Angela Knight, the former head of Energy UK, talks to ELN about whether she believes the government will go forward with the price cap.
With socio-political uncertainty reigning the decisions of businesses and banks, currency fluctuation is unpredictable and both the USD and GBP have been undergoing copius periods of pressure. Here Bodhi Ganguli, Lead Economist at Dun & Bradstreet gives Finance Monthly an updated run down on the currencies and their status moving forward.
An investigation of the movements in the dollar-pound exchange rate needs to balance short run fluctuations against the medium to long term fundamentals. While day-to-day volatility in the currencies can produce financial gains for a subset of finance professionals like currency traders, the underlying trends in the exchange rate are far more important for the overall growth of the two economies, and eventually of more significance to businesses.
Note that the USD-GBP exchange rate is a “relative price”, or in other words, it is the price of one currency in terms of the other currency. As such, all movements in the exchange rate are relative to each other. Therefore, factors that have an impact on either the USD only, or the GBP only, will end up producing fluctuations in the exchange rate. The latest phase of weakening in the GBP relative to the USD began in earnest after the Brexit referendum in June 2016. The UK’s decision to exit the EU was seen as detrimental to growth in the near to medium term, causing erosion of investor confidence in the GBP. The immediate reaction was a slump in the relative price of the GBP; in less than a month the value of the GBP fell from USD1.45 to USD1.30 or nearly an 11% depreciation in the sterling. Since then, the GBP has lost even more ground vis-à-vis the USD.
The USD’s behavior over the last couple of years was also a factor behind the post-Brexit slump in the GBP. The drop in the pound happened to coincide with one of the strongest phases of the dollar in recent history. Against the currencies of a broad group of major US trading partners, the USD started appreciating sharply and steadily in mid-2014, and by the time of the Brexit vote in June 2016, it was already 18% stronger compared with July 2014. Since then, the USD gained even more thanks to investor optimism following the election of the Trump government.
More recent trends in the USD and GBP offer clues to the near-term movement of the exchange rate. The pound will remain under pressure during the course of the Brexit negotiations that have just commenced primarily because there is significant uncertainty associated with them. Brexit remains a systemic risk that will weigh on growth in the near term. More importantly, investor sentiment will be subject to frequent changes until Brexit is complete and any perceived increase in risks will weigh on the pound. This will tilt the exchange rate in favor of the USD, also, partly because the USD is a safe haven currency that investors flock to whenever there is an increase in geopolitical uncertainty. Over the longer run, we expect the pound to weaken modestly against the euro (the currency of the UK's most important trading partner) until 2021, but this assessment assumes that elections on the continent will be won by pro-European parties and the Greek debt crisis will not return. Against the dollar, a very modest strengthening should set in towards the tail end of this decade but political risk in the wake of the Brexit negotiations has the potential to impact on the exchange rate. In any case, currency volatility will be a bigger issue than in previous years, also caused by political events on both sides of the Atlantic and the Channel.
Monetary policy in the two countries will also be a driver. The US Federal Reserve has already started the process of monetary policy normalization—the only major western central bank that has started raising interest rates from the ultra-accommodative lows necessitated by the Great Recession. On the other hand, the Bank of England launched the latest round of monetary stimulus right after the Brexit referendum and continues to support the economy with record low interest rates. The spread between the US and UK interest rates will also favor the USD, although the USD has its own issues to worry about there. Following the latest rate hike by the Fed in mid-June, the dollar remained relatively subdued. There are two main reasons why the link between a Fed rate hike and dollar appreciation seems broken for now: one, investors are assigning a low probability to aggressive rate hikes by the Fed given the recent weakness in US inflation data, and secondly, while investor optimism is still there, it is now widely accepted that the Trump administration’s fiscal policy measures, like tax reform and deregulation, will not add to US growth in 2017. In fact, implementation risk remains high given the level of disagreement on key issues among Congressional Republicans.
Ironically, while currency weakness fundamentally signals weakness in a country’s economic prospects over the longer run, it could benefit an economy in the short run. This is clearly evident from the gains in manufacturing seen in the UK, thanks to the weakness of the pound. However, there are downside risks from the weak pound, like rising inflation, which will weigh on consumers and prompt the BoE to raise rates. Similarly, no one seems to mind the lackluster reaction of the USD to the Fed rate hike. Manufacturing benefits, corporate profits gain, and even the Fed might not be too worried as the weak dollar will boost inflation and help it stay on track to raise rates. Eventually, of course, economic fundamentals will take over and the exchange rate will reflect the varying economic prospects of the two countries.
