The British High Street: Changed, Not Gone

BHS. Austin Reed. Woolworths. Phones4U.

Those are just some of the traditional, iconic brands which have disappeared from the British High Street, victims several years on to the recession.

Many questions have been asked about the fate of those and other companies – some companies seeing their former leadership questioned by MP’s. In all cases, administrators have been called in as the old names and brands are wound up. In most cases, uncertainties over pensions, and the issue of thousands suddenly losing their jobs, arise. As the failure and collapse is studied after the event, in some cases last minute rescue deals that never quite went through (such as happened during the collapse of BHS and Phones4U) emerge. Although the loss of each High Street brand is tragic for all concerned- as each name is lost, the British public becomes more accustomed to seeing yet another brand name vanish.

Success has been limited in saving those iconic names, as company after company enters receivership. Each loss, amongst other things, means lost jobs, and ha‎s a negative impact on the economy. It is therefore no wonder that some former CEO’s and investors are hauled before MP’s to explain why their company collapsed. One prime example here is billionaire businessman and investor Sir ‎Philip Green, who recently appeared before MP’s over the collapse of BHS, which he used to own. His performance, according to most commentators was just that – a performance. Little of any use or value was discussed, raised, or answered – and lurid revelations including alleged death threats to senior executives, emerged. ‎

On top of that, there is the inherent uncertainty of the EU Referendum. Whichever way the vote goes, the only certainty amidst all the unknown is that the UK economy will be affected negatively either way. This is not good news for a High Street already struggling to kick start economic growth.

However, the bizarre thing is that many indications show that the High Street is actually thriving. December 2015 and January 2016 was many companies (such as John Lewis) post record sales figures. Statistics of public spending and borrowing show that recent months have seen (in many cases) a dramatic rise is spending. Credit card borrowing has also seen in many instances a record increase, as people spend more or credit cards.

As such, it is quite clear that the High Street is seeing spending, and resultant growth. The services sector continues to be the great success story of the UK economy – and still visibly thriving on the average High Street.

Whilst the likes of Sir Philip Green and Mike Ashley are being hauled before MP’s – many shops and business leaders are seeing their companies trading nicely in towns and cities across the UK. Admittedly, the figures are not all wonderful and excellent. Marks & Spencer has consistently seen problems with its clothing departments, for example, and full growth has yet to be seen. Although encouraging, the figures and statistics do not at all show a High Street or economy that has recovered from the recession, or that will not be impacted by Brexit in the upcoming Referendum.

What is being seen is change. The older, well known nationwide brands are failing – whilst smaller, more dynamic brands are succeeding. As times are changing, so does society and its needs, and so does the economy. Newer business brands and models are succeeding, whilst older brands, stuck in the past, are not.

Instead of seeing the average High Street as a story of economic recovery, growth or failure – the recent developments are more indicative of a High Street under great change. As the needs of society change, and as the Internet revolutionises shopping and retail, and indeed retail companies themselves, the High Street is merely adapting to those changes.

Although the loss of such iconic British brands is always sad, and the resultant job losses of great concern, it is not the end of the High Street. The economic figures and statistics indicate that the High Street is not as troubled as some would say – but merely at a time of transition as it adapts to modern times and needs.

Posted in UK Economy | Tagged , , , , , | Leave a comment

John Lewis Posts Record Profits for Christmas 2015

In heartening consumer and economic news to start the New Year, iconic department store brand John Lewis has posted record profits and sales for the festive season.

Overall, the 46 stores in the John Lewis Partnership saw their sales rising by 5.1% over the season’s “Three Peaks” (Black Friday, Christmas and Post-Christmas). Further, in the six weeks leading up to January 2nd, across the group sales of £1.8bn were reported, up 4.1% from the same period in 2014. Sales were greatly boosted by online sales, which rose by 21.4%, and offset a decline in store sales, despite unusually mild December weather. Fashion, home and technology sales saw significant sales during that time.

John Lewis Partnership Chairman Sir Charlie Mayfield told the BBC that “we’re pleased with our overall results, we think they’ll be pretty much in line with the market.” He went on to comment that the groups Black Friday total sales had been “more heavily weighted towards online” than in previous years, with its shops not as busy as the same time in previous years.

The good news was offset by a recorded fall in sales at Waitrose, which is a part of the John Lewis group. The upmarket supermarket saw similar sales fall by 1.4%; according to Sir Charlie “grocery is challenging.” This is particularly so as recent years have seen food prices falling.

