Shame On You!                                                                             30 June 2023

After a record week ending last Friday, with property transactions valued at US$ 4.25 billion, the market was only open for one day, Monday, 26 June. This was reflected in the figures that showed there were only 637 real estate and properties transactions totalled US$ 597 million, on the day and for the week. The sum of transactions was 30 plots, sold for US$ 22 million, and 131 apartments and villas, selling for US$ 70 million, bringing the total realty transactions on the day to over US$ 708 million.

Dubai’s property hit a H1 record level this year, with 61k sales transactions, valued at US$ 21.61 billion – equating to increases of 42% and 57% respectively. The 10.4k June sales of US$ 8.26 billion were 32.2% higher than the previous June best, recorded back in 2009 when there were sales of US$ 6.24 billion; despite the last week of the month celebrating Eid Al Adha, (with six days’ holiday), June will still be the fourth best month on record. If the current trend continues, then 2023 could be a bumper year for the sector, surpassing all previous records, with demand, particularly at the higher end, continuing to outpace supply.

After successfully selling out the first two phases of its South Bay project, comprising four hundred units, Dubai South Properties has launched the third stage. Located in the heart of The Residential District within Dubai South, it will contain two hundred villas and townhouses in a mix of 3 B/R – 4 B/R townhouses, 4 B/R – 5 B/R semi-detached villas, as well as five, six and seven-bedroom standalone waterfront mansions. The townhouses and semi-detached villas will be upgraded with the interiors given marble flooring, built-in fully equipped kitchens, glass handrails, a rooftop access (sky garden) and will all include private outdoor gardens. Once completed, South Bay will feature over eight hundred villas and townhouses, more than two hundred waterfront mansions, a 1 km-long crystal lagoon, over 3 km of a waterfront promenade, multiple beaches, clubhouse, fitness centres and parks. Additional amenities include a shopping mall, renowned spa, kids’ clubs, waterparks, swimming pools, waterfront cafés, a lake park. The Residential District at Dubai South currently boasts a population of over 25k residents.

Dubai-based real estate company Meteroa Developers has invested US$ 56 million on its maiden entrée into the local market – two 19-storey, 250’, identical towers in District 17 of JVC and 7 Park Central in an adjoining neighbourhood. Encompassing an area of 167k sq ft, the East Crest and 7 Park Central were both sold out within days. The former will house 118 1 B/R units, covering an area of between 648 – 775 sq ft, and slated for completion by the end of Q2 2024. The developer is planning to launch a further four projects, valued at US$ 136 million, with the third one being released in July.

Following the success of its earlier-than-scheduled completion of its first project – the US$ 27 million, 103-unit, PG Upper House – property developer Pure Gold Living has launched its first two 2023 projects, valued at US$ 82 million – PG One Al Furjan and the other in Meydan. The Al Furjan project will feature studio, 1 B/R, 2 B/R and 3 B/R units, each with their own pool. Both projects will be completed by Q2 2026.

Emaar Properties has seen S&P Global Ratings upgrade its long-term issuer credit rating from BBB- to BBB, based on expectations of a more robust business performance, as Dubai’s property sector continues to sizzle. S&P’s projection is based on the emirate’s biggest listed developer continuing to demonstrate steady operating performance and low leverage while being able to sustain its strong market position and capture the bulk of renewed interest from international buyers. The agency also added that Dubai’s business-friendly environment, low taxation regime and reputation as a safe haven, will also continue to benefit Emaar’s business. S&P also noted that “off-plan properties accounted for roughly half of all deals, and prices continued to increase at double-digit rates, benefitting all developers who have been actively launching new projects.” In Q1, the developer notched a 43% hike in profit, on revenue of US$ 1.72 million, with a sales backlog of US$ 15.18 billion.