Wayne Beecham, Director of Progressive Property, the UK's biggest property education and investment company below gives Finance Monthly his reaction to the Queen’s speech’ plans to ban landlord’s charging letting fees.
"Following the Queen’s speech we once again receive confirmation that a tenancy fee cap/ban is on the cards in the future, this has been a headline subject in the industry and I have heard many landlords, property professionals and property companies/ agencies groan at the thought of an outright ban on fees, in many ways I agree as an out-right ban tends to undermine the work and effort put into to the processes of renting properties and the hard work applied by a good quality agent who understands the importance of these fees to support the work required for a harmonious tenancy cycle. Though many people forget that the lettings industry has continued to fall short when it comes to regulations and change over the time and in some ways the landslide of changes we have been encountering over the last 10 - 15 years has been a result of the industry trying to catch up with the limited changes and regulations applied to the private rental sector and we should see these changes as a positive step forward to a better regulated, safer and fairer industry for all involved.
"I agree that an outright ban would not be a positive move forward for the industry and will encourage more agents and landlords to cut corners to try and achieve the outcome they require, a simple fee cap would be adequate to ensure consistency and fairness across the industry as well as acknowledging the works required to protect all parties in the private rental sector. Following conversations with referencing agencies a fee ban would merely promote more creative strategies to be implemented to the industry which would fundamentally cost tenants more money and completely undermine the purpose of a fee ban, as referencing agencies may look to increase their fees to tenants who require referencing for the purpose of renting a property and look to share this fee with letting agents the tenants will ultimately end up paying more to support essentially two fees. I agree any good agent is happy to promote more regulations within the industry which would ensure less bad practices and unscrupulous landlords who look to cut corners and potentially risk lives for their own personal gain, but we also need to ensure we are promoting becoming a property investor to ensure supply of good quality properties continues into the market place to keep up with demand and the shortage of housing we currently face.
"We have already seen a number of regulation changes which have failed to live up to their original objectives, this is clearly seen in the introduction of the protection of deposits and the choice of two different schemes. One scheme has met the objectives set and has a positive impact on the sector by holding the funds and therefore ensuring the purpose of the scheme to protect the tenants monies from any wrong doing or foul play, whilst the other has made little change and following personal experiences of bad practice by an agent the tenants and there deposits which were meant to be safeguarded where unfortunately left in the same situation they would have been if the scheme did not exist at all. We have also seen this with local councils and the eviction process as councils now inform tenants to stay even when legal notices have been served and even worse after county courts have instructed the tenants to leave, this short sighted advice has left many tenants in an even worse situation and delayed the inevitable outcome that they require alternative accommodations, following this advice they are now left in emergency housing or a hostel with a CCJ against their name and therefore narrowing their options for housing going forward and in many cases leaving them with the option of council housing which is already in short supply. By introducing a fee structure within the industry we would ensure consistency and transparency and therefore achieving the outcome required, if any agent or landlord was seen to be ignoring this structure a simple fine process would be enough discouragement."
In addition, Finance Monthly heard from Adrian McClinton, Associate Solictor at law firm Coffin Mew, on the Tenant's Fees Bill:
"Will the banning of letting agent’s fees help tenants? In my view probably not as much as hoped.
“Many of those renting do not want to be renting, but they cannot afford to buy because properties where people want/need to live are too expensive. On the flipside, landlords have seen their margins fall and therefore will understandably want to maintain already slim margins whilst still using the valuable services of letting agents. We have also seen an increase in competition within the letting agent market, recently joined by online providers.
“I think that landlords will stand firm and we will see the cost of this proposed ban being partly shouldered by letting agents, by reducing their prices and internal cost cutting, and by tenants, through an increase in rents, which is possible because of the huge demand for housing.”
Gordon Dadds, the legal and professional services firm, is urging the UK property sector to get to grips on the 4th EU Anti-Money Laundering Directive or face receiving a hefty financial penalty which could be unlimited.
The Directive which comes into force from today (26th June 2017), combined with the new investigation power being introduced by the Criminal Finance Act 2017, is going to impact the UK property industry significantly with banks and estate agents having to carry out further due diligence on both the buyers and sellers of property which will slow down the buying process by up to 186 days. There will also need to be formal risk assessments and nominated officers will have to be re-appointed if not currently an executive sitting on a board (or equivalent) of the business.
