Last week, the FTSE 100 saw a late upward rush as it closed at a new record high of 7,724.22 points. This was after a fresh record high at the end of the year, spurred by a rally in mining stocks and a healthcare burst. But how will FTSE kick off the year and will it sustain its consistency in record highs throughout 2018?

According to some sources, the success of FTSE in 2018 will largely depend on the outcome of Brexit negotiations, although a rise in the pound may make it a mixed blessing. Below Finance Monthly has heard Your Thoughts, and listed several comments from top industry experts on this matter.

Jordan Hiscott, Chief Trader, ayondo markets:

I believe the FTSE 100 will go above 8,000 in 2018. In part, this is due to the current political turmoil we are experiencing, with the incumbent UK government looking increasingly unstable as each week passes, an economy that seems to be lagging behind Europe on a relative basis, and the ongoing turbulence from Brexit.

However, all these factors are already known to investors and traders and so far, the FTSE has performed well despite these fears. For 2018, I believe the Brexit turmoil will increase dramatically as negotiations with Europe continue down an incredibly fractious route.

Craig Erlam, Senior Market Analyst, OANDA:

Two key factors contributing to the performance of the FTSE this year will be the global economy and movements in the pound. The improving global economic environment was an important driver of equity market performance in 2017 and many expect that to continue in 2018, with some potential headwinds having subsided over the last year. The FTSE 100 contains a large number of stocks that are global facing, rather than domestically reliant, and so the global economy is an important factor in its performance. Stronger economic performance is also typically associated with stronger commodity prices and with the FTSE having large exposure to these stocks, I would expect this to benefit the index.

The global exposure of the index also makes the FTSE sensitive to movements in the pound. After the Brexit vote, the FTSE continued to perform well as a weaker pound was favourable for earnings generated in other currencies. The pound has since gradually recovered in line with positive progress in Brexit negotiations and a more resilient UK economy. Should negotiations continue to make positive progress this may create a headwind for the index and offset some of the gains mentioned above. A negative turn for the negotiations though would likely weaken sterling and provide an additional positive for the index.

While many people are confident about the economy, Brexit negotiations are more uncertain and will have a significant impact on the index’s performance, as we have seen over the last 18 months.

Sophie Kennedy, Head of Research, EQ Investors:

We believe that the synchronised global growth and continued easy monetary policy should support global risk assets going forward. As such, equities should deliver a reasonable return over the next year, which will be the starting point for FTSE performance.

The deviation of FTSE performance around global equity performance will likely be a function of a few factors:

1. The level of sterling is extremely important. Many FTSE companies have very global revenue streams. As such, when sterling falls, foreign earnings are inflated. The level of sterling over the next year is likely to be a function of Brexit-negotiations, the result of which we are not attempting to forecast.
2. There are a number of large commodity producers in the FTSE. Their profits and share prices tend to rise and fall with the price of commodities. The oil market looks more balanced than it has previously and strong global growth should boost global commodity demand. However, we have already had a large rally since the middle of 2017, so upside is likely to be more muted.
3. The trajectory of the UK economy is also relevant, particularly for the smaller capitalisation parts of the market and sectors including housebuilders and utilities. We are not hugely positive on this point, on account of the real income squeeze and continued weak investment environment.

We feel that points 1 and 2 are neutral but point 3 is negative. As such, we expect the FTSE to deliver positive returns but likely underperform the MSCI World.

Tim Sambrook, Professor of Finance, Audencia Business School:

2017 ended the year strongly and is now around all-time highs. The 7% return and 4% dividend gain was better than most had hoped. But will this positive trend continue or will investors worry about the price?

The FTSE has performed strongly, because the global economy has done well. The FTSE is largely a collection of international conglomerates who happen to be based in the UK. The political mess has had little effect on the economic environment (fortunately!).

Strangely, a poor negotiation on Brexit will have a positive effect on the FTSE (if not the UK economy) as a large part of the earnings of the larger companies are overseas. Hence a fall in sterling will lead to a boost in earnings and hence push up the price of the FTSE.

Currently there is little reason to believe that the global economy, and hence corporate earnings, will not continue to do well in 2018. The current PE of the FTSE is not cheap at around the 18-20, and is without doubt above the long-term average of around 15-16. However, this is not excessive and could even support some negative surprises this year.

However, the underpinning of the current bull market has been dividend yields. The FTSE is currently offering 4% and is likely to increase over the coming year, with many of the large caps having excess liquidity. This is very attractive compared to other assets, particular as we shall be expecting higher rates in the future. The large number of income seekers are likely to increase the positions in the FTSE this year rather than reduce them.

Ron William, Senior Lecturer, London Academy of Trading:

The UK’s FTSE100 was reaching all-time record highs into the New Year, fuelled by a global wave of investor euphoria. 2018 was the best start to a year for S&P500 since 1999, marked by the Dow’s historic break above the psychological 25K handle.

All these technical new high breakouts are being supported by the highest level of upward earnings revisions since 2011, coupled with extreme levels of market optimism last seen at the peak of Black Monday 1987.

From a behavioural standpoint, it seems that analysts and investors are silencing tail-risk concerns in a precarious trade-off for fear of missing out on the party.

