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KPMG predicts upturn for UK economy – Industry roundup: 2 July

UK economy ‘will grow faster than forecast’, says KPMG

The UK economy is set to grow more rapidly than initially forecast, predicts consultancy KPMG, suggesting that opposition leader Sir Keir Starmer could inherit more stable economic conditions if his Labour party wins the general election on Thursday, as anticipated.

KPMG says that UK gross domestic product (GDP) growth will rise to 0.5% this year, an upgrade from the previous estimate of 0.3% and against modest growth of 0.1% last year. The 2024 growth rate has also been revised upwards to 0.5% from the earlier projection of 0.3%.

The economy is expected to expand by 0.9% in 2025, supported by a series of interest rate cuts by the Bank of England as inflation subsides..KPMG anticipates that the BoE’s base rate could decrease to around 3% next year from the current 16-year high of 5.25%.

KPMG describes the UK economy as “turning a corner” after struggling since the pandemic began in 2020. Severe inflation, rising interest rates, and a surge in living costs driven by higher global energy prices following Russia’s invasion of Ukraine have hampered economic growth.

Yael Selfin, KPMG UK’s chief economist, commented: “Political uncertainty will now resolve sooner with a summer election and a potential fiscal event in the autumn, setting out the new government’s economic agenda. This could be aided by gradual cuts in interest rates, which look likely despite a small rise in inflation above its target expected later this year.”

Evidence suggests the incoming government will benefit from more stable economic conditions post-election. Inflation has dropped to the BoE’s 2% target for the first time since July 2021. Additionally, the Office for National Statistics (ONS) recently revised its estimate for first-quarter GDP growth to 0.7%, up from 0.6%.

The BoE is expected to commence interest rate cuts at its next meeting on 1 August. KPMG predicts that a slowdown in price growth could lead to several base rate reductions over the next 18 months.

However, the group cautioned that despite the uptick in growth, the next government will face a challenging fiscal environment. “The fiscal reality is similar for whichever party wins the general election on July 4,” it said. “Interest rates are set to remain higher, debt more difficult to bring down and spending pressures on health and defence continue to mount.”

Both Labour and the Conservatives have faced criticism for overlooking the strain on public finances during the election campaign. Current fiscal plans, outlined by UK Chancellor Jeremy Hunt in his March budget, suggest unprotected government departments, such as local government and the justice system, could see real-terms cuts of about £20 billion (US$25 billion).

Starmer and prime minister Rishi Sunak have both ruled out increases to income tax, national insurance, and value added tax (VAT), the three primary revenue sources for the government. Such commitments imply that the next government will need to increase borrowing, breach existing fiscal rules, or implement significant public spending cuts.

The Labour leader has pledged to bring stability to economic policymaking and reform the planning system to boost economic growth, thereby raising funds for the Treasury to support public services.


IFRS, IFC partner to improve emerging markets’ sustainability reporting

The International Financial Reporting Standards (IFRS) Foundation and the World Bank Group’s International Finance Corporation (IFC) are setting up strategic partnership aimed improving sustainability reporting in emerging markets and developing economies (EMDEs), in order to strengthen sustainable capital markets through improved standardisation and transparency.

The new alliance reflects the need for developing economies to significantly scale up climate investments and finance over the next few years, with the IFC estimating that emerging markets require nearly US$3 trillion per year by 2030 to adapt to climate change, with the bulk of funding to come from private sources.

Martine Valcin, IFC Global Manager, Corporate Governance and ESG Advisory, Knowledge and Learning, said: “Our combined efforts are set to drive significant strides in standardising and enhancing transparency, ensuring that EMDEs are not left behind in the global shift towards sustainable finance.”

The IFRS Foundation launched its International Sustainability Standards Board (ISSB) in November 2021 at the COP26 climate conference, with the goal to develop IFRS Sustainability Disclosure Standards to provide investors with information about companies’ sustainability risks and opportunities. The IFRS released its inaugural general sustainability (IFRS S1) and climate (IFRS S2) reporting standards in June 2023.

Following the release of the standards last year, IOSCO, the leading international policy forum and standards setter for securities regulators called on regulators to incorporate the standards into their sustainability reporting regulatory frameworks. The IFRS Foundation reported in May that to date, more than 20 jurisdictions representing nearly 55% of global GDP have decided to use the ISSB standards, or are taking steps to introduce the standards in their own frameworks.

Under the new partnership, the IFRS Foundation and IFC will focus on implementing programmes to promote and build capacity for the consistent application of the IFRS Sustainability Disclosure Standards across EMDEs, through initiatives including the development of toolkits and research publications and by conducting training programmes to encourage sustainability reporting. The partnership also plans to provide technical assistance and tailored support to help jurisdictions adopt and implement the standards effectively.

