Archive for July, 2011

FPS’ Friday Fiver

We’re back, providing another round-up of some of the big stories from the world of financial services, the economy and Westminster this week. Contributors this week include Clare, Linzi, Jo and Ed, who bring us an overview of banking, pensions, retailers, and our new feature – Good Week/Bad Week.

Banking – fundamental flaws and failed customers…On Tuesday, Vince Cable held court at the Which? Banking Reform – An Agenda for Competition and Growth discussion at the Commonwealth Club, where he re-iterated his opinion that “banking is a structurally flawed industry that has fundamentally failed customers”.

Vince Cable - on the attack on banking once again (Image:

That the current system of banking is flawed is a no-brainer, but the harder question to answer is where exactly do the flaws lie? The conversation on Tuesday spanned the topics of increased competition, universal banking, ring-fencing, culture and behaviour along with new entrants into the banking market, but it seems that, nearly three years since the start of the global financial crisis, more questions continue to be posed than answered.

Is universal banking really the root of all banking evil? Do customers really feel their banks have failed them given so few of us have switched? With the array of initiatives, commissions, inquiries, and comite des sages taking place at the national, European and international levels, one has to hope that between them they will be able to identify and remedy the flaws that exist. However, there is the potential for all of these to come up with different flaws and different answers which complicate and confuse structures and customers alike!

Paying more for retirement…The spotlight returned to public sector pensions this week as figures leaked to The Daily Telegraph revealed exactly how much workers in the public sector will pay extra each month for their pensions.

Danny Alexander was asked how much more he personally would have to pay towards his pension this week (Image:

As expected, higher earners will take the brunt of the increases and the lowest paid workers, earning less than £15,000, will escape any increases at all.

Here are some of the figures from the proposals:

  • Those earning over £100,000 will pay £284 a month (£3,400 a year) more
  • Public sector workers in the £50,000 bracket will pay between £684 – £768  more
  • Those on a £35,000 salary face paying an extra £516 a year more

Despite the backlash, which was always going to happen, you can’t escape the welcome news that low paid public sector workers, some 750,000 people, will be exempt from any increase in contributions and those earning £21,000 will be out of pocket £108 a year, or just £9 a month. The fact remains that even with these increases, public sector pensions are still a valuable benefit.

We still aren’t buying much on the high street…Another worrying week for retailers as figures on Thursday showed that sales fell at their fastest pace for a year as consumers become increasingly reluctant to spend. This is brutal news for the already struggling retailers and may be a sign of further deterioration and shop closures to come.

Only one in three retailers claimed their sales volumes were up on a year ago, with food retailers being particularly hard hit – either we’ve all been hit by the rise in food costs and are watching the pennies like hawks or the nation is on a collective pre-holiday diet.

However, one retailer that isn’t afraid of the UK high street (or shall we say Oxford Street) is cut-price U.S. brand Forever 21, which opened its doors for us on Wednesday. Some critics state that we are not ready for ‘cheap, fast, American’ fashion’ but with the way things are going on the high street we may not have a choice.

George Soros - the latest financial veteran to retire

Good week/Bad week – George Soros & George Osborne…A tale of two George’s this week. For the first (the man who ‘broke the Bank of England’), the effective end of a remarkable 40 year investment career. While the manner of his retirement was a little sour, blaming US regulations, you can’t argue with his success over the years. He will likely be missed.

On the flip side, it was a less than stellar week for the younger George, who, as yet more vanilla growth figures rolled in, suddenly found himself the victim of attacks from several fronts. How he must be wishing for the summer break to roll around quickly.

FPS’ Friday Fiver

Hello All! It’s been another very heavy week of news, and equally heavy rain here in London – will summer ever raise its head again? Given the weather is playing havoc with any outdoor plans for the next few hours, we’ve put together another series of five key stories of the week from the world of financial and professional services. Thanks as ever to Ed, Mel and Jo for their contributions.

When is a default not a default?…Here are two rather intriguing and perhaps contradictory headlines for you from the same news website today: ‘Greece deal sparks bank-led European share rally‘, and ‘Fitch declares Greece default‘.

Greece - lives to fight another day

So which is it? The answer, rather confusingly, is both, depending on who you listen to. What isn’t in doubt is that eurozone countries have agreed another bailout package for Greece (though some have their doubts as to whether it’s big enough). This in turn, has sparked a market rally.

What also isn’t in doubt though, is that ratings agency Fitch have declared that because the deal involves private lenders ‘taking a haircut‘ on some of their debt, Greece has undergone a ‘restricted default’. At least in part. Confused? Quite possibly. What does it mean? That Greece continues to rage against the dieing of the light for a little longer, and that the other PIGS get some brief respite as well.