According to the US online education company Courser, the UAE has been ranked second globally for the business skills of its workforce, and ranked highly in terms of specific business skills, such as communication, (first globally), leadership/management, (second globally) HR, (second globally), strategy/operations, and entrepreneurship. The Global Skills Report 2023 assessed the skills of more than 124 million learners in one hundred countries over the past year. The country was placed highest in the Mena region, and thirty-second globally in terms of overall skills, with Switzerland, Spain and Germany the top three countries. For technology and data science skills, the UAE’s talent pool was ranked fifty-eighth and seventy-seventh, respectively, in the world. The eleven-year-old Californian based training company provides online courses through partnerships with more than two hundred universities and industry players. The report indicated that the country lagged in skills such as computer programming, mobile development and web development but achieved cutting-edge scores in technology skills such as computer networking, security engineering and software engineering. In total, Coursera has 800k registered learners in the UAE, with an average age of about thirty-five, of which 42% are female and 45% study on a mobile device.

Abdullah bin Touq Al Marri, Minister of Economy, confirmed preliminary estimates of the UAE’s 2022 GDP, at constant prices of US$ 441.4 billion – 7.9% higher on the year – whilst, at current prices the figure of US$ 507 billion was up 22.1%. Non-oil GDP at constant prices reached US$ 319.9 billion, achieving positive growth in all vital sectors. The data, issued by the Federal Competitiveness and Statistics Centre, reaffirmed the strength of the UAE economy, with growth levels exceeding estimates. Over the past six years, the country’s GDP per capita has increased by 24.7%, even though its population has grown, and last year it expanded 21.1% on the year.

Dubai Land Department has launched the real estate investment trusts (REIT) privileges registry, and announced the opening of registration, and that applications from both local and international real estate investment trusts are now ready to be processed. This is in line with Decree No. 22 of 2022 relating to the grant of privileges to real estate investment funds and to enhance its position as a global hub for real estate investment, and to increase investment in the market by achieving a long-term capital return for shareholders in these trusts and increasing investment in the market by achieving a long-term capital return for shareholders in these trusts.

This week, the iconic Pepsi factory on SZR was sold for US$ 69 million by Dubai Refreshment PJSC – the official bottler of the US beverage company – to Al Futtaim Private Company LLC. The plot was used by the company as the factory, warehouse and offices for all Pepsi-related brands, but since their move to Dubai Investments Park 2, the site had become largely redundant. The sale is expected to be reflected as a one-time gain in the company’s financial accounts..

Dubai’s Public Prosecutor posted that an unnamed owner of a construction company, based in Dubai, had been fined US$ 293k for failing to pay workers’ salaries; this was after the Dubai Naturalisation and Residency Prosecution had referred the company’s director to court, charging him over non-payment of workers’ wages. The director admitted that because of financial charges, 215 employees were not paid for two months, and he was fined US$ 1.36k (AED 5k) for every worker not paid.

The Ministry of Energy, as usual, adjusts fuel prices in the UAE on the first day of every month. According to the government, the UAE liberalised fuel prices, introduced in August 2015, help to rationalise consumption and encourage the use of public transport in the long run and incentivise the use of alternatives. In 2020, prices were frozen by the Fuel Price Committee after the onset of the coronavirus pandemic, with the controls being removed in March 2021 to reflect the movement of the market once again.

After prices dipped in May, the UAE Fuel Price Committee increased all July retail petrol prices:

• Super 98: US$ 0.817 – up by 1.69% on the month and up 7.93% YTD from US$ 0.793  
• Special 95: US$ 0.787 – up by 1.76% on the month and up 8.25% YTD from US$ 0.727
• Diesel: US$ 0.752 – up 2.98% on the month and down 16.07% YTD from US$ 0.896
• E-plus 91: US$ 0.766 – up by 1.81.% on the month and up 8.50% YTD from US$ 0.706

The DFM opened on Monday, 26 June 2023, 338 points (10.0%) higher the previous four weeks, dipped by 1 point in Monday’s trading to close the week on 3,792, by 30 June 2023. (The DFM was closed for four trading days, 27 – 30 June, to celebrate Eid Al Adha). Emaar Properties, US$ 0.08 lower the previous week, dropped US$ 0.05 to close on US$ 1.75 by the end of the week. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.72, US$ 4.06, US$ 1.49, and US$ 0.41 and closed on US$ 0.71, US$ 4.05, US$ 1.49 and US$ 0.41. On 26 June, trading was at 563 million shares, with a value of US$ 136 million, compared to 411 million shares, with a value of US$ 116 million, on 23 June 2023.

