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There has been much soul-searching and agonising during recent years over the valuation of the UK stock market – intertwined with a debate over London’s ability to attract world-class businesses to list here.

Even though the FTSE-100 has hit several record highs so far in 2024, the UK’s premier stock index is still trading at a significant discount to its global peers.

The FTSE-100 is currently trading on a price/earnings ratio – a valuation measure widely used by equity investors – of 14.78 times, according to Refinitiv data, compared with one of 15.71 for the pan-European Stoxx 600 and one of 24.7 for the S&P 500, the main US stock index.

But the UK is not the only European economy where concerns are being expressed about the relatively lowly valuation applied to its stock market.

German business has been set ablaze after a speech made nearly two months ago by Theodor Weimer, the outgoing chief executive of Deutsche Boerse, surfaced at the weekend.

Addressing the Bavarian Economic Advisory Council on 17 April at Munich’s luxury Bayerischer Hof hotel, Mr Weimer said he had just had his 18th meeting with Robert Habeck, Germany’s vice chancellor and economics minister.

He told his audience: “And I can tell you, it’s a sheer disaster.”

German Economy and Climate Minister Robert Habeck
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German economy and climate minister Robert Habeck

Mr Weimer said that, when Mr Habeck had come to office, he had been encouraged by the minister’s preparedness to listen to him – but said that enthusiasm had now dissipated.

In a no-holds-barred attack on Germany’s coalition government, Mr Weimer criticised not only its economic policy but its attitudes towards immigration and innovation.

He added: “We are on the way to becoming a developing country.”

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Mr Weimer, a former investment banker who has been CEO of Deutsche Boerse since 2018, said this was not only his opinion but those of major international investors he speaks with.

He added: “Our reputation in the world has never been as bad as it is now. Never before.”

Mr Weimer said that he had been asked by investors in Singapore what kind of government Germany was putting up with while, elsewhere, he said people “just shake their heads and wonder where the German virtues have gone”.

He said the only investment in German stocks was being made “opportunistically” because its market was so cheap.

He went on: “We have become a junk store.”

Not the first outburst

It is not the first time Mr Weimer, who is renowned for his plain speaking, has bemoaned the lowly rating on Germany’s stock market.

He has drawn attention several times in the past to the risk of European stocks moving their main listing to the US – something that has also alarmed City figures following the decision of companies like Ferguson, CRH and Flutter Entertainment to move their primary stock market listing from London to New York.

But this speech saw Mr Weimer widen his comments to a broader critique of the government – and one which is shared by many in Germany’s business community.

It includes “destroying” the country’s car industry, long a source of industrial prestige, by insisting on the phasing out of new petrol and diesel vehicles and refusing to subsidise the energy transition in the way the Biden administration has in the US.

Other criticisms include what he described as an “orientation towards do-gooderism” in migration policy and encouraging working from home and promoting work-life balance over the traditional German virtue of diligent work.

Mr Weimer also complained that the government’s “economic policy lacks a compass” and said excessive government bureaucracy and interference in the economy was patronising to ordinary Germans.

He added: “Damn it, I don’t want to be protected by this government.”

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Reaction to the speech has been mixed.

Verena Hubertz, an MP in the SPD – the biggest party in the coalition government – told the Financial Times: “The bizarre speech is more beer tent than Dax-listed company executive.”

But Sarna Roeser, one of Germany’s most celebrated young entrepreneurs, told the newspaper Die Zeit that, as someone who travels abroad widely, she had also heard similar comments from international investors.

She added: “With ideological left-green politics, moral finger-pointing and feminist foreign policy, Germany will no longer be taken seriously at home or abroad and will continue to slide.”

Mr Weimer, whose €10.6m pay package in 2023 made him Germany’s second best-paid CEO after Ola Kaellenius of Mercedes-Benz, may have felt emboldened to speak because he is about to step down.

There is little doubt, though, that in attacking chancellor Olaf Scholz’s government, he has said publicly what many German business people are saying privately.

And to judge by the spanking Mr Scholz’s coalition received in the European parliament elections at the weekend – Mr Habeck’s Green Party did particularly badly – many ordinary German voters seem similarly disgruntled.

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Chair candidates battle to check in at Premier Inn-owner Whitbread

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Chair candidates battle to check in at Premier Inn-owner Whitbread

Two chairs of FTSE-100 companies are vying to succeed Adam Crozier at the top of Whitbread, the London-listed group behind the Premier Inn hotel chain.

