UK economy still contracting- but at a slower pace.

August 31st, 2009 by tom | Filed under Central banks, Daily News, Global Credit Crisis, Recession, Stocks and shares, UK Banks, World Banks.

financial news

The news released on Friday that the U.K. economy had contracted less than was previously estimated in the second quarter raised a few eyebrows. Recoveries in the manufacturing, auto services industries as well as increased and government spending helped mitigate the biggest slump in business investment for close to a quarter of a century.

In truth, the Gross domestic product still fell, but by less than 0.7 percent, which was 0.1 percent less than estimated, according to a review issued by the Office for National Statistics. The review also stated that the economy had shrunk by 5.5 percent for the twelve month period, the highest since records began in 1955.

It was also revealed on Friday that UK business investment has fallen by more than ten percent in the second quarter of 2009, and by 18 percent annually, which again is the largest fall in its category since 1966. Both of these less than inspiring sets of statistics are playing a major part in forcing the pound down to its lowest level for the last two months.

The Icelandic parliament has voted in favour of compensating the governments of the UK and the Netherlands more than £3 billion for those who lost money in the Icelandic online bank Icesave

The so-called Icesave bill will reimburse funds paid by the governments to compensate the 400,000 savers who lost their savings when its owner Landsbanki collapsed last year.

The bill has not met with a lot of enthusiasm by the Icelandic people, who fear that their government’s unprecedented attack of conscience might bankrupt their nation.

The deal, agreed way back in June, t was only passed after an amendment was agreed that set various limits to the payments.

Rises in mining and financial stocks helped push the FTSE 100 to its second successive monthly gain. Among the day’s most prominent risers was Lloyds Banking Group up 6.3 per cent to 111 pence. The continuing possibility that the bank will increase its share capital, by reducing its exposure to the government’s Asset Protection Scheme has pushed shares in the bank up by close to 10 percent this week.

Shares in InterContinental Hotels rose 0.5 per cent to 764 pence, driven by reports that an Emirates investment group was interested in its small portfolio of luxury hotels.