The bourse had opened the year on 3,438 and, having closed on 30 June on 3,577 was 354 points (6.0%) higher. Emaar started the year with a 01 January 2023 opening figure of US$ 1.60, to close the first six months at US$ 1.75. Four other bellwether stocks, DEWA, Emirates NBD, DIB and DFM started the year on US$ 0.59, US$ 3.54, US$ 1.55 and US$ 0.41 and closed YTD at US$ 0.71, US$ 4.05, US$ 1.49 and US$ 0.41.   On 26 June, trading was at 411 million shares, with a value of US$ 116 million, compared to 66 million shares, with a value of US$ 18 million, on 31 December 2022.74.43

By Friday, 30 June 2023, Brent, US$ 1.98 lower (2.6%) the previous week, shed US$ 1.87 (2.5%) to close on US$ 74.43.  Gold, US$ 44 (2.2%) lower the previous fortnight, lost US$ 43 (2.2%) to US$ 1,928 on 30 June 2023.  

Brent started the year on US$ 85.91 and shed US$ 11.48 (13.36%), to close 30 June on US$ 72.58. Meanwhile, the yellow metal opened 2023 trading at US$ 1,830 and gained US$ 98 (5.4%) to close YTD on US$ 1,928.

Last year, Opec’s revenue jumped 42.8%, on the year, to US$ 888 billion, on the back of higher crude prices, and to a lesser degree to higher petroleum liquids production. In February 2022, Brent surged to almost US$ 140 a barrel at the start of Moscow’s offensive into the Ukraine but has since shed all those gains and is trading at around the US$ 70 – US$ 80 level, because Russia is still pumping out oil and the prospect of a slowing economy is gaining momentum. Last year, the bloc’s output rose by 2.5 million bpd to 34.2 million bpd, with Saudi Arabia accounting for almost 35% of the total, at US$ 311 billion. The EIA forecast that revenue will drop this year to US$ 655 billion attributable to Opec+ production cuts and lower crude prices, although global demand is expected to nudge 2.3% higher to 101.9 million bpd.

Despite indicating that he thought the worst of the energy crisis was over, Centrica chief executive, Chris O’Shea, said UK energy bills are likely to stay high for the foreseeable future and that risks still remain. With the advent of a new price cap tomorrow, a typical household will pay US$ 2.6k – over US$ 1k more expensive than two years ago. He did warn that although prices had now dipped below pre-Russian invasion levels, they had actually more than doubled before the start of the war and are running at two and a half times the long run average.

It appears that FTX’s senior management has been concealing figures since August 2022 that the now defunct exchange house owed its customers a staggering US$ 8.7 billion, hidden in a myriad of accounts; US$ 6.4 billion of that total comprised fiat currency and stablecoins that were misused by the FTX.com exchange. There is still a chance that more than the US$ 7.0 billion, already discovered in liquid assets, will be recovered, as the search for the company’s missing assets continues. John J. Ray III, the CEO leading the effort to recover funds for creditors, noted that the former management, led by former CEO Sam Bankman-Fried, resorted to “lying to banks and auditors, executing false documents and moving the FTX Group across jurisdictions” from the US to Hong Kong and the Bahamas, in a desperate attempt to facilitate their wrongdoing, while evading detection. Presently going through bankruptcy proceedings in Delaware, the company is under Ray’s guidance, as he works to settle FTX’s affairs following its collapse in November 2022.

