Azure Global : April 2013

Tuesday 30 April 2013

Solid earnings, ECB rate cut prospects lift FTSE

The benchmark share index rose on Tuesday, inching back towards its 2013 highs after upbeat earnings reports from BP and Lloyds bank and on expectations for a European Central Bank (ECB) rate cut this week.

"We're looking forward to a possible ECB rate cut later this week. That stimulus has kept everyone upbeat," said Darren Easton, director of trading at Logic Investments.

Expectations of fresh stimulus measures and rate cuts from world central banks, such as the ECB and U.S. Federal Reserve, have boosted equity markets. The lower rates and injections of liquidity should help companies export more overseas and have also led investors to shift money out of bonds and into equities for better returns.

Easton said he had taken out "long" positions to bet on further gains for the FTSE this week.

"We wouldn't want to bet against this market going higher in the near term."

Solid results from leading UK companies supported sentiment.

According to Thomson Reuters Starmine data, 80 percent of companies who have reported first-quarter results in the broader FTSE 350 index, which comprises the FTSE 100 and the FTSE 250 mid-cap sector, have beaten or met expectations.

Oil major BP continued that trend on Tuesday with forecast-beating first-quarter profits, sending BP shares up 2.

Part-nationalised British bank Lloyds also posted higher first-quarter profits to send its shares up by 5.1 percent to the top of the FTSE 100's leaderboard.

The FTSE 100 has risen by nearly 10 percent since the start of 2013 but some traders expect the market to trade sideways or fall slightly in the next couple of months as some investors sell shares in order to book profits on the rally.

"I would still sell strong rallies on the FTSE," said Hartmann Capital trader Basil Petrides.

(Editing by Susan Fenton)

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Article source : http://uk.reuters.com

Axa plans to axe final salary pension scheme

Axa will move almost 2,500 staff on to a defined contribution scheme, with future payments dependent on the performance of the underlying fund

Financial services group Axa has announced plans to close its final salary pension to existing members, in a move one union claimed would result in employees having to work an extra five years to achieve the same retirement pay out.

The company told staff it planned to move 2,300 employees currently in the scheme to a defined contribution pension, where payments are not guaranteed and depend on the performance of the underlying fund. These schemes are cheaper to run as the investment risk is transferred from the employer to the employee.

Axa, which provides pensions and other financial products, will shift the risk on to its members.

In common with many other firms Axa, whose business is providing pensions alongside other financial products, had already closed the final salary scheme to new members. Since 2003 they have been enrolled in a defined contribution scheme.

"We have worked hard to maintain our defined benefit (final salary) pension scheme over the past few years and have introduced a number of changes to try to keep the scheme sustainable," a spokesperson said. "Like many other companies before us, we are now proposing that the scheme be closed pending a further 60 days of consultation."

Benefits that have already been accrued in the scheme will be kept. The spokesperson added: "This allows us to harmonise pension arrangements in a fairer way across our employee base and ensure that all of our employees have access to long-term pension provision."

Unite, Britain's biggest union and the representative for Axa staff, expressed anger over the plans and said it could not rule out industrial action. It said it had put forward a range of alternatives including possible changes to members' contributions or accrual rates, but these had all been rejected by Axa.

Unite's national officer, Dominic Hook, said: "The move to end the defined benefit pension scheme at Axa is appalling and unjustified. Long-serving staff now face the prospect of having to work an extra five years to get the same level of pension and [the move] puts all the investment risk on to the staff."

He added: "The decision by Axa is unacceptable and industrial action will be among the options being discussed with members if Axa refuses to reconsider its proposals."

Article source : http://www.guardian.co.uk

Monday 29 April 2013

House price rise disguises regional differences

Land Registry figures show house prices rose by 2.5% in London in March alone, whereas Middlesbrough saw 5.1% fall

House prices in England and Wales increased by 0.1% in March, according to the latest Land Registry report, but the headline figure disguised a mixed pattern of rises and falls around the regions.

London continued to record the strongest growth, with prices rising by 2.5% in March alone. The annual rate of price growth in the capital hit 9.6% and the average price reached £374,568. In contrast, prices in Middlesbrough fell by 5.1% in March and were down 16.5% year-on-year to an average of £69,049.

Across England and Wales prices were up by 0.9% on March 2012, but in Yorkshire, the east Midlands and the north-east and north-west of England prices were lower than in March 2012. The biggest faller is the north-east where values have dropped by 5.5% to an average of £97,033.

In Kensington and Chelsea the average property price is now £1.1m – 12.2% higher than in March 2012

The Land Registry's data showed strong sales of homes worth £1m or more in January, with the number increasing by 28% on the same month of the previous year at 610. The number of £2m-plus properties changing hands was up 52% at 140; of these 113 were in London. In Kensington & Chelsea, the UK's most expensive neighbourhood, the average property price is now £1.1m – 12.2% higher than in March 2012.

