All that money that went to prop up the UK banking system had to come from somewhere and it looks like public will be paying for it through a severely disabled health service. A recent report from the NHS Confederation predicts that health service will face the most severe and sustained financial shortfall in its history beginning in 2011
The report, to be published today will warn that limited government funding increases are likely be increasingly outstripped by rising costs within the health service, leaving the NHS to cope with budget reductions running between eight to ten billion pounds between 2011 and 2014. Something to look forward to! Confidence is returning to the domestic and commercial property markets, according to recent reports stating that the collapse in commercial property which began in mid 2007 has bottomed out and 2009 has already witnessed an increase in transactions as well as renewed investor interest.

On the domestic front, figures from the Royal Institution of Chartered Surveyors revealed that house prices fell in May at the slowest annual pace since November 2007, adding strength to other indicators that the UK housing market might be stabilising

On the business front, the UK’s second largest travel agency Thomas Cook, looks live they will be themselves seeking a safe haven together with Rewe, its main competitor based in Germany. The move came after the collapse of the Thomas Cook’s largest shareholder on Tuesday. The shareholder, Arcandor, who own 53% of Thomas Cook stock, filed for insolvency, in one of Europe’s largest corporate failures outwith the banking sector.

Lloyds Banking Group announced their plan to close up to 400 bank branches in England. The closures will likely include the 164 Cheltenham & Gloucester outlets which will disappear from the high streets in November. As a result of the closures, designed to improve efficiency and profitability, Lloyds will also cut 1,660 jobs before the end of the year. The FTSE liked the idea and the Lloyds’ shares rose by 3.1 percent to 63 pence.

Also on the up was Barclays Plc whose shares rose by 2.2 percent to 290 pence on speculation that US based investment banker BlackRock Inc. has valued Barclays’ fund business at $13 billion, and are on the verge of making a cash/stock offer.

On the day, FTSE 100 dropped less than a point to close on 4,404.79 while the FTSE 250 rose a conservative four points to close on 7,691.65
The pound advanced yesterday as UK housing data provided a further sign that the worst of the economic slowdown might be over.

Pound/US dollar 1.6344
Pound/Euro 1.1606
Pound/Japanese Yen 159.9017
Pound/Swiss Franc 1.7609

In the US, ten of the largest US banks made a firm declaration that they are ready and willing to repay some $68 billion of the government bail-out money they have received indicating a significant indication of how rapidly the financial crisis is easing.
Whilst welcoming the move, President Barack Obama suggested restraint stating that it shouldn’t be taken for granted that “our financial troubles are over”.

On the news the Dow Jones remained constant falling only 1.43 points to 8763.09, while the NASDAQ climbed 17.73 points to close on 1860.13

The Chrysler saga seems to be finally over after the US Supreme Court rejected a plea to block the sale of assets of the bankrupt company to Italian giant Fiat. The US government strongly in favour of the sale issued a statement applauding the decision.

On a more sinister note, crude oil for July continued their steady increase, rising by 1.9 percent to close on $69.40 on the New York Mercantile Exchange.

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Tags: Barclays Bank, British Economy, Financial News, Lloyds Banking Group, LloydsTSB, NHS, Thomas Cook Group Plc

Actor Sean Connery is backing a legal challenge to the Lloyds TSB and HBoS bank merger.

The Competition Appeal Tribunal will today consider whether the government was right to bypass competition concerns in allowing HBOS to be rescued.

A group of businessman, investors and customers make up the Merger Action Group (MAG) is fighting the merger.

HBOS is confident the ruling, due on Tuesday, will approve the deal.

“It is time that people stopped using HBOS as a plaything,” said HBOS spokesman Shane O’Riordain. “We’re confident the appeal will be unsuccessful and we would then ask this self-appointed group to withdraw.”

MAG feels allowing Lloyds TSB to buy HBOS is bad for Scotland’s economy. Their stand has won support from Sean Connery, who has sent them a personal message agreeing he does not believe the merger is in the best interest of HBoS or the Scottish economy.

MAG says Business Secretary Lord Mandelson’s decision to allow the deal to go ahead was based on legislation that was not in place at the time the merger was announced.

The legal process has been fast-tracked to ensure there will be a ruling before the HBOS shareholders vote on the deal on December 12.

“We have been greatly encouraged by the backing we have received from such a cross-section of the Scottish public from employees and customers of HBOS, to leading businessmen and politicians,” said MAG spokesman Malcolm Fraser.