Gordon Dadds predicts that the new regime will increase workloads due to the required volume of administration with all polices now needing to be tailored to each client case and for the usual terms of business to be updated. This doubling of the workloads will increase company costs with existing staff requiring training and in a high proportion of cases, estate agents needing to recruit staff in order to help with the administration burden. We estimate this could cost the largest estate agents a combined additional cost of £6million.
Alex Ktorides, Partner at Gordon Dadds, says: “The Directive is a shake-up of the way that banks, estate agents and other parts of the regulated sector apply a risk based approach to customers. They will now have to consider the characteristics of the customer, the product and its distribution and the jurisdictions involved in determining the lengths that they have to now go to in terms of conducting due diligence on their clients. There is even a new requirement to force overseas branches of UK parent companies to apply UK standards. This will cause huge concerns to international businesses and even encourage moving head office from the UK.”
The property sector now has to act quickly in order to ensure it complies with the Directive. The purchasers and the seller are both now included in the application of customer due diligence, meaning additional checks will need to be carried out by estate agents, auctioneers and surveyors.
Alex Ktorides continues: “This is going to create substantial challenges for the property sector especially given the final version of the directive has only been made public today which has left no time for banks, estate agents and the lending sectors among others to update their policies and processes alongside training staff on the new regime. Some agents have in excess of 100 branches and have received no prior time to implement the new processes in order to comply.
“For many smaller estate agents (and surveyors) this will be the first time they will have carried out checks on both the buyers and sellers and they are going to have to get up to speed with the regime as quickly as possible or risk facing an unannounced visit from the HM Treasury.”
Gordon Dadds is calling on the UK property sector to act fast and to start to get to grips with the Directive from today. For many medium to large sized estate agents Gordon Dadds recommend they appoint a money laundering officer and a deputy to help with the increased work load and to ensure they are compliant and not falling foul of the regime which could spark a warning or fine from the HM Treasury.
(Source: Gordon Dadds)
Oanda Senior Market Analyst Craig Erlam believes the GBP exchange rate depends on how the Brexit talks unfold and the political situation in the UK. Erlam says the US dollar is heavily sold and due for correction. He expects EUR/USD to revisit 1.10 handle.
Watch the full segment as Erlam details the key technical levels on the major pairs - EUR/USD, GBP/JPY and GBP/USD.
Tip TV Finance is a daily finance show based in Belgravia, London. Tip TV Finance prides itself on being able to attract the very highest quality guests on the show to talk markets, economics, trading and investing, keeping our audience informed via insightful and actionable infotainment.
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The details of the Government agenda for the next two years have been revealed; and the global delivery experts Fastlane International say there is some good news for exporters and logistics companies.
The delayed Queen’s Speech has finally been delivered, and the e-commerce delivery specialists Fastlane International say that there is some good news for exporters and logistics; though many Brexit details remain unclear.
Says Fastlane’s Head of Consumer Research, David Jinks MILT: ‘There are eight bills tackling Brexit alone; but the real details of the Government’s approach to Brexit, and how wedded they still are to a ‘hard’ Brexit - leaving the Customs Union and the Single Market entirely - remains to be seen as negotiations unfold.’
David comments below on the Bills introduced:
- The Customs Bill will contain legislation to ensure the UK has a stand-alone UK Customs regime on exit: not entirely good news for exporters and logistics companies hoping to see few significant changes to current tariff free exports and imports. However, the stated flexibility to accommodate future trade agreements with the EU and others does perhaps pave the way for a softer Brexit, including the opportunity to retain tariff free borders.
- Additionally, the Trade Bill will introduce a legal framework for Britain to agree free trade deals with countries and trading blocs around the world; and it is to be hoped this includes opportunities for deals with Nafta - the group made up of Canada, Mexico and the US – and the remaining members of the Trans-Pacific Partnership (TPP), the deal which was due to be implemented between 12 countries, including Australia and Japan, until Donald Trump pulled the US out of the agreement.
- More good news for UK logistics companies was the Automated and Electronic Vehicles Bill. Fastlane believes the future of UK courier services will be closely linked to greener, autonomous vehicles delivering in urban areas.
- The news that the Government is pushing ahead with its High Speed 2 Phase 2A Bill – the so called HS2A extension of the HS2 railway from Birmingham to Crew - will mean more freight transport will be able to use the existing West Coast Mainline as slots are freed-up when high-speed passenger services switch to the new line.