The result of that has been to see a long running price war between the major UK supermarkets. Aldi and Lidl have also been increasing their market share with their lower prices. Although Waitrose has seen an increase of nearly 7% in customer numbers, low food prices have not helped to produce as good trading figures as seen in the rest of John Lewis Partnership.

Food deflation was at 0.3% in both November and December of last year, according to figure from the British Retail Consortium (BRC). These falling prices have been passed on to consumers, as Christmas 2015 saw consumers being able to indulge in more festive food for less money than in previous years. However, such falling prices towards the end of 2015 saw falling profits for the major supermarkets. According to BRC Chief Executive Helen Dickinson “for the last two years and eight months, customers have been able to fill their baskets, whether virtual or physical, and pay less for their goods than the year before… A number of key commodities in the retail supply chain – in particular, oil which is now trading under $40 per barrel – have fallen dramatically recently and the impact of these falls will continue to make its way through to shop prices for some time to come.”

BRC figures show that food prices during this time fell at a rate of 3%, with overall UK goods prices falling at a rate of 2%. Additionally, and by contrast to John Lewis, other major High Street retailers found that their sales had been affected by the unusually mild December weather, in spite of evidence of greater consumer spending overall. Next, for example, reported after the New Year Bank Holiday that it’s sales in the run up to Christmas had been “disappointing.”

Performance for the group was very robust and solid, the figures show. John Lewis is famous for the fact that it is owned by its employees, with its employees having a stake in the company. Could this boost employee morale and spirit, and therefore sales? Many business experts have long praised this philosophy, and how it can motivate staff, but few businesses seem to want to adopt this admirable business approach.


Whether it is that or not, whether it is their clever and eagerly anticipated Christmas commercials, the results speak for themselves. The iconic upmarket brand is doing well. Once again, the services sector has shown how string it is, and that despite national and personal financial woes, money is still being spent. The High Street is doing well – both of which bode well for personal and national finances.

It is good financial news, and one positive start to the economic issues of 2016. Quite clearly, despite economic concerns and issues, if the High Street and major retailers are posting record sales, consumer spending and confidence are quite high.

Posted in Uncategorized | Tagged , , , , , | Leave a comment

‘Super Thursday’: No Interst Rates Change, But Change To Come

August saw the Bank of England release several statements and announcements regarding interest rates, the rate of inflation, and related financial matters all at the same time. One of the major economic announcements of that ‘Super Thursday’ was that the Bank of England has kept interest rates at a record low of 0.5%.

This was the first time that the all-powerful Monetary Policy Committee (MPC) at the Bank of England had not had a unanimous agreement in this matter, with the votes being 8 -1. Secondly, many were expecting either an interest rate increase, or action in lieu of that.

In their announcement at the beginning of August, the Bank cited a falling stock market in China, continuing talks regarding Greece and the Eurozone and other global economic issues as an indicator that the outlook for growth globally was muted. Falling energy costs and oil prices also played a part in the decisions over inflation and interest rates, as have rising rates for the value of sterling.

Despite that interest rate freeze, the MPC was contradictory. Whilst holding the interest rate at 0.5%, there are great hints and movements towards a rate rise at the beginning of 2016. Indeed, in keeping with his signature policy of ‘forward guidance’, in a statement earlier this month, Bank of England Governor Mark Carney said that:

Governor Mark Carney

Governor Mark Carney

It would not seem unreasonable to me to expect that once normalisation begins, interest rate increases would proceed slowly and rise to a level in the medium term that is perhaps about half as high as historic averages… In my view, the decision as to when to start such a process of adjustment will likely come into sharper relief around the turn of this year.”

All the indications from Threadneedle Street indicate an interest rate rise, however small (some predict a 0.25% rise), at the beginning of 2016.

That in itself has caused consumer watchdogs, financial advisers and other commentators to be concerned. The last few years have seen extremely low interest rates, with many people taking the opportunity and buying property, or being tied into mortgages at those low rates. Amidst an era of strained household budgets and low earnings, households have adjusted to those financial constraints, and repayments. Any rise in interest rates could see many with mortgages, or many homeowners and households, either struggle to meet, or be unable to meet, their mortgage repayments. The advice from financial advisers and charities is to plan and prepare your household finances for 2016 now, with a suspected interest rate increase in mind.

Renters will also be affected by a change in interest rates, big or small. With landlords having to make higher mortgage repayments, renters might see their rent rise accordingly.