Jingdong Hua, ISSB Vice-Chair, said: “This partnership will expand our impact, helping enhance the quality of sustainability and climate-related financial reporting worldwide, especially in emerging markets and developing economies. It plays a critical role in bringing structured and reliable sustainability information to the forefront of global markets, facilitating investments.”


China’s PBOC plans to borrow bonds from market

China's central bank said it would borrow treasury bonds from some primary dealers soon, outlining the specifics of a plan analysts say is aimed at putting a floor under plunging domestic interest rates.

The People’s Bank of China (PBOC) said it would borrow the bonds in open market operations in the near future, setting the stage for possible treasury bond selling, a new tool that will help the central bank control credit flow and market yields.

The country’s sovereign bonds have been on a long rally since the start of the year, with yields hitting record lows, as a wobbly economy and volatile stock markets pushed savers into fixed-income safe haven investments.

Those declines in yields, which move inversely to bond prices, have heightened concerns among policymakers that sharp speculative moves could trigger financial instability.

PBOC Governor Pan Gongsheng hinted at the Lujiazui Forum last month that the central bank might soon start trading in the secondary bond market.

ʺThe move means the central bank will likely sell treasury bonds via open market operations soon,ʺ said Ming Ming, an economist at Citic Securities. ʺSelling bonds at a time when 10-year treasury yields have fallen to historic lows can help ward off interest rate risks.ʺ

Yields on China's 10-year which have fallen 35 basis points (bps) so far this year, rose 6 bps to 2.275% following the statement, while 30-year treasuries rose nearly 7 basis points. A 30-year treasury ETF managed by Pengyang Asset Management dropped 1.2%, the largest one-day decline since late April.

Unlike other major central banks, the PBOC does not hold scheduled monetary policy meetings. It guides interest rates through its medium-term funding operations and short-term repo transactions, and uses bank reserve requirements to manage cash conditions.

PBOC’s move to borrow and trade bonds would improve its ability to steer market expectations, said Fan Qianghua, investment director at Cypress Investment Management Co. The central bank said in an online statement it will ensure stability in China’s bond market and its plan was ʺbased on prudent observation and evaluations of current market situationsʺ.

The central bank said in May that it would sell low risk debt including government bonds when necessary, while paying close attention to current bond market changes and potential risks. The PBOC bought bonds in 2007 for the creation of the sovereign wealth fund China Investment Corp.

The bank only holds 1.52 trillion yuan (US$209.14 billion) worth of bonds, about 5% of the treasury bonds in circulation and 1.4% of all the local bond holdings worth $14.6 trillion by Chinese entities.

ʺWhen the central bank starts selling, it will increase the scale of tradable treasury bonds in the market, meaning activating a larger supply,ʺ said Xing Zhaopeng, senior China strategist at ANZ.  ʺThe central bank's move will set a bottom line for treasury yields.ʺ


BlackRock acquires data provider Preqin in US$3.22 billion deal

Multinational investment group BlackRock has agreed to acquire UK data provider Preqin, as part of efforts by the world’s largest asset manager to bolster data capabilities as it expands into private-market investments.

The New York-based group said that it had agreed to acquire privately held Preqin for £2.55 billion (US$3.22 billion) in cash. It expects the deal to close before the end of the year pending regulatory approvals.

BlackRock said the purchase of Preqin, which provides independent data solutions for alternative markets, would add to its Aladdin financial technology platform, bringing together data, research and investment processes for fund managers and investors.

Preqin is expected to generate approximately US$240 million of highly recurring revenue this year and has seen growth of around 20% annually in the past three years, BlackRock said in a statement.

“As clients increasingly evolve their focus from choosing products to constructing portfolios, this shift requires technology, data, and analytics that create a ‘common language’ for investing across both public and private markets. We see data powering the industry across technology, capital formation, investing, and risk management,” said Rob Goldstein, BlackRock’s chief operating officer.

BlackRock, which had US$10.4 trillion in assets under management as of April, commented that the fast-growing segment of alternative assets is expected to reach U$40 trillion by the end of a decade. Private markets data, meanwhile, is estimated to be an US$8 billion total addressable market, with growth of 12% a year that is expected to reach US$18 billion by 2030.

That has compounded the need for standardised data, benchmarks and analytics at help investors get those types of investments into their portfolios, BlackRock said.

BlackRock shares this year have declined 3%, underperforming the 14% rise for the S&P 500 SPX.

