According to a leading economist the UK should be classed with Greece and Spain, as countries carrying severe debt problems Not in agreement and understandably so are the UK Treasury sources who rebuked the suggestions that the UK was gradually becoming one of the poor relations of Europe by confirming that all of the three major credit-rating agencies had reaffirmed the UK’s triple A credit status.

Meanwhile Chancellor of the Exchequer Alistair Darling is the man faced with balancing the demands of investors and rating companies who fear that Britain’s top-level credit rating could be at risk, with the hopes of the UK public as well as some of his colleagues for an easing of taxation in the coming budget. Darling has already put the dampers on a lot of people’s hopes that this year’s budget will not be too populist, in a move to win votes for the general election that is due to follow a few months later

“People in the U.K. will want the budget to be realistic,” Darling was quoted as saying. “No one is looking for giveaways; that’s not the mood.” He summed up. Darling said voters realize the need to reduce Britain’s record budget deficit having already vowed to more than halve the £176 billion-pound deficit by 2014 starting next year.

Britain’s budget shortfall, which the Treasury estimates at about 12 percent of gross domestic product this year, is the biggest among the Group of 20 nations.

Dividends paid out shareholders by UK companies were honed back by to the tune of £10 billion in 2009, according to recent research.

Total dividends paid out by British listed companies amounted to £56.9 billion last year, down 15 per cent on 2008. The figures would have been considerably worse for investors if it not had been for the contribution of just five leading UK companies, with almost fifty percent of all dividends paid out coming from them. The e British business heroes were by BP, Shell, HSBC, Vodafone and GlaxoSmithKline. A sign of the shifting sands in the UK trading picture is that as recently as 2007, these companies accounted for 35 percent of the total dividend payout.

All the UK banks combined cut their dividends by half, adding up to around £6 billion less in dividends than in 2008. Performing particularly poorly was the high-street sector whose dividend payouts fell by 62 per cent.

At the recent meeting of the Group of Seven finance ministers’ tacit agreement was reached to draw up as set of common rules designed to force banks to pay for possible failures similar to the current one, which led to taxpayers being forced to take on trillions of dollars in liabilities.

The ministers said the world’s most advanced economies should adopt common rules as long as other major countries also agree. Apparently the G-7 is moving closer to an agreement on a bank insurance levy, one of a range of options proposed by the U.K. in November.

Already Sweden has taken the first step forward by creating a fund financed by their banks to help safeguard its financial system. In terms of the agreement, Swedish banks are required to make annual payments to the fund. The Swedish government injected 15 billion kronor (£1.2 billion) into the fund when it was set up, as well adding funds that had previously held in Sweden’s deposit guarantee fund.

According to government estimates, interest from the funds deposited by banks and on the money in the fund means it will swell to 150 billion kronor, or 2.5 percent of Sweden’s gross domestic product, by 2023.

U.K. stocks rose for first time in four days, led by a rebound in mining companies. The FTSE 100 Index increased 50.2 points to 5,111.84 at close of business in London.

The pound dropped to its lowest level in more than eight months against the dollar as growing concerns over the UK’s fiscal situation began to weigh on the currency. Sterling closed at 1.5701 and at 1.1388 against the Euro. The Euro has lost a lot of its attractions recently and was down to an eight-month low of 1.3583 against the dollar.

On Wall Street things were looking up. The Dow Jones Industrial Average finished up 74 points at 10058.64. The NASDAQ gained 15 points to close on 2,150.87.

Honda has added close to half a million cars to its existing global safety recall list. The problem this time is over airbag inflation problems mostly affecting cars sold in North America, with others Japan, Mexico, Taiwan and Australia due for recall. There was also further bad news for e Japanese carmakers Toyota after they were forced to recalled nearly half a million hybrid cars over faulty brakes, and millions of other models will need to be brought back to dealerships worldwide, suffering from accelerator and floor mat problems.

