Category Archives: Business

Recession Britain, it’s official: but don’t lose hope!

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It’s a a hard Friday for the UK: it’s official we are in recession. Probably it’s not exactly news, but all the newspapers have opened today with new even darker predictions for the future.

The BBC.co.uk reports: “The UK is now in recession for the first time since 1991, official government figures have confirmed. … That means that the widely accepted definition of a recession – two consecutive quarters of falling economic growth – has been met”.

The Guardian.co.uk says: “Britain has officially entered recession for the first time since 1991, after the economy shrank at the fastest pace for nearly 30 years in the fourth quarter”.

The Timesonline.co.uk explains: “Britain is in the grip of its sharpest recession for three decades, grim official figures confirmed today. The economy suffered a brutal 1.5 per cent drop in Gross Domestic Product (GDP) during the past three months, shrinking at its fastest quarterly pace since 1980”.

People in London feel the pressure: unemployment is accelerating sharply, with 1.92 million people now out of work, the housing market remains severely depressed and retail sales are weak. There are no ‘green shoots of recovery’, no light at the end of the tunnel. The average recession in the UK since 1955 has lasted for three quarters, but the past two recessions have lasted for five. But people don’t lose the hope and the will to do and work.

Pound sinks to record low against the euro!

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Bad news for all the French, Italian and Spanish workers in London (who earn in pound and spend in euro): the pound has fallen to a new record low against the euro today. And also for English people this means problems and a growing fear about the strength of the British coin.

“The euro climbed to 87.79p against the pound on the currency markets, building on a previous high of 87.73p,” reports the Timesonline.co.uk. “At the same time, sterling hit $1.4765 against the dollar”.
The British pound has been weakening during the economic downturn: in the past 12 months the sterling has fallen 17.4% against the euro and 27.1% against the dollar. The pound is now almost euro parity… is it time to change and accept the euro?

Now £100 are changed for €114.13; amazing news for tourists in Europe!

Vat reduced to 15% to push our economy

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As you know the VAT rate has been reduced from 17.5% to 15%. The Change of Rate Order is valid from 1st December 2008 to 31st December 2009. The Chancellor announced this decision in the Pre-Budget Report on 24th November 2008 to cut the prices of any sales and services in an attempt to push the economy.

The proposal of cutting Value Added Tax comes from the European Commission to help the worldwide financial situation and promote the Internal Market (production and use of energy-saving materials and energy-efficient appliances and equipment) and UK government accepted a challenge that should positively impact all of us.

Services relating to many sectors (including housing construction, renovation, repair, maintenance, cultural heritage and historical monuments) will see their rates reduced. Only standard-rated sales are affected, so there are no changes to sales that are zero-rated or reduced-rated for VAT, similarly, there are no changes to the VAT exemptions. The 15% rate will remain until 31st December 2009, and from 1st January 2010 it will revert to 17.5%. Genuine commercial transactions should not be affected. All the details are in the written statement to be made by the Financial Secretary to the Treasury on 25th November 2008.

So enjoy the reduction and think positively and don’t forget to update the prices of your products and services.

Tesco on sale: good prices (and ideas) could help!

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Tesco, the British-based international supermarket chain has reported only a 2 per cent rise in like-for-like UK sales over the past three months, its worst performance since the 1990s. People are abandoning Britain’s biggest supermarket in favour of its rivals that offer cheaper prices.

Tesco has begun to cut its prices. The discount supermarket sector is growing because of the economic turmoil: the rising inflation push shoppers to buy food & drink, clothing and electronics in the stores that offer the best deals.
Even if inflation is now falling back, the Bank of England is expected to cut interest rates to encourage shoppers to spend in the run-up to Christmas. Overall, total UK sales grew 5.9 per cent and group revenue across Tesco rose by 11.7 per cent over the past 3 months.

In changing times, companies must be prepared to change too in order to adapt to the current economic climate.

BBC News Bites: mortgages, RBS, RyanAir and environment

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The Let’s start the last month of 2008 with a look at BBC Business News:

Mortgages: As they fall, so do house sales and prices. “Bank of England figures show that just 32,000 mortgages were approved, 1,000 fewer than in the previous month”. BBC.co.uk comments, “The number of mortgages approved, but not yet lent, is a good indicator of medium-term trends in lending”.

