UK economy will be on flat line by Christmas

June 16th, 2009 by admin | Filed under Daily News, Recession, Retail, Stocks and shares, UK Bank Accounts.

money info According to a report by the Confederation of British Industry, the UK economy won’t start growing again until 2010. It also seems likely that in order to keep the recovery on track, the Bank of England may need to expand its money-printing plan.

CBI predicts that the UK’s gross domestic product will fall 0.3 percent in the second quarter of 2009 and 0.1 percent in the third, before flat lining during the final three months of the year.

A slower recovery than planned is bad news for Prime Minister Gordon Brown’s government. Lack of growth means reduced tax revenues, increasing the already exaggerated budget deficit.

British van maker LDV, which fell into administration last week, may get a reprieve if a takeover bid from telecoms entrepreneur John Caudwell proves successful. Caudwell, on the lookout for fresh challenges after selling his mobile phone retailer business Phones 4U, has reportedly requested review LDV’s current financial situation. LDV’S administrators PricewaterhouseCoopers hastened to point out that Caudwell’s interest in LDV is at a very early stage and he is yet to sign a non-disclosure agreement. LDV, based in Birmingham, central England, was placed in administration on June 8, and if the company does close down, most of its 850 employees will be made redundant.

Expectations are that the UK’s largest retailer Tesco will report a pick-up in underlying UK sales growth when it reports it last quarter returns today.
Tesco, who account for a total of almost one third of British supermarket turnover, has been reportedly been losing share of the market over the last few months.
Tesco’s downturn in sales is reported to be due to customers switching to their discount brands range, which while boosting sales in terms of volumes has affected their turnover figures.

On the stock exchange, materials stocks dragged the FTSE down as commodity prices dropped.

Gold mining giants Randgold Resources lost 2.4 per cent to 4068 pence after a downgrade in valuation.

The oil exploration company Heritage Oil announced their successful launch of fundraising effort in anticipation of a proposed merger with Turkish contemporaries, Genel.
Heritage’s stock jumped eight per cent to 546 pence after Heritage had sold 25.4 million new shares at 520 pence.

Yesterday was stormy on the Stock Exchange, which fell by more than 2.5 percent. The FTSE 100 dropped like a stone, 115.94 points to finish on 4,326. 01 while the FTSE 250 fared a lot worse and for the second trading day in a row, down 197.84 close on 7,493.52

Sterling took a drop against the dollar as well as the yen, while recovering slightly against the Euro and the Swiss Franc
Pound/US dollar 1.6313
Pound/Euro 1.1826
Pound/Japanese Yen 159.6003
Pound/Swiss Franc 1.7816

The dollar started the week on a firm footing, helped on Monday by positive statements emanating from the weekend’s meeting of the Group of Eight leading industrialised nations.
Alexei Kudrin, Russian finance minister, announced that his country recognized there was “no alternative” to the dollar as a reserve currency and that Russia had confidence the currency was in “good shape”. News that released the pressure that had been felt on the US currency recently.

On Wall Street took a very major tumble. The Dow Jones dropped 187.13 points to close on 8612.13, while the NASDAQ dropped 42.42 points to close on 1816.38

German luxury carmaker Porsche is in advanced talks about selling a 25% stake to the Qatar Investment Authority. Porsche struggling under debt of more than nine billion Euro is in merger talks with Volkswagen.

The only ray of sunshine on a difficult day was the news that oil prices continued to fall and sharply, since last week’s eight-month high of $72.68 a barrel.
US light crude fell to $69.86 and London Brent to $69.52, down more than a dollar on the day.

Analysts reckon that the stronger dollar and the stock market downturn yesterday were factors that pushed the oil prices down.