UPDATE – It seems we may have spoken too soon. According to Channel 4’s Economics Editor, Faisal Islam, Fitch is now not declaring Greece to be in restricted default.

Britain’s economy 2011 – what might we think in 2021?…What will be made of the Government’s economic policy in years to come? Will George Osborne’s approach be heralded as a masterstroke which got the nation back on its feet or criticised for paralysing the economy, engendering neither deficit reduction nor economic growth?

Read the rest of this entry »

FPS’ Friday Fiver

posted by Edward Jones

Well, an eventful week to say the least. We in the FPS team have looked beyond the obvious to find five other things that have happened this week. Enjoy.

Moody clouds hover over USA ratings

Photograph: Ryan24

This week, Moody’s threatened to revise down the USA’s AAA credit rating. Back in April, Standard and Poor’s revised to negative the outlook on USA ratings, a monumental move given that this was the first time that the USA’s outlook was revised down since Pearl Harbour. As the USA’s Congress and President continue to grapple over debt negotiations, it is looking increasingly unlikely that they will be able to come to an agreement before the 2nd August, after which the USA would literally run out of money and not be able to match its debt commitments.

Elsewhere financial markets are getting increasingly jittery as this week Ireland became the third Eurozone country to be downgraded to junk status –Ba1 – alongside Greece and Portugal. This downward pressure continues to strengthen fears that Italy and Spain will soon follow suit. One wonders if any country will escape what feels like a tidal wave of downgrades.

Bonuses back in vogue?

Photograph: Sky

We read with interest this week Sports Direct’s average £44,000 payout to staff after hitting profit targets. Out of 18,000 employees, 2,200 staff qualify for the bonus. This is on the basis of their employment being permanent over the last 12 months, irrespective of their position. According to the Times (£) the scheme is the most generous in the retail sector.

The move offers an interesting parallel to bonuses paid in the banking sector and the justification offers hope to the City: “There is nothing more powerful… in terms of  getting everyone pulling together… we wanted them [the staff] to see everyone is going to benefit” said Sports Direct’s Chief Executive Dave Forsey. One wonders if the banks presented their bonus schemes with the same clarity and distributed the fruits of their labours more equitably, they might not receive so much stick. Does this move represent a shift in other sectors towards a model whereby staff are incentivised to deliver for their employer? We are all aware of the success of the John Lewis Partnership, Sports Direct’s scheme seems a very positive sign in a sector which has struggled of late and could offer a way forward in overcoming low staff morale.

The cost of living (longer)

How much does it cost to retire in the 21st century? If you’re talking purely about the level of income people should have, then the Joseph Rowntree Foundation reckon that around £15,000 should be sufficient. If however, you’re asking how much it costs the state for you to retire, that’s a very different question. The bad news is the cost is rising as we continue to live longer lives.

The OBR released its first Fiscal Sustainability Report this week which provides long-term projections on how much the government will have to spend on welfare and healthcare by 2060. The answer, in a nutshell, is a lot more. Spending on health is going to increase from 8.2% of GDP now, to nearly 10% in 2060 and the separate cost of long-term care is going to increase as well. At the same time, the amount spent on the state pension will increase by over 2% of GDP to 7.9%. Put the whole package together, and ‘age-related spending’ increases from 24.6% of our GDP to 27.3%.

So what can be done about the rising cost? One answer is to raise the retirement age and hence lessen the number of years people receive their state pension, though this is proving deeply unpopular. Another is to prepare the population better for old-age and try to keep them healthier in it, which is no easy thing. This still isn’t enough though – which is why the OBR suggested we will need to raise an additional £22bn in tax each year from 2016 onwards to stop national debt spiralling away. Not what consumers who believe their disposable incomes are already shrinking want to hear as The Economist notes today.

Baby Boom to Boomerang

Our parents were the baby boomers- tuition fee free, riding on the crest of 80’s affluence, buying up property and reproducing. Whilst we are the boomerangers saddled with the debt of our education and the country and forced to return to the nest that our parents bought.  Returning home post Uni would once have made you a failure or at least a social embarrassment for the parents having to hide a 30 year old console loving son in their annexe.  But now 1 in 4 graduates are returning home and frankly, who can blame them?

Photograph: Paul Barton/Corbis available at

New findings from Endsleigh show that most rental prices in the UK have increased steadily in the last two years with the average rent now standing at £688 per month, rising to almost £1,372 in London where most grads head in search of that increasingly elusive goal ‘employment.’ Demand is also increasing in the rental market as more and more first-time buyers are finding themselves frozen out of the mortgage market due to tighter lending criteria and a lack of finance.  And this would probably account for why 41% of the three million adults living with their parents returned home to save money whilst three in ten cited that they were unable to pay mortgages.

