Gordon Brown about to tell the banks that the era of “free lunches” is over

Gordon Brown and his loyal sidekick Alistair Darling is about to tell the banks, and in particular the RBOS that there is no such thing as a Scottish Mafia, The Royal Bank of Scotland, are among the first and most prominent banks are about to discover that the golden days of free spending are over for them, and as keepers of the taxpayer’s money, Brown and Darling are about to impose some fiscal limitations on them and their colleagues in the UK banking industry, or what remains of it. As part of the Government’s new multi-billion pound bank insurance scheme, where 70% of the shares are now in Government hands, pay cuts and bonus slashing will be the order of the day as well as the demand that the first ten percent of any future losses fall onto the private stockholder’s equity share. Not only RBoS will fall into this category, also the other UK banks that were bailed out last week in Brown and Darling’s rescue scheme (part two)
Expected to join their colleagues in the banking industry in the “it wasn’t our fault” whining category are the major players in the UK insurance sectors. Almost all of these companies are expected to announce profit warnings in the coming days, against figures to be issued for the last quarter of 2008.

Shares in the insurance sector have begun to fall rapidly in value. There are serious concerns that many companies have begun to experience serious cash flow problems as asset values plunge. The first to declare results ton Wednesday 27th will be Standard life. Their figures are expected to show an annual UK life and pension’s sales drop to £12.2 billion in 2008. Investment net inflows are expected to have fallen by 31 per cent in the same period.

Friends Provident are also expected to announce a fall of 29 UK life and pensions sales, to £531million.

As if the insurance companies didn’t have their problems to seek, credit insurers are also taking some stick. Industry suppliers are complaining bitterly about insurer’s reluctance to cover credit sales for industry. With payment terms being gradually abused and bankruptcies becoming common place, insurers show signs of great discomfort insuring credit for industry, with less than 5% of company issued credit now being insured. Key UK manufactures and distributors have called on Business Secretary Peter Mandelson to intervene and apply pressure on reluctant credit insurers.
One the consumer front, WH Smith the high street books, stationary and music retailer expects to post a five per cent fall in like-for-like sales for 2008. On a more positive front, comparable sales at the group’s travel stores, situated in airports, railway stations and motorway services is expected to have fallen by only one per cent. These figures are to be released ahead of the company’s AGM.

Plans for the World’s largest off-shore wind farm may be in trouble as funding doubts begin to creep in.
the company behind the scheme Eon UK, announced their warning yesterday, raising doubts about the government’s energy strategy. This uncertainty will increase pressure from the industry for more generous government subsidies to get the project, the London Array wind farm situated in the Thames estuary off the ground. With the price of fuel falling and money short, fears that the project may be put on hold, if for the time being.

A sign that the domestic building market is still on its knees is The British plumbing and heating supplies group Wolseley’s announcement yesterday that its profit for the second half of 2007 would be down by more than 50 per cent. Wolseley has also been hit by the weakness of the pound. In the final five months of 2008 the company’s net debt rose by around 20 per cent to £3billion, with exchange rate erosion accounting for around 20 percent of that figure Shares in Wolseley tumbled by almost 30per cent yesterday and a company spokesman gave little reason to suspect that things will get better for the company until UK building starts pick up.

SINCE reporting third-quarter profits of $10.9 billion (£6.6 billion) last October, the outlook for Royal Dutch Shell has undergone significant change due to the collapse in oil prices, falling demand for oil products and the onset of a global recession.

Shell’s annual results due on Thursday are eagerly awaited as they are expected to provide the first opportunity to assess the industry’s response to the changed economic climate
The FTSE 250 Index was down -13.55 (-0.22%) to -6,242.67 at close of trading yesterday while the FTSE 100 fell by a similar percentage (-0.30%)-12.42 to 4,196.59.
Sterling again held its own as banks shares started to rise slightly against optimistic forecasts.
· Pound/US dollar 1.4208
· Pound/Euro 1.0689
· Pound/Japanese Yen 127.09

On Wall Street ,Dow Jones industrial average futures rose 46, or 0.58 percent, to 8,019. while Nasdaq 100 index futures rose 5.75, or 0.49 percent, to 1,170.00.
Oil prices fell to below $46 a barrel Monday in Asia after White House officials warned Sunday the U.S. recession will likely worsen in coming months, undermining demand for crude.
Light, sweet crude for March delivery fell 70 cents to $45.77 a barrel by midday in Singapore in electronic trading on the New York Mercantile Exchange. The contract rose Friday $2.80 to settle at $46.47.

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Tags: Alastair Darling, Bank, Bank of England, Economy, Financial News, Gordon Brown, Interest Rates, Money, Mortgages, Recession, UK Banks, UK Recession