Chancellor Alistair Darling will say in his pre-Budget report that the economy performed worse in 2009 than he first predicted, Treasury sources have said.

Darling is expected to say that the UK economy shrank by 4.75% this year – more than the 3.5% originally forecast in the Budget in March.

The adjustment follows the economy’s unexpectedly poor performance in the first three months of the year. The chancellor looks likely to stick to 2010 forecasts of growth between 1-1.5%, despite the emergence of Dubai’s financial problems which now raises fresh fears that UK banks could face more write-downs on bad debts, and chimes with warnings earlier this week from the International Monetary Fund, who said that global banks had only worked through half their toxic assets since the banking crisis broke two years ago. Investors had been hoping the British financial sector had worked through much its toxic debt, which included exposure to America’s sub-prime mortgage market.

Despite this week’s setbacks, economic analysts continue to predict that the UK economy should emerge from recession by the end of the year, with the Northern Ireland and Scotland facing a more challenging recovery. The prediction came as revised gross domestic product (GDP) figures showed the UK recession was shallower than previously thought between July and September. Revised estimates from the Office for National Statistics (ONS) showed a 0.3% fall in UK output in the third quarter, compared with the 0.4% slide originally stated. While UK business confidence surveys on the "mainland" bear out signs of recovery, Northern Ireland business activity continued to fall in October, albeit at the slowest rate since the start of 2008. The reasons apparently are local margins remaining under pressure, is that the manufacturing sector in the province is still reporting a lack of demand and heavy competition in difficult markets. The combination of these factors looks like meaning Northern Ireland will likely lag the UK recovery. Scotland’s growth will continue to lag behind the rest of the UK’s, according to a leading economic think tank. Similar sources also announced that they had observed some "disturbing weaknesses" in the Scottish economy and predicted growth of -4.9% this year and 0.7% in 2010. Job cuts are expected to continue, with the unemployment rate reaching as high as 8% in 2010. The only prescription for growth for both Northern Ireland and Scotland would be to switch to a more export-led economy, exploiting global markets

Jaguar Land Rover had seen its sales rise 23% in the second quarter after its new models were well-received.

Owner Tata Motors said new products such as the upgraded Range Rover, Range Rover Sport and Discovery 4 had had successful launches.

Although Jaguar Land Rover made a net loss of £60 million in the July-September quarter, it was much less than the £240 million loss it made a year earlier.

India’s Tata Motors made a net profit of £2.8 million in the third quarter of, 2008, compared with a loss of £127,000 for the same period last year.

Borders U.K., the bookstore chain once owned by U.S.- based Borders Group Inc., has called in administrators after failing to find a buyer for its stores. A total of 1,150 employees are affected, according to the statement.

“All stores currently remain open for business as normal whilst the administrators undertake a review of the company’s affairs and seek a purchaser for all or some of the company’s stores in which there has already been interest,” Philip Duffy, principal administrator announced in a statement.

U.K. media have reported that HMV Group Plc’s Waterstone’s books chain is considering buying some of the stores. A spokesman for HMV declined to comment on this when contacted by Bloomberg News earlier.

The steep advertising downturn pushed U.K. publisher Daily Mail & General Trust PLC’s into a net loss for its full fiscal year, as management focused on cutting costs and its £1.05 billion ($1.76 billion) debt pile, but the company said there are signs that trading conditions are improving.

Daily Mail, which publishes the Daily Mail and its sister Sunday paper and the Metro free-sheet, posted a net loss of £303.4 million for the 12 months ended Oct. 4, compared to zero net profit a year earlier.

According to brokers, Thursday’s activity on the FTSE was very similar to when Lehman Brothers collapsed, warning that Dubai’s problems could be the catalyst for the market to fall further. RBS, which is 70 per owned by the UK taxpayer, fell 7.8 per cent, wiping off £1.73 billion of its market value. Barclays lost 8 per cent, cutting its capitalisation by £2.65 billion. HSBC fell 4.8 per cent losing £6.2 billion of its value and Lloyds Banking Group lost 5.6 per cent, wiping off £1.5 billion.