The “January Effect” is part of a tried and tested maxim that states “as the first week in January goes, so does the month”; and even more importantly, “as January goes, so does the year”. So our recommendation would be to see how January plays out as a potential barometer for the next 12 months.

However, keep in mind that we still live in known unknown times; some major markets have not even had a 5% setback in 16 months and the VIX index is at new record lows.

Back to the FTSE100, all eyes remain on the next glass ceiling: 8000. While there is an increasing probability that the market will achieve this historic price target, we must also apply prudent risk management as the asymmetric risk of a violent correction remains.

The long-term 200-day average, currently at 7422, is key. Only a sustained confirmation back under here would signal a major cliff-drop ahead from very high altitudes. Brexit tail risk will more than likely continue to weigh heavily on it.

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

According to reports, the ‘ridiculous’ bill the UK is to pay out in order to exit the UK, otherwise known as the Brexit bill, stands at around £44 billion. That’s a lot of money, and a lot of cash, but how much cash to be exact?

Finance Monthly has worked out approximately, based on the average size of a £50 bank note, the largest readily available note in the UK, how much space £44 billion in cash takes up? We don’t really have a photo of £44 billion in cash, so we’ll have to try and compare it to something just as big. Is it the size of a football field? The size of the Louvre? The size of the moon?

Well, a classic £50 measures at 156mm x 85mm x 0.113mm and weighs about 1.1g. That’s 1,498.38 mm³ per note. There are 20 million £50s in £1 billion. 20 million £50 notes take up 29,967,600,000 mm^3, therefore 29.9676 m^3. The Brexit cash is 44 times that figure. This brings us to 1,318.5744 m^3, which rounded up is 1,318.6 m^3.

Focusing on London, the capital of British finance, Big Ben is officially marked at around 4,650 m³ for its interior. Therefore realistically, the Brexit bill cash could fill up the inside of Big Ben just over a quarter of the way up! At this point it would likely also fill the floor in the House of Commons.

It’s a stack load of cash to hand over, 10 double decker buses’ worth in fact, in terms of volume that is, not value. A London Routemaster double decker bus is worth around £349,500, so 10 of those is £3,495,000 and well, Brexit is going to cost us a little more than that.

Of course, this is all speculation, and even the figure of £44 billion is an unconfirmed unofficial number. None the less, the prospect of paying the European Union such an amount means that as Brexit has all in all been a sizeable decision from the British public, there will be a sizeable price to pay.

Anomali recently released a new report that identifies major security trends threatening the FTSE 100. The volume of credential exposures has dramatically increased to 16,583 from April to July 2017, compared to 5,275 last year’s analysis. 77% of the FTSE 100 were exposed, with an average of 218 usernames and password stolen, published or sold per company. In most cases the loss of credentials occurred on third party, non-work websites where employees reuse corporate credentials.

In May 2017, more than 560 million login credentials were found on an anonymous online database, including roughly 243.6 million unique email addresses and passwords. The report shows that a significant number of credentials linked to FTSE 100 organisations were still left compromised over the three months following the discovery. This failure to remediate and secure employee accounts, means that critical business content and personal consumer information held by the UK’s biggest businesses has been left open to cyber-attacks.

The report, The FTSE 100: Targeted Brand Attacks and Mass Credential Exposures, executed by Anomali Labs also reveals that:

• Five of the FTSE 100 companies had more than 1,000 credential exposures, access to these enable cyber criminals to harvest and misuse additional credentials and company data
• The banking sector accounted for a quarter (23%) of the total exposed credentials

“Our research has uncovered a staggering increase in compromised credentials linked to the FTSE 100 companies. Security issues are exacerbated by employees using their work credentials for less secure non-work purposes. Employees should be reminded of the dangers of logging into non-corporate websites with work email addresses and passwords. While companies should invest in cyber security tools that monitor and collect IDs and passwords on the Dark Web, so that staff and customers can be notified immediately and instructed to reset accounts,” said Colby DeRodeff, Chief Strategy Officer and Co-Founder at Anomali.

The Anomali research team also analysed suspicious domain registrations, finding 82% of the FTSE 100 to have at least one catalogued against them, and 13% more than ten. In a change to last year the majority were registered in the United States (38%), followed by China (23%). With the majority of cyber attackers using gmail.com and qq.com (a free Chinese email service) to register these domains to mask themselves. With a deceptive domain malicious actors have the potential to orchestrate phishing schemes, install malware, redirect traffic to malicious sites, or display inappropriate messaging.

For the second year, the vertical hit hardest by malicious domain registrations was banking with 83, which accounted for 23%. This is double that of any other industry. To avoid a breach, organisations have to be more accountable and adopt a stronger cyber security posture, for themselves and to protect the partners and customers they directly impact.

“Monitoring domain registrations is a critical practice for businesses to understand how they might be targeted and by whom. A threat intelligence platform can aid companies with identifying what other domains the registrant might have created and all the IPs associated with each domain. This information can then be routed to network security gateways to keep inbound and outbound communication to these domains from occurring. No one is 100% secure against actors even with the intent and right level of capabilities. It is essential to invest in the right tools to help secure every asset, as well as collaborate with and support peers in order to reduce their risks to a similar attack,” continued Mr. DeRodeff.

