GDP growth in Canada's banking industry will be limited to 2.4% this year amid a slowdown in consumer and business credit growth, according to The Conference Board of Canada's first outlook for the Canadian banking services industry. Still, the industry is expected to perform better than the overall Canadian economy and profit margins will remain healthy over the forecast period.

"Despite a sluggish Canadian economy, the banking industry managed a strong performance in 2016 largely due to the robust growth in the housing sector and equity markets," said Kristelle Audet, Senior Economist, The Conference Board of Canada. "However, with growth in consumer and business credit expected to weaken going forward, the industry will expand at a slower rate than what we have seen in recent years, although it will still outperform the overall Canadian economy".

Highlights

• Canada's banking services industry's growth will be limited to 2.4% in 2017 due to weaker growth in both consumer and business credit.
• With high household indebtedness and low interest rates limiting growth in the consumer credit segment, banks have been keen to tap into business lending in recent years. However, this segment is now also running out of steam.
• Despite slower growth, the industry will keep its costs under control, allowing pre-tax profits to surpass $80 billion in 2017.

The robust performance of the industry in recent years was largely driven by non-interest income sources due to historically low interest rates. Interest income, which accounts for over 40% of the industry's revenues, has remained essentially flat in recent years. In order to generate revenue growth, the industry had to look for other sources, including insurance and investment management services, as well as banking fees.

The banking industry has also been keen to tap into the business loan segment in recent years. Chartered bank loans issued to the private sector have posted their longest expansion on record—24 consecutive quarters of growth since the 2009 recession. However, the double-digit increases seen through 2016 will not be sustained moving forward, with a slowdown in private sector lending growth expected this year.

Also, with the housing market forecast to cool as a result of new taxes and tightened mortgage-lending rules combined with interest rates likely to rise at modest pace starting in 2018, growth in mortgage and non-mortgage debt will continue to ease. In fact, this year, for the first time in 25 years, growth in disposable income should outpace growth in consumer debt.

Growth in the industry will thus be limited by more moderate growth in both consumer and business credit. Given the more challenging business environment, the industry is undertaking significant efforts to keep costs growth under control, which will allow it to maintain a healthy profit margin throughout the forecast. However, there are still risks to this outlook. A correction in either the housing or equity markets would have a significant impact on the industry's performance.

Despite historically low interest rates, the industry's profit margin has improved significantly in recent years and is expected to average around 31% over the next five years. Meanwhile, pre-tax profits will continue to climb, reaching over $80 billion this year.

(Source: Conference Board of Canada)

Growth in the number of SMEs in the technical and professional sector² has outstripped every other industry since 2010, according to the latest study from specialist challenger bank Hampshire Trust Bank.

The research conducted in partnership with the Centre for Economics and Business Research (CEBR), reveals there are almost 40% more legal services SMEs, architects and vets than in 2010. Other sectors which have seen high levels of growth³ since 2010 are information and communication (33%) and business services (25%). Looking at the UK as a whole, there has been a 17% rise in the number of SMEs from 2010.

The study highlighted that despite a lower percentage of start-ups entering retail and construction⁴, these sectors do have higher numbers of SMEs overall. However these two sectors attributed financial concerns as barriers to growth in their industries which may deter start-ups in the sectors. Nearly two in five (39%) retail and three in 10 (28%) construction companies said competition in the market was the biggest barrier to growth.

Sectors by level of growth

The sectors experiencing a higher number of start-ups correspond to those demonstrating a greater level of confidence when it comes to the long-term economic prospects of the industry they operate in – with three in five (59%) accountancy, IT and communication firms saying they feel optimistic.

Mark Sismey-Durrant, Chief Executive Officer at Hampshire Trust Bank, said: “Our report identifies the critical role of SMEs within the economy, particularly the many micro firms that are emerging in the UK.  It’s encouraging to see SMEs enter all sectors from 2010 – 15 and from our experience many are identifying opportunities for growth in the future. These figures should be seen as a source of optimism for the government in terms of providing employment and long-term economic prosperity for the years ahead.

“As the government prepares to set out plans for leaving the EU, I urge them to keep the spotlight on smaller companies by creating conditions and opportunities which will support the levels of growth our research has identified.”

