LONDON’S BUSINESS NEWSPAPER
ESCAPE TO CROATIA SUN, SEA AND A STAR-STUDDED GUEST LIST AT PULA’S TOP HOTEL P16 MONDAY 15 MAY 2023
GUNNED DOWN ARSENAL TITLE HOPES ALL BUT OVER P20
CITYAM.COM
ISSUE 3,979
FREE IT’S SHOWTIME
New Vodafone CEO enters the spotlight CHARLIE CONCHIE
£233BN LYING IDLE
BILLIONS IN SAVINGS LEFT IN ZERO-INTEREST ACCOUNTS AS BANKS UNDER PRESSURE TO OFFER BETTER RATES AND NOT EXPLOIT CUSTOMER INERTIA CHRIS DORRELL AND CHARLIE CONCHIE AS BANKS come under fire for offering “measly” rates to savers, new figures reveal many are leaving hundreds of billions of pounds lying idle in zero-interest accounts. Some £233bn is being held in zerointerest accounts, according to Bank of England Data analysed by asset management firm Bowmore. This is up from the total held in such accounts back in November 2021 at the beginning of the Bank of England’s rate-
hiking cycle, which last week raised interest rates again to 4.5 per cent. The figures will likely add more weight to calls that banks should be doing more to make sure customers are getting a good deal. The influential Treasury Select Committee recently expanded its probe into the low savings rates currently on offer beyond the four largest retail banks to include Nationwide, Santander, TSB and Virgin Money. Keeping savings in a zero-interest account means the value will be eroded by
inflation, which remains above 10 per cent despite the Bank’s efforts to bring it down. A Lloyds Banking Group spokesperson told City A.M. that customers were “proactively moving their money as their needs change”, while Barclays, HSBC and Natwest all said they offer competitive rates to savers. “We would always encourage people to shop around for the product and interest rate that is suited to their need,” UK Finance, which represents Britain’s banking industry, told City A.M. However, the Financial Conduct Authority
has argued that the incoming Consumer Duty will force firms to demonstrate they are not exploiting customer inertia. “Savers have got used to a decade and a half where interest rates were effectively zero and there was little point shopping around for a better deal on your savings. Those days are long gone,” Charles Incledon, client director at Bowmore Asset Management, said. “People need to be aware that savings in a zero-interest account are being eaten away at an alarming rate at the moment,” he added.
VODAFONE’s new chief Margherita Della Valle will be looking to lay out a convincing vision for the firm tomorrow as she updates the City with its full year results for the first time in the top job. Della Valle (pictured), the former finance chief, has been tasked with breathing life into the FTSE 100 laggard after a 58 per cent collapse in its share price over the past five years. Analysts are expecting the firm to post pre-tax profits of €4.8bn (£4.2bn), down from just over €5bn last year. Hargreaves Lansdown said it was “not looking too hopeful” that the fourth quarter will offer a major improvement on the previous three quarters. “It will be interesting to hear further details from the new CEO on her vision for the business,” Matt Britzman, an equity analyst at Hargreaves Lansdown said. “Price hikes throughout Europe are already underway, which should help limit some of the impacts of higher costs.” “There could be portfolio changes on the horizon, not least of which may centre around the ongoing talks to merge Vodafone’s UK business with Three UK,” he added.
Cost of card payments slammed as ‘startling’ after Mastercard exec defends fees CHARLIE CONCHIE A LOBBY group has today warned of the “startling rise in the cost of accepting cards” for small businesses after the European chief of Mastercard defended the fees it levies on merchants over the weekend. Interchange fees, which are
charged to merchants and paid to the card issuing bank and payment network, have climbed sharply in recent years and squeezed merchants. The price hikes have drawn the ire of business bodies who have argued it amounts to a tax on card payments. But the European president of
Mastercard, Mark Barnett, this weekend defended the current fee structure. “We believe interchange is the right mechanism for everybody, sharing the costs and benefits of the payment system,” he told the Financial Times. “We think it represents incredibly good value.” Start-up lobby group Coadec –
which helped launch the ‘Axe the Card Tax’ campaign last year calling for regulators to step into the market and reduce fees – criticised his comments. “Coadec is part of the Axe the Card Tax campaign because of the startling rise in the cost of accepting cards,” Luke Kosky, fintech policy lead at Coadec, told City A.M.
Coadec’s analysis suggests card processing fees have risen 600 per cent over the past eight years. “The government has not yet worked out if the current cap levels are right for the UK where 90 per cent of retail sales are on cards,” Kosky said. The Payment Systems Regulator is conducting a market review of the fees paid to card payment networks.
INSIDE M&G CALLS MANAGERS BACK TO THE OFFICE P3 HIGHER ENERGY BILLS THE NEW NORM WITHOUT ACTION P11 KEMI BACKS THE CITY P12 MARKETS P13 OPINION P14-15