UK public opinion is reported to be swinging the way of large scale cuts in the public service sector, according to recent reports. The sector, costing taxpayer’s record amounts of money each year. Is now employing more people than ever before. Unions who represent public sector employees are anticipating having a have a fight on their hands, if as expected, the Conservative party wins the next election and inherits an economy still struggling to pull itself out of recession.

According to statistics issued by the Office for National Statistics before the weekend, business investment in the UK fell 0.6% sequentially in the third quarter, significantly less than the 3% initially estimated. British private and public sector manufacturing investment has reportedly fallen 9.4% since the second quarter and by almost 30 % since the third quarter of 2008.

According to a recent report by the Bank of England the “probability of default by U.K. real estate companies has increased significantly” as households continue to face a weakening labor market paired with tightening credit conditions.

Amid concerns that the government’s 50% banking bonus tax could seriously damage future business levels, stock markets around the world have been focusing upon the city of London investment markets. The UK government went as far as issuing a report, released on Friday, clarifying who is liable to fall under the scope of the banking tax.

With reports in circulation that UK banks, and especially those whose activities are centered on in London continue to consider their position regarding the banking bonus tax, which has been mooted as a one-off charge, is making people in the banking world a little hot under the collar.

The Confederation of British Industry (CBI) has raised its 2010 economic growth forecast, whilst predicting that the Bank of England may place their bond-purchase plan on hold as soon as February as policy makers prepare to raise interest rates.

The CBI also predict that gross domestic product in the UK will increase 1.2 percent in 2010 after contracting 4.5 percent in 2009, up from their previously forecast expansion of 0.9 percent. The group also predicts the bank will raise the benchmark interest rate from 0.5 percent in the second quarter to reach 2 percent by the end of the year.

The recovery will be aided by companies rebuilding stocks to meet a rebound in world growth and as exporters benefit from a weaker pound, down almost a quarter since the start of 2007, making British goods cheaper to buy abroad.

Google, smart boys that they are, succeeded in not paying a penny in corporation tax on the £1.6 billion advertising revenues that it earned in Britain in 2008. The company, which enjoys an estimated 90% market share of UK internet searches, last year, used a cross-border network of subsidiary companies to keep the taxman at bay. Their smoothly interwoven international corporate structure enabled Google to avoid paying what could otherwise have been a corporation tax bill in the UK of as much as £450 million, according to recently filed accounts for subsidiary company Google UK Limited. The accounts show none of the search engine’s advertising revenues from British customers were accounted for in the business, despite operations in London and Manchester While much of the costs linked to the running of Google’s British operations are recognised for tax purposes in the UK. Revenues from customers in Britain, however, are diverted to another Google company in Ireland, where the corporation tax rate is between 10% and 25%, while UK corporation tax is levied at between 28 and 30%

The British Pound has begun to recover and bounced back to a high of 1.6251 on Friday following the rise in risk appetite. Analysts predict that Sterling may continue to recover as a recent Bank of England Financial Stability report said the U.K. financial system has become “significantly more stable”. This was credited to the unprecedented steps taken on by the government.

• Dollar 1.6152
• Euro 1.1262

Things were pretty brisk on the FTSE 100 approaching the weekend, with

nursing homes group Care UK drawing a lot of attention. The company has been reportedly been considering whether to accept a £275 million pound bid from Bridgepoint which will take them private. Care that runs 60 nursing homes, GP practices and NHS walk-in centres in the UK saw their shares rise 10.5 pence to 430.5 pence on Friday.

Overall U.K. stocks were on a minor downward spiral, with banks leading the way. Lloyds Banking Group Plc and Barclays Plc were are ever leading the way, as the European Central Bank (ECB) increased their estimate of the value of write downs by 13 percent. Lloyds, the 43 percent government-owned bank, lost 4.7 percent to 48.7 pence, to its lowest since July. Barclays, the U.K.’s second biggest bank, slid 3.5 percent to 264.25 pence.

Ryanair surged 5.8 percent to 3.282 Euros after the carrier said it will generate surplus cash for shareholders between 2012 and 2015 after they had suspended their talks with Boeing regarding future aircraft acquisitions.

Also on the up was Aggreko Plc, the world’s biggest provider of mobile power-supply gear. Their shares rallied 7.9 percent after announcing that trading in the fourth quarter was better than it estimated.

The benchmark FTSE 100 Index dropped 20.8, or 0.4 percent, to 5,196.81. The FTSE 100 fell 1.2 percent this week. The gauge has still rebounded 48 percent since March and is heading for its biggest annual gain since 1997 as central banks cut interest rates to record lows and governments worldwide committed about $12 trillion to revive the economy.

On close of trading, the Dow Jones Industrial Average was up to 10, 328.61 while the NASDAQ was stable on 2,211.69

GM says it has failed to sell its Swedish car brand Saab and will begin "an orderly wind-down of Saab operations".

GM had been in talks with the Dutch specialty car maker Spyker over a sale. Talks with Sweden’s Koenigsegg also fell through earlier this year.

GM has been trying to sell Saab as part of its turnaround plans since January. Dutch luxury car maker Spyker has submitted a new offer to General Motors (GM) for its Swedish car brand Saab.

Spyker has submitted a new 11-point proposal to GM, addressing the issues that ended talks.

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