Nina Skero, Managing Economist at CEBR, said: “This study is yet another indicator of how strong UK SMEs are and the vital role they play within the UK economy. It’s encouraging to see SMEs across various industries posting a strong performance. This further highlights how vital it is to nurture the optimism they are demonstrating if they are to continue driving economic growth.”

(Source: CEBR)

According to the annual Business Pulse Survey by SunTrust Banks, Inc., nearly two-thirds of business leaders expect the global and US economy to improve through 2017. Even more optimistic about their own companies, as 75% of middle market (annual revenue of $10-150 million) and small business (annual revenue of $2-10 million) leaders feel their business outlook is strong. Both segments have high expectations for healthcare (46%) and tax reform (44%) as a catalyst for growth. Mid-market leaders also cite reducing regulations (39%) and investments in infrastructure (37%) as ways to spur business momentum.

"This year, business leaders are feeling very prepared to take advantage of growth opportunities, 75% believe they have access to the critical capital needed," said Allison Dukes, Commercial and Business Banking executive at SunTrust. "Three out of four have a goal-setting process linked to long-term growth strategies and are comfortable that they will achieve their goals."

In 2017, the short term priority for 31% of mid-market companies is profitability, a 29% increase since 2016; while 34% of small businesses are focused on revenue, a 54% increase from last year.

Looking out five years, introducing a new product or service is still the top long-term strategy to stimulate growth for both mid-market (40%) and small business leaders (31%), while making a major capital investment (31%) and acquiring another company (17%) is a greater priority for the mid-market. To undertake these initiatives, common strategies include using cash on hand, reducing costs, obtaining a bank loan and reinvesting corporate earnings.

"Over the past four years, businesses in the small and mid-markets have taken incremental steps toward growing their companies, including M&A, hiring, and improving cash flow. At SunTrust, our purpose is to Light the Way to Financial Well-Being for our clients, and we have been working with them to ensure they have the tools and capabilities to grow their business in a smart way. Now, they see an opportunity for significant structural changes in taxes and regulations to unleash additional business growth," added Dukes.

Decision-makers representing more than 500 small and mid-size businesses participated in the SunTrust/Radius Global Market Research survey. Survey results have a maximum margin of error of +/- 5 percentage points at a 90% confidence level.

(Source: SunTrust Banks, Inc.)

The UK’s tech growth over the last decade has been phenomenal, and this very much thanks to technology startups and increased expansion of innovate firms. However, in the midst of uncertainty and instability, expansion is often being pushed to foreign soils, mostly due to a lack of the right people. This week we heard from Adam Hale, CEO of Fairsail, on the role that the UK must continue to play as a global tech hub and the skills crisis that could stand in the way of this.

The unique value of our tech industry comes from the large number of digital businesses starting up and scaling globally out of the UK market. Just look at the hotbeds of innovation in Tech City, Silicon Fen or the Thames Valley areas. To fuel that innovation, and the growth it powers, acquiring the right talent is a pre-requisite. However, despite having the necessary funding and bright ideas, recruiting people with the right technology skills can often being the biggest barrier to global expansion for companies looking to scale up. It’s a barrier we’ve come up against time and time again.

As the CEO of Fairsail, the UK’s fastest growth technology scale up, head-quartered in Reading but with offices and customers around the world, the current skills crisis makes it difficult for us to keep software development in our home market. The skills crisis means that, for companies like us, exports are hampered because we can’t get enough technical skills to keep up the development and innovation that our global market is demanding. Without the right people with the right skills, scale ups are being forced to move development offshore. And without a solid strategy to reverse the skills crisis, the UK tech economy risks losing its momentum. So what can we do?

To start with, there needs to be more recognition of technology as an important part of the UK economy, and government strategy must reflect the real demand for digital skills. Radical action to address the systemic flaws in our education system is at the heart of this. Recent announcements by the government do show improvement in its efforts to address the skills gap, most notably the creation of ‘T-Levels’ announced in the Chancellor’s Spring Budget that will provide 16-18 year olds with vocational technical education to the same level as their academic equivalent – A Levels. However, digital is only one of 15 different technical routes to choose from. So, while £500m investment in skills may be a headline grabbing figure, in reality, it boils down to an insufficient concentration on where we need to radically improve skills – in IT.