General Motors’ (GM) Opel unit has announced their plans to will invest 11 billion Euros (£9.7 billion) in introducing new product ranges over the next five years. Opel’s investment plan to breaking even within two years, a move that will entail cutting 8,300 jobs across Europe as well as the closure of at least one company plant in Antwerp, Belgium. Opel are trying to persuade

European governments to provide them with billions of Euros in loans to help the company’s plan to return to profitability.

India has announced that its economy is looking at growth levels by 7.2% in the year to the end of March. Government stimulus measures helped to maintain strong growth during the global downturn, but attention is now turning towards cooling rising prices, raising the chance that state support could soon be withdrawn. Many financial analysts also expect the government to raise interest rates earlier than expected. Strong growth in manufacturing in India is helping to compensate for falling agricultural output.

Oil prices rose and base metals moved higher as commodity markets managed a partial recovery after a sharp sell-off in the previous week US crude oil prices traded above the $71 a barrel.

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Tags: Alistair Darling, Bank, Banking, BP, British Economy, Credit Crunch, Currency, Dow Jones, Economics, Economy, Financial News, FTSE, G-7, General Motors, GlaxoSmithKline, Honda, HSBC, Money, Money Markets, NASDAQ, Recession, Retail, Shell, Stock Markets, Toyota, UK Banks, UK Economy, UK government, UK Recession, UK treasury, Vodafone, Wall Street

The weaker Pound and an insurge of wealthy foreign shoppers wishing to take advantage of the satiation have contributed to a major revival in retail sales in the shopping centres of London during September. The British Retail Consortium who are involved in producing the London Retail Sales Monitor, have announced that retail sales in central London were up by 7.5 percent on September 2008. The largest month-for-month increase in 12 trading months. Even more encouraging, were sales figures released by the New West End Company, who monitor sales from retailers based around the highly exclusive Bond Street, Oxford Street and Regent Street region in the West End of London. There retailer were reporting an increase of 25 percent jump in sales in September when compared to August, as well as a 4.6 per cent increase on September 2008.

Britain’s banks could be in line to pay windfall taxes that could reach punitive levels. if they are unable or unwilling to provide acceptable guarantees that they will discard their long running practices of tax avoidance. In a recent statement, officials of the UK Treasury described speculation that tax raids on the banks under their spotlight was imminent is being unfounded, as well as reports that higher levels of corporation tax would be imposed as “not being currently under consideration”. The major UK banks have been negotiating with the Inland Revenue and the Treasury for some time to ensure that their tax payments adhere “to the spirit of the law rather than the letter”. The “powers that be” are looking for a new approach from the banks, and on that will be in contrast to their approach before the bail out of the financial system late last year, that was largely funded by the British taxpayer..

The Treasury is working on a new tax code with the banks, with a final verdict expected ahead of the chancellor Alistair Darling’s forthcoming pre-Budget report. One Treasury official said: “If the banks were not participating we would need to look at other channels, but at this stage they are playing ball

Willie Walsh, chief executive of British Airways has announced that he has held "open and frank" talks with union leaders, in order to prevent cabin crew balloting for strike action. Both sides have been involved in a long running conflict regarding BA’s plans to cut 1,700 jobs as well as making further changes to pay and conditions for other members of the BA staff. The union representing the airline’s employees, Unite, has stated that they will have little option but to ballot for industrial action if BA’s changes are imposed on their members. A representative of BA announced that Mr Walsh had written to unite joint leader Derek Simpson after the meeting, while the union declined to comment.

The pound continued its steady rise, despite faltering slightly against the Euro and the Swiss Franc.

• Pound/US dollar 1.6425
• Pound/Euro 1.10969
• Pound/Japanese Yen 147.9728
• Pound/Swiss Franc 1.6587

The FTSE 100 had a good day, up 91.34 points to 5281.54 The FTSE 250 rose strongly on the day’s trading, up 138.44 points to close on. 9564.64.

