will not. That’s why I believe we are set for a disruptive 12 months which will radically redefine the property market as a whole.
BT is set to offer frontline workers a special bonus of £1,500 in recognition of their work to keep customers connected during the COVID-19 pandemic.
The bonus is equivalent to about 5% of BT’s average salary and will offered to around 59,000 staff, the company said in a statement.
"BT has made a massive contribution to the national cause over the past year,” said BT CEO Philip Jansen. “We’ve supported the NHS, families and businesses, and avoided the use of redundancy or furlough in our response to the pandemic."
“Our frontline colleagues and key workers have been true heroes, keeping everyone connected in this most difficult time.”
BT does not expect any change to its full year financial outlook as a result of the bonus payment, which comes amid a company-wide pay freeze. The announcement coincides with plans by Communication Workers Union (CWU) to ballot its members about industrial action following a dispute with BT management.
The CWU is concerned that the company’s modernisation plans could result in up to 270 office closures and thousands of job cuts. Around 3,600 jobs at BT were cut in 2020 under Jansen.
Around 45,000 BT staff are represented by the CWU.
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BT’s Q3 revenue for 2020 was roughly £16 billion, down 7% “due primarily to the impact of COVID-19”, the company said. Profit for the nine months leading up to 31 December fell 17% to under £1.6 billion.
BT is not the only UK firm to be offering staff pandemic bonus payments. Supermarkets Sainsbury and Lidl also rewarded staff with payouts, with Sainsbury’s granting frontline workers a 3% bonus – worth about £530 to a full-time employee.
John Ellmore, Director at NerdWallet, outlines the current state of the UK housing market and the things a homebuyer should keep in mind in 2021.
A study from Halifax in 2019 revealed that 57% of renters aged between 18 and 34 believed they would buy their own home in the foreseeable future. However, a recent survey of over 2,000 UK adults, commissioned by NerdWallet, revealed that 38% of people had put their long-term savings goals, such as a deposit for a house, on hold due to COVID-19. This figure jumps to 60% among 18- to 34-year-olds; the “first-time buyer” demographic.
This trend is understandable. Millions of people have been put on furlough or made redundant, in turn shifting their financial priorities. Without the guarantee of a regular salary, Britons will be more likely to concentrate on the short-term – affording basic necessities or making credit card payments, for example – as opposed to planning for the long-term.
Positively, throughout the pandemic the Government has stepped in to offer both short- and long-term supports. The 2021 Spring Budget on 3 March included further initiatives – prospective homebuyers will no doubt have welcomed measures such as extending the stamp duty holiday and ensuring access to 95% mortgages.
At face value, these are all strong support mechanisms from the Government. However, such generosity may not be as beneficial to first-time buyers in the long-term.
Stamp duty holiday extension
The stamp duty holiday was originally introduced on 8 July 2020. It had the aim of reigniting the property market after several months of inactivity and it has been largely successful.
According to the Office for National Statistics (ONS), average UK property prices grew by £20,000 last year to reach £252,000 at the close of 2020. Similarly, transactional activity has surged in recent months.
A study from Halifax in 2019 revealed that 57% of renters aged between 18 and 34 believed they would buy their own home in the foreseeable future.
In light of this success, the Chancellor has extended the holiday by three months until 30 June 2021. The measure means that homebuyers do not need to pay any tax on the first £500,000 of a purchase, which could save homebuyers up to £15,000. Between 1 July and 30 September, the Government will lower the threshold to £250,000. From 1 October, the stamp duty threshold will return to its usual level of £125,000.
Even now with the extension, the looming end to the stamp duty holiday will encourage thousands of Britons to push ahead with plans to purchase a property in the months ahead. But I would urge buyers not to make any impulsive decisions.
As stated above, there are tax savings to be made in the short-term. However, unless time is taken to conduct careful due diligence, people may find themselves worse off in the long-term. For instance, buying a property that needs considerable repairs work, paying above the market rate for a house or flat, or not spending time to search for an appropriate mortgage provider could cause serious financial issues in the long-term.
