Further cuts in UK interest rates expected to be announced today

March 5th, 2009 by admin | Filed under Daily News, Money Management, Recession, Savings Accounts, UK Bank Accounts, UK Banks.

In yet another attempt to kick start the British economy, it is expected that the Bank of England will announce yet another cut in interest rates today. The cut, from 1% to 0.5%, is probably the lowest that the Banks can afford go. With the anticipated increase in lending failing to transpire, Chancellor Darling may be forced to admit that the UK economy will require a different form of innovative thinking to help it to get back on track.

Banks continue to be the centre of attraction as news that legal action against Sir Fred Goodwin as well as others who are likely to be implicated in their role in the near-collapse of RBOS could begin within a matter of weeks.

Two former members of the RBOS board were criticised at a recent meeting of the Treasury committee handling the affair. They were “hauled over the coals” for failing to dismiss Goodwin, when the bank were handed a stay of execution at the time of the October taxpayer bail-out. The decision to allow Sir Fred, the bank’s former chief executive, to take early retirement instead of giving him 12 months’ notice to quit allowed his pension to almost double from £416,000 to £703,000 a year

The “compromise agreement” between the Bank and Sir Fred has now provoked a political storm was seemingly negotiated at the very last minute before the rescue deal for the bank was announced

A more pleasant side of the face of banking was the announcement made yesterday that the National Savings and Investment had seen a 10.5 increase in deposits during the second half of 2008. Deposits in the state owned bank, founded in 1861, rose to £94.9 billion on Dec. 31 from £85.9 billion from the previous period.

A sign that more and more people are spending less time in front of their television is the announcement that ITV are to lay off 600 people across the UK in a major cost cutting exercise. Another move in the offing for ITV is a “pain sharing” deal with Setanta, the UK television cable channel that specialise in sports broadcasting. The plan seemingly involves cutting competition on broadcasting live FA Cup and England international soccer matches for which they share a contract.

A rare and unusually bright star on the FTSE yesterday was the UK business process outsourcing (BPO) Capita who’s recently announced results revealed a growth in revenue of £2.4 billion, with operating profit up 18% to £321 million.

BPO appears to be a growing business in the UK, with Capita holding 25% of the total BPO market within the British Isles.

Producer of Hovis bread and Mr. Kipling cakes, Premier Foods, are expected to announce today the implementation of a £400million equity issue in conjunction with the company’s annual results. This move is planned as a reward to shareholders, as Premier announces their intention to sell a large but minority stake in the company to Warburg Pincus, a US based private equity group.

The rights issue is reckoned to more than double the equity value of the group, which has recently dwindled to £238million. In anticipation, shares closed up 3½p at 28½p on Wednesday.

The FTSE 250 index remained stable at 6,083.51 while the FTSE 100 finished at 3,645.87.

Sterling rose again, albeit slightly against the dollar and the Euro and considerably against the Japanese Yen and the Swiss Franc:

Pound/US dollar 1.4186

Pound/Euro 1.1241

Pound/Japanese Yen 141.38

Pound/Swiss Franc 1.6640
At his meeting with PM Gordon Brown at the White House on Tuesday, President Barack Obama publicly announced his backing of British efforts to forge a global response to the economic crisis. Obama voiced his support for coordinated fiscal stimulus measures in an aim to stimulate the world economy ahead of next month’s G20 summit, due to be hosted by in London.

As if strengthening the shared optimism of Brown and Obama, Wall Street shares had a good day. Largely offsetting the losses incurred on Tuesday.

The Dow Jones Average rose 149.82 points to close 6875.84. NASDAQ also rose 32.73 points to 1353.74

On the other side of the World, things appear to be getting gloomy. The ability of Australia to escape the global recession appeared to be under threat after a government spokesman reported on Wednesday that its economy an unexpected contraction in the fourth quarter, its first in eight years.

The spokesman announced that Australia’s economy had shrunk by 0.5 per cent from the third quarter, against predictions that the economy would remain at least stable. Over the last year, Australia’s economy has grown by 0.3 per cent, a considerable achievement all things being equal in the current global financial turmoil.

Indonesia, one of the few developed countries not considered to be crisis have been granted an unsolicited $2 billion loan by the World Bank, it was announced on Tuesday. The loan, the largest ever World Bank loan to Indonesia, is earmarked as a contingency facility to support government spending and external fundraising during the current market turmoil, and part of a $5.5 billion fund including Japan, Australia and overseen by the Asian Development Bank.