The Bank of England today warned AI-focused valuations remain “materially stretched” and at risk of a “sharp correction”.
However, it said the UK banking system remains sturdy enough to support households and businesses even if economic conditions got substantially worse.
The Bank’s financial stability committee also announced that it intends to ease the capital requirements for lenders by one percentage point to 13%.
Bank of England eases capital rules, eyes lending growth
The Bank of England has cut its estimate for the level of cash reserves that banks must hold to protect against their collapse.
The new capital requirements for banks will be lowered by one percentage point to 13% of risk-weighted assets, under the Bank’s proposals.
The rules were introduced in the aftermath of the 2008 financial crisis to help prevent banks from excessive risk-taking and protect them from failure.
The Bank’s Financial Policy Committee said the reduced benchmark should mean banks have more certainty and confidence to use their capital to lend to UK households and businesses.
Just Eat Takeaway boss steps down
Just Eat Takeaway founding boss Jitse Groen is stepping down after 25 years at the helm.
His departure comes months after the firm’s 4.1 billion euros (£3.6 billion) takeover by Dutch technology firm Prosus.
He founded Just Eat in 2000, growing it from a student-led idea into a takeaway food delivery giant which now has operations in 16 countries.
Groen said: “After a quarter-century as founder and chief executive of Just Eat Takeaway.com, I am leaving the company today.”
On The Beach bookings rise, shares up 13%
On The Beach said today it is confident of notching up another record summer as under-pressure consumers continue to “protect their holiday”.
The Manchester-based firm reported a 20% rise in underlying profits to £35 million for the year to September 30 as 1.7 million customers booked with the group.
The result follows September’s warning that annual profits were set to come in short of City expectations. The company’s shares rose 13% today.
It said bookings for this winter were up 15% on a year earlier and 8% higher for next summer.
Chief executive Shaun Morton said: “Bookings for summer 26 are encouraging and give us confidence that we will deliver another record summer.”
Zipcar shuts down UK operations
Car sharing firm Zipcar is set to shut down its UK operations just as new congestion charges on electric vehicles come into force in central London.
The American owned business said it will no longer take booking beyond the end of the year and has launched a consultation with its UK staff.
Zipcar was the last major operator in a sector that had once promised to take thousands of private cars off London’s streets.
Lenders steady in flat FTSE 100, housebuilders lifted
Banking shares were broadly unchanged today after the Bank of England eased capital requirements and said all lenders passed its 2025 stress test.
Lloyds lifted 0.3p to 95.8p, Barclays rose 2.5p to 432.1p and NatWest fell 1.2p to 630.6p.
The FTSE 100 index rose 7.84 points to 9710.37, led by Persimmon after RBC analysts upgraded their stance on the housebuilder and FTSE 250-listed Taylor Wimpey.
Persimmon shares rose 23.5p to 1363.5p, which compares with the bank’s new price target of 1750p, while Taylor Wimpey added 2.1p to 103.3p.
Ladbrokes owner Entain also benefited from a positive note by JP Morgan as shares rose 8.8p to 795.8p.
Lender plays down mansion tax impact
The “mansion tax” on homes worth more than £2 million is “unlikely to have a significant impact on the housing market.” Nationwide said today.
Chancellor Rachel Reeves revealed in her Budget speech that a “high value” council tax surcharge on the most expensive houses and flats in England will come into force in 2028, raising around £430 million.
Lender Nationwide played down the impact on the market as a whole, pointing out that it will apply to less than 1% of homes nationally and even in London to just 3% of properties.
However it did warn that the two percentage point rise in tax on rental income “may dampen the supply of new rental properties coming onto the market.
Bank of England warns over AI correction risk
The Bank of England today warned that many risky asset valuations remain materially stretched, particularly for technology companies focused on AI.
In its financial stability report, the bank said: “Equity valuations in the US are close to the most stretched they have been since the dot-com bubble, and in the UK since the global financial crisis. This heightens the risk of a sharp correction.”
It flagged the role of debt financing as AI-focused firms seek large-scale infrastructure investment. By some industry estimates, AI infrastructure spending over the next five years could exceed five trillion US dollars.
The bank said: “While AI hyperscalers will continue to fund much of this from their operating cash flows, approximately half is expected to be financed externally, mostly through debt.
“Deeper links between AI firms and credit markets, and increasing interconnections between those firms, mean that, should an asset price correction occur, losses on lending could increase financial stability risks.”
Lenders pass BoE stress test, capital requirements ease
The UK banking system would be able to continue to support the economy even if conditions turn out materially worse than expected, the Bank of England said today.
Announcing the results of its latest stress test, the Bank said no individual institution was required to strengthen its capital position.
The test scenario was based on a severe global supply shock, leading to a deep recession and rise in inflation that required central banks to hike interest rates.
In the stress test, the aggregate Common Equity Tier 1 (CET1) capital ratio starts at 14.5% and falls to a low point of 11% in the first year.
The Bank’s financial policy committee also announced today that it intends to ease capital requirements for lenders by one percentage point to 13%.
The Bank said: “UK household and corporate aggregate indebtedness remains low.
“The UK banking system is well capitalised, maintains robust liquidity and funding positions, and asset quality remains strong.
“The results of the 2025 Bank Capital Stress Test demonstrate that the UK banking system is able to continue to support the economy even if economic and financial conditions turn out to be materially worse than expected. This underscores the role of financial stability as a pre-condition for sustainable growth.”
Annual house price growth slows - Nationwide
The annual rate of house price growth slowed from 2.4% to 1.8% in November, according to building society Nationwide.
Prices still increased by 0.3% month-on-month, reflecting the impact of seasonal effects. The average price stood at £272,998 last month.
Chief economist Robert Gardner said: “The housing market has remained fairly stable in recent months, with house prices rising at a modest pace and the number of mortgages approved for house purchase maintained at similar levels to those prevailing before the pandemic.
“Against a backdrop of subdued consumer confidence and signs of weakening in the labour market, this performance indicates resilience, especially since mortgage rates are more than double the level they were before Covid struck and house prices are close to all-time highs.”
Shop price inflation eases - BRC
Shop prices rose by 0.6% compared with a year ago in November, down from the previous month’s rate of 1%.
The research by the British Retail Consortium (BRC) and NIQ also showed a slowdown in food inflation from 3.7% to 3%.
BRC chief executive Helen Dickinson said: “Black Friday deals began earlier than normal as competition between retailers hit fever pitch.
“With Budget uncertainty behind us, retailers are hoping that consumer confidence rebounds in this crucial trading period and they will continue doing everything they can to keep prices down and help customers’ money go further this Christmas.”
FTSE 100 set for another fall, Bitcoin price steadies
The FTSE 100 index is set to remain on the back foot after US markets last night closed in negative territory.
The Dow Jones Industrial Average fell 0.9%, the S&P 500 lost 0.5% and the Nasdaq Composite retreated 0.4%.
The FTSE 100 index last night closed down 0.2% at 9702.53 and is forecast to lose another 0.2% at today’s opening bell.
Brent Crude stands at $62.50 a barrel and gold at $4222 an ounce, while Bitcoin has steadied at $86,952.
This article was written by Graeme Evans from The Evening Standard and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.