Figures for property purchases registered in March underline the huge differences of prices being paid around the regions, with the 47,600 registrations ranging from £14,000 to £12.5m.

In recent years the London property market has been buoyed by overseas investors seeking a safe haven for their money. The recent weakness of the pound and events in other countries have bolstered demand even further, and only recently the UK's most expensive home went on sale at a reported £250m.

Giles Hannah, managing director of estate agency VanHan, said cash was continuing to come into the capital from domestic and overseas buyers.

"International buyers, particularly from Asia, are fuelling demand for best-in-class properties and are snapping them up at 10%-14% discounts as a result of the weakness of sterling compared with their own currencies," he said.

"UK-based buyers are also highly active and are seeing investment in London property as an alternative to a pension, and a way of maintaining and growing their wealth."

He added: "We have also witnessed a rise in French high net worth families relocating to London owing to the increased taxes in France, creating a shortage of supply in the £5m-plus bracket and fuelling price rises."

Article source : http://www.guardian.co.uk

Revealed: 'Sweetheart' tax deals each worth over £1bn

Four corporations that reached settlements worth £4.5bn between them are among those let off lightly

The scale of the government's "sweetheart" tax deals – individual secret agreements drawn up between tax officials and corporations to settle disputes – can be revealed for the first time after previously unseen documents showed that just four settlements were worth £4.5bn between them.

A leaked document sent by Dave Hartnett, the former head of tax at HM Revenue and Customs (HMRC), to David Gauke, the exchequer secretary at the Treasury, discloses the figure, which has not been released by HMRC before on the grounds of preserving "taxpayer confidentiality".

The document describes deals in excess of £1bn as "not uncommon". The size of the figure has been seized upon by MPs and tax campaigners who want HMRC to release details of how much tax was owed by each of the four unnamed companies before the deals were struck.

Margaret Hodge, the chair of the Commons public accounts committee, said: "If we got £4.5bn in, how much did we not get? That is what taxpayers will want to know, and I'll be raising this with HMRC through the committee.

"Whilst it is in the interest of the government to collect monies, these are huge sums. If there were deals involved, we need to know that the companies paid a fair amount on the profits they made from their businesses in the UK."

The revelation comes as separate documents disclosed in the Guardian show that tax officials used intrusive investigative powers designed to help them catch serious criminals to try to prove that the whistleblower who uncovered one of the first sweetheart deals, involving Goldman Sachs, had spoken to the Guardian.

The belongings, emails, internet search records and telephone calls of HMRC solicitor Osita Mba and the mobile phone records of his wife, Claudia, were examined by HMRC investigators using powers to investigate criminals, the previously undisclosed documents reveal. In 2011 Mba disclosed the existence of the Goldman Sachs deal by passing information to two parliamentary committees and the National Audit Office (NAO) under whistleblowing legislation.

The disclosures about the multibillion-pound scale of the government's deals come from a seven-page memo sent by Hartnett in December 2011 as he asked for public support from Gauke in the face of growing criticism in the media and parliament.

He wrote: "In 2006, HMRC adopted a new approach to reaching tax settlements with large business through building constructive relationships and encouraging mutual openness and transparency, increasing certainty for business and reducing the time taken to resolve issues.

"Settlements of above £1bn are now not uncommon and £4.5bn … has come from just four settlements with bespoke governance."

A 2011 NAO inquiry into the four settlements found that they were made outside the high risk corporates programme set up in 2006 to ensure proper governance of deals with corporations.

Hartnett claimed in his submission to Gauke that the programme had allowed the government to bring in an extra £9bn in revenue in total – a figure previously disclosed to parliament. MPs on two select committees have claimed that the deals are secretive and allow corporations to develop a cosy relationship with tax officials.

A document sent by Dave Hartnett, the ex-head of tax at HMRC, to the exchequer secretary at the Treasury, describes the tax deals

The £4.5bn figure is believed to include a previously reported Vodafone deal which ended when the telecoms giant paid £1.25bn.

A committee of MPs was told that the Vodafone tax bill should have been £6bn or more. That figure is disputed by Vodafone.

The £4.5bn does not include, however, the relatively small Goldman Sachs agreement when the bank was let off paying up to £20m.

The revelations will be of interest to solicitors for the anti-tax avoidance organisation UK Uncut who on Thursday are taking HMRC to the high court, claiming that the deal which let off Goldman Sachs from paying up to £20m in interest charges was unlawful.

Anna Walker, a spokesperson for UK Uncut Legal Action, which campaigns on tax issues, said: "It is not legally, politically or morally acceptable to let big business off paying the tax that they owe. David Cameron and George Osborne's government's claims that they are leading the world in clamping down on tax ring hollow as these backroom 'sweetheart' deals come to light and no real action is taken."

