In one of the classic understatements of the year so far, new finance minister George Osborne has just announced his findings that the British economy is in a dire state and there will be difficult times ahead. Osborne’s revelation came as the government sat down to take action on tackling the record budget deficit. Osborne took up the role of Chancellor after the center-right Conservatives joined with the center-left Liberal Democrats to form the country’s first coalition government for more than half a century, as the Labour Government wound up 13 years rule.

Britain has barely limped out of the worst recession since World War Two, and the new government is under pressure to show their pre-election promises to reduce spending and raise taxes to cut a budget deficit running at more than 11 percent of GDP were not hollow. The coalition already pledged to significantly accelerate the reduction of the deficit in the next five years, cutting £6 billion pounds ($8.75 billion) from non-frontline public services during the current financial year. George Osborne is expected to unveil his emergency Budget on June 22 as the new coalition Government attempts to overcome the appalling state of the economy inherited from Labour.

Meanwhile on the home front, news from the Council of Mortgage Lenders (CML) is that mortgage borrowing by house buyers is on the increase, with the number of loans made to home buyers rising by 25% between February and March, to reach 45,000. First-time buyer borrowing rebounded faster than that by existing home owners, according to CML who also went on to warn that mortgage rationing might continue indefinitely unless the new government helped lenders raise finance.

The latest news on the small business front has shown decrease in UK business insolvencies last month. On a year to year basis, it was shown that

the total number of insolvencies fell by 15.1% in April compared with the same month last year, 2,274 in April 2009 down to 1,818 in April 2010.

Businesses that fell into the medium sized category were found to have suffered the most in April. Companies employing between fifty to hundred workers being the most vulnerable.

In a move that may indicate a thawing of hostilities between internet giant Google and the printed media – particularly Rupert Murdoch’s News Corp, Eric Schmidt, chief executive of Google, announced that Google were holding talks with Murdoch and other newspaper proprietors regarding running subscription services for their online sites. Murdoch has repeatedly criticized Google for undermining newspapers by allowing internet users too much access to their valuable news content. Late last year Murdoch went far as threatening to sue Google for including headlines from News International in its search results. Staring from June, the Times and Sunday Times are set to erect a pay wall limiting access to their online news sites to paying customers. The papers will also withdraw their articles from Google’s search engine

With annual results due to be issued before the weekend, mobile phone company Vodafone are expected to announce a 150 percent increase in profits, with analysts expecting pre-tax profits of around £10.4 billion for the year to the end of March. Vodafone’s profits for 2009 were just £4.1 billion, largely due to one of impairment of £5.9 billion pounds of impairment charges.

Reports are that the Spanish bank Santander are believed to have emerged as likely winners of the tender to take over the 318 Williams & Glyn-branded Royal Bank of Scotland (RBS) branches across England and Wales. Santander has apparently outbid Virgin, Spanish rival BBVA and Blackstone, with only National Australian Bank’s Clydesdale Bank arm still in the running. RBS is expected to make around £2 billion pounds from the successful completion of the sale.

Meanwhile credit card firm American Express has reportedly become the latest contender to enter into bidding for the payment processing arm of Royal Bank of Scotland. The partially state owned bank has been forced to sell of this division under European Commission rules governing state aid. The move by American Express, which has joined forces with private equity house Permira to table a bid in the £2.5 billion pound auction for RBS’s Global Merchant Services division, has been welcomed by RBS. Previously the bank had stated concerns over stand alone private equity buyers having sufficient experience to manage the business. With experience of processing payments of millions of customers in 130 countries, American Express could fit the bill and help RBS in their drive to expand in emerging markets,

Property development and investment giant, British Land, appears likely to take over the mantle as being the largest company in the field in the UK, leaving their bigger rival, Land Securities in their wake, when both companies announce full year results this week. British Land is expected to reveal that its net value of assets has increased by more than 20 percent over the past year to 490 pence a share, while Land Securities will announce that their shares have risen 16 percent increase in its net asset value over 690 pence a share.

Coming back down to earth with a thump will be British Airways who are widely expected to report losses of more than £600 million pounds when they reports their results on Friday. It is expected that results for the 12 months to the end of March will mark the airline’s worst ever financial performance, over a period in which it suffered from the effects of recession, strikes and bad weather. There are suggestions from senior staff that the company will not be able to survive any further blows. Analysts attending the shareholder’s conference will be keen to hear how chief executive Willie Walsh intends to explain the losses as well as the company’s ongoing dispute with cabin crews.

