Financial terminology is continually thrown around as we navigate through the different stages of our lives. The need to entirely acknowledge and comprehend what some financial terms mean becomes most apparent when making difficult financial decisions such as how best to climb onto the property ladder and selecting the best saving account or investment product that could provide the greatest return in the future.
With words and phrases in areas such as banking, savings, investments, pensions and mortgages more than likely to feature heavily in an individual’s handling of their personal finances – the expectation would be for them to have a firm grasp of common and recognisable financial jargon. Unfortunately, this does not seem to be the case, as 31% of Brits have shockingly admitted to signing a financial contract without knowing some or all the terminology according to research by Norton Finance.
Interested in financial competency, Reboot Online Digital Marketing Agency analysed findings from YouGov, who surveyed 1,916 British adults to see how confident they were with the meaning of a range of financial words and phrases.
Reboot Online found that ‘savings account’ is the financial term that most Brits are confident about at 92%. Thereafter, 78% claim to be assured by what a ‘cash ISA’ is. In third position, 74% of Brits feel confident enough to know what a ‘building society’ represents and can differentiate it from a normal bank.
Interestingly, despite regularly featuring in the small print of advertising mediums for potentially significant purchases like cars, only 64% of Brits are entirely confident about what a ‘fixed or variable annual percentage rate (APR)’ truly is. Information for immediate release Reboot Online Digital Marketing Agency.
Focusing specifically on the different types of mortgages and the terms related to it - Brits seem most confident knowing what a ‘fixed mortgage’ (72%), ‘mortgage deposit’ (63%) and ‘tracker mortgage’ (49%) is. Contrastingly, Brits are apprehensive about how a ‘shared equity mortgage (58%)’ and ‘offset mortgage’ (57%) respectively work.
On the other end of the scale, the British public were least confident about a ‘spread betting account’, with an overwhelming 67% unsure about its proper connotation. Closely by, 65% are shaky about what ‘corporate bonds’ are. 64% of Brits were equally unclear by a ‘tracker fund’ and ‘self-invested-personal-pension’.
Shai Aharony, Managing Director of Reboot Online commented: “Jargon specifically related to certain sectors and subject matters can be a mind field. Individuals can therefore often get lost in translation when trying to decipher them. Despite this, considering the fact that numerous financial terms have a substantial impact on minor as well as major saving and spending intentions, Brits should be more accustomed to them. This research certainly shows that Brits currently lack the knowledge and confidence to correctly understand a handful of financial terms in a range of important areas such as mortgages, pensions and savings. Going forward, there should be a real drive to educate Brits from an early age on the different aspects of the financial world that will more than likely affect their personal and business matters in adulthood.”
(Source: Reboot Online)
With the future looking more cashless by the day, the future of cybersecurity looks even more risk heavy. Below Nick Hammond, Lead Advisor for Financial Services at World Wide Technology, discusses with Finance Monthly how banks/financial services firms can ensure a high level of cyber security as we move towards a cashless society.
Debit card payments have overtaken cash use for the first time in the UK. A total of 13.2 billion debit card payments were made in the last year and an estimated 3.4 million people hardly use cash at all, according to banking trade body UK Finance.[1] But with more people in the UK shunning cash in favour of new payments technology, including wearable devices and payment apps as well as debit and credit cards, the effects of IT outages could be more crippling than ever.
Take Visa’s recent crash, for example, which left people unable to buy things or complete transactions. Ultimately, payment providers were unable to receive or send money, causing serious disruption for users. And all because of one hardware issue. Finding new ways to mitigate the risk of system outages is a growing area of focus for financial services firms.
Application Assurance
At a typical bank, there will be around 3,500 software applications which help the bank to deliver all of its services. Of these, about 50-60 are absolutely mission critical. If any of these critical applications goes down, it could result in serious financial, commercial and often regulatory impact.
If the payments processing system goes down, for instance, even for as little as two hours in a whole year, there will be serious impact on the organisation and its customers. The more payments systems change to adapt to new payments technology, the more firms focus their efforts on ensuring that their applications are healthy and functioning properly. As Visa’s recent hardware problems show, much of this work to assure critical applications must lead firms back to the infrastructure that their software runs on.
Having a high level of assurance requires financial services firms to ensure that applications, such as credit card payment systems, are in good health and platformed on modern, standardised infrastructure. Things become tricky when shiny new applications are still tied into creaking legacy systems. For example, if a firm has an application which is running on Windows 2000, or is taking data from an old database elsewhere within the system, it can be difficult for banks to map how they interweave. Consequently, it then becomes difficult to confidently and accurately map all of the system interdependencies which must be understood before attempting to move or upgrade applications.