Banks: “the Royal Bank of Scotland (RBS) has guaranteed not to repossess the properties of customers who fall behind on payments for at least six months. The bank, which owns NatWest, is Britain’s fifth largest mortgage lender with a 7% market share”. But the most important fact reading BBC.co.uk is that, “the government has bought a 58% stake in RBS as part of its recapitalisation plan for the banking sector.”

Companies: The Irish airline RyanAir has made a fresh takeover bid for the Irish flag-carrier Aer Lingus to the tune of €748 million. The article reports, “Ryanair’s previous offer for Aer Lingus, which valued it at €1.5 billion, was blocked by the European Commission on competition grounds”.

Environment: “Official advisers to the UK government have demanded Britain slash greenhouse gases by a fifth of current levels by 2020 – the toughest target so far”. The article reads, “The Committee on Climate Change said the cut (21% on 2005 levels) is needed for the UK to play its fair share in combating dangerous change. The independent committee recommends that by 2020 it should be made almost impossible to burn coal for electricity without technology to capture and store the carbon emissions”.

Interest rates, taxes, mortgages and the new Budget…

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…the four key words of today. Everyday we receive new dark reports from the economic world about the imminent financial crisis in Uk. For example? The Guardian underlines again: “Britain will be one of the developed countries worst affected by the severest recession to hit the global economy since the early 1980s. The Paris-based Organisation for Economic Cooperation and Development said it expected unemployment across its 30 rich-country members to rise by 8 million to 42 million by 2010 as all parts of the West felt the effects of the financial crisis”. “Britain’s economy may not begin to grow again until the end of next year”, – explains The Timesonline.co.uk agreeing with most international opinion.

The Guardian goes on to say that the Governor of the Bank of England may work on the interest rates: “Interest rates may have to be cut more aggressively to ensure that businesses and consumers benefit from cheaper borrowing”. The Timesonline.co.uk states: “mortgage lending slipped back towards a record low in October, as consumers turned to their deposits to fund other spending”. In the meantime “Prime Minister Gordon Brown swept aside three decades of economic orthodoxy with tax increases on the rich” and plans that, Bloomberg says, “will double Britain’s national debt”.

BBC.co.uk publishes all the documents about the Pre-Budget Report: the latest tax and economic forecasts and future departmental spending plans. Have a look at them and let’s see what they will mean for us.

Today News from the Financial Times

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Good afternoon. London Presence is back today, flipping through the pages of the Financial Times- the UK’s best business newspaper.
Founded in 1888 by James Sheridan and his brother, the Financial Times has specialised in reporting business and financial news while maintaining an independent editorial outlook.
Printed as a broadsheet on distinctive light salmon-coloured paper, the FT is the only paper in the UK providing full daily reports on the London Stock Exchange and world markets.

Let’s see the 3 main news stories of today:
The main UK headline reads, “Inflation falls for first time in 15 months”. The article reads, “Consumer prices tumbled in October, justifying the Bank of England’s dramatic 1.5 percentage point interest rate cut earlier this month and opening the door for further reductions in the costs of borrowing, according to economists.”
We find another newspaper in more business news of the day;

“The Independent to shed quarter of journalists”. Reading on, “The Independent newspaper and its Sunday sister title will cut up to a quarter of their editorial staff in one of the most savage cuts to hit the UK newspaper industry in recent years as management seeks £10m of savings, the company said on Tuesday.”

From Business Life – “Epicentres of new austerity”. The article begins, “The party is over and the hangover has kicked in. In economies all over the western world, corporate executives and the rising stars of finance are beginning to think that this downturn could be different.”

Our monday review

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Good morning. Let’s start the week with a quick update from the Business World:

1) “London rallies on China’s £375bn stimulus plan,” says the Timesonline.co.uk today. “Shares in London rose by over 130 points in early trading as mining stocks soared on China’s surprise plan to pump four trillion Yuan (£375 billion) into the world’s fastest growing economy.”

