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BREXIT – A POSITIVE NEWS STORY FOR UK PLC

BREXIT

– Andrew Mitchell, Group Investment Director for Godwin Capital

 

It is fair to say that Brexit dominated headlines in the final few years of the 2010s.

After the UK made the historic decision to forge its own future outside of the European Union [EU], many people and businesses were naturally concerned as to what the future might hold.

For example, the property sector saw some buyers and sellers alike put their plans on hold ahead of the Brexit vote in light of a few sensationalised media claims that a no-deal scenario would increase mortgage payments, and lead to distressed sales and falling house prices.

This was in spite of a poll of over 2,000 people conducted by property investment firm Good Move, which concluded that three-quarters of the British public had overestimated the impact that Brexit has had on house prices. This was subsequently proven by figures from the Office for National Statistics (ONS) which revealed that the cost of a home rose by 2.2% in the year to November 2019.

There have also been a number of good news revelations that strengthen the UK government’s narrative that Brexit will benefit the UK. Further research by the ONS has shown that the rate of employment has reached a record high and currently stands at 76.3%, with the unemployment rate at its lowest since 1974. Even the UK’s latest GDP figures covering July to September 2019 are estimated to have increased by 0.4%, revised upwards by 0.1 percentage points from the first quarterly estimate.

A positive anticipation of the benefits that Brexit will bring appears to be forming in the heart of British business. This is evidenced by more than a third of FTSE 350 company secretaries surveyed by the Financial Times that stated their belief that the UK economy will continue to improve — the highest level since 2015, and up from just 7 per cent last summer.

Findings such as these give an indication of how strongly the British economy is performing but it is also important to look at what is occurring in the UK’s major industries.

 

PROPERTY’S IN EXCELLENT HEALTH

Following the outcome of the 2019 General Election, the forecast for the UK’s property sector and the Pound is looking decidedly more positive for the next 12 months. Many commentators have attributed this to Boris Johnson’s success in bringing about Brexit on 31st January.

Yet even before the election, November 2019 saw the highest-ever average house price of £235,298 according to the latest figures from the UK’s Land Registry, while December 2019 saw the highest number of property transactions since before the referendum, with sales up 6.8% year-on-year. Moreover, a total of ten UK cities have demonstrated a double-figure price growth following the Brexit vote, with Birmingham and the Midlands leading the way. Figures such as these help to paint a clearer picture of the UK’s property market, how it is set for growth in 2020, and the potential that investors from around the world are recognising in it.

 

UK EMPLOYMENT IS AT A RECORD HIGH

In February, figures from the Office for National Statistics saw the unemployment rate remain at its lowest since 1974, while the number of UK nationals in employment grew by over 2.3 million since 2010 to reach just over 29 million. The total number in work climbed to just below 33 million.

In January, the Department for Work and Pensions (DWP) also announced that for the 22nd consecutive month, wage growth has outpaced inflation and a total of 3.1 million more people are now in higher skilled work. Of those to have benefitted from the UK’s thriving jobs market, women come out on top with 317,000 more having entered work in the past year alone. Combined with UK PLCs’ growing confidence, we should expect to see a stronger jobs market in 2020 and beyond.

 

UK MANUFACTURING IS THRIVING

As it stands, the UK is the eighth largest industrial nation in the world. If current growth trends continue, the UK is expected to break into the top five by 2021. In the UK, manufacturing accounts for 11% of GVA, 44% of total exports, 70% of business R&D, and directly employs 2.6 million people.

Manufacturing output has grown faster than at any point in the previous 10 months during February 2020, with growth expectations in the private sector edging up, according to IHS Markit’s flash purchasing managers index. The recent return to growth signalled by the manufacturing sectors gives a clear indication that the economy is on the rise and suggests that increased confidence is translating into higher business activity and greater spending by clients.

 

CONCLUSION

Brexit is still in its infancy but it is clear that the UK is weathering negative predictions and the general mood of the country is buoyant and hopeful for the future. The government is already in talks with nations such as the US, China and Australia, who are all eager to take advantage of the UK’s new independent trading position. China for example is eager to be a key investor in HS2, the UK’s largest infrastructure project, as well as the UK’s 5G network. It is clear then that the UK is being recognised as a key investment target for foreign governments and therefore very much “open for business”. It is to be expected that the road to becoming an independent sovereign nation will incur a few bumps along the way, but the UK has always punched above its weight and Brexit will be no different.

 

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ERSTE BANK HUNGARY IMPROVES AND SECURES THE REMOTE BANKING EXPERIENCE WITH ONESPAN MOBILE SECURITY

ONESPAN

Leading Hungarian bank deploys OneSpan’s Mobile Security Suite to one million customers to make mobile banking convenient while fighting fraud and meeting PSD2 requirements

 

OneSpan™ (NASDAQ: OSPN), the global leader in securing remote banking transactions, today announced that Erste Bank Hungary, a subsidiary of Erste Group Bank AG, one of the leading banks in Central and Eastern Europe, has integrated OneSpan’s Mobile Security Suite into its banking app MobilBank. Erste Bank Hungary selected Mobile Security Suite to enable and protect online and mobile transactions and to comply with PSD2 requirements for authentication and dynamic linking.