Protecting the Crown Jewels
Changes to the way financial services firms use technology means that information cannot simply be kept on a closed system and protected from external threats by a firewall. Following the enforcement of Open Banking in January 2018, financial services firms are now required to facilitate third party access to their customers’ accounts via an open Application Programming Interface (API). The software intermediary provides a standardised platform and acts as a gateway to the data, making it essential that banks, financial institutions, and fintechs have the appropriate technology in place.
In addition, data gets stored on employee and customer devices due to the rise of online banking and bring-your- own- device schemes. The proliferation of online and mobile banking, cloud computing, third-party data storage and apps is a double edged sword: while enabling innovative advances, they have also blurred the perimeter around which firms used to be able to build a firewall. is no longer possible to draw a perimeter around the whole system, so firms are now taking the approach of protecting each application individually, ensuring that they are only allowed to share data with other applications that need it.
Financial services firms are increasingly moving away from a product-centric approach to cyber-security. In order to protect their crown jewels, they are focusing on compartmentalising and individually securing their critical applications, such as credit card payment systems, in order to prevent a domino effect if one area comes under attack. But due to archaic legacy infrastructure, it can be difficult for financial institutions to gauge how applications are built into the network and communicating with each other in real-time.
To make matters more difficult, documentation about how pieces of the architecture have been built over the years often no longer exists within the organisation. What began as relatively simple structures twenty years ago have been patched and re-patched in various ways and stitched together. The teams who setup the original systems have often moved on from the firm, and their knowledge of the original body has gone with them.
The Next Steps
So how can this problem be overcome? Understanding how applications are built into the system and how they speak to one another is a crucial first step when it comes to writing security policies for individual applications. Companies are trying to gain a clear insight into infrastructure, and to create a real-time picture of the entire network.
As our society moves further away from cash payments and more towards payments technology , banks need the confidence to know that their payments systems are running, available and secure at all times. In order to ensure this, companies can install applications on a production network before installation on the real system. This involves creating a test environment that emulates the “real” network as closely as possible. Financial players can create a software testing environment that is cost-effective and scalable by using virtualisation software to install multiple instances of the same or different operating systems on the same physical machine.
As their network grows, additional physical machines can be added to grow the test environment. This will continue to simulate the production network and allow for the avoidance of costly mistakes in deploying new operating systems and applications, or making big configuration changes to the software or network infrastructure.
Due to the growth in payments data, application owners and compliance officers need to be open to talking about infrastructure, and get a clear sense of whether their critical applications are healthy, so that they can assure them and wrap security policies around them. An in-depth understanding of the existing systems will enable financial services firms to then upgrade current processes, complete documentation and implement standards to mitigate risk.
[1] http://uk.businessinsider.com/card-payments-overtake-cash-in-uk-first-time-2018-6
Last week it was announced that the UK has overtaken the US on fintech investment for the first half of 2018. Simon Wax, Partner at Buzzacott below looks at how companies must address and identify their sweet spot in the market to ensure long term success.
It’s terrific to see the UK is leading the way when it comes to fintech. Funding is at an all-time high and the UK should certainly feel proud of its ability to attract more investment into the sector than any other country.
To secure continued success for the UK’s fintech scene, it’s vital that these young companies are able to scale successfully, and to do this, they will need to overcome some challenges. Increased uncertainty around Brexit and how this will impact the UK’s access to the digital single market, the availability of skilled technical workers and even funding for R&D are all key risks for small businesses.
Scaling fintech companies need to focus their efforts on long-term success, not being the biggest money maker. The risk is companies may lose sight of what they originally set out to do, a trap in which young companies can easily fall into, when not careful. Leaders must take a methodical and responsible approach to fundraising, bring in investment which matches their aims, rather than taking the first offer of funds. There are many options out there such as UK R&D funding, through sources such as the Industrial Strategy Challenge Fund or Innovate UK. Scaling fintech companies must address and identify their sweet spot in the market, and develop a business plan focused on which best suits their model. That way, scaling businesses can secure their success in the market, and grow in a way that is right for their business.
After some time of speculation, the Bank of England confirmed interest rate hike last week, by 0.25%. Already we have seen some banks act fast in passing this hike onto the customer, in particular mortgage buyers, as opposed to savings rates.
In this week’s Your Thoughts, Finance Monthly has collated several expert comments from UK based professionals with expert knowledge on this topic.