(Source: Anomali)

With the recent interest rate rise, from mortgages to savings, the public is still awaiting movement in the financial sphere. Below Paul Richards, Chairman of Insignis Cash Solutions, explains to Finance Monthly what 2018 holds for savers.

The Bank of England November rate rise has triggered a waiting game among banks. The government’s move to extend the rise to NS&I savers puts more pressure on competitors to do the same, but savers have still only seen the full benefit with a handful of banks. Most banks are still waiting to see what competitors do, or passing on only a fraction of the rise.

Some economic commentators point to two further interest rate rises in 2018, but protracted Brexit negotiations could delay this. If the Bank of England hikes rates again, it will once more be the government’s decision on NS&I rates that influences whether other banks will follow.

No savings provider wants to pay more interest than they need to, as it has a direct impact on their profitability. Margins have been compressed heavily since the global finance crisis and banks don’t want to see them fall further. Challengers are more hungry to grow their balance sheets via retail deposits, so we’ll likely continue to see better rates from these players than the traditional larger banks.

February 2018 will see the end of the £100 billion term funding scheme, a source of cheap borrowing for banks. Once this scheme is closed, appetite for retail deposits will increase, prompting more competitive rates in the market. Longer term the impact will be even more significant, banks have four years to repay money to the scheme, and will need to rely on retail deposits for some of these funds.

For several years a large amount of banks’ budgets and human resources have been dedicated to managing regulatory change. This drain has likely prompted unintended consequences for consumers; if banks hadn’t had to spend so much money on implementing new regulation, would we have seen the same level of branch closures?

But there are huge benefits from regulation, driving increased consumer protection and access to better deals. Open Banking and PSD2 are the most interesting areas to watch - both open up, with consumer consent, bank transaction data to power new financial tools. These will help people better manage their money and access the right deals for them. A wide range of fintechs across the UK, including Insignis, are working hard to develop new solutions and over time consumers will feel a real benefit to their day-to-day lives.

Some banks are further advanced with their Open Banking plans than others, and there are challenges to grapple in terms of data management and security; however, there’s no question that 2018 will be a year of huge advances that give consumers more control over how they manage their money.

The annual cost of fraud in the UK is £190 billion, equal to around £10,000 per family, according to a new research study.

The Annual Fraud Indicator 2017 reveals the staggering prevalence of fraud, which is now the UK’s most common criminal offence.

Put into context, the scale of the problem is such that the cost of fraud to the UK is greater than the Gross Domestic product of 148 out of 191 countries.

The study, compiled by Crowe Clark Whitehill, Experian and the Centre for Counter Fraud Studies at the University of Portsmouth shows that private sector fraud costs the UK economy £140 billion, while fraud in the public sector is estimated to cost the country £40.4 billion in 2017.

Fraudulent activity aimed at individuals amounts to £6.8 billion, while charities suffer to the tune of £2.3 billion.

These numbers are far from insignificant. With the latest National Audit Office and National Crime Agency statistics confirming that fraud has surged to the top of the list of commonly committed crimes, now is the time to identify and measure its cost so that businesses, government bodies, charities and individuals can understand the value of their investment in countering fraud.

The private sector is the worst hit, largely due to the volume of expenditure conducted by private enterprises. While public sector fraud is the easiest to measure and detect due to the reliability of tax and benefits data.

A significant proportion of the costs of fraud in the report are attributed to procurement fraud. Procurement accounts for a large portion of organisational expenditure and fraud can creep in at various stages of the procurement process. The rise in the incidence of fraud in registered charities is largely attributable to an increased expenditure on procurement, for example.

New trends have emerged that impact demography and type of fraud victim. Technology continues to open up new avenues for fraudulent activity. Online Banking fraud has grown by 226% and Telephone Banking Fraud by 178% in the past year, with many millennials increasingly being drawn into the fraudsters’ net.

Technology and legislative controls are also impacting behavioural patterns amongst fraudsters. Reformative measures such as the Payment Services Directive 2 (PSD2) will bring tighter regulatory controls and deter attacks, while new counter fraud tools are causing fraudsters to innovate and target platforms not governed by strong customer authentication.

Jim Gee, Head of Forensics and Counter Fraud at Crowe Clark Whitehill, comments: “The cost of fraud is clear – not just the proportion which is detected, nor a guestimate but accurate information about the total cost to UK plc, just like any other business cost. And that cost is £190 billion.

“Private companies are made less stable and financially healthy; as citizens we don’t get the quality of public services that we pay our taxes to receive; and even charities don’t get to spend the full value of the donations which people make. What other problem of this size doesn’t have a proper national response?”

Nick Mothershaw, Director of Fraud and Identity Solutions at Experian: “Awareness of the dangers fraud poses is growing, but the total of £190 billion is startlingly high. Plastic card and online banking fraud continues to increase, so new regulations which make it harder for fraudsters to use someone’s cards online are a necessary step. Fraudsters are shamelessly opportunistic and are now turning their attention to the pensions release, lured by the promise of high value returns when their scams are successful.”