The high court will hear UK Uncut's claims that Goldman tried to funnel employees' bonuses through an offshore tax scheme based in the British Virgin Islands, avoiding paying national insurance contributions.

HMRC admits it made a mistake in reaching a deal with Goldman, resulting in underpayment of interest on the tax due. But it argues that it acted lawfully in doing so. The hearing is expected to last for one day.

The case was granted permission to go to a full hearing in June 2012, one day before the NAO concluded a judge-led investigation into tax settlements which found that the Goldman Sachs deal was reasonable.

However, the Guardian disclosed last month that the head of the NAO, Amyas Morse, appeared to undermine the process before it had even started by telling Hartnett that the inquiry would find "nothing of substance".

It is believed that HMRC's defence rests on the findings of the NAO report that the deal was "reasonable".

A spokesman for HMRC said that it could not comment on individual agreements, but "bespoke deals" had been found to be good value.

"The National Audit Office looked into the 'bespoke governance' settlements, finding they represented good value for the country and were properly carried out. However, since then we have significantly improved the transparency of the governance around our large business settlements," he said.

Article source : http://www.guardian.co.uk

Sunday 28 April 2013

Item Club predicts rise in lending to UK businesses

Bank lending to UK businesses will rise in 2013, the first increase for four years, the Ernst & Young (E&Y) Item Club has predicted
The forecasting group's financial services outlook estimates that lending will rise by 3% to £440bn this year
The report says this year's increase is being led by the commercial banks having better access to wholesale funding, and a fall in bad debts.

This year's predicted rise follows after a fall of 5% in 2012.The report also said that the government's Funding for Lending Scheme was making a "material difference".

Lending to firms fell by 5% last year

'Encouraging lending'

Under the FLS scheme, the Bank of England allows the banks and building societies to lend more cheaply, on the condition that they pass on the funds to customers, both businesses and consumers, in the form of cheaper loans and mortgages.

Last week it was announced that FLS would be extended by another year to 2015. The Bank of England also confirmed that non-bank lenders would be able to participate.

Andy Baldwin, head of financial services in Europe at E&Y, said: "Behind the scenes, banking fundamentals have quietly been improving and banks are now in a better position to be able to provide funds to the wider economy.

"Our analysis suggests the main drivers of banks' return to lending will be better access to wholesale funding and a decrease in non-performing loans, rather than the Funding for Lending Scheme making a material difference.

"That said, the scheme is making a contribution in shifting emphasis and encouraging lending expansion across the sector while also helping to restore confidence and stimulate demand from consumers and SMEs [small and medium businesses] alike."

Article Source : http://www.bbc.co.uk

UK economy avoids triple-dip recession

The UK economy has avoided falling back into a recession after recording faster-than-expected growth in the first three months of the year.

The Office for National Statistics said its first estimate for gross domestic product (GDP) showed the economy grew 0.3% during the first quarter of 2013.

Chancellor George Osborne said it was an "encouraging sign".

But the shadow chancellor, Ed Balls, said that the economy was "just back to where it was six months ago".

The growth in GDP means the economy avoided two consecutive quarters of contraction - the definition of a recession. There had been fears the UK would enter its third recession in five years, a so-called triple-dip recession.

Economists say the news should give a small psychological boost to consumers and businesses, but the broader picture of the economy remains the same.

The UK economy has been on a plateau since the financial crisis hit in 2008, with small spurts of growth and contraction.

'Making progress'

The better-than-expected rise in GDP for the first quarter was largely down to strong growth in the services sector and a recovery in North Sea oil and gas output.

The ONS figures also showed that GDP had risen by 0.6% when compared with the first quarter of 2012, the strongest year-on-year increase since the end of 2011.

Chancellor George Osborne said: "Today's figures are an encouraging sign the economy is healing. Despite a tough economic backdrop, we are making progress. The deficit is down by a third, businesses have created over a million and a quarter new jobs, and interest rates are at record lows.

"We all know there are no easy answers to problems built up over many years, and I can't promise the road ahead will always be smooth, but by continuing to confront our problems head on, Britain is recovering and we are building an economy fit for the future," he added.

Matt Basi, from CMC Markets UK, said: "Growth of 0.3% is hardly cause for celebration, but may ease some of the pressure that has been piling on the government's austerity plans."

The chancellor has faced calls from the International Monetary Fund to rethink the pace of the austerity programme.

But the government insists its austerity measures are vital to bringing down borrowing, and guarantee growth in the long-term.

Poor growth has already led to two international credit rating agencies stripping the UK of its top-notch triple-A rating.

Shadow chancellor Ed Balls said: "If we're to have a strong and sustained recovery, and catch up all the ground we have lost over the last few years, we need urgent action to kick-start our economy and strengthen it for the long-term - as Labour and the IMF have warned."

