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Accounting giants fined for £237 million bond firm collapse
Two of the big four accountancy firms have been hit with multimillion-pound fines for their audits for collapse minibonds group London Capital & Financial (LC&F).
LC&F collapsed before the pandemic after failing to have enough funds to pay back bondholders, leaving around £237 million owed to as many as 12,000 people.
PwC and Ernst & Young were fined by the Financial Reporting Council (FRC) for their involvement in the failed firm's finances.
E&Y will pay £4.4 million, while its auditor Neil Parker was fined close to £47,000 for the group's involvement in LC&F's 2017 accounts.
Meanwhile, PwC was given a £4.9 million sanction for its 2016 audit, with Jessica Miller, an auditor at the firm, receiving a £105,000 fine.
House prices facing bumpy 2024 as interest rates hold
Economists have warned that UK house prices will continue to face pressure throughout the year, despite a slight lift in April keeping them flat for 2024 so far.
Peter Arnoal, EY UK's chief economist, said: "The recent rise in mortgage rates is likely to dampen the recovery in the short-term.
"And looking ahead, the recovery in prices is unlikely to be rapid given that poor affordability continues to significantly limit the pool of potential buyers and mortgage rates are only likely to fall back slowly."
Knight Frank's head of UK residential research Tom Bill added he expects house prices to rise by 3% in 2024, due to the increased downward pressure on prices as hopes of a rate cut "drifts further into the distance."
The Bank of England will meet on Thursday to decide on interest rates and is expected to maintain them at their current levels.
Victoria Scholar at Interactive Investor said: "It looks like mortgage rates will continue to remain elevated with the Bank of England poised to keep interest rates at 16-year highs of 5.25% this Thursday.
"Financial markets have been pushing back their forecasts for the timing of the first rate hike this year, with August currently pencilled into the diary, although that could certainly change depending on the data."
Heathrow airport criticised for fresh cost-cutting round
Heathrow needs to drum up £400 million in funding after it was revealed by the aviation regulator that it would need to lower the amount it charges airlines to use its airport.
Boss Thomas Woldbye has launched a cost-cutting plan to combat the deficit, with one of his first moves being to outsource hundreds of security staff roles to third-party contractors.
However, said cost efficiencies have been criticised by unions such as Unite, which said it wants to challenge the £400 million figure as it believes a revised amount was provided by the Civil Aviation Authority in March.
Instead union officials believe Heathrow will gain £217 million from changes to passenger fees rather than the estimated loss.
Sharon Graham, Unite's general secretary, said: “Heathrow has no justification for outsourcing these workers’ jobs, other than its own greed.
“It is peddling the same old tired myths about the need for cost savings. But in truth, it is one of the world’s busiest airports and it has been making money hand over fist since the pandemic. Unite will not sit back and let these members be exploited.”
The morning so far
The FTSE 100 notched up another record this morning after surging more than 80 points in opening exchanges to surge above 8,300 for the first time in history.
Shifting expectations of near-term rate cuts both in the UK and across the Atlantic are fuelling much of the market optimism.
Disappointing UK retail sales today could heap further pressure on policymakers to cut rates sooner rather than later.
Retail sales in the UK dropped 4.4% on a like-for-like basis in April 2024 from a year ago, far below expectations for a 1.6% growth and the worst reading since November 2019.
“Dismal weather and disappointing sales led to a depressing start to spring for retailers, even accounting for the change in timing of Easter," said Helen Dickinson, chief executive at the BRC.
Housing prices were also on the macroeconomic calendar today. The Halifax House Price Index edged up 0.1% in April after falling in March. The index is now up 1.1% year on year, with the average house in the UK now costing £288,949, representing a £168 gain from a month ago.
BP was the main point of focus on the company news front. The oil major reported a profit of $2.3 billion in the first quarter, a significant decrease from $8.2 billion in the same period last year.
The less-favourable comparison reflected exceptionally strong gas marketing and trading results in the first quarter of 2023, weaker fuel margins, and lower production at 914 million barrels of oil equivalent- 5.7% lower year on year. Shares fell 0.75% to 506.5p.
Haleon (LON:HLN), Phoenix Group and Melrose were also down.
Despite the poor retail print, JD Sports and Marks & Spencer were among the top morning risers, alongside Ocado (LON:OCDO) and Holiday Inn owner IHG (LON:IHG).
The FTSE 100 came off slightly from the morning’s all-time high and was swapping for 8,281 at the time of writing.