Much greater investment is also needed to improve teaching and present the technology industry as an attractive career choice from a young age. Currently, the supply of technical school leavers/graduates is pitiful and does not come close to fulfilling demand. In 2016, only 5,600 students studied Computer Science at A-Level in 2016, and a meagre 600 of these were female. To really change perceptions and address the gender-imbalance in the industry, the government needs to impose increased primary and secondary education focus on tech and STEM. If we are to meet the nation’s demand, we should be aiming for a tenfold increase of students studying computer science over the next five years, with females making up at least 30%.

I have a passionate belief in the UK’s ability to grow and develop world leading businesses; however, as UK-born companies pursue growth, they have no choice but to look further afield in the search for the talent they need to meet their customers’ demands. Only by getting young people interested in and studying technology subjects will we avert this crisis, and cement the UK’s rightful position as a future global tech hub.

Growth expectations for 2017 remain subject to both upside and downside risks from potential policy changes as the Federal Reserve considers raising interest rates for the second time in three months, according to the Fannie Mae Economic & Strategic Research (ESR) Group's March 2017 Economic and Housing Outlook. Full-year economic growth is projected at 2.0 percent, unchanged from last month, while the forecast for current quarter growth is down slightly due to weaker-than-expected consumer spending data. Still, general business and economic sentiment remain strong despite policy uncertainty.

Thanks to rising household net worth and healthy jobs data, consumer spending should remain the primary driver of growth. A pickup in the Fed's favoured measure of inflation in January supported several Fed officials' hawkish speeches, which led the market to fully price in a rate hike at the conclusion of the Fed meeting later today. The ESR Group expects today's target rate increase to be followed by two additional hikes in the second half of the year. Home sales should continue to improve this year despite affordability challenges, including continued strong home price appreciation due to scarce inventory.

"Our economic forecast remains in a conservative holding pattern as we await word on the particulars of the new Administration's plans for fiscal stimulus," said Fannie Mae Chief Economist Doug Duncan. "In the meantime, economic sentiment from most industry stakeholders continues to reach new heights: consumers, as demonstrated by our National Housing Survey, are more positive than at any time since the survey's inception in 2010 about the direction of the economy, while homebuilders' optimism remains near an eleven-year high."

"Tight inventory remains a boon to home prices and Americans' net worth, but it also continues to price out many would-be first-time homebuyers. However, our research suggests that aging millennials, now boasting higher real wages, are beginning to narrow the homeownership attainment gap," said Duncan.

(Source: Fannie Mae)

According to UK mortgage lender Halifax, February saw the lowest increase in house price since July 29013, going up just 5.1% YoY. This means that house price inflation has halved over the course of 11 months.

Halifax’s housing economist, Martin Ellis says this is down to a sustained period of house price growth in excess of pay rises making it more and more difficult for many to buy a home. He says that this, alongside a reduced momentum in the job market and less consumer spending will equate to a further slowdown in inflation rise throughout 2017.

This week Finance Monthly has heard from a number of sources in the housing markets sector, to see what their thoughts are on the slowdown, and whether indeed more growth curbing is to occur in the coming months.

Neil Bainbridge, Ashcox & Stone:

Why is it slowing down? The key factor in this is uncertainty and it's slowing in some areas and not others. In Swindon, we were looking at six per cent average growth in 2016 in house sales, this year it's predicted to be around four per cent but we are only in March. So far, we've had a strong start to the year and that shows no signs of slowing down. I suspect we will be between five to six per cent by the end of the year.

We have to remember that our economy's growth is consumer led and consumer confidence is attached to our love of property and if people stop having that confidence, spending will slow, credit will slow and consequently growth will slow. it's a fragile position we are in when our economy's growth relies on the confidence of the average consumer.

Things could start slowing as people take stock and think, "if I don't sell my house or buy a new home this year, what's the market going to be like next year? Am I better off sitting tight?" Will they wait for decisions regarding Brexit, interest rates and a wealth of other economic uncertainties?

As a non-Londoner, it seems to me that that market is still very much an 'anomaly' with outside investors with strong currencies against the pound, being able to buy more for their money. However, uncertainty over Brexit may cause those people to think twice before rushing to buy that investment property if concerns over jobs being relocated overseas are realised.

