Real Estate

UK property market strengthens, but renters face tighter squeeze; GSK’s shares surge after $2.2bn Zantac settlement – business live


Introduction: UK property market strengthens, but renters face more pressure

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

The UK housing market is continuing to pick up, the nation’s surveyors have reported, but renters are being squeezed by a fall in properties available to them.

The latest Royal Institution of Chartered Surveyors (RICS) Residential Market Survey has shown that UK house price growth turned positive across the country for the first time in almost two years.

More surveyors reported rising house prices in their area than falling prices in September, which ends a run of negative or flat returns for this indicator stretching back to October 2022.

RICS reports that most parts of the UK are experiencing rising house prices, although the West Midlands, South West and East Anglia are lagging behind.

With borrowing costs expected to keep falling, prices are expected to rise across the UK in the year ahead.

A chart showing UK house price forecasts
Photograph: RICS

Surveyors also reported that demand for homes, sales, and new listings all returned to growth last month.

RICS head of market analytics, Tarrant Parsons, says:

“The latest survey results once again convey a brighter picture for housing market activity, with the recent easing in mortgage interest rates continuing to support a recovery in buyer demand.

“Critical for the outlook, a further unwinding in monetary policy is anticipated over the months ahead, which should create a more favourable backdrop for the market moving forward. In keeping with this idea, forward-looking sentiment data from the survey points to sales volumes gaining impetus, both in the near-term and over the next twelve months.”

But renting a house in the UK is becoming harder, as demand continues to grow and outstrip supply.

RICS reports that demand from tenants increased again last month, while there was a drop in the number of properties listed for rent – possibly because landlords are fearful of capital gains tax (CGT) changes in the budget this month.

The group explains::

This trend is further influenced by some landlords listing their properties for sale before potential CGT rises. Unfortunately for renters, the continuing squeeze on supply will likely mean further rent rises and difficulties finding property.

The struggle to rent property has already led to a rise in rough sleeping last year. Homelessness charities warned yesterday that rough sleeping will head back towards record levels unless the government addresses a looming £1bn shortfall in frontline funding.

The agenda

  • 9.30am BST: Bank of England’s credit conditions survey

  • 10am BST: Post Office chief executive, Nick Read, to give evidence at the Horizon IT inquiry for the second day

  • 1.30pm BST: US inflation report for September

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Key events

UK lenders see mortgage default rates rising

More UK households have defaulted on their mortgages in the last quarter, new Bank of England data shows, and the situation is likely to worsen in the run-up to Christmas.

UK lenders have reported that the default rates on secured loans to households increased in the third quarter of this year, and are expected to increase again in the final quarter (October-December).

This is the seventh quarter in a row in which lenders have reported a rise in default rates on secured loans, as this chart shows:

A chart showing UK default rates Illustration: Bank of England

However, default rates for total unsecured lending slightly decreased in the last quarter, helped by a drop in defaults on credit cards.

Karim Haji, global and UK head of financial services at KPMG, says:

“These latest figures suggest that many households are still struggling in the current environment.

Unsecured lending demand, while stable, remained elevated compared to the first quarter of the year. A fall in default rates for unsecured lending is an encouraging sign and reflects the cautious approach to credit being taken by households.

Unions are calling on ministers to undo “years of damage to the housing sector” by the previous Conservative government and honour its pledge to tackle the housing emergency by introducing a form of rent cap.

More here:

TSB fined £10.9m over treatment of customers in financial difficulty

TSB bank has been fined almost £11m for failing to treat struggling customers fairly when they fall behind on their loans.

The Financial Conduct Authority has fined TSB £10,910,500 for failing to ensure customers who were in arrears were treated fairly.

The watchdog has found that TSB risked agreeing unaffordable payment arrangements with customers in difficulty or charging them inappropriate fees, because it lacked suitable systems and controls to secure fair outcomes.

The bank has paid almost £100m in redress to the 232,849 mortgage, overdraft, credit card and loan customers affected.

Therese Chambers, joint executive director of enforcement and market oversight at the FCA, says:

‘If you get into difficulty, you hope for – and we expect – fair treatment so a stressful situation isn’t made worse.