Richard Haymes, Head of Financial Difficulties, TDX Group:
While an interest rate rise is positive news for people living on their savings income, or holding pensions and investments, it may prove to be the tipping point for those in financial difficulty or struggling with debt.
Individual Voluntary Arrangements (IVAs) have reached record levels and we expect the rate of monthly IVAs and Trust Deeds to grow by around 17% this year. A rise in interest rates will make it much harder for people in these arrangements, and there’s a risk they’ll default on their strict requirements.
A large portion of people who are in personal insolvency hold a mortgage (over a fifth according to personal insolvency practice Creditfix), and a rate rise will obviously increase their mortgage repayments. Due to these people’s unfavourable credit circumstances, it’s likely that majority of mortgage holders in insolvency are tied to variable mortgage products, leaving them particularly vulnerable to a higher interest environment.
Holders of a £250,000 mortgage will have to absorb a monthly repayment increase of £31* as a result of this 0.25% hike. Modest as it may appear to many, for people in structured debt management plans or IVAs this could have a very significant impact, even resulting in their debt solution becoming defunct or in need of renegotiation.
Jon Ostler, UK CEO, finder.com:
This rate rise decision comes as no surprise. Our panel of nine leading economists unanimously predicted that the interest rate would rise by 25 base points, and this is a positive sign that the economy is growing stronger.
It’s particularly good news for savers, who have suffered ultra-low interest rates for the past decade. They can expect a rise to their savings, albeit a small one. Now is a good time to consider switching your banking products, as banks will be reviewing their rates. Make sure you keep an eye on which banks are offering the best interest rates as not all of their products will increase by the BoE’s 25 basis points.
On the other hand, borrowers and homeowners with a mortgage are likely to face extra costs. For example, those paying off the UK’s average mortgage debt with a variable rate mortgage face paying an extra £17-£18 per month, which adds up to an extra £200 per year or more than £6,000 over the life of a 30-year loan term.
Angus Dent, CEO, ArchOver:
While banks are likely to pass the rate rise straight onto borrowers, they will be less keen to pass it on immediately to savers. Aspirational borrowing such as mortgages and bank loans will get more expensive – so the man in the street needs to counter that with strong returns on savings. Only 50% of savings account rates changed after last year’s rise, so there’s good reason to be underwhelmed.
But this is certainly a step in the right direction for the cautious Bank of England. While such an incremental rise won’t shake the earth, and probably means business as usual, it nevertheless spells good news for the UK.
The country is still hungry for a stronger economy, ten years after the financial crash. Both savers and investors are now aware that to chase higher returns, they need to open the door to alternative opportunities. Alternative finance options that offer higher yields – without sacrificing security – offer savers a path to higher returns in a still-struggling economy.
Savings accounts still aren’t the safety net they once were. Despite this rate rise, savers still need to cast the net wide in the hunt for higher returns.
Markus Kuger, Senior Economist, Dun & Bradstreet:
This rate hike had been anticipated by the markets, despite inflation having fallen in recent months, as UK growth seems to have recovered from the poor performance in Q1. The effects of the rate rise will be minimal, given the Bank’s forward guidance over the past months. The progress in Brexit talks will remain the most important factor for companies and households in the near to medium term. Dun & Bradstreet maintains its current real GDP and inflation forecasts for 2018-19 and we continue to forecast a modest recovery in 2019, assuming the successful completion of the talks with the EU.
Max Lehrain, Chief Operating Officer, Relendex:
The increase in interest rates is a significant moment as it is the first time the Bank of England has raised interest rates above 0.5 in nearly a decade. However, for savers, this change should act as a wakeup call as it is not likely to have a material impact on their investment meaning that those stuck in standard savings accounts are still missing out.
This is in large part down to the rate of inflation far outstripping interest rates, even with today's increase. In simple terms this means that if your savings earn 0.75% interest they are being eaten into by the effects of inflation.
With traditional lenders offering low returns on their savings accounts and cash ISA products, savers who are looking to achieve higher rates of returns should still consider alternative options. Peer-to-Peer (P2P) lending for example, can offer substantially higher returns, giving a good income boost when interest rates are still relatively low.
Innovative savers will identity these options to take this interest rate rise out of the equation. In real terms, over a three year period investing £5,000 in a cash ISA is likely to render a return ranging from £15 to £113, whereas P2P providers offer prospective returns far exceeding that. For example, investing £5,000 in a provider that offers 8%, would see returns of approximately £1,300 over a three year period.
Nigel Green, CEO, deVere Group:
Hiking interest rates now – for only the second time since the financial crash – is, to my mind, premature.