Professor Mark Button, Director of the University of Portsmouth’s Centre for Counter Fraud Studies, adds: “The 2017 Annual Fraud Indicator highlights again the colossal cost of fraud to the UK economy. At £190 billion it would represent more than the UK government spends on health and defence combined, or on all welfare payments, bar pensions.”

(Source: Crowe Clark Whitehill)

The swell of rumours, conjecture, and concerns surrounding Britain’s exit from the EU has, in the eight months since Article 50 was triggered, ebbed somewhat. Though many questions still remain on the pending negotiations, financial companies in London have known since last year that Brexit will change their ability to do business in the EU. As a result, hubs within the EU like Ireland, Germany, and Luxembourg have been vying for the attention of these firms—and now, one year after the Brexit vote, companies have begun making decisions.

From the beginning, Ireland has been a contender, sharing a language with the UK and many of its legal aspects, as well as having an attractive fund framework. However, Luxembourg has been mentioned in the same breath—notably by Standard Life CEO Keith Skeoch, who, CNBC reported, specified these two countries as top options for asset managers. By the latest count, there are 11 companies moving house to Ireland, 10 to Germany, and 4 to the Netherlands.

And 24 to Luxembourg.

There are perhaps many reasons for this. Ireland does speak Britain’s language, but that language happens to be the international tongue of business—and is thus, the core language spoken in Luxembourg’s finance industry, whose widespread proficiency in German and French adds extra accessibility to those markets. And while Dublin’s fund toolbox is attractive, Luxembourg’s is at least as alluring—and its Government has made it clear that this will not change. Just last year they introduced a new vehicle, the Reserved Alternative Investment Fund (RAIF), to meet customer demand for less supervision and a faster time-to-market. Again, to support these comments with numbers: Luxembourg is the second largest fund hub in the world, second only to the United States, a country whose population is 500 times bigger.

Luxembourg has also taken its own approach to attracting firms from London. Due to its size, the Grand Duchy must consider quality over quantity. In fact, having large insurance companies, fund houses, and banks putting their entire headquarters in Luxembourg’s capital city—population 100,000—wouldn’t be sustainable. So, instead, led by Finance Minister Pierre Gramegna, the country has asserted itself as a partner to London, rather than a replacement. Why not move a core part of your workforce to Luxembourg, argues Mr Gramegna, rather than the entire cohort? This may have played well with Britain-domiciled companies, whose employees probably don’t relish leaving their UK homes.

A key issue to moving part of a company is, of course, substance. Companies should know that there is a wealth of guidance out there on this topic, substance being central to this post-crisis zeitgeist.

And since we are discussing the merits of Luxembourg as a finance hub, some of the main talking points—industry veterans will be well-acquainted with them already—must be mentioned: Luxembourg has a AAA stability rating; its sovereign debt is 22.1% of its GDP and saw growth in 2016 by 3.7%; it has a highly-skilled and multilingual workforce; it is a leading European financial centre (both for cross-border fund distribution and cross-border insurance and reinsurance activities); and finally it has a predictable and competitive legal, tax, and regulatory framework.

To top it all off, you can get Bus 16 from the airport to the business district of Kirchberg in about 7 minutes. Dublin Airport to the city centre is, so I hear, up to an hour in traffic.

Website: https://home.kpmg.com/lu/en/home.html

We've seen some huge deals in 2017, from Qualcomm/Broadcom earlier in the year, to Gemalto/Atos in the last few weeks. We also had the 10-year anniversary of the financial crisis and the seating of Donald Trump into power.

As part of this week’s Your Thoughts, Finance Monthly reached out to experts far and wide to ask about their favourite moments in this financial year, from the most significant changes in regulation and announcements of further regulatory developments, to highlights of the most impacting acquisitions and mergers in the UK and beyond.

Andrew Boyle, CEO at LGB & Co.:

A key 2017 highlight for me surrounded Brexit and came in November at an event organised by the Edinburgh law firm Turcan Connell, which featured an SNP MP and a Conservative MEP. I expected a lively but entrenched debate carried out in a partisan fashion. To my complete surprise, the mood at the event was calm, points were made politely and there was an obvious willingness to compromise. It seems this more constructive spirit foreshadowed that of subsequent UK/EU negotiations given the breakthrough in talks with the EU and the clear indication that all parties, including the EU Commission, wanted to move forward. At the moment, the prospect of a transition period will keep the financial markets and company directors guessing what the final outcome will be. However, it is becoming increasingly clear that a failure to reach a deal will be in the interest of neither of the parties, whose economic viability is so deeply intertwined. I hope the new more constructive mood continues into the New Year.

Another highlight was the Budget. Fears of a radical change to EIS and VCT investing rules were unfounded. The Chancellor did refer to limiting EIS investment that shelters low-risk assets, but he offset this by promising increased EIS limits for investing in knowledge-intensive companies.

