‘Investability’ problem
The chancellor may again find the narrative running away from her this week. With Britain’s economy struggling to grow, and potential tariffs from Donald Trump threatening a further blow, financial services representatives are sounding the alarm about another big upset.
“It’s clearly a matter for concern,” said Chris Hayward, policy chairman at the City of London Corporation. “It’s hard because [Reeves] has got very little maneuvering, and she’s got huge pressures on the public purse.”
Charlie Nunn, chief executive of Lloyds Bank, which could be on the hook for the most in consumer redress due to its motor finance lending subsidiary Black Horse, told a December event that the initial Court of Appeal ruling created an “investability problem.”
He added: “Investors are looking at this and saying this principle of the courts coming up with decisions independently from the regulation — which is then having a significant retrospective look back — is bleeding across the whole economy.”
Moody’s has predicted a total redress bill of at least £30 billion. Lloyds has set aside £1.15 billion already, Santander set aside £295 million in the third quarter of 2024, and Barclays £90 million at the end of last year. Close Brothers, one of the two lenders in this week’s case, has reserved £165 million.
Analysts warn the bill could rise even further — or come in below those estimates. “There is significant uncertainty over the outcome of the legal and regulatory processes. The final cost could be meaningfully higher or lower than lenders’ current provisions,” said Richard Barnes, director & lead analyst, European FIs, at S&P Global Ratings.