The Bank has long hinted that the time is right to increase interest rates –but that time is clearly not now. Further, in the MPC’s lengthy statements on interest rates and inflation, the rate of inflation itself is predicted to rise to its old rate of 2% over the next two years, according to policymakers, with Mr Carney stating that the rate of inflation is expected to pick up significantly by 2016. As such, the stimulus programme of Quantative Easing (essentially, simplistically, printing more money) remains unchanged.

Mr Carney is electing to keep things as little changed as possible at this delicate time economically. Recent figures show that unemployment has actually risen (by 25,000 to 1.85 million) in recent months, and that the growth that the UK economy was expecting to see over the next few months will not be as high.

Despite that, Mr Carney and the MPC, with their hints that interests rates will rise, and their statements regarding the economy, are seemingly fully confident that overall the UK economy is still on track to greater growth and recovery. However that road will not be an easy road- as households and businesses will find out in 2016.

Posted in UK Economy | Tagged , , , , , | Leave a comment

TSB Sold to Spanish Banking Giant

Since being split from Lloyds a few years ago as part of debt agreements, TSB bank has done remarkably well. However, still affected by the negative debt and other financial issues it had. March 2015 saw a welcome relief for TSB when it was finally announced that it had been bought out.

After months of talks, it was announced that Banco Sabadell had bought the troubled bank for £1.7 bn. This came less than a year after Lloyds had sold off its stake in TSB, and TSB had re-joined the stock market. It is not the first time the Sabadell and Lloyds have come together to do business; Lloyds holds a 1.8% stake in Sabadell following a sale of Lloyds’ Spanish assets to the Catalan bank in 2013.

The markets greeted the news with a sudden surge in the values of the banks involved. Shares in TSB and Lloyds rose in value by 2% and 0.5% respectively- with shares in Banco Sabadell falling by contrast. Further, Lloyds has to sell TSB in its entirety under conditions of its UK government bailout imposed by the EU. Such a sale is seen as progress towards that.

Both banks will overall benefit from the sale. In a statement released by TSB at the time, Sabadell would continue to “operate TSB as a robust competitor in the UK banking market, building on the TSB brand name… [and Banco Sabadell would support and accelerate its] retail growth strategy”.

Ian Gordon, an analyst at Investec, echoed the sentiment apparent in the financial sector by stating that the deal represented “an unexpected proposal that makes total sense”. Overall, the news of the proposed sale has been welcomed. It is good news for TSB’s customers, and will provide long term security and stability for the bank. The injection of foreign capital will help to secure TSB’s debts and assets. Further, it gives the Spanish bank a chance to diversify and expand into the British market. This further boosts the prospects of Banco Sabadell, given the current banking and economic climate in Spain.

TSB has 631 branches and 8,600 staff. Banco Sabadell, founded in Barcelonain 1881 now has 2,320 branches and financial interests across Europe. The Catalan bank is Spain’s fifth largest banking institution.

Although the £1.7bn offer was made and accepted by Lloyds- the matter still has to be referred to the regulators of both countries and the EU regulators. In May, those national and EU regulators approved the buyout- and the sale is set to go ahead. No doubt there will be some changes made to TSB- but very much change for the better, with the long term prosperity of the troubled bank in mind.

The deal with the troubled British bank and the large, established Spanish bank is but one example of a new, dynamic, and cross border banking era for the EU.

Posted in Banks | Tagged , , , , | Leave a comment

Falling Energy Prices On the Cards for Consumers

Energy prices, in line with plummeting oil prices, and similar, are falling for the big energy companies.

However, that is not being passed on to households, resulting into enquiries and investigations from regulators and government- with another one launched this January. This follows previous price related issues and transparency complaints against the Big Six energy firms (the six biggest energy providers: British Gas, EDF Energy, npower, E.On, Scottish Power and SSE) over the last few years, with regulators pressing for more openness and transparency as regards tariffs, and urging a reduction in energy bills to ease the financial burden on households. Indeed, industry regulator Ofgem has ruled in this matter of energy tariffs previously, and told the energy firms that they must offer their best deals, and act more with the consumer in mind. There is also an FCMA investigation pending.

Amidst such scrutiny, and more enquiries, it is likely that tariffs will start to fall over the next few months. Further, the recent surprising fall in oil prices, and a milder winter resulting In less energy being used, has put pressure on the energy companies to pass on the profits to consumers. Indeed, wholesale gas prices have also fallen by 20% since November 2014. However, past information indicates that the big energy companies are unwilling to lower prices; when oil and gas prices similarly fell in July 2014, household bills only saw an average decrease of just £3.