Continued support for early-stage businesses is key to what the Chancellor described as Britain’s position at the forefront of a technological revolution. UK SMEs will increase their total economic contribution to £217bn by the end of the decade –up significantly from 2015. In spite of the economic uncertainty around Brexit, British SMEs remain hungry for growth and are generally optimistic about the future. What often holds them back is a lack of funding, particularly through conventional avenues. SMEs often need to raise money quickly to adapt to changing markets or new opportunities, but obtaining bank financing can be a slow and cumbersome process – and that’s where EIS and VCT investors and indeed alternative lenders can help fund the gap. Specific measures announced in the Chancellor’s budget were positive for companies and investors. For now, government policy remains to support innovative companies notwithstanding the pressure to reduce tax breaks and apply funds elsewhere.

Richard Anton, General Partner, Oxx:

The biggest financial story of 2017, in the world of venture capital and technology start-ups and scale-ups, was the European Investment Fund suspending investment in UK VC firms. As an immediate result of the Brexit vote, FinTech lending was the first to suffer, before full suspension of investment into UK VCs. The EIF had been by far the single largest funder of UK venture capital firms and with the options for supply reduced so significantly, not only does this make competition for funding even more intense, the lack of on-the-ground European experience presents yet another challenge to businesses trying to grow to the next stage.

Thankfully, the British Business Bank has moved quickly to help mitigate the EIF’s withdrawal. The £1.5 billion Enterprise Capital Fund programme has got to work to support UK-based start-ups, recognising that the entire market needs to see small firms confident to apply for finance in order to grow. Perhaps the most encouraging indication that British funding is filling the void is the success of Episode 1 Ventures in recently raising £60m for its fund targeted at British early stage start-ups - £36m of this coming from the British Business Bank.

The withdrawal of the EIF shook up the market more than perhaps was covered at the time. Of course for any business to survive and grow, it needs to adapt to a range of situations, yet the sudden absence of European funding was particularly challenging. It is also one that will have long-term ramifications and when the dust settles the European funding market will look very different.

Peter Veash, CEO, Bio:

Amazon’s purchase of Whole Foods in August is my most significant financial moment of 2017. The deal was lauded by many industry pundits as a match made in heaven, with Whole Foods’ glowing reputation for offering high-quality goods marrying with Amazon’s unsurpassed track record for fast, efficient logistics – a new retail power couple was born.

The upshot? Aside from a slashing of prices across the board at Whole Foods (many by up to as much as 40%), the deal also meant that Amazon tech like the Echo, Dot, Fire and Kindle products are now available to purchase instore, while Whole Foods products are now available to buy online via Amazon. ‘Try before you buy’ Amazon Pop-Up stores have opened in locations all over the country, and Amazon Lockers have also been introduced instore, allowing customers to pick up packages and drop off returns. The deal has also given rise to rumours around the potential roll out of Amazon concept stores, including cashier-free checkouts, which would allow Amazon to push commerce tech to a new level.

The $13.7 billion megadeal knocked some competitor share prices sideways and boosted Amazon's – it rose so much on the news that some were saying they’d essentially bought it for nothing. Most importantly, it gave Amazon the physical outlets to develop the future of truly omnichannel retail, particularly within the coveted fresh grocery market (which the ecommerce giant had been preparing to attack for some time).

Marina Cheal, Chief Marketing & Customer Officer, Reevoo:

2017 marked 10 years since the financial crisis, and it’s been a story of reputations - new players trying to forge a new one, and old ones clinging desperately on to theirs.

The world’s big banks took a spectacular fall from grace, the likes of which hadn’t been seen since The Great Depression: after being perceived as trustworthy, powerful corporate behemoths for decades, consumer trust in these institutions was at an all-time low, with many feeling shaken and disillusioned by the lack of ethics displayed by those responsible for the crash.

Meanwhile, a new breed of disruptive, digital-first fintech brand was evolving to challenge the status quo. In 2017 this group of app-based banks have broken the mainstream. Monzo, Starling, Atom and others are now household names, appealing in particular to Millennials who came of age during the crisis years and had the least trust in the financial sector.

Where big institutions once represented trust, newer and nimbler banks have taken their place. Legacy is a dwindling commodity, replaced by convenience and transparency.

What we’re seeing is the next stage on the road to rebuilding consumer trust, but what people want most of all now is a sense that they are in control of their own money, coupled with an ease of use and friendly, authentic communications from their bank – and right now, the challengers are beating the legacy brands to the punch.

Howard Leigh, Co-Founder, Cavendish Corporate Finance:

This year’s November Budget was my highlight for 2017 as it provided some welcome news for the UK’s thriving Financial Services industry and saw the Chancellor confirm his commitment to maintain the UK‘s leading position in technology and innovation post-Brexit. Although it was anticipated by some that EIS and SEIS investments, were going to be in the Chancellor’s firing line, he instead doubled the EIS investment limits for “knowledge-intensive” companies, demonstrating the Government’s commitment to help UK start-ups. The Chancellor also chose to continue supporting Entrepreneurs’ Relief, which, along with other business-friendly policies, is predicted to support the inflow of billions of pounds worth of investment into growth businesses.