The arrival of 95% mortgages
The recent Spring Budget also saw the Chancellor announce the availability of 95% mortgages. This scheme means that the Government will offer guarantees to banks, encouraging them to offer homebuyers mortgages even when they only have a deposit of 5% the value of the property.
Again, this will be viewed as a positive move by many first-time buyers. Particularly during a period when house prices are rising, the opportunity to get onto the property ladder without needing to have as much money in savings will open up homeownership to many more people.
That said, savers should consider the potential drawbacks of 95% mortgages before committing to a lender. Firstly, they could have a knock-on effect on monthly repayments. This is because borrowing a large amount to pay for the property will result in more interest having to paid over the term of the loan. Lenders could also charge higher interest rates for 95% mortgages.
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Additionally, the concept of negative equity must also be considered. This occurs when the value of a property drops, and the owner ends up owing more money than the property is actually worth. This can make repaying the mortgage in full when the owner sells their home particularly problematic. However, the higher the percentage of a property an individual owns, the less likely this becomes – so, savers might want to consider saving a bit longer for a larger deposit.
Of course, the Government’s measures to boost confidence among first-time buyers and reignite activity within the property market are largely positive for UK savers. Indeed, the extended stamp duty holiday and 95% mortgages will help many more people buy a house than otherwise could.
However, savers would be wise not to rush into a house purchase or make any snap decisions. While they may feel like they are making savings in the short-term, it could cost them more later down the line.
Instead, I urge Britons to conduct careful due diligence on their homes of choice and carefully research various mortgage lenders to find one that suits their requirements. Doing so will mean people can take their first steps onto the property ladder and buy with confidence.
Finance Monthly hears from Rob Coole, VP of Cloud Technologies at IPC, on the outlook for the UK fintech industry post-Brexit.
In recent years, the fintech industry has become an important focus for the UK, with the sector going from strength to strength. By the end of 2019, the UK's fintech sector was worth £11 billion in revenues, and accounted for roughly 8% of total financial services output. Adding to this, 44% of fintech companies that are based in Europe and valued at over $1 billion are based in the UK, while the UK continues to gain new investment in the fintech sector.
In a similar way to how the COVID-19 pandemic has introduced wide-ranging changes to the way we work and live, the impact of Brexit will continue to be felt for a long period of time.
While no single EU rival to the City of London has emerged yet, different Member States are taking advantage of the uncertainty presented by Brexit and are positioning themselves as new homes for fintechs. For example, both Lithuania and Malta have let it be known that they can provide new homes for UK-based fintechs, with Lithuania even running a PR campaign promoting itself as “the new capital of fintech” in the midst of the UK’s exit from the EU. This provides fintechs with a regulatory authorisation in an environment which has an entry point to the EU, something that the UK is now unable to offer.
The Opportunities
Nevertheless, the Brexit situation is not necessarily all doom and gloom. There is the potential for a number of new opportunities to emerge on the back of Brexit for the fintech sector. For example, the combination of Brexit and the COVID-19 pandemic have given fintechs an opportunity to collaborate like never before in order to piece together end-to-end solutions. This has seen the emergence of a hybrid-European view as providers look to share connectivity across mainland Europe and the UK, with lots of solutions being designed between Frankfurt, Paris and London. Furthermore, this increase in collaboration should resolve a number of issues, such as reducing the dependency that fintechs have on countries and specific technologies.
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Additionally, the Kalifa Review – a report on how the UK can maintain its leading global fintech reputation – laid out a number of recommendations to help the UK’s fintech industry to thrive in a post-pandemic, post-Brexit world. These recommendations include making changes to UK listing regulations so as to make the UK’s Initial Public Offering (IPO) market a more attractive location for fintechs, as well as creating a centre of Finance, Innovation, and Technology, to drive both domestic and international collaboration in order to boost growth across the country's fintech ecosystem. In addition to this, Chancellor Rishi Sunak’s 2021 Spring Budget included a new fast-track visa for specialists in the fintech sector – a recommendation from the Kalifa review that aims to provide a boost to the fintech industry post-Brexit. If the UK is able to take on board these recommendations, then there is an opportunity for the UK fintech sector to continue to grow and thrive following Brexit.
