Unbelievable though it may sound, Chancellor of the Exchequer Alistair Darling is expected to announce a further set of bank guarantees, this time for mortgage backed bonds. The strategy behind Alisdair’s thinking appears to be that the guarantees will allow banks to sell their securities without the risk of making a loss, in the hope of reviving lending in the mortgage sector.

It is expected that Chancellor Darling will announce in his eagerly awaited budget speech today, that the treasury will be offering guarantees for up to 50 billion pounds of the bonds through a new mechanism, to be established.

Treasury officials expect that banks will be slow to take up the offer and instead prefer and instead to more make use of some of easier to operate lending options already available.

While as yet there is no official confirmation available that the plan will go ahead, it is anticipated that the Treasury intend to provide as many options to attract investors back to the property market, and Darling has chosen his budget speech to confirm this. In the recent past, investors have steered clear of mortgage backed bonds and other hard-to-value assets in the wake of bitter experience after the international money markets went belly up in 2007.

Currently sales of mortgage backed securities have hit rock bottom in 2009, where in 2007 they had reached around 80 billion pounds worldwide. The reason for Darling’s generous offer may well stem from the fact that investors are demanding rates as higher than three percent above bank rates to take on mortgage backed bonds, and hopefully the fact that the loans will be guaranteed will reduce these rates.

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Tags: Alastair Darling, Budget, Credit Crunch, Economics, Economy, Financial News, Gordon Brown, Recession, UK Recession

All eyes are on budget predictions, and how far will Chancellor Alastair Darling veer away from his Pre-Budget Report made last November. He has already hinted strongly that his forecast that the economy would contract by less than 2% in 2009, now looks to be almost double that figure. He also announced during the same report that the government could raise £1.6 billion through introducing an income tax rate rising to 45% on incomes above £150,000, to begin from April 2011. In light of the fact that the Treasury needs to raise income and soon, economic pundits appear to be united and unwavering in their opinion that the increase would be “difficult to avoid”

However they also appear to agree on the fact that the Government’s plans to raise income tax rates are highly unlikely to raise the much needed £1.6 billion, and indeed may create an opposite effect.

According to a recent study, increased taxation may well bring a spiral of tax avoidance and/or people from reducing their taxable income

The report also points out that even if the Treasury has judged the situation correctly in how the UK’s largest earner will respond to the rate increase, the reform is liable to only raise around one third of the desired amount, taking into account the loss indirect tax revenues.

The report goes on to point out that the optimal figure that the Treasury could expect to raise would be around one billion pounds, and only if they raised the tax rate to a flat 54%. Simply by increasing the marginal tax rate on incomes above £150,000 would be around £900 million, and that would require an income tax rate of 54%.

Taking history into account and recent history at that, the Treasury needs look no further than the late 1980s. It was discovered then that the 45% band actually reduced revenue for the Government, albeit slightly. Then as now, imposing a 40% income tax rate was found to be the niche that generates the most revenue.

There are no shortages of ways to reduce the levels of income tax to be paid, with many people turning to working less, contributing more to a tax-free private pension among others. Higher, or some may even say prohibitive tax rates might even lead to migration, especially in these days of global economies, or even earlier retirement. Or a mixture of both.

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Tags: Alastair Darling, British Economy, Budget, Economics, Financial News, Tax, UK Recession

You may love him or you may hate him, but one thing is for sure, not many UK citizens would like to be in Alistair Darling’s shoes on Wednesday when he makes his eagerly awaited budget speech.

Chancellor Darling is expected to announce spending cuts of around some £15billion of over the next few years, hopefully while making the entire financial apparatus based around Whitehall much slimmer and even meaner.

Financial analysts are predicting that the Darling’s budget statement will reveal the full extent of public borrowing this year, with has a potential of reaching more than £160billion. In honest truth, there will be very few pleasant surprises around this year’s UK budget for the man in the street. Alistair Darling’s statement is expected to announce that the fiscal deficit for 2008/09 has reached the £90billion mark, which is more than six percent of the Gross Domestic Production (GDP). If that wasn’t bad enough, experts predict that the figure will have reached about £174bn by this time next year, equivalent to a staggering 12.4pc of GDP.

