Darling to apply pressure on banks to reduce lending rates for small businesses

Expressing his fears that interest rates being charged to small businesses may be too high, Chancellor Alistair Darling is set to meet with top management of the major UK banks poste haste to discuss how much they charge small firms for loans.

Apparently information has reached Darling that the cost of loans seemed to have risen, despite the fact that the UK’s base interest rate of 0.5% is a record low. Bank executives will be asked to explain their viewpoints on interest rates and why they remain high at a special meeting convened for today in Downing Street.

The UK economy has contracted in the second quarter, and by considerably more than economists had expected, according to information released by the Office for National Statistics. GDP in the UK fell by 0.8 per cent quarter on quarter in the three months to June after a 2.4 per cent decline in the first quarter.

The world’s third largest bank, Bank of China has begun offering mortgages to British borrowers, and at rates below many of the deals on offer from established UK lenders. Bank of China, who till now had focused their attentions on expatriate Chinese communities, have announced their desire to compete with the major high street banking groups, such Barclays and HSBC. Funding for loans will come from the bank’s its own capital reserves/ UK mortgage brokers are apparently trembling at their knees at the prospect saying that the Bank of China’s tracker rates are among the best on the market. Estimates are that the Bank’s entry into the market should go some way towards relieving the shortfall of home loans in the UK.

Car production in Britain continues to remain in the doldrums, thirty per cent lower in June of 2008. June’s figures made for some depressing reading, with only 91,718 new cars leaving the plants, making for 410,710 for the half year. This figure is more than 50% less than it was for the same period of 2008.

Caravan park operator Park Resorts, hit by falling caravan sales and cuts in discretionary spending announced that they are close to agreeing terms with its lenders on restructuring the terms of its debt holdings, currently running around 330 million pounds. Park Resorts were acquired by GI Partners in March 2007 for 440 million pounds and over the last two years the company has injected a further 45 million pounds in fresh equity.

On the FTSE Friday, the market was buoyed an unexpected rise in retail sales for June after a sharp fall in May. According to reports, sales were up 1.2% over May and 2.9% over the same period in 2008. The figures were boosted by the good weather and an early start to the sale season.

In the retail sector Kingfisher were among the beneficiaries of the improving retail environment. It said subsidiary B&Q delivered ahead of expectations, but its French business is still weak. Overall, like for like sales fell 1.9% – analysts had been expecting a fall of 3.2%. The shares rose 1.7% to 209.5 pence.

The utilities sector took a lot of the edge of smiles on the floor, with news from UK water regulator Ofwat that it planned to cut water bills by an average of £14 a year by 2015 dampening the atmosphere.

Shares in United Utilities fell by 4.63% to 479.25 pence, while Severn Trent dropped 7.28% to 1,032 pence. Despite the fact that Scottish & Southern announced that their half-yearly profits were likely to be significantly higher than 2008, and the company looked likely to deliver 4% annual dividend growth, the sector gloom caused their shares to rise a mere 0.26% to 1,137 pence

Carphone Warehouse were among the day’s winners as their shares rose 3.31% to 171.5 pence after reporting first quarter revenue in line with expectations.
Tate & Lyle were also among the day’s top performers after announcing first quarter results that were well ahead of expectations. Their shares moved forward 8.83% to close on 339 pence.

Shares in Vodafone were in demand after the group announced in-line quarterly figures and optimism for the full-year’s trading. Shares in the company climbed 2.8 per cent to 120 pence. BT Group, due to announce their first-quarter results on Thursday, gained 1.3 per cent to 115 pence. Ahead of their full-year results also due on Thursday, shares in BSkyB gained 0.5 per cent to close on Friday at 515 pence,

Following a positive production report issued on Thursday, Lonmin was the star of the commodities sector with their shares rising 3.8 per cent to 1243 pence.

The FTSE 100 inched to its 10th straight gain on Friday making it one day short of its best ever winning streak.

The FTSE 100 index closed down for the weekend still rising, on Friday by 16.81 points to 4576.61, while the FTSE 250 continued to gain, up 51.21 points to 7,938.44.

The pound lost ground on Friday after data showed the UK economy shrank more than expected in the second quarter.

Pound/US dollar 1.6399
Pound/Euro 1.156
Pound/Japanese Yen 155.3089
Pound/Swiss Franc 1.7598

As the lights went off for the weekend on Wall Street, the Dow Jones had risen by 23.96 points to 9093.24. The NASDAQ, after some impressive gains, dropped 7.64 points to close on 1965.96.

Crude oil prices rose while gold held above the $950 mark and concerns about supply problems continued to support sugar prices as commodity markets headed for a strong finish to the trading week

• How To Reduce A Trillion Dollar Deficit Stanford professor John Taylor had an alarming op-ed piece in...
• State Street tries cutting bonuses | FT.com Last month State Street, the world’s biggest institutional money manager,...
• State Street slashes bonuses, updates higher earnings Last month State Street, the world’s biggest institutional money manager,...

Tags: Alastair Darling, Bank, Bank of China, Bank of England, Banking, British Economy, Economy, Employment, Financial News, Mortgage, Mortgages, Recession, Small Businesses, UK Banks, UK Small Business