Finally, it is also worth noting that the fintech UK has always had a strong ecosystem. This is down to a number of factors, including having good and solid infrastructure already in place, a deep understanding of the industry, and a willingness to continue to innovate and develop fintech. In fact, Brexit provides the UK with a fantastic opportunity to change its financial regulation, which could help make the country even more appealing to fintechs.
Although the winners and losers of trading venues has been a focus for many in the aftermath of Brexit, these volumes overlook the hybrid models that are being created between London and other key European, and international markets. Today, there is more focus on global connectivity, reducing silos and increasing business resilience. Cloud and SaaS models will continue to be key to supporting customers, wherever they are in the world, regardless of borders.
As such, while both Brexit and the COVID-19 pandemic have presented numerous challenges, their combination has created a great opportunity for the UK’s fintech industry to continue to thrive and for the UK to remain an unquestionable leader when it comes to fintech.
UK exports of goods to the European Union (EU) fell by a record margin at the start of the year as Brexit came into effect.
Exports to the EU fell by 40.7% in the first month since leaving the EU, the equivalent to a £5.6 billion loss in trade, the Office for National Statistics (ONS) revealed in figures released on Friday.
Imports from the EU also suffered, falling 28.8%, or £6.6 billion. The losses seen in both EU exports and imports represent the greatest monthly falls seen since records began in 1997.
The slump occurred as Brexit took effect on 1 January 2021, marking the UK’s official exit from the single market and the implementation of new trading rules and customs checks. It also coincided with the UK’s third national lockdown amid accelerating COVID-19 cases, further exacerbating the trade slowdown.
Exports of food and live animals – particularly seafood and fish – were the hardest-hit by the disruption, plunging 63.6% in January. However, the sector counts for only 7% of total UK exports. Overall, global UK exports and imports fell by around a fifth at the beginning of the year.
Although the fall in exports was historic, the decline did not reach the 68% plunge that road hauliers had expected to face. January’s GDP figure also represented the UK’s largest economic contraction since the beginning of the pandemic, but did not fall as much as the 4.9% anticipated by analysts.
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The lack of a greater decline in GDP is believed by some analysts to suggest that businesses and households have adapted better to lockdown restrictions than they had prior to April 2020, when GDP fell by more than 20% as the first lockdown measures were imposed.
HSBC, the UK’s largest bank, has unveiled a £15 billion fund to help small businesses in the UK to rebound from losses caused by the COVID-19 pandemic.
The £15 billion allocation comprises the newest and largest-ever iteration of its SME Fund, which was first launched in 2014 with the aim of helping small businesses in the UK to grow.
The bank stated on Tuesday that two-thirds of the 2021 fund will be directed to specific regions, ensuring that companies throughout the UK are able to benefit from its support. The fund will also include a £2 billion ring-fenced pot for firms trading overseas and a further £1.2 billion for those in the agricultural sector.
Also new in the 2021 SME Fund are £500 million allocations each for technology firms and franchise businesses.
HSBC delayed the launch of the newest SME Fund from late 2020 to better coincide with the reopening of the UK economy. Its announcement comes a week after the release of the 2021 budget and the announcement of a new Recovery Loan Scheme for businesses to replace the Bounce Back Loan Scheme.
“We’ve helped British business get through the last year with over £14 billion of Covid-19 lending support,” said Peter McIntyre, head of small business banking at HSBC UK. “Now it’s time to turn our minds to what comes next and how we help companies grow again, opening up a world of opportunity and contributing towards a sustainable future society.”
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SMEs will be able to borrow from the SME Fund on standard commercial terms, with loans beginning at £1,000.
Figures published on Wednesday showed that small business borrowing reached more than £100 billion last year, an increase of over 80%.
The price of crude hit its highest level since the beginning of the COVID-19 pandemic on Monday after Yemen’s Houthi forces targeted Saudi oil sites with drones and missiles over the weekend.