Needless to say, the UK public are howling for blood, with the opposition Conservative party stating that Darling’s Budget is the equivalent of a “day of reckoning” with the Labour Party having led the UK into the worst economic crisis that it has known for decades.

Yet despite the constant flow of depressing predictions that are expected to reach fever pitch by Wednesday, there are those that continue to announce that the UK economy is no longer in free fall and that the beginning of a recovery should be felt by the spring of 2010. Hiding behind that well know cliché” it has to get better worse before it can get better, the same financial analysts are more certain in their predictions that the UK economy will contract by as much as by 3.5% this year and by an encouraging 0.1% in 2010.

In his Budget statement, Alistair Darling is expected to at least agree with the more unpleasant side of the prediction, that the UK economy will contract by around about 3% this year, a rapid turnaround from his November 2008 forecast in which he announced that the economy will “only” fall between 0.75% to 1.25%.

In fact, it seems that just about every set of statistics released these days in the UK provides an opportunity for interpretation, depending on whether you are an optimist or a pessimist. The news that UK retail sales fell in March 2009 compared with figures issued by the British Retail Consortium (BRC) a year earlier, seems like a very obvious victory for the pessimist.

Like-for-like sales fell 1.2%, making for the ninth fall in sales in the past 10 months, with the explanation that due to continued economic uncertainty. Leading consumers had no option to tighten their belts. For the optimists, there was some light in the fact that fall was made worse due to the fact that Easter fell in April this year but during March in 2009, meaning that, March’s figures did not include the traditional boost from Easter sales. If they had, the figures would have been much higher, resulting in a victory for the optimist, at least until this time next month.

Another reason for optimism came with the news that UK local councils who rather unwisely invested hundreds of millions of taxpayer’ money in Icelandic banks have been given some cautious indications that they may succeed in recovering a healthy percentage of the money. The reasons being that banks in Iceland, who were taken over by the authorities when the country’s financial system collapsed in October 2008, have appointed administrators to sort out the bank’s muddled affairs. It now transpires that the administrators have indicated its creditors could get up to 80% of funds invested back with initial

payments expected towards the end of July and August.

London-listed Chesnara Plc announced on Friday that has acquired the life insurance operations of Swedish financial services company Modern Finance AB.

Chesnara, owner of Countrywide Assured Plc, paid out twenty million pounds cash in cash for Moderna Life, a sum that represents a 63% discount from the book value of the unit as calculated at the end of 2008

Moderna Finance has been under the control of Icelandic bank Islandsbanki, who were recently nationalised, following the collapsed of Icelandic investment company Milestone.

Chesnara announced that Moderna Life’s activities will complement its UK business, as well as being an opportunity to grow a new division within the group.

Equities markets saw gains Friday, helped by gains in the banking sector after US bank Citigroup (NYSE: C) said that it only lost 18 cents per share in the first quarter, a better performance than analysts had anticipated.

In London on Friday the FTSE continued its steady climb with Lloyds Banking Group and RBS both doing well

British investor in leveraged buyouts, Candover Investments were said to be discussing bids received for the group, which put itself up for sale last year. The news saw their shares rising by 5.3 percent (11.75 pence to 234.25)

The world’s second-biggest drug maker GlaxoSmithKline appeared to be drawing nearer an agreement to acquire Stiefel Laboratories Inc. for about $3 billion. The shares rose by 0.3 percent (3 pence to 1,038)

Showing that progress nearly always pays dividends was the news that the London Stock Exchange Group Plc, who operate of the London and Milan bourses may announce who will be the technology providers for its Baikal pan-European trading system sometime this week, The shares rose 1.8 percent ( 12 pence to 689) in anticipation.

The FTSE 250 closed up 65 points at 7307.63 while the FTSE 100 finished the session 3.9 per cent, or 156.5 points, higher at 4,209.