Chairman of the US Fed Ben Bernanke announced on Monday that the US and Asia adopt policies that prevent a revival of global economic imbalances as the financial crisis ebbs, and such a move was “extraordinarily urgent”. Bernanke went on to warned that global imbalances, meaning the large gaps between national saving, consumption and investment rates that were reflected in large trade deficits and surpluses needed to be bridged. The US must establish “a sustainable fiscal trajectory anchored by a clear commitment to substantially reduce federal deficits over time”. he continued

The Dow Jones index recovered strongly on Monday’s trading; climbing again above the 10,000 points mark, as encouraging US bank results fuelled optimism for the global economy. The Dow Jones was up .96.28 points to close on 10092.19 The NASDAQ Composite index also recovered all of Friday’s losses, up 19.52 points to close for the day on 2,176.32.

Annual car production in China has topped the 10 million mark for the first time in the industry’s history, with car makers boosting output to meet the ever growing demand. Despite the global downturn in demand for new cars for most of the major car makers, demand for cars is bucking the trend with state incentives, such as tax cuts on small cars, going a long way to boosting sales

The price of oil has continued to rise, mostly on the back of the weak US dollar reaching a new high for 2009. US crude settled up $1.08 at $79.61 in New York trading, while London Brent rose 78 cents to at $77.77

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Tags: Alistair Darling, BA, Bank, Banking, Bond Street, British airways, British Economy, British Pound, British Retail Consortium, British taxpayer, corporation tax, Credit Crunch, Currency, Derek Simpson, Dow Jones, Economy, Financial News, FTSE, Inland Revenue, London Retail Sales Monitor, Money, Money Markets, NASDAQ, New West End Company, Oxford Street, pre-Budget report, Recession, Regent Street, Retail, Stock Markets, Stocks and shares, tax avoidance, UK Banks, UK Economy, UK government, UK Recession, UK treasury, Unite, Weak Pound, West End, Willie Walsh

It now appears that the global economy is recovering at a much faster pace than many expected it would. However it appears that making up the rear, and probably by a distance, will be the UK economy that just can’t seem to shake itself out of the doldrums.

According to the Organisation for Economic Co-operation and Development (OECD) the UK economy is even liable to contact by 4.7% this year, a scenario which is much worse than predicted by the UK Treasury who called the rate of decline at 3.5% decline.

The OECD predicts that both the US and the Eurozone to officially call and end top their recessions by the end of the third quarter, encouraged by a series of positive financial indicators in recent months.

.Meanwhile UK financial analysts explain that the UK stodgy economy has been brought about by the fall in the growth for 2009, which has been driven entirely driven by to terribly negative downturns in fourth-quarter 2008 and first-quarter 2009, while forecasts for the UK in the third and fourth quarters of 2009 are, in fact, slightly better than were originally predicted. However they are not sufficient to pull the UK out of the recession.

Meanwhile UK Chancellor, Alastair Darling, forever thinking one move ahead, fears that Germany and France, having returned to a position of economic growth, will begin to reduce their stimulus spending.

Darling is determined to push the G20 nations to take whatever measures necessary to combat unemployment. He expects them to take similar measures to Britain’s £5 billion jobs package, as he is concerned that if the stimulus package is pulled away too soon, the return to growth might fizzle out.

Chancellor Darling is due to attend a meeting of G20 finance ministers in London on Friday and Saturday, prior to a global recovery debate to be held in Pittsburgh in three weeks, where he and Prime Minister Gordon Brown will be in attendance

Recent reports have shown that the service sector expanded at a faster rate in August than expected, adding further hope that the economy is recovering, albeit slowly.

This piece of positive news was offset by a warning from the financially embattled West Yorkshire Welcome Financial Services that the company may have to shed a further 500 jobs as it continues its battle for survival.

Yorkshire based Cattles, who own the company, are burdened by debts of over £2.4 billion and are under scrutiny due to accounting irregularities, have announce plans to close 30 of its 180 Welcome branches as well as reducing the number of employees in their s sales and support teams.