All in all around £44 billion was wiped off London’s biggest companies amid growing fears the UK financial sector could be heavily exposed to Dubai World, the state-owned conglomerate which yesterday asked for a standstill on its £36 billion debt pile. The FTSE 100 tumbled 170.68 points or more than 3 per cent to 5194.1 in its biggest one-day percentage fall since the market plunged to six-year lows in March. Encouragingly enough, the exchange recovered well on Friday, closing on 5245.73.

The pound declined against the dollar after a drop in stocks across the world prompted investors to sell U.K. assets and on speculation the government will downgrade its forecast for the economy. Sterling slipped to the weakest level since Nov. 3 against the U.S. currency as the MSCI World Index declined for a second day after Dubai’s attempt to reschedule its debt continued to rattle investors.

• Pound/US dollar 1.6553
• Pound/Euro 1.10996
• Pound/Japanese Yen 142.7188
• Pound/Swiss Franc 1.6565

US shares have fallen on worries about Dubai’s debt problems, with the Dow Jones ending down 154 points, or 1.5%, at 10,309.92, in a shorter trading day.

It was the first chance for markets in the US to react to news that state-owned Dubai World had asked for more time to repay its debts.

US markets were closed for a holiday on Thursday when other world markets suffered steep losses.

The Dow Jones average dropped 154.58 points on Friday’s trading to close on 10309.92 The NASDAQ lost 37.61 points to close on 2138.44

financial

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Tags: Alastair Darling, Bank, Banking, Barclays, Borders Group Inc, British Economy, British Pound, Daily Mail, Discovery 4, Dow Jones, Dubai World, Economy, Financial News, FTSE, General Trust PLC, HMV Group Plc, International Monetary Fund, Jaguar Land Rover, Lehman Brothers, Lloyds Banking Group, Money, MSCI World Index, NASDAQ, Office for National Statistics, Philip Duffy, pre-Budget report, Range Rover, Range Rover Sport, RBS, Recession, Royal Bank of Scotland, Stock Markets, Stocks and shares, Tata Motors, UK Banks, UK Economy, UK government, UK Recession, Waterstone's

The UK economy has contracted at a reduced rate for the April to June quarter. Gross domestic product (GDP) was reported to have fallen by 0.6% compared with the previous quarter, an improvement on the previous estimate of a 0.7% contraction. The latest improvement, coming mostly from the manufacturing and construction sectors, suggests that the UK is in recovery mode, and may even have grown in the third quarter.

Union leaders have accused Jaguar Land Rover (JLR) bosses of "taking another trip to Fantasy Island" over promises that there would be no job losses when a West Midlands plant is closed. Dave Osborne, national secretary for the UK car industry for Unite the union, launched a ferocious attack on JLR’s plans to close either Land Rover at Solihull or Jaguar at Castle Bromwich. Meanwhile, politicians in Coventry have reacted with surprise and sadness at Jaguar’s decision to close its wood veneer manufacturing centre at its Browns Lane plant, employing close to 400 people, within the next two years. In a recent interview, a JLR executive pledged that no job losses would come from the plant closure. However Osborne remained skeptical vowing that unions would not accept attacks on pensions nor reduced salary levels for new recruits

The word is that high street giant Marks & Spencer could have better news for investors after a difficult 18 months in second-quarter trading figures due out this week. After a 40% fall in annual profits shareholders had been hit by the first M&S dividend cut in nine years. However, recently chief executive Sir Stuart Rose has indicated that business had been steadily improving. First-quarter sales figures showed a further decline but were better than expected, causing M&S shares to increase in value by almost 25% since the end of May. At the time of the results, Sir Stuart warned that margins would shrink by up to 1.75% in the current year as the firm invested in price cuts and as a weaker pound harmed purchasing power.

Orange rated the UK’s third largest mobile operator in terms of subscribers, has pulled off a coup by signing a deal with Apple to market its popular iPhone in Britain. The deal, represents a significant setback for O2, currently the largest mobile operator in the country, who had held the exclusive British network for the iPhone. Orange is expected to start selling the iPhone in October, in time for the Christmas sales period.