The introduction of tuition fees of up to £9,000 a year from 2012 will increase the pressure on graduates even further, with the number returning to the family home likely to rise.

Hungry for Growth

Photograph: Reuters

This week, the GE Capital (client) team were hitting the phones to secure coverage of the first ever ‘SME Capex Barometer’, a survey of 1,000 small and medium sized businesses across Europe looking at how much they plan to invest in replacing equipment ranging from plant machinery to IT hardware to photocopiers.

In the UK, 92% of SMEs are planning to spend a staggering £74.9 billion in the coming year, although businesses in Germany and France were looking to invest even more.  Reflecting the challenges involved with pulling out of recession, businesses reported missing out on over £8bn of new businesses as a result of out-dated equipment.

As John Jenkins, CEO of GE Capital put it: “Despite popular belief, the appetite for investing in growth amongst UK SMEs is actually very strong, with many businesses having reached a tipping point where putting off investment is no longer possible without compromising their ability to create revenue”.

FPS’ Friday Fiver

Yes, it’s Friday, and even though the weather’s not looking great, it is at least the weekend. Undertandably this week, most people have had their heads focused on one story in particular. However, there’s also plenty else going on which is why nin this edition of the Financial & Professional Services Fiver we bring you some of the stories you may have missed this week.

Thanks as ever to our contributors – this wek, Jo, Ed and Clare.

To save or spend, that is the question…With retailers going bust on UK High Street, you could be forgiven for thinking that consumers have no money to spend. However, quarter two’s Visa Europe: UK Expenditure Index (our client) paints a more complicated picture of consumers’ expenditure behaviour.

Consumers aren't spending and the high street is in trouble. The reasons why are more complex than you might imagine though (Image:

The Index shows that year on year consumer expenditure increased by 4.4% in quarter two. The monthly data for April, May and June shows year on year increases in expenditure of 4.2%, 4.5% and 4.3% respectively. However when you look more closely at May’s figures, things start to get interesting: expenditure growth in May was bolstered by consumers saving rather than spending as they put their money into NS&I certificates. The impact of one-off factors were largely diminished in June, which saw a strengthening of underlying spending as consumers cautiously returned to the High Street and ‘usual’ spend.

It seems that consumers are becoming increasingly circumspect about what they do with their money.  The challenge for the High Street is to convince consumers their money is best spent with them rather than saved. This is a battle that may well get bloody…

The Huffington Post launches…Yes, HuffPo, as it is affectionately known Read the rest of this entry »

FPS’ Friday Fiver

2011 continues to be a year of historic events and hard news stories. This week’s strike by public sector workers was billed as the largest since 1926 and events in Greece continue to worry global financial markets.  In this week’s Fiver we review the events that caught our attention, some more serious than others. Thanks to Nick, Daisy, Jo and Ed for their contributions this week.

Sunflowers and euro banks

As I sat at my desk this Friday afternoon, trying to formulate something to say for today’s Fiver, my mind wandered towards the weekend. My inspiration for the post comes from what is quite possibly my (and Dave Chambers’) favourite sporting event of the year, The Tour de France.

 The Tour which starts tomorrow is a spectacle of drama, competition, tactics and colour as well as scandal. To my mind, it’s always hard to tell whether the sport of cycling or French tourism is the real winner from the three week event.

The Tour is also the one time of year where we are exposed to an array of European sponsors –  many of them financial services companies – that few of us will have heard of. So, in the coming weeks, don’t be surprised if you catch a glimpse of names such as Rabobank, SaxoBank, Cofidis and LCL Banque plastered across men in lycra moving quickly through fields of sunflowers or the Haute Alpes.


Inspired by a break up 

At yesterday’s company meeting we heard about National Australia Bank one of this year’s winners from the Cannes Lions PR Awards and how they changed the public’s perception of them in a single day by publically breaking up with the other banks.  For year’s Australians had believed that their four biggest banks had been working together to fix fees and eliminate competition when in reality NAB had been working hard to abolish fees and lower interest rates in a bid to be viewed by customers as a fairer alternative.  This is the perfect example of a bank exposing its human face and becoming instantaneously more relatable for its customers.  The big bank break up generated $5 million of PR earned media in one day but most importantly it set NAB apart from the big bad banks and earned them tangible business returns with a 50% increase week on week in NAB credit card applications and a 20% increase week on week new transaction accounts being opened.