HSBC plans to increase cash available for UK mortgages by 20% to £15 billion in 2009. The bank hopes the move will increase its share of the UK mortgage market from 4% to 5%, an HSBC spokesman said.

HSBC will pass on the full 1% cut to borrowers.

Other mortgage lenders have announced their plans to pass on last week’s 1% rate cut by the Bank of England.

Lloyds TSB, Cheltenham & Gloucester, will bring their mortgage rate by 1%

Halifax will reduce main rates by just 0.25% but has announced tracker customers will benefit from a full 1% reduction.

Nationwide building society’s main rate will go down by 0.69% to 4% from January 1.

Abbey is reviewing rates, which currently stand at 5.44%. Tracker customers will have their rates cut by 1% from the start of January.

Royal Bank of Scotland and NatWest will reduce their main mortgage rate by 0.75% to 4.44. RBS said borrowers with a tracker or One Account mortgage would benefit from the full 1% cut.

Barclays will cut rates at the Woolwich lending arm by 1.15%. Tracker mortgage customers will benefit from the full 1% cut.

Bradford & Bingley will reduce rates by 0.75% to 4.84%.

The FTSE finished 239 points down on the week – starting at 4288 and closing on Friday at 4049.

The DOW dropped 192 points in the week – opening on Monday at 8827 and closing Friday at 8635.

The Pound also weakened against the US dollar and the Euro over the week – moving from $1.54 against the dollar to $1.47 and 1.21 Euros to 1.15 Euros.

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Tags: Bank Merger, HBos, HSBC, LloydsTSB, Lord Mandelson, Merger Action Group, Scottish Economy, Sean Connery

Savers with large amounts of cash on deposit should take action now to protect their money as the credit crunch threatens to sink more banks.

The Financial Services Compensation Scheme (FSCS) underwrites a £35,000 per person per bank repayment guarantee in the event of a crisis.

On the face of it, the FSCS pays out if savers have up to £35,000 squirreled away in a savings account – but rules for receiving compensation are not as straightforward as they seem.

Reading the small print reveals the rules actually say that if a saver has up to £35,000 on deposit in any number of accounts at the same bank, only the first £35,000 of the total amount is protected

Those at particular risk are savers with personal, partnership and business accounts with the same banking groups

FSCS is triggered if a bank, building society or credit union cannot settle or is unlikely to settle claims from savers – providing the institution is authorised under a banking licence in the UK.

The problem is many banks are groups operating on one licence, and although savers may feel their money is safe, they are at real risk of losing a lot of money if the banking group collapses.

In the current dog-eat-dog world of banking, a saver may unwittingly have cash outside FSCS due to a take-over or merger, even though they may know about the scheme’s shortcomings and have already taken action to protect their cash.

Here’s a list of the main banks and financial institution groups that operate under umbrella licenses:

· LloydsTSB, The AA, Bank of Scotland, Halifax, Birmingham Midshires, Intelligent Finance, Saga, Cheltenham and Gloucester

· Nationwide, Cheshire and Derbyshire Building Societies

· Barclays and the Woolwich

· Royal Bank of Scotland and Direct Line

· Clydesdale and Yorkshire Bank

· The Post Office and Bank of Ireland

· Co-op and Smile

· Abbey, Cahoot, Alliance and Leicester and Bradford and Bingley savings accounts

Under FSCS rules, if you have more than £35,000 in a single name or joint names in any of these groups, then disperse the money straight away in to sums of less than £35,000 at banks and building societies operating under separate licenses.

Most other big players like HSBC hold individual banking licenses.

Keep an eye on any cash you may have with the Alliance and Leicester – the Abbey recently swallowed the bank and at the moment they are trading on separate licenses, but this may change at short notice.

The FSCS raises money for compensation from a levy paid by member financial institutions.

Chancellor Alistair Darling has hinted that the £35,000 FSCS limit may go up to £50,000 in the near future.

Banks outside the UK

By law, overseas financial institutions should request Financial Services Authority permission before they open for business in the UK.

Many of these firms are not covered by the FSCS and savers should carefully check the firm’s terms and conditions before depositing money, however good the deal may seem.

The Post Office bank looks a good safe bet for savers as trading is under the same licence as the Bank of Ireland. The Irish government has recently announced all Irish banks are covered by a 100% compensation guarantee.

 

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