- News of a Commonwealth Summit next year will also help concentrate plans for British exporters post Brexit. From Australia to Zambia the 52 member countries present an A-Z of opportunities for business.
- Finally, as e-commerce delivery specialists Fastlane was interested to hear of a Digital Charter in the Data Protection Bill. Measures to crack down on internet crime help increase trust in online transactions.
(Source: Fastlane)
Authored by Markus Kuger, Senior Economist at Dun & Bradstreet.
On Monday 19th June, the UK is scheduled to enter negotiations for its exit from the EU, in discussions that will fundamentally shape the future of the country and its economy. Just two months ago Prime Minister Theresa May surprised the nation by calling a shock general election, seemingly with the aim of strengthening her position in the Brexit negotiations and bolstering her claim to represent a consensus in the UK. However, the election did not unfold as expected.
Despite early polls suggesting a 20 percentage point lead for the Conservatives, the Tories lost 13 seats and thus their overall majority. Now, just days before talks with the EU begin, the Prime Minister is involved in domestic negotiations with the Democratic Unionist Party (DUP) to form a government. So, what will the ‘Hung Parliament’ outcome mean for Brexit negotiations – and how can businesses respond?
On the home front
Short-term political uncertainty in the UK has increased sharply. The Conservative Party must now enter an alliance with another party in order to pass the Queen’s Speech and form a new government. Overall, this process will be time-consuming, leaving businesses without a clear outlook in the coming days and possibly even weeks.
In the longer term, even with the support of the DUP, the Conservatives’ majority will be extremely slim – which will be problematic, given the wide spectrum of views within the party on a number of issues, including Brexit. Against this backdrop, the government is likely to need to tread a conciliatory line both within and outside its own party: all of which will fundamentally impact the Brexit negotiations. Taking all factors into account, Dun & Bradstreet has downgraded the UK’s Political Environment Outlook from 'deteriorating' to 'deteriorating rapidly’, although this indicator is likely to be upgraded again once a new government is formed.
At the negotiating table
The dynamic of the Brexit negotiations has changed fundamentally. After Article 50 was invoked on 29 March and snap elections were called in April, initial talks between the EU and the UK were scheduled for 19/20 June. However, this round of talks is unlikely to deliver any noteworthy results, as the yet-to-be-formed British government will not have had enough time to prepare its negotiating position.
The election result suggests that the UK lacks an overwhelming consensus on the sort of deal that should be brokered. Theresa May’s personal position has also shifted, and rumours already suggest that she could be asked to step down by her own party at some point in the coming months as a result of the disappointing election outcome. The UK government may need to placate a broader range of opinions in parliament – including those of other parties – to pass any legislation. The extra time this will take will make negotiations with the EU even more complicated: Article 50 sets a strict 24-month deadline within which talks must be completed, of which two months have already passed due to the election campaign in the UK.
We predict that in the long run, the election result could make a ‘hard’ Brexit – which our analysis suggests would be harmful for the British economy – extremely hard to implement. It’s now more likely that the UK could remain in a customs union with the EU, reducing Brexit’s impact on businesses. The election outcome has even opened up the very small chance of the UK remaining in the EU, although businesses should continue to assume that the UK’s exit from the EU will still take place in March 2019. With so many factors in play at home and internationally, it is currently difficult to predict how the negotiations will unfold.
From the business perspective
All of this makes for a complex environment for businesses. Our analysis indicates that uncertainty will remain high in the next 18 months, regardless of what happens in the wake of the election, and we are maintaining our risk rating for the UK at DB2d, with a ‘deteriorating’ outlook. Given the backdrop of an already slowing economy (the UK posted the lowest real GDP growth of all 28 EU economies in Q1 2017), it is not surprising that businesses are beginning to express a lack of confidence, as seen in a recently published survey for the Institute of Directors.
Businesses should continue to monitor the progress of negotiations, and use the latest data and analytics to assess risk and identify potential opportunities. Once a government is firmly in place and Brexit negotiations progress, organisations may get a clearer picture of the likely basis for future business relations between the UK and the rest of the world. Until then, a careful and measured approach to managing relationships with suppliers, customers, prospects and partners will be essential.
Navigating uncertain times
The general election result surprised most commentators, and more importantly it creates the prospect of greater uncertainty in the medium term – both domestically and for the Brexit negotiations, which will be one of the most significant factors in the future development of the UK economy.