Preqin said it welcomed the deal, and that founder Mark O’Hare will join BlackRock as a vice chair after the close of the transaction. Preqin is owned by its management and employees, alongside Valhalla Ventures, the family holding company of O’Hare.


Greece introduces a six-day working week

The working week has just become longer for some employees in Greece’s private sector, with the introduction of a six-day, 48 hour working week effective from 1 July.

The initiative has been promoted by the pro-business government of prime minister, Kyriakos Mitsotakis, who says that it has become necessary by the combination of Greece’s shrinking population and shortage of skilled workers.

Select industrial and manufacturing facilities, along with businesses that provide 24/7 services, are eligible to extend the working week beyond five days under new labour laws. Food service and tourism workers are not included in the longer workweeks.

The amended labour laws, which were approved last September also following productivity issues in the country, which have seen many workers put in extra hours and often not be compensated for their efforts.

Workers who do put in the extra time will receive 40% extra during the additional eight hours—and 115% of their normal salary if they work on a holiday.

Employers who decide to embrace the 48-hour workweek will be required to notify employees at least 24 hours before the shift begins. No additional overtime beyond the eight hours is allowed.

The new rules were met with protests ahead of their approval. The day before the bill was passed, public sector workers, such as teachers, doctors, and transportation workers, walked off the job in protest, calling the overhaul an affront to workers’ rights that could create “barbaric” conditions.

Workers in Greece already work more than those in North America and most of Europe. The reports that Greeks worked an average of 1,886 hours in 2022, compared to 1,811 in the US and the European Union average of 1,571.

Greece’s unorthodox approach to labour contrast with many other countries that are experimenting with a four-day working week. In February the results of the world’s largest trial of the shorter schedule in the UK showed workers who put in four days were just as productive as they were during a five-day week. The nonprofit that ran the pilot programme called it a “resounding success on virtually every dimension.”

Last March, a member of California’s legislature floated legislation for a 32-hour workweek to become national law, but the bill failed to find traction.


ANZ secures approval for A$4.9 billion Suncorp deal

ANZ Bank has secured the Australian Federal Treasurer’s approval for its previously announced A$4.9 billion (US$3.25bn) acquisition of Suncorp Group’s banking division Suncorp Bank.

Granted under the Financial Sector (Shareholdings) Act 1998 (FSSA), the approval entails various conditions, such as ANZ Bank maintaining its and Suncorp Bank’s regional branch numbers across Australia for a period of three years.

ANZ Bank will also have to ensure that there are no net job losses in Australia as a direct result of the acquisition for a period of three years. In addition, the bank will continue its ongoing efforts to strike an agreement with Australia Post, on a commercial basis, to provide Bank@Post services to its customers.

The Federal Treasurer’s decision comes after the Australian Competition Tribunal’s decision to authorise the proposed deal in February this year and the Queensland Parliament’s enactment of the State Financial Institutions and Metway Merger Amendment Bill last month.

The proposed deal is contingent upon the Queensland State Financial Institutions and Metway Merger Amendment Act coming into effect.

This amendment, upon proclamation, will modify the Metway Merger Act, satisfying the remaining requirement to enable the proposed acquisition.

The completion of the transaction is expected to take place at the end of the next month.

ANZ Bank chief executive Shayne Elliott said: “This is a significant milestone in our plans to expand our presence in Queensland and bring the best of ANZ to Suncorp Bank customers.

“Queensland is thriving. With strong economic growth, high workforce participation and more interstate migration than any other state or territory, we’re excited about the opportunities Queensland presents for ANZ and our customers.”

ANZ originally signed the agreement to acquirre Suncorp Bank two years ago as part of aims to expedite the expansion of its retail and commercial businesses along with boosting the geographic balance of its business in Australia.


Vodafone Business launches CSRD sustainability reporting solution

European telecoms company Vodafone’s digital communications solutions unit Vodafone Business has launched Vodafone Business ESG Navigator, a new software solution aimed at enabling companies to address their sustainability reporting needs, with a particular focus on the European Union’s (EU) Corporate Sustainability Reporting Directive (CSRD), in collaboration with sustainability reporting software provider Envoria.

Founded in 2018, Munich-based Envoria provides solutions enabling companies to meet sustainability reporting requirements, calculate CO2 emissions, implement EU Taxonomy regulatory requirements, and address supply chain laws. The company is part of the Vodafone UPLIFT program, which partners with innovative startups to work on specific applications for market-ready solutions.

Sven Schubert, CEO & Co-Founder of Envoria, said: “Thanks to the partnership with Vodafone Business, we can make our proven ESG software accessible to a wider range of companies, helping them meet increasing sustainability demands. We are confident that the new Vodafone Business ESG Navigator will become an essential tool for sustainable business management for all Vodafone Business customers.”