Sterling fell slightly against the dollar and the Euro and rose slightly against the Japanese Yen and the Swiss Franc:

Pound/US dollar 1.4716

Pound/Euro 1.1333

Pound/Japanese Yen 127.58

Pound/Swiss Franc 1.6425

Wall Street shares had another steady day on trading before closing down for the weekend. The Dow Jones Industrial Average added 5.9 points to close at 8,133.33 while the NASDAQ crept up 2.63 points to 1,673.07

The continued optimism was largely down to Citigroup, who reported their first quarterly net profit in nearly two years, becoming the latest US bank to see an improvement in its performance.

Citigroup made a profit of £1.1billion ($1.6bn) compared with a loss of $5.1bn a year earlier. Revenues rose a commendable 99% to $24.8bn.

Shares in the bank initially rose, before falling backwards, closing 9% lower at $3.65 in New York.

Better than expected results also came from conglomerate General Electric, who reported a 40 per cent drop in first quarter earnings, beating analysts’ expectations of an even steeper decline?

Markets in the Asia-Pacific region were mixed.

In Tokyo, the Nikkei 225 added 1.74 percent to 8,907.58 while the Topix index was 1.63 percent higher to 845.57 and the Mothers market gained 1.44 percent to 319.63.

In Australia, the S&P/ASX200 was up 0.03 percent to 3,776.7 and the Sydney Ordinaries added 0.07 percent to 3,728.1, while the Hang Seng was 0.12 percent.

Crude oil prices were a bit higher but precious metals and grains declined on the session.

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Tags: Alastair Darling, Budget, Credit Crunch, Economy, Financial News

For at least the next twelve months, more than six million UK families will be living in a state of fear and financial uncertainty. According to recent research, homeowners, many of them already ridiculously exposed due to paying well above the true market price in an effort to get on the property ladder now face the real risk that unemployment or illness will cause them to fall behind on their mortgage payments and they will face eviction. And it won’t take much for them to find themselves in such a position
Statistics now show that more than sixty percent of the working population are living on a day to day basis with this fear, and are increasingly fretful, largely due to increasing silence from both the banks and the government on policy regarding repossessions. Many of the public feel that the government has paid too much attention on bailing out the banks and insurance companies, and not on providing some form of “safety net” for home owners.

While the feeling is that the credit crisis has bottomed out and the only way from here is up, for much financial security is still a long way away. In the meantime, with more than 40% of mortgage payments dependant on joint incomes, there are many families juggling their incomes on a very fine balance.

And their fears are not without foundation, with the Council of Mortgage Lenders currently estimating that more than 75,000 UK homes will bill repossessed in 2009, adding more than 300,000 people to the list of homeless.

Understandably this fear can cause tremendous repercussions within the family, and many consumer societies are simply requesting some form of official statement clearly laying out the criteria under which a family will be evicted from their home and what steps can be taken to prevent this from happening.

This scenario is too real for too many people, with information from the
Financial Services Authority (FSA) showing that the number of mortgages in arrears rose by 31 per cent in 2008 and that two and half million mortgages holders will see their property fall into negative equity in 2009.

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Tags: Budget, Debt, Economics, Economy, Money Management, Mortgage, Mortgages, Recession

British chancellor Alistair Darling was looking and sounding somewhat sheepish as he was forced to admit over the weekend that what was already obvious to everyone. The chances of their being resurgence in the UK economy IN 2009 is non-existent.

The not so eagerly awaited budget speech by Darling on the 22nd of April 22 will begin with his prediction that the UK economy will shrink by at least 3 per cent in 2009 and that budget deficits will amount for more than 10 per cent of national income.

No simple admission to make, as the prediction turnaround is regarded by financial analysts as the most radical modification of any debt forecasts in modern history. In real terms the three percent slide in growth deterioration is three hundred percent higher than the Chancellor predicted in his pre-Budget report in November, which also pointed to a turn around that would begin in late summer 2009.

Signs that all is far from well with the UK economy came with a recent report that British companies made the highest number of profit warnings in the first quarter since 2001. A total of 117 British companies issued forecasts of profit reductions, making it the third quarter in a row when profit warnings have been in three figures. Struggling particularly are companies in the support services followed by media and industry.