However, it’s vital to remember that the UK remains a stable economy, with long-term economic potential that exceeds that of most other European economies. For now, businesses should continue to follow developments closely as the impact on the Brexit settlement – and the political landscape of the UK – becomes clearer.
The UK’s financial sector is the biggest and most respected in the world, with the City of London acting as a magnet for investment and industry talent. Here Craig James, CEO of Neopay, discusses with Finance Monthly the potential impact the FCA could have through its engagement in fintech beyond the City.
Most recently the capital has been a hotbed of innovation in the financial technology – fintech – sector, with a number of start-up accelerators and new companies coming onto the scene to challenge the established industry.
But with the confusion over Brexit now firmly in people’s mind, many are concerned that London’s position as a leading financial centre and the focal point of the EU’s fintech industry may be under threat.
Other EU countries are beginning to respond to this and attempting to entice fintech businesses away from London and the UK.
As a result, the British government and its financial regulator appear to be doing more than ever to boost the UK’s share of the fintech market.
This is definitely a good time for fintech businesses, as governments across the world compete for their business, and this is even more apparent in Europe and the UK as a result of Brexit.
In one of its latest initiatives, the British government are looking specifically beyond the borders of London to help boost fintech hubs in the rest of the UK and encourage greater development of fintech across the country.
Expanding access to regulation beyond the capital
Britain’s financial watchdog, the Financial Conduct Authority (FCA), has recently announced that it is to expand its regulatory support across the UK in efforts to aid emerging financial technology hubs based outside of London.
Specifically, the regulator is looking to areas with both a strong financial centre and technology presence.
Historically, fintech business have predominantly come from London due to its proximity to tech funding and major financial institutions as well as government and regulatory bodies.
Looking around the rest of the world, these four factors have been key in the success of fintech companies.
But devolution of government, the rise of non-London tech hubs and the increasing willingness of banks to have a presence in other major cities around the UK, means there is greater potential for fintech businesses to spread far beyond London, just at the time the country needs to solidify and expand its position in the world’s financial and technology markets.
Speaking to the Leeds Digital Festival earlier this year Christopher Woolard, executive director of strategy and competition at the FCA, identified emerging hubs in the Edinburgh-Glasgow corridor and the Leeds-Manchester area as significant areas for potential growth.
The developing “FiNexus Lab” in Leeds – a collaboration between local government, industry, and central government – is laying solid foundations for fintech firms to flourish in the city, while in Manchester, Barclays’ “Rise” hub and “The Vault”, a 20,000 sq ft co-working space for fintech firms in Spinningfield’s business quarter, is improving the conditions for innovative firms to collaborate and grow.
The FCA has also been seeking to assist up and coming fintech businesses through its “sandbox” scheme, which helps firms to experiment with innovative products, services and business models.
About two thirds of the scheme’s first cohort was London based, but a rash of regional interest has seen nearly half of applications for its latest round come from outside the capital, highlighting the growth of fintech across the UK.
Non-London fintech companies are also seeing an increased interest in investment with Durham based Atom Bank recently securing £83m of funding from investors including Spanish bank BBVA, fund manager Neil Woodford and Toscafund Asset Management.
Not an entirely new trend
While encouraging new fintech companies outside of London has just recently become a focus of the FCA, it is not an entirely new concept and as far back as 2014 politicians, as well as financial and technology bosses, were calling for an expansion of the UK’s fintech sector beyond the boundaries of London to fully recognise its potential – long before the possibility of Brexit became a reality.
For instance, Eric van der Kleij, head of Canary Wharf based start-up accelerator Level39, has been one of the leading fintech figures suggesting that a business’ location isn’t a factor in whether it will be a success, pointing particularly to Manchester as a place where fintech companies were performing strongly.
One of the major hurdles, and a major barrier the FCA is now seeking to breach with its latest commitment, is that much of the regulatory framework emanated from London, with businesses based outside of this area – particularly those further towards the north and Scotland – struggling to get access to the kind of help they needed.
Speaking at the Leeds Festival, Christopher Woolard said the FCA now wanted to make it “as easy as possible” for firms to engage with the regulator and get access to the advice and help they needed to get into the market.
While many businesses have been able to set up outside of London and travel, sometimes great distances, to access this regulatory assistance, actively moving this help closer to businesses could be a significant benefit to new businesses, and a boost to British fintech at a time when it most needs it.
Increasing Brexit Britain’s competitiveness
The global fintech market is one of the fastest growing sectors in the world and, according to European Union figures, the value of investment into the sector reached $22.3bn by the end of 2015, a 75% increase on the year before.