Cattles have already closed its Welcome Car Finance car loans business cutting more than 1,000 jobs.

The company said it remains in negotiations with key creditors about a deal that would give it breathing space on the repayment of its debt

Deutsche Telekom have made no secret that they are interested in offloading their UK mobile phone unit T-Mobile UK, and have begun talks with the UK’s Vodafone, France Telecom, and Telefónica of Spain in hope of completing a rapid sale. One of the possibilities being discussed is a possible merger between T-Mobile UK and France Telecom’s Orange UK, a possibility suggested by Telecom. Representatives of Deutsche Telekom are seemingly hopeful that significant progress can be made by mid to late-October.

Electrical goods retailer DSG International were so anxious to withdraw from the Polish market that they sold off their interest there for a nominal €1, just three months after retreating from Hungary leaving a single Euro note there also. DSG have enjoyed considerably more success in the Nordic region however that is partially offsetting a continued weak performance in the UK and Ireland, where DSG operations Curries, PC World and Dixons electric goods retailing chains. Shares in DSG rose by 0.59 pence to 27.58 pence on the news.

Gains on London equity markets faded by the close on Thursday as falling oil and drug stocks offset gains for miners and financial stocks.

The FTSE 100 index ended a further 20.80 points lower at 4,796.75. Meanwhile the FTSE 250 made up for most of Wednesday’s reverses, rising 84.87 points to close on 8,604.80

The pound climbed to its highest level for a week on Thursday after a survey of the UK services sector raised some hopes that the country’s economy could return to growth in the third quarter.

• Pound/US dollar 1.6322
• Pound/Euro 1.1454
• Pound/Japanese Yen 151.1341
• Pound/Swiss Franc 1.7338

On Wall Street, the markets continued to be relatively stable, with the Dow Jones Industrial Average rising 11.86 points to close on 9292.53 while the NASDAQ Composite index rose a mere 5.94 points to close on 1973.01

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Tags: Alastair Darling, Banking, British Economy, British Pound, Cattles, Curries, Deutsche Telekom, Dixons, DSG, Economy, Employment, Financial News, financial recovery, France Telecom, FTSE, Global Economy, Gordon Brown, Money Markets, NASDAQ, OECD, Organisation for Economic Co-operation and Development, PC World, Recession, T-Mobile UK, Telefónica, UK Banks, UK Economy, UK government, UK Recession, UK treasury, Unemployment, Vodafone, Wall Street

UK Chancellor, Alistair Darling expects to receive the go ahead that they UK will be recipients of some much needed financial aid within the coming weeks from the European Commission. However with the aid will come some conditions, particularly that they the commission expects to seek the shrinking of assets in the partially state owned Lloyds Banking Group.

Officials from the UK Treasury strongly suspect that the Brussels based commission could stipulate a reduction in asset holdings or agree to an even more unacceptable situation where the EEC will have a say on the running of the bank in the future.

Lloyds management team have admitted that these are real possibilities and have even stated them in writing in a tender issued on Wednesday as part of its £4billion request offer.

Talks between officials at the UK Treasury Department and European Commission officials in Brussels have been taking place for the last few weeks, and appear to be drawing close to the point where serious decisions have to be made.

Lloyds’ warning underscores the new and uncertain situation that state owned banks will have to face for the foreseeable future, with not only Lloyds but also the Royal Bank of Scotland having to come to terms with being part of a completely different picture.

Under European Union rules, companies (even banks) that have been the recipients of government aid are required to restructure their balance sheets and their assets, toxic or otherwise, to offset any competitive edges or advantages stemming from the assistance that they have received.