With Britain soon to lose access to the European Investment Fund, it was encouraging to see the Chancellor outline his plans to establish a new dedicated subsidiary of the British Business Bank to become a leading UK-based investor in patient capital across the UK. The new subsidiary will be capitalized with £2.5 billion. and will provide a cushion if negotiations with the EIB and EIF do not encourage then to continue investing in the UK. I hope, as some of it is our money and London is clearly Europe’s centre of social impact investing the EIF will now recommence its activities in the UK.

Finally, another key measure in the Budget was the introduction of a policy that will compel online ecommerce companies, such as eBay and Amazon, to police their own websites, thus helping to stem the £1.2 billion yearly tax loss due to fraudulent sales. I first raised this issue in an Oral question in the Lords some 2 years ago and am delighted to see that the campaign run largely with VatFraud.org and Richard Allen has been successful.

The Autumn Budget was a pivotal moment for the UK’s Financial Services sector and the policies laid out by the Government firmly position it as a friend to business. Not only will these policies help to boost UK businesses in the tech and digital sectors, but it will help enhance the City’s position as a leading global centre for finance and innovation.

Tsuyoshi Notani, Managing Director, JCB International (Europe) Ltd:

PSD2 can revolutionise retail banking, generate further investment into fintech, and drive innovation. We’re focused on increasing partnerships with PSPs and fintech firms, enabling them to secure global reach as a gateway to Asia, so February 2nd, when the UK government confirmed its PSD2 timetable, was a really promising step in the sectors’ quest to level the playing field."

We would also love to hear more of Your Thoughts on your favourite moments of 2017’s finance world, so feel free to comment below and tell us what you think!

Discussing the latest US tax cuts decision, FTSE updates and bitcoin news, Lee Wild, Head of Equity Strategy at interactive investor, talks to Finance Monthly about the end of year affairs.

With a week to go till Christmas there’s a whiff of Santa rally in the air. Markets should respond well to a ‘yes’ vote on US corporate tax cuts and possible political agreement to avoid a government shutdown on Friday. UK stocks are better value than their US counterparts and, despite the spectre of Brexit horse trading through 2018, there are no obvious banana skins between here and New Year.

In fact, Trump’s tax reform and the failure of progress on Brexit negotiations to revive sterling, will continue to give overseas earners listed here a foreign exchange kick. This, and typically thin trade as investors wind down for Christmas, should allow the FTSE 100 to consolidate gains above 7,500, something it has failed to do thus far. If it does, don’t bet against a new record high by year-end. It’s only one good session away.

An ongoing shutdown of the North Sea Forties pipeline continues to underpin oil prices, with Brent crude looking prepped for a crack at a fresh two-and-a-half-year high.

Whether or not bitcoin traded above $20,000 over the weekend depends on where you get your prices from. According to coinmarketcap.com it peaked Sunday at $20,089.

That bitcoin passed $20,000 for the first time over the weekend is not a surprise. A week ago, with the price at less than $17,000, we said ‘the music may have much longer to play on this one than people think’.

With every new milestone there’s fresh discussion around bitcoin’s legitimacy and potential, both as a trading instrument and revolutionary digital currency. It was the same when it first broke above $10,000 at the end of November. Valuing cryptocurrencies is like sticking your finger in the wind, but traffic is still very much one-way.

Introducing futures contracts in the US was meant to give short-sellers access to the market and improve liquidity, but availability is still fairly restricted. The introduction of bitcoin futures on the Chicago Mercantile Exchange over the weekend may help, but it will take time.

Until it becomes easier to sell short, buying dries up, or there are tech issues or a major hack, bitcoin will keep passing milestones with alarming regularity. Right now, there’s a long queue of investors, both amateur and professional, still waiting for a ride. This bubble is not bursting yet.

A new report from VentureFounders, in conjunction with Beauhurst, has found that 56% of UK tech founders expect that their business will sell for £50m or less, but 80% want to re-enter the tech ecosystem and support it post-exit.

Other key findings:

• Most UK tech founders are intending to exit within 2-5 years, despite recognising the risks of exiting too early.
• If founders think they will sell for more than £50m, it would be to an overseas buyer.
• The longer a company has been generating revenue, the lower the valuation they expected on exit.

Quoted respondents include James Meekings of Funding Circle, Justin FitzPatrick of DueDil and SwiftKey's Jon Reynolds.

No ambition gap 

James Codling, CEO and co-founder of VentureFounders, believes that, despite the £50m figure, there is no ambition gap among UK tech founders:

"Our report highlights the challenges faced by scale-up entrepreneurs and how critical it is for the UK to continue to nurture the scale-up ecosystem. While UK founders do expect to exit earlier, 80% of them want to go back in to the ecosystem and support it, after they've exited their own business. We hope the government's Patient Capital Review will address some of the key findings from this report.

"We are also commissioning a further piece of work to look at the cost to scale a business in the UK and the funding gap that businesses experience. On the back of this, we expect to make a number of policy recommendations."

Toby Austin, CEO at Beauhurst, commented: “At Beauhurst, we have observed what I suspect are the beginnings of a shift in the funding landscape. Late-stage companies have been able to find the support and capital they need in the UK recently, although much of the money has come from foreign investors. The findings of the report support my belief that the UK is brimming with exciting, ambitious businesses and the ecosystem simply needs to catch up — hopefully it has already started to do so.”