He added: "We need radical bank reform and a jobs and growth plan, including building thousands of affordable homes and a compulsory jobs guarantee for the long term unemployed. And instead of a tax cut for millionaires, we need a lower 10p starting rate of tax to ease the squeeze on millions of people on middle and low incomes."

Strong services

The pound rose nearly 1% to $1.5414 against the US dollar on the news, its highest point in two months.

The services sector, which accounts for three-quarters of the economy, grew by 0.6% in the quarter, with a strong performance from hotels and restaurants.

Transport and communications also made a solid contribution with growth of 1.4%.

But there were some areas of continuing weakness. Construction activity fell 2.5% in the first quarter and remains more than 18% lower than it was before the start of the financial crisis in 2008.

Phil Orford, the chief executive at the Forum of Private Business said: "While the service sector looks to have led the way, the construction industry figure is more worrying, and shows the need to get projects moving at a quicker pace."

Vicky Redwood, UK economist at Capital Economics said the recovery still faced "significant obstacles ahead, with households still experiencing falling real pay and policymakers still struggling to get bank lending to rise".

"Today's figure offers some hope that things might finally be starting to move in the right direction again," she added.

The economy has still not recovered from what has been the longest and deepest recession in modern history.

Overall the size of the economy as a whole remains 2.6% smaller than its pre-recession peak. Its pace of growth has also been much slower and weaker than in previous recessions in the UK.

Article Source : http://www.bbc.co.uk

Universal credit: Major benefits shake-up begins

A massive shake-up in the UK benefits system starts on Monday, with the first claims being made for a new universal credit payment.

Universal credit will merge several benefits and tax credits into one monthly payout.

It begins with a very small number of new claimants in Ashton-under-Lyne in Greater Manchester, but will eventually affect nearly six million people.

Those who are looking for work will receive the new universal credit

The system relies on a complex computer system, with claims made online.

Simplification

The benefit is for working age people looking for work, and will replace income-based jobseeker's allowance, income-related employment and support allowance, income support, child tax credit, working tax credit, and housing benefit.

It is the central plank of a benefits overhaul, championed by Work and Pensions Secretary Iain Duncan Smith, which the government says will mean people are always better off in work than on benefits.

It is also designed to simplify the welfare system by bringing a number of benefits together and reducing fraud and error.

However, some groups have raised concerns that the system is entirely dependent on a complex computer network which may not be ready or able to cope with millions of claims. They are also concerned that many potential claimants do not have access to the internet.

Online claims

The key features of universal credit include:

A single, monthly payment which the government says mirrors the world of work, but charities say could create problems for personal money management
The inclusion of financial help to pay rent, which is currently paid directly to landlords
An online-only claiming process, with accounts also managed online
The benefit paid to households, rather than individuals, and put straight into bank accounts
Benefits automatically adjusted depending on earnings, which employers enter into a computer system called real-time information

This means that there will no longer be a ceiling of 16 hours of work a week, below which people can sign on and above which claims are cancelled.

This is set to benefit people like Darren Bailey, an agency worker, whose working hours fluctuate, meaning he has to keep making claims under the current system.

"I have five kids so I can't afford to mess about," he said. "Any system has got to be better than this system."

Budgeting

The government estimates 3.1 million households will be entitled to more benefits as a result of universal credit, while 2.8 million households will be entitled to less.

Across all households, ministers say there will be an average gain of £16 per month. The long-term cost to the government is £100m in current prices.

The only claimants to receive universal credit in the initial stages will be single, new claimants at a jobcentre in Ashton-under-Lyne.

Three other pilot projects - in Warrington, Oldham, and Wigan - have been delayed until July.

From October, newly unemployed people will make claims under the new system. Current benefits and tax credits will gradually be shifted to universal credit from spring 2014, with the whole process completed by 2017.

Iain Duncan Smith said at the weekend that universal credit was being introduced over a four-year period because "I want to get these things right".

He added: "We want to say to people, you're claiming unemployment benefit but you're actually in work paid for by the state: you're in work to find work. That's your job from now on: to find work."

All claims for universal credit will need to be made online

Labour's Shadow Work and Pensions Secretary Laim Bryne said that universal credit was "a fine idea that builds on Labour's tax credits revolution".

Yet he added: "The truth is the scheme is late, over budget, the IT system appears to be falling apart and even DWP [Department of Work and Pensions] ministers admit they haven't got a clue what is going on."

Benefits and grants charity Turn2us said that 43% of people whose benefits would be replaced by universal credit were not aware of the change.

"Once you look at the nuts and bolts, budgeting is not going to be easy especially for those with a small amount of money," said Alban Hawksworth, welfare benefits specialist at the charity.

Article Source : http://www.bbc.co.uk