TSB’s woeful systems and controls exposed its customers to risk of harm and meant it missed opportunity after opportunity to do the right thing. While it did take action, it took us instigating a review before it acted effectively to address all the issues.’

Bloomberg: EDF seeks £4bn to fund Hinkley Nuclear Plant construction

The cost of building a new UK nuclear power plant at Hinkley Point is weighing on French energy firm EDF.

Bloomberg are reporting that EDF is holding talks with investors over funding for the Hinkley Point C nuclear power plant.

With the costs ballooning, EDF is seeking to raise as much as £4bn through a bespoke financial instrument which would give investors a stake in the Hinkley project, Bloomberg say.

Back in January, EDF warned that the plan was running behind schedule and could cost up to £35bn in 2015 prices.

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Unilever completes sale of Russian business

Unilever has exited Russia, more than two and a half years after the invasion of Ukraine.

The consumer good giant has today completed the sale of its Russian assets to Arnest Group, which makes perfume, cosmetics, and household products.

The sale includes all of Unilever’s business in Russia and its four factories in the country, plus its business in Belarus.

Hein Schumacher, CEO of Unilever, says:

“Over the past year, we have been carefully preparing the Unilever Russia business for a potential sale. This work has been very complex, and has involved separating IT platforms and supply chains, as well as migrating brands to Cyrillic.

“The completion of the sale ends Unilever Russia’s presence in the country.”

Unilever, whose brands include Marmite, Dove and Domestos, had been criticised for nor quitting Russia following the invasion of February 2022.

Last year, it was named as an international sponsor of war by the Ukrainian government after a law forced large companies operating in Russia to contribute directly to its war effort.

Analysts at Jefferies predict GSK’s stock should “uptick” by around 10%, now that most of the uncertainty around Zantac has been removed.

Jefferies had previously estimated that settling the litigation around Zantac would cost GSK between $2bn and $3.5bn, so last night’s settlement is at the bottom end of that forecast.

GSK shares jump after reaching Zantac settlement

Shares in pharmaceuticals group GSK have jumped over 6.5% in early trading after agreeing to settle US litigation over its heartburn treatment Zantac.

GSK said last night that it has struck agreements with 10 plaintiff law firms who represent about 93%, roughly 80,000, of the US state court product liability cases pending against it over Zantac. The company will pay up to $2.2bn to settle the claims.

Relief that the litigation is largely resolved has pushed up GSK’s share price to £15.52, a three-week high.

That lifts its value by around £3.7bn, from £60.6bn to £64.4bn.

Derren Nathan, head of equity research at Hargreaves Lansdown, says:

“Pharma giant GSK has taken a giant leap towards drawing a line under the long-running legal battle concerning alleged cancer to heartburn remedy Zantac.

It’s agreed to settle around 93% of cases pending in the US State Courts for a payment of up to $2.2bn as well as an additional $70mn in a separate but related action. In sterling terms, it’s expecting to recognise a £1.8bn charge for the settlements, which also covers the remaining 7% of outstanding claims, with some analysts seeing scope for the final quantum to come in a little lower.

This is a significantly better outcome than initially expected, with some estimates standing at as much as $45bn just a couple of years ago. Since then, GSK and other drugmakers implicated in the case, Sanofi and Boehringer Ingelheim, have seen several key rulings go in their favour. GSK continues to accept no liability.

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Tributes paid after Indian tycoon Ratan Tata dies

Roses are seen kept near the coffin carrying mortal remains of Indian industrialist Ratan Tata at the National Centre for the Performing Arts (NCPA) today Photograph: Punit Paranjpepunit Paranjpe/AFP/Getty Images

Tributes have been pouring in for Indian business tycoon and former Tata Group chairman Ratan Tata after his death yesterday.

Tata, who acquired several UK companies during his career including tea firm Tetley, Anglo-Dutch steelmaker Corus, and car brands British Jaguar and Land Rover, died aged 86 yesterday.

Indian prime minister Narendra Modi led the tributes, calling Tata “a visionary business leader, a compassionate soul and an extraordinary human being”.

Google and Alphabet CEO Sundar Pichai says:

He leaves an extraordinary business and philanthropic legacy and was instrumental in mentoring and developing the modern business leadership in India. He deeply cared about making India better.