Pharmaceutical retailer and wholesaler Alliance Boots are expected to join the one billion pounds club on Monday. Alliance Boots, who returned to private ownership in 2007, are expected to announce a trading profit over the one billion pound by exceeding the 11.6 percent growth in 2009, when their profit was £953 million. By passing the one billion pound profit barrier Alliance Boots will become only the third retailer to do so in the history of UK retailing.

The euro has plummeted against the US dollar, falling below $1.22 for the first time since April 2006. The eurozone’s single currency fell more than 1.7% in afternoon trading in New York, to $1.216, before rallying.

The decline came after Germany announced plans to ban naked short-selling of shares from midnight local time on Tuesday. The single currency dropped by more than 2% against the yen on the news. Forex traders fear that the austerity measures being put in place in many eurozone countries will hit growth.

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Tags: Alliance Boots, American Express, Bank, Banking, BBVA, Blackstone, British airways, British Economy, British Land, Clydesdale, Council of Mortgage Lenders, Currency, Economics, Economy, Eric Schmidt, Financial News, George Osborne, Google, Government, Land Securities, Money, Money Management, Mortgages, News Corp, Recession, Retail, Royal Bank of Scotland, Santander, UK Banks, UK Economy, UK government, UK Recession, Vodafone, Willie Walsh

Recent figures have shown that insurers paid out £650 million from 335,000 claims, with most of them were caused by the wintry weather in the UK this year. According to the Association of British Insurers (ABI), the biggest chunk of the payout was to motorists whose vehicles were damaged vehicles on the slippery roads during January, which was the eighth coldest month on record and the UK’s worst since 1987. The ABI went on to confirm most of the £650 million claims were from 18 December to 13 January when the number of homes, vehicles and businesses all experience damages as a result of the winter weather. Specifically, £395 million was paid out to motorists from 268,400 motor insurance claims.

A new round of tougher stress tests have been ordered by regulators for the UK banks to make sure that if a forecasted "double dip" in the UK economy should occur , they will be able to withstand it in better shape than they did in the " first dip." The banks will be required to prove that their "tier core one capital ratio" would be capable of remaining above the minimum four percent level even if the economy contracted an additional 2.3 percent. These figures were part of a projection provided by the Financial Services Authority said in their annual Financial Risk Outlook.

Official statistics revealed on Thursday that UK industrial output fell 0.9% in January, making for the first drop in five months. The news out a damper on speculation of continued expansion of industrial output, and put further strain on the pound which is still hovering around the $1.50 mark.

The British Property Federation (BPF) has warned against possible abuse of insolvency practices in Britain’s frail real estate market as profitable tenants seek to renegotiate leases signed in better economic times.

The industry body, representing blue chip landlords such as Land Securities and British Land, has condemned the trend. A spokesperson for the BPF explained their standpoint as follows. "Landlords are caught between rock and a hard place when it comes to bailing out occupiers at the expense of their shareholders or facing the prospect of empty space and the costs that come with it,"

BPF has called for tightening of insolvency rules that she said unfairly penalised property company shareholders, among them under fire pension funds, for badly negotiating leases.

Sterling continued to be in the doldrums, with the pound closing yesterday up slightly on $1.5123 while falling against the Euro to €1.1011.

On the FTSE, the star of the show was undoubtedly the Tullett Prebon Company. Tullett Prebon are an interdealer broker, whose shares rose by 25.7% as speculation mounted that the company was in the throes of talks regarding a possible sale of the company to with the Bank of China being marked as potential bidders.

UK equities continued to rally in midweek, despite the weaker-than-forecast manufacturing data. Investors appeared to be focusing their efforts on the financial and mining sectors.

The FTSE 100 index took on 23.0 points to close on 5617. 26 it’s highest level since June 2008, closing at 5,617.26.

The US government announced that they had recorded a budget deficit of $221 billion (£147.6 billion) in February, making for their largest monthly deficit in s history.