Today 30 June, Apple share valuation topped a record US$ 3.0 trillion, with the rise following the launch of Apple’s augmented-reality headset Vision Pro; its stock is 50% higher YTD and 36% over the past twelve months, despite a Q1 3% dip in revenue, to US$ 94.8 billion, and a 3.4% profit slide to US$ 24.1 billion. The US$ 2.0 trillion market valuation was achieved in August 2020, and briefly touched US$ 3.0 billion, in January 2022, but then slid below the US$ 2.0 trillion level last January – for the first time since March 2021. On a percentage basis, other tech giants have performed better YTD, with Tesla and Meta up 136% and 126% since the start of the year.

It is reported that Satya Nadella has revealed that Microsoft’s revenue could top US$ 500 billion by 2023 – that being the case, the revenue would have to show a 20% CAGR, and would double the company’s current size. He also added that he was confident of annual returns exceeding 10% to shareholders over the specified timeframe and highlighted the company’s priority to maintain growth above the market rate, aiming to extend its lead over Google Cloud Platform and narrow the gap with Amazon Web Services. Much will depend on whether the Federal Trade Commission decides to block Microsoft’s US$ 68.7 billion acquisition of game publisher Activision.

Niantic becomes the latest tech firm to cut staff numbers by 25% to under 800. With the gaming industry facing a slowdown in demand, after downloads surged during the pandemic, the maker of the Pokemon Go Video game, admitted that “we have allowed our expenses to grow faster than revenue.” The firm will also close its studio in Los Angeles and cancel two games and will also retire its NBA All-World game, which was released in January, as well as stopping production of its Marvel World of Heroes title. Last June, Niantic said it would cancel four projects and reduce its workforce by around 8%.

It is expected that, starting from next month, the UBS Group will slash Credit Suisse’s workforce by more than 50%, with bankers, traders and support staff, in London, New York and parts of Asia being the main casualties; there will be three rounds of redundancies in 2023, and comes three months after UBS agreed to acquire the disgraced bank in a Swiss government-brokered rescue. Earlier in the year, UBS, with a 120k payroll, announced that it had plans to cut US$ 6 billion in staff costs; Credit Suisse has about 45k staff. One source has indicated that the bank intends to reduce total combined staffing by about 30%, or 35k people. Already this year, the likes of Morgan Stanley and Goldman Sachs Group, have slashed thousands from their numbers. After the pandemic, HSBC told staff it was going to reduce office space globally by about 40% to reduce costs and energy and allow more employees to work from home.

As part of its new strategy to downsize its office space post-Covid, and its committal to flexible working, HSBC is to move its global HQ from its 45-storey Canary Wharf tower, which houses about 8k staff, when its current lease expires, after two decades. It is now negotiating a new lease, with a much smaller space, on BT’s former headquarters near St Paul’s Cathedral. HSBC said the new development “is being designed to promote wellbeing and constructed to best-in-class sustainability standards, using predominantly repurposed materials”.

As the world’s second biggest cinema chain plans to file for administration, Cineworld has said that its screens will remain open, The firm, which owns the Picturehouse chain in the UK, said it was still business as usual for its cinemas, and noted that “Cineworld continues to operate its global business and cinemas as usual without interruption and this will not be affected by the entry of Cineworld Group plc into administration.” Cineworld, with more than 28k staff across 751 sites globally, with 128 locations in the UK and Ireland, hopes that restructuring will see its debts cut by about US$ 4.5 billion, whilst raising US$ 800 millio in fresh funds. Next month, the company will apply for administration which will see shares in the firm suspended and existing shareholders wiped out.

After a 135-year-old history, the National Geographic will no longer be available on newsstands in the US, as from 2024. This week, it has laid off its last nineteen remaining staff writers and, in the future, article assignments will be contracted out, or patched together by the few remaining editors. Staffing changes will not affect the company’s plans to continue publishing a monthly magazine “but rather give us more flexibility to tell different stories and meet our audiences where they are across our many platforms”. It seems that the Disney-owned magazine will invest more in social video as the brand continues to modernise. In the late 1980s, NG had over twelve million subscribers, which had slumped to 1.2 million last year. When the company was privatised in 1989, it had no debt – currently, it has US$ 17.7 billion in borrowings.