While there is a level of optimism around after the positive decisions arrived at during the G20 conference, the fact remains that the British economy Is still very much in the doldrums, Recent figures have shown that the economy contracted in the fourth quarter at the highest level since 1980 with indication that the first quarter of 2009 will show some improvement but will be far from encouraging.

Banks enjoyed some good and bad publicity over the weekend. Predictions made at the AGM of the Royal Bank of Scotland held on Friday that the bank will take a minimum of three years and probably five to recover from the myriad of mistakes made BT the former management, with the disastrous acquisition of ABN Amro assets being the most prominent. The message at the meeting was that there was optimism for the future, and that previous mistakes should erased from the stockholder’s memories. Easier said than done it seemed, according to the reportedly turgid reactions of the stockholders who attended the AGM in Edinburgh.

Much loved by their shareholders is Europe’s biggest bank, HSBC Holding as investors bought 97 percent of the U.K.’s largest-ever rights offer., with the banker succeeding in raising around $17.7 billion The shares went for sold 254 pence each, 41 percent less than their value at the close of the FTSE on April 3 in London. Early indications that they will recover to their pre-rights issue value came from Asia where HSBC shares have already risen by more than three percent on early trading.

Bank officials stated that the London-based bank is now “well-positioned for the uncertain economic environment and for growth opportunities

Meanwhile the BT Group, the World’s long established communications company in the world announced that they are considering including their remaining property assets, which include the London landmark BT Tower as well at their high value office headquarters situated adjacent to St Paul’s Cathedral into their pension fund to tackle a deficit running close to excess of 5 billion pounds. With the properties valued at about 300 million pounds it might make some difference, but not a lot.

All seems well at BG Group, at least if you consider what the group’s chief executive Frank Chapman, took home last year. Frank earned a total of £10.9million in 2008, putting him well into the bracket of being amongst Britain’s highest salary earners. To be fair, Mr. Chapman did lead the company through a year of profitability and rapid expansion.

BG’s 2008 earnings beat analysts’ expectations following astute negotiations supervised by Chapman, which saw BG achieve high profit margins in its liquefied natural gas (LNG) business.

In a recent announcement, Mr. Chapman announced that BG was slated to become the world’s third-largest producer of LNG by 2015, behind Exxon and Shell.

The FTSE 250 index rose by 1.49% or 93.35 points to 6351.92 while the FTSE 100 finished Friday’s session up 46.56 points, at 4,076

Sterling rose slightly against the dollar and the Euro and rose slightly against the Japanese Yen and the Swiss Franc:

Pound/US dollar 1.493

Pound/Euro 1.1028

Pound/Japanese Yen 150.93

Pound/Swiss Franc 1.6849

Wall Street shares had a another solid day on Friday’s trading

The Dow Jones Average rose 39.51. To creep over the eight thousand mark at 8017.59. Nasdaq also rose 19.24points to close at 1621.87

The market was obviously dampened by news that US unemployment had reached its highest level since 1983, arriving at 8.5 per cent of the work force
In March, industry and commerce shed 663,000 jobs, bringing job losses since December 2007 to 5.1m, with around three and a half million jobs being lost since October 2008 alone.

In Asian markets moved higher for a fourth consecutive session on early trading on Monday. By the 11am break in Tokyo, the Nikkei 225 had risen 2.3 per cent

At close of business on Friday European stocks had also risen, reaching their highest level for eighteen months, a sure sign that coincidence was on the rise aft the G20 conference

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Tags: Alastair Darling, British Economy, Budget, Economics, Finance, Financial News, FTSE, Recession, UK Banks, UK Recession

40% of UK’s financial services firms have reported that they are accumulatively liable to lay off around 15,000 staff during the coming quarter according to a recent survey conducted by the Confederation of British Industry (CBI). In the last quarter of 2008, the number of people employed in the financial services industry fell making it the fourth consecutive quarter that the numbers have been reduced.

The financial sector has been particularly hard hit during the financial downturn and has been cutting jobs at levels unknown since1993.

Transport has also been hard hot and with Jarvis the rail maintenance group announcing their intention to lay off 450 people, things don’t appear to be getting any better. Jarvis, who also issued a profits warning, stated that that a decline in business through Network Rail as well as the general downturn in freight container business were the principal factors in their decision to lay off people.