Less of an impact but still one to watch is the trans-Atlantic effect of the American dollar as they consider a rise in interest rates in the USA and that's likely to have a knock-on effect on economies around the world, including here in the UK.  Interest rates in the UK are likely to rise at the end of 2017, beginning of 2018 to counteract the inevitable rise in inflation, caused by the increase in food and fuel prices that we are already beginning to see. These are the sorts of headline costs that most affect consumer confidence.

Another factor to bear in mind is the massive effort by the government to put the brakes on the buy-to-let market which is causing a huge number of potential landlords or investors to avoid investing in the property market. But that's a whole other debate.

Professor Ivan Paya, Lancaster University Management School:

The results of our forecasts suggest that house prices in the national and all regional property markets will grow this year. For the UK national market, the considered forecasting models predict a slowdown in the rate of house price inflation to 3.5% in 2017 (we note that the value of the corresponding statistic in 2016 was 4.4%). Although house prices are expected to grow at a lower rate than last year, the two main factors responsible for the positive forecasted growth in the housing market are (i) the sound domestic economic conditions (mainly a healthy growth rate of consumption), and (ii) the fall in the real mortgage rate (mainly due to the recent rise in inflation rate). At the same time, we note a slight reduction in the number of housing starts in the past year, which can also explain the continued positive trend in the national property prices.

When it comes to the regional housing markets, the predicted patterns of property price behaviour vary across regions. We note that expectation about the future interest rate increases, which is an important determinant of housing dynamics in London but not in the other regional markets, is the key factor that puts a downward pressure on the house price growth in this region. On the other hand, we note a small decrease in the ratio of property prices to personal income in the last quarter for the first time since the early 2013. This measure is an indicator of housing affordability, and it has been gradually deteriorating until the third quarter of 2016, when the ratio of prices to income reached its historical maximum. The improvement in housing affordability together with the fall in the real mortgage rate and the sluggish supply of housing are all factors responsible for continued growth in London property prices. According to the forecasting results, housing inflation in London will slow down in the first quarters of 2017, but the growth in property prices is predicted to build up towards the end of the year. Overall, the forecasts indicate a 3.9% growth in London property prices in the course of 2017.

The forecasts predict a similar pattern of house price behaviour in the regions contiguous to London, including Outer Metropolitan, Outer South East and South West. We note that the property market of East Anglia, which is currently growing faster than any other regional market of the country, is predicted to slow down in 2017, but still remain the market with the highest housing inflation (the forecasts suggest that house prices in this region will grow by 5.7% over the year). We see deterioration in housing affordability in all these regional property markets: the ratios of house prices to households’ disposable income are at or close to their historical maxima.

Charles Fletcher, Head of Analysis, Cogress:

The news is not particularly surprising when you consider the series of unprecedented events over the past twelve months that have rocked the UK economy and property market. From the stamp duty changes, to rising inflation rates squeezing consumer-spending power, and the shocking referendum results in the UK, a house price slowdown amidst such economic uncertainty was effectively inevitable.

With that said, property values are still 5.1% higher than they were at the same time last year. Even though the growth rate is slowing, a shortage in supply of both new homes and existing properties will continue to lift UK house prices. Meanwhile, demand for housing is being supported by an economy that continues to perform well with employment still expanding.

Over the next few months, we expect that the UK’s financial resilience will be reflected in the property market. Although prices and transaction levels in prime central London areas like Chelsea and Kensington may keep dropping, this will be offset by properties valued below £1,000,000, which are still trading well. This trend towards more affordable properties is indicative of mounting consumer caution over major spending decisions and the difference between one’s ‘need’ for property and one’s ‘want’ for property. The large disparity between supply and demand for property across the country means that competition will remain fierce for properties at the more affordable end of the market, even against Brexit’s uncertainty. Which means that cities such as Manchester, Bristol and Leeds will continue to benefit from ongoing tenant demand.

While issues of affordability will remain top-of-mind for many UK consumers and first-time buyers, falling house prices in central London represent an opportunity for foreign buyers. Many central London estate agents have been reporting that a large portion of their applicants are $-based buyers hoping to take advantage of currency fluctuations to invest in valuable long-term property assets.

Despite predictions of a price crash, we expect that house prices will continue to grow at a stable rate over the next few months. This is as a result of the country’s sound economic conditions and a resilient property market that can withstand any potential volatility Brexit brings.