Since 2010, large corporates, venture capitalists and private equity firms have invested in excess of $50bn into nearly 2,500 global start-ups since the start of the decade.
In the UK, the fintech sector – enveloping everything from online lending to applying blockchain to capital markets – is worth about £7bn to the economy, while more than 60,000 people are employed in the sector.
Looking at the UK’s global positioning, the country is second only to the United States in prominence on the top 100 fintech list, compiled by KPMG.
But while many of the UK companies on the list are London based, the highest based company, and the only UK business to breach the top 10, is based outside London.
The fact that a non-London business is the country’s highest valued fintech business is significant if we are to continue to convince new businesses to set up in the UK.
This is particularly important as other EU countries are attempting to take advantage of the confusion surrounding Brexit and boost their share of the fintech market.
A new public-private partnership, “House of Fintech” was recently set up in Luxembourg to attract companies to set up in the country, while French lobbyists have been making efforts to entice fintech businesses to relocate from the UK to Paris.
Even outside of the EU, steps are being taken to replicate the innovation and success being seen in the UK and The Monetary Authority of Singapore has moved to copy the FCA’s “sandbox” scheme to improve the prospects of its own fintech market.
With the UK’s future position in the single market still not fully known, and not likely to be defined for another year at least, the UK government knows it needs to maintain its popularity for fintech businesses. These businesses need to be given an even greater chance to succeed if the UK is to maintain its strong position during the Brexit negotiations and fend off the competition.
We can expect to see further new initiatives from the UK aimed at making that a reality and more positive developments for fintech as European countries compete for their business.
With wage inflation stagnating below the rate of increased property prices, it has become very difficult to get a firm foothold on the London property ladder. Many people have therefore been forced into the private rental sector; signified by nearly one in three London household’s renting privately.
Despite the tremendous growth for the sector itself, the increased demand has driven up private rental values. Especially in London, where the average rent for a one bedroom property is a substantial £1,329 per month.
Sellhousefast.uk analysed data from the Office of National Statistics (ONS), revealing that single tenant’s in 25 of London’s 32 boroughs are sacrificing more than 50% of their monthly salary (after income and council tax deductions) on rent for their one bedroom property.
Single tenants living in a one bedroom property in Kensington and Chelsea are sacrificing an astonishing 85% of their monthly salary on rent – the highest out of all the London boroughs.
Single tenants in Kensington and Chelsea are then closely followed by those in Hackney – who give up 81% of their monthly salary to pay for rent on their one bedroom property. In third place is Westminster, where single tenants use up 79% of their monthly salary to pay rent for their one bedroom property.
Single tenants in Bromley as well as Havering, sacrifice the joint lowest percentage of their monthly salary on renting their one bedroom properties in London at 42%. Redbridge (49%), Merton (49%) Richmond upon Thames (48%) and Bexley (43%) are the other London boroughs where single tenants sacrifice less than 50% of their monthly salary on a one bedroom property.
Sellhousefast.uk asked a couple of single tenants living in a one bedroom property in London about their experience of renting.
Jessica, 26, has been renting a one bedroom property in Southwark for the last two years: ‘I am giving up a lot of my monthly income on renting a one bedroom in Southwark. It’s frustrating but I only tolerate it due to the convenience of living a short distance away from my workplace. It’s ideal as I start early and finish late most days. The biggest benefit is that it eradicates any time that I would lose through commuting if I lived outside the area. A lot of my colleagues are also currently doing the same thing as me. Whilst most are unhappy about giving up such a huge proportion of their salary on rent each month, it’s ok for the short-term. But in the long-run, it isn’t sustainable, as I wouldn’t be able to secure a deposit for a property of my own.’
Chris, 29, has been renting a one bedroom property in Hounslow for the last four-years: ‘Rent in London is truly extortionate. For the past three years, over half my monthly salary has gone on covering rent. On top of that, I have to pay for my food, utilities and travel every month – so I am not left with much to save, let alone enjoy any leisure activities. With me nearing thirty I want to settle down with my partner and this tiny one bedroom flat is certainly not going to suffice for the both of us. We have started to look at bigger properties in Hounslow, as we both work in the area. With rental prices as they are in London, it might be an uphill struggle for us’.