The government-backed operator Network Rail announced on Tuesday that they are to embark on a five year, £35 billion railway improvements programme. However it remains unclear when the project will begin and until it does Jarvis stand be limited in their operational capacity

US based car manufacture, General Motors; currently in President Obama’s bad books have remained undeterred. According to reports, company officials have approached the UK government requesting a £600m aid package to help Vauxhall their British brand to stay afloat

Company representatives confirmed that they were currently in discussions with the UK government, but have yet to get down to the “nitty gritty” as far as finance was concerned.

General Motors UK’s operations as well as others in have cut back on launching new models of late as well as introducing other cost saving methods.

Cost saving seems to be too late for Visteon UK, whose auto parts production unit announced that they will file for bankruptcy, making their entire workforce of around 600 redundant. The company, who were part of the Ford Motor group up until 2000, announced that since they became an autonomous body they had made accumulative losses of £669m. The Company operated three plants across the UK, situated in Basildon, Belfast and Enfield.

On the home front, it was reported that property owners have been pushing up their entity values, to record levels of just over eight billion pounds during the last three months of 2008.

The sum is the highest capital injection since gland records began in 1970; the 5.887 billion injected in the third quarter of 2008 fades in comparison. When property values were shooting thorough the roof in the boom years it was considered sound practice to refinance properties to free up capital. When the downturn began, too many people found themselves with negative equities. However the encouraging trend to increase equities appears to be gaining momentum.

Om a more negative note, key David Blanchflower Bank of England executive announced in a recent statement that the UK was still to bear the full brunt of rising unemployment.

On the stock market, the FTSE 250 index rose by 1.04% or 66.31 points to 6.440.20 while the FTSE 100 took a short drop finishing the session down 1.02 per cent, or 40.14 points, at 3,886

The pound continued to show modest gains against the euro and dollar on Wednesday Estimates were that, although results indicated an improvement and that the significant actions of the UK treasury were beginning to take effect, there was still a long way to go.

Pound/US dollar 1.4358

Pound/Euro 1.0835

Pound/Japanese Yen 141.68

Pound/Swiss Franc 1.6378

Wall Street shares continued to rise and fall on a daily basis. Yesterday shares were up.

The Dow Jones Average rose 86.9 to close at 7608.92. Nasdaq trickled upward 26.79 points to 1528.59

The big news from Silicon Value in California was that Google the internet giant are about to move into the start-up business. To be more exact, the company, who currently turnover around $10 billion a year, have set aside a paltry $100m in its first year to compete against the top venture capital firms for some of investment opportunities afforded by the many start-up businesses in the region. Google’s new financing arm is to be known as Google Ventures.

In Asia the Japanese yen continued its four-week slump against the dollar with economists announcing that business sentiment has fallen to its lowest level for more than 30 years.

With expectations that the European Central Bank will cut interest rates tomorrow, the Euro is liable to also follow suit.

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Tags: Banking, British Economy, British Pound, Budget, Credit Crunch, Economics, Employment, Financial News

If you thought that things in the UK couldn’t get any worse, then it would appear that you might be wrong. At least so the experts say. However it would appear that we won’t need to be taking our medicine for too much long with the consensus of opinion amongst the financial community is that at by the end of 2009 things will begin to look a little more optimistic, and 2010 might even see some growth. This recovery, if it does arrive as predicted, will come a lot earlier than these gurus were forecasting not so long ago. The likely reason will be the many measures taken and yet to be implemented to stimulate the UK economy. Measures that include the Bank of England’s drive to inject billions of pounds into the economy, that has reached full force in recent months. .

Against the backdrop of this mood of cautious optimism that Brown and Darling’s plan might even work there are still some major UK economists who will hasten to point out that the economy is now likely to shrink by three percent in 2009 this year. In February the annual projection figure was 2.9 percent, so while the downgrade estimate is far from encouraging. The same economic correspondents are conservatively suggesting a growth of 0.5% percent in 2010. Hardly boom times but at least encouraging and something to look forward to in the UK , where things are as tough as they have been for many years.