Gavriel Merkado, Founder & CEO, REalyse:

The recent announcement that the UK housing market has slowed to its lowest pace in three and a half years was not a surprise. The UK market has experienced a period of instability, with an imbalance in supply and demand leading to properties becoming overpriced. If you pair this with the low interest rates the UK has been experiencing and the relative ease of access to debt finance, you are left with a market that is unaffordable for the masses.

Over the past year, the government has been instructed that to help solve the housing crisis 300,000 more homes must be built in England alone, year-on-year. Despite this goal, we are still experiencing low levels of housebuilding and development, which have subsequently added to high prices. Therefore, it appears that a key reason for the slowdown is affordability.

It will be interesting to see the impact this shift has on the market over the next few months. We have already endured a period of uncertainty following the Brexit vote, and while the initial shock period is calming, implications are still far reaching. Brexit may well lead to an increase in inflation, with the Bank of England forced into increasing interest rates, which in turn may put pressure on the purchasing market.

There is also the impact of movement of EU migrants to consider, with many of them residing in the UK expecting to return home in the lead-up to Brexit. If this does prove to be the case, we may experience a drop in demand for rental property, which in turn could balance out the demand for buying property.

Investors and developers should monitor the situation closely, as we are already noticing a shift in the patterns of growth and decline. Central areas, such as London and Manchester, that were previously viewed as overpriced, could experience a stabilisation in prices, whilst some regional cities and suburban areas, such as Cambridge, could continue to rise in price. Other socio-economic factors, such as the development of the high-speed rail links may also lead to the increase in value of other regional towns and cities.

We would also love to hear more of Your Thoughts on this, so feel free to comment below and tell us what you think!

With CEO’s citing growth as top priority for the coming years, CFOs are to be strongly impacted. Finance Monthly here benefits from an exclusive outlook on the future of CFOs by Mark Nittler, VP Enterprise Strategy at Workday, who discusses the changing role of finance and how CFOs can better prepare themselves for the future.

The role of the CFO is going through a period of significant change. It’s no longer just a numbers game, but CEOs are calling on the finance team to play a bigger role in decision-making, technology, and data governance.

CFOs need to ensure they’re ready for such major levels of change, which are only exacerbated further by an intensely competitive digital business landscape. And despite CFOs now needing a more strategic approach to decision making, recent research suggests that many still rely on gut feel rather than hard data. Many also admit they neglect innovation and process improvement, and have not mastered how to manage and analyse the volume and variety of business data available to them.

So what are the business priorities impacting the focus of the finance function? This article looks at how CFOs can best prepare themselves – and their teams – to become a more strategic partner able to meet the changing needs of a modern organisation.

Multiple growth strategies

It will come as no surprise that many CEOs cite growth as their top priority for the next three years, a move set to strongly impact the CFO. It’s now expected that CFOs will play a core part in driving growth strategies across the company, which makes good business sense given the insight they have into every part of the organisation.

This growth will be the result of numerous different approaches – from organic growth to geographic expansion and acquisition – so the CFO will need to drive multiple growth strategies. In today’s dynamic business environment this will be no easy task, but it’s vital CFOs embrace this new role, supporting the CEO in the pursuit of growth and becoming a strategic partner to the business.

Regulation, regulation, regulation

The CFO has an important part to play when it comes to the regulatory environment. This not only applies when considering how to adapt to new regulations but also to ascertain where the potential value lies for the business. CFOs have the ‘big picture’ view and should look at incoming regulation beyond the core issue of compliance – how these could potentially provide more insights into the business or streamline additional processes, for example.

One example here comes from the changing reporting requirements within financial services. These requirements led to more standardisation across the industry, and a new focus on building data-warehouse environments to meet these regulations. For many organisations, this actually presents an opportunity to better understand the company’s data and in turn grow the business.

CFO decision making

Modern businesses are under constant pressure to operate quickly and efficiently, and CEOs are demanding more real-time data from their CFOs in order to make the best possible decisions. In turn, they’re looking for analysis and insights from the finance function, as well as guidance on future strategy.

As a result, the finance organisation will need to spend more time on insights and analysis, and less time on processing transactions than it has done in the past. Looking at historical data alone is no longer enough. Finance now needs a holistic view of the business, combining various streams of live and historical data, if they’re to better understand the business as a whole. They will then be able to provide insights into how various parts of the business – such as HR and finance – impact each other, and advise on future strategies based on these insights.

