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You can find the current article at its original source at https://www.theguardian.com/business/live/2016/jul/05/mark-carney-to-outline-bank-of-englands-brexit-stability-moves-business-live
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| Brexit crisis: Aviva suspends property trust as Carney warns of 'crystallising' risks - business live | Brexit crisis: Aviva suspends property trust as Carney warns of 'crystallising' risks - business live |
| (35 minutes later) | |
| 3.13pm BST | |
| 15:13 | |
| Property shares are sliding again | |
| Investors are bailing out of Britain’s building and property companies today, as evidence mounts that Brexit fears are now hitting the sector. | |
| Housebuilders Barratt, Taylor Wimpey and Berkeley Group are leading the fallers on the blue-chip FTSE 100 index, down around 6% each. | |
| The FTSE 100 is still up a bit, thanks to the plunge in the pound (which helps big exporters). | |
| But Mark Carney told us this morning to watch the smaller FTSE 250 index instead, to see what the City really thinks about the UK economy. And that index has fallen by 2.5% this morning. | |
| Two challenger banks, Shawbrook and Virgin Money, have tumbled by 12% each. they are both acutely sensitive to UK consumer confidence, and spending. | |
| Important, given what Mark Carney said about the FTSE 100, that the UK focused FTSE 250 is down around 2.5% on the back 's of today's events | |
| 2.45pm BST | 2.45pm BST |
| 14:45 | 14:45 |
| According to investment site Trustnet, the Aviva Property Trust holds commercial property assets across the UK. | According to investment site Trustnet, the Aviva Property Trust holds commercial property assets across the UK. |
| Roughly a third of its assets were in London and the South East (as of 31 May), including offices in the centre of the capital. | Roughly a third of its assets were in London and the South East (as of 31 May), including offices in the centre of the capital. |
| It also owns shopping centres in Edinburgh, Manchester and Exeter, and offices in Birmingham. | It also owns shopping centres in Edinburgh, Manchester and Exeter, and offices in Birmingham. |
| It will also have invested in shares of UK property companies, which have fallen sharply since the referendum. | It will also have invested in shares of UK property companies, which have fallen sharply since the referendum. |
| Here is the Aviva fund asset allocation pic.twitter.com/ghkYKDva76 | |
| Updated | |
| at 2.56pm BST | |
| 2.20pm BST | 2.20pm BST |
| 14:20 | 14:20 |
| Here’s our news story about Aviva locking down its UK property fund to prevent investors selling up, after the Brexit vote. | Here’s our news story about Aviva locking down its UK property fund to prevent investors selling up, after the Brexit vote. |
| Related: Aviva halts trading in its property fund | Related: Aviva halts trading in its property fund |
| 2.16pm BST | 2.16pm BST |
| 14:16 | 14:16 |
| Other property funds will probably come under pressure to follow Aviva and Standard Life’s lead, if their customers decide to pull money out. | Other property funds will probably come under pressure to follow Aviva and Standard Life’s lead, if their customers decide to pull money out. |
| Emma Bewley, head of funds at Connection Capital in London, told Bloomberg that: | Emma Bewley, head of funds at Connection Capital in London, told Bloomberg that: |
| The potential impact of a high-profile liquid fund suspending redemptions shouldn’t be underestimated, particularly given the uncertain environment. | The potential impact of a high-profile liquid fund suspending redemptions shouldn’t be underestimated, particularly given the uncertain environment. |
| While asset managers will seek to avoid suspending redemptions, they may have to use additional liquidity facilities. | While asset managers will seek to avoid suspending redemptions, they may have to use additional liquidity facilities. |
| 2.12pm BST | 2.12pm BST |
| 14:12 | 14:12 |
| Why UK property slowdown could really hurt the economy | Why UK property slowdown could really hurt the economy |
| Jill Treanor | Jill Treanor |
| Aviva has suspended redemptions from its property fund just three hours after the Bank of England spelt out the potential implications of such funds to the overall market. | Aviva has suspended redemptions from its property fund just three hours after the Bank of England spelt out the potential implications of such funds to the overall market. |
| In its half-yearly assessment of risks to the financial markets, the Bank flagged up that: | In its half-yearly assessment of risks to the financial markets, the Bank flagged up that: |
| “Since the referendum, share prices of UK real estate investment trust have fallen sharply, highlighting the risk of future adjustments in commercial retail estate prices. | “Since the referendum, share prices of UK real estate investment trust have fallen sharply, highlighting the risk of future adjustments in commercial retail estate prices. |