UK Chancellor, Alistair Darling and Prime Minister Gordon Brown have consistently borrowed to pay for rescuing banks that have reported around eighty billion pounds in losses and asset write-downs since 2007.
Till now, the government pledged has pledged around forty billion pounds in order to re-finance banks whilst guaranteeing hundreds of billions of pounds worth of loans, some of which are “highly toxic”

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Tags: Alastair Darling, Debt, EEC, Financial News, Lloyds Banking Group, UK treasury

Estimates have it that by next year, the U.K. will have the unfortunate distinction of being the holder of the largest budget deficit in the developed world, almost entirely reversing the country’s hard earned status as the role model of a successful and wealthy financial services epicenter. A status that she has held for the last decade.

With the UK’s s budget deficit soaring to a staggering twelve percent of gross domestic product, who could now take Great Britain’s role as the key player on the global financial services stage seriously, and with forecasts that it could take at least another ten years to get the country’s finances back into some form of healthy financial situation, it seems likely that the UK financial service industry will be placed on a back burner for years to come.

While no one is confirming the fact that the UK crown has slipped, it is hard to disguise the fact that our credibility has slipped, and at a very crucial time. Jobs in the financial service industry in Great Britain are under serious threat. Tens of thousands have already disappeared as cut backs continue on a widespread basis, and the estimates are that more than 70,000 will disappear till the crisis runs its course

Despite the fact that the UK Treasury has pumped billions of pounds into the Banking and Insurance sectors to prevent a meltdown in the city, there seems a scant chance of a return in confidence any time soon. In order o recover at least some of their investments; the Treasury is demanding a whole new set of standards from the financial institutions. These standards mean that, in any event, dealing with the “city” will be a lot less attractive, it is only reasonable to suspect that the World’s financial movers and shakers may well be taking their business elsewhere.

The financial input from the financial services industry will be sadly missed, contributing almost eleven percent of the UK’s gross domestic product as recently as 2007, more than double of what it was just ten years previously.

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Tags: Budget, Financial News, London, UK Recession, UK treasury

Is the global financial crisis a conspiracy?—or just a case of too many people who should have stopped the rot looking the other way.

When more talented and experienced writers than I sit down to write the history of the first global depression of the 21st century, the chances are that they will say that it all began with the collapse of the Bear Stearns Bank of Manhattan, New York, and attach much of the blame on the crash on the role of mortgage-backed securities that brought the global banking system to its knees.

In its prime Bear Stearns were the fifth-largest investment bank in all of the US, and had survived and even profited during every financial upset since their foundation in 1923. What symbolized the bank and attracted investors was their conservative management policy. However when money supply became easier in the early years of the third millennium, some new generation financial wizards saw the golden opportunity to earn some fairly massive paper profits for the bank, and some really fat bonuses for themselves as a result. In the space of a few years, Bear Stearns shed their conservative image and became the leader in securing loans against asset-backed securities. Other banks followed suit, however Bear Stearns exposed themselves very heavily, and enjoyed tremendous profits for the initial few years. However during 2006 and 2007, as interest rates began to rise and the public found it difficult to make payments, losses became to mount. Instead of curtailing their activities, the bank’s executives chased their losses by increasing their exposure, with similar disastrous results. In March 2008, the whistle was blown on their activities when the Bear Stearns’s board were forced to approach the Federal Reserve Bank of New York asking for an emergency bail- out. When no help was forthcoming, the bank was sold off at a bargain price of $10.00 a share, $120.00 a share less than the bank had been valued at just twelve months before. With the collapse of Bear Stearns, alarm bells and sirens began to sound along the entire length of Wall Street and eventually reverberated around the World.

In the UK, the first cry for help came from the Northern Rock Building Society, and later most of the major high street banks were also found to be in very shaky financial positions many of them due to excessive and indiscriminate lending. The UK public found themselves exposed to the sum of one trillion pounds, which at the time seemed like a colossal sum of money, but now fades into significance when compared to some of the figures being bandied about during the many global conferences being held to discuss the situation, how it happened, how is to blame for it and where did all the money go?

To try and discover the reasons and attach the blame we first have to acknowledge that the World is going through a situation of major change.