Robby Du Toit, Managing Director of Sell House Fast commented: “Demand has consistently exceeded supply over the last few years, Londoner’s have unfortunately been caught up in a very competitive property market where prices haven’t always reflected fair value. This notion is demonstrated through this research whereby private rental prices in London are certainly overstretching single tenants; to the extent they must sacrifice over half their monthly salary. For those single tenants with ambitions to climb up the property ladder – their intentions are painfully jeopardised, as they can’t set aside a sufficient amount each month to save up for a deposit or explore better alternatives. It’s not only distressing for them but worrying for the property market as a whole – where the ‘generation rent’ notion is truly continuing too spiral further.”
(Source: Sellhousefast)
Earlier this month, Finance Monthly had the privilege of interviewing the CFO of IBM UK & Ireland (UKI) – Vineet Khurana. Here he discusses his role within the organisation, Brexit implications and offers piece of advice to fledging CFOs.
You have been the CFO of IBM UKI for nearly a year now - what is your favourite thing about your role?
My favourite thing about the role has to be the breadth, reach and influence it offers.
I get to work extremely closely with our Chief Executive and the rest of the leadership team (Sales, Operations, HR, IT, RESO, etc.) not only on all financial matters, but also across a spectrum of other business matters that impact our business - both in the short and long term. As an example, I recently led a piece of work, in partnership with the Corporate Strategy team based at the Headquarters in New York, to re-define our Client coverage strategy in the UK.
As a CFO, I am also presented with opportunities to engage externally with Clients and share with them IBM’s point of view and value proposition, as it relates to Enterprise IT. I personally find this aspect of my role very enjoyable.
What would you say have been IBM UK & Ireland's major achievements in the past twelve months? What has been your involvement, in relation to them?
Our key focus over the last year has been to align ourselves here in the UK & Ireland with IBM’s transformation as a Cloud Platform and a Cognitive Solutions company.
This is absolutely key for us in order to fully leverage and benefit from the breadth of the Cloud-based cognitive offerings that are available. Associated with this, my role as the Finance Leader for UK & Ireland has been to ensure that our resources and investments are (a) prioritized and (b) deployed appropriately in support of this initiative. Of course, we’ve also had to make sure that we have a revised set of operational/performance metrics and reporting capabilities in place.
Finally, as mentioned above, the work we led as a Finance team in regards to re-defining and making our Client Coverage strategy more effective is something I am particularly proud of.
What is the best advice you could share with Fledging CFOs and Finance Directors?
With the role of finance constantly expanding and finance increasingly needing to play a central part in all business decisions, I really don’t think there has been a more exciting time to be a finance professional.
Technological advances are disrupting the status-quo. Companies are utilising technology to transform their business and the way they interact with their clients and employees. This is being done while industry convergence is producing new agile rivals at breakneck speed. With all this change afoot, the role of the CFO needs to change as well.
CFOs need to embrace business strategy in addition to the financial strategy, understand the changing market/client needs in addition to regulatory changes, and deliver business insight in conjunction with data reporting and analysis.
Therefore, my advice is to embrace this change, as it is key to ensure your increased effectiveness in the role and your ability to deliver enhanced value at the leadership table.
In light of the recent triggering of Article 50 - what is your outlook for the future of IBM UK Ireland in next twelve months and beyond?
IBM has been operating in the UK for over 100 years and as such it is an important market in the context of our global business. We have always done and continue to make significant investments here in support of our business and economy. As an example, we recently announced the establishment of four new UK cloud data centres, tripling our UK cloud data centre capability.
In summary, we are making sure that we are well-placed to help our clients as they transform their businesses by improving their competitiveness, as they prepare to exploit new opportunities.
What are the implications and challenges of global Brexit uncertainties faced by CFOs?
I think we all recognise that we are facing an extended period of uncertainty during the exit negotiations. So at this early stage of Brexit, the approach of the CFO should be to understand the potential exposures their organisations could face.
I believe two significant uncertainties centre around import/export of goods and data and the free movement of resources across the continent. The magnitude of these uncertainties will obviously vary by sector and individual organisation. CFOs should look at mapping the relative exposure of their organisations to these elements by carrying out the data analytics work now. This analysis will then allow for quicker action and informed business decisions to be taken, once the negotiations are concluded and changes in regulations are clear.
British entrepreneurs are being offered the chance to develop financial services ideas in one of the top financial regions in the US, with a $100,000 (£77,000) equity-based grant and a package of support for growing businesses.