The economy contracted 1.5 percent in the last quarter of 2008, the deepest contraction since 1980, confirming the first recession in the UK since the 1990s.

Recent data suggest the economy is in deep trouble. Industrial output shrank at its fastest pace since 1981 in January, despite a 20 percent fall in sterling in the last three months which should benefit exports, while the trade deficit widened.

The economy’s performance contrasts with 3.0 percent growth in 2007 and 0.7 percent last year, but forecasts were relatively wide, ranging between a 1.3 percent and 4.1 percent contraction this year.

British investors face a 20 billion pound dividend shortfall this year as UK companies opt to protect their balance sheets in the global recession.

The slide in earnings caused by crumbling demand is forcing a hard rethink about how much to pay UK shareholders, who traditionally have attached high importance to dividends.

Morgan Stanley expects a 60 percent peak-to-trough fall in UK profits, worse than the early 1930s at the time of the Great Depression.

Analysts say this will intensify downward pressure on yields.

“Dividend distributions are falling. Headline dividend yields are not to be trusted. We think there is more dividend downside ahead,” Citigroup said in a note to clients.

The ratio of dividend yields to government bond yields has averaged 1:2 over the last few decades, and analysts have seen a ratio of even 1:1 as a buy signal for equities.

But though one year forward UK dividend yields at 6.4 percent are more than double government bond yields at 3.11 percent, few investors see this as a call to buy stock, partly because many question the accuracy of dividend forecasts in an uncertain environment.

A raft of economic and corporate news showing the severity of the global crisis also offered glimmers of stabilizing, and investors seized upon the silver lining on Thursday.

Bank of America reported a return to profit, General Electric was unruffled by a ratings downgrade, U.S. retail sales surprised with only a slight dip and China reported a surge in lending in the face of its economic slowdown.

Stock investors responded by driving the blue-chip Dow Jones industrials index .DJI 3.5 percent higher. The broader S&P 500 index .SPX rose 4.1 percent. .N Earlier, the pan-European FTSEurofirst 300 .FTEU3 index of top European shares turned positive, gaining 0.6 percent.

Bank of America (BAC.N) provided the week’s latest reassurance from the fragile U.S. banking sector, recipient of massive government bailouts. The largest U.S. bank said it was profitable in January and February.

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Tags: Bank, British Economy, Budget, Recession, Stock Markets, Stocks and shares, UK Recession

According to a recent report issued by the UK Council of Mortgage Lenders (CML), the number of properties repossessed in the United Kingdom in 2008 rose to around 40,000. This figure represented an increase of 54% from 2007.

In a statement that can only be described as contrary, the CML hastened to add that the number of repossessions was considerably less than their original projections, due to the fact that lenders had made considerable concessions to their clients to ensure repossession was a last resort.

In 2009, as the recession really begins to bite, the CML expect that around 75,000 families and business premise owners will be asked to vacate their properties

In their report, Michael Coogan, director general of the CML’ advised borrowers strongly to make every effort to reach an agreement with their mortgage bank regarding outstanding debts. He pointed out that many borrowers simply vacate the property when repossession appears inevitable to avoid the trauma of forced eviction. Coogan advised that people who borrowed money to buy property remain liable for their debts, even after the leave the property.

In general, the situation regarding UK mortgages is certainly less than healthy, as arrears levels continue to grow.

At the end of 2008, there were more than 180,000 mortgage holders in arrears. The average arrears were more than 2.5% more than the outstanding balance, and more than 1.5% or total UK mortgage debt. .

Housing Minister Iain Wright pointed out that the fact that arrears figures were gradually rising was a cause for concern. He added that the government had instigated a range of initiatives in order to forestall repossessions that he hoped minimise the risk as much as possible

He pointed out that families where one or more of the principal wage earners have been made redundant are entitled to claim support to meet their mortgage interest payments. This option has been in place for some time, but it is now available within a much shorter time frame

Others who have suffered a major drop in income as a result of the recession will be able to apply to their mortgage bank request to have a percentage of their repayments deferred for a period of up to two years.