My last meeting with Ratan Tata at Google, we talked about the progress of Waymo and his vision was inspiring to hear. He leaves an extraordinary business and philanthropic legacy and was instrumental in mentoring and developing the modern business leadership in India. He deeply…

— Sundar Pichai (@sundarpichai) October 9, 2024

During his long career, Ratan Tata expanded and grew his family conglomerate in a bold bold international expansion.

Harsh Vardhan Goenka, chair of conglomerate RPG Enterprises, dubbed Tata a “titan” who had left “an indelible mark on the world of business and beyond”.

The clock has stopped ticking. The Titan passes away. #RatanTata was a beacon of integrity, ethical leadership and philanthropy, who has imprinted an indelible mark on the world of business and beyond. He will forever soar high in our memories. R.I.P pic.twitter.com/foYsathgmt

— Harsh Goenka (@hvgoenka) October 9, 2024

N. Chandrasekaran, the current chairman of Tata Sons, says:

“Mr. Tata’s dedication to philanthropy and the development of society has touched the lives of millions. From education to health care, his initiatives have left a deep-rooted mark that will benefit generations to come.”

Tata was the largest international donor to US university Cornell, whose interim president Michael I. Kotlikoff says:

“Ratan Tata has left an extraordinary legacy in India, across the world and at Cornell, which he cared about deeply.

Ratan’s quiet demeanor and humility belied his international profile. His generosity and concern for others enabled research and scholarship that improved the education and health of millions of people in India and beyond, and extended Cornell’s global impact.”

Tata was also an animal lover, who ordered that stray dogs be allowed to lounge in the lobby of the Tata headquarters in Mumbai.

Shaktikanta Das, Governor of the Reserve Bank of India (RBI) pays his respect to the former chairman of Tata Group Ratan Tata, in Mumbai, India, today. Photograph: Francis Mascarenhas/Reuters
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Everyone will be better off under the new Government, the Business Secretary has said, rejecting the suggestion pensioners would have to “hide behind the sofa” when the Budget was announced.

Asked whether it was fair to say pensioners would have to “hide behind the sofa wrapped in a blanket” on October 30, Jonathan Reynolds told Sky News:

“This is a Government that is going to make everybody better off.

Specifically for pensioners, we already have the commitment to the triple lock, that’s a guarantee that pensioners will be better off this year, next year, the year after that.

That is a significant pledge from this new Government, so people should be reassured from commitments like that.

Yes, it is a challenging situation, but we are serious on delivering on our objectives, which is an economy that works better for everyone, better growth, better investment and to make sure everyone benefits from that.”

Rachel Reeves has also been warned that she risks a Liz Truss-style meltdown if the City responded badly to substantially higher borrowing in the budget later this month.

Ben Nabarro, chief UK economist at Citi, said there was a risk of a “buyer’s strike”(a run on government bonds) unless Reeves made it clear any increase in investment spending would be gradual.

Nabarro (whose economic forecasts underpin the IFS’s latest projections), said:

“There is material concern in the gilt market about an unconstrained dash for investment out there…

International investors are not really giving the gilt market the benefit of the doubt.

IFS says Reeves has to raise taxes by £25b at the budget

Spending has to increase by £30b to avoid austerity

And Citi warns gilts risk a “buyers’ strike” fiscal rules are relaxed too far to borrow tens of billions for investment

Via @tomelleryreeshttps://t.co/5g6GDGrD5n

— Alex Wickham (@alexwickham) October 10, 2024

IFS: Labour needs £25bn a year in tax rises to avoid austerity

Chancellor Rachel Reeves needs to make £25bn of tax rises to avoid breaking Labour’s pledge not to return to austerity, the Institute for Fiscal Studies is warning this morning.

The IFS has calculated that taxes would need to rise substantially even if Reeves changes the UK’s debt rules to allow extra investment spending.

NEW: The decisions made at this month’s Budget could shape domestic policy for the whole parliament to come.