2) “Gordon Brown hints at tax cuts,” writes the Guardian.co.uk. “Prime Minister suggests taxes will be reduced to push the UK out of recession. At the weekend the Financial Times reported that ministers were drawing up an emergency package of tax cuts. It said that, according to experts, cuts would have to be worth about £15bn to have much effect.”

3) “Jobless total set to soar to 1.8m,” reveals the Financialtimes.com. “Unemployment is likely to have risen above 1.8m, the highest level since 1998… Economists at the Royal Bank of Scotland and BNP Paribas expect that unemployment will continue to rise sharply next year and could reach 2.7m by the first quarter of 2010.”

4) Reuters.com writes, “Circuit City Stores Inc, the No. 2 U.S. consumer electronics retailer, filed for bankruptcy protection on Monday, falling victim to tighter credit terms from vendors and a loss of market share to Best Buy Co, Wal-Mart Stores Inc and other rivals… Circuit City filed a week after saying it would close 155 stores, or more than one-fifth of its retail base, and eliminate 17 percent of its U.S. workforce. It also said it was considering all options to restructure.”

5) The Christian Science Monitor starts its new life today: from daily-print format to a multi-platform news organisation with a 24/7 daily online publication, a weekly print edition and a daily electronic subscription product. Here we have the future of journalism: this event marks the definitive step to the digital age, as Marketwatch.com explains.

The latest news bites

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Good afternoon and welcome back. It never rains but it pours:

1. “Recession will hit UK hardest” – says the Guardian.co.uk -, economists predict slowdown will be sharper in Britain than in any other major European countries and Britain will suffer a deeper recession than any other mature EU economy. Consequence? The European Commission’s latest half-yearly forecast predicts UK unemployment will rise from 5.3% in 2007 to 7.1% in 2009 — which would bring the number out of work to about 2.25 million.”

2. “HBOS deal to save Lloyds £1.5bn,” writes BBCNews.com. “Lloyds has said that its acquisition of HBOS would save it at least £1.5bn a year, raising fears of heavy job losses from the merger. Both banks have also unveiled further write-downs on assets ravaged by the credit crunch, with HBOS hardest hit. The banks also detailed plans to raise up to £17bn as part of the government’s bank bail-out plan. Unions said that the banks should think about the human cost of the takeover and avoid compulsory redundancies.”

3. “Ryanair profits fall sharply,” reveals today’s Financial Times. “[Its] profits fell heavily in the first six months under pressure from the doubling of fuel costs, and the group forecast that it would be in loss during the second half of the year… The group, Europe’s largest low cost carrier, had only “limited visibility” of forward bookings, but from October to March would fall by between 15 and 20 per cent leading to losses in the third and fourth quarters.”

4. WorldNews explains, “Gordon Brown hinted at another emergency global interest cut yesterday amid warnings that UK unemployment is set to soar to almost 3million. The Prime Minister promised ‘co-ordinated action’ across the world as pressure grew on the Bank of England to slash the cost of borrowing by as much as 1 per cent this week.” We shall see.

How much did the crisis cost?

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How much money did the crash cost? Today the Bank of England said that the market crisis has cost $2.8 trillion to date, leaving the world’s financial system in a situation similar to the aftermath the First World War. This is just the first half-yearly health check of the City, but the Bank of England has underlined how a new regulation is necessary. Policymakers have learned the lesson from the mistakes that have led this crisis, that doesn’t seem to be over: the report also expressed cautious optimism about the effectiveness of the recent change of trend.

Today The Guardian explains: “The £50bn pledged by the government had helped underpin the system and would provide a breathing space for UK banks so that they did not have to sell assets at cut-price values immediately. The Bank’s estimate exceeds that made by the International Monetary Fund recently. The IMF concentrated on US institutions and did not include losses from the turmoil of recent weeks. Estimated paper losses from UK banks on mortgage-backed securities and corporate bonds are currently £122.6bn, the Bank report said. Gordon Brown insisted yesterday that it was right for the government to increase borrowing in order to fund investment to help the economy through tough times. But he moved to reassure markets that he would not preside over a reckless increase in borrowing during the recession and said he would reduce it as a proportion of GDP once the economy picks up.”

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