Ongoing transformation

A recent KPMG report found that one in three CEOs see experience with transformation as one of the top attributes for a CFO. And with business leaders focused on beating the competition and ensuring their products or services stay ahead of the curve, the pressure is on for CFOs to support in business innovation and transformation efforts.

Organisations are being disrupted from all sides, whether it’s changing consumer demands, new regulation coming into effect, or innovative competitors coming onto the scene. This also comes largely from changes within specific industries – from the growth of omnichannel in retail to the evolution of connectivity in the automotive industry.

These changes often push businesses to innovate if they’re to remain competitive and continue to grow, and the CFO can support considerably on this journey. The CFO and finance team can identify growth opportunities and inform key business decisions by providing the relevant insights and data they have access to. The finance function should also be able to scale quickly – entering new markets, for example – in order to support certain areas of growth.

The current burden of transaction processing and audit and control tasks felt by many finance teams leaves little room for strategic partnership and the ability to influence decision-making. As such, it’s vital that organisations across the globe embrace new ways of thinking about the role of finance in today’s highly disruptive business landscape, and that CFOs keep these considerations front of mind if they are to be successful with new future growth strategies.

SimCorp recently announced the results of a comprehensive survey, titled 'Realizing Growth Through Operational Agility', which examines the current state of IT and operations in the global buy-side investment management industry and includes several notable findings. This includes the fact that 47% of the surveyed firms lack confidence in either their IT infrastructure, their data, or both.

The results also show that firms that are confident in both their data and infrastructure are much more likely to pursue a growth strategy than those with data/infrastructure problems. Further, firms with a lower degree of confidence in data or infrastructure are more likely to increase IT spend in the future, according to the survey.

The availability of real-time data in the front office is generally perceived as an important factor in buy-side firms' ability to make quality investment decisions. The survey shows that almost half (47%) of the respondents do not have access to real-time data in the front office. When breaking this down by IT strategy, the findings show that more firms running on 'an integrated investment management solution' have access to real-time front office data than those running with 'a core platform with multiple add-ons' or a 'best-of-breed strategy'.

Other findings include:

• The integrated strategy - either a solution from a single supplier or a core system with add-ons - is preferred by the majority (53%).

• The average rate of manual processes in the front office (measured as time spent per day) is 19%, or 1½ hours out of an eight-hour workday for each employee.

• On average, firms operating with a best-of-breed IT infrastructure have higher manual process rates than those running with an integrated solution (24% versus 17%).

David Beveridge, Senior Product Marketing Manager at SimCorp commented: "Having roughly half of all surveyed firms express a mistrust in either their IT infrastructure or data is alarming. While this is damaging to the firms' own ability to generate growth, the ultimate losers could very well be their clients. The survey results clearly suggest the integrated solution strategy as the most viable path to higher operational agility and efficiency."

The survey was conducted in mid-2016 by the market research firm Lindberg International and covered 150+ respondents worldwide. For a full presentation of survey results and conclusions, please download the white paper: 'Realizing Growth Through Operational Agility'.

(Source: SimCorp)

Countering the narrative that slow economic growth is "the new normal" for America's economy, the Pacific Research Institute today released the first in a series of reports from its new study, Beyond the New Normal, which makes the case that future U.S. economic growth can meet -or exceed - past growth trends if the right economic policies are adopted.

"America's economy has been stuck in neutral for so long that some economists claim that low growth rates are now the new normal," said Dr. Wayne Winegarden, PRI Senior Fellow in Business and Economics, and co-author of Beyond the New Normal.

"History has shown that when free-market policies are embraced, America's economic engine roars. President Trump and Congress should adopt these policies that have proven successful in growing the economy and lifting more people out of poverty."

Part 1 of Beyond the New Normal provides an overview of the case Winegarden and co-author Niles Chura will present arguing that free-market policies are needed to stimulate long-term, strong economic growth in the US.

Among the key points in Part 1 of their study:

• Average family income and average household income stagnated during much of the 1970s, and since 1999. Average annual real GDP growth has averaged just 1.89 percent since 2001.