At just above the Bank’s target of 2%, inflation is not currently a key issue. In addition, major uncertainty surrounding Brexit, the looming threat of international trade wars, and absolutely average economic growth, business and consumer confidence are on the slide.
As such, there seems little real justification to increase interest rates now.
Against this back drop, why is the Bank of England raising rates today?
Has the decision been motivated in order to protect reputations and credibility after the Bank’s Governor and some of the committee had effectively already said the rise would happen?
Whilst today’s decision to hike rates is unnecessary, I think that the Bank is likely to refrain from any more increases until after Brexit.
Paul Mumford, Cavendish Asset Management:
The decision on balance might be the wrong one. While all agree that rates need to return to normality eventually, panicking and doing it for the sake of it - or just because other countries are doing it - will only make things worse.
The idea, as in these other regions, is to start incrementally escalating rates in a managed way as growth and inflation tick up. But the UK is in quite a distinct situation. To borrow some terminology from the Tories, the economy is stable, but far from strong - and certainly not booming. Higher interest rates could have very disruptive effects on sectors such as housing, where it could trigger a rush to buy at fixed rates, and motors and retail, which are performing OK but contain a lot of highly geared companies. This does not look like the sort of economy you want - or can afford - to remove demand from. Meanwhile the pound is holding firm at its lower base, so there is no immediate impetus to shore up the currency.
And of course looming behind all this is Brexit. Interest rates may be needed as a weapon to combat sudden inflation from tariffs should the worst happen and we crash out of Europe without a deal. It would make more sense to save the powder until there is more clarity on this front, and we now what sort of economic environment we're all heading into. The last thing we want is to be in a situation where we are stuck with higher and higher rates to combat inflation, while growth remains anaemic or stagnant.
These things are all swings and roundabouts, of course - one big plus from rate rises is that they will ease our mounting problem with big pension fund deficits. Whether this will make it worth the risk remains to be seen.
Stuart Law, CEO, Assetz Capital:
It looks like savers will be disappointed once again. Although the rate has risen slightly, this is unlikely to be passed on to savers, with many banks having form for just applying increases to borrowers.
What’s more, the Bank of England's statement that future increases will be at a 'gradual pace' implies that savers won't see returns that outstrip inflation for months - and potentially even years.
Rob Douglas, VP of UKI and Nordics, Adaptive Insights:
Ultimately, it is the companies that do not currently have sound financial planning processes in place that are likely to be impacted when changes like this occur, as it can upend budgeting and forecasting, making it difficult for finance and management teams to develop accurate financial plans and make business-critical decisions.
The 0.25% extra interest rate is being announced at an already uncertain time, when many fear the long-term effects of a possible no-deal Brexit or a potential trade war with the US on their business, organisations across the country will need to once again adjust their financial plans accordingly. To do this, companies must plan in real-time, with current data from across the organisation, so that they can mitigate potentially damaging consequences, such as a negative impact on profit margins.
The interest rate hike, while expected, is a reminder why businesses need to be able to continuously update their financial forecasts in real-time. Manual spreadsheets and processes simply don’t cut it anymore and finance teams need to be able to respond to economic changes such as this efficiently and effectively. With a modern, active approach to planning and forecasting, businesses will have the foresight and visibility to make better decisions faster, minimising the impact of unexpected government, regulatory or economic changes.
Paddy Osborn, Academic Dean, London Academy of Trading (LAT):
As widely expected, the Bank of England’s Monetary Policy Committee (MPC) raised the UK base rate by 0.25% today, stating that the low GDP data in Q1 2018 was just a blip, the UK labour market has tightened further and wage growth is increasing. This is the highest level of interest rates in the UK in more than nine years, and the MPC’s vote to raise rates was actually 9-0, against expectations of 8-1 or even 7-2.
There was also an unanimous vote to keep the level of government bond purchases at £435 billion, although the MPC remains cautious about the potential reactions of households, businesses and financial markets to future Brexit developments.
Assuming the economy develops in line with current projections, they stated that any future increases in the Bank rate (to return inflation to the 2% target) are likely to be “at a gradual pace and to a limited extent”.
In currency markets, GBP/USD spiked 50 pips higher from 1.3070 within 10 minutes of the announcement, but has since collapsed back below 1.3100. The longer term view for GBP/USD remains bearish, although there are a number of political and fundamental factors which may affect Cable in the coming weeks, namely Brexit developments, the developing trade war, and US interest rates.
The stock market, having fallen over 200 points since yesterday morning, failed to find any solace in the MPC comments and is currently trading at its 1-month lows around 7550. Higher interest rates mean higher cost of debt for companies, and this will often encourage investors to take some money out of their (more risky) stock market investments.
