This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

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

The article has changed 19 times. There is an RSS feed of changes available.

Version 9 Version 10
Brexit crisis: Aviva suspends property trust as Carney warns of 'crystallising' risks - business live M&G and Aviva suspend property fund redemptions as Brexit fears mount – business live
(35 minutes later)
4.22pm BST
16:22
M&G SUSPENDS ITS PROPERTY FUND
NEWSFLASH: M&G has now suspended its property fund after experiencing a surge of withdrawal requests.
And like Standard Life and Aviva, M&G blames the Brexit uncertainty for driving investors to the exits (which are now locked)
This is significant, as M&G’s is the biggest property fund in the UK (I believe).
Here’s the statement from M&G, which is part of Prudential:
M&G SUSPENDS TRADING IN M&G PROPERTY PORTFOLIO AMID BREXIT UNCERTAINTY
London, 5th July 2016 - M&G Investments (M&G) announces a temporary suspension of trading in the shares of the M&G Property Portfolio and its feeder fund.
Investor redemptions in the Fund have risen markedly because of the high levels of uncertainty in the UK commercial property market since the outcome of the European Union referendum.
Redemptions have now reached a point where M&G believes it can best protect the interests of the funds’ shareholders by seeking a temporary suspension in trading.
This will allow the fund manager time to raise cash levels in a controlled manner, ensuring that any asset disposals are achieved at reasonable values.
The decision to suspend was taken in agreement with the Fund’s Depositary and the Financial Conduct Authority has been informed. Orders placed after 12pm on 4th July 2016 will not be processed until the suspension is lifted. M&G will review the suspension every 28 days.
The Property Portfolio is a broadly diversified fund which invests in 178 UK commercial properties across retail, industrial and office sectors on behalf of UK retail investors. The Fund, which managed assets of £4.4 billion as at 30 June 2016, has no borrowings.
M&G SUSPENDS TRADING IN M&G PROPERTY PORTFOLIO FUND
Updated
at 4.32pm BST
3.56pm BST3.56pm BST
15:5615:56
Afternoon summary: Brexit crisis hits property sectorAfternoon summary: Brexit crisis hits property sector
To help anyone just tuning in, here’s a quick recap of the key points today:To help anyone just tuning in, here’s a quick recap of the key points today:
Aviva, the UK investment group, has become the second company to suspend withdrawals from its property fund, following the Brexit vote.Aviva, the UK investment group, has become the second company to suspend withdrawals from its property fund, following the Brexit vote.
Aviva followed Standard Life, which shuttered its fund last night after experiencing a wave of redemption requests from nervous investors.Aviva followed Standard Life, which shuttered its fund last night after experiencing a wave of redemption requests from nervous investors.
It’s the latest signal that last month’s EU referendum result is now hitting confidence in the UK economy.It’s the latest signal that last month’s EU referendum result is now hitting confidence in the UK economy.
Related: Aviva halts trading in its property fund as Brexit contagion spreadsRelated: Aviva halts trading in its property fund as Brexit contagion spreads
An Aviva spokesperson blamed “extraordinary market circumstances”, adding that freezing the fund will protect all investors.An Aviva spokesperson blamed “extraordinary market circumstances”, adding that freezing the fund will protect all investors.
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.”
Otherwise, it would have been forced to start selling its assets (which include supermarkets and offices across the UK) to raise funds.Otherwise, it would have been forced to start selling its assets (which include supermarkets and offices across the UK) to raise funds.
Analysts believe other funds will come under pressure too, if investors begin to worry that commercial property values are going to tumble in the aftermath of Britain’s decision to leave the EU.Analysts believe other funds will come under pressure too, if investors begin to worry that commercial property values are going to tumble in the aftermath of Britain’s decision to leave the EU.
Aviva has now suspended trading in its property fund. I expect others will follow.Aviva has now suspended trading in its property fund. I expect others will follow.
The move came just a couple of hours after the Bank of England took new steps to tackle the consequences of the Brexit vote. Britain’s central bank relaxed the capital rules imposed on UK lenders, meaning firms and households will get access to an extra £150bn of potential credit.The move came just a couple of hours after the Bank of England took new steps to tackle the consequences of the Brexit vote. Britain’s central bank relaxed the capital rules imposed on UK lenders, meaning firms and households will get access to an extra £150bn of potential credit.
Banks, who met with chancellor George Osborne today, have just announced that they will make the extra capital available to the real economy.Banks, who met with chancellor George Osborne today, have just announced that they will make the extra capital available to the real economy.
But Bank governor Mark Carney also issued a warning that the risks around Brexit are now ‘starting to crystallise’,But Bank governor Mark Carney also issued a warning that the risks around Brexit are now ‘starting to crystallise’,
“The UK has entered a period of uncertainty and significant economic adjustment.“The UK has entered a period of uncertainty and significant economic adjustment.
The efforts of the Bank of England will not be able fully and immediately to offset the market and economic volatility that can be expected while this adjustment proceeds.”The efforts of the Bank of England will not be able fully and immediately to offset the market and economic volatility that can be expected while this adjustment proceeds.”
Carney also urged borrowers to be prudent, and warned that Britain’s current account deficit with the rest of the world was a key risk in the post-Brexit world, as foreign investors may lose faith in the UK.Carney also urged borrowers to be prudent, and warned that Britain’s current account deficit with the rest of the world was a key risk in the post-Brexit world, as foreign investors may lose faith in the UK.