As regards the tariffs, it must be noted that a large part of the average domestic energy bill consists of green taxes (currently £91), and VAT at 5%. Further, major suppliers buy wholesale and large quantities of oil and gas from different sources at different times. Given industry reluctance as to the details regarding those sales, it means that the oil and gas bought might have been bought several months ago, whilst prices were still high. As such, reducing tariffs in response to a current fall in prices could be to the detriment of the energy providers. As mentioned by Scottish Power’s chief executive of retail and generation, Neil Clitheroe, ‘[Scottish Power's] pricing reflected costs other than just the wholesale price of gas, which makes up about half a typical bill… non-energy costs such as transmission and distribution networks and environmental and social obligations remain unaffected by any wholesale energy price movements.”

Despite that, several of the Big Six have actually cut their energy prices. Scottish Power was the latest with their announcement that their prices will fall by 4.8% from 20 February. This will see, for example, customers on their standard tariff making an average saving of £33 on annual gas bills.

That followed a similar announcement from British Gas that their prices will be cut by 5% from 27 February. German owned E.On was the first energy provider to cut its tariffs; its 3.5% decrease has already taken effect.

Such voluntary tariff reductions are welcome news- but still not far enough. Many say that still consumers are not seeing proper savings, especially after price hikes the last few years. As such, the matter is still being investigated and monitored. It is highly likely that the results of any such investigation will result in energy tariffs falling further in a few months.

This is all good news for households long oppressed by hefty fuel bills. Aside from several energy providers deciding to lower their tariffs, although there are no definite or long term changes currently- the outlook is bright for such households, and a welcome relief on strained personal finances.




Posted in Consumer Finance | Tagged , , , , , | Leave a comment

Tesco Investigated: 2014 Ends with Another Problem for Troubled Retailer

Supermarket giant Tesco has been going through hard times recently.  July saw its CEO leave – with its Chairman having recently announced his own departure. Late October saw a major scandal erupt at the well-established, stable and respected supermarket.

Tesco had announced in September profits of £250m. Late October saw Tesco announcing that, actually, those profits had been overstated by £263m. The initial announcement had been made in error, due to Tesco bringing forward rebates from some suppliers.

The September announcement had been released along with the company’s results for the first half of the fiscal year. Those figures showed a fall in this year’s profits by neatly 47% during the year, to £783m.  With Tesco’s share value gradually declining since June/July, the news caused that value to fall more. Further to the drama, Chairman Sir Richard Broadbent also announced his departure.

The misstatement of profits damaged the well-known supermarket. Aside from damages to its finances and share value, the reputation of the company, both in the financial arena, and (probably) amongst shoppers was tarnished. However, the bad news for Tesco was not over.

Concurrently with the profit misstatement, Black Rock (a major investor in the supermarket) revealed that it had sold down it stake in the company. Furthermore, Standard & Poor put Tesco’s credit rating under review. There were suggestions, even after four Tesco executives were suspended, that senior executives at the troubled company might have to fact the House of Commons Business Select Committee over the sheer scale of the error. Another admission at the time was that the supermarket had not had a Finance Director for the last five months.

The profit misstatement at once triggered an investigation by the banking sector regulator the Financial Conduct Authority (FCA). In an era of making banks accountable, and in exposing misdeeds (past and present), and in setting significant fines or similar punishments to set an example, the FCA is not known for its clemency or kindness when it comes to such financial irregularities.

However, after only a few days, the FCA investigation ceased. The Serious Fraud Office (SFO) stepped in, announcing that SFO Director David Green QC “has opened a criminal investigation into accounting practices at Tesco plc”. With the SFO now carrying out a criminal investigations into accounting irregularities at the troubled supermarket, the allegations of malpractice and the consequences, became more serious.

The FCA handed over their investigation to date to the SFO; the SFO investigation is still very much on-going. Bothagencies have declined to comment on the matter- with Tesco stating that they were cooperating (initially) fully with the FCA, and now the SFO.

Tesco has been a stalwart of the high street for many decades. Indeed, many supermarkets, large and small, have been opened in recent years. As such, the investigations top what is a great fall for such a retail giant. Aide frim the retail impact, and the legal implications of any SFO verdict, the fall of such an economic giant, and a vast and (formerly) stable UK company, will be felt in economic circles.