An apparent change in strategy will see WH Smith no longer opening any new UK High Street stores, but focus on UK airports and train stations, as well as opening shops in the US and Europe; it already has 550 UK stores and opening more “would just be a duplication”. However, it will continue to invest in its stores, including a retail partnership with Toys R Us in nine UK High Street shops. The retailer’s biggest growth market is the US where, since the turn of the century, it has captured about 12% of the retail market in US airports and expanded its presence in US-based casino resorts; it hopes to reach its 20% target by 2027 which would mean opening one hundred and fifty new shops – YTD, it has already opened thirty with a further thirty due to open in H2. Last year, WH Smith reported a US$ 80 million in profit-before-tax.

The US-owned Walgreens Boots Alliance, the company behind Boots the Chemist, is to close three hundred of its branches throughout the UK over the next twelve months, saying that it will shut down stores in close proximity to each other as part of plans to “consolidate” the business. Following this purge, with no redundancies involved, there still will be 1.9k branches in the country. The owners confirmed that the move was part of a “transformation plan”, as it had seen a surge in people shopping online and choosing own-brand labels as customers looked to save money. Boots posted that May quarter retail sales were 13.4% higher on the year, whilst its “Everyday” essentials label grew by 40%.

As Thames Water, which serves about 25% of the UK population, has a debt pile of some US$ 17.7 billion, it is in talks to secure extra funding, as the government says it is ready to act in a worst case scenario if the company collapses. The country’s biggest water firm, which has been heavily criticised over its performance following a series of sewage discharges and leaks, said it is trying to raise the cash it needs to improve, and that it still had “strong” cash and borrowing reserves to draw on. If it fails to raise the required financing, then it could be temporarily taken over by the government, until a new buyer is found, in a special administration regime. Last year, Thames Water’s owners – a consortium of institutional investors – pumped US$ 632 million into the business and pledged a further US$ 1.26 billion to help turn things around. (Interestingly, this investment was the only time investors had put their own cash into the company since it was privatised in 1989, having instead raised cash for investment from customer bills).  It appears that over the past seven years, profits have not covered the cost of paying interest on its debt, investment costs, and dividend payments – the current high rates will only add to its problems. That being the case, investors would be reluctant to take on the risk of further investment due to fears it will not be repaid. Other water firms, such as Yorkshire Water, SES Water and Portsmouth Water, are facing similar pressures due to higher interest payments on their debts and rising costs, including higher energy and chemical prices.

Kering, the owner of the Gucci brand, has acquired the high-end fragrance label House of Creed, in an all-cash deal thought to be worth between US$ 1.2 billion to US$ 2.2 billion. Creed, which, until its 2020 sale to BlackRock Long Term Private Capital and chairman Javier Ferran, was a family-owned business, is best known for its Aventus fragrance. This was the first acquisition of its recently formed cosmetics unit, Kering Beaute, which was formed in February as its parent company sought to tap into the potential of the growing luxury cosmetics sector.  Over recent years, this segment of the market has seen some major acquisitions including L’Oreal paying US$ 2.53 billion for Australian luxury brand Aesop, Estee Lauder investing US$ 2.8 billion for Tom Ford last November and, in 2020, VF Corporation – which owns the Vans, Timberland, Altra and The North Face brands – buying streetwear company Supreme for US$ 2.1 billion. Research firm iMarc Group estimates that the luxury cosmetics market will grow at an annual 5.0% rate to US$ 67.6 billion from its 2022 US$ 50 billion figure.

Investment fraud in the US more than doubled last year to a record US$ 3.82 billion, compared to US$ 1.60 billion in 2021. There are several factors involved but the prime reason is a marked rise in cryptocurrency-related scams, which accounts for US$ 2.57 billion of the 2022 total, with relatively minor ones being Ponzi schemes, pyramid scams and real estate fraud. Fraudsters are also exploiting advances in technology, with many utilising AI, such as voice cloning and deep fake videos. Those in higher age brackets lost nearly US$ 1 billion to investment fraud last year, forcing many to sell their homes.

