The IMF has cut its growth forecasts for the global economy for this year and next. It predicts growth of 3.2% in 2019, down from its April forecast of 3.3%. Growth next year is set to pick up to 3.5%, although that is below its earlier forecast of 3.6%. The IMF has raised its growth forecast for the UK this year to 1.3% from 1.2%. The revision for the UK reflects what the report calls a stronger-than-expected first three months of the year, boosted by pre-Brexit stockpiling. However, the IMF’s World Economic Outlook analysis has named a no-deal Brexit among the chief threats to the world economy.

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Analysis by estate agent Ludlow Thompson shows that the number of long term mortgages issued jumped last year, with homebuyers taking out 3,483 mortgages with 40-year terms in 2018, compared with 162 in 2017. The figures show that the number of mortgages issued with terms longer than 25-years climbed 10% between 2017 and 2018, from 455,647 to 499,558. Money Expert cites a Moneyfacts report which found that more than half of all residential mortgage products now offer a maximum term of 40 years, with the number increasing from 1,217 in June 2014 to 2,744 in June 2019.

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Banks are assessing the risks a no-deal Brexit poses to small businesses, according to accountancy firms which have been advising banks on their preparations for Britain leaving the EU without a deal in place. The Bank of England (BoE) believes the banking sector is well-prepared for the fallout of an exit from the EU with no deal in place, but it has been suggested that a sudden downturn could hit access to credit for small firms. BoE analysis suggests that 80% of businesses believe they are prepared for a no-deal Brexit but around one in 10 have no contingency plan and did not expect to develop one. SMEs were also deemed more likely to have not prepared for a cliff-edge Brexit.

The Daily Telegraph

Demand for mortgages rose significantly in the second quarter of the year in a sign that the housing market is holding firm amid Brexit uncertainty, according to the Bank of England. In its latest credit conditions survey, a balance of 29.3% of lenders said that demand for mortgages had risen in the past year, compared with 1.8% in the first quarter. Economists said that the figures indicated the avoidance of a disruptive Brexit at the end of March may have provided a boost to housing market activity.

The Times

New research from HSBC has found that the length of mortgage term being taken out by first-time buyers and the loan to value chosen have both increased significantly since the beginning of 2018. Since January 2018 the average mortgage length chosen by first-time buyers has increased by three and a half years, and now sits at 27 years 8 months. First-time buyers are now, on average, taking out mortgages for six years longer than those already on the property ladder and the average LTV for first-time purchases has increased from 72% LTV to 81%. The research also found that the average age people expect to get onto the property ladder is now 39 years old and more than half of those looking to buy their first home already have a family to support.

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The UK economy grew by 0.3% in the three months to the end of May, according to the Office for National Statistics (ONS). Manufacturing rebounded by 1.4% in May compared to a 4.2% drop the previous month. However, the National Institute of Economic and Social Research said it still expected a fall in GDP of 0.1% in the three months to June as Brexit-related uncertainty takes its toll.

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British Airways is facing a record fine of £183m for last year’s breach of its security systems. The airline, owned by IAG, says it is “surprised and disappointed” by the penalty from the Information Commissioner’s Office (ICO). The ICO said the incident took place after users of British Airways’ website were diverted to a fraudulent site. Through this false site, details of about 500,000 customers were harvested by the attackers, the ICO said. The watchdog said a variety of information was “compromised” by poor security arrangements at the company, including log in, payment card, and travel booking details as well name and address information.

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Productivity fell for the third consecutive quarter in Q1, with the decline January through March matching the biggest fall since the end of 2015. Figures from the Office for National Statistics show that output dipped 0.2% compared to Q1 2018. This compares to the 0.1% slide seen in the final quester of last year. The manufacturing sector saw productivity decline by 0.9%, while in the services sector a 0.2% increase was recorded.

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IHS Markit’s UK Construction Purchasing Managers’ Index (PMI) fell to its lowest level since April 2009 in June, to a reading of 43, on the back of the sharpest drop in UK housebuilding demand for three years. This marks the fourth time the sector has contracted in the past five months. Economists were expecting a figure of 49.2. Any reading above 50 denotes growth, below represents contraction. Tim Moore, associate director at IHS Markit, said the figures revealed “weakness across the board” for the construction sector.

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Publicly listed companies and large asset owners will have to report on how climate change risk impacts on their activities by 2022, the City minister John Glen is set to announce. Speaking at a Green Finance Summit in London, Mr Glen will point out that the UK’s financial services sector must be at the heart of the country’s efforts to tackle climate change and meet a goal of net zero carbon emissions by 2050. Banks will be urged to play a bigger role to support the UK meeting its target by investing in sustainability and explaining their own exposure to the climate crisis while financial services firms will also be expected to disclose how climate change risk will hit their activities.

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The number of borrowers taking out “marathon” mortgages lasting 35 years or more has reached its highest level since the 2011 recession. Figures from the Financial Conduct Authority reveal 28,310 mortgages running for 35 years or more were approved in 2017 – a 27% annual rise. Barclays last week extended the maximum term on its Family Springboard mortgage from 25 to 35 years, a further sign that first-time buyers are being encouraged to take out marathon deals. The FCA said 2.5% of mortgage approvals in 2017 were for marathon deals, compared with 1.6% in 2011.