It is to be hoped that Tesco recovers from this, both economically, market share and market value. A full investigation, transparent, open, thorough, and the punishment of wrongdoing will clear the matter, and re-establish trust and value in Tesco. However, that could some time. Until then, the drop in Tesco’s value is worrying in the big economic picture – except for Tesco’s competitors.

Posted in Business | Tagged , , , | Leave a comment

Service Sector Strength Means Potential Buy Out for Sprint Pubs

October saw wobbles in the international stock markets. This was then swiftly followed by fluctuations in oil prices. Add to that the instability in Middle Eastern markets with the impact of IS militants being felt- and many in the economic arena have been more than a bit concerned.

Indications from many sources seem to indicated that the fluctuations and wobbles will actually not be overly significant, or have too much of a detrimental effect on the markets long term. Despite October’s negativity over the international markets, domestically saw some financial matters being announced which seems to indicate some economic growth and potential in the overall economic stagnation.

Unsurprisingly, the news came from the services sector, a mainstay of the current British economy. In the latest in a long running series of negotiations, pub giant Greene King increased its offer to take over the smaller Spirit pub chain.

Earlier this year, Greene King (which runs 1,900 pubs, restaurants and hotels nationwide, including some much smaller chains) made an offer to buy Spirit (which runs the Chef & Brewer and Flaming Grill chains, after being split from Punch Taverns in 2011). The offer was valued at £661m- and was rejected by Spirit. Undeterred, Greene King made another offer, this time for approximately £700m. The offer valued Spirit at 109.5p a share, and increase from the value of 100p a share under the previous deal. The deal is itself part of Greene King’s wider business strategy and plan; the pub company is working on shifting into restaurants and pubs that serve food. True to that aim, Green King sold earlier this year’s 275 pubs to Hawthorne Leisure. The diversification comes after announcing in July £105m in profits, down 5% from the previous year. Previously, Greene King had seen figures over December and January which indicated that the pub giant had a very merry time over the festive season. Of those figures, restaurants saw a rise in profits by 4.1%, with pubs having a rise of 2.2%.

Whatever the economics or business models behind this proposed buyout, there is a lot of positives behind it. Both companies would probably benefit financially- and also individual pubs and restaurants affected will have their future guaranteed. Managers, employees, and suppliers alike will also benefit from the sale, with their jobs and contracts (although probably subject to renegotiation in some cases) still being honoured (in most cases), or at least guaranteed under the new ownership. However, this proposed deal really goes to show the sheer strength of the services sector, and the hospitality industry in the UK.

If buy outs approaching £1bn are still being negotiated, then it cannot be all doom for the UK economy, as many analysts and commentators say it is. These are painful economic times, but many indicators are showing as slow but steady return to stability and growth. As October’s market fluctuations indicate, though, these are also volatile economic times. That is also illustrated by the fact that, at time of writing, Spirit had yet to agree to the deal, or enter into firm negotiations. Volatile and changeable financial times; but definitely showing great promise for the future.

Posted in UK Economy | Tagged , , , | Leave a comment

The Chancellor’s new proposals focus: Tax and Benefits

Chancellor George Osborne has summarized two important strategies which could form sections of the fiscal policy of a future conservative government. Discussing this at the Conservative Party convention that took place this week, the Chancellor has proposed a crack down on big technology firms who avoid their tax dues, as well as a halt on benefits for non-disabled people of working age.

It is well known that some technology firms go to extraordinary lengths as a way to prevent paying the tax they rightfully owe. “My message to those companies is clear,” Osborne said, “We will put a stop to it. Low taxes, but low taxes that are paid.” Osborne made assurances that the conservatives would take measures to stop the technology companies from continuing to participate in those practices, in the event he form a majority government following the next general election.

The second of the two major proposals that Osborne issued to the conference was a two-year halt on benefits.  Such as move would save the country £3bn. The planned benefit halt would exclude things including pensions, maternity pay and disability benefits – but instead target people receiving benefits like Jobseeker’s Allowance. The halt would be intended to begin in 2016 in the event the Conservatives emerge triumphant from the following general election.

These two measures are geared toward helping decrease the deficit that’s now being borne out by the UK. As stated by the chancellor, it’d require additional savings that are long-term worth a total of £25 billion to be able to get rid of the deficit completely.  He stated: “The option of taxing your way out of a deficit no longer exists, if it ever did,” He also reiterrated that the UK national debt remains “dangerously high” but “resolve that we will finish the job that we have started.”