Sky News has learnt that Christine Hodgson, who chairs water company Severn Trent, and Andrew Martin, chair of the testing and inspection group Intertek, are the leading contenders for the Whitbread job.

Mr Crozier, who has chaired the leisure group since 2018, is expected to step down later this year.

The search, which has been taking place for several months, is expected to conclude in the coming weeks, according to one City source.

Ms Hodgson has some experience of the leisure industry, having served on the board of Ladbrokes Coral Group until 2017, while Mr Martin was a senior executive at the contract caterer Compass Group and finance chief at the travel agent First Choice Holidays.

Under Mr Crozier’s stewardship, Whitbread has been radically reshaped, selling its Costa Coffee subsidiary to The Coca-Cola Company in 2019 for nearly £4bn.

The company has also seen off an activist campaign spearheaded by Elliott Advisers, while Mr Crozier orchestrated the appointment of Dominic Paul, its chief executive, following Alison Brittain’s retirement.

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It said last year that it sees potential to grow the network from 86,000 UK bedrooms to 125,000 over the next decade or so.

Mr Crozier is one of Britain’s most seasoned boardroom figures, and now chairs BT Group and Kantar, the market research and data business backed by Bain Capital and WPP Group.

He previously ran the Football Association, ITV and – in between – Royal Mail Group.

On Friday, shares in Whitbread closed at £25.41, giving the company a market capitalisation of about £4.5bn.

Whitbread declined to comment this weekend.

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Bank chiefs to Reeves: Ditch ring-fencing to boost UK economy

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Bank chiefs to Reeves: Ditch ring-fencing to boost UK economy

The bosses of four of Britain’s biggest banks are secretly urging the chancellor to ditch the most significant regulatory change imposed after the 2008 financial crisis, warning her its continued imposition is inhibiting UK economic growth.

Sky News has obtained an explosive letter sent this week by the chief executives of HSBC Holdings, Lloyds Banking Group, NatWest Group and Santander UK in which they argue that bank ring-fencing “is not only a drag on banks’ ability to support business and the economy, but is now redundant”.

The CEOs’ letter represents an unprecedented intervention by most of the UK’s major lenders to abolish a reform which cost them billions of pounds to implement and which was designed to make the banking system safer by separating groups’ high street retail operations from their riskier wholesale and investment banking activities.

Their request to Rachel Reeves, the chancellor, to abandon ring-fencing 15 years after it was conceived will be seen as a direct challenge to the government to take drastic action to support the economy during a period when it is forcing economic regulators to scrap red tape.

It will, however, ignite controversy among those who believe that ditching the UK’s most radical post-crisis reform risks exacerbating the consequences of any future banking industry meltdown.

In their letter to the chancellor, the quartet of bank chiefs told Ms Reeves that: “With global economic headwinds, it is crucial that, in support of its Industrial Strategy, the government’s Financial Services Growth and Competitiveness Strategy removes unnecessary constraints on the ability of UK banks to support businesses across the economy and sends the clearest possible signal to investors in the UK of your commitment to reform.

“While we welcomed the recent technical adjustments to the ring-fencing regime, we believe it is now imperative to go further.

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“Removing the ring-fencing regime is, we believe, among the most significant steps the government could take to ensure the prudential framework maximises the banking sector’s ability to support UK businesses and promote economic growth.”

Work on the letter is said to have been led by HSBC, whose new chief executive, Georges Elhedery, is among the signatories.

His counterparts at Lloyds, Charlie Nunn; NatWest’s Paul Thwaite; and Mike Regnier, who runs Santander UK, also signed it.

While Mr Thwaite in particular has been public in questioning the continued need for ring-fencing, the letter – sent on Tuesday – is the first time that such a collective argument has been put so forcefully.

The only notable absentee from the signatories is CS Venkatakrishnan, the Barclays chief executive, although he has publicly said in the past that ring-fencing is not a major financial headache for his bank.

Other industry executives have expressed scepticism about that stance given that ring-fencing’s origination was largely viewed as being an attempt to solve the conundrum posed by Barclays’ vast investment banking operations.

The introduction of ring-fencing forced UK-based lenders with a deposit base of at least £25bn to segregate their retail and investment banking arms, supposedly making them easier to manage in the event that one part of the business faced insolvency.