Demonstrating that you really know your customer’s should be an essential facet of any discerning banks PR plan, as Mr Nick Woods so eloquently told us at H&K’s recent Demystifying Digital Event.  His 5 minute Ignite on HSBC Bank International’s creative Digital Strategy was an example of how this insight enabled HBIB to become the ‘expert in expats.’  HBIB’s Expat Explorer Survey the world’s largest survey of expats examined not only the financial concerns of expats but everything from lifestyle to childcare.  They then took those insights and put them in a really great online tool so that instead of downloading an unwieldy PDF the global expat community had a great resource to play with and share.  This ‘human’ approach was then mirrored throughout all social media channels with a dedicated blog and twitter for expat issues not financial products.  And most importantly HBIB are continuing to deepen their understanding of their customer’s-  The 2011 Survey is now live and we are keen to get even more respondents in order to update the online tool with living data.  So if you are reading this and you are an expat or know of anyone who is please fill it in and pass it on!

 Caught between a rock and a hard place

 So it’s been a tough week for the UK economy with data from the PMI (Purchasing Managers Index) suggesting that the previously robust recovery in the industrial sector seems to be coming quickly off the rails.  With figures for June down to 51.3 from 52 in May driven by weak export orders and job growth, economists were left disappointed by the 21-month low.

 It seems ironic then that on the same day that figures seemingly suggesting the road to recovery has hit something of a speed-bump Work and Pensions Secretary Iain Duncan Smith has nailed his colours firmly to the cross  and urged British businesses to hire local jobless youths rather than relying on labour from overseas. His argument is that controlling immigration is “critical” to avoid another generations of “dependency and hopelessness” and to be honest I don’t think there are many commentators who’d disagree.


However for me there are two things that need to be addressed. Firstly at a time when many businesses are fighting hard just to stay afloat, controlling workforce costs is a key priority. Until the green shoots of recovery take hold and actually demonstrate consistent growth it’s unlikely many employers will be looking to increase their payroll considerably by adopting an extensive hiring policy. Secondly, we can’t get away from the fact that foreign workers are cheaper and in many cases better qualified than young UK potential employees. It’s a problem with both technical and cultural elements but until we can build an education system that delivers skilled workers with a hard working ethos then both the Government and UK Plc will find itself caught in the uncomfortable position between a rock and a hard place.

This town town, is going like a ghost town. Trouble on the high street…

 This week has seen a string of fashion disasters as shoppers cut back drastically on ‘non-essentials’ which has subsequently led to the collapse of well know fashion retailers as well as home furnishing shops.


Even those that are still in business are closing outlets as the rise of internet shopping takes over and shopping down the local high street may someday be a distant memory – slightly dramatic perhaps.

 So what does the future hold for those that are still standing? It really is a battle ground out there and survival of the fittest is a term that springs to mind.  Adapting to a number of changing factors, such as the rise of the tech savvy shoppers and the baby boom may just be their saving grace but of course there is no one direct answer and  those that are only addressing issues now may be ‘late to the game’

A New Dawn?

 Earlier this week we attended Which?’s A New Dawn: Will financial Services reform deliver for consumers? Conference. A host of high profile speakers assessed and probed the potential issues new financial services regulation and the new bodies responsible for implementation: the Bank of England and Financial Policy Committee (FPC), the Financial Conduct Authority (FCA) and the Prudential Regulatory Authority (PRA), will come up against.

 All agreed that the overwhelming ambition of new regulation is competition – but competition that benefits the consumer. The thrust of conversation centred on what competition that would deliver for consumers would look like, though this was never really concluded. Mark Hoban, Financial Secretary to the Treasury’s speech was light on detail, heavy on rhetoric. Much of what was said had been heard before: in essence, consumers will be at the heart of the new regulatory structure, although how, is less clear.

 The panel discussions highlighted the tensions new regulatory structures will cause. Excellently, hosted by Moneybox’s Paul Lewis, the panel probed how competition will deliver outcomes for consumers, how to educate and empower consumers to make informed decisions, and where responsibility should lie – with financial services providers or consumers? The answer was probably both.

Clare Spottiswoode, Member of the Independent Commission of Banking (ICB), though not representing the ICB, took to the stage and called for a culture change in banks. She argued that banks cannot justify selling poor products by virtue of them meeting all of the ‘rules’. She argued they should develop products according to principles and that consumer interest should be at their heart. New entrants to the market should be encouraged, mobile bank account numbers were discussed and dismissed in turn, and the prospect of a community bank was discussed to support our ailing high street economies.

 It was an excellent event which posed far more questions than answers. This conversation will go on and on.