First of all global population is on a constant increase, and due to that fact the World’s natural resources are being exhausted. The great industrial nations of the Western World seem neither interested nor capable of finding viable alternatives. Secondly, the governments of the Western World have to come to terms with the fact that there will not be nearly enough jobs for everybody if they do not embark on some of form of protectionism. Not so much against each other, but against the emerging economies of India and China. It may be unpalatable for many to think that way, but the uneven flow of capital to these nations must be curtailed before further and deeper rooted financial disaster falls.

The UK taxpayer, as well as all their friends in the Western World, is both the biggest losers in the situation as well as one of its principal causes. The increasing dependency on the consumer on credit was allowed to reach epidemic proportions. Whilst the banks were allowed to make windfall profits on the back of Joe public’s impatience, naivety or stupidity, the government looked on.

And why not, as long as this irresponsible behaviour was allowed to continue and the economy was ostensibly booming, the UK treasury was earning unprecedented fortunes in the form of tax incomes. Now that the bubble has burst, the taxpayer of the Western World is being asked to mortgage his future yet again to prop up the banks and insurance companies, who have become vulnerable, yet cannot be allowed to fail.

When the history books are written, it will be difficult not to point a finger at those people who were at the helm before and during this crisis. First of all US President George W. Bush and our own PMs Tony Blair and Gordon Brown.

Tony Blair had either the good sense or the good fortune to abdicate his throne and left Gordon Brown to carry the blame for the mess that is now the UK economy. However he cannot come out of it with clear hands entirely, because you wouldn’t need to be a financial genius to see the writing on the wall at least two years before everything went belly up.

So when we take a look at the picture as it stands now, it is obvious that the worst is over, at least because we now know what to expect for the World economy in general and the UK economy in particular. A period of recession, of austerity, hopefully followed by a longer period of restraint, reconciliation and prudent financial management for the public and private sectors as well as the public at large.

There is only one question in my mind that for the UK public remains unanswered, and that is the most significant question of them all. Yet nobody wants to address the question and provide the answer.

Where did the money go!

People seem to have forgotten that during a period running from 2005 to 2008, the price of crude oil doubled and for a while even trebled and almost quadrupled.

It also may not be a coincidence that since the global financial collapse has reached it full force the price of crude oil has fallen to levels that were consistent for almost the previous ten years. Which means that the OPEC member nations simply pushed the prices through the roof, knowing that the World was in a state of false euphoria and would pay any price for a barrel of oil? Oil that began 2005 at $40 a barrel reached a peak of $150 in late 2008.

Just to consider some of the statistics that these facts generate is mind boggling. Current global consumption is around 85 million barrels of oil a day, making for an annual global demand for 31,000,000 barrels. If we take into account that the OPEC member countries are breaking even at $40 a barrel, that means that over the five year period from 2004 to 2008 inclusive, their overheads for producing the 150 million barrels of oil comes out to a staggering six trillion dollars. What is even more staggering is the fact that at a conservative estimate the OPEC countries sold us that oil for an average of $80 a barrel, which means that they made a 100% profit or six trillion dollars.

$6,000,000,000

That’s a lot nothings by anyone’s standards as well as being almost exactly the sum of money that the global economy is hanging out their tongue looking for.

While these figures are rough estimates, the numbers that generated them are accurate and even if they are out by five or even ten percent, they still make some pretty cruel reading.

So if there is a conspiracy behind the global financial crisis, there it may lie.

The question has to be why the leader of the World’s most powerful nation allowed that massive amount of capital flow through his government’s hands.

As readily as Bush and Blair formed an alliance to invade Iraq they could just have easily done so to put a stop to the Western dependency and by doing so forced the price of crude oil down. Their actions will have certainly caused a recession, but one that would surely have been nowhere as severe and painful as that which currently is upon us.

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Tags: Bear Stearns, conspiracy theory, Credit Crunch, Financial News, George W. Bush, Global Credit Crisis, Gordon Brown, Interest Rates, Tony Blair, UK Banks, UK Recession, UK taxpayer, UK treasury