Banks spent billions of pounds designing and setting up their ring-fenced entities, with separate boards of directors appointed to each division.

More recently, the Treasury has moved to increase the deposit threshold from £25bn to £35bn, amid pressure from a number of faster-growing banks.

Sam Woods, the current chief executive of the main banking regulator, the Prudential Regulation Authority, was involved in formulating proposals published by the Sir John Vickers-led Independent Commission on Banking in 2011.

Legislation to establish ring-fencing was passed in the Financial Services Reform (Banking) Act 2013, and the regime came into effect in 2019.

In addition to ring-fencing, banks were forced to substantially increase the amount and quality of capital they held as a risk buffer, while they were also instructed to create so-called ‘living wills’ in the event that they ran into financial trouble.

The chancellor has repeatedly spoken of the need to regulate for growth rather than risk – a phrase the four banks hope will now persuade her to abandon ring-fencing.

Britain is the only major economy to have adopted such an approach to regulating its banking industry – a fact which the four bank chiefs say is now undermining UK competitiveness.

“Ring-fencing imposes significant and often overlooked costs on businesses, including SMEs, by exposing them to banking constraints not experienced by their international competitors, making it harder for them to scale and compete,” the letter said.

“Lending decisions and pricing are distorted as the considerable liquidity trapped inside the ring-fence can only be used for limited purposes.

“Corporate customers whose financial needs become more complex as they grow larger, more sophisticated, or engage in international trade, are adversely affected given the limits on services ring-fenced banks can provide.

“Removing ring-fencing would eliminate these cliff-edge effects and allow firms to obtain the full suite of products and services from a single bank, reducing administrative costs”.

In recent months, doubts have resurfaced about the commitment of Spanish banking giant Santander to its UK operations amid complaints about the costs of regulation and supervision.

The UK’s fifth-largest high street lender held tentative conversations about a sale to either Barclays or NatWest, although they did not progress to a formal stage.

HSBC, meanwhile, is particularly restless about the impact of ring-fencing on its business, given its sprawling international footprint.

“There has been a material decline in UK wholesale banking since ring-fencing was introduced, to the detriment of British businesses and the perception of the UK as an internationally orientated economy with a global financial centre,” the letter said.

“The regime causes capital inefficiencies and traps liquidity, preventing it from being deployed efficiently across Group entities.”

The four bosses called on Ms Reeves to use this summer’s Mansion House dinner – the City’s annual set-piece event – to deliver “a clear statement of intent…to abolish ring-fencing during this Parliament”.

Doing so, they argued, would “demonstrate the government’s determination to do what it takes to promote growth and send the strongest possible signal to investors of your commitment to the City and to strengthen the UK’s position as a leading international financial centre”.

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Post Office to unveil £1.75bn banking deal with big British lenders

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Post Office to unveil £1.75bn banking deal with big British lenders

The Post Office will next week unveil a £1.75bn deal with dozens of banks which will allow their customers to continue using Britain’s biggest retail network.

Sky News has learnt the next Post Office banking framework will be launched next Wednesday, with an agreement that will deliver an additional £500m to the government-owned company.

Banking industry sources said on Friday the deal would be worth roughly £350m annually to the Post Office – an uplift from the existing £250m-a-year deal, which expires at the end of the year.

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The sources added that in return for the additional payments, the Post Office would make a range of commitments to improving the service it provides to banks’ customers who use its branches.

Banks which participate in the arrangements include Barclays, HSBC, Lloyds Banking Group, NatWest Group and Santander UK.

Under the Banking Framework Agreement, the 30 banks and mutuals’ customers can access the Post Office’s 11,500 branches for a range of services, including depositing and withdrawing cash.

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The service is particularly valuable to those who still rely on physical cash after a decade in which well over 6,000 bank branches have been closed across Britain.

In 2023, more than £10bn worth of cash was withdrawn over the counter and £29bn in cash was deposited over the counter, the Post Office said last year.

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A new, longer-term deal with the banks comes at a critical time for the Post Office, which is trying to secure government funding to bolster the pay of thousands of sub-postmasters.

Reliant on an annual government subsidy, the reputation of the network’s previous management team was left in tatters by the Horizon IT scandal and the wrongful conviction of hundreds of sub-postmasters.

A Post Office spokesperson declined to comment ahead of next week’s announcement.

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