(Source: VentureFounders)

Entering the property market has become an increasingly daunting task for many young people in today’s economic climate. As a result, many have looked to government-backed help in the form of help-to-buy schemes and ISAs to turn the dream of joining the property ladder into a reality.

The required deposit can then be saved with the help of high-interest ISAs.

Though purchasing through help-to-buy has become an increasingly feasible option, not all areas of the UK have equal opportunity. Credit experts TotallyMoney have investigated Britain’s best and worst districts, cities and regions to lay down roots utilising help-to-buy schemes.

We researched a number of factors in each district across the UK to determine a ranking, including the number of equity loans utilised in each region (per capita), the number of help-to-buy ISA property completions and the average amount left to pay after government help (based on average property prices). The research uses government data to compare every district of the UK, including Scotland, Wales and Northern Ireland, to generate the complete ordered list of help-to-buy hotspots.

Desirable Districts

Considering the ranking factors mentioned above, of the 388 government-defined regions in the UK, the top help-to buy hotspots were revealed to be:

1. Central Bedfordshire – The Eastern district came up trumps, with a high level of equity loans (1710) per capita, and 245 properties successfully bought using a help-to-buy ISA. The district beat out all competitors as the best place to purchase a property utilising help-to-buy in the UK.

2. Chorley – The Lancashire market town came in second position with a low average property cost (£182,818) making entering the property ladder through help-to-buy schemes more achievable. The district also boasts the lowest average minimum deposit from the top 5 districts (£9,141) and relatively high number of equity loans given out by the government per capita making property ownership more achievable for residents.

3. Cheshire West and Cheshire – The second area in the North West to appear among the top scoring districts, Cheshire West and Cheshire scored particularly highly in terms of the number of help-to-buy ISA property completions per capita where it came out top in the whole of the UK, with 495 residents purchasing homes utilising this scheme.

Help-To-Buy Cities

The research also accounts for the most populated UK cities and which of those offer the best options for buyers looking to utilise help-to-buy options. Of these, the most buyer-friendly cities were revealed to be:

1. Wakefield – Located in a prime spot between Leeds and York, Wakefield tops the UK’s most populated cities for help-to-buy hotspots. The city has one of the highest levels of help-to-buy ISA property completions, helping 610 residents purchase new homes between December 2015 and March 2017.

2. Hull – In second place, and securing Yorkshire as a true hotspot hotshot, the port city scored highly in equity loans per capita. Hull’s low average property cost (£134,452) means that the 5% deposit required is the cheapest of any city at just £6,722.

3. Salford – Home to MediaCityUK, Salford sits in bronze position with 437 residents successfully purchasing homes utilising the help-to-buy ISAs in recent times and a good level of equity loans per capita boosting its ranking.

Joe Gardiner, Head of Brand and Communications at TotallyMoney, said: “Today, entering the property ladder is increasingly being seen as a pipedream for many young people. But with the introduction of government help-to-buy schemes, this dream can become a realistic option. For those thinking of utilising these schemes, knowing where in the UK is the most help-to-buy friendly, and whether your local area is one of these hotspots, is of particular importance to allow buyers to make a responsible financial decision.”

The full ranked map of the UK’s help-to-buy hotspots can be explored here, or the infographic covering the best help-to-buy cities can be viewed here.

(Source: TotallyMoney)

Written by Nigel Mellor, Senior Policy Adviser, the Office of Tax Simplification 

On 7 November 2017, the Office of Tax Simplification (OTS) laid before Parliament its report entitled Value Added Tax: routes to simplification. The OTS is a small team of independent, expert advisers who undertake detailed research into tax complexity issues typically on behalf of Ministers but it can undertake reviews at its own instigation. The parties consulted for the report included professional bodies, trade associations and micro-businesses through to global corporations. In addition, the team worked closely with HM Treasury and HM Revenue and Customs. Once a report has been finalised, the OTS then lays it before Parliament and typically the Chancellor gives a formal response to any recommendations which have been made.

The 80-page report contains 23 recommendations of which 8 are described as being core recommendations and 15 are categorised as additional recommendations. In essence, the report can be broken down into three main areas; namely,

• The issues and impacts involved if the registration threshold were either higher or lower than it is at present;
• Administrative changes which could help businesses, advisers and HMRC better achieve their common aim of easing friction points in the system;
• The extent to which the definitions of the type of supply which are currently relieved from VAT create complexity for businesses and administration.

Registration threshold issues

The UK’s £85,000 VAT registration is often seen as being a tax simplification measure as many small businesses can comfortably operate below this level without needing to register for VAT. The report points out the current threshold is the highest in the EU and the OCED and at present, the average threshold in the EU is around £20,000. The report also highlights the fact that based on submissions received and academic analysis of HMRC data, the threshold is clearly having a distortive impact on business growth. This is considered to be because businesses are deliberately limiting their expansion, for example, by not taking on an extra employee, an extra contract, or closing their doors for a period to keep their turnover below the threshold. The distortions which this creates can clearly be seen in the graph below.

The OTS has therefore recommended that the government should examine the current approach to the level and design of the VAT registration threshold, including consideration of the potential benefits of introducing a smoothing mechanism.