The European Payment Council has stated that social engineering attacks continue to increase and remain instrumental in fraud schemes, often in combination with malware.[1] Erste Bank Hungary chose to implement OneSpan’s Mobile Security Suite to protect against potential social engineering and malware attacks directed at its customers. OneSpan’s technology enables banks to integrate application shielding, biometric authentication and transaction signing.

Erste Bank Hungary added Mobile Security Suite’s Cronto visual transaction signing to replace the bank’s SMS authentication with push authentication for login and transaction signing. This new process improves security and eliminates significant costs related to SMS delivery. OneSpan’s Cronto technology also helps fight social engineering attacks like phishing, while enhancing the customer experience by  enabling transaction signing using a color QR code.

“OneSpan’s proven technology will help us maintain our leading position in the market without compromising on security or the customer experience,” said Erste Bank Head of Digital Services, Akos Andras Molnar. “As part of this roll-out, our customers can also make online purchases using push notification with any retailer connecting to Erste Bank via the 3-D Secure protocol.”

“Criminal hackers continue to target banking customers as social engineering remains a preferred technique,” said OneSpan CEO, Scott Clements. “In their search for security solutions, banks need to consider cost, convenience and regulatory compliance. OneSpan’s technologies address these concerns so that banks can focus on providing a secure and convenient customer experience.”

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HOW WILL LENDERS TREAT THE FINANCIAL SYMPTOMS OF COVID19?

FINANCIAL

COULD the coronavirus pandemic spark a financial crisis similar to that which was seen in 2008? Tim Kirby, Group Commercial Director of the global fintech Monevo, a personal lending marketplace and platform, discusses how Covid-19 could play out for lenders.

The 2008 financial crisis, explains Kirby, was about credit over-exposure. While strains are apparent in the money markets today, it is not 2008, when risky mortgage investments in the US banking sector and into the UK caused everything to collapse.

Kirby said: “The financial crash was self-inflicted for many reasons, including poor income verification, poor credit quality assessment and poor employment verification (self-certification). It was asset-backed predominantly as it was led by sub-prime mortgage lending.

“My thoughts are that once the virus is contained, the economy will most likely turn back on within a few months, however recovery to current levels will be somewhat longer.”

Kirby predicts that it is very possible this downturn will be shorter than the 2008 financial crisis based on a number of factors.

He said: “The financial crash was either at a house purchase level or encouraging debt consolidation through re-mortgaging that placed unsecured debt into secured debt over a longer term. The consumer then ramped up unsecured debt again with the same poor assessment applied and eventually ran out of headroom.

“This was propped up by the capital markets and warehouse funding lines being supported through securitisation models that rated the loans held in the bonds as AAA.”

Kirby adds that the coronavirus outbreak is more micro and consumer-led than the recession was.

“There is still a great deal of uncertainty, but consumers are certainly going to experience affordability difficulties in the short-term, perhaps three to six months,” Kirby explains. “Lenders are already tightening their criteria and that could lead to more tactical initiatives being introduced.”

Kirby points to the potential introduction of black-listing certain occupation types most affected, and reducing opening balances to applicants that they are most prepared to lend to.

He said: “At Monevo, we have been speaking to lenders who are predicting a 50% slow down, with some pausing to assess short-term strategies, as clearly there are aspects of credit / risk scorecards that aren’t working at the moment.”

Kirby also adds that access to capital markets will be a challenge in the short term: “Lenders who don’t lend off balance sheet may become constrained and you would have to question the Peer-to-Peer lender impact as the returns and appetite of investors could be under threat.”

“Additionally, those lenders nervous about funding certain cohorts of consumers, now have those very same consumers currently in their loan books.

“So, for lenders, focussing on forbearance and other support activity to protect these consumers in the short term of 3-6 months, will be a priority.

Kirby takes the view that it is important lenders relieve some repayment pressure from consumers in the short term, so they can rehabilitate when the new normal arrives.

“Lender feedback in the last week is that they haven’t seen a massive increase in defaults, it’s very early days though. Anecdotal feedback from lenders that are strong and well-funded is that they expect strong growth when the market returns, and that those who are optimised and agile will see an upswing.

“What I am hearing, is that consumers will remedially seek liquidity through debt, as the world normalises to address the short-term pain being experienced at present.”

Kirby adds that lenders who look at credit risk closely when the upturn comes in three to six months could see dramatic growth, albeit from a reduced base.

He added: “From Monevo’s perspective, day trading is difficult to predict and lenders are re-assessing short-term strategies.  We are using the time at present to apply additional focus on our internal tech pipeline in driving the product development roadmap forward to continue to deliver great solutions for our partners.

“We want to ensure when normality returns and the upswing in both demand and supply inevitably happens, that we are supporting our origination partners and the lenders on our panel as effectively as possible.”

 

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