Our IFS Green Budget report launching today, funded by @NuffieldFound and @citi, examines the fiscal situation and options for the Chancellor: https://t.co/ev5r12WLqY

— Institute for Fiscal Studies (@TheIFS) October 10, 2024

In the run-up to the election, Labour outlined plans for £9bn of tax increases, but the IFS said that if Reeves wanted to increase spending on public services in line with national income she would need to raise a further £16bn to meet her rule that day-to-day spending should be covered by tax receipts.

The thinktank says:

“Given the pledges she has made not to raise the main rates of income tax and corporation tax, or to increase national insurance or VAT at all, she might struggle to implement a tax rise on that scale.

“It would be bigger than the net tax rises implemented in July 1997 and October 2010 (both around £13bn-£14bn). In which case she might have to live with day-to-day spending on many public services falling as a fraction of national income.”

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Rents expected to keep rising

The shortage of rental properties means most surveyors expect rents to keep rising, as this chart shows:

A chart showing forecasts for UK rental growth Illustration: RICS

The government’s renters’ rights bill will ban competitive bidding in the housing market, by preventing property owners accepting more rent than they have asked for.

We are changing renting for the better. 

Here are just some the of changes the Bill will introduce:   

➡️ Ending no-fault evictions  

➡️ Banning bidding wars  

➡️ Improving safety  

➡️ Giving the right to request a pet   #RentersRights pic.twitter.com/zdl4Ahniyl

— Ministry of Housing, Communities & Local Gov (@mhclg) October 9, 2024

RICS president Tina Paillet says:

“While the Renter’s Rights Bill aims to improve standards and offer better protections for tenants, we must ensure that these reforms do not discourage responsible landlords from remaining in the market.”

“Most importantly, the planned changes in the private rental sector fall short of tackling the core issue: increasing supply and making housing more affordable for tenants.”

For those renting, stock levels continued to reduce in September 2024 as some landlords hoping to avoid any potential CGT increase look for a quick completion before budget day. Should the Gov follow through with a delayed start date, expect more stock to hit the shelves and… pic.twitter.com/MEGkFyNvSt

— Emma Fildes (@emmafildes) October 10, 2024

Introduction: UK property market strengthens, but renters face more pressure

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

The UK housing market is continuing to pick up, the nation’s surveyors have reported, but renters are being squeezed by a fall in properties available to them.

The latest Royal Institution of Chartered Surveyors (RICS) Residential Market Survey has shown that UK house price growth turned positive across the country for the first time in almost two years.

More surveyors reported rising house prices in their area than falling prices in September, which ends a run of negative or flat returns for this indicator stretching back to October 2022.

RICS reports that most parts of the UK are experiencing rising house prices, although the West Midlands, South West and East Anglia are lagging behind.

With borrowing costs expected to keep falling, prices are expected to rise across the UK in the year ahead.

Photograph: RICS

Surveyors also reported that demand for homes, sales, and new listings all returned to growth last month.

RICS head of market analytics, Tarrant Parsons, says:

“The latest survey results once again convey a brighter picture for housing market activity, with the recent easing in mortgage interest rates continuing to support a recovery in buyer demand.

“Critical for the outlook, a further unwinding in monetary policy is anticipated over the months ahead, which should create a more favourable backdrop for the market moving forward. In keeping with this idea, forward-looking sentiment data from the survey points to sales volumes gaining impetus, both in the near-term and over the next twelve months.”

But renting a house in the UK is becoming harder, as demand continues to grow and outstrip supply.

RICS reports that demand from tenants increased again last month, while there was a drop in the number of properties listed for rent – possibly because landlords are fearful of capital gains tax (CGT) changes in the budget this month.

The group explains::

This trend is further influenced by some landlords listing their properties for sale before potential CGT rises. Unfortunately for renters, the continuing squeeze on supply will likely mean further rent rises and difficulties finding property.

The struggle to rent property has already led to a rise in rough sleeping last year. Homelessness charities warned yesterday that rough sleeping will head back towards record levels unless the government addresses a looming £1bn shortfall in frontline funding.

The agenda

  • 9.30am BST: Bank of England’s credit conditions survey

  • 10am BST: Post Office chief executive, Nick Read, to give evidence at the Horizon IT inquiry for the second day

  • 1.30pm BST: US inflation report for September

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