The initiative aims to bring up to twelve of the most promising emerging financial companies in the world to Ohio and help them boost their growth beyond the start-up stage. Equity-based grants of $100,000 per firm plus coaching, office space, visa support and a strong business network are all being provided through the accelerator Fintech71.
Valentina Isakina, Managing Director for Financial Services and Select HQ Operations at JobsOhio, said: “Ohio looks ahead to the future by investing in technologies of the next generation. Our financial services sector is one of the strongest in the world, and it is always actively seeking innovative ideas and partnerships. Here people are more approachable and doing business is easier, so these innovative companies will have a better chance to blossom into the financial stars of tomorrow. JobsOhio is happy to support this innovative industry effort.
“Getting beyond the start-up phase is always difficult even when entrepreneurs have a great idea and have managed to get their business going, so the financial services industry wants to give them a helping hand by creating Fintech71. By bringing them here to enjoy Ohio’s support and hospitality, they will make contacts that will last a lifetime and benefit everyone.”
Fintech71 is aimed at start-up and scale-up businesses from all over the world which have matured enough to present a well-thought-out concept to test with a corporate partner or a market-ready business model. The application deadline is July 17 via www.fintech71.com.
The accelerator has a not-for-profit model and will negotiate a customised, entrepreneur-friendly equity-based participation in exchange for a grant of US $100,000 and access to the accelerator program for each of the selected companies. The finalists will be invited to the state capital Columbus to receive coaching from leading experts of the industry from mid-September to mid-November, in order to further develop their business ideas.
Additionally, the selected start-ups will get the opportunity to build relationships with the sponsor businesses, which are well established in Ohio and throughout the USA, and to network with mentors, partners, and customers. The selected start-ups will have access to free office space in the city centre of Columbus, with foreign businesses will be supported with their visa application.
Some 270.000 people, nearly the size of NYC’s workforce, work in the financial industry in Ohio, one of the largest in the USA. Ohio is also an innovative and successful hub for a large number of other industries, including automotive, aerospace, mechanical engineering, and chemicals. The state is among the top five US states for Fortune 500 and Fortune 1000 headquarters.
Fintech71, named as a nod to the cross-state highway I-71 connecting Ohio via its three largest cities, is backed by leading enterprises, banks and insurers from Ohio, like KeyBank, Huntington Bank, Grange Insurance, Progressive Insurance and Kroger, the largest food chain in the USA. JPMChase is also supporting the program, leveraging its large technology presence in Ohio. JobsOhio, the innovative non-profit economic development corporation, is supporting Fintech71’s operations along with its industry expertise, state and national contacts.
“Fintech71 and Ohio are ready to compete on a global scale given the alignment of the state, the private sector and its entrepreneurial ecosystem,” added Matt Armstead, the executive director for the accelerator.
(Source: JobsOhio and Fintech71)
Androulla Soteri, tax development manager at MHA MacIntyre Hudson below discusses the consequences of the US President’s potential implementation of tax reform in the country, and the impact it could have on UK business.
Corporation Tax (CT) has been an important part of the election manifestos, and we now find ourselves in a coalition of two parties supporting a move towards lower CT rates. This makes it clear which direction the new government will decide to go in.
The main argument for dropping CT rates is to make the UK a more attractive place for multinationals to locate business. This in turn increases the job-pool which raises further tax revenue in the form of National Insurance contributions, and consequently VAT as consumers have more disposable income to play with. In over a decade, CT has never made up more than 11% of total tax take. Given its relative lack of significance, there’s a strong argument to suggest an overall benefit in reducing it.
One of the arguments against a reduction is that if big multinational companies were forced to pay their fair share of CT, this would help reduce the budget deficit and national debt, and also contribute to public services such as the NHS, schools and policing.
But it’s also worth taking a look at the US, which has one of the highest rates of CT in the world at 35%. One of Trump’s intentions is to drop the rate to 15%, to bring US companies back home. If this happens, US businesses could lose interest in investing in the UK, especially with Brexit looming on the horizon. Instead, they could look to repatriate headquarters, increasing employment of US citizens and consequent tax revenues associated with it.
If Trump’s plan is a success, the UK could be shaken hard over the next few years, especially in light of ongoing Brexit uncertainties. Lowering CT rates in the UK may therefore be an incentive for companies to remain within a benign competitive UK tax system.
The task of running the UK over the next two years is unenviable. But if the Government sticks to its plan of lower CT rates, we’ll certainly see clear evidence within the next few years of whether this is good or bad for the economy.
