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Brexit fallout on UK finance intensifies – think tank

More than 275 financial firms are moving a combined $1.2 trillion (£925 billion) in assets and funds and thousands of staff from Britain to the European Union in readiness for Brexit at a cost of up to $4 billion, a report from a think tank said on Monday.

UK lawmakers are due to vote on Tuesday on an EU divorce settlement. But with less than three weeks to go before Brexit day on March 29, it is still unclear whether the deal will be approved, whether departure from the EU will be delayed, or whether it will happen without agreement.

The report by the New Financial think tank, one of the most detailed yet on the impact of Brexit on financial services, said Dublin alone accounted for 100 relocations, ahead of Luxembourg with 60, Paris 41, Frankfurt 40, and Amsterdam 32.

The independent think tank said half of the affected asset management firms, such as Goldman Sachs Investment Management, Morgan Stanley Investment Management and Vanguard, had chosen Dublin, with Luxembourg the next port of call, attracting firms like Schroders, JP Morgan Wealth Management and Aviva Investors.

Nearly 90 percent of all firms moving to Frankfurt are banks, while two-thirds of those going to Amsterdam are trading platforms or brokers. Paris is carving out a niche for markets and trading operations of banks and attracting a broad spread of firms.

New Financial identified 5,000 expected staff moves or local hires, a figure that is expected to rise in coming years.

A better measure of Brexit’s impact is the scale of assets and funds being transferred, it said.

Ten large banks and investment banks are together moving 800 billion pounds of assets from Britain – or 10 percent of banking assets in the country. A small selection of insurers have shifted a combined 35 billion pounds in assets, and a handful of asset managers have moved a total of 65 billion pounds in funds.

William Wright, founder and managing director of New Financial, said the hit to London was bigger than expected and would get worse.

“Business will continue to leak from London to the EU, with more activity being booked through local subsidiaries,” Wright said.

“This will reduce the UK’s influence in European banking and finance, reduce tax receipts from the industry, and reduce financial services exports to the EU.”

A 10 percent shift in banking and finance activity would cut UK tax receipts by about 1 percent, the report said.

Relocations have cost firms $3 billion to $4 billion, which will be passed on to customers and shareholders, the report said.

But the breadth and depth of relocations so far, combined with pacts between regulators in Britain and the EU, mean the industry is well prepared for whatever form Brexit takes, New Financial said.

London will remain the dominant financial centre for the foreseeable future, but other European cities will chip away at London’s lead over time, it added.

By Huw Jones

Source: Yahoo Finance

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UK mortgage lending rises but experts warn of tough year ahead

THE number of mortgages approved by UK banks increased for the first time in four months in January, according to industry data.

However, UK Finance – the body that represents all the major high street banks – found lending to consumers fell, reflecting caution among households.

Total mortgage lending rose by 9.7 per cent to £21.9 billion in January compared with the same month a year ago.

Consumer credit declined by 0.2 percent in annual terms in January – the first drop since UK Finance’s new consumer credit series started in April 2017.

Much of the boost to mortgage lending could have come from a cut in stamp duty for first-time buyers.

But lending to businesses contracted by 1.4 per cent, with construction falling. Spending on credit cards rose by 5.8 per cent, or much faster than the growth in personal incomes, although the banks said that repayment levels on credit cards were also high.

The figures suggest that borrowers are switching away from personal loans, which declined by 15 per cent on the month, and preferring to borrow via their credit cards instead.

Deposits at banks and building societies advanced just two per cent on the year, hitting a total of £835bn, with ISA products continuing to see outflows.

UK Finance warned 2018 is likely to be a difficult year for the housing market.

Howard Archer, chief economic advisor to the EY Item Club said: “UK Finance reported that mortgage approvals for house purchases picked up to a three-month high of 40,117 in January after slowing to a 56-month low of 36,085 in December from 39,624 in November, 40,599 in October and 41,647 in September.

“January’s rebound in mortgage approvals suggests that there may have been a hit to activity in December as a reaction to the Bank of England raising interest rates in November.

“It is also possible that cutting stamp duty for first-time buyers in the Chancellor’s Budget may have provided limited support to mortgage approvals in January. The abolition of stamp duty for first time buyers for properties costing up to £300,000 (and on the first £300,000 for properties costing up to £500,000) should also provide some support to house prices.

“It should be noted that housing market activity can be particularly volatile around Christmas and New Year.

“While January’s rebound in mortgage approvals suggests that December’s drop overstated the weakness of housing market activity, it is still subdued. Indeed, January saw mortgage approvals for house purchases at the third lowest level since September 2016.

“Furthermore, at 40,117 in January, mortgage approvals for house purchases were still 22.2 per cent below their long-term (1997-2018) average of 51,563

“The latest survey evidence also points to lacklustre housing market activity early on in 2018.

“New buyer enquiries were down for a 10th month running while agreed sales fell for an 11th month.

“The latest UK Finance mortgage approvals data does little to dilute our belief that 2018 will be a difficult year for the housing market and price gains over the year will be limited to a modest two per cent.

“The fundamentals for house buyers are likely to remain challenging. The squeeze on consumers’ purchasing power remained significant going into 2018, and it is likely to only gradually ease as the year progresses.”

Source: The National

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UK mortgage approvals hit lowest since 2013 in December

British banks approved the fewest mortgages since April 2013 last month and growth in consumer credit slowed, industry figures showed on Thursday, pointing to a weaker housing market this year.

Banks approved 36,115 mortgages for house purchase in December, down some 19 percent from with a year ago and weaker than the 39,007 approved in November, trade association UK Finance said.

Britain’s economy slowed last year as higher inflation triggered by the June 2016 referendum to leave the European Union ate into households’ disposable income, causing the housing market to cool in much of the country.

Thursday’s figures are the first to show what happened to lending after the Bank of England raised interest rates for the first time in 10 years in November, when the government also announced it would scrap a property purchase tax for most first-time buyers.

“December’s marked drop in mortgage approvals suggests that already pressurised housing market activity took a further hit from the Bank of England raising interest rates in early-November,” said economist Howard Archer from the EY ITEM Club consultancy.

Nor was there much sign that the government’s property tax changes in November – which included scrapping purchase taxes for most first-time buyers – had lifted total demand.

UK Finance described the figures as showing “a healthy mortgage market in a traditionally quiet month” and said there was an underlying upward trend in the number of first-time buyers, boosted by previous government initiatives.

Annual growth in consumer credit slowed to 0.7 percent from 0.8 percent, the weakest reading since UK Finance started publishing a new version of this figure in April last year.

More comprehensive lending figures from the Bank of England are due on Tuesday.

Source: UK Reuters