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Britain’s public finances reckoned to be worst state since records began

January 22nd, 2009 by admin | 0 Comments | Filed in Central banks, Daily News, Recession, Retail, UK Bank Accounts, UK Banks, UK Small Business, UK employment

The continuing decline of Sterling on the World stage was never in more evidence than yesterday when the pound reached its lowest level since the dark days of the Second World War.

Sterling hit $1.38, (the weakest level versus the dollar since 1985) and €1.07, a sign that investors are totally lacking in confidence in the UK economy. This feeling of doom and gloom was not lightened by the prophesy of Bank of England rate-setter Paul Tucker that the latest bailout of the banking sector by the Government is not guaranteed to succeed. .

Whilst appearing before the Commons Treasury Select Committee, Tucker added that this week’s slump in banking stocks risks had overshadowed the rescue package, or at least this stage of it.

Carrying on the same less than optimistic themes, Bank of England Governor Mervyn King predicted yesterday that the central bank may have no option but to start snapping up assets within the coming weeks, after reducing the main interest rate to its lowest level since 1694.

U.K. stocks continue to decline for the third day in a row, as predictions that unemployment rates would rise at as fast a rate as the pound would decrease in value were proven to be true.

Among the many companies whose shares were still on the decline were Reed Elsevier Plc who declined by 3.9 percent to 528.5 pence, Vodafone Group Plc falling 2.8 percent to 132.8 pence and the U.K.’s second-largest clothing retailer, Next Plc, who lost 2.5 percent and went down to 1,102 pence per share.

Other UK stocks on the decline were:

African Copper Plc who dropped by a record 25% (0.38p to 1.13) after the company announced that it would need an immediate cash injection of $15 million to survive.

The U.K. mail-order retailer Flying Brands Plc dropped 1.6 percent,( 0.5 pence, to 31 pence) on the announcement of profit cuts against weak sales..

Declining 12 percent ( 17.75 pence to 129.75 ) was SIG Plc Britain’s largest supplier of insulation and roofing materials after being downgraded by UBS AG. The reason for the downgrade given was a breach of loan covenants by the company seemed likely due to forecasts of a “tough year ahead for insulation products.”

Bank shares continued their decline, although slowing down just like an elevator does as it reaches the basement.

The FTSE 100 Index fell 0.8 percent (31.52 to 4,059.88 ) the lowest rate since December 2008 and showing a drop of 2.1 percent this week alone

The FTSE 250 Index stood still closing at 6,159.50
With fourth-quarter gross domestic product data due on Friday 22nd that are expected to officially confirm that Britain is in recession, and the Bank of England likely to announce that it is to cut interest rates by a half a percentage point on 5 February, the mood of despondency is looking to be with us for some time. .

The downward lurch followed Wall Street, where investors returning from a holiday. Share prices pitched sharply lower despite the euphoria as Barack Obama took office, with the Dow Jones industrial average plummeting by four percent (332.13 to 7,949.09), its worst ever showing for an Inauguration Day.

Broader stock indicators also fell sharply, as the Standard & Poor’s 500 index fell 44.90, or 5.3 percent, to 805.22.

Wall Street futures suggested U.S. markets are more likely to recover during Wednesday’s trading. Dow futures were up 60 points, or 0.8 percent, at 8,005 and S&P500 futures were up 5.3 points, or 0.6 percent, at 811.10.

Across Asia and Europe as Obama assumed power the feeling was that oratory alone cannot bring about a quick recovery in the world’s largest economy, even through President Obama plans to begin a massive stimulus package early this year.

In the latest signs of strain on Asian economies amid the global slump, Singapore slashed its 2009 growth forecast for a second time this month, saying the economy could shrink as much as 5 percent due to from plunging demand for its exports from industrial countries and elsewhere.

In Japan, the Nikkei 225 stock average dropped 164.15 points, or 2 percent, to 7,901.64, while Hong Kong’s Hang Seng Index shed 381.19 points, or 2.9 percent, to 12,578.58.

Trading in Sterling was rapid with the currency fetching low prices on selling.

Pound/US dollar 1.38293

Pound/Euro 1.06530

Pound/Japanese Yen 123.132

In oil, light, sweet crude for March delivery fell 47 cents to $40.37 in Asian trade. The contract fell $1.53 to settle at $40.68 overnight, with the February contract expiring Tuesday.
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Banks called to account for rule breaking

December 3rd, 2008 by jamie | 0 Comments | Filed in Daily News, Debt, Loans, Money Management

The Government’s is set to crack the whip over banks refusing to lend fairly to homeowners and small businesses after bailing out the banking sector with a £500 billion rescue package.

New powers for fining banks that breach the banking code are expected as part of today’s Queen’s Speech in Parliament as part of several major financial changes included in a new Banking Reform bill.

Now the Government has a major stake in the Royal Bank of Scotland, HBoS and Lloyds TSB, there is a new determination to make sure the banks don’t squeeze small businesses and homeowners facing hardships over loan repayments due to the credit crunch.

The existing code of conduct sets out minimum standards banks must provide. This includes lending responsibly, giving help for customers who hit problems and more transparent bank charges.

The plans will allow the Financial Services Authority to police the banks and penalise them with unlimited fines for breaking rules or refusing to improve their service.

Royal Bank of Scotland was told yesterday that its lending policy, boardroom appointments and business strategy were under review as the government took control of 58% of the bank.

Meanwhile the bank promised to grant a six-month cooling-off period to homeowners struggling to keep up with mortgage payments. The move was welcomed by the Treasury and is expected to become an industry standard.

HBOS announced new support for businesses this morning. Small and medium-sized firms who are Bank of Scotland customers will be offered funding worth £250m, which will be available at up to 0.8% below standard lending rates, and guarantee pricing on small business customer overdrafts for 12 months from the date of arrangement for new loans and renewals.

On the markets, the FTSE closed up 58 points at 4123 and the DOW recovered 270 points to 8419. The Pound weakened against the US dollar to $1.47 and against the Euro to 85.74 pence.

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7 fat years and 7 lean

October 21st, 2008 by admin | 0 Comments | Filed in Daily News, Debt, Global Credit Crisis, Money Management, Recession

During these most extraordinarily difficult of times, more and more people are turning to their local churches, synagogues and mosques for help and advice in getting through the problems that we all face to some degree. Religious institutions from all faiths are reporting an upsurge in the number of people asking for help and guidance with financial issues. So what does the bible tell us about the current situation?

We are told that following 7 fat years, there will be 7 lean, referring to the cyclical nature of economics and prosperity…even in biblical times. The advice was to store up grain from the fat years to feed cattle during the lean so that, over the entire economic cycle, the biblical farmers wouldn’t suffer too much. This sounds like very sensible advice to me. So have we learned from 2000 years of boom and bust? Eh….no.

Unfortunately, our own government must have missed school the day that old currently apt piece of advice was talked about in class. They totally forgot to store up enough grain during the fat years to get us through the lean ones. What did they do instead? They spent it. The golden rule of borrowing no more than 40% of National Income now lies in ruins as Ernst and Young expect this figure to rise to near over 90% in 2009/10, saddling us all with more and more debt at the time that tax revenues are falling and disposable income is being pressured from all sides.

The upshot is that the rules to protect during a slowdown are basically thrown out the window as soon as the slow down arrives. Now, it looks like we will have a sustained lean period…but then the Old Testament was pretty heavy on punishment. It’s time to pay the piper for the good times.

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