The storage tank that was the target of Sunday’s attack was the largest crude terminal in the world, capable of exporting around 6.5 million barrels per day, representing almost 7% of global demand for oil. Though the Saudi energy ministry confirmed that no injuries or property damage occurred in the attacks, and output appeared to be unaffected, the shock prompted a crude price surge.
Brent crude rose as much as 5% to its highest level in 14 months before easing slightly, while BP and Shell also rose higher on opening. Though Brent crude retreated to $67, it subsequently rose back to $69 by 10:14 GMT on Tuesday morning, while West Texas Intermediate rose 41 cents to $65.46.
Stephen Innes, chief global markets strategist at Axi, attributed the price surge to the possibility of supply disruption over the weekend. “With OPEC pursuing a tight oil policy and US Shale Oil inelastic supply response to higher prices, any disruption to the Middle East supply chain could shoot oil prices considerably higher,” he said.
The focus on supply follows last week’s OPEC+ meeting, in which the organisation agreed to maintain their supply cuts for April.
Pundits predict that this decision could have a long-lasting impact on oil prices in the months ahead.
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Oil prices have also benefited from expectations of global economic recovery after the US Senate passed a $1.9 trillion stimulus package, which US Treasury Secretary Janet Yellen hailed as sufficient to fuel a “very strong” recovery in the US.
Sanjay Radia, Sales Engineering Manager at NETSCOUT, explores how financial services have changed with the global health crisis and how its more positive changes can be made permanent.
Even before the pandemic, the financial services sector was under pressure to meet the challenges of the modern, digital world. The rise of open banking, and the move to hybrid cloud infrastructures was a shot in the arm for new digital native competitors, which demonstrated a flexibility and agility that larger, older financial services firms lacked.
When the pandemic eventually struck, staff moved to remote working and customers were forced online as bank branches closed, it caused an acceleration of digital transformation in the largest institutions. Now, customers have grown accustomed to the speed and convenience of online banking. If these changes are signs of a more permanent change, what does this mean for financial services institutions?
Digital transformation in the past
Online banking has been around for nearly twenty-five years with mobile banking following a decade later – financial services are well versed in online provision. However, the level of demand placed on these services over the past year has been unprecedented. Indeed, according to research by Fidelity National Information Services, in April 2020 there was a 200% increase in new registrations to mobile banking and an 85% increase in mobile banking traffic.
In the year since then, continued lockdown restrictions have prevented bank branches from reopening for in-person banking. In this time, employees have adjusted to remote working and customers have adjusted to online banking. This shift to an increased reliance on online banking has resulted in several banks announcing the closure of branches. HSBC, for instance, plans to close 82 branches this year.
Online banking has been around for nearly twenty-five years with mobile banking following a decade later – financial services are well versed in online provision.
The previously gentle digital transformation process has rapidly accelerated since the start of the pandemic, and it looks like these changes are here to stay. Customers who did not previously bank online have had a whole year to get used to the change and are now unlikely to revert back to visiting their local branch, it is just not as convenient as logging into an app on their phone.
The rise in online banking means that customers and employees are increasingly dependent on online systems. This has significant implications, both from a service assurance and a security perspective. Any drop in service could disrupt the customer experience and impact customer loyalty. Added to that is the fact that employees working from home are more vulnerable to cyberattack.
Preparing for the digital future
With customers disproportionately dependent on online systems, service assurance needs to be a top priority for providers. A recent survey revealed that Barclays is the top rated of the traditional banks’ apps with 76% of users rating it 'great' for usability. Barclays launched its mobile banking app in 2012, so it has had plenty of time to fine tune it. Even so, to cope with the increased demand, some banks have been forced to increase their VPN capacity, by as much as 600% in the case of Standard Chartered.
As we begin to return to the ‘new normal’ it is important that this progress is continued, and the adjustments made to cope with the pandemic become more permanent. To ensure a high-quality user experience, companies must test and monitor new developments over both wired and wireless networks to account for the expanded user parameters. Companies must also pair this with a revamped vulnerability monitoring process to make sure that any issues are spotted and resolved rapidly.