Feel free to offer Your Thoughts in the comment box below and tell us what you think.
Rugged coastline, sandy beaches, beautiful countryside, medieval castles and a world-class food scene. The largest Channel Island, Jersey, is the perfect destination for a long weekend break, although the abundance of cultural and scenic experiences and the genuine friendliness of everyone you meet promise to make you want to book another trip and return there as soon as you’re back home.
If you’re planning a mini trip to Jersey or if you need inspiration for your next weekend getaway this summer, then read on for Finance Monthly’s top recommendations.
How to get there?
Getting from Europe, and especially the UK, to Jersey is ridiculously easy. Flybe operates flights to Jersey from all major British cities, which get you to the picturesque island in approximately an hour. Once you land, grab a Hertz rental car from the arrivals hall and head out into the narrow country lanes.
Where to stay?
With its breath-taking views across St. Ouen’s Bay, stunning outdoor pool and swaying palms, The Atlantic Hotel makes it difficult to believe that all of this is only an hour-long flight from London. With its six acres of grounds that border La Moye Golf Course, along with lush gardens, timelessly elegant interiors and rooms that have either sea or golf-course views, The Atlantic Hotel is Jersey’s answer to beachside luxury.
If you don’t feel like heading out to the capital St. Helier for dinner on your first night in Jersey, enjoy a gastronomic fine-dining experience at the hotel’s Ocean Restaurant and sample the Tasting Room seven-course menu by Chef Will Holland.
The Atlantic Hotel offers an Atlantic break year round from £118 per person per night. This includes accommodation, full English breakfast each morning, a three-course dinner in Ocean Restaurant each night, use of the Palm Club and a group B hire car (petrol, insurance and Jersey hire car tax to be settled direct with the hire car company). Minimum two-night stay.
To book your stay at The Atlantic Hotel, please visit www.theatlantichotel.com, call +44 (0) 1534 744101 or email reservations@theatlantichotel.com.
What to do & see?
Jersey is only five miles by nine miles, but is brimming with an abundance of things to do. With its hugely varied landscape, a coastline that doesn’t get boring for a second, ideal conditions for water sports such as surfing or kayaking, a number of museums, an adventure centre, a zoo and so much history, the island offers something for everyone.
Start off your day of exploration in St. Brelade’s Bay by taking a stroll along the beach and soaking up some sunshine. La Corbière is the extreme south-western point of Jersey in St. Brelade and visiting its lighthouse is another great way to take in the endless sea views. However, you still haven’t seen anything and I promise you - it only gets better. For some of the most dramatic scenery on the whole island, drive along the west coast, all the way up until you get to the main act – the rugged north coast. We suggest stopping a few times to fully enjoy the jaw-dropping beauty of Jersey’s north coast and take photos.
Following this, grab a quick crab sandwich and a coffee from Jersey’s iconic kiosk The Hungry Man and set some time aside to properly explore the network of staircases and secret rooms in Mont Orgueil Castle, which guards the picturesque village of Gorey on the east coast.
After a delicious breakfast in the Atlantic Hotel on the next morning, prepare yourselves for a journey back in time with Jersey War Tours. Immerse yourselves in the Channel Island’s fascinating WWII history by visiting a number of bunkers, batteries, tunnels, towers and many other sites - all of which are not open to the public.
In addition to its water sports offering, adrenaline junkies or families with kids can enjoy a morning or an afternoon at Valley Adventure Centre, which offers an exciting range of activities such as zip wiring, aerial or rookie trekking, climbing, paintball and more.
If you have some time to spare before your flight, grab your car and head to the capital St. Helier for a coffee or an ice-cream and some shopping or enjoy one last beach walk and a few final deep breaths of fresh salty air.
Where to dine?
For a real taste of just-caught seafood, head to the Michelin Bib Gourmand Mark Jordan at the Beach – a relaxed beachside restaurant in the magical fishing village of St. Aubin. Delicious, locally sourced and cleverly presented food, excellent views, laid back atmosphere and outstanding service – what more can one ask for? The Jersey scallops with chive and cucumber beurre blanc and the brill in lobster bisque are both unmissable.
On your last night, head back to St. Aubin and its harbour and finish your day at Salty Dog Bar & Bistro. Enjoy a glass of wine in the garden before settling down in the bustling dining area to indulge in classic dishes, with a contemporary twist and impeccably prepared with local ingredients. For a taste of everything, try the St. Aubin Seafood sharing platter for two, which comes with scrumptious Jersey Royals and a green salad.