The world’s leading supplier of heating and plumbing products Wolseley, have issued a warning of more job cuts, stating that it was impossible to predict when the difficult trading conditions might end. Wolseley have had to take drastic action to cope with the recession, among them reducing staff by 28,073, representing almost one third of their workforce. The company also initiated a £1 billion rights issue earlier this year as well as spinning its US building materials business, Stock Building Supply, into a joint venture.

London equities moved a little lower by the close after US markets slipped backwards following disappointing consumer confidence data. Financial stocks kept the FTSE 100 anchored over the 5,100-point mark. On yesterday’s trading, the FTSE 100 held firm, dropping just 5.98 points to close on 5,159.72, while the FTSE 250 continued to rise, up a further 46.17 points to 9,215.57

The pound made a recovery yesterday against the major currencies.

• Pound/US dollar 1.5928
• Pound/Euro 1.10939
• Pound/Japanese Yen 143.6783
• Pound/Swiss Franc 1.6531

The Dow Jones Industrial Average made a minor downwards adjustment dropping 6.8 points to close on 9,782.56. The NASDAQ remained stable, dropping just 1.13 points to 2129.61.

An unexpected fall in US consumer confidence for September, suggests that Americans are not as convinced that the economic recovery is as close as US policymakers would have them believe. The Consumer Confidence Index from the Conference Board business organisation slipped to 53.1 in September from 54.5 in August.

Meanwhile Japan’s core consumer prices dropped for the fourth successive month, 2.4% in August year-on-year, largely due to lower petrol and other energy costs as well as weak domestic demand.

financial

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Tags: Apple, British Economy, British Pound, Consumer Confidence Index, Credit Crunch, Currency, Dave Osborne, Dow Jones, Economy, Financial News, FTSE, GDP, Global Credit Crisis, gross domestic product, iPhone, Jaguar Land Rover, JLR, Marks & Spencer, Money, Money Markets, NASDAQ, O2, Orange, Recession, Retail, Stock Markets, Stocks and shares, UK Banks, UK Economy, UK government, UK Recession, Wolseley

According to recent reports UK Business Secretary Lord Mandelson has "strongly advised" the Indian conglomerate Tatas to accept a revised proposal that will guarantee them hundreds of millions of pounds in short-term funding for luxury brands Jaguar Land Rover.

Apparently the UK government has issued a subtle hint to the Tatas management that they should not take too much time to accept their revised proposal to guarantee hundreds of millions of pounds in short-term funding s they run the risk that the offer will be withdrawn. Mandelson’s team are reportedly surprised that Tatas are stalling on the offer, obviously on the look out for better terms, which according to reports coming out of the UK treasury will not be forthcoming. What is currently on offer are government guarantees for 290 million pounds (340 million Euros) of European Investment Bank loans.

Britain’s biggest retailer Tesco, seem very determined to establish a financial services division and at a considerable scale. Recent reports suggest that the company is even considering seeking a separate credit rating for their banking wing that will provide them with considerably more clout to take on the UK existing high street banks.

The new division to be known as Tesco Personal Finance, planning to launch a current account section within the next 18 months, and a mortgage section, within the next two years.

On the stock markets, fears of the severity of a second wave of swine flu hitting the West has played a part in forcing share values down, with British Airways, down on Monday 2.4 per cent to 134¾p.

The insurance sector had an erratic day, with speculation that Resolution was preparing to offer about 80p a share for Friends Provident, valuing the company at £1.9bn.

After the market closed, Friends announced that they had rejected Resolution’s merger proposals. On the day shares in the insurance company, added 2.4 percent to 73¼ pence, while Resolution’s shares fell by 2.2 percent to 90¼p.

Shares in Legal & General closed up 7.6 per cent to 61¼p, as rumours began to mount that the company might be interested in selling off or at least splitting up their investment management business.

Sector leader Prudential also gained 5.5 per cent to 409½p, while Aviva added 2.9 per cent to 237¾p and Old Mutual who were 2.3 per cent higher on 88¾p.

In the banking sector, Barclays stood firm 313p, despite the fact that there were rumours abounding was that the bank were courting offers for their wealth management unit…

Shares in Lloyds Banking Group rose by 6.7 per cent to 72p, in anticipation of the announcement that they had made a trading profit for the first half of 2009.