From an employee perspective, lockdown restrictions forced a shift to working from home but, with closures of bank branches, this shift looks to be here to stay. This impacts security. Bad actors love to take advantage of tumultuous times and the decentralisation of workforces is the perfect opportunity for them. Indeed, in 2020 the annual number of observed distributed denial-of-service (DDoS) attacks crossed the 10 million threshold for the first time in history – the numbers speak for themselves.
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The fact of the matter is that home office networks are just not as secure as corporate infrastructures. The rushed nature of the shift to working from home meant that many businesses did not have time to implement best practice security procedures. Of course, it has now been a year and many businesses will have updated these procedures to enhance their security. The next step is to future proof these procedures to account for the hybrid office-home landscape that will likely become the norm in the post-COVID world. Implementing advanced automated DDoS technology will be critical to securing dispersed workforces.
We are only just beginning to understand what the post-COVID world will look like, but with banking apps becoming more popular than social media apps in 2020, it is clear that the trends of the past year will continue. Remote working impacts both employees and customers so it is vital that the financial services sector continues to advance the progress made over the past year and ensure that mission-critical businesses services can operate securely and uninterrupted.
New research has found that average women in their twenties today will have £100,000 less in their pensions than their male peers upon retiring.
The report was produced by pensions firm Scottish Widows to coincide with International Women’s Day, which found that women in the first 15 years of their careers on average save about £2,200 a year, compared to £3,300 for their male counterparts.
Lower average earnings, part-time work and the need to take time out of employment to care for family all cut into savings and are setting women back by almost four decades compared to men, the firm stated. The average young woman today will need to work 37 years longer than a man to reach “retirement parity”.
The COVID-19 pandemic has further widened the gender pension gap, the firm continued. 36% of employed women under the age of 25 work in areas such as hospitality and retail, which have been among the sectors hardest hit by the health crisis, and over 49% have been furloughed.
"We know that young women have been some of the hardest hit by the short-term financial impact of the pandemic and this has only exacerbated the challenge of reaching pensions parity,” said Jackie Leiper, Scottish Widows’ managing director of pensions.
However, the firm found that if women could increase their pensions contribution by 5% from the beginning of their careers, they could almost completely close the gap by the time they retire.
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“By taking control of their contributions and increasing them as early as possible, young women stand a fighting chance of improving their long-term savings outlook,” Leiper said.
A spokesperson for the Department for Work and Pensions drew attention to the government’s pension reforms and increased pension participation among women in the private sector, which rose from 40% in 2012 to 86% in 2019.
Nic Redfern, finance director at NerdWallet, lays out his predictions for what the Government's priorities will be in the 2021 Spring Budget.
In spite of falling infection rates and the successful rollout of the vaccination programme, the Government is exercising extreme caution in its plans to lift lockdown restrictions.
This approach is understandable. Within the previous 12 months, the UK has faced three national lockdowns, as well as tiered regional restrictions. Keen to avoid a fourth lockdown, Prime Minister Boris Johnson has stressed that the route out of the third lockdown will be gradual, yet irreversible.
Such caution also means that many UK businesses – particularly those within the hospitality, leisure and retail sectors – will remain unable to reopen their doors for several weeks. Consequently, the 2021 Spring Budget is set to be dominated by “continued emergency support” for such organisations.
So, what sort of support can UK businesses expect to be announced by the Chancellor Rishi Sunak on 3 March?
Business rate holiday extension
The Great British high street has been on a well-documented decline over the past decade. However, the pandemic has exacerbated the struggles of bricks and mortar retailer outlets.
Conversely, COVID-19 has facilitated an eCommerce boom as UK consumers, unable to leave their homes, have become more reliant on online shopping. For example, the sales of Amazon UK’s wholesalers rose by an astonishing 51% last year. Put another way: it is predominantly merchants reliant on footfall and instore transactions that have felt the effects of the pandemic the hardest.
COVID-19 has facilitated an eCommerce boom as UK consumers, unable to leave their homes, have become more reliant on online shopping.