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The Bank of England has kept interest rates on hold at 0.75% amid heightened no-deal Brexit fears and as UK growth falters. The MPC voted unanimously to keep rates unchanged as it cautioned the “downside risks” to growth had increased since its last set of forecasts in May. The Bank also trimmed its expectations for second quarter growth, predicting GDP will remain flat against a previous forecast for 0.2% expansion, after official data showed the economy dipped by a worse-than-feared 0.4% in April. However, the Bank reiterated that “gradual” rate hikes would be needed over the next three years to keep inflation to its two per cent target.

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The amount of loan-to-value mortgage lending with ratios above 90% is approaching pre-crisis highs, but the Bank of England’s executive director for financial stability has said the regulator isn’t concerned. Speaking at the University of Warwick, Alex Brazier continued to say that, although banks have a real appetite to lend, households don’t have the appetite to borrow. He said credit conditions in the mortgage market are “easy” and mortgage pricing is competitive.

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According to figures from the Finance & Leasing Association, asset finance new business grew by 7% in April, compared with the same month last year. The data showed that new business in the plant and machinery finance and business equipment finance sectors rose by 8% and 9% respectively, while commercial vehicles finance new business was up 23% over the same period. Total asset finance for the month of April was £2.94bn (€3.32bn). The total excluding high value deals was £2.82bn, a rise of 10% year-on-year. By channel, direct finance was £1.48bn, a 16% year-on-year rise, while broker introduced finance was £561m, up 10% compared to April 2018. Sales finance came in at £779m, unchanged from last year. Geraldine Kilkelly, head of research and chief economist at the FLA, said: “The asset finance market has made a great start to the second quarter of 2019, recording its seventh consecutive month of new busines s growth in April.”

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The SME sector outperformed larger firms when it came to mergers and acquisitions in the first quarter of the year. Overall, UK M&A was down 83.7% compared to Q4 last year, with business confidence shaken in the build-up to the March Brexit deadline. ONS data shows deal values fell from £38.8bn to £6.3bn in the first three months of 2019. But Mark Collings, chief commercial officer at Code Investing, said SMEs saw Brexit uncertainty as an opportunity for growth and M&A in the sector fared better than larger corporate firms. Daniel Domberger, partner at Livingstone, added: “M&A volumes are holding up quite nicely in this area as investors look to fulfil long-term strategic goals, and business leaders demonstrate clear growth trajectories.”

City AM

UK shoppers shunned the high street last month leading to sales plunging in May faster than at any time in the past 24 years, new data shows. Sales dropped 2.7% in the four weeks to May 25 compared with a month earlier, according to the British Retail Consortium-KPMG Retail Sales Monitor, making it the biggest fall since records began in January 1995. Helen Dickinson, the BRC’s chief executive said: “With the biggest decline in retail sales on record, the risk of further job losses and store closures will only increase. We have a broken tax system, which sees retailers paying vast sums of money regardless of whether they make a penny at the till, and yet the government is failing to act.”

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A report from Smith & Williamson reveals that 70% of small businesses fail to secure finance at the first attempt while two in five companies said that they had been turned down for funding more than three times. One in ten had made five or more unsuccessful attempts and nearly half said weak management was the reason given for the refusal. Inadequate business models and poor financial controls were also key reasons for losing out. Smith & Williamson said fast-growing companies with a concise business plan and an understanding of how much money they need were more successful than other small businesses but still found fundraising difficult.

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CBI director general Carolyn Fairbairn has sent an open letter to all Tory leadership candidates warning that a no-deal Brexit would do “severe” damage to businesses. She said her 190,000 members desperately wanted an end to Brexit turmoil, adding: “Leaving the EU with a deal is the best way forward. Short-term disruption and long-term damage to British competitiveness will be severe if we leave without one. The majority of firms can never be prepared for no deal, particularly our small and medium-sized members who cannot afford complex and costly contingency plans.”

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British companies paid 30% more in fines last year for breaching privacy rules, according to a PwC report, with even bigger penalties forecast for this year. Marketing activities triggered the largest number of infringements last year, accounting for half the cases, with 64% of those resulting from telephone gambits. A quarter of enforcement actions related to personal data security breaches. Mark Taylor, a partner at Osborne Clarke commented: “While GDPR has made international compliance easier, it hasn’t unfortunately made it a one-size-fits-all approach everywhere.” Mr Taylor predicted that “enforcement activity will step up, with companies that are undertaking higher-risk processing likely to be most at risk”.

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More money entered the UK housing market in April than at any point since 2007, according to industry group UK Finance, with almost £9bn of home purchase mortgages approved for nearly 43,000 such loans. The number of mortgages was up 6% on the month and more than 11% on April 2018, while remortgaging also picked up – with more than 31,000 homeowners shopping around for a new loan in the month.

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