The CSRD is a major update to the EU’s Non-Financial Reporting Directive (NFRD), the previous EU sustainability reporting framework, significantly expanding the number of companies required to provide sustainability disclosures to over 50,000 from around 12,000, and introducing more detailed reporting requirements on company impacts on the environment, human rights and social standards and sustainability-related risk. The CSRD took effect from the beginning of 2024 for large public-interest companies with over 500 employees, followed by companies with more than 250 employees or €40 million in revenue in 2025, and listed SMEs in 2026.

According to Vodafone, the new ESG Navigator provides a central collection point for all ESG-relevant company data, bringing together data points from different locations and systems for processing and analysis, and enabling the creation of legally compliant reports using pre-defined templates.

In addition to CSRD compliance, the solution also enables companies to adhere to the EU Taxonomy, and to calculate Scope 1, 2 and 3 emissions.


Philippines woos investors for ‘China-free’ nickel supply chain

The Philippines is seeking western investment to develop its nickel reserves as an alternative to China’s dominance in the electric vehicle (EV) battery supply chain, and aims to attract US, UK, Australia, Japan, and South Korea investors, reports the Financial Times,

The FT says that the country plans to produce "greener" nickel using renewable energy. Neighbouring Indonesia leads in nickel production, with 57% of global refined nickel in 2023.

The Philippines currently has two processing plants and aims to diversify the supply chain. Last week it announced plans to add three more processing plants in the effort to develop a downstream industry for its abundant nickel resources. The Southeast Asian nation is looking to follow Indonesia, which lured major investment in processing plants for its huge deposits of nickel ore after banning unprocessed exports in 2020.

Environment Minister Maria Antonia Yulo-Loyzaga, whose agency also regulates mining, said the Philippines should boost its capacity to process nickel, a key component in producing EV batteries.

Australia, the UK Canada and European Union nations had also shown interest in the Philippines, she said. ʺWe do wish we were part of the value chain, rather than just the supply chain,ʺ Loyzaga told a briefing.

ʺWe want to be able to foster an environment that will encourage investments in processing by making sure we're able to facilitate exploration, and facilitate extraction in a responsible way.ʺ

The latest government figures show that the Philippines produced 35.14 million dry metric tons in 2023, an increase of 19% on the year.


China’s WeBank moves closer to international expansion

WeBank, the Chinese neobank backed by Tencent Holdings, has received regulatory approval from mainland China to establish a fintech subsidiary in Hong Kong.

The approval allows WeBank to expand its operations beyond mainland and set up the wholly-owned unit in Hong Kong with a capitalisation of US$150 million, according to an announcement by the Shenzhen bureau of the National Financial Regulatory Administration (NFRA). Additionally, NFRA approved WeBank president Li Nanqing to lead the new unit.

The Hong Kong subsidiary will manage the bank’s international business and offer services to regions involved in the Belt and Road Initiative, aligning with national policies, WeBank told the South China Morning Post.

The expansion is part of broader efforts to enhance economic integration between Shenzhen and Hong Kong under the Greater Bay Area initiative.


Revolut CEO confident of UK banking licence approval

The chief of British fintech Revolut said that he is optimistic about the company’s chances of being granted a UK banking licence, as a jump in users saw the firm report record full-year pre-tax profits.

Nikolay Storonsky, Revolut’s CEO and co-founder, told broadcaster CNBC that the company is feeling confident about securing its licence, after overcoming some key hurdles in its more than three-year-long journey toward gaining approval from regulators.

“Hopefully, sooner or later, we’ll get it,” Storonsky said. Regulators are “still working on it,” he added, but so far haven’t raised any outstanding concerns with the fintech.

Storonsky suggested that Revolut’s size means that it has taken longer for the company to get its banking licence approved than would have been the case for smaller companies. Several small financial institutions have been able to win approval for a banking license with few customers, he added.

“UK. banking licences are being approved for smaller companies,” Storonsky said. “They usually approve someone twice every year,” and they typically tend to be smaller institutions. “Of course, we are very large, so it takes extra time.”

Revolut is a licensed electronic money institution (EMI)I in the UK but is not yet permitted to offer lending products such as credit cards, personal loans, or mortgages. A bank licence would enable it to offer loans in the U.K. The firm has faced lengthy delays to its application, which it filed in 2021.

The company also released annual accounts showing its full-year pre-tax profit rose to US$545 million in 2023, which it said reflected strong user growth and revenue diversification

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