Anticipating profits from the swine flu epidemic are drug makers, GlaxoSmithKline Plc whose shares added 2.6 percent to finish on 1,141 pence. Sales of GlaxoSmithKline’s swine flu vaccine could reach as high 1.3 billion pounds in 2010 if fears of the extent of the diseases prove to be true.

In the commodities sector, things were fairly rampant. Shares in BHP Billiton Ltd., the world’s largest mining company, added 3.4 percent as copper prices continued to rise. Europe’s second largest producer of zinc Boliden AB rallied 14 percent they announced higher than projected profits.

U.K. stocks continued their rally with the FTSE 100, which has climbed 7.7 per cent in six sessions, up a further 54.87 points to 4,443.62. The FTSE 250 climbed 85.97 points to close on 7,666.63. The FTSE 100 closed 1.3 per cent higher to reach its best level since early June.

The pound had a solid day, rising against all the main currencies.

Pound/US dollar 1.6524

Pound/Euro 1.162

Pound/Japanese Yen 155.837

Pound/Swiss Franc 1.7622

Stateside, there were sighs of relief all round as CIT Group, the struggling commercial lender, announced that they were on the brink of closing a deal that could save it from bankruptcy. As investors waited an official announcement from CIT Group, unofficial reports had it that bondholders would supply them with $3 billion in emergency funding over two years.

Inspired by the news, US stocks climbed towards their highest levels for the year.

On Monday’s trading , the Dow Jones continued its steady rise, on the day by 194,21 points to 8848.15 while the NASDAQ also climbed, breaching the 1900 point mark by closing up 22.68 points to 1909.29..

There was also some good news coming out of Iceland, for the first time in a while. The Icelandic Government announced their long overdue £1.3billion ( 270billion-crown) plan that it will enable the country’s s banking system to get back on its feet after their three main banks were subject to a last minute rescue bid in 2008..

The Iceland treasury intends to inject capital into three new banks to be formed to replace those that failed. The failed banks, Glitnir, Landsbanki and Kaupthing, all collapsed within a week last October, with debts of $60 billion.

Under the plan, the government will also offer controlling stakes in Islandsbanki (formerly Glitnir) and New Kaupthing to the old banks’ existing shareholders.

The dollar’s continued weakness helped commodity markets make a positive start to trading on Monday. Oil prices rose by more than $1 a barrel on Monday while gold jumped above the $950 level.

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Tags: British airways, British Economy, Credit Crunch, Financial News, Insurance, Jaguar Land Rover, Lord Mandelson, Money, Recession, stock market, Tesco, UK Banks, UK Recession

As the UK wakes up this morning to the reality of being officially in recession, the three day working week is starting to look inevitable in certain sectors of industry. The news that Britain’s largest steel maker,

Corus, is to lay off 3,500 of its work forces added to the expected announcement that auto parts manufacturer GKN is due to announce that they will also be laying off thousands, in the wake of negative profits.

Signs that the automobile industry is being especially hard hit by the recession is the news that Jaguar Land Rover are also considering making yet another 1,500 job cuts within the next week or so. .

Corus, who employ 24,000 in plants situated throughout the UK, are in a period of restructure in an attempt to withstand strong competition in a rapidly dwindling market, and exceptionally strong competition from Brazil and India.

In what be a last minute attempt to prevent these painful job cuts, Business Secretary Lord Mandelson is believed to be in talks with the Treasury. His obvious goal is to prevent these cuts in work force for the car industry, and a probable compromise is to partially finance the salary costs, as well as suggesting that a three day working week be implemented at these plants still things begin to recover in the economy, which might well be a few years away. With car manufacturers throughout the World hinting and threatening that three day weeks and production breaks are inevitable, it looks like the UK will have no option but to follow suit.

On a more positive note, it appears that the UK public while cutting back on major purchases, such as property, cars, electrical goods and just about everything else, are spending more on cosmetics and personal hygiene products as well as on entertainment . These positive trends were well in evidence on Friday as PZ Cussons, whose brand name Imperial Leather and Carex both announced growth figures of more than ten percent in the last quarter of 2008.