To provide a little sunshine in this otherwise bleak picture, the Royal Institution of Chartered Surveyors (RICS) announced in a recent statement that Wright’s programmes appeared to be making a difference. The report stated that despite increasingly difficult economic circumstances, both the number of houses taken into possession in the fourth quarter of 2008 as well as mortgage possession actions issued actually fell during that period

A set of guidances introduced at the end of 2008, stipulate that County Court judges are required to ensure that all mortgage banks are required to clearly demonstrate that they have tried to discuss and agree alternatives to repossession. In addition, court action can not be taken within three months of a borrower missing their first payment.

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Tags: Bank, Budget, Credit Crunch, Economy, Mortgage, Mortgages, negative equity, Recession

The worst Christmas in 25 years could make the high street in to graveyard after the holidays.

Retail sales have fallen for the ninth month in a row and half of retailers expect January to be even worse.

Confederation of British Industry research shows 67% of retailers reported a decline in year-on-year trade during the first two weeks of December, compared to 13% who experienced an increase

In a double whammy to knock retailers, the Halifax recently released figures showing 39% of shoppers are cutting back on Christmas spending.

Andy Clarke of the CBI said: “The next week will be nail-bitingly tense for retailers as they pin their hopes on a last-minute Christmas dash.”

Retail analyst Nick Bubb, at stockbrokers Pali International, predicted the poor state of high street trading would result in more businesses going bust in the New Year as they struggle to ring up sales.

Reports of a bad week of sales at retailer Marks & Spencer have prompted Pali International recommend selling the stock.

Industry sources revealed Marks & Sparks had “an appalling week” last week, with sales down by as much as 25% on last year.

With Debenhams announcing more ‘Up to 50% off’ discounts, the M&S discount food might not be enough to draw customers in to buy other goods, leading to another one day sale before Christmas.

Woolworth’s is expected to start an up to 70% off clearance sale on Boxing Day and may close a week later leaving 30,000 employees worrying about their New Year prospects over the holidays.

Holidaymakers face an expensive Christmas as the tourist £1 slumped to 1.07 euros. The pound climbed against the US dollar again to $1.53.

The FTSE is still stagnant – up slightly from 4309 to 4324, while on Wall Street, the DOW dipped from 8921 to 8824.

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Tags: British Pound, Budget, Credit, Credit Crunch, Debt, Economy, FTSE

The new homeowner mortgage support scheme seems another example of the Chancellor Alastair Darling’s habit of announcing policy without thinking through the implications.

Prime Minister Gordon Brown first announced the scheme on December 3 and the Chancellor followed up with more details in his Pre-Budget Report.

Now, the Government seems to have cobbled together a policy that sounds great but will help virtually no one because the criteria for the scheme are so tight few homeowners will qualify and even if they do, mortgage lenders are not bound to give them, a mortgage holiday.

Experts believe about 9,000 homeowners may qualify for a mortgage break – while the City fears 75,000 will have their homes repossessed.

Despite the regular announcements about how the scheme may work, no one knows when it will start, who will act as independent advisors or whether the banks and building societies will actually operate the scheme.

The Treasury says some of the practical details were still being worked out.

The advantage of the new scheme for anyone eligible is that they will be able to stop repaying interest for two years.

Any unpaid interest will be added to the mortgage and have to be repaid once the borrower can afford to restart their payments, or when the two-year holiday period has ended – whichever comes first.

If the borrower still cannot afford their mortgage then the government will pay the lender the “equivalent sum of the total amount of the interest guaranteed that is not recoverable from equity in the property.”

The main qualifications are that someone should have:

• Suffered a loss of income from employment or self-employment which makes full mortgage payments difficult, but which is not expected to be a permanent income loss

• Taken out a mortgage of up to £400,000

• Savings below £16,000

• Received financial advice from a party other than their lender to determine their eligibility for the scheme 

• Alliance & Leicester
• Barclays
• Capital One
• Child Trust Fund
• First Direct
• HSBC
• Post Office
• Tesco Savings

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Tags: Alastair Darling, Budget, Chancellor of the Exchequer, Gordon Brown, Loss of Income, Mortgage