Administration including guidance, rulings, penalties and appeals

The OTS in earlier reviews has highlighted feedback which it has received that practical issues are often the most important to users of the tax system and many contributors identified where improvements could make life easier for businesses.

A range of concerns were expressed to us about the benefit which is obtained from certainty when decisions need to be made about the VAT treatment of goods and services they supply and/or when dealing with one off events such as a complex restructuring. Concerns were also raised with us about the quality of the guidance produced by HMRC, problems relating to penalties (particularly where a business had made a voluntary disclosure), and issues relating to appeals. The OTS has made a number of recommendations in this area so as to try and address some of these concerns.

Multiple rates

Goods and services supplied in the UK are by default subject to VAT at the standard rate. There are various exceptions under which the goods or services may be subject to a reduced rate, zero-rated or exempt from VAT. As most readers will be aware, these boundaries can create absurdities and the different treatments can cause complexity and be administratively burdensome. This complexity has arisen over many years and on occasion the treatment has links to how goods were classified for purchase tax.

The OTS recommended that rather than trying to address these complexities in a piecemeal fashion, the time is now right for HM Treasury and HMRC to undertake a comprehensive review of the reduced rate, zero-rate and exemption schedules, working with the support of the OTS.

Partial exemption

During the course of the review, it became apparent that many more businesses are now captured by the partial exemption regime than would have been the case when the tax was introduced over 40 years ago. There are many reasons why this has happened including the fact that there is now more diversification by businesses but a contributing factor is that the de minimis limits which are designed to keep smaller businesses out of partial exemption have not been increased for decades. Similarly, many larger businesses expressed concern that when they need to negotiate or renew a partial exemption special method, the process was frequently taking years to obtain approval.

As a way of resolving these issues, the OTS recommended that the government should both increase the de minimis limits and explore alternative ways for businesses incurring insignificant amounts of input tax to be relieved from carrying out partial exemption calculations.

Capital Goods Scheme

The Capital Goods Scheme (CGS) requires businesses to consider each year after the purchase or first use of the asset whether the use of the asset has changed. The rules around the necessary adjustments can be quiet complex. The scheme currently captures land and building works in excess of £250,000 as well as computers, aircraft and yachts costing more than £50,000. There are several issues with caused by the complexities of the scheme but the most important is that the threshold for scheme adjustments relating to land and property have not increased since 1990 despite a huge increase in property values. The OTS have recommended that the land and property threshold should be increased and it has also questioned whether the other categories are still needed.

Option to tax

The option to tax allows businesses to charge VAT on certain land a property transactions which would otherwise be exempt and this enables a recovery of input VAT on costs associated with that supply. The OTS explored a number of potential changes in relation to this area and it has recommended that HMRC should consider how the record keeping and audit trails for options could be improved for example by handling options to tax on-line.

In addition to the core recommendations which have been outlined above, the report has made a number of additional recommendations. These recommendations are explained in more detail in the report and a pdf can be downloaded from the OTS section on the gov.uk website. This can be found at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/657215/Value_added_tax_routes_to_simplification_print.pdf

Here below MHA MacIntyre Hudson Partner, Jason Mitchell outlines the impact of the Autumn Budget for the UK’s tech sector.

Philip Hammond says a new UK high-tech business is founded every hour. He wants this changed to one every half hour in an attempt to lift the gloom over the country’s prime growth sector and support jobs of the future.

To achieve a new dawn for tech start-ups, there first needs to be an environment conducive to growth. The tech sector is reliant on access to the right talent and this has proved a real bottleneck over the past five years.

I welcome the chancellor’s vision to create skills through the biggest increase in science and innovation funding in schools for decades. There will be a training fund for maths teachers, a £600 "maths premium" for schools linked to the number of pupils taking the subject, and proposals for new maths schools. It was also positive to hear the promise of increased funding of innovation in universities, including commitment to replace European funding if necessary.

Today’s workforce also needs to be reskilled. There was mention of a new National Centre for Computing & initiatives for digital skills retraining, which clearly harks back to recommendations put forward by techUK.

The government also needed to help finance growth. It plans to unlock over £20 billion of patient capital investment to finance growth in innovative firms over 10 years through a new £2.5bn investment fund. This doubles the annual allowance for people investing in knowledge-intensive companies through Enterprise Investment Schemes (EIS) and backing overseas investment in UK venture capital through the Department for International Trade.

The planned increase in research and development expenditure credits (“RDEC”) for large companies is also great. Mr Hammond has promised to allocate a further £2.3 billion for investment in R&D and will increase RDEC from 11% to 12%. The next step, it appears, is to make everyone aware of it! Many companies currently miss out on the scheme.

He’s also proposing to introduce measures in 2019 to apply withholding tax on royalties and similar payments to “low tax jurisdictions”. It will be interesting to see these proposals set out in detail and how they will interact with existing double tax treaties. This will have a significant impact on cross border tax structuring even where significant substance, activity and risk is undertaken to support such payments from a transfer pricing perspective.

The world is "on the brink of a technological revolution" exclaimed Mr Hammond, and the UK needs to be at the forefront.