The PZ Cussons group, awarded a M.E.N. Business of the Year prize for 2008, announced that it was continuing to witness growth in their UK business. A spokesman for the company said that they had put their success down to new initiatives, such as the re-launch and update of fragrances and domestic products in their Carex range. This included anti-bacterial wipes and waterless hand gels.

Another company that seems to be bucking the downward trend exceptionally well is BSkyB who’s expected announcement of trading results for the second half of 2008 December 31 will show a downturn, but one that is minor when compared to the state of the UK economy as it stands at the moment.
The forecast of pre-tax profits of £290m for BSkyB shows an increase of fifteen per cent on the same period in 2007.

So while the UK publics are digging in to see this recession through, it would appear that the trends are many of them are spending more time at home, and making a determined effort to look and smell better!

Late Friday on the US stock market, stocks continued their decline with disappointing earnings being reported by some industry standards such as Microsoft and Fifth Third Bancorp. The announcement, although expected, that Microsoft were to pay off 5,000 people Worldwide did send a chill down a few people spines on Wall Street as they announced to shareholders that they would be unwilling to provide a profit forecast for 2009.

The Dow Jones industrial average slipped 2.5 percent, to 8077.56, with Wells Fargo and Bank of America slumping by more than 13 percent for the week. These falls added fuel to the fire that the banks may well is forced to take decisive steps in order to shore up their balance sheets.

Average annual profits have decreased since January 2008 by sixty percent for the 69 companies that make up the S&P 500 whose fourth-quarter results have been released to date. U.S. financial analysts are now forecasting that most companies will report more than a 30 percent drop in profits for the last quarter of 2008 alone.

President Obama in a determined effort to show that he will be a skilled president as well as a great orator began to pressed congressional leaders to reach a consensus on an $825 billion stimulus plan. He warned that the country may be facing an economic crisis that was “unprecedented”. Obama’s warnings were given some added weight with the announcements that average home prices dropped the most since 1990 in November 2008, housing starts fell 16 percent in December and the number of Americans filing first-time claims for jobless benefits climbed to its highest level since 1983.

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Tags: Corus, Jaguar, Jaguar Land Rover, Land Rover, Lord Mandelson, PZ Cussons group, Recession

Just a few days after causing luxury saloon cars enthusiasts to purr with their launch of two exciting new models for 2009/2010 at the Detroit Motor Show, Jaguar Land Rover had the city to groaning, but only slightly, with the announcement that the company is to cut 450 jobs in 2009.

The Bulk of the jobs to be cut are in the group’s management sector, with 300 managers to be laid off. The remaining 150 will come from the factory floor.

Despite some very cautious optimism for sales in 2009, Jaguar Land Rover announced that they had a very tough 2008.

Overall, sales of new cars dropped by 11% in the UK during 2008, with the last quarter of the year being especially tough.

Strangely enough, sales at the top end of the market appear to be doing proportionately better, and this possibly the reason why Jaguar Land Rover’s

Owners Tata Motors of India appeared to have made a considerable effort to keep their factory floor staff as intact as possible.

Jaguar Land Rover , acquired by Tata from Ford for £1.7bn in 2007 has a total work force of around 15,000 people based in their Castle Bromwich, Coventry and Solihull plants in the West Midlands as well as at Halewood, on Merseyside.

Jaguar Land Rover’s decision to cut jobs follows a trend in the UK car industry that is causing Business Secretary Lord Mandelson to furrow his brow just a little.

When questioned on his thoughts on the Jaguar Land Rover redundancies. Lord Mandelson replied”: “Jaguar Land Rover’s decision today reflects the continued downturn in the market and that is a reflection of what is happening more generally in the global economy.”

Mandelson has recently revealed that the government was looking into a possible rescue package for the entire UK car industry in the wake of recent job cuts, not just at Jaguar Land Rover but also at other UK plants, most prominently Nissan’s North East plant where 1,600 jobs will be lost,

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Tags: Economics, Finance, Financial News, Jaguar, Jaguar Land Rover, Job Loses, Land Rover, Money, Retail, Tata Motors, UK Recession