Earlier, new economic data showed that UK service sector growth slowed last month.Earlier, new economic data showed that UK service sector growth slowed last month.
Fresh fears over Brexit are gripping the markets again. The pound has been rocked, hitting a new 31-year low around $1.305 against the US dollar.Fresh fears over Brexit are gripping the markets again. The pound has been rocked, hitting a new 31-year low around $1.305 against the US dollar.
And the FTSE 250 index, which includes many small UK firms, is currently down 2.1% today.And the FTSE 250 index, which includes many small UK firms, is currently down 2.1% today.
3.41pm BST3.41pm BST
15:4115:41
Q&A: What the commercial property fund freeze means for youQ&A: What the commercial property fund freeze means for you
My colleague Jill Treanor has rattled out a Q&A about Aviva and Standard Chartered’s decision to block investors from cashing out of their property trusts.My colleague Jill Treanor has rattled out a Q&A about Aviva and Standard Chartered’s decision to block investors from cashing out of their property trusts.
Here’s a flavour:Here’s a flavour:
What are commercial property funds?What are commercial property funds?
They are funds that allow people to invest in commercial property developments such as office blocks and shopping centres – projects that normally rely on money from major professional investors.They are funds that allow people to invest in commercial property developments such as office blocks and shopping centres – projects that normally rely on money from major professional investors.
How much money is invested in them?How much money is invested in them?
Around £35bn, around 7% of the total investment in UK commercial property, is invested in these property funds.Around £35bn, around 7% of the total investment in UK commercial property, is invested in these property funds.
Could this affect the residential property market?Could this affect the residential property market?
It is not immediately clear how this this feeds through into residential properties, although a hit to sentiment in the commercial property industry can quickly feed through to homebuyers, who might decide to pull out of transactions.It is not immediately clear how this this feeds through into residential properties, although a hit to sentiment in the commercial property industry can quickly feed through to homebuyers, who might decide to pull out of transactions.
The Bank of England is concerned that if these funds all seize up at once that it could amplify any fall in commercial property prices....The Bank of England is concerned that if these funds all seize up at once that it could amplify any fall in commercial property prices....
Could this affect the broader UK economy?Could this affect the broader UK economy?
Around75% of small businesses use commercial property as collateral for loans so they could face problems with their banks if prices fall too sharply. Banks also use commercial property to count towards their capital buffers; around 55% of their core capital – their main safety net in a crisis -– at the end of 2015 was based on commercial property....Around75% of small businesses use commercial property as collateral for loans so they could face problems with their banks if prices fall too sharply. Banks also use commercial property to count towards their capital buffers; around 55% of their core capital – their main safety net in a crisis -– at the end of 2015 was based on commercial property....
More here:More here:
Related: Commercial property fund freeze – all you need to knowRelated: Commercial property fund freeze – all you need to know
3.25pm BST3.25pm BST
15:2515:25
Earlier today, JP Morgan gave a pithy warning of the dangers of Brexit:Earlier today, JP Morgan gave a pithy warning of the dangers of Brexit:
JPMorgan has a message for Tory leadership contenders confidence on trade negotiations pic.twitter.com/OGaQQfnyizJPMorgan has a message for Tory leadership contenders confidence on trade negotiations pic.twitter.com/OGaQQfnyiz
3.13pm BST3.13pm BST
15:1315:13
Property shares are sliding againProperty 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.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.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).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.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.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 eventsImportant, 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 BST2.45pm BST
14:4514:45
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/ghkYKDva76Here is the Aviva fund asset allocation pic.twitter.com/ghkYKDva76
UpdatedUpdated
at 2.56pm BSTat 2.56pm BST
2.20pm BST2.20pm BST
14:2014:20
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 fundRelated: Aviva halts trading in its property fund
2.16pm BST2.16pm BST
14:1614:16
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 BST2.12pm BST
14:1214:12
Why UK property slowdown could really hurt the economyWhy UK property slowdown could really hurt the economy
Jill TreanorJill 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 BST1.58pm BST
13:5813:58
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 redemptionsMore here: Aviva becomes second UK property fund to halt redemptions
1.53pm BST1.53pm BST
13:5313:53
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 BST1.45pm BST
13:4513:45
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/aVx5DqVTaDDifficult 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.
UpdatedUpdated
at 2.09pm BSTat 2.09pm BST
1.23pm BST1.23pm BST
13:2313:23
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/GPJmKhJUTaSterling slips below $1.31 for first time since 1985 https://t.co/GPJmKhJUTa
1.17pm BST1.17pm BST
13:1713:17
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.
UpdatedUpdated
at 1.21pm BSTat 1.21pm BST
1.14pm BST1.14pm BST
13:1413:14
Aviva suspends property fund redemptions after Brexit voteAviva 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/OU8xL4ykoOBreaking: 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.
UpdatedUpdated
at 1.18pm BSTat 1.18pm BST
1.11pm BST1.11pm BST
13:1113:11
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.