During the first five months of the year, China Construction Bank has issued US$ 13.7 billion, (295.5 billion yuan) of loans to support the country’s transportation sector – 11.4% higher than a year earlier. Financing was for the construction of expressways, the improvement of congested road sections, and the completion of some expressways in central and western China. At the end of Q1, the People’s Bank of China posted that outstanding re-lending loans for transportation and logistics came in at US$ 4.9 billion, up US$ 1.5 billion from the beginning of this year.

This week, China’s Premier Li Qiang announced that the Chinese economy had grown in Q2 and that he was confident that 2023 could witness a 5.0% hike in the country’s GDP, in line with the ruling Communist Party’s official target. No Q2 figures were given, but he said it was faster than the previous quarter’s 4.5%; whatever figure results it will be a major improvement on 2022’s 3.0% return. Last month, consumer and factory activity weakened, and youth unemployment spiked, following a marked rebound in the first four months of 2023.

Monday saw the Turkish lire slump by 3.0% against the dollar to US$ 26.05, surpassing the previous week’s all-time low of 25.84; YTD, the currency has sank by over 28%, and follows Recep Tayyip Erdogan’s  re-election last month and his move to backtrack on his years of unorthodox economic policy including slashing rates, by 6.5% to 8.5%, despite surging inflation; this has seen the central bank taking steps to simplify policy, and stopping  using its reserves to support the lira – earlier in the month, reserves fell to a historical low, with net reserves at minus US$ 5.7 billion. Since the central bank completely abandoned the use of reserves in the forex market, the foreign exchange position showed increases of US$ 1 billion -US$ 2 billion a day.

Crisis-hit Pakistan has reached a staff-level agreement with the IMF over a US$ 3 billion funding package, as the country is experiencing its worst ever economic crisis since gaining independence in 1947. Part of the deal included the need for the central bank to lift rates to a record 22% high on Monday. The main factors behind the sorry state of its economy are not only chronic financial mismanagement for many years but also the global energy crisis and last February’s devastating floods.

There are reports that Amazon is planning to double its investment in India to US$ 26.0 billion by 2030. The deal was made during Prime Minister Narendra Modi’s visit to Washington where he met with the tech giant’s chief executive. Andy Jassy commented that the “productive meeting” discussed “Amazon’s commitment to working together we will support start-ups, create jobs, enable exports and empower individuals and small businesses to compete globally”. With the world’s largest population, at 1.4 billion, many of whom rely on smart digital services, the country has become a hotbed for technology and welcomed many global tech companies to take advantage of the growing opportunities on offer. Last fiscal year, its manufacturing exports topped a record US$ 418 billion, with forecasts that the electronics manufacturing sector alone could be valued at US$ 300 billion, by 2030. During Modi’s visit, he also met with Google chief executive Sundar Pichai who indicated that the company would establish a global FinTech centre in Gujarat International Finance Tec-City; last week., US chip manufacturer Micro said it will invest up to US$ 825 million to build its first assembly line in the country. Earlier in the year, US retailer Walmart announced that it will spend US$ 2.5 billion in India to tap into the nation’s booming retail and e-commerce sectors.

There are signs that the Biden administration is considering steps to further control the export of chips for AI so as to make it more difficult for Chinese companies to obtain technology with military applications. This would impact on US manufacturers such as Nvidia and Advanced Micro Devices, with the former’s chief executive, Jensen Huang, noting that the existing export controls could cause “enormous damage” to the US tech industry and that his company had been left with its “hands tied behind our back” by not being allowed to export its most powerful chips to China. Apparently Chinese mega companies, such as Tencent, Alibaba, Baidu and ByteDance placed additional orders with the US company.