| It then warned that: | It then warned that: |
| “Any adjustment in commercial real estate markets could be amplified by the behaviour of leveraged investors and investors in open-ended commercial property funds. Any such amplification of market adjustments could affect economic activity by reducing the ability of companies that use commercial real state as collateral to access finance” | “Any adjustment in commercial real estate markets could be amplified by the behaviour of leveraged investors and investors in open-ended commercial property funds. Any such amplification of market adjustments could affect economic activity by reducing the ability of companies that use commercial real state as collateral to access finance” |
| These funds account for 7% - or around £35bn - of the investment in commercial property, and had already experienced significant outflows before the referendum. | These funds account for 7% - or around £35bn - of the investment in commercial property, and had already experienced significant outflows before the referendum. |
| Commercial property prices matter because around 55% of their core capital bases are aligned to the loans in the sector and 75% of small businesses use commercial property as collateral for loans. | Commercial property prices matter because around 55% of their core capital bases are aligned to the loans in the sector and 75% of small businesses use commercial property as collateral for loans. |
| It is the smaller banks which have greater exposure, the Bank said, after the major players reduced their exposure after the 2008 crisis. The Bank pointed out it had conducted stress tests in 2014 and 2015 on the major lenders to assume a 30% fall in property prices. Its own staff have calculated that for every 10% fall in commercial property prices there is a 1% fall in wider economic investment. | It is the smaller banks which have greater exposure, the Bank said, after the major players reduced their exposure after the 2008 crisis. The Bank pointed out it had conducted stress tests in 2014 and 2015 on the major lenders to assume a 30% fall in property prices. Its own staff have calculated that for every 10% fall in commercial property prices there is a 1% fall in wider economic investment. |
| 1.58pm BST | 1.58pm BST |
| 13:58 | 13:58 |
| The Financial Times has some good early reaction to Aviva’s move: | The Financial Times has some good early reaction to Aviva’s move: |
| Mike Prew, analyst at Jefferies, the investment bank, said it was “inevitable” that further funds would halt redemptions in a “vicious circle of value destruction” that would also affect listed real estate investment trusts. | Mike Prew, analyst at Jefferies, the investment bank, said it was “inevitable” that further funds would halt redemptions in a “vicious circle of value destruction” that would also affect listed real estate investment trusts. |
| A fund manager who monitors flows across the market said that outflows since the vote had been driven by discretionary wealth managers moving large chunks of investors’ money into other asset classes. | A fund manager who monitors flows across the market said that outflows since the vote had been driven by discretionary wealth managers moving large chunks of investors’ money into other asset classes. |
| More here: Aviva becomes second UK property fund to halt redemptions | More here: Aviva becomes second UK property fund to halt redemptions |
| 1.53pm BST | 1.53pm BST |
| 13:53 | 13:53 |
| Aviva and Standard Life are trying to protect the interests of all investors in their property funds by refusing to allow clients to take money out. | Aviva and Standard Life are trying to protect the interests of all investors in their property funds by refusing to allow clients to take money out. |
| Otherwise, they would be forced to sell property assets at firesale prices to fund redemption requests. That would drive down the value of the fund, encouraging more investors to cash out, creating a vicious circle. | Otherwise, they would be forced to sell property assets at firesale prices to fund redemption requests. That would drive down the value of the fund, encouraging more investors to cash out, creating a vicious circle. |
| Instead, people with money in these funds must now sit and wait. | Instead, people with money in these funds must now sit and wait. |
| 1.45pm BST | 1.45pm BST |
| 13:45 | 13:45 |
| The pound hasn’t been this weak since September 1985: | The pound hasn’t been this weak since September 1985: |
| It has shed almost 2 cents today. | It has shed almost 2 cents today. |
| Global traders are baulking at the news that two UK property trusts (so far) are now refusing to allow investors to pull their money out: | Global traders are baulking at the news that two UK property trusts (so far) are now refusing to allow investors to pull their money out: |
| Difficult to see the pound forming the Dying Elephant pattern as good news pic.twitter.com/aVx5DqVTaD | Difficult to see the pound forming the Dying Elephant pattern as good news pic.twitter.com/aVx5DqVTaD |
