FPS’ Friday Fiver

Hello All! And welcome to our brand new, dedicated Financial Services blog from our FPS team here at H&K. This blog will cover all things related to finance, money, the economy, politics, consumer trends and probably a bit of humour along the way. We hope you enjoy reading it and look forward to your comments.

In the meantime, here’s this week’s Friday Five with contributions from Ed, Ross and Marie.

George Osborne's Budget has generally been well received, but more pain lies ahead

Two days on from the Budget…There’s always a mad rush to get initial reaction out on Budget Day. Two days on though, where do we stand? Our initial reaction remains largely the same – George Osborne delivered a Budget for business and one designed for growth. The question though is at what cost.

The Institute for Fiscal Studies argued yesterday that due to inflation the pain on the public sector will be even greater than originally thought as we try to cut our public spending and drive growth. Moody’s then compunded this, putting a chill on the UK with a warning that slow growth and our high debt risk our precious AAA debt rating. It’s not any rosier in Parliament for the Coalition either. Ed Miliband is picking up some momentum, his key spinners have found a more coherent message, and local elections are on the horizon – never easy for an incumbent government, especially if the Lib Dems suffer again as they did in Barnsley last month.

Never thought you'd see these two in the same image? No, us neither. Until now

What Anne Hathaway and Warren Buffett have in common…We came across a fascinating column on the Huffington Post this week. It explored the lengths financial traders are going to in order to extract the best possible return by sourcing as much information as possible, no matter its source or content.  The post noted the curious way in which Warren Buffett’s investment company, Berkshire Hathaway, saw its shares rise on occasions when actress Anne Hathaway appeared in the news. The theory goes that this is a result of automated financial trading engines picking up the chatter on Anne and applying it to the stock market.

US site, The Atlantic, picked up the story and delved a bit deeper – it’s well worth a read, but is perhaps summed up by a quote from computer scientist John Bates, who simply explains companies are now trying to “correlate everything against everything”.

Change for Takeover specialists…In a move reminiscent of the curtain opening trick in the Wizard of Oz, the UK’s merger regulator, the Takeover Panel proposed changes to its rules that would seek, among other things, to make deal fees public to increase transparency. In particular, it proposes that the maximum and minimum fees, including incentives and success fees, paid to deal advisers by both bidders and targets should be revealed.

Cadbury Law - change for takeovers, but what about for takeover advisers?

What does this mean? Ultimately, that the value M&A ‘wizards’ who provide financing, corporate broking, legal, accountancy, consulting and PR services will be open to more public and in particular shareholder scrutiny. What impact this will have is unclear though. Everyone knows that bankers make considerable fees from M&A, just as everyone knows bankers make considerable salaries and bonuses as a result of these fees. No one seems to be able to do much about the latter and so it is unlikely that much will be done about the former.

Clearly, based on the strong reputation of many of the top investment banks, people are likely to still pay good money for that wizardry. What about the rest of us though? Aided by these new transparency measures and given that knowledge is power, will M&A advisory services become more of a buyers’ market? Certainly, it will become more value-focussed, but that is not necessarily a bad thing. Whether ‘public scrutinisers’ really understand what they are evaluating is another matter.

Still waiting for the Big Society?…David Cameron’s ‘Big Society’ has received mixed reviews, but a common response has been from those who claim to not understand what it is. MPs from all parties as well as the media have often muddled the concept, perhaps to undermine it before it has even got off the ground. Credit then to The Economist which this week has analysed exactly what BigSoc is and presented it clearly without trying to induce scepticism. The paper breaks the concept down into three strands: pluralism, localism and voluntarism.

The struggle to define BigSoc has clearly served to slow down people from embracing and committing to it – is this failure to agree the reason why businesses aren’t engaging with and supporting it with any gusto at present? It remains to be seen though whether debates like The Economist’s can actually serve to shape what the Big Society is. Nearly one year on from the General Election, many would argue we’re still waiting to answer even that basic question.

David Buik - "One of the last true city gents"

Farewell to a legend…Finally, a short note on the passing of an institution. BGC Partners’ David Buik has been an ever present on TV screens, in newspaper columns and on radio for many a year, but today retires. Described by some on Twitter today as one of the last ‘true gents’ in the City, he’ll be missed.

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