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

Chancellor Alistair Darling, possibly with an eye to future job prospects, is expected to blow his own horn in the coming days, by claiming that the Labour government’s investment in jobs programmes are responsible for saving no less than £12 billion during the recession. Darling backed up his claims by stating that in the 2009 budget, the government’s prediction for unemployment was as high as 2.09 million by the end of 2009 and reaching close to 2.5 million in 2010. By the end of December of last year they had already revised, their estimates down to one and three quarters of a million by end 2009 and less than two million for 2010. The reduced number of benefit claimants, if maintained, will save £10 billion over the next five years according to the stressed Chancellor’s figures.

There is much speculation afoot that the UK government are about to introduce important legislation regarding the use of credit cards. The new legislation will prohibit credit card companies from using a method of calculating interest known as the "adverse order of payments method. The adverse order of payments is where credit card companies force customers to pay off the debts on their account holding the lowest rates of interest before higher interest rate debt is reduced. Figures show that currently there are close to ten million people in the UK holding credit card debts with multiple interest rates. The practice is said to cost credit card holders an average of around £250 pounds in the first year they hold the card.

Business Secretary Lord Mandelson has announced that the UK government will be offering a £270 million loan to GM designed to safeguard five thousand Vauxhall jobs in the UK. The money, which will go to Vauxhall’s parent company GM Europe, will guarantee production at the car maker’s plants in Luton and Ellesmere Port. According to a statement from Lord Mandelson, the outline deal followed "highly complex" talks between the Government and bosses in the US.

Lord Mandelson stressed in his statement: "I always said the Government would stand foursquare behind Vauxhall. With this announcement, we have kept our word." Unite boss Tony Woodley who represent the Vauxhall workers chipped in by saying that the loan is great news for British industry.

Lloyds Banking Group Plc and Royal Bank of Scotland Group Plc improved on the increase in value of their U.S. bank shares. RBS soared 5 percent to 42.57 pence. U.S. banks yesterday closed at the highest since November 2008, led by Citigroup Inc. Lloyds climbed 3.4 percent to 58.47 pence. The bank is close to agreeing a joint venture to sell a number of the less than worthwhile assets assembled by HBOS.

BSkyB, the U.K.’s biggest pay-television provider, surged the most in almost eight months on a report that Rupert Murdoch’s News Corp. may bid for the shares that the y currently do not hold in the company. On the news BSkyB rose 5 percent to 598 pence, the biggest gain since July 30. News Corp, which already owns 39 percent of the pay-TV company, may be planning to pay 735 pence a share for the stake it doesn’t already own.

The Pound was still seen to be struggling again the main currencies, although the currency did rise slightly before the weekend. The pound was on $1.5183 while remaining almost on par with the Euro on €1.1033

As the markets closed for the weekend U.K. stocks gained, extending a second weekly increase for the benchmark FTSE 100 Index, largely on the back of increases in financial share values.

The FTSE 100 increased 0.2 percent to 5,625.65, bringing its weekly gain to 0.5 percent. The FTSE 100 has climbed to near the highest level since June 2008, lifted by optimism that the global economic recovery and higher earnings will support the 12-month rally in equities.

Former executives of the now defunct Lehman Brothers firm as well as the senior executives of their erstwhile auditor, Ernst & Young headed home for a weekend of self contemplation as they were severely censured in a recent report for some serious professional lapses that led to the firm’s collapse.

The report also went on to say that Lehman trading on knowing they were insolvent for a number of weeks before eventually declaring themselves bankrupt. Lehman’s bankruptcy is generally recognized as being the catalyst that sparked of the global financial meltdown. The collapse of the 158-year-old investment bank in September 2008 was the world’s largest bankruptcy at that time.