Figures from the US treasury now show that the United States total deficit since the beginning of the fiscal year which began in October 2009 now stands at $651.6 billion, putting it well on track to beat last year’s record annual budget deficit of $1.4 trillion, with Treasury Secretary Timothy Geithner calling the deficit "unsustainable".

On the Wall Street the Dow Jones Industrial Average dropped back a little, down 21 points to close on 10,566.95. The NASDAQ Composite was still climbing, rising just 9 points to close on 2,356.27

China’s exports jumped by 46% in February compared with a year ago, raising hopes of a strong recovery in global trade.

The increase was higher than analysts’ expectations of a rise of between 35% and 40%.

It is likely to increase pressure on the Chinese government to raise the value of the yuan, which the US in particular complains is undervalued.

China’s imports also rose strongly, increasing by 44.7% last month

Microsoft founder Bill Gates must have been feeling a little dizzy yesterday after it was announced that he had been knocked down from one of his many pedestals, This one was to second place in Forbes magazine’s billionaire’s list, and not by his close friend US investor Warren Buffet who was in third, but by Mexican telecom giant Carlos Slim, which made for the first time since 1994 that an American has not led the who has got the most cash rankings. Mr Slam’s fortune rose by $18.5 billion (£12.4 billion) from last year to $53.5 billion. The Gates fortune now totals $53 billion, while investment guru Buffet has fallen on hard times, now worth only $43 billion.

2009 was all in all a tough year for billionaires with 332 of them being reduced to being mere multi-millionaires, while around two hundred news ones being accepted to the club, according to the Forbes list.

In the UK, the sixth Duke of Westminster Gerald Grosvenor remained the wealthiest Briton with a net worth of $12 billion as he improved his finances by $1 billion despite the UK property slump. The improving health of the global economy meant that 55 countries were represented in the Forbes, among them China. In fact if you take in Hong Kong, the Chinese now account for 89 of the world’s billionaires, second only to the United States with 403 billionaires.

One or two of them must come from the Chinese automotive industry, which increase capacity at an alarming rate in order to meet demand. Changan Automobile, the 4th largest domestic producer by sales (and a strategic partner of Ford) announced 2009 total revenues up by 88.4%, with an almost two-thirds increase in total units sold. Announcing the figures, the company also said that they expect liberal government policies will continue to support industry growth at the present pace for the foreseeable and that facility expansion will likely continue. Changan is not alone in ramping up capacity, with the Chery Company announcing the launch of a new factory in Mongolia despite the fact that their new facilities in Wuhu and Dalian have not yet been completed. Chery are best known for their range of compact cars.

Signals from Beijing do seem to indicate that the automotive industry will continue to receive special support even as tightening measures are implemented broadly. In a newspaper interview yesterday, a spokesperson for the Ministry of Industry reaffirmed the Chinese government’s commitment to provide subsidies for green automotive technology to help achieved the official target of half a million green cars before 2013.

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Tags: Association of British Insurers, Bank, Bank of China, Banking, Bill Gates, British Economy, British Land, British Property Federation, Carlos Slim, Credit Crunch, Dow Jones, Economics, Economy, Financial News, FTSE, Insurance, Land Securities, Microsoft, Money, NASDAQ, Recession, Retail, Tullett Prebon Company, UK Banks, UK Economy, UK Recession, US Government, US Treasury, Wall Street, Warren Buffet

A recent worrying trend that has begun to raise it head no doubt as result of the ongoing financial downturn is company directors pledging their share equity in companies as loan security, not necessarily for loans pertaining to their business. In December 2008 , a co-founder of Carphone Warehouse, David Ross, , resigned his post as deputy chairman of the company when he was obliged to admit that he had used his equity to guarantee personal loans on commercial property without his partner’s knowledge.

Yesterday, the city brokerage Icap also revealed that their chief executive Michael Spencer had pledged more than 90 per cent of his company shareholding in the company as security for a loan. Spencer who founded and acts as managing partner for Icap made his announcement as an FSA imposed deadline draws nearer.

It was also announced that towards the end of 2008, that Spencer, had also pledged shares in stockbroker Numis,, where he acts as non-executive chairman and is a major shareholder, as collateral for a loan with HSBC.

The FSA recently announced an amnesty on such undeclared loans giving executives, till the 23rd January 2003 to come clean on any similar arrangements.

