Rachel Reeves’ Budget was ‘monumentally mishandled,’ says London-listed bank
A London-listed bank has given its scathing assessment of Rachel Reeves’ second Autumn Budget and warned of the impact it will have on consumer confidence.
S&U – which was founded in 1938 and once known as Sports and Utilities – said the performance of its motor finance and property financing arms was “remarkably resilient given the chaotic and monumentally mishandled recent Budget”.
The Chancellor raised taxes to the tune of £26bn on November 26, which included cash grabs on the wealthy, savers, gambling firms and landlords. Banks managed to escape a tax raid after fierce lobbying, but had been highly speculated to be a target.
Reeves also froze the income tax threshold – a move dubbed a ‘stealth tax’ – which many have viewed as a direct break of the Labour manifesto to not hike taxes on working people.
S&U said the policies had triggered a “dampening effect on consumer confidence in general and more specifically on the housing market”.
The Office for Budget Responsibility (OBR) cut growth forecasts every year from 2026 to the end of the Parliament after finding the measures released in the Budget would do little to drive growth.
“Ironically, a happy consequence now appears to be a dawning realisation within the Treasury and the FCA that without growth and greater access to credit, consumer satisfaction and protection are pretty hypothetical,” S&U added.
S&U free from regulatory ‘shackles’
Elsewhere, the specialist lender said it had been able to accelerate in its rebound following a rough road during the motor finance scandal.
The London-listed lender said once it was “freed from the shackles of regulatory intervention” – referring to the mandated review from the City watchdog into its car finance arm Advantage – it was able to beat third-quarter profit expectations.
The bank’s stock rose four per cent to 1,929.50p in early trading.
It added the “calming effect” triggered by the Supreme Court – which majorly sided with lenders in the scandal – also helped bring closure to the market.
In the last four months Advantage enjoyed an upsurge in trading volumes with over £25m in value.
In the three months to 31 October, S&U posted a record 869,000 finance applications with receivables – the money owed to it by borrowers for loans and other credit extended – near £318m, marking an increase of 14 per cent year-on-year.
But the motor finance battle has continued to rumble on in the second half of the year with the Financial Conduct Authority’s (FCA) redress scheme causing widespread industry backlash.
The watchdog pushed back the deadline for its redress consultation – initially scheduled for 18 November – to 12 December at 5:00pm after banking giants lashing out at the regulator as they upped provisions.
Lloyds Banking Group – which owns the UK’s largest car finance provider Black Horse – was forced to hike provisions to £2bn from £1.2bn.
The bank’s chief Charlie Nunn has also warned the scheme would take away 20 years of profitability from the sector and create concerns about investability in the UK.
S&U said the clarity around the scheme had allowed it to “both improve its interest margins… and also improve the quality of its loan book” due to the bank’s lack of exposure to discretionary commission arrangements – which are the fundamental point of the regulatory redress.
The lender said Advantage was able to “assist its customers to protect and improve their credit ratings – an attribute too little recognised in the non-prime market”.
“We would encourage the Financial Conduct Authority to remember this when addressing industry concerns about its Commission Redress scheme which is currently under consultation,” it added.