There’s very little to celebrate in Downing Street these days but it must have been vodka shots all round in Chancellor Rachel Reeves’s office last week when Revolut, the City’s glossiest fintech start-up, finally secured the banking licence it has been pursuing for the past five years.
Founded as a currency payments app in 2015 by two tech entrepreneurs, Russian-born Nik Storonsky and Ukrainian Vlad Yatsenko, Revolut acquired customers at an explosive rate and first sought recognition as a UK bank – able to accept deposits under the umbrella of the Financial Services Protection Scheme – in 2021. But a delay in publishing accounts because auditors could not verify almost half a billion pounds of revenue was one reason why the Bank of England took its time scrutinising Revolut’s governance and systems. This provoked invective from Storonsky about ‘extreme bureaucracy’ holding back his brilliant business and how much better ‘tech champions’ like himself are treated in the US.
While Storonsky’s thousand-yard stare met Governor Andrew Bailey’s unblinking response, Reeves took up the Revolut cause. She attended the opening of its new Canary Wharf home and told a Mansion House audience that too much regulation had become ‘a boot on the neck [of] enterprise and innovation that is the lifeblood of growth’. When she went so far as to try to broker a meeting between Revolut, the Treasury and the Bank’s Prudential Regulation Authority (PRA), however, Bailey asserted his authority and blocked her.
Now at last, after a Bank-imposed ‘mobilisation period’ (equivalent to a provisional driving licence) that lasted 20 months rather than the standard 12, Revolut can offer a full range of loans and deposit accounts with a target of reaching up to 25 million UK customers. And the PRA, coincidentally, has a new boss – Katherine Braddick, ex-Barclays and ex-Treasury – whom Reeves pointedly describes as ‘pro-business’.
Revolut sources have even started whispering about flotation on the London stock exchange, having previously favoured New York. The official line is that a listing won’t happen until at least 2028; but when it does, Revolut could join the FTSE 100 at a valuation greater than Barclays or Lloyds, and its founders will be high in the ‘rich lists’.
Is Revolut’s advance a rare victory for the Reeves growth mission? Or a red flag in a time of rising financial uncertainty? Let’s just say that in this case, City sages tend to think Bailey was right to be so cautious.
Back to the future
The Chancellor’s Mais lecture on Tuesday was a chance to make up for the nullity of her recent Spring Statement. Without a howling opposition (I was tempted) or a tight time limit, she certainly put more meat on the bone of her essentially trad-Labour credo. Her ‘modern industrial strategy’ sounded a lot like a search for ‘national champions’ from the 1960s; her cash pledges to the regions (including ‘fiscal devolution’) will have pleased the shade of John Prescott. As for her hostility to ‘passive accumulation of wealth’ by providers of capital, it was straight from Thomas Piketty. The headline was her urge for regulatory realignment with the EU. But the key refrain – the tacit nod to reality on transport, housing, energy, infrastructure and skills – was ‘much more to do’. I’ll say there is.
Water under the bridge
Thames Water, the crippled utility that still somehow manages to serve 16 million customers, may be Britain’s most unloved company. But I salute the stamina of Thames executives, multiple regulators, busloads of creditors and mysterious men from the Treasury in the long-running rescue negotiation that culminated on Monday with a ‘best and final’ offer from the London & Valley Water creditors consortium. Headlines include £10 billion of new equity and debt, a write-off of £5 billion of existing ‘senior’ debt and promises to pay Thames’s outstanding fines for leaks and pollution but not to pay dividends to new shareholders during the turnaround. Former equity holders have already been wiped out and ‘junior’ creditors will suffer the same fate.
Though rapidly running out of cash, Thames is keen to claim there’s ‘no certainty’ this new plan will be accepted. Yet after a failed earlier trawl for viable bidders, the truth is that L&VW has been the only player across the table for many months. To maintain competitive tension, Thames didn’t discourage media speculation about other potential investors such as the Hong Kong-based CK Infrastructure – which never seriously stepped up and would have been hugely controversial if it had done so. In fact the only real alternative, longed for by Labour backbenchers, was renationalisation, imposing calls on taxpayers’ funds that the Chancellor and Treasury were dreading. Best for all that L&VW’s deal gets done at last – and Thames gets back to cleaning pipes.
City bacchanalia
The City’s solemn temples are almost all gone, not dissolved as Shakespeare foretold, but transformed into palaces of self-indulgence. Long ago I interviewed the last chiefs of the fading Midland Bank in their head office close by the Bank of England. Completed in 1929, the stately building was designed by Sir Edwin ‘Ned’ Lutyens for his friend Reginald McKenna, a former Chancellor of the Exchequer who was chairman of Midland in its interwar heyday as the largest bank in the world. Empty for decades, it was transformed in 2017 into the Ned hotel and restaurant complex.
And there I happened to find myself, late on Friday after a City dinner, amid a bacchanalian throng of big-ticket drinking, dancing and (so my taxi driver informed me) oldest-profession pick-up action. Who knows what that says as an omen for financial markets, never mind City morals; but above the rock-band din, I’m sure I could hear the rattle of Ned’s and Reggie’s skeletons.
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