The report made for some heavy and disturbing reading, accusing the Lehman Brothers’ management of "actionable balance sheet manipulation" and using accounting tricks to hide debts. In their defence, Ernst & Young said that its last audit of Lehman was "fairly presented" according to accounting rules. As Lehman Brothers wobbled on the edge of collapse, a determined effort from Wall Street, the City of London, and the US and UK governments did all that they could to prevent the banks’ fearing the chain reaction that Lehman’s failure would set off around the globe.

Whether the long awaited report had an effect on Wall Street trading remains to be seen, but share trading was certainly restrained on Friday before the markets closed. The Dow Jones was up 12. 85 points to 10624.49 while the NASDAQ dropped less than a point to 2367.66

After weeks of crisis, it looks like the Eurozone region are on the verge of agreeing to support a multibillion-euro bailout for Greece as part of a package to shore up the Euro, the zone’s single currency.

Despite huge resistance, Germany, who were against the bailout, have bowed to pressure from fellow members of the 16 strong Eurozone members who expect to draw up the rescue package in the early days of this week. At the same time, the Eurozone members, at Germany’s behest, will introduce new legislation to enforce greater fiscal discipline among its members.

According to a senior European commission official, the Euro member states have agreed to provide a series of loans or loan guarantees to Greece in the likely event that Athens finds itself unable to refinance its soaring debt and requests help from the EU. Speculation has it that the initial aid to Greece could reach as high as €25 billion (£22.6 billion), with estimates that the total extent of Greece’s financial problems could see them needing up to €55 billion in loans by the end of 2010. Despite the fact that Germany were the most reluctant to come to the rescue of a fiscal delinquent in the current crisis, they have played the pivotal role in organising the rescue package, in their role as the EU’s traditional paymaster,

According to a report by the International Energy Agency (IEA),

China’s demand for oil jumped by an "astonishing" 28% in January compared with the January 2009. The IEA went on to point out that added that the estimated global demand for oil in 2010 would be driven by rising demand from emerging markets, with half of all growth coming from Asia while demand in developed countries is likely to fall by 0.3%.

The IEA has increased its global oil demand forecast for 2010 by 1.8% to 86.6 million barrels a day.

Oil prices were above $83 a barrel on Friday, the highest in two months.

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Tags: Alistair Darling, Bank of England, Banking, British Economy, British Pound, BskyB, Citigroup Inc, Dow Jones, Economics, Economy, Ernst & Young, Financial News, FTSE, GM Europe, HBos, International Energy Agency, Labour government, Lehman Brothers, Lloyds Banking Group Plc, Lord Mandelson, Money, Money Management, NASDAQ, News Corp, Oil prices, Recession, Royal Bank of Scotland Group Plc, Rupert Murdoch, Stocks and shares, UK Banks, UK Economy, UK government, UK Recession, Vauxhall, Wall Street

According to Boris Johnston, London is the best city in the world to do business, Boris, the current Mayor of London Johnson who during his visit to New York, enjoyed the privilege of ringing both the opening bell at NASDAQ and the closing bell at the New York Stock Exchange, stated the case to leading American high tech and industrial concerns to locate in London. He emphasized that London remains the top global destination for digital innovation.

In a series of financial services and business meetings today, Mayor Johnson reminded New Yorkers to remember the greatness of London’s past, and to prove to the world that both New York and London are as confident as ever of their dominant roles in World business.

London’s newspaper publishing community were reportedly in a state of shock with the announcement that the Evening Standard was to become a free sheet. The move by the paper’s Russian owner Alexander Lebedev, was described by industry analysts as “more of a gamble than a calculated risk” when the news broke on Friday. Lebedev recently acquired the Evening Standard from the Daily Mail & General Trust. (DMGT).Lebedev decision makes the Standard one of the first leading titles in Europe to drop its cover price and rely entirely on advertising. Forecasts are that the move will see the paper’s current circulation of 250,000 rises to close to 600,000. The move comes after News International, part of Rupert Murdoch’s News Corp, announced that they will be ceasing to publish its free sheet, The London Paper. News International has been involved in distribution battle with a rival free sheet, London Lite, which is still owned by DMGT. DMGT, who have retained a 24.9 per cent stake in the Standard, are liable to close down the London Lite.