Consequently, it is expected that the Chancellor will extend the business rates holiday in an attempt to boost high street stores. Initially intended to end in April 2021, Mr Sunak has come under increasing pressure to extend the holiday for another 12 months.
It is yet to be confirmed exactly how long the business rates holiday will be extended for. However, I anticipate that it will at least extend until non-essential shops, pubs and leisure venues are allowed to fully open.
Extending the business rates holiday will also mean that the Chancellor is likely to hold off on announcing any reform to the business taxation system on Budget day. Last year, a review was launched into “levelling the playing field” between high street and online retailers; for example, introducing online sales tax, targeting tech and eCommerce giants is under consideration. Such changes would have likely been welcomed by high street businesses; however, any concrete decision will likely be postponed until the economy is on a more stable footing.
Nevertheless, while the Chancellor’s immediate priority will be the business rates holiday itself, it is important to note that we could see more dramatic changes to business taxation under this government.
A review of the furlough scheme
The furlough scheme has undeniably helped to safeguard the livelihoods of millions of employees. According to figures from HMRC, a total of 1.2 million employers had placed staff on furlough, as of December 2020 – costing the government £46 billion.
The Government initially planned for furlough to be a short-term scheme, with the intention being to end the initiative altogether in November 2020 and replace it with a new Job Support Scheme. However, rising infection rates and stricter lockdown measures meant that this could not happen, and the furlough was extended. It is now scheduled to end on 30 April 2021.
The furlough scheme has undeniably helped to safeguard the livelihoods of millions of employees.
With the Prime Minister’s roadmap making it clear that many non-essential organisations will be unable to open until summer, there have been inevitable calls for the scheme to be extended even further.
I expect the Chancellor to use the Budget to announce such an extension – at least for more vulnerable sectors such as hospitality, retail or leisure. Of course, the furlough scheme is expensive; difficult decisions regarding how to pay for it must be made in the near future. However, Mr Sunak will be aware that ending vital support such before vulnerable businesses are able to properly reopen will jeopardise their long-term survival.
Possible extension of the CBILS
The Coronavirus Business Interruption Loan Scheme (CBILS) provides small and medium sized businesses access to loans and other forms of finance up to £5 million. The Government guarantees up to 80% of the finance to the lender, whilst also paying interest and additional fees over the first twelve months.
This has offered some welcome financial breathing space for many organisations as they attempt to rebuild, post-COVID. However, the scheme is scheduled to end on 31 March.
Perhaps unsurprisingly, the deadline has been met with opposition; a recent poll revealed that almost a third (31%) of businesses are keen to see the scheme extended.
However, Mr Sunak has stressed that businesses will receive more support beyond March 2021. So, whilst it is unclear whether the CBILS will be extended, the promise of further support should offer some comfort to businesses.
Support for the self-employed
Throughout the pandemic, the Government has received criticism for excluding many self-employed people from its financial support schemes.
It did introduce the Self-Employed Income Support Scheme (SEISS), which offered relief to some. However, those who earned over £50,000 a year, paid themselves in dividends, or recently became self-employed were not eligible. This resulted in approximately 2 million people being unable to access financial support.
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There are rumours that the Government is planning to extend the eligibility criteria of the SEISS, ensuring recently self-employed individuals are able to apply for the grant. Such an extension seems sensible. After all, the self-employed contributed £305 billion to the UK economy in 2019 alone; the Government cannot allow such a prominent economic force fall by the wayside.
It is evident that the Government’s focus for the Budget will be continuing its emergency support schemes for UK businesses. In particular, it is vital that the Chancellor focusses his efforts on safeguarding vulnerable sectors and organisations – those that have been worst impacted and those that will take some time to reopen fully.
Retail, hospitality, leisure businesses, as well the self-employed, have all faced significant challenges throughout the previous 12 months. And without adequate help, their long-term survival will be jeopardised. The Budget is an ideal opportunity to deliver further life support to organisations that need it, easing the transition out of what everyone hopes will be the final lockdown.
Sezer Sherif, Founder and CEO of investment group Vector Capital, explores the strengths of alternative property investment in the UK.
