Mark Kleinman: Regulators’ D-Day is crucial for Starmer agenda
Mark Kleinman is Sky News’ City Editor and is the man who gets the Square Mile talking in his weekly Morning Wire column. This week, he looks at D-Day for regulators, Ebury’s IPO knife-edge and Badenoch’s Reform nightmare
Regulators’ D-Day is crucial for Starmer agenda
It’s D-Day for Britain’s regulators. Barely three weeks after a dozen economic watchdogs were handed a crucial piece of homework by Sir Keir Starmer, the deadline for them to submit their mince pie-fuelled contributions has arrived.
The mandate given to them by the prime minister was clear: reduce barriers to economic growth by removing unnecessary or duplicative measures from their rulebooks. Among the recipients of the letter were the Financial Conduct Authority, Ofgem, Ofwat and the Competition and Markets Authority.
It prompted howls of derision from Labour’s critics, who decried the apparent fact that Starmer’s administration was already so bereft of ideas to stimulate economic growth that it was turning to regulators for them.
That was a convenient narrative for the growing body of opinion weighted against the government’s stewardship of the economy, with rising borrowing costs threatening to blow a hole in Rachel Reeves’s spending plans, speculation about an emergency spring Budget, and ugly comparisons with the Truss-Kwarteng axis of autumn 2022.
That narrative was not accurate, however. Those familiar with the letter to watchdogs, which was the brainchild of Varun Chandra, the former Hakluyt boss who now serves as Starmer’s top business adviser, was about removing unnecessary rules rather than seeking wider growth ideas.
Had it done so, some criticism would have been legitimate – and there are certainly sufficient grounds for attacking Starmer and Rachel Reeves’s stewardship of the economy in the six months since they came to power.
Under their Conservative predecessors, rebukes of regulators – particularly the CMA and FCA – became increasingly common amid frustration in Whitehall about their tendency to regulate for risk, rather than growth.
(As an aside, this begs the question of why – given this new focus – they are so intent upon creating a new football regulator from scratch.)
Downing Street should now commit to publishing the watchdogs’ responses to the PM’s Christmas Eve letter; moreover, it should not only be the regulators’ feet which are held to the fire. Starmer must also say, as a matter of urgency, how he intends to respond.
Ebury’s IPO and a Bank of America mystery
Oh what a tangled web they weave. Consider the situation at Ebury, the payments group majority-owned by Spanish banking giant Santander and touted as a flotation candidate for the first half of the year.
Last year, Bloomberg News reported that investment banks including Bank of America and Goldman Sachs had been retained by Ebury to help prepare the company for an IPO that could value it at up to £2bn.
Other banks were also invited to pitch, but I understand that subsequent to it being lined up to work on the float, BoA mysteriously disappeared from the syndicate.
The City scuttlebutt is that BoA lost its role on the deal because it declined to participate in the refinancing of debt owed by the company to Santander – although a source close to the deal insisted that the lending impasse was not the determining factor in BoA’s aborted involvement.
Other banks which have since been hired, including Barclays, are said to have sizeable positions in Ebury’s revolving credit facility. Peel Hunt, which has an underwriting collaboration agreement with Santander, is also understood to be in line for a role. Rewarding investment banks for their lending commitment in the form of roles on IPOs and other equity and advisory mandates is hardly a new phenomenon.
Ebury has made a smart move by appointing Bruce Carnegie-Brown, outgoing chair of Lloyd’s of London and former Santander non-executive director at both group and UK levels, as its chairman. Whether he can persuade portfolio managers to back the company at the £2bn valuation mooted in earlier reports is debateable, though. I suspect Ebury’s IPO will remain on a knife-edge, particularly if market sentiment remains choppy in the first half of the year.
Reform’s donor dream is a Badenoch nightmare
It’s a safe bet that Kemi Badenoch will be scouring the guestlist attending Reform UK’s first big fundraising event of the year on January 28.
She might find some of the names worryingly familiar. Hosted by Nigel Farage, the party leader, and Nick Candy, its new treasurer, the bash at an upmarket London venue will park Reform’s tanks firmly on the Conservatives’ financial turf.
Anecdotally, evidence is growing that significant numbers of sizeable Tory donors are weighing switching to back Farage.
Of course, some won’t follow through, and the acid test will be Electoral Commission disclosures after May’s local elections to assess whether Reform’s monetary pulling power matches Candy’s boisterous rhetoric.
“My phone hasn’t stopped ringing with calls from donors and supporters eager to back Reform UK,” he told me this week.
With or without Elon Musk’s riches, if Reform’s warchest begins to fill in the way Farage and Candy hope, it will put intense pressure on Badenoch to rethink her self-imposed ban on major policy pronouncements before 2027 (?).
If the Tories try to operate in a vacuum for two years, Reform will fill it – and based on both the latest poll data showing Farage’s party just one percentage point behind Labour, and the turnout at the fundraiser in 12 days time, Badenoch hasn’t got a moment to waste.