French utility Electricite de France announced on Friday that as part of a plan to reduce debt by at least 5 billion Euros, they are considering options for selling its U.K. electricity distribution business. EDF Energy is the largest electricity distribution network operator in the U.K., serving London as well as the South-East of England.

Shares in Domino’s Pizza rose as much as 5 percent to an all-time high of 307 pence after Britain’s biggest pizza delivery chain announced that it is on track to beat market expectations for the year following sales growth of 10.8 percent in the third quarter.

The FTSE 100 maintain a moderate collapse, after a long run of constant increases. On Friday it dropped 4.31 points to close on 4993.01.

Before weekend, the FTSE 250 continued to drop, below the 9,000 points barrier drop, down 49.85 points to close on 8906.62.

Despite a minor increase against the dollar, the pound remained below the $1.60 mark as trading closed down for the weekend, as it continued to stutter against the leading currencies.

• Pound/US dollar 1.5969
• Pound/Euro 1.109081
• Pound/Japanese Yen 143.2797
• Pound/Swiss Franc 1.6473

In spite of aggressive measures to stimulate the economy, the US unemployment rate climbed to 9.8 per cent in September, making for a fresh 26-year high. Official figures released on Friday showed that non-farm payrolls dropped by 263,000, making it the 21st consecutive month that the US economy has shed jobs. The data were worse than economists predicted, with a 175,000 drop in payrolls, following a decline of 201,000 jobs in August.

These figures go a long way in re-iterating recent statements from World Bank president Robert Zoellick that US economic power is declining as a result of the financial crisis. Until recently regarded as the world’s largest and most dynamic economy, The US has been in the grips of a bitter recession for almost two years, while emerging economies like China and Brazil have grown. Zoellick predicts that a long-term rebalancing of the world economy may well be under way..

Despite hints of a recovery the Dow Jones index continued to adjust downwards, closing 21.61 points down at 9,387.67. The NASDAQ index fared slightly better, falling only 9.37 points to 2,048.11.

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Tags: Alexander Lebedev, Banking, Boris Johnston, British Economy, British Pound, Credit Crunch, Currency, DMGT, Domino's Pizza, Dow Jones, Economics, EdF, Electricite de France, Employment, Evening Standard, Financial News, FTSE, Money, Money Markets, NASDAQ, New York Stock Exchange, News Corp, Recession, Robert Zoellick, Rupert Murdoch, Stock Markets, The Daily Mail & General Trust, UK Banks, UK Economy, UK government, UK Recession, Unemployment, US economy, World Bank

According to data released by the Halifax Building Society, property prices increased by more than one percent. Halifax, one of the UK’s leading building societies also reduced their forecast reduced how far they reckoned property values would fall in the remaining part of 2009. Their updated prediction is that house prices will fall by just seven percent in 2009.

Halifax stated hat prices had fallen by 0.8 per cent during the first seven months of 2009, with average house prices at £159,623 in July compared with £160,861 in December 2008. July house prices were 12.1 per cent lower than the same period in 2008, with the annual rate of change showing an improvement for the third consecutive month.

On a more sober note a recent report released by the Royal Institution of Chartered Surveyors has reiterated their well known standpoint that there is little chance of a quick return to a housing boom, despite the fact that UK prices may well rise in 2010, while standing firm on their forecast of a price fall of 10-15% this year amid a “considerable shift” in the market. Tight credit and job losses are the principal causes for limited transactions in 2009 and if they continue may still cause prices to slip back in 2010.

Despite their expected £4 billion loss in the first half of 2009, shares in Lloyds Banking Group surged by 11% due to mounting bad debts at HBOS. The only reason that analysts could come up with were that most of the bad news that the bank could dish up was now out in the open, and investors now had a clearer picture to build on.