| Hat-tip to Giles Wilkes of the FT for the chart skills. | Hat-tip to Giles Wilkes of the FT for the chart skills. |
| Updated | Updated |
| at 2.09pm BST | at 2.09pm BST |
| 1.23pm BST | 1.23pm BST |
| 13:23 | 13:23 |
| Correction... the pound has actually fallen through $1.31 (so i’ve updated that last entry). | Correction... the pound has actually fallen through $1.31 (so i’ve updated that last entry). |
| Sterling slips below $1.31 for first time since 1985 https://t.co/GPJmKhJUTa | Sterling slips below $1.31 for first time since 1985 https://t.co/GPJmKhJUTa |
| 1.17pm BST | 1.17pm BST |
| 13:17 | 13:17 |
| Aviva’s decision to suspend its property trust has sent the pound reeling to a new 31-year low. | Aviva’s decision to suspend its property trust has sent the pound reeling to a new 31-year low. |
| Sterling slumped to $1.3098 against the US dollar, down 1.8 cents, to a level not seen since 1985. | Sterling slumped to $1.3098 against the US dollar, down 1.8 cents, to a level not seen since 1985. |
| Updated | Updated |
| at 1.21pm BST | at 1.21pm BST |
| 1.14pm BST | 1.14pm BST |
| 13:14 | 13:14 |
| Aviva suspends property fund redemptions after Brexit vote | Aviva suspends property fund redemptions after Brexit vote |
| NEWSFLASH: Aviva, the savings and investment group, has suspended redemptions from its £1.8bn property fund. | NEWSFLASH: Aviva, the savings and investment group, has suspended redemptions from its £1.8bn property fund. |
| It took the decision following the Brexit vote, which triggered a surge of requests from investors to pull their money out of its UK Property Trust. | It took the decision following the Brexit vote, which triggered a surge of requests from investors to pull their money out of its UK Property Trust. |
| That’s because the EU referendum could hurt the property sector, driving down the value of office blocks, supermarkets and factories. | That’s because the EU referendum could hurt the property sector, driving down the value of office blocks, supermarkets and factories. |
| Aviva blamed “extraordinary market circumstances”, a day after Standard Life became the first firm to freeze its property fund. | Aviva blamed “extraordinary market circumstances”, a day after Standard Life became the first firm to freeze its property fund. |
| "Extraordinary market circumstances" - @avivainvestors suspends £1.7bn UK property fund. Some investors clear feel it's not worth that now. | "Extraordinary market circumstances" - @avivainvestors suspends £1.7bn UK property fund. Some investors clear feel it's not worth that now. |
| An Aviva spokesperson said: | An Aviva spokesperson said: |
| “We have acted to safeguard the interests of all our investors by suspending dealing in the fund with immediate effect. | “We have acted to safeguard the interests of all our investors by suspending dealing in the fund with immediate effect. |
| “Suspension of dealing will give Aviva Investors greater control in managing cashflows and conducting orderly asset sales in order to meet our obligations to investors wishing to redeem their holdings.” | “Suspension of dealing will give Aviva Investors greater control in managing cashflows and conducting orderly asset sales in order to meet our obligations to investors wishing to redeem their holdings.” |
| Breaking: Aviva becomes second firm to suspend UK property fund, citing "extraordinary market circumstances" https://t.co/OU8xL4ykoO | Breaking: Aviva becomes second firm to suspend UK property fund, citing "extraordinary market circumstances" https://t.co/OU8xL4ykoO |
| Laith Khalaf, senior analyst at City firm Hargreaves Lansdown, reckons more investment firms will freeze redemptions soon. | Laith Khalaf, senior analyst at City firm Hargreaves Lansdown, reckons more investment firms will freeze redemptions soon. |
| ‘The dominos are starting to fall in the UK commercial property market, as yet another fund locks its doors on the back of outflows precipitated by the Brexit vote. It’s probably only a matter of time before we see other funds follow suit. | ‘The dominos are starting to fall in the UK commercial property market, as yet another fund locks its doors on the back of outflows precipitated by the Brexit vote. It’s probably only a matter of time before we see other funds follow suit. |
| Updated | Updated |
| at 1.18pm BST | at 1.18pm BST |
| 1.11pm BST | 1.11pm BST |
| 13:11 | 13:11 |
| George Osborne has repeated his support for Mark Carney’s decision to ease the funding rules, allowing banks to lend more. | George Osborne has repeated his support for Mark Carney’s decision to ease the funding rules, allowing banks to lend more. |
| He’s told Sky News that the government’s financial reforms, making the banks ‘part of the solution in the UK economy, not part of the problem’ are paying off. | He’s told Sky News that the government’s financial reforms, making the banks ‘part of the solution in the UK economy, not part of the problem’ are paying off. |