• During times of slow economic growth, other negative trends, including slower average household income growth, greater income inequality, and increased poverty, have followed. These negative trends were reversed when the economy grew at a more rapid pace.

• Strong economic growth occurs when there is a pro-growth policy environment in place that:

1. Empowers the private sector to efficiently employ capital, labor, and technology;
2. Discourages value destroying rent-seeking behavior; and
3. Provides core public goods as efficiently as possible.

"Status quo thinking is holding back robust economic growth and keeping more Americans stuck in poverty," said PRI President Sally Pipes. "In this and subsequent volumes, Wayne and Niles make the compelling case that the President and Congress must instead embrace proven, free-market policies if we are to return America to the days of strong and sustained economic growth."

Dr. Wayne Winegarden is a Senior Fellow in Business and Economics at Pacific Research Institute. He is also the Principal of Capitol Economic Advisors and a Contributing Editor for EconoSTATS. Niles Chura is the founder of Ouray Capital.

(Source: Pacific Research Institute)

Daniel Tannenbaum at Tudor Lodge Consultants talks us through the latest changes in the UK payday loan industry, including new FCA regulation and authorisation guidelines, and what that will mean for the industry. 

The UK’s payday loan industry has seen a huge transformation. The once thriving and highly profitable £2 billion sector has seen major changes to its regulatory framework, advertising and profit margins – causing payday giant Wonga to record losses of £80 million this year and further reverberations for the industry.

New regulation from the Financial Conduct Authority

The FCA began regulating the payday loan industry in April 2014, taking over from The Office of Fair Trading. Following 29,000-payday loan related complaints recorded by The Citizens Advice Bureau in 2014 and pressure from politicians and religious figures to contest usurious rates, and a tough stance was implemented.

The regulator reviewed the practices of the some of the biggest lenders, which inevitably led to £220 million fine for Wonga, £20 million for Cash Genie, £15.4 million for Dollar Financial, and £1.7 million for Quickquid. The fines were partly to the regulator and some amounts were required to refund customers that should not have been lent to in the first place.

To address the high rates of interest, the FCA introduced a price cap in January 2015. This limit on what lenders could charge was fixed to 0.8% per day and ensured that customers will never have to repay double what they have borrowed.

Other rules included a maximum default charge of £15 and no options for rollovers, which commonly caused customers to keep borrowing at high rates even if they were unable to repay their debts.

The enforcement of this price cap has caused much lower profit margins for payday lenders, which trickled down to all other brokers and introducers involved. Notably, the industry-leader Wonga reported a loss of £80 million in 2015.

Authorisation required to continue trading

The FCA required all companies wishing to participate in the payday industry to apply for formal authorization. Firms could apply for interim permission as a short-term solution with the long-term aim to receive full permission provided that the company’s procedures, staff and product had been fully approved by the regulator.

As firms were granted permission in Q1 of 2016, the most responsible lenders have prevailed whilst several lenders and brokers have been forced to exit due to not meeting the criteria or because they do not believe they can be profitable under the new regulation.

Google bans payday loan adverts

To put further pressure on the industry, Google made an announcement in May 2016 that they will be banning all paid adverts on their search engine for all payday loans related products. This includes any loan term that is less than 60 days or has an APR higher than 36%, including logbook loans and guarantor loan products. (Source: GuarantorLoanComparison)

This change will impact hundreds of payday loan lenders and introducers that pay for adverts on Google to generate leads. Instead, they will have to fight for the very limited positions on Google’s organic search listings, which can be tough to break into for new and old entrants.

The future of the industry

The measures that have been introduced are effectively removing the least compliant players from the industry, keeping the most responsible in the game and creating a barrier to entry.

Further adjustments might be made including tighter rules on Continuous Payment Authority, the automatic collection system used by lenders which might be replaced by a simple direct debit.

Other changes involve more loan companies providing long-term loans like Mr Lender and Wonga, that allow you to borrow for up to 6 months with the option to repay early. The FCA has also emphasised the importance of comparison sites to allow borrowers to compare the different costs and options before applying.

Over half (54%) of retail investors globally feel more confident about investment opportunities in the next 12 months than they did a year ago, according to the Schroders Global Investment Trends Survey 2015, released yesterday.

Nine-in-ten (91%) investors across the globe expect to see their investments grow over the next 12 months. Globally, retail investors are expecting a challenging average return of 12% over this period.

