• Market Loop
  • Posts
  • Today's business and finance round up 5th November 2021

Today's business and finance round up 5th November 2021

📊Interest rates stay put…for now

5th November 2021

Good morning Can you believe it, it’s officially 50 days until Christmas. To mark the occasion a host of high street retailers unveiled their festive ads including John Lewis, M&S and Boots. Sports Direct reportedly has the most expensive campaign featuring several sports stars and costing £6m.

Today's stories

  • Interest rates stay put…for now

  • Metro Bank attracts US takeover bid

ECONOMYInterest rates stay put…for now

What’s going on?The Bank of England surprised the market yesterday when it announced it would not raise interest rates from the record low of 0.1%. But the UK central bank did drop hints that an increase is on the way within months.

Why is this important?

The Bank of England’s main role is to use interest rates to keep inflation below 2%.Thursday’s statement from the Bank’s policymaking committee was hotly anticipated by investors and economists. The market had expected that rate rise would be on the cards to cool the rapidly rising prices of goods and services.But the Bank’s nine policymakers voted 7-2 to keep rates unchanged. Inflation is currently 3.1% but is predicted to reach 5% by next year – the highest in a decade. The wait was justified by concern about economic growth following signs of weakening consumption due to higher energy prices and clogged up supply chains. But Bank officials said recent economic data reinforced the view that borrowing costs will have to rise in the “coming months” to keep inflation on target.TakeawayThe decision to keep interest rates unchanged caught many by surprise and led to a fall in the value of the pound by two cents against the US dollar to less than $1.35. The Bank believes that the UK economy is still too fragile to deal with higher costs of borrowing despite the rising inflation.Policymakers meet every six weeks so there’s a chance a pre-Christmas rise could be in store. But the Bank made it clear that interest rates were not going to return to levels seen before the 2008 financial crisis, i.e. above 5%, anytime soon.

BANKSMetro Bank attracts US takeover bid

Shares in Metro Bank rose by nearly 30% yesterday after it confirmed it received a takeover offer from Carlyle, an American private equity firm.Metro was founded in 2010 and is the newest UK high street bank in over 150 years. Today it has 78 branches and more than two million customer. The bank tries to stand out from its more traditional rivals with branches that are dog friendly and open seven days a week.However Metro has struggled since launch, its smaller scale and intense competition has made the past decade of low interest rates a challenge for profitability.On top of that a major accounting error in 2019 led to an overhaul in its leadership. Since then the share price has tumbled but the approach from Carlyle led to its best ever one-day performance.This year has been one of the busiest ever for UK takeovers by private equity firms. The deep pockets of private equity firms combined with the relatively low valuations of British businesses versus America and European peers has fuelled the activity.The banking sector could see particular attention driven by hopes that rising interest rates might boost the profits of smaller banks like Metro which have struggled to compete against the high street giants.

Stat of the day

Since its introduction in 2008 the HPV vaccine has cut cervical cancer by nearly 90%

Other stories to keep you in the loop

  • COP26: More than 40 countries pledge to quit coal

  • Sainsbury's warns of price pressures and consumer electronics shortages ahead of Christmas

  • JD Sports ordered to sell Footasylum over price rise fears after £90m takeover

  • Purplebricks shares collapse after warning of big losses

  • Currys and Uber launch tech takeaway service delivering emergency gadgets in 30 minutes

  • Microsoft Teams adds 3D avatars as it lays out metaverse ambitions

  • Wizz Air to offer discount tickets this winter as budget airline pursues growth

  • Venture capital fund dives into Love Island star’s swimwear brand

Interesting links from around the web

Forward to Friend