Investment fraud in the US more than doubled last year to a record US$ 3.82 billion, compared to US$ 1.60 billion in 2021. There are several factors involved but the prime reason is a marked rise in cryptocurrency-related scams, which accounts for US$ 2.57 billion of the 2022 total, with relatively minor ones being Ponzi schemes, pyramid scams and real estate fraud. Fraudsters are also exploiting advances in technology, with many utilising AI such as voice cloning and deep fake videos. Those in higher age brackets lost nearly US$ 1 billion to investment fraud last year, forcing many to sell their homes.

There are still many questions to be answered relating to the sordid PwC episode involving its senior partners misusing confidential Australian government information to help big multinational companies (legally) avoid paying more tax. To date, it is known that its Australian CEO has quit, nine senior partners have been stood down, and the man at the centre of the scandal, Peter-John Collins, is being investigated by the Australian Federal Police. For more than a decade, PwC’s international tax expert had been assisting the ATO design laws that would solve a problem – how to make big global tech companies, like Google, Facebook and Apple, to pay their fair share of tax in Australia. Along with Deloitte, KPMG and Ernst & Young, it is known to be one of the four big global firms that provide services such as accounting, auditing, consulting and advising big companies how to minimise their tax bill. It turns out that PwC’s biggest client in the country is the Australian government, accounting for some 20% of its revenue; over the past two years, it has been awarded US$ 350 million in Commonwealth contracts for consultancy services, including defence, education, transport spending, and even potential changes to tax laws.

In their dealings with the government and designing the tax laws, PwC and those assisting partners/senior managers were required to sign multiple confidentiality agreements which specifically stated that the knowledge could not be disclosed. However, it is reported that the Tax Practitioners Board found Collins shared that secret knowledge with people within PwC, which gave the firm an advantage by being able to come up with ways for companies to get around paying the new tax. Although this must have been going on for some time, it was only in December 2022, that the TPB announced it had suspended his tax licence for two years because of integrity breaches ruling that “Internal communications within PwC indicated that Collins was aware that the confidential knowledge he gained from the consultations with Treasury would be leveraged to market PwC to a new client base.” In other words, the firm was using this inside information to get new clients and make money. The news did not reach the public domain until the Australian Financial Review (AFR) published the story a month later, and until then, PwC tried to keep the news quiet. However, it took another four months for the whole story to come out when one hundred and thirty-eight internal PwC emails were released. Those emails formed the basis of a story by the AFR about the tax scandal, which published in detail the scale of the leak and how it potentially helped PwC’s clients try to (legally) dodge tax. The emails also showed that not only were several of Mr Collins’s colleagues aware that he was leaking these secret government documents — in some cases, but they were also supportive of him doing so. It would be naïve to think that PwC is the only firm in Australia to carry out such practices and that such episodes are not repeated all over the financial world.

Australia’s latest monthly consumer price indicator shows inflation fell sharply by to 5.6%, down 1.2% in May on the month, but is still well above the 2%-3% RBA target. The main driver behind this improvement was the fall in fuel prices, after a marked increase in April, down 1.5% to 8.0%. Downward pressure on prices also came from travel and accommodation, as the post-pandemic summer and Easter travel booms subsided, although holiday costs were still 7.3% higher than a year ago. Housing, food/non-alcoholic beverages and furniture/ household equipment/services, at 8.4%, 7.9% and 6.0% respectively, were the biggest contributors to inflation over the year to May. It was also noted that that insurance prices surged 14.2% in the twelve months to May, which is the strongest annual rise on record, reflecting higher premiums for house, home contents and motor vehicle insurance. Latest figures are the main reason why the RBA will probably hold off on another rate hike next Tuesday, as earlier in the month a definite move upwards was on the cards – but a further rate hike is inevitable in August.

The ECB President voiced her concern about the ongoing inflation problem and reiterated that the bank intends to raise rates high enough to “break this persistence”. Christine Lagarde noted that inflation had fallen from all-time highs last year because of the fall in energy prices and the rapid increases in interest rates, which made it more expensive for consumers and businesses to borrow and spend; she added that the central bank needed “to address this dynamic decisively” by keeping rates high for as long as required, and that it would discourage “expectations of a too-rapid policy reversal”. By last month, the bloc’s inflation rate had fallen from 10.6% last October to 6.1%. Lagarde commented “barring a material change to the outlook, we will continue to increase rates in July.” The BoE Governor, Andrew Bailey, has suggested that markets were wrong to think that rates would fall quickly from its earlier peak. (This is the same person who was forecasting last August that the UK would soon fall into recession).