The study, commissioned by Schroders and conducted by 20,000 retail investors in 28 countries, shows an increasing appetite for financial investments compared to previous years. Half (50%) of those questioned intend to increase the amount they save or invest in the coming 12 months, compared to just 43% of those questioned in 2014 and 38% of those polled in 2013. On average, investors plan to increase the amount they save or invest by 8.5% over the next year.Overall, 87% of investors worldwide are looking to generate an income from their investments. Daily Telenor SMS packages are for one who doesn’t have needs of communication all the time. Like our elder ones who prefer not to be texting all the time. They only need it when they feel like messaging some important information. Also, peeps who don’t like texting, use these packages only whenever they need.

Almost nine-in-ten (88%) retail investors said they made a profit from their investments in the past 12 months, with average gains of 10%, while 5% reported a loss. In comparison, investors polled two years ago reported making an average loss of 4.6% since the recession. However, despite the high levels of confidence being reported this year and optimistic expectations of double-digit returns in the next 12 months, the Schroders survey reveals a significant disconnect between expected returns and the appetite that investors have for risk, with many favouring shorter-term and lower risk investments.

Massimo Tosato, Executive Vice Chairman, Schroders plc said: “It’s overwhelmingly clear that the demand for income is prevalent as retail investors seek to meet various objectives such as financing their children’s education, purchasing a first home, setting up new businesses, or supplementing their existing income in retirement. The necessity and challenge to generate income from investments is strong, particularly given the global low interest rate environment.

“However, our survey highlights a clear disconnect globally between retail investors’ return expectations and their attitudes to risk. Expecting double digit returns within the next 12 months, while only placing less than a quarter (21%) of their investment portfolio in higher risk assets suggests that investors are not taking a realistic approach to investing. It’s imperative that investors shape their portfolios to balance the risk profile with the returns they are seeking, and in most cases, that will require a level of professional advice.”

John Simmons, Head of Middle Market Banking & Specialised Industries

US businesses have reported growing optimism about the economy and easing concerns about credit and regulation, according to the 2015 Chase Business Leaders Outlook, published in April.

"We're seeing a positive combination of business leaders feeling better about their companies and effectively managing regulatory challenges, such as healthcare and taxes," said John Simmons, Head of Middle Market Banking & Specialized Industries.

For the first time in the study's five years, middle market companies' optimism about the national economy exceeds the outlook for their local economy and industry performance. About two-thirds (68%) of middle market companies are optimistic about the US economy, compared with 54% in 2014.

Meanwhile small business owners have the brightest outlook in the three years Chase has surveyed them.

Businesses of all sizes reported lower confidence about the global economy, with pessimism among middle market companies increasing to 26% from 15% from last year, and 31% for small businesses in 2015. Monthly jazz call packages are very convenient and super easy to follow up. They are perfect for the User who is Entrepreneur, Business Persons, Traveller or any other working persons. Who needs to be connected at every other second to anyone in any area of Pakistan. These packages won’t only offer on-net minutes they also include off-net and SMS bundles. Its all in one kind of offer to avail.

As in past years, small businesses are most optimistic about their local economies.

"Small business owners have their fingers on the pulse of the local economy, so it's especially encouraging to see their confidence in their customers and communities continue to grow," said Jennifer Piepszak, CEO of Chase Business Banking, which generally serves businesses with up to $20 million (€17.9 million) in annual revenue.

A majority of both middle market and small business respondents expect sales and profit growth in 2015, with about three-quarters (73%) of larger companies and 60% of small businesses projecting revenue growth.

Optimism about profits is higher among middle market companies, with 66% expecting to grow profits compared with 55% of small businesses. Business leaders in the retail industry expect to see the biggest increase in both revenue/sales (80% vs. 67% in 2014) and profits (78% vs. 55% in 2014).

Meanwhile, concern over the availability of credit dropped in 2015, especially among small businesses (8% lower than 2014), indicating business leaders feel more confident about their access to the capital to support their business plans.

Planned capital expenditures are on the rise, especially for companies with more than $500,000 (€448,000) in annual revenue.

About half of all business leaders said lower oil prices had a positive impact on their businesses, although larger companies - especially in the South - were more likely to react negatively.