Lloyds Banking Group, of which 43% is owned by UK taxpayers, announced that although they were still sitting on £13 billion of toxic loans and investments, such charges for bad loans would be smaller in the future.

Meanwhile it seems increasingly likely that the sale of the healthy parts of Northern Rock will be held off until after the general election. Alistair Darling, UK chancellor said he was in “no hurry” to offload the bank he nationalised in February 2008 after they announced reasonable half-year losses of around £700 million. The chancellor remains adamant that the rescue operation could still reap a profit for the taxpayer.

A recent study also shows that the pension-plan shortfalls of the U.K.’s top publicly traded companies more than doubled to an unprecedented 96 billion pounds in June.
The deficit of these companies all of whom are listed on the FTSE-100 Index with a 41 billion-pound shortfall in the same period last year, The signs are that employers are cutting back on pension benefits after the global financial crisis eroded profits and stock prices. Europe’s second-largest oil company, BP Plc, announced in June their intention to close its final salary pension plan to new U.K. workers, while Barclays Plc are asking their 18,000 employees to surrender similar benefits that the bank now claim to have become too costly.

Insurance group Legal & General have announced that they have succeeded in “considerably reducing” their losses in the first six months of the year, as well increasing their capital surplus. L&G claimed that the cuts were brought about by reduced workforce headcount, and closing down activities in less profitable business areas.
Despite the fact, the insurance group halved its interim dividend as it pressed ahead with a programme to save costs, causing their shares to drop in value by 5.6 per cent to 62 pence. , For the half year, Legal & General’s showed pre-tax losses decreased by 81 per cent to £74 million on revenues that slid 6 per cent to £3.1 billion.

Industry tycoon Rupert Murdoch’s News Corp announced losses of £2 billion in the financial year to the end of June. A year which Murdoch claimed to have been “their most difficult in recent history”.

The loss, largely due to $8.9 billion in write-downs already announced, compares with a $5.4 billion profit a year earlier.
Revenues at the media giant, owners BSkyB, 20th Century Fox and the Sun newspapers among many others, were down 7.8%.

It appears that ITV is set to sell Friends Reunited to DC Thomson, the Dundee-based publisher, for £25 million, less than four years after the company bought the social network for £170 million, a sum that included £50 million in performance-related bonuses.

The FTSE 100 reversed early gains to close down 24.24 points at 4,647.13.
Meanwhile the FTSE 250 continued to gain, climbing a further 23.57 points to close on 8,266.08

The pound continued its rise against the dollar as well as all the other major currencies on Wednesdays trading.

Pound/US dollar 1.7009
Pound/Euro 1.1799
Pound/Japanese Yen 161.1997
Pound/Swiss Franc 1.8028

As a result of ongoing controversies, the US Senate looks likely to push through their $2 billion extension of the “cash for clunkers” car subsidy programme before it breaks up for its August recess on Friday.

In a change of position from Monday, when senators from both parties expressed reluctance to follow the House of Representatives in extending the highly popular scheme the extension could be passed by the end of the week

Yesterday on Wall Street, the Dow Jones lost a lot of its previous days falling 39.22 points to 9280.97. The NASDAQ also crept back a little, down 18.26 points to close below the 2,000 mark on 1993.05

In the face of the global economic slump computer firm Cisco Systems have announced a fall in its quarterly profits by 46%, $1.1 billion compared with $2 billion for the same period a year earlier. Analysts, who had expected an even steeper decline, also were encouraged as was the company who announced that the quarter may have seen the last of the recession-related downturn.

Following the latest US weekly inventories data, US crude oil prices fell to $71.97 a barrel, after hitting a high of $74.89 in the previous session.
US crude stocks have risen to 1.7 million barrels.

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Tags: Alastair Darling, Barclays, BP, British Economy, Economics, Economy, Employment, Financial News, Halifax, Halifax International, Legal & General, Lloyds, Lloyds Banking Group Plc, Mortgage, Mortgages, News Corp, Recession, UK Banks