There is no question that COVID-19 has completely torn through the UK economy, with signs of initial recovery towards the end of 2020 largely dashed as the country continues to navigate through a third round of lockdown restrictions.
Yet, one sector that has continued to fair well despite initial and ongoing restrictions is the residential property market, with data from HM Revenue and Customs confirming an estimated 129,400 house sales in December 2020 – which was nearly a third (31.5%) higher than December 2019 and 13.1% higher than in November 2020.
However, according to a recent study by Citizen’s Advice, the same positive stats cannot be reported for the rental or buy-to-let sector, which found that almost a third of renters across the UK had lost income during the pandemic and 11% were in rent arrears. Furthermore, the number of private renters behind on their rent has also doubled over the last 12 months.
In addition to the challenge of rent arrears, landlords haven’t been able to generate viable yields on buy-to-let for a long time, with evolving landlord taxes resulting in an average annual return of 3.53% for the UK market; a figure even considered to be ‘over-performing’.
When compared to the projected returns and no hassle promise of property bonds, it is clear to see why hundreds of thousands of landlords are now selling up and reinvesting funds into the alternative market, with COVID-19 standing as the final catalyst for making this change.
Asset-Backed Investment, No Hassle
In brief, alternative property investment enables high net worth or sophisticated investors to invest funds into the construction of large-scale property developments, without the hassle of actually owning or managing it.
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By essentially ‘lending’ funds under a legally binding agreement, which usually comes with a fixed rate of return, investors don’t have to worry about managing tenants, finance or maintenance issues and instead reap a financial reward of between 6 – 10% for helping to fund the build – a somewhat significant increase when compared to buy-to-let.
Savvy Investors Diversify
The COVID-19 pandemic has completely obliterated many investment channels in addition to buy-to-let, with the stock market having also taken a serious hit – something repeated when details of the new COVID-19 variants came to light.
However, the savvy investor has been circumventing volatile markets for years, particularly following the Brexit referendum several years ago together with political uncertainties overseas.
Although COVID-19 has taken investment challenges to a new level, it is these periods of uncertainty that force investors to think differently and to diversify their portfolio and investment decisions in order to make viable returns.
The alternative property investment market is one such route, and with construction not impacted by secondary lockdown restrictions, both developments and resulting returns are more likely to remain on track.
As it stands, there is no definitive end to the current COVID-19 pandemic. However, the initial pangs of panic have disappeared and there is definitely a stronger resolve amongst business leaders, developers and investors to fight back, disrupt and diversify, where one great place to start is with the alternative property market.
HSBC, the UK’s largest bank, posted a 34% drop in profit for 2020 and has signalled a “pivot to Asia” along with job cuts to compensate for the decline.
The bank reported a pre-tax profit of $8.8 billion from revenue of $50.4 billion in 2020, going slightly beyond analysts’ expectations of an $8.3 billion profit on income of $50 billion.
Part of HSBC’s losses, like those seen by Barclays, were caused by a sharp rise in credit loss provisions owing to the COVID-19 pandemic. HSBC set aside a further $1.2 billion in Q4 2020 to cover an expected rise in bad loans, bringing its total loss provisions for the year to $8.8 billion.
HSBC also reinstated a dividend of 15p, significantly above analyst forecasts of 10.1p, following the Bank of England’s lifting of its dividend ban in December.
Also on Tuesday, HSBC announced plans to accelerate its transformation plans. The bank is currently undergoing a major restructuring intended to reverse several years of underperformance, which will involve cutting 35,000 jobs and reducing costs by $4.5 billion by 2022. 11,000 jobs were shed during 2020.
The bank also signalled its intent to focus on opportunities for growth in Asian markets. Stephen Moss, its head of strategy, will take on the role of chief executive for the Middle East, North Africa and Turkey, and will relocate to Dubai from London. More executive roles are expected to relocate to Hong Kong, HSBC’s historic home base.
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"I am proud of everything our people achieved and grateful for the loyalty of our customers during a very turbulent year," chief executive Noel Quinn said in a statement.