While the topic of tax avoidance and benefits crackdown dominated the event, Osborne also declared some minor policies at the convention. Maybe most notably, Osborne assured that the 55% rate of tax on pension funds that were inherited would be lost.

As is to be expected, Osborne has faced criticism whilst some have welcomed the proposals.

Posted in Government Spending | Tagged , , , , , | Leave a comment

Small Business Lending Drops as Government Scheme Falters

The latest figures show that, during the second quarter of the year, lending to small and medium-sized enterprises (SMEs) under the government’s Funding for Lending Scheme (FLS) fell. This continues a downward trend that was already seen in previous months.

According to the Bank of England, the total net amount of money lent to SMEs, taking repaid loans into account, experienced a drop of £435 million in the second quarter of 2014. Money lent through the FLS scheme specifically experienced a significantly more severe contraction, falling by £3.9 billion.

This drop-off was not as severe as that seen in the previous quarter, where overall lending to SMEs was down by £723 million. Nonetheless, the fall remains significant and represents a continued faltering of the government’s Funding for Lending Scheme.

The FLS provides banks with cheap funding to support them in issuing loans to small businesses. This allows them to make loans available more readily and cheaply to SMEs – a group which has previously been reported to have trouble accessing business credit. The scheme was first launched in July 2012, and received an extension in April of the following year. Banks will continue to have access to the scheme until January next year.

The figures came as a disappointment to a number of business groups, many of whom feel that more must be done to boost lending.

Among the organisations expressing disappointment was the British Chambers of Commerce. Director general John Longworth said that the scheme “continues to disappoint” in making loans accessible to smaller businesses. Longworth went on to say that “The real test for the scheme has always been whether it is able to get credit flowing to young and fast-growing businesses… Unfortunately many of these firms remain frozen out when it comes to accessing the finance they need to fulfil their potential.”

Senior Hargreaves Lansdown analyst Laith Khalaf spoke in similar terms about the schemes success, or lack thereof. Khalaf said that “The jury is still out on the Funding for Lending scheme and today’s figures don’t increase the chances of a positive verdict.” Khalaf acknowledged, however, that the Bank of England would likely contend that it will take longer for the scheme to “have full effect.” He also pointed out that “we don’t know what business lending would be shrinking by if the scheme were not in place.”

The latest business lending figures were not entirely bad news. Lending by all banks and building societies to all businesses increased, and lending to non-financial businesses rose for the first time since 2009.

Posted in Banks, Business, Government Spending, Money Regulation, UK Economy | Tagged , , , , , , , , , | Leave a comment

Mortgage Cap Forms UK “Insurance Policy”

The Bank of England plans to put a cap on more high-risk mortgage lending as part of an “insurance policy” to protect the UK economy.  This move is expected to have little short-term impact, but in the future it could help protect the stability of the economy in the event of a housing boom.

The proposal aims to prevent mortgage providers from lending to more than 15% of customers for whom total value of borrowing exceeds 4.5 times the income of the borrower. The way things stand at present, there will be no immediate impact on people’s ability to secure finance for a home purchase, but commentators are suggesting that future developments could give the move more “bite.”

It is the responsibility of the Financial Policy Committee (FPC) of the Bank to introduce measures to prevent threats to the country’s economic stability. This particular proposal aims to do just that, both by reigning in the housing market should a boom occur and preventing individuals from entering into debts that are not sustainable.

The 15% cap on high-risk mortgages will take effect from October this year. Affordability checks will also be slightly tightened, with lenders having to check that borrowers will be able to cope with an interest rate increase of three percentage points. A separate but related move has been announced by the treasury, entirely banning people from applying for a loan of more than 4.5 times their income through the government’s Help to Buy scheme.

Mark Carney, the governor of the Bank of England, said that the potential threat to the UK economy was not an imminent one. Nonetheless, the moves have been introduced in an attempt to prevent any problems with irresponsible lending before they begin to occur and, according to Carney, the transition from careful to reckless lending can be a quick one.

By acting early, Mr Carney said, the bank was acting in a way that was proportional to the threat and putting in a useful “fire break” against the problem of high-risk mortgage lending.

The Bank of England has also stressed the lack of immediate impact associated with the measures. They will not, for example, suddenly prevent anybody from entering the housing market the way things stand at present.

According to lenders, London will see the greatest impact as a result of these measures. The proportion of lending at more than 4.5 time the borrower’s income is more than twice the national average.

Posted in Banks, Consumer Finance, Money Regulation, UK Economy | Tagged , , , , , | Leave a comment