Shares in lenders caught up in the car finance scandal rose after Rachel Reeves launched a bid to shield them from multibillion-pound payouts in a landmark mis-selling case.
In some much-need respite for investors, Close Brothers jumped 21.6 per cent, or 52.8p, to 297.6p and Lloyds Banking Group added 4 per cent, or 2.34p, to 61p.
Close Brothers remains down some 60 per cent since the start of last year, however.
Lloyds, which owns the country’s largest car finance lender Black Horse, has fared far better as motor loans make up a smaller part of its overall business.
Both have been caught up in a mis-selling case surrounding hidden commissions related to car loans that has left the industry facing a compensation bill estimated by some of £44billion.
It has been dubbed ‘PPI on wheels’ following the payment protection insurance scandal.
Car finance scandal: In some much-need respite for investors, Close Brothers jumped 21.6%, or 52.8p, to 297.6p and Lloyds Banking Group added 4%, or 2.34p, to 61p
But the Chancellor fears the case could cause chaos in the motor finance and car industry – making it harder for drivers to get loans. Around 80 per cent of new vehicles in the UK are bought using such loans.
The Treasury has now sought permission to intervene in a forthcoming Supreme Court case – potentially depriving motorists of a hefty compensation payment.
A Treasury spokesman said: ‘We want to see a fair and proportionate judgement that ensures compensation to consumers that is proportionate to the losses they have suffered – and allows the motor finance sector to continue playing its role in supporting millions of motorists to own vehicles.’
Jonathan Pierce, an analyst at Jefferies, said: ‘Reports that the Treasury want to intervene in the Supreme Court motor case are helpful.
The argument that any compensation due should be proportionate is key. Banks still face material costs but if this is the way it goes, nothing like the worse-case scenarios out there.’
With eyes still very much on America following the return of Donald Trump as president, the FTSE 100 climbed 0.33 per cent, or 27.75 points, to 8548.29 and the FTSE 250 gained 0.53 per cent, or 108.99 points, to 20,595.73.
On Wall Street – which was closed for trading on Monday as the inauguration coincided with Martin Luther King Day – the Dow Jones edged up 1 per cent, the S&P 500 added 0.7 per cent and the Nasdaq grew by 0.6 per cent.
Back in London, defence group QinetiQ fell 7.9 per cent, or 33.4p, to 387.2p after it warned orders have slowed in the UK ‘due to the fiscal environment’.
Shares in fund manager Abrdn rose 4.5 per cent, or 6.3p, to 147.9p after it reported £1.2billion of inflows from clients in the fourth quarter of 2024, having seen £5.7billion of outflows in the same period a year earlier.
North Sea oil and gas firm Serica Energy rose 3.2 per cent, or 4.9p, to 157.2p after it said it expects production to hit 40,000 barrels a day in 2025 compared to 34,600 in 2024.
British crypto miner Argo Blockchain said Thomas Chippas is resigning as chief executive and director having only taken the top job in November 2023. Shares slid 5.7 per cent, or 0.26p, to 4.25p.
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