On the FTSE, equipment hire group Speedy Hire saw their shares plummet by almost fifty percent to 48.25 pence after issuing a profit warning, based on predictions that revenues for the fourth quarter would be much lower than a year earlier. Forecasts are that Speedy Hire’s pre-tax profits for the year will run around 36 million pounds, a fall of 25% from 2007. . The company said uncertainty in the credit markets had affected confidence in the construction market

Leisure group JD Wetherspoon has announced that it will be cancelling its dividend as well as halting short term expansion plans. These measures are being taken in an attempt to conserve capital holdings, largely due to difficulties in raising funds. A company representative admitted that, as a result of the continuing turmoil in the banking system, refinancing “cannot be taken for granted”.

Britain’s largest real estate investment trust, Land Securities (LAND.L), has announced their intention sell off certain assets as part of a cash-raising initiative. Rental revenues are considerably down as more and more clients are closing down their businesses. Retail clients who have gone into liquidation currently make up around five percent of the company’s annual turnover, a rise from three percent in September.

In banking circles, newly formed Lloyds Banking Group was seen to attempt to strengthen their efforts to fight off government ownership. Their efforts not to follow the Royal Bank of Scotland into government ownership, was strengthened by bond holders injecting capital.

Lloyds, currently 43.4 per cent owned by the taxpayer, will pay state owned banking group GBP 480 million ponds this year

Financial analysts said the deal was good for both Lloyds and its bond holders, while the markets showed their disagreements. Shares in the bank closed 34 per cent down at 65p. Small potatoes when compared to RBOS but still a cause for worry

In the United States, trade was slack with most of the interest focused on the Presidential inauguration. One interesting development was the announcement that Mexican tycoon e Carlos Slim Helu is to invest about £170 ($250m) in the New York Times Company.

Rumours have it that the telecommunications tycoon is poised to shore up the publisher’s ailing finances, with the company’s board expected to meet Wednesday to approve the deal. The terms of the deal would see Slim issued with preferred shares in the company in return for his investment.

Slim, the third richest man on the planet with a wealth of $49bn from telecommunications, retail, construction, banking, insurance, among others, bought a 6.4% stake in the New York Times Company in September 2008 for (£73m) $128m. The New York Times Company publishes the New York Times, the Boston Globe and a string of local newspapers,

As European markets opened, Britain’s FTSE 250 Index fell -64.96 (-1.06%) to 6,077.10o while the FTSE 100 FTSE 100 Index fell -31.06 (-0.76%) to 4,060.34
whilst, Germany’s DAX rose 1.12percent and France’s CAC-40 was up 1.1 percent.

U.S. stock futures suggested a weaker open on Wall Street. Dow futures were down 38 points, or 0.5 percent, at 8,205 and S&P500 futures fell 3.8, or 0.5 percent, to 844.80.

In Asia, financial issues sank. Sumitomo Mitsui Financial Group Inc. fell 3.8 percent, and Mizuho Financial Group Inc. dived 6.2 percent.

Shares of Toyota Motor Corp. bucked the trend, rising 2.3 percent as investors waited for the automaker to name a new leader, which it did after market close.

Akio Toyoda, the 52-year-old grandson of Toyota’s founder, was named to lead the company through its biggest crisis in history, which led to a 4-percent fall in global vehicles sales last year.

Sterling was stable against other major currencies early Tuesday with rates as follows

Pound/US dollar 1.37617
Pound/Euro 1.06785

Pound/Japanese Yen 123.466

Oil prices fell to near $34 a barrel Tuesday in Asia as traders sold the expiring front-month Nymex contract due to a lack of space at a key U.S. storage facility.

On the Asian front Japan’s Nikkei 225 stock average lost 2.3 percent to 8,065.79, paring losses in the afternoon after dipping under the key 8,000-level during the morning session.

Natural resource companies were among the hardest-hit after overnight declines in commodity prices. Australia’s BHP Billiton Ltd. plunged 4.7 percent, and Nippon Oil Corp., Japan’s biggest oil distributor, retreated 4.1 percent

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Tags: Bank, Banking, British Economy, British Pound, Carlos Slim Helu, Carphone Warehouse, David Ross, HSBC, JD Wetherspoon, Land Securities, Lloyds Banking Group, Money, Recession, Retail, Royal Bank of Scotland, Sumitomo Mitsui Financial Group