There are many who think that if the central banks keep policy tightening, by moving rates even higher to put the emergency brakes on stubbornly soaring inflation, the chances of a recession move higher. It now seems that the same clowns who thought it better to raise rates only when inflation got out of hand – and way above their mostly 2% target levels – consider that they are capable of keeping rates high, reduce inflation and avoid a recession! Both US Federal Reserve Chairman Jerome Powell and ECB’s Christine Lagarde hinted to further hikes. Powell   said the U.S. labour market in particular needed to soften further to take pressure off prices, and even acknowledged a “significant probability” that could lead to a downturn”, whilst Lagarde said it was possible that the flatlining euro zone economy could slip into an outright recession this year but stressed that was not the ECB’s baseline expectation.

King Charles III gave his Royal Assent to the Financial Services and Markets Bill to officially recognise cryptocurrencies as a regulated financial activity in the UK, bringing crypto activities within the established financial market regulations in the country. This puts the UK, with thirty-one million users ahead of the US (with fifty-four million) – where cryptocurrency regulations are still in the planning stages – and aligns it with the EU.  The bill also leverages new powers that became available after Brexit that could unlock approximately US$ 16.3 billion for productive investment, foster innovation and boost the country’s economy.

In a bid to enhance cooperation in the financial services, the UK and the EU have signed an agreement to establish a forum that will meet bi-annually to discuss financial regulations and standards – an indicator that a post-Johnson UK is willing to work more closely with the EU. The agreement does not mean the UK is committing to align with the EU on regulation, but that the meetings are a means to move to discuss “voluntary regulatory co-operation on financial services issues”, and that “both sides will share information, work together towards meeting joint challenges and co-ordinate positions.” The EU accounted for 37% of UK financial services exports in 2019, and the UK has retained its position as Europe’s most important financial centre post-Brexit, while less than 10k jobs have moved – much fewer than expected.

A worrying development in May saw the equivalent of US$ 5.08 billion more being withdrawn than paid into bank and building society accounts, as UK bill payers spent at record levels as the ongoing cost of living crisis takes hold – this was the highest level seen since comparable records began twenty-six years ago. The May figure is in direct contrast to what happened the previous month when net deposits saw a positive US$ 4.67 billion added to bank and building society accounts.

With the possibility of dire consequences if no action were taken, and after discussions with Chancellor Jeremy Hunt, UK banks and building societies will offer more flexibility to struggling mortgage-holders, as rates soar. Borrowers will be able to make a temporary change to their mortgage terms, then will be able to return to their original deal within six months. Lenders also agreed to a twelve-month delay before taking repossession proceedings against borrowers unable, or unwilling, to pay over the long term. It seems that the Sunak government is not willing to take any direct action to help millions of struggling mortgage payers. Jeremy Hunt has confirmed what many bank customers already knew – banks are “taking too long” to pass on increases in interest rates to savers but have moved a lot quicker to pass on higher interest rates to mortgage customers. The UK Chancellor noted that “it is taking too long for the increases in interest rates to be passed on to savers,” adding things were particularly slow to those with instant access accounts. UK Finance, the trade body for the banking sector, said saving and mortgage rates were not “directly linked”. Moneyfacts points out that in December 2021, the average two-year fixed mortgage rate was 2.38% and the average easy access savings rate – which is the most common savings account – was 0.19%, a gap of 2.19%. Last Monday the gap was at 3.87% – 6.23% against 2.36% – but this was an improvement on the 4.24% gap in December 2022. It is about time that banks started to play ball with their customers and one sure thing is that this problem is not confined to the UK – it is a global issue that needs sorting out. The only winners are the banks’ fat cats and major shareholders, Shame On You!