For more information about Jersey, please visit www.jersey.com
Flybe operates daily flights to Jersey from London and Birmingham, with fares starting from £26.33 one way, including taxes and charges. Book now at www.flybe.com
Amidst the recent shock resignations of Brexit Secretary David Davis and Foreign Secretary Boris Johnson, investment uncertainty, slower economic growth and a weaker pound, the United Kingdom is on its way to a slow but steady Brexit, with negotiations about the future relations between the UK and the EU still taking place.
And whilst the full consequences of Britain’s vote to leave the EU are still not perceptible, Finance Monthly examines the effects of the vote on economic activity in the country thus far.
Do you remember the Leave campaign’s red bus with the promise of £350 million per week more for the NHS? Two years after the referendum that confirmed the UK’s decision to leave the European Union, the cost of Brexit to the UK economy is already £40bn and counting. Giving evidence to the Treasury Committee two months ago, the Governor of the Bank of England Mark Carney said the 2016 leave vote had already knocked 2% off the economy. This means that households are currently £900 worse off than they would have been if the UK decided to remain in the EU. Mr. Carney also added that the economy has underperformed Bank of England’s pre-referendum forecasts “and that the Leave vote, which prompted a record one-day fall in sterling, was the primary culprit”.
Moreover, recent analysis by the Centre for European Reform (CER) estimates that the UK economy is 2.1% smaller as a result of the Brexit decision. With a knock-on hit to the public finances of £23 billion per year, or £440 million per week, the UK has been losing nearly £100 million more, per week, than the £350 million that could have been ‘going to the NHS’.
Whether you’re pro or anti-Brexit, the facts speak for themselves – the UK’s economic growth is worsening. Even though it outperformed expectations after the referendum, the economy only grew by 0.1% in Q1, making the UK the slowest growing economy in the G7. According to the CER’s analysis, British economy was 2.1 % smaller in Q1 2018 than it would have been if the referendum had resulted in favour of Remain.
To illustrate the impact of Brexit, Chart 1 explores UK real growth, as opposed to that of the euro area between Q1 2011 and Q1 2018.
As Francesco Papadia of Bruegel, the European think tank that specialises in economics, notes, the EU has grown at a slower rate than the UK for most of the ‘European phase of the Great Recession’. However, since the beginning of 2017, only six months after the UK’s decision to leave the EU, the euro area began growing more than the UK.
Reflecting on the effect of Brexit for the rest of 2018, Sam Hill at RBC Capital Markets says that although real income growth should return, it is still expected to result in sub-par consumption growth. Headwinds to business investment could persist, whilst the offset from net trade remains underwhelming.”
All of these individual calculations and predictions are controversial, but producing estimates is a challenging task. However, what they show at this stage is that the Brexit vote has thus far left the country poorer and worse off, with the government’s negotiations with the EU threatening to make the situation even worse. Will Brexit look foolish in a decade’s time and is all of this a massive waste of time and money? Or is the price going to be worth it – will we see the ‘Brexit dream’ that campaigners and supporters believe in? Too many questions and not enough answers – and the clock is ticking faster than ever.
The financial services industry must “unite and fight” against a no-deal Brexit that potentially erodes clients’ rights and damages the financial sector itself.
This warning from deVere Group founder and CEO, Nigel Green, comes as the UK's International Trade Secretary, Liam Fox, said that Britain should accept a ‘no-deal’ scenario, instead of requesting more negotiating time.
It also follows MPs being told earlier this week by the Association of British Insurers that it could be “illegal” to pay private pensions to British expats if the UK crashes out of the EU with no deal.
In addition, the City of London is claiming that Brexit will cost Britain up to 12,000 financial services jobs in the short-term, with many more potentially disappearing in the longer term.
Mr Green says: “Now is the time for the financial services industry to unite and fight against a no-deal Brexit that potentially erodes clients’ rights, protections and freedoms. It must also stand against it potentially damaging the financial sector itself.”
He continues: “It is an outrage that if the UK crashes out of the EU, and free movement of capital stops because there is no agreement in place, people could stop receiving their hard-earned retirement income, saved over many years, simply because they have chosen to live outside the UK, which they are perfectly entitled to do.
“As an industry we need to step up, lobby the policymakers, and ensure clients are secure on this issue, amongst others. We need politicians to guarantee their rights, choices and safeguards as a matter of urgency.”
Mr Green goes on to say: “This latest warning, and the ongoing uncertainty, is likely to trigger even more people who are eligible to do so to consider moving their British pensions out of the UK into HMRC-recognised pensions while they still can.
“Many will be seeking to safeguard their retirement funds by transferring them into a secure, regulated, English-speaking jurisdiction outside the UK.”
The deVere CEO adds: “The financial sector also needs to make its own voice heard.
“The industry needs continuity and certainty. What it does not need is the chaos and the expense of a no-deal Brexit.
“A no-deal scenario will likely mean a reduction of the services and products that we are able to offer clients, as well as increased costs for businesses and, ultimately, the client.
“Therefore, we must actively engage with politicians – who largely seem only to have their own political agenda at heart - to prevent this from happening.”
(Source: deVere Group)
As UK banks continue to report their interim results, the forecast remains positive for banking giants Royal Bank of Scotland (RBS) and Lloyds Banking Group. While the outlook is rosy, traditional lenders still face fierce competition from digital challenger banks, with 61% of smartphone owners opting to bank solely online.
RBS is expected to outperform analyst predictions and Lloyds’ strong financial performance is forecasted to continue. Although confidence is high, traditional institutions remain under pressure to maintain market share in the increasingly digital climate. To do so, many are focusing on securing their long-term future by improving customer-centricity, regardless of the short-term impact on profit.
Many traditional banks are looking for novel ways to raise the standard of their customer services, with features such as chatbots and roboadvisors, says Bhupender Singh, CEO of Intelenet Global Services.
Mr. Singh comments: “Despite 42% of people moving to alternative service providers for personal banking needs, over half are choosing to stick with their traditional bank, making these institutions a force to be reckoned with.
“But this does not mean that traditional lenders should become complacent - in the age of the customer, it is crucial that banks can provide advice and support that is truly in the customers’ best interest. One way that banks are streamlining the customer experience, is by using chatbots and AI technology to carry out customer interactions.
Mr. Singh continues: “For instance, voice recognition software can be paired with customer records and predictive tools to identify a specific customer and confirm which department they require before sending them there directly, without the customer having to explain their problem multiple times. This dramatically improves the customer experience and, for one bank, has reduced the average handling time by 40%.
“But while technology is a key part of the solution, it is important to remember that it is simply that – a part of the puzzle. A human touch is still essential to solve many of the financial issues that people face. Much of the best automation and AI technologies in the banking sector takes away the burden of repetitive tasks for staff, allowing them to focus their efforts on quality in-person service.”
(Source: Intelenet® Global Services)
According to the latest YouGov debt research commissioned by Equifax, 15% of UK adults have missed a payment on a credit card or short term loan at some point. Almost a third (32%) of UK adults with a credit card admit that, in a typical month, they don’t pay off their credit cards debts in full, with over half (52%) of these saying it’s because they can’t afford the full monthly balance. With the net lending to individuals in the UK increasing by £9.68 million a day in March 2018 and an average debt to income ratio per adult in the UK at 114.4% as of May 2018 , Equifax asks the question: is all debt bad?
Household debt has been on the increase over the past few years, fuelled by squeezed wages and rising inflation. Last year alone the total credit card debt of households across the UK stood at £70 billon by November – equating to an average debt of £2574.00 per household. Whilst using credit can be useful for various reasons, there is a tipping point where the borrowing can turn into unmanageable debt. If someone can no longer afford to repay their debt they may have to opt for an Individual Voluntary Arrangement (IVA) or even declare themselves bankrupt.
Lisa Hardstaff, consumer credit expert at Equifax, comments: “According to our YouGov research, 40% use credit cards for day-to-day spending, which isn’t strictly a ‘good’ or ‘bad’ thing. But 13% of respondents have gone into their overdraft limit without approval from the lender, which could mean incurring extra charges and fees. Our infographic aims to help consumers see the different kinds of debt and recognise the risks, whilst outlining steps they can take to regain control of their finances.
“Not all debt is bad. If it’s managed properly and paid off, loans and credit cards can help people make plans and deal with unexpected events and emergencies. However, it’s vital that people understand the basics of budgeting, otherwise borrowing can spiral out of control. The first step to budgeting is understanding what’s coming in in terms of wages, benefits and other income. Individuals also need to take stock of their outgoings, including bills, pensions, loans and daily purchases, such as coffee or clothes. By subtracting their total spending from their total income, individuals will be able to see if there’s a shortfall and make positive changes.”
(Source: Equifax)
Three quarters of finance decision makers within UK businesses have admitted that their company could be susceptible to fraud because of poor accounts payable systems, according to a new report.
And 70% of finance decision makers also admitted that a failure to implement robust purchase order processing within their company was also putting them at severe risk from fraud.
In fact according to the ‘Changing trends in the purchasing processes of UK businesses’ report commissioned by document managing, accounts payable and purchasing solution provider Invu, less than a quarter (24%) of decision makers are ‘completely confident’ that they could prevent or detect fraud with their current systems.
The risk from fraud is also not limited by company size, according to the research, with 25% of large businesses and 30% of small companies harbouring some concerns about fraud due to weak processes and checks.
“Although we’ve seen a slight reduction in the amount of financial decision makers concerned about fraud, it is clear that concerns remain high within Britain’s business community and that not enough is being done to protect companies from becoming victims of fraud,” said Ian Smith, GM and Finance Director at Invu.
“Fraud is a huge problem for any business, with the results being potentially fatal. Automated processes, which can monitor purchase and payment processes, go a long way to prevent and detect these issues, but they are clearly not being deployed enough within UK businesses.”
(Source: Invu)
Below Rebecca O’Keeffe, Head of Investment at interactive investor, comments on the latest global market updates offering insight into the recent Ryanair strike debacle and Brexit progress.
Global markets continue their malaise, as trade tensions weigh on sentiment amid fears that global growth will slow. With no major catalysts to drive the market higher, the risks are on the downside and the danger is that equity markets will drift lower. Earnings will allow individual stocks or even sectors to out or underperform, but the broader indices are likely to find it more difficult to gain traction.
What a difference a week makes. Just last week, Theresa May appeared to have come up with a revised vision of Brexit that offered a middle ground and might have delivered a softer Brexit. However, resignations, rebellions, concessions and amendments now mean that it is difficult to be sure what the UK’s position actually is. With May’s government somewhere between a hard Brexit and no deal, it will be very difficult for Europe to sign off on any deal based on the current UK confusion. The summer recess may provide some respite, but as the weeks ticks by the prospect of no deal is rising rapidly and the impact on sterling could become more severe than it already is, and international companies may once again begin to rachet up the rhetoric regarding the very real risks of a bad deal.
Ryanair are suffering multiple threats, all of which are weighing on the bottom line. Sustained higher oil prices, air traffic control strikes in Europe, bigger wage costs and increased competition are all problems for the low-cost airline. Ryanair has historically been reasonably good at hedging their oil exposure, but prolonged higher prices have increased their costs. Strikes by European air traffic controllers, in particular in Marseilles, have wreaked havoc for many European airlines, causing significant cancellations and disruption. Further strikes by Ryanair pilots are adding to their woes, alongside additional staff wage costs for pilots. The prospect of further competition in the low-cost sector from IAG is another headache that Ryanair could do without. Some of these headwinds are generic and some are self-made, but it is difficult to see much upside for Ryanair in the short term.
A simple increase of 1% on income tax and National Insurance could pay for the 3.4% increase to the NHS budget announced by the Government says leading accounting, tax and advisory practice Blick Rothenberg.
Robert Pullen a Director at the firm said: “The debate has been raging over the weekend about how the increase to the budget could be paid for. There was alarm recently when a report from the Institute for Fiscal Studies and Health Foundation said that the NHS would need an extra 4% a year - or £2,000 per UK household - for the next 15 years and that the only realistic way this could be paid for is by tax rises of 3% on VAT, income tax and National Insurance contributions.”
Pullen said: “If a 3% tax increase is implemented, this would undoubtedly cause further issues within the Government, but a more manageable increase of just 1% to income tax rates could give the additional funding required."
He added: “We have calculated the impact of a 3% increase for an employed worker who is not at retirement age. It would mean extra tax of £892 for someone on £25,000 (3.5% effective tax rate) up to £11,747 for someone on £200,000 (5.9% effective tax rate).”
It is potentially worse as the tax brackets increase, Robert said: “For the £25k earner, that equates to £17 per week or £74 per month and for the £200k earner £226 and £979 respectively.”
He continued: “The NHS budget in 2016/17 was around £122bn, and so a 3.4% funding increase, as proposed, would broadly be equivalent to an extra £4.2bn per year.”
He added: “We calculated, using HMRC statistics, that if income tax rates were increased by 1% then in the tax year 2016/17 an extra £4.2bn would have been generated."
“This means that a 1% increase for an employed worker who is not at retirement age would mean extra tax of £297.00 for someone on £25,000 (1.19% effective tax rate) up to £3,196.00 for someone on £200,000 (1.96% effective tax rate).”
He added: “This would go some way to filling the hole in the finances without relying on the ‘Brexit